10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

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: 001-35215

HomeAway, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-0970381
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1011 W. Fifth Street, Suite 300

Austin, Texas 78703

(Address of principal executive offices, including zip code)

(512) 684-1100

(Registrant’s telephone number, including area code)

Indicate by check mark whether 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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    x  Yes    ¨  No

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of stock, as of the latest practicable date.

Class	Outstanding at October 30, 2015
Common Stock, $0.0001 par value per share	96,237,408

HomeAway, Inc.

Table of Contents

		Page No.
PART I: FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)		3
	Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014		3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and September 30, 2014		4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2015 and September 30, 2014		5
	Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2015		6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and September 30, 2014		7
	Notes to Condensed Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44
Item 4.	Controls and Procedures		45
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings		46
Item 1A.	Risk Factors		46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		60
Item 3.	Defaults Upon Senior Securities		60
Item 4.	Mine Safety Disclosures		60
Item 5.	Other Information		61
Item 6.	Exhibits		61
Signature			62
Exhibit Index			63
Certifications

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

HomeAway, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except for share and per share information)

(unaudited)

	September 30, 2015			December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	301,293		$	292,325
Short-term investments		618,343			520,844
Accounts receivable, net of allowance for doubtful accounts of $633 and $663 as of September 30, 2015 and December 31, 2014, respectively		24,019			23,189
Income tax receivable		1,680			1,900
Prepaid expenses and other current assets		18,269			17,913
Deferred tax assets		9,384			8,774
Total current assets		972,988			864,945
Property and equipment, net		60,773			56,173
Goodwill		460,049			493,671
Intangible assets, net		58,003			70,456
Non-marketable investments		39,549			35,285
Deferred tax assets		880			1,545
Other non-current assets		6,295			8,053
Total assets	$	1,598,537		$	1,530,128
Liabilities, redeemable noncontrolling interests and stockholders’ equity
Current liabilities:
Accounts payable	$	7,487		$	8,281
Income tax payable		907			1,344
Accrued expenses		50,446			50,255
Deferred revenue		193,769			170,522
Total current liabilities		252,609			230,402
Convertible senior notes, net		329,905			316,181
Deferred revenue, less current portion		2,981			3,179
Deferred tax liabilities		24,376			26,624
Other non-current liabilities		19,817			12,192
Total liabilities		629,688			588,578
Commitments and contingencies (see Note 6)
Redeemable noncontrolling interests (see Note 8)		9,033			9,742
Stockholders’ equity:
Common stock: $0.0001 par value; 350,000,000 shares authorized; 96,162,374 and 94,515,344 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively		10			9
Additional paid-in capital		1,076,292			1,022,586
Accumulated other comprehensive loss		(60,608	)		(28,053	)
Accumulated deficit		(55,878	)		(62,734	)
Total stockholders’ equity		959,816			931,808
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	1,598,537		$	1,530,128

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

3

HomeAway, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except for per share information)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenue:
Listing	$	106,484		$	96,601		$	301,281		$	278,459
Other		24,198			20,511			74,272			58,591
Total revenue		130,682			117,112			375,553			337,050
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)		19,361			16,926			58,472			50,291
Product development		22,058			20,212			65,235			56,952
Sales and marketing		42,963			42,234			143,850			117,251
General and administrative		23,874			22,995			72,115			69,467
Amortization expense		2,819			3,397			8,713			10,163
Total costs and expenses		111,075			105,764			348,385			304,124
Operating income		19,607			11,348			27,168			32,926
Other income (expense):
Interest expense		(4,718	)		(4,373	)		(13,971	)		(8,842	)
Interest income		927			552			2,426			1,117
Other expense, net		(338	)		(1,434	)		(633	)		(6,452	)
Total other income (expense)		(4,129	)		(5,255	)		(12,178	)		(14,177	)
Income before income taxes		15,478			6,093			14,990			18,749
Income tax expense		(5,625	)		(845	)		(9,757	)		(5,909	)
Net income		9,853			5,248			5,233			12,840
Less: Impact of noncontrolling interests, net of tax		(564	)		336			(709	)		(382	)
Net income attributable to HomeAway, Inc.	$	10,417		$	4,912		$	5,942		$	13,222
Net income per share attributable to HomeAway Inc.:
Basic	$	0.11		$	0.05		$	0.06		$	0.14
Diluted	$	0.11		$	0.05		$	0.06		$	0.14
Weighted average number of shares outstanding:
Basic		95,716			94,106			95,162			93,507
Diluted		97,688			96,389			97,389			96,358

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

4

HomeAway, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net income	$	9,853		$	5,248		$	5,233		$	12,840
Other comprehensive income (loss):
Foreign currency translation adjustments (net of tax)		(19,823	)		(14,793	)		(29,024	)		(6,463	)
Unrealized gain (loss) on short-term investments (net of tax)		209			(491	)		618			(642	)
Defined benefit pension plan adjustments		96			—			(4,149	)		—
Total other comprehensive loss, net of tax		(19,518	)		(15,284	)		(32,555	)		(7,105	)
Less: Comprehensive loss attributable to noncontrolling interests		(655	)		(515	)		(1,623	)		(1,233	)
Currency translation adjustments attributable to noncontrolling interests		—			12			—			29
Comprehensive income (loss) attributable to HomeAway, Inc.	$	(9,010	)	$	(9,509	)	$	(25,699	)	$	6,997

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

5

HomeAway, Inc.

Consolidated Statement of Changes in Stockholders’ Equity

(In thousands)

(unaudited)

	Common Stock
	Number of Shares		Amount		Additional Paid- in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2014		94,515	$	9	$	1,022,586		$	(28,053	)	$	(62,734	)	$	931,808
Issuance of stock under Company plans, net of shares withheld for taxes		1,647		1		9,639			—			—			9,640
Stock-based compensation		—		—		37,487			—			—			37,487
Excess tax benefits related to employee stock options		—		—		7,494			—			—			7,494
Other comprehensive loss		—		—		—			(32,555	)		—			(32,555	)
Net income (loss) attributable to HomeAway, Inc.		—		—		(914	)		—			6,856			5,942
Balance at September 30, 2015		96,162	$	10	$	1,076,292		$	(60,608	)	$	(55,878	)	$	959,816

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

6

HomeAway, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities
Net income	$	5,233		$	12,840
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		16,204			12,091
Amortization of intangible assets		8,713			10,163
Amortization of debt discount and transaction costs		13,764			8,720
Amortization of premiums on securities and other		8,683			4,288
Stock-based compensation		37,487			35,582
Excess tax benefit related to stock-based compensation		(8,161	)		(2,583	)
Deferred income taxes		(1,368	)		(435	)
Net unrealized foreign exchange loss (gain)		15,564			(6,057	)
Realized loss (gain) on foreign currency forwards		(15,081	)		12,011
Changes in operating assets and liabilities, net of assets and liabilities assumed in business combinations:
Accounts receivable		(2,172	)		(2,591	)
Income tax receivable		(426	)		(1,590	)
Prepaid expenses and other current assets		(2,519	)		(4,938	)
Accounts payable		1,151			6,668
Accrued expenses		1,748			(3,394	)
Income tax payable		7,087			1,272
Deferred revenue		29,667			25,392
Other non-current liabilities		3,520			3,976
Net cash provided by operating activities		119,094			111,415
Cash flows from investing activities
Acquisition of businesses, net of cash acquired		—			(17,847	)
Change in restricted cash		122			166
Purchases of intangibles and other assets		(278	)		(303	)
Purchases and sales of non-marketable investments		(3,866	)		(10,135	)
Purchases of short-term investments		(379,387	)		(473,331	)
Proceeds from maturities and redemptions of marketable securities		272,022			23,048
Proceeds from sales of marketable securities		1,525			4,358
Net settlement of foreign currency forwards		15,081			(12,011	)
Purchases of property and equipment		(23,792	)		(20,456	)
Net cash used in investing activities		(118,573	)		(506,511	)
Cash flows from financing activities
Proceeds from borrowings on convertible senior notes, net		—			390,978
Proceeds from issuance of warrants		—			38,278
Purchase of convertible note hedge		—			(85,853	)
Other financing activities		—			(919	)
Proceeds from exercise of options to purchase common stock		9,640			22,827
Excess tax benefit from stock-based compensation		8,161			2,583
Net cash provided by financing activities		17,801			367,894
Effect of exchange rate changes on cash and cash equivalents		(9,354	)		(5,303	)
Net increase (decrease) in cash and cash equivalents		8,968			(32,505	)
Cash and cash equivalents at beginning of period		292,325			324,608
Cash and cash equivalents at end of period	$	301,293		$	292,103
Cash paid for interest	$	503		$	253
Cash paid for taxes, net of refunds	$	2,091		$	3,727
Supplemental disclosure of non-cash activities
Changes to accrued capital expenditures	$	2,455		$	—
Changes to redemption value of noncontrolling interests	$	914		$	851

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

7

HomeAway, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Description of Business

HomeAway, Inc. (the “Company”) operates an online vacation rental property marketplace that enables property owners and managers to market properties available for rental to vacation travelers who rely on the Company’s websites to search for and find available properties. Property owners and managers pay listing fees to provide detailed listings of their properties on the Company’s websites and reach a broad audience of travelers seeking vacation rentals. Listing fees are typically annual subscriptions or payments on a performance basis, based on bookings or inquiries made by travelers to property owners and managers. A listing includes published detailed property information, including photographs, descriptions, location, pricing, availability and contact information. The Company also sells, directly or through third parties, complementary products, including travel guarantees, insurance products and property management software and services. Travelers use the network of websites to search for vacation rentals meeting their desired criteria, including location, size and price. Travelers that find properties meeting their requirements through the Company’s marketplace are able to make reservations online or contact property owners and managers directly by phone or through form-based communication tools on the Company’s websites.

The Company is a Delaware corporation headquartered in Austin, Texas.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of HomeAway, Inc. and its wholly and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission, (the “SEC”). All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments and those items discussed in these notes, necessary for a fair statement of the Company’s financial position, as of September 30, 2015 and December 31, 2014, results of operations for the three and nine months ended September 30, 2015 and September 30, 2014, comprehensive income (loss) for the three and nine months ended September 30, 2015 and September 30, 2014, cash flows for the nine months ended September 30, 2015 and September 30, 2014, and changes in stockholders’ equity for the nine months ended September 30, 2015. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Operating results for this interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, or for any other period.

Business Segment

The Company has one operating segment consisting of various products and services related to its online marketplace of accommodation rental listings. The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the single operating segment level.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include certain revenues, traveler guarantees, the allowance for doubtful accounts, marketable and non-marketable investments, goodwill and other indefinite-lived intangible assets, definite-lived intangible assets, depreciation and amortization, stock-based compensation, deferred income taxes and noncontrolling interests.

8

Fair Value of Financial Instruments

Fair value is defined as the price received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1:	Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2:	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Valuations based on unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company’s financial instruments classified as Level 1 are valued using quoted prices generated by market transactions involving identical assets. Instruments classified as Level 2 are valued using non-binding market consensus prices corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with significant inputs derived from or corroborated with observable market data. The Company did not hold financial instruments categorized as Level 3 in any period presented.

Short-term investments are classified as available-for-sale and reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of tax. Additionally, the Company periodically assesses whether an other than temporary impairment loss on investments has occurred due to declines in fair value or other market conditions. Declines in fair value considered other-than-temporary are recorded as an impairment in the condensed consolidated statement of operations. The Company did not record impairments of its investments during any of the periods presented.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and deferred revenue approximate fair value because of the relatively short maturity of these instruments.

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at September 30, 2015 (in thousands):

	Balance as of September 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	151,691	$	151,691	$	—	$	—
Total cash equivalents		151,691		151,691		—		—
Restricted cash
Time deposits		1,983		—		1,983		—
Total restricted cash		1,983		—		1,983		—
Short-term investments
U.S. government agency bonds		23,339		—		23,339		—
Time deposits		39,529		—		39,529		—
Corporate bonds		346,782		—		346,782		—
International government bonds		21,390		—		21,390		—
Municipal bonds		187,303		—		187,303		—
Total short-term investments		618,343		—		618,343		—
Total financial assets	$	772,017	$	151,691	$	620,326	$	—

9

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at December 31, 2014 (in thousands):

	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	183,008	$	183,008	$	—	$	—
Municipal bonds		1,001		—		1,001		—
Total cash equivalents		184,009		183,008		1,001		—
Restricted cash								—
Time deposits		2,058		—		2,058		—
Total restricted cash		2,058		—		2,058		—
Short-term investments
Time deposits		21,726		—		21,726		—
Corporate bonds		353,212		—		353,212		—
International government bonds		1,501		—		1,501		—
Municipal bonds		140,406		—		140,406		—
Commercial paper		3,999		—		3,999		—
Total short-term investments		520,844		—		520,844		—
Total financial assets	$	706,911	$	183,008	$	523,903	$	—

Cash and Cash Equivalents

Cash and cash equivalents include investments in demand deposits, money market funds, and municipal bonds readily convertible into cash. Cash and cash equivalents are stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Cash and cash equivalents consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Demand deposit accounts	$	149,602	$	108,316
Money market funds		151,691		183,008
Municipal bonds		—		1,001
Total cash and cash equivalents	$	301,293	$	292,325

Restricted Cash

Restricted cash of $2,200,000 and $2,492,000 at September 30, 2015 and December 31, 2014, respectively, was held in accounts owned by the Company to secure property licenses, leased office space, credit card availability and reimbursable direct debits due from the Company. Restricted cash is recorded as “Other non-current assets” on the Company’s condensed consolidated balance sheets.

Short-term Investments

Short-term investments generally consist of marketable securities with original maturities greater than ninety days as of the date of purchase. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations, including those with contractual maturities greater than one year from the date of purchase, are classified as short-term. The Company’s investment securities are classified as available-for-sale and presented at estimated fair value with any unrealized gains and losses included in other comprehensive income (loss).

10

Cash flows from purchases, sales and maturities of available-for-sale securities are classified as investing activities and reported gross, including any related premiums or discounts. Premiums related to purchases of available-for-sale securities were $9,240,000 and $11,239,000 during the nine months ended September 30, 2015 and 2014, respectively. Short-term investments consisted of the following (in thousands):

	September 30, 2015
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S government agency bonds	$	23,375	$	3	$	(39	)	$	23,339
Time deposits		39,529		—		—			39,529
Corporate bonds		346,949		141		(308	)		346,782
International government bonds		21,418		—		(28	)		21,390
Municipal bonds		187,254		83		(34	)		187,303
Total short-term investments	$	618,525	$	227	$	(409	)	$	618,343

	December 31, 2014
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Time deposits	$	21,726	$	—	$	—		$	21,726
Corporate bonds		353,957		7		(752	)		353,212
International government bonds		1,504		—		(3	)		1,501
Municipal bonds		140,455		45		(94	)		140,406
Commercial paper		3,999		—		—			3,999
Total short-term investments	$	521,641	$	52	$	(849	)	$	520,844

For fixed income securities with unrealized losses as of September 30, 2015, the Company does not intend to sell any of these investments; and the Company expects it will not be required to sell any of these investments before recovery of the entire amortized cost basis. The Company has evaluated these fixed income securities and determined that no credit losses exist. Accordingly, the Company has determined that the unrealized losses on fixed income securities as of September 30, 2015 were temporary in nature.

The following table summarizes the contractual underlying maturities of the Company’s short-term investments (in thousands):

	September 30, 2015
	Less than 1 Year		1 to 3 Years		Total
U.S government agency bonds	$	597	$	22,742	$	23,339
Time deposits		25,951		13,578		39,529
Corporate bonds		203,039		143,743		346,782
International government bonds		15,192		6,198		21,390
Municipal bonds		131,167		56,136		187,303
Total short-term investments	$	375,946	$	242,397	$	618,343

	December 31, 2014
	Less than 1 Year		1 to 3 Years		Total
Time deposits	$	21,479	$	247	$	21,726
Corporate bonds		240,570		112,642		353,212
International government bonds		1,501		—		1,501
Municipal bonds		87,615		52,791		140,406
Commercial paper		3,999		—		3,999
Total short-term investments	$	355,164	$	165,680	$	520,844

Non-marketable Cost Investments

During the nine months ended September 30, 2015, the Company invested $2,799,000 for a non-controlling equity interest in a privately-held vacation rental website company in Canada and $2,000,000 for a non-controlling equity interest in a privately-held vacation rental website company in Turkey. The Company also has a non-controlling equity interest in a privately-held company in China with a carrying value of $19,498,000 and a non-controlling equity investment with a carrying value of $15,000,000 in a privately-held company in the United States that operates a travel research application and website.

11

The Company’s investment in these privately-held companies is reported using the cost method of accounting and adjusted to fair value when an event or circumstance indicates an other-than-temporary decline in value has occurred. No event or circumstance indicating an other-than-temporary decline in value of the Company’s interest in the non-marketable cost investments has been identified during any of the periods presented.

Accounts Receivable

Accounts receivable are generated from credit card merchants who process the Company’s property listing sales, property listings sold on installments to the Company’s customers, partners who advertise the Company’s inventory on their websites and/or sell ancillary products to the Company’s customers and Internet display advertising. Accounts receivable outstanding beyond the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by estimating losses on receivables based on known troubled accounts and historical experiences of losses incurred.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Computer equipment and purchased software are generally depreciated over three years. Furniture and fixtures are generally depreciated over five to ten years. Leasehold improvements are depreciated over the shorter of the contractual lease period or estimated useful life. Upon disposal, property and equipment and the related accumulated depreciation are removed and the resulting gain or loss is reflected in the condensed consolidated statements of operations. Ordinary maintenance and repairs are charged to expense, while expenditures that extend the physical or economic life of the assets are capitalized.

The Company capitalizes certain internally developed software and website development costs. These capitalized costs were approximately $38,759,000 and $36,038,000 at September 30, 2015 and December 31, 2014, respectively, and are included in property and equipment, net, in the condensed consolidated balance sheets. Internally developed software costs are generally depreciated over five years.

The Company recorded depreciation expense on internally developed software and website development costs as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Depreciation expense on internally developed software and website development costs	$	1,677	$	1,343	$	4,867	$	3,947

Goodwill and Intangible Assets

Goodwill arises from business combinations and is measured as the excess of the purchase consideration over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed. The Company uses estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date, and these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, adjustments to the assets acquired and liabilities assumed are recorded with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the condensed consolidated statements of operations.

Goodwill and intangible assets deemed to have indefinite useful lives, such as certain trade names, are not amortized. Tests for impairment of goodwill and indefinite-lived intangible assets are performed on an annual basis or when events or circumstances indicate that the carrying amount may not be recoverable.

Circumstances that could trigger an impairment test outside of the annual test include but are not limited to: a significant adverse change in the business climate or legal factors, adverse cash flow trends, an adverse action or assessment by a regulator, unanticipated competition, loss of key personnel, decline in stock price and the results of tests for recoverability of a significant asset group. The Company has determined that no triggering event occurred during any of the periods presented.

For goodwill and indefinite-lived intangible assets, the Company completes a “Step 0” analysis, which involves evaluating qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance related to its goodwill and its indefinite-lived intangible assets. If the Company’s “Step 0” analysis indicates that it is more likely than not that the fair value of a reporting unit or of an indefinite-lived intangible asset is less than its carrying amount, then the Company would perform a quantitative two-step impairment test. The quantitative analysis compares the fair value of the Company’s reporting unit or indefinite-lived intangible assets to its carrying amount, and an impairment loss is recognized equivalent

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to the excess of the carrying amount over fair value. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset exceeds its carrying amount, then the quantitative impairment tests are unnecessary.

The Company performs an evaluation of goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of its fiscal year.

The determination of whether or not goodwill or indefinite-lived intangible assets have become impaired involves a significant level of judgment. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or indefinite-lived intangible assets.

No impairment of goodwill or indefinite-lived intangible assets was identified in any of the periods presented.

Identifiable intangible assets consist of trade names, customer relationships, developed technology, domain names and contractual non-competition agreements associated with acquired businesses. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable (see Note 3). The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Impairment of Long-lived Assets

The Company evaluates long-lived assets held for use, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value in the period in which the determination is made. No material impairments of long-lived assets have been recorded during any of the periods presented.

Leases

The Company leases facilities in several countries around the world and certain equipment under non-cancelable lease agreements. The terms of certain lease agreements provide for rental payments on a graduated basis. Rent expense is recognized on a straight-line basis over the lease period and accrued as rent expense incurred but not paid.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an agreement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. The Company accounts for sales incentives to customers as a reduction of revenue at the time revenue is recognized from the related product sale. The Company also reports revenue net of any sales taxes collected.

The Company generates a significant portion of its revenue from customers purchasing online advertising services related to the listing of their properties for rent, primarily on a subscription basis over a fixed-term. The Company also generates revenue based on the number of traveler inquiries and reservation bookings for property listings on the Company’s websites, local and national Internet display advertisers, license of property management software and ancillary products and services.

Payments for term-based subscriptions received in advance of services rendered are recorded as deferred revenue and recognized on a straight-line basis over the listing period.

Revenue for inquiry-based contracts are determined on a fixed fee-per-inquiry basis as stated in the arrangement and recognized when the service has been performed.

The Company earns commission revenue for reservations made online through its websites, which is calculated as a percentage of the value of the reservation. This revenue is earned as the services are performed or as the customers’ refund privileges lapse and is included in listing revenue in the condensed consolidated statements of operations.

Internet display advertising revenue is generated primarily from advertisements appearing on the Company’s websites. Depending upon the terms, revenue is earned each time an impression is delivered, a user clicks on an ad, a graphic ad is displayed, or a user clicks-through the ad and takes a specified action on the destination site.

The Company sells gift cards with no expiration date to travelers and does not charge administrative fees on unused cards. There is a portion of the gift card obligation that, based on historical redemption patterns, will not be used by the Company’s customers and

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is not required to be remitted to relevant jurisdictions (“breakage”). At the point of sale, the Company recognizes estimated breakage as deferred revenue and amortizes it over 48 months based on historical redemption patterns. The Company also records commission revenue for each gift card sale over the same 48-month redemption period.

Through its professional software for bed and breakfasts and professional property managers, the Company also makes selected, online bookable properties available to online travel agencies and channel partners. The Company receives a percentage of the transaction value or a fee from the property manager for making this inventory available, which is recognized when earned. This revenue is included in other revenue in the condensed consolidated statements of operations.

The Company generates revenue from the sale of hosted software solutions where revenue is recognized on a straight-line basis over the contract term, generally one year. Certain implementation services are essential to the customer’s use of the Company’s hosted software solutions. Accordingly, the Company recognizes implementation revenue ratably over the estimated period of the hosting relationship, which is three years. Recognition starts once the product has been made available to the customer.

Training and consulting revenue is recognized upon delivery of the training or consulting services to the end customer.

Stock-Based Compensation

Stock-based compensation for option awards is recognized based upon the estimated grant date fair value of the awards measured using the Black–Scholes valuation model. The fair value of restricted stock awards is determined based on the number of shares granted and the fair value of the Company’s common stock on the grant date. Fair value is generally recognized as an expense on a straight-line basis, net of estimated forfeitures, over the requisite service period. When estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures.

The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company only recognizes a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. When tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of the resulting difference is charged first to additional paid-in capital to the extent of the Company’s pool of windfall tax benefits with any remainder recognized in income tax expense. The Company has determined that it has a sufficient windfall pool available and therefore no amounts have been recognized as income tax expense. In addition, the Company accounts for the indirect effects of stock-based awards on other tax attributes through the condensed consolidated statements of operations.

The gross benefits of tax deductions in excess of recognized compensation costs are reported as financing cash inflows, but only when such excess tax benefits are realized by a reduction to current taxes payable.

The following table summarizes the excess tax benefit that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Excess tax benefit from stock-based compensation, net	$	5,200	$	1,362	$	7,494	$	2,583

This tax benefit has been recorded as additional paid-in capital on the Company’s condensed consolidated balance sheets.

Defined Benefit Pension Plan

During the nine months ended September 30, 2015, the Company recorded an adjustment to correct a prior period accounting error related to the Company’s defined benefit pension plan for one of its foreign subsidiaries. The adjustment increased the Company’s liabilities by approximately $4,200,000 and decreased other comprehensive income by approximately $4,000,000 and income before income taxes by approximately $200,000 as of and during the nine months ended September 30, 2015. The Company does not believe these adjustments are material to the consolidated financial statements for the three and nine months ended September 30, 2015, the expected annual results for 2015 or to the consolidated financial statements of any prior period.

Income Taxes

The Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Evaluating the need for an amount of a

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valuation allowance for deferred tax assets requires significant judgment and analysis of the positive and negative evidence available, including past operating results, estimates of future taxable income, reversals of existing taxable temporary differences and the feasibility of tax planning in order to determine whether all or some portion of the deferred tax assets will not be realized. Based on the available evidence and judgment, the Company has determined that it is more likely than not that certain loss carryforwards will not be realized; therefore, the Company has established a valuation allowance for such deferred tax assets to reduce the loss carryforward assets to amounts expected to be utilized.

The Company may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which the Company operates. The Company is currently undergoing audits in the United States as well as at its subsidiary in the United Kingdom. Significant judgment is required in determining uncertain tax positions. The Company recognizes the benefit of uncertain income tax positions only if these positions are more likely than not to be sustained. Also, the recognized income tax benefit is measured at the largest amount that is more than 50% likely of being realized. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. The countries in which the Company may be subject to potential examination by tax authorities include Australia, Brazil, Colombia, France, Germany, Italy, the Netherlands, New Zealand, Singapore, Spain, Switzerland, Thailand, the United Kingdom and the United States.

The calculation of the Company’s tax liabilities involves the inherent uncertainty associated with the application of complex tax laws. As a multinational corporation, the Company conducts its business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company’s business is subject to the application of various and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax rates in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate. The Company believes it has adequately provided in its financial statements for additional taxes that it estimates may be assessed by the various taxing authorities. While the Company believes that it has adequately provided for all uncertain tax positions, amounts asserted by tax authorities could be greater or less than the Company’s accrued position. These tax liabilities, including the interest and penalties, are adjusted pursuant to a settlement with tax authorities, completion of audit, refinement of estimates or expiration of various statutes of limitation.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is generally their respective local currency. The financial statements of the Company’s international operations are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities, the historical exchange rate for stockholders’ equity, and a weighted average exchange rate for each period for revenue, expenses, gains and losses. Foreign currency translation adjustments are recorded as a separate component of stockholders’ equity. Gains and losses from non-functional currency denominated transactions are recorded in other income (expense) in the Company’s condensed consolidated statements of operations.

The following table summarizes the foreign exchange loss that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Foreign exchange loss	$	279	$	1,432	$	930	$	6,421

Derivative Financial Instruments

As a result of the Company’s international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company’s primary foreign currency exposures are in Euros, British Pounds, Brazilian Real, Australian Dollars, Singapore Dollars and New Zealand Dollars. As a result, the Company faces exposure to adverse movements in currency exchange rates as the financial results of its operations are translated from local currency into U.S. dollars. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains and losses that are reflected in other income (expense) in the Company’s condensed consolidated statements of operations.

The Company may enter into derivative instruments to hedge certain net exposures of nonfunctional currency denominated assets and liabilities, primarily related to intercompany loans, even though it does not elect to apply hedge accounting or hedge

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accounting does not apply. Gains and losses resulting from a change in fair value for these derivatives are reflected in the period in which the change occurs and are recognized on the condensed consolidated statement of operations in other income (expense). Cash flows from these contracts are classified within cash flows from investing activities on the condensed consolidated statements of cash flows.

The Company does not use financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments on the balance sheet at fair value and its derivative instruments are generally short-term in duration. The Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations.

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of September 30, 2015 which settled October 2, 2015 (in thousands):

	September 30, 2015
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	1,173		$	—	$	1,173		$	41,301
Accrued expenses		(656	)		—		(656	)		129,303
Total	$	517		$	—	$	517		$	170,604

In addition to the notional amounts listed above, the Company entered into new derivative contracts with notional amounts of $157,735,000 on September 30, 2015 with a closing date of January 5, 2016.

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of December 31, 2014 which settled January 2, 2015 (in thousands):

	December 31, 2014
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	4,506		$	—	$	4,506		$	157,164
Accrued expenses		(67	)		—		(67	)		11,562
Total	$	4,439		$	—	$	4,439		$	168,726

Net Income Per Share Attributable to HomeAway, Inc.

Basic net income per share is computed by dividing net income attributable to HomeAway, Inc. by the weighted average number of common shares outstanding during the period. Diluted income per share is computed by dividing net income attributable to HomeAway, Inc. by the weighted average common shares outstanding plus potentially dilutive common shares. The dilutive effect of outstanding options, warrants and awards is reflected in diluted earnings per share by application of the treasury stock method.

Restricted stock awards provide the holder of unvested shares the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are included in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings. Restricted stock awards are excluded from the basic earnings per share in periods of undistributed losses as the holders are not contractually obligated to participate in the losses of the Company. Unvested restricted stock units do not provide the holder the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are excluded in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings or losses.

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Comprehensive Income (Loss) Attributable to HomeAway, Inc.

Comprehensive income (loss) attributable to HomeAway, Inc. consists of net income (loss), foreign currency translation adjustments, unrealized gain (loss) on short-term investments, defined benefit pension plan adjustments and comprehensive loss attributable to noncontrolling interests.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to fiscal years, and interim reporting periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company has not yet selected a transition method and is currently evaluating the effect the updated standard will have on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. The updated standard requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect the updated standard will have on its consolidated balance sheets.

In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This standard clarifies whether a customer should account for a cloud computing arrangement as an acquisition of a software license or as a service arrangement by providing characteristics that a cloud computing arrangement must have in order to be accounted for as a software license acquisition. This guidance is effective for annual periods beginning after December 15, 2015. Early adoption is permitted. Upon adoption, an entity may apply the new guidance prospectively or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, including the effects on current-period income that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date. The new standard is effective for fiscal years, and interim period within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect that the update standard will have on its consolidated financial statements and related disclosures.

3. Goodwill and Other Intangible Assets

Goodwill

Changes in the Company’s goodwill balance are summarized in the table below (in thousands):

Balance at December 31, 2013	$	507,611
Acquired in business combinations		11,647
Foreign currency translation adjustment		(26,098	)
Post-acquisition goodwill adjustment for Stayz		511
Balance at December 31, 2014		493,671
Foreign currency translation adjustment		(33,622	)
Balance at September 30, 2015	$	460,049

The goodwill arising from the December 2013 acquisition of Stayz was increased by $511,000 to $178,288,000 in the year ended December 31, 2014 due to certain income taxes and changes in fair value estimates derived from additional information gained during the measurement period. Goodwill adjustments were not significant to the Company’s previously reported operating results or financial position. Therefore, the Company elected not to retrospectively adjust the acquisition date accounting and instead recorded the adjustment in the year ended December 31, 2014.

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Intangible Assets

The Company’s intangible assets, excluding goodwill, primarily consist of assets acquired in business combinations and are recorded at estimated fair value on the date of acquisition. The Company’s finite-lived intangible assets are summarized in the table below (in thousands):

		September 30, 2015							December 31, 2014
	Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names and trademarks	10	$	28,525	$	(9,572	)	$	18,953	$	30,316	$	(8,396	)	$	21,920
Developed technology	2-8		20,290		(14,748	)		5,542		21,293		(13,231	)		8,062
Customer relationships	6-14		53,436		(27,650	)		25,786		57,656		(25,512	)		32,144
Noncompete agreements and domain names	2-5		1,949		(1,256	)		693		2,224		(923	)		1,301
Total		$	104,200	$	(53,226	)	$	50,974	$	111,489	$	(48,062	)	$	63,427

Amortization of noncompete agreements is recorded over the term of the agreements.

The following table summarizes amortization expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Amortization expense	$	2,819	$	3,397	$	8,713	$	10,163

The Company has the following indefinite-lived intangible assets recorded in its consolidated balance sheet (in thousands):

	September 30,		December 31,
	2015		2014
Trade names	$	7,029	$	7,029

4. Accrued Expenses

The Company’s accrued expenses are comprised of the following (in thousands):

	September 30,		December 31,
	2015		2014
Compensation and related benefits	$	19,591	$	21,413
Taxes		6,810		4,954
Marketing		5,131		4,115
Gift cards		4,103		5,654
Contracting, consulting and professional fees		3,111		3,254
Traveler guarantee		1,246		1,790
Foreign exchange-forward contracts		683		99
Other		9,771		8,976
Total	$	50,446	$	50,255

5. Convertible Senior Notes

Convertible Senior Notes

			Equity			Carrying Value of Convertible
			Component			Senior Notes as of
			Recorded			September 30,		December 31,
(In thousands)	Par Value		at Issuance			2015		2014
0.125% Convertible Senior Notes due April 1, 2019	$	402,500	$	90,887	(1)	$	329,905	$	316,181

⁽¹⁾ This amount represents the equity component recorded at the initial issuance of the 0.125% convertible senior notes.

In March 2014, the Company issued at par value $402.5 million of 0.125% convertible senior notes (the “Notes”) due April 1, 2019, unless earlier purchased by the Company or converted. Interest is payable semi-annually, in arrears on April 1 and October 1 of each year, commencing October 1, 2014.

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The Notes are governed by an indenture between the Company, as issuer, and U.S. Bank National Association, as trustee. The Notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness or the issuance or repurchase of securities by the Company.

If converted, holders will receive cash and/or shares of the Company’s common stock, at the Company’s election. The Company’s intent is to settle the principal amount of the Notes in cash upon conversion. As a result, upon conversion of the Notes, only the amounts payable in excess of the principal amount of the Notes are considered in diluted earnings per share under the treasury stock method.

	Conversion Rate per $1,000 Par Value		Initial Conversion Price per Share		Free Convertibility Date
0.125% Convertible Senior Notes		19.1703	$	52.16		October 1, 2018

Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events as described in the indenture governing the Notes. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a Note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited. Holders may convert their Notes under the following circumstances:

• during any calendar quarter commencing after June 30, 2014, if, for at least 20 trading days during the 30 consecutive trading day period ending on the last trading day of the immediately preceding calendar quarter, the last reported sales price of the Company’s common stock for such trading day is greater than or equal to 130% of the applicable conversion price for the Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes is less than 98% of the product of the sale price of the Company’s common stock and the conversion rate;

• upon the occurrence of specified corporate transactions described under the indenture governing the Notes, such as a consolidation, merger or binding share exchange; or

• at any time on or after October 1, 2018.

As of September 30, 2015, the Notes are not convertible.

Holders of the Notes have the right to require the Company to purchase with cash all or a portion of the Notes upon the occurrence of a fundamental change, such as a change of control, at a purchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest. Following certain corporate transactions that constitute a fundamental change, the Company will increase the conversion rate for a holder who elects to convert the Notes in connection with such make-whole fundamental change.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated conversion feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the transaction costs related to the Note issuance, the Company allocated the total amount incurred to the liability and equity components based on their relative values. Transaction costs attributable to the liability component are being amortized to expense over the term of the Notes, and transaction costs attributable to the equity component were netted with the equity component in stockholders’ equity. Additionally, the Company recorded a deferred tax liability of $0.8 million in connection with the Notes.

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The Notes consist of the following (in thousands):

	September 30,			December 31,
	2015			2014
Liability component:
Principal:
0.125% Convertible Senior Notes	$	402,500		$	402,500
Less: debt discount, net
0.125% Convertible Senior Notes		(72,595	)		(86,319	)
Net carrying amount	$	329,905		$	316,181

The Notes are included in the consolidated balance sheets within convertible senior notes, net, which is classified as a non-current liability. The debt discount is amortized over the life of the Notes using the effective interest rate method.

The total estimated fair value of the Company’s Notes at September 30, 2015 was $293.3 million. The fair value of the Notes was determined based on inputs that are observable in the market (Level 2).

Based on the closing price of the Company’s common stock of $26.54 on September 30, 2015, the if-converted value of the Notes was less than their principal amount.

Note Hedges

To minimize the impact of potential economic dilution upon conversion of the Notes, the Company entered into convertible note hedge transactions with respect to its common stock (the “Note Hedges”).

	Date		Purchase (in thousands)		Shares underlying Note Hedges
Note Hedges		March 2014	$	85,853		7,716,049

The Note Hedges cover shares of the Company’s common stock at a strike price that corresponds to the initial conversion price of the respective Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The Note Hedges will expire upon the maturity of the Notes. The Note Hedges are intended to reduce the potential economic dilution upon conversion of the Notes in the event that the market value per share of the Company’s common stock, as measured under the Notes, at the time of exercise is greater than the conversion price of the Notes. The Note Hedges are separate transactions and are not part of the terms of the Notes. Holders of the Notes will not have any rights with respect to the Note Hedges.

Warrants

	Date		Proceeds (in thousands)		Shares		Strike Price
Warrants		March 2014	$	38,278		7,716,049	$	81.14

Separately, in March 2014, the Company also entered into warrant transactions (the “Warrants”), whereby the Company sold warrants to acquire, subject to anti-dilution adjustments, shares of the Company’s common stock at $81.14 per share. The Warrants have a term of five years from the date of issuance. If the average market value per share of the Company’s common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants would have a dilutive effect on the Company’s earnings per share if the Company reports net income for the reporting period. The Warrants were anti-dilutive for the period ended September 30, 2015. The Warrants are separate transactions, entered into by the Company and are not part of the terms of the Notes or Note Hedges. Holders of the Notes will not have any rights with respect to the Warrants.

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Interest Expense

The following table sets forth total interest expense recognized related to the Notes (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
0.125% coupon	$	126	$	126	$	378	$	252
Amortization of debt issuance costs		14		13		40		26
Amortization of debt discount		4,641		4,378		13,724		8,694
Total	$	4,781	$	4,517	$	14,142	$	8,972

6. Commitments and Contingencies

Leases

The Company leases its facilities and certain office equipment under noncancellable operating leases.

The following table summarizes total rental expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Rental expense	$	1,733	$	1,911	$	5,754	$	5,134

Guarantees

The Company offers two guarantee products to travelers: Basic Rental Guarantee and Carefree Rental Guarantee. The Basic Rental Guarantee is offered to travelers that book a vacation rental property listed on any one of the Company’s websites to protect their vacation rental payments up to $1,000 against Internet fraud. Travelers can also purchase additional protection to cover their vacation rental payments up to $10,000 against Internet fraud, misrepresentation, wrongful denial of entry, wrongful deposit loss or losses from phishing claims by the purchase of the Carefree Rental Guarantee. The Company does not maintain insurance from any third party for claims under these guarantees, and any amounts payable for claims made under these guarantees are payable by the Company. Amounts recorded for estimated future claims under the guarantees are based on historical experience and expectations for future claims. Claim costs related to the Basic Rental Guarantee are recognized in general and administrative expenses in the consolidated statements of operations while claim costs related to the Carefree Rental Guarantee are recognized in cost of revenue.

Expected future claims for traveler guarantees, which are presented as a current liability in the Company’s condensed consolidated balance sheets, and changes for the guarantees, are as follows (in thousands):

Traveler guarantee liability at December 31, 2013	$	956
Costs accrued for new and expected future claims		3,576
Guarantee obligations honored		(2,742	)
Traveler guarantee liability at December 31, 2014	$	1,790
Costs accrued for new and expected future claims		1,216
Guarantee obligations honored		(1,760	)
Traveler guarantee liability at September 30, 2015	$	1,246

The Company maintains a guarantee of £5,000,000 (approximately $7,595,000 as of September 30, 2015) to a bank in the United Kingdom for extending credit to the Company in connection with the wholly owned United Kingdom subsidiary’s business of collecting its subscription revenue in advance via credit card payments.

Legal

From time to time, the Company is involved in litigation relating to claims arising in the ordinary course of business. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. Views on estimated losses are developed by management in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. After taking all of the above factors into account, the Company determines whether an estimated loss from a contingency related to litigation should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company further determines whether an

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estimated loss from a contingency related to litigation should be disclosed by assessing whether a material loss is deemed reasonably possible. Such disclosures will include an estimate of the additional loss or range of loss or will state that such an estimate cannot be made.

Management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

7. Stock-Based Compensation

During the three and nine months ended September 30, 2015, the Company issued an aggregate of 502,383 and 1,686,767 restricted stock units, respectively, under its 2011 Equity Incentive Plan (the “2011 Plan”), for an aggregate fair value of $14,261,000 and $49,261,000, respectively. Additionally, during the three and nine months ended September 30, 2015, the Company issued an aggregate of 83,644 and 947,986 options, respectively, to purchase common stock under the 2011 Plan for an aggregate fair value of $958,000 and $9,995,000, respectively.

The following table summarizes the total stock-based compensation expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Cost of revenue	$	881	$	847	$	2,615	$	2,415
Product development		3,931		3,485		10,769		9,589
Sales and marketing		3,152		2,763		9,003		7,868
General and administrative		4,654		5,576		15,100		15,710
Total	$	12,618	$	12,671	$	37,487	$	35,582

8. Redeemable Noncontrolling Interests

During the year ended December 31, 2013, the Company acquired 68.5% of the outstanding stock of Travelmob Pte. Ltd. (“travelmob”) and 55% of the outstanding stock of Bookabach Limited. During the year ended December 31, 2014, the Company acquired an additional 20% of the outstanding equity of Bookabach Limited, increasing its ownership to 75%. The redeemable noncontrolling interests are reported on the condensed consolidated balance sheets as redeemable noncontrolling interests.

The Company recognizes changes to the redemption value of noncontrolling interests as they occur by adjusting the carrying value to estimated redemption value at the end of each reporting period.

Changes in the Company’s redeemable noncontrolling interests are summarized in the table below (in thousands):

Balance at December 31, 2013	$	10,584
Net loss attributable to noncontrolling interests		(1,839	)
Changes to redemption value of noncontrolling interests		2,421
Repurchase of redeemable noncontrolling interests		(1,461	)
Currency translation adjustments		37
Balance at December 31, 2014	$	9,742
Net loss attributable to noncontrolling interests		(1,623	)
Changes to redemption value of noncontrolling interests		914
Balance at September 30, 2015	$	9,033

In October 2015, the Company acquired the remaining outstanding equity interest of travelmob (see Note 12).

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9. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following (in thousands):

	September 30,			December 31,
	2015			2014
Foreign currency translation adjustments	$	(56,276	)	$	(27,252	)
Unrealized losses on short-term investments		(183	)		(801	)
Defined benefit pension plan adjustments		(4,149	)		—
Total	$	(60,608	)	$	(28,053	)

10. Income Taxes

The following table summarizes the total income tax expense that the Company recorded, and the related effective tax rate, for the three and nine months ended September 30, 2015 and 2014 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Income tax expense	$	5,625		$	845		$	9,757		$	5,909
Effective tax rate		36.3	%		13.9	%		65.1	%		31.5	%

At September 30, 2015, the Company’s effective tax rate estimate for the year ending December 31, 2015 differed from the statutory rate primarily due to losses in certain foreign jurisdictions for which a benefit cannot be recorded at this time, non-deductible stock compensation charges and state taxes, which is offset by the effect of different statutory tax rates in foreign jurisdictions and certain items recorded discretely in the nine months ended September 30, 2015. Those discrete items include a tax benefit due to disqualifying dispositions of incentive stock options, a tax benefit due to an income tax reserve release, a tax benefit for adjustments to the recognized value of the Company’s federal and Texas research and experimentation tax credit carryforwards and a tax benefit of $0.4 million related to a correction of an immaterial prior period transfer pricing error, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. The effective tax rate for the three months ended September 30, 2015 is lower than the effective tax rate estimated for the full year ending December 31, 2015 due to higher income before income taxes in the three months as well as the mix of earnings between income and loss jurisdictions.

On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued a taxpayer-favorable opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision has yet to be issued by the Tax Court due to other outstanding issues related to the case, and the decision is subject to appeal by the Internal Revenue Service. At this time, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. The Company has reviewed this case and its impact and has concluded that no adjustment to the consolidated financial statements is appropriate at this time. The Company will continue to monitor ongoing developments and potential impacts to the condensed consolidated financial statements.

At September 30, 2014, the Company’s effective tax rate estimate differed from the statutory rate primarily due to non-deductible stock compensation charges and state taxes, which was partially offset by the effect of different statutory tax rates in foreign jurisdictions and certain items recorded discretely in the nine months ended September 30, 2014. Those discrete items include a tax benefit due to disqualifying dispositions of incentive stock options, a tax benefit for a state tax apportionment change related to a prior period, a tax benefit for adjustments to the recognized value of our federal and Texas research and experimentation tax credit carryforwards, and a tax benefit resulting from the filing of certain 2013 tax returns, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. In addition, the merger of our wholly owned subsidiaries in Spain in the three months ended September 30, 2014 resulted in tax basis intangibles which will be deductible in future periods, with a tax benefit of $2.5 million recorded discretely.

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11. Net Income Per Share Attributable to HomeAway, Inc.

The following table sets forth the computation of basic and diluted net income per share of common stock (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Numerator
Net income attributable to HomeAway, Inc.	$	10,417	$	4,912	$	5,942	$	13,222
Denominator
Weighted average common shares outstanding - basic		95,716		94,106		95,162		93,507
Dilutive effect of stock options, warrants and restricted stock units		1,972		2,283		2,227		2,851
Weighted average common shares outstanding - diluted		97,688		96,389		97,389		96,358
Net income per share attributable to HomeAway, Inc.:
Basic	$	0.11	$	0.05	$	0.06	$	0.14
Diluted	$	0.11	$	0.05	$	0.06	$	0.14

The following common equivalent shares were excluded from the calculation of diluted net loss per share attributable to HomeAway, Inc. as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Stock options		3,295		2,604		3,089		2,038
Restricted stock units		547		62		21		49
Warrants		7,716		7,716		7,716		7,716
Total common equivalent shares excluded		11,558		10,382		10,826		9,803

12. Subsequent Events

(i) On October 1, 2015, the Company acquired Dwellable, Inc., a United States company that is the creator of an online vacation rental search engine and mobile application that provides unique, interactive ways for travelers to find and book vacation rentals, for cash consideration of $18.0 million.

(ii) In the fourth quarter of 2013, the Company acquired a controlling interest in travelmob. Under the terms of the acquisition agreement, the Company had a call option to purchase the remaining non-controlling interest of travelmob for the period defined in the agreement beginning on December 31, 2016. In the event the Company did not exercise its call option to purchase the remaining shares of travelmob by such deadline, the remaining travelmob stockholders had a put option to require the Company to repurchase their remaining interest for the period defined in the agreement beginning on February 1, 2017. The call and put were accounted for as embedded features of the non-controlling interest.

In October 2015, the Company and the non-controlling interest holders agreed to terminate the call and put options and the Company acquired the remaining outstanding equity interest of travelmob. In connection with the mutual termination of the options, in the fourth quarter of 2015, the Company will recognize an operating expense charge of approximately $3.9 million representing the amount paid for the acquisition of the non-controlling interest in excess of the fair value of the non-controlling interest prior to the termination of the options.

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(iii) On November 4, 2015, the Company, Expedia, Inc., a Delaware corporation (“Expedia”), and HMS 1, Inc., a Delaware corporation and a direct wholly owned subsidiary of Expedia (“Purchaser”)entered into an Agreement and Plan of Reorganization (the “Merger Agreement”).

Pursuant to the Merger Agreement, Purchaser commenced a tender offer to acquire all of the outstanding shares of Company common stock for an equity value of approximately $3.9 billion in cash and Expedia common stock, representing a per share price for HomeAway shares of $38.31, based on Expedia’s closing price on November 3, 2015. Under the terms of the transaction, Expedia will offer to acquire each outstanding share of common stock of HomeAway in exchange for $10.15 in cash and 0.2065 of a share of Expedia common stock. Under the terms of the transaction, Expedia will acquire each outstanding share of common stock of HomeAway through a tender offer, followed by a second-step merger.

The Board of Directors of the Company unanimously approved the Merger Agreement and the consummation of the transactions contemplated thereby, including the tender offer and the Mergers. Consummation of the transactions is subject to the satisfaction or, if permissible, waiver of customary closing conditions, including there having been validly tendered and not validly withdrawn prior to the expiration of the tender offer a majority of all then outstanding shares of Company common stock, the absence of certain legal impediments and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The Merger Agreement contains certain termination rights, including the right of the Company to terminate the Merger Agreement to accept a superior proposal (subject to compliance with certain notice and other requirements). The Merger Agreement provides that, in connection with termination of the Merger Agreement by the Company or Expedia upon specified conditions, the Company will be required to pay to Expedia a termination fee of $138 million. In addition, subject to certain exceptions and limitations, the Company or Expedia may terminate the Merger Agreement if the Merger is not consummated by May 4, 2016 (or as such date may be extended pursuant to the terms of the Merger Agreement).

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Safe Harbor Cautionary Statement

This quarterly report on Form 10-Q contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The statements contained in this quarterly report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements may be signified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other 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. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in other documents we file with the Securities and Exchange Commission. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this quarterly report on Form 10-Q. You should read this quarterly report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

The following discussion should be read in conjunction with our interim condensed consolidated financial statements contained elsewhere in this quarterly report on Form 10-Q and in our other Securities and Exchange Commission, or SEC, filings including our Annual Report on Form 10-K for the year ended December 31, 2014 and subsequent reports on Form 8-K, which discuss our business in greater detail.

Overview

HomeAway, Inc. and its wholly and majority-owned subsidiaries (“HomeAway”, the “Company”, “we”, “us” and “our”) operate the world’s largest online marketplace for the vacation rental industry, bringing together millions of travelers seeking vacation rentals online with the property owners and managers of over one million vacation rental properties located in over 190 countries around the world. Our portfolio includes leading global vacation rental websites. During the three and nine months ended September 30, 2015, our websites attracted approximately 272 million and 834 million website visits, respectively, and as of September 30, 2015, our global marketplace included approximately 1.2 million paid listings. We continue to focus on providing the largest selection of properties to travelers and the most qualified inquiries and bookings to property owners and managers.

The majority of our revenue is generated from our paid listing business. Our subscription listings generate the majority of our paid listing revenues and generally have annual terms. We continued to improve monetization of our subscription listing base in the three and nine months ended September 30, 2015 through pricing and product changes including continued adoption of our tiered pricing structure and sales of bundled listings. This improved monetization can be seen in the increase in our average revenue per subscription listing measured on a constant currency basis for the three and nine months ended September 30, 2015. Tiered pricing allows property owners and managers with paid subscriptions to improve their position in search results by purchasing a higher subscription level, or tier. Bundled listings provide subscribers the opportunity to purchase additional distribution on multiple HomeAway websites. We also offer performance-based pricing on most websites, which allows property owners and managers to list their properties for free and pay a commission for bookings. In order to grow our revenue from performance-based listings, we will continue to focus on increasing the number of bookings for these customers. Additionally, we believe that we can grow the number of performance-based paid listings and generate additional bookings and revenue.

We believe a large selection of qualified properties is necessary to attract and retain travelers. Our total paid listings grew from September 30, 2014 to September 30, 2015 by 15.5% as we added approximately 160,000 new paid listings, net of non-renewals. Subscription listings declined slightly compared to last year as new subscriptions were offset with non-renewals. However performance-based listings grew by 50.5% to approximately 480,000 listings as property owners and managers continued to adopt the new performance-based model. We expect performance-based listings will continue to grow at a faster rate than subscriptions. Additionally, we are continually investing in product enhancements and property owner and manager communications to encourage high quality listings on our websites to ensure a positive experience for travelers.

Enablement of online booking capabilities on our websites has been and will continue to be a focus for our Company. While the inquiry process still remains important to many travelers in the selection of a vacation rental, we believe online bookable properties will provide a better experience for travelers and offers greater process efficiencies for many of our property owners and managers. We continue to see increased adoption of paid listings that are online bookable as well as increased adoption of our online payments platform, which is currently available on the majority of our websites.

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We consider a listing to be online bookable when it has a fully updated calendar and rates, which allows the traveler to accurately estimate the cost of the stay. In some cases the booking will take place immediately and in other cases our property owners and managers will require additional information before accepting or rejecting the booking request. As to payment processing, property owners and managers are encouraged but not required to use our payments platform which is continuously being improved to support multiple payment methods. This is important for our global marketplace. We also allow payments to be processed offline or through integrated platforms. Property owners and managers, in some countries, can make value-added products available for purchase through our payments platform. We believe adoption and increased use of our platform over time will allow us to earn more revenue from ancillary products and fees while providing a more secure and efficient payment mechanism for travelers. We plan to introduce new products and services for travelers, property owners and managers which we believe will provide further opportunities to generate revenue through our marketplace.

We believe bringing travelers to our online marketplace is necessary to attract and retain vacation rental owners and managers as well as increase revenue from commissions and value-added-services. It is also critical for us to increase the rate at which travelers book vacation rentals with our property owners and managers. To meet these challenges, which are even more important with the increase in performance-based listings, we are focused on a combination of marketing strategies including pay-per-click advertising, search engine optimization and brand and display advertising, with a goal of driving more travelers and bookings to our websites as well as increasing the exposure of the vacation rental category. We expect spending in sales and marketing to increase over time as we add online and offline marketing campaigns to increase our brand awareness to travelers and property owners and managers, and as we increase our marketing support for our growing performance-based listing base. During the nine months ended September 30, 2015, we increased our sales and marketing expenses by $26.6 million compared to the nine months ended September 30, 2014. We are continuously investing in product enhancements to make it easier for travelers visiting our websites to search and find the right property, to inquire and to book their stay.

We believe conversion of traveler visits to bookings is necessary for long term growth of our business. The combination of increasing visits to our websites and conversion of those visits to bookings allows us to deliver value to property owners and managers which supports renewal of listings, increases our opportunity for revenue on transactions booked through our platform, and increases the commission revenue we earn from performance based listings.

Our financial reporting currency is the U.S. dollar and changes in foreign exchange rates significantly affect our reported results and consolidated trends. For example, if the U.S. dollar strengthens year-over-year relative to currencies in our international locations, our consolidated revenues and operating expenses will be lower than if currencies had remained constant. Likewise, if the U.S. dollar weakens year-over-year relative to currencies in our international locations, our consolidated revenues and operating expenses will be higher than if currencies had remained constant. We believe our diversification beyond the U.S. economy through our international businesses benefits our stockholders over the long term. We also believe it is useful to evaluate key operating results and growth rates before and after the effect of currency changes. Additionally, the re-measurement of our intercompany balances can result in significant gains and charges associated with the effect of movements in foreign currency exchange rates. Currency volatilities may continue, which could significantly impact (either positively or negatively) our reported results and consolidated trends and comparisons.

Acquisitions

Since our inception and through September 30, 2015, we have acquired 22 businesses as part of our growth strategy. Our acquisitions have presented, and certain of them continue to present, significant integration challenges. They have required us to integrate new operations, offices and employees and to formulate and execute on marketing, product and technology strategies associated with the acquired businesses. In some cases, we continue to manage multiple brands and technology platforms of the acquired businesses, which has increased our cost of operations. Challenges of this nature are likely to arise if we acquire businesses in the future.

Growth Opportunities and Trends

We believe that our ability to further grow our revenue will depend largely on increasing the number of paid listings, increasing revenue per listing and increasing revenue from other products, services and fees through our marketplace. Our achievement of these objectives will further depend on our ability to successfully enable more online bookable listings and to drive more bookings to our paid listings. Achieving growth in the number of paid listings involves our ability to increase our paid listing renewal rates, reach new property owners and managers through marketing or telesales activities or obtain new paid listings through geographic expansion, strategic acquisitions or investments. We believe that increasing revenue per listing and revenue from other products and services will involve our ability to successfully drive more transactions through our platform as well as increased adoption of our products and services, such as higher adoption of our payments platform. Furthermore, we believe our ability to successfully modify or introduce new products, services and fees will be important in achieving future revenue growth.

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In the future, we believe it will become more important to increase marketing investments to grow and further advertise our brand and products to travelers. We have seen other companies launch online businesses offering vacation rentals or other alternatives to hotels. We believe this growing favorable awareness of alternatives to hotels has and will continue to support growth in our business. However, we have also seen a trend of increased government regulation and taxation of the industry. We continue to monitor the effects of these trends and intend to take actions as necessary to mitigate their effects.

Key Financial Highlights

Since our commercial launch in 2005, our revenue growth has been attributable to our acquisitions of other online listings businesses, organic growth in the number of listings purchased by property owners and managers, increases in the average revenue per listing due to additional features and price increases, and the introduction of additional products and services related to our marketplace. We view our market opportunity as global and have historically generated strong cash flows. Additionally, we have experienced predictable financial results because of our advance payment, subscription-based model and our high annual listing renewal rates. However, our revenue predictability may be affected as we develop new and alternative sources of revenue.

Key financial highlights for the three months ended September 30, 2015 include the following:

• Total revenue was $130.7 million compared to $117.1 million in the third quarter of 2014, or an increase of 11.6%; measured on a constant currency basis, total revenue increased by 19.8%;

• Percentage of total revenue from outside the United States was 34.4% in the third quarter, compared to 40.6% in the third quarter of 2014; total revenue from outside the United States in the third quarter of 2015 included 29.3% from Europe and 5.1% from South America and the Asia Pacific region;

• Listing revenue was $106.5 million compared to $96.6 million in the third quarter of 2014 and contributed 81.5% of total revenue compared to 82.5% in the third quarter of 2014;

• Net income attributable to HomeAway, Inc. was $10.4 million, or $0.11 per diluted share, compared to net income of $4.9 million, or $0.05 per diluted share, in the third quarter of 2014;

• Cash from operating activities was $24.6 million compared to $25.5 million in the third quarter of 2014, or a decrease of 3.5%;

• Adjusted EBITDA was $40.2 million compared to $31.6 million in the third quarter of 2014, or an increase of 27.2%; Adjusted EBITDA as a percentage of revenue was 30.8%, an increase from 27.0% in the third quarter of 2014;

• Free cash flow was $24.9 million compared to $20.0 million in the third quarter of 2014, or an increase of 24.5%; on a trailing twelve month basis, free cash flow increased 8.6% to $127.2 million from $117.2 million in the comparable trailing twelve month period for the prior year;

• Non-GAAP net income was $23.5 million, or $0.24 per diluted share, compared to non-GAAP net income of $18.9 million, or $0.20 per diluted share, in the third quarter of 2014; and

• Cash, cash equivalents and short-term investments as of September 30, 2015 were $919.6 million.

For further discussion regarding Adjusted EBITDA, free cash flow and non-GAAP net income, along with reconciliations of such numbers to the most directly comparable financial measures calculated and presented in accordance with GAAP, please see the information under the caption “Discussion of Non-GAAP Financial Measures” in Item 2 of this Quarterly Report on Form 10-Q.

Key Business Metrics

In addition to traditional financial and operational metrics, we use the following business metrics to monitor and evaluate results:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Paid listings (in thousands):
Subscription listings, end of period		715			716			715			716
Performance listings, end of period		480			319			480			319
Total paid listings, end of period		1,195			1,035			1,195			1,035
Paid listings, growth year-over-year		15.5	%		33.8	%		15.5	%		33.8	%
Average revenue per subscription listing	$	514		$	479		$	501		$	476
Average revenue per subscription listing, growth year-over-year		7.3	%		11.9	%		5.3	%		12.8	%
Subscription renewal rate, end of period		72.4	%		72.2	%		72.4	%		72.2	%
Visits to websites (in millions)		272			232			834			707
Visits to websites, growth year-over-year		17.3	%		17.3	%		18.0	%		16.6	%

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Paid Listings. The majority of our revenue is derived from paid listings which we regularly track as a key revenue growth indicator and to identify trends in our business and industry. The growth in paid listings is due to our marketing and selling new and additional listings to property owners and managers, the addition of performance-based listings, organic growth from property owners and managers who become aware of our websites and choose to market their properties, and new listings added through new affiliates or acquisitions. For the period, we added a significant number of performance-based listings.

When we migrate one of our websites to our global technology platform, property owners and managers that have listings on the pre-migrated website and on a website already on our global technology platform are able to consolidate their listings into one listing displayed on both websites. Additionally, platform consolidations allow property owners and managers to purchase bundled listings that include display on multiple websites that exist on the global technology platform. As a result of a website migration, we count each of these bundled listings as one listing. This impacts the comparability of our current period reported metrics to our previously reported metrics for paid listings, renewal rate and average revenue per listing. We migrated the VRBO.com website to our global technology platform in 2012 and in the second quarter of 2014, we migrated Homelidays.com to our global technology platform. In the second quarter of 2015, we migrated the Owners Direct Holiday Rentals.co.uk website to our global technology platform. Furthermore, we expect future platform migrations for certain of our websites, such as Stayz.com.au, to our global technology platform. When this occurs, property owners and managers who have purchased subscriptions on the website being migrated as well as other HomeAway websites will be given the opportunity to consolidate their listings through the purchase of a bundled listing. We expect these migrations to impact the comparability of future operating metrics.

As a result of consolidated and bundled listings, our paid listing counts will be lower because these listings previously would have been counted as multiple paid listings had they been purchased on multiple websites. The lower paid listing counts from consolidations and bundles will in turn lower our reported subscription renewal rate. However, our bundled listing products generally have a higher overall price and we expect they will increase our average revenue per subscription listing. We intend to disclose and discuss the trends of the business resulting from these consolidated listings when there is a significant impact.

As the number of paid listings increases, we believe we will generate additional revenue while also expanding the value of the marketplace to travelers, thus increasing the likelihood travelers will find a property suitable to their needs. It is possible a specific property may be listed on more than one of our websites without indicating that the multiple listings refer to the same property.

Average Revenue per Subscription Listing. We compute average revenue per subscription listing as annualized subscription listing revenue divided by the average of paid subscription listings at the beginning and end of the period. We believe trends in revenue per subscription listing, over an extended period, are important to understanding the value we bring to property owners and managers, and the overall health of our marketplace. As the majority of our listing business is generated from subscriptions, we use trends in revenue per subscription listing, as well as trends in paid listings, to formulate financial projections and make strategic business decisions. At a consolidated level, increases in revenue per subscription listing may increase our earnings or may be used for future investment. The average revenue per subscription listing may fluctuate based on the timing and nature of acquisitions, changes in our pricing, the impact of consolidated and bundled listing products, uptake and pricing of listing enhancements, seasonality, changes in brand and listing type mix, and the impact of foreign exchange rates on our listing revenue outside of the United States.

In order to provide a comparable framework for assessing average revenue per subscription listing, excluding the effect of foreign currency fluctuations, we analyze year-over-year growth on a constant currency basis by calculating average revenue per subscription listing in the current period using exchange rates from the comparable prior period. Excluding the impact of foreign exchange rates, average revenue per subscription listing would have been $554 and $544 in the three and nine months ended September 30, 2015, respectively, an increase of 15.7% and 14.3%, respectively, when compared to $479 and $476 as reported in the three and nine months ended September 30, 2014, respectively.

In order to increase revenue per subscription listing, we rely on increases in base pricing, adoption of tiered pricing and bundled listings for our property owners and managers. We began offering tiered pricing on HomeAway.com in the United States in 2011 and have continued to launch tiered pricing to our sites globally, bringing the total number of our websites that provide tiered pricing alternatives to 19. As we continue to implement tiered pricing on other websites, or change the prices or structure of tiered pricing, we may see an impact on listing sales in the period of the change and revenue thereafter.

Subscription Renewal Rate. The renewal rate for our subscription listings at the end of any period is defined as the percentage of those paid listings active at the end of the period ended twelve months prior that are still active as of the end of the current reported period. Unique property subscription listings removed from property managers’ accounts and subsequently replaced with new subscription listings within the same property manager’s account listings are not considered as renewals in our renewal rate calculation. We include most subscription listings in our calculation of renewal rate, with the exception of subscriptions sold by BedandBreakfast.com, Bookabach.co.nz and Stayz.com.au, which will remain excluded until we can further develop our systems. However, based on our review of other internal renewal rate data, we do not believe the exclusion of these brands from the renewal rate calculation materially impacts the result. We exclude pay-for-performance listings from our renewal rate analysis because they are not sold on a subscription basis.

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Renewal of paid subscription listings is a key driver of revenue for our business. We track renewal rate in order to understand and improve property owners’ and managers’ satisfaction and to help us more accurately estimate our future revenue and cash flows. Our overall renewal rate for the nine months ended September 30, 2015 stayed relatively constant compared to the nine months ended September 30, 2014. Beginning in the second quarter of 2015, customers in Australia were directed to Stayz.com.au to list their property and were not able to renew their listing on HomeAway Australia. Accordingly, beginning in the second quarter of 2015, we exclude HomeAway Australia from the subscription renewal rate calculation. All periods prior to the second quarter of 2015 have been revised to exclude HomeAway Australia. We continue to make product improvements and increase our investment in demand generation for property owners and managers in order to increase customer satisfaction and improve renewal rates. In addition, several other factors affect renewal rates including our property owners’ and managers’ ability to consolidate their listings, their ability to purchase geographic bundled listings and our use of promotional pricing to attract new subscribers. Our paid subscription listing renewal rate could also be impacted by property owners and managers who elect to list their properties through our pay-per-booking commission offering, rather than paying a subscription fee. With increase adoption of our pay-per-booking listing product, we anticipate evaluating measuring a total customer retention rate in the future to complement our subscription renewal rate measure to provide a more complete picture of our marketplace supply.

Visits to Websites. We view visits to websites as a key indicator of growth in our brand awareness among users and our ability to provide our property owners and managers with inquiries and bookings from travelers. We believe that growth in visits to websites will be driven by our marketing strategies and has both a direct and indirect impact on our financial performance. We use a variety of tools to measure visits to our websites, including solutions from third parties such as Google Analytics. We also review third-party published reports to measure our results against comparable companies; however, these reports are frequently inconsistent with our internal measurements.

We believe certain quality initiatives aimed at reducing the number of visits required to secure a booking may have a negative impact on growth in visits while providing a positive experience for travelers and property owners and managers. These initiatives include online booking, quotable rates, and continuous improvements to our search functionality to help travelers locate appropriate properties more quickly.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements include the accounts of our U.S.-based operations and our partially and wholly-owned subsidiaries throughout the world and are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. To the extent there are material differences between these estimates and our actual results, our condensed consolidated financial statements will be affected.

Our significant accounting policies are described in Note 2 to the accompanying condensed consolidated financial statements. The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations. Accordingly, we believe the policies listed below involve the greatest degree of complexity and judgment by our management and are the most critical for understanding and evaluating our financial condition and results of operations. These critical accounting policies are:

• Revenue recognition;

• Business combinations;

• Convertible senior notes and the related warrants and hedges;

• Stock-based compensation; and

• Income taxes.

A description of our critical accounting policies that involve significant management judgments appears in our Annual Report on Form 10-K for the year ended December 31, 2014 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.”

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Results of Operations

The following table presents our operating results and our operating results as a percentage of revenue for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(in thousands, except per share data)
Condensed Consolidated Statements of Operations Data:
Revenue:
Listing	$	106,484		$	96,601		$	301,281		$	278,459
Other		24,198			20,511			74,272			58,591
Total revenue		130,682			117,112			375,553			337,050
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)		19,361			16,926			58,472			50,291
Product development		22,058			20,212			65,235			56,952
Sales and marketing		42,963			42,234			143,850			117,251
General and administrative		23,874			22,995			72,115			69,467
Amortization expense		2,819			3,397			8,713			10,163
Total costs and expenses		111,075			105,764			348,385			304,124
Operating income		19,607			11,348			27,168			32,926
Other income (expense):
Interest expense		(4,718	)		(4,373	)		(13,971	)		(8,842	)
Interest income		927			552			2,426			1,117
Other expense, net		(338	)		(1,434	)		(633	)		(6,452	)
Total other income (expense)		(4,129	)		(5,255	)		(12,178	)		(14,177	)
Income before income taxes		15,478			6,093			14,990			18,749
Income tax expense		(5,625	)		(845	)		(9,757	)		(5,909	)
Net income		9,853			5,248			5,233			12,840
Less: Impact of noncontrolling interests, net of tax		(564	)		336			(709	)		(382	)
Net income attributable to HomeAway, Inc.	$	10,417		$	4,912		$	5,942		$	13,222
Net income per share attributable to HomeAway Inc.:
Basic	$	0.11		$	0.05		$	0.06		$	0.14
Diluted	$	0.11		$	0.05		$	0.06		$	0.14
Weighted average number of shares outstanding:
Basic		95,716			94,106			95,162			93,507
Diluted		97,688			96,389			97,389			96,358

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Condensed Consolidated Statements of Operations as a Percentage of Revenue:
Revenue:
Listing		81.5	%		82.5	%		80.2	%		82.6	%
Other		18.5			17.5			19.8			17.4
Total revenue		100.0			100.0			100.0			100.0
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)		14.8			14.5			15.6			14.9
Product development		16.9			17.3			17.4			16.9
Sales and marketing		32.9			36.1			38.3			34.8
General and administrative		18.3			19.6			19.2			20.6
Amortization expense		2.2			2.9			2.3			3.0
Total costs and expenses		85.0			90.3			92.8			90.2
Operating income		15.0			9.7			7.2			9.8
Other income (expense):
Interest expense		(3.6	)		(3.7	)		(3.7	)		(2.6	)
Interest income		0.7			0.5			0.6			0.3
Other expense, net		(0.3	)		(1.2	)		(0.2	)		(1.9	)
Total other income (expense)		(3.2	)		(4.5	)		(3.2	)		(4.2	)
Income before income taxes		11.8			5.2			4.0			5.6
Income tax expense		(4.3	)		(0.7	)		(2.6	)		(1.8	)
Net income		7.5			4.5			1.4			3.8
Less: Impact of noncontrolling interests, net of tax		(0.4	)		0.3			(0.2	)		(0.1	)
Net income attributable to HomeAway, Inc.		8.0	%		4.2	%		1.6	%		3.9	%

Comparison of the Three and Nine Months Ended September 30, 2015 and 2014

Revenue

	Three Months Ended September 30,
	2015					2014					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Listing	$	106,484		81.5	%	$	96,601		82.5	%	$	9,883		10.2	%
Other		24,198		18.5			20,511		17.5			3,687		18.0
Total	$	130,682		100.0	%	$	117,112		100.0	%	$	13,570		11.6	%

	Three Months Ended September 30,
	2015					2014					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			Percent
	(dollars in thousands)
United States	$	85,759		65.6	%	$	69,564		59.4	%	$	16,195			23.3	%
International		44,923		34.4			47,548		40.6			(2,625	)		(5.5	)
Total	$	130,682		100.0	%	$	117,112		100.0	%	$	13,570			11.6	%

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	Nine Months Ended September 30,
	2015					2014					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			Percent
	(dollars in thousands)
Listing	$	301,281		80.2	%	$	278,459		82.6	%	$	22,822			8.2	%
Other		74,272		19.8			58,591		17.4			15,681			26.8
Total	$	375,553		100.0	%	$	337,050		100.0	%	$	38,503			11.4	%
	Nine Months Ended September 30,
	2015					2014					Change
Revenue	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			Percent
	(dollars in thousands)
United States	$	244,410		65.1	%	$	195,786		58.1	%	$	48,624			24.8	%
International		131,143		34.9			141,264		41.9			(10,121	)		(7.2	)
Total	$	375,553		100.0	%	$	337,050		100.0	%	$	38,503			11.4	%

For the Three Months Ended September 30, 2015

Our overall revenue growth rate for the three months ended September 30, 2015 was 11.6%. All of our revenue growth in the period was organic revenue growth. We consider growth to be organic if generated from businesses we have owned for at least 12 months.

Listing Revenue

Our core listing business revenue increased primarily due to increases in new paid listings, increases in average revenue per subscription listing and higher performance-based commissions. Paid listings increased from 1.0 million at September 30, 2014 to 1.2 million at September 30, 2015 primarily due to selling new and additional performance-based listings to property owners and managers. For our subscription listings, our average revenue per subscription listing was $514 in the three months ended September 30, 2015 compared to $479 in the three months ended September 30, 2014, an increase of $35, or 7.3%. We continued to improve monetization of our subscription listing base through continued adoption of our tiered pricing structure and an increase in bundled listings products.

Other Revenue

Other revenue increased by $3.7 million, or 18.0%, in the three months ended September 30, 2015 compared to the three months ended September 30, 2014. Revenue from products focused on travelers and property owners, such as insurance products, the Carefree Rental Guarantee and software products increased by $3.7 million in the three months ended September 30, 2015 compared to the same period in 2014. Furthermore, a $1.4 million increase in revenue from merchant bank credit card royalties was offset by a $1.4 million decrease in advertising and other revenues in the three months ended September 30, 2015 compared to the same period in 2014.

Revenue Growth in Constant Currency

We invoice and collect payments in the Euro, British Pound, Brazilian Real, Australian Dollar, Singapore Dollar and New Zealand Dollar, as well as other currencies. As a result, our total revenue is affected by changes in the value of the U.S. dollar relative to these other currencies. In order to provide a comparable framework for assessing our business performance, excluding the effect of foreign currency fluctuations, we analyze year-over-year revenue growth on a constant currency basis by calculating revenue in the current period using exchange rates from the comparable prior period. In the three months ended September 30, 2015, the year-over-year growth in listing revenue measured on a constant currency basis was 19.7%, compared with 10.2% as reported. The year-over-year growth in total revenue in the three months ended September 30, 2015 measured on a constant currency basis was 19.8%, compared with 11.6% as reported.

For the Nine Months Ended September 30, 2015

Our overall revenue growth rate for the nine months ended September 30, 2015 was 11.4%. We consider growth to be organic if generated from businesses that we have owned for at least 12 months.

Listing Revenue

Our core listing business revenue increased primarily due to increases in new paid listings, increases in average revenue per subscription listing and higher performance-based commissions. Paid listings increased from 1.0 million at September 30, 2014 to 1.2 million at September 30, 2015 primarily due to selling new and additional performance-based listings to property owners and

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managers. Our average revenue per subscription listing was $501 in the nine months ended September 30, 2015 compared to $476 in the nine months ended September 30, 2014, an increase of $25, or 5.3%. We continued to improve monetization of our subscription listing base through continued adoption of our tiered pricing structure and an increase in bundled listings products.

Other Revenue

Other revenue increased by $15.7 million, or 26.8%, in the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. Revenue from products focused on travelers and property owners, such as insurance products, the Carefree Rental Guarantee and software products increased by $13.0 million in the nine months ended September 30, 2015 compared to the same period in 2014. Furthermore, a $4.1 million increase in revenue from merchant bank credit card royalties was partially offset by a $1.4 million decrease in advertising and other revenues in the nine months ended September 30, 2015 compared to the same period in 2014.

Revenue Growth in Constant Currency

We invoice and collect payments in the Euro, British Pound, Brazilian Real, Australian Dollar, Singapore Dollar and New Zealand Dollar, as well as other currencies. As a result, our total revenue is affected by changes in the value of the U.S. dollar relative to these other currencies. In order to provide a comparable framework for assessing our business performance, excluding the effect of foreign currency fluctuations, we analyze year-over-year revenue growth on a constant currency basis by calculating revenue in the current period using exchange rates from the comparable prior period. In the nine months ended September 30, 2015, the year-over-year growth in listing revenue measured on a constant currency basis was 17.9%, compared with 8.2% as reported. The year-over-year growth in total revenue in the nine months ended September 30, 2015 measured on a constant currency basis was 19.8%, compared with 11.4% as reported.

Cost of Revenue

	Three Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Cost of revenue	$	19,361		14.8	%	$	16,926		14.5	%	$	2,435		14.4	%

	Nine Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Cost of revenue	$	58,472		15.6	%	$	50,291		14.9	%	$	8,181		16.3	%

For the Three Months Ended September 30, 2015

Compensation costs for our customer service and web-hosting personnel, including non-cash stock-based compensation, increased by $0.9 million due to 65 new customer support and web-hosting personnel as of September 30, 2015 compared to September 30, 2014. With the increased headcount and higher investments in hosting equipment, we incurred a higher expense for facilities and depreciation, which increased by $0.3 million, or 12.4%. Other increases include $1.0 million of software licenses and maintenance costs for our corporate systems and $0.2 million in equipment expenses, web hosting fees and merchant fees.

For the Nine Months Ended September 30, 2015

Compensation costs for our customer service and web-hosting personnel, including non-cash stock-based compensation, increased by $3.5 million due to an increase in new customer support and web-hosting personnel during the nine months ended September 30, 2015. With the increased headcount and higher investments in hosting equipment, we incurred a higher expense for facilities and depreciation, which increased by $1.6 million, or 23.5%. Other increases included $0.4 million in increases in equipment expenses, web hosting fees and merchant fees and $2.6 million in software licenses and maintenance for our corporate systems.

For the full year 2015, we expect to continue to increase expenses across the organization to support our growth and expect cost of revenue to grow in absolute dollars and stay relatively consistent as a percentage of revenue.

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Product Development

	Three Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Product development	$	22,058		16.9	%	$	20,212		17.3	%	$	1,846		9.1	%
Capitalized software development costs		2,536		1.9			1,912		1.6			624		32.6
Total product and technology costs expensed and capitalized	$	24,594		18.8	%	$	22,124		18.9	%	$	2,470		11.2	%

	Nine Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Product development	$	65,235		17.4	%	$	56,952		16.9	%	$	8,283		14.5	%
Capitalized software development costs		6,859		1.8			6,384		1.9			475		7.4
Total product and technology costs expensed and capitalized	$	72,094		19.2	%	$	63,336		18.8	%	$	8,758		13.8	%

For the Three Months Ended September 30, 2015

Compensation costs for product and development personnel, including non-cash stock-based compensation, increased by $2.3 million due to 41 new employees in product development as of September 30, 2015 compared to September 30, 2014. Overall increases in headcount also drove higher facilities and depreciation expense of $0.2 million. Including capitalized software development costs, total product and development expenses stayed relatively constant as a percentage of revenue at 18.8% in the three months ended September 30, 2015 as compared to 18.9% in the three months ended September 30, 2014.

For the Nine Months Ended September 30, 2015

Compensation costs for product and development personnel, including non-cash stock-based compensation, increased by $7.5 million due to an increase in new employees in product development during the nine months ended September 30, 2015. Overall increases in headcount also drove higher facilities and depreciation expense of $1.0 million and $0.2 million in subscription and maintenance fees for our corporate systems. Including capitalized software development costs, total product and development expenses increased as a percentage of revenue to 19.2% in the nine months ended September 30, 2015 as compared to 18.8% in the nine months ended September 30, 2014 due to higher headcount and employee costs.

For the full year 2015, we expect product development expenses as a percentage of revenue to be relatively consistent as we expand our team to develop new features and products and incur a full year impact of personnel hired in 2014.

Sales and Marketing

	Three Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Sales and marketing	$	42,963		32.9	%	$	42,234		36.1	%	$	729		1.7	%
	Nine Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Sales and marketing	$	143,850		38.3	%	$	117,251		34.8	%	$	26,599		22.7	%

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For the Three Months Ended September 30, 2015

Direct marketing expenses were the primary driver for the increase of sales and marketing expenses in the three months ended September 30, 2015 and increased by $1.2 million due to increased pay-per-click advertising, display advertising, affiliate marketing and broad reach media, including television, compared to the three months ended September 30, 2014. Although headcount increased by 16 new employees as of September 30, 2015 compared to September 30, 2014, compensation costs for sales and marketing personnel, including non-cash stock-based compensation, decreased by $0.9 million due to a shift from building the marketing executive team in 2014 to building the sales team in 2015. Overall increases in headcount also drove higher software licenses and maintenance fees for our corporate systems of $0.3 million and an increase of $0.1 million in facilities and depreciation expense.

For the Nine Months Ended September 30, 2015

Direct marketing expenses were the primary driver for the increase of sales and marketing expenses as a percentage of revenue in the nine months ended September 30, 2015 and increased by $22.3 million due to increased pay-per-click advertising, display advertising, affiliate marketing and broad reach media, including television. Compensation costs for sales and marketing personnel, including non-cash stock-based compensation, increased by $0.9 million due to the hiring of new employees during the nine months ended September 30, 2015. Overall increases in headcount also drove higher facilities and depreciation expense of $1.1 million. Other increases included $1.9 million in increases in software licenses and maintenance fees for our corporate systems and $0.4 million from travel expenses and professional and consulting fees.

For the full year 2015, we expect sales and marketing expenses in absolute dollars and as a percentage of revenue to increase as we continue to increase our marketing activities to generate additional traveler demand to paid listings, continue to build brand and category awareness, and continue to build our sales team to serve professional property managers.

General and Administrative

	Three Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
General and administrative	$	23,874		18.3	%	$	22,995		19.6	%	$	879		3.8	%

	Nine Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
General and administrative	$	72,115		19.2	%	$	69,467		20.6	%	$	2,648		3.8	%

For the Three Months Ended September 30, 2015

Compensation costs for general and administrative personnel, including non-cash stock-based compensation, increased by $0.6 million due to the addition of 41 new employees and executives in operations, information technology, finance, human resources and legal during the three months ended September 30, 2015 compared to the three months ended September 30, 2014. Overall increases in headcount also drove higher facilities and depreciation expense of $0.2 million and subscription and maintenance fees for our corporate systems of $0.2 million. Furthermore, increased professional fees of $0.6 million were offset by a reduction in our Basic Rental Guarantee Claims expense of $0.8 million.

For the Nine Months Ended September 30, 2015

Compensation costs for general and administrative personnel, including non-cash stock-based compensation, increased by $4.5 million due to an increase in new employees and executives in operations, information technology, finance, human resources and legal and a $1.4 million compensation charge, which includes the acceleration of the vesting period for some equity-based awards, associated with the departure of a former executive officer during the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014. Overall increases in headcount also drove higher facilities and depreciation expense of $0.7 million and subscription and maintenance fees for our corporate systems of $0.2 million. These increases were offset by a $2.6 million decrease in certain foreign operating taxes. Furthermore, increased professional fees of $0.6 million were offset by a reduction in our Basic Rental Guarantee Claims expense of $0.8 million.

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For the full year 2015, we expect general and administrative expenses as a percentage of revenues to remain consistent or leverage slightly compared to prior periods, excluding any non-recurring expenses associated with the merger agreement with Expedia, Inc. announced on November 4, 2015.

Amortization

	Three Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			Percent
	(dollars in thousands)
Amortization expense	$	2,819		2.2	%	$	3,397		2.9	%	$	(578	)		(17.0	)%
	Nine Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount			Percent
	(dollars in thousands)
Amortization expense	$	8,713		2.3	%	$	10,163		3.0	%	$	(1,450	)		(14.3	)%

For the Three Months Ended September 30, 2015

The decrease in amortization expense was due to $0.3 million from certain intangible assets becoming fully amortized and $0.3 million from foreign currency changes.

For the Nine Months Ended September 30, 2015

The decrease in amortization expense included additional expense of $0.3 million from the addition of intangible assets from the acquisition of Glad to Have You, Inc. in March 2014, offset by a decrease of $1.0 million from certain intangible assets becoming fully amortized and $0.8 million from foreign currency changes.

For the full year 2015, we expect our amortization expenses to decrease in both absolute dollars and as a percentage of revenue as compared to 2014; however, amortization expense could increase as a result of future acquisition activity.

Other Income (Expense)

	Three Months Ended September 30,
	2015						2014						Change
	Amount			Percentage of Revenue			Amount			Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Other income (expense)	$	(4,129	)		(3.2	)%	$	(5,255	)		(4.5	)%	$	1,126		(21.4	)%
	Nine Months Ended September 30,
	2015						2014						Change
	Amount			Percentage of Revenue			Amount			Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Other income (expense)	$	(12,178	)		(3.2	)%	$	(14,177	)		(4.2	)%	$	1,999		(14.1	)%

For the Three Months Ended September 30, 2015

Other expense in the three months ended September 30, 2015 includes interest expense of $4.7 million, partially offset by interest income of $0.9 million, compared to interest expense of $4.4 million partially offset by $0.6 million of interest income in the three months ended September 30, 2014. In addition, other expense in the three months ended September 30, 2015 includes approximately $0.3 million in losses from foreign currency related transactions, compared to losses of $1.4 million in the three months ended September 30, 2014. These losses consist primarily of hedging costs and gains/losses on forward contracts used to hedge

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exposures related to intercompany loans and other assets and liabilities denominated in foreign currencies. These losses also include the re-measurement of certain intercompany loans and other assets and liabilities denominated in foreign currencies that are not hedged.

For the Nine Months Ended September 30, 2015

Other expense in the nine months ended September 30, 2015 includes interest expense of $14.0 million, partially offset by interest income of $2.4 million, compared to interest expense of $8.8 million partially offset by $1.1 million of interest income in the nine months ended September 30, 2014. In addition, other expense in the nine months ended September 30, 2015 includes approximately $0.6 million in losses from foreign currency related transactions, compared to losses of $6.4 million in the nine months ended September 30, 2014. These losses consist primarily of hedging costs and gains/losses on forward contracts used to hedge exposures related to intercompany loans and other assets and liabilities denominated in foreign currencies. These losses also include the re-measurement of certain intercompany loans and other assets and liabilities denominated in foreign currencies that are not hedged.

Income Taxes

	Three Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Income tax expense	$	5,625		4.3	%	$	845		0.7	%	$	4,780		565.7	%

	Nine Months Ended September 30,
	2015					2014					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percent
	(dollars in thousands)
Income tax expense	$	9,757		2.6	%	$	5,909		1.8	%	$	3,848		65.1	%

For the Three Months Ended September 30, 2015

Our income tax expense was $5.6 million for the three months ended September 30, 2015, compared to $0.8 million for the three months ended September 30, 2014. The expense in the three months ended September 30, 2015 was primarily due to tax expense, determined using our estimated annual effective tax rate, offset by certain items recorded discretely in the three months ended September 30, 2015. Those discrete items include a tax benefit due to disqualifying dispositions of incentive stock options, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. The estimated annual effective tax rate at September 30, 2015 differed from the statutory rate primarily due to losses in certain foreign jurisdictions for which a benefit cannot be recorded at this time, non-deductible stock compensation charges, and state taxes, which was partially offset by the benefit of the effect of different statutory tax rates in foreign jurisdictions.

The expense in the three months ended September 30, 2014 was primarily due to tax expense of $3.5 million determined using our estimated annual effective tax rate offset by certain items booked discretely in the three months ended September 30, 2014, including a tax benefit due to disqualifying dispositions of incentive stock options, a tax benefit resulting from the filing of certain 2013 tax returns, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. In addition, the merger of our wholly owned subsidiaries in Spain in the three months ended September 30, 2014 resulted in tax basis intangibles which will be deductible in future periods, with a tax benefit of $2.5 million recorded discretely. The estimated annual effective tax rate at September 30, 2014 differed from the statutory rate primarily due to non-deductible stock compensation charges and state taxes, and is partially offset by the effect of different statutory tax rates in foreign jurisdictions.

For the Nine Months Ended September 30, 2015

Our income tax expense was $9.8 million for the nine months ended September 30, 2015, compared to $5.9 million for the nine months ended September 30, 2014. The expense in the nine months ended September 30, 2015 was primarily due to tax expense, determined using our estimated annual effective tax rate, offset by certain items recorded discretely in the nine months ended September 30, 2015. Those discrete items include a tax benefit due to disqualifying dispositions of incentive stock options, a tax benefit due to an income tax reserve release, a tax benefit for adjustments to the recognized value of our federal and Texas research and experimentation tax credit carryforwards, and a tax benefit of $0.4 million related to a correction of an immaterial prior period

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transfer pricing error, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. The estimated annual effective tax rate at September 30, 2015 differed from the statutory rate primarily due to losses in certain foreign jurisdictions for which a benefit cannot be recorded at this time, non-deductible stock compensation charges, and state taxes, which was partially offset by the benefit of the effect of different statutory tax rates in foreign jurisdictions.

The expense in the nine months ended September 30, 2014 was primarily due to tax expense, determined using our estimated annual effective tax rate, offset by certain items recorded discretely in the nine months ended September 30, 2014, including a tax benefit due to disqualifying dispositions of incentive stock options, a tax benefit for a state tax apportionment change related to a prior period, a tax benefit for adjustments to the recognized value of our federal and Texas research and experimentation tax credit carryforwards, and a tax benefit resulting from the filing of certain 2013 tax returns, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. In addition, the merger of our wholly owned subsidiaries in Spain in the three months ended September 30, 2014 resulted in tax basis intangibles which will be deductible in future periods, with a tax benefit of $2.5 million recorded discretely. The estimated annual effective tax rate at September 30, 2014 differed from the statutory rate primarily due to non-deductible stock compensation charges and state taxes, and is partially offset by the effect of different statutory tax rates in foreign jurisdictions.

Seasonality and Quarterly Results

Our operating results may fluctuate for a variety of reasons, including seasonal factors and economic cycles that influence the vacation travel market. Property owners and managers tend to buy subscription listings at times when travelers are most likely to make vacation plans. The timing primarily depends on whether travelers are taking a winter or summer vacation and tends to vary by country. Historically, we have experienced the highest level of new and renewed subscription listings in the first quarter of the year, which is typically when travelers are making plans for summer vacations in the United States and Europe. This seasonality results in higher cash flows during the first quarter as most subscription listings are annual and fully paid at the time of purchase or renewal, but may not be seen as prominently in our revenue due to ratable recognition of subscription listing revenue over the listing term.

As we introduce new products for property owners, managers and travelers, including our performance-based pay-per-booking product, the seasonality of those commission-based transactions may vary from the seasonality of our subscription listing sales, and this may result in higher revenues and cash flows in the summer and winter months. We also experience seasonality in the number of visitors to our websites, with the first quarter having the highest number of visitors. This is reflected in our quarterly financial results when we add customer service staff, hosting capabilities and marketing expense to support the increase.

Our operating results may fluctuate due to a variety of factors, many of which are outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful and historical results may not be indicative of future performance.

Discussion of Non-GAAP Financial Measures

This Form 10-Q contains non-GAAP financial measures: Adjusted EBITDA, free cash flow and non-GAAP net income, as defined below, as well as revenue adjusted for foreign currency, which we refer to as constant currency revenue. Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue are financial measures that are not calculated in accordance with GAAP. However, we believe that the use of Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue are useful to investors in evaluating our operating performance for the following reasons:

• our management uses Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue in conjunction with GAAP financial measures as part of our assessment of our business and in communications with our board of directors concerning our financial performance;

• Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue provide consistency and comparability with our past financial performance, facilitate period-to-period comparisons of operations, and also facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results;

• securities analysts use Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue as supplemental measures to evaluate the overall operating performance of companies; and

• Adjusted EBITDA and non-GAAP net income exclude non-cash charges, such as depreciation, amortization, stock-based compensation and interest expense, because such non-cash expenses in any specific period may not directly correlate to the underlying performance of our business operations and can vary significantly between periods.

Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue should not be reviewed in isolation. You should consider them in addition to, and not as substitutes for, measures of our financial performance reported in accordance with GAAP. Our Adjusted EBITDA, free cash flow, non-GAAP net income or constant currency revenue may not be comparable to similarly titled measures of other companies and because other companies may not calculate such measures in the same manner as we do. Adjusted EBITDA, free cash flow, non-GAAP net income and constant currency revenue have limitations as analytical tools. In addition, none of these measures reflect future requirements for contractual obligations.

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Further limitations of Adjusted EBITDA include:

• this measure does not reflect changes in working capital;

• this measure does not reflect interest income or interest expense; and

• this measure does not reflect cash requirements for income taxes.

We define Adjusted EBITDA as net income (loss) attributable to HomeAway, Inc. plus depreciation, amortization of intangible assets; stock-based compensation expense; interest expense (income); other expense (income), net; income tax expense (benefit); and impact of noncontrolling interests.

The following table presents a reconciliation of net income attributable to HomeAway, Inc. to Adjusted EBITDA (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Net income attributable to HomeAway, Inc.	$	10,417		$	4,912		$	5,942		$	13,222
Depreciation and amortization		7,997			7,595			24,917			22,254
Stock-based compensation		12,618			12,671			37,487			35,582
Interest expense		4,718			4,373			13,971			8,842
Interest income		(927	)		(552	)		(2,426	)		(1,117	)
Other expense, net		338			1,434			633			6,452
Income tax expense		5,625			845			9,757			5,909
Impact of noncontrolling interests, net of tax		(564	)		336			(709	)		(382	)
Adjusted EBITDA	$	40,222		$	31,614		$	89,572		$	90,762

We define free cash flow as our cash provided by operating activities, adjusted for cash interest expense and excess tax benefit (shortfall) from stock-based compensation, and subtracting capital expenditures. For the purpose of calculating free cash flow, we consider purchases of property, equipment, leasehold improvements for our offices and software licenses, including costs associated with internally developed software, as capital expenditures.

The following table presents a summary of cash flows and a reconciliation of cash flows from operating activities to free cash flows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Cash provided by operating activities	$	24,640		$	25,527		$	119,094		$	111,415
Cash paid for interest		251			253			503			253
Excess tax benefit from stock-based compensation		5,730			1,362			8,161			2,583
Capital expenditures		(5,675	)		(7,107	)		(23,792	)		(20,456	)
Free cash flow	$	24,946		$	20,035		$	103,966		$	93,795

We define non-GAAP net income as our net income (loss) attributable to HomeAway, Inc. adjusted for changes to the redemption value of noncontrolling interests, and the after-tax effect of stock-based compensation, amortization of intangible assets, amortization of debt discount and issuance costs, net of amounts capitalized and the impact on noncontrolling interests of these items, utilizing a tax rate of 35%. The income tax effect of adjustments to non-GAAP net income assists investors in understanding the tax provision related to those adjustments using a tax rate of 35% related to ongoing operations.

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The following table presents a reconciliation of net income attributable to HomeAway, Inc. to non-GAAP net income (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net income attributable to HomeAway, Inc.	$	10,417		$	4,912		$	5,942		$	13,222
Add:
Stock-based compensation		12,618			12,671			37,487			35,582
Amortization expense		2,819			3,397			8,713			10,163
Amortization of debt discount and issuance costs, net		4,592			4,247			13,583			8,576
Related tax effect		(7,010	)		(7,110	)		(20,924	)		(19,012	)
Changes to redemption value of noncontrolling interests		91			851			914			851
Impact on noncontrolling interests of non-GAAP interests		(38	)		(78	)		(152	)		(218	)
Non-GAAP net income	$	23,489		$	18,890		$	45,563		$	49,164
Non-GAAP earnings per share - diluted	$	0.24		$	0.20		$	0.47		$	0.51

We define constant currency revenues as revenue adjusted for foreign currency assuming foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency revenue, we divide our monthly U.S. dollar revenues by the applicable current year monthly average foreign exchange rates and then multiply those amounts by the applicable prior year monthly average foreign exchange rates.

The following tables present a reconciliation of revenue to constant currency revenue:

	Three Months Ended September 30,
	2015						2014		Change
Revenue	As Reported		Exchange Rate Impact (1)		Constant Currency Revenue (2)		As Reported		Amount		Percent
	(dollars in thousands)
Listing	$	106,484		9,108		115,592	$	96,601	$	18,991		19.7	%
Other		24,198		543		24,741		20,511		4,230		20.6
Total	$	130,682	$	9,651		140,333	$	117,112	$	23,221		19.8	%

	Nine Months Ended September 30,
	2015						2014		Change
Revenue	As Reported		Exchange Rate Impact (1)		Constant Currency Revenue (2)		As Reported		Amount		Percent
	(dollars in thousands)
Listing	$	301,281		26,883		328,164	$	278,459	$	49,705		17.9	%
Other		74,272		1,510		75,782		58,591		17,191		29.3
Total	$	375,553	$	28,393		403,946	$	337,050	$	66,896		19.8	%

(1) Represents the decrease in reported amounts resulting from changes in foreign exchange rates from those in effect in the comparable prior year period for revenues.

(2) Represents the outcome that would have resulted had foreign exchange rates in the reported period been the same as those in effect in the comparable prior year period for revenues.

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Supplemental Financial Information

The following tables present stock-based compensation and depreciation included in the respective line items in our condensed consolidated statements of operations (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Stock-based compensation:
Cost of revenue	$	881	$	847	$	2,615	$	2,415
Product development		3,931		3,485		10,769		9,589
Sales and marketing		3,152		2,763		9,003		7,868
General and administrative		4,654		5,576		15,100		15,710
Total	$	12,618	$	12,671	$	37,487	$	35,582
Depreciation:
Cost of revenue	$	1,554	$	1,218	$	4,922	$	3,512
Product development		1,249		1,007		3,850		2,907
Sales and marketing		1,589		1,373		5,090		3,970
General and administrative		786		600		2,342		1,702
Total	$	5,178	$	4,198	$	16,204	$	12,091

Liquidity and Capital Resources

From our incorporation in 2004 until March 2014, we financed our operations and acquisitions primarily through private placements of our capital stock and bank borrowings as well as from cash flow generated by the business. In March 2014, we issued $402.5 million in 0.125% convertible senior notes due April 2019 (the “Notes”) for net proceeds of $391.6 million after deducting underwriting discounts and other issuance expenses. Concurrent with the issuance of the Notes, we sold warrants to purchase shares of our common stock for cash consideration of $38.3 million, which was offset by the purchase of a convertible note hedge of $85.9 million. The net cash increase in March 2014 from these transactions was $344.0 million.

As of September 30, 2015, our cash, cash equivalents and short-term investments totaled $919.6 million, compared to $813.2 million at December 31, 2014. At September 30, 2015, this amount included assets held in certain of our foreign operations totaling approximately $124.2 million. If these assets were repatriated to the U.S., we may be subject to additional U.S. taxes in certain circumstances. We have not provided for these taxes because we consider these assets to be permanently reinvested in our foreign operations. We have no plans to repatriate the cumulative earnings of our foreign subsidiaries.

We actively monitor the third-party institutions and money market funds that hold these assets, primarily focusing on the preservation of principal while secondarily maximizing investment returns. We diversify our holdings among various financial institutions and money market funds to reduce our exposure to any single counterparty. To date, we have not experienced any material loss or lack of access to our cash or investments; however, we can provide no assurances that access to our cash or investments will not be impacted by future adverse conditions in the financial markets. We have our operating accounts on deposit with third party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limits. While we continually monitor the balances in our operating accounts, these cash balances could be adversely impacted if the underlying financial institutions fail or by other adverse conditions in the financial markets.

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The following table summarizes our cash flows for the periods indicated:

	Nine Months Ended September 30,
	2015			2014
	(in thousands)
Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities	$	119,094		$	111,415
Net cash used in investing activities		(118,573	)		(506,511	)
Net cash provided by financing activities		17,801			367,894
Effect of exchange rate changes on cash and cash equivalents		(9,354	)		(5,303	)
Net increase (decrease) in cash and cash equivalents		8,968			(32,505	)
Cash and cash equivalents at beginning of period		292,325			324,608
Cash and cash equivalents at end of period	$	301,293		$	292,103

Net Cash Provided by Operating Activities

In the nine months ended September 30, 2015, cash was generated primarily through an increase in new and renewed subscription listings, resulting in higher upfront collection of listing fees and increased deferred revenue of $29.7 million. During the nine months ended September 30, 2015, we generated a net income of $5.2 million. Included in our net income was depreciation expense of $16.2 million, amortization expense of $8.7 million, amortization of debt discount and transaction costs of $13.8 million and non-cash stock-based compensation expense of $37.5 million. In addition, cash flow from operations was reduced by excess tax benefit from stock-based compensation of $8.2 million and a decrease in non-cash deferred income taxes of $1.4 million. Net income, excluding these non-cash reductions, contributed $71.9 million to cash provided by operating activities during the nine months ended September 30, 2015.

In the nine months ended September 30, 2014, cash was generated primarily through an increase in new and renewed subscription listings, resulting in higher upfront collection of listing fees and increased deferred revenue of $25.4 million. During the nine months ended September 30, 2014, we generated net income of $12.8 million. Included in our net income was depreciation expense of $12.1 million, amortization expense of $10.2 million, amortization of debt discount and transaction costs of $8.7 million and non-cash stock-based compensation of $35.6 million. Net income, excluding these non-cash reductions, contributed $79.4 million to cash provided by operating activities.

The growth in our number of paid listings, the impact of other revenue and expenses, the timing and amount of future working capital changes and tax payments will affect the future amount of cash used in or provided by operating activities.

Net Cash Used in Investing Activities

In the nine months ended September 30, 2015, capital expenditures were $23.8 million and included $6.9 million in capitalized software development costs. Purchases of short-term investments, net of proceeds received from the sale and maturities of short-term investments were $105.8 million. Additionally, we invested $3.9 million for non-controlling equity interests in privately held vacation rental website companies in Turkey and Canada.

During the nine months ended September 30, 2014, we invested $16.8 million, net of cash acquired, in the acquisition of Glad to Have You, Inc. Capital expenditures were $20.5 million and included $6.4 million in capitalized software development costs. Purchases of short-term investments, net of proceeds received from the sale and maturities of short-term investments, were $445.9 million and cash outflows related to the net settlement of foreign currency forwards were $12.0 million. We also increased our minority stake in a privately held company in China for $9.4 million.

As our business expands, we expect to invest in new computers and software for employees, for product development and to support the hosting of our websites. As we expand our facilities to support a growing employee base, we intend to purchase furniture and fixtures and invest in leasehold improvements. We may have acquisitions in the future that could have a material impact on our cash flows and operations. Our planned capital expenditures are not expected to exceed $35.0 million in 2015.

Net Cash Provided by Financing Activities

Cash provided by financing activities in the nine months ended September 30, 2015 was comprised of proceeds from the exercise of stock options to purchase common stock of $9.6 million and $8.2 million of cash provided from the excess tax benefits from stock-based compensation.

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Cash provided by financing activities during the nine months ended September 30, 2014 was primarily comprised of $391.0 million in net proceeds from the issuance of the Notes. Additionally, we received proceeds of $38.3 million from the sale of warrants to acquire shares of our common stock and paid $85.9 million for a convertible note hedge transaction. Proceeds from the exercise of stock options to purchase common stock were $22.8 million in the nine-month period ended September 30, 2014. Additionally, in the nine-month period ended September 30, 2014, $2.6 million of cash provided was related to excess tax benefits from stock-based compensation.

Capital Resources

Based on past performance and current expectations, we believe our existing cash and investments plus future cash generated from operations will be sufficient to satisfy our cash requirements through at least the next 12 months.

Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our marketing and sales activities, the extent of product development efforts, the introductions of new products and services, enhancements to existing products and services, potential acquisitions and the continuing market acceptance of our products and services. We may need to raise additional capital through future debt or equity financing to fund such activities. Additional financing may not be available at all or on favorable terms. We may enter into arrangements in the future with respect to investments in, or acquisitions of, complementary businesses, products, services or technologies which could also require additional equity or debt financing.

Contractual Obligations and Commitments

The majority of our property owners and managers pay for their subscription listings by credit card because it simplifies and expedites the payment process and is a relatively secure form of payment. We have multiple agreements with credit card companies to support these activities. Most of our property owners and managers purchase an annual listing, for which payment is made at the beginning of the listing. There is a risk that we may fail to fully perform our obligations under the listing, which could result in an obligation of the credit card companies to reimburse their customers for a portion, or all, of the listing fee. We would be obligated to reimburse the credit card companies for all such amounts they pay pursuant to our agreements with them, under which we have obtained our credit card acceptance privileges.

As of September 30, 2015, we have amounts held in restricted cash to fund payments received on behalf of property owners, to protect banks from default on credit cards and direct debits used in our operations and to support bank guarantees related to our office leases. As bookings continue to increase, as we make changes to our credit card merchants and acquiring banks and as we enter into new leases, we may have increases to restricted cash and deposits.

As of September 30, 2015, we have reserved $9.9 million for uncertain tax positions, including interest and penalties. We are unable to make a reasonably reliable estimate as to when or if cash settlement with taxing authorities will occur. For additional information regarding uncertain tax positions, see Note 12 of the Notes to Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2014.

For a discussion of the Notes due April 1, 2019, please see Note 5 in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

During the nine month period ended September 30, 2015, we did not, and we do not currently, have any relationships with unconsolidated entities or financial partnerships, including entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

See Note 2 in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for a full description of recent accounting pronouncements which is incorporated herein by reference.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations and changes in the market values of our investments and the Notes. Information relating to quantitative and qualitative disclosures about market risk is set forth above and in Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

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Foreign currency exchange risk. We have foreign subsidiaries that generally use the local currency as their functional currency, which we translate into U.S. dollars for consolidation. Our results of operations and cash flows are subject to fluctuations due to changes in exchange rates involving the Euro, British Pound, Brazilian Real, Australian Dollar, Singapore Dollar and New Zealand Dollar, among others. We currently enter into forward contracts to hedge fluctuations in the value of certain intercompany debt denominated in foreign currencies but do not enter into any other derivative financial instruments for trading or speculative purposes. Following our acquisition of Stayz.com.au, our intercompany debt denominated in foreign currencies has increased significantly.

Fluctuations in currency exchange rates could result in translation gains and losses when we consolidate our results and harm our business in the future. Because we conduct a significant and growing portion of our business outside the United States but report our results in U.S. dollars, we face exposure to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. For example, if the U.S. dollar strengthens relative to the Euro, British Pound, Brazilian Real, Australian Dollar, Singapore Dollar or New Zealand Dollar, our non-U.S. revenue and operating results would be adversely affected when translated into U.S. dollars. Conversely, a decline in the U.S. dollar relative to these foreign currencies would increase our non-U.S. revenue and operating results when translated into U.S. dollars.

The effect of an immediate 10% adverse change in exchange rates on foreign denominated cash and receivables as of September 30, 2015 would result in a loss of approximately $1.8 million and a reduction in value on the balance sheet of approximately $13.4 million.

Convertible senior notes and interest rate risk. In March 2014, we issued $402.5 million of 0.125% convertible senior notes due April 1, 2019. We carry this instrument at face value less unamortized discount on our balance sheet. Because this instrument bears interest at fixed rates, we have no financial statement risk associated with changes in interest rates. However, the fair value of this instrument fluctuates when interest rates change and when the market price of our stock fluctuates.

Investments and interest rate sensitivity. The primary objective of our investment activities is to preserve principal while also maximizing yields without significantly increasing risk. To achieve this objective and minimize our exposure to an adverse shift in interest rates, we invest in short-term, high-quality, interest-bearing securities. To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of our investment portfolio assuming a 100 basis point increase in interest rates. As of September 30, 2015, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $5.2 million incremental decline in the fair market value of our portfolio.

We have non-controlling investments in the equity of privately-held companies in Turkey, Canada, China and the United States. Because our ownership interest is less than 20 percent and we do not have the ability to exert significant influence, we account for these non-marketable equity investments using the cost method of accounting. As of September 30, 2015, the carrying value of these investments was $39.3 million.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2015. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2015, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2015, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in litigation related to claims arising from the ordinary course of our business. We believe that there are no claims or actions pending or threatened against us, the ultimate disposition of which would have a material adverse effect on us.

Item 1A. Risk Factors.

Risks Related to Our Business

The following risk factors and other information included in this Quarterly Report on Form 10-Q should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business, results of operations or financial condition.

If we are unable to attract and maintain a critical mass of vacation rental listings and travelers, whether due to competition or other factors, our marketplace will become less valuable to property owners and managers and to travelers, and our revenue and net income could decrease materially.

Most of our revenue is generated when owners or managers of vacation rentals pay us listing fees, by subscription or a booking commission, to list and market vacation rentals to travelers who visit our online marketplace. Accordingly, our success primarily depends on our ability to attract owners, managers, travelers and advertisers to our marketplace. If property owners and managers choose not to market their vacation rentals through our websites, or instead list them with a competitor, we may be unable to offer a sufficient supply and variety of vacation properties to attract travelers to our websites. Similarly, our volume of new listings and listing renewals may suffer if we are unable to attract travelers to our websites. If we are unable to attract owners and travelers to our websites, advertisers may not purchase display advertising on our websites. As a result of any of these events, the perceived usefulness of our online marketplace is likely to decline, and our revenue and net income could decrease materially.

Our business depends substantially on property owners and managers renewing their subscription listings. Because we recognize revenue over the term of the applicable agreement, the lack of subscription-based listing renewals may not immediately be reflected in our operating results.

Our business depends substantially on property owners and managers renewing their subscription listings. Any decline in our subscription listing renewals could harm our operating results. Property owners and managers generally market their vacation rentals on our websites pursuant to prepaid annual subscription listings with no obligation to renew. We may be unable to predict future listing renewal rates accurately, and our renewal rates may decline materially or fluctuate as a result of a number of factors. These factors include property owners’ decisions to sell or to cease renting their properties, their decisions to use the services of our competitors, or their dissatisfaction with our pricing, fees, products, services or websites. Property owners and managers may not establish or renew subscription listings if we cannot generate visits from large numbers of travelers seeking, inquiring about or booking vacation rentals.

In addition, from time to time we make changes that impact our customers, including changes to listings’ available features, the software tools we offer owners and managers in their operations, our pricing, fees, and the algorithms that determine the listings’ ranking in search query results. While such changes may be intended to improve customer satisfaction, there can be no guarantee that the changes will perform as expected or that property owners and managers will react positively and continue to renew their listings. For example, we offer different subscription levels on many of our websites and property owners and managers may not be satisfied with the subscription level that is available or they purchase. We also offer on certain websites the ability for property owners and managers to list on a commission basis without paying a subscription fee. Subscription-based customers may choose not to renew their subscriptions and list on a commission basis, which could result in decreased revenue. If property owners and managers do not renew their subscription listings at the same level or at all, or if we are forced to offer renewals on less favorable terms, our revenue could decline and our business could suffer.

We recognize subscription listing revenue ratably over the term of the applicable listing agreement, and the majority of our quarterly revenue represents revenue attributable to listings entered into during previous quarters. As a result, the effect of significant downturns in new or renewed subscription listings in a particular quarter will not be fully reflected in our results of operations until future periods. Our business model also makes it difficult for any rapid increase in new or renewed listings to increase our revenue in any one period because revenue from new and renewed subscription listings must be recognized over the applicable listing term.

Moreover, some of our property owners and managers may live in states or countries that give subscribers the right to cancel their subscriptions prior to expiration and receive refunds for the unused portions of their subscriptions. Termination of subscriptions in this manner may adversely affect our cash flows.

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Our quarterly financial results and key operating metrics are subject to fluctuations. As a result, we could fail to meet our projections or the expectations of analysts or investors, which could cause our stock price to decline.

Our revenue, expenses, operating results and cash flows, as well as our key operating metrics, have fluctuated from quarter to quarter in the past and are likely to continue to do so in the future. These fluctuations are due to, or may result from, many factors, some of which are outside of our control and many of which are difficult to predict. These factors include:

• the quantity of vacation rental listings on our websites;

• the timing and success of changes in our pricing, fees or services;

• the introduction and performance of new products or services;

• advertising costs for paid search keywords and other online or broad reach advertising and marketing initiatives;

• the amount and timing of financing activities, operating expenses and capital expenditures;

• changes in cash flow due to the seasonal nature of our listing renewals and new listing acquisition;

• changes in cash flow due to customers purchasing commission-based listings, the timing and quantity of which are difficult to predict;

• changes in revenue due to the irregular timing of commissions earned on our performance-based listings;

• economic instability abroad and fluctuations in exchange rates;

• changes by major online search engine companies in their search algorithms, which could increase expenses related to marketing and search engine optimization, or could cause our websites’ positions in search results to suffer;

• the timing of revenue and expenses related to the licensing, development, acquisition and integration of technologies, products, services or businesses, including expenses for such strategic business acquisitions which may not be finally completed;

• the introduction of new products or services by our competitors;

• development of or increases in fraud impacting our property owners and managers and travelers, including theft of online identities through phishing or other system security breaches;

• declines or disruptions in the travel industry, particularly in regions where we generate substantial revenue;

• changes in the timing of holidays or other vacation events;

• litigation and settlement costs, including unforeseen attorneys’ fees and costs;

• new accounting pronouncements and changes in accounting standards or practices, particularly any affecting the recognition of listing revenue or accounting for mergers and acquisitions; and

• new laws or regulations, or interpretations of existing laws or regulations, that harm our business models or restrict the vacation rental industry, the Internet, e-commerce, online payments, or online communications.

Fluctuations in our quarterly operating results may, particularly if unforeseen, cause us to miss any projections we may have provided or may lead analysts or investors to change their valuation of our stock. In addition, such fluctuations may cause us to face short-term liquidity issues, impact our ability to retain or attract key personnel or cause other unanticipated issues. Any of these effects could cause our stock price to decline. As a result of the potential variability in our quarterly revenue and operating results, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and the results of any one quarter should not be relied upon as an indication of future performance.

If we are unable to continue to drive visitors to our websites from search engines, then traffic to our websites could decrease, which could negatively impact transactions on our websites and therefore cause our revenue to decrease.

Many visitors find our websites by searching for vacation rental information through Internet search engines. A critical factor in attracting visitors to our websites is how prominently we are displayed in response to search queries. Accordingly, we utilize search engine marketing, or SEM, as a means to provide a significant portion of our visitor acquisition. SEM includes both paid visitor acquisition (on a cost-per-click basis) and unpaid visitor acquisition, which is often referred to as organic search.

One method we employ to acquire visitors via organic search is commonly known as search engine optimization, or SEO. SEO involves developing our websites in order to rank highly in relevant search queries. In addition to SEM and SEO, we may also utilize other forms of marketing to drive visitors to our websites, including branded search, display advertising and email marketing.

The various search engine providers, such as Google and Bing, employ proprietary algorithms and other methods for determining which websites are displayed for a given search query and how highly websites rank. Search engine providers may change these methods in a way that may negatively affect the number of visitors to our websites and may do so without public announcement or detailed explanation. Therefore, the success of our SEO and SEM strategy depends, in part, on our ability to anticipate and respond to such changes in a timely and effective manner.

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In addition, websites must comply with search engine guidelines and policies. These guidelines and policies are complex and may change at any time. If we fail to follow such guidelines and policies properly, the search engine may cause our content to rank lower in search results or could remove the content altogether. If we fail to understand and comply with these guidelines and policies and ensure our websites’ compliance, our SEO and SEM strategy may not be successful.

If we are listed less prominently or fail to appear in search result listings for any reason, including as a result of our failure to successfully execute our SEO and SEM strategy, it is likely that we will acquire fewer visitors to our websites. Fewer visitors to our websites could lead to property owners and managers becoming dissatisfied with our websites, as well as fewer travelers inquiring and booking through our websites, either or both of which could adversely impact our revenue. We may not be able to replace this traffic in a cost-effective manner from other channels, such as cost-per-click SEM or display or other advertising, or even at all. Any attempt to replace this traffic through other channels may increase our sales and marketing expenditures, which could adversely affect our operating results.

If we are unable to introduce new or upgraded products, services or features that travelers or property owners and managers recognize as valuable, we may fail to drive additional travelers to our websites or retain existing and attract new property owners and managers. Our efforts to develop new and upgraded services and products could require us to incur significant costs.

In order to continue to attract travelers to our online marketplace and retain existing and attract new property owners and managers, we will need to continue to invest in the development of new products, services and features that add value for travelers, property owners and managers and/or differentiate us from our competitors. The success of new products, services and features depends on several factors, including the timely completion, introduction and market acceptance of the product, service or feature. If travelers, property owners or managers do not recognize the value of our new services or features, they may choose not to utilize or list on our online marketplace.

Attempting to develop and deliver these new or upgraded products, services or features involves inherent hazards and difficulties, and is costly. Efforts to enhance and improve the ease of use, responsiveness, functionality and features of our existing websites have inherent risks, and we may not be able to manage these product developments and enhancements successfully. We cannot assure that we will succeed or that new or upgraded products, services or features will work as intended or provide value. In addition, some new or upgraded products, services or features may be difficult for us to market and may also involve unfavorable pricing or fees. Even if we succeed, we cannot guarantee that our property owners and managers will respond favorably.

In addition to developing our own improvements, we may choose to license or otherwise integrate applications, content and data from third parties. The introduction of these improvements imposes costs on us and creates a risk that we may be unable to continue to access these technologies and content on commercially reasonable terms, or at all.

Unfavorable changes in, or interpretations of, government regulations or taxation of the evolving vacation rental, Internet and e-commerce industries could harm our operating results.

We operate in markets throughout the world, in jurisdictions which have various regulatory and taxation requirements that can affect our operations or regulate the rental activity of property owners and managers. Compliance with laws and regulations of different jurisdictions imposing different standards and requirements is very burdensome because each region in which we operate has different regulations with respect to licensing and other requirements for the listing of vacation rentals. Our online marketplace is accessed by property owners, managers and travelers in multiple states and foreign jurisdictions. Our business efficiencies and economies of scale depend on generally uniform treatment of property owners, managers and travelers across all jurisdictions in which we operate. Compliance requirements that vary significantly from jurisdiction to jurisdiction impose an added cost to our business and increased liability for compliance deficiencies. In addition, laws or regulations that may harm our business could be adopted, or reinterpreted in a manner that affects our activities, including but not limited to the regulation of personal and consumer information and real estate licensing requirements. Violations or new interpretations of these laws or regulations may result in penalties, negatively impact our operations and damage our reputation and business.

In addition, since we began our operations in 2005, there have been, and continue to be, regulatory developments that affect the vacation rental industry and the ability of companies like us to list those vacation rentals online. For example, some municipalities have adopted ordinances that limit the ability of property owners and managers to rent certain properties for fewer than 30 consecutive days and other cities may introduce similar regulations. Some cities also have fair housing or other laws governing whether and how properties may be rented, which they assert apply to vacation rentals. Many homeowners, condominium and neighborhood associations have adopted rules that prohibit or restrict short-term vacation rentals. In addition, many of the fundamental statutes and regulations that impose taxes or other obligations on travel and lodging companies were established before the growth of the Internet and e-commerce, which creates a risk of these laws being used in ways not originally intended that could burden property owners and managers or otherwise harm our business. These and other similar new and newly interpreted regulations could increase costs for, or otherwise discourage, owners and managers from listing on our websites, which could harm our business and operating results.

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From time to time, we may become involved in challenges to, or disputes with government agencies regarding, these regulations. For example, some government agencies have asked us directly to comply with their regulations and provide owner and manager data to assist them in their enforcement and audit efforts. There can be no assurance that we will be successful in defending against the application of these laws and regulations. Further, if we were required to comply with regulations and government requests that negatively impact our relations with property owners, managers and travelers, our business, operations and financial results could be adversely impacted.

Additionally, new, changed, or newly interpreted or applied tax laws, statutes, rules, regulations or ordinances could increase our property owners’ and managers’ and our compliance, operating and other costs. This, in turn, could deter property owners and managers from renting their vacation properties, negatively affect our new listings and subscription renewals, or increase costs of doing business. Any or all of these events could adversely impact our business and financial performance.

Furthermore, as we expand or change the products and services that we offer or the methods by which we offer them, we may become subject to additional legal regulations, tax requirements or other risks. Regulators may seek to impose regulations and requirements on us even if we utilize third parties to offer the products or services. These regulations and requirements may apply to payment processing, insurance products or the various other products and services we may now or in the future offer or facilitate through our marketplace. Whether we comply with or challenge these additional regulations, our costs may increase and our business may otherwise be harmed.

If we are not able to maintain and enhance our HomeAway brand and the brands associated with each of our websites, our reputation and business may suffer.

It is critical for us to maintain and enhance our brand identity in order to attract and retain property owners, managers and travelers. The successful promotion of our brands will depend largely on our marketing and public relations efforts. We expect that the promotion of our brands will require us to make substantial investments, and, as our market becomes more competitive, these branding initiatives may become increasingly difficult and expensive. In addition, we may not be able to successfully build our HomeAway brand identity in the United States and overseas without losing value associated with, or decreasing the effectiveness of, our other brand identities. If we do not successfully maintain and enhance our brands, we could lose traveler traffic, which could, in turn, cause property owners and managers to terminate or elect not to renew their listings with us. In addition, our brand promotion activities may not be successful or may not yield revenue sufficient to offset their cost, which could adversely affect our reputation and business.

Our long-term success depends, in part, on our ability to expand our property owner, manager and traveler bases outside of the United States and, as a result, our business is susceptible to risks associated with international operations.

As our operations have expanded, we have acquired businesses or established offices around the world. As of September 30, 2015, we maintain offices in the United States, Europe, South America, Australia and Asia and operate websites in several additional countries and regions. We have limited operating and e-commerce experience in many foreign jurisdictions and are making significant investments to build our international operations. We plan to continue our efforts to expand globally, including acquiring international businesses and conducting business in jurisdictions where we do not currently operate, including increasing our focus on the Asia Pacific region. However, we may from time to time also reduce the locations of our physical operations if we believe it would create efficiencies in doing so and there can be no guarantee that the locations where we choose to operate will be the most efficient or that they will not create additional risks. Managing a global organization is difficult, time consuming and expensive and any international expansion efforts that we undertake may not be profitable in the near or long term or otherwise be successful. In addition, conducting international operations subjects us to risks that we generally do not face in the United States. These risks include:

• the cost and resources required to localize our services, which requires the translation of our websites and their adaptation for local practices and legal and regulatory requirements;

• adjusting the products and services we provide in foreign jurisdictions, as needed, to better address both the needs of local owners and travelers, and the threats of local competitors;

• being subject to foreign laws and regulations, including those laws governing Internet activities, email messaging, collection and use of personal information, ownership of intellectual property, taxation and other activities important to our online business practices, which may be less developed, less predictable, more restrictive, and less familiar, and which may adversely affect financial results in certain regions;

• competition with companies that understand the local market better than we do or who have pre-existing relationships with property owners, managers and travelers in those markets;

• legal uncertainty regarding our liability for the transactions and content on our websites, including online bookings, property listings and other content provided by property owners and managers, including uncertainty resulting from unique local laws or a lack of clear precedent of applicable law;

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• lack of familiarity with and the burden of complying with a wide variety of other foreign laws, legal standards and foreign regulatory requirements, including invoicing, data collection and storage, financial reporting and tax compliance requirements, which are subject to unexpected changes;

• laws and business practices that favor local competitors or prohibit or limit foreign ownership of certain businesses;

• challenges associated with joint venture relationships and minority investments;

• adapting to variations in foreign payment forms;

• difficulties in managing and staffing international operations and establishing or maintaining operational efficiencies;

• difficulties in establishing and maintaining adequate internal controls and security over our data and systems;

• currency exchange restrictions and fluctuations in currency exchange rates;

• potentially adverse tax consequences, which may be difficult to predict, including the complexities of foreign value added tax systems and restrictions on the repatriation of earnings;

• increased financial accounting and reporting burdens and complexities and difficulties in implementing and maintaining adequate internal controls;

• political, social and economic instability abroad, war, terrorist attacks and security concerns in general;

• the potential failure of financial institutions internationally;

• reduced or varied protection for intellectual property rights in some countries; and

• higher telecommunications and Internet service provider costs.

Operating in international markets also requires significant management attention and financial resources. We cannot guarantee that our international expansion efforts in any or multiple territories will be successful. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability and could instead result in increased costs.

The market in which we participate is highly competitive, and we may be unable to compete successfully with our current or future competitors.

The market to provide listing, search and marketing services for the vacation rental industry is very competitive and highly fragmented. In addition, the barriers to entry are low and new competitors may enter. All of the services that we provide to property owners, managers and travelers, including listing and search, are provided separately or in combination by current or potential competitors. Our competitors may adopt aspects of our business model, which could reduce our ability to differentiate our services. Additionally, current or new competitors may introduce new business models or services that we may need to adopt or otherwise adapt to in order to compete, which could reduce our ability to differentiate our business or services from those of our competitors. Furthermore, properties in the vacation rental industry are not typically marketed exclusively through any single channel, and our listing agreements are not typically exclusive. Accordingly, our competitors could aggregate a set of listings similar to ours. Increased competition could result in a reduction in revenue, rate of new listing acquisition, existing listings or market share.

There are thousands of vacation rental listing websites that compete directly with us for listings, travelers, or both, such as HouseTrips.com, Booking.com, Airbnb, @Leisure, InterHome, TripAdvisor and Wyndham Worldwide. Many of these competitors offer free or heavily discounted listings or focus on a particular geographic location or a specific type of rental property. Some of them also aggregate property listings obtained through various sources, including the websites of property managers some of whom also market their properties on our websites.

Competitors also operate websites directed at the wider fragmented travel lodging market, such as Airbnb (worldwide) and Wimdu (worldwide), by listing either rooms or the owner’s primary home. These properties increase both the number of rental opportunities available to travelers and the competition for the attention of the traveler. Some vacation rental property owners and managers also list on these websites, and consequently these companies currently compete with us to some extent.

We also compete with online travel agency websites, such as Expedia, Hotels.com, Kayak, Priceline, Booking.com, Orbitz and Travelocity, which have traditionally provided comprehensive travel services and some of whom are now expanding into the vacation rental category. We also compete with large Internet search companies, such as craigslist, eBay, Google, MSN.com and Yahoo!, which provide listing or advertising services in addition to a wide variety of other products or services. In addition, some competitors, such as Perfect Places, Inc. and VacationRoost, Inc. in the United States and Atraveo and eDomizil in Europe, predominately serve the professional property manager marketplace, and therefore have the ability to create more products and features targeted to property managers. Hotels, corporate travel providers, travel metasearch engines, travel content aggregators, mobile platform travel applications, social media websites, and even mobile computing hardware providers all also have the potential to increase their competitive presence in the areas of our business as well.

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We believe we compete primarily on the basis of the quantity and quality of our listings, the quality of the direct relationships we have with property owners and managers, the volume of travelers who visit our websites, the number of inquiries provided to our property owners and managers, the global diversity of the vacation rentals available on our websites, the quality of our websites, the tools provided to our property owners and managers to assist them with their business, customer service, brand identity, the success of our marketing programs, and price. If current or potential property owners, managers or travelers choose to use any of these competitive offerings in lieu of ours, our revenue could decrease and we could be required to make additional expenditures to compete more effectively. Any of these events or results could harm our business, operating results and financial condition.

In addition, some of our current or potential competitors are larger and have more resources than we do. Many of our current and potential competitors enjoy substantial competitive advantages, such as greater name recognition in their markets, longer operating histories and larger marketing budgets, as well as substantially greater financial, technical and other resources. In addition, our current or potential competitors may have access to larger property owner, manager or traveler bases. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or owner, manager or traveler requirements. Furthermore, because of these advantages, existing and potential owners, managers and travelers might accept our competitors’ offerings, even if they may be inferior to ours. For all of these reasons, we may not be able to compete successfully against our current and future competitors.

If our cost efficiency measures are not successful, we may become less competitive.

We continue to focus on minimizing our operating expenses through cost improvements and simplifying our structure. However, certain factors may prevent the achievement of these goals, which may in turn negatively affect our competitive position. For example, we may experience delays or unanticipated costs in implementing our cost efficiency plans. As a result, we may not achieve our expected cost efficiencies in the time or to the extent anticipated.

If the businesses we have acquired or invested in do not perform as expected or we are unable to effectively integrate acquired businesses, our operating results and prospects could be harmed.

As of September 30, 2015, we have acquired 22 businesses and currently have equity investments in four companies. The businesses we have acquired or invested in may not perform as well as we expect. Failure to manage and successfully integrate recently acquired businesses and technologies could harm our operating results and our prospects. If the companies we have invested in do not perform well, our investments could become impaired and our financial results could be negatively impacted.

Our mergers and acquisitions involve numerous risks, including the following:

• difficulties in integrating and managing the combined operations, technologies, technology platforms and products of the acquired companies and realizing the anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical or financial problems;

• legal or regulatory challenges or post-acquisition litigation, which could result in significant costs or require changes to the businesses or unwinding of the transaction;

• failure of the acquired company to achieve anticipated revenue, earnings or cash flow;

• diversion of management’s attention or other resources from our existing business;

• our inability to maintain the key customers and business relationships, and the reputations of acquired businesses;

• uncertainty resulting from entering markets in which we have limited or no prior experience or in which competitors have stronger market positions;

• our dependence on unfamiliar affiliates and partners of acquired businesses;

• unanticipated costs associated with pursuing acquisitions;

• liabilities of acquired businesses, which may not be disclosed to us or which may exceed our estimates, including liabilities relating to non-compliance with applicable laws and regulations, such as data protection and privacy controls;

• difficulties in assigning or transferring to us or our subsidiaries intellectual property licensed to companies we acquired;

• difficulties in maintaining our internal standards, controls, procedures and policies including financial reporting requirements of the Sarbanes-Oxley Act of 2002 and extending these controls to acquired companies;

• potential loss of key employees of the acquired companies;

• difficulties in complying with antitrust and other government regulations;

• challenges in integrating and auditing the financial statements of acquired companies that have not historically prepared financial statements in accordance with U.S. generally accepted accounting principles; and

• potential accounting charges to the extent intangibles recorded in connection with an acquisition, such as goodwill, trademarks, customer relationships or intellectual property, are later determined to be impaired and written down in value.

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Moreover, we rely heavily on the representations and warranties provided to us by the sellers of acquired companies, including as they relate to creation, ownership and rights in intellectual property, existence of open source software and compliance with laws and contractual requirements. If any of these representations and warranties are inaccurate or breached, such inaccuracy or breach could result in costly litigation and assessment of liability for which there may not be adequate recourse against such sellers, in part due to contractual time limitations and limitations of liability.

We may be unable to effectively manage our growth.

Since our inception, we have experienced rapid growth. As our operations have expanded, we have grown from 87 employees at December 31, 2005 to 1,900 employees at September 30, 2015, of whom 711 were located outside the United States. This includes employees of entities for which we have a controlling interest. Our business is becoming increasingly complex, especially in light of the continued rapid evolution of our industry and e-commerce, and our reliance on multiple websites throughout the world. This complexity and our rapid growth have demanded, and will continue to demand, substantial resources and attention from our management. We may need to increase headcount and to hire more specialized personnel in the future as we grow our business. We may also need to hire, train and manage additional qualified website developers, software engineers, client and account services personnel, and sales and marketing staff and improve and maintain our technology to properly manage our growth. If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees or if we are not successful in retaining our existing employees, our business may be harmed.

Further, to accommodate our expected growth we must add new hardware and software and improve and maintain our technology, systems and network infrastructure. Failure to effectively upgrade our technology or network infrastructure to support the expected increased listing and traveler traffic volume could result in unanticipated system disruptions, slow response times or poor experiences for property owners, managers or travelers. To manage the expected growth of our operations and personnel and to continue to support our public company financial reporting and internal control requirements, we will need to continue to improve our transaction processing and reporting, operational and financial systems, procedures and controls. These improvements will be particularly challenging if we acquire new operations with different systems. Our current and planned personnel, systems, procedures and controls may not be adequate to support our future operations. If we are unable to expand our operations and hire additional qualified personnel in an efficient manner, it could adversely affect property owner, manager, traveler or advertiser satisfaction and revenue and operating income as a result.

We have a relatively limited operating history and we operate in a rapidly evolving industry, which make it difficult to evaluate our current business and future prospects. If we fail to predict the manner in which our business will perform or how the market will develop, our business and prospects may suffer materially.

We began our operations in February 2005. Our relatively limited operating history, together with our rapidly changing industry, may make it difficult to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries. These include challenges in accurate financial planning and forecasting as we develop new products or strategic plans, such as our online booking initiative and value added services like insurance and property damage protection and payment processing capabilities, with little or no historical reference as a basis for such planning and forecasting. Our business and prospects should be considered in light of the risks and difficulties we may encounter as a company operating in a highly competitive environment where changes to our business, plans, and products may be required to respond to such changes.

In addition, the market for online vacation rentals is relatively new and, in many geographies, is unproven with little data or research available regarding the market and industry. It is uncertain whether the vacation rental market in many territories where we do business will continue to develop or if our services will achieve and sustain a level of demand and market acceptance sufficient for us to generate revenue, net income and cash flow growth, at anticipated levels or at all. Even in territories where we currently do business, we may need to focus on or offer different types of products and services in order to remain competitive. Our success will depend to a substantial extent on the willingness of property owners and managers to use commercial online rental property listing services. Some property managers have developed and use their own proprietary online listing services and, therefore, may be reluctant or unwilling to use our websites to market their properties. Furthermore, some travelers and property owners and managers may be reluctant or unwilling to use online listing services because of concerns regarding the security of data, the potential for fraudulent activity, including phishing, or the integrity of the online marketplace. If property owners and managers do not perceive the benefits of marketing their properties online, then our market may not develop as we expect, or it may develop more slowly than we expect, either of which could significantly harm our business and operating results. Moreover, our success will depend on travelers’ use of our online marketplace to search, locate and rent vacation rentals, which will depend on their willingness to use the Internet and their belief in the integrity of our websites. In addition, because we operate in unproven and unstudied markets, we have limited insight into trends that may develop in those markets and may affect our business. We may make errors in predicting and reacting to other relevant business trends, which could harm our business.

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Changes in our effective tax rate could harm our future operating results.

We are subject to federal and state income taxes in the United States and in various foreign jurisdictions. Our provision for income taxes and our effective tax rate are subject to volatility and could be adversely affected by several circumstances, including:

• earnings being lower than anticipated in countries that have lower tax rates and higher than anticipated in countries that have higher tax rates;

• effects of certain non-tax deductible expenses, including those arising from the requirement to expense stock options;

• changes in the valuation of our deferred tax assets and liabilities;

• expiration of or lapses in the research and development tax credit laws;

• transfer pricing adjustments, including the effect of acquisitions on our intercompany research and development cost sharing arrangement and legal structure;

• adverse outcomes resulting from any tax audit;

• our ability to utilize our net operating losses and other deferred tax assets; and

• changes in accounting principles or changes in tax laws and regulations, or the application of the tax laws and regulations, including possible U.S. changes to the taxation of earnings of our foreign subsidiaries, the deductibility of expenses attributable to foreign income, or the foreign tax credit rules.

Significant judgment is required in the application of accounting guidance relating to uncertainty in income taxes. If tax authorities challenge our tax positions and any such challenges are settled unfavorably, it could adversely impact our provision for income taxes.

We are exposed to fluctuations in currency exchange rates.

Because we conduct a significant portion of our business outside the United States but report our results in U.S. dollars, we face exposure to adverse movements in currency exchange rates, which may cause our revenue and operating results to differ materially from expectations. In addition, fluctuation in our mix of U.S. and foreign currency denominated transactions may contribute to this effect as exchange rates vary. Moreover, as a result of these exchange rate fluctuations, revenue, cost of revenue, operating expenses and other operating results may differ materially from expectations when translated from the local currency into U.S. dollars upon consolidation. For example, if the U.S. dollar strengthens relative to foreign currencies our non-U.S. revenue would be adversely affected when translated into U.S. dollars. Conversely, a decline in the U.S. dollar relative to foreign currencies would increase our non-U.S. revenue when translated into U.S. dollars. Revenue in the three and nine months ended September 30, 2015 was negatively impacted by foreign currency translation of approximately $9.7 million and $28.4 million, respectively. Revenue in the three months ended September 30, 2014 was positively impacted by foreign currency translation of approximately $0.2 million, while revenue in the nine months ended September 30, 2014 was positively impacted by foreign currency translation of approximately $2.9 million. As exchange rates vary, revenue, cost of revenue, operating expenses and other operating results, when translated, may differ materially from expectations. In addition, our revenue and operating results are subject to fluctuation if our mix of U.S. and foreign currency denominated transactions and expenses changes in the future. In addition, we maintain intercompany loans and payables which are subject to translation losses due to foreign exchange fluctuation. We may enter into hedging arrangements in order to manage foreign currency exposure but such activity may not completely eliminate fluctuations in our operating results.

Our business depends on retaining and attracting capable management and operating personnel.

Our success depends in large part on our ability to attract and retain high-quality management and operating personnel, as well as skilled technical and marketing personnel, who are in high demand and are often subject to competing offers. Competition for qualified employees is intense in our industry, and the loss of even a few qualified employees, or an inability to attract, retain and motivate additional highly skilled employees required for the planned expansion of our business could harm our operating results and impair our ability to grow. To attract and retain key personnel, we use various measures, including an equity incentive program and incentive bonuses for executive officers and other key employees. However, some employees have been granted stock options with an exercise price that is or may become less than the market price, which reduces the incentive value of these grants. While we attempt to provide additional or different incentive compensation tools to mitigate this impact, the measures we employ to attract and maintain key personnel may not be effective enough to enable us to attract and retain the personnel we require to operate our business effectively.

If we fail to protect confidential information against security breaches, or if property owners, managers or travelers are reluctant to use our online marketplace because of privacy or security concerns, we might face additional costs, and activity on our websites could decline.

We collect and use personally identifiable information of property owners, managers and travelers in the operation of our business. Our systems may be vulnerable to computer viruses or physical or electronic break-ins that our security measures may not

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detect. Anyone that is able to circumvent our security measures could misappropriate confidential or proprietary information, cause interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. Security breaches of our systems, or even the systems of third parties we rely upon, such as credit card processors, could damage our reputation and expose us to litigation and possible liability under various laws and regulations. In addition, industry-wide incidents, or incidents specific to us, could deter people from using our online marketplace. Concern among property owners, managers and travelers regarding our use of personal information collected on our websites could keep them from using, or continuing to use, our online marketplace.

There are risks of security breaches both on and off our systems as we increase the types of technology we use to operate our marketplace, such as mobile applications. New and evolving technology systems and platforms may involve security risks that are difficult to predict and adequately guard against. In addition, third parties that process credit card transactions between us and property owners and managers maintain personal information collected from them. Such information could be stolen or misappropriated, and we could be subject to liability as a result. Further, property owners and managers may develop a lack of confidence in these third parties or in their ability to securely conduct credit card transactions on our websites or the Internet in general, which could adversely impact our business, revenue and operating results. Our property owners, managers and travelers may be harmed by such breaches and we may in turn be subject to costly litigation or regulatory compliance costs, and harm to our reputation and brand. Moreover, some property owners, managers and travelers may cease using our marketplace altogether.

The laws of some states and countries require businesses that maintain personal information about their residents in electronic databases to implement reasonable measures to keep that information secure. Our practice is to encrypt all sensitive information, but we do not know whether our current practice will be challenged under these laws. In addition, under certain of these laws, if there is a breach of our computer systems and we know or suspect that unencrypted personal data has been stolen, we are required to inform any user whose data was stolen, which could harm our reputation and business. Complying with the applicable notice requirements in the event of a security breach could result in significant costs. We may also be subject to contractual claims, investigation and penalties by regulatory authorities, and claims by persons whose information was disclosed.

Compounding these legal risks, many states and countries have enacted different and often contradictory requirements for protecting personal information collected and maintained electronically. Compliance with these numerous and contradictory requirements of is particularly difficult for us because we collect personal information from users in multiple jurisdictions. While we intend to comply fully with these laws, failure to comply could result in legal liability, cause us to suffer adverse publicity and lose business, traffic and revenue. If we were required to pay any significant amount of money in satisfaction of claims under these or similar laws, or if we were forced to cease our business operations for any length of time as a result of our inability to comply fully, our business, operating results and financial condition could be adversely affected.

In addition, third parties may target users of our websites directly with attempts to breach the security of their email accounts or management systems, such as through phishing attacks, which are fraudulent identity theft schemes designed to appear as legitimate emails from us or from our property owners and managers. Criminals may also employ other schemes aimed at defrauding our property owners, managers or travelers in ways that we may not anticipate or be able to adequately guard against. Although phishing attacks and other fraud schemes are generally not carried out through our systems, victims may nevertheless seek recovery from us. As a result, we may be required to defend ourselves in costly litigation and may suffer harm to our reputation, brand and business.

If we are unable to adapt to changes in technology, our business could be harmed.

Because property owners, managers and travelers can access our websites using a variety hardware and software platforms, we will need to continuously modify and enhance our service to keep pace with related technological changes. We may not be successful in developing necessary, functional and popular modifications and enhancements. Furthermore, uncertainties about the timing and nature of these necessary changes could result in unplanned research and development expenses. In addition, any failure of our online marketplace to operate effectively with future technologies could result in dissatisfaction from travelers, property owners, managers and advertisers, any of which could harm our business.

We may be subject to liability for the activities of our property owners and managers, which could harm our reputation and increase our operating costs.

We periodically receive complaints related to certain activities on our websites, including disputes over the authenticity of a vacation rental listing, unauthorized use of credit card and bank account information and identity theft, phishing attacks, potential breaches of system security, libel, and infringement of third-party copyrights, trademarks or other intellectual property rights. We have also experienced fraud by purported owners or managers listing properties which either do not exist or are significantly not as described in the listing. The methods used by perpetrators of fraud constantly evolve and are complex. Moreover, our trust and security measures may not detect all fraudulent activity. Consequently, we expect to continue to receive complaints from travelers and requests for reimbursement of their rental fees, as well as actual or threatened related legal action against us.

We may also be subject to claims of liability based on events that occur during travelers’ stays at vacation rentals, including those related to robbery, injury, death, and other similar incidents. As our websites become more integral to the rental transaction

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through our expanded e-commerce tools and offerings, the potential for these types of claims could increase. This in turn could increase our operating costs and adversely affect our business and results of operations, even if these claims do not result in liability, as we incur costs related to investigation and defense. The available terms and conditions of our websites specifically state that we are exempt from any liability to travelers relating to these matters. However, the enforceability of these terms varies from jurisdiction to jurisdiction, and the laws in this area are consistently evolving. If we are subject to liability or claims of liability relating to the acts of our property owners or managers, or due to fraudulent listings, we may be subject to negative publicity, incur additional expenses and be subject to liability, any of which could harm our business and our operating results.

Loss or material modification of our credit card acceptance privileges could have a material adverse effect on our business and operating results. Credit card acceptance privileges involve additional potential costs relating to reimbursements and fraud.

A significant percentage of our property owners and managers pay for their listings by credit card. The loss of our credit card acceptance privileges could significantly limit the availability and desirability of our products and services. Moreover, if we fail to fully perform our contractual obligations we could be obligated to reimburse credit card companies for refunded payments that have been contested by the cardholders. In addition, even when we are in compliance with these obligations, we bear other expenses including those related to the acceptance of fraudulent credit cards. As a result of all of these risks, credit card companies may require us to set aside additional cash reserves, may increase the transaction fees they charge us, or may even refuse to renew our acceptance privileges.

In addition, credit card networks, such as Visa, MasterCard and American Express, have adopted rules and regulations that apply to all merchants who process and accept credit cards and include the Payment Card Industry Data Security Standards, or the PCI DSS. Under these rules, we are required to adopt and implement internal controls over the use, storage and security of card data. We assess our compliance with the PCI DSS rules on a periodic basis and make necessary improvements to our internal controls. Failure to comply may subject us to fines, penalties, damages and civil liability and could prevent us from processing or accepting credit cards. However, we cannot guarantee that compliance with these rules will prevent illegal or improper use of our payments systems or the theft, loss or misuse of the credit card data.

The loss of, or the significant modification of, the terms under which we obtain credit card acceptance privileges could have a material adverse effect on our business, revenue and operating results.

Our revenue, expenses and operating results could be affected by changes in travel, real estate and vacation rental markets, as well as general economic conditions.

Our business is particularly sensitive to trends in the travel, real estate and vacation rental markets, which are unpredictable, as well as trends in the general economy. Therefore, our operating results, to the extent they reflect changes in the broader travel, real estate and vacation rental industries, may be subject to significant fluctuations.

For example, changes in the travel industry, such as disruptions caused by war, terrorist attacks, natural disasters, weather bankruptcies or diseases could significantly reduce the willingness of potential travelers to plan vacation and other travel. Such disruptions that harm or destroy vacation homes could cause the property owners and managers of such homes to cancel or fail to renew their listings. Downturns in real estate markets may result in decreased new building rates and increases in foreclosures, which could also result in fewer vacation rentals available for listing. Also, because vacation travel is generally dependent on discretionary spending, negative general economic conditions could significantly reduce the overall amount that travelers spend on vacation travel. Additionally, property owners may choose or be forced to sell their vacation rentals during periods of economic slowdown or recession. Any or all of these factors could reduce the demand for vacation rentals and our services, reducing our revenue. This in turn could increase our need to make significant expenditures to continue to attract property owners, managers and travelers to our websites.

Vacation rentals are often located in popular vacation destinations around the world and utilized on a seasonal basis. Factors influencing the desirability of vacation rentals in a particular region or season could adversely affect our ability to obtain new listings and retain existing listings.

Vacation rentals are often located in popular vacation destinations and utilized on a seasonal basis. As a result, our listings involve properties that are often concentrated in particular regions, and our revenue is dependent upon our ability or willingness to list properties in those regions. If we became unable or unwilling to list properties in a particular region, our listings in the region could decline or cease to grow, and revenue and results of operations could be adversely impacted.

In addition, factors influencing the desirability of vacation rentals in a particular region or during a specific season could adversely affect our ability to obtain new listings and retain existing listings. A significant natural disaster, political turmoil or other regional disturbance could reduce the number of available vacation rentals in that area, reducing our listing base and our revenue. In addition, if we do not have sufficient property listings in a newly popular vacation destination, we could fail to attract travelers to our websites and property owners and managers may opt to list their properties with a competitor having a greater presence in that area.

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We could face liability for transactions and information on or accessible through our online marketplace.

A significant portion of the information available through our online marketplace is submitted by property owners and managers and third parties. We also allow third parties to advertise their products and services on our websites and include links to third-party websites. We could be exposed to liability with respect to this third-party information. Property owners and managers could assert that information concerning them on our websites contains errors or omissions and third parties could seek damages from us for losses incurred if they rely upon such incorrect information. We could also be subject to claims that such information is defamatory, libelous, or infringes on third-party copyrights and privacy and publicity rights. We might be subject to claims that by providing links to third party websites, we are liable for wrongful actions by those third parties. Even if these claims do not result in liability to us, we could incur significant costs in investigating and defending against these claims.

In addition, our services feature a property review platform, which allows travelers to post property reviews and other information about properties, property owners and managers. Although this feedback is generated by users and not by us, claims of libel, defamation or other injury have been made against other Internet service providers offering similar forums and may be made against us for content posted in this forum. Our potential liability for this information could require us to expend substantial resources to reduce our liability exposure and may limit the attractiveness of our online marketplace. Moreover, our general liability insurance may not cover all potential claims to which we are exposed and may not be adequate to indemnify us for all liability that may be imposed.

Property owner, manager or traveler complaints or negative publicity about our company, our services or our business activities could diminish use of our online marketplace.

Property owner, manager or traveler complaints or negative publicity about our company, our services or our business activities could severely diminish consumer confidence in and use of our online marketplace. Our measures to combat risks of fraud and breaches of privacy and security can damage relations with our property owners and managers, for instance when we remove listings which have repeatedly been reported as misleadingly described. These measures heighten the need for prompt and accurate customer service to resolve irregularities and disputes. Effective customer service requires significant personnel expense, and this expense, if not managed properly, could significantly impact our profitability. Failure to manage or train our customer service representatives properly could compromise our ability to handle property owner, manager and traveler complaints effectively. If we do not handle these complaints effectively, our reputation may suffer, and we may lose the confidence of property owners, managers and travelers. We may also be the subject of blog or forum postings that include inaccurate statements and create negative publicity. As a result of these complaints or negative publicity, property owners and managers may discontinue their listing with us or travelers may discontinue their use of our websites, and our business and results of operations could be adversely impacted.

If we do not adequately protect our intellectual property, our ability to compete could be impaired.

Our intellectual property includes the content of our websites, our registered domain names, our registered and unregistered trademarks and patent applications. We believe that our intellectual property is an essential asset of our business and that our domain names and our technology infrastructure currently give us a competitive advantage in the online market for vacation rental listings. If we do not adequately protect our intellectual property, our brand, reputation and perceived content value could be harmed, resulting in an impaired ability to compete effectively.

To protect our intellectual property we rely on a combination of copyright, trademark, patent and trade secret laws, contractual provisions and our user policy and restrictions on disclosure. Upon discovery of potential infringement of our intellectual property, we promptly take action we deem appropriate to protect our rights. We regularly deliver cease and desist letters to parties who misappropriate our trademarks or content, such as aggregators of vacation rental listing content who use automated technology to download content from our online marketplace and display it on their websites without our permission. We also enter into confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary information in a commercially prudent manner. The efforts we have taken to protect our intellectual property may not be sufficient or effective, and, despite these precautions, it may be possible for other parties to copy or otherwise obtain and use the content of our websites without authorization. We may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon or diminish the value of our domain names, service marks and our other proprietary rights. Even if we do detect violations and decide to enforce our intellectual property rights, litigation may be necessary to enforce our rights, and any enforcement efforts we undertake could be time-consuming, expensive, distracting and result in unfavorable outcomes. A failure to protect our intellectual property in a cost-effective and meaningful manner could have a material adverse effect on our ability to compete.

As of September 30, 2015, we had 22 patent applications and no issued patents. Any future patents issued to us may be challenged, invalidated or circumvented, may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. Furthermore, effective patent, trademark, copyright and trade secret protection may not be available in every country in which our products are available over the Internet. In addition, the legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving.

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We may be subject to claims that we violated intellectual property rights of others, which are extremely costly to defend and could require us to pay significant damages and limit our ability to operate.

Companies in the Internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. We have received and may continue to receive claims that we have violated other parties’ intellectual property rights. There may be intellectual property rights held by others, including issued or pending patents and trademarks, that cover significant aspects of our technologies, content, branding or business methods. Any intellectual property claim against us, regardless of merit, could be time-consuming and expensive to settle or litigate and could divert our management’s attention and other resources. These claims also could subject us to significant liability for damages and could result in our having to stop using technology, content, branding or business methods found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms, or at all. If we cannot license or develop technology, content, branding or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Even if a license is available, we could be required to pay significant royalties, which could increase our operating expenses. We may also be required to develop alternative non-infringing technology, content, branding or business methods, which could require significant effort and expense and be inferior. Any of these results could harm our operating results.

We currently rely on a small number of third-party service providers to host and deliver a significant portion of our services, and any interruptions or delays in services from these third parties could impair the delivery of our services and harm our business.

We rely on third-party service providers for numerous products and services, including payment processing services, data center services, web hosting services, insurance products for customers and travelers and some customer service functions. We rely on these companies to provide uninterrupted services and to provide their services in accordance with all applicable laws, rules and regulations.

We use a combination of third-party data centers distributed globally across multiple regions to host our websites and core services. We do not control the operation of any of the third-party data center facilities we use. These facilities, including our co-location hosting center, may be subject to break-ins, computer viruses, denial-of-service attacks, sabotage, acts of vandalism and other misconduct. They are also vulnerable to damage or interruption from power loss, telecommunications failures, fires, floods, earthquakes, hurricanes, tornadoes and similar events. We currently do not have a comprehensive disaster recovery plan in place nor do our systems provide complete redundancy of data storage or processing. As a result, the occurrence of any of these events, a decision by our third-party service providers to close their data center facilities without adequate notice or other unanticipated problems could result in loss of data as well as a significant interruption in our services and harm to our reputation and brand. Additionally, our third-party data center facility agreements are of limited durations, and our third-party data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew our agreements with these facilities on commercially reasonable terms, we may experience delays in the provisioning of our services until an agreement with another data center facility can be arranged. This shift to alternate data centers could take more than 24 hours depending on the nature of the event.

Furthermore, we depend on continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business. If we lose the services of one or more of our bandwidth providers for any reason or if their services are disrupted, we could experience disruption in our services or we could be required to retain the services of a replacement bandwidth provider, which could harm our business and reputation.

Our operations are dependent on the availability of electricity, which also comes from third-party providers. If we or the third-party data center facilities that we use to deliver our services were to experience a major power outage, it could result in disruption of our services and harm to our business.

If these companies experience difficulties and are not able to provide services in a reliable and secure manner, if they do not operate in compliance with applicable laws, rules and regulations and, with respect to payment and card processing companies, if they are unable to effectively combat the use of fraudulent payments on our websites, our results of operations and financial positions could be materially and adversely affected. In addition, if such third-party service providers were to cease operations or face other business disruption either temporarily or permanently, or otherwise face serious performance problems, we could suffer increased costs and delays until we found or developed an equivalent replacement, any of which could have an adverse impact on our business and financial performance.

If we do not successfully implement any acquisition strategies, our operating results and prospects could be harmed.

We face competition within our industry for acquisitions of businesses, technologies and assets, and, in the future, such competition may become more intense. As such, even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms or at all because of such competition. Furthermore, if we enter into negotiations that are not ultimately consummated, those negotiations could result in diversion of management time and significant out-of-pocket costs. Even if we are able to complete such acquisitions, we may additionally expend significant amounts of cash or incur substantial debt to finance them, which indebtedness could result in restrictions on our business and use of available

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cash. In addition, we may finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which could result in dilution of our existing stockholders. If we fail to evaluate and execute acquisitions successfully, we may not be able to realize their benefits. If we are unable to successfully address any of these risks, our business, financial condition or operating results could be harmed.

We rely on assumptions and estimates and data from third parties to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

Certain key metrics, such as number of unique visitors, total traffic and number of listings, reviews and opinions, are calculated, in some cases, using internal company data and, in other cases, relying on data from third parties. While these numbers are based on what we believe to be reasonable calculations for the applicable periods of measurement, there are inherent challenges in measuring usage and user engagement across our large user base around the world. Accordingly, the calculations of our unique visitors may not accurately reflect the number of people actually using our platforms. In addition, our measures of growth may differ from estimates published by third parties or from similar metrics of our competitors due to differences in methodologies utilized by us and the third parties on which we rely for this data.

We are continually seeking to improve our ability to estimate these key metrics. We regularly review and adjust our processes for calculating our internal metrics to improve their accuracy. If our users, advertisers, partners and stockholders do not perceive our metrics to be accurate representations or if we discover material inaccuracies in our user metrics, our reputation may be harmed. This in turn could cause property owners, managers, travelers and advertisers not to use our products and services which could negatively affect our business and operating results.

Our culture emphasizes rapid innovation and prioritizes property owner, manager, and traveler experience over short-term financial results.

We have a culture that encourages rapid development and release of new and improved products, and generally prioritizes property owner, manager, and traveler experience over short-term financial results. We have taken actions in the past and may continue to make product or other decisions going forward that have the effect of reducing our short-term revenue or profitability if we believe that the decisions benefit long term-revenue and profitability through improved property owner, manager, and traveler experience and/or conversion rates and pricing and fees. The short-term reductions in revenue or profitability could be more severe than we anticipate. These decisions may not produce the long-term benefits that we expect, in which case our growth, website experience, relationships with property owners, managers, and travelers and advertisers, and business and results of operations could be harmed.

Our failure to maintain effective internal controls could adversely affect our financial position and lower our stock price.

We are subject to reporting and other obligations under the Securities Exchange Act of 1934, including the requirements of Sarbanes-Oxley. These provisions require annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing our assessments. We also operate in a complex environment and expect these obligations, together with our rapid growth and expansion through acquisitions, to place significant demands on our management and administrative resources, including accounting and tax resources. Although we have expanded the size and depth of the finance and accounting staff in our U.S. and European headquarters, we may need to hire additional personnel. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to attest that our management’s report is fairly stated or they are unable to express an opinion on our management’s assessment or on the effectiveness of our internal control over financial reporting, our investors could lose confidence in the accuracy and completeness of our financial reports.

We might require additional capital to support business growth, and this capital might not be available.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new products or services or enhance our existing products or services, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.

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We have significant indebtedness, which could adversely affect our business and financial condition.

As of September 30, 2015, the aggregate face value of our outstanding convertible senior promissory notes was $402.5 million. Risks relating to our indebtedness include:

• increasing our vulnerability to general adverse economic and industry conditions;

• requiring us to dedicate a portion of our cash flow from operations to principal and interest payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes;

• making it more difficult for us to optimally capitalize and manage the cash flow for our businesses;

• limiting our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;

• possibly placing us at a competitive disadvantage compared to our competitors that have less debt;

• applying the accounting method for convertible debt securities that may be settled in cash, which requires the notes’ equity component to be included in the paid-in capital section of stockholders’ equity and the value of the equity component to be treated as a debt discount. The amortization of this discount will result in lower reported net income which in turn could adversely affect our reported financial results;

• limiting our ability to borrow additional funds or to borrow funds at rates or on other terms that we finds acceptable; and

• responding to the conditional conversion feature of the notes, which if triggered could adversely affect our liquidity if we elect to satisfy our conversion obligation through the payment of cash.

Risks Related to the Ownership of our Common Stock

Our stock price may be volatile.

The market price of our common stock is likely to be volatile and could be subject to wide fluctuations in response to, among other things, the risk factors described in this section of this Quarterly Report on Form 10-Q, and other factors beyond our control. Factors affecting the trading price of our common stock could include:

• variations in our operating results;

• variations in operating results of similar companies and competitors;

• changes in the estimates of our operating results or changes in recommendations by any securities analysts that elect to follow our common stock;

• changes in our outlook for future operating results which are communicated to investors and analysts;

• announcements of technological innovations, new products, services or service enhancements, strategic alliances or agreements by us or by our competitors;

• marketing and advertising initiatives by us or our competitors;

• the gain or loss of listings;

• threatened or actual litigation;

• changes in our management;

• recruitment or departures of key personnel;

• market conditions in our industry, the travel industry and the economy as a whole;

• the overall performance of the equity markets;

• sales or purchases of shares of our common stock by existing stockholders;

• the reports of industry research analysts who cover our competitors and us;

• stock-based compensation expense under applicable accounting standards; and

• adoption or modification of regulations, policies, procedures or programs applicable to our business.

Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations and general economic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock regardless of our actual operating performance. Each of these factors, among others, could harm the value of our common stock.

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In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us, regardless of the merits or outcome, could result in substantial costs and divert our management’s attention from other business concerns, which could materially harm our business.

If securities analysts and other industry experts do not continue to publish research or publish negative research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research, reports and other media that securities analysts and other industry experts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes negative research about our business, our stock price could decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the stock market and demand for our stock could decrease, which could cause our stock price or trading volume to decline. If one or more industry analysts publish negative statements about our business, our stock price could decline.

We do not anticipate paying any dividends on our common stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. If we do not pay cash dividends, our stockholders could receive a return on their investment in our common stock only if the market price of our common stock has increased when they sell their shares.

Our charter documents, Delaware law, and the indenture governing our outstanding convertible senior promissory notes could prevent a takeover that stockholders consider favorable and could also depress the market price of our stock.

Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

• creating a classified board of directors whose members serve staggered three-year terms;

• not providing for cumulative voting in the election of directors;

• authorizing our board of directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;

• prohibiting stockholder action by written consent; and

• requiring advance notification of stockholder nominations and proposals.

Similarly, the indenture governing our outstanding convertible promissory notes includes provisions that:

• prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the promissory notes; and

• may require us under certain circumstances to repurchase all or a portion of these promissory notes, and in some cases repurchase the promissory notes subject to an additional make whole adjustment.

Certain provisions under Delaware law, the provisions listed above, and other provisions included in our amended and restated certificate of incorporation and our amended and restated bylaws could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

Not applicable.

Item 6. Exhibits

See the Exhibit Index immediately following the signature page of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

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HomeAway, Inc.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HOMEAWAY, INC.
Dated: November 6, 2015	By:	/s/ Lynn Atchison
		Lynn Atchison
		Chief Financial Officer and Secretary

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EXHIBIT INDEX

Exhibit Number		Incorporated by Reference
	Exhibit Description	Form	File No.	Exhibit	Filing Date
3.1	Amended and Restated Certificate of Incorporation, as currently in effect.	S-1	333-172783	3.2	March 11, 2011
3.2	Amended and Restated Bylaws, as currently in effect.	S-1	333-172783	3.4	March 11, 2011
10.1*	Executive Employment Agreement between the Registrant and Melissa Fruge dated October 1, 2015
31.1*	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** Furnished herewith.

63

EX-10.1

Exhibit 10.1

HOMEAWAY, INC.

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”) is entered into effective as of October 1, 2015 (the “Effective Date”) by and between HomeAway, Inc., a Delaware corporation (the “Company”), and Melissa Frugé (“Executive”).

RECITALS

WHEREAS, Executive and the Company entered into an offer letter dated as of August 25, 2009 (the “Prior Agreement”);

WHEREAS, Executive is currently employed by the Company and has been promoted to the position of SVP and General Counsel, effective as of October 1, 2015;

WHEREAS, the Company and Executive desire to amend and restate the Prior Agreement to reflect the new terms of Executive’s employment;

WHEREAS, the Company considers it essential to its best interests and the best interests of its stockholders to foster the continued employment of Executive by the Company during the term of this Agreement; and

WHEREAS, Executive is willing to continue Executive’s employment on the terms hereinafter set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:

1. Duties and Scope of Employment.

(a) Positions and Duties. As of the Effective Date, Executive serves as the SVP and General Counsel, reporting to the Chief Executive Officer (the “CEO”). Executive will render such business and professional services in the performance of Executive’s duties as are customarily associated with Executive’s position within the Company and Executive agrees to perform such other duties and functions as shall from time to time be reasonably assigned or delegated to Executive by the CEO. The period Executive is employed by the Company under this Agreement is referred to herein as the “Employment Term.”

(b) Obligations. During the Employment Term, Executive will perform Executive’s duties faithfully and to the best of Executive’s ability and will devote Executive’s full business efforts and time to the Company; provided, however, Executive shall be allowed to (i) manage Executive’s passive personal investments and (ii) be involved in charitable activities, so long as these matters do not interfere with Executive’s duties to the Company during the Employment Term. During the Employment Term, Executive agrees not actively to engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the CEO.

(c) Subject to Section 2, this Agreement will have a term of three (3) years, commencing on the Effective Date, unless terminated earlier as provided herein. Notwithstanding the foregoing, if a Change of Control should occur when there is less than eighteen (18) months remaining in the term of this Agreement, Section 8 of this Agreement shall survive following the expiration of the term of this Agreement for a period of eighteen (18) months following the Change of Control.

2. At-Will Employment. Executive and the Company agree and acknowledge Executive’s employment with the Company constitutes “at-will” employment. Executive and the Company further agree and acknowledge that this employment relationship may be terminated at any time, with or without notice to the other party, with or without cause, at the option of either Executive or the Company. Executive understands and agrees that neither Executive’s job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of Executive’s employment with the Company.

3. Compensation.

(a) Base Salary. As of October 1, 2015, the Company will pay Executive as compensation for Executive’s services a base salary at the annualized rate of $290,000 (the “Base Salary”). The Base Salary will be paid in regular installments in accordance with the Company’s normal payroll practices (subject to required withholding). The first and last payment will be adjusted, if necessary, to reflect a commencement or termination date other than the first or last working day of a pay period. Executive will be entitled to an annual review of the base salary with a change in this base salary to be at the sole discretion of the Board.

(b) Bonus. Executive will be eligible to earn an annual bonus targeting 50% of base earnings (the “Bonus”) pursuant to an annual bonus plan to be adopted each year by the Compensation Committee of the Board (the “Committee”) with terms and conditions determined by the Committee in its discretion after consultation with Executive. Any Bonus will be paid each year following confirmation by the Board of the financial performance of the Company, and such determination and payment shall be made in all events no later than March 15^th of the year following the end of the year for which the Bonus is earned.

(c) Equity. Executive currently holds equity awards received for services to the Company. During the Employment Term, the Board or Committee will determine in its discretion whether Executive will be granted additional equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time.

4. Employee Benefits. During the Employment Term, Executive will be entitled to participate, in accordance with the terms thereof, in all employee benefit plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.

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5. Vacation. Executive will be entitled to paid vacation generally applicable to the senior executives of the Company, in accordance with the Company’s current vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by Executive and the CEO.

6. Business Expenses. During the Employment Term, the Company will reimburse Executive for reasonable travel, entertainment and other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time (the “Expense Reimbursement”).

7. Termination of Employment. In the event Executive’s employment with the Company terminates for any reason, including death or Disability, then Executive (or Executive’s estate, as applicable) will be entitled to (i) earned but unpaid compensation, including Base Salary and Bonus earned through the date of termination, (ii) any accrued but unpaid vacation pay for the current calendar year, (iii) Expense Reimbursement, and (iv) not receive any other compensation or benefits from the Company except as may be required by law or in accordance with established Company plans and policies, (v) not be credited with any additional vesting of his outstanding equity awards (that is, all vesting of outstanding equity awards will immediately terminate). In addition, if the termination is by the Company without Cause or by the Executive for Good Reason, Executive will be entitled to the amounts specified in Section 8.

8. Severance.

(a) Termination Not in Connection With a Change in Control. If the Company terminates Executive’s employment with the Company without Cause, and such termination occurs more than three (3) months prior to, or more than eighteen (18) months following, a Change in Control, then, subject to Section 9, (i) Executive shall be entitled to receive a lump sum cash payment equal to six (6) months’ Base Salary, payable within thirty (30) days following termination or such later date required by Section 9, and (ii) if Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for Executive and Executive’s eligible dependents, the Company shall reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) six (6) months following the date of termination, or (B) the date upon which Executive and/or Executive’s eligible dependents become covered under similar plans, with such reimbursements made by the Company to Executive consistent with the Company’s normal expense reimbursement policy; provided, however, that if the Company determines that reimbursed COBRA premiums would be deemed to be discriminatory or to otherwise violate the then-applicable provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, and the guidance and regulations issued thereunder, then Executive and the Company agree to negotiate in good faith to establish an alternative that replaces the benefit to Executive in a manner consistent with then applicable law, and does not increase the Company’s costs or liability with respect to the benefit.

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(b) Termination in Connection With a Change in Control. If the Company terminates Executive’s employment with the Company without Cause or Executive terminates employment with the Company for Good Reason, and such termination occurs within the period beginning three (3) months prior to, and ending eighteen (18) months following, a Change in Control, then, subject to Section 9, (i) Executive shall be entitled to receive a lump sum cash payment equal to twelve (12) months’ Base Salary, payable within thirty (30) days following termination or such later date required by Section 9, (ii) one hundred percent (100)% of the unvested portion of all equity awards, including without limitation stock option grants, restricted stock and restricted stock units, held by Executive at the time of the termination shall become fully vested or released from the Company’s repurchase right and exercisable as of such date, and (iii) if Executive elects continuation coverage pursuant to COBRA for Executive and Executive’s eligible dependents, the Company shall reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive’s termination) until the earlier of (A) twelve (12) months from the date of termination, or (B) the date upon which Executive and/or Executive’s eligible dependents become covered under similar plans, with such reimbursements made by the Company to Executive consistent with the Company’s normal expense reimbursement policy; provided, however, that if the Company determines that reimbursed COBRA premiums would be deemed to be discriminatory or to otherwise violate the then-applicable provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, and the guidance and regulations issued thereunder, then Executive and the Company agree to negotiate in good faith to establish an alternative that replaces the benefit to Executive in a manner consistent with then applicable law, and does not increase the Company’s costs or liability with respect to the benefit.

(c) For purposes of this Section 8, Base Salary shall mean Executive’s Base Salary immediately prior to the termination date, or, if Executive resigned for Good Reason as a result of a material reduction in his Base Salary, his Base Salary as in effect immediately prior to such reduction. If Executive should die before all amounts have been paid, such unpaid amounts shall be paid in a lump sum payment (less any withholding taxes) to Executive’s designated beneficiary, if living, or otherwise to the personal representative of Executive’s estate

9. Release of Claims Agreement; No Duty to Mitigate.

(a) Release of Claims Agreement. The receipt of any severance payments or benefits pursuant to this Agreement is subject to Executive signing and not revoking a separation agreement and release of claims in substantially the form reasonably acceptable to the Company (the “Release”), which must become effective and irrevocable no later than the sixtieth (60th) day following Executive’s termination of employment (the “Release Deadline”). If the Release does not become effective and irrevocable by the Release Deadline, Executive shall forfeit any right to severance payments or benefits under this Agreement. In no event shall severance payments or benefits be paid or provided until the Release actually becomes effective and irrevocable.

(b) Confidential Information Agreement and Non-Disparagement. Executive’s receipt of any payments or benefits under Section 8 shall be subject to Executive continuing to comply with the terms of the Confidential Information Agreement (as defined herein) and Section 13.

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(c) Section 409A.

(i) Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Payments”) shall be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) shall be payable until Executive has a “separation from service” within the meaning of Section 409A.

(ii) It is intended that none of the severance payments under this Agreement shall constitute “Deferred Payments” but rather shall be exempt from Section 409A as a payment that would fall within the “short-term deferral period” as described in Section 9(c)(iv) below or resulting from an involuntary separation from service as described in Section 9(c)(v) below. However, any severance payments or benefits under this Agreement that would be considered Deferred Payments shall be paid on, or, in the case of installments, shall not commence until, the sixtieth (60^th) day following Executive’s separation from service, or, if later, such time as required by Section 9(c)(iii). Except as required by Section 9(c)(iii), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s separation from service but for the preceding sentence shall be paid to Executive on the sixtieth (60^th) day following Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.

(iii) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Payments, if any, that are payable within the first six (6) months following Executive’s separation from service, shall become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Payments, if any, shall be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but before the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph shall be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments shall be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment under Section 1.409A-2(b)(2) of the Treasury Regulations.

(iv) Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations shall not constitute Deferred Payments for purposes of clause (i) above.

(v) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of

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the Treasury Regulations that does not exceed the Section 409A Limit shall not constitute Deferred Payments for purposes of clause (i) above. “Section 409A Limit” means the lesser of two (2) times: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of Executive’s termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive ’s employment is terminated.

(vi) This Agreement is intended to satisfy the requirements of Section 409A with respect to amounts subject thereto, and shall be interpreted and construed consistent with such intent; provided that, notwithstanding the other provisions of this Agreement, with respect to any right to a payment or benefit hereunder (or portion thereof) that does not otherwise provide for a “deferral of compensation” within the meaning of Section 409A, it is the intent of the parties that such payment or benefit will not so provide. Furthermore, if either party notifies the other in writing that, based on the advice of legal counsel, one or more of the provisions of this Agreement contravenes any regulations or Treasury guidance promulgated under Section 409A or causes any amounts to be subject to interest or penalties under Section 409A, the parties shall promptly and reasonably consult with each other (and with their legal counsel), and shall use their reasonable best efforts, to reform the provisions hereof to (a) maintain to the maximum extent practicable the original intent of the applicable provisions without violating the provisions of Section 409A or increasing the costs to the Company of providing the applicable benefit or payment and (b) to the extent practicable, to avoid the imposition of any tax, interest or other penalties under Section 409A upon Executive or the Company.

(d) No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

10. Code Section 280G Best Results. If any payment or benefit Executive would receive pursuant to this Agreement or otherwise, including accelerated vesting of any equity compensation (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order: (A) cash payments shall be reduced first and in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; (B) accelerated vesting of stock awards shall be cancelled/reduced next and in the reverse order of the date of grant for such stock awards (i.e., the vesting of the most recently granted stock awards will be reduced first), with full-value awards reversed before any

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stock option or stock appreciation rights are reduced; and (C) employee benefits shall be reduced last and in reverse chronological order such that the benefit owed on the latest date following the occurrence of the event triggering such excise tax will be the first benefit to be reduced.

The Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder and perform the foregoing calculations. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within fifteen (15) calendar days after the date on which right to a Payment is triggered (if requested at that time by the Company or Executive) or such other time as requested by the Company or Executive. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive.

11. Definitions.

(a) Cause. For purposes of this Agreement, “Cause” means (i) with respect to Executive’s employment with the Company, Executive’s willful and continued failure to substantially perform the duties and obligations of Executive’s position with the Company; (ii) any proven act of personal dishonesty, fraud or misrepresentation taken by Executive which was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (iii) Executive’s violation of a federal or state law or regulation applicable to the Company’s business which violation was or is reasonably likely to be injurious to the Company, excluding violations made in good faith and upon advice of the Company’s counsel or directive of the Board; (iv) Executive’s conviction of, or plea of nolo contendere or guilty to, a felony under the laws of the United States or any State, excluding felonies for minor traffic violation and vicarious liability (so long as Executive did not know of the felony and did not willfully violate the law) (v) Executive’s breach of the terms of the Confidential Information Agreement, which breach is not remedied in a reasonable period of time (not to exceed thirty (30) days) after receipt of written notice from the Company or (vi) failure to reasonably cooperate with any government investigation involving Executive or the Company.

(b) Change in Control. For purposes of this Agreement, “Change in Control” shall have the meaning defined in the Company’s 2011 Equity Incentive Plan.

(c) Good Reason. For purposes of this Agreement, “Good Reason” means, (i) without Executive’s consent, a material reduction of Executive’s duties, authority or responsibilities or change in Executive’s title or reporting relative to Executive’s duties, authority, responsibilities title or reporting as in effect immediately prior to such reduction; provided, however, that any reduction in Executive’s duties, authority or responsibilities or change in Executive’s title or reporting resulting solely from the Company being acquired by and made a part of a larger entity (as, for example, when a chief executive officer becomes an employee of the acquiring corporation following a Change in Control but is not the chief executive officer of the acquiring corporation) shall not constitute a Good Reason; (ii) without Executive’s consent, a reduction of at least 10% in the total annual target cash compensation (base salary plus the target bonus amount (i.e., the total bonus that could be earned and not the bonus actually paid) of Executive as in effect immediately prior to such reduction, unless such reduction is part of a reduction in expenses generally affecting

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senior executives of the Company; (iii) without Executive’s consent, a material reduction by the Company in the kind or level of employee benefits to which Executive was entitled immediately prior to such reduction, with the result that Executive’s overall benefits package is materially reduced, unless such reduction is part of a reduction in benefits generally affecting senior executives of the Company; (iv) a change in the geographic location of Executive’s primary work facility or location of more than fifty (50) miles from Executive’s then present location; or (v) the Company’s material breach of the Agreement, which breach is not remedied in a reasonable period of time (not to exceed thirty (30) days) after receipt of written notice from Executive. Notwithstanding the foregoing, if Executive terminates employment with the Company for Good Reason, but the Company discovers after such termination that Executive’s conduct during the Employment Term would have entitled the Company to terminate Executive for Cause, then Executive’s termination shall be for Cause and not for Good Reason and Executive shall remit all amounts paid to Executive for termination for Good Reason (other than those amounts that would have been payable by the Company to Executive for termination for Cause). Notwithstanding anything herein to the contrary, Executive may terminate employment hereunder for Good Reason within a period not to exceed one hundred twenty (120) days following the initial existence of the event(s) constituting Good Reason. For purposes of this Agreement, Good Reason shall not exist unless Executive provides the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and a reasonable cure period of not less than thirty (30) days following the date of such notice. Such termination shall occur immediately following the cure period if such event remains uncured. Nonrenewal of the Agreement by the Company at the end of the initial three-year term or a renewal term shall not constitute a termination of Executive by the Company without Cause at the expiration of the term or Good Reason and shall not trigger severance payments under Section 8.

(d) Disability. For purposes of this Agreement, “Disability” means Executive’s inability to perform Executive’s duties due to Executive’s physical or mental incapacity, as reasonably determined by the Board or its designee, for an aggregate of 180 days in any 365 consecutive day period.

12. Confidential Information. Executive confirms Executive’s obligations under the employee proprietary information agreement entered into by the Company and Executive as of April 19, 2010 (the “Confidential Information Agreement”).

13. Non-Disparagement. Executive shall not, while Executive is employed by the Company or at any time thereafter, directly, or through any other personal entity, make any public or private statements that are disparaging of the Company, its business or its employees, officers, directors, or stockholders. The Company agrees to refrain from any public statements after Executive’s employment with the Company ceases that are disparaging to Executive. The Company’s obligations under this section extend only to then current officers and members of the Board, and only for so long as those individuals are officers or directors of the Company.

14. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or

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otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.

15. Notices. All notices, requests, demands and other communications called for under this Agreement shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, directed to the party to be notified at the address indicated for such party on the signature page to this Agreement, or at such other address as such party may designate by ten (10) days’ advance written notice to the other parties hereto. All such notices and other communications shall be deemed given upon personal delivery, three (3) days after the date of mailing, or upon confirmation of facsimile transfer.

16. Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

17. Arbitration.

(a) Executive agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in Austin, Texas in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b) The arbitrator(s) will apply Texas law to the merits of any dispute or claim, without reference to rules of conflicts of law. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in Texas for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.

(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.

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18. Integration. This Agreement, together with the Confidential Information Agreement and agreements memorializing outstanding equity awards, represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral, including the Prior Agreement. To the extent that any provision of the Confidential Information Agreement conflicts with a provision of this Agreement, this Agreement shall control. No waiver, alteration or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.

19. Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

20. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

21. Governing Law. This Agreement will be governed by the laws of the State of Texas (with the exception of its conflict of laws provisions).

22. Acknowledgment. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtain advice from Executive’s private attorney, Executive has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written.

“COMPANY”
HomeAway, Inc.
By:	/s/ Lori Knowlton
Name:	Lori Knowlton
Title:	Chief People Officer
Address:
1011 W. Fifth Street, Suite 300
Austin, TX 78730
Attn: Human Resources
“EXECUTIVE”
/s/ Melissa Frugé
Melissa Frugé
Address:
10608 MERRYWING COVE
AUSTIN, TEXAS 78730

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Brian H. Sharples, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HomeAway, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2015	By:	/s/ Brian H. Sharples
		Brian H. Sharples
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Lynn Atchison, certify that:

1. I have reviewed this quarterly report on Form 10-Q of HomeAway, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2015	By:	/s/ Lynn Atchison
		Lynn Atchison
		Chief Financial Officer and Secretary (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of HomeAway, Inc. for the quarterly period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian H. Sharples, as Chief Executive Officer of HomeAway, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HomeAway, Inc.

Date: November 6, 2015	By:	/s/ Brian H. Sharples
		Brian H. Sharples
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of HomeAway, Inc. for the quarterly period ended September 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lynn Atchison, as Chief Financial Officer of HomeAway, Inc., hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HomeAway, Inc.

Date: November 6, 2015	By:	/s/ Lynn Atchison
		Lynn Atchison
		Chief Financial Officer and Secretary

XML

Summary of Significant Accounting Policies - Schedule of Fair Value and Notional Amounts of Outstanding or Unsettled Derivative Instruments (Detail) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Derivatives, Fair Value [Line Items]
Notional Amount	$ 157,735,000
Not Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	170,604,000	$ 168,726,000
Not Designated as Hedging Instruments [Member] | Accrued expenses [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	129,303,000	11,562,000
Not Designated as Hedging Instruments [Member] | Prepaid expense and other current assets [Member]
Derivatives, Fair Value [Line Items]
Notional Amount	41,301,000	157,164,000
Not Designated as Hedging Instruments [Member] | (Level 2) [Member]
Derivatives, Fair Value [Line Items]
Gross Amount of Recognized Assets/Liabilities	517,000	4,439,000
Gross Amounts Offset in the Balance Sheet	0	0
Net Amount Presented in the Balance Sheet	517,000	4,439,000
Not Designated as Hedging Instruments [Member] | (Level 2) [Member] | Accrued expenses [Member]
Derivatives, Fair Value [Line Items]
Gross Amount of Recognized Assets/Liabilities	(656,000)	(67,000)
Gross Amounts Offset in the Balance Sheet	0	0
Net Amount Presented in the Balance Sheet	(656,000)	(67,000)
Not Designated as Hedging Instruments [Member] | (Level 2) [Member] | Prepaid expense and other current assets [Member]
Derivatives, Fair Value [Line Items]
Gross Amount of Recognized Assets/Liabilities	1,173,000	4,506,000
Gross Amounts Offset in the Balance Sheet	0	0
Net Amount Presented in the Balance Sheet	$ 1,173,000	$ 4,506,000

XML

Commitments and Contingencies - Summary of Rental Expenses (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Leases [Abstract]
Rental expense	$ 1,733	$ 1,911	$ 5,754	$ 5,134

XML

Convertible Senior Notes - Additional Information (Detail)	3 Months Ended	9 Months Ended
	Mar. 31, 2014 USD ($)	Sep. 30, 2015 USD ($) $ / shares	Dec. 31, 2014 USD ($)
Debt Instrument [Line Items]
Closing price of common stock | $ / shares		$ 26.54
Warrants price per unit | $ / shares		$ 81.14
Term issuance of warrants		5 years
Convertible Senior Notes 0.125% due April 1, 2019 [Member]
Debt Instrument [Line Items]
Interest rate	0.125%	0.125%
Debt par value	$ 402,500,000	$ 402,500,000
Semi-annual first interest is payable	--04-01
Semi-annual second interest is payable	--10-01
Interest is payable start date	Oct. 01, 2014
Debt conversion description		During any calendar quarter commencing after June 30, 2014, if, for at least 20 trading days during the 30 consecutive trading day period ending on the last trading day of the immediately preceding calendar quarter, the last reported sales price of the Company's common stock for such trading day is greater than or equal to 130% of the applicable conversion price for the Notes on each applicable trading day
Debt instrument convertible threshold trading days		20
Common stock closing sales price percentage		130.00%
Percentage of trading price for conversion of note		98.00%
Consecutive trading period		5 days
Principal amount		$ 1,000
Percentage of principal amount of notes		100.00%
Convertible Senior Notes 0.125% due April 1, 2019 [Member] | (Level 2) [Member]
Debt Instrument [Line Items]
Total estimated fair value of the notes		$ 293,300,000
0.125% Convertible Senior Notes [Member]
Debt Instrument [Line Items]
Debt par value		402,500,000	$ 402,500,000
Deferred tax liability		$ 800,000

XML

Commitments and Contingencies - Additional Information (Detail) - Sep. 30, 2015	USD ($)	GBP (£)
Carefree Rental Guarantee [Member]
Commitments and Contingencies [Line Items]
Guarantee maximum exposure amount	$ 10,000
Basic Rental Guarantee [Member]
Commitments and Contingencies [Line Items]
Guarantee maximum exposure amount	1,000
Subsidiary's Bank Credit, United Kingdom [Member] | United Kingdom [Member]
Commitments and Contingencies [Line Items]
Guarantee maximum exposure amount	$ 7,595,000	£ 5,000,000

XML

Convertible Senior Notes - Summary of Convertible Senior Notes (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Mar. 31, 2014
Debt Instrument [Line Items]
Carrying Value of Convertible Senior Notes	$ 329,905	$ 316,181
Convertible Senior Notes 0.125% due April 1, 2019 [Member]
Debt Instrument [Line Items]
Par Value	402,500		$ 402,500
Equity Component Recorded at Issuance	90,887
Carrying Value of Convertible Senior Notes	$ 329,905	$ 316,181

XML

Summary of Significant Accounting Policies - Schedule of Cash and Cash Equivalents (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2013
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	$ 301,293	$ 292,325	$ 292,103	$ 324,608
Demand Deposits [Member]
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	149,602	108,316
Money market funds [Member]
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents	$ 151,691	183,008
Municipal bonds [Member]
Cash and Cash Equivalents [Line Items]
Cash and cash equivalents		$ 1,001

XML

Stock-Based Compensation - Additional Information (Detail) - Stock Incentive Plan 2011 [Member] - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015
Stock-Based Compensation And Stockholders Equity [Line Items]
Restricted stock units issued, aggregate fair value	$ 14,261,000	$ 49,261,000
Restricted Stock Units [Member]
Stock-Based Compensation And Stockholders Equity [Line Items]
Share-based compensation, Number of shares issued	502,383	1,686,767
Stock Option [Member]
Stock-Based Compensation And Stockholders Equity [Line Items]
Share-based compensation, Number of shares issued	83,644	947,986
Common stock issued pursuant to stock awards, aggregate fair value	$ 958,000	$ 9,995,000

XML

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Summary of Rental Expense

The following table summarizes total rental expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Rental expense	$	1,733	$	1,911	$	5,754	$	5,134

Changes for Traveler Guarantees

Expected future claims for traveler guarantees, which are presented as a current liability in the Company’s condensed consolidated balance sheets, and changes for the guarantees, are as follows (in thousands):

Traveler guarantee liability at December 31, 2013	$	956
Costs accrued for new and expected future claims		3,576
Guarantee obligations honored		(2,742	)
Traveler guarantee liability at December 31, 2014	$	1,790
Costs accrued for new and expected future claims		1,216
Guarantee obligations honored		(1,760	)
Traveler guarantee liability at September 30, 2015	$	1,246

XML

Convertible Senior Notes - Schedule of Conversion of Senior Notes (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Net carrying amount	$ 329,905	$ 316,181
0.125% Convertible Senior Notes [Member]
Debt Instrument [Line Items]
Principal: 0.125% Convertible Senior Notes	402,500	402,500
Less: debt discount, net 0.125% Convertible Senior Notes	(72,595)	(86,319)
Net carrying amount	$ 329,905	$ 316,181

XML

Goodwill and Other Intangible Assets - Summary of Finite-Lived Intangible Assets (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 104,200	$ 111,489
Accumulated Amortization	(53,226)	(48,062)
Net Carrying Amount	$ 50,974	63,427
Trade names and trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	10 years
Gross Carrying Amount	$ 28,525	30,316
Accumulated Amortization	(9,572)	(8,396)
Net Carrying Amount	18,953	21,920
Developed technology [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	20,290	21,293
Accumulated Amortization	(14,748)	(13,231)
Net Carrying Amount	$ 5,542	8,062
Developed technology [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	2 years
Developed technology [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	8 years
Customer relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 53,436	57,656
Accumulated Amortization	(27,650)	(25,512)
Net Carrying Amount	$ 25,786	32,144
Customer relationships [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	6 years
Customer relationships [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	14 years
Noncompete agreements and domain names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 1,949	2,224
Accumulated Amortization	(1,256)	(923)
Net Carrying Amount	$ 693	$ 1,301
Noncompete agreements and domain names [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	2 years
Noncompete agreements and domain names [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset useful life	5 years

XML

Summary of Significant Accounting Policies - Summary of Excess Tax Benefit (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accounting Policies [Abstract]
Excess tax benefit from stock-based compensation, net	$ 5,200	$ 1,362	$ 7,494	$ 2,583

XML

Convertible Senior Notes - Components of Warrants (Detail) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Class of Warrant or Right [Line Items]
Warrants, proceed amount		$ 38,278
Warrants, shares	7,716,049
Warrants, strike price	$ 81.14
Warrants [Member]
Class of Warrant or Right [Line Items]
Warrants, proceed amount	$ 38,278

XML

Accumulated Other Comprehensive Loss - Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent [Abstract]
Foreign currency translation adjustments	$ (56,276)	$ (27,252)
Unrealized losses on short-term investments	(183)	(801)
Defined benefit pension plan adjustments	(4,149)
Total	$ (60,608)	$ (28,053)

XML

Convertible Senior Notes - Summary of Convertible Senior Notes (Parenthetical) (Detail) - Convertible Senior Notes 0.125% due April 1, 2019 [Member]	9 Months Ended
	Sep. 30, 2015	Mar. 31, 2014
Debt Instrument [Line Items]
Senior notes, Interest rate	0.125%	0.125%
Senior notes, Maturity date	Apr. 01, 2019

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of HomeAway, Inc. and its wholly and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission, (the “SEC”). All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments and those items discussed in these notes, necessary for a fair statement of the Company’s financial position, as of September 30, 2015 and December 31, 2014, results of operations for the three and nine months ended September 30, 2015 and September 30, 2014, comprehensive income (loss) for the three and nine months ended September 30, 2015 and September 30, 2014, cash flows for the nine months ended September 30, 2015 and September 30, 2014, and changes in stockholders’ equity for the nine months ended September 30, 2015. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Operating results for this interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, or for any other period.

Business Segment

The Company has one operating segment consisting of various products and services related to its online marketplace of accommodation rental listings. The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the single operating segment level.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include certain revenues, traveler guarantees, the allowance for doubtful accounts, marketable and non-marketable investments, goodwill and other indefinite-lived intangible assets, definite-lived intangible assets, depreciation and amortization, stock-based compensation, deferred income taxes and noncontrolling interests.

Fair Value of Financial Instruments

Fair value is defined as the price received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1:	Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2:	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Valuations based on unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company’s financial instruments classified as Level 1 are valued using quoted prices generated by market transactions involving identical assets. Instruments classified as Level 2 are valued using non-binding market consensus prices corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with significant inputs derived from or corroborated with observable market data. The Company did not hold financial instruments categorized as Level 3 in any period presented.

Short-term investments are classified as available-for-sale and reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of tax. Additionally, the Company periodically assesses whether an other than temporary impairment loss on investments has occurred due to declines in fair value or other market conditions. Declines in fair value considered other-than-temporary are recorded as an impairment in the condensed consolidated statement of operations. The Company did not record impairments of its investments during any of the periods presented.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and deferred revenue approximate fair value because of the relatively short maturity of these instruments.

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at September 30, 2015 (in thousands):

	Balance as of September 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	151,691	$	151,691	$	—	$	—
Total cash equivalents		151,691		151,691		—		—
Restricted cash
Time deposits		1,983		—		1,983		—
Total restricted cash		1,983		—		1,983		—
Short-term investments
U.S. government agency bonds		23,339		—		23,339		—
Time deposits		39,529		—		39,529		—
Corporate bonds		346,782		—		346,782		—
International government bonds		21,390		—		21,390		—
Municipal bonds		187,303		—		187,303		—
Total short-term investments		618,343		—		618,343		—
Total financial assets	$	772,017	$	151,691	$	620,326	$	—

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at December 31, 2014 (in thousands):

	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	183,008	$	183,008	$	—	$	—
Municipal bonds		1,001		—		1,001		—
Total cash equivalents		184,009		183,008		1,001		—
Restricted cash								—
Time deposits		2,058		—		2,058		—
Total restricted cash		2,058		—		2,058		—
Short-term investments
Time deposits		21,726		—		21,726		—
Corporate bonds		353,212		—		353,212		—
International government bonds		1,501		—		1,501		—
Municipal bonds		140,406		—		140,406		—
Commercial paper		3,999		—		3,999		—
Total short-term investments		520,844		—		520,844		—
Total financial assets	$	706,911	$	183,008	$	523,903	$	—

Cash and Cash Equivalents

Cash and cash equivalents include investments in demand deposits, money market funds, and municipal bonds readily convertible into cash. Cash and cash equivalents are stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Cash and cash equivalents consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Demand deposit accounts	$	149,602	$	108,316
Money market funds		151,691		183,008
Municipal bonds		—		1,001
Total cash and cash equivalents	$	301,293	$	292,325

Restricted Cash

Restricted cash of $2,200,000 and $2,492,000 at September 30, 2015 and December 31, 2014, respectively, was held in accounts owned by the Company to secure property licenses, leased office space, credit card availability and reimbursable direct debits due from the Company. Restricted cash is recorded as “Other non-current assets” on the Company’s condensed consolidated balance sheets.

Short-term Investments

Short-term investments generally consist of marketable securities with original maturities greater than ninety days as of the date of purchase. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations, including those with contractual maturities greater than one year from the date of purchase, are classified as short-term. The Company’s investment securities are classified as available-for-sale and presented at estimated fair value with any unrealized gains and losses included in other comprehensive income (loss).

Cash flows from purchases, sales and maturities of available-for-sale securities are classified as investing activities and reported gross, including any related premiums or discounts. Premiums related to purchases of available-for-sale securities were $9,240,000 and $11,239,000 during the nine months ended September 30, 2015 and 2014, respectively. Short-term investments consisted of the following (in thousands):

	September 30, 2015
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S government agency bonds	$	23,375	$	3	$	(39	)	$	23,339
Time deposits		39,529		—		—			39,529
Corporate bonds		346,949		141		(308	)		346,782
International government bonds		21,418		—		(28	)		21,390
Municipal bonds		187,254		83		(34	)		187,303
Total short-term investments	$	618,525	$	227	$	(409	)	$	618,343

	December 31, 2014
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Time deposits	$	21,726	$	—	$	—		$	21,726
Corporate bonds		353,957		7		(752	)		353,212
International government bonds		1,504		—		(3	)		1,501
Municipal bonds		140,455		45		(94	)		140,406
Commercial paper		3,999		—		—			3,999
Total short-term investments	$	521,641	$	52	$	(849	)	$	520,844

For fixed income securities with unrealized losses as of September 30, 2015, the Company does not intend to sell any of these investments; and the Company expects it will not be required to sell any of these investments before recovery of the entire amortized cost basis. The Company has evaluated these fixed income securities and determined that no credit losses exist. Accordingly, the Company has determined that the unrealized losses on fixed income securities as of September 30, 2015 were temporary in nature.

The following table summarizes the contractual underlying maturities of the Company’s short-term investments (in thousands):

	September 30, 2015
	Less than 1 Year		1 to 3 Years		Total
U.S government agency bonds	$	597	$	22,742	$	23,339
Time deposits		25,951		13,578		39,529
Corporate bonds		203,039		143,743		346,782
International government bonds		15,192		6,198		21,390
Municipal bonds		131,167		56,136		187,303
Total short-term investments	$	375,946	$	242,397	$	618,343

	December 31, 2014
	Less than 1 Year		1 to 3 Years		Total
Time deposits	$	21,479	$	247	$	21,726
Corporate bonds		240,570		112,642		353,212
International government bonds		1,501		—		1,501
Municipal bonds		87,615		52,791		140,406
Commercial paper		3,999		—		3,999
Total short-term investments	$	355,164	$	165,680	$	520,844

Non-marketable Cost Investments

During the nine months ended September 30, 2015, the Company invested $2,799,000 for a non-controlling equity interest in a privately-held vacation rental website company in Canada and $2,000,000 for a non-controlling equity interest in a privately-held vacation rental website company in Turkey. The Company also has a non-controlling equity interest in a privately-held company in China with a carrying value of $19,498,000 and a non-controlling equity investment with a carrying value of $15,000,000 in a privately-held company in the United States that operates a travel research application and website.

The Company’s investment in these privately-held companies is reported using the cost method of accounting and adjusted to fair value when an event or circumstance indicates an other-than-temporary decline in value has occurred. No event or circumstance indicating an other-than-temporary decline in value of the Company’s interest in the non-marketable cost investments has been identified during any of the periods presented.

Accounts Receivable

Accounts receivable are generated from credit card merchants who process the Company’s property listing sales, property listings sold on installments to the Company’s customers, partners who advertise the Company’s inventory on their websites and/or sell ancillary products to the Company’s customers and Internet display advertising. Accounts receivable outstanding beyond the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by estimating losses on receivables based on known troubled accounts and historical experiences of losses incurred.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Computer equipment and purchased software are generally depreciated over three years. Furniture and fixtures are generally depreciated over five to ten years. Leasehold improvements are depreciated over the shorter of the contractual lease period or estimated useful life. Upon disposal, property and equipment and the related accumulated depreciation are removed and the resulting gain or loss is reflected in the condensed consolidated statements of operations. Ordinary maintenance and repairs are charged to expense, while expenditures that extend the physical or economic life of the assets are capitalized.

The Company capitalizes certain internally developed software and website development costs. These capitalized costs were approximately $38,759,000 and $36,038,000 at September 30, 2015 and December 31, 2014, respectively, and are included in property and equipment, net, in the condensed consolidated balance sheets. Internally developed software costs are generally depreciated over five years.

The Company recorded depreciation expense on internally developed software and website development costs as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Depreciation expense on internally developed software and website development costs	$	1,677	$	1,343	$	4,867	$	3,947

Goodwill and Intangible Assets

Goodwill arises from business combinations and is measured as the excess of the purchase consideration over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed. The Company uses estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date, and these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, adjustments to the assets acquired and liabilities assumed are recorded with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the condensed consolidated statements of operations.

Goodwill and intangible assets deemed to have indefinite useful lives, such as certain trade names, are not amortized. Tests for impairment of goodwill and indefinite-lived intangible assets are performed on an annual basis or when events or circumstances indicate that the carrying amount may not be recoverable.

Circumstances that could trigger an impairment test outside of the annual test include but are not limited to: a significant adverse change in the business climate or legal factors, adverse cash flow trends, an adverse action or assessment by a regulator, unanticipated competition, loss of key personnel, decline in stock price and the results of tests for recoverability of a significant asset group. The Company has determined that no triggering event occurred during any of the periods presented.

For goodwill and indefinite-lived intangible assets, the Company completes a “Step 0” analysis, which involves evaluating qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance related to its goodwill and its indefinite-lived intangible assets. If the Company’s “Step 0” analysis indicates that it is more likely than not that the fair value of a reporting unit or of an indefinite-lived intangible asset is less than its carrying amount, then the Company would perform a quantitative two-step impairment test. The quantitative analysis compares the fair value of the Company’s reporting unit or indefinite-lived intangible assets to its carrying amount, and an impairment loss is recognized equivalent to the excess of the carrying amount over fair value. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset exceeds its carrying amount, then the quantitative impairment tests are unnecessary.

The Company performs an evaluation of goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of its fiscal year.

The determination of whether or not goodwill or indefinite-lived intangible assets have become impaired involves a significant level of judgment. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or indefinite-lived intangible assets.

No impairment of goodwill or indefinite-lived intangible assets was identified in any of the periods presented.

Identifiable intangible assets consist of trade names, customer relationships, developed technology, domain names and contractual non-competition agreements associated with acquired businesses. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable (see Note 3). The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Impairment of Long-lived Assets

The Company evaluates long-lived assets held for use, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value in the period in which the determination is made. No material impairments of long-lived assets have been recorded during any of the periods presented.

Leases

The Company leases facilities in several countries around the world and certain equipment under non-cancelable lease agreements. The terms of certain lease agreements provide for rental payments on a graduated basis. Rent expense is recognized on a straight-line basis over the lease period and accrued as rent expense incurred but not paid.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an agreement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. The Company accounts for sales incentives to customers as a reduction of revenue at the time revenue is recognized from the related product sale. The Company also reports revenue net of any sales taxes collected.

The Company generates a significant portion of its revenue from customers purchasing online advertising services related to the listing of their properties for rent, primarily on a subscription basis over a fixed-term. The Company also generates revenue based on the number of traveler inquiries and reservation bookings for property listings on the Company’s websites, local and national Internet display advertisers, license of property management software and ancillary products and services.

Payments for term-based subscriptions received in advance of services rendered are recorded as deferred revenue and recognized on a straight-line basis over the listing period.

Revenue for inquiry-based contracts are determined on a fixed fee-per-inquiry basis as stated in the arrangement and recognized when the service has been performed.

The Company earns commission revenue for reservations made online through its websites, which is calculated as a percentage of the value of the reservation. This revenue is earned as the services are performed or as the customers’ refund privileges lapse and is included in listing revenue in the condensed consolidated statements of operations.

Internet display advertising revenue is generated primarily from advertisements appearing on the Company’s websites. Depending upon the terms, revenue is earned each time an impression is delivered, a user clicks on an ad, a graphic ad is displayed, or a user clicks-through the ad and takes a specified action on the destination site.

The Company sells gift cards with no expiration date to travelers and does not charge administrative fees on unused cards. There is a portion of the gift card obligation that, based on historical redemption patterns, will not be used by the Company’s customers and is not required to be remitted to relevant jurisdictions (“breakage”). At the point of sale, the Company recognizes estimated breakage as deferred revenue and amortizes it over 48 months based on historical redemption patterns. The Company also records commission revenue for each gift card sale over the same 48-month redemption period.

Through its professional software for bed and breakfasts and professional property managers, the Company also makes selected, online bookable properties available to online travel agencies and channel partners. The Company receives a percentage of the transaction value or a fee from the property manager for making this inventory available, which is recognized when earned. This revenue is included in other revenue in the condensed consolidated statements of operations.

The Company generates revenue from the sale of hosted software solutions where revenue is recognized on a straight-line basis over the contract term, generally one year. Certain implementation services are essential to the customer’s use of the Company’s hosted software solutions. Accordingly, the Company recognizes implementation revenue ratably over the estimated period of the hosting relationship, which is three years. Recognition starts once the product has been made available to the customer.

Training and consulting revenue is recognized upon delivery of the training or consulting services to the end customer.

Stock-Based Compensation

Stock-based compensation for option awards is recognized based upon the estimated grant date fair value of the awards measured using the Black–Scholes valuation model. The fair value of restricted stock awards is determined based on the number of shares granted and the fair value of the Company’s common stock on the grant date. Fair value is generally recognized as an expense on a straight-line basis, net of estimated forfeitures, over the requisite service period. When estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures.

The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company only recognizes a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. When tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of the resulting difference is charged first to additional paid-in capital to the extent of the Company’s pool of windfall tax benefits with any remainder recognized in income tax expense. The Company has determined that it has a sufficient windfall pool available and therefore no amounts have been recognized as income tax expense. In addition, the Company accounts for the indirect effects of stock-based awards on other tax attributes through the condensed consolidated statements of operations.

The gross benefits of tax deductions in excess of recognized compensation costs are reported as financing cash inflows, but only when such excess tax benefits are realized by a reduction to current taxes payable.

The following table summarizes the excess tax benefit that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Excess tax benefit from stock-based compensation, net	$	5,200	$	1,362	$	7,494	$	2,583

This tax benefit has been recorded as additional paid-in capital on the Company’s condensed consolidated balance sheets.

Defined Benefit Pension Plan

During the nine months ended September 30, 2015, the Company recorded an adjustment to correct a prior period accounting error related to the Company’s defined benefit pension plan for one of its foreign subsidiaries. The adjustment increased the Company’s liabilities by approximately $4,200,000 and decreased other comprehensive income by approximately $4,000,000 and income before income taxes by approximately $200,000 as of and during the nine months ended September 30, 2015. The Company does not believe these adjustments are material to the consolidated financial statements for the three and nine months ended September 30, 2015, the expected annual results for 2015 or to the consolidated financial statements of any prior period.

Income Taxes

The Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Evaluating the need for an amount of a valuation allowance for deferred tax assets requires significant judgment and analysis of the positive and negative evidence available, including past operating results, estimates of future taxable income, reversals of existing taxable temporary differences and the feasibility of tax planning in order to determine whether all or some portion of the deferred tax assets will not be realized. Based on the available evidence and judgment, the Company has determined that it is more likely than not that certain loss carryforwards will not be realized; therefore, the Company has established a valuation allowance for such deferred tax assets to reduce the loss carryforward assets to amounts expected to be utilized.

The Company may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which the Company operates. The Company is currently undergoing audits in the United States as well as at its subsidiary in the United Kingdom. Significant judgment is required in determining uncertain tax positions. The Company recognizes the benefit of uncertain income tax positions only if these positions are more likely than not to be sustained. Also, the recognized income tax benefit is measured at the largest amount that is more than 50% likely of being realized. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. The countries in which the Company may be subject to potential examination by tax authorities include Australia, Brazil, Colombia, France, Germany, Italy, the Netherlands, New Zealand, Singapore, Spain, Switzerland, Thailand, the United Kingdom and the United States.

The calculation of the Company’s tax liabilities involves the inherent uncertainty associated with the application of complex tax laws. As a multinational corporation, the Company conducts its business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company’s business is subject to the application of various and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax rates in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate. The Company believes it has adequately provided in its financial statements for additional taxes that it estimates may be assessed by the various taxing authorities. While the Company believes that it has adequately provided for all uncertain tax positions, amounts asserted by tax authorities could be greater or less than the Company’s accrued position. These tax liabilities, including the interest and penalties, are adjusted pursuant to a settlement with tax authorities, completion of audit, refinement of estimates or expiration of various statutes of limitation.

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is generally their respective local currency. The financial statements of the Company’s international operations are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities, the historical exchange rate for stockholders’ equity, and a weighted average exchange rate for each period for revenue, expenses, gains and losses. Foreign currency translation adjustments are recorded as a separate component of stockholders’ equity. Gains and losses from non-functional currency denominated transactions are recorded in other income (expense) in the Company’s condensed consolidated statements of operations.

The following table summarizes the foreign exchange loss that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Foreign exchange loss	$	279	$	1,432	$	930	$	6,421

Derivative Financial Instruments

As a result of the Company’s international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company’s primary foreign currency exposures are in Euros, British Pounds, Brazilian Real, Australian Dollars, Singapore Dollars and New Zealand Dollars. As a result, the Company faces exposure to adverse movements in currency exchange rates as the financial results of its operations are translated from local currency into U.S. dollars. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains and losses that are reflected in other income (expense) in the Company’s condensed consolidated statements of operations.

The Company may enter into derivative instruments to hedge certain net exposures of nonfunctional currency denominated assets and liabilities, primarily related to intercompany loans, even though it does not elect to apply hedge accounting or hedge accounting does not apply. Gains and losses resulting from a change in fair value for these derivatives are reflected in the period in which the change occurs and are recognized on the condensed consolidated statement of operations in other income (expense). Cash flows from these contracts are classified within cash flows from investing activities on the condensed consolidated statements of cash flows.

The Company does not use financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments on the balance sheet at fair value and its derivative instruments are generally short-term in duration. The Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations.

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of September 30, 2015 which settled October 2, 2015 (in thousands):

	September 30, 2015
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	1,173		$	—	$	1,173		$	41,301
Accrued expenses		(656	)		—		(656	)		129,303
Total	$	517		$	—	$	517		$	170,604

In addition to the notional amounts listed above, the Company entered into new derivative contracts with notional amounts of $157,735,000 on September 30, 2015 with a closing date of January 5, 2016.

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of December 31, 2014 which settled January 2, 2015 (in thousands):

	December 31, 2014
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	4,506		$	—	$	4,506		$	157,164
Accrued expenses		(67	)		—		(67	)		11,562
Total	$	4,439		$	—	$	4,439		$	168,726

Net Income Per Share Attributable to HomeAway, Inc.

Basic net income per share is computed by dividing net income attributable to HomeAway, Inc. by the weighted average number of common shares outstanding during the period. Diluted income per share is computed by dividing net income attributable to HomeAway, Inc. by the weighted average common shares outstanding plus potentially dilutive common shares. The dilutive effect of outstanding options, warrants and awards is reflected in diluted earnings per share by application of the treasury stock method.

Restricted stock awards provide the holder of unvested shares the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are included in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings. Restricted stock awards are excluded from the basic earnings per share in periods of undistributed losses as the holders are not contractually obligated to participate in the losses of the Company. Unvested restricted stock units do not provide the holder the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are excluded in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings or losses.

Comprehensive Income (Loss) Attributable to HomeAway, Inc.

Comprehensive income (loss) attributable to HomeAway, Inc. consists of net income (loss), foreign currency translation adjustments, unrealized gain (loss) on short-term investments, defined benefit pension plan adjustments and comprehensive loss attributable to noncontrolling interests.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to fiscal years, and interim reporting periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company has not yet selected a transition method and is currently evaluating the effect the updated standard will have on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. The updated standard requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect the updated standard will have on its consolidated balance sheets.

In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This standard clarifies whether a customer should account for a cloud computing arrangement as an acquisition of a software license or as a service arrangement by providing characteristics that a cloud computing arrangement must have in order to be accounted for as a software license acquisition. This guidance is effective for annual periods beginning after December 15, 2015. Early adoption is permitted. Upon adoption, an entity may apply the new guidance prospectively or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, including the effects on current-period income that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date. The new standard is effective for fiscal years, and interim period within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect that the update standard will have on its consolidated financial statements and related disclosures.

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Income Taxes - Summary of Income Tax Expenses (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Tax Disclosure [Abstract]
Income tax expense	$ 5,625	$ 845	$ 9,757	$ 5,909
Effective tax rate	36.30%	13.90%	65.10%	31.50%

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Goodwill and Other Intangible Assets - Summary of Amortization Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 2,819	$ 3,397	$ 8,713	$ 10,163

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Summary of Income Tax Expenses

The following table summarizes the total income tax expense that the Company recorded, and the related effective tax rate, for the three and nine months ended September 30, 2015 and 2014 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Income tax expense	$	5,625		$	845		$	9,757		$	5,909
Effective tax rate		36.3	%		13.9	%		65.1	%		31.5	%

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following (in thousands):

	September 30,			December 31,
	2015			2014
Foreign currency translation adjustments	$	(56,276	)	$	(27,252	)
Unrealized losses on short-term investments		(183	)		(801	)
Defined benefit pension plan adjustments		(4,149	)		—
Total	$	(60,608	)	$	(28,053	)

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Commitments and Contingencies - Changes for Traveler Guarantees (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]
Traveler guarantee liability, beginning balance	$ 1,790	$ 956
Costs accrued for new and expected future claims	1,216	3,576
Guarantee obligations honored	(1,760)	(2,742)
Traveler guarantee liability, ending balance	$ 1,246	$ 1,790

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Goodwill and Other Intangible Assets - Indefinite-Lived Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Trade names [Member]
Indefinite-lived Intangible Assets [Line Items]
Trade names	$ 7,029	$ 7,029

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Net Income Per Share Attributable to HomeAway, Inc. (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income Per Share of Common Stock

The following table sets forth the computation of basic and diluted net income per share of common stock (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Numerator
Net income attributable to HomeAway, Inc.	$	10,417	$	4,912	$	5,942	$	13,222
Denominator
Weighted average common shares outstanding - basic		95,716		94,106		95,162		93,507
Dilutive effect of stock options, warrants and restricted stock units		1,972		2,283		2,227		2,851
Weighted average common shares outstanding - diluted		97,688		96,389		97,389		96,358
Net income per share attributable to HomeAway, Inc.:
Basic	$	0.11	$	0.05	$	0.06	$	0.14
Diluted	$	0.11	$	0.05	$	0.06	$	0.14

Common Equivalent Shares Excluded from Calculation of Diluted Net Loss Per Share Attributable to HomeAway, Inc as their Inclusion Would have been Anti-Dilutive

The following common equivalent shares were excluded from the calculation of diluted net loss per share attributable to HomeAway, Inc. as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Stock options		3,295		2,604		3,089		2,038
Restricted stock units		547		62		21		49
Warrants		7,716		7,716		7,716		7,716
Total common equivalent shares excluded		11,558		10,382		10,826		9,803

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Summary of Significant Accounting Policies - Additional Information (Detail)	3 Months Ended	9 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2015 USD ($) Segment	Dec. 31, 2014 USD ($)	Sep. 30, 2014 USD ($)
Significant Accounting Policies [Line Items]
Number of operating segment | Segment		1
Available for sales securities, premium	$ 9,240,000	$ 9,240,000		$ 11,239,000
Capitalized certain internally developed software	38,759,000	38,759,000	$ 36,038,000
Decrease in other comprehensive income	$ (96,000)	$ 4,149,000
Recognized income tax positions, percentage	50.00%	50.00%
Derivatives amount	$ 157,735,000	$ 157,735,000
Money market funds [Member]
Significant Accounting Policies [Line Items]
Restricted cash	2,200,000	$ 2,200,000	$ 2,492,000
Breakage Revenue [Member]
Significant Accounting Policies [Line Items]
Revenue recognition period		48 months
Commission Revenue [Member]
Significant Accounting Policies [Line Items]
Revenue recognition period		48 months
Canada [Member]
Significant Accounting Policies [Line Items]
Carrying value of non-marketable cost investment	2,799,000	$ 2,799,000
China [Member]
Significant Accounting Policies [Line Items]
Total carrying value of company investments	19,498,000	19,498,000
United States [Member]
Significant Accounting Policies [Line Items]
Carrying value of non-marketable cost investment	15,000,000	15,000,000
Turkey [Member]
Significant Accounting Policies [Line Items]
Carrying value of non-marketable cost investment	$ 2,000,000	2,000,000
Adjustments to Prior Period Errors [Member]
Significant Accounting Policies [Line Items]
Increase in liabilities		4,200,000
Decrease in other comprehensive income		4,000,000
Decrease in profit before tax		$ 200,000
Equipment, computer hardware and purchased computer software [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life		3 years
Furniture and fixtures [Member] | Minimum [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life		5 years
Furniture and fixtures [Member] | Maximum [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life		10 years
Leasehold Improvements [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life description		Shorter of the contractual lease period or estimated useful life.
Internally Developed Software and Website Development Costs [Member]
Significant Accounting Policies [Line Items]
Property, plant and equipment useful life		5 years

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Description of Business

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Description of Business

1. Description of Business

HomeAway, Inc. (the “Company”) operates an online vacation rental property marketplace that enables property owners and managers to market properties available for rental to vacation travelers who rely on the Company’s websites to search for and find available properties. Property owners and managers pay listing fees to provide detailed listings of their properties on the Company’s websites and reach a broad audience of travelers seeking vacation rentals. Listing fees are typically annual subscriptions or payments on a performance basis, based on bookings or inquiries made by travelers to property owners and managers. A listing includes published detailed property information, including photographs, descriptions, location, pricing, availability and contact information. The Company also sells, directly or through third parties, complementary products, including travel guarantees, insurance products and property management software and services. Travelers use the network of websites to search for vacation rentals meeting their desired criteria, including location, size and price. Travelers that find properties meeting their requirements through the Company’s marketplace are able to make reservations online or contact property owners and managers directly by phone or through form-based communication tools on the Company’s websites.

The Company is a Delaware corporation headquartered in Austin, Texas.

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Summary of Significant Accounting Policies - Fair Value of Financial Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	$ 618,343	$ 520,844
Money market funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Restricted cash	2,200	2,492
Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	39,529	21,726
Municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	187,303	140,406
Corporate bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	346,782	353,212
International government bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	21,390	1,501
U.S. government agency bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	23,339
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	151,691	184,009
Restricted cash	1,983	2,058
Short-term investments	618,343	520,844
Total financial assets	772,017	706,911
Fair Value, Measurements, Recurring [Member] | Money market funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	151,691	183,008
Fair Value, Measurements, Recurring [Member] | Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Restricted cash	1,983	2,058
Short-term investments	39,529	21,726
Fair Value, Measurements, Recurring [Member] | Municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents		1,001
Short-term investments	187,303	140,406
Fair Value, Measurements, Recurring [Member] | Corporate bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	346,782	353,212
Fair Value, Measurements, Recurring [Member] | International government bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	21,390	1,501
Fair Value, Measurements, Recurring [Member] | Commercial paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments		3,999
Fair Value, Measurements, Recurring [Member] | U.S. government agency bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	23,339
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	151,691	183,008
Total financial assets	151,691	183,008
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fair Value, Measurements, Recurring [Member] | Money market funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	151,691	183,008
(Level 2) [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents		1,001
Restricted cash	1,983	2,058
Short-term investments	618,343	520,844
Total financial assets	620,326	523,903
(Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Time Deposits [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Restricted cash	1,983	2,058
Short-term investments	39,529	21,726
(Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Municipal bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents		1,001
Short-term investments	187,303	140,406
(Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Corporate bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	346,782	353,212
(Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | International government bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	21,390	1,501
(Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | Commercial paper [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments		$ 3,999
(Level 2) [Member] | Fair Value, Measurements, Recurring [Member] | U.S. government agency bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Short-term investments	$ 23,339

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Goodwill and Other Intangible Assets - Changes in Goodwill Balance (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
Beginning balance	$ 493,671	$ 507,611
Acquired in business combinations		11,647
Foreign currency translation adjustment	(33,622)	(26,098)
Post-acquisition goodwill adjustment for Stayz		511
Ending balance	$ 460,049	$ 493,671

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Convertible Senior Notes - Schedule of Total Interest Expense Recognized (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Debt Disclosure [Abstract]
0.125% coupon	$ 126	$ 126	$ 378	$ 252
Amortization of debt issuance costs	14	13	40	26
Amortization of debt discount	4,641	4,378	13,724	8,694
Total	$ 4,781	$ 4,517	$ 14,142	$ 8,972

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 301,293	$ 292,325
Short-term investments	618,343	520,844
Accounts receivable, net of allowance for doubtful accounts of $633 and $663 as of September 30, 2015 and December 31, 2014, respectively	24,019	23,189
Income tax receivable	1,680	1,900
Prepaid expenses and other current assets	18,269	17,913
Deferred tax assets	9,384	8,774
Total current assets	972,988	864,945
Property and equipment, net	60,773	56,173
Goodwill	460,049	493,671
Intangible assets, net	58,003	70,456
Non-marketable investments	39,549	35,285
Deferred tax assets	880	1,545
Other non-current assets	6,295	8,053
Total assets	1,598,537	1,530,128
Current liabilities:
Accounts payable	7,487	8,281
Income tax payable	907	1,344
Accrued expenses	50,446	50,255
Deferred revenue	193,769	170,522
Total current liabilities	252,609	230,402
Convertible senior notes, net	329,905	316,181
Deferred revenue, less current portion	2,981	3,179
Deferred tax liabilities	24,376	26,624
Other non-current liabilities	19,817	12,192
Total liabilities	$ 629,688	$ 588,578
Commitments and contingencies (see Note 6)
Redeemable noncontrolling interests (see Note 8)	$ 9,033	$ 9,742
Stockholders' equity:
Common stock: $0.0001 par value; 350,000,000 shares authorized; 96,162,374 and 94,515,344 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively	10	9
Additional paid-in capital	1,076,292	1,022,586
Accumulated other comprehensive loss	(60,608)	(28,053)
Accumulated deficit	(55,878)	(62,734)
Total stockholders' equity	959,816	931,808
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$ 1,598,537	$ 1,530,128

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Accrued Expenses - Accrued Expenses (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014	Dec. 31, 2013
Payables and Accruals [Abstract]
Compensation and related benefits	$ 19,591	$ 21,413
Taxes	6,810	4,954
Marketing	5,131	4,115
Gift cards	4,103	5,654
Contracting, consulting and professional fees	3,111	3,254
Traveler guarantee	1,246	1,790	$ 956
Foreign exchange-forward contracts	683	99
Other	9,771	8,976
Total	$ 50,446	$ 50,255

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2015 - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]
Beginning Balance, value at Dec. 31, 2014	$ 931,808	$ 9	$ 1,022,586	$ (28,053)	$ (62,734)
Beginning Balance, shares at Dec. 31, 2014		94,515,344
Issuance of stock under Company plans, net of shares withheld for taxes, value	9,640	$ 1	9,639
Issuance of stock under Company plans, net of shares withheld for taxes, shares		1,647,000
Stock-based compensation	37,487		37,487
Excess tax benefits related to employee stock options	7,494		7,494
Other comprehensive loss	(32,555)			(32,555)
Net income (loss) attributable to HomeAway, Inc.	5,942		(914)		6,856
Ending Balance, value at Sep. 30, 2015	$ 959,816	$ 10	$ 1,076,292	$ (60,608)	$ (55,878)
Ending Balance, shares at Sep. 30, 2015	96,162,374	96,162,374

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Redeemable Noncontrolling Interests - Additional Information (Detail)	Dec. 31, 2014	Dec. 31, 2013
Travelmob [Member]
Redeemable Noncontrolling Interest [Line Items]
Percentage of ownership interest		68.50%
Bookabach [Member]
Redeemable Noncontrolling Interest [Line Items]
Percentage of ownership interest	75.00%	55.00%
Percentage of additional ownership interest acquired	20.00%

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Summary of Significant Accounting Policies - Summary of Contractual Underlying Maturities of Short-Term Investments (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Short-term Investments, Less than 1 Year	$ 375,946	$ 355,164
Short-term Investments, 1 to 3 Years	242,397	165,680
Short-term Investments, fair value	618,343	520,844
Time Deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Short-term Investments, Less than 1 Year	25,951	21,479
Short-term Investments, 1 to 3 Years	13,578	247
Short-term Investments, fair value	39,529	21,726
Commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Short-term Investments, Less than 1 Year		3,999
Short-term Investments, fair value		3,999
U.S. government agency bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Short-term Investments, Less than 1 Year	597
Short-term Investments, 1 to 3 Years	22,742
Short-term Investments, fair value	23,339
Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Short-term Investments, Less than 1 Year	203,039	240,570
Short-term Investments, 1 to 3 Years	143,743	112,642
Short-term Investments, fair value	346,782	353,212
International government bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Short-term Investments, Less than 1 Year	15,192	1,501
Short-term Investments, 1 to 3 Years	6,198
Short-term Investments, fair value	21,390	1,501
Municipal bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Short-term Investments, Less than 1 Year	131,167	87,615
Short-term Investments, 1 to 3 Years	56,136	52,791
Short-term Investments, fair value	$ 187,303	$ 140,406

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Net Income Per Share Attributable to HomeAway, Inc. - Common Equivalent Shares Excluded from Calculation of Diluted Net Loss Per Share attributable to HomeAway, Inc as their Inclusion Would have been Anti-Dilutive (Detail) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common equivalent shares excluded from the calculation of net income per share	11,558	10,382	10,826	9,803
Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common equivalent shares excluded from the calculation of net income per share	3,295	2,604	3,089	2,038
Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common equivalent shares excluded from the calculation of net income per share	547	62	21	49
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common equivalent shares excluded from the calculation of net income per share	7,716	7,716	7,716	7,716

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in Goodwill Balance

Changes in the Company’s goodwill balance are summarized in the table below (in thousands):

Balance at December 31, 2013	$	507,611
Acquired in business combinations		11,647
Foreign currency translation adjustment		(26,098	)
Post-acquisition goodwill adjustment for Stayz		511
Balance at December 31, 2014		493,671
Foreign currency translation adjustment		(33,622	)
Balance at September 30, 2015	$	460,049

Summary of Finite-Lived Intangible Assets

The Company’s finite-lived intangible assets are summarized in the table below (in thousands):

		September 30, 2015							December 31, 2014
	Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names and trademarks	10	$	28,525	$	(9,572	)	$	18,953	$	30,316	$	(8,396	)	$	21,920
Developed technology	2-8		20,290		(14,748	)		5,542		21,293		(13,231	)		8,062
Customer relationships	6-14		53,436		(27,650	)		25,786		57,656		(25,512	)		32,144
Noncompete agreements and domain names	2-5		1,949		(1,256	)		693		2,224		(923	)		1,301
Total		$	104,200	$	(53,226	)	$	50,974	$	111,489	$	(48,062	)	$	63,427

Summary of Amortization Expenses

The following table summarizes amortization expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Amortization expense	$	2,819	$	3,397	$	8,713	$	10,163

Indefinite-Lived Intangible Assets

The Company has the following indefinite-lived intangible assets recorded in its consolidated balance sheet (in thousands):

	September 30,		December 31,
	2015		2014
Trade names	$	7,029	$	7,029

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Summary of Significant Accounting Policies - Summary of Depreciation Expenses on Internally Developed Software and Website Development Costs (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Depreciation and Other Amortization Expenses [Line Items]
Depreciation expense on internally developed software and website development costs			$ 16,204	$ 12,091
Internally Developed Software and Website Development Costs [Member]
Depreciation and Other Amortization Expenses [Line Items]
Depreciation expense on internally developed software and website development costs	$ 1,677	$ 1,343	$ 4,867	$ 3,947

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Convertible Senior Notes (Tables)

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Summary of Convertible Senior Notes

			Equity			Carrying Value of Convertible
			Component			Senior Notes as of
			Recorded			September 30,		December 31,
(In thousands)	Par Value		at Issuance			2015		2014
0.125% Convertible Senior Notes due April 1, 2019	$	402,500	$	90,887	(1)	$	329,905	$	316,181

⁽¹⁾ This amount represents the equity component recorded at the initial issuance of the 0.125% convertible senior notes.

Schedule of Conversion of Senior Notes to Common Stock

	Conversion Rate per $1,000 Par Value		Initial Conversion Price per Share		Free Convertibility Date
0.125% Convertible Senior Notes		19.1703	$	52.16		October 1, 2018

Schedule of Convertible Senior Notes

The Notes consist of the following (in thousands):

	September 30,			December 31,
	2015			2014
Liability component:
Principal:
0.125% Convertible Senior Notes	$	402,500		$	402,500
Less: debt discount, net
0.125% Convertible Senior Notes		(72,595	)		(86,319	)
Net carrying amount	$	329,905		$	316,181

Summary of Hedge Notes

	Date		Purchase (in thousands)		Shares underlying Note Hedges
Note Hedges		March 2014	$	85,853		7,716,049

Components of Warrants

	Date		Proceeds (in thousands)		Shares		Strike Price
Warrants		March 2014	$	38,278		7,716,049	$	81.14

Schedule of Total Interest Expense Recognized

The following table sets forth total interest expense recognized related to the Notes (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
0.125% coupon	$	126	$	126	$	378	$	252
Amortization of debt issuance costs		14		13		40		26
Amortization of debt discount		4,641		4,378		13,724		8,694
Total	$	4,781	$	4,517	$	14,142	$	8,972

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities
Net income	$ 5,233	$ 12,840
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	16,204	12,091
Amortization of intangible assets	8,713	10,163
Amortization of debt discount and transaction costs	13,764	8,720
Amortization of premiums on securities and other	8,683	4,288
Stock-based compensation	37,487	35,582
Excess tax benefit related to stock-based compensation	(8,161)	(2,583)
Deferred income taxes	(1,368)	(435)
Net unrealized foreign exchange loss (gain)	15,564	(6,057)
Realized loss (gain) on foreign currency forwards	(15,081)	12,011
Changes in operating assets and liabilities, net of assets and liabilities assumed in business combinations:
Accounts receivable	(2,172)	(2,591)
Income tax receivable	(426)	(1,590)
Prepaid expenses and other current assets	(2,519)	(4,938)
Accounts payable	1,151	6,668
Accrued expenses	1,748	(3,394)
Income tax payable	7,087	1,272
Deferred revenue	29,667	25,392
Other non-current liabilities	3,520	3,976
Net cash provided by operating activities	119,094	111,415
Cash flows from investing activities
Acquisition of businesses, net of cash acquired		(17,847)
Change in restricted cash	122	166
Purchases of intangibles and other assets	(278)	(303)
Purchases and sales of non-marketable investments	(3,866)	(10,135)
Purchases of short-term investments	(379,387)	(473,331)
Proceeds from maturities and redemptions of marketable securities	272,022	23,048
Proceeds from sales of marketable securities	1,525	4,358
Net settlement of foreign currency forwards	15,081	(12,011)
Purchases of property and equipment	(23,792)	(20,456)
Net cash used in investing activities	(118,573)	(506,511)
Cash flows from financing activities
Proceeds from borrowings on convertible senior notes, net		390,978
Proceeds from issuance of warrants		38,278
Purchase of convertible note hedge		(85,853)
Other financing activities		(919)
Proceeds from exercise of options to purchase common stock	9,640	22,827
Excess tax benefit from stock-based compensation	8,161	2,583
Net cash provided by financing activities	17,801	367,894
Effect of exchange rate changes on cash and cash equivalents	(9,354)	(5,303)
Net increase (decrease) in cash and cash equivalents	8,968	(32,505)
Cash and cash equivalents at beginning of period	292,325	324,608
Cash and cash equivalents at end of period	301,293	292,103
Cash paid for interest	503	253
Cash paid for taxes, net of refunds	2,091	3,727
Supplemental disclosure of non-cash activities
Changes to accrued capital expenditures	2,455
Changes to redemption value of noncontrolling interests	$ 914	$ 851

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Statement of Financial Position [Abstract]
Accounts receivable, Allowance for doubtful accounts	$ 633	$ 663
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	350,000,000	350,000,000
Common stock, shares issued	96,162,374	94,515,344
Common stock, shares outstanding	96,162,374	94,515,344

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Income Taxes

9 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

The following table summarizes the total income tax expense that the Company recorded, and the related effective tax rate, for the three and nine months ended September 30, 2015 and 2014 (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
Income tax expense	$	5,625		$	845		$	9,757		$	5,909
Effective tax rate		36.3	%		13.9	%		65.1	%		31.5	%

At September 30, 2015, the Company’s effective tax rate estimate for the year ending December 31, 2015 differed from the statutory rate primarily due to losses in certain foreign jurisdictions for which a benefit cannot be recorded at this time, non-deductible stock compensation charges and state taxes, which is offset by the effect of different statutory tax rates in foreign jurisdictions and certain items recorded discretely in the nine months ended September 30, 2015. Those discrete items include a tax benefit due to disqualifying dispositions of incentive stock options, a tax benefit due to an income tax reserve release, a tax benefit for adjustments to the recognized value of the Company’s federal and Texas research and experimentation tax credit carryforwards and a tax benefit of $0.4 million related to a correction of an immaterial prior period transfer pricing error, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. The effective tax rate for the three months ended September 30, 2015 is lower than the effective tax rate estimated for the full year ending December 31, 2015 due to higher income before income taxes in the three months as well as the mix of earnings between income and loss jurisdictions.

On July 27, 2015, in Altera Corp. v. Commissioner, the U.S. Tax Court issued a taxpayer-favorable opinion related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. A final decision has yet to be issued by the Tax Court due to other outstanding issues related to the case, and the decision is subject to appeal by the Internal Revenue Service. At this time, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation from its regulations. The Company has reviewed this case and its impact and has concluded that no adjustment to the consolidated financial statements is appropriate at this time. The Company will continue to monitor ongoing developments and potential impacts to the condensed consolidated financial statements.

At September 30, 2014, the Company’s effective tax rate estimate differed from the statutory rate primarily due to non-deductible stock compensation charges and state taxes, which was partially offset by the effect of different statutory tax rates in foreign jurisdictions and certain items recorded discretely in the nine months ended September 30, 2014. Those discrete items include a tax benefit due to disqualifying dispositions of incentive stock options, a tax benefit for a state tax apportionment change related to a prior period, a tax benefit for adjustments to the recognized value of our federal and Texas research and experimentation tax credit carryforwards, and a tax benefit resulting from the filing of certain 2013 tax returns, offset by tax expense related to the amortization of tax charges on the intercompany sale of assets that were deferred in prior periods. In addition, the merger of our wholly owned subsidiaries in Spain in the three months ended September 30, 2014 resulted in tax basis intangibles which will be deductible in future periods, with a tax benefit of $2.5 million recorded discretely.

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 30, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Trading Symbol	AWAY
Entity Registrant Name	HOMEAWAY INC
Entity Central Index Key	0001366684
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		96,237,408

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Net Income Per Share Attributable to HomeAway, Inc.

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Net Income Per Share Attributable to HomeAway, Inc.

11. Net Income Per Share Attributable to HomeAway, Inc.

The following table sets forth the computation of basic and diluted net income per share of common stock (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Numerator
Net income attributable to HomeAway, Inc.	$	10,417	$	4,912	$	5,942	$	13,222
Denominator
Weighted average common shares outstanding - basic		95,716		94,106		95,162		93,507
Dilutive effect of stock options, warrants and restricted stock units		1,972		2,283		2,227		2,851
Weighted average common shares outstanding - diluted		97,688		96,389		97,389		96,358
Net income per share attributable to HomeAway, Inc.:
Basic	$	0.11	$	0.05	$	0.06	$	0.14
Diluted	$	0.11	$	0.05	$	0.06	$	0.14

The following common equivalent shares were excluded from the calculation of diluted net loss per share attributable to HomeAway, Inc. as their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Stock options		3,295		2,604		3,089		2,038
Restricted stock units		547		62		21		49
Warrants		7,716		7,716		7,716		7,716
Total common equivalent shares excluded		11,558		10,382		10,826		9,803

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenue:
Listing	$ 106,484	$ 96,601	$ 301,281	$ 278,459
Other	24,198	20,511	74,272	58,591
Total revenue	130,682	117,112	375,553	337,050
Costs and expenses:
Cost of revenue (exclusive of amortization shown separately below)	19,361	16,926	58,472	50,291
Product development	22,058	20,212	65,235	56,952
Sales and marketing	42,963	42,234	143,850	117,251
General and administrative	23,874	22,995	72,115	69,467
Amortization expense	2,819	3,397	8,713	10,163
Total costs and expenses	111,075	105,764	348,385	304,124
Operating income	19,607	11,348	27,168	32,926
Other income (expense):
Interest expense	(4,718)	(4,373)	(13,971)	(8,842)
Interest income	927	552	2,426	1,117
Other expense, net	(338)	(1,434)	(633)	(6,452)
Total other income (expense)	(4,129)	(5,255)	(12,178)	(14,177)
Income before income taxes	15,478	6,093	14,990	18,749
Income tax expense	(5,625)	(845)	(9,757)	(5,909)
Net income	9,853	5,248	5,233	12,840
Less: Impact of noncontrolling interests, net of tax	(564)	336	(709)	(382)
Net income attributable to HomeAway, Inc.	$ 10,417	$ 4,912	$ 5,942	$ 13,222
Net income per share attributable to HomeAway Inc.:
Basic	$ 0.11	$ 0.05	$ 0.06	$ 0.14
Diluted	$ 0.11	$ 0.05	$ 0.06	$ 0.14
Weighted average number of shares outstanding:
Basic	95,716	94,106	95,162	93,507
Diluted	97,688	96,389	97,389	96,358

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Convertible Senior Notes

9 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Convertible Senior Notes

5. Convertible Senior Notes

Convertible Senior Notes

			Equity			Carrying Value of Convertible
			Component			Senior Notes as of
			Recorded			September 30,		December 31,
(In thousands)	Par Value		at Issuance			2015		2014
0.125% Convertible Senior Notes due April 1, 2019	$	402,500	$	90,887	(1)	$	329,905	$	316,181

⁽¹⁾ This amount represents the equity component recorded at the initial issuance of the 0.125% convertible senior notes.

In March 2014, the Company issued at par value $402.5 million of 0.125% convertible senior notes (the “Notes”) due April 1, 2019, unless earlier purchased by the Company or converted. Interest is payable semi-annually, in arrears on April 1 and October 1 of each year, commencing October 1, 2014.

The Notes are governed by an indenture between the Company, as issuer, and U.S. Bank National Association, as trustee. The Notes are unsecured and do not contain any financial covenants or any restrictions on the payment of dividends, the incurrence of senior debt or other indebtedness or the issuance or repurchase of securities by the Company.

If converted, holders will receive cash and/or shares of the Company’s common stock, at the Company’s election. The Company’s intent is to settle the principal amount of the Notes in cash upon conversion. As a result, upon conversion of the Notes, only the amounts payable in excess of the principal amount of the Notes are considered in diluted earnings per share under the treasury stock method.

	Conversion Rate per $1,000 Par Value		Initial Conversion Price per Share		Free Convertibility Date
0.125% Convertible Senior Notes		19.1703	$	52.16		October 1, 2018

Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events as described in the indenture governing the Notes. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a Note. Accrued but unpaid interest will be deemed to be paid in full upon conversion rather than cancelled, extinguished or forfeited. Holders may convert their Notes under the following circumstances:

• during any calendar quarter commencing after June 30, 2014, if, for at least 20 trading days during the 30 consecutive trading day period ending on the last trading day of the immediately preceding calendar quarter, the last reported sales price of the Company’s common stock for such trading day is greater than or equal to 130% of the applicable conversion price for the Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes is less than 98% of the product of the sale price of the Company’s common stock and the conversion rate;

• upon the occurrence of specified corporate transactions described under the indenture governing the Notes, such as a consolidation, merger or binding share exchange; or

• at any time on or after October 1, 2018.

As of September 30, 2015, the Notes are not convertible.

Holders of the Notes have the right to require the Company to purchase with cash all or a portion of the Notes upon the occurrence of a fundamental change, such as a change of control, at a purchase price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest. Following certain corporate transactions that constitute a fundamental change, the Company will increase the conversion rate for a holder who elects to convert the Notes in connection with such make-whole fundamental change.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated conversion feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the transaction costs related to the Note issuance, the Company allocated the total amount incurred to the liability and equity components based on their relative values. Transaction costs attributable to the liability component are being amortized to expense over the term of the Notes, and transaction costs attributable to the equity component were netted with the equity component in stockholders’ equity. Additionally, the Company recorded a deferred tax liability of $0.8 million in connection with the Notes.

The Notes consist of the following (in thousands):

	September 30,			December 31,
	2015			2014
Liability component:
Principal:
0.125% Convertible Senior Notes	$	402,500		$	402,500
Less: debt discount, net
0.125% Convertible Senior Notes		(72,595	)		(86,319	)
Net carrying amount	$	329,905		$	316,181

The Notes are included in the consolidated balance sheets within convertible senior notes, net, which is classified as a non-current liability. The debt discount is amortized over the life of the Notes using the effective interest rate method.

The total estimated fair value of the Company’s Notes at September 30, 2015 was $293.3 million. The fair value of the Notes was determined based on inputs that are observable in the market (Level 2).

Based on the closing price of the Company’s common stock of $26.54 on September 30, 2015, the if-converted value of the Notes was less than their principal amount.

Note Hedges

To minimize the impact of potential economic dilution upon conversion of the Notes, the Company entered into convertible note hedge transactions with respect to its common stock (the “Note Hedges”).

	Date		Purchase (in thousands)		Shares underlying Note Hedges
Note Hedges		March 2014	$	85,853		7,716,049

The Note Hedges cover shares of the Company’s common stock at a strike price that corresponds to the initial conversion price of the respective Notes, also subject to adjustment, and are exercisable upon conversion of the Notes. The Note Hedges will expire upon the maturity of the Notes. The Note Hedges are intended to reduce the potential economic dilution upon conversion of the Notes in the event that the market value per share of the Company’s common stock, as measured under the Notes, at the time of exercise is greater than the conversion price of the Notes. The Note Hedges are separate transactions and are not part of the terms of the Notes. Holders of the Notes will not have any rights with respect to the Note Hedges.

Warrants

	Date		Proceeds (in thousands)		Shares		Strike Price
Warrants		March 2014	$	38,278		7,716,049	$	81.14

Separately, in March 2014, the Company also entered into warrant transactions (the “Warrants”), whereby the Company sold warrants to acquire, subject to anti-dilution adjustments, shares of the Company’s common stock at $81.14 per share. The Warrants have a term of five years from the date of issuance. If the average market value per share of the Company’s common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants would have a dilutive effect on the Company’s earnings per share if the Company reports net income for the reporting period. The Warrants were anti-dilutive for the period ended September 30, 2015. The Warrants are separate transactions, entered into by the Company and are not part of the terms of the Notes or Note Hedges. Holders of the Notes will not have any rights with respect to the Warrants.

Interest Expense

The following table sets forth total interest expense recognized related to the Notes (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
0.125% coupon	$	126	$	126	$	378	$	252
Amortization of debt issuance costs		14		13		40		26
Amortization of debt discount		4,641		4,378		13,724		8,694
Total	$	4,781	$	4,517	$	14,142	$	8,972

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Accrued Expenses

9 Months Ended

Sep. 30, 2015

Payables and Accruals [Abstract]

Accrued Expenses

4. Accrued Expenses

The Company’s accrued expenses are comprised of the following (in thousands):

	September 30,		December 31,
	2015		2014
Compensation and related benefits	$	19,591	$	21,413
Taxes		6,810		4,954
Marketing		5,131		4,115
Gift cards		4,103		5,654
Contracting, consulting and professional fees		3,111		3,254
Traveler guarantee		1,246		1,790
Foreign exchange-forward contracts		683		99
Other		9,771		8,976
Total	$	50,446	$	50,255

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Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2015

Payables and Accruals [Abstract]

Accrued Expenses

The Company’s accrued expenses are comprised of the following (in thousands):

	September 30,		December 31,
	2015		2014
Compensation and related benefits	$	19,591	$	21,413
Taxes		6,810		4,954
Marketing		5,131		4,115
Gift cards		4,103		5,654
Contracting, consulting and professional fees		3,111		3,254
Traveler guarantee		1,246		1,790
Foreign exchange-forward contracts		683		99
Other		9,771		8,976
Total	$	50,446	$	50,255

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Subsequent Events

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Events

12. Subsequent Events

(i) On October 1, 2015, the Company acquired Dwellable, Inc., a United States company that is the creator of an online vacation rental search engine and mobile application that provides unique, interactive ways for travelers to find and book vacation rentals, for cash consideration of $18.0 million.

(ii) In the fourth quarter of 2013, the Company acquired a controlling interest in travelmob. Under the terms of the acquisition agreement, the Company had a call option to purchase the remaining non-controlling interest of travelmob for the period defined in the agreement beginning on December 31, 2016. In the event the Company did not exercise its call option to purchase the remaining shares of travelmob by such deadline, the remaining travelmob stockholders had a put option to require the Company to repurchase their remaining interest for the period defined in the agreement beginning on February 1, 2017. The call and put were accounted for as embedded features of the non-controlling interest.

In October 2015, the Company and the non-controlling interest holders agreed to terminate the call and put options and the Company acquired the remaining outstanding equity interest of travelmob. In connection with the mutual termination of the options, in the fourth quarter of 2015, the Company will recognize an operating expense charge of approximately $3.9 million representing the amount paid for the acquisition of the non-controlling interest in excess of the fair value of the non-controlling interest prior to the termination of the options.

(iii) On November 4, 2015, the Company, Expedia, Inc., a Delaware corporation (“Expedia”), and HMS 1, Inc., a Delaware corporation and a direct wholly owned subsidiary of Expedia (“Purchaser”)entered into an Agreement and Plan of Reorganization (the “Merger Agreement”).

Pursuant to the Merger Agreement, Purchaser commenced a tender offer to acquire all of the outstanding shares of Company common stock for an equity value of approximately $3.9 billion in cash and Expedia common stock, representing a per share price for HomeAway shares of $38.31, based on Expedia’s closing price on November 3, 2015. Under the terms of the transaction, Expedia will offer to acquire each outstanding share of common stock of HomeAway in exchange for $10.15 in cash and 0.2065 of a share of Expedia common stock. Under the terms of the transaction, Expedia will acquire each outstanding share of common stock of HomeAway through a tender offer, followed by a second-step merger.

The Board of Directors of the Company unanimously approved the Merger Agreement and the consummation of the transactions contemplated thereby, including the tender offer and the Mergers. Consummation of the transactions is subject to the satisfaction or, if permissible, waiver of customary closing conditions, including there having been validly tendered and not validly withdrawn prior to the expiration of the tender offer a majority of all then outstanding shares of Company common stock, the absence of certain legal impediments and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

The Merger Agreement contains certain termination rights, including the right of the Company to terminate the Merger Agreement to accept a superior proposal (subject to compliance with certain notice and other requirements). The Merger Agreement provides that, in connection with termination of the Merger Agreement by the Company or Expedia upon specified conditions, the Company will be required to pay to Expedia a termination fee of $138 million. In addition, subject to certain exceptions and limitations, the Company or Expedia may terminate the Merger Agreement if the Merger is not consummated by May 4, 2016 (or as such date may be extended pursuant to the terms of the Merger Agreement).

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Redeemable Noncontrolling Interests

9 Months Ended

Sep. 30, 2015

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interests

8. Redeemable Noncontrolling Interests

During the year ended December 31, 2013, the Company acquired 68.5% of the outstanding stock of Travelmob Pte. Ltd. (“travelmob”) and 55% of the outstanding stock of Bookabach Limited. During the year ended December 31, 2014, the Company acquired an additional 20% of the outstanding equity of Bookabach Limited, increasing its ownership to 75%. The redeemable noncontrolling interests are reported on the condensed consolidated balance sheets as redeemable noncontrolling interests.

The Company recognizes changes to the redemption value of noncontrolling interests as they occur by adjusting the carrying value to estimated redemption value at the end of each reporting period.

Changes in the Company’s redeemable noncontrolling interests are summarized in the table below (in thousands):

Balance at December 31, 2013	$	10,584
Net loss attributable to noncontrolling interests		(1,839	)
Changes to redemption value of noncontrolling interests		2,421
Repurchase of redeemable noncontrolling interests		(1,461	)
Currency translation adjustments		37
Balance at December 31, 2014	$	9,742
Net loss attributable to noncontrolling interests		(1,623	)
Changes to redemption value of noncontrolling interests		914
Balance at September 30, 2015	$	9,033

In October 2015, the Company acquired the remaining outstanding equity interest of travelmob (see Note 12).

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Redeemable Noncontrolling Interests - Schedule of Changes of Redeemable Noncontrolling Interests (Detail) - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Noncontrolling Interest [Abstract]
Beginning balance	$ 9,742	$ 10,584	$ 10,584
Net loss attributable to noncontrolling interests	(1,623)		(1,839)
Changes to redemption value of noncontrolling interests	914	$ 851	2,421
Repurchase of redeemable noncontrolling interests			(1,461)
Currency translation adjustments			37
Ending balance	$ 9,033		$ 9,742

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

Leases

The Company leases its facilities and certain office equipment under noncancellable operating leases.

The following table summarizes total rental expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Rental expense	$	1,733	$	1,911	$	5,754	$	5,134

Guarantees

The Company offers two guarantee products to travelers: Basic Rental Guarantee and Carefree Rental Guarantee. The Basic Rental Guarantee is offered to travelers that book a vacation rental property listed on any one of the Company’s websites to protect their vacation rental payments up to $1,000 against Internet fraud. Travelers can also purchase additional protection to cover their vacation rental payments up to $10,000 against Internet fraud, misrepresentation, wrongful denial of entry, wrongful deposit loss or losses from phishing claims by the purchase of the Carefree Rental Guarantee. The Company does not maintain insurance from any third party for claims under these guarantees, and any amounts payable for claims made under these guarantees are payable by the Company. Amounts recorded for estimated future claims under the guarantees are based on historical experience and expectations for future claims. Claim costs related to the Basic Rental Guarantee are recognized in general and administrative expenses in the consolidated statements of operations while claim costs related to the Carefree Rental Guarantee are recognized in cost of revenue.

Expected future claims for traveler guarantees, which are presented as a current liability in the Company’s condensed consolidated balance sheets, and changes for the guarantees, are as follows (in thousands):

Traveler guarantee liability at December 31, 2013	$	956
Costs accrued for new and expected future claims		3,576
Guarantee obligations honored		(2,742	)
Traveler guarantee liability at December 31, 2014	$	1,790
Costs accrued for new and expected future claims		1,216
Guarantee obligations honored		(1,760	)
Traveler guarantee liability at September 30, 2015	$	1,246

The Company maintains a guarantee of £5,000,000 (approximately $7,595,000 as of September 30, 2015) to a bank in the United Kingdom for extending credit to the Company in connection with the wholly owned United Kingdom subsidiary’s business of collecting its subscription revenue in advance via credit card payments.

Legal

From time to time, the Company is involved in litigation relating to claims arising in the ordinary course of business. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using available information. Views on estimated losses are developed by management in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. After taking all of the above factors into account, the Company determines whether an estimated loss from a contingency related to litigation should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company further determines whether an estimated loss from a contingency related to litigation should be disclosed by assessing whether a material loss is deemed reasonably possible. Such disclosures will include an estimate of the additional loss or range of loss or will state that such an estimate cannot be made.

Management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

7. Stock-Based Compensation

During the three and nine months ended September 30, 2015, the Company issued an aggregate of 502,383 and 1,686,767 restricted stock units, respectively, under its 2011 Equity Incentive Plan (the “2011 Plan”), for an aggregate fair value of $14,261,000 and $49,261,000, respectively. Additionally, during the three and nine months ended September 30, 2015, the Company issued an aggregate of 83,644 and 947,986 options, respectively, to purchase common stock under the 2011 Plan for an aggregate fair value of $958,000 and $9,995,000, respectively.

The following table summarizes the total stock-based compensation expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Cost of revenue	$	881	$	847	$	2,615	$	2,415
Product development		3,931		3,485		10,769		9,589
Sales and marketing		3,152		2,763		9,003		7,868
General and administrative		4,654		5,576		15,100		15,710
Total	$	12,618	$	12,671	$	37,487	$	35,582

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2015

Equity [Abstract]

Accumulated Other Comprehensive Loss

9. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following (in thousands):

	September 30,			December 31,
	2015			2014
Foreign currency translation adjustments	$	(56,276	)	$	(27,252	)
Unrealized losses on short-term investments		(183	)		(801	)
Defined benefit pension plan adjustments		(4,149	)		—
Total	$	(60,608	)	$	(28,053	)

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Net Income Per Share Attributable to HomeAway, Inc. - Computation of Basic and Diluted Net Income Per Share of Common Stock (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Numerator
Net income attributable to HomeAway, Inc.	$ 10,417	$ 4,912	$ 5,942	$ 13,222
Denominator
Weighted average common shares outstanding - basic	95,716	94,106	95,162	93,507
Dilutive effect of stock options, warrants and restricted stock units	1,972	2,283	2,227	2,851
Weighted average common shares outstanding - diluted	97,688	96,389	97,389	96,358
Net income per share attributable to HomeAway, Inc.:
Basic	$ 0.11	$ 0.05	$ 0.06	$ 0.14
Diluted	$ 0.11	$ 0.05	$ 0.06	$ 0.14

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Subsequent Events - Additional Information (Detail) $ / shares in Units, $ in Millions			1 Months Ended	9 Months Ended
	Nov. 04, 2015 USD ($) $ / shares	Oct. 01, 2015 USD ($)	Oct. 31, 2015 USD ($)	Sep. 30, 2015
Dwellable Inc [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Cash consideration		$ 18.0
Travelmob [Member] | Call Option [Member]
Subsequent Event [Line Items]
Call option purchase agreement start date				Dec. 31, 2016
Travelmob [Member] | Put Option [Member]
Subsequent Event [Line Items]
Put option to repurchase remaining interest agreement start date				Feb. 01, 2017
Travelmob [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Operating expense charge			$ 3.9
Expedia, Inc. [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Outstanding shares of common stock equity value	$ 3,900.0
Common stock, per share price | $ / shares	$ 38.31
Outstanding shares of common stock exchange in cash | $ / shares	$ 10.15
Common stock, exchange in share	0.2065
Termination fee	$ 138.0

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Taxes [Line Items]
Income tax expense	$ 5,625	$ 845	$ 9,757	$ 5,909
Effective income tax rate, expense (Benefit) of wholly owned subsidiaries, amount		$ (2,500)
Adjustments to Prior Period Errors [Member]
Income Taxes [Line Items]
Income tax expense			$ (400)

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Summary of Significant Accounting Policies - Short-Term Investments (Detail) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	$ 618,525	$ 521,641
Gross Unrealized Gains	227	52
Gross Unrealized Losses	(409)	(849)
Short-term Investments, fair value	618,343	520,844
Time Deposits [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	39,529	21,726
Short-term Investments, fair value	39,529	21,726
Commercial paper [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Cost		3,999
Short-term Investments, fair value		3,999
U.S. government agency bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	23,375
Gross Unrealized Gains	3
Gross Unrealized Losses	(39)
Short-term Investments, fair value	23,339
Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	346,949	353,957
Gross Unrealized Gains	141	7
Gross Unrealized Losses	(308)	(752)
Short-term Investments, fair value	346,782	353,212
International government bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	21,418	1,504
Gross Unrealized Losses	(28)	(3)
Short-term Investments, fair value	21,390	1,501
Municipal bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Cost	187,254	140,455
Gross Unrealized Gains	83	45
Gross Unrealized Losses	(34)	(94)
Short-term Investments, fair value	$ 187,303	$ 140,406

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Convertible Senior Notes - Summary of Hedge Notes (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Derivatives, Fair Value [Line Items]
Note Hedges, Purchase		$ 85,853
Note Hedges [Member]
Derivatives, Fair Value [Line Items]
Note Hedges, Contract Date	2014-03
Note Hedges, Purchase	$ 85,853
Underlying Note Hedges, Shares	7,716,049

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at September 30, 2015 (in thousands):

	Balance as of September 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	151,691	$	151,691	$	—	$	—
Total cash equivalents		151,691		151,691		—		—
Restricted cash
Time deposits		1,983		—		1,983		—
Total restricted cash		1,983		—		1,983		—
Short-term investments
U.S. government agency bonds		23,339		—		23,339		—
Time deposits		39,529		—		39,529		—
Corporate bonds		346,782		—		346,782		—
International government bonds		21,390		—		21,390		—
Municipal bonds		187,303		—		187,303		—
Total short-term investments		618,343		—		618,343		—
Total financial assets	$	772,017	$	151,691	$	620,326	$	—

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at December 31, 2014 (in thousands):

	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	183,008	$	183,008	$	—	$	—
Municipal bonds		1,001		—		1,001		—
Total cash equivalents		184,009		183,008		1,001		—
Restricted cash								—
Time deposits		2,058		—		2,058		—
Total restricted cash		2,058		—		2,058		—
Short-term investments
Time deposits		21,726		—		21,726		—
Corporate bonds		353,212		—		353,212		—
International government bonds		1,501		—		1,501		—
Municipal bonds		140,406		—		140,406		—
Commercial paper		3,999		—		3,999		—
Total short-term investments		520,844		—		520,844		—
Total financial assets	$	706,911	$	183,008	$	523,903	$	—

Schedule of Cash and Cash Equivalents

Cash and cash equivalents consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Demand deposit accounts	$	149,602	$	108,316
Money market funds		151,691		183,008
Municipal bonds		—		1,001
Total cash and cash equivalents	$	301,293	$	292,325

Short-Term Investments

Short-term investments consisted of the following (in thousands):

	September 30, 2015
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S government agency bonds	$	23,375	$	3	$	(39	)	$	23,339
Time deposits		39,529		—		—			39,529
Corporate bonds		346,949		141		(308	)		346,782
International government bonds		21,418		—		(28	)		21,390
Municipal bonds		187,254		83		(34	)		187,303
Total short-term investments	$	618,525	$	227	$	(409	)	$	618,343

	December 31, 2014
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Time deposits	$	21,726	$	—	$	—		$	21,726
Corporate bonds		353,957		7		(752	)		353,212
International government bonds		1,504		—		(3	)		1,501
Municipal bonds		140,455		45		(94	)		140,406
Commercial paper		3,999		—		—			3,999
Total short-term investments	$	521,641	$	52	$	(849	)	$	520,844

Summary of Contractual Underlying Maturities of Short-Term Investments

The following table summarizes the contractual underlying maturities of the Company’s short-term investments (in thousands):

	September 30, 2015
	Less than 1 Year		1 to 3 Years		Total
U.S government agency bonds	$	597	$	22,742	$	23,339
Time deposits		25,951		13,578		39,529
Corporate bonds		203,039		143,743		346,782
International government bonds		15,192		6,198		21,390
Municipal bonds		131,167		56,136		187,303
Total short-term investments	$	375,946	$	242,397	$	618,343

	December 31, 2014
	Less than 1 Year		1 to 3 Years		Total
Time deposits	$	21,479	$	247	$	21,726
Corporate bonds		240,570		112,642		353,212
International government bonds		1,501		—		1,501
Municipal bonds		87,615		52,791		140,406
Commercial paper		3,999		—		3,999
Total short-term investments	$	355,164	$	165,680	$	520,844

Summary of Depreciation Expenses on Internally Developed Software and Website Development Costs

The Company recorded depreciation expense on internally developed software and website development costs as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Depreciation expense on internally developed software and website development costs	$	1,677	$	1,343	$	4,867	$	3,947

Summary of Excess Tax Benefit

The following table summarizes the excess tax benefit that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Excess tax benefit from stock-based compensation, net	$	5,200	$	1,362	$	7,494	$	2,583

Summary of Foreign Exchange Loss

The following table summarizes the foreign exchange loss that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Foreign exchange loss	$	279	$	1,432	$	930	$	6,421

Schedule of Fair Value and Notional Amounts of Outstanding or Unsettled Derivative Instruments

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of September 30, 2015 which settled October 2, 2015 (in thousands):

	September 30, 2015
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	1,173		$	—	$	1,173		$	41,301
Accrued expenses		(656	)		—		(656	)		129,303
Total	$	517		$	—	$	517		$	170,604

In addition to the notional amounts listed above, the Company entered into new derivative contracts with notional amounts of $157,735,000 on September 30, 2015 with a closing date of January 5, 2016.

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of December 31, 2014 which settled January 2, 2015 (in thousands):

	December 31, 2014
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	4,506		$	—	$	4,506		$	157,164
Accrued expenses		(67	)		—		(67	)		11,562
Total	$	4,439		$	—	$	4,439		$	168,726

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Total Stock-Based Compensation Expense

The following table summarizes the total stock-based compensation expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Cost of revenue	$	881	$	847	$	2,615	$	2,415
Product development		3,931		3,485		10,769		9,589
Sales and marketing		3,152		2,763		9,003		7,868
General and administrative		4,654		5,576		15,100		15,710
Total	$	12,618	$	12,671	$	37,487	$	35,582

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Convertible Senior Notes - Schedule of Conversion of Senior Notes to Common Stock (Detail) - 0.125% Convertible Senior Notes [Member]	9 Months Ended
	Sep. 30, 2015 $ / shares
Debt Instrument [Line Items]
Debt instrument conversion rate	19.1703
Initial conversion price per share	$ 52.16
Free Convertibility Date	Oct. 01, 2018

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Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014	Dec. 31, 2013
Goodwill [Line Items]
Goodwill	$ 460,049	$ 493,671	$ 507,611
Stayz [Member]
Goodwill [Line Items]
Increase in goodwill	511
Goodwill	$ 178,288

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 9,853	$ 5,248	$ 5,233	$ 12,840
Other comprehensive income (loss):
Foreign currency translation adjustments (net of tax)	(19,823)	(14,793)	(29,024)	(6,463)
Unrealized gain (loss) on short-term investments (net of tax)	209	(491)	618	(642)
Defined benefit pension plan adjustments	96		(4,149)
Total other comprehensive loss, net of tax	(19,518)	(15,284)	(32,555)	(7,105)
Less: Comprehensive loss attributable to noncontrolling interests	(655)	(515)	(1,623)	(1,233)
Currency translation adjustments attributable to noncontrolling interests		12		29
Comprehensive income (loss) attributable to HomeAway, Inc.	$ (9,010)	$ (9,509)	$ (25,699)	$ 6,997

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

3. Goodwill and Other Intangible Assets

Goodwill

Changes in the Company’s goodwill balance are summarized in the table below (in thousands):

Balance at December 31, 2013	$	507,611
Acquired in business combinations		11,647
Foreign currency translation adjustment		(26,098	)
Post-acquisition goodwill adjustment for Stayz		511
Balance at December 31, 2014		493,671
Foreign currency translation adjustment		(33,622	)
Balance at September 30, 2015	$	460,049

The goodwill arising from the December 2013 acquisition of Stayz was increased by $511,000 to $178,288,000 in the year ended December 31, 2014 due to certain income taxes and changes in fair value estimates derived from additional information gained during the measurement period. Goodwill adjustments were not significant to the Company’s previously reported operating results or financial position. Therefore, the Company elected not to retrospectively adjust the acquisition date accounting and instead recorded the adjustment in the year ended December 31, 2014.

Intangible Assets

The Company’s intangible assets, excluding goodwill, primarily consist of assets acquired in business combinations and are recorded at estimated fair value on the date of acquisition. The Company’s finite-lived intangible assets are summarized in the table below (in thousands):

		September 30, 2015							December 31, 2014
	Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trade names and trademarks	10	$	28,525	$	(9,572	)	$	18,953	$	30,316	$	(8,396	)	$	21,920
Developed technology	2-8		20,290		(14,748	)		5,542		21,293		(13,231	)		8,062
Customer relationships	6-14		53,436		(27,650	)		25,786		57,656		(25,512	)		32,144
Noncompete agreements and domain names	2-5		1,949		(1,256	)		693		2,224		(923	)		1,301
Total		$	104,200	$	(53,226	)	$	50,974	$	111,489	$	(48,062	)	$	63,427

Amortization of noncompete agreements is recorded over the term of the agreements.

The following table summarizes amortization expense (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Amortization expense	$	2,819	$	3,397	$	8,713	$	10,163

The Company has the following indefinite-lived intangible assets recorded in its consolidated balance sheet (in thousands):

	September 30,		December 31,
	2015		2014
Trade names	$	7,029	$	7,029

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Stock-Based Compensation - Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 12,618	$ 12,671	$ 37,487	$ 35,582
Cost of revenue [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	881	847	2,615	2,415
Product development [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	3,931	3,485	10,769	9,589
Sales and marketing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	3,152	2,763	9,003	7,868
General and administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 4,654	$ 5,576	$ 15,100	$ 15,710

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Redeemable Noncontrolling Interests (Tables)

9 Months Ended

Sep. 30, 2015

Noncontrolling Interest [Abstract]

Schedule of Changes of Redeemable Noncontrolling Interests

Changes in the Company’s redeemable noncontrolling interests are summarized in the table below (in thousands):

Balance at December 31, 2013	$	10,584
Net loss attributable to noncontrolling interests		(1,839	)
Changes to redemption value of noncontrolling interests		2,421
Repurchase of redeemable noncontrolling interests		(1,461	)
Currency translation adjustments		37
Balance at December 31, 2014	$	9,742
Net loss attributable to noncontrolling interests		(1,623	)
Changes to redemption value of noncontrolling interests		914
Balance at September 30, 2015	$	9,033

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Summary of Significant Accounting Policies - Summary of Foreign Exchange Loss (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accounting Policies [Abstract]
Foreign exchange loss	$ 279	$ 1,432	$ 930	$ 6,421

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of HomeAway, Inc. and its wholly and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission, (the “SEC”). All significant intercompany transactions and balances have been eliminated in consolidation. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal recurring adjustments and those items discussed in these notes, necessary for a fair statement of the Company’s financial position, as of September 30, 2015 and December 31, 2014, results of operations for the three and nine months ended September 30, 2015 and September 30, 2014, comprehensive income (loss) for the three and nine months ended September 30, 2015 and September 30, 2014, cash flows for the nine months ended September 30, 2015 and September 30, 2014, and changes in stockholders’ equity for the nine months ended September 30, 2015. Certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with GAAP have been omitted from these interim condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Operating results for this interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, or for any other period.

Business Segment

Business Segment

The Company has one operating segment consisting of various products and services related to its online marketplace of accommodation rental listings. The Company’s chief operating decision maker is the Chief Executive Officer. The chief operating decision maker allocates resources and assesses performance of the business and other activities at the single operating segment level.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These differences could have a material effect on the Company’s future results of operations and financial position. Significant items subject to estimates and assumptions include certain revenues, traveler guarantees, the allowance for doubtful accounts, marketable and non-marketable investments, goodwill and other indefinite-lived intangible assets, definite-lived intangible assets, depreciation and amortization, stock-based compensation, deferred income taxes and noncontrolling interests.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1:	Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2:	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Valuations based on unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company’s financial instruments classified as Level 1 are valued using quoted prices generated by market transactions involving identical assets. Instruments classified as Level 2 are valued using non-binding market consensus prices corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with significant inputs derived from or corroborated with observable market data. The Company did not hold financial instruments categorized as Level 3 in any period presented.

Short-term investments are classified as available-for-sale and reported at fair value using the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a component of other comprehensive income (loss), net of tax. Additionally, the Company periodically assesses whether an other than temporary impairment loss on investments has occurred due to declines in fair value or other market conditions. Declines in fair value considered other-than-temporary are recorded as an impairment in the condensed consolidated statement of operations. The Company did not record impairments of its investments during any of the periods presented.

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and deferred revenue approximate fair value because of the relatively short maturity of these instruments.

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at September 30, 2015 (in thousands):

	Balance as of September 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	151,691	$	151,691	$	—	$	—
Total cash equivalents		151,691		151,691		—		—
Restricted cash
Time deposits		1,983		—		1,983		—
Total restricted cash		1,983		—		1,983		—
Short-term investments
U.S. government agency bonds		23,339		—		23,339		—
Time deposits		39,529		—		39,529		—
Corporate bonds		346,782		—		346,782		—
International government bonds		21,390		—		21,390		—
Municipal bonds		187,303		—		187,303		—
Total short-term investments		618,343		—		618,343		—
Total financial assets	$	772,017	$	151,691	$	620,326	$	—

The following table summarizes the basis used to measure certain financial assets at fair value on a recurring basis in the Company’s condensed consolidated balance sheet at December 31, 2014 (in thousands):

	Balance as of December 31, 2014		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents
Money market funds	$	183,008	$	183,008	$	—	$	—
Municipal bonds		1,001		—		1,001		—
Total cash equivalents		184,009		183,008		1,001		—
Restricted cash								—
Time deposits		2,058		—		2,058		—
Total restricted cash		2,058		—		2,058		—
Short-term investments
Time deposits		21,726		—		21,726		—
Corporate bonds		353,212		—		353,212		—
International government bonds		1,501		—		1,501		—
Municipal bonds		140,406		—		140,406		—
Commercial paper		3,999		—		3,999		—
Total short-term investments		520,844		—		520,844		—
Total financial assets	$	706,911	$	183,008	$	523,903	$	—

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents include investments in demand deposits, money market funds, and municipal bonds readily convertible into cash. Cash and cash equivalents are stated at cost, which approximates fair value. The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Cash and cash equivalents consisted of the following (in thousands):

	September 30, 2015		December 31, 2014
Demand deposit accounts	$	149,602	$	108,316
Money market funds		151,691		183,008
Municipal bonds		—		1,001
Total cash and cash equivalents	$	301,293	$	292,325

Restricted Cash

Restricted Cash

Restricted cash of $2,200,000 and $2,492,000 at September 30, 2015 and December 31, 2014, respectively, was held in accounts owned by the Company to secure property licenses, leased office space, credit card availability and reimbursable direct debits due from the Company. Restricted cash is recorded as “Other non-current assets” on the Company’s condensed consolidated balance sheets.

Short-term Investments

Short-term Investments

Short-term investments generally consist of marketable securities with original maturities greater than ninety days as of the date of purchase. Investments in which the Company has the ability and intent, if necessary, to liquidate in order to support its current operations, including those with contractual maturities greater than one year from the date of purchase, are classified as short-term. The Company’s investment securities are classified as available-for-sale and presented at estimated fair value with any unrealized gains and losses included in other comprehensive income (loss).

Cash flows from purchases, sales and maturities of available-for-sale securities are classified as investing activities and reported gross, including any related premiums or discounts. Premiums related to purchases of available-for-sale securities were $9,240,000 and $11,239,000 during the nine months ended September 30, 2015 and 2014, respectively. Short-term investments consisted of the following (in thousands):

	September 30, 2015
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S government agency bonds	$	23,375	$	3	$	(39	)	$	23,339
Time deposits		39,529		—		—			39,529
Corporate bonds		346,949		141		(308	)		346,782
International government bonds		21,418		—		(28	)		21,390
Municipal bonds		187,254		83		(34	)		187,303
Total short-term investments	$	618,525	$	227	$	(409	)	$	618,343

	December 31, 2014
	Gross Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Time deposits	$	21,726	$	—	$	—		$	21,726
Corporate bonds		353,957		7		(752	)		353,212
International government bonds		1,504		—		(3	)		1,501
Municipal bonds		140,455		45		(94	)		140,406
Commercial paper		3,999		—		—			3,999
Total short-term investments	$	521,641	$	52	$	(849	)	$	520,844

For fixed income securities with unrealized losses as of September 30, 2015, the Company does not intend to sell any of these investments; and the Company expects it will not be required to sell any of these investments before recovery of the entire amortized cost basis. The Company has evaluated these fixed income securities and determined that no credit losses exist. Accordingly, the Company has determined that the unrealized losses on fixed income securities as of September 30, 2015 were temporary in nature.

The following table summarizes the contractual underlying maturities of the Company’s short-term investments (in thousands):

	September 30, 2015
	Less than 1 Year		1 to 3 Years		Total
U.S government agency bonds	$	597	$	22,742	$	23,339
Time deposits		25,951		13,578		39,529
Corporate bonds		203,039		143,743		346,782
International government bonds		15,192		6,198		21,390
Municipal bonds		131,167		56,136		187,303
Total short-term investments	$	375,946	$	242,397	$	618,343

	December 31, 2014
	Less than 1 Year		1 to 3 Years		Total
Time deposits	$	21,479	$	247	$	21,726
Corporate bonds		240,570		112,642		353,212
International government bonds		1,501		—		1,501
Municipal bonds		87,615		52,791		140,406
Commercial paper		3,999		—		3,999
Total short-term investments	$	355,164	$	165,680	$	520,844

Accounts Receivable

Accounts Receivable

Accounts receivable are generated from credit card merchants who process the Company’s property listing sales, property listings sold on installments to the Company’s customers, partners who advertise the Company’s inventory on their websites and/or sell ancillary products to the Company’s customers and Internet display advertising. Accounts receivable outstanding beyond the contractual payment terms are considered past due. The Company determines its allowance for doubtful accounts by estimating losses on receivables based on known troubled accounts and historical experiences of losses incurred.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Computer equipment and purchased software are generally depreciated over three years. Furniture and fixtures are generally depreciated over five to ten years. Leasehold improvements are depreciated over the shorter of the contractual lease period or estimated useful life. Upon disposal, property and equipment and the related accumulated depreciation are removed and the resulting gain or loss is reflected in the condensed consolidated statements of operations. Ordinary maintenance and repairs are charged to expense, while expenditures that extend the physical or economic life of the assets are capitalized.

The Company capitalizes certain internally developed software and website development costs. These capitalized costs were approximately $38,759,000 and $36,038,000 at September 30, 2015 and December 31, 2014, respectively, and are included in property and equipment, net, in the condensed consolidated balance sheets. Internally developed software costs are generally depreciated over five years.

The Company recorded depreciation expense on internally developed software and website development costs as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Depreciation expense on internally developed software and website development costs	$	1,677	$	1,343	$	4,867	$	3,947

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill arises from business combinations and is measured as the excess of the purchase consideration over the sum of the acquisition-date fair values of tangible and identifiable intangible assets acquired, less any liabilities assumed. The Company uses estimates and assumptions to value assets acquired and liabilities assumed at the acquisition date, and these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, adjustments to the assets acquired and liabilities assumed are recorded with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the condensed consolidated statements of operations.

Goodwill and intangible assets deemed to have indefinite useful lives, such as certain trade names, are not amortized. Tests for impairment of goodwill and indefinite-lived intangible assets are performed on an annual basis or when events or circumstances indicate that the carrying amount may not be recoverable.

Circumstances that could trigger an impairment test outside of the annual test include but are not limited to: a significant adverse change in the business climate or legal factors, adverse cash flow trends, an adverse action or assessment by a regulator, unanticipated competition, loss of key personnel, decline in stock price and the results of tests for recoverability of a significant asset group. The Company has determined that no triggering event occurred during any of the periods presented.

For goodwill and indefinite-lived intangible assets, the Company completes a “Step 0” analysis, which involves evaluating qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance related to its goodwill and its indefinite-lived intangible assets. If the Company’s “Step 0” analysis indicates that it is more likely than not that the fair value of a reporting unit or of an indefinite-lived intangible asset is less than its carrying amount, then the Company would perform a quantitative two-step impairment test. The quantitative analysis compares the fair value of the Company’s reporting unit or indefinite-lived intangible assets to its carrying amount, and an impairment loss is recognized equivalent to the excess of the carrying amount over fair value. If, after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset exceeds its carrying amount, then the quantitative impairment tests are unnecessary.

The Company performs an evaluation of goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter of its fiscal year.

The determination of whether or not goodwill or indefinite-lived intangible assets have become impaired involves a significant level of judgment. Changes in the Company’s strategy and/or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill or indefinite-lived intangible assets.

No impairment of goodwill or indefinite-lived intangible assets was identified in any of the periods presented.

Identifiable intangible assets consist of trade names, customer relationships, developed technology, domain names and contractual non-competition agreements associated with acquired businesses. Intangible assets with finite lives are amortized over their estimated useful lives on a straight-line basis and reviewed for impairment whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable (see Note 3). The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

Impairment of Long-lived Assets

Impairment of Long-lived Assets

The Company evaluates long-lived assets held for use, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated future undiscounted cash flows expected from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value in the period in which the determination is made. No material impairments of long-lived assets have been recorded during any of the periods presented.

Leases

Leases

The Company leases facilities in several countries around the world and certain equipment under non-cancelable lease agreements. The terms of certain lease agreements provide for rental payments on a graduated basis. Rent expense is recognized on a straight-line basis over the lease period and accrued as rent expense incurred but not paid.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an agreement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. The Company accounts for sales incentives to customers as a reduction of revenue at the time revenue is recognized from the related product sale. The Company also reports revenue net of any sales taxes collected.

The Company generates a significant portion of its revenue from customers purchasing online advertising services related to the listing of their properties for rent, primarily on a subscription basis over a fixed-term. The Company also generates revenue based on the number of traveler inquiries and reservation bookings for property listings on the Company’s websites, local and national Internet display advertisers, license of property management software and ancillary products and services.

Payments for term-based subscriptions received in advance of services rendered are recorded as deferred revenue and recognized on a straight-line basis over the listing period.

Revenue for inquiry-based contracts are determined on a fixed fee-per-inquiry basis as stated in the arrangement and recognized when the service has been performed.

The Company earns commission revenue for reservations made online through its websites, which is calculated as a percentage of the value of the reservation. This revenue is earned as the services are performed or as the customers’ refund privileges lapse and is included in listing revenue in the condensed consolidated statements of operations.

Internet display advertising revenue is generated primarily from advertisements appearing on the Company’s websites. Depending upon the terms, revenue is earned each time an impression is delivered, a user clicks on an ad, a graphic ad is displayed, or a user clicks-through the ad and takes a specified action on the destination site.

The Company sells gift cards with no expiration date to travelers and does not charge administrative fees on unused cards. There is a portion of the gift card obligation that, based on historical redemption patterns, will not be used by the Company’s customers and is not required to be remitted to relevant jurisdictions (“breakage”). At the point of sale, the Company recognizes estimated breakage as deferred revenue and amortizes it over 48 months based on historical redemption patterns. The Company also records commission revenue for each gift card sale over the same 48-month redemption period.

Through its professional software for bed and breakfasts and professional property managers, the Company also makes selected, online bookable properties available to online travel agencies and channel partners. The Company receives a percentage of the transaction value or a fee from the property manager for making this inventory available, which is recognized when earned. This revenue is included in other revenue in the condensed consolidated statements of operations.

The Company generates revenue from the sale of hosted software solutions where revenue is recognized on a straight-line basis over the contract term, generally one year. Certain implementation services are essential to the customer’s use of the Company’s hosted software solutions. Accordingly, the Company recognizes implementation revenue ratably over the estimated period of the hosting relationship, which is three years. Recognition starts once the product has been made available to the customer.

Training and consulting revenue is recognized upon delivery of the training or consulting services to the end customer.

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation for option awards is recognized based upon the estimated grant date fair value of the awards measured using the Black–Scholes valuation model. The fair value of restricted stock awards is determined based on the number of shares granted and the fair value of the Company’s common stock on the grant date. Fair value is generally recognized as an expense on a straight-line basis, net of estimated forfeitures, over the requisite service period. When estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures.

The Company uses the “with and without” approach in determining the order in which tax attributes are utilized. As a result, the Company only recognizes a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax attributes currently available to the Company have been utilized. When tax deductions from stock-based awards are less than the cumulative book compensation expense, the tax effect of the resulting difference is charged first to additional paid-in capital to the extent of the Company’s pool of windfall tax benefits with any remainder recognized in income tax expense. The Company has determined that it has a sufficient windfall pool available and therefore no amounts have been recognized as income tax expense. In addition, the Company accounts for the indirect effects of stock-based awards on other tax attributes through the condensed consolidated statements of operations.

The gross benefits of tax deductions in excess of recognized compensation costs are reported as financing cash inflows, but only when such excess tax benefits are realized by a reduction to current taxes payable.

The following table summarizes the excess tax benefit that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Excess tax benefit from stock-based compensation, net	$	5,200	$	1,362	$	7,494	$	2,583

This tax benefit has been recorded as additional paid-in capital on the Company’s condensed consolidated balance sheets.

Defined Benefit Pension Plan

Defined Benefit Pension Plan

During the nine months ended September 30, 2015, the Company recorded an adjustment to correct a prior period accounting error related to the Company’s defined benefit pension plan for one of its foreign subsidiaries. The adjustment increased the Company’s liabilities by approximately $4,200,000 and decreased other comprehensive income by approximately $4,000,000 and income before income taxes by approximately $200,000 as of and during the nine months ended September 30, 2015. The Company does not believe these adjustments are material to the consolidated financial statements for the three and nine months ended September 30, 2015, the expected annual results for 2015 or to the consolidated financial statements of any prior period.

Income Taxes

Income Taxes

The Company recognizes income taxes using an asset and liability approach. This approach requires the recognition of deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. The measurement of deferred taxes is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Evaluating the need for an amount of a valuation allowance for deferred tax assets requires significant judgment and analysis of the positive and negative evidence available, including past operating results, estimates of future taxable income, reversals of existing taxable temporary differences and the feasibility of tax planning in order to determine whether all or some portion of the deferred tax assets will not be realized. Based on the available evidence and judgment, the Company has determined that it is more likely than not that certain loss carryforwards will not be realized; therefore, the Company has established a valuation allowance for such deferred tax assets to reduce the loss carryforward assets to amounts expected to be utilized.

The Company may be subject to income tax audits by the respective tax authorities in any or all of the jurisdictions in which the Company operates. The Company is currently undergoing audits in the United States as well as at its subsidiary in the United Kingdom. Significant judgment is required in determining uncertain tax positions. The Company recognizes the benefit of uncertain income tax positions only if these positions are more likely than not to be sustained. Also, the recognized income tax benefit is measured at the largest amount that is more than 50% likely of being realized. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of an audit or the refinement of an estimate. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. The countries in which the Company may be subject to potential examination by tax authorities include Australia, Brazil, Colombia, France, Germany, Italy, the Netherlands, New Zealand, Singapore, Spain, Switzerland, Thailand, the United Kingdom and the United States.

The calculation of the Company’s tax liabilities involves the inherent uncertainty associated with the application of complex tax laws. As a multinational corporation, the Company conducts its business in many countries and is subject to taxation in many jurisdictions. The taxation of the Company’s business is subject to the application of various and sometimes conflicting tax laws and regulations as well as multinational tax conventions. The Company’s effective tax rate is highly dependent upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax rates in each geographic region, the availability of tax credits and carryforwards, and the effectiveness of its tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation, and the evolution of regulations and court rulings. Consequently, taxing authorities may impose tax assessments or judgments against the Company that could materially impact its tax liability and/or its effective income tax rate. The Company believes it has adequately provided in its financial statements for additional taxes that it estimates may be assessed by the various taxing authorities. While the Company believes that it has adequately provided for all uncertain tax positions, amounts asserted by tax authorities could be greater or less than the Company’s accrued position. These tax liabilities, including the interest and penalties, are adjusted pursuant to a settlement with tax authorities, completion of audit, refinement of estimates or expiration of various statutes of limitation.

Foreign Currency

Foreign Currency

The functional currency of the Company’s foreign subsidiaries is generally their respective local currency. The financial statements of the Company’s international operations are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities, the historical exchange rate for stockholders’ equity, and a weighted average exchange rate for each period for revenue, expenses, gains and losses. Foreign currency translation adjustments are recorded as a separate component of stockholders’ equity. Gains and losses from non-functional currency denominated transactions are recorded in other income (expense) in the Company’s condensed consolidated statements of operations.

The following table summarizes the foreign exchange loss that the Company recorded (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Foreign exchange loss	$	279	$	1,432	$	930	$	6,421

Derivative Financial Instruments

Derivative Financial Instruments

As a result of the Company’s international operations, it is exposed to various market risks that may affect its consolidated results of operations, cash flows and financial position. These market risks include, but are not limited to, fluctuations in currency exchange rates. The Company’s primary foreign currency exposures are in Euros, British Pounds, Brazilian Real, Australian Dollars, Singapore Dollars and New Zealand Dollars. As a result, the Company faces exposure to adverse movements in currency exchange rates as the financial results of its operations are translated from local currency into U.S. dollars. Additionally, foreign exchange rate fluctuations on transactions denominated in currencies other than the functional currency result in gains and losses that are reflected in other income (expense) in the Company’s condensed consolidated statements of operations.

The Company may enter into derivative instruments to hedge certain net exposures of nonfunctional currency denominated assets and liabilities, primarily related to intercompany loans, even though it does not elect to apply hedge accounting or hedge accounting does not apply. Gains and losses resulting from a change in fair value for these derivatives are reflected in the period in which the change occurs and are recognized on the condensed consolidated statement of operations in other income (expense). Cash flows from these contracts are classified within cash flows from investing activities on the condensed consolidated statements of cash flows.

The Company does not use financial instruments for trading or speculative purposes. The Company recognizes all derivative instruments on the balance sheet at fair value and its derivative instruments are generally short-term in duration. The Company is exposed to the risk that counterparties to derivative contracts may fail to meet their contractual obligations.

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of September 30, 2015 which settled October 2, 2015 (in thousands):

	September 30, 2015
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	1,173		$	—	$	1,173		$	41,301
Accrued expenses		(656	)		—		(656	)		129,303
Total	$	517		$	—	$	517		$	170,604

In addition to the notional amounts listed above, the Company entered into new derivative contracts with notional amounts of $157,735,000 on September 30, 2015 with a closing date of January 5, 2016.

The following table shows the fair value and notional amounts of the Company’s outstanding or unsettled derivative instruments that are not designated as hedging instruments covering foreign currency exposures as of December 31, 2014 which settled January 2, 2015 (in thousands):

	December 31, 2014
	Significant Other Observable Inputs (Level 2)
	Gross Amount of Recognized Assets/Liabilities			Gross Amounts Offset in the Balance Sheet		Net Amount Presented in the Balance Sheet			U.S. Dollar Notional
Prepaid expense and other current assets	$	4,506		$	—	$	4,506		$	157,164
Accrued expenses		(67	)		—		(67	)		11,562
Total	$	4,439		$	—	$	4,439		$	168,726

Net Income Per Share

Net Income Per Share Attributable to HomeAway, Inc.

Basic net income per share is computed by dividing net income attributable to HomeAway, Inc. by the weighted average number of common shares outstanding during the period. Diluted income per share is computed by dividing net income attributable to HomeAway, Inc. by the weighted average common shares outstanding plus potentially dilutive common shares. The dilutive effect of outstanding options, warrants and awards is reflected in diluted earnings per share by application of the treasury stock method.

Restricted stock awards provide the holder of unvested shares the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are included in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings. Restricted stock awards are excluded from the basic earnings per share in periods of undistributed losses as the holders are not contractually obligated to participate in the losses of the Company. Unvested restricted stock units do not provide the holder the right to participate in dividends declared on the Company’s common stock. Accordingly, these shares are excluded in the weighted average shares outstanding for the computation of basic earnings per share in periods of undistributed earnings or losses.

Comprehensive Income (Loss)

Comprehensive Income (Loss) Attributable to HomeAway, Inc.

Comprehensive income (loss) attributable to HomeAway, Inc. consists of net income (loss), foreign currency translation adjustments, unrealized gain (loss) on short-term investments, defined benefit pension plan adjustments and comprehensive loss attributable to noncontrolling interests.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to fiscal years, and interim reporting periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company has not yet selected a transition method and is currently evaluating the effect the updated standard will have on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in financial statements. The updated standard requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect the updated standard will have on its consolidated balance sheets.

In April 2015, the FASB issued ASU No. 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This standard clarifies whether a customer should account for a cloud computing arrangement as an acquisition of a software license or as a service arrangement by providing characteristics that a cloud computing arrangement must have in order to be accounted for as a software license acquisition. This guidance is effective for annual periods beginning after December 15, 2015. Early adoption is permitted. Upon adoption, an entity may apply the new guidance prospectively or retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, including the effects on current-period income that would have been recognized in previous periods if the adjustments were recognized as of the acquisition date. The new standard is effective for fiscal years, and interim period within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect that the update standard will have on its consolidated financial statements and related disclosures.