MIAMI, FL (May 13, 2014) — Interval Leisure Group (Nasdaq: IILG) (“ILG”) has announced results for the three months ended March 31, 2014.
FIRST QUARTER 2014 HIGHLIGHTS
- ILG consolidated revenue increased by 16.4% year-over-year.
- Interval International renewed four large multi-year corporate affiliations.
- Management and Rental segment acquisitions drove topline growth.
- Earnings per share of $0.41.
“The first quarter revenue growth demonstrates the positive impact from our strategy to broaden the ILG footprint.” saidCraig M. Nash, Chairman, President and Chief Executive Officer of Interval Leisure Group. “Our latest transaction, the purchase of the Hyatt Residential Group and exclusive master license agreement for use of the Hyatt brand in shared ownership, is the next step in the evolution of ILG as a comprehensive provider of non-traditional lodging and hospitality services.”
Financial Summary & Operating Metrics (USD in millions except per share amounts)
|Membership and Exchange revenue||95.3||102.1||(6.6)%|
|Management and Rental revenue||61.7||32.8||88.2%|
|Net income attributable to common stockholders||23.7||25.0||(5.2)%|
|Balance sheet data||March 31, 2014||December 31, 2013|
|Cash and cash equivalents||64.9||48.5|
|Three Months Ended
|Cash flow data||2014||2013||Change|
|Net cash provided by operating activities||34.1||47.4||(28.2)%|
|Free cash flow*||31.0||44.4||(30.2)%|
* “Adjusted EBITDA” and “Free cash flow” are non-GAAP measures as defined by the Securities and Exchange Commission (the “SEC”). Please see “Presentation of Financial Information,” “Glossary of Terms” and “Reconciliations of Non-GAAP Measures” below for an explanation of non-GAAP measures used throughout this release.
DISCUSSION OF RESULTS
First Quarter 2014 Consolidated Operating Results
Consolidated revenue for the first quarter ended March 31, 2014 was $157.0 million, an increase of 16.4% from $134.9 million for the first quarter of 2013.
Net income attributable to common stockholders for the three months ended March 31, 2014 was $23.7 million, lower by 5.2% from $25.0 million for the same period of 2013. The year-over-year decrease in net income reflects lower pre-tax income of $1.8 million in the quarter largely attributable to lower transaction revenue and the unfavorable economic impact associated with the renewal of several significant long-term affiliation agreements in our Membership and Exchange segment, partially offset by incremental earnings contribution from our recently acquired businesses in the Management and Rental segment. First quarter 2014 diluted earnings per share were $0.41 compared to diluted earnings per share of$0.44 for the same period of 2013.
Adjusted EBITDA (defined below) was $50.3 million for the quarter ended March 31, 2014, compared to adjusted EBITDA of$51.8 million for the same period of 2013.
Business Segment Results
Membership and Exchange
Membership and Exchange segment revenue for the three months ended March 31, 2014 was $95.3 million, a decrease of 6.6% from the comparable period in 2013. Segment results, year to date, have been negatively impacted by a continued shift in the percentage mix of the Interval Network membership base from traditional, direct renewal members to corporate members, together with a tightening in the availability of exchange and Getaway inventory and reduced profitability in connection with developer contract renewals. Membership mix as of March 31, 2014 is comprised of 59% traditional versus 41% corporate members, compared to 61% and 39%, respectively, as of March 31, 2013.
For the first quarter of 2014, membership fee revenue (defined below) was $31.8 million, a decrease of 4.6%, and transaction revenue (defined below) was $56.1 million, a decrease of 8.2% from the comparable period in 2013.
Total active members at March 31, 2014 were approximately 1,819,000, lower by 0.5% from March 31, 2013. Average revenue per member for the first quarter of 2014 was $49.30, a decrease of 6.6% from the first quarter of 2013. During the first quarter of 2014, Interval renewed multi-year agreements with Starwood Vacation Ownership, Marriott Vacation Club, Diamond Resorts International and Tsogo Sun; four of its largest developer clients which encompass approximately two-thirds of corporate members. Additionally, 13 new vacation ownership resorts in domestic and international markets were affiliated in the first quarter.
Membership and Exchange segment adjusted EBITDA was $38.5 million in the first quarter, declining 15.9% from the prior year.
Management and Rental
Management and Rental segment revenue for the three months ended March 31, 2014 was $61.7 million, including $36.6 million of management fee and rental revenue (defined below). Year-over-year, management fee and rental revenue increased 109.9%. The improvement was primarily driven by the incremental contribution from our recently acquired businesses – VRI Europe and Aqua Hotels. Combined Aston and Aqua RevPAR (defined below) for the quarter endedMarch 31, 2014 was $141.45. Aston standalone RevPAR was $167.89 compared to $166.39 for the same period in 2013.
Management and Rental segment adjusted EBITDA was $11.8 million in the first quarter, an increase of 97.6% from the prior year.
CAPITAL RESOURCES AND LIQUIDITY
As of March 31, 2014, ILG’s cash and cash equivalents totaled $64.9 million, compared to $48.5 million as of December 31, 2013.
Debt outstanding as of March 31, 2014 was $248 million, compared to $253 million as of December 31, 2013. In April 2014, ILG amended its revolving credit facility and increased its borrowing capacity to $600 million from $500 million, which may be increased by an additional $100 million, subject to specified conditions.
For the first quarter of 2014, ILG’s capital expenditures totaled $3.1 million, or 2.0% of revenue, net cash provided by operating activities was $34.1 million and free cash flow (defined below) was $31.0 million. The decline in free cash flow was principally due to payments made in connection with long-term agreements.
For the first quarter 2014, ILG paid $6.3 million, or $0.11 cents per share in dividends.
In May 2014, our Board of Directors declared a $0.11 per share dividend payable June 18, 2014 to shareholders of record on June 4, 2014.
PRESENTATION OF FINANCIAL INFORMATION
ILG management believes that the presentation of non-generally accepted accounting principles (non-GAAP) financial measures, including, among others, EBITDA, adjusted EBITDA, non-GAAP net income, non-GAAP basic and diluted EPS and free cash flow, serves to enhance the understanding of ILG’s performance. These non-GAAP financial measures should be considered in addition to and not as substitutes for, or superior to, measures of financial performance prepared in accordance with generally accepted accounting principles (GAAP). In addition, adjusted EBITDA (with certain additional add-backs) is used to calculate compliance with certain financial covenants in ILG’s credit agreement. Management believes that these non-GAAP measures improve the transparency of our disclosures, provide meaningful presentations of our results from our business operations excluding the impact of certain items not related to our core business operations and improve the period to period comparability of results from business operations. These measures may also be useful in comparing our results to those of other companies; however, our calculations may differ from the calculations of these measures used by other companies. More information about the non-GAAP financial measures, including reconciliations of GAAP results to the non-GAAP measures, is available in the financial tables that accompany this press release.
ILG will host a conference call today at 4:30 p.m. Eastern Daylight Time to discuss its results for the first quarter 2014, with access via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing (844) 826-0618 (toll-free domestic) or (973) 638-3062 (international); Conference ID: 33707426. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for 14 days via telephone starting approximately two hours after the call ends. The replay can be accessed at (855) 859-2056 (toll-free domestic) or (404) 537-3406 (international); Conference ID: 33707426. The webcast will be archived on Interval Leisure Group’s website for 90 days after the call. A transcript of the call will also be available on the website.
ABOUT INTERVAL LEISURE GROUP
Interval Leisure Group (ILG) is a leading global provider of membership and leisure services to the vacation industry. Headquartered in Miami, Florida, ILG has approximately 5,000 employees worldwide. The company’s Membership and Exchange segment offers leisure and travel-related products and services to about 2 million member families who are enrolled in various programs. Interval International, the segment’s principal business, has been a leader in vacation ownership exchange since 1976. With offices in 16 countries, it operates the Interval network of more than 2,800 resorts in over 75 nations. ILG delivers additional opportunities for vacation ownership exchange through its Trading Places International (TPI) and Preferred Residences networks. ILG’s Management and Rental segment includes Aston Hotels & Resorts, Aqua Hospitality, VRI Europe (VRIE), Vacation Resorts International (VRI), and TPI. These businesses provide hotel, condominium resort, timeshare resort, and homeowners’ association management, as well as rental services, to travelers and owners at approximately 250 vacation properties, resorts, and club locations throughout North America andEurope. More information about the company is available at www.iilg.com.
This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to: our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Actual results could differ materially from those contained in the forward-looking statements included herein for a variety of reasons, including, among others: adverse trends in economic conditions generally or in the vacation ownership, vacation rental and travel industries; adverse changes to, or interruptions in, relationships with third parties; lack of available financing for, or insolvency of developers; consolidation of developers; decreased demand from prospective purchasers of vacation interests; travel related health concerns; changes in our senior management; regulatory changes; our ability to compete effectively and successfully add new products and services; our ability to successfully manage and integrate acquisitions; impairment of assets; the restrictive covenants in our revolving credit facility; adverse events or trends in key vacation destinations; business interruptions in connection with the rearchitecture of our technology systems; ability of managed homeowners associations to collect sufficient maintenance fees; third parties not repaying advances or extensions of credit; failure to consummate a previously announced transaction; and our ability to expand successfully in international markets and manage risks specific to international operations. Certain of these and other risks and uncertainties are discussed in our filings with the SEC. Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this release may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of our management as of the date of this press release. Except as required by applicable law, ILG does not undertake to update these forward-looking statements.
Source: Interval Leisure Group