Bluegreen Vacations Corporation Reports First Quarter 2019 Results

BOCA RATON, Fla.–(BUSINESS WIRE)–Bluegreen Vacations Corporation (NYSE: BXG) (“Bluegreen” or the
“Company”) today reported its first quarter 2019 financial results.


1Q19 Highlights:


Earnings Per Share (“EPS”) of $0.20, compared to $0.28 in the prior
year quarter.


Net income attributable to shareholders was $15.2 million, compared to
$21.0 million in the prior year quarter.


Adjusted EBITDA of $26.2 million, compared to $33.3 million in the
prior year quarter.


Total revenue of $168.8 million, compared to $167.5 million in the
prior year quarter.


System-Wide Sales of Vacation Ownership Interests (VOIs) of $129.7
million, compared to $132.8 million in the prior year quarter.


“We remain focused on strengthening our platform to support growth and
to accelerate new owner sales. To accomplish this, we added new sales
offices, streamlined processes and offered vacation package holders the
ability to book their vacations online,” said Shawn B. Pearson, Chief
Executive Officer and President. “During the quarter we saw an increase
in package sales, which we believe is a positive leading indicator for
VOI sales, and we are seeing the positive impact of sales at the new
resorts added to our network over the past year and improved activation
of our vacation packages. We continue to explore opportunities to add
new partnerships and distribution channels to broaden our network so as
to introduce Bluegreen to potential new owners. Our financial condition
is strong supported by a stable balance sheet and solid cash flows.”


“Regarding our relationship with Bass Pro Shops, we continue to have
communications regarding the scheduling of good faith meetings with the
objective of settling our differences and continuing our successful
alliance. In the meantime, we are continuing to sell vacation packages
through the Bass Pro marketing channel, we opened a new kiosk at the
Rogers, Arkansas Bass Pro store on April 26, 2019 and we achieved a 23%
increase in the number of vacation packages sold through the Bass Pro
marketing channel in the first quarter of 2019 compared to the first
quarter of 2018. In addition, we’re underway with the construction and
design process of new cabins within the Bluegreen/Big Cedar Vacations
joint venture with an affiliate of Bass Pro.”


Financial Results


 






 






 




(dollars in millions, except per share data)


















————————————————————


































 






Three Months Ended March 31,






2019




2018




Change


















 


Total revenue




$


168.8




$


167.5




0.8%


Income before non-controlling interest and


















provision for income taxes




$


22.2




$


30.8




(27.9)%


Net income attributable to shareholders




$


15.2




$


21.0




(27.6)%


Earnings per share basic and diluted




$


0.20




$


0.28




(28.6)%


Adjusted EBITDA




$


26.2




$


33.3




(21.3)%


Capital-light revenue(1) as a percentage of


















total revenue






70.8%






74.8%




(400)bp


(1)


 


Bluegreen’s “capital-light” revenue includes revenue from the sales
of VOIs under fee-based sales and marketing arrangements,
just-in-time inventory acquisition arrangements, and secondary
market arrangements, as well as other fee-based services revenue and
cost reimbursements revenue.


Total Revenue for the three months ended March 31, 2019 was $168.8
million, compared to $167.5 million in the prior year period, primarily
due to increases in resort operations and club management revenue and
interest income, partially offset by decreases in VOI sales and an
increase in the provision for loan losses as discussed more fully under
“Segment Results” below. Adjusted EBITDA was $26.2 million in the first
quarter of 2019 compared to $33.3 million in the first quarter of 2018,
primarily due to lower VOI sales and higher provision for loan losses,
cost of VOI sales and net carrying cost of inventory, partially offset
by higher profit on resort operations and club management.


Corporate & Other expenses were $18.2 million in the first quarter of
2019 compared to $22.5 million in the first quarter of 2018. The decline
in the 2019 period was primarily due to lower legal and healthcare
costs, and lower long-term incentive compensation.


In terms of segment results, decreased results in the Sales of VOIs and
Financing segment were partially offset by growth in the Company’s
Resort Operations and Club Management segment, as more fully described
below.


Segment Results


 






 






 




Sales of VOIs and Financing Segment


















(dollars in millions, except per guest and per transaction
amounts)


















 


































 






Three Months Ended March 31,






2019




2018




Change


















 


System-wide sales of VOIs




$


129.7




$


132.8




(2.4)%


Segment adjusted EBITDA




$


31.1




$


43.7




(28.8)%


Number of total guest tours






48,138






50,197




(4.1)%


Average sales price per transaction




$


15,796




$


15,234




3.7%


Sales to tour conversion ratio






17.1%






17.5%




(2.3)%


Sales volume per guest (“VPG”)




$


2,705




$


2,661




1.7%


Selling and marketing expenses, as a


















% of system-wide sales of VOIs






50.3%






49.4%




90bp


Provision for loan losses






17.7%






12.5%




520bp


Cost of VOIs sold






7.4%






3.2%




420bp


During the first quarter of 2019, system-wide sales of VOIs were $129.7
million, compared to $132.8 million in the first quarter of 2018. The
decrease in sales reflected the decrease in guest tours, partially
offset by a slightly higher average sales volume per guest (“VPG”). The
impact of lower marketing vacation package sales last year and
pre-qualifying holders of packages through the Company’s “yield
management” program resulted in a decrease in the number of tours in the
first quarter of 2019, although, as indicated above, an increase in VPG.
Package sales volumes in the first quarter of 2019 increased 8% compared
to the first quarter of 2018 and this increase is expected to result in
increased guest tours over the next six to 18 months.


Provision for loan losses increased to 17.7% of gross VOI sales,
compared to 12.5% in the prior year first quarter. In the first quarter
of 2018, the low provision for loan losses resulted primarily from the
impact of prepayments (including equity trades) on prior years’
originations in excess of previous estimates. The Company’s provision
for loan losses in the third and fourth quarter of 2018 was 17.0% and
20.7%, respectively, with expectations for 2019 at the low end of that
range. The year over year increase was also driven by continued attorney
cease and desist activity. The Company believes that its zero-tolerance
strategy and ongoing steps to address this issue, should ultimately
result in a reduction of cease and desist activity.


Fee-based sales commission revenue was $45.2 million in the first
quarter of 2019, compared to $45.9 million in the first quarter of 2018.
The year over year change reflected lower sales of third-party VOI
inventory, partially offset by higher commission rates.


In the first quarter of 2019, cost of VOIs sold represented 7.4% of
sales of VOIs compared to 3.2% in the first quarter of 2018. In the
first quarter of 2018, the low cost of VOIs sold was primarily due to
the benefit achieved from approximately 36% of our VOI sales coming from
a resort that we acquired in 2017 that had a relatively lower cost than
our other VOIs. The cost of VOIs sold in the first quarter of 2019 were
favorably impacted by more secondary market inventory acquisitions
during the quarter than expected.


Net carrying cost of inventory increased $5.2 million in the first
quarter of 2019 compared to the first quarter of 2018, primarily due to
the carrying cost associated with the Éilan Hotel and Spa, which was
acquired in April 2018.


Resort Operations and Club Management Segment


 






 






 




(dollars in millions)


































 






Three Months Ended March 31,






2019




2018




% Change


















 


Resort operations and club management revenue




$


47.1




$


41.5




13.3%


Segment adjusted EBITDA




$


13.2




$


12.1




9.6%


Resorts managed






49






47




4.3%


In the first quarter of 2019, resort operations and management club
revenue increased by $5.5 million, or 13.3%, to $47.1 million from the
prior year quarter. The increase was driven in part by the additional
resorts managed in the first quarter of 2019 compared to 2018, as well
as fee increases under certain management contracts. Segment adjusted
EBITDA grew by 9.6% to $13.2 million.


Balance Sheet and Liquidity


As of March 31, 2019, unrestricted cash and cash equivalents totaled
$189.9 million. Bluegreen had availability of approximately $191.1
million under its receivable-backed purchase and credit facilities and
corporate credit line as of March 31, 2019, subject to eligible
collateral and the terms of the facilities, as applicable. Excluding
receivable-backed notes payable, the Company’s net debt-to-EBITDA ratio
as of March 31, 2019 was only 0.05.


Free cash flow, which the Company defines as cash flow from operating
activities, less capital expenditures, was $3.4 million for the quarter
ended March 31, 2019, compared to $8.0 million for the quarter ended
March 31, 2018. The decrease in free cash flow was primarily
attributable to sales office expansions, increased information
technology spending and the acquisition of secondary market inventory,
partially offset by lower income tax payments and lower change in
working capital.


During the first quarter of 2019, the Company did not repurchase any
shares of Common Stock under the repurchase program approved by the
Company’s Board of Directors in 2018. There are approximately 2.7
million shares remaining in the program authorized for repurchase. The
program authorizes the Company, in management’s discretion, to
repurchase shares from time to time subject to market conditions and
other factors.


Dividend


On April 17, 2019, Bluegreen’s Board of Directors declared a quarterly
common stock cash dividend of $0.17 per share. The dividend is payable
May 15, 2019 to shareholders of record as of the close of trading on
April 30, 2019.


First Quarter 2019 Webcast


The Company has provided a pre-recorded business update and management
presentation via webcast link, indicated below, in the Investor
Relations section of its website at ir.bluegreenvacations.com. A
transcript will also be available simultaneously with the webcast. The
webcast and supplemental management presentation can be accessed on the
Investor Relations section of Bluegreen Vacations’ website at ir.bluegreenvacations.com.
The pre-recorded presentation can also be accessed at 1-844-512-2921
(domestic) and 1-412-317-6671 (international) and entering pin number
1134342. The business update via dial-in will be available through
midnight Sunday, June 2, 2019. A transcript will also be available
simultaneously with the webcast.


Forward-Looking Statements:


Certain statements in this press release are “forward-looking
statements” within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. All statements, other than statements of historical
fact, are forward-looking statements. Forward-looking statements are
based on current expectations of management and can be identified by the
use of words such as “believe”, “may”, “could”, “should”, “plans”,
“anticipates”, “intends”, “estimates”, “expects”, and other words and
phrases of similar impact. Forward-looking statements involve risks,
uncertainties and other factors, many of which are beyond our control,
that may cause actual results or performance to differ from those set
forth or implied in the forward-looking statements. These risks and
uncertainties include, without limitation, risks relating to our ability
to achieve increases in VOI sales or new owner sales successfully
implementing our strategic plans and initiatives, generate earnings and
long-term growth, improve our digital capabilities, including our
virtual reality technology or complete sales office expansions when
planned or at all and that such expansions will be profitable; and risks
that our marketing alliances will not contribute to growth or be
profitable or that issues with Bass Pro will not be successfully
resolved; risks that dividend payments will not continue at current
levels, if at all; and the additional risks and uncertainties described
in Bluegreen’s filings with the Securities and Exchange Commission,
including, without limitation, those described in the “Risk Factors”
section of Bluegreen’s Annual Report on Form 10-K and the Quarterly
Report on Form 10-Q for the three months ended March 31, 2019 which is
expected to be filed on or about May 6, 2019. Bluegreen cautions that
the foregoing factors are not exclusive. You should not place undue
reliance on any forward-looking statement, which speaks only as of the
date made. Bluegreen does not undertake, and specifically disclaims any
obligation, to update or supplement any forward-looking statements.


Non-GAAP Financial Measures:


The Company refers to certain non-GAAP financial measures in this press
release, including system-wide sales of VOIs, Adjusted EBITDA, adjusted
EPS and free cash flow. Please see the supplemental tables and
definitions attached herein for additional information and
reconciliation of such non-GAAP financial measures.


About Bluegreen Vacations Corporation:


Bluegreen Vacations Corporation (NYSE: BXG) is a leading vacation
ownership company that markets and sells vacation ownership interests
(VOIs) and manages resorts in top leisure and urban destinations. The
Bluegreen Vacation Club is a flexible, points-based, deeded vacation
ownership plan with approximately 217,000 owners, 69 Club and Club
Associate Resorts and access to more than 11,000 other hotels and
resorts through partnerships and exchange networks as of March 31, 2019.
Bluegreen Vacations also offers a portfolio of comprehensive, fee-based
resort management, financial, and sales and marketing services, to or on
behalf of third parties. Bluegreen is approximately 90% owned by BBX
Capital Corporation (NYSE: BBX) (OTCQX: BBXTB), a diversified holding
company. For further information, visit www.BluegreenVacations.com.


About BBX Capital Corporation:


BBX Capital Corporation (NYSE: BBX) (OTCQX: BBXTB) is a Florida-based
diversified holding company whose principal investments include
Bluegreen Vacations Corporation (NYSE: BXG), BBX Capital Real Estate,
Renin Holdings, and IT’SUGAR. For additional information, please visit www.BBXCapital.com.


BLUEGREEN VACATIONS CORPORATION


CONSOLIDATED STATEMENTS OF INCOME


AND COMPREHENSIVE INCOME (UNAUDITED)


(In thousands, except for share and per share data)




 






 










For the Three Months Ended






March 31,






2019




2018


Revenue:














Gross sales of VOIs




$


62,884




$


64,160


Provision for loan losses




 


(11,153)




 


(8,019)


Sales of VOIs






51,731






56,141














 


Fee-based sales commission revenue






45,212






45,854


Other fee-based services revenue






29,568






28,024


Cost reimbursements






20,236






16,200


Interest income






22,008






21,122


Other income, net




 


89




 


181


Total revenue




 


168,844




 


167,522














 


Costs and expenses:














Cost of VOIs sold






3,848






1,812


Cost of other fee-based services






22,868






17,411


Cost reimbursements






20,236






16,200


Selling, general and administrative expenses






90,214






93,549


Interest expense




 


9,506




 


7,767


Total costs and expenses




 


146,672




 


136,739














 


Income before non-controlling interest and














provision for income taxes






22,172






30,783


Provision for income taxes




 


5,303




 


7,201


Net income






16,869






23,582


Less: Net income attributable tonon-controlling interest




 


1,716




 


2,607


Net income attributable to Bluegreen














Vacations Corporation shareholders




$


15,153




$


20,975














 


Comprehensive income attributable to














Bluegreen Vacations Corporation














shareholders




$


15,153




$


20,975


BLUEGREEN VACATIONS CORPORATION


CONSOLIDATED STATEMENTS OF INCOME


AND COMPREHENSIVE INCOME (UNAUDITED)


(In thousands, except for share and per share data)




 






 










For the Three Months Ended






March 31,






2019




2018


Earnings per share attributable to Bluegreen
Vacations Corporation shareholders – Basic and diluted




$


0.20




$


0.28














 


Weighted average number of common shares outstanding:














Basic and diluted




 


74,446




 


74,734














 


Cash dividends declared per share




$


0.17




$


0.15


BLUEGREEN VACATIONS CORPORATION


CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)


(In thousands)




 






 










For the Three Months Ended






March 31,






2019




2018


Operating activities:














Net income




$


16,869




$


23,582


Adjustments to reconcile net income to net cash provided














by operating activities:














Depreciation and amortization






4,486






3,946


Loss on disposal of property and equipment






10






—


Provision for loan losses






11,145






8,006


Provision for deferred income taxes






2,281






3,247


Changes in operating assets and liabilities:














Notes receivable






(7,607)






(5,264)


Prepaid expenses and other assets






(9,131)






(5,177)


Inventory






(8,237)






(9,673)


Accounts payable, accrued liabilities and other, and














deferred income




 


1,126




 


(5,204)


Net cash provided by operating activities




 


10,942




 


13,463














 


Investing activities:














Purchases of property and equipment




 


(7,507)




 


(5,462)


Net cash used in investing activities




 


(7,507)




 


(5,462)














 


Financing activities:














Proceeds from borrowings collateralized














by notes receivable






13,487






25,761


Payments on borrowings collateralized by notes receivable






(34,968)






(33,947)


Payments under line-of-credit facilities and notes payable






(8,168)






(16,487)


Payments of debt issuance costs






(105)






(98)


Dividends paid




 


(12,655)




 


(11,210)


Net cash used in financing activities




 


(42,409)




 


(35,981)


Net decrease in cash and cash equivalents














and restricted cash






(38,974)






(27,980)


Cash, cash equivalents and restricted cash at beginning of period




 


273,134




 


243,349


Cash, cash equivalents and restricted cash at end of period




$


234,160




$


215,369














 


Supplemental schedule of operating cash flow information:














Interest paid, net of amounts capitalized




$


8,271




$


6,685


Income taxes paid




$


812




$


4,182


BLUEGREEN VACATIONS CORPORATION


CONSOLIDATED BALANCE SHEETS (UNAUDITED)


(In thousands, except for per share data)




 






 










March 31,




December 31,






2019




2018


ASSETS














Cash and cash equivalents




$


189,875




$


219,408


Restricted cash ($20,714 and $28,400 in VIEs at March 31, 2019














and December 31, 2018, respectively)






44,285






53,726


Notes receivable, net ($318,111 and $341,975 in VIEs














at March 31, 2019 and December 31, 2018, respectively)






435,629






439,167


Inventory






342,386






334,149


Prepaid expenses






17,948






10,097


Other assets






48,931






49,796


Operating lease assets






24,031






—


Intangible assets, net






61,577






61,845


Loan to related party






80,000






80,000


Property and equipment, net




 


102,431




 


98,279


Total assets




$


1,347,093




$


1,346,467














 


LIABILITIES AND SHAREHOLDERS’ EQUITY














Liabilities














Accounts payable




$


16,169




$


19,515


Accrued liabilities and other






80,827






80,364


Operating lease liabilities






25,263






—


Deferred income






17,051






16,522


Deferred income taxes






93,337






91,056


Receivable-backed notes payable – recourse






74,744






76,674


Receivable-backed notes payable – non-recourse (in VIEs)






363,183






382,257


Lines-of-credit and notes payable






125,436






133,391


Junior subordinated debentures




 


71,504




 


71,323


Total liabilities






867,514






871,102














 


Commitments and Contingencies


























 


Shareholders’ Equity














Common stock, $.01 par value, 100,000,000 shares authorized;
74,445,923














shares issued and outstanding at March 31, 2019 and December 31, 2018






744






744


Additional paid-in capital






270,369






270,369


Retained earnings




 


161,139




 


158,641


Total Bluegreen Vacations Corporation shareholders’ equity






432,252






429,754


Non-controlling interest




 


47,327




 


45,611


Total shareholders’ equity




 


479,579




 


475,365


Total liabilities and shareholders’ equity




$


1,347,093




$


1,346,467


BLUEGREEN VACATIONS CORPORATION


ADJUSTED EBITDA RECONCILIATION




 






 










For the Three Months Ended






March 31,


(in thousands)




2019




2018


Net income attributable to shareholders




$


15,153




$


20,975


Net income attributable to the














non-controlling interest in














Bluegreen/Big Cedar Vacations






1,716






2,607


Adjusted EBITDA attributable to the














non-controlling interest














in Bluegreen/Big Cedar Vacations






(1,781)






(2,612)


Loss (gain) on assets held for sale






9






(20)


Add: depreciation and amortization






3,365






2,927


Less: interest income (other than interest














earned on VOI notes receivable)






(1,846)






(1,434)


Add: interest expense – corporate and other






4,244






3,056


Add: franchise taxes






34






81


Add: provision for income taxes






5,303






7,201


Corporate realignment cost




 


—




 


476


Total Adjusted EBITDA




$


26,197




$


33,257


BLUEGREEN VACATIONS CORPORATION


SEGMENT ADJUSTED EBITDA SUMMARY




 






 










For the Three Months Ended






March 31,


(in thousands)




2019




2018


Adjusted EBITDA – sales of VOIs














and financing




$


31,131




$


43,702


Adjusted EBITDA – resort operations














and club management




 


13,234




 


12,078


Total Segment Adjusted EBITDA






44,365






55,780


Less: Corporate and other




 


(18,168)