Marriott Vacations Worldwide Corporation · NYSE:VAC
Marriott Vacations Worldwide — Q3 2022 Earnings Presentation
39 slides from Marriott Vacations Worldwide's earnings presentation, Nov 1, 2022
Slide 1: Investor Presentation
Investor Presentation November 1, 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: 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 Inter
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. *Based on full year 2022 estimate. 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 def
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 lodging average rates 2 Spacious upper upscale resorts • Product well aligned with current vacation style 1 100% leis
Slide 11: Large and Attractive Addressable Market and Customer Base
Large and Attractive Addressable Market and Customer Base Vacation Ownership ~43M households – addressable market in U.S. alone1 >$130K median annual income ~735 FICO score $1.5M median net worth 1. Based on 2021 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 ex
Slide 13: Strong Liquidity Position
Strong Liquidity Position As of September 30, 2022 Available cash on hand $294M Gross notes available for securitization $142M Additional borrowing capacity under revolving credit facility $519M $1.0 Billion of Liquidity 13
Slide 14: Conservative Balance Sheet at 9/30/22 with Interest Rates Primarily Fixed
Conservative Balance Sheet at 9/30/22 with Interest Rates Primarily Fixed Debt Maturity Schedule Fixed vs Floating Rate Debt2 ($M) $1,034 Floating 250 17% $750 (cost: 5.9%) $575 520 $500 Revolving 784 Credit $350 Facility1 Fixed 230 83% (cost: 3.5%) 2022 2023 2024 2025 2026 2027 2028 2029 Net corpor
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: 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 implementation 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% Boomers Millennial & GenX ~135K 35% 61% First-time buyers added since 2016 1. As of YTD Q3 2022 contract sales. First time buyers only and excludes legacy
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 ~$30M To-Go Opportunities ADDITIONAL $200M SAVINGS Total Savings • Expanded Automation • Central Procurement Forecast • Data & Call Center Modernization ~$170M Synergies September COMPLETED 2022 INITIATIVES September 2018 All numbers reflect run-rate
Slide 29: Strong Adjusted EBITDA and Free Cash Flow Growth
Strong Adjusted EBITDA and Free Cash Flow Growth Contract Sales Adjusted EBITDA* Adjusted Free Cash Flow* ($M) ($M) ($M) 7% 6% 16% CAGR CAGR CAGR $670-730 $1,820-1,860 $950-975 $1,524 900-925 $758 Excluding Alignment $450 ~75-80% Conversion Rate** 2019 2022 2019 2022 2019 2022 *Adjusted EBITDA and A
Slide 30: Robust Q3 Contract Sales and Adjusted EBITDA Growth
Robust Q3 Contract Sales and Adjusted EBITDA Growth Q3 Contract Sales Q3 Adjusted EBITDA* ($M) ($M) 7% 8% CAGR $483 CAGR $284 $390 $380 $205 $240 $190 Excluding Alignment 28% Margin 27% 24% 2019 2021 2022 2019 2021 2022 *Adjusted EBITDA is a non-GAAP measure. For definition and reconciliation, pleas
Slide 31: Resilient, Well-Positioned Business Executing on Proven Strategy
IN SUMMARY Resilient, Well-Positioned Business Executing on Proven Strategy Proven resilient business model Well-positioned products with iconic brands Rapid expansion through organic growth, acquisitions, and new product lines Enhancing value and efficiency with technology High-margin businesses yi
Slide 32: Appendix
Appendix MARRIOTT VACATIONS AA
Slide 33: Non-GAAP Financial Measures
Non-GAAP Financial Measures In our presentation we report certain financial measures that are not prescribed by GAAP. We discuss our reasons for reporting these non-GAAP financial measures below and we have made footnote references to them on the preceding pages. The financial schedules included her
Slide 34: Full-Year 2022 Adjusted Free Cash Flow Guidance
Full-Year 2022 Adjusted Free Cash Flow Guidance ($M) Low High Adjusted EBITDA* $950 $975 Non-cash Alignment impact (50) (50) Adjusted EBITDA as Adjusted** $900 $925 Cash interest (105) (105) Cash taxes (150) (165) Corporate capital expenditures (55) (45) Inventory 100 110 Financing activity and othe
Slide 35: Non-GAAP Financial Measures
Non-GAAP Financial Measures (In millions) 2022 As reported Alignment As Adjusted** Consolidated Adjusted EBITDA Margin 2019 Low High Low High Low High Net income attributable to common shareholders $ 138 $ 390 $ 400 $ (37) $ (37) $ 353 $ 363 Interest expense 132 123 123 - - 123 123 Provision for inc
Slide 36: Non-GAAP Financial Measures
Non-GAAP Financial Measures (In millions) Q3 2022 Consolidated Adjusted EBITDA Margin Q3 2019 Q3 2021 As reported Alignment As Adjusted** Net income attributable to common shareholders $ (9) $ 10 $ 109 $ (33) $ 76 Interest expense 31 41 34 - 34 Provision for income taxes 10 47 59 (11) 48 Depreciatio
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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