Update: Interval Leisure Group Earnings

Aug.12.14 | About: Interval Leisure (IILG)

Summary

Interval Leisure Group delivered an earnings beat and a beat on revenues in Q2.

It was a solid earnings report and gives me confidence in the company even though shares are down 16% since my March article.

The company continues to make progress in diversifying its business model that I discussed in my prior article.

Interval Leisure Group (NASDAQ:IILG) posted a revenue increase in Q2 of 14.8% to $143.5 million. This was also $4.61 million higher than analysts had anticipated. EPS of $0.33 beat expectations and last year's EPS by $0.02. Membership and exchange revenues dropped 9% to $86.9 million. Management and rental revenues increased 128.4% to $56.6 million due to acquisitions.

Of its two business segments, the membership and exchange business remains the laggard. I discussed this issue in greater detail in my previous article. While total active members of 1.82 million remains the same as last year, average revenue per member dropped 8.7% to $44.36. Offsetting this weakness and the prime growth driver for Interval Leisure Group is the management and rental division. EBITDA for this segment rose 222% to $8.6 million in Q2. The company benefited from the acquisitions of VRI Europe and Aqua Hotels.

Further acquisitions in the management and rental segment are what's needed in my opinion to get shares moving higher again. Judging by its balance sheet moves, I think Interval Leisure Group is getting ready to do just that. The company amended its revolving credit facility and increased its borrowing capacity to $600 million from $500 million. It could also be increased by another $100 million if need be. Overall, I continue to expect the management and rental segment to be the prime growth driver going forward and offset the weakness of the membership and exchange business.

Disclosure: The author is long IILG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.