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, 2011 and subsequent reports on Form 8-K, which discuss our business in greater detail.

Overview

We operate the world's largest online marketplace for the vacation rental industry. Our marketplace brings together millions of travelers seeking vacation rentals online with hundreds of thousands of owners and managers of vacation rental properties located in 168 countries around the world. Our portfolio includes leading vacation rental websites in the United States, the United Kingdom, Germany, France, Spain, Brazil and Australia. During the three and six months ended June 30, 2012, according to our internal metrics, our websites attracted 159 million and 319 million website visits, respectively, and as of June 30, 2012, our global marketplace included more than 735,000 paid listings.

During the second quarter of 2012, we continued to follow our strategy and focused our efforts on providing the greatest selection of properties to travelers and the most qualified inquiries to property owners and managers. Expansion of our network continues to be a key driver of growth. During the three months ended June 30, 2012, we added nearly 37,000 paid listings to our network and also completed the acquisition of Top Rural S.L. in Spain. This acquisition further solidifies our market presence in Spain and Southern Europe and extends our reach to a desirable European traveler segment that seeks long weekend holidays to small towns or countryside destinations. In addition, we are nearing the completion of the platform consolidation of adding VRBO.com to our global network, which we believe will provide a better experience for property owners and managers and travelers.

For our property owners and managers, we continued to see positive results from pricing changes introduced in 2011. Tiered pricing is currently available on HomeAway.com to new and renewing customers and allows them to improve their position in search results by purchasing a higher subscription level or tier. We believe more owners and managers will elect to purchase higher tiers, which would increase overall average revenue per listing in future periods, while keeping base prices as low as possible to promote growth of the number of paid listings. Although we plan to launch tiered pricing on our other websites as well, we may use different strategies as we enter new markets and geographies or attempt to further penetrate the professional property manager market. Despite growth in average revenue per listing due to tiered pricing on HomeAway.com, there were other factors during the quarter which resulted in a decrease in the average revenue per listing compared to the second quarter of 2011. These factors included additional listings from property managers which were sold on a pay-per performance basis, and the negative impact of foreign exchange rates.

Our online payments platform, called ReservationManager, which was launched in 2011 and is currently available to our HomeAway.com and VRBO.com owners and managers in the United States, continued to gain traction with increasing adoption rates during the second quarter of 2012. The product is not currently available outside of the United States. We believe that adoption of this product over time will allow us to earn more revenue from ancillary products while providing a safe and secure payment mechanism for travelers. We plan to introduce new products and services for travelers, property owners and managers, which will provide further opportunities to generate revenue through our marketplace.

We believe that attracting travelers to our online marketplace is necessary to attract and retain vacation rental owners and managers. In addition to increasing the number of visitors to our websites, it is critical for us to increase the rate at which these visitors

inquire about renting and choose to book a vacation rental with our property owners and managers. To meet these challenges, we are focused on a combination of marketing tactics, including pay-per-click advertising, search engine optimization, and broad reach marketing, with a goal of driving visits to our sites as well as increasing the exposure of the vacation rental category. We are also 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 this will increase the travelers' interactions with our vacation rental owners and managers, which will in turn increase the satisfaction levels of the owners and managers.

Key Financial Highlights

We have achieved significant growth since our commercial launch in 2005. Our revenue growth is attributable to our acquisitions of other online listings businesses, the organic growth in the number of listings that property owners and managers purchase from us, increases in the average revenue we receive 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 had predictable financial results because of our advance payment, subscription-based model and our high annual listing renewal rates.

Key financial highlights for the three months ended June 30, 2012 include the following:

• Total revenue was $71.6 million compared to $58.7 million in the second quarter of 2011, or an increase of 22.0%, with the increase being negatively impacted by declining foreign exchange rates. On an foreign exchange neutral basis, revenue increased by 26.3%;

• Percentage of total revenue coming from outside the United States was 39.6% in the second quarter of 2012, compared to 41.0% in the second quarter of 2011, and in the three months ended June 30, 2012 included 38.0% from Europe and 1.5% from Brazil and Australia;

• Listing revenue was $60.2 million compared to $51.0 million in the second quarter of 2011 and contributed 84.1% of total revenue compared to 86.9% in the second quarter of 2011;

• Net income was $2.9 million compared to $2.2 million in the second quarter of 2011, or an increase of 31.7%;

• Cash from operating activities was $21.6 million compared to $19.5 million in the second quarter of 2011, or an increase of 10.7%;

• Adjusted EBITDA was $20.8 million compared to $18.2 million in the second quarter of 2011, or an increase of 14.5%; as a percentage of revenue, Adjusted EBITDA was 29.1%;

• Free cash flow was $18.0 million compared to $17.0 million in the second quarter of 2011, or an increase of 6.4%; on a trailing twelve month basis, free cash flow increased 34.1% to $75.7 million from $56.4 million in the comparable trailing twelve month period for the prior year;

• Pro forma net income was $9.5 million, or $0.11 per diluted share, compared to pro forma net income of $8.3 million, or $0.21 per diluted share, in the second quarter of 2011; and

• Cash, cash equivalents and short-term investments as of June 30, 2012 were $221.3 million.

For further discussion regarding Adjusted EBITDA, free cash flow and pro forma net income, please see the information under the caption "Discussion Regarding Adjusted EBITDA, Free Cash Flow and Pro Forma Net Income and Reconciliation to GAAP" in Item 2 of this Quarterly Report on Form 10-Q.

Acquisitions

Since our inception in 2004, we have acquired 18 businesses as part of our growth strategy. Each of these acquisitions has been accounted for using the acquisition method of accounting. Accordingly, the financial statements for these businesses have been included in our consolidated financial results since the applicable acquisition dates. The most recent acquisition was in April 2012 (see Note 3 to the Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q), when we acquired Top Rural S.L. in Spain. This acquisition further solidifies our market presence in Spain and Southern Europe and extends our reach to a desirable European traveler segment that seeks long weekend holidays to small towns or countryside destinations.

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

Our ability to continue to grow our revenue will depend largely on increasing the number of paid listings, increasing revenue per listing and increasing other revenues from other products and services through our marketplace. We continually assess opportunities

for strategic acquisitions. We also use direct and indirect marketing as well as telesales to reach owners and professional property managers. We believe that the growing awareness of vacation rentals, as a favorable alternative to hotels, has and will continue to support growth of our business.

We continue to monitor the weakened economic environment in Europe and the corresponding impact on our business. Visits to our European websites are outpacing broader search engine growth for certain European vacation rental keywords, but the growth rate of visits has been negatively impacted in the first half of 2012. We believe that our ability to deliver high quality inquiries to our customers in spite of the broader economic challenges in Europe will help mitigate any negative visit trends to our websites. Additionally, we continue to monitor foreign exchange rates as pressures on foreign exchange rates will negatively impact our results given that 38% of our revenues are generated in Europe.

Expenses

Our expenses are primarily composed of salaries and related expenses, marketing and professional fees. Our expenses from quarter to quarter may fluctuate due to timing of specific events or projects. We will continue to increase expenses across the organization on an annual basis to support our growth but expect our cost of revenue to remain relatively steady or grow only slightly as a percentage of revenue for the year ended December 31, 2012. We expect to incur higher expenses for product development as we hire additional personnel to develop new features and products and expect product development expenses to increase slightly as a percentage of revenue for the year ended December 31, 2012. We expect to incur higher expenses for sales and marketing as we continue to build our sales team to address the professional property managers and continue to build brand and category awareness, but expect sales and marketing expenses to remain relatively steady or decline slightly as a percentage of revenue for the year ended December 31, 2012. We expect to incur higher expenses for general and administrative expenses to support the growth of our business and the requirements of being a publicly traded company, but expect general and administrative expenses to remain flat or decline slightly as a percentage of revenue for the year ended December 31, 2012. We plan for our investment in capital expenditures to grow moderately as a percentage of revenue as compared to 2011. We are in the process of reorganizing our global corporate structure, which we believe will lower our tax expense over the longer term.

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             Six Months Ended
                                             June 30,                      June 30,
                                       2012           2011           2012           2011
  Key Business Metrics:
  Paid listings, end of period         735,921        626,661        735,921        626,661
  Average revenue per listing        $     336      $     339      $     332      $     333
  Renewal rate, end of period             75.3 %         76.2 %         75.3 %         76.2 %
  Visits to websites (in millions)         159            132            319            269

Paid Listings. In the three months ended June 30, 2012 and 2011, 84.1% and 86.9% of our revenue was derived from paid listings, respectively. We regularly track paid listings as a key revenue growth indicator and to identify trends in our business and industry. From June 30, 2011 to June 30, 2012, ending paid listings increased by 17.4%, contributing to listing revenue growth of 18.1%. The growth in paid listings was due to our marketing and selling new and additional listings to professional property managers, cross-selling listings to multiple websites to existing owners and managers, as well as organic growth from owners and managers who become aware of our websites and choose to market their properties. Growth in new listings is partially offset by loss of listings through attrition. As the number of paid listings increases, we believe that we will generate additional revenue while also expanding the value of the marketplace to travelers, thus increasing the likelihood that travelers will find a property that is suitable to their needs. We define a paid listing as a fee to list a property advertisement on one or more websites in our marketplace. A paid listing allows a property owner or manager to include a description of the property, along with location, pricing, availability, a specified number of photos and contact information. We also provide tools to enable them to manage their listings and rental business. Most listings are sold on a subscription basis, and some listing packages may include listings on more than one of our websites. Listings are also sold on a pay-for-performance basis to property managers. When purchased at the same time in one bundle, we count this as one paid listing. It is possible that a specific property may be listed on more than one of our websites without indicating that the multiple listings refer to the same property. We have used various technologies to estimate the number of unique properties and are implementing systems and processes to identify the number of unique properties that comprise our paid vacation rental listings, which we estimate was approximately 639,000 as of June 30, 2012, as compared to approximately 526,000 as of June 30, 2011.

Average Revenue per Listing. We believe that trends in revenue per listing, over an extended period, are important to understanding the value we bring to owners and managers, and the overall health of our marketplace. We use trends in revenue per listing, as well as trends in paid listings, in order to formulate financial projections and make strategic business decisions. At a

consolidated level, increases in revenue per listing may increase our earnings or may be leveraged for future investment. The average revenue per listing may fluctuate based on the timing and nature of acquisitions, changes in our pricing, uptake of listing enhancements, changes in the pricing of enhancements, changes in brand and listing type mix, and the impact of foreign exchange rates on our listing revenue outside of the United States.

Average revenue per listing for the three months ended June 30, 2012 decreased 0.9% as compared to the three months ended June 30, 2011. Average revenue per listing for subscriptions only, excluding the negative impact of foreign exchange and lower revenue per listing for pay-for-performance listings, grew 6.1% in the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. Average revenue per listing for the six months ended June 30, 2012 decreased 0.3% as compared to the six months ended June 30, 2011. Excluding the impacts from the acquisitions of Toprural and realholidays.com.au in Australia and the negative impact of foreign exchange rates, average revenue per listing would have increased 3.0% in the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. We compute average revenue per listing as annualized listing revenue divided by the average of paid listings at the beginning and end of the period. Our paid listings include both subscription listings and pay-for-performance listings to professional property managers. Average revenue per listing may be impacted by changes in mix between listing types, with pay-for-performance listings generally having a dilutive effect on average revenue per listing. The price of listings varies by website and can include various additional fees associated with listing enhancements. We have traditionally relied on increases in base pricing to increase revenue per listing but are now focused on the introduction of tiered pricing to our property owners and managers which may or may not include increases in our base price. In the third quarter of 2011, we began offering tiered pricing alternatives on HomeAway.com in the United States, which allows our property owners and managers to purchase a higher subscription level to increase the position of their listings in search results. As we implement tiered pricing on other sites, or change the prices or structure of tiered pricing, we may see an impact to listing sales in the current period with the impact on revenue seen over the length of the subscription period.

Renewal Rate. Renewal of paid subscription listings is a key driver of revenue for our business. Also, we track renewal rate in order to understand and improve upon the satisfaction of our property owners and managers and to help us more accurately estimate our future revenue and cash flows. While our overall renewal rate decreased from 76.2% as of June 30, 2011 to 75.3% as of June 30, 2012, renewal rates vary among our websites and can fluctuate due to a variety of factors, including customer satisfaction, changes in our processes associated with renewal activity, such as the introduction of automatic renewal, and general market conditions. Approximately one half of the decline from June 30, 2011 to June 30, 2012 can be attributed to the inclusion of our Australian site, HomeAway.com.au, in the calculation for the first time this quarter, and the other half is primarily related to weakened economic conditions in Europe. The renewal rate for our subscription listings at the end of any period is defined as the percentage of those paid listings that were active at the end of the period ended twelve months prior that are still active as of the end of the reported period. We include most brands in our calculation of renewal rate. However, subscriptions to BedandBreakfast.com and TopRural remain excluded until we can further develop our database system. However, based on our review of other internal renewal rate data, we do not believe that the exclusion of these brands from the renewal rate calculation materially impacts the result. Property owners' and managers' satisfaction with our solutions is the primary driver of our renewal rate. We believe that property owners and managers measure their satisfaction with our websites based largely on the number of inquiries and rental bookings that they receive from travelers. When the underlying vacation properties are sold or taken off the market, the owner or manager has no further need for the listings, and this attrition is a natural and ongoing component of non-renewal of listings. We exclude pay-per-lead listings from our renewal rate analysis since they are not sold on a subscription basis.

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 from travelers. Growth in visits to websites will be driven by our marketing strategies and has an indirect impact on our financial performance. We use a variety of tools to measure visits to our websites. These tools include solutions from third parties such as Omniture, Google Analytics and eStat. We also use third-party published reports to measure our results against comparable companies; however, these reports are not consistent with our internal measurements.

Key Components of Our Results of Operations

Revenue

We derive most of our revenue from paid listings from our property owners and managers. Our customers generally pay for their listings at the beginning of the listing term, and revenue is recognized monthly over the term of the listing, which is generally one year. We offer pay-for-performance listings to professional managers, which represented 1.6% of our revenue in both the three and six months ended June 30, 2012, respectively. This offering is generally taken when a property manager has a marketing budget that is allocated over many managed properties. They can elect to list more properties and pay us each month for the number of inquiries that are generated.

Our primary source of new property listings has been through the use of our inside sales organization who target larger professional managers. We also generate new listings from search engines such as Google, where property owners and managers search to find vacation rental listings websites. In addition, word-of-mouth referrals, primarily from existing property owners and managers that have been successful in renting their vacation rentals or travelers who have been successful in finding a property to rent using our websites, are another source for new listings.

We believe that in order to grow our revenue in the future, it will be important to introduce new features and functionality for our property owners and managers, allowing us to keep prices low while offering expanded distribution and search placement for additional fees.

Deferred revenue consists of payments received from sales of listings in excess of the revenue that we have recognized from the same listings and sales from hosted software solutions for which the estimated period of the hosting relationship is longer than one year. Deferred revenue increases as a result of new listings and decreases as a result of the recognition each month of the pro-rata share of revenue from cash collected in previous periods. We expect an increase in deferred revenue on an annual basis as we grow our core listing business, but may experience seasonal decreases in deferred revenue in quarters with fewer new listings and renewals, as is discussed in more detail in the "Management's Discussion and Analysis of Financial Condition and Results of Operations-Seasonality and Quarterly Results" section of this quarterly report on Form 10-Q. As with other balance sheet line items, deferred revenue is reflected at the current month-end exchange rate, and the change in deferred revenue may therefore be impacted by movements in foreign currency.

We earn revenues from the sales of Internet display-based advertising on our websites, property management software licenses and related maintenance, gift cards and commissions for online reservations. We also offer other services to property owners, managers and travelers that result in revenues and royalties.

Costs and Expenses

A large component of our costs and expenses is personnel costs. Personnel costs include salaries, benefits, bonuses and related expenses (including stock-based compensation). We grew from 908 employees at June 30, 2011 to 1,116 employees at June 30, 2012. We expect that personnel costs will be higher in absolute dollars in 2012 than in 2011 based on an expected increase in the number of employees in 2012.

Cost of Revenue. Cost of revenue consists of customer service personnel and web-hosting personnel costs, merchant fees charged by credit card processors, costs associated with the hosting of our websites and costs associated with payments under our Carefree Rental Guarantee. Personnel costs include salaries, benefits, bonuses and related expenses, including stock-based compensation. To the extent that the number of paid listings on our marketplace grows, we intend to invest additional resources in customer service systems and personnel. Our customer service personnel help our property owners and managers use our websites to list their properties, answer their questions, and perform listing reviews and other processes as a part of our efforts to ensure quality, trust and security. Our merchant fees are based on a contractual rate per transaction and will increase in absolute dollars as sales of listings increase, but for the full year ending December 31, 2012 we expect for them to remain relatively constant and commensurate with 2011 levels, as a percentage of revenue. In general, as we add more features and functionality to our websites and anticipate an increase in the number of travelers accessing our websites, we will increase our spending on hardware and software required for hosting. However, we expect such spending for 2012 to remain at 2011 levels or grow only slightly as a percentage of revenue.

We view the operation of our websites as a foundation upon which different revenue streams are generated. Cost of revenue, as described above, which includes the cost of customer service personnel, web hosting and merchant fees, directly supports our listing revenue, which was 84.1% and 86.9% of total . . .