HomeAway’s stock price fell April 28 to $32.60, down from $48.90 in February of this year. However in last week’s earnings call HomeAway reported a 33% year-over-year increase in revenue, a 20% growth in adjusted EDITDA, and a 28% increase in listings (now at 952,000).

In addition, last quarter HomeAway’s sites had 245 million visits (up 18%), and in March they completed a convertible debt offering with proceeds of $344 million bringing cash and short-term investments to $770 million.

Further evidence that HomeAway is well positioned in the market came from a recent study conducted by HomeAway and the National Association of Realtors reporting 47% growth in US vacation home sales between 2011 and 2013, with 89% of vacation homebuyers indicating an intention to rent their homes.

 

8 takeaways from last week’s earnings call

 

1. Pay Per Booking Model

At the end of Q1 HomeAway had 224,000 e-commerce enabled listings. “Once again, driving this increase in adoption was both the addition of online bookable PPB (pay-per-booking) listings as well as continued adoption of payments and online booking on subscription listings,” said CEO Brian Sharples.

In the first quarter HomeAway added approximately 35,000 performance-based listings with the “majority being PPB listings from large property managers.”

Listings from property managers currently make up 36% of total listings, up from 35% last quarter.

With increasing interest in the PPB product, HomeAway has shifted focus to improving the quality and conversion rate of existing PPB listings. By testing and optimizing the PPB listing performance and functionality, they have been able to improve conversion rates.

“We’ve also identified distinct requirements to make these listings successful on our websites and have implemented initiatives aimed at improving these attributes, many rolling out as we speak,” said Sharples. “For example, many property managers have fairly rigid rules regarding check-in and checkout dates, and we can improve conversion and traveler satisfaction by modifying our platforms to prominently display and utilize this information.”

Sharples added, “We’re still early in the launch of our integrated PM PPB product but are pleased with the initial wins on conversion and the team is firing on all cylinders to drive further improvement in the coming quarters. Keep in mind though that in general our expectation is that these listings will have less calendar availability compared to listings from individual owners and that combined with their still relatively low placement and sort order will mean they will not perform at the same level as their platform counterparts.”

 

2. Mobile

HomeAway has been working to roll out its responsive design on its sites and has acquired mobile guest management tool Glad to Have You (GTHY).

The questions was raised –is HomeAway looking to integrate third-party marketplaces which provide restaurant reservations, delivery and transportation services?

“Right now we’re focused on getting it (GTHY) integrated into the HomeAway app and we’re going to try to use it to create an awesome experience for travelers when they’re in market primarily so that we can embed our brand into their brain for the next time and they go to purchase vacation rental travel,” said Sharples. “That said, the platform is absolutely built to accommodate those kind of things, it already allows for owners to put in reviews of restaurants and recommend things and places to do. So yes, at some point, it’s a natural bridge to your offering coupons or simply distributing other services, maybe with some kind of percentage take rates, that capability doesn’t fully exist today but it’s in the long-term plan for sure.”

 

3. Expedia Integration

“Both HomeAway and Expedia would like to add greater volume of listings to this program, so we are accelerating internal development work to enable this sooner than we had originally planned and outside of Expedia we continue to make product investments to enable broader distribution of our listings in the future,” said Sharples.

 

4. Other Revenue

Other revenue (17.4% of total revenue), which includes ancillary revenues, advertising, software and other items, grew 46.8% year-over-year.

“Our value-added services product which include insurance, product and revenue share for payment processing are key area of focus and continue to demonstrate robust growth,” said CFO Lynn Atchinson. “We are also pleased that both advertising and software contributed to the growth of the business.”

 

5. Response Time and Updated Calendars

One of the ways HomeAway is looking to improve is by encouraging owners to respond quickly to inquiries and maintain updated calendars.

“If our travelers could go to the sites and know that every calendar on our site was fully up-to-date and accurate, then the number of visits to secure a booking would go down by orders of magnitude, which would look really crappy on the traffic front but would be 100% the right thing to do for our business,” said Sharples. “So we are in fact very hard at work to make that a reality, and in the end what we’ve really got to do is create an incentive for our customers to keep their calendars up-to-date and create an incentive for them to respond quickly to travelers. So we are getting said in the coming quarters to roll out a new measurement system that does in fact measure and report owner responsiveness on our site so that travelers will be able to see specifically not only how quickly somebody responds but how accurate their calendar is. So if somebody consistently when their calendar says they are open, responds and says they are not open, that’s a negative thing that we’re going to start measuring and I think very quickly we’re going to create an incentive system that improves that experience dramatically and that’s going to be a very big deal and we’re excited about it.”

 

6. Closed Loop Communications

HomeAway has recently brought communications in-house through a secure platform which allows HomeAway to monitor communications, track response time, look at how many times calendars are incorrect, and provide incentives.

“And this is — we didn’t have that capability last year, this capability comes from us taking all the communications and bringing them in-house with our HomeAway secure communications platform,” said Sharples. “You may recall we did that primarily as a trust and safety measure to help stave off phishing but the real benefit of us now being able to monitor all communications is that we can now track these things, report these things, create an incentive structure, so people fix these things and it’s going to be a vast, vast improvements to our sites.”

 

7. Search Engine Marketing

“There is no question that somebody like Booking.com spends a lot more money in SEM than we do,” said Sharples. “Now we are also highly advantaged in our category and that we are the SEO leader by far. But so we may not have to spend as much as a percentage as competitors might have to in the category. But you’ll certainly see us ramp up that spending over the next several years.”

 

8. Future Acquisitions

“The primary purpose of this financing (convertible debt offering) was to provide firepower for additional acquisitions and investments we may wish to make in the coming years,” said Sharples. “While we don’t discuss specific targets, it is reasonable for investors to assume that our past behavior informs our choice of future and target businesses that can open up new markets and geographies or provide us with complementary products and services to enhance our marketplace remain attractive to us.”