10-Q 1 vcsa-20230930.htm 10-Q vcsa-20230930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to ________
Commission File Number: 001-41130

Vacasa_Identity_Lockup_Horizontal_RGB-Blue.gif
Vacasa, Inc.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
(State or other jurisdiction of incorporation or organization)
87-1995316
(I.R.S. Employer Identification No.)
850 NW 13th Avenue
Portland, OR 97209
(Address of principal executive offices)(Zip Code)
(503) 946-3650
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)Name of Each Exchange on Which Registered
Class A Common Stock, par value $0.00001 per share
VCSA
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐
Accelerated filer
Non-accelerated filer ☐
Smaller reporting company
Emerging growth company







If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of November 3, 2023, 12,453,362 shares of the registrant's Class A Common Stock were outstanding, 9,485,517 shares of the registrant's Class B Common Stock were outstanding, and 316,666 shares of the registrant's Class G Common Stock were outstanding.

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Table of Contents
Page
3

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q ("Quarterly Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our results of operations, financial position, growth strategy, seasonality, business strategy, policies, and approach, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid placing undue reliance on such statements.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties, and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to:

our ability to achieve profitability;
our ability to grow our business;
our expectations regarding our financial performance, including our revenue, costs, and Adjusted EBITDA;
our ability to attract and retain homeowners and guests;
our ability to compete in our industry;
our expectations regarding the health of the travel and hospitality industries, including in areas such as domestic travel, short-distance travel, and travel outside of top cities;
the effects of seasonal and other trends on our results of operations;
anticipated trends, developments, and challenges in our industry, business, and the highly competitive markets in which we operate, including changes in guest booking patterns and levels of supply of vacation rental homes;
the sufficiency of our cash and cash equivalents, revolving credit facility, and other sources of liquidity to meet our liquidity needs;
declines or disruptions to the travel and hospitality industries or general economic downturns;
our ability to anticipate market needs or develop new or enhanced offerings and services to meet those needs;
our ability to expand into new markets and businesses, expand our range of homeowner services, and pursue strategic partnership and acquisition opportunities;
any future impairment of our long-lived assets or goodwill;
our ability to manage any further expansion into international markets;
our ability to stay in compliance with laws and regulations, including tax laws, that currently apply or may become applicable to our business both in the United States and internationally and our expectations regarding the impact of various laws, regulations, and restrictions that relate to our business;
our expectations regarding our tax liabilities and the adequacy of our reserves;
our ability to effectively manage and expand our infrastructure, and maintain our corporate culture;
our ability to identify, recruit, and retain skilled personnel, including key members of senior management;
the effects of labor shortages and increases in wage and labor costs in our industry;
the safety, affordability, and convenience of our platform and our offerings, including the safety of, in and around the homes we manage;
our ability to keep pace with technological and competitive developments;
our ability to maintain and enhance brand awareness;
our ability to successfully defend litigation brought against us and our ability to secure adequate insurance coverage to protect the business and our operations;
our ability to make required payments under our credit agreement and to comply with the various requirements of our indebtedness;
our ability to effectively manage our exposure to fluctuations in foreign currency exchange rates;
the anticipated increase in expenses associated with being a public company;
our ability to remain in compliance with Nasdaq listing requirements;
our ability to maintain, protect, and enhance our intellectual property;
our use of artificial intelligence, or AI, in our business; and
4

those risks, uncertainties, and assumptions identified in Part I, Item 1A. "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Annual Report"), in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 1A. "Risk Factors" of our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 ("Q1 2023 Quarterly Report") and June 30, 2023 ("Q2 2023 Quarterly Report") and Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 1A. "Risk Factors" in this Quarterly Report, and in our subsequent filings with the Securities and Exchange Commission.

There may be additional risks that we consider immaterial or which are unknown. It is not possible to predict or identify all such risks.

The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements and our actual future results, levels of activity, performance, and achievements may be materially different from what we expect.

These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events, or otherwise.

Basis of Presentation

Vacasa, Inc. was incorporated on July 1, 2021 under the laws of the state of Delaware as a wholly owned subsidiary of Vacasa Holdings LLC ("Vacasa Holdings") for the purpose of consummating the business combination described herein. In December 2021, Vacasa, Inc. merged with TPG Pace Solutions Corp., with Vacasa, Inc. continuing as the surviving entity, following which Vacasa, Inc. consummated a series of reorganization transactions through which Vacasa, Inc. became the sole manager and owner of approximately 50.3% of the outstanding equity interests in Vacasa Holdings, and Vacasa Holdings cancelled its ownership interest in Vacasa, Inc. The business combination was accounted for as a reverse recapitalization (the "Reverse Recapitalization") in accordance with accounting principles generally accepted in the United States of America ("GAAP"). For the period from inception to December 6, 2021, Vacasa, Inc. had no operations, assets or liabilities. Unless otherwise indicated, the financial information included herein is that of Vacasa Holdings, which, following the business combination, became the business of Vacasa, Inc. and its subsidiaries.

Additionally, unless the context otherwise requires, references herein to the “Company,” “we,” “us,” or “our” refer (a) after December 6, 2021, to Vacasa, Inc. and its consolidated subsidiaries and (b) prior to December 6, 2021, to Vacasa Holdings and its consolidated subsidiaries.
5

PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)

Vacasa, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)


As of September 30,As of December 31,
20232022
Assets
Current assets:
Cash and cash equivalents$151,291 $157,810 
Restricted cash162,327 161,850 
Accounts receivable, net11,543 17,204 
Prepaid expenses and other current assets27,442 44,499 
Total current assets352,603 381,363 
Property and equipment, net59,422 65,543 
Intangible assets, net125,166 214,851 
Goodwill171,853 585,205 
Other long-term assets56,556 58,622 
Total assets$765,600 $1,305,584 
Liabilities, Temporary Equity, and Equity
Current liabilities:
Accounts payable$38,888 $35,383 
Funds payable to owners178,926 228,758 
Hospitality and sales taxes payable50,128 52,217 
Deferred revenue103,262 124,969 
Future stay credits1,145 3,369 
Accrued expenses and other current liabilities76,050 85,833 
Total current liabilities448,399 530,529 
Long-term debt, net of current portion 125 
Other long-term liabilities37,385 54,987 
Total liabilities$485,784 $585,641 
Commitments and contingencies (Note 14)
Redeemable noncontrolling interests93,539 306,943 
Equity:
Class A Common Stock, par value $0.00001, 1,000,000,000 shares authorized; 12,553,800 and 11,819,511 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.(1)
3 2 
Class B Common Stock, par value $0.00001, 476,333,850 shares authorized; 9,387,427 and 9,872,261 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.(1)
2 2 
Additional paid-in capital1,384,387 1,355,141 
Accumulated deficit(1,197,252)(942,147)
Accumulated other comprehensive income (loss)(863)2 
Total equity186,277 413,000 
Total liabilities, temporary equity, and equity$765,600 $1,305,584 

(1) Common stock shares issued and outstanding have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split that occurred on October 2, 2023. Refer to Note 16 - Subsequent Event for additional information.

The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Vacasa, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share data)
(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenue$379,077 $412,184 $940,510 $969,792 
Operating costs and expenses:
Cost of revenue, exclusive of depreciation and amortization shown separately below150,789 174,123 417,046 447,976 
Operations and support64,998 76,877 187,662 196,349 
Technology and development16,026 18,422 45,900 52,493 
Sales and marketing57,658 75,020 171,559 196,909 
General and administrative19,328 31,043 61,402 83,486 
Depreciation5,204 5,376 15,597 16,676 
Amortization of intangible assets15,266 15,490 46,143 45,771 
Impairment of long-lived assets46,000  46,000  
Impairment of goodwill411,000  411,000  
Total operating costs and expenses786,269 396,351 1,402,309 1,039,660 
Income (loss) from operations(407,192)15,833 (461,799)(69,868)
Interest income2,349 779 6,022 1,220 
Interest expense(561)(606)(1,873)(1,957)
Other income (loss), net1,823 (23)5,597 41,499 
Income (loss) before income taxes(403,581)15,983 (452,053)(29,106)
Income tax benefit (expense)1,123 (170)341 (1,073)
Net income (loss)$(402,458)$15,813 $(451,712)$(30,179)
Less: Net income (loss) attributable to redeemable noncontrolling interests(174,266)7,489 (196,607)(15,464)
Net income (loss) attributable to Class A Common Stockholders$(228,192)$8,324 $(255,105)$(14,715)
Net income (loss) per share of Class A Common Stock(1):
Basic$(18.37)$0.73 $(21.07)$(1.34)
Diluted$(18.37)$0.72 $(21.07)$(1.34)
Weighted-average shares of Class A Common Stock used to compute net income (loss) per share(1):
Basic12,419 11,341 12,108 10,993 
Diluted12,419 11,615 12,108 10,993 

(1) Weighted-average shares outstanding used in the computation of basic and diluted earnings (loss) per share have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split that occurred on October 2, 2023. Refer to Note 16 - Subsequent Event for additional information.

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Vacasa, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income (loss)$(402,458)$15,813 $(451,712)$(30,179)
Foreign currency translation adjustments(602)(718)(1,601)(1,437)
Total comprehensive income (loss)$(403,060)$15,095 $(453,313)$(31,616)
Less: Comprehensive income (loss) attributable to redeemable noncontrolling interests(174,541)7,144 (197,343)(16,150)
Total comprehensive income (loss) attributable to Class A Common Stockholders$(228,519)$7,951 $(255,970)$(15,466)

The accompanying notes are an integral part of these condensed consolidated financial statements.
8

Vacasa, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
20232022
Cash from operating activities:
Net loss$(451,712)$(30,179)
Adjustments to reconcile net loss to net cash provided by operating activities:
Credit loss expense2,686 4,708 
Depreciation15,597 16,676 
Amortization of intangible assets46,143 45,771 
Impairment of long-lived assets46,000  
Impairment of goodwill411,000  
Impairment of right-of-use assets4,240  
Future stay credit breakage(1,180)(15,158)
Reduction in the carrying amount of right-of-use assets7,833 9,561 
Deferred income taxes(6)433 
Other gains and losses(1,084)2,414 
Fair value adjustment on derivative liabilities(4,325)(43,921)
Non-cash interest expense161 162 
Equity-based compensation expense12,005 28,360 
Change in operating assets and liabilities, net of assets acquired and liabilities assumed:
Accounts receivable2,908 65,433 
Prepaid expenses and other assets10,358 (26,433)
Accounts payable3,563 (3,976)
Funds payable to owners(50,230)(28,177)
Hospitality and sales taxes payable(2,188)1,811 
Deferred revenue and future stay credits(22,729)(26,191)
Operating lease obligations(8,003)(8,050)
Accrued expenses and other liabilities7,398 13,750 
Net cash provided by operating activities28,435 6,994 
Cash from investing activities:
Purchases of property and equipment(3,996)(8,367)
Cash paid for internally developed software(5,689)(7,407)
Cash paid for business combinations, net of cash and restricted cash acquired(664)(87,699)
Net cash used in investing activities(10,349)(103,473)
Cash from financing activities:
Payments of Reverse Recapitalization costs (459)
Cash paid for business combinations(19,478)(28,093)
Payments of long-term debt(250)(250)
Proceeds from exercise of stock options362 157 
Proceeds from Employee Stock Purchase Program716  
Proceeds from borrowings on revolving credit facility2,000 5,000 
Repayment of borrowings on revolving credit facility(2,000)(5,000)
Repayment of financed insurance premiums(4,386) 
Other financing activities(330)(1,709)
Net cash used in financing activities(23,366)(30,354)
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash(762)(480)
Net decrease in cash, cash equivalents and restricted cash(6,042)(127,313)
Cash, cash equivalents and restricted cash, beginning of period319,660 519,136 
Cash, cash equivalents and restricted cash, end of period$313,618 $391,823 
9

Vacasa, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
20232022
Supplemental disclosures of cash flow information:
Cash paid for income taxes, net of refunds$4,474 $602 
Cash paid for interest1,733 1,792 
Cash paid for operating lease liabilities3,049 11,355 
Supplemental disclosures of non-cash activities:
Financed insurance premiums186  
Lease liabilities exchanged for right-of-use assets662 6,486 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$151,291 $150,791 
Restricted cash162,327 241,032 
Total cash, cash equivalents and restricted cash$313,618 $391,823 

The accompanying notes are an integral part of these condensed consolidated financial statements.
10


Vacasa, Inc.
Condensed Consolidated Statements of Equity (Deficit)
(in thousands, except share and unit data)
(unaudited)
Redeemable Non-controlling InterestsClass A Common StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Equity (Deficit)
Amount
Shares(1)
Amount
Shares(1)
AmountAmountAmountAmountAmount
Balance as of December 31, 2022$306,943 11,819,511 $2 9,872,261 $2 $1,355,141 $(942,147)$2 $413,000 
Vesting of employee equity units382 23,009 (382)(382)
Vesting of restricted stock units(1,669)126,647 1,667 2 1,669 
Exercise of equity-based awards(480)36,986 841 841 
Purchase of shares under the ESPP(820)62,813 1,636 1,636 
Redemption of OpCo units and retirement of Class B Common Stock(15,559)507,843 1 (507,843)15,537 25 15,563 
Equity-based compensation2,058 9,947 9,947 
Foreign currency translation adjustments(709)(892)(892)
Net loss(196,607)(255,105)(255,105)
Balance as of September 30, 2023$93,539 12,553,800 $3 9,387,427 $2 $1,384,387 $(1,197,252)$(863)$186,277 
Balance as of June 30, 2023$276,613 12,191,309 $2 9,669,069 $2 $1,371,618 $(969,060)$(536)$402,026 
Vesting of employee equity units93 5,707 (93)(93)
Vesting of restricted stock units(631)50,074 630 1 631 
Exercise of equity-based awards(317)25,068 576 576 
Purchase of shares under the ESPP—  
Redemption of OpCo units and retirement of Class B Common Stock(8,220)287,349 1 (287,349)8,207 16 8,224 
Equity-based compensation525 3,449 3,449 
Foreign currency translation adjustments(258)(344)(344)
Net loss(174,266)(228,192)(228,192)
Balance as of September 30, 2023$93,539 12,553,800 $3 9,387,427 $2 $1,384,387 $(1,197,252)$(863)$186,277 

(1) Common stock shares outstanding have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split that occurred on October 2, 2023. Refer to Note 16 - Subsequent Event for additional information.
11


Vacasa, Inc.
Condensed Consolidated Statements of Equity (Deficit)
(in thousands, except share and unit data)
(unaudited)
Redeemable Non-controlling InterestsClass A Common StockClass B Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Equity (Deficit)
Amount
Shares(1)
Amount
Shares(1)
AmountAmountAmountAmountAmount
Balance as of December 31, 2021$1,770,096 10,739,689 $2 10,637,598 $2 $ $(751,891)$(59)$(751,946)
Vesting of employee equity units2,282 97,899 (2,282)(2,282)
Vesting of restricted stock units(1,826)85,328 1,826 1,826 
Exercise of equity-based awards(1,089)51,040 (412)(412)
Redemption of OpCo units and retirement of Class B Common Stock(24,467)552,699 (552,699)24,453 14 24,467 
Equity-based compensation4,491 23,869 23,869 
Other comprehensive loss(672)(765)(765)
Net loss(15,464)(14,715)(14,715)
Adjustment of redeemable noncontrolling interest to redemption amount(1,108,127)1,120,485 (12,358)1,108,127 
Balance as of September 30, 2022$625,224 11,428,756 $2 10,182,798 $2 $1,167,939 $(778,964)$(810)$388,169 
Balance as of June 30, 2022$590,163 11,239,119 $2 10,245,887 $2 $1,188,035 $(787,288)$(437)$400,314 
Vesting of employee equity units424 18,073 (424)(424)
Vesting of restricted stock units(1,339)63,232 1,339 1,339 
Exercise of equity-based awards(961)45,243 (594)(594)
Redemption of OpCo units and retirement of Class B Common Stock(3,623)81,162 (81,162)3,617 6 3,623 
Equity-based compensation1,439 7,937 7,937 
Other comprehensive loss(339)(379)(379)
Net income7,489 8,324 8,324 
Adjustment of redeemable noncontrolling interest to redemption amount31,971 (31,971)(31,971)
Balance as of September 30, 2022$625,224 11,428,756 $2 10,182,798 $2 $1,167,939 $(778,964)$(810)$388,169 

(1) Common stock shares outstanding have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split that occurred on October 2, 2023. Refer to Note 16 - Subsequent Event for additional information.

The accompanying notes are an integral part of these condensed consolidated financial statements.
12


13

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)


Organization

Vacasa, Inc. and its subsidiaries (the "Company") operate a vertically integrated vacation rental platform. Homeowners utilize the Company’s technology and services to realize income from their rental assets. Guests from around the world utilize the Company’s technology and services to search for and book Company-listed properties in the United States, Belize, Canada, Costa Rica, and Mexico. The Company collects nightly rent on behalf of homeowners and earns the majority of its revenue from commissions on rent and from additional reservation-related fees paid by guests when a vacation rental is booked directly through the Company’s website or app or through its distribution partners. The Company conducts its business through Vacasa Holdings LLC ("Vacasa Holdings" or "OpCo") and its subsidiaries. The Company is headquartered in Portland, Oregon.

Reverse Stock Split

On October 2, 2023, the Company completed a 1-for-20 reverse stock split of the Company's Class A Common Stock, Class B Common Stock, and Class G Common Stock (the "Reverse Stock Split"). All share and share-related information presented in these condensed consolidated financial statements has been retroactively adjusted for all periods presented to reflect the decreased number of shares resulting from the Reverse Stock Split. See Note 16, Subsequent Event, for additional information.


Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with GAAP and the rules and regulations of the Securities and Exchange Commission ("SEC"). These condensed consolidated financial statements include the accounts of the Company, its wholly-owned or majority-owned subsidiaries, and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. All intercompany balances and transactions have been eliminated in consolidation. The financial information as of December 31, 2022 contained in this Quarterly Report is derived from the audited consolidated financial statements and notes included in the Company's 2022 Annual Report, which should be read in conjunction with these condensed consolidated financial statements. Certain information in footnote disclosures normally included in annual financial statements was condensed or omitted for the interim periods presented in accordance with GAAP. In the opinion of management, the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The interim results of operations and cash flows are not necessarily indicative of those results and cash flows expected for the year.

As of September 30, 2023, the Company held 12,553,800 units of Vacasa Holdings ("OpCo Units"), which represented an ownership interest of approximately 57%. The portion of the consolidated subsidiaries not owned by the Company and any related activity is eliminated through redeemable noncontrolling interests in the condensed consolidated balance sheets and net income (loss) attributable to redeemable noncontrolling interests in the condensed consolidated statements of operations.

The Company is an emerging growth company, as defined in Section 2(a) of the Securities Act of 1933, as amended, as modified by the Jumpstart Our Business Startups Act of 2012, which permits the Company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. As of January 1, 2022, the Company elected to irrevocably opt out of the extended transition period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions reflected in the condensed consolidated financial statements include, but are not limited to, the useful lives of property and equipment and intangible assets, allowance for credit losses, valuation of assets acquired and liabilities assumed in business acquisitions and related contingent consideration, valuation of Class G Common Stock, valuation of equity-based compensation, valuation of goodwill, and valuation of long-lived assets. Actual results may differ materially from such estimates. Management believes that the estimates, and judgments upon which they rely, are reasonable based upon information available to them at the time that these estimates and judgments are made. To the extent that there are material differences between these estimates and actual results, the Company’s condensed consolidated financial statements will be affected.

14

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)


Significant Accounting Policies

Except as identified below, there were no changes to the accounting policies disclosed in Note 2, Significant Accounting Policies of the Company's 2022 Annual Report that had a material impact on the Company's condensed consolidated financial statements and related notes.

Impairment of Long-lived Assets

The Company evaluates its long-lived assets or asset groups for indicators of possible impairment by comparison of the carrying amount to future net undiscounted cash flows expected to be generated by such asset or asset group and its eventual disposal when events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. If the carrying amount of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined primarily using the estimated cash flows discounted at a rate commensurate with the risk involved and based on assumptions representative of market participants. During the third quarter of 2023, the Company recorded long-lived asset impairment charges of $46.0 million. There were no long-lived asset impairment charges recorded during 2022. Refer to Note 7, Intangible Assets, Net and Goodwill, for additional information.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. The Company has one reporting unit which the Company tests for impairment on the first day of the fourth quarter, or whenever events or changes in circumstances indicate that goodwill might be impaired. The Company reviews goodwill for impairment by initially considering qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, as a basis for determining whether it is necessary to perform a quantitative analysis. If it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative analysis is performed to identify goodwill impairment. The Company may elect to bypass the qualitative assessment and proceed directly to performing a quantitative analysis.

If the fair value of the reporting unit exceeds its carrying amount, goodwill is not impaired. If the fair value of the reporting unit is less than its carrying amount, a goodwill impairment loss is measured as the excess of the carrying amount of the reporting unit over its fair value (not to exceed the reporting unit's total goodwill balance).

During the third quarter of 2023, the Company recorded goodwill impairment charges of $411.0 million. During the fourth quarter of 2022, the Company recorded goodwill impairment charges of $244.0 million. Refer to Note 7, Intangible Assets, Net and Goodwill, for additional information.

Accounting Pronouncements Adopted in Fiscal 2023

In September 2022, the FASB issued Accounting Standards Update ("ASU") No. 2022-04, requiring enhanced disclosures related to supplier financing programs. The ASU requires disclosure of the key terms of the program and a rollforward of the related obligation during the annual period, including the amount of obligations confirmed and obligations subsequently paid. The new disclosure requirements became effective for the Company on January 1, 2023, except for the rollforward requirement, which will be effective for the Company beginning on January 1, 2024. The adoption did not have a material impact on the Company's financial statements and related disclosures.

Accounting Pronouncements Not Yet Adopted

The Company has not identified any recent accounting pronouncements that are expected to have a material impact on the Company's financial position, results of operations, or cash flows.

15

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)


Revenue Disaggregation

A disaggregation of the Company’s revenues by nature of the Company’s performance obligations are as follows (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Vacation rental platform$372,606 $401,228 $917,881 $934,811 
Other services6,471 10,956 22,629 34,981 
Total$379,077 $412,184 $940,510 $969,792 

Contract Liability Balances

Contract liability balances on the Company’s condensed consolidated balance sheets consist of deferred revenue for amounts collected in advance of a guest stay, limited to the amount of the booking to which the Company expects to be entitled as revenue. The Company’s deferred revenue balances exclude funds payable to owners and hospitality and sales taxes payable, as those amounts will not result in revenue recognition. Deferred revenue is recognized into revenue over the period in which a guest completes a stay. Substantially all of the deferred revenue balances at the end of each period are expected to be recognized as revenue within the subsequent 12 months.

Future Stay Credits

In the event a booked reservation made through our website or app is cancelled, the Company may offer a refund or a future stay credit up to the value of the booked reservation. Future stay credits are recognized upon issuance as a liability on the Company's consolidated balance sheets. Revenue from future stay credits is recognized when redeemed by guests, net of the portion of the booking attributable to funds payable to owners and hospitality and sales taxes payable. The Company uses historical breakage rates to estimate the portion of future stay credits that will not be redeemed by guests and recognizes these amounts as breakage revenue in proportion to the expected pattern of redemption or upon expiration. Future stay credits typically expire fifteen months from the date of issue.

The table below presents the activity of the Company's future stay credit liability balance (in thousands):

Nine Months Ended September 30,
2023
Balance as of December 31, 2022$3,369 
Issuances1,772 
Redemptions(2,807)
Breakage recognized in revenue(1,180)
Foreign currency fluctuations(9)
Balance as of September 30, 2023$1,145 

Costs to Obtain a Contract

The Company capitalizes certain costs it incurs to obtain new homeowner contracts when those costs are expected to be recovered through revenue generated from that contract. Capitalized amounts are amortized on a straight-line basis over the estimated life of the customer through sales and marketing expenses in the condensed consolidated statements of operations. Costs to obtain a contract capitalized as of September 30, 2023 and December 31, 2022 were $33.2 million and $26.4 million, respectively, and were recorded as a component of prepaid expenses and other current assets and other long-term assets in the condensed consolidated balance sheets. The amount of amortization recorded for the three and nine months ended
16

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

September 30, 2023 was $2.2 million and $6.0 million, respectively. The amount of amortization recorded for the three and nine months ended September 30, 2022 was $1.3 million and $3.9 million, respectively.

Allowance for Credit Losses

As of September 30, 2023 and December 31, 2022, the Company’s allowance for credit losses related to accounts receivable was $11.3 million and $11.2 million, respectively. For the three and nine months ended September 30, 2023, the Company recognized credit loss expense of $0.9 million and $2.7 million, respectively, which were recorded as a component of general and administrative expense in the condensed consolidated statements of operations. For the three and nine months ended September 30, 2022, the Company recognized credit loss expense of $1.6 million and $4.7 million, respectively, which was recorded as a component of general and administrative expense in the condensed consolidated statements of operations.


The Company has acquired vacation rental properties on its platform through individual additions, as well as through portfolio and strategic acquisitions, where the Company acquires and onboards multiple homes in a single transaction. Portfolio and strategic acquisitions are generally accounted for as business combinations. The goodwill resulting from portfolio and strategic acquisitions arises largely from synergies expected from combining the operations of the businesses acquired with the Company's existing operations and from benefits derived from gaining the related assembled workforce.

Nine Months Ended September 30, 2023

During the nine months ended September 30, 2023, the Company completed one portfolio acquisition with total consideration of $0.3 million.

During the nine months ended September 30, 2023, the Company recorded measurement period adjustments related to certain portfolio acquisitions that occurred in prior periods. For more information about these acquisitions, see the Company's 2022 Annual Report. The impact of the measurement period adjustments was a decrease in goodwill of $2.5 million and an increase in intangible assets of $2.4 million. The remaining changes in acquired assets and assumed liabilities were not material.

The purchase price allocations for the portfolio acquisitions completed from the fourth quarter of 2022 through the third quarter of 2023 are preliminary, and the Company has not obtained and evaluated all of the detailed information necessary to finalize the opening balance sheet amounts in all respects. The Company recorded the purchase price allocations based upon currently available information.


The following tables set forth the Company's financial assets and liabilities that were measured at fair value on a recurring basis (in thousands):

As of September 30, 2023
Level 1Level 2Level 3Total
Liabilities
Contingent consideration$ $ $9,692 $9,692 
Class G Common Stock(1)
  752 752 

As of December 31, 2022
Level 1Level 2Level 3Total
Liabilities
Contingent consideration $ $ $22,317 $22,317 
Class G Common Stock(1)
  5,077 5,077 

(1) For more information, see Note 13, Equity of our 2022 Annual Report.

17

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

The carrying amounts of certain financial instruments, including cash equivalents, restricted cash, accounts receivable, and accounts payable, approximate fair value due to their short-term maturities and are excluded from the fair value tables above.

Level 3 instruments consist of contingent consideration obligations related to acquired businesses and the liabilities for contingent earnout share consideration represented by the Company's Class G Common Stock.

Contingent Consideration

The contingent consideration obligations are recorded in accrued expenses and other current liabilities and other long-term liabilities on the condensed consolidated balance sheets. The fair value of the contingent consideration is estimated utilizing an income approach and based on the Company's expectation of achieving the contractually defined homeowner contract conversion and retention targets at the acquisition date. The Company assesses the fair value of these obligations at each reporting date thereafter with any changes reflected as gains and losses in general and administrative expenses in the condensed consolidated statements of operations. The charges for changes in fair value of the contingent consideration were not material for the three and nine months ended September 30, 2023 and 2022.

Class G Common Stock

The contingent earnout share consideration represented by the Company's Class G Common Stock is recorded in other long-term liabilities on the condensed consolidated balance sheets. The fair value of the Class G Common Stock is estimated on a recurring basis using the Monte Carlo simulation method. The fair value is based on the simulated stock price of the Company over the remaining term of the shares. Pursuant to the Amended and Restated Certificate of Incorporation, the Class G Common Stock is automatically converted to Class A shares at certain conversion ratios upon the occurrence of their respective triggering events. Inputs used to determine the estimated fair value of the Class G Common Stock include the remaining contractual term of the shares, the risk-free rate, the volatility of comparable companies over the remaining term, and the price of the Company's Class A Common Stock. The Company assesses the fair value of the Class G Common Stock at each reporting date with any changes reflected as other income (expense), net in the condensed consolidated statements of operations.

The following table summarizes the changes in the Company's Class G Common Stock measured and recorded at fair value on a recurring basis using significant unobservable inputs (in thousands):

Nine Months Ended September 30,
2023
Balance as of December 31, 2022$5,077 
Change in fair value of Class G Common Stock included in earnings(4,325)
Balance as of September 30, 2023$752 

Impairment of Long-lived Assets

During the three and nine months ended September 30, 2023, the Company recorded long-lived asset impairment charges of $46.0 million. The fair value estimate of the Company's homeowner contract assets was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information. For more information on the impairment of long-lived assets, refer to Note 7, Intangible Assets, Net and Goodwill.

Impairment of Goodwill

During the three and nine months ended September 30, 2023, the Company recorded goodwill impairment charges of $411.0 million. The fair value estimate of the Company's single reporting unit was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information. For more information on the impairment of goodwill, refer to Note 7, Intangible Assets, Net and Goodwill.

Impairment of Right-of-Use Assets

The Company tests long-lived assets for recoverability whenever events or changes in circumstances suggest that the carrying value of an asset or group of assets may not be recoverable. During the three months ended March 31, 2023, the Company took substantive action to negotiate certain sublease agreements for portions of the Company's leased corporate office space in
18

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Portland, Oregon and Boise, Idaho. Based on the sublease negotiations, the Company determined that the respective right-of-use assets had net carrying values that exceeded their estimated undiscounted future cash flows. The Company then estimated the fair value of the asset groups based on their discounted cash flows. The carrying values of the asset groups exceeded their fair values and, as a result, the Company recorded right-of-use asset impairments of $4.2 million. The impairment charges are recorded within general and administrative expenses in the condensed consolidated statements of operations. During the three months ended June 30, 2023, the Company executed the sublease agreements for portions of the Company's leased corporate office space in Portland, Oregon. During the three months ended September 30, 2023, the Company executed the sublease agreement for a portion of the Company's leased corporate office space in Boise, Idaho. There were no material changes to the final sublease agreements and, therefore, no incremental impairment charges were recorded.


Property and equipment, net consisted of the following (in thousands):

As of September 30,As of December 31,
20232022
Land$13,394 $13,394 
Buildings and building improvements12,471 12,471 
Leasehold improvements6,525 6,528 
Computer equipment13,524 13,510 
Furniture, fixtures, and other25,724 22,096 
Vehicles8,036 7,975 
Internal-use software58,250 53,024 
Total137,924 128,998 
Less: Accumulated depreciation(78,502)(63,455)
Property and equipment, net$59,422 $65,543 


Intangible assets, net consisted of the following (in thousands):

Weighted Average Useful Life Remaining (in years)As of September 30, 2023
Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying Amount
Homeowner contracts3$314,100 $(143,238)$(46,000)$124,862 
Databases, photos, and property listings026,525 (26,285) 240 
Trade names19,586 (9,552) 34 
Other(1)
52,902 (2,872) 30 
Total intangible assets$353,113 $(181,947)$(46,000)$125,166 

(1) Other intangible assets consist primarily of non-compete agreements, websites, and domain names.

19

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Weighted Average Useful Life Remaining (in years)As of December 31, 2022
Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying Amount
Homeowner contracts4$311,456 $(101,142)$ $210,314 
Databases, photos, and property listings127,450 (23,661) 3,789 
Trade names19,942 (9,316) 626 
Other(1)
22,903 (2,781) 122 
Total intangible assets$351,751 $(136,900)$ $214,851 

(1) Other intangible assets consist primarily of non-compete agreements, websites, and domain names.

The Company's estimated future amortization of intangible assets as of September 30, 2023 is expected to be as follows (in thousands):

Year Ending December 31:Amount
Remainder of 2023$10,241 
202439,439 
202537,431 
202622,131 
20276,778 
Thereafter9,146 
Total$125,166 

The following table summarizes the changes in the Company's goodwill balance (in thousands):

Nine Months Ended September 30,
2023
Balance at beginning of period(1)
$585,205 
Acquisitions179 
Measurement period adjustments(2,539)
Impairment of goodwill(411,000)
Foreign exchange translation and other8 
Balance at end of period(2)
$171,853 

(1) Goodwill is net of accumulated impairment losses of $244.0 million that were recorded to the Company's single reporting unit during the fourth quarter of fiscal 2022.

(2) Goodwill is net of accumulated impairment losses of $655.0 million that were recorded to the Company's single reporting unit during the fourth quarter of fiscal 2022 and the third quarter of fiscal 2023.

Impairment

During 2023, the Company experienced a sustained decline in share price that pushed its market capitalization below the carrying value of its stockholders’ equity. Further, the Company saw a significant decline in Gross Booking Value ("GBV") during the third quarter of 2023. Based on these factors, the Company concluded the events and changes in circumstances indicated an impairment may exist (the "triggering event") and conducted quantitative impairment assessments of long-lived assets and goodwill as of September 30, 2023.

Impairment of Long-lived Assets

The Company evaluates its long-lived assets or asset groups for indicators of possible impairment by comparison of the carrying amount to future net undiscounted cash flows expected to be generated by such asset or asset group and its eventual disposal
20

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

(the "recoverability test") when there is a triggering event. The Company determined its long-lived assets represent one asset group for purposes of long-lived asset impairment. Based on the results of the recoverability test, the Company concluded the the carrying value of the single asset group is not recoverable. To allocate and recognize the impairment charge, the Company determined the individual fair value of the long-lived assets.

The carrying value of the Company's homeowner contracts exceeded the fair value, resulting in a long-lived asset impairment charge of $46.0 million. No impairment was recognized on the remaining long-lived assets as their carrying values did not exceed their fair values. The Company estimated the fair value of the homeowner contracts based on the present value of estimated future cash flows, which the Company considers to be a Level 3 unobservable input in the fair value hierarchy. The Company prepared cash flow projections based on management's estimates of revenue growth rates and operating margins, taking into consideration the historical performance and the current macroeconomic, industry, and market conditions. The Company based the discount rate on the weighted-average cost of capital considering Company-specific characteristics and changes in the reporting unit's projected cash flows.

Impairment of Goodwill

The Company reviews goodwill for impairment annually, as of the first day of the fourth quarter, and more frequently if events or changes in circumstances indicate an impairment may exist. Based on the triggering event identified above, the Company conducted a quantitative goodwill impairment assessment as of September 30, 2023. The goodwill impairment assessment resulted in goodwill impairment charges of $411.0 million. The fair value estimate of the Company's single reporting unit was derived from a combination of an income approach and a market approach. Under the income approach, the Company estimated the fair value of the reporting unit based on the present value of estimated future cash flows, which the Company considers to be a Level 3 unobservable input in the fair value hierarchy. The Company prepared cash flow projections based on management's estimates of revenue growth rates and operating margins, taking into consideration the historical performance and the current macroeconomic, industry, and market conditions. The Company based the discount rate on the weighted-average cost of capital considering Company-specific characteristics and changes in the reporting unit's projected cash flows. Under the market approach, the Company estimated the fair value of the reporting unit based on revenue market multiples derived from comparable publicly traded companies with similar characteristics as the reporting unit, as well as an estimated control premium.

Potential indicators of impairment include significant changes in performance relative to expected operating results, significant negative industry or economic trends, or a significant decline in the Company's stock price and/or market capitalization for a sustained period of time. It is reasonably possible that one or more impairment indicators could occur or intensify in the near term, which may result in further impairment of long-lived assets or goodwill.


Accrued expenses and other current liabilities consisted of the following (in thousands):

As of September 30,As of December 31,
20232022
Employee-related accruals$32,311 $25,110 
Homeowner reserves11,117 9,837 
Current portion of acquisition liabilities(1)
12,412 25,056 
Current portion of operating lease liabilities8,792 9,490 
Other11,418 16,340 
Total accrued expenses and other current liabilities$76,050 $85,833 

(1) The current portion of acquisition liabilities includes contingent consideration and deferred payments to sellers due within one year.

21

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)


The Company's debt obligations consisted of the following (in thousands):

As of September 30,As of December 31,
20232022
Insurance premium financing$298 $4,498 
Other long-term debt 375 
Total debt298 4,873 
Less: current maturities(1)
(298)(4,748)
Long-term portion$ $125 

(1) Current maturities of debt are recorded within accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Insurance Premium Financing

The Company has entered into short-term agreements to finance certain insurance premiums. The outstanding balance of $0.3 million as of September 30, 2023 is repayable in monthly installments of principal and interest through November 2023, at a weighted-average annual percentage rate of 5.65%.

Revolving Credit Facility

In October 2021, the Company and its wholly owned subsidiary (the "Borrower") and certain of its subsidiaries (collectively, the "Guarantors") entered into a credit agreement with JPMorgan Chase Bank, N.A. and the other lenders party thereto from time to time.

The credit agreement, as subsequently amended in December 2021 and June 2023 (as amended, the "Credit Agreement"; capitalized terms used herein and not otherwise defined are used as defined in the Credit Agreement), provides for a senior secured revolving credit facility in an aggregate principal amount of $105.0 million ("Revolving Credit Facility"). The Revolving Credit Facility includes a sub-facility for letters of credit in aggregate face amount of $40.0 million, which reduces borrowing availability under the Revolving Credit Facility. Proceeds may be used for working capital and general corporate purposes.

The June 2023 amendment modified the Credit Agreement to replace the LIBOR-based reference rate options with Adjusted Term Secured Overnight Financing Rate ("SOFR") based reference rate options. Subsequent to the amendment, any borrowings under the Revolving Credit Facility are subject to interest, determined as follows:

Alternate Base Rate ("ABR") borrowings accrue interest at a rate per annum equal to the ABR plus a margin of 1.50%. The ABR is equal to the greatest of (i) the Prime Rate, (ii) the New York Federal Reserve Bank Rate plus 0.50%, and (iii) the Adjusted Term SOFR for a one-month interest period plus 1.00%.
Term SOFR borrowings accrue interest at a rate per annum equal to the Adjusted Term SOFR plus a margin of 2.50%. Adjusted Term SOFR means, for any Interest Period, an interest rate per annum equal to (a) the Term SOFR for such Interest Period.

Borrowings under the Revolving Credit Facility do not amortize and are due and payable on October 7, 2026. Amounts outstanding under the Revolving Credit Facility may be voluntarily prepaid at any time and from time to time, in whole or in part, without premium or penalty. In addition to paying interest on the principal amounts outstanding under the Revolving Credit Facility, the Company is required to pay a commitment fee on unused amounts at a rate of 0.25% per annum. The Company is also required to pay customary letter of credit and agency fees.

The Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict the ability of the Borrower and its restricted subsidiaries to:

create, incur, assume or permit to exist any debt or liens;
merge into or consolidate or amalgamate with any other person, or permit any other person to merge into or consolidate with it, or liquidate or dissolve;
make or hold certain investments;
sell, transfer, lease, license or otherwise dispose of its assets, including equity interests (and, in the case of restricted subsidiaries, the issuance of additional equity interests);
22

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

pay dividends or make certain other restricted payments;
substantively alter the character of the business of the Borrower and its restricted subsidiaries, taken as a whole; and
sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its affiliates.

In addition, beginning on June 30, 2022, the Borrower and its restricted subsidiaries are required to maintain a minimum amount of consolidated revenue, measured on a trailing four-quarter basis, as of the last date of each fiscal quarter, provided that such covenant will only apply if, on such date, the aggregate principal amount of outstanding borrowings under the Revolving Credit Facility and letters of credit (excluding undrawn amounts under any letters of credit in an aggregate face amount of up to $20.0 million and letters of credit that have been cash collateralized) exceeds 35% of the then-outstanding revolving commitments. The Borrower is also required to maintain liquidity of at least $15.0 million as of the last date of each fiscal quarter beginning on June 30, 2022.

The obligations of the Borrower and the Guarantors are secured by first-priority liens on substantially all of the assets of the Borrower and the Guarantors. As of September 30, 2023 and December 31, 2022, there were no borrowings outstanding under the Revolving Credit Facility. As of September 30, 2023, there were $23.4 million of letters of credit issued under the Revolving Credit Facility, and $81.6 million was available for borrowings. As of September 30, 2023, the Company was in compliance with all covenants under the Credit Agreement.


Other long-term liabilities consisted of the following (in thousands):

As of September 30,As of December 31,
20232022
Class G Common Stock(1)
$752 $5,077 
Long-term portion of acquisition liabilities(2)
7,838 16,226 
Long-term portion of operating lease liabilities17,809 21,706 
Other10,986 11,978 
Total other long-term liabilities$37,385 $54,987 

(1) For more information, see Note 13, Equity of our 2022 Annual Report.

(2) The long-term portion of acquisition liabilities includes contingent consideration and deferred payments to sellers due after one year.


The Company's effective tax rate was an 0% benefit on pre-tax loss for the three months ended September 30, 2023 and 1% expense on pre-tax income for the three months ended September 30, 2022. The Company's effective tax rate was a 0% benefit on pre-tax loss for the nine months ended September 30, 2023 and a 4% expense on pre-tax loss for the nine months ended September 30, 2022. The effective tax rate differs from our statutory rate in both periods due to the effect of flow-through entity income and losses for which the taxable income or loss is allocated to the Vacasa Holdings, LLC members and due to valuation allowance considerations.

23

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)


Reverse Stock Split

On September 1, 2023, the Board of Directors of the Company approved a 1-for-20 reverse stock split (the "Reverse Stock Split") of the Company's Class A Common Stock, Class B Common Stock, and Class G Common Stock. The Reverse Stock Split was effective as of October 2, 2023. See Note 16, Subsequent Event, for additional information.

Equity-Based Award Activities

Restricted Stock Units

A summary of the Restricted Stock Unit ("RSU") activity was as follows during the period indicated:

Activity TypeRestricted Stock Units
(in thousands)
Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2022269$99.20 
Granted67321.20 
Vested(128)81.40 
Forfeited(89)64.00 
Outstanding as of September 30, 202372534.40 

As of September 30, 2023, there was unrecognized compensation expense of $21.4 million related to unvested RSUs, which is expected to be recognized over a weighted-average period of 2.6 years.

Performance Stock Units

The Company has granted Performance Stock Units ("PSUs") to certain members of its leadership team, which vest based upon the achievement of performance criteria and requisite service. The performance criteria are based on the achievement of certain share price appreciation targets. Attainment of each share price appreciation target is measured based on either the trailing 45-day or 60-day average closing trading price of our Class A Common Stock or, in the event of a change in control, the amount per share of Class A Common Stock to be paid to a stockholder in connection with such change in control. For certain of the awards, depending on the performance achieved, the actual number of shares of Class A Common Stock issued to the holder may range from 0% to 200% of the target number of PSUs granted. The number of PSUs granted included in the table below is based on the maximum potential achievement for all awards. In the event that performance criteria and requisite service are not achieved, the corresponding portion of the PSUs that do not vest will be forfeited.

A summary of the PSU activity was as follows during the period indicated:

Activity TypePerformance Stock Units
(in thousands)
Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2022105$58.00 
Granted14310.20 
Forfeited(5)75.80 
Outstanding as of September 30, 202324329.50 

As of September 30, 2023, there was unrecognized compensation expense of $4.7 million related to unvested PSUs, which is expected to be recognized over a weighted-average period of 2.1 years.

24

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Stock Appreciation Rights

A summary of the Stock Appreciation Rights ("SARs") activity was as follows during the period indicated:

Activity TypeStock Appreciation Rights
(in thousands)
Weighted Average Exercise Price
Outstanding as of December 31, 202287$61.20 
Forfeited(39)60.60 
Outstanding as of September 30, 20234861.60 

As of September 30, 2023, there was $0.1 million of unrecognized compensation expense for the Company's SARs that will be recognized over a weighted-average remaining recognition period of 0.7 years. As of September 30, 2023, the Company's outstanding SARs had a weighted-average remaining contractual life of 5.8 years and no intrinsic value.

Stock Options

A summary of the stock options activity was as follows during the period indicated:

Activity TypeStock Options
(in thousands)
Weighted Average Exercise Price
Outstanding as of December 31, 2022234 $18.40 
Exercised(37)9.80 
Forfeited(21)23.80 
Outstanding as of September 30, 2023176 19.40 

As of September 30, 2023, there was $0.1 million of unrecognized compensation expense for the Company's stock options that will be recognized over a weighted-average remaining recognition period of 1.1 years. As of September 30, 2023, the Company's outstanding stock options had a weighted-average remaining contractual life of 4.7 years and an intrinsic value of $4.6 million.

Employee Equity Units

A summary of the Vacasa Employee Holdings LLC employee equity units is as follows:

Employee Equity Units
(in thousands)
Weighted-Average Grant Date Fair Value
Unvested outstanding as of December 31, 2022101$112.00 
Vested(23)102.60 
Forfeited(48)123.40 
Unvested outstanding as of September 30, 202330100.80 

As of September 30, 2023, there was $2.9 million of unrecognized compensation expense related to unvested employee equity units, which is expected to be recognized over a weighted-average period of 1.4 years.

Employee Stock Purchase Plan

Under the Company's 2021 Nonqualified Employee Stock Purchase Plan ("ESPP"), eligible participants may purchase shares of the Company’s Class A Common Stock using payroll deductions, which may not exceed 15% of their total cash compensation. Offering and purchase periods begin on June 1 and December 1 of each year. Participants will be granted the right to purchase shares at a price per share that is 85% of the lesser of the fair market value of the shares at (i) the participant’s entry date into the applicable one-year offering period or (ii) the end of each six-month purchase period within the offering period.

25

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

The ESPP does not meet the criteria of Section 423 of the Internal Revenue Code and is considered a non-qualified plan for federal tax purposes. The Company has treated the ESPP as a compensatory plan under GAAP.

During the nine months ended September 30, 2023, there were 62,813 shares of Class A Common Stock purchased under the ESPP at a weighted-average price of $13.00 per share.

Equity-Based Compensation Expense

The Company recorded equity-based compensation expense for the periods presented in the condensed consolidated statements of operations as follows (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of revenue$29 $225 $91 $842 
Operations and support390 1,069 1,117 4,845 
Technology and development647 1,107 1,550 5,272 
Sales and marketing460 1,075 2,004 4,876 
General and administrative2,448 5,900 7,243 12,525 
Total equity-based compensation expense$3,974 $9,376 $12,005 $28,360 


The Company calculates net income (loss) per share of Class A Common Stock in accordance with ASC 260, Earnings Per Share, which requires the presentation of basic and diluted net income (loss) per share. Basic net income (loss) per share is calculated by dividing net income (loss) attributable to Vacasa, Inc. by the weighted-average shares of Class A Common Stock outstanding without the consideration for potentially dilutive shares of common stock. Diluted net income (loss) per share represents basic net income (loss) per share adjusted to include the potentially dilutive effect of RSUs, PSUs, SARs, stock options, employee equity units, shares expected to be purchased under the ESPP, and Class G Common Stock. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of Class A Common Stock equivalents outstanding for the period determined using the treasury stock method and if-converted method, as applicable. During periods of net loss, diluted loss per share is equal to basic net loss per share because the antidilutive effect of potential shares of common stock is disregarded.

26

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

The following is a reconciliation of basic and diluted income (loss) per Class A common share for the periods presented (in thousands, except per share data):

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Numerator for net income (loss) per class A common share calculation:
Net income (loss) attributable to Class A Common Stockholders, basic$(228,192)$8,324 $(255,105)$(14,715)
Net income allocated to dilutive securities 95   
Net income (loss) attributable to Class A Common Stockholders, diluted$(228,192)$8,419 $(255,105)$(14,715)
Denominator for net income (loss) per Class A common share calculation:
Weighted-average shares outstanding, basic(1)(2)
12,419 11,341 12,108 10,993 
Effect of dilutive securities:
Restricted stock units(2)
 12   
Stock appreciation rights(2)
 25   
Stock options(2)
 186   
Employee equity units(2)
 51   
Total effect of dilutive securities(2)
 274   
Weighted-average shares outstanding, diluted(1)(2)
12,419 11,615 12,108 10,993 
Basic net income (loss) per Class A common share:
Net income (loss) attributable to Class A Common Stockholders, basic$(228,192)$8,324 $(255,105)$(14,715)
Weighted-average shares outstanding, basic(1)(2)
12,419 11,341 12,108 10,993 
Net income (loss) per share of Class A Common Stock, basic(2)
$(18.37)$0.73 $(21.07)$(1.34)
Diluted net income (loss) per Class A common share:
Net income (loss) attributable to Class A Common Stockholders, diluted(2)
$(228,192)$8,419 $(255,105)$(14,715)
Weighted-average shares outstanding, diluted(1)(2)
12,419 11,615 12,108 10,993 
Net income (loss) per share of Class A Common Stock, diluted(2)
$(18.37)$0.72 $(21.07)$(1.34)

(1) Basic and diluted weighted-average shares outstanding include restricted stock units that have vested but have not yet settled into shares of Class A Common Stock.

(2) Weighted-average shares outstanding and equity awards used in the computation of basic and diluted earnings (loss) per share have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split that occurred on October 2, 2023. Refer to Note 16 - Subsequent Event for additional information.

27

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

Shares of the Company's Class B Common Stock and Class G Common Stock do not participate in earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings (loss) per share of Class B Common Stock and Class G Common Stock under the two-class method has not been presented.

The following outstanding potentially dilutive securities were excluded from the calculation of diluted net income (loss) per share of Class A Common Share either because their impact would have been antidilutive for the period presented or because they were contingently issuable upon the satisfaction of certain market conditions (in thousands)(1):

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
OpCo units(2)
9,387 10,183 9,387 10,183 
Restricted stock units725 215 725 283 
Performance stock units(3)
243 117 243 117 
Stock appreciation rights48 57 48 97 
Stock options176 13 176 247 
Employee equity units30 93 30 149 
Employee stock purchase plan228 86 228 86 
Class G Common Stock411 411 411 411 
Common shares excluded from calculation of diluted net income (loss) per share11,248 11,175 11,248 11,573 

(1) The share amounts herein have been retroactively adjusted to reflect the 1-for-20 Reverse Stock Split that occurred on October 2, 2023. Refer to Note 16 - Subsequent Event for additional information.

(2) These securities are neither dilutive nor anti-dilutive for the period presented as their assumed redemption for shares of Class A Common Stock would cause a proportionate increase to net income (loss) attributable to Class A Common Stockholders, diluted.

(3) PSUs are contingently issuable upon the satisfaction of certain market conditions. As of September 30, 2023, none of the requisite market conditions have been met, and therefore all such contingently issuable shares have been excluded from the calculation of diluted net income (loss) per share of Class A Common Stock.






Leases

The Company leases real estate and equipment under various non-cancelable operating leases. There have been no material changes to the Company's operating lease commitments during the three and nine months ended September 30, 2023. For additional information, refer to Note 8, Leases, of the Company's 2022 Annual Report.

Regulatory Matters and Legal Proceedings

The Company’s operations are subject to laws, rules, and regulations that vary by jurisdiction. In addition, the Company has been and is currently a party to various legal proceedings, including employment and general litigation matters, which arise in the ordinary course of business. Such proceedings and claims can require the Company to expend significant financial and operational resources.

Regulatory Matters

The Company’s core business operations consist of the management of short-term vacation rental stays, which are subject to local, city, or county ordinances, together with various state, U.S. and foreign laws, rules and regulations. Such laws, rules, and regulations are complex and subject to change, and in several instances, jurisdictions have yet to codify or implement applicable
28

Vacasa, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

laws, rules or regulations. Other ancillary components of the Company’s business activities include the management of long-term rental stays and homeowner association management. In addition to laws governing these activities, the Company must comply with laws in relation to travel, tax, privacy and data protection, intellectual property, competition, health and safety, consumer protection, employment and many others. These business operations expose the Company to inquiries and potential claims related to its compliance with applicable laws, rules, and regulations. Given the shifting landscape with respect to the short-term rental laws, changes in existing laws or the implementation of new laws could have a material impact on the Company’s business.

Tax Matters

Some states and localities impose transient occupancy, lodging accommodations, and sales taxes ("Hospitality and Sales Taxes") on the use or occupancy of lodging accommodations and other traveler services. The Company collects and remits Hospitality and Sales Taxes collected from guests on behalf of its homeowners. Such Hospitality and Sales Taxes are generally remitted to tax jurisdictions within a 30-day period following the end of each month, quarter, or year end.

As of September 30, 2023 and December 31, 2022, the Company had an obligation to remit Hospitality and Sales Taxes collected from guests in these jurisdictions totaling $20.8 million and $