MIAMI--(BUSINESS WIRE)--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."
Financial Summary & Operating Metrics (USD in millions except per share amounts)
|
Three Months Ended |
Year |
||||||||
| METRICS | 2015 | 2014 | |||||||
| 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 |
||||||||
| CASH FLOW DATA | 2015 | 2014 | |||||||
| 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.
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, 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 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) 638-3062 (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 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.
| 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 income1 | $ | 16,761 | $ | 19,309 | $ | 41,494 | $ | 43,696 | ||||||||
| Adjusted earnings per share1: | ||||||||||||||||
| 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 | ||||||||||||||
| RevPAR1 | $ | 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 price2 | $ | 32,231 | N/M | $ | - | $ | 35,855 | N/M | $ | - | ||||||||||
| Volume per guest2 | $ | 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 items1 | (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 |
Vacation |
Consolidated |
Exchange and |
Vacation |
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 |
Vacation |
Consolidated |
Exchange and |
Vacation |
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.
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.
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.
