Marriott Vacations Worldwide Corporation · NYSE:VAC
Marriott Vacations Worldwide — Investor Presentation (November 2019)
46 slides from Marriott Vacations Worldwide's investor presentation, Nov 5, 2019
Slide 1: Investor Presentation November 2019
INVESTOR PRESENTATION NOVEMBER 2019
Slide 2: Forward-Looking Statements
Forward-Looking Statements We refer throughout this presentation to the results from the business associated with the brands that existed prior to our acquisition of ILG, Inc. (“ILG”) as “Legacy-MVW,” and we refer to the results from the business and brands that were acquired from ILG as “Legacy-ILG
Slide 3: Agenda: Powerful Business Model Driving Sustained Growth
AGENDA Powerful Business Model Driving Sustained Growth • The business today – a market leader • Unique and resilient model • Three-point strategy MARRIOTT VACATIONS WORLDWIDE I 3
Slide 4: Leading Provider of Vacation Experiences
Leading Provider of Vacation Experiences Vacation Ownership Over Leading 7 110 660,000 Upper Upscale Iconic brands Resorts around the world Owner families & Luxury Vacation Ownership Developer Exchange and Third-Party Management Serving nearly More than Over 2M 3,200 175 Members Exchange Properties
Slide 5: We Have a Broad, Diverse Portfolio
We Have a Broad, Diverse Portfolio Strengthened by the ILG Acquisition Vacation Ownership 87% of Revenues • Sales of vacation ownership products & financing • Management & rentals Exchange & Third-Party Management 13% of Revenues • Exchange • Third-party management As of December 31, 2018. Revenues
Slide 6: More Diverse, Less Capital-Intensive Model
More Diverse, Less Capital-Intensive Model 2008 Now Timeshare + Business Residences + Timeshare + Exchange More Fractional diverse Development Less capital Weeks-based Points-based intensive Model Solid free On balance cash flow Funding Capital-efficient sheet MARRIOTT VACATIONS WORLDWIDE I 6
Slide 7: Agenda: Powerful Business Model Driving Sustained Growth
AGENDA Powerful Business Model Driving Sustained Growth • The business today – a market leader • Unique and resilient model • Three-point strategy MARRIOTT VACATIONS WORLDWIDE I 7
Slide 8: Key Attributes of our Model
Key Attributes of our Model 1 3 Attractive and Resilient revenue growing industry streams 2 4 Strong Powerful Adjusted performance Free Cash Flow record engine MARRIOTT VACATIONS WORLDWIDE I 8
Slide 9: We Play in a Healthy, Growing Industry
1. We Play in a Healthy, Growing Industry Timeshare Is Healthy And Growing U.S. timeshare contract sales ($B) 6% $10.2 CAGR 7 out of 10 $6.3 owners would purchase again 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data from ARDA AIF State of the Timeshare Industry for each year shown as well as
Slide 10: Large And Attractive Addressable Market
Large And Attractive Addressable Market >35M households – addressable market in U.S. alone >$130k median annual income ~740 FICO score $1.5M median net worth Amounts represent Marriott Vacation Club owners except addressable market, which is from management’s estimates. MARRIOTT VACATIONS WORLDWIDE
Slide 11: Strong Performance Record
2. Strong Performance Record Legacy Legacy Combined MVW Contract Sales ILG Contract Sales Contract Sales ($M) ($M) ($M) 9% CAGR $1,432 8% CAGR $1,112 $902 10% CAGR $719 $530 $393 2015 2018 2015 2018 2015 2018 MARRIOTT VACATIONS WORLDWIDE I 11
Slide 12: Resilient Vacation Ownership Business Model
3. Resilient Vacation Ownership Business Model 2018 Adjusted EBITDA Contribution Management and Exchange 40% Vacation Ownership 28% 72% Sales of Adjusted EBITDA from non-VO-sales 17% 15% Rentals Financing Excludes VRI-Europe (sold December 2018). Adjusted EBITDA Contribution is a non-GAAP measure. F
Slide 13: High-Margin Exchange & Third-Party Management Business Provides Strong Free Cash Flow
High-Margin Exchange & Third-Party Management Business Provides Strong Free Cash Flow 2018 Adjusted EBITDA Contribution Key Metrics Revenues $403M Third-Party Management ~20% Adjusted EBITDA Margin Exchange ~80% 63% Capital Expenditures $17M Combined basis, excluding VRI-Europe (sold December 2018).
Slide 14: Recurring and Predictable Fee Based Revenue
Recurring and Predictable Fee Based Revenue 2018 Interval International Total Revenue $315M Recurring Predictable 34% membership transaction 58% revenue revenue 8% Ancillary & Other revenue MARRIOTT VACATIONS WORLDWIDE I 14
Slide 15: Stable Exchange Revenue During Last Recession
Stable Exchange Revenue During Last Recession Interval International Total Member Revenue $328 $330 $329 $302 Real U.S. GDP per capita 2007 2008 2009 2010 $’s in millions. Source: Federal Reserve Economic Data. MARRIOTT VACATIONS WORLDWIDE I 15
Slide 16: A Powerful Free Cash Flow Engine
4. A Powerful Free Cash Flow Engine Adjusted Free Cash Flow before Inventory and Capex $1,763M Inventory Investment Adjusted Free Cash Flow Capital Expenditure $719M $907M $137M Shares Repurchased Dividends ~80% Returned $563M $147M to Shareholders Cumulative 2015 to 2018. Free Cash Flow and Adjuste
Slide 17: Agenda: Powerful Business Model Driving Sustained Growth
AGENDA Powerful Business Model Driving Sustained Growth • The business today – a market leader • Unique and resilient model • Three-point strategy MARRIOTT VACATIONS WORLDWIDE I 17
Slide 18: Three-Point Strategy
Three-Point Strategy 1. Drive profitable revenue 3. growth Balanced capital deployment 2. Transform business with ILG acquisition Foundational Beliefs Owner/Guest Satisfaction & Associate Engagement MARRIOTT VACATIONS WORLDWIDE I 18
Slide 19: Substantial Growth Opportunities
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Substantial Growth Opportunities Expand digital: • Capture growth through digital Leverage world-class brands: • Leverage exclusive access to Marriott BonvoyTM and World of Hyatt loyalty programs New Vacation Ownership resorts: • Develop exciting new reso
Slide 20: Driving Growth with Digital
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Driving Growth with Digital Strengthen Our Digital Infrastructure Grow Online Tour Packages Enhance Experiences MARRIOTT VACATIONS WORLDWIDE I 20
Slide 21: Leveraging Strong License Relationships
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Leveraging Strong License Relationships Number of Loyalty Members ~130M 85M 61M 16M MARRIOTT VACATIONS WORLDWIDE I 21
Slide 22: Develop New Exciting Resorts and Properties
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Develop New Exciting Resorts and Properties Add new resorts Grow Match inventory and sales efficiently spending with centers sales pace MARRIOTT VACATIONS WORLDWIDE I 22
Slide 23: Acquired Brands Underrepresented in Major Markets
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Acquired Brands Underrepresented in Major Markets • Las Vegas, NV • Orlando, FL • Maui, HI • Waikiki, HI • Big Island, HI • Urban • Key West, FL • Aruba • Cancun, Mexico • Los Cabos, Mexico • Asia Pacific MARRIOTT VACATIONS WORLDWIDE I 23
Slide 24: Strong Focus on First-Time Buyer Growth
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Strong Focus on First-Time Buyer Growth First-Time Buyers 28K 25K 22K 75k first-time buyers added since 2016!! 2016 2017 2018 MARRIOTT VACATIONS WORLDWIDE I 24
Slide 25: Adding New Owners to the System Grows Revenue
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Adding New Owners to the System Grows Revenue Average Revenue Contribution of Initial Purchases Through First Five Years Other Financing Management Revenue Fees, Ancillary, Financing Rental, Other Development Revenue Revenue Additional Purchase Developmen
Slide 26: Grow Exchange & Third-Party Management Business
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Grow Exchange & Third-Party Management Business Increase share of Expand Grow affiliations wallet with enhanced distribution & management product offerings channels contracts MARRIOTT VACATIONS WORLDWIDE I 26
Slide 27: ILG Acquisition Delivers Transformative Benefits
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION ILG Acquisition Delivers Transformative Benefits • Additional well-respected brands • Offering exciting new customer experiences • Creates economies of scale • Provides opportunities for new ways of working • High margin, strong free cash flow exchange bus
Slide 28: On Track to Deliver $125M+ in Cost Synergy Savings
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION On Track to Deliver $125M+ in Cost Synergy Savings ~$65M+ 2021 Remaining Synergies PLANNED INITIATIVES ~$125M+ Total ~$60M • Back of house technology and synergies 2019 Synergies process consolidation COMPLETED INITIATIVES • Digital transformation • Reduce
Slide 29: Capturing Revenue Synergies From ILG Acquisition
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION Capturing Revenue Synergies From ILG Acquisition A few examples… Hotel In-House Owner Trial Program Volume per Call Marketing Tour and Site Guest Transfer Locations Penetration Packages Sold (VPG) Increased Market Best Practices Sales Excellence Penetratio
Slide 30: Linking All Marriott-Branded Vacation Ownership Resorts
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION Linking All Marriott-Branded Vacation Ownership Resorts Today Target Future Product Form MARRIOTT VACATIONS WORLDWIDE I 30
Slide 31: Three Year Outlook – Delivering Strong Earnings Growth
STRATEGY #3: BALANCED CAPITAL DEPLOYMENT Three Year Outlook – Delivering Strong Earnings Growth and Adjusted Free Cash Flow Revenues Adjusted EDITDA ($B) ($M) ~7% $3.8-$4.1 ~9% $930-$1,060 $3.25-$3.30 CAGR $745-$775 CAGR Margin Margin ~23% ~25% Margin 2019E 2022E 2019E 2022E ~23% Contract Sales Adju
Slide 32: Allocate Adjusted Free Cash Flow to Maximize Shareholder Value
STRATEGY #3: BALANCED CAPITAL DEPLOYMENT Allocate Adjusted Free Cash Flow to Maximize Shareholder Value Strategic M&A Strong Adj. FCF ~$1.3B to $1.5B Share Repurchases next 3 years1 after development & investment spend Dividends 1 Cumulative 2020 to 2022. Adjusted Free Cash Flow is a non-GAAP measur
Slide 33: Substantial Cash Available 2020 to 2022
STRATEGY #3: BALANCED CAPITAL DEPLOYMENT Substantial Cash Available 2020 to 2022 ($M) 2022 Low 2022 High Adjusted free cash flow 1 $1,300 $1,500 Disposition proceeds $160 $220 Leverage capacity $110 $450 Inventory optimization $0 $200 Non-traditional securitizations $30 $60 Less: Transformation cost
Slide 34: In Summary: Powerful Cash Flow Engine
IN SUMMARY Powerful Cash Flow Engine. Delivering Sustainable Growth and Strong Shareholder Returns • Proven track record • Diversified and resilient business model • On track to deliver substantial synergies • Targeting meaningful growth • Strong cash flow and disciplined capital deployment MARRIOTT
Slide 35: Appendix
APPENDIX MARRIOTT VACATIONS WORLDWIDE I A-1
Slide 36: Third Quarter 2019 Highlights
Third Quarter 2019 Highlights Combined Contract Sales Combined Adjusted EDITDA ($M) ($M) $190 $390 $372 $160 +18% +5% Margin Margin 20.0% 23.7% Margin Q3 2018 Q3 2019 Q3 2018 Q3 2019 ~23% Combined VPG $3,367 $3,461 +3% Q3 2018 Q3 2019 Adjusted EBITDA is a non-GAAP measure. For definition, please see
Slide 37: Strong Balance Sheet with No Long-Term Debt Maturities Before 2022
Strong Balance Sheet with No Long-Term Debt Maturities Before 2022 Debt Maturity Schedule ($M) Net Leverage $848 Target: $750 2.0x to 2.5x $350 $230 2020 2021 2022 2023 2024 2025 2026 2027 2028 Excludes the 1% annual term loan amortization, capital lease payments and non-recourse securitized debt. M
Slide 38: Non-GAAP Financial Measures
Non-GAAP Financial Measures In our presentation we report certain financial measures that are not prescribed by United States generally accepted accounting principles ("GAAP"). We discuss below our reasons for reporting these non-GAAP financial measures, and we’ve made footnote references to them on
Slide 39: Non-GAAP Financial Measures
Non-GAAP Financial Measures Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("EBITDA") and Adjusted EBITDA. EBITDA is defined as earnings, or net income, before interest expense (excluding consumer financing interest expense associated with term loan securitization transaction
Slide 40: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted EBITDA Margin. We calculate Adjusted EBITDA Margin by dividing segment or total company Adjusted EBITDA, where applicable, by segment or total company revenues excluding cost reimbursements, where applicable. We consider Adjusted EBITDA Margin to be an indicator
Slide 41: Q3 2018 and 2019 Combined Net Income
NON-GAAP FINANCIAL MEASURES Q3 2018 and 2019 Combined Net Income Q3 2018 Legacy-ILG Reclassified (July/August)(1) MVW(2) Combined(3) Q3 2019 REVENUES Sale of vacation ownership products $ 88 $ 252 $ 340 $ 350 Management and exchange 118 126 244 231 Rental 57 90 147 149 Financing 15 48 63 72 Cost rei
Slide 42: Q3 2018 and 2019 Combined Adjusted EBITDA
NON-GAAP FINANCIAL MEASURES Q3 2018 and 2019 Combined Adjusted EBITDA Q3 2018 Legacy-ILG Reclassified (1) (2) (3) (July/August) MVW Combined Q3 2019 Net income attributable to common shareholders $ 2 $ (36) $ (34) $ (9) (4) Interest expense 6 14 20 31 Tax provision - (2) (2) 10 Depreciation and amor
Slide 43: 2018 Adjusted EBITDA Contribution and Margin
NON-GAAP FINANCIAL MEASURES 2018 Adjusted EBITDA Contribution and Margin Exchange & Third-Party Management Exchange & Third-Party Management Third Party Third Party Less: Management (In millions) Exchange Management VRIE Less: VRIE Total Net income $ 169 $ 56 $ (17) $ 39 $ 208 Depreciation and amort
Slide 44: Cumulative Adjusted Free Cash Flow – 2015 through 2018
NON-GAAP FINANCIAL MEASURES Cumulative Adjusted Free Cash Flow – 2015 through 2018 (In millions) 2015 2016 2017 2018 Cumulative Net cash provided by operating activities $ 109 $ 141 $ 142 $ 97 $ 489 Capital expenditures for property and equipment (excluding inventory): Other (36) (35) (26) (40) (137
Slide 45: Adjusted EBITDA and Adjusted Free Cash Flow Outlook
NON-GAAP FINANCIAL MEASURES Adjusted EBITDA and Adjusted Free Cash Flow Outlook (In millions) 2019 2022 Adjusted EBITDA Low High Low High Net income attributable to common shareholders $ 130 $ 144 $ 426 $ 523 Interest expense(1) 131 131 125 125 Tax provision 75 81 194 227 Depreciation and amortizati
Slide 46: Potential 2019 Excess Adjusted Free Cash Flow for Capital Deployment
Potential 2019 Excess Adjusted Free Cash Flow for Capital Deployment • Cash flow generated by diversified business model projected to provide significant excess capital for accretive new business opportunities and shareholder returns - Capital efficient vacation ownership development model optimizes
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