(1) ILG, as used above before 2008, references predecessor companies of ILG. ⢠1987 ... than compete with resort devel
Investor Presentation June 2011
Safe Harbor Statement This presentation may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements relating to the anticipated financial performance, business prospects, new developments and similar matters of/relating to Interval Leisure Group, Inc. (“ILG”) and/or statements that use words such as “anticipates,” “estimates,” “expects,” “intends,” “plans,” “believes” and similar expressions. These forward-looking statements are based on management’s current expectations and assumptions, 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 or consolidation of developers; decreased demand from prospective purchasers of vacation interests; travel related health concerns, such as pandemics; changes in our senior management; regulatory changes; our ability to compete effectively and successfully introduce new products and services; the effects of our significant indebtedness and our compliance with the terms thereof; adverse events or trends in key vacation destinations; business interruptions in connection with the rearchitecture of our technology systems; 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 ILG’s filings with the Securities and Exchange Commission, including in its reports on Form 10-K and Form 10-Q. Other unknown or unpredictable factors also could have a material adverse effect on ILG’s business, financial condition and results of operations. In light of these risks and uncertainties, these forward-looking statements may not occur. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of ILG management as of the date of this presentation. ILG does not undertake to update these forward-looking statements.
2
Who We Are
Membership & Exchange
Management & Rentals
Timeshare exchange
Property management
Membership services
Rentals: Hotel & Resorts / Condos / Timeshare
Developer services
Timeshare Home Owners’ Associations
3
Investment Highlights
A Leading Provider of Vacation Ownership Member Services
Significant position in concentrated industry ~2 million members through various programs ~2,600 resorts in more than 75 nations participating in the Interval Network Offices in 15 countries worldwide
Longstanding Relationships with Leading Resort Developers
Strong relationships with quality-tier resort developers Independent and branded hospitality companies
Premium Positioning
Favorable membership demographics with nearly 90% retention rate Exclusive, multi-year affiliation agreements with resort developers High quality vacation accommodations in premier leisure destinations
Robust Business Model
Meaningful value proposition in historically resilient industry Low cap-ex, negative working capital Financial stability - consistently positive operating results 2008 to 2010 Fee-for-service, recurring revenue Healthy margins
Seasoned Management Team
Over 125 years of combined senior management experience with the Company Demonstrated ability to perform through prior economic downturns
Sources: Company Management State of the Vacation Timeshare Industry: United States Study, 2011 Edition, ARDA Shared Vacation Ownership Owners Report, 2010 Edition, ARDA
4
Major Milestones and Ownership Over 35 Years Founders
LeagueStar PLC
1976, ILG (1) is founded in Miami, Florida
Willis Stein & Investment Group
CUC
1999, Interval membership reaches record one-millionth consumer
1990, Marriott affiliates its resort system with Interval’s exchange network
1991, Westgate Resorts affiliates with Interval
2007, ILG acquires representative in South Pacific 2007, ILG acquires Aston (RQH) 2000, Accor affiliates its Australian multi- resort vacation club program with Interval
1995, Interval launches interactive website
1976
1988
1992
1997
IILG
2005, Interval opens office in Dubai
1994, Hyatt affiliates and sources its backroom servicing to Interval
1980, First international office is established in Paris
1987, Interval launches the industry’s first membership upgrade program
IAC
2007, Interval expands relationship with Accor to Asia
2010, ILG acquires TPI
2008, ILG becomes standalone publiclytraded company
2002
2008
2011
Note: (1) ILG, as used above before 2008, references predecessor companies of ILG
5
ILG Operating Philosophy Focused on:
Providing services to the Hospitality and Leisure Industry
Delivering the best possible customer experience
Emphasizing quality vacation destinations
Cap-ex light, fee-for-service businesses
Responsible, conservative allocation of capital
Creating shareholder value
6
Membership and Exchange
7
The Vacation Ownership Experience
Most people learn about timesharing by attending a resort tour sponsored by a developer.
The salesperson explains the benefits of vacation ownership. Buyers can lock in the purchase price of the accommodations for a lifetime of vacations.
Membership in an exchange network provides flexibility, enriches the timeshare owner’s experience and reinforces satisfaction in the purchase decision.
It’s a fun and flexible way to enjoy home-like accommodations, premium amenities, and appealing destinations across the country and around the world. 8
Interval International
Interval International offers exchange privileges that allow members to vacation at a different resort from their home property, or at a different time period.
In addition to exchange, Interval International has developed a portfolio of value-added benefits, including:
Getaways – affordable one-week resort stays
Travel agency services
Members-only publications
Discounted shopping at IntervalWorld.com
9
Introduction to Interval’s Vacation Exchange Business
Interval’s exchange business provides programs and services designed to complement rather than compete with resort developer clients
Resort Developer
Vacation Ownership Member
10
Vacation Ownership: Market Highlights 2010 U.S. Industry Metrics
Sales Volume ($Bn)
$6.4
Number of Vacation Ownership Interests Sold Intervals Owned
329,230 8.1 million
Number of Resorts Number of Units
1,548 197,668
…With Attractive Customer Demographics Median Household Income
Interval
Timeshare Owners
$102,600
$78,400
Sources: State of the Vacation Timeshare Industry: United States Study, 2011 Edition, ARDA 2009 U.S. Membership Profile, Interval International Shared Vacation Ownership Owners Report, 2010 Edition, ARDA
11
Interval International: Compelling Value Proposition % of Originated Sales Value (U.S. 2009) Developer 100%
1.2%
8.5%
90%
17.3%
80% 70%
0.3%
The low cost of purchasing a membership represents ~0.3% of a vacation ownership sales price
7.4%
60%
27.4%
50%
100.0%
Consumer
40%
14.1%
30% 20% 10%
23.8%
0%
Product Sales Marketing Interval Cost Commi- Costs (1) Memberssions ship(2)
G&A Uncollectible HOA & Other Sales
Pre-Tax Margin
Surveyed vacation ownership buyers report flexibility and the ability to exchange within an exchange network as major motivating factors to purchase
Total
Sources: Company Management Financial Performance of the U.S. Timeshare Industry, 2010 Edition, ARDA Shared Vacation Ownership Owners Report, 2010 Edition, ARDA Notes: (1) Excludes any exchange membership enrollment fees (2) Assumes weighted average price of U.S. timeshare week of $25,589 in 2009 and basic 1-year membership at point-of-sale ($69)
12
Interval International: U.S. Membership Options
Basic Membership ($89 per year):
Ability to trade weeks or points through Interval’s exchange network –
U.S. Exchange Fees: $159 via call center or $139 via www.intervalworld.com
Getaways: special pricing on resort stays
Interval Publications:
Interval Gold ($59 incremental per year):
$25 savings on each Getaway
$50 off already reduced Getaway vacation rentals
ShortStay Exchange Option
Priority viewing and booking of Getaway vacation rental
Concierge service
Interval Options®
Special e-mail invitations to deeply discounted Getaways
Complimentary Exchange and Getaway Guest Certificates - To share the gift of travel with family and friends
Complimentary membership in the standard Priority Pass TM program, with access at more than 600 airports
Companion Airline Certificate ticket when members book airline tickets to participating cities
Specially trained advisors to assist with vacation plans
– –
Resort Directory, Interval World Magazine & Go IntervalWorld Newsletter
Interval Platinum ($129 incremental per year):
Exchange vacation interest for a discount on a cruise, spa or golf vacation
Discounts on shopping, hotels, entertainment, dining & travel
Travel agency services
Hertz #1 Club Gold® membership
Travel & leisure discount coupons
Online discounts from Internet retailers
Online, printable coupons for buy-one, get one free or 50% off discounts at merchant locations
13
Business Model
Total Membership Fee Revenue
+
Total Transaction Revenue
= Total Interval Recurring Revenue
+ Ancillary Member Revenue
= Total Member Revenue
÷ Total (Average) Active Members
= Average Revenue Per Member
Key
= =
Company provided metric Calculated output
14
Management and Rental
15
Management and Rental
Management – Aston/Maui Condo
Unique balance of value and amenities
Sales, marketing & revenue management
– Trading Places:
Timeshare Home Owners’ Associations
Shared ownership properties
Vacation Rentals – Hotel style service option – Accounting services – Purchasing support – Interior decoration and renovation service
16
Business Model
Management Fees
+
Pass-Through Revenue
= Total Revenue
Pass-Through Revenue
= Revenue
(Cost of Sales - Pass-Through Expenses)
= Gross Profit
Key
= =
Company provided metric Calculated output
17
Financials
18
Operating Metrics 2007 FY Key Metrics
2008
2009
1Q
2Q
3Q
4Q
FY
2010
1Q
2Q
3Q
4Q
FY
2011
1Q
2Q
3Q
4Q
FY
1Q
(1)
Membership and Exchange Transaction Fee Revenue
$ 170.2
$ 57.5
$ 47.5
$ 43.8
$ 36.9
$ 185.8
$ 58.6
$ 47.7
$ 43.5
$ 40.0
$ 189.8
$ 59.0
$ 48.3
$ 45.1
$ 38.6
$ 191.0
$ 56.4
Membership Fee Revenue
$ 123.5
$ 32.5
$ 34.1
$ 33.9
$ 33.3
$ 133.7
$ 33.0
$ 33.1
$ 33.0
$ 32.9
$ 132.1
$ 32.5
$ 32.4
$ 32.4
$ 32.5
$ 129.8
$ 32.6
1.98
2.00
2.01
2.00
2.00
1.89
1.88
1.86
1.84
1.84
1.83
1.81
1.81
1.80
1.80
$ 35.93
$ 164.83
$ 43.95
$ 42.11
$ 40.22
$ 175.56
$ 45.51
$ 44.02
$ 40.45
$ 181.36
395
1,594
394
399
414
1,580
390
410
421
392
1,613
$ 89.37
. $ 82.48
$ 102.80
$ 81.24
$ 99.74
$ 99.79
Total Active Members Average Revenue per Member
1.96 $ 156.75
$ 46.80
$ 42.08
$ 40.05
$ 49.18
$ 51.31
1.82 $ 50.13
Management and Rental Available Room Nights RevPAR
955 $ 127.14
396 $ 147.89
402 $ 109.95
401 $ 114.23
$ 96.35
$ 117.08
372 $ 112.12
$ 83.85
$
91.47
$
95.79
376 $ 126.25
Year-to-Year Change Membership and Exchange Transaction Fee Revenue
-
13.5%
10.4%
11.4%
(0.5%)
9.2%
1.9%
0.3%
(0.8%)
8.4%
2.2%
0.6%
1.3%
3.6%
(3.4%)
0.6%
(4.5%)
Membership Fee Revenue
-
8.5%
11.6%
8.7%
4.5%
8.3%
1.6%
(2.8%)
(2.5%)
(1.1%)
(1.2%)
(1.7%)
(2.0%)
(2.0%)
(1.1%)
(1.7%)
0.4%
(2)
(2)
(7.4%) (8.1%)
(8.1%)
Total Active Members
-
3.7%
3.6%
3.3%
1.9%
1.9%
(4.3%)
(5.7%)
(3.6%)
(3.6%)
(2.8%)
(1.8%)
(1.8%)
(0.4%)
Average Revenue per Member
-
6.7%
6.8%
6.7%
(0.4%)
5.2%
5.1%
4.4%
5.1%
11.9%
6.5%
4.3%
3.5%
4.5%
0.6%
3.3%
(2.3%)
Available Room Nights
-
-
197.8%
(3.1%)
(2.7%)
66.9%
(6.1%)
(2.0%)
(0.4%)
4.8%
(0.8%)
5.0%
3.9%
5.5%
(5.4%)
2.0%
(3.7%)
RevPAR
-
-
(13.2%)
(16.6%)
(17.8%)
(7.9%)
(24.2%)
(23.7%)
(21.8%)
(14.4%)
(21.9%)
(8.3%)
(3.1%)
11.6%
21.0%
4.7%
22.8%
Management and Rental
Source: Company Management Notes: (1) Refer to definitions contained in Appendix Revenue and Active Members in Millions Available Room Nights in Thousands (2) Excluding Disney, (1.5%)
19
Historical Financial Data (1) EBITDA(2)
Revenue ($MM) 500
415.8
0 CAG ’06 – ’1
405.0
409.4
364.2
400 300
($MM)
9.1% CAGR 0 1 ’ – ’06
175 150
288.6
145.5
R 5.5%
154.6
148.2
151.5
2008
2009
2010
122.5
125 100
200
75 50
100
25 0
0 2006
2007
2008
2009
2006
2010
2007
Free Cash Flow (3)
CapEx ($MM)
($MM)
20.0
150
16.4
115.3
125
15.2
16.0
13.6
99.7 90.3
100
72.2
75
75.0
12.0 8.0
10.3 6.7
50 4.0
25 0
0.0
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
Source: Company Management Notes: (1) Includes Aston since its acquisition in May 2007 (2) Refer to Non-GAAP reconciliation in Appendix. (3) Free cash flow calculated as net cash provided by operating activities less Capex; refer to Appendix
20
First Quarter 2011 Financial Performance
($MM) REVENUE
Membership and Exchange Management and Rental EBITDA
Membership and Exchange Management and Rental
Q1 2010
Q1 2011
Change
$ 113.8
$ 117.0
2.8%
97.5 16.3
96.4 20.6
(1.1%) 26.1%
$ 46.3
$ 44.4
(4.3%)
44.5 1.8
41.4 3.0
(7.0%) 62.7%
2010
2011
$ 177.1 $ 385.8 2.74x 4.43x
$ 204.3 $ 353.2 2.48x 4.53x
SELECTED DATA AS OF MARCH 31 Cash Debt (Net of discount of $20.2 in 2010 and $17.8 in 2011) Consolidated Total Leverage Ratio
(1)
Consolidated Interest Coverage Ratio
(2)
Notes: (1) Maximum is 3.65 during 2010 through year-end, and 3.40 thereafter (2) Minimum is 3.00 during 2010 and thereafter
21
2010 Financial Performance ($MM)
2009
REVENUE
Membership and Exchange Management and Rental EBITDA
Membership and Exchange Management and Rental
2010
Change
$ 405.0
$ 409.4
1.1%
346.0 59.0
345.2 64.2
(0.2%) 8.8%
$ 148.2
$ 151.5
2.2%
143.3 5.0
145.8 5.8
1.7% 16.4%
SELECTED DATA AS OF DECEMBER 31, 2010 Cash Debt (Net of discount of $18.4) Consolidated Total Leverage Ratio (3.90 max) (1) Consolidated Interest Coverage Ratio (2.75 min) (2)
$ 180.5 $ 357.6 2.47x 4.61x
Notes: (1) Maximum is 3.65 during 2010 through year-end, and 3.40 thereafter (2) Minimum is 3.00 during 2010 and thereafter
22
Growth Initiatives
23
ILG Growth Initiatives
Diversification
Online
Strategic, complementary acquisitions
IntervalWorld.com
Cap-ex light
Mobile apps
Positive cash flow
Channel pricing
Fee-for-service
Community
Products & Services
International Markets
Developer servicing
South Africa
Reservation servicing Short term membership options Additional POS support
Latin America Asia
Platinum Direct-to-Consumer Exchanges Timeshare Resort and HOA Management Club Interval Gold
24
ILG in Summary and Valuation
25
ILG in Summary Management & Rentals
Membership & Exchange Vacation Ownership
Resort Management and Vacation Rentals
– Membership and Exchange Services
Strengths
– Management and Rental Services
– Value proposition to developer and owner
– Value proposition to the owner, HOA and guest
– A leading player in concentrated market
– Brand Recognition
– Demonstrated resilient model
– Resort and Association management
– Cap-ex light, rich free cash flow
Strengths
Challenges
– Broad distribution channels for rentals
– Credit restricted developers
Challenges – Concentrated porfolio
– Fewer point-of-sale generated new members – Fragmented market
– Reduced consumer discretionary spending – Inventory mix
Opportunities – Enhance developer value proposition – Drive average revenue per member
Opportunities – Continue to expand footprint beyond Hawaii – Leverage economies of scale – Broaden services for timeshare HOAs
– Broaden reach outside of developer conduit – Private label membership services 26
Valuation: Sector Comparison Defining Business Characteristics Industry Dynamics
Target Market/ Product
Limited competition High barriers to entry Attractive baby boomers target market Leisure driven spend Creates liquidity Membership based/ Recurring revenue
Business Model
Transactional revenues Attractive margins Working capital lite Low Capital intensity
Interval Leisure Group
Security Exchanges
Business Services
Timeshare/ Lodging
Online Travel
FY 2011E EV/EBITDA
6.8x
8.7x – 15.0x
9.1x – 12.7x
10.0x – 14.0x
4.7x – 17.8x
FY 2012E EV/EBITDA
6.5x
7.8x – 13.7x
8.0x – 11.7x
9.3x – 12.1x
4.0x – 13.8x
Source: ThomsonOne FirstCall mean EBITDA estimates, Enterprise Value calculated as of 5-31-11
27
Appendices
28
Non-GAAP Reconciliation (Annual) ($MM) EBITDA
2006
2007
2008
2009
2010
$ 122.5
$ 145.5
$ 154.6
$ 148.2
$ 151.5
Goodwill impairment
-
-
(34.3)
-
-
(25.2)
(26.9)
(25.9)
(26.0)
(26.4)
Depreciation expense
(7.8)
(8.4)
(9.3)
(9.9)
(10.5)
Non-cash compensation expense
(3.3)
(3.6)
(8.8)
(10.6)
(10.1)
Operating income
86.1
106.6
76.3
101.8
104.5
Interest income
8.9
10.3
11.5
1.0
0.4
Interest expense
(0.4)
(0.2)
(15.9)
(37.3)
(35.8)
Other non-operating income (expense)
(0.8)
(0.6)
4.0
(1.3)
(0.3)
(35.9)
(45.0)
(30.8)
(26.1)
(26.5)
58.0
71.1
45.2
38.2
42.4
-
(0.0)
0.1
0.0
0.0
Amortization expense of intangibles
Income tax provision Net income Net loss (income) attributable to noncontrolling interest Net income attributable to common stockholders
$
Net cash provided by operating activities
$ 106.4
Less: Capital Expenditures Free Cash Flow
58.0
(6.7) $
99.7
$
71.1
$ 125.6
$
45.3
$
38.2
$
42.4
$ 103.9
$
87.3
$
91.4
(10.3) $ 115.3
(13.6) $
90.3
(15.2) $
72.2
(16.4) $
75.0
29
Non-GAAP Reconciliation (Q1) Three Months Ended March 31 2010
($MM)
2011
Membership and Exchange
Management and Rental
Consolidated
$ 44.5
$ 1.8
$ 46.3
EBITDA
Membership and Exchange $ 41.4
Management and Rental
Consolidated
$ 3.0
$ 44.4
Amortization expense of intangibles
(5.3)
(1.3)
(6.6)
(5.4)
(1.4)
(6.8)
Depreciation expense
(2.3)
(0.2)
(2.4)
(3.0)
(0.3)
(3.3)
Non-cash compensation expense
(2.3)
(0.2)
(2.5)
(2.8)
(0.3)
(3.0)
Operating income
$ 34.7
$ 0.1
34.8
$ 30.2
$ 1.0
31.2
Interest income
0.1
0.1
Interest expense
(9.0)
(9.0)
Other non-operating expense, net
(0.7)
(1.2)
Income tax provision
(9.7)
(8.0)
Net income
15.4
13.2
Net income attributable to noncontrolling interest Net income attributable to common stockholders
(0) $ 15.4
(0) $ 13.2
30
Non-GAAP Reconciliation (FY) Twelve Months Ended December 31 2009
($MM) EBITDA
2010
Membership and Exchange
Management and Rental
$ 143.3
$ 5.0
Consolidated
Membership and Exchange
Management and Rental
Consolidated
$ 148.2
$ 145.8
$ 5.8
$ 151.5
(21.0)
(4.9)
(26.0)
(21.1)
(5.3)
(26.4)
Depreciation expense
(9.1)
(0.8)
(9.9)
(9.7)
(0.8)
(10.5)
Non-cash compensation expense
(9.8)
(0.8)
(10.6)
(9.3)
(0.8)
(10.1)
$(1.6)
101.8
$(1.2)
104.5
Amortization expense of intangibles
Operating income (loss)
$ 103.4
$ 105.6
Interest income
1.0
0.4
Interest expense
(37.3)
(35.8)
(1.3)
(0.3)
(26.1)
(26.5)
38.2
42.4
0.0
0.0
$ 38.2
$ 42.4
Other non-operating expense, net Income tax provision Net income Net loss attributable to noncontrolling interest Net income attributable to common stockholders
Twelve Months Ended December 31 2009 Net cash provided by operating activities Less: Capital Expenditures Free Cash Flow
$ 87.3 (15.2) $ 72.2
2010 $ 91.4 (16.4) $ 75.0
31
Glossary of Terms
Adjusted EBITDA - Net income, excluding, if applicable (1) non-cash compensation expense, (2) depreciation expense, (3) amortization expense, (4) goodwill and asset impairments, (5) income taxes, (6) interest income and interest expense, (7) other non-operating income and expense, (8) incremental stand-alone and public company expense over the prior year for 2008 and 2009 and (9) the European Union VAT accrual in 2009. The Company's presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.
Ancillary Member Revenue – Includes revenue related to insurance and travel related services provided to Interval Network members.
Available Room Nights - Number of nights available for rental by Aston at managed vacation properties during the period.
Average Revenue per Member - Membership fee revenue, transaction revenue and ancillary member revenue for the Interval Network for the applicable period, divided by the monthly weighted average number of active members during the applicable period.
Constant Currency – Current period results of operations determined by translating our functional currency results to U.S. dollars (our reporting currency) using the actual blended rate of translation from the comparable prior period.
EBITDA - Net income, excluding, if applicable (1) non-cash compensation expense, (2) depreciation expense, (3) amortization expense of intangibles, (4) goodwill and asset impairments, (5) income taxes, (6) interest income and interest expense and (7) other nonoperating income and expense. The Company's presentation of EBITDA may not be comparable to similarly-titled measures used by other companies.
Free Cash Flow - Cash provided by operating activities less capital expenditures.
Gross Lodging Revenue - Total room revenue collected from all Aston-managed occupied rooms during the period.
Pass-through Revenue - Represents the compensation and other employee-related costs directly associated with management of the properties that are included in both revenue and cost of sales and that are passed on to the property owners without mark-up. Management believes presenting gross margin without these expenses provides management and investors a relevant period-over-period comparison.
RevPAR - Gross Lodging Revenue divided by Available Room Nights during the period.
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.
Transaction Revenue - Transactional and service fees paid for Interval Network exchanges, Getaways, reservation servicing and related transactions.
32
33
