Marriott Vacations Worldwide Corporation · NYSE:VAC
Marriott Vacations Worldwide — Q2 2022 Earnings Presentation
39 slides from Marriott Vacations Worldwide's earnings presentation, Aug 9, 2022
Slide 1: Investor Presentation
Investor Presentation August 9, 2022 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements We refer throughout this presentation to the business acquired by our acquisition of Welk Resorts as “Legacy Welk.” This presentation and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about e
Slide 3: Agenda: Driving Sustained Long-Term Growth
AGENDA Driving Sustained Long-Term Growth • Unique and resilient business model • Consistent and sustainable growth strategy 3
Slide 4: Leading Provider of Vacation Experiences
Leading Provider of Vacation Experiences Vacation Ownership – ~80% of Adjusted EBITDA contribution 7 >120 ~700,000 Leader in Iconic Brands Resorts Owner Families Upper Upscale Resorts Exchange and Third-Party Management – ~20% of Adjusted EBITDA contribution ~1.6M ~3,200 Premier >90 Interval Interna
Slide 5: We Have a Unique, Iconic Brand Portfolio
We Have a Unique, Iconic Brand Portfolio Strengthened by the ILG and Welk Acquisitions Vacation Ownership ~90% of Revenues • Sales of vacation ownership products & financing • Management & rentals Exchange & Third-Party Management ~10% of Revenues • Exchange • Third-party management Revenues as of 1
Slide 6: Evolving and Resilient Business Model
Evolving and Resilient Business Model Pre 2011 Today Outcome Strong consumer Brand 3 brands 7 brands demographic/ New Expansion Marriott/Hyatt programs Timeshare + residence + Timeshare + Product Diverse cash flow fractional ownership exchange Development Deeded Primarily points-based Capital effici
Slide 7: Well Positioned to Face Recessionary Challenges
Well Positioned to Face Recessionary Challenges ✓ Strong customer base ✓ Vacations are “pre-paid” driving high resort occupancy rates ✓ The Interval International exchange model performs well in typical recessionary periods ✓ Minimum inventory commitments and debt maturities for the next few years ✓
Slide 8: On-Site Guests Drive Sales
On-Site Guests Drive Sales High Resort Most Vacation Ownership Occupancy Sales Come from On-Property Guests 88% 90% 82% ~85% from resort guests 2019 2021 2022 Sales from resort guests based on 2021 contract sales. 8
Slide 9: Substantial Adjusted EBITDA from Recurring Sources
Substantial Adjusted EBITDA from Recurring Sources Adjusted EBITDA Contribution Development Management and Exchange 30% 36% ~40% of Adjusted EBITDA contribution from recurring sources 15% Rentals 19% Financing Adjusted EBITDA Contribution is based on 2021 results and is a non-GAAP measure. For defin
Slide 10: Well Positioned To Continue Rapid Growth
Well Positioned To Continue Rapid Growth 4 High margin/cash flow business • Efficient capital and cost controls provide substantial free cash flow 3 Strong value proposition • Versus market ADRs 2 Spacious upper upscale resorts • Product well aligned with post-COVID vacation style 1 100% leisure foc
Slide 11: Large and Attractive Addressable Market and Customer Base
Large and Attractive Addressable Market and Customer Base Vacation Ownership ~38M households – addressable market in U.S. alone1 >$130K median annual income ~735 FICO score $1.5M median net worth 1. Based on 2020 data from the American Community Survey. 11
Slide 12: Exchange and Third-Party Management Delivers High Margins with Low Capital Intensity
Exchange and Third-Party Management Delivers High Margins with Low Capital Intensity $273M 53% Segment Revenue Segment (excluding Cost Adjusted EBITDA Margin Reimbursements) $144M 1% - 4% Capital Expenditure Segment as % of Revenue (excluding Adjusted EBITDA Cost Reimbursements) FY 2021 Metrics exce
Slide 13: Strong Liquidity Position
Strong Liquidity Position As of June 30, 2022 Available cash on hand $324M Gross notes available for securitization $106M Additional borrowing capacity under revolving credit facility $749M $1.2 Billion of Liquidity 13
Slide 14: Conservative Balance Sheet with Interest Rates Primarily Fixed
Conservative Balance Sheet with Interest Rates Primarily Fixed Debt Maturity Schedule Fixed vs Floating Rate Debt2 ($M) Floating $1,035 9% (cost: 3.4%) 250 $575 $750 Revolving $500 Credit 785 Facility1 $350 Fixed $230 91% (cost: 3.3%) 2022 2023 2024 2025 2026 2027 2028 2029 Net corporate debt: $2.7B
Slide 15: Disciplined Capital Allocation Model
Disciplined Capital Allocation Model Strong Free Cash Flow Currently1 Within Generation our Target Leverage of s 2.5x to 3.0x Additional Return Strategic organic capital to M&A growth shareholders • Inventory acquisition • Bolt-on to existing • Share repurchases • Technology investment • New leisure
Slide 16: Agenda: Driving Sustained Long-Term Growth
AGENDA Driving Sustained Long-Term Growth • Unique and resilient business model • Consistent and sustainable growth strategy 16
Slide 17: Three-Point Growth Strategy
Three-Point Growth Strategy 3 Disciplined use of free cash flow 2 Leverage technology to 1 expand our Drive growth Vacation Ownership through continued and Exchange transformation of businesses and our products new product offerings 17
Slide 18: Driving Vacation Ownership Growth
Driving Vacation Ownership Growth 1 2 3 4 Integrate Digital High Owner Leveraging our Experience & Technology-Driven Engagement with Brands to Drive Enhance Service for Sales and Marketing Customer-Driven Growth Next Generation of Growth Product Strategies Travelers 18
Slide 19: Leveraging Strong License Relationships
Vacation Ow nership Grow th Strategy #1 Leveraging Strong License Relationships Number of Loyalty Members 169M 139M 95M 30M Marriott, Hilton, and Wyndham as of June 30, 2022. Hyatt as of December 31, 2021. 19
Slide 20: Global Footprint in Premium Locations
Vacation Ow nership Grow th Strategy #1 Global Footprint in Premium Locations Scottsdale, AZ Orlando, FL Maui, HI Oahu, HI Big Island, HI Kauai, HI Las Vegas, NV Urban Aruba Cancun, Mexico Los Cabos, Mexico Asia Pacific Hyatt Residence Club includes Sirena del Mar, a Legacy Welk resort, which is exp
Slide 21: Transforming Hyatt Vacation Ownership Business
Vacation Ow nership Grow th Strategy #1 Transforming Hyatt Vacation Ownership Business 1 2 3 4 Capitalize on Optimize Implement best Product development marketing practices enhancements opportunities channels 21
Slide 22: Vacation Next Initiative – A Multi-Year Transformation with Key Advantages
Vacation Ow nership Grow th Strategy #2 Vacation Next Initiative – A Multi-Year Transformation with Key Advantages 1. Unification of products 2. Creates integrated 3. Transforms marketing, and New Owner Program digital experience sales and service 22
Slide 23: Abound by Marriott Vacations Enhances Value and Flexibility for Owners
Vacation Ow nership Grow th Strategy #2 Abound by Marriott Vacations Enhances Value and Flexibility for Owners Expansion of resorts with direct booking access Expanded experiences for Westin and Sheraton Encourages upgrades to access streamlined owner benefit levels 23
Slide 24: Recent Initiatives to Optimize Direct Marketing
Vacation Ow nership Grow th Strategy #3 Recent Initiatives to Optimize Direct Marketing Modern CRM Improving Expanded Enhancing campaign implemented performance access to digital program management across across all members efficiency tools business channels Digital Advanced Programs Analytics 24
Slide 25: Focusing on First Time Buyer Growth
Vacation Ow nership Grow th Strategy #4 Focusing on First Time Buyer Growth Increasing Sales to Younger Generations1 Growing New Owners2 Other 4% Millennial Boomers & GenX ~132K 29% First-time buyers 67% added since 2016 1. As of Q2 2022 contract sales. Younger generation is first time buyers only a
Slide 26: Adding Highly Engaged New Owners Drives Revenue Growth
Vacation Ow nership Grow th Strategy #4 Adding Highly Engaged New Owners Drives Revenue Growth Average Revenue Contribution of Initial Purchases Through First Five Years Other Financing Management Fees, Ancillary, Rental, Financing Other Development Revenue Revenue Additional Purchase Development Re
Slide 27: Exchange & Third-Party Management Business Growth Strategies
Exchange & Third-Party Management Business Growth Strategies 1 2 3 Increase share of wallet Expand distribution Grow affiliations and with enhanced product channels management contracts offerings 27
Slide 28: On Track to Deliver $200M in Cost Synergy Savings
On Track to Deliver $200M in Cost Synergy Savings ~$35M To-Go Opportunities ADDITIONAL $200M SAVINGS Total Savings • Expanded Automation • Central Procurement Forecast • Data & Call Center Modernization ~$165M Synergies June COMPLETED 2022 INITIATIVES September 2018 All numbers reflect run-rate syne
Slide 29: Strong Adjusted EBITDA and Free Cash Flow Growth
Strong Adjusted EBITDA and Free Cash Flow Growth Contract Sales Adjusted EBITDA Adjusted Free Cash Flow ($M) ($M) ($M) 6% CAGR 6% 15% CAGR CAGR $1,775 - 1,875 $880 - 930 $650 - 730 $1,524 $758 $450 ~75% Conversion rate 2019 2022 2019 2022 2019 2022 For definition and reconciliation, please see appen
Slide 30: Robust Q2 Contract Sales and Adjusted EBITDA Growth
Robust Q2 Contract Sales and Adjusted EBITDA Growth Q2 Contract Sales Q2 Adjusted EBITDA ($M) ($M) 9% 9% CAGR $506 CAGR $255 $386 $362 $195 $164 29% 25% Margin 23% 2019 2021 2022 2019 2021 2022 For definition and reconciliation, please see appendix. 30
Slide 31: Resilient, Well-Positioned Business Executing on Proven Strategy
IN SUMMARY Resilient, Well-Positioned Business Executing on Proven Strategy Proven resilient business model Well-positioned products with iconic brands Rapid expansion through organic growth, acquisitions, and new product lines Enhancing value and efficiency with technology High-margin businesses yi
Slide 32: Appendix
Appendix A-1
Slide 33: Non-GAAP Financial Measures
Non-GAAP Financial Measures In our presentation we report certain financial measures that are not prescribed by GAAP. We discuss our reasons for reporting these non-GAAP financial measures below and we’ve made footnote references to them on the preceding pages. The financial schedules included herei
Slide 34: Full-Year 2022 Adjusted Free Cash Flow Guidance
Full-Year 2022 Adjusted Free Cash Flow Guidance ($M) Low High Adjusted EBITDA $880 $930 Cash interest (100) (100) Cash taxes (150) (165) Corporate capital expenditures (70) (60) Inventory 90 110 Financing activity and other - 15 Adjusted Free Cash Flow $650 $730 Adjusted EBITDA and Adjusted Free Cas
Slide 35: Non-GAAP Financial Measures
Non-GAAP Financial Measures (In millions) 2022** Consolidated Adjusted EBITDA Margin 2019 Low High Net income attributable to common shareholders $ 138 $ 365 $ 395 Interest expense 132 114 114 Provision for income taxes 83 147 157 Depreciation and amortization 141 126 126 EBITDA 494 752 792 Share-ba
Slide 36: Non-GAAP Financial Measures
Non-GAAP Financial Measures (In millions) Consolidated Adjusted EBITDA Margin Q2 2019 Q2 2021 Q2 2022 Net income attributable to common shareholders $ 49 $ 6 $ 136 Interest expense 35 44 30 Provision for income taxes 25 27 43 Depreciation and amortization 36 36 32 EBITDA 145 113 241 Share-based comp
Slide 37: Non-GAAP Financial Measures
Non-GAAP Financial Measures Reportable Segments Exchange & VO and Exchange Vacation Third-Party Corporate 2021 & Third-Party % Vacation % Exchange & (In millions) Ownership Management and Other Total Management Ownership Third-Party Management Net income attributable to common shareholders $ 585 $ 9
Slide 38: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted EBITDA Contribution. We calculate Adjusted EBITDA Contribution by calculating profit by revenue source (development, management and exchange, rental and financing) and then calculating profit by revenue source as a percentage of total profit, as reconciled herein
Slide 39: Non-GAAP Financial Measures
Non-GAAP Financial Measures Free Cash Flow, Adjusted Free Cash Flow and Total Cash Flow. We evaluate Free cash flow and Adjusted free cash flow as liquidity measures that provide useful information to management and investors about the amount of cash provided by operating activities after capital ex
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