Before I roll into all of this I’m going to go ahead and get this out of the way. This isn’t a short interest or gamma squeeze play nor does it have an options chain yet. It’s a play to keep an eye on based on fundamentals. Now that 70% of the server has already closed out of this DD, for those of you who are left, let’s dive in.
TPGS
TPG Pace Group is yet another blank check company bringing another company into our lovely stock market. They are currently in the works of merging with Vacasa, North America’s leading vacation rental management platform. More on Vacasa here in a bit.
The first thing that caught my eye about this merger was the fact that the managing partner of TPGS is Karl Peterson, the former co-founder, president, and CEO of Hotwire.com. He launched Hotwire.com in 2000 and sold it to InterActiveCorp (now Expedia ever heard of them?). I like this because he’s had experience in the vacation sector. Granted it’s more of the commercialized, typical hotel reservation part, but still experience nonetheless. There’s a comfort on that end knowing that the guy in charge on the SPAC side of the merger has some direct experience and it’s not some corporate big wig who has absolutely no experience in bringing a company public into that company’s perspective competitive market. To read more about TPGS go to www.tpg.com/pace-solutions.
VACASA
Like I said above Vacasa is the leading vacation rental management platform in North America. They manage 35,000 vacation homes in the U.S., Canada, Belize, and Costa Rica.
I know what some of you are thinking, if you didn’t read that statement correctly. Airbnb and VRBO are larger than Vacasa dumbass. Not so fast. I said “vacation rental management platform”. Airbnb and VRBO are vacation rental platforms designed for homeowners to list their homes, condos, etc. on their platforms. After that the clients of Airbnb and VRBO are on their own. That means that all the property management aspects of renting a vacation home falls on them. Below is a list of various responsibilities the owner of the vacation rental would have to deal with.
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Manage bookings (aka making sure you get them and also not double book) and customer complaints (fucking nightmare)
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Finding reliable cleaners and people to do repairs at a moments notice (plumbing, electrical, HVAC, etc.). Shit happens and the vacation rental owner’s need all these professionals on speed dial and hope to God they are reliable enough to get the job done in a timely manner. Otherwise Sherry B. is going to leave them 2 stars because the shitter overflowed and flooded the bathroom and no one came to fix it.
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Financial aspects for taxes such as expense tracking, keeping receipts, depreciation, etc. That too is a pain in the ass.
Granted the property owner can hire a property management company to do a lot of these things, but they may not cover everything on this list. They also charge a percentage fee of your rental revenue, between 10%-50%. I know that’s a very broad range, but there’s no real exact measure of what they will charge without comparing rates of various property management companies in the area.
Everything I listed above. Vacasa covers. They handle all of the stuff the owners either don’t want to or can’t due to distance. They also list the properties across various rental platforms for you, such as Airbnb, VRBO, Booking.com, and their own platform.
You can see a full list of exactly what they do here
What Is Full-Service Vacation Rental Property Management? | Vacasa.
I have also searched around and it appears they charge 25%-35%. If someone else can fact check that for me that would be great. That’s the consensus of what I found.
VACASA FINANCIALS
2021 Q2 EARNINGS
source: https://www.yahoo.com/now/vacasa-reports-record-second-quarter-210000998.html
“Vacasa’s operating and financial results far exceeded our second quarter targets, driven by pent-up demand for leisure travel, shifting consumer preference and the unique benefits vacation rentals provide in the current environment,” said Matt Roberts, CEO of Vacasa. “These strong consumer trends have continued, and we now expect our third quarter revenue to finish well ahead of the targets we established with TPG Pace Solutions prior to our announced business combination.”
Second Quarter 2021 Highlights:
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Vacasa’s Operating and Financial Results Exceed Targets. Second quarter 2021 Gross Booking Value, Revenue, and Adjusted EBITDA all finished above the targets outlined in the Investor Presentation filed by TPG Pace Solutions Corp. (NYSE: TPGS; “TPGS”) when the planned business combination was announced on July 29, 2021.
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Strong Gross Booking Value Drives Record Revenue. Gross Booking Value reached $514 million in the second quarter, up 247% year-over-year and above the target of $478 million. As a result, Revenue reached $240 million in the second quarter, up 188% year-over-year and above the target of $220 million.
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Over 1.4 Million Nights Sold. There were more than 1.4 million Nights Sold in the second quarter compared to 449,000 in the second quarter of 2020. Not only was occupancy strong, driven by increased demand for leisure travel, but we were able to achieve that with an increase in Gross Booking Value per Night Sold to a record setting $365 during the quarter.
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Net Loss. Net loss in the second quarter was $17 million compared to $20 million in the second quarter of 2020.
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Topline Outperformance Results in Adjusted EBITDA Beat. Second quarter 2021 Adjusted EBITDA was positive $9 million compared to negative $6 million in the second quarter of 2020 and to the target of negative $7 million. The $16 million outperformance on Adjusted EBITDA relative to the target was attributable to stronger than projected Revenue.
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Third Quarter Revenue Pacing Nearly 20% Higher than Target. The favorable tailwinds that drove outperformance in the second quarter have continued into the third quarter. We are capitalizing on the ongoing surge in consumer demand by executing on our core strategy: maximizing revenue for our homeowners by achieving the optimal balance between occupancy and Gross Booking Value per Night Sold. Based on the trends we’ve seen to date, we expect third quarter revenue to be in the range of $300 million to $310 million compared to our target of $258 million. Given the continued momentum in the business, we are pulling forward some of our planned investments to the third and fourth quarter, which we expect to fund with revenue outperformance. We now expect third quarter Adjusted EBITDA to be in the range of positive $35 million to $40 million compared to our target of positive $26 million.
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Product Updates. We recently released a number of new products including the beta version of our Homeowner Mobile App, the “Add a Night” Feature to further optimize revenue and the guest experience, and the HomeCare Hub API for contractor agencies. We have a deep product roadmap and will continue to invest in engineers to improve our proprietary technology offering and, in turn, our customer experience.
“Heightened demand for vacation rentals during the second quarter resulted in strong occupancy. Simultaneously, Vacasa was able to increase Gross Booking Value per Night Sold by over 10% versus last year, maximizing rental income for our valued homeowners,” said Jamie Cohen, CFO of Vacasa. “With these favorable patterns clearly extending into the third quarter, we are finding ways to invest the overperformance back into the business to further our competitive differentiation and continue building a strong foundation for long-term growth.”
2021 Q3 EARNINGS
source: https://nz.news.yahoo.com/vacasa-reports-record-third-quarter-130000068.html
Third Quarter 2021 Highlights:
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Record-Setting Third Quarter Financial Results Far Exceed Targets; Raising Full-year 2021 Revenue and Adjusted EBITDA Guidance and Strong Confidence that Full-year 2022 Revenue Finishes Above Target. Third quarter 2021 Gross Booking Value, Revenue, and Adjusted EBITDA all finished at their highest levels ever and above the targets outlined in the Investor Presentation filed by TPG Pace Solutions Corp. (NYSE: TPGS; “TPGS”) when the planned business combination was announced on July 29, 2021. Based on the continued strong consumer demand trends, we are raising our full-year 2021 Revenue and Adjusted EBITDA guidance. Further, we have high confidence that our full-year 2022 Revenue will finish ahead of the target as the favorable secular tailwinds in the industry likely persist, allowing occupancy and Gross Booking Value per Night Sold to remain above pre-pandemic levels.
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Revenue Finishes Ahead of Target on Record Gross Booking Value. Gross Booking Value reached $776 million in the third quarter, up 97% year-over-year. As a result, Revenue reached an all-time high of $330 million in the third quarter, up 77% year-over-year and $72 million, or 28%, above the target of $258 million.
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Over 1.8 Million Nights Sold. There were more than 1.8 million Nights Sold in the third quarter compared to 1.1 million in the third quarter of 2020. We continued to see strong demand for vacation rentals during our seasonally strongest quarter. Through our internally developed, technology-driven pricing strategies, we were able to drive Gross Booking Value per Night Sold to a record setting $422, up 19% year-over-year.
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Net Income. Net Income in the third quarter was $33 million compared to $9 million in the third quarter of 2020.
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Topline Outperformance Results in Adjusted EBITDA Beat and Demonstrates Inherent Operating Model Leverage. Third quarter 2021 Adjusted EBITDA was $57 million compared to $25 million in the third quarter of 2020 and above the target of $26 million. The $31 million outperformance on Adjusted EBITDA relative to the target was attributable to stronger than projected Revenue and demonstrates the underlying earnings and margin power of our business. Additionally, some of the investments we expected to make in the third quarter, funded by the outperformance in the second and third quarter, are now being made in the fourth quarter primarily due to the timing of our brand advertising campaign.
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Raising Full-year 2021 Revenue and Adjusted EBITDA Guidance. Based on the trends we’ve seen to date, we’ve raised our full-year 2021 Revenue guidance, and now expect Revenue to be in a range of $872 million to $877 million, with the range more than $100 million, or 16%, above our target of $757 million. We’ve also raised our full-year 2021 Adjusted EBITDA guidance to be in a range of negative $45 million to negative $40 million, which is about 10% to 20% better than our target of negative $49 million.
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Full-year 2022 Outlook. As we approach the end of 2021, we believe that the favorable consumer demand trends will persist into 2022. Given these trends, as well as our growth investments, we have increased confidence that we will finish ahead of the full-year 2022 Revenue target driven by relatively higher occupancy and Gross Booking Value per Night Sold.
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Favorable Shifts in Consumer Behavior. Our business continues to perform exceptionally well, driven by a combination of shifting consumer preferences toward vacation rentals and outstanding execution across our entire organization. We expect the consumer preference shift toward vacation rentals, which materializes in our strong occupancy and higher Gross Booking Value per Night Sold, to be enduring rather than transitory. We’ve seen massive trial of the category over the past 18 months; nearly 20% of guests stayed in a vacation rental for the first time between March 2020 and March 2021 according to a Skift Study and recent industry reports suggest trial could be even higher. Additionally, guests are having an outstanding experience with short-term rentals; 86% of guests plan to continue booking vacation rentals post-pandemic according to VRM Intel and 52% of guests would prefer to stay in a vacation rental over a hotel post-pandemic according to a Skift Study. Finally, we expect a continuation of favorable secular trends such as “work from anywhere” and expanded use cases of vacation rentals. While the consumer preference shift towards vacation rentals has been a decade in the making, the environment over the past 18 months has accelerated adoption. We believe the consumer demand environment will remain above pre-pandemic levels, which gives us the confidence to accelerate investments in the business and raise our full-year 2021 financial guidance. It also increases our confidence that full-year 2022 Revenue will finish above our target.
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Product Updates. We recently released our AI-driven Itinerary Based Pricing algorithm update, which is another custom-built technology tool that allows Vacasa to maximize income for its homeowners. We also will begin to more broadly roll out Vacasa Smart Home technology across our portfolio, which leverages proprietary, in-home technology devices to create an elevated guest experience, enables local teams to support homes remotely, and drive operational efficiencies. Finally, we added a Probability of Booking feature to our homeowner portal to help homeowners understand the probability of a guest booking their home on a given night along with the projected associated income. This enables homeowners to make informed decisions regarding when to leave their calendars open for guests in order to maximize revenue. We have a deep product roadmap and will continue to invest in engineers to improve our technology offering and, in turn, all facets of the homeowner and guest experience.
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Transaction Update. TPGS and Vacasa currently expect to close the proposed business combination with Vacasa Holdings in the fourth quarter of 2021. Vacasa, Inc.’s registration statement on Form S-4 (the “Registration Statement”) was declared effective by the United States Securities and Exchange Commission (the “SEC”) on November 10, 2021. We expect TPGS’ shareholder vote to take place on November 30, 2021 at 4:30 p.m. Eastern time. The closing of the business combination is subject to shareholder approval and other customary closing conditions.
Management Remarks on the Third Quarter
“We generated record results in the third quarter, driven by a combination of consumers’ continued desire to travel, the ongoing preference shift towards vacation rentals, and strong execution across our entire organization,” said Matt Roberts, CEO. “While guest demand is the leading driver of our outperformance, we’ve had solid supply additions through both our individual and portfolio approaches in 2021. We now have more than 35,000 homes on our platform, in-line with the expectations we outlined when we announced our transaction with TPGS, and are the largest vacation rental management platform in North America.”
“A strong consumer demand environment allowed us to achieve high occupancy and record levels of Gross Booking Value per Night Sold, up 19% year-over-year, leading to third quarter Revenue and Adjusted EBITDA coming in well ahead of our targets,” said Jamie Cohen, CFO of Vacasa. “As we indicated in September, we are investing the outperformance from the second and third quarters back into the business during the fourth quarter through a brand advertising campaign and a pull forward of hiring to drive growth as we enter 2022. Even with the investments in the fourth quarter, we are still expecting to deliver full-year 2021 Adjusted EBITDA about 10% to 20% better than our target.”
“With the business performing exceptionally well, we are raising our Revenue guidance and now expect full-year 2021 Revenue to come in more than $100 million ahead of our initial target,” said Roberts. “Based on everything we’ve seen to date, we are more confident that occupancy and Gross Booking Value per Night Sold will remain above pre-pandemic levels in 2022. As a result of this and the investments we are making, we expect full-year 2022 Revenue to finish ahead of our target and look forward to sharing a more detailed 2022 outlook when we report fourth quarter results.”
SUMMARY
As you can see their earnings reports keep getting stronger. Granted the Q2 YoY numbers could be inflated due to the covid lockdowns that covered a lot of 2020, but a lot of the lockdowns were lifted in Q3 of 2020 so the strong YoY increase in Q3 2021 leads me to believe that this is a company that is performing strongly regardless if the Q2 results were skewed due to covid-19.
This merger has been in the works since July 29th 2021. There is a shareholder meeting to vote on the merger Tuesday November 30th at 4:30pm. My expectation is that the merger passes. I think we could see a pop following the vote due to how strong this company is performing. This could be a long term play is well, at least in my opinion, because I am bullish in the short term vacation rental market. I am currently monitoring it and have no positions. I will be watching it next week to see how the stock is moving. There is currently no TA because the chart has essentially traded sideways, if not flat. If anyone has any comments or additions to this feel free to add. Negative and positive comments are welcome. I’m not an expert so do your own dd too, I could be completely wrong and the stock could tank as it is a SPAC and are very risky.
Oh and the new ticker will be VSCA after the merger, forgot to add that.
Edit: also today Northland Capital initiated coverage with an outperform rating and a PT of $15
2nd Edit: valuation 4.5 billion
Hope this was helpful
Puka out