HomeAway, Inc. Reports Third Quarter 2014 Financial Results

− Total revenue of $117.1 million, up 29.9% year-over-year

− Adjusted EBITDA of $31.6 million, up 8.8% year-over-year

− TTM Free cash flow generation of $117.2 million, up 28.1% year-over-year

− Ending paid listings of approximately 1,035,000, up 33.8% year-over-year

AUSTIN, Texas, Nov. 4, 2014 (GLOBE NEWSWIRE) -- HomeAway, Inc. AWAY, the world's leading online marketplace for the vacation rental industry, today reported its financial results for the third quarter ended September 30, 2014.

Management Commentary

"We've had another great quarter, once again delivering strong financial results," says Brian Sharples, chief executive officer of HomeAway®. "During the quarter we welcomed our new chief marketing officer, Mariano Dima, to the leadership team. Mariano brings more than twenty years' experience across all aspects of marketing and we are thrilled he has taken the reins of our marketing organization."

Mr. Sharples continued, "We continue to deliver financially, while at the same time executing against our robust product roadmap, delivering new owner and manager tools and Mobile Hospitality Manager, our guest management app, within the quarter. Our pay-per-booking product is now available on all of our U.S. websites and our largest European websites and we now offer expanded distribution to these listings through our partnership with Expedia. As our marketplace evolves, we look forward to significantly increasing adoption of online booking across all of our listings."

Third Quarter 2014 Financial Highlights

• Total revenue increased 29.9% to $117.1 million from $90.1 million in the third quarter of 2013. On an FX neutral basis, year-over-year revenue growth was 29.7%. Growth in total revenue primarily reflected an increase in average revenue per listing as a result of tiered pricing and bundled product offerings, an increase in new listings and the benefit of ancillary product and services revenue.
• Listing revenue increased 27.2% to $96.6 million from $75.9 million in the third quarter of 2013. On an FX neutral basis, year-over-year listing revenue growth was 27.0%.
• Other revenue, which is comprised of ancillary revenue from owners and travelers, advertising, software and other items, increased 44.2% to $20.5 million from $14.2 million in the third quarter of 2013. Growth in other revenue primarily reflected increased adoption of value-added owner, manager and traveler products.
• Net income attributable to HomeAway was $4.9 million, or $0.05 per diluted share, compared to net income attributable to HomeAway of $8.5 million, or $0.10 per diluted share, in the third quarter of 2013.
• Adjusted EBITDA increased 8.8% to $31.6 million from $29.0 million in the third quarter of 2013. As a percentage of revenue, adjusted EBITDA was 27.0% compared to 32.2% in the third quarter of 2013. 
• Free cash flow increased 17.6% to $20.0 million from $17.0 million in the third quarter of 2013. On a trailing twelve month basis, free cash flow increased 28.1% to $117.2 million from $91.5 million in the comparable trailing twelve month period for the prior year.
• Non-GAAP net income was $18.9 million, or $0.20 per diluted share, compared to non-GAAP net income of $16.7 million, or $0.19 per diluted share, in the third quarter of 2013.  

Key Business Metrics

• Paid listings at the end of the third quarter were 1,034,847, a year-over-year increase of 33.8% from 773,352 at the end of the third quarter of 2013. At the end of the third quarter, 715,990 of the listings were subscription listings and 318,857 were performance-based listings.
• Average revenue per subscription listing during the third quarter was $479, an FX neutral increase of 11.7% compared to the prior year, up 11.9% as reported.
• Renewal rate was 71.7% at the end of the third quarter, compared to 71.7% at the end of the third quarter of 2013 and 72.8% at the end of the second quarter of 2014. Adjusting for the impact of consolidated listings and network bundles, renewal rate for the third quarter of 2014 would have been 72.6%, compared to 74.2% at the end of the third quarter of 2013 and 74.3% at the end of the second quarter of 2014.
• Visits were 232.1 million during the third quarter, a year-over-year increase of 17.3%.

Business Outlook

HomeAway management currently expects to achieve the following results for fourth quarter and full year ending December 31, 2014:

Fourth Quarter 2014

• Total revenue is expected to be in the range of $107.0 to $109.0 million.
• Adjusted EBITDA is expected to be in the range of $25.3 to $28.3 million.

Full Year 2014

• Total revenue is expected to be in the range of $444.0 to $446.0 million.
• Adjusted EBITDA is expected to be in the range of $116.0 to $119.0 million.

The above statements are based on current expectations and actual results may differ materially as explained in the "Cautionary Statement Regarding Forward-looking Statements" below. Information about HomeAway's use of non-GAAP financial measures and key business metrics is provided below under the captions "Use of Non-GAAP Financial Measures" and "Use of Key Business Metrics."

Conference Call & Webcast Information

HomeAway will host a conference call on Tuesday, November 4, 2014 to review and discuss the third quarter results at 5:00 p.m. Eastern Time / 4:00 p.m. Central Time. In addition, a live webcast of the call will be accessible through the Investor Relations section of HomeAway's website and will be archived online for 60 days upon completion of the conference call.

The details of the conference call and replay are:

The telephonic replay of the call will be available from 7:30 p.m. Eastern Time / 6:30 p.m. Central Time on November 4, 2014 through 11:59 p.m. Eastern Time / 10:59 p.m. Central Time on November 18, 2014.

About HomeAway

HomeAway, Inc. based in Austin, Texas, is the world's leading online marketplace for the vacation rental industry, with sites representing over one million paid listings of vacation rental homes in 190 countries. Through HomeAway, owners and property managers offer an extensive selection of vacation homes that provide travelers with memorable experiences and benefits, including more room to relax and added privacy, for less than the cost of traditional hotel accommodations. The company also makes it easy for vacation rental owners and property managers to advertise their properties and manage bookings online. The HomeAway portfolio includes the leading vacation rental websites HomeAway.com, VRBO.com and VacationRentals.com in the United States; HomeAway.co.uk and OwnersDirect.co.uk in the United Kingdom; HomeAway.de in Germany; Abritel.fr and Homelidays.com in France; HomeAway.es and Toprural.es in Spain; AlugueTemporada.com.br in Brazil; HomeAway.com.au and Stayz.com.au in Australia; and Bookabach.co.nz in New Zealand. The Asia Pacific short-term rental site, travelmob.com, is also majority owned by HomeAway.

HomeAway also operates BedandBreakfast.com, the most comprehensive global site for finding bed-and-breakfast properties, providing travelers with another source for unique lodging alternatives to chain hotels. For more information about HomeAway, please visit www.HomeAway.com.

Cautionary Statement Regarding Forward-looking Statements

This press release contains "forward-looking" statements, subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which are based on HomeAway management's beliefs and assumptions and on information currently available to management. Forward-looking statements include information concerning HomeAway's expected, possible or assumed future results of operations, growth and business outlook; roll-out of new products and services; and the anticipated adoption of online booking across all of our listings.

Forward-looking statements include all statements that are not historical facts and may be identified by terms such as "continues," "plans," "believes," "expects," "anticipates," "could," "look forward to," or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause HomeAway's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to the following: (a) HomeAway's inability to continue to attract and maintain a critical mass of property listings and travelers, (b) a decrease in renewal of listings, (c) HomeAway's inability to effectively manage its growth, (d) HomeAway's inability to increase sales to existing property owners and managers and attract new ones, (e) the impact of pay-per-booking or other changes in HomeAway's pricing policies or those of its competitors, (f) HomeAway's inability to execute its product and services development roadmap, including e-commerce initiatives, (g) the impact of general economic conditions, (h) fluctuations in foreign exchange rates, (i) HomeAway's inability to introduce successful new products and services; (j) the inability to integrate and grow recent acquisitions, and (k) inability to effectively execute its marketing strategy and (l) such other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission (the "SEC"), including HomeAway's most recent 10-Q, filed on July 30, 2014. All information provided in this press release is as of the date hereof and, except as required by law, HomeAway assumes no obligation to update this information, even if new information becomes available in the future.

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures: Adjusted EBITDA, free cash flow, non-GAAP net income and revenue adjusted for foreign currency. Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States, or GAAP. HomeAway defines Adjusted EBITDA as its net income (loss) attributable to HomeAway, Inc. plus depreciation, amortization of intangible assets, interest expense, net, income tax expense (benefit), stock-based compensation expense, impact of noncontrolling interests, all net of any foreign exchange income or expense. HomeAway defines free cash flow as its cash provided by operating activities, adjusted for cash interest expense and excess tax benefit (expense) from stock-based compensation, and subtracting capital expenditures. For the purpose of calculating free cash flow, HomeAway considers purchases of property, equipment, tenant improvements for its offices, and software licenses (including costs associated with internally developed software) as capital expenditures. HomeAway defines non-GAAP net income as its net income (loss) attributable to HomeAway, Inc. adjusted for the changes to redemption value of noncontrolling interests and the after-tax effect of stock-based compensation expense, amortization of intangible assets, amortization of debt discount and issuance costs, net of amounts capitalized, and the impact on noncontrolling interests of these items, utilizing a tax rate of 35%. The income tax effect of adjustments to non-GAAP net income assists investors in understanding the tax provision related to those adjustments and a tax rate of 35% related to ongoing operations. Revenue adjusted for foreign currency, which we refer to as constant currency or FX neutral revenue, assumes foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute constant currency revenue, HomeAway divides its monthly U.S. dollar results by the applicable current year monthly average foreign exchange rates and then multiplies those amounts by the applicable prior year monthly average foreign exchange rates.

HomeAway management believes that the use of Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue are useful to investors in evaluating its operating performance for the following reasons:

• HomeAway management uses Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue in conjunction with GAAP financial measures as part of its assessment of its business and in communications with its board of directors concerning its financial performance;
• Adjusted EBITDA, free cash flow,  non-GAAP net income and constant currency revenue provide consistency and comparability with HomeAway's past financial performance, facilitate period-to-period comparisons of operations, and also facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results;
• Securities analysts use Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue as supplemental measures to evaluate the overall operating performance of companies, and HomeAway management anticipates that its investor and analyst presentations will include Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue; and
• Adjusted EBITDA and non-GAAP net income exclude non-cash charges, such as depreciation, amortization and stock-based compensation, because such non-cash expenses in any specific period may not directly correlate to the underlying performance of HomeAway's business operations and can vary significantly between periods.

Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue should not be reviewed in isolation. Investors should consider them in addition to, and not as substitutes for, measures of HomeAway's financial performance reported in accordance with GAAP. HomeAway's Adjusted EBITDA, free cash flow, non-GAAP net income or constant currency revenue may not be comparable to similarly titled measures of other companies because other companies may not calculate such measures in the same manner as HomeAway does. Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue have limitations as analytical tools. As an example, although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often need to be replaced in the future, and Adjusted EBITDA, free cash flow and non-GAAP net income do not reflect any cash requirements for these replacements. In addition, none of these measures reflect future requirements for contractual obligations.

Further limitations of Adjusted EBITDA include:

• this measure does not reflect changes in working capital;
• this measure does not reflect interest income or interest expense; and
• this measure does not reflect cash requirements for income taxes.

Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP measures used in this press release are included at the end of this release.

Use of Key Business Metrics

We define a paid listing as an advertisement for a property paid via subscription or on a performance basis and displayed on one or more websites in our marketplace. Although listings may be displayed on multiple sites, a paid listing is counted only one time on its native HomeAway brand, or HomeAway website from which the listing originated. Subscription-based paid listings are purchased in advance by property owners or managers as a form of advertising to promote their vacation rentals to prospective travelers on one or more of our websites, typically for one year. Performance-based paid listings allow property owners and managers to list a property with no initial upfront fees and, instead, pay us commissions on traveler bookings or fees on traveler inquiries.

Average revenue per subscription listing is computed by HomeAway as subscription listing revenue for the period divided by the average of paid subscription listings at the beginning and end of the period and then annualizing the result. The price of listings varies by website and can include various additional fees associated with listing enhancements. The average revenue per listing may fluctuate based on the timing and nature of acquisitions, impacting the number of average paid listings for a given period; changes in HomeAway's base pricing; uptake of listing enhancements; changes in the pricing of enhancements; and changes in brand mix. For the purposes of providing a foreign exchange neutral growth rate, subscription revenue per listing is calculated at prior year monthly foreign exchange rates.

The renewal rate for HomeAway's subscription listings at the end of any period is defined as the percentage of those paid listings that were active at the end of the period ended twelve months prior that are still active as of the end of the reported period. Unique property subscription listings that are removed from property managers' accounts and subsequently replaced with new subscription listings within the same property manager's account listings are not considered as renewals in HomeAway's renewal rate calculation. HomeAway includes most subscription listings in its calculation of renewal rate with the exception of subscription listings sold by BedandBreakfast.com, Toprural.com, and Bookabach.co.nz, which will remain excluded until HomeAway can further develop its database system. HomeAway excludes pay-for-performance listings from its renewal rate analysis since they are not sold on a subscription basis.

Visits to websites are measured by HomeAway through the use of a variety of tools, including solutions from third parties such as Omniture and Google Analytics.