MIAMI, FL (November 7 2014) — Interval Leisure Group (Nasdaq: IILG) (“ILG”) today announced results for the three months ended September 30, 2014.
THIRD QUARTER 2014 HIGHLIGHTS
- ILG consolidated revenue increased year-over-year by 23.1%
- ILG consolidated adjusted EBITDA improved year-over-year by 8.6%
- Third quarter diluted earnings per share of $0.37, up 27.6% from $0.29 in the prior year
- Interval International added 17 resort affiliations during the quarter
- Management fee and rental revenue more than doubled
- ILG free cash flow of $77.2 million year-to-date
“The third quarter financial results for Interval Leisure Group reflect the positive contributions from our strategic acquisitions,” said Craig M. Nash, chairman, president and Chief Executive Officer of Interval Leisure Group. “On October 1, 2014, ILG completed the acquisition of the Hyatt Residential Group. Today, ILG is a stronger, more dynamic company with a foundation of fee-for-service businesses that span many facets of the non-traditional lodging market. We are excited and optimistic about the opportunities that lie ahead.”
Financial Summary & Operating Metrics (USD in millions except per share amounts)
|Three Months EndedSeptember 30,||Quarter
|Membership and Exchange revenue||86.6||86.6||0.0||%|
|Management and Rental revenue||60.1||32.5||84.6||%|
|Net income attributable to common stockholders||21.3||17.1||24.5||%|
|Adjusted net income*||21.5||18.0||19.3||%|
|Adjusted diluted EPS*||$||0.37||$||0.31||19.4||%|
|BALANCE SHEET DATA||September 30, 2014||December 31, 2013|
|Cash and cash equivalents||83.9||48.5|
|Nine Months EndedSeptember 30,||Year
|CASH FLOW DATA||2014||2013||Change|
|Net cash provided by operating activities||91.5||89.3||2.4||%|
|Free cash flow*||77.2||80.0||(3.5||)%|
* “Adjusted EBITDA”, “adjusted net income,” “adjusted diluted EPS,” 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
Third Quarter 2014 Consolidated Operating Results
Consolidated revenue for the third quarter ended September 30, 2014 was $146.7 million, an increase of 23.1% from $119.2 million for the third quarter of 2013.
Net income attributable to common stockholders for the three months ended September 30, 2014 was $21.3 million, an increase of 24.5% from $17.1 million for the prior year period. The year-over-year increase was primarily attributable to incremental earnings contribution from recently acquired businesses in the Management and Rental segment and a lower effective tax rate, partially offset by lower pre-tax income from the Membership and Exchange segment.
For the three months ended September 30, 2014, ILG recorded an income tax provision of $11.8 million which represents an effective tax rate of 34.9%. This compares to an effective tax rate of 43.1% for the same period of 2013. The decline in the effective tax rate was due to a shift in income to jurisdictions that have lower tax rates, mainly related to VRI Europe’s operations, as well as favorable tax adjustments recorded in the 2014 quarter compared to unfavorable adjustments in the prior year period related to changes in tax laws.
Diluted earnings per share were $0.37 in the third quarter of 2014 compared to diluted earnings per share of $0.29 for the same period of 2013.
Adjusted EBITDA (defined below) was $44.4 million for the quarter ended September 30, 2014, compared to adjusted EBITDA of $40.9 million for the same period of 2013.
Business Segment Results
Membership and Exchange
Membership and Exchange segment revenue for the three months ended September 30, 2014 was $86.6 million, comparable to the same period in 2013.
For the third quarter of 2014, transaction and membership fee revenue (defined below) were $46.9 million and $32.0 million, respectively, an increase of 1.8% and a decrease of 0.8% from the same period in 2013.
Total active members at September 30, 2014 were 1.81 million, comparable to the number of total active members at September 30, 2013. Average revenue per member for the third quarter of 2014 was $44.57, an increase of 1.2% from the third quarter of 2013. During the quarter, Interval International affiliated 17 vacation ownership resorts located in 10 countries.
Membership and Exchange segment adjusted EBITDA was $33.0 million in the third quarter, a decrease of 6.4% from the segment’s adjusted EBITDA of $35.3 million in 2013. The decline in this segment’s adjusted EBITDA was primarily related to reduced profitability resulting from securing multi-year renewals of four corporate developer clients during the first quarter of 2014.
Management and Rental
Management and Rental segment revenue for the three months ended September 30, 2014 was $60.1 million, which includes $35.1 million of management fee and rental revenue (defined below). Year-over-year, management fee and rental revenue grew by 116.5%, driven by the incremental contribution from Aqua and VRI Europe.
Aston RevPAR for the quarter ended September 30, 2014, which excludes Aqua for purposes of year-over-year comparison, of $146.04 was slightly higher when compared to RevPAR of $145.53 for the same period in 2013. From a Hawaii standpoint, Aston saw year-over-year improvement in average daily rate, partly offset by lower occupancy for the three months ended September 30, 2014 when compared to 2013.
In the third quarter of 2014, Management and Rental segment adjusted EBITDA was $11.4 million, an increase of 103.6% from $5.6 million in the prior year period.
CAPITAL RESOURCES AND LIQUIDITY
As of September 30, 2014, ILG had $83.9 million of cash and cash equivalents, including $57.2 million of U.S. dollar equivalent or denominated cash deposits held by foreign subsidiaries which are subject to changes in foreign exchange rates. Of this amount, $40.2 million is held in foreign jurisdictions, principally the U.K.
Debt outstanding as of September 30, 2014 was $258 million. As of that date, ILG had $342 million available on its revolving credit facility, which may be increased by an additional $100 million, subject to specified conditions. On October 1, 2014, ILG drew approximately $220 million on its revolving credit facility in connection with closing the Hyatt Residential Group acquisition.
For the first nine months of 2014, ILG’s capital expenditures totaled $14.3 million, or 3.2% of revenue, net cash provided by operating activities was $91.5 million and free cash flow (defined below) was $77.2 million which compares to $80 million for the same period of 2013. The change in free cash flow is primarily due to variances in net cash provided by operating activities and capital expenditures principally related to IT initiatives.
The Board of Directors of Interval Leisure Group declared a quarterly dividend payment of $0.11 per share to shareholders of record on September 3, 2014. On September 17, 2014, a cash dividend of $6.3 million was paid. Additionally, the Board of Directors has declared a fourth quarter dividend of $0.11 per share which is scheduled to be paid on December 17, 2014 to shareholders of record on December 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 distinct 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. These non-GAAP measures have certain limitations in that they do not take into account the impact of certain expenses in our statements of income; such as non-cash compensation and acquisition related and restructuring costs as it relates to adjusted EBITDA. 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.
“Hyatt Vacation Ownership” refers to the group of businesses using that trademark pursuant to a master license agreement with a subsidiary of Hyatt Hotels Corporation.
ILG will host a conference call today at 4:30 p.m. Eastern Time to discuss its results for the third quarter 2014, with access via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing (800) 638-4817 (toll-free domestic) or (617) 614-3943 (international); participant pass code: 50742128. Please register at least 10 minutes before the conference call begins. A live webcast of the conference call will be available on the Investor Relations section of ILG’s website at www.iilg.com. A replay of the call will be available for fourteen 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); pass code: 61248016. 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 non-traditional lodging, encompassing a portfolio of travel, leisure, membership, exchange, resort management, and rental businesses. Interval International and Trading Places International (TPI) offer exchange and travel-related products to more than 2 million member families worldwide. Under license from Hyatt, Hyatt Vacation Ownership markets and manages shared ownership properties and operates Hyatt Residence Club. Vacation Resorts International, VRI Europe, and TPI offer timeshare resort, homeowners’ association, and club management services, while Aston Hotels & Resorts and Aqua Hospitality provide hotel and condominium rentals and resort management. Headquartered in Miami, Florida, ILG has offices in 16 countries and over 6,000 employees. For more information, visit 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; the occurrence of a change of control event under our master license agreement, our failure to comply with designated Hyatt brand standards with respect to the operation of the Hyatt Vacation Ownership business; our ability to market vacation ownership interests successfully and efficiently; 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; 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.