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Additional definitive proxy soliciting materials filed by non-management and Rule 14(a)(12) material




Washington, D.C. 20549




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This filing consists of the transcript of a conference call held by Expedia, Inc. and HomeAway, Inc. to discuss the Acquisition Transaction on November 4, 2015, 01:45PM PT

Corporate Participants

Alan Pickerill; Expedia, Inc.; VP, IR

Dara Khosrowshahi; Expedia, Inc.; President & CEO

Mark Okerstrom; Expedia, Inc.; CFO & EVP, Operations

Brian Sharples, HomeAway, Inc.; Founder and CEO

Conference Call Participants

Eric Sheridan; UBS; Analyst

Kevin Kopelman; Cowen and Company; Analyst

Paul Bieber for Justin Post; BofA Merrill Lynch; Analyst

Rohit Kulkarni, RBC Capital Markets, Analyst

Lloyd Walmsley, Deutsche Bank; Analyst; Analyst

Jed Kelly, Oppenheimer & Co.; Analyst

Mike Olson, Piper Jaffray; Analyst

Heath Terry, Goldman Sachs, Analyst

Justin Patterson, Raymond James; Analyst

Tom White; Macquarie Research; Analyst

Chris Merwin, Barclays; Analyst

Nathaniel Schindler, Bank of America, Analyst

Naved Khan; Cantor Fitzgerald; Analyst

Brian Fitzgerald, Jeffries; Analyst


Good day and welcome to the Expedia announces acquisition of HomeAway conference. Todays conference is being recorded. At this time, I will turn conference over to Alan Pickerill. Please go ahead.


Thank you, and good afternoon and welcome to todays conference call. On the call today are Dara Khosrowshahi, Expedia CEO and President, Brian Sharples, founder and CEO of HomeAway, and Mark Okerstrom, Expedia CFO and EVP Operations. Dara will begin with a review of todays announcement and the deal rationale. Brian will speak about HomeAway and the vision for the future. And Mark will wrap up with some preliminary thoughts about financial implications and expectations. After these prepared remarks, we will take your questions. You can find todays press release on both the Expedia and HomeAway IR sites at and The following discussion, including responses to your questions reflect managements views as of today, November 4, 2015 only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on todays call are forward-looking and are typically proceeded by words such as will, we expect, we believe, we plan to, we intend, or similar statements. Please refer to todays press release in each of the Companys filings with the SEC for information about factors that could cause the actual results to differ materially from these forward-looking statements. With that, let me turn the call over to Dara.


Thanks, Alan. We are very happy to be here in Austin today with Brian Sharples, the founder and CEO of HomeAway, to announce that Expedia, one of the largest travel companies in the world, and HomeAway, a pioneer and true leader in vacation home rentals, have agreed to join forces. Those of you who follow us over the past half-dozen years have seen our company moved through quite a strategic transition. Our spinoff with TripAdvisor created huge value for our shareholders and signals that our investment in re-platforming our core OTA transaction technologies were able to bear fruit, and bear fruit they have. We were able to innovate faster than we ever have before leading to better, higher converting sites and services for travelers. Higher conversion allowed us to market our services much more effectively to a global audience, allowing us to significantly accelerate new customer acquisition which in turn resulted in a growing loyal base of customers. We more recently supercharged this repeat customer base with market-leading loyalty programs and significant investment in our supplier-facing capabilities. Agency and merchant models with lower margins combined with more feet on the street, faster onboarding capabilities and improved supplier tools and technologies, all driving accelerated property acquisition and excellent rates and inventory for our customers. We demonstrated our ability to extend these capabilities to other OTA brands with acquisitions of Travelocity, Wotif, and most recently with Orbitz.

Our welcoming HomeAway is a winner in two ways. First, it brings industry leading vacation rental brands, traffic, and unique inventory to the Expedia family. All of us have witnessed not only the incredible growth of the sharing economy but also substantial growth of alternative lodging in particular. Last year, according to Phocuswright, 1 in 4 US travelers rented private accommodations for their leisure travel. Weve been very clear that the next chapter of our growth is supply led, and

we think HomeAway will accelerate that growth in the fastest-growing segment we see out there. Second, HomeAway has been undertaking a challenging transition that Brian will talk about. That of a listing-based model to an online transactional marketplace. The HomeAway team was working on this challenge on a stand-alone basis, but together we believe we can get there much faster and with greater certainty. As many of you know, weve been working with HomeAway for some time and are very much and very much respect their capabilities, and at the same time were super excited about working together under a single corporate umbrella. Ill let Brian talk a bit about their bold plans and then come back to the strategic fit for our two companies.


Thanks, Dara. First, on behalf of all of us at HomeAway, Id like to say how thrilled we are to be joining the Expedia family. Vacation rentals have become a huge and important part of the overall travel ecosystem, and I believe this combination will turbocharge our growth in industry leadership for years to come. I know there are many investors in Expedia who are not investors in HomeAway, so I wanted to start with a quick high-level introduction of the company and the strategy weve been pursuing, including the most recent step announced separately today, and why I am so enthusiastic about this deal with Expedia.

The vacation rental category is the second largest category of lodging behind hotels with an estimated global market size of almost 100 billion. HomeAway is the worlds leading online platform in the category with an estimated $14 billion to $16 billion in annual bookings for 2015 and 1.2 million whole home rentals in 190 countries around the world. Like Expedia, weve built a platform that allows us to operate a number of brands, including both HomeAway and VRBO in the United States and many other leading vacation rental brands around globe. HomeAway started in 2005 as a classified marketplace with most of our revenues derived from annual subscriptions from vacation rental suppliers that include both individual owners and professional managers. In 2014, we fully launched a commission model that allowed our suppliers to either pay a fixed annual subscription fee or a 10% commission on bookings with no upfront fee. Today roughly half of new listings choose the subscription option and about half the pay for booking option, and we plan to continue to offer both types of listing products in the future. In late 2014, we announced a plan to make nearly all of our listings online bookable by the end of 2016, regardless of whether they were subscription or commission-based, and were confident that were on track to achieve that target. The goal is to align our shopping and payment experience to be more consistent with a hotel booking experience, albeit adjusted for some of the unique needs of vacation rental owners, property managers, and travelers. As those investors who have been following the HomeAway story have heard us discuss before, our momentum in online booking unlocks our ability to further monetize our industry-leading booking volume, and this will allow us to, one, aggressively accelerate demand growth for our suppliers and, two, reinvest in products and services with a particular focus on making HomeAway the easiest to use and most trusted marketplace for vacation rentals in the world. All while accelerating revenue growth and margin expansion for the business. And the potential to do this is huge, because our current take rate today is roughly one-third of that of our major competitors. As a result, today HomeAway announced separately some important business model changes, and those specifics are still to be finalized. We do plan to introduce a traveler service fee in mid-2016 on transactions through our platform. Because well begin rolling this out in Q2 and over the balance of the year, we characterize 2016 as a transition year with more notable impact in 2017 and beyond. Weve been preparing for these changes for most of the year and have already decided prior to this combination that launching the service fee is the best way forward for our marketplace. In conjunction with the new traveler service fee, well be lowering commission rates for most of our pay per booking suppliers and providing meaningful incentives to our subscribers based on the bookings they do through our platform. All in all, we expect these business model changes to be a huge win for our suppliers and travelers while providing an engine for accelerated and sustained growth well into the future.

So before I hand the call back to Dara, Ill finish by articulating why we believe the combination with Expedia will turbocharge the HomeAway and Expedia businesses. First, weve had a chance to work with Expedia as a distribution partner over the last two years, and are very impressed with their technology and travel booking expertise. We operate in similar multibrand environments, and face similar challenges with respect to issues like usability, conversion, mobile, and the challenges around global payments. We think we will derive significant benefits from their experience in order to make our products even better than they are today. Second, we expect our combined networks will point substantially more qualified traffic at our listings and a transactional business means more bookings and revenue, which in turn creates loyalty with suppliers. We think that the opportunity to list our inventory across the Expedia brands represents tremendous upside. Given our business model changes and the fact that will be under one corporate umbrella , we expect this exposure for our suppliers and Expedia platforms to be orders of magnitude higher than what weve experienced to date through our partnership, and were looking to develop opportunities in the future to include Expedias multiunit inventory in our marketplace and also and very importantly as a combined company, we can aggressively pursue the huge and growing opportunity represented for this category in urban destinations. Finally, and third, in a transactional business, conversion is king and optimizing conversion is a relatively new muscle for HomeAway, but an area where Expedia has tremendous capability. Given our industry-leading booking volume, even small changes in conversion should yield significant financial benefits. Well also be able to invest more in variable marketing channels and benefit from Expedias expertise in performance marketing to drive even more vacation rental travelers to our marketplace. So in summary, we believe this deal is a win for our shareholders, its a win for our suppliers, its a win for our travelers, and, of course, its a big win for our employees, too. Id like to close by thanking our employees for building such a great company that has become such a valuable part of the travel ecosystem. Ill turn it back to Dara for a few comments before Mark takes over. Dara?


Thanks, Brian. Id like to make just a few more comments and then Ill hand it over to Mark to discuss more details about the transaction and the value that we think we can create. As Brian explained, over the next few years, HomeAway will transform from a classified marketplace to a transactional business where every listing, whether subscription or commission, can be booked online. And because such a transformation can be quite difficult, we believe will be better together. At its core, Expedia is a transaction company and we strongly believe we can help HomeAway develop the same continuous optimization and improvement capability and discipline that weve built up on our own site over the past few years.

At the end of this transition, we think well have an exceptional entity. Well have the premier online alternative lodging brands of HomeAway and VRBO that today drive an estimated $15 billion in vacation rental bookings. We plan to distribute that inventory across our portfolio of leading OTA and lodging brands of Expedia,, Travelocity, Orbitz, and others, providing HomeAway property owners and managers with...