Marriott Vacations Worldwide Corporation

Greetings and welcome to the Marriott Vacations Worldwide Third 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. Neil Goldner, Vice President and Best Relations for Marriott Vacations Worldwide. Thank you. You may begin.

Thank you, Melissa, and welcome to the Marriott Vacations Worldwide third quarter 2023 earnings conference call. I am joined today by John Geller, President and Chief Executive Officer, and Jason Marino, 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 as well as our comments on this call are effective only when made and will not be updated as actual events unfold. Throughout the call, we will make reference 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 to the Investor Oasis page on our website at ir.mvwc.com. Before I turn the call over to John, as you saw in our earnings release last night, with four vacation ownership resorts in West Maui, the wildfires had a negative impact on our results in the third quarter, despite having no physical damage to our properties. To facilitate a conversation this morning about our business excluding the Maui wildfires impact, Our discussion and commentary this morning about our consolidated results for the quarter will exclude the impact of the fires, except where noted. We added a table to our earnings release last night to illustrate the impact of the wildfires by line of business to facilitate your analysis. In addition, during last year's third quarter with the launch of Abound by Marriott Vacations Worldwide, we aligned the contract terms of vacation ownership sales across our Marriott, Westin, and Sheridan brands. We also aligned and combined our accounting methodologies for the reserve on vacation ownership notes receivable for these brands. These changes, which we refer to as the alignment, resulted in a non-recurring benefit of $44 million to last year's third quarter adjusted EBITDA to the acceleration of revenue from the sale of Marriott branded vacation ownership interest. The schedules we provided in last night's earnings release illustrate what our results would have been your quarter and year-to-date period without this benefit. During our call today, all of our discussion and commentary about year-to-year changes exclude last year's alignment benefit. With that, it's now my pleasure to turn the call over to John Geller.

Thanks, Neil. Good morning, everyone, and thank you for joining our third quarter earnings call. I wanted to start the call today by reflecting on one of the most significant happenings in the third quarter, the wildfires that battered West Maui. While we did not have any physical damage to our resorts, the wildfires had a profound impact on our associates and their families, with several hundred of them losing their homes. For all of our associates in Maui, our thoughts and prayers continue to be with them as they work with each other and their community to rebuild. Thanks to the hard work and dedication of our associates, we have reopened our resorts in West Maui, although occupancy in October was well below normal. We are seeing reservations build for the balance of the year, though we expect it will take until early next year until occupancy returns to more normal levels. At the same time, our focus has been on educating our owners, members, and guests on respectful travel as the community rebuilds and encouraging any visitors to explore the island and enjoy local businesses that need the support of tourism. Moving to our third quarter results, it was only a year ago when we first announced Abound. Our enthusiasm at the time to provide owners and first-time buyers direct access to a much broader portfolio of resorts using a common currency couldn't have been higher. Since then, thousands of owners and other customers have been introduced to Abound, and we continue to see elevated interest at our resorts with people wanting to learn more about Abound and its benefits. Despite the near-term impacts of the transition, there's no doubt in my mind that it is fundamentally a better product. For legacy Marriott owners, they are now able to book directly into any of our Sheraton and Western resorts using their points. And for legacy Sheraton and Western owners who had previously had access to a more limited system of resorts, They can now book directly into any of the more than 90 Marriott-branded vacation ownership resorts around the world using a common currency. In addition, legacy Sheraton and Wesson owners now have a much more robust selection of vacation options to choose from, with the new access to thousands of other vacation alternatives using their points from hotel stays and cruises to sporting events, Broadway plays, and more. Over the past year, we've been working hard educating consumers about the benefits of Abound, and our salespeople are getting more experience selling it. We have also seen three times the number of legacy Vistana owners elect to use the Abound program this year compared to last, which will allow more owners to experience the benefits firsthand. This was evident in our results this quarter, where VPG, for sites that transitioned, increased more than 15% sequentially from the second quarter. And in our legacy wealth business, the changes we've made help drive a 5% sequential VPG improvement. As a result, total company VPG improved 2% sequentially from the second quarter, despite the impact of the Maui fires. We also formally launched the Hyatt Vacation Club brand during the third quarter, bringing our 22 former Hyatt Residence Club and Legacy Wealth Resort properties under a single brand. And with the launch of the new Beyond program, Hyatt Vacation Club owners now have access to more travel offerings, including cruises and vacation experiences, which will help drive higher owner satisfaction and incremental tours. Our international business continues to provide strong growth, with contract sales across Europe and Asia Pacific growing 42% year-over-year. But with more U.S. consumers traveling abroad this year, this has negatively impacted our North America results. We continue to focus on driving sales of new owners, with first-time buyers representing half of our tours in the quarter and a third of our contract sales, which is good for the long-term health of the system. On the development front, we acquired a property in Savannah, Georgia, which we intend to convert into a 73-unit Westin Vacation Club. Savannah consistently ranks as a top tourism destination by our owners. This resort will also add new sales centers in the market when it opens in a few years. In our exchange and third-party management segment, our interval business performed in line with expectations this quarter. Active members were down slightly year over year, while revenue per member increased. Looking forward, travel demand continues to revert to historical patterns, and economic conditions are mixed, with consumers starting to feel the impact of higher interest rates and inflation. At the same time, the changes we've made in our Marriott branded vacation ownership business with the launch of Abound, as well as those to our legacy Welk business are encouraging. VPGs improved 2% from the second quarter, and we're up 17% above 2019 Q3 levels, even with the Maui fires impacting our results, reflecting the benefits of our team's hard work. Taking the longer view, our business is fundamentally sound with long-term growth opportunities. We have some of the best brands in the vacation ownership industry, each with its own expansion potential. We are making smart investments in digital technologies to enable more self-service by our owners and members. We're leveraging data to make the right offers to the right people at the right time while streamlining processes to lower costs across our organization. We also have a substantial amount of high-margin recurring revenue streams that reduce our exposure to economic cycles at times like this. and we generate substantial free cash flow year in, year out. And at our current stock price, I can't think of a better use of that cash except to return it to shareholders. With that, I'll turn it over to Jason to discuss our results.