Interval Leisure Group, Inc. (IILG)

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Interval Leisure Group (IILG)

Q1 2013 Earnings Call

May 06, 2013 4:30 pm ET


Jennifer Klein Trager

Craig M. Nash - Chairman, Chief Executive Officer, President and Member of Executive Committee

William L. Harvey - Chief Financial Officer and Executive Vice President


Charles Patrick Scholes - SunTrust Robinson Humphrey, Inc., Research Division

Stephen Altebrando - Sidoti & Company, LLC

Nikhil Bhalla - FBR Capital Markets & Co., Research Division



Good afternoon, ladies and gentlemen. At this time, I would like to welcome everyone to the Interval Leisure Group Earnings Conference Call. Please be advised this call is being recorded on Monday, May 6, 2013. [Operator Instructions] I would now like to turn the call over to Ms. Jennifer Klein, Investor Relations for Interval Leisure Group. Ma'am, you may begin your conference.

Jennifer Klein Trager

Thank you, Derick, and good afternoon to everyone on the call. Welcome to the Interval Leisure Group First Quarter 2013 Earnings Conference Call. I want to remind you that on our call today, we will discuss our outlook for future performance. These forward-looking statements typically are preceded by words such as we expect, we believe, we anticipate or similar statements. These forward-looking statements are subject to risks and uncertainties, and our actual results can differ materially from the views expressed today. Some of these risks have been set forth in our first quarter 2013 press release issued earlier today and in our 2012 Form 10-K and other periodic reports filed with the SEC. We will also discuss certain non-GAAP measures. I refer you to our press release posted on our website at www.iilg.com for all comparable GAAP measures and full reconciliation.

And now, I'd like to turn the call over to Craig Nash, our Chairman, President and Chief Executive Officer. Craig?

Craig M. Nash

Thanks Jennifer and good afternoon to everyone. Thank you for joining us for Interval Leisure Group's First Quarter 2013 Earnings Conference Call. Once again, ILG reported positive top and bottom line results, driven by our strategic initiatives and execution across our businesses.

Interval Leisure Group's consolidated revenue for the quarter increased by more than 6% from the prior year. Earnings per share increased 63% and adjusted EBITDA was up nearly 7%.

The Management and Rental segment remains a source of growth within our company. Revenue was up nearly 27%, reflecting the contribution from Vacation Resorts International, which we acquired at the end of February 2012. Management fee and rental revenue grew at an impressive 40%.

More telling, is the success we've had in improving gross margin in this area. Excluding the past revenue, gross margins for this segment was 68% in the first quarter compared to 65.7% last year.

Technology has been a focus for Aston. We have been investing in software and hardware that will allow us to improve most facets of our property management infrastructure. This should further our efforts to control costs, while optimizing yield for owners and managed properties.

In the Membership and Exchange segment, revenue saw a modest uptick that was driven by 2.3% increase in membership fee revenue. The Interval Network saw a slight decline in total active members. This is due to the impact of fewer new members entering from the point-of-sale when compared to last year. If you recall, we added a large block of corporate members in the first quarter of 2012.

During the quarter, Interval International added 36 resorts to its extensive network. Notable affiliations announced during the quarter included Royal Results Caribbean collection, a points-based vacation club and the Morritt's Tortuga Club in Grand Cayman. This property includes 131 existing units and 20 new luxury suites that are currently under construction. With more than 20% of our new affiliations for the quarter, Latin America has become one of the most promising regions for growth. Interval work with Ipsos Research to study the market for shared ownership in Colombia and Brazil. The results of these studies clearly show that the expanding middle class in these countries is attracted to the shared ownership concept. Interval's commitment to improving service levels puts members and developer clients is demonstrated by our investment in leading-edge technology.

Launched this spring, the Interval Sales Tool Kit App leverages the growing popularity of using an iPad at the point-of-sale to create a more impactful exchange presentation. A key feature is the Interval Exchange Tracker, an interactive world map that animates exchange vacations that have been booked by members in the previous 24 hours. Since industry research reinforces that exchange is a top initial purchase motivator, this app brings to life the world of vacation possibilities available through Interval International. This tool was extremely well received by our clients at the annual ARDA conference in March.

Additionally, Interval has added digital tools for members with the advanced -- enhanced Interval International app, which has now gives them the ability to purchase Getaways. They're also able to log in while on the go to access account information, browse the resort directory and share information with family and friends on social networks. Updates have also been made to the user-friendly consumer website IntervalWorld.com. Additionally, we now have the moble version of the site which gives our members a variety of ways to transact with Interval.

Our ongoing commitment to web-based services has resulted in a 50% increase in online confirmations from 2007 to 2012. Our investments in mobile platforms will serve the growing number of members who research or book their vacations on a smartphone or tablet device.

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