Marriott Vacations Worldwide Corporation

Greetings and welcome to Marriott Vacations Worldwide First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Neil Goldner. Thank you. You may begin.

Thank you, Rob, and welcome to the Marriott Vacations Worldwide First Quarter 2021 Earnings Conference Call. I am joined today by Steve Wise, Chief Executive Officer, and John Geller, President and Chief Financial Officer. I need to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued last night and the presentation we added to our website this morning, as well as our comments in this call, are effective only when made and will not be updated as actual events unfold. Throughout the call, we will make references to non-GAAP financial information, You can find a reconciliation of non-GAAP financial measures referred to in our remarks and the schedules attached to our press release, as well as the investor relations page of our website at ir.mvwc.com. With that, it's now my pleasure to turn the call over to CEO Steve Wise.

Thanks, Neil. Good morning, everyone, and thank you for joining our first quarter earnings call. It's now been more than a year since COVID-19 came into our lives, but that certainly didn't mean people forgot about traveling. If anything, the past year reminded us what is really important in life, family, experiences, and togetherness, all the things that travel offers. As a company whose products enable these unique and memorable occasions, it's been gratifying to see more and more people at our resorts this year. As vaccination levels rise, and even more people return to travel. We look forward to welcoming them as well. J.W. Marriott Sr. was fond of saying, if we treat our employees right, they'll treat our customers right, and if customers are treated right, they'll come back. This past year has been quite difficult for many of our associates, so I'm very happy to say that with occupancies recovering as they have, we've been able to bring back most of our associates to work, and they are hard again working to take care of our guests, delivering great vacation experiences. Our results this quarter are evidence of the continued recovery in our business. At this point, nearly all of our sales centers have reopened, and contract sales and exchange transactions grew substantially on a sequential basis during the first quarter, exceeding our own expectations. In fact, six of our sales centers in the quarter actually exceeded their first quarter 2019 levels, which is very encouraging. A review of our vacation ownership occupancies this quarter illustrates just how widespread the recovery has been. For example, occupancy at our Florida beach resorts averaged in the high 80% range during the quarter, including nearly 95% for the month of March. Our Colorado and Utah mountain resorts averaged over 85 percent for the quarter. Our South Carolina resorts ran almost 80 percent occupancy during March as the weather improved, and our U.S. Virgin Island resorts averaged nearly 85 percent for the quarter. Orlando and Hawaii, two of our larger markets that had previously lagged, also continued to recover nicely. For example, Orlando, which represents more than 20 percent of our North American keys, averaged nearly 60 percent occupancy during the quarter, including over 75 percent during March. And Hawaii, excluding Kauai, which was operating under quarantine restrictions for the entire first quarter, averaged over 70 percent occupancy during the quarter, with March averaging nearly 85 percent. These strong occupancies, coupled with the continued execution from our sales teams, enabled us to achieve 27 percent sequential contract sales growth in the quarter, with VBGs increasing 21 percent, even with first-time buyer sales becoming a larger portion of the overall sales mix. Adjusted development profit margin was in line with the first quarter 2019 levels, despite having two-thirds of the contract sales, illustrating the benefits of our business transformation work and synergy initiatives. The recovery in our interval international business was also evident during the first quarter. with interval exchange transactions and revenue per member not only growing year over year, but also increasing compared to the first quarter of 2019, reflecting members' desires to travel and the pent-up demand. During the quarter, Interval introduced getaway rentals of less than seven nights for the first time, enabling members more opportunities to use their membership in ways that better fit their schedule. So let's talk about where I think we go from here. While we're not providing guidance for the second half of the year, we are very encouraged with the improvement in our business. Though Europe and Asia are lagging the recovery and international travel to the U.S. continues to be hampered. We also shut down certain linkage and other marketing channels during the pandemic, all of which are reminders that a full recovery will still take some time. We closed the Welk Transact acquisition on April 1st and have already begun integrating them into our business. Similar to our vacation ownership business this year, Welk has also experienced a strong recovery in occupancies and contract sales, and we expect that improvement to continue going forward. Our urban markets have now reopened, with New York and San Francisco reopening last week, and all of our Kauai sales centers have now reopened as well. As you know, we have been investing in our tour pipeline package, a tour package pipeline engine to support future contract sales growth. And we sold nearly 80% more tour packages in the first quarter than we did in the fourth quarter of 2020. At the end of March, we had 184,000 tours in our package pipeline, a 9% increase from the end of December. And more importantly, nearly 74,000 customers have already booked their vacation and tour for 2021. And we expect Interval's new short-term rental product to lead to more flexible yielding strategies, which we expect will deliver higher overall getaway pricing over time. Finally, our research continues to point to a strong recovery this year as customers get back to traveling. For example, owner confidence to travel in the next three months recently hit its highest level since the pandemic began. Online destination searches by owners are more than double that of January 2019. We're also seeing very high levels of engagement on our social media pages, reflecting excitement around travel. Google searches for resorts and hotels in the U.S. are at their highest levels in nearly 10 years, and the TSA has recorded the most prolonged travel rebound since the pandemic started. We currently have 13% more owner and preview reservations on the books for the second half of this year than we did at the same time in 2019. And finally, occupancies were strong in April and sales grew sequentially, all of which underpins the confidence we have in the recovery and the strength of our leisure-focused business model. As a result, we expect contract sales to grow around 45% sequentially in the second quarter at the midpoint of our guidance range. With that, I'll turn the call over to John.