Marriott Vacations Worldwide Corporation · NYSE:VAC
Marriott Vacations Worldwide — Q1 2020 Earnings Presentation
33 slides from Marriott Vacations Worldwide's earnings presentation, May 2020
Slide 1: Investor Presentation May 2020
INVESTOR PRESENTATION MAY 2020
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
AGENDA Powerful Business Model Driving Long-Term Growth • Well Positioned to Weather the Storm • Unique Business Model • Long-Term Growth Strategy MARRIOTT VACATIONS WORLDWIDE I 3
Slide 4: Highly Resilient Business Model
Highly Resilient Business Model 2019 Adjusted EBITDA Contribution Recurring ~ Management and Vacation Exchange Ownership Sales 28% 36% ~45% of Adjusted EBITDA Contribution from Recurring Sources 19% 17% Rentals Financing Adjusted EBITDA Contribution, a non-GAAP measure, excludes allocations for gene
Slide 5: Taking Aggressive Cost Reduction Measures
Taking Aggressive Cost Reduction Measures Salaries and wages Other salaries and Other cost reduction reduced wages measures measures Eliminated all travel 50% reduction for Deferred 2020 merit and off-site Senior Leadership increases meetings Deferred 2019 Curtailed Furloughing nearly 401(k) company
Slide 6: Deferring Cash Investments and Other Payments
Deferring Cash Investments and Other Payments Reducing capex and • Reduced planned inventory and corporate inventory spending capex investments Curtailing synergy • Focus on initiatives that are cash flow neutral or investments better in 2020 Prioritizing • Temporarily suspending share repurchases a
Slide 7: Strong Liquidity Position with Ample Runway
Strong Liquidity Position with Ample Runway Cash on hand on March 31 $651M Additional cash from May Senior Notes Offering $500M Gross securitizable notes receivable on March 31 $98M Remaining warehouse capacity on April 30 $258M . MARRIOTT VACATIONS WORLDWIDE I 7
Slide 8: No Long-Term Debt Maturities Before 2022
No Long-Term Debt Maturities Before 2022 Debt Maturity Schedule ($M) Covenant Leverage $1,393 New Senior Q1 2020: Notes 1.3x vs. 3.0x first $500 lien covenant Revolving Credit Facility $750 $596 $893 $350 $230 2020 2021 2022 2023 2024 2025 2026 2027 2028 Maturities above exclude the 1% annual term l
Slide 9: Substantial Second-Half Bookings and Tours
Substantial Second-Half Bookings and Tours Vacation Ownership Preview Package Interval International Nights Booked Tours Booked Bookings (000’s) (000’s) (000’s) 2,093 2,018 Preview & Transient Stays 122.8 106.5 77% Owner 43.3 Stays 78% 41.6 78% H2 2019 H2 2020 H2 2019 H2 2020 H2 2019 H2 2020 North A
Slide 10: Agenda
AGENDA Powerful Business Model Driving Long-Term Growth • Well Positioned to Weather the Storm • Unique Business Model • Long-Term Growth Strategy MARRIOTT VACATIONS WORLDWIDE I 10
Slide 11: 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 Nearly Over 2M 3,200 170 Members Exchange Properties Res
Slide 12: We Have a Broad, Diverse Portfolio
We Have a Broad, Diverse Portfolio Strengthened by the ILG Acquisition Vacation Ownership 88% of Revenues • Sales of vacation ownership products & financing • Management & rentals Exchange & Third-Party Management 12% of Revenues • Exchange • Third-party management As of December 31, 2019. Revenues
Slide 13: More Diverse, Less Capital-Intensive Model
More Diverse, Less Capital-Intensive Model Then 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 13
Slide 14: 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 15: High-Margin Exchange & Third-Party Management Business
High-Margin Exchange & Third-Party Management Business Provides Strong Free Cash Flow 2019 Adjusted EBITDA Contribution Key Metrics Interval International Third-Party Active Members 1.7M Management ~20% Adjusted EBITDA Margin Exchange ~80% 63% Capital Expenditures $13M Adjusted EBITDA Contribution a
Slide 16: Strong Performance Record
Strong Performance Record Legacy Legacy Combined MVW Contract Sales ILG Contract Sales Contract Sales ($M) ($M) ($M) 8% CAGR $1,524 7% CAGR $1,112 $952 10% CAGR $719 $572 $393 2015 2019 2015 2019 2015 2019 MARRIOTT VACATIONS WORLDWIDE I 16
Slide 17: A Powerful Free Cash Flow Engine
A Powerful Free Cash Flow Engine Adjusted Free Cash Flow before Inventory and Capex $2.6B Inventory Investment Adjusted Free Cash Flow Capital Expenditure $1.0B $1.4B $0.2B Shares Repurchased Dividends ~90% Returned $1.0B $0.2B to Shareholders Cumulative 2015 to 2019. Free Cash Flow and Adjusted Fre
Slide 18: Agenda
AGENDA Powerful Business Model Driving Long-Term Growth • Well Positioned to Weather the Storm • Unique Business Model • Long-Term Growth Strategy MARRIOTT VACATIONS WORLDWIDE I 18
Slide 19: Driving Growth with Digital
Driving Growth with Digital Strengthen Our Digital Infrastructure Grow Online Tour Packages Enhance Experiences MARRIOTT VACATIONS WORLDWIDE I 19
Slide 20: Leveraging Strong License Relationships
Leveraging Strong License Relationships Number of Loyalty Members 141M 103M 81M 22M MARRIOTT VACATIONS WORLDWIDE I 20
Slide 21: Acquired Brands Underrepresented in Major Markets
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 Announced proposed project in February 2020. MARRIOTT VACATIONS WORLDWIDE I 21
Slide 22: Focus on New Owners and Younger Generations
Focus on New Owners and Younger Generations Increasing Sales to Younger Growing New Generations Owners Millennial New Owner Not Disclosed Growth & GenX 10% 33% ~95k first-time buyers added since 2016!! 57% Boomers MARRIOTT VACATIONS WORLDWIDE I 22
Slide 23: Adding New Owners to the System Grows Revenue
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 Development Revenue Initial Vacation Total Revenue Owne
Slide 24: Grow Exchange & Third-Party Management Business
Grow Exchange & Third-Party Management Business Increase share of Expand Grow affiliations wallet with distribution & management enhanced product channels contracts offerings MARRIOTT VACATIONS WORLDWIDE I 24
Slide 25: On Track to Deliver $125M+ in Cost Synergy Savings
On Track to Deliver $125M+ in Cost Synergy Savings ~$55M+ Remaining Synergies ~$125M+ PLANNED INITIATIVES Total ~$70M • Back of house technology and synergies Synergies process consolidation COMPLETED INITIATIVES • Digital transformation • Reduced systems • Duplicate leadership positions and public
Slide 26: Capturing Revenue Synergies From 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 Penetration MARRIOTT VACATIONS WORLDWIDE I 26
Slide 27: Linking All Marriott-Branded Vacation Ownership Resorts
Linking All Marriott-Branded Vacation Ownership Resorts Today Target Future Product Form MARRIOTT VACATIONS WORLDWIDE I 27
Slide 28: In Summary: Resilient Business Model With Balance Sheet and Liquidity
IN SUMMARY Resilient Business Model With Balance Sheet and Liquidity to Weather The Storm Quick Action Taken to Reduce Cash Burn and Preserve Liquidity Ample Liquidity to Cover Capital Needs Through End of 2021 Resilient Business Model with History of Strong Performance More Than 80% of U.S. Keys Lo
Slide 29: Appendix
APPENDIX MARRIOTT VACATIONS WORLDWIDE I A-1
Slide 30: 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 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures Revenues Excluding Cost Reimbursements. Cost reimbursements revenue includes direct and indirect costs that property owners' associations and joint ventures we participate in reimburse to us, and relates, predominantly, to payroll costs where we are the employer. As we re
Slide 32: 2019 Net Income
NON-GAAP FINANCIAL MEASURES 2019 Net Income 2019 REVENUES Sale of vacation ownership products $ 1,390 Management and exchange 954 Rental 628 Financing 275 Cost reimbursements 1,108 TOTAL REVENUES 4,355 EXPENSES Cost of vacation ownership products 356 Marketing and sales 762 Management and exchange 5
Slide 33: Cumulative Adjusted Free Cash Flow – 2015 through 2019
NON-GAAP FINANCIAL MEASURES Cumulative Adjusted Free Cash Flow – 2015 through 2019 (In m illions) 2015 2016 2017 2018 2019 Cumulative Net cash provided by operating activities $ 109 $ 141 $ 142 $ 97 $ 382 $ 871 Capital expenditures for property and equipment (excluding inventory): Other (36) (35) (2
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