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Exhibit 99.1

 

 

INTERVAL LEISURE GROUP REPORTS FIRST QUARTER 2014 RESULTS

 

MIAMI—(BUSINESS WIRE)—May 7, 2014— Interval Leisure Group (Nasdaq: IILG) (“ILG”) today announced results for the three months ended March 31, 2014.

 

FIRST QUARTER 2014 HIGHLIGHTS

 

·                  ILG consolidated revenue increased by 16.4% year-over-year.

·                  Interval International renewed four large multi-year corporate affiliations.

·                  Management and Rental segment acquisitions drove topline growth.

·                  Earnings per share of $0.41.

 

“The first quarter revenue growth demonstrates the positive impact from our strategy to broaden the ILG footprint.” said Craig M. Nash, Chairman, President and Chief Executive Officer of Interval Leisure Group. “Our latest transaction, the purchase of the Hyatt Residential Group and exclusive master license agreement for use of the Hyatt brand in shared ownership, is the next step in the evolution of ILG as a comprehensive provider of non-traditional lodging and hospitality services.”

 

Financial Summary & Operating Metrics (USD in millions except per share amounts)

 

 

 

Three Months Ended
March 31,

 

Quarter
Over Quarter

 

Metrics 

 

2014

 

2013

 

Change

 

Revenue

 

157.0

 

134.9

 

16.4

%

Membership and Exchange revenue

 

95.3

 

102.1

 

(6.6

)%

Management and Rental revenue

 

61.7

 

32.8

 

88.2

%

Gross profit

 

93.2

 

88.5

 

5.3

%

Net income attributable to common stockholders

 

23.7

 

25.0

 

(5.2

)%

Diluted EPS

 

$

0.41

 

$

0.44

 

(6.8

)%

Adjusted EBITDA*

 

50.3

 

51.8

 

(2.9

)%

 

Balance sheet data

 

March 31, 2014

 

December 31, 2013

 

Cash and cash equivalents

 

64.9

 

48.5

 

Debt

 

248.0

 

253.0

 

 

 

 

Three Months Ended
March 31,

 

Quarter Over
Quarter 

 

Cash flow data

 

2014

 

2013

 

Change

 

Net cash provided by operating activities

 

34.1

 

47.4

 

(28.2

)%

Free cash flow*

 

31.0

 

44.4

 

(30.2

)%

 


* “Adjusted EBITDA” and “Free cash flow” are non-GAAP measures as defined by the 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.

 

1



 

DISCUSSION OF RESULTS

 

First Quarter 2014 Consolidated Operating Results

 

Consolidated revenue for the first quarter ended March 31, 2014 was $157.0 million, an increase of 16.4% from $134.9 million for the first quarter of 2013.

 

Net income attributable to common stockholders for the three months ended March 31, 2014 was $23.7 million, lower by 5.2% from $25.0 million for the same period of 2013. The year-over-year decrease in net income reflects lower pre-tax income of $1.8 million in the quarter largely attributable to lower transaction revenue and the unfavorable economic impact associated with the renewal of several significant long-term affiliation agreements in our Membership and Exchange segment, partially offset by incremental earnings contribution from our recently acquired businesses in the Management and Rental segment. First quarter 2014 diluted earnings per share were $0.41 compared to diluted earnings per share of $0.44 for the same period of 2013.

 

Adjusted EBITDA (defined below) was $50.3 million for the quarter ended March 31, 2014, compared to adjusted EBITDA of $51.8 million for the same period of 2013.

 

Business Segment Results

 

Membership and Exchange

 

Membership and Exchange segment revenue for the three months ended March 31, 2014 was $95.3 million, a decrease of 6.6% from the comparable period in 2013. Segment results, year to date, have been negatively impacted by a continued shift in the percentage mix of the Interval Network membership base from traditional, direct renewal members to corporate members, together with a tightening in the availability of exchange and Getaway inventory and reduced profitability in connection with developer contract renewals. Membership mix as of March 31, 2014 is comprised of 59% traditional versus 41% corporate members, compared to 61% and 39%, respectively, as of March 31, 2013.

 

For the first quarter of 2014, membership fee revenue (defined below) was $31.8 million, a decrease of 4.6%, and transaction revenue (defined below) was $56.1 million, a decrease of 8.2% from the comparable period in 2013.

 

Total active members at March 31, 2014 were approximately 1,819,000, lower by 0.5% from March 31, 2013. Average revenue per member for the first quarter of 2014 was $49.30, a decrease of 6.6% from the first quarter of 2013. During the first quarter of 2014, Interval renewed multi-year agreements with Starwood Vacation Ownership, Marriott Vacation Club, Diamond Resorts International and Tsogo Sun; four of its largest developer clients which encompass approximately two-thirds of corporate members. Additionally, 13 new vacation ownership resorts in domestic and international markets were affiliated in the first quarter.

 

Membership and Exchange segment adjusted EBITDA was $38.5 million in the first quarter, declining 15.9% from the prior year.

 

Management and Rental

 

Management and Rental segment revenue for the three months ended March 31, 2014 was $61.7 million, including $36.6 million of management fee and rental revenue (defined below). Year-over-year, management fee and rental revenue increased 109.9%. The improvement was primarily

 

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driven by the incremental contribution from our recently acquired businesses - VRI Europe and Aqua Hotels. Combined Aston and Aqua RevPAR (defined below) for the quarter ended March 31, 2014 was $141.45. Aston standalone RevPAR was $167.89 compared to $166.39 for the same period in 2013.

 

Management and Rental segment adjusted EBITDA was $11.8 million in the first quarter, an increase of 97.6% from the prior year.

 

CAPITAL RESOURCES AND LIQUIDITY

 

As of March 31, 2014, ILG’s cash and cash equivalents totaled $64.9 million, compared to $48.5 million as of December 31, 2013.

 

Debt outstanding as of March 31, 2014 was $248 million, compared to $253 million as of December 31, 2013. In April 2014, ILG amended its revolving credit facility and increased its borrowing capacity to $600 million from $500 million, which may be increased by an additional $100 million, subject to specified conditions.

 

For the first quarter of 2014, ILG’s capital expenditures totaled $3.1 million, or 2.0% of revenue, net cash provided by operating activities was $34.1 million and free cash flow (defined below) was $31.0 million. The decline in free cash flow was principally due to payments made in connection with long-term agreements.

 

Dividend

 

For the first quarter 2014, ILG paid $6.3 million, or $0.11 cents per share in dividends.

 

In May 2014, our Board of Directors declared a $0.11 per share dividend payable June 18, 2014 to shareholders of record on June 4, 2014.

 

PRESENTATION OF FINANCIAL INFORMATION

 

ILG management believes that the presentation of non-generally accepted accounting principles (non-GAAP) financial measures, including, among others, EBITDA, adjusted EBITDA, non-GAAP net income, non-GAAP basic and diluted EPS and free cash flow, serves to enhance the understanding of ILG’s performance. These non-GAAP financial measures should be considered in addition to and not as substitutes for, or superior to, measures of financial performance prepared in accordance with generally accepted accounting principles (GAAP). In addition, adjusted EBITDA (with certain additional add-backs) is used to calculate compliance with certain financial covenants in ILG’s credit agreement. Management believes that these non-GAAP measures improve the transparency of our disclosures, provide meaningful presentations of our results from our business operations excluding the impact of certain items not related to our core business operations and improve the period to period comparability of results from business operations. These measures may also be useful in comparing our results to those of other companies; however, our calculations may differ from the calculations of these measures used by other companies. More information about the non-GAAP financial measures, including reconciliations of GAAP results to the non-GAAP measures, is available in the financial tables that accompany this press release.

 

3



 

CONFERENCE CALL

 

ILG will host a conference call today at 4:30 p.m. Eastern Daylight Time to discuss its results for the first quarter 2014, with access via the Internet and telephone. Investors and analysts may participate in the live conference call by dialing (844) 826-0618 (toll-free domestic) or (973) 638-3062 (international); Conference ID: 33707426. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for 14 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: 33707426. The webcast will be archived on Interval Leisure Group’s website for 90 days after the call. A transcript of the call will also be available on the website.

 

ABOUT INTERVAL LEISURE GROUP

 

Interval Leisure Group (ILG) is a leading global provider of membership and leisure services to the vacation industry. Headquartered in Miami, Florida, ILG has approximately 5,000 employees worldwide. The company’s Membership and Exchange segment offers leisure and travel-related products and services to about 2 million member families who are enrolled in various programs. Interval International, the segment’s principal business, has been a leader in vacation ownership exchange since 1976. With offices in 16 countries, it operates the Interval network of more than 2,800 resorts in over 75 nations. ILG delivers additional opportunities for vacation ownership exchange through its Trading Places International (TPI) and Preferred Residences networks. ILG’s Management and Rental segment includes Aston Hotels & Resorts, Aqua Hospitality, VRI Europe (VRIE), Vacation Resorts International (VRI), and TPI. These businesses provide hotel, condominium resort, timeshare resort, and homeowners’ association management, as well as rental services, to travelers and owners at approximately 250 vacation properties, resorts, and club locations throughout North America and Europe. More information about the company is available at www.iilg.com.

 

FORWARD-LOOKING STATEMENTS

 

This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to: our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, 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 of developers; consolidation of developers; decreased demand from prospective purchasers of vacation interests; travel related health concerns; changes in our senior management; regulatory changes; our ability to compete effectively and successfully add new products and services; our ability to successfully manage and integrate acquisitions; impairment of assets; the restrictive covenants in our revolving credit facility; adverse events or trends in key vacation destinations; business interruptions in connection with the rearchitecture of our technology systems; ability of managed homeowners associations to collect sufficient maintenance fees; third parties not repaying advances or extensions of credit; failure to

 

4



 

consummate a previously announced transaction; 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 our filings with the SEC. Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. In light of these risks and uncertainties, the forward-looking statements discussed in this release may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of our management as of the date of this press release. Except as required by applicable law, ILG does not undertake to update these forward-looking statements.

 

5



 

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Revenue

 

$

157,041

 

$

134,881

 

Cost of sales

 

63,850

 

46,376

 

Gross profit

 

93,191

 

88,505

 

Selling and marketing expense

 

14,570

 

13,735

 

General and administrative expense

 

31,437

 

26,305

 

Amortization expense of intangibles

 

2,966

 

2,012

 

Depreciation expense

 

3,793

 

3,664

 

Operating income

 

40,425

 

42,789

 

Other income (expense):

 

 

 

 

 

Interest income

 

44

 

151

 

Interest expense

 

(1,324

)

(1,653

)

Other income (expense), net

 

(136

)

(520

)

Total other expense, net

 

(1,416

)

(2,022

)

Earnings before income taxes and noncontrolling interest

 

39,009

 

40,767

 

Income tax provision

 

(14,315

)

(15,757

)

Net income

 

24,694

 

25,010

 

Net income attributable to noncontrolling interest

 

(979

)

(6

)

Net income attributable to common stockholders

 

$

23,715

 

$

25,004

 

 

 

 

 

 

 

Earnings per share attributable to common stockholders:

 

 

 

 

 

Basic

 

$

0.41

 

$

0.44

 

Diluted

 

$

0.41

 

$

0.44

 

Weighted average number of shares of common stock outstanding:

 

 

 

 

 

Basic

 

57,505

 

56,928

 

Diluted

 

58,078

 

57,435

 

Dividends declared per share of common stock

 

$

0.11

 

$

 

 

6



 

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

$

64,883

 

$

48,462

 

Deferred membership costs

 

9,226

 

9,828

 

Prepaid income taxes

 

 

11,211

 

Other current assets

 

117,385

 

89,061

 

Total current assets

 

191,494

 

158,562

 

Goodwill and intangible assets, net

 

764,909

 

766,703

 

Deferred membership costs

 

11,535

 

10,741

 

Other non-current assets

 

90,729

 

88,613

 

TOTAL ASSETS

 

$

1,058,667

 

$

1,024,619

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

Accounts payable, trade

 

$

16,376

 

$

13,793

 

Deferred revenue

 

109,630

 

92,503

 

Other current liabilities

 

88,730

 

83,262

 

Total current liabilities

 

214,736

 

189,558

 

Long-term debt

 

248,000

 

253,000

 

Deferred revenue

 

102,287

 

100,494

 

Other long-term liabilities

 

96,380

 

104,608

 

TOTAL LIABILITIES

 

661,403

 

647,660

 

Redeemable noncontrolling interest

 

444

 

426

 

Total ILG stockholders’ equity

 

362,888

 

343,825

 

Noncontrolling interest

 

33,932

 

32,708

 

TOTAL EQUITY

 

396,820

 

376,533

 

TOTAL LIABILITIES AND EQUITY

 

$

1,058,667

 

$

1,024,619

 

 

7



 

INTERVAL LEISURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

24,694

 

$

25,010

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Amortization expense of intangibles

 

2,966

 

2,012

 

Amortization of debt issuance costs

 

196

 

196

 

Depreciation expense

 

3,793

 

3,664

 

Non-cash compensation expense

 

2,847

 

2,557

 

Non-cash interest expense

 

4

 

68

 

Deferred income taxes

 

573

 

(985

)

Excess tax benefits from stock-based awards

 

(1,877

)

(2,474

)

Loss (gain) on disposal of property and equipment

 

10

 

156

 

Change in fair value of contingent consideration

 

 

425

 

Changes in operating assets and liabilities:

 

851

 

16,820

 

Net cash provided by operating activities

 

34,057

 

47,449

 

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(3,101

)

(3,075

)

Proceeds from disposal of property and equipment

 

(7

)

5

 

Investment in financing receivables

 

(500

)

 

Payments received on financing receivables

 

 

9,876

 

Net cash provided by (used in) investing activities

 

(3,608

)

6,806

 

Cash flows from financing activities:

 

 

 

 

 

Payments on revolving credit facility

 

(5,000

)

(20,000

)

Dividend payments

 

(6,350

)

 

Payments of contingent consideration

 

(816

)

 

Withholding taxes on vesting of restricted stock units

 

(3,700

)

(2,680

)

Proceeds from the exercise of stock options

 

289

 

350

 

Excess tax benefits from stock-based awards

 

1,877

 

2,474

 

Net cash used in financing activities

 

(13,700

)

(19,856

)

Effect of exchange rate changes on cash and cash equivalents

 

(328

)

(3,034

)

Net increase (decrease) in cash and cash equivalents

 

16,421

 

31,365

 

Cash and cash equivalents at beginning of period

 

48,462

 

101,162

 

Cash and cash equivalents at end of period

 

$

64,883

 

$

132,527

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest, net of amounts capitalized

 

$

1,222

 

$

1,283

 

Income taxes, net of refunds

 

$

699

 

$

231

 

 

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OPERATING STATISTICS

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

% Change

 

2013

 

Membership and Exchange

 

 

 

 

 

 

 

Total active members at end of period (000’s)

 

1,819

 

(0.5

)%

1,829

 

Average revenue per member

 

$

49.30

 

(6.6

)%

$

52.79

 

 

 

 

 

 

 

 

 

Management and Rental

 

 

 

 

 

 

 

Available room nights (000’s)

 

736

 

110.6

%

349

 

RevPAR

 

$

141.45

 

(15.0

)%

$

166.39

 

 

ADDITIONAL DATA

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

% Change

 

2013

 

 

 

(Dollars in thousands)

 

Membership and Exchange

 

 

 

 

 

 

 

Transaction revenue

 

$

56,111

 

(8.2

)%

$

61,148

 

Membership fee revenue

 

31,818

 

(4.6

)%

33,364

 

Ancillary member revenue

 

1,623

 

(15.6

)%

1,924

 

Total member revenue

 

89,552

 

(7.1

)%

96,436

 

Other revenue

 

5,793

 

2.4

%

5,659

 

Total revenue

 

$

95,345

 

(6.6

)%

$

102,095

 

 

 

 

 

 

 

 

 

Management and Rental

 

 

 

 

 

 

 

Management fee and rental revenue

 

$

36,611

 

109.9

%

$

17,445

 

Pass-through revenue

 

25,085

 

63.5

%

15,341

 

Total revenue

 

$

61,696

 

88.2

%

$

32,786

 

Management and Rental gross margin

 

35.4

%

(2.3

)%

36.2

%

Management and Rental gross margin without Pass-through revenue

 

59.6

%

(12.4

)%

68.0

%

 

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RECONCILIATIONS OF NON-GAAP MEASURES

 

 

 

Quarter Ended March 31,

 

 

 

2014

 

% Change

 

2013

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

34,057

 

(28.2

)%

$

47,449

 

Less: Capital expenditures

 

(3,101

)

0.8

%

(3,075

)

Free cash flow

 

$

30,956

 

(30.2

)%

$

44,374

 

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

Membership
and
Exchange

 

Management
and
Rental

 

Consolidated

 

Membership
and
Exchange

 

Management
and
Rental

 

Consolidated

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

38,530

 

$

11,760

 

$

50,290

 

$

45,820

 

$

5,951

 

$

51,771

 

Non-cash compensation expense

 

(2,569

)

(278

)

(2,847

)

(2,279

)

(278

)

(2,557

)

Other non-operating income (expense), net

 

17

 

(153

)

(136

)

(349

)

(171

)

(520

)

Acquisition related and restructuring costs

 

(365

)

(873

)

(1,238

)

(213

)

(542

)

(755

)

EBITDA

 

35,613

 

10,456

 

46,069

 

42,979

 

4,960

 

47,939

 

Amortization expense of intangibles

 

(334

)

(2,632

)

(2,966

)

(337

)

(1,675

)

(2,012

)

Depreciation expense

 

(3,335

)

(458

)

(3,793

)

(3,319

)

(345

)

(3,664

)

Less: Net income attributable to noncontrolling interest

 

 

979

 

979

 

 

6

 

6

 

Less: Other non-operating income (expense), net

 

(17

)

153

 

136

 

349

 

171

 

520

 

Operating income

 

$

31,927

 

$

8,498

 

40,425

 

$

39,672

 

$

3,117

 

42,789

 

Interest income

 

 

 

 

 

44

 

 

 

 

 

151

 

Interest expense

 

 

 

 

 

(1,324

)

 

 

 

 

(1,653

)

Other non-operating expense, net

 

 

 

 

 

(136

)

 

 

 

 

(520

)

Income tax provision

 

 

 

 

 

(14,315

)

 

 

 

 

(15,757

)

Net income

 

 

 

 

 

24,694

 

 

 

 

 

25,010

 

Net income attributable to noncontrolling interest

 

 

 

 

 

(979

)

 

 

 

 

(6

)

Net income attributable to common stockholders

 

 

 

 

 

$

23,715

 

 

 

 

 

$

25,004

 

 

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GLOSSARY OF TERMS

 

Acquisition related and restructuring costs - Represents transaction fees, costs incurred in connection with performing due diligence, subsequent adjustments to our initial estimate of contingent consideration obligations associated with business acquisitions, and other direct costs related to acquisition activities. Additionally, this item includes certain restructuring charges primarily related to workforce reductions and estimated costs of exiting contractual commitments.

 

Adjusted EBITDA - EBITDA, excluding, if applicable: (1) non-cash compensation expense, (2) goodwill and asset impairments, (3) acquisition related and restructuring costs, (4) other non-operating income and expense (including loss on extinguishment of debt), and (5) the impact of correcting prior period items. The Company’s presentation of adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

 

Ancillary Member Revenue - Other Interval Network member related revenue including insurance and travel related services.

 

Available Room Nights - Number of nights available for rental by Aston and Aqua at managed vacation properties, which excludes all rooms under renovation. Aqua occupied room nights are included only from the acquisition date.

 

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 Interval Network active members during the applicable period.

 

EBITDA - Net income attributable to common stockholders excluding, if applicable: (1) interest income and interest expense, (2) income taxes, (3) depreciation expense, and (4) amortization expense of intangibles.

 

Free Cash Flow - Cash provided by operating activities less capital expenditures.

 

Gross Lodging Revenue - Total room revenue collected from all Aston and Aqua-managed occupied rooms. Aqua occupied room nights are included only from the acquisition date.

 

Management Fee and Rental Revenue — Represents revenue earned by our Management and Rental segment exclusive of pass-through revenue.

 

Membership Fee Revenue — Represents fees paid for membership in the Interval Network.

 

Pass-through Revenue - Represents the compensation and other employee-related costs directly associated with  management of the properties and homeowner associations that are included in both revenue and cost of sales and that are passed on to the property owners and homeowner associations 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 for Aston and Aqua.

 

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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 — Interval Network transactional and service fees paid primarily for exchanges, Getaways, and reservation servicing.

 

Interval Leisure Group

Investor Contact:

Jennifer Klein, 305-925-7302

Investor Relations

Jennifer.Klein@iilg.com

 

Or

 

Media Contact:

Christine Boesch, 305-925-7267

Corporate Communications

Chris.Boesch@intervalintl.com

 

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