MIAMI, FL (August 4, 2017)
LG (Nasdaq: ILG) yesterday announced results for the second quarter ended June 30, 2017.
“We are pleased with our results for the second quarter, which reflect a significant contribution from Vistana. On a pro forma basis, our branded vacation ownership sales and marketing platform delivered an increase of 21% in consolidated timeshare contract sales, reflecting robust performance across our expanded distribution platform,” said Craig M. Nash, chairman, president, and CEO of ILG. “With our unique portfolio of upper upscale brands, diverse and complementary businesses, strong balance sheet, track record of developing world-class properties and operational excellence, we have high confidence in our ability to drive long term value for our shareholders.”
SECOND QUARTER HIGHLIGHTS
- Consolidated revenue increased $153 million to $450 million. Excluding cost reimbursements, consolidated revenue was $361 million, $128 million more than the prior year
- Net income was $27 million
- Adjusted net income* was $32 million
- Diluted EPS was $0.22 and adjusted diluted EPS* was $0.26
- Adjusted EBITDA* was $82 million, an increase of $20 million
- After $120 million of inventory spend, net cash from operating activities for the six months was $113 million
* “Adjusted net income,” “Adjusted diluted EPS” and “Adjusted EBITDA” are non-GAAP measures as defined by the U.S. 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.
The acquisition of Vistana Signature Experiences, Inc. on May 11, 2016 affects the comparability of the periods presented.
Second quarter consolidated operating results
Consolidated revenue was $450 million, compared to $297 million, and excluding cost reimbursements, consolidated revenue increased by $128 million to $361 million primarily due to the inclusion of Vistana.
Net income attributable to common stockholders was $27 million, compared to $183 million in the prior year, principally attributable to the $197 million non-taxable gain on the purchase recorded in 2016 in connection with the Vistana acquisition. This non-cash gain was not subject to tax and caused our effective tax rate to decrease to 16.4% for that quarter. As a result, the reported year-over-year comparisons of non-operating items do not adequately reflect the relative performance for the quarter. To make the information more comparable, we have included selected information calculated using a normalized effective tax rate of 37.7% for the second quarter of 2016.
Adjusted net income was $32 million, compared to $35 million in 2016. Using a normalized tax rate for 2016, adjusted net income would have been $23 million dollars in the comparable period.
Diluted earnings per share (EPS) was $0.22, compared to $1.87, primarily reflecting the gain on purchase in 2016.
Adjusted diluted EPS was $0.26, compared to $0.36 in 2016. Using a normalized tax rate for 2016, adjusted diluted EPS would have been $0.24 in the comparable period.
Adjusted EBITDA increased by $20 million, to $82 million, reflecting the inclusion of Vistana.
Business segment results
Vacation Ownership segment revenue increased $137 million to $294 million, principally resulting from the Vistana acquisition. Excluding cost reimbursements, Vacation Ownership segment revenue increased $114 million, to $231 million. This reflects an increase of $74 million in sales of vacation ownership products and a $22 million increase in resort operations revenue, which primarily includes rentals at our vacation ownership resorts and owned hotels. Higher consumer financing and management fee revenue were also important contributors.
Vacation Ownership segment operating income increased to $9 million and adjusted EBITDA increased $14 million to $33 million, due to Vistana.
Exchange and Rental
Exchange and Rental segment revenue was $156 million, an increase of 11% compared to 2016. Excluding cost reimbursements, segment revenue was $130 million, an increase of 12% compared to 2016. The increase is related to the inclusion of Vistana Signature Network (“VSN”).
Total Interval Network active members at quarter end were 1.8 million, consistent with 2016. Average revenue per member was $47.39, an increase of 1% compared to 2016 due to the inclusion of VSN.
Exchange and Rental segment operating income increased 37% to $37 million and adjusted EBITDA was $49 million, an increase of 14% from the prior year, principally due to the inclusion of VSN.
CAPITAL RESOURCES AND LIQUIDITY
As of June 30, 2017, ILG’s cash and cash equivalents totaled $173 million, compared to $126 million on December 31, 2016, and we had $322 million of unsecuritized receivables net of loan loss reserves.
The principal amount outstanding of long-term corporate debt as of June 30, 2017 was $661 million consisting of $350 million 5.625% Senior Notes and $311 million drawn under our revolving credit facility. ILG had $277 million available on its revolving credit facility, net of outstanding letters of credit as of June 30, 2017. The revolver may be increased by $100 million under certain conditions.
Net cash provided by operating activities, which includes $120 million of inventory spend, was $113 million compared to $53 million in 2016. The inventory spend was associated with investments at Vistana since the acquisition, primarily related to ongoing development activities at The Westin Nanea Ocean Villas, The Westin Los Cabos Resort Villas & Spa, Sheraton Steamboat Resort Villas and The Westin Desert Willow Villas. Excluding inventory spend, net cash provided by operating activities would have been $233 million, reflecting higher net cash receipts largely attributable to the inclusion of Vistana.
Net cash used in investment activities was $48 million reflecting capital expenditures related to investments in sales galleries and other resort operation assets, as well as IT initiatives.
Net cash used in financing activities was $20 million, reflecting $66 of million repayments on securitized debt, dividend payments of $37 million, $5 of million withholding tax on the vesting of restricted stock units and shares, and $3 million in stock repurchases. These uses of cash were partly offset by net borrowings of $71 million on our revolving credit facility, and a decrease of $20 million in financing-related restricted cash.
Free cash flow (defined below) for the first half of 2017 was $23 million compared to $45 million in 2016. This primarily reflects higher repayments related to the September 2016 securitization and the inclusion of Vistana for the full 2017 period.
During the first half of 2017, ILG paid $37 million, or $0.30 cents per share in dividends. In August 2017, our Board of Directors declared a $0.15 per share dividend payable September 18, 2017 to shareholders of record on September 5, 2017.
BUSINESS OUTLOOK AND GUIDANCE
The 2017 Outlook schedule reconciles the non-GAAP financial measures in our full year 2017 guidance to the following expected GAAP results:
|Net income attributable to common stockholders||137||150|
|Net cash provided by operating activities||70||90|
|Free cash flow||110||140|
*Includes an estimated $340 to $365 million of cost reimbursements
In 2017 we expect our effective tax rate to be approximately 36%, absent the impact of any subsequent discrete items or other items that may cause volatility in the rate.
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, free cash flow and constant currency, 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 and liquidity prepared in accordance with generally accepted accounting principles (GAAP). In addition, adjusted EBITDA (with certain different adjustments) is used to calculate compliance with certain financial covenants in ILG’s credit agreement and indenture. Management believes that these non-GAAP measures improve the transparency of our disclosures, provide meaningful presentations of our results from our business operations and liquidity 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 historical GAAP results to the non-GAAP measures, is available in the financial tables that accompany this press release.
Investors and analysts may participate in the live conference call by dialing (844) 832-7221 (toll-free domestic) or (973) 638-3062 (international); Conference ID: 53590877. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for 7 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: 53590877. The webcast will be archived on ILG’s website for 90 days after the call. A transcript of the call will also be available on the website.
ILG (Nasdaq: ILG) is a leading provider of professionally delivered vacation experiences and the exclusive global licensee for the Hyatt®, Sheraton®, and Westin® brands in vacation ownership. The company offers its owners, members, and guests access to an array of benefits and services, as well as world-class destinations through its international portfolio of resorts and clubs. ILG’s operating businesses include Aqua-Aston Hospitality, Hyatt Vacation Ownership, Interval International, Trading Places International, Vacation Resorts International, VRI Europe, and Vistana Signature Experiences. Through its subsidiaries, ILG independently owns and manages the Hyatt Residence Club program and uses the Hyatt Vacation Ownership name and other Hyatt® marks under license from affiliates of Hyatt Hotels Corporation. In addition, ILG’s Vistana Signature Experiences, Inc. is the exclusive provider of vacation ownership for the Sheraton and Westin brands and uses related trademarks under license from Starwood Hotels & Resorts Worldwide, LLC. Headquartered in Miami, Florida, ILG has offices in 15 countries and more than 10,000 associates. For more information, visit www.ilg.com.
CAUTIONARY LANGUAGE CONCERNING FORWARD-LOOKING STATEMENTS
Information set forth in this release, including statements regarding our future financial performance, our business prospects and strategy, anticipated financial position, liquidity, capital needs and other similar matters constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of the management of ILG and are subject to significant risks and uncertainties outside of ILG’s control.
Among the risks and uncertainties that could cause actual results to differ from those described in the forward-looking statements are the following: (1) adverse trends in economic conditions generally or in the vacation ownership, vacation rental and travel industries, or adverse events or trends in key vacation destinations, (2) lack of available financing for, or insolvency or consolidation of developers, including availability of receivables financing for our business, (3) adverse changes to, or interruptions in, relationships with third parties, (4) our ability to compete effectively and successfully and to add new products and services, (5) our ability to market VOIs successfully and efficiently, (6) our ability to source sufficient inventory to support VOI sales and risks related to development of inventory in accordance with applicable brand standards, (7) the occurrence of a termination event under the master license agreement with Starwood or Hyatt, (8) actions of Starwood, Hyatt or any successor that affect the reputation of the licensed marks, the offerings of or access to these brands and programs, (9) decreased demand from prospective purchasers of vacation interests, (10) travel related health concerns, (11) significant increase in defaults on our vacation ownership mortgage receivables; (12) the restrictive covenants in our revolving credit facility and indenture and our ability to refinance our debt on acceptable terms; (13) our ability to successfully manage and integrate acquisitions, including Vistana, (14) impairment of ILG’s assets or other adverse changes to estimates and assumptions underlying our financial results, (15) our ability to expand successfully in international markets and manage risks specific to international operations (16) fluctuations in currency exchange rates, (17) the ability of managed homeowners associations to collect sufficient maintenance fees, (18) business interruptions in connection with technology systems, and (19) regulatory changes.
PRESS RELEASE SOURCE: ILG