Marriott Vacations Worldwide Corporation · NYSE:VAC
Marriott Vacations Worldwide — Investor Presentation (March 2020)
49 slides from Marriott Vacations Worldwide's investor presentation, Mar 18, 2020
Slide 1: Investor Presentation March 2020
INVESTOR PRESENTATION MARCH 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: 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 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 6: 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 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) 8% CAGR $1,524 7% CAGR $1,112 $952 10% CAGR $719 $572 $393 2015 2019 2015 2019 2015 2019 MARRIOTT VACATIONS WORLDWIDE I 11
Slide 12: Resilient Business Model
3. Resilient Business Model 2019 Adjusted EBITDA Contribution Management and Exchange 36% Vacation Ownership 28% 72% Sales of Adjusted EBITDA from 17% non-VO-sales 19% Financing Rentals Adjusted EBITDA Contribution is a non-GAAP measure. For definition and reconciliation, please see appendix. MARRIO
Slide 13: 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 Recurring Revenues 70% Third-Party Management ~20% Adjusted EBITDA Margin Exchange ~80% 63% Capital Expenditures $13M Revenues exclude cost reimbursements. Revenues exc
Slide 14: 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 14
Slide 15: A Powerful Free Cash Flow Engine
4. 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
Slide 16: 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 16
Slide 17: 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 17
Slide 18: 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 HyattTM loyalty programs New Vacation Ownership resorts: • Develop exciting new re
Slide 19: 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 19
Slide 20: Leveraging Strong License Relationships
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Leveraging Strong License Relationships Number of Loyalty Members ~130M 103M 81M 22M MARRIOTT VACATIONS WORLDWIDE I 20
Slide 21: 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 21
Slide 22: 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 22
Slide 23: Focus on New Owners and Younger Generations
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH 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 23
Slide 24: 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 25: 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 25
Slide 26: 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 27: On Track to Deliver $125M+ in Cost Synergy Savings
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION On Track to Deliver $125M+ in Cost Synergy Savings ~$60M+ 2021 Remaining Synergies PLANNED INITIATIVES ~$125M+ Total ~$65M • Back of house technology and synergies 2019 Synergies process consolidation COMPLETED INITIATIVES • Digital transformation • Reduce
Slide 28: Capturing Revenue Synergies From ILG Acquisition
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION Capturing Revenue Synergies From ILG Acquisition A few examples… Hotel In-House Owner Trial Program Volume per Call Marketing Tour and Site Guest Transfer Locations Penetration Packages Sold (VPG) Increased Market Best Practices Sales Excellence Penetratio
Slide 29: Linking All Marriott-Branded Vacation Ownership Resorts
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION Linking All Marriott-Branded Vacation Ownership Resorts Today Target Future Product Form MARRIOTT VACATIONS WORLDWIDE I 29
Slide 30: Three Year Outlook – Delivering Strong Earnings Growth
STRATEGY #3: BALANCED CAPITAL DEPLOYMENT Three Year Outlook – Delivering Strong Earnings Growth and Adjusted Free Cash Flow Revenues Adjusted EDITDA ($B) ($M) ~7% $3.8-$4.1 ~9% $930-$1,060 $3.2 CAGR $758 CAGR Margin Margin 23% ~24% 2019 2022E 2019 2022E Contract Sales Adjusted Free Cash Flow ($B) ($
Slide 31: 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 $1.5B Share Repurchases next 3 years1 after development & investment spend Dividends 1 Cumulative 2020 to 2022. Adjusted Free Cash Flow is a non-GAAP measur
Slide 32: Substantial Cash Available Through 2022
STRATEGY #3: BALANCED CAPITAL DEPLOYMENT Substantial Cash Available Through 2022 ($M) 2022 Low1 2022 High1 Adjusted free cash flow $1,300 $1,500 Disposition proceeds2 160 220 Leverage capacity 110 450 Inventory optimization 0 200 Non-traditional securitizations 30 $60 Less: Transformation costs (100
Slide 33: In Summary
IN SUMMARY Powerful Cash Flow Engine. Delivering Sustainable Growth and Strong Shareholder Returns • Proven track record • Diversified and resilient business model • On track to deliver substantial synergies • Targeting meaningful growth • Strong cash flow and disciplined capital deployment MARRIOTT
Slide 34: Appendix
APPENDIX MARRIOTT VACATIONS WORLDWIDE I A-1
Slide 35: Fourth Quarter 2019 Highlights
Fourth Quarter 2019 Highlights Contract Sales Adjusted EBITDA ($M) ($M) $394 $207 +10% $180 +15% $358 Margin Margin 24.1% 23.1% Q4 2018 Q4 2019 Q4 2018 Q4 2019 VPG $3,499 $3,208 +9% Q4 2018 Q4 2019 Adjusted EBITDA is a non-GAAP measure. For definition, please see A-9, and for reconciliation, please
Slide 36: Full-Year 2019 Highlights
Full-Year 2019 Highlights Contract Sales Adjusted EBITDA ($M) ($M) $1,524 $758 $667 +14% $1,432 +6% Margin Margin 21.3% 23.3% 2018 2019 2018 2019 VPG $3,308 $3,403 +3% 2018 2019 Adjusted EBITDA is a non-GAAP measure. For definition, please see A-9, and for reconciliation, please see A-15. Fiscal yea
Slide 37: Strong Balance Sheet with No Long-Term Debt Maturities Before 2022
Strong Balance Sheet with No Long-Term Debt Maturities Before 2022 Debt Maturity Schedule ($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: Geographic Revenue and Earnings Breakdown
Geographic Revenue and Earnings Breakdown 2020E Revenues1 2020E Adjusted EBITDA2 North North America America 94% 97% 3% 1% 2% Asia 3% Asia Europe Europe Adjusted EBITDA is a non-GAAP measure. For definition and reconciliation, please see appendix. 1 Revenues exclude reimbursed costs. 2Adjusted EBITD
Slide 39: 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 40: Non-GAAP Financial Measures
Non-GAAP Financial Measures MVW certain items (full year) Certain items for the fiscal year ended December 31, 2019, consisted of $119 million of acquisition costs (including $118 million of ILG acquisition-related costs and $1 million of other acquisition costs), $99 million of asset impairment cha
Slide 41: 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 42: Q4 2019 and 2018 Net Income
NON-GAAP FINANCIAL MEASURES Q4 2019 and 2018 Net Income Q4 2019 Q4 2018 REVENUES Sale of vacation ownership products $ 389 $ 358 Management and exchange 245 225 Rental 156 132 Financing 66 64 Cost reimbursements 289 273 TOTAL REVENUES 1,145 1,052 EXPENSES Cost of vacation ownership products 94 93 Ma
Slide 43: 2019 and 2018 Net Income
NON-GAAP FINANCIAL MEASURES 2019 and 2018 Net Income 2019 2018 REVENUES Sale of vacation ownership products $ 1,390 $ 990 Management and exchange 954 499 Rental 628 371 Financing 275 183 Cost reimbursements 1,108 925 TOTAL REVENUES 4,355 2,968 EXPENSES Cost of vacation ownership products 356 260 Mar
Slide 44: Full Year 2018 Combined Net Income
NON-GAAP FINANCIAL MEASURES Full Year 2018 Combined Net Income ($'s in millions) Legacy-ILG(1) MVW(2) Combined REVENUES Sale of vacation ownership products $ 331 $ 990 $ 1,321 Management and exchange 473 499 972 Rental 224 371 595 Financing 63 183 246 Cost reimbursements 173 925 1,098 TOTAL REVENUES
Slide 45: 2019 and 2018 Combined Net Income
NON-GAAP FINANCIAL MEASURES 2019 and 2018 Combined Net Income 2019 2018 REVENUES Sale of vacation ownership products $ 1,390 $ 1,321 Management and exchange 954 972 Rental 628 595 Financing 275 246 Cost reimbursements 1,108 1,098 TOTAL REVENUES 4,355 4,232 EXPENSES Cost of vacation ownership product
Slide 46: Q4 and Full Year 2019 and 2018 Adjusted EBITDA
NON-GAAP FINANCIAL MEASURES Q4 and Full Year 2019 and 2018 Adjusted EBITDA Q4 2019 Q4 2018 Net income attributable to common shareholders $ 74 $ 44 (1) Interest expense 32 31 Tax provision 33 36 Depreciation and amortization 35 33 Share-based compensation expense 8 12 Certain items (2) 25 24 Adjuste
Slide 47: 2019 Adjusted EBITDA Contribution and Margin
NON-GAAP FINANCIAL MEASURES 2019 Adjusted EBITDA Contribution and Margin Exchange & Third-Party Management Exchange & Third-Party Management Third-Party (In millions) Exchange Management Total Net income $ 152 $ 28 $ 180 Depreciation and amortization 33 15 47 Share-based compensation 2 1 3 Certain i
Slide 48: Adjusted EBITDA and Adjusted Free Cash Flow Outlook
NON-GAAP FINANCIAL MEASURES Adjusted EBITDA and Adjusted Free Cash Flow Outlook (In millions) 2022E Adjusted EBITDA 2019 Low High Net income attributable to common shareholders $ 138 $ 426 $ 523 (1) Interest expense 132 125 125 Tax provision 83 194 227 Depreciation and amortization 141 150 150 Share
Slide 49: Cumulative Adjusted Free Cash Flow – 2015 through 2019
NON-GAAP FINANCIAL MEASURES Cumulative Adjusted Free Cash Flow – 2015 through 2019 (In millions) 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) (26
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