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Shares of HomeAway (NASDAQ:AWAY) dropped more than 15% early Wednesday after the company turned in solid third-quarter results, but followed with weaker-than-expected guidance.
Why it's happening
Quarterly sales jumped 29.9% year over year to $117.1 million, which translated to adjusted net income of $18.9 million, or $0.20 per share. Analysts, on average, were only expecting adjusted earnings of $0.16 per share on sales of $116 million.
HomeAway's revenue also exceeded its own previous guidance, which called for sales in the range of $114.5 million-$116.5 million. That performance included 27.2% growth in listing revenue to $75.9 million, and 44.2% growth in other revenue (think ancillary sales from owners and travelers, advertising, and software) to $20.5 million. Licensing revenue, in particular, was bolstered by a combination of a 33.8% jump in total paid listings to 1,034,847, and 11.9% growth in average revenue per listing to $479. Meanwhile, HomeAway saw total site visits in Q3 climb 17.3% year over year to 232.1 million.
For the current quarter, however, HomeAway sees revenue in the range of $107 million-$109 million. Consequently, HomeAway also lowered the top end of its full-year revenue guidance by $3 million, resulting in a new range of $444 million-$446 million. Analysts expected the sequential decline, but that fourth quarter range still falls well below expectations for sales of $112.34 million.
To be fair, management explained the impending shortfall is purely the result of foreign exchange rate calculations, which resulted in a $4 million hit to the top end of their guidance range. They then boosted that number by $1 million to account for their outperformance, which means this was actually a raise on an FX-neutral basis. In the end, the market may not see it that way, but I think investors should be pleased this isn't a symptom of a broader problem with HomeAway's business.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends HomeAway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.