MIAMI, FL (August 7, 2014) — Interval Leisure Group (Nasdaq: IILG) (“ILG”) has announced results for the three months ended June 30, 2014.
SECOND QUARTER 2014 HIGHLIGHTS
- ILG reports record second quarter consolidated revenue; revenue increased by 14.8% year-over-year
- Net income of $18.4 million. Adjusted net income was $19.3 million, an increase of 8%
- Adjusted EBITDA increased 7%
- Management and rental segment revenue, excluding pass-throughs, increased by 128.4% reflecting the contribution from accretive acquisitions
- Interval International affiliated 24 resorts during the quarter
“ILG continues to execute a strategy of broadening its role in non-traditional lodging. Our record second quarter revenue stems from the inclusion of VRI Europe and Aqua Hospitality,” said Craig M. Nash, chairman, president and Chief Executive Officer of Interval Leisure Group. “An 8% increase in adjusted net income was driven by both acquisitions and organic improvement from our existing vacation ownership resort management businesses. We are building a strong foundation for future growth as the management and rental segment now contributes nearly 40% of revenue and over 20% of adjusted EBITDA. We look to realize further benefits as ILG continues the integration of our acquisitions.”
Financial Summary & Operating Metrics (USD in millions except per share amounts)
|Three Months Ended
|Membership and Exchange revenue||86.9||95.5||(9.0)%|
|Management and Rental revenue||56.6||29.5||92.0%|
|Net income attributable to common stockholders||18.4||20.6||(10.7)%|
|Adjusted net income*||19.3||17.9||8.0%|
|Adjusted diluted EPS*||$0.33||$0.31||7.4%|
|BALANCE SHEET DATA||June 30, 2014||December 31, 2013|
|Cash and cash equivalents||74.6||48.5|
|Six Months EndedJune 30,||YearOver Year
|CASH FLOW DATA||2014||2013|
|Net cash provided by operating activities||55.7||61.3||(9.1)%|
|Free cash flow*||46.5||54.7||(14.9)%|
* “Adjusted EBITDA,” “adjusted net income,” “adjusted earnings per share” 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
Second Quarter 2014 Consolidated Operating Results
Consolidated revenue for the second quarter ended June 30, 2014 was $143.5 million, an increase of 14.8% from $125.0 million for the second quarter of 2013. Excluding the impact of a $4.1 million second quarter 2013 out of period item, consolidated revenue increased 18.7% year over year.
Net income attributable to common stockholders for the three months ended June 30, 2014 was $18.4 million from $20.6 million in 2013. Adjusted net income, which excludes acquisition related and restructuring costs, non-operating foreign currency remeasurements and a 2013 prior period correction, increased 8.0% to $19.3 million for the second quarter of 2014 from $17.9 million for the second quarter of 2013. The year-over-year increase in adjusted net income reflects incremental earnings contribution from recently acquired businesses in the Management and Rental segment and positive contributions from ILG’s other vacation ownership management businesses, partially offset by lower profit from the Membership and Exchange segment.
Second quarter 2014 diluted earnings per share were $0.32 from $0.36 in 2013. Adjusted diluted earnings per share (defined below) were $0.33 for the 2014 quarter compared to $0.31 for the 2013 quarter.
Adjusted EBITDA (defined below) was $41.5 million for the quarter ended June 30, 2014, an increase of 7.0% from adjusted EBITDA of $38.8 million for the same period of 2013.
Business Segment Results
Membership and Exchange
Membership and Exchange segment revenue for the three months ended June 30, 2014 was $86.9 million, a decrease of 9.0% from the comparable period in 2013 or 4.9% excluding the $4.1 million prior period item recorded in 2013. Segment results, year-to-date, have been negatively impacted by lower transaction volumes and membership revenue resulting from the shift in the percentage mix of the Interval Network membership base from traditional, direct renewal members to corporate members and reduced profitability in connection with renewals of several large corporate developer contracts. Membership mix as of June 30, 2014 is comprised of 59.3% traditional versus 40.7% corporate members, compared to 60.5% and 39.5%, respectively, as of June 30, 2013.
For the second quarter of 2014, membership fee revenue (defined below) was $31.6 million, a decrease of 14.2%, or 3.6% excluding the prior period item recorded in 2013, and transaction revenue (defined below) was $47.3 million, a decrease of 5.7% from the comparable period in 2013.
Total active members at June 30, 2014 were approximately 1.82 million, relatively consistent with June 30, 2013. Average revenue per member for the second quarter of 2014 was $44.36, a decrease of 8.7% from the second quarter of 2013. Excluding the impact of the prior period item recorded in the second quarter of 2013, average revenue per member decreased 4.3% from $46.37 in the prior year to $44.38 this quarter. During the second quarter of 2014, Interval affiliated 24 new vacation ownership resorts in domestic and international markets.
Membership and Exchange segment adjusted EBITDA was $32.9 million in the second quarter, declining 8.9% from the prior year.
Management and Rental
Management and Rental segment revenue for the three months ended June 30, 2014 was $56.6 million, including $32.4 million of management fee and rental revenue (defined below). Year-over-year, management fee and rental revenue increased 128.4%, primarily driven by the incremental contribution from recently acquired businesses – VRI Europe and Aqua Hotels.
Combined Aston and Aqua RevPAR (defined below) for the quarter ended June 30, 2014 was $110.39. Aston standalone RevPAR was $125.41 compared to $129.17 for the same period in 2013.
Management and Rental segment adjusted EBITDA was $8.6 million in the second quarter, an increase of 222.6% from the prior year.
CAPITAL RESOURCES AND LIQUIDITY
As of June 30, 2014, ILG’s cash and cash equivalents totaled $74.6 million, compared to $48.5 million as of December 31, 2013.
Debt outstanding as of June 30, 2014 was $268 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 six months of 2014, ILG’s capital expenditures totaled $9.1 million, or 3.0% of revenue, net cash provided by operating activities was $55.7 million and free cash flow (defined below) was $46.5 million. The decline in free cash flow was principally due to payments made during the first quarter of 2014 in connection with long-term agreements.
Share Repurchase Program
Effective August 3, 2011 and June 4, 2014, ILG’s Board of Directors authorized a share repurchase program for up to$25.0 million and $20.0 million, respectively, excluding commissions, of the Company’s outstanding common stock.
During the six months ended June 30, 2014, the Company repurchased 0.2 million shares of common stock for $4.1 million, including commissions, under the August 2011 repurchase program, and 0.4 million shares of common stock for $9.5 million, including commissions, under the June 2014 repurchase program. As of June 30, 2014, the remaining availability for future repurchases of ILG common stock was $10.5 million.
For the second quarter 2014, ILG paid $6.3 million, or $0.11 cents per share in dividends.
In August 2014, the Board of Directors declared a $0.11 per share dividend payable September 17, 2014 to shareholders of record on September 3, 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, adjusted net income, adjusted 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 its disclosures, provide meaningful presentations of its results from business operations excluding the impact of certain items not related to its core business operations and improve the period to period comparability of results from business operations. These measures may also be useful in comparing its results to those of other companies; however, its 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 second quarter 2014, with access via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing (877) 280-4955 (toll-free domestic) or (857) 244-7312 (international); Conference ID: 75023015. 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 (888) 286-8010 (toll-free domestic) or (617) 801-6888 (international); Conference ID: 71507623. 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 nearly 2,900 resorts in over 80 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 more than 225 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: its future financial performance, its 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 its senior management; regulatory changes; its ability to compete effectively and successfully add new products and services; its ability to successfully manage and integrate acquisitions; impairment of assets; the restrictive covenants in its revolving credit facility; adverse events or trends in key vacation destinations; business interruptions in connection with the rearchitecture of its 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 its 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 its filings with the SEC. Other unknown or unpredictable factors that could also adversely affect its 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 its 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.
PRESS RELEASE SOURCE: Interval Leisure Group