Vacasa, Inc.

Please stand by. We're about to begin. Good afternoon, ladies and gentlemen. Welcome to the BCASA second quarter 2023 earnings call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. And if you do like to withdraw your question, simply press star 1 again. And now at this time, I would like to turn the call over to Mr. Ryan Domanczyk of Investor Relations. Please go ahead.

Good afternoon, everyone, and thanks for joining us today for Verkasa's second quarter 2023 earnings call. I'm pleased to be joined today by CEO Rob Graber and CFO Bruce Schumann. Before we begin, let me cover a few administrative details. This call contains information that speaks only as of the date of today's live broadcast, and redistribution of this broadcast is prohibited. We have posted a shareholder letter on the IR section of our website at investors.picasa.com that will be referenced by our speakers. Comments made during this conference call and in our shareholder letter may contain statements that are commonly referred to as forward-looking statements. Such statements include those about future expectations, beliefs, plans, projections, targets, estimates, objectives, events, conditions, and financial performance. We caution that various factors could cause actual results to differ from those anticipated. For additional information concerning these risks and uncertainties, please read the forward-looking statement section in the shareholder letter we issued earlier today and the forward-looking statements and risk factors section in our filings with the SEC. During this call, we will discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial results, including a reconciliation of 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 not intended to be a substitute for our GAAP results. And now, I'd like to hand the call over to Rob Graber. Rob?

Good afternoon, everyone, and thank you for joining us. I'm pleased to be with you all today to provide an update on the progress we made during the second quarter to review our financial results and to share an outlook for the business. I'd like to start by welcoming Bruce Schumann, our new CFO to Vacasa. Bruce joined Vacasa in June and in just two short months is already ingrained in the business and has become a valued member of our leadership team. Bruce brings nearly 30 years of experience to Vacasa, including more than 25 years at Intel before serving as CFO of one of the nation's largest technology-driven real estate lenders. Bruce, thank you for all your contributions to date, and I look forward to working with you in the years to come. Now on to our updates for the business. We are in the midst of our summer peak season, with a three-month period from June through August, which represents our busiest time of the year. During these months, we will facilitate more than 500,000 reservations, and on some weekends, we will manage over 30,000 reservations, more than other industry operators manage in a year, a reminder of the size and scale of Vacasa today and the incredible dedication of our team. A quick word on the attention our industry has received in the national and local press and on social media in recent months, with articles discussing market dynamics such as demand returning to urban and international destinations, an uptick in hybrid and in-office work, and most significantly, increased vacation rental supply. We spotted and highlighted these trends starting in the fall of last year. With the benefit of our scale and data-driven approach, we were able to adjust our revenue management stance to address these shifts. Based on our data, we believe in the vast majority of our markets, the CASA listings are generating more revenue than the industry. While 2023 has been a more challenging environment for vacation rentals relative to the record levels reached last year, we are primarily seeing lower gross booking value per night or price while nights sold per average home during peak season is tracking roughly in line with last year. As a result, our teams are busier than ever welcoming guests for their summer vacations. We are sharply focused on execution and are seeing some early benefits as we work against the priorities we set and the changes we made starting last year. I am pleased with our progress in operations, and I'm proud of the guest service levels we are delivering during our seasonally busiest summer months. I want to recognize the dedication and hard work of all the CASA colleagues in the field. When I spoke with you all for the first time back in November, I outlined the tremendous opportunity the CASA has in front of it. The CASA addresses a large dynamic market with a hard problem that's best solved with technology and with competitors who have thus far not built the foundation to use technology and data to learn and improve. As I shared when I first joined Vacasa, to reach our potential in this market, we needed to sharpen our focus to perform at our best. Over the past nine months, we've been adjusting the way we work, which is never easy, especially in a changing market environment. Nevertheless, our teams have persisted, and I'm incredibly proud of all our Vacasa employees for helping make demonstrable progress across all facets of our business. Throughout 2023, the team and I have been guided by four critical priorities, improving execution in local markets and customer support functions, unlocking the potential of the individual sales approach, developing the right technology product and service offerings, and ruthlessly prioritizing our business needs to drive profitable growth. There is always more to do, but we've made substantial progress against these goals. Week by week, wins are stacking up and the results of our efforts are beginning to materialize. There have been and will be steps forward and back, but we are gaining real momentum across our entire business, and I remain incredibly excited for what's ahead. We spent the last several quarters becoming more tactical in the way we operate in our local markets, particularly with regards to aligning staffing levels in a dynamic reservation environment. In 2021 and 2022, our teams were staffing in anticipation of stronger and stronger demand. Now, we are more closely collaborating to watch demand and booking intakes and adjusting resources in local markets accordingly. We have also rolled out improved purpose-built technology tools and integrations for our local teams. The initial progress we saw in the first quarter from these changes carried into the second quarter. As a result, During the second quarter, we saw year-over-year improvements across our key local market operating metrics, despite a more uncertain demand environment. And most importantly, we aren't sacrificing service levels, which we also watch very closely to achieve these efficiencies, as guest satisfaction, for example, among other key metrics, is right in line with last year. On the approach to managing local markets, we are removing layers of management and empowering the owner and guest experience teams who take care of customers. We've also set up processes that drive closer alignment across all the functions that support these local operations teams with better analytics and real-time support from revenue management, human resources, and finance. We've also brought new technology into key workflows during the first half of the year with the goal of decreasing the cost of managing homes and guest stays while providing owners and guests with an even better experience. For example, we launched an automated scheduling tool for our field operations teams, providing greater visibility into and making it easier to get through their daily tasks. We released the home care dashboard, which we touched on last quarter, that provides homeowners with an unprecedented view into their homes. Now owners can track maintenance issues online and see reports of recent inspections, for example, providing owners with 20 to 50 photos showing the condition of their home. Since launch, we've shared millions of photos with homeowners. We've also incorporated both SMS and web chat into our communications tools, opening up another communications medium for owners and guests. These technology tools bring efficiency to our local market operations and more immediacy to communications with homeowners, a win for our homeowners, a win for our guests, and a win for Vacasa. On the individual sales approach, the primary way in which we add homes to our platform, we've been testing and implementing changes that are taking hold. Our guiding principle for retooling the individual sales approach has been to streamline and simplify how we work. Some of the changes we have implemented include adjusting the organizational structure so every sales rep focuses on a single market, allowing them to develop and build the local market expertise that our homeowners crave. simplifying the pricing structures we offer to homeowners, rolling out internally developed technology tools to improve the onboarding experience for new homeowners, and reducing the number and complexity of the incentive plans we manage internally. In the second half of the year, our focus will continue to be on solidifying the productivity improvements we've made in recent months. Once we've fully institutionalized these new processes, we'll then consider growing the sales team. Encouragingly, While still elevated relative to prior years, homeowner churn has trended in the right direction in the second quarter. Our data continues to indicate that the higher level of churn is primarily due to concerns about levels of homeowner income as the industry comes off two record years. We are making significant efforts to educate our homeowners about the state of the industry, including sharing market-level data to underscore that these trends aren't specific to Picasa, And those communications have been positively received by homeowners. On the technology front, we've completely changed our process of product development. Rather than shipping a few significant products each year, we are shortening development cycles and pushing to release smaller enhancements more often. As a result, we are getting more and better product tools and updates in front of homeowners, guests, and colleagues faster. These advancements are improving experiences and having a positive, meaningful impact on our business. For example, earlier I mentioned that we are making it easier for homeowners and guests to communicate with Picasa over SMS if they prefer. In the first half of the year, we launched a click-to-SMS feature, giving guests the options to transfer to SMS rather than waiting on hold to speak to an agent. Guests have resoundingly opted for this feature with SMS inbounds now exceeding phone inbounds. These changes create a better experience for our guests allowing them to more easily communicate with PCASA and get answers to their questions faster, while improving the efficiency of our customer service representatives. The team is also exploring how new artificial intelligence tools can be used in our workflow. For example, we are now using a tool to analyze listing photos of the homes we manage to ensure homes are tagged with all the relevant amenities. To date, we have analyzed more than 2.5 million listing images to expand on attributes like pools, kitchens, patios, and more, as well as provide us with image quality scores. The goal is for these insights to help improve the guest booking experience by serving up the most relevant homes for any query or filter and drive reservation conversion. Finally, we continue to prioritize our business needs to drive profitable growth. We are carefully managing our operating expenses with technology and development, sales and marketing, and general and administrative expenses down year over year. We are finding our focus on operating discipline and product development is starting to deliver results for Vacasa and is driving a better experience for homeowners and guests. Even though we have a lot more to do, I've seen this dynamic play out many times in my career, and I'm excited about the path ahead. Before I turn it over to Bruce, I'd just like to say thank you to our thousands of dedicated employees who are working so hard this summer peak season and throughout the year to bring vacations home for our homeowners and guests.