Marriott Vacations Worldwide Corporation

Greetings and welcome to the Marriott Vacations Worldwide Second Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Neil Goldner, Vice President Investor Relations. Thank you, Neil. You may begin.

Thanks, Alicia. Welcome to the Marriott Vacations Worldwide Second Quarter Earnings Call. I am joined today by John Geller, our 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 boat-looking statements under federal securities laws. The statements are subject to numerous risks and uncertainties which could cause future results to differ materially from those expressed in or implied by our comments. Boat-looking statements in the press release, as well as comments on 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-GAF financial information. You can find a reconciliation of non-GAF financial measures in the schedules attached to our press release and on our website. With that, it is now my pleasure to turn the call over to John Geller.

Thanks, Neil. Good morning, everyone, and thank you for joining our second quarter earnings call. We delivered $203 million in adjusted EBITDA in the quarter and reiterated our full year guidance, reflecting the continued demand for leisure travel, the resilience of our business model, and the hard work of our associates around the world. The first half of the year was certainly interesting, yet despite all the external noise, leisure customers continued to prioritize vacation and our team focused on what it could control, providing great experiences for our owners, members, and guests while executing on our modernization program. Exiting the first half of the year, our business is well positioned. We're the only vacation ownership company focused solely on the upper upscale part of the market. Our owners have a median annual income of $150,000 and more than 80% of them do not have a loan on their timeshare, so we are confident they will be vacationing with us. And our exchange business includes most of the top tier names in the timeshare industry. Quickly reviewing the quarter, we delivered nearly 90% resort occupancy with strength in the quarter, which we had seen in Maui, coastal Florida, and the Caribbean, while Vegas was relatively weak. We made further progress on our modernization initiative and remain on track to deliver $150 to $200 million in run rate benefits by the end of 2026, with half coming from revenue initiatives and the other half coming from cost savings and efficiencies. As we've talked about, the second quarter started off soft, but trends improved as we progressed through the quarter. As a result, contract sales were down less than 1% for the quarter, an improvement compared to Q1. First time buyer sales were up year over year, our fourth consecutive quarter of higher year over year first time buyer sales, and I'm particularly excited about this trend as new owners tend to buy additional points over time. First time buyers represented a third of total contract sales in the quarter, up 200 basis points from a year ago, reflecting the success of our new owner strategies. Owner sales were down year over year due to lower VPGs, while owner tours were flat. As you know, late last year we announced a modernization program that we believe can deliver an incremental $150 to $200 million in adjusted EBITDA benefits on a run rate basis by the end of next year. The reason for pursuing this initiative is to speed decision making across two organizations, right size our cost structure, optimize our IT platforms, and provide the foundation to drive growth in our leisure focused business. We expect half of the benefit to come from cost savings and efficiencies, while the other half will come from revenue initiatives. And while most of the expected benefit is still ahead of us, we are making great progress. For example, during the second quarter we launched and expanded a number of revenue initiatives, including expanding our enhanced call transfer program across the Marriott system, resulting in our best package sales quarter since the pandemic. This should help drive future sales. We also increased our use of nontraditional channels through a combination of road shows, virtual tours, and other events, accounting for over 13% of our total contract sales in the quarter. We expanded our new owner experiences campaign, which contributed to higher first time buyer VPGs. We also implemented a campaign to drive additional near-term owner stays driving incremental tours. And soon we plan to start using FICO score data for marketing purposes, which should result in higher VPGs and improved credit metrics. With our data and analytics and marketing and sales teams working together, we built and developed an AI-based propensity model focusing on renters most likely to become owners, which we believe will help drive higher sales. We are also using internally developed advanced analytic predictive models to better support our sales execs, and we are also rolling out new sales training. And we introduced a refundable getaway pricing option at Interval International, which we believe will drive higher rentals and profitability over time. In total, we expect these and other revenue enhancing initiatives will help us deliver $75 million to $100 million in incremental EBITDA by the end of next year on a run rate basis. We also expect to deliver another $75 million to $100 million from cost savings and efficiencies. We expect significant savings to come from retiring legacy technology debt, which will lead to efficiencies in how we run the business, eliminating manual processes and taking costs out that are currently required to maintain these legacy systems. We also expect to deliver substantial benefits from increasing automation, lowering procurement costs, reducing overhead costs, including corporate G&A, and optimizing our organizational structure. And while not part of our expected $150 million to $200 million EBITDA benefit, early indications suggest maintenance fees on our points-based products may be flattish next year, partially due to our monetization initiatives, which enhances the overall value proposition for our owners as well as our first-time buyers. But just as important as the momentum we've built in our early successes, we're changing how things get done, increasing the speed of decision-making and driving accountability. And I'm pleased with the way our associates have embraced the new ways of working. Looking forward, occupancy is expected to remain high. Tour capture rates are increasing, and owner keys on the books for the second half of the year look strong. A majority of owner villa reservations are now being done online, and we expect that to grow further. Loan delinquencies continue to trend down, guest satisfaction scores remain strong, and we ended the quarter with nearly 270,000 packages in our pipeline, with almost 30% scheduled to take a tour in the second half of the year, providing us good tour visibility. Contract sales increased slightly in July compared to June on higher tours and stable BPGs, and the team is focused on ramping up a number of new sales initiatives scheduled to launch in August, as well as increasing investment and sales training. Looking out longer term, despite the noisy environment, leisure consumers continue to prioritize travel, and timeshare remains a great value for many of them. As the only -or-upscale player in the industry with the best collection of brands, we believe our company is uniquely positioned for long-term growth, offering a product that resonates with today's consumer that is looking for space and experiences combined with brands they trust. Despite some ups and downs, our long-term financial model hasn't changed. We think we can grow tours and BPG in the low single digits, lever our fixed costs to improve margins, and use our free cash flow to reduce leverage and buy back shares. Over time, that should result in high single digit to low double digit EPS growth, and with the bulk of our modernization benefits still ahead of us, we should be able to do better than that for the next few years. With that, I'll turn the call over to Jason to discuss our results in more detail.