Rec: Diamond Resorts International

(DRII: $24.10)

Position: Sell

Shares Out: 75.66M

Nov. 20, 2014

Target: $18.00

Market Cap: $ 1,820M

FYE: Dec

Concept:
1. Fragile business model characterized by a lack of any structural competitive advantage and a reliance
on continuous access to capital markets to meet working capital requirements
2. Growth strategy predicated on cheap inventory acquisition and roll-up/consolidation is unsustainable
3. Controversial management structure points to serious misalignment of management compensation and
shareholder interests
4. Aggressive accounting raises questions about the quality of earnings
Summary: Diamond Resorts International (DRII or the Company) represents an attractive short
candidate with near-term catalysts. DRII is a growth story the second-largest global timeshare company
that has recorded impressive top-line growth in the past three years largely by consolidating distressed
resort operators. While the street contends that DRIIs strategy of recycling inventory created by customer
defaults vs. constructing new properties leads to cash flow generative and sustainable growth, my
conversations with DRII customers points to an unsustainable strategy of aggressive increases in HOA
assessments to pressure client defaults. Furthermore, DRIIs business model requires continuous access to
capital markets to fund its working capital requirements. Additionally, an opaque compensation structure and
aggressive accounting practices raise serious questions about the quality of DRIIs earnings. Even after
using extremely optimistic long-term revenue growth and EBITDA margin targets, DRII appears to be fully
valued, suggesting that DRII is currently priced to perfection.

Company Background:
Diamond Resorts International (DRII) is the second-largest global timeshare company based on the number
of resorts managed and number of owner-families within its network. DRII has over 513k owner-families,
second only to industry leader Wyndham that has 907k owner families. The company completed its IPO on
July 24, 2013 and has grown its business into a global network of resorts including 93 managed and 210
affiliated resorts.
Diamonds core businesses are managing timeshare resorts, selling timeshares, and providing financing for
consumers purchases of timeshares. Diamond was created in 2007 when founder Steven Cloobeck
acquired the assets of Sunterra several years after that companys exit from bankruptcy protection.
Beginning in 2010, in the immediate wake of the financial crisis, Diamond embarked on an aggressive roll-up
strategy and acquired several private timeshare companies that were in or near bankruptcy.

Figure'1.'Diamond'Resorts'International'is'the'second'largest'timeshare'company'in'terms'of'resorts'owned'and'
number'of'owner'families.'
Source.'Company'presentation'

Investment Thesis:
1. The transition of the timeshare industry from fixed-week, fixed unit purchases to a point system
and competition from major hotel companies diminishes the value proposition of DRII product.
In the last decade, faced with changing travel patterns of consumers (fewer people taking an annual
weeklong vacation and more taking frequent, shorter vacations) and the introduction of a plethora of hotel
and airline frequent traveler programs, the timeshare industry embraced product development and product
extension strategies. The timeshare product has evolved from a fixed-week, fixed-unit real estate purchase
to a travel currency (points) that can be redeemed for many different travel products for varying lengths of
time, including airfare, hotels, and car rentals. These product extensions mean that today the flexibility of the
product offering, more than the physical product itself, is the key to a differentiated product offering. While
DRII may have more owner families or managed properties in the timeshare industry than do other major
hotel corporations, the company is challenged to match the flexibility of the product offered by Marriott,
Starwood, Wyndham, and Hilton. For example, Starwood Vacation Network, Starwoods timeshare business
consists of only 19 properties, but a one-week vacation is equivalent to either 44,000 points (StarOptions)
to be used at the clients home resort the equivalent of about a one-bedroom condo at most resorts or
can be converted into 26,000 points (Starpoints) to be used at any of Starwoods 1100+ hotels. The DRII
network of 300 hotels is far smaller than those of major hotel companies, reducing the value proposition of
the companys product to prospective buyers. The data clearly demonstrates the importance of the flexibility
of the product offering to customer acquisition costs and the advantage that major hotel corporations have
over traditional timeshare resort operators Marriott Vacations currently averages ~7,000 families per resort
owned vs. DRII which averages ~5,500 families per resort owned.
The infancy of the vacation ownership industry was marked by scams and gross misrepresentation. This has
led to a disproportionate importance of having a trusted brand. Major hotel corporations have brought both
credibility and stability to the industry and all of the major multinational hotel corporations now have a
vacation ownership business unit. Although DRII may have 500k owner families, it will still have to overcome
a smaller share of mind vs. the more established hotel companies when selling to prospective customers.

Figure'2.'Interest'in'timeshare'ownership'is'on'the'wane'

Source.'Google'Trends'

Given that the industry faces an aging population (the median age of the timeshare owner was 51 years in
2012 according to ARDA) and needs to find means to attract the next generation of timeshare buyer with a
plethora of vacation options, DRII has no sustainable competitive advantage vs. major hotel companies who
enjoy both a greater share of mind and a more flexible product offering. Additionally, interest in timeshare
ownership is on the wane, indicating a short runway for growth for DRII, with multiple companies competing
for a share of a shrinking industry.

Figure'3.'Customer'Demographics.'The'timeshare'industry'is'confronted'with'an'aging'owner'base'with'significantly'
lower'disposable'incomes'today'than'20'or'30'years'ago.'DRII'will'have'to'face'the'challenge'of'finding'younger'
customers'to'replace'timeshare'owners'who'may'choose'to'stop'paying'assessments.'
Source.'Alexa.com'

2. Challenging the bull case - DRIIs asset light/balance sheet light inventory acquisition strategy
is unsustainable.
Bulls contend that DRIIs inventory sourcing model makes the company an attractive investment. Rather
than build new inventory, Diamond repurchases very low cost inventory that homeowners associations
regularly take back from the 3-4% of owners who default on their maintenance fees each year. Bulls claim
that this capital efficient strategy boosts free cash flow generation and is very beneficial to margins.
Problem with the assertion:
a. DRII has been known to use aggressive tactics in its attempts to recover inventory from HOA
defaults.
My annual Maintenance Fees started out at $600/week and are now $1300-$1400/week, which have
increased by nearly 20% per year ever since Diamond Resorts International took over management of the
resort
- Bruce Wood, deeded owner at Point Poipu, Sugar Grove, Illinois

DRI sent bills to individual Poipu Point interval owners in or around October 2011, with an initial payment
installment, of at least $2,000, due by January 1, 2012. The water assessment was charged in addition to
owners assessments and fees. Even with the installment payment option, the amount charged was more
than double the amount typically invoicedDRI intends the Water Intrusion Assessment to be used for
renovations and upgrades at Point Poipu other than the repair of damage caused by water intrusion.
- Class Action Lawsuit filed against DRII by owners of the Point Poipu resort on
April 6, 2014 alleging misuse of HOA assessments.

The company derives a significant portion of its inventory needs from actively recapturing defaults on HOA.
In fact, the company has set up agreements with its managed resorts and the Collections, which allow it to
reacquire vacation ownership interests (VOIs) in the event of default. DRII reports significantly higher HOA
defaults of 3% - 4% vs. the industry average of 1.5% - 2% (Outlook for timeshare/ vacation ownership,
ARDA International Foundation, October 2013). Significant questions have been raised about DRIIs
aggressive stance on raising HOA assessments, the most egregious instance of which was levying a
$65.8M water intrusion assessment (equivalent to $5893 per one-week interval) on owners at its Point Poipu
resort.
Raising HOA assessments indiscriminately is not a sustainable strategy and threatens the long-term
viability of the DRII asset light model. Both long-term revenue growth and margins are adversely affected
the cost of unsold inventory on its books goes up and the overall cost of ownership increases for a timeshare
buyer, hurting initial (and upgrade) sales.

Figure'4.'Looking'closer'at'DRIIs'asset'light'model.'DRIIs'cash'flow'generative'business'model'that'depends'on'
acquiring'low'cost'inventory'from'defaulting'owners'is'underpinned'by'an'aggressive'and'ultimately'unsustainable'
strategy'of'indiscriminately'raising'HOA'assessments.'
Source.'Company'presentation'

b. Inventory sourcing mix will have to change if current growth rates are to be sustained.
A distinguishing feature of DRII has been its reliance on recycling/reclaiming defaulted (via default on
financed notes and HOA dues) inventory for its inventory needs. As sales accelerate, the company will have
to transition to more traditional forms of getting inventory to support the growth.
In Figure 5, for 2013, the recapture rate of 3.5% (item D in the table) equates to 13.5K week equivalents of
inventory (item E) that can support $339mn in VOI sales (item G). We believe that, using the default rate on
the originated loan portfolio (item I), this suggests that another 926 week equivalents of inventory (item J) or
9% of inventory needs could come from loan defaults. We believe the HOA recovery mechanism was
sufficient to cover all of the inventory needs in 2012, but only a smaller portion in subsequent years. By
2018, the recapture mechanism will provide only about 47% of DRIIs inventory requirements. Therefore as
the company grows it will have to build inventory or look for alternate mechanisms by which it can
source the remaining inventory requirement, challenging its asset light business model.

'
Figure'5.'To'build'or'not.'TwoPthirds'of'DRIIs'2013'inventory'needs'came'from'recaptured'HOA'inventory.'The'
strategy'is'unsustainable'if'revenues'are'to'grow,'necessitating'significant'Capex/Acquisition'spend,'threatening'the'
bull'thesis.'
Source.'Company'filings,'company'presentations,'my'estimates.'

!
3. Challenging the bull case Consolidation/gradual roll-up opportunity gives DRII a long runway for
growth
Bulls contend that the highly fragmented timeshare industry offers potential for inorganic growth that would
provide recurrent revenue streams as well as a source of low-cost timeshare inventory.

Problem with the assertion:

DRIIs balance sheet capacity is constrained by its need to access capital markets to fund its
consumer finance business.
In FY13, DRIIs vacation interest revenue segment comprised 64% of total revenues. VOI sales are
essentially accruals and are recognized after a binding contract has been executed - satisfied when
Diamond receives a minimum 10% down payment. To monetize these revenues DRII requires securitization
markets to function smoothly and access to conduit financing. Any disruption in the capital markets could
create working capital shortages in the business and thus constraining DRIIs ability to increase financial
leverage to fund large acquisitions. The problem is further compounded because default rates spike during
economic slowdowns, reducing management and member services revenues at the same time vacation
interest revenue declines, further necessitating the need to maintain prudent levels of leverage.
The companys need to access capital markets to fund its working capital has severely stressed the
companys viability during past economic slowdowns.
DRII (formerly Sunterra) traced its roots to the early 1990s when three partners purchased the Cypress
Pointe Resort in Lake Buena Vista, Florida. In 1996, KGK Resorts was formed, uniting nine of the LPs or
LLCs formed by the companys founders. The company changed its name to Signature Resorts and
completed its IPO in August 1996.
Following its IPO, Signature expanded at an extremely rapid pace, going from nine resorts to 81 resorts
within a year or so of the IPO. The stock performed very well and hit a peak of $32 in October 1997. In 1998
Signature changed its name to Sunterra Corporation. Two years later, problems related to Sunterras rapid
growth began to emerge. The company announced a large write-down in early 2000 and then reported a
huge loss in 1Q00. In May 2000 Sunterra defaulted on its debt, filed for Chapter 11 and was delisted from
the NYSE.
Sunterra restructured under bankruptcy protection and exited chapter 11 in July 2002. The company
returned to profitability in 2003 and by late 2004 it had again begun acquiring resorts. Sunterra was unable

to withstand a second economic slowdown, and in 2006 it was delisted from NASDAQ after its auditors
resigned and withdrew their certification of Sunterras financial statements. In March 2007, Diamond Resorts
acquired Sunterra for $16 per share.
While poor management may have contributed to the woes of DRIIs predecessor companies, the
companys need to constantly access capital markets to fund its working capital means that the company will
continue to be threatened by economic downturns.
!

DRII has already used the proceeds from its Initial Public Offering to fund acquisitions limiting
future growth through consolidation.
DRII has already utilized the net proceeds of $210 million from its IPO to:
1. Repay the PMR acquisition loan - $56 million
2. Repay the Tempus acquisition loan - $50 million
3. Acquire the PMR Service companies - $48 million
4. Repurchase warrants from Guggenheim - $10 million
5. Repurchase a portion of its notes payable.
This leaves the company with a limited war chest to fund future acquisitions.

Figure'6.'The'first'timeshare'rollup.'DRII'has'ramped'up'acquisition'activity'over'the'last'three'years,'but'given'the'
working'capital'issues'inherent'in'the'timeshare'business'model,'adding'leverage'to'the'balance'sheet'to'fund'further'
acquisitions'leaves'the'business'vulnerable'to'economic'slowdowns.'
Source.'Company'presentations.'

4. Complex G&A structure and related party transactions raise serious questions about alignment of
management compensation with shareholder interests.
Diamond has a controversial senior management structure. Diamonds Chairman, CEO, CFO and about 40
other officers and employees are not directly employed by or compensated by Diamond. Instead, these
individuals work for and are paid by an outside entity called Hospitality Management and Consulting
Services, LLC, or HM&C. Each of the employees of HM&C devotes her full business time and attention to
Diamond. Diamonds Chairman, Steven Cloobeck, beneficially owns HM&C. HM&C is an external
management company that provides services to Diamond.
Diamond has a management agreement with HM&C and pays it for providing these services to the HOAs
and the company. Under this agreement, HM&C earns an annual management fee for providing HOA
management services, an annual management fee for providing corporate management services, and an
annual incentive fee payment based on performance metrics set out by Diamonds board, subject to certain
minimums. Diamond also reimburses HM&C for certain expenses. Diamond paid HM&C $16.9 million in
2011 and $17.9 million in 2012 in total management fees, incentive fees, and reimbursements under the
HM&C agreement. Diamond also provides various perks to certain employees of HM&C, including personal
use of company planes and health benefits.

The HM&C contract allows a substantial portion of the fees it earns to be allocated out to, and paid for by,
the HOAs. In fact, a substantial majority of the fees generated by HM&C is allocated out to the HOAs and
paid by the owners as part of their annual maintenance fees. As such, they are not running through
Diamonds SG&A expenses.

What are the incentives to top management for setting up a complex compensation structure
through HM&C?
I believe the opaque compensation structure reflects managements lack of confidence in the stability of the
consumer finance and vacation interest revenue streams. A compensation structure whereby management
elects to remunerate itself only through member services revenues underscores the instability inherent in
DRIIs business model. If management does not believe that revenues from the securitization of receivables
can be relied on to provide a stable income stream, why should shareholders?
Numerous related party transactions also raise questions about the prudence of DRII compensation
practices.
Since FY2011, DRII has paid upwards of $41.6M to companies directly affiliated with senior management
(as outlined in the table below), raising questions about the propriety of its compensation practices.

Figure'7.'Related'party'transactions.'Since'FY2011,'DRII'has'paid'more'than'$41M'to'companies'directly'affiliated'
with'top'management.''
Source.'Company'filings.'

4. Aggressive accounting practices raise questions about the quality of DRIIs earnings.
We continue to believe that your current presentation of Adjusted EBITDA as a performance measure is
misleading to investors due to the exclusion of vacation interest costs. Please revise your filing to remove
the adjustment for vacation interest costs when presenting this performance measure.
SEC letter to Diamond Resorts, May 9, 2013
Adjusted EBITDA for DRII is different from peers
In its calculation of adjusted EBITDA, DRII backs out costs related to vacation interest cost of sales (i.e.,
timeshare product cost).
Under the relative sales value, timeshare developers have to make significant estimates which are subject to
uncertainty, and if the relative cost economics improve/decrease for a pool of inventory, it can cause
significant volatility in outcomes. DRII backs out the costs here as the share of inventory coming from

distress or HOA recapture outweighs the amount of developed inventory for DRII. I think the treatment
leaves out a key cost (the cost of sourcing inventory, even if sourced from HOA defaults, this is not zero) in
the calculation of adjusted EBITDA, and makes EBITDA margin among peers non-comparable. I believe that
costs incurred in the acquisition of VOI inventory can be a suitable subtraction from the reported adjusted
EBITDA to get a better representation.

A significant portion of DRIIs costs are capitalized implying that any slowdown in growth would
have a larger than anticipated impact on earnings
The idiosyncrasies of timeshare accounting provide DRII with significant discretion in capitalizing numerous
expenses including inventory-sourcing costs and loan origination costs. Often DRII has been aggressive in
capitalizing expenses the company capitalizes routine expenditures such as legal, title, and trust fees
involved in inventory acquisition. Any slowdown in revenue growth would thus disproportionately affect
earnings as past accruals are amortized and charged against a smaller revenue base.

Valuation
I have relied on a discounted cash flow model to handicap the risks to my short thesis. My DCF assumptions
include optimistic revenue growth estimates for 2014 to 2018 and significant improvements in EBITDA
margin.

The model employs an 8.0% discount rate, and a long-term free cash flow growth rate of 1.5%, which is
reasonable given industry dynamics. Cash flows have been discounted using a mid-year timescale and a
30% tax rate. I consider this to be a best-case scenario for the business, incorporating extremely optimistic
growth and margin improvement forecasts, and yet the implied valuation target is still only $18/share
indicating that the stock is fully valued.

Financial Models
Diamond Resorts International
Income Statement

2011
(data in thousands, except per share)

1Q

2Q

Revenues:
Management and member services
Consolidated resort operations
Vacation interest, net
Interest
Other
Total Revenues
Management and member services
Advertising, sales, and marketing
Vacation interest carrying cost, net
Loan portfolio
Other operating
General and administrative
Depreciation and amortization
Interest expense
Loss on extinguishment of debt
Impairments and other write-offs
Gain on disposal of assets
Gain on bargain purchase of business combinations

23,295
6,946
38,943
9,829
8,519
87,532
6,127
28,436
8,560
2,618
133
19,053
3,170
18,372
0
83
(9)
-

24,208
7,242
48,717
9,801
3,819
93,787
5,688
33,197
7,347
2,024
862
18,669
3,142
19,908
0
240
(363)
-

Total costs and expenses

92,778

92,139

Pre-tax income(loss)

(5,246)

1,648

2012
3Q
25,992
7,601
55,712
14,650
3,495
107,450
6,719
34,488
4,156
2,172
1,023
21,074
3,853
22,102
0
693
(76)
(34,183)

FY'11

1Q

25,811
8,104
51,387
13,005
3,945
102,252
8,591
32,596
21,268
3,939
-720
21,616
3,801
21,628
0
556
(260)
19,854

99,306
29,893
194,759
47,285
19,778
391,021
27,125
128,717
41,331
10,753
1,298
80,412
13,966
82,010
0
1,572
(708)
(14,329)

27,280
8,534
54,572
13,656
4,908
108,950
8,275
34,819
9,272
2,802
706
20,761
3,805
21,931
0
-11
(72)
(51)

134,823

390,235

117,550

2Q
28,295
8,627
64,874
12,512
7,136
121,444
8,460
40,218
9,176
2,383
1,807
22,201
4,369
23,219
0
0
(24)
(22,698)

29,999
8,361
83,318
12,886
8,148
142,712
8,862
49,554
8,226
2,446
2,454
27,976
5,205
24,808
0
401
(122)
115

4Q

FY'12

29,363
8,234
90,334
14,152
8,479
150,562
9,733
53,774
9,689
1,855
3,540
28,077
5,478
26,199
0
619
(387)
2,024

1Q

2Q

114,937
33,756
293,098
53,206
28,671
523,668
35,330
178,365
36,363
9,486
8,507
99,015
18,857
96,157
0
1,009
(605)
(20,610)

31,587
8,620
91,668
13,255
8,322
153,452
50,359
7,722
9,779
2,505
368
22,800
6,254
24,842
0
79
(50)
-

31,107
8,519
110,439
13,607
10,201
173,873
8,765
60,595
10,750
2,754
2,238
21,698
6,075
24,794
0
0
(38)
30

524,335

EST

EST

EST

4Q

FY'14

FY'15

2014
3Q

4Q

FY'13

1Q

2Q

3Q

33,610
9,326
123,708
14,297
10,661
191,602
9,408
70,714
10,154
2,296
3,912
61,114
7,583
20,925
13,383
1,200
(585)
(2,756)

34,934
9,047
138,798
15,885
12,197
210,861
9,955
76,783
12,206
2,076
5,588
40,313
8,273
18,065
2,221
308
(309)
(153)

131,238
35,512
464,613
57,044
41,381
729,788
35,330
178,365
36,363
9,631
12,106
145,925
28,185
88,626
0
1,587
(982)
(2,879)

38,224
8,723
105,897
15,674
12,707
181,225
60,775
7,771
8,947
2,490
5,537
24,192
8,061
16,615
0
7
(4)
-

39,219
9,621
130,005
16,206
13,963
209,014
5,881
71,107
6,729
2,359
5,266
23,264
8,269
17,383
46,807
35
(149)
-

37,795
10,481
143,180
17,130
13,379
221,965
8,549
82,308
5,162
1,400
5,847
26,747
8,271
11,294
0
11
224
-

35,686
10,238
150,189
8,052
10,022
214,187
-29,928
108,742
60,960
14,756
-6,065
91,075
10,521
-20,874
-46,807
0
-

150,924
39,063
529,271
57,062
50,071
826,391
45,277
269,928
81,798
21,005
10,585
165,278
35,122
24,418
0
0
-

166,016
42,970
583,521
88,071
55,078
935,656
49,805
297,596
145,625
24,146
11,670
116,704
39,765
24,716
0
0
-

154,017

163,267

150,741

155,506

225,555

194,734

726,536

155,168

211,088

175,505

189,273

730,910

(12,705)

(667)

2,711

18,367

(33,953)

16,127

3,252

26,057

(2,074)

46,460

24,914

95,481

146,109

(957)

(14,310)

438

411

(7,626)

12,554

5,777

12,047

20,156

8,720

33,418

51,138

2,273

17,956

(26,327)

3,573

(2,525)

14,010

(2,731)

26,304

16,194

62,063

94,971

Diluted GAAP EPS

$0.04

$0.33

($0.37)

$0.05

($0.04)

$0.18

($0.04)

$0.34

$0.21

$0.81

$1.18

Diluted Shares

54,058

54,058

Net Income (loss)

1,473
(6,719)

(891)
2,539

36,955
(646)
37,601

(32,571)

786

(9,453)

(9,517)

(23,118)

10,303

(8,600)
975
(9,575)

89,501

2013
3Q

(11,305)

Tax (GAAP)

70,495

4Q

31,943
(14,668)
46,611

340
(11,645)

(11,748)

13,643

657

789,547

70,959

75,741

63,704

75,839

75,456

77,418

77,418

76,533

80,359

(33,953)
16,658
7,583
18,605
1,200
(585)
(2,756)
1,408
365
38,495
13,383
60,403

16,127
14,105
8,273
11,244
308
(309)
(153)
1,543
104
2,038
2,221
55,501

3,252
77,422
28,185
32,150
1,587
(982)
(2,879)
3,295
(953)
141,077

26,057
13,246
8,061
12,902
7
(4)
2,064
(109)
4,696
66,920

(2,074)
13,827
8,269
15,462
35
(149)
2,147
16
4,166
46,807
88,506

46,460
7,429
8,271
16,476
11
224
2,380
57
3,336
84,644

24,914
21,704
10,521
(2,498)
904
(138)
55,407

95,481
24,418
35,122
155,021

146,109
24,716
39,765
210,590

34%
46%
200%
126%

40%
19%
-227%
-130%

39%
39%
-588%
-119%

18%
3%
861%
516%

20%
36%
-111%
-115%

16%
-22%
-237%
-200%

2%
-3%
54%
353%

13%
1%

13%
8%
53%
53%

Adjusted EBITDA Calculations

Net Income - (before extraordinary items) GAAP
Add: Corporate Interest expense
Depreciation and Amortization
Vacation interest cost of sales
Impairments and other non-cash write-offs
Gain on the disposal of assets
Gain on bargain purchase from business combination
Amortization of loan origination costs
Amoritzation of portfolio discounts
Stock-based compensation
Loss on extinguishment of debt
Adjusted EBITDA

(5,246)
14,317
3,170
67
83
(9)
646
(89)
12,939

1,648
15,530
3,142
(5,681)
240
(363)
662
(74)
15,104

36,955
16,453
3,853
1,854
693
(76)
(34,183)
718
138
26,405

(32,571)
17,086
3,801
(5,935)
556
(260)
19,854
736
825
4,092

786
63,386
13,966
(9,695)
1,572
(708)
(14,329)
2,762
800
58,540

(8,600)
17,011
3,805
8,231
(11)
(72)
(51)
707
(955)
20,065

31,943
18,453
4,369
(7,834)
(24)
(22,698)
788
60
25,057

(11,305)
20,254
5,205
16,778
401
(122)
115
896
174
32,396

(12,705)
21,704
5,478
14,975
619
(387)
2,024
904
(138)
32,474

24%
27%
64%
43%

29%
-3%
1838%
1736%

33%
118%
-131%
-131%

47%
21%
-61%
-49%

(667)
77,422
18,857
32,150
1,009
(605)
(20,610)
3,295
(953)
109,898

2,711
20,764
6,254
17,846
79
(50)
1,182
48
48,834

18,367
20,688
6,075
9,000
(38)
30
1,286
19
55,427

yr/yr growth rates

Total Revenue
Total costs and expenses
Pre-Tax Income
Net Income

34%
34%
-185%
32%

41%
28%
-132%
-124%

43%
74%
-43%
-61%

November 20, 2014

Diamond Resorts International

Balance Sheet
2011
Cash and Equivalents
Mortgages and contracts receivable
Unsold vacation interest, net
Other assets
TOTAL ASSETS
Senior secured notes
Securitization notes and Funding facilities
Notes Payable
Other liabilities
TOTAL LIABILITIES
Member capital
Accumulated deficit
Accumulated other comprehensive loss
Total equity
TOTAL LIAB. & EQUITY

!
!
!

1Q
19,897
283,302
256,805
68,109
833,219
415,546
415,546
71,514
212,466
833,219
152,247
(251,077)
(18,372)
(117,202)
833,219

2Q
19,897
283,302
256,805
68,109
833,219
415,546
415,546
71,514
212,466
833,219
152,247
(251,077)
(18,372)
(117,202)
833,219

3Q
19,384
297,084
246,445
66,203
833,923
415,328
415,328
65,590
187,761
833,923
152,294
(227,959)
(17,930)
(93,595)
833,923

2012
4Q
19,897
283,302
256,805
68,109
833,219
415,546
415,546
71,514
212,466
833,219
152,247
(251,077)
(18,372)
(117,202)
833,219

1Q
18,191
280,091
256,525
66,343
882,480
415,771
415,771
71,400
274,273
882,480
152,239
(260,652)
(16,356)
(124,769)
882,480

2Q
17,876
283,242
320,712
109,109
979,759
416,003
416,003
129,941
275,077
979,759
152,238
(214,041)
(18,069)
(79,872)
979,759

3Q
18,247
298,449
330,088
105,959
962,247
416,243
416,243
125,315
259,250
962,247
152,212
(225,686)
(16,771)
(90,245)
962,247

4Q
21,061
312,932
315,867
112,498
993,008
416,491
416,491
137,906
280,908
993,008
155,568
(237,434)
(16,733)
(98,599)
993,008

1Q
26,204
320,967
300,488
108,312
1,053,803
416,747
416,747
137,545
319,641
1,053,803
155,568
(235,161)
(19,465)
(99,058)
1,053,803

2013
2Q
3Q
18,847
29,876
335,076
377,513
307,613
301,709
104,960
231,125
1,073,472 1,232,205
417,012
367,642
417,012
367,642
132,647
22,866
311,679
283,620
1,073,472 1,232,205
155,558
755
(217,205) (243,532)
(19,685)
(18,497)
(81,332)
200,459
1,073,472 1,232,205

4Q
35,945
405,454
298,110
198,632
1,301,195
367,892
367,892
23,150
288,669
1,301,195
755
(239,959)
(16,177)
207,813
1,301,195

1Q
75,776
411,250
293,653
193,633
1,389,148
368,150
368,150
25,407
342,699
1,389,148
755
(225,949)
(15,763)
226,969
1,389,148

2014
2Q
3Q
117,882
181,923
428,863
464,400
292,248
277,066
188,645
183,493
1,431,323 1,478,908
0
0
0
0
5,074
2,414
307,926
271,468
1,431,323 1,478,908
755
757
(228,680) (202,376)
(14,586)
(17,475)
230,199
258,773
1,431,323 1,478,908

4Q
267,162
613,951
356,272
177,972
1,759,470
0
0
7,400
326,881
1,759,470
757
(177,896)
(17,475)
283,253
1,759,470