Marriott Vacations Worldwide Corporation

Greetings and welcome to the Marriott Vacations Worldwide fourth quarter 2022 earnings 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 is being recorded. I would now like to turn the conference over to your host, Mr. Neil Goldner, Vice President and Best Relations for Marriott Vacations Worldwide. Thank you. You may begin.

Thank you, Melissa, and welcome to the Marrification's Worldwide Fourth Quarter 2022 Earnings Call. I am joined today by John Geller, President and Chief Executive Officer, and Tony Terry, our Executive Vice 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 that 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 schedules attached to our press release as well as the investor relations page of our website at ir.mvwc.com. As you saw in our earnings release last night, as a result of aligning the contract terms for our vacation ownership sales across Marriott, Westin, and Sheridan brands last year, we recorded an additional $12 million of revenue in the fourth quarter. The schedules to our earnings release provide a reconciliation to show what our reported results would have been without this benefit. Our discussion and commentary today will refer to our results after adjusting for the alignment, including the $7 million benefit to adjusted EBITDA. With that, it's now my pleasure to turn the call over to CEO John Geller.

Thanks, Neil. Good morning, and thank you for joining our fourth quarter earnings call. I'm happy to welcome you for the first time as CEO. The past two months have felt a lot like when I joined the company just over 13 years ago, full of potential and possibility. I've stepped into this role with a strong leadership team around me and a vision of growth ahead for us. If you've been following the travel industry, you know there's an optimistic view on leisure travel this year. In a recent survey, 77% of respondents said they're excited to travel this year, while nearly 50% of them have already begun researching trips. That said, leisure travel looks different than it did pre-pandemic. Recent research we conducted revealed that 80% of people surveyed would consider working remotely from a vacation destination as a way to extend the length of their trip, and this trend is expected to continue. So what does that mean for us? It means that more travelers than ever can visit our top destinations, stay in our spacious villas, and experience the unparalleled service that our on-site resort teams deliver. With the strength we've seen In leisure travel, we've averaged nearly 90% occupancy for the year, illustrating the continued high demand for leisure accommodations. We also generated over $1.8 billion of contract sales and delivered $744 million of adjusted free cash flow in 2022. And we added over 20,000 new owners to our vacation ownership business, while growing active interval members by 21%. This year, we expect to continue that momentum. We will build on our strategic investments in products, technology, people, and customer experiences that propel our business forward. We have dedicated and passionate teams around the world delivering unparalleled vacation experiences every day to our owners, guests, and members, and we continue to positively impact the communities in which we live and work. I'm also proud to say that we recently published our new ESG report and are formalizing a strategy to ensure we're being good stewards to the environment in which we operate and the communities we serve. One such example is the establishment of the Stephen Wise Endowment, providing scholarships to students at the Rosen College of Hospitality Management at the University of Central Florida. Since 2020, we have hired more than 175 UCF graduates, and I'm very proud that our company was able to make this investment to support the development of future hospitality leaders while honoring the legacy of our former CEO. Now moving to our results. 2022 was a great year for Marriott Vacations, and we ended the year on a very strong note. Occupancy was 90% for the fourth quarter, with Hawaii running over 95%. while Asia Pacific occupancies doubled compared to the prior year. With the strong occupancy, we grew tours by 18% on a year-over-year basis, with fourth quarter tours just below our pre-pandemic levels. As expected, VPG declined year-over-year, but remained 17% higher than 2019. As a result, we grew contract sales by 12% in the fourth quarter compared to the prior year, and expanded our adjusted EBITDA margin, illustrating the resiliency of our business model and the desirability of our product offerings. Last year, we successfully implemented our online booking engine for previews and continued to improve predictive modeling for our marketing campaigns. These initiatives resulted in significantly higher consumer response rates, and we ended the year with more than 200,000 preview packages in our pipeline. with roughly one-third of those customers having already booked their vacations for 2023. Taking a step back, when we first acquired ILG in 2018, the goal was to allow owners the ability to enjoy expanded vacation opportunities and provide direct access across our Marriott, Sheraton, and Westin Vacation Club brands. Since then, we've been working to set up the systems and technology to expand our offerings and fulfill this promise, which we achieved last year with the launch of Abound by Marriott Vacations. Looking forward to our multi-year Vacation Next program, we expect to leverage our brands and digital strategy to help unlock our growth potential. We expect this will allow us to create efficiencies in how we market, sell, and service our products, resulting in top-line growth lower customer acquisition costs, and increased owner satisfaction as we make more service options available online. In our Hyatt vacation ownership business, we continue to make great progress integrating Legacy Welk. In January, we announced that beginning this summer, all of our Hyatt and Legacy Welk resorts and sales galleries will be rebranded Hyatt Vacation Club. Later this year, we plan to expand the vacation experiences available to Hyatt owners with a new exchange option called Beyond, allowing them to use their ownership for cruises, tours, and hotel stays. I'm also excited to announce that earlier this month we acquired a fully entitled parcel of land in Charleston, South Carolina. Overlooking the heart of the city, we intend to develop a new Marriott-branded resort by early 2025, including a new on-site sales gallery. The city of Charleston continuously ranks as one of the top owner destinations for its thriving culinary scene, easy walkability, and southern charm. Located steps from the historic Charleston City Market, this new 50-unit resort will make a great destination for our owners. In our exchange and third-party management business, Interval ended the year with nearly 1.6 million members, a 21% year-over-year improvement driven by the new affiliations we signed in late 2021. Excluding the results of VRI Americas, which was sold last April, adjusted EBITDA in our exchange and third-party management business increased 11% in the quarter, driven by higher average exchange fees and increased getaways, as well as increased management fees at Aqua Aston. Before turning the call over to Tony to discuss our fourth quarter results in 2023 guidance, a number of investors have asked me what they should expect as I step into the CEO role. As you know, I've been in a senior leadership position for over a dozen years and had a significant amount of input into our objectives and strategies along the way. So in short, I remain committed to delivering the level of operational excellence that our customers expect from us. I also expect to deliver against the goals we laid out at our last investor day. Long-term, I expect our timeshare and exchange business to remain the core of our business model while we look to add to our growth by diversifying into adjacent leisure-focused businesses where we can leverage our core capabilities. And finally, I want us to find new ways to unlock the power of data through advanced analytics to improve efficiency and drive top-line growth. The opportunities that lie ahead for us are exciting, and my optimism about the long-term future has never been greater. With that, I'll turn the call over to Tony.