Bluegreen Vacations Corporation Reports First Quarter 2020 Results

FORT LAUDERDALE, Fla.–(BUSINESS WIRE)–BBX Capital Corporation (NYSE: BBX) (OTCQX: BBXTB) (“BBX Capital”), announced that Bluegreen Vacations Corporation (NYSE: BXG), which is approximately 93% owned by BBX Capital, issued the following press release. Please see the Bluegreen press release below.

BBX Capital Corporation Investor Relations Contact:

Leo Hinkley, Managing Director, Investor Relations Officer

Phone: 954-940-5300

Email: LHinkley@BBXCapital.com

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Bluegreen Vacations Corporation Reports First Quarter 2020 Results

BOCA RATON, Florida (May 11, 2020) – Bluegreen Vacations Corporation (NYSE: BXG) (“Bluegreen” or the “Company”) today reported its first quarter 2020 financial results.

1Q20 Highlights:

• Net income attributable to shareholders was $0.2 million in the first quarter compared to net income of $15.2 million in the prior year first quarter.
• Earnings Per Share (“EPS”) of $0.00, compared to $0.20 in the prior year quarter.
• Adjusted EBITDA of $11.0 million, compared to $26.2 million in the prior year quarter.
• Total revenue decreased 5.3% to $156.9 million from $165.7 million in the prior year quarter.
• System-wide Sales of vacation ownership interests (“VOIs”) increased 5.9% to $137.4 million in the current year quarter from $129.7 million in the prior year quarter.
• The current year quarter’s results were adversely impacted by the economic impact of the COVID-19 pandemic and initial steps taken by the Company in reaction to the impact of the pandemic. These steps included the temporary closure of all of the Company’s VOI sales centers commencing in the last week of March 2020 and the incurrence of $15.5 million of pretax expenses ($0.21 loss per share) including the following:
  • a $3.3 million pretax charge or ($0.04) loss per share for severance and employee furloughs;
  • a $12.0 million pretax charge or ($0.16) loss per share to increase the allowance for loan losses.
• Net income and EPS were also adversely impacted by a $2.0 million pretax charge ($0.03) loss per share for severance charges related to a reduction in force in January 2020 unrelated to the COVID-19 pandemic.

Alan B. Levan, Chairman, President and Chief Executive Officer, commented, “While the Company started the year off strong, with system-wide sales of vacation ownership interests up 16.5% through February 29, 2020, Bluegreen has since experienced significant declines in occupancy, guest tours, and system-wide sales of VOIs and an increase in mortgage defaults, which we believe were associated with the impact of the COVID-19 pandemic. This is an unprecedented event in the United States and globally, and it is currently impossible to predict the duration or severity of the pandemic or if and when the economy and our business will return to pre-pandemic levels. We entered this period of disruption with a strong balance sheet and liquidity and believe that we are executing a prudent plan of action in response to the current circumstances.”

As previously announced, the Company temporarily closed all of its VOI sales centers; its retail marketing operations at Bass Pro Shops; Cabela’s stores and outlet malls; and its Choice Hotels call transfer program. Additionally, the Company canceled existing owner reservations through May 15, 2020 and new prospect guest tours through June 30, 2020. Several of the Company’s resorts have been closed based on various governmental mandates and advisories. We are currently developing a plan to reopen these operations including accepting guests as of May 16 and reopening VOI sales centers and marketing operations beginning June 1 on a phased schedule. The Company has also taken additional actions including a reduction in force, temporary furloughs and reduced work hours. In addition, the Company is providing temporary relief to owners with mortgages on a case-by-case basis.

Mr. Levan added, “We remain committed to our owners and the future of Bluegreen and look forward to the end of this global crisis and the reestablishment of our full business operations. We will be excited to welcome our owners and guests back for much needed vacations as soon as conditions allow.”

Financial Results

(dollars in millions, except per share data)

Total revenue for the three months ended March 31, 2020 decreased 5.3% to $156.9 million from $165.7 million in the prior year quarter, primarily associated with a $12.0 million increase in the allowance for loan losses associated with the COVID-19 pandemic, and a decrease in fee-based service commission revenue partially offset by increases in VOI sales and growth in resort operations and club management revenues, as discussed more fully under “Segment Results” below. Adjusted EBITDA decreased to $11.0 million in the first quarter of 2020 from $26.2 million in the first quarter of 2019, primarily associated with the economic impacts of the COVID-19 pandemic discussed above.

Segment Results

Sales of VOIs and Financing Segment

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

System-wide sales of VOIs

System-wide sales of VOIs were $137.4 million and $129.7 million during the three months ended March 31, 2020 and 2019, respectively. System-wide sales of VOIs increased during the first quarter compared to the comparable prior year quarter due to an increase in the sale-to-tour conversion ratio and higher average sales volume per guest, partially offset by a decrease in guest tours. As previously disclosed, the Company temporarily closed all of its VOI sales offices on March 23, 2020 associated with the COVID-19 pandemic. The closures of all marketing operations and VOI sales centers as a result of the COVID-19 pandemic is expected to significantly impact system-wide sales of VOIs during the remainder of 2020, however the actual impact, including the extent and duration of the impact, cannot be predicted at this time.

Sales mix for the first quarter of 2020 was weighted toward sales to existing owners at 59.7% of system-wide sales of VOIs, compared to 56.9% in the comparable prior year quarter.

Fee-based sales commission revenue was $41.4 million during the current year quarter, compared to $45.2 million in the prior year quarter. This decrease was a result of the previously announced shift of more of Bluegreen’s system-wide sales away from sales of third-party VOI inventory and slightly lower commission rates during the current year quarter. Sales of third-party VOI inventory were 45.1% of system-wide sales in the current year quarter, compared to 51.5% in the prior year quarter.

Provision for Loan Losses

The provision for loan losses varies based on the amount of financed, nonfee-based sales during the period and changes in our estimates of future notes receivable performance for existing and newly originated loans. Our provision for loan losses as a percentage of gross sales of VOIs was 40% and 18% during the current year quarter compared to the prior year quarter, respectively. The percentage of our sales which were realized in cash within 30 days from sale was 43% during the current year quarter and 44% during the prior year quarter.

While the impact of COVID-19 pandemic on our borrowers was not reflected in our default or delinquency rates as of March 31, 2020, we believe that the COVID-19 pandemic will have a significant impact on our VOI notes receivable. Accordingly, as of March 31, 2020, we recorded an additional allowance for loan losses of $12.0 million, which includes our estimate of customer defaults as a result of the COVID–19 pandemic based on our historical experience, forbearance requests received from our customers, and other factors, including but not limited to, the seasoning of the notes receivable and FICO scores of the customers. The Company is working with its owners with mortgages on a case-by-case basis with a view to mitigating defaults, however there can be no assurances that these efforts will be successful or that the allowances for loan losses taken to date will prove to be adequate.

In addition to the COVID-19 pandemic impact discussed above, the provision for loan losses was impacted by an increase in the average annual default rates, which we believe was due in large part to the receipt of letters from third parties and attorneys who purport to represent certain VOI owners and who have encouraged such owners to become delinquent and ultimately default on their obligations. Defaults associated with such letters in the current year quarter increased 51.9% compared to the prior year quarter.

Selling and Marketing Expense

Selling and marketing expense increased to 54.0% of system-wide sales of VOIs during the current year quarter as compared to 50.3% during the prior year quarter primarily attributable to higher costs per guest tour, higher fees to Bass Pro as well as a change in the timing of expense recognition under the 2019 settlement agreement with Bass Pro, additional costs related to our marketing operations in 21 new Cabela’s stores and additional costs associated with the COVID-19 pandemic.

As previously described, during the last week of March 2020 we temporarily closed all of our marketing operations and VOI sales centers in response to the COVID-19 pandemic. Our current plan is to reopen these operations including accepting guests as of May 16 and reopen VOI sales centers and marketing operations beginning June 1 on a phased schedule. Further, we implemented several cost mitigating activities including terminating certain marketing employees and placing a significant number of our sales, sales support and corporate associates on temporary furlough and reduced work hours. As of March 31, 2020, we had incurred $1.9 million in severance and $0.7 million of payroll to sales and marketing employees on temporary furlough or reduced work hours as a result of the impact of the COVID-19.

Resort Operations and Club Management Segment

(dollars in millions)

In the first quarter of 2020, resort operations and management club revenue increased by $1.8 million, or 4.2%, to $45.7 million from $43.9 million in the prior year quarter. Further, segment adjusted EBITDA grew by 10.2% to $14.6 million. The increase in segment adjusted EBITDA was driven primarily by lower costs incurred during the first quarter of 2020, excluding severance and other costs associated with the Company’s response to the COVID-19 pandemic, as well as severance costs incurred in connection with the January 2020 reduction in force.

Balance Sheet and Liquidity

As of March 31, 2020, unrestricted cash and cash equivalents totaled $241.5 million. Bluegreen had availability of approximately $124.5 million under its receivable-backed purchase and credit facilities, inventory lines of credit and corporate credit line as of March 31, 2020, subject to eligible collateral and the terms of the facilities, as applicable. In March 2020, the Company borrowed $60 million under its syndicated corporate credit line, as well as executed borrowings/receivable sales under its receivable-backed debt and purchase facilities, in part to increase its cash on hand to respond to the economic impacts of the COVID-19 pandemic. Excluding receivable-backed notes payable, the Company’s net debt-to-EBITDA ratio as of March 31, 2020 was 0.51.

Free cash flow, which the Company defines as cash flow from operating activities, less capital expenditures, was $(16.8) million for the three months ended March 31, 2020, compared to $3.4 million for the three months ended March 31, 2019. Cash flows during 2020 reflected a $4.0 million payment made to Bass Pro in January 2020 pursuant to the settlement agreement entered into in June 2019, lower escrow deposits from customers associated with the closure of VOI sales centers resulting from the COVID-19 pandemic and a reduction in working capital, partially offset by a reduction in income tax payments and $3.5 million in decreased spending on the acquisition and development of inventory and the purchase of property and equipment during the 2020 period as compared to the 2019 period.

Stock Repurchase and Dividend

In March 2020, the Company purchased approximately 1.9 million shares of its common stock in a private transaction for $6.25 per share.

On April 22, 2020, our board of directors determined to suspend quarterly cash dividends on our common stock until further notice associated with the impact of the COVID-19 pandemic.

COVID-19 Response and Outlook

For further information regarding the Company’s COVID-19 Response and Outlook please see the Quarterly Report on Form 10-Q for the three months ended March 31, 2020 filed with the Securities and Exchange Commission on May 11, 2020.

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 public health issues, including in particular the COVID-19 pandemic and the effects of the pandemic, including required resort closures, travel and business restrictions, volatility in the international and national economy and credit markets, worker absenteeism, quarantines and other health related restrictions; the length and severity of the COVID-19 pandemic and our ability to successfully resume full business operations thereafter; governmental and agency orders, mandates and guidance in response to the COVID-19 pandemic and the duration thereof, which is uncertain and will impact our ability to fully utilize resorts and re-open sales centers and other marketing activities; the pace of recovery following the COVID-19 pandemic; competitive conditions; our liquidity and the availability of capital; our ability to successfully implement our strategic plans and initiatives to navigate the COVID-19 pandemic; risks that our current or future marketing alliances may not be available to us in the future; risks that default rates may increase and exceed the Company’s expectations; risks related to our indebtedness, including the potential for accelerated maturities and debt covenant violations; the risk of heightened litigation as a result of actions taken in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic on our ability to pay dividends in the future, including that dividends may not be paid at historical rates or at all; the impact of the CARES Act and our ability to obtain certain of the relief provided thereof; the impact of the COVID-19 pandemic on consumers, including their income, their level of discretionary spending both during and after the pandemic, and their views towards travel and the vacation ownership industries; the risk that our resort management fees and finance operations may not continue to generate recurring sources of cash during or following the pandemic to the extent anticipated or at all; risks that our current or future marketing alliances may not be available to us in the future; risks that the Company’s efforts to address the actions of timeshare exit firms and the increase in default rates may not be successful and default rates may exceed the Company’s expectations; our ability to achieve increases in VOI sales once sales operations resume; that the Company’s current strategy to reduce sales of fee-based inventory may not result in EBITDA growth or otherwise positively impact the Company and such strategy may change; our ability to successfully implement our strategic plans and initiatives, generate earnings and long-term growth; risks that the Company’s costs, including costs of VOIs sold, net carrying cost of inventory, overhead expenses and provision for loan losses will not be within the expected ranges; risks related to our indebtedness; risks that natural disasters, including hurricanes, may result in declines in leisure travel or traffic at locations where we have marketing operations, adversely impact the availability of credit, or otherwise adversely impact the Company’s financial condition and operating results; any damage to physical assets or interruption of access to physical assets or operations resulting from public health issues, such as the recent coronavirus outbreak, or from hurricanes, earthquakes, fires, floods, windstorms or other natural disasters, which may increase in frequency or severity due to climate change or other factors; 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 for the year ended December 31, 2019, which was filed on March 12, 2020. 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 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, vacation ownership plan with approximately 221,000 owners, 68 Club and Club Associate Resorts and access to more than 11,350 other hotels and resorts through partnerships and exchange networks as of March 31, 2020. 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 93% 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 activities include its approximate 93% ownership interest in Bluegreen Vacations Corporation (NYSE: BXG) as well as its real estate and middle market divisions. For additional information, please visit www.BBXCapital.com.

Contacts

Bluegreen Vacations Corporation

Investor Relations:

Leo Hinkley 954-940-5336

Email: Leo.Hinkley@BluegreenVacations.com

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