Ultimate Escapes First Quarter 2010 Results and Discussion

By: Destination Club News
Date: June 7, 2010

Last month, Ultimate Escapes conducted a conference call with investors, members, and the general public to report on their first quarter of 2010. Hosted by President and CEO Jim Tousignant and Chief Financial Officer Philip Callaghan, we listened in on the call and have highlighted some of the notable discussion points.

"The beginning of 2010 was, from many points of view, similar to what we saw in 2009," Tousignant began. "A generally weak macroeconomic environment which is certainly affecting the discretionary income of most consumers. Although we've seen growing signs that recovery is beginning to take place, we are continuing to take a conservative and cautious approach to our fiscal plans in order to best navigate this environment. With that said, there are some positives to take away from our first quarter. On the membership side, total memberships increased in the quarter to 1,229 members. Our membership fee revenue increased 66% from the prior year quarter while our annual dues revenue rose 17% from the first quarter of 2009. During 2010, our members are traveling more than this time last year, which has also resulted in higher club property occupancy levels and improved member satisfaction, leading to higher member renewal rates and member referrals. As our membership base continues to grow and member retention improves, our recurring revenues from membership fees, annual dues, and nightly fees has also improved on a year over year basis, which we believe is a strong indicator of the strong value proposition of our lifestyle product and services, particularly given the continued global recession we are still experiencing."

"In addition to growing our core based business, we continue to focus on deleveraging the business and reducing our debt. Since September of 2009, we have paid down almost $12 million in debt, including paying down $3.2 million in the first quarter of 2010. As we look forward to the rest of 2010, we do not expect a major shift in the overall macroeconomic environment, although we do see positive signs of consumer spending increasing, particularly in the affluent consumer segment that we target. We are also seeing real estate values in most markets that we serve improving as well as the equity and debt financing becoming generally more available. Most importantly, we are seeing increasing interest from potential members in our growing portfolio of club membership offerings, which we believe should lead to improved sales growth later in 2010 and into 2011. We will certainly continue to focus on building overall category awareness for destination clubs and brand awareness specifically for Ultimate Escapes for over 10 million qualified buyers that we target on a worldwide basis, as well as continue to provide the best in member experiences and the highest quality customer service possible to our existing club members, all while maintaining the premiere portfolio of destinations and properties in the luxury destination club industry."

These sentiments have been echoed by many in the destination club space in recent months. Steve Case, the Chairman of Exclusive Resorts, the world's largest destination club, sat down with CNBC to discuss the club early this year, saying "My guess is we will have a decent year in 2010 and probably accelerate from there."

Tousignant would then turn over the call to Callaghan to discuss the club's financials for the first quarter in greater detail.

"For the first quarter of 2010, the company reported revenue of $7.3 million, a 15% decrease from $8.6 million in the prior year's quarter, primarily due to $3 million of member assessment fees collected in the first quarter of 2009 that were not repeated in the first quarter of 2010, partially offset by the increased revenues from existing members and from new members added as a result of the Private Escapes transaction," Callaghan said. "Excluding these assessment fees, first quarter revenues were up 31% from the prior year quarter."

"EBITDA for first quarter 2010 showed a loss of $1.2 million, compared with a profit of $2.3 million from the prior-year quarter. Depreciation and amortization expense for the first quarter 2010 was $2.0 million, up 90% from the prior-year quarter, primarily due to the Private Escapes transaction, which closed in September of 2009. On an adjusted EBITDA basis for the first quarter of 2010, adjusted EBITDA showed a small loss of $156,000."

"Interest expense for the first quarter 2010 was $3.0 million, a 31% increase from the prior-year quarter, mainly as a result of the Private Escapes transaction. Net loss for the first quarter of 2010 was $6.5 million, compared to a net loss of $1.2 million in the first quarter of 2009. As of March 31, 2010, the company had $4.7 million in cash and restricted cash and approximately $120.1 million of debt outstanding on its balance sheet. During the first quarter of 2010, the company used cash from operations of approximately $.5 million, mainly attributable to the net loss of the first quarter, partially offset by a net increase in non-cash charges and the collection of membership receivables."

As the world's first publicly-traded destination club, Ultimate Escapes adheres to more disclosure than most of their competitors. If you would like to learn more about Ultimate Escapes and the rest of the destination club industry, request a free copy of our Destination Club Guide, where you can make comparisons between various clubs and learn more about the benefits and risks of membership.