Marriott Vacations Worldwide Corporation

Greetings and welcome to the Marriott Vacations Worldwide Second Quarter 2023 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. Neal Goldner, Vice President, Investor Relations for Marriott Vacations Worldwide. Please go ahead.

Thank you, Melissa, and welcome to the Marriott Vacations Worldwide Second Quarter 2023 Earnings Conference Call. I am joined today by John Geller, President and Chief Executive Officer, Tony Terry, our Executive Vice President and Chief Financial Officer, and Jason Marino, who will be assuming the role of CFO effective September 30th when Tony retires. I need to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under the 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, 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 in 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 John Geller.

Thanks, Neil, and good morning, everyone, and thank you for joining our second quarter earnings call. While we were pleased to run nearly a 90% occupancy in the quarter with the high VPGs we had last year in a mixed macroeconomic environment this year, we knew coming into the quarter that comparisons were going to be tough. As a result, we expected VPGs to be lower on a year-over-year basis, though we expected this to be offset by higher tours. However, VPGs declined more than we expected in the second quarter, and while tours did grow 4%, that was a few points below our expectations. We believe most of the VPG difference this quarter, compared to what we expected, was a result of the changes we discussed in the past, specifically the transition to selling abound by Marriott Vacations at most of our legacy Vistana sales centers and the changes we've made at the legacy Welk locations. For example, despite the difficult comparison, contract sales at locations that didn't transition from selling a legacy Vistana product were only down 5% in the quarter, while sales at legacy Vistana locations that made the change were down double digits. And on the legacy Welk side, we are aligning the business models and the sales processes, which we expect will improve our business for the long term, but resulted in double digit sales decline in the quarter. Despite the near term transition impact, I remain confident that the changes we've made are the right strategic decisions that will benefit us in the future. We are also seeing changes in travel patterns, with more Americans vacationing overseas this year, which has not been fully replaced by inbound international travelers. This shift negatively impacted sales and rentals in our higher end U.S. travel destinations like Hawaii. However, we benefited from the increase in international travel as our European and Asian contract sales grew 56 percent. We also continue to focus on driving new owner growth, with first-time buyers representing one-third of our contract sales this quarter, up 200 basis points from the prior year. which is good for the long-term health of the system. In our Hyatt vacation ownership business, we expect to rebrand the Legacy Wealth Resorts later this month to align them under one unified brand, Hyatt Vacation Club. In addition, we will be adding more vacation options for our Hyatt owners, including cruises and tours as we launch the Beyond program in a few weeks. Moving to our exchange and third-party management segment, Active members at Interval International were unchanged compared to the first quarter. Inventory utilization was very strong in the quarter, and average revenue per member increased 1% compared to the prior year. However, member deposits remained below pre-pandemic levels. In our Aqua Askin business, revenue was lower compared to the prior year due to lower ADRs in Hawaii. As a result, excluding cost reimbursements and VRI Americas, which we sold last April, revenue in our exchange and third-party management segment declined 4% compared to the prior year. Despite the difficult quarter, it was heartening to see our vacation ownership resorts at nearly 90% occupancy, reflecting the continued demand for leisure travel. And I want to thank our associates who have been working tirelessly to deliver exceptional vacation experiences for our owners, members, and guests. Looking forward, while I'm not satisfied with our results this quarter, we have some of the best brands in the hospitality industry in sought-after markets and an experienced management team that has successfully integrated new businesses and launched new products in the past. And I'm confident that the strategic changes we've made will provide long-term benefits. In fact, VPG improves sequentially in June and July, even with an increase in first-time buyer mix. And while we are seeing some variability in the macroeconomic environment, we still expect to grow contract sales for the full year. We also expect to grow adjusted earnings per share this year, excluding the impact of last year's alignment, reflecting the benefit of our share repurchases. and to generate between $540 and $600 million of adjusted free cash flow, illustrating the strength of our leisure-focused business model. With that, I'll turn it over to Tony.