Summary
- Today, we take our first look at SPAC birthed online vacation rental company Vacasa, Inc.
- The company has quickly grown to north of $1 billion of annual revenue but continues to hemorrhage cash and recently announced a major restructuring.
- The start of a potential turnaround or rough sailing still ahead? An investment analysis follows in the paragraphs below.
"After all, the best part of a holiday is perhaps not so much to be resting yourself, as to see all the other fellows busy working ."? Kenneth Grahame
Today, we put Vacasa, Inc. ( VCSA ) in the spotlight for the first time. The company debuted on the market in late 2021 and is a competitor in the burgeoning online vacation rental market. Unfortunately, it has been a very rocky ride for shareholders. The company recently announced a major restructuring. Can Vacasa right the ship or are the shares heading to eventual oblivion? An analysis follows below.
Company Overview
Vacasa, Inc. is based in Portland, OR. The company offers a rental vacation platform where guests can search, discover, and book it approximately 35,000 properties across more than 400 destinations in North America, Belize and Costa Rica. Vacasa generates revenue by earning a commission on the rental income they deliver to homeowners and collecting fees from guests.
Vacasa also provides services to buy and sell vacation homes through its network of real estate agents. Currently the stock trades just below two bucks a share and sports an approximate market capitalization of just north of $800 million. Vacasa came public late in 2021 via formed out of a SPAC deal with TPG Pace Solutions Corp. Like most SPACs and IPOs of that ' vintage ', the debut has destroyed a lot of shareholder value to this point.
Third Quarter Results:
On November 10th, the company posted its third quarter numbers . Vacasa posted GAAP earnings of four cents a share, two cents under expectations. Revenues did rise 25% on a year-over-year basis to $412 million which beat the consensus by just over $20 million. Gross bookings rose 25% to $969 million, while nights sold only increase 12% to 2.1 million.
However, adjusted EBITDA for the quarter came in at $46 million, which was significant under the previous guidance from management of between $55 million to $60 million. Management then guided Q4 sales guidance down to $195 million-$215 million, under the just over $220 million consensus at the time. The company also said it would post a $65 million to $75 million adjusted EBITDA loss in the fourth quarter. Leadership noted it was ' experiencing some softness and variability in guest bookings ' and also had higher than expected ' local market and customer support costs during the third quarter '. Management also dropped their forecast in growth of homes available on its platform by YE2022 to 20% from 30% previously.
The stock fell sharply as investors took in third quarter results and guidance. The next shoe to drop came last week when the company announced it was laying off approximately 17% of its employee base or some 1,300 individuals. Management did confirm its earlier fourth quarter guidance as part of this press release.
Analyst Commentary & Balance Sheet
Since third quarter results hit, the analyst community has been mixed on Vacasa's prospects. Both Goldman Sachs ($4 price target) and J.P. Morgan maintained Hold ratings on the stock while Needham ($5 price target) and JMP Securities ($3 price target) reissued Buy ratings on the shares.
In June and September of last year, a beneficial owner dumped nearly $18 million worth of shares on the open market while a company director sold nearly $1.4 million worth of equity. The average price of sales was about four bucks a share. Those are the only insider transactions in this name since the stock debuted on the market.
Just over seven percent of the outstanding float in current held short. The company ended the third quarter with approximately $150 million of cash and marketable securities on its balance sheet against no long term debt.
Verdict
The current analyst firm consensus has the company losing some 44 cents a share in FY2022 even as revenues rise over 30% to $1.18 billion. Losses are projected to increase slightly in FY2023 as revenue growth slows to just under 10%.
Vacasa seems like it is a bit of sinking ship as it implements widespread layoffs and faces slowing revenue growth. The company also replaced its CEO in August of last year. Vacasa also has a new COO and Chief Commercial Officer. The company competes against deeper pocketed Airbnb, Inc. ( ABNB ) and Expedia's ( EXPE ) VRBO as well as smaller competitors such as Evolve.com. Based on some searches, its available properties seem quite sparse in comparison to its bigger brethren.
Outside a buyout from a larger competitor, it is hard to be too enthusiastic about the company's prospects and it likely to continue bleeding cash. If and until the company shows great progress gaining traction towards profitability, I don't see any reason an investor should own Vacasa at these trading levels.
"No man needs a vacation so much as the man who has just had one. "? Elbert Hubbard
For further details see:
Vacasa: Too Little, Too Late