ILG Reports First Quarter 2017 Results

May 8, 2017 — ILG (Nasdaq: ILG) yesterday announced results for the first quarter ended March 31, 2017.

“Our results for the first quarter were in-line with our expectations reflecting a significant contribution from Vistana, as well as continued investment in the long-term growth of our business,” said Craig M. Nash, chairman, president, and CEO of ILG. “We are pleased to have opened The Westin Los Cabos Resort Villas and Spa and The Westin Nanea Ocean Villas and their respective sales galleries in April. These world-class properties are key components of our VOI sales growth strategy. As we continue to successfully execute on our organic initiatives and the integration of Vistana, we are confident that we are on track to create long-term value for all stakeholders in the company.”

FIRST QUARTER HIGHLIGHTS

• Consolidated revenue increased $266 million to $452 million. Excluding cost reimbursements, consolidated revenue was $364 million, $215 million more than the prior year
• Net income was $44 million compared to $22 million
  • Adjusted net income* was $42 million compared to adjusted net income of $24 million
  • Diluted EPS was $0.35 and adjusted diluted EPS* was $0.33
  • Adjusted EBITDA* was $93 million, an increase of $39 million
• After $57 million of inventory spend, net cash from operating activities was $88 million
• Free cash flow* was $54 million, an increase of $20 million

* “Adjusted net income”, “Adjusted diluted EPS”, “Adjusted EBITDA” and “Free cash flow” 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.

First quarter consolidated operating results
Consolidated revenue was $452 million, compared to $186 million, and excluding cost reimbursements, consolidated revenue increased by $215 million to $364 million primarily due to the inclusion of Vistana.

Net income attributable to common stockholders was $44 million, double that of the comparable period in 2016, primarily due to the inclusion of Vistana. Also contributing to these results is $5 million dollars of tax-effected net favorable items largely related to foreign currency remeasurements. Diluted earnings per share (EPS) was $0.35, compared to $0.38 reflecting the shares issued in connection with the Vistana acquisition.

Adjusted net income, which excludes the net favorable items discussed above, as well as the impact of purchase accounting and acquisition-related and restructuring costs, was $42 million, compared to $24 million in 2016. Adjusted diluted EPS was $0.33, compared to $0.41 in the prior year.

Adjusted EBITDA increased by $39 million, to $93 million, reflecting the inclusion of Vistana.

Business segment results

Vacation Ownership
Vacation Ownership segment revenue increased $229 million to $281 million principally resulting from the Vistana acquisition. Excluding cost reimbursements, Vacation Ownership segment revenue increased $182 million, to $219 million. This reflects an increase of $101 million in sales of vacation ownership products and a $53 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 from $2 million to $16 million and adjusted EBITDA increased $27 million to $34 million, due to Vistana.

Exchange and Rental
Exchange and Rental segment revenue was $171 million, an increase of 28% compared to 2016. Excluding cost reimbursements, segment revenue was $145 million, an increase of 29% compared to 2016. The increase is related to the inclusion of Vistana Signature Network (“VSN”). The addition of this proprietary club drove the $27 million increase in club rental revenue and contributed to membership and transaction revenues.

Total Interval Network active members at year-end were 1.8 million, consistent with 2016. Average revenue per member was $52.12, an increase of 6% compared to 2016 due to the inclusion of VSN.

Exchange and Rental segment operating income increased 26% to $48 million and adjusted EBITDA was $59 million, an increase of 26% from the prior year principally due to the inclusion of VSN.

CAPITAL RESOURCES AND LIQUIDITY
As of March 31, 2017, ILG’s cash and cash equivalents totaled $171 million, compared to $126 million on December 31, 2016, and we had $290 million of eligible unsecuritized receivables.

The principal amount outstanding of long term corporate debt as of March 31, 2017 was $610 million consisting of $350 million 5 5/8% Senior Notes and $260 million drawn under our revolving credit facility. ILG had $328 million available on its revolving credit facility, net of outstanding letters of credit as of March 31, 2017. The revolver may be increased by $100 million under certain conditions.

Net cash provided by operating activities, which includes $57 million of inventory spend, was $88 million compared to $40 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. Excluding inventory spend, net cash provided by operating activities would have been $145 million, reflecting higher net cash receipts largely attributable to the inclusion of Vistana.

Net cash used in investment activities was $22 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, in-line with 2016, reflecting $32 million repayments on securitized debt, a dividend payment of $19 million, $4 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 $20 million on our revolving credit facility, and a decrease of $18 million in financing-related restricted cash.

Free cash flow (defined below) for the first quarter of 2017 was $54 million compared to $34 million in 2016.

Dividends and Stock Repurchases
During the first quarter of 2017, ILG paid $19 million, or $0.15 cents per share in dividends. In May 2017 our Board of Directors declared a $0.15 per share dividend payable June 20, 2017 to shareholders of record on June 6, 2017.

In the three months ended March 31, 2017 ILG repurchased 159,000 shares for approximately $3 million at an average share price of $17.90. At quarter-end we had $46 million available for future stock repurchases.

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:

ILG Reports First Quarter 2017 Results | Business Wire

CONFERENCE CALL
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: 6862068. 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: 6862068. 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.

ABOUT ILG
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.iilg.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, (8) decreased demand from prospective purchasers of vacation interests, (9) travel related health concerns, (10) significant increase in defaults on our vacation ownership mortgage receivables; (11) the restrictive covenants in our revolving credit facility and indenture and our ability to refinance our debt on acceptable terms; (12) our ability to successfully manage and integrate acquisitions, including Vistana, (13) impairment of ILG’s assets or other adverse changes to estimates and assumptions underlying our financial results, (14) our ability to expand successfully in international markets and manage risks specific to international operations (15) fluctuations in currency exchange rates, (16) the ability of managed homeowners associations to collect sufficient maintenance fees, (17) business interruptions in connection with technology systems, and (18) regulatory changes.