ILG
#Thanks, <UNK>, and good afternoon to everyone.
Thank you for joining us for today's discussion of ILG's first-quarter 2015 results.
This year began on target, with record first-quarter total consolidated revenue and adjusted EBITDA.
While much of this growth was driven by the inclusion of Hyatt Vacation Ownership, which was acquired last October, we are seeing organic growth across a number of our businesses.
Within the exchange and rental segment, our vacation rental management revenue improved by 2% as we added more mainland contracts.
The Hawaii rental business faced increased headwinds, as the appreciation of the dollar has put a damper on arrivals from Japan to Waikiki and other Oahu destinations.
However, all other islands saw positive RevPAR growth on a same-store basis.
Resorts in the out islands, such as Maui and Kauai, tend to have a longer booking window and are historically less reliant on foreign visitors.
Within exchange, Interval International grew Platinum membership revenue by 18.6%, driven by improved upgrades and renewals of this premium product.
Platinum has been a success story in terms of both revenue and members.
Today, there are over 150,000 Platinum members and revenue from this product has increased at a CAGR of nearly 86% since its introduction in 2011.
Also, the Interval network benefited from improved inventory levels.
As a result, there was an uptick in getaway volume, which contributed to an increase in average revenue per member.
We continue to source additional inventory from new and existing affiliations in a variety of high-demand locations.
In aggregate, the inventory utilization rate increased from last year by 30 basis points to 93%.
The Interval Network expanded by 22 resorts in eight countries during the first quarter.
We successfully restructured Interval International's European operations and are routing more international calls to the larger US-based call center that utilizes a flextime model, including home-based agents.
This allows us to scale call center headcount on an as-needed basis.
The vacation ownership segment saw an overall increase that was driven by the inclusion of the HVO business.
The segment adjusted EBITDA also benefited from organic growth in our US-based independent management businesses.
VRI Europe was most affected by currency fluctuations, but in constant currency this business did see modest improvements.
Segment adjusted EBITDA in constant currency was up 40.7%.
We have made good progress integrating the HVO business, which has recently added a number of key positions to help lead the charge in 2015.
Excluding pass-through revenue related to management contracts, HVO contributed an incremental $13.6 million to this segment's consolidated topline.
Systemwide, net contract sales were $27.2 million.
The average price per transaction was up by about 7% to $40,000.
VPG was $4,216, with 77% of sales dollars coming from new buyers.
In the unconsolidated Maui joint venture, sales grew nearly 25% from last year, as we benefited from the resort opening, more dynamic lead generation programs, and an increase in tour flow.
Last month, the American Resort Development Association bestowed its prestigious Project of Excellence Award to HVO for the Hyatt Ka'anapali Beach Resort.
The honor recognizes a timeshare or mixed-use project built within the United States and the judges consider design, sustainability, and impact on the local community.
The resort also garnered awards in two resort design categories, best site plan and resort architecture.
As we mentioned on our last earnings call, we are starting the process of building and expanding from a solid foundation.
We still have work to do, but we did make progress during the first quarter on all fronts.
We executed on increasing inventory for the Interval Network, ramped up the HVO sales initiatives, and made incremental improvements to both our rental and management businesses.
I will go into more detail on our plans for the rest of the year following <UNK>'s recap of the numbers.
<UNK>, please take us through the financials.
Thank you, <UNK>.
Good afternoon, everyone.
First-quarter 2015 consolidated revenue was $184.6 million, a year-over-year increase of 17.5%.
Excluding pass-throughs, consolidated revenue was up 11.1%.
This increase was driven by the incremental contribution from our recently acquired Hyatt Vacation Ownership business.
As we had anticipated, foreign-exchange fluctuations adversely impacted our results for the quarter.
In constant currency, consolidated revenue was $187.6 million, an increase of 19.5%.
Excluding pass-throughs and in constant currency, revenue was $149.6 million or up 13.4% from last year.
In looking at segments, exchange and rental revenue decreased (sic - see Press Release - "an increase") by 4.3% to $135.6 million.
Excluding pass-throughs, segment revenue was up 3.3%.
While the majority of the improvement in this segment was due to the inclusion of the Hyatt Residence Club, there was about 2% organic growth in rental management revenue.
At quarter-end, the Interval Network membership count was flat with the prior year, with approximately 58% coming from traditional memberships.
The inclusion of HRC wallet share helped to drive a 1.4% increase in membership fee revenue, while transaction revenue was consistent with last year.
Exchange transaction volume was off by 3% versus last year.
However, getaway volume rose by 7% and helped drive an increase in average revenue per member.
In constant currency, average revenue per member was $50.20, an increase of about 2% from last year.
Our vacation rental business had 763,000 available room nights, a 3.8% increase from the same period last year, due primarily to new mainland contracts.
While these new contracts contribute positively to the topline, they generally have lower RevPAR than the Hawaii properties in our system.
As a result, rental management revenue increased 2%, while rental RevPAR was $130.39, a comparative decrease of 5.1%.
Hawaii-only RevPAR increased by 1.7%.
The vacation ownership segment contributed revenue of $48.9 million versus $27 million for the first quarter of 2014.
On a constant-currency basis, total revenue and revenue excluding pass-throughs for this segment would have been $51.4 million and $36.1 million, respectively.
The inclusion of Hyatt Vacation Ownership is the main driver behind the year-to-year growth in the segment topline, with both HVO and our existing management businesses growing the bottom line.
In terms of seasonality, you\
Thanks, <UNK>.
This year, we'll be focused on disciplined investment in the areas that we believe will drive long-term growth.
At a high level, these include increased efficiencies and new product development in the exchange and rental segment and expansion of sales in the vacation ownership business.
In addition to making good headway improving inventory volume and utilization, Interval International is seeing early success in a new initiative that partners with the HOAs in the network to enroll owners that have purchased resales or reactivate owners whose memberships have lapsed.
This quarter, we are rolling out similar programs with TPI and VRI managed properties.
Our rental companies have established a preferred vendor program with a leading hotel procurement provider.
This allows Aston and Aqua to pass cost savings directly to their clients.
We are hoping to expand this program to the US-based vacation ownership management business and Interval International clients in order to provide additional benefits to these constituents.
These are just two examples of how our operating companies are collaborating to the benefit of our clients, members, and ultimately our investors.
At HVO, the Maui project is showing improvement in net contract sales, average transaction price, and number of tours.
At the consolidated locations, we have been busy recruiting key personnel and securing quality lead generation locations.
We're optimistic about the future of our industry.
Several prominent Interval affiliated developers have new projects in progress.
Preliminary data from ARDA indicates that US developer sentiment has improved considerably and that new construction should be increasing.
Last year, we demonstrated that we can build a foundation for growth and return 43% of our free cash flow to shareholders.
We believe that the strength of our consolidated business model will generate ongoing cash that can be methodically deployed to produce shareholder returns.
The remainder of 2015 will require continued execution, but we believe we are on target to deliver in line with our expectations as we further expand ILG's role in nontraditional lodging.
Operator, please open the call for questions.
<UNK>, before I answer your question, I may have misspoke early in my remarks.
Exchange and rental revenue increased by 4.3% to $135.6 million, so I just ---+ I may have said decreased.
It should be increased.
Right.
Well, as you saw in the first quarter, we did have some increase in stuff, and we are comfortable, based on where we are at, to go ahead and increase that guidance.
Sure.
In one of my remarks, I indicated we had improved cash flow from receipts ---+
---+ primarily related to HVO.
There were payments that didn't occur that occurred in the previous year related to contracts and one wide one was a timing difference, which won't have any impact on the full year.
And then, we also ---+ and then, I also indicated that in spite of the FX and the interest payments, interest will have an impact as related to the bonds.
I think your second question ---+ go ahead.
On the refi between floating and fixed, the bonds are fixed at 5-5/8%, and we thought that it was a really good time to take advantage of historically low interest rates.
I think it is ---+ in the last probably 18 months, we have done the acquisitions for HVO, for [VRIE], and for Aqua.
So, in connection with that, we run off our revolver rather high, towards the top of that, and when you look at the historically low interest rates, being able to take advantage of that on an unsecured basis, it just seemed like a very prudent thing to do.
Yes, we are continuing to do the analysis of the two properties in buildout.
That is ongoing and we should be getting to plans within the next few months of exactly what we're going to do there.
In terms of the pipeline, we continue to work the pipeline both domestically and internationally to process and, again, we have to build that pipeline ourselves this year and it's a priority.
Yes, it 77% of the revenue from those sales.
It's slightly less than that in terms of total owners that buy.
It is driven primarily by the sales in Maui, which are very much first-generation buyers.
That's basically how the tours are developed.
In terms of the future, clearly we hope that we will be able to sell more interest to our customers moving forward, but right now, the way we are constructed, it is pretty much directed primarily at new buyers.
And then, the accounting lumpiness, the purchase accounting stuff should pretty much wash out towards the end of the year, the end of the calendar 2015.
But that's the ---+ purchase accounting stuff lumpiness, as you know in the sales business, you could potentially have lumpiness in a sales model.
We have all constructed inventory that we are selling today, so you're not going to have a percentage of completion issue from a lumpiness perspective.
RevPAR in the aggregate is down because of the inclusion of the mainland contracts, which are lower RevPAR just by definition.
In addition to that, the Waikiki properties struggled with the strength of the dollar and the Japanese visitor, while the out islands RevPAR was up.
But overall, Hawaii RevPAR year to year was up 1.7%.
No, we're seeing it ---+ Steve, we are seeing healthy increases in RevPAR now, and it's Waikiki, which caters to the Japanese and more the international visitor, is where the issue has been.
Maui has been very strong.
Steve, are you comfortable with the purchase accounting question.
Thanks.
I want to thank you for your questions and participation on today's call.
We appreciate your continued interest in ILG.
Operator, please conclude the call.
