EX-99.1 2 a15-16893_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

INTERVAL LEISURE GROUP REPORTS SECOND QUARTER 2015 RESULTS

 

MIAMI—(BUSINESS WIRE)—August 5, 2015— Interval Leisure Group (Nasdaq: IILG) (“ILG”) today announced results for the three months ended June 30, 2015.

 

SECOND QUARTER 2015 HIGHLIGHTS

 

·                  ILG consolidated revenue increased by 21.1% year-over-year to $173.7 million, and was up 14.1% excluding pass-throughs

 

·                  Refinanced capital structure, issuing $350 million of 5.625% senior notes due 2023

 

·                  Diluted earnings per share was $0.29. Incremental after-tax interest expense related to our senior notes impacted earnings per share by $0.03

 

·                  Adjusted EBITDA increased by 4.9% to $43.5 million

 

·                  In constant currency:

 

·                  Revenue increased by 23.3%, or 16.9% excluding pass-through revenue

 

·                  Diluted EPS was $0.30

 

·                  Adjusted EBITDA was $44.6 million, an increase of 7.4%

 

·                  Free cash flow for the first six months of 2015 increased by 71.5% to $79.7 million

 

“ILG reported a solid quarter, with both top line and adjusted EBITDA growth.  Consolidated revenue without pass-throughs increased 14.1% over the prior year quarter which led to nearly 5% greater adjusted EBITDA, or a 7.4% adjusted EBITDA increase in constant currency,” said Craig M. Nash, chairman, president and CEO of Interval Leisure Group. “The issuance of $350 million of senior notes during the quarter provides ILG with a flexible capital structure to pursue our long-term strategy.”

 

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Financial Summary & Operating Metrics (USD in millions except per share amounts)

 

 

 

Three Months Ended
June 30,

 

Year
Over Year

 

METRICS

 

2015

 

2014

 

Change

 

Revenue

 

173.7

 

143.5

 

21.1

%

Exchange and Rental revenue

 

124.6

 

116.8

 

6.7

%

Vacation Ownership revenue

 

49.1

 

26.7

 

83.9

%

Gross profit

 

93.3

 

83.8

 

11.4

%

Net income attributable to common stockholders

 

16.6

 

18.4

 

(9.4

)%

Adjusted net income*

 

16.8

 

19.3

 

(13.2

)%

Diluted EPS

 

$

0.29

 

$

0.32

 

(9.4

)%

Adjusted diluted EPS*

 

$

0.29

 

$

0.33

 

(12.1

)%

Adjusted EBITDA*

 

43.5

 

41.5

 

4.9

%

 

 

 

 

 

 

 

 

BALANCE SHEET DATA

 

June 30, 2015

 

December 31, 2014

 

Cash and cash equivalents

 

92.2

 

 

 

80.5

 

Debt

 

434.8

 

 

 

484.4

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
June 30,

 

Year
Over Year

 

CASH FLOW DATA

 

2015

 

2014

 

Change

 

Net cash provided by operating activities

 

86.4

 

55.7

 

55.3

%

Free cash flow*

 

79.7

 

46.5

 

71.5

%

 

* “Adjusted net income”, “Adjusted earnings per share”, “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

 

Second Quarter 2015 Consolidated Operating Results

 

Consolidated revenue for the quarter ended June 30, 2015 was $173.7 million, an increase of 21.1% compared to the second quarter of 2014. In constant currency (defined below), consolidated revenue increased by 23.3% to $177.0 million. Excluding pass-through revenue, consolidated revenue increased by $16.8 million, or 14.1%, and $20.1 million, or 16.9% in constant currency.

 

Net income attributable to common stockholders for the three months ended June 30, 2015 was $16.6 million, a decrease of 9.4% from the second quarter of 2014 and in constant currency was $17.5 million, a decrease of 4.5%. Diluted earnings per share (EPS) were $0.29 compared to diluted EPS of $0.32 for the same period of 2014. In constant currency, diluted EPS was $0.30. Adjusted net income (defined below) for the quarter ended June 30, 2015 was $16.8 million, $17.7 million in constant currency. Contributing to the results are $1.8 million of incremental after-tax interest expense from the issuance of the senior notes and $0.7 million of after-tax impact related to a shift in the timing of a member magazine into the second quarter compared to last year’s distribution schedule. Excluding these items, net income attributable to common stockholders for the quarter would have been $19.1 million and diluted earnings per share would have been $0.33, and in constant currency these would have been $20.0 million and $0.34, respectively.

 

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Adjusted EBITDA (defined below) for the quarter ended June 30, 2015 was $43.5 million, a 4.9% increase from $41.5 million for the same period of 2014. On a constant currency basis, adjusted EBITDA would have been $44.6 million, an increase of 7.4% over the prior year quarter.

 

Business Segment Results

 

In the fourth quarter of 2014, as a result of the Hyatt Vacation Ownership (HVO) acquisition, ILG reorganized its management reporting structure resulting in the following operating and reportable segments: Exchange and Rental, and Vacation Ownership.

 

The Exchange and Rental segment offers access to vacation accommodations and other travel-related transactions and services to leisure travelers, by providing vacation exchange services and vacation rentals, working with resort developers and managing vacation properties. The Vacation Ownership segment engages in the management, sales, marketing, and financing of vacation ownership interests and related services to owners and associations.

 

Exchange and Rental

 

Exchange and Rental segment revenue for the three months ended June 30, 2015 was $124.6 million, an increase of 6.7% from the comparable period in 2014. The increase is due to incremental revenue attributable to our Hyatt Residence Club (HRC) business — acquired in October 2014 — which drove an increase of $2.6 million in other revenue, and to higher rental management fees of $1.4 million and pass through revenue of $4.4 million for the quarter.

 

For the second quarter of 2015, membership fee revenue (defined below) was $31.6 million and transaction revenue (defined below) was $47.1 million, relatively consistent with the prior year.

 

Total active members at June 30, 2015 were approximately 1.82 million, consistent with last year. Average revenue per member for the second quarter of 2015 was $44.17, in-line with $44.36 from the second quarter of 2014.

 

Through the second quarter, the Interval Network affiliated 29 vacation ownership resorts in domestic and international markets. Membership mix as of June 30, 2015 included 58% traditional and 42% corporate members, compared to 59% and 41%, respectively, as of June 30, 2014.

 

Year-over-year rental management revenue increased $1.4 million, or 13.7%, to $11.4 million. RevPAR (defined below) was $106.01, an increase of 2.7% over prior year’s RevPAR of $103.24. The increase in RevPAR was driven by stronger RevPAR in Hawaii, partly offset by newly-acquired rental management contracts on the mainland which operate at a lower RevPAR. Hawaii-only RevPAR increased 11.7% to $118.51 in the quarter compared to $106.08 in the prior year, driven by both higher average daily rate and occupancy. Regarding the prior RevPAR figures, effective January 1, 2015, a change in industry reporting standards now excludes certain resort fees from gross lodging revenue (defined below). This reporting change together with certain other calculation refinements impacts the year-over-year comparability of RevPAR and therefore we have recast prior year RevPAR figures.

 

Exchange and Rental segment adjusted EBITDA was $36.5 million in the second quarter, an increase of 1.7% from the prior year due to the incremental contribution from HRC, together with stronger results from our rental businesses and lower call center related costs.  In constant currency, segment adjusted EBITDA was $36.6 million. Additionally, adjusted EBITDA in the quarter was negatively impacted by a $1.1 million shift in the timing of a member magazine into the second quarter compared to the prior year’s distribution schedule. Excluding this impact,

 

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adjusted EBITDA in constant currency would have been $37.6 million, an increase 4.8% over the prior year.

 

Vacation Ownership

 

Vacation Ownership segment revenue for the three months ended June 30, 2015 was $49.1 million, including $24.9 million of management fee revenue (defined below). The increase over the prior year of $22.4 million, or 83.9%, in segment revenue reflects increases of $10.9 million of incremental vacation ownership sales and financing revenue and $9.0 million in pass-through revenue, entirely related to the HVO acquisition, as well as $2.5 million in management fee revenue. The increase in management fee revenue is a result of incremental revenue from the HVO acquisition, partly offset by a foreign currency negative impact of translating the results of VRI Europe into U.S. dollars.

 

On a constant currency basis, total revenue and revenue excluding pass-through for this segment would have been $51.9 million and $38.5 million, respectively, an increase of 94.2% and 72.5%, over the prior year quarter.

 

Vacation Ownership segment adjusted EBITDA was $7.0 million in the second quarter, an increase of 25.7% from the prior year. The growth in this segment is driven by the incremental management and sales and financing activities from our recently acquired HVO business. In constant currency, segment adjusted EBITDA was $8.0 million for the second quarter.

 

CAPITAL RESOURCES AND LIQUIDITY

 

As of June 30, 2015, ILG’s cash and cash equivalents totaled $92.2 million, compared to $80.5 million as of December 31, 2014.

 

Debt outstanding as of June 30, 2015 was $434.8 million, compared to $484.4 million as of December 31, 2014 (inclusive of debt issuance costs). On April 10, 2015, we completed a private offering of $350 million in aggregate principal amount of our 5.625% senior notes due in 2023. The net proceeds from the offering, after deducting estimated offering related expenses, were approximately $343 million. We used the proceeds to repay indebtedness outstanding on our revolving credit facility. As of June 30, 2015, total unamortized debt issuance costs pertaining to our senior notes were $6.7 million.

 

For the first half of 2015, ILG’s capital expenditures totaled $6.7 million, net cash provided by operating activities was $86.4 million and free cash flow (defined below) was $79.7 million. The $33.2 million increase in free cash flow from the same period of 2014 was principally due to higher net cash receipts due in part to the addition of HVO, lower payments of $13.0 million made in connection with long-term agreements and lower income taxes paid of $8.2 million, partly offset by higher interest payments of $1.1 million.

 

Dividend

 

For the second quarter 2015, ILG paid $6.9 million, or $0.12 cents per share, in dividends.

 

In August 2015, our Board of Directors declared a $0.12 per share dividend payable September 15, 2015 to shareholders of record on September 1, 2015.

 

BUSINESS OUTLOOK AND GUIDANCE

 

“For the remainder of 2015, we remain focused on disciplined investment in those areas we believe will drive long-term growth. In particular, these include increased efficiencies and new

 

4


 

product development in exchange and rental and expansion of sales in vacation ownership,” said Mr. Nash.

 

Based upon a revised forecast of pass-through revenue, which does not impact the bottom line, ILG is adjusting its 2015 revenue guidance. Additionally, following the actual results of the first six months, the company is tightening the adjusted EBITDA range and decreasing the projected capital expenditures. This decrease in capex drives an increase in the projection for free cash flow to $100 million to $110 million for 2015.

 

Guidance

 

Current

 

Prior

Consolidated Revenue

 

$690 - $705 million

 

$690 - $720 million

Adjusted EBITDA

 

$182 - $192 million

 

$180 - $195 million

Free cash flow

 

$100 - $110 million

 

$95 - $105 million

Capital expenditures

 

3 – 4.5% of consolidated revenue

 

3 – 5% of consolidated revenue

 

These expectations of future performance are for continuing operations and exclude the impact of any potential acquisitions or restructuring activities. Revenue and adjusted EBITDA guidance reflects the expectation of an adverse impact of foreign exchange. Based on actual results year-to-date and projected rates for the remainder of 2015, foreign exchange movements are expected to adversely impact 2015 revenue and adjusted EBITDA by approximately $12.5 million and $3.5 million, respectively, when compared with 2014 full year results. Adjusted EBITDA will be computed on a basis consistent with the reconciliation of the second quarter 2015 and 2014 results in the tables at the end of this release.

 

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 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 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 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.

 

CONFERENCE CALL

 

ILG will host a conference call today at 4:30 p.m. Eastern Daylight Time to discuss its results for the second quarter 2015, 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-

 

5


 

3062 (international); Conference ID: 89398720. 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: 89398720. 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 leisure businesses from exchange and vacation rental to vacation ownership. In its exchange and rental segment, Interval International and Trading Places International (TPI) offer vacation exchange and travel-related products to more than 2 million member families worldwide, while Hyatt Residence Club provides exchanges among its branded resorts in addition to its participation in the Interval Network. Aston Hotels & Resorts and Aqua Hospitality provide hotel and condominium rentals and resort management. In its vacation ownership segment, Vacation Resorts International, VRI Europe, Hyatt Vacation Ownership (HVO), and TPI provide management services to timeshare resorts and clubs, as well as homeowners’ associations. HVO also sells, markets, and finances vacation ownership interests. ILG through its subsidiaries 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. Headquartered in Miami, Florida, ILG has offices in 16 countries and more than 6,000 employees. For more information, visit www.iilg.com.

 

FORWARD-LOOKING STATEMENTS

 

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 in control event under the master license agreement with Hyatt; 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 and indenture; adverse events or trends in key vacation destinations; business interruptions in connection with our technology systems; ability of managed homeowners associations to collect sufficient maintenance fees; third parties not repaying advances or extensions of credit; fluctuations in currency exchange rates; 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

 

6


 

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.

 

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INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

173,745

 

$

143,528

 

$

358,297

 

$

300,569

 

Cost of sales

 

80,423

 

59,761

 

162,780

 

123,611

 

Gross profit

 

93,322

 

83,767

 

195,517

 

176,958

 

Selling and marketing expense

 

18,578

 

13,808

 

36,786

 

28,378

 

General and administrative expense

 

35,541

 

31,251

 

71,436

 

62,688

 

Amortization expense of intangibles

 

3,514

 

2,895

 

7,015

 

5,861

 

Depreciation expense

 

4,328

 

3,876

 

8,597

 

7,669

 

Operating income

 

31,361

 

31,937

 

71,683

 

72,362

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest income

 

276

 

55

 

543

 

99

 

Interest expense

 

(5,974

)

(1,628

)

(8,727

)

(2,952

)

Other income (expense), net

 

195

 

(280

)

1,116

 

(416

)

Equity in earnings from unconsolidated entities

 

925

 

—

 

2,449

 

—

 

Total other expense, net

 

(4,578

)

(1,853

)

(4,619

)

(3,269

)

Earnings before income taxes and noncontrolling interests

 

26,783

 

30,084

 

67,064

 

69,093

 

Income tax provision

 

(9,656

)

(10,690

)

(24,148

)

(25,005

)

Net income

 

17,127

 

19,394

 

42,916

 

44,088

 

Net income attributable to noncontrolling interest

 

(486

)

(1,034

)

(1,013

)

(2,013

)

Net income attributable to common stockholders

 

$

16,641

 

$

18,360

 

$

41,903

 

$

42,075

 

 

 

 

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

$

0.32

 

$

0.73

 

$

0.73

 

Diluted

 

$

0.29

 

$

0.32

 

$

0.72

 

$

0.72

 

Weighted average number of shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

57,453

 

57,669

 

57,316

 

57,587

 

Diluted

 

58,041

 

58,169

 

57,894

 

58,123

 

Dividends declared per share of common stock

 

$

0.12

 

$

0.11

 

$

0.24

 

$

0.22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income(1)

 

$

16,761

 

$

19,309

 

$

41,494

 

$

43,696

 

Adjusted earnings per share(1):

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

$

0.33

 

$

0.72

 

$

0.76

 

Diluted

 

$

0.29

 

$

0.33

 

$

0.72

 

$

0.75

 

 

(1) “Adjusted net income” and “Adjusted earnings per share” are non-GAAP measures as defined by the SEC. Please see “Reconciliations of Non-GAAP Measures” for a reconciliation to the comparable GAAP measure.

 


 

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

As of

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

92,241

 

$

80,493

 

Vacation ownership mortgages receivable, net

 

6,344

 

7,169

 

Vacation ownership inventory

 

50,614

 

54,061

 

Deferred membership costs

 

8,740

 

8,716

 

Prepaid income taxes

 

17,432

 

22,029

 

Other current assets

 

120,878

 

112,505

 

Total current assets

 

296,249

 

284,973

 

Vacation ownership mortgages receivable, net

 

26,966

 

29,333

 

Investments in unconsolidated entities

 

35,891

 

33,486

 

Goodwill and intangible assets, net

 

825,508

 

831,125

 

Deferred membership costs

 

10,498

 

10,948

 

Other non-current assets

 

131,197

 

134,137

 

TOTAL ASSETS

 

$

1,326,309

 

$

1,324,002

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Accounts payable, trade

 

$

25,473

 

$

39,082

 

Deferred revenue

 

102,513

 

89,850

 

Other current liabilities

 

103,271

 

85,036

 

Total current liabilities

 

231,257

 

213,968

 

Long-term debt

 

434,838

 

484,383

 

Deferred revenue

 

93,346

 

93,730

 

Other long-term liabilities

 

112,518

 

111,116

 

TOTAL LIABILITIES

 

871,959

 

903,197

 

Redeemable noncontrolling interest

 

699

 

457

 

Total ILG stockholders’ equity

 

416,748

 

384,043

 

Noncontrolling interests

 

36,903

 

36,305

 

TOTAL EQUITY

 

453,651

 

420,348

 

TOTAL LIABILITIES AND EQUITY

 

$

1,326,309

 

$

1,324,002

 

 


 

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Six months ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Cash flows from operating activities:

 

$

42,916

 

$

44,088

 

Net income

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Amortization expense of intangibles

 

7,015

 

5,861

 

Amortization of debt issuance costs

 

642

 

407

 

Depreciation expense

 

8,597

 

7,669

 

Provision for loan losses

 

880

 

—

 

Non-cash compensation expense

 

6,934

 

5,480

 

Deferred income taxes

 

289

 

310

 

Equity in earnings from unconsolidated entities

 

(2,449

)

—

 

Excess tax benefits from stock-based awards

 

(1,890

)

(1,908

)

Loss on disposal of property and equipment

 

217

 

10

 

Change in fair value of contingent consideration

 

—

 

(1,606

)

Changes in operating assets and liabilities

 

23,287

 

(4,655

)

Net cash provided by operating activities

 

86,438

 

55,656

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(6,694

)

(9,146

)

Investment in financing receivables

 

(250

)

(750

)

Other

 

(24

)

(7

)

Net cash used in investing activities

 

(6,968

)

(9,903

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from the issuance of senior notes

 

350,000

 

—

 

Borrowing (payments) on revolving credit facility, net

 

(393,000

)

15,000

 

Payments of debt issuance costs

 

(6,677

)

(1,711

)

Dividend payments

 

(13,789

)

(12,681

)

Payments of contingent consideration

 

—

 

(7,272

)

Repurchases of common stock

 

—

 

(10,999

)

Withholding taxes on vesting of restricted stock units

 

(4,333

)

(3,972

)

Proceeds from the exercise of stock options

 

182

 

310

 

Excess tax benefits from stock-based awards

 

1,890

 

1,908

 

Net cash used in financing activities

 

(65,727

)

(19,417

)

Effect of exchange rate changes on cash and cash equivalents

 

(1,995

)

(188

)

Net increase in cash and cash equivalents

 

11,748

 

26,148

 

Cash and cash equivalents at beginning of period

 

80,493

 

48,462

 

Cash and cash equivalents at end of period

 

$

92,241

 

$

74,610

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest, net of amounts capitalized

 

$

3,495

 

$

2,386

 

Income taxes, net of refunds

 

$

18,011

 

$

26,281

 

 

 


 

OPERATING STATISTICS

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2015

 

% Change

 

2014

 

2015

 

% Change

 

2014

 

Exchange and Rental

 

 

 

 

 

 

 

 

 

 

 

 

 

Total active members at end of period (000’s)

 

1,820

 

0.1

%

1,818

 

1,820

 

0.1

%

1,818

 

Average revenue per member

 

$

44.17

 

(0.4

)%

$

44.36

 

$

94.04

 

0.4

%

$

93.68

 

Available room nights (000’s)

 

793

 

2.3

%

775

 

1,567

 

2.0

%

1,537

 

RevPAR(1)

 

$

106.01

 

2.7

%

$

103.24

 

$

116.86

 

(0.0

)%

$

116.89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vacation Ownership

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract sales (000’s)(2)

 

$

25,043

 

N/M

 

$

—

 

$

52,240

 

N/M

 

$

—

 

Average transaction price(2)

 

$

32,231

 

N/M

 

$

—

 

$

35,855

 

N/M

 

$

—

 

Volume per guest(2)

 

$

3,398

 

N/M

 

$

—

 

$

3,780

 

N/M

 

$

—

 

 

(1) Due to a change in industry reporting standards (effective January 1, 2015) and certain revisions resulting from a refinement in our calculation of RevPAR pursuant to industry reporting standards, RevPAR for the three and six months ended June 30, 2014 has been recast from $110.39 and $125.85, respectively.

(2) Applicable solely for the period subsequent to the acquisition of HVO on October 1, 2014.

 

ADDITIONAL DATA

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2015

 

% Change

 

2014

 

2015

 

% Change

 

2014

 

 

 

(Dollars in thousands)

 

(Dollars in thousands)

 

Exchange and Rental

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction revenue

 

$

47,139

 

(0.4

)%

$

47,315

 

$

104,203

 

0.8

%

$

103,426

 

Membership fee revenue

 

31,579

 

(0.1

)%

31,602

 

63,127

 

(0.5

)%

63,420

 

Ancillary member revenue

 

1,402

 

(18.0

)%

1,709

 

2,801

 

(15.9

)%

3,332

 

Total member revenue

 

80,120

 

(0.6

)%

80,626

 

170,131

 

(0.0

)%

170,178

 

Other revenue

 

8,866

 

40.4

%

6,314

 

17,571

 

45.1

%

12,107

 

Rental management revenue

 

11,411

 

13.7

%

10,035

 

25,611

 

6.9

%

23,960

 

Pass-through revenue

 

24,200

 

22.1

%

19,827

 

46,921

 

15.4

%

40,645

 

Total revenue

 

$

124,597

 

6.7

%

$

116,802

 

$

260,234

 

5.4

%

$

246,890

 

Exchange and Rental gross margin

 

60.3

%

(2.3

)%

61.7

%

61.3

%

(1.2

)%

62.0

%

Exchange and Rental gross margin without Pass-through Revenue

 

74.8

%

0.7

%

74.3

%

74.8

%

0.7

%

74.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vacation Ownership

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fee revenue

 

$

24,855

 

11.4

%

$

22,308

 

$

49,913

 

10.9

%

$

44,995

 

Sales and financing revenue

 

10,875

 

N/M

 

—

 

19,471

 

N/M

 

—

 

Pass-through revenue

 

13,418

 

203.7

%

4,418

 

28,679

 

230.3

%

8,684

 

Total revenue

 

$

49,148

 

83.9

%

$

26,726

 

$

98,063

 

82.7

%

$

53,679

 

Vacation Ownership gross margin

 

37.1

%

(15.6

)%

44.0

%

36.7

%

(17.4

)%

44.5

%

Vacation Ownership gross margin without Pass-through Revenue

 

51.1

%

(3.0

)%

52.7

%

51.9

%

(2.1

)%

53.1

%

 


 

RECONCILIATIONS OF NON-GAAP MEASURES

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

% Change

 

2014

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

86,438

 

55.3

%

$

55,656

 

Less: Capital expenditures

 

(6,694

)

(26.8

)%

(9,146

)

Free cash flow

 

$

79,744

 

71.5

%

$

46,510

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

 

$

16,641

 

$

18,360

 

$

41,903

 

$

42,075

 

Acquisition related and restructuring costs

 

276

 

1,167

 

483

 

2,406

 

Other non-operating foreign currency remeasurements

 

(250

)

305

 

(1,326

)

135

 

Other special items

 

171

 

—

 

171

 

—

 

Income tax impact of adjusting items(1)

 

(77

)

(523

)

263

 

(920

)

Adjusted net income

 

$

16,761

 

$

19,309

 

$

41,494

 

$

43,696

 

Adjusted earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

$

0.33

 

$

0.72

 

$

0.76

 

Diluted

 

$

0.29

 

$

0.33

 

$

0.72

 

$

0.75

 

 

(1) Tax rate utilized is the applicable effective tax rate respective to the period to the extent amounts are deductible.

 


 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

Exchange and
Rental

 

Vacation
Ownership

 

Consolidated

 

Exchange and
Rental

 

Vacation
Ownership

 

Consolidated

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

36,499

 

$

7,002

 

$

43,501

 

$

35,904

 

$

5,570

 

$

41,474

 

Non-cash compensation expense

 

(2,654

)

(758

)

(3,412

)

(2,261

)

(372

)

(2,633

)

Other non-operating income (expense), net

 

282

 

(87

)

195

 

(279

)

(1

)

(280

)

Acquisition related and restructuring costs

 

(67

)

(209

)

(276

)

(987

)

(180

)

(1,167

)

Other special items

 

(144

)

(27

)

(171

)

—

 

—

 

—

 

EBITDA

 

33,916

 

5,921

 

39,837

 

32,377

 

5,017

 

37,394

 

Amortization expense of intangibles

 

(2,155

)

(1,359

)

(3,514

)

(1,751

)

(1,144

)

(2,895

)

Depreciation expense

 

(3,896

)

(432

)

(4,328

)

(3,694

)

(182

)

(3,876

)

Less: Net income attributable to noncontrolling interests

 

2

 

484

 

486

 

—

 

1,034

 

1,034

 

Less: Other non-operating income (expense), net

 

(282

)

87

 

(195

)

279

 

1

 

280

 

Equity in earnings in unconsolidated entities

 

(16

)

(909

)

(925

)

—

 

—

 

—

 

Operating income

 

$

27,569

 

$

3,792

 

31,361

 

$

27,211

 

$

4,726

 

31,937

 

Interest income

 

 

 

 

 

276

 

 

 

 

 

55

 

Interest expense

 

 

 

 

 

(5,974

)

 

 

 

 

(1,628

)

Other non-operating income (expense), net

 

 

 

 

 

195

 

 

 

 

 

(280

)

Equity in earnings in unconsolidated entities

 

 

 

 

 

925

 

 

 

 

 

—

 

Income tax provision

 

 

 

 

 

(9,656

)

 

 

 

 

(10,690

)

Net income

 

 

 

 

 

17,127

 

 

 

 

 

19,394

 

Net income attributable to noncontrolling interest

 

 

 

 

 

(486

)

 

 

 

 

(1,034

)

Net income attributable to common stockholders

 

 

 

 

 

$

16,641

 

 

 

 

 

$

18,360

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

Exchange and
Rental

 

Vacation
Ownership

 

Consolidated

 

Exchange and
Rental

 

Vacation
Ownership

 

Consolidated

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

82,372

 

$

13,946

 

$

96,318

 

$

80,628

 

$

11,136

 

$

91,764

 

Non-cash compensation expense

 

(5,402

)

(1,532

)

(6,934

)

(4,741

)

(739

)

(5,480

)

Other non-operating income (expense), net

 

1,208

 

(92

)

1,116

 

(262

)

(154

)

(416

)

Acquisition related and restructuring costs

 

(169

)

(313

)

(482

)

(1,337

)

(1,068

)

(2,405

)

Other special items

 

(144

)

(27

)

(171

)

—

 

—

 

—

 

EBITDA

 

77,865

 

11,982

 

89,847

 

74,288

 

9,175

 

83,463

 

Amortization expense of intangibles

 

(4,310

)

(2,705

)

(7,015

)

(3,580

)

(2,281

)

(5,861

)

Depreciation expense

 

(7,722

)

(875

)

(8,597

)

(7,305

)

(364

)

(7,669

)

Less: Net income attributable to noncontrolling interest

 

11

 

1,002

 

1,013

 

18

 

1,995

 

2,013

 

Less: Other non-operating income (expense), net

 

(1,208

)

92

 

(1,116

)

262

 

154

 

416

 

Equity in earnings in unconsolidated entities

 

(31

)

(2,418

)

(2,449

)

—

 

—

 

—

 

Operating income

 

$

64,605

 

$

7,078

 

71,683

 

$

63,683

 

$

8,679

 

72,362

 

Interest income

 

 

 

 

 

543

 

 

 

 

 

99

 

Interest expense

 

 

 

 

 

(8,727

)

 

 

 

 

(2,952

)

Other non-operating income (expense), net

 

 

 

 

 

1,116

 

 

 

 

 

(416

)

Equity in earnings in unconsolidated entities

 

 

 

 

 

2,449

 

 

 

 

 

—

 

Income tax provision

 

 

 

 

 

(24,148

)

 

 

 

 

(25,005

)

Net income

 

 

 

 

 

42,916

 

 

 

 

 

44,088

 

Net income attributable to noncontrolling interests

 

 

 

 

 

(1,013

)

 

 

 

 

(2,013

)

Net income attributable to common stockholders

 

 

 

 

 

$

41,903

 

 

 

 

 

$

42,075

 

 

 


 

RECONCILIATIONS OF NON-GAAP MEASURES

2015 OUTLOOK

 

 

 

Current Guidance

 

 

 

Low

 

High

 

 

 

(In millions)

 

Adjusted EBITDA

 

$

182

 

$

192

 

Non-cash compensation expense

 

(14

)

(14

)

Other non-operating income, net

 

1

 

1

 

Acquisition related and restructuring costs

 

(1

)

(1

)

Amortization expense of intangibles

 

(14

)

(14

)

Depreciation expense

 

(17

)

(17

)

Interest, net

 

(20

)

(20

)

Income tax provision

 

(44

)

(48

)

Net income attributable to common stockholders

 

$

73

 

$

79

 

 

 

 

 

 

 

 

 

Current Guidance

 

 

 

Low

 

High

 

 

 

(In millions)

 

Net cash provided by operating activities

 

$

121

 

$

142

 

Less: Capital expenditures

 

(21

)

(32

)

Free cash flow

 

$

100

 

$

110

 

 


 

GLOSSARY OF TERMS

 

Acquisition related and restructuring costs - Represents transaction fees, costs incurred in connection with performing due diligence, subsequent adjustments to our initial estimate of contingent consideration obligations associated with business acquisitions, and other direct costs related to acquisition activities. Additionally, this item includes certain restructuring charges primarily related to workforce reductions and estimated costs of exiting contractual commitments.

 

Adjusted earnings per share (EPS) is defined as adjusted net income divided by the weighted average number of shares of common stock outstanding during the period for basic EPS and, additionally, inclusive of dilutive securities for diluted EPS.

 

Adjusted EBITDA - EBITDA, excluding, if applicable: (1) non-cash compensation expense, (2) goodwill and asset impairments, (3) acquisition related and restructuring costs, (4) other non-operating income and expense, and (5) other special items. The Company’s presentation of adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

 

Adjusted net income is defined as net income attributable to common stockholders, excluding the impact of (1) acquisition related and restructuring costs, (2) other non-operating foreign currency remeasurements, and (3) other special items.

 

15


 

Ancillary member revenue - Other Interval Network member related revenue including insurance and travel related services.

 

Available room nights - Number of nights available for rental by Aston and Aqua at managed vacation properties excludes all rooms reserved for owner occupancy or usage including those under renovation at the owner’s request in our condominium rental programs.

 

Average revenue per member - Membership fee revenue, transaction revenue and ancillary member revenue for the Interval Network and Hyatt Residence Club for the applicable period, divided by the monthly weighted average number of Interval Network active members during the applicable period. Hyatt Residence Club revenue is included herein only since its date of acquisition.

 

Average transaction price — Contract Sales divided by the net number of transactions during the period subsequent to HVO’s October 1, 2014 acquisition.

 

Constant Currency — Represents current period results of operations determined by translating the functional currency results into dollars (the reporting currency) using the actual blended rate of translation from the comparable prior period. Management believes that the presentation of results of operations excluding the effect of foreign currency translations serves to enhance the understanding of ILG’s performance and improves period to period comparability of results from business operations.

 

Contract sales — Total vacation ownership interests sold at consolidated and unconsolidated projects pursuant to purchase agreements executed, net of cancellations received, during the period which are no longer subject to a statutory rescission period and where we have received a minimum 10% down payment of the contract purchase price. Contract sales are included herein only since HVO’s October 1, 2014 acquisition.

 

EBITDA - Net income attributable to common stockholders excluding, if applicable: (1) non-operating interest income and interest expense, (2) income taxes, (3) depreciation expense, and (4) amortization expense of intangibles.

 

Free cash flow - Cash provided by operating activities less capital expenditures.

 

Gross lodging revenue - Total room revenue collected from all Aston and Aqua-managed occupied rooms.

 

Management fee revenue — Represents vacation ownership property management revenue earned by our Vacation Ownership segment exclusive of pass-through revenue.

 

Membership fee revenue — Represents fees paid for membership in the Interval Network and Hyatt Residence Club.

 

Other revenue — includes revenue related primarily to exchange and rental transaction activity and membership programs outside of the Interval Network and Hyatt Residence Club, sales of marketing materials primarily for point-of-sale developer use, and certain financial services-related fee income.

 

Other special items — consist of other items that we believe are not related to our core business operations. For the three and six months of 2015, such item relates to legal proceedings as described in Part II, Item 1 of our second quarter 2015 Form 10-Q.

 

16


 

Pass-through revenue - Represents the compensation and other employee-related costs directly associated with managing properties that are included in both revenue and cost of sales and that are passed on to the property owners or homeowner associations without mark-up. Pass-through revenue of the Vacation Ownership segment also includes reimbursement of sales and marketing expenses, without mark-up, pursuant to contractual arrangements. Management believes presenting gross margin without these expenses provides management and investors a relevant period-over-period comparison

 

Rental management revenue — Represents rental management revenue earned by our vacation rental businesses within our Exchange and Rental segment, exclusive of pass-through revenue.

 

RevPAR - Gross Lodging Revenue divided by Available Room Nights for Aston and Aqua.

 

Total active members - Active members of the Interval Network as of the end of the period. Active members are members in good standing that have paid membership fees and any other applicable charges in full as of the end of the period or are within the allowed grace period. All Hyatt Residence Club members are also members of the Interval Network.

 

Transaction revenue — Interval Network and Hyatt Residence Club transactional and service fees paid primarily for exchanges, Getaways, reservation servicing and related transactions.

 

Volume per guest — Contract sales divided by the total number of tours during the period subsequent to HVO’s October 1, 2014 acquisition.

 

Interval Leisure Group

Investor Contact:

William L. Harvey, 305-925-7216

Investor Relations

William.Harvey@iilg.com

 

Or

 

Media Contact:

Christine Boesch, 305-925-7267

Corporate Communications

Chris.Boesch@iilg.com

 

17