Marriott Vacations Worldwide Corporation · NYSE:VAC
Marriott Vacations Worldwide — Investor Day (October 2019)
145 slides from Marriott Vacations Worldwide's investor day presentation, Oct 4, 2019
Slide 1: Investor Day
MARRIOTT VACATIONS WORLDWIDE OCTOBER 4, 2019 W
Slide 2: Neal Goldner
NEAL GOLDNER Vice President Investor Relations
Slide 3: 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 4: Agenda
Agenda 8:30 – 8:35 Introduction Neal Goldner, Vice President Investor Relations 8:35 – 9:00 Strategic Overview Steve Weisz, President and Chief Executive Officer 9:00 – 9:15 Brand and Digital Ovi Vitas, Chief Brand & Digital Strategy Officer 9:15 – 9:30 Q&A 9:30 – 9:45 Break 9:45 – 10:00 Exchange &
Slide 5: Steve Weisz: Strategic Overview
STEVE WEISZ President and Chief Executive Officer Strategic Overview
Slide 6: Key Messages for the Day
Key Messages for the Day 1 2 3 Business Transformative Clear Model ILG Strategy Acquisition Resilient, powerful On track to Clear go-forward free cash flow maximize the ILG growth strategy business model combination MARRIOTT VACATIONS WORLDWIDE I 6
Slide 7: The Team That Will Present and Execute Our Plan
The Team That Will Present and Execute Our Plan OVIDIO E. VITAS R. LEE CUNNINGHAM JEANETTE E. MARBERT Executive Vice President and Executive Vice President and President, Exchange and Chief Brand and Digital Chief Operating Officer – Third-Party Management Strategy Officer Vacation Ownership 35 Year
Slide 8: Powerful Business Model Driving Sustained Growth
AGENDA Powerful Business Model Driving Sustained Growth • The business today • Unique and resilient model • Three-point strategy MARRIOTT VACATIONS WORLDWIDE I 8
Slide 9: 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 10: 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 11: Resilient Business Model
Resilient Business Model 2018 Adjusted EBITDA Contribution Management and Exchange 40% Only 28% of Adjusted EBITDA from VO-sales 17% 15% Rentals Financing Excludes VRI-Europe (sold December 2018). Adjusted EBITDA Contribution is a non-GAAP measure. For definition and reconciliation, please see appen
Slide 12: Solid Performance Record
Solid Performance Record Revenues Adjusted EBITDA ($M) ($M) $419 $2,043 $294 $1,433 $1,280 $237 2016 2017 2018 2016 2017 2018 Revenues exclude cost reimbursements. Revenues excluding cost reimbursements and Adjusted EBITDA are non-GAAP measures. For definitions and reconciliation, please see appendi
Slide 13: Delivering on Our Goals
Delivering on Our Goals Achieved or Exceeded 2015 Investor Day Goals Metric 2018 Target 2018 Actuals1 Target Met • Contract sales $870M to $1,025M2 $902M • Adjusted EBITDA $290M to $330M2 $320M • Cumulative adjusted free cash flow $700M to $775M $907M 1 Excludes Legacy-ILG results post acquisition;
Slide 14: $1.4B Total Capital Returned to Shareholders
$1.4B Total Capital Returned to Shareholders $409M1 $225M $212M $329 $212M Pursuing ILG acquisition $147M $126M $201 $178 $204 $96 $88 $26M $80 $8 $34 $38 $51 $24 2013 2014 2015 2016 2017 2018 2019 YTD Dividends Share repurchases 1 2019 share repurchases through September 20, 2019; 2019 dividends in
Slide 15: Marriott Vacations Worldwide Today: Larger and More Resilient
Marriott Vacations Worldwide Today: Larger and More Resilient 2008 Now Timeshare + Business Residences + Timeshare + Exchange More Fractional diverse Development Less capital Weeks-based Points-based intensive Model Solid free On balance cash flow Funding Capital-efficient sheet MARRIOTT VACATIONS W
Slide 16: We Play in a Healthy, Growing Industry
VACATION OWNERSHIP We Play in a Healthy, Growing Industry Timeshare Is Healthy And Growing U.S. timeshare contract sales ($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
Slide 17: Large and Attractive Addressable Market
VACATION OWNERSHIP 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 V
Slide 18: High Margin, Stable and Strong Cash Flow
EXCHANGE & THIRD-PARTY MANAGEMENT High Margin, Stable and Strong Cash Flow Established, Respected Brand in Global Vacation Exchange Industry 80 nations, Thousands of resorts More than 40 years Variety of products Proprietary clubs are Robust international as the quality vacation and services a diffe
Slide 19: What Consumers Want From Their Vacation Has Evolved
What Consumers Want From Their Vacation Has Evolved Today’s Vacationer Wants Experiences and Consistent high- Flexible options Value Ease of use memories quality product MARRIOTT VACATIONS WORLDWIDE I 19
Slide 20: And So Have We
And So Have We: At the Leading Edge of the Consumer-Driven Evolution Experiences and Consistent high- Flexible options Value Ease of use memories quality product Enhanced experiences Points-based Trade for hotel frequency points Recycle Inventory Flexible weeks Weeks-based MARRIOTT VACATIONS WORLDWI
Slide 21: Powerful Business Model Driving Sustained Growth
AGENDA Powerful Business Model Driving Sustained Growth • The business today • Unique and resilient model • Three-point strategy MARRIOTT VACATIONS WORLDWIDE I 21
Slide 22: Unique & Resilient Business Model Drives Value
Unique & Resilient Business Model Drives Value Diverse and Exclusive access Capital-efficient Strong free cash Leading resilient revenue to Marriott inventory flow and exchange streams Bonvoy™ acquisition model balance sheet platform & World of Hyatt loyalty programs $440M to $490M 2019E Adjusted Fr
Slide 23: Integrated Vacation Ownership Products and Service
Integrated Vacation Ownership Products and Service Create a Foundation for Future and Recurring Revenue 8. Incremental Vacation 1. Branded Transient Ownership Resort Stays Additional purchases On-property 2. Initial Vacation 7. Resort Operations Ownership Purchase On-property First-time buyer Initia
Slide 24: Powerful Business Model Driving Sustained Growth
AGENDA Powerful Business Model Driving Sustained Growth • The business today • Unique and resilient model • Three-point strategy MARRIOTT VACATIONS WORLDWIDE I 24
Slide 25: 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 25
Slide 26: Substantial Growth Opportunities
STRATEGY #1: DRIVE PROFITABLE REVENUE GROWTH Substantial Growth Opportunities New resorts: • Develop exciting new resorts and properties Leverage brands: • Leverage exclusive access to Marriott BonvoyTM and World of Hyatt loyalty programs Grow tours: • Grow Vacation Ownership tour flow focusing on f
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 Substantial Synergies
STRATEGY #2: TRANSFORM WITH ILG ACQUISITION On Track to Deliver Substantial Synergies General & administrative $125+ Million 2 Operational redundancies Savings by the end of 2021 Digital transformation Marketing / sales synergies Top-line growth Projected annualized run rate savings in place by end
Slide 29: Three Year Growth Targets
Three Year Growth Targets Contract Adjusted Revenue Sales EBITDA CAGR CAGR CAGR 5-8% 7-11% 7-11% All CAGR’s are 2019-2022. Revenue excludes cost reimbursements. Revenue excluding cost reimbursements and Adjusted EBITDA are non-GAAP measures. For definitions and reconciliation, please see appendix. M
Slide 30: 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 31: Powerful Business Model Driving Sustained Growth
IN SUMMARY Powerful Business Model Driving Sustained Growth • High adjusted free cash flow generative business model • Diverse and highly resilient revenue • On track to deliver substantial synergies • Transforming the business with digital • Experienced team with demonstrated track record of delive
Slide 32: Ovi Vitas: Digital Strategy
OVI VITAS Executive Vice President and Chief Brand and Digital Strategy Officer Digital Strategy
Slide 33: Driving Growth Through Digital
AGENDA Driving Growth Through Digital • Digital landscape today • Strengths we are leveraging • Our transformational growth strategy MARRIOTT VACATIONS WORLDWIDE I 33
Slide 34: Global Trends Signal an Era of Unprecedented Innovation
Global Trends Signal an Era of Unprecedented Innovation Global Connectivity Shifting Population Dynamics 7.2 billion+ 2 billion+ gadgets in the are digital world by natives 2020 DIGITAL DISRUPTION Rapid Urbanization Tsunami of Data 4 billion+ 9X more in last 2 years live in urban major enabler of ar
Slide 35: With Today's Connected, Self-Directed Consumer
With Today’s Connected, Self-Directed Consumer… Consumer Self-Directed Research / Sources • Bloggers Share • Reviews • Loyalty programs • Recommendation Re/Discover engines • Social media • Video • Personalized campaigns Inspire & Explore • Service • Tips / tricks • Samples Purchase • Retailer apps
Slide 36: Today's Customer is Constantly Connected and Increasingly Demanding
Today’s Customer is Constantly Connected and Increasingly Demanding Take Travel as an Example… 93% 90% 81% 69% Update Check-in Track Mobile flight status at home bags boarding pass IATA MARRIOTT VACATIONS WORLDWIDE I 36
Slide 37: Driving Growth Through Digital
AGENDA Driving Growth Through Digital • Digital landscape today • Strengths we are leveraging • Our transformational growth strategy Traditional Marketing Promotions I N T E G R AT E D M A R K E T I N G Web/ Social Media MARRIOTT VACATIONS WORLDWIDE I 37
Slide 38: Extensive Digital Footprint Online & Mobile
Extensive Digital Footprint Online & Mobile MARRIOTT VACATIONS WORLDWIDE I 38
Slide 39: Digital Strategy Guiding Principles
Marriott Vacations Worldwide Digital Strategy Guiding Principles Our Virtuous Circle Generate demand digitally Enhance experiences Get people on before, during and vacation faster and after vacation more frequently MARRIOTT VACATIONS WORLDWIDE I 39
Slide 40: Digital Transaction Growth
Digital Transaction Growth Number of Online Points Transactions 387K 28% CAGR 237K 2016 2018 Includes Legacy-MVW and Vistana. MARRIOTT VACATIONS WORLDWIDE I 40
Slide 41: Digital Transaction Growth
Digital Transaction Growth Online Points Transactions as a % of Total Transactions > 50% 40% 29% 2016 2018 2022 Includes Legacy-MVW and Vistana. MARRIOTT VACATIONS WORLDWIDE I 41
Slide 42: Driving Growth Through Digital
AGENDA Driving Growth Through Digital • Digital landscape today • Strengths we are leveraging • Our transformational growth strategy MARRIOTT VACATIONS WORLDWIDE I 42
Slide 43: Three Ways We Will Continue to Drive Growth with Digital
Three Ways We Will Continue to Drive Growth with Digital Strengthen Our Digital Infrastructure Grow Online Packages Enhance Experiences MARRIOTT VACATIONS WORLDWIDE I 43
Slide 44: Strengthen Our Digital Infrastructure: Current Focus
1. Strengthen Our Digital Infrastructure Current Focus On-site HOTEL DIRECT IN-HOUSE EVENT LINKAGE DIGITAL MARKETING MARKETING MARKETING SALES Current Focus Off-site DIGITAL DIGITAL IN APP PACKAGE WEBSITE PARTNERSHIPS SALES GROWTH MARRIOTT VACATIONS WORLDWIDE I 44
Slide 45: Strengthen Our Digital Infrastructure: Future Focus
1. Strengthen Our Digital Infrastructure Our Future Focus On-site HOTEL DIRECT IN-HOUSE EVENT LINKAGE DIGITAL MARKETING MARKETING MARKETING SALES Our Future Focus Off-site DIGITAL DIGITAL IN APP PACKAGE WEBSITE PARTNERSHIPS SALES GROWTH MARRIOTT VACATIONS WORLDWIDE I 45
Slide 46: Grow Tour Packages
2. Grow Tour Packages Digital Initiatives Self-service Real-time Pre-arrival booking offer marketing tool engines offers MARRIOTT VACATIONS WORLDWIDE I 46
Slide 47: Use Digital to Enhance Experiences
3. Use Digital to Enhance Experiences Activity Planning, Self-Service, Community Engagement MARRIOTT VACATIONS WORLDWIDE I 47
Slide 48: Three Year Ambitions
Marriott Vacations Worldwide 3 Year Ambitions 2 $300M Digital Transactions 1 > 50% Online vs. Offline Transactions Customer Experience 1 Vacation Ownership on-line transactions. 2 Vacation Ownership and Exchange & Third-Party Management digital transactions. MARRIOTT VACATIONS WORLDWIDE I 48
Slide 49: Significant Potential to Drive Growth Through Digital
IN SUMMARY Significant Potential to Drive Growth Through Digital • Creating meaningful relationships – will yield better targeting for content and offers • Improved targeting – drives more cost effective channel management and expansion • Aligning behaviors, needs and technology will drive dramatic
Slide 50: Jeanette Marbert: Exchange & Third-Party Management
JEANETTE MARBERT President Exchange & Third-Party Management Segment
Slide 51: An Attractive and Complementary Business
AGENDA An Attractive and Complementary Business • Performance highlights • Two solid businesses • Key strengths • Strategic growth priorities MARRIOTT VACATIONS WORLDWIDE I 51
Slide 52: High-Margin Exchange & Third-Party Management Business
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 53: An Attractive and Complementary Business
AGENDA An Attractive and Complementary Business • Performance highlights • Two solid businesses • Key strengths • Strategic growth priorities MARRIOTT VACATIONS WORLDWIDE I 53
Slide 54: Two Solid Businesses
Two Solid Businesses Exchange Third-Party Management • ~80% of Adjusted EBITDA • ~20% of Adjusted EBITDA • Serves: ~2M member families • Serves: Over 175 properties managed • Value provided: Ability to vacation in variety of locations • Value provided: Professional management of assets Combined basi
Slide 55: Leading Exchange Networks and Membership Programs
Leading Exchange Networks and Membership Programs 3,200 affiliated resorts Open network 1.7 million member families 290k member families Who We Serve Value Provided Member/Owner Exchange Families Developers Rental HOAs Leisure Benefits MARRIOTT VACATIONS WORLDWIDE I 55
Slide 56: Interval International: Quality Exchange Network
INTERVAL INTERNATIONAL More Than 40 Years As the Quality Exchange Network Interval's Member Resorts are Strong Member Retention Recognized for Their Quality 40% 88% of resorts are Member designated elite, retention rate1 premier or select Long-standing Developer Highly Efficient Inventory Utilizatio
Slide 57: Enhancing the Vacation Ownership Purchase
INTERVAL INTERNATIONAL Enhancing the Vacation Ownership Purchase Exchange Membership Options Basic Membership Interval Gold Interval Platinum Club Interval Gold Non-Exchange, Leisure & Lifestyle Products Leisure Dream Time Vacation Week Passport MARRIOTT VACATIONS WORLDWIDE I 57
Slide 58: Two Solid Businesses
Two Solid Businesses Exchange Third-Party Management • ~80% of Adjusted EBITDA • ~20% of Adjusted EBITDA • Serves: ~2M member families • Serves: Over 175 properties managed • Value provided: Ability to vacation in variety of locations • Value provided: Professional management of assets Combined basi
Slide 59: Leading Resort Operator
THIRD-PARTY MANAGEMENT Leading Resort Operator AAH Lifestyle Brands and Independent Hotels Leading Hospitality Brands1 Aston at The Whaler Aston Waikiki Beach Tower Copperwynd Resort 1 Aqua Aston is also an approved operator of 4 Hilton brands and 1 IHG brand resulting from re-branding of former man
Slide 60: Highly Predictable Property Management Business
THIRD-PARTY MANAGEMENT Highly Predictable Property Management Business ~140 335k 270k Resort & Club VO Intervals Owner Locations Families Maui Schooner Resort Club Cascadas de Baja The Resort on Cocoa Beach Includes Trading Places International. MARRIOTT VACATIONS WORLDWIDE I 60
Slide 61: An Attractive and Complementary Business
AGENDA An Attractive and Complementary Business • Performance highlights • Two solid businesses • Key strengths • Strategic growth priorities MARRIOTT VACATIONS WORLDWIDE I 61
Slide 62: Key Attributes of Interval Exchange Business
Key Attributes of Interval Exchange Business 1 3 Recurring Highly and predictable complementary to fee-based vacation ownership revenue segment 2 4 Loyal Track record customer base of stability with high level of during economic engagement downturns MARRIOTT VACATIONS WORLDWIDE I 62
Slide 63: Recurring and Predictable Fee Based Revenue
1. 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 63
Slide 64: Loyal Customer Base With High Level of Engagement
2. Loyal Customer Base With High Level of Engagement Exchange is Essential Upgraded Membership 95% 45% of members have an State that the ability to upgraded membership exchange is important1 product (Gold or Platinum) Household Income Intent to Exchange 52% 52% Have household Intend to exchange inco
Slide 65: Highly Complementary to Vacation Ownership
3. Highly Complementary to Vacation Ownership 97% Utilization of branded inventory Efficient distribution channel MARRIOTT VACATIONS WORLDWIDE I 65
Slide 66: Stable Exchange Revenue During Last Recession
4. 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 66
Slide 67: An Attractive and Complementary Business
AGENDA An Attractive and Complementary Business • Performance highlights • Two solid businesses • Key strengths • Strategic growth priorities MARRIOTT VACATIONS WORLDWIDE I 67
Slide 68: Strategic Growth Priorities
Strategic Growth Priorities 1 2 3 Increase share of Expand Grow affiliations wallet with enhanced distribution & management product offerings channels contracts MARRIOTT VACATIONS WORLDWIDE I 68
Slide 69: Increase Share of Wallet with Enhanced Products
1. Increase Share of Wallet with Enhanced Products Increased engagement will fortify long-term relationships that drive recurring revenue streams Mobile Usage Options Digital Product Experience Innovation Personalized Content Customer Insights MARRIOTT VACATIONS WORLDWIDE I 69
Slide 70: Leverage Product Portfolio to Reach New Customers
2. Leverage Product Portfolio to Reach New Customers Non-Exchange, Leisure & Lifestyle Products Leveraging the sales force to market products to third-party organizations outside of vacation ownership MARRIOTT VACATIONS WORLDWIDE I 70
Slide 71: Drive Recurring Revenue by Growing Affiliations and Management Contracts
3. Drive Recurring Revenue and Profit by Growing New Affiliations and Management Contracts Network Initiatives Continue expansion of network Grow with global brands and independent hotels in targeted markets Convert properties from self-managed and other independent property managers MARRIOTT VACATI
Slide 72: Three Year Growth Outlook
Three Year Growth Outlook 2-4% 3-4% CAGR CAGR Revenues Adjusted EBITDA All CAGR’s are 2019-2022. Revenues exclude cost reimbursements. Revenues excluding cost reimbursements and Adjusted EBITDA are non-GAAP measures. For definitions and reconciliation, please see appendix. MARRIOTT VACATIONS WORLDWI
Slide 73: Exchange & Third-Party Management Summary
IN SUMMARY Exchange & Third-Party Management – An Attractive and Complementary Business • High margin, recurring fee-based revenue • Complementary to vacation ownership • Low capital intensity business model • Strong market position with diversified offering MARRIOTT VACATIONS WORLDWIDE I 73
Slide 74: Lee Cunningham: Vacation Ownership Segment
LEE CUNNINGHAM EVP and Chief Operating Officer Vacation Ownership Segment
Slide 75: A Resilient Business with Growth Momentum
AGENDA A Resilient Business with Growth Momentum • The business today – solid platform • Executing development strategy • Growing contract sales • The future - growth well positioned to continue MARRIOTT VACATIONS WORLDWIDE I 75
Slide 76: Diverse Earnings Streams = A Resilient Business
VACATION OWNERSHIP AT A GLANCE Diverse Earnings Streams = A Resilient Business 2018 2018 Revenue Mix Adjusted EBITDA Contribution Resort Management Resort Management 19% Sale of 28% Sale of Vacation 36% Vacation 51% Ownership Ownership Rentals 20% 16% 10% Rentals 20% Financing Financing On a combine
Slide 77: Leveraging Strong License Relationships
VACATION OWNERSHIP AT A GLANCE Leveraging Strong License Relationships Number of Loyalty Members ~130M 85M 61M 16M MARRIOTT VACATIONS WORLDWIDE I 77
Slide 78: Record of Steady Growth Across Key Performance Metrics
LEGACY MARRIOTT VACATIONS WORLDWIDE Record of Steady Growth Across Key Performance Metrics Contract Sales Revenues Adjusted EBITDA ($M) ($M) ($M) 5% CAGR $1,563 8% CAGR $1,347 $902 7% CAGR $719 $425 $345 2015 2018 2015 2018 2015 2018 Legacy-MVW contract sales, revenues and Adjusted EBITDA. Revenues
Slide 79: Similar Growth in Acquired Vacation Ownership Business
Similar Growth in Acquired Vacation Ownership Business Legacy Legacy Combined MVW Contract Sales ILG Contract Sales Contract Sales ($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 79
Slide 80: Vacation Ownership Has Momentum
Vacation Ownership Has Momentum! Increasing Sales Customer Growing New to Younger Focused Service Owners Generations Culture Consistent New Owner Not Disclosed Millennial Growth & GenX Satisfaction 10% 90% 91% 91% 91% 91% 33% 13% 57% CAGR Boomers 2016-2018 2014 2015 2016 2017 2018 MARRIOTT VACATIONS
Slide 81: Vacation Ownership Has Momentum
Vacation Ownership Has Momentum! Increasing Sales Customer Growing New to Younger Focused Service Owners Generations Culture Consistent New Owner Not Disclosed Millennial Growth & GenX Satisfaction 10% 90% 91% 91% 91% 91% 33% 13% 57% CAGR Boomers 2016-2018 2014 2015 2016 2017 2018 MARRIOTT VACATIONS
Slide 82: Vacation Ownership Has Momentum
Vacation Ownership Has Momentum! Increasing Sales Customer Growing New to Younger Focused Service Owners Generations Culture Consistent New Owner Not Disclosed Millennial Growth & GenX Satisfaction 10% 90% 91% 91% 91% 91% 33% 13% 57% CAGR Boomers 2016-2018 2014 2015 2016 2017 2018 MARRIOTT VACATIONS
Slide 83: Importance of Adding New Owners to the System
Importance of Adding New Owners to the System 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 84: Leveraging Capital Efficient Points Model
Leveraging Capital Efficient Points Model Perpetual Perpetual sales centers sales centers selling same selling same product product New and Creates Consistent free reacquired points cash flow growth inventory to sell Perpetual Perpetual sales centers sales centers selling same selling same product p
Slide 85: Linking All Marriott-Branded Vacation Ownership Resorts
Linking All Marriott-Branded Vacation Ownership Resorts Today Target Future Product Form MARRIOTT VACATIONS WORLDWIDE I 85
Slide 86: Lani Kane-Hanan: Development
LANI KANE-HANAN EVP and Chief Development and Product Officer Vacation Ownership Segment
Slide 87: A Resilient Business with Growth Momentum
AGENDA A Resilient Business with Growth Momentum • The business today – solid platform • Executing development strategy • Growing contract sales • The future - growth well positioned to continue MARRIOTT VACATIONS WORLDWIDE I 87
Slide 88: Execute Consistent Development Strategy
Execute Consistent Development Strategy 1. Grow Footprint 2. Balanced Approach Grow footprint with Balanced, capital new flags and sales efficient, inventory centers at desirable spend to optimize locations product cost Leverage upper scale brands and customer insights MARRIOTT VACATIONS WORLDWIDE I
Slide 89: What We Said in 2015
What We Said in 2015… 1 2 3 Add new resorts Grow Match inventory and sales efficiently spending with centers sales pace MARRIOTT VACATIONS WORLDWIDE I 89
Slide 90: What We Have Accomplished
… What We Have Accomplished San Diego Costa Rica 264 units Waikoloa Opening 2021 112 units Bali Nusa Surfers Dua Terraces Paradise Opening 2020 88 units ~$300M Annual Contract Sales1 San Francisco Marco Island 233 units ~$785M 152 units Inventory Investment2 Bali Nusa Washington, Dua Gardens DC 51 u
Slide 91: Matching Inventory Spending With Sales Pace
Matching Inventory Spending With Sales Pace ($M) Inventory Sold Inventory Investment Avg.=$170m/yr. Avg.=$168m/yr. $210 $187 $189 $167 $167 $155 $137 $139 New Inventory Repurchases1 2016 2017 2018 2019E 2016 2017 2018 2019E Legacy-MVW. 1 Repurchases and other inventory spending. MARRIOTT VACATIONS W
Slide 92: Advantages of Development Model
Advantages of Development Model Repurchase inventory below replacement cost and resell Supports wide range of project scales and structures Focus on new v. existing markets Absorb inventory quickly – months v. years Perpetual sales centers MARRIOTT VACATIONS WORLDWIDE I 92
Slide 93: Target Markets Come from Customer Insights
Target Markets Come from Customer Insights Owner external Owner On-site Social usage patterns and prospect feedback media surveys MARRIOTT’S KO OLINA BEACH CLUB, KAPOLEI Oahu, Hawaii MARRIOTT VACATIONS WORLDWIDE I 93
Slide 94: Acquired Brands Underrepresented in Major Markets
Acquired Brands Underrepresented in Major Markets • Las Vegas, NV • Orlando, FL • Maui, HI • Waikiki, HI • Big Island, HI • Urban • Key West, FL • Aruba • Cancun, Mexico • Los Cabos, Mexico • Asia Pacific MARRIOTT VACATIONS WORLDWIDE I 94
Slide 95: 110 Resorts in 12 Countries With Substantial Growth Potential
110 Resorts in 12 Countries With Substantial Growth Potential England Boston, MA London Park City, UT Steamboat Springs, CO North Lake Tahoe, CA Avon, CO Incline Village, NV Vail, CO New York, NY Truckee, CA Washington, D.C. Beaver Creek, CO Breckenridge, CO Absecon, NJ Spain San Francisco, CA South
Slide 96: Balanced Approach to Development
GOING FORWARD Balanced Approach to Development Target Inventory Key Future Inventory Investment Guidelines Commitments ($M) • Capital efficient Repurchase development whenever possible $208 ~33% • Low-cost inventory repurchases reduce 1c cost overall product • Target ~25% overall $110 product cost ~
Slide 97: Brian Miller: Marketing, Sales and Service
BRIAN MILLER EVP and Chief Marketing, Sales and Service Officer Vacation Ownership Segment
Slide 98: A Resilient Business with Growth Momentum
AGENDA A Resilient Business with Growth Momentum • The business today – solid platform • Executing development strategy • Growing contract sales • The future - growth well positioned to continue MARRIOTT VACATIONS WORLDWIDE I 98
Slide 99: Key Drivers of Growth in Contract Sales
Key Drivers of Growth in Contract Sales 1 New market growth 2 Grow tours 3 Expand VPG 4 Capture revenue synergies MARRIOTT VACATIONS WORLDWIDE I 99
Slide 100: Expanded Customer Segmentation Opens New Markets
Expanded Customer Segmentation Opens New Markets MARRIOTT VACATIONS WORLDWIDE I 100
Slide 101: Strong Focus on First-Time Buyer 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 101
Slide 102: Continue to Scale Our Marketing Platform
Continue to Scale Our Marketing Platform ~80% of annual contract sales generated from on-site programs MARRIOTT VACATIONS WORLDWIDE I 102
Slide 103: Global Opportunities for Targeted Channel Expansion
Global Opportunities for Targeted Channel Expansion Branded Hotel Global Digital and Channels Partners Social Media MARRIOTT VACATIONS WORLDWIDE I 103
Slide 104: Drive Direct Sales Excellence
Drive Direct Sales Excellence MARRIOTT VACATIONS WORLDWIDE I 104
Slide 105: Solid Volume per Guest (VPG) Growth
IMPROVE VPG Solid Volume per Guest (VPG) Growth… Vacation Ownership VPG $4,000 $3,500 $3,000 $2,500 $2,000 2012 2013 2014 2015 2016 2017 2018 Legacy MVW Vistana North America MARRIOTT VACATIONS WORLDWIDE I 105
Slide 106: Substantial Opportunity to Close Gap
IMPROVE VPG …With Substantial Opportunity to Close Gap Vacation Ownership VPG Total VPG Owner VPG First-Time Buyer VPG ~40% First Time Buyer Opportunity Legacy Vistana Legacy Vistana Legacy Vistana MVW MVW MVW North America MARRIOTT VACATIONS WORLDWIDE I 106
Slide 107: Investing in Digital Sales Infrastructure to Drive Sales
INVEST IN SALES INFRASTRUCTURE Investing in Digital Sales Infrastructure to Drive Sales Delivering the right information to the customer or associate at the right time MARRIOTT VACATIONS WORLDWIDE I 107
Slide 108: Continued Investment in Interactive Customer Technology
INVEST IN SALES INFRASTRUCTURE Continued Investment in Interactive Customer Technology MARRIOTT VACATIONS WORLDWIDE I 108
Slide 109: Capturing Revenue Synergies From ILG Acquisition
REVENUE SYNERGIES Capturing Revenue Synergies From ILG Acquisition A few examples… Trial Program Hotel Marketing Call In-House Owner and Site Locations Transfer Tour Penetration Packages Sold Increased Market Best Practices Sales Excellence Penetration MARRIOTT VACATIONS WORLDWIDE I 109
Slide 110: Lee Cunningham: Vacation Ownership Segment
LEE CUNNINGHAM EVP and Chief Operating Officer Vacation Ownership Segment
Slide 111: A Resilient Business with Growth Momentum
AGENDA A Resilient Business with Growth Momentum • The business today – solid platform • Executing development strategy • Growing contract sales • The future - growth well positioned to continue MARRIOTT VACATIONS WORLDWIDE I 111
Slide 112: Three Year Growth Targets
Three Year Growth Targets 7-11% 6-9% CAGR CAGR Contract Sales Adjusted Growth EBITDA All CAGR’s are 2019-2022. Adjusted EBITDA is a non-GAAP measure. For definition and reconciliation, please see appendix. MARRIOTT VACATIONS WORLDWIDE I 112
Slide 113: A Resilient Business with Growth Momentum
IN SUMMARY A Resilient Business with Growth Momentum • A record of strong sales growth • Adding new owners to the system • Substantial development opportunities • Growing contract sales • Capturing revenue synergies MARRIOTT VACATIONS WORLDWIDE I 113
Slide 114: John Geller: Financial Overview
JOHN GELLER EVP and Chief Financial and Administrative Officer Financial Overview
Slide 115: Powerful Cash Flow Engine
AGENDA Powerful Cash Flow Engine. Delivering Sustainable Growth and Strong Shareholder Returns • Performance highlights • Delivering on synergy targets • Disciplined capital allocation • Long-term outlook MARRIOTT VACATIONS WORLDWIDE I 115
Slide 116: Delivering On Our Goals
Delivering On Our Goals Achieved Prior Investor Day Goals Contract Sales Adjusted EBITDA $2902-$330M2 $320M $870-$1,025M2 $902M 2018 Target 2018 Actual1 2018 Target 2018 Actual 1 Cumulative Adjusted Free Cash Flow $907M $700-$775M 2018 Target 2018 Actual1 1Excludes Legacy-ILG results post acquisitio
Slide 117: Significant Increase in Scale and Greater Diversification
Significant Increase in Scale and Greater Diversification 2018 Legacy 2018 Increase MVW Combined Revenue $1,563M $3,134M 101% Mix of revenue from non- vacation ownership sales 47% 58% 1,100 bps Contract sales $902M $1,432M 59% Adjusted EBITDA $320M $667M 108% Adjusted EBITDA margin 20.5% 21.3% 80 bp
Slide 118: Larger and More Resilient
BUSINESS MODEL NOW & THEN Larger and More Resilient 2008 Today Advantages Business Timeshare + Residences + Timeshare + exchange More diverse Fractional Development Model Less capital Less capital Weeks-based Points-based intensive intensive Funding Solid free On balance sheet Capital-efficient cash
Slide 119: Added High-Margin & Stable Exchange Business
BUSINESS MODEL NOW & THEN Added High-Margin & Stable Exchange Business Interval International Total Member Revenue $328 $330 $329 $329 $302 2007 2008 2009 2010 2011 $’s in millions. MARRIOTT VACATIONS WORLDWIDE I 119
Slide 120: Powerful Cash Flow Engine
AGENDA Powerful Cash Flow Engine. Delivering Sustainable Growth and Strong Shareholder Returns • Performance highlights • Delivering on synergy targets • Disciplined capital allocation • Long-term outlook MARRIOTT VACATIONS WORLDWIDE I 120
Slide 121: On Track to Deliver $125M+ in Cost Synergy Savings
On Track to Deliver $125M+ in Cost Synergy Savings ~$65M+ 2021 Remaining Synergies PLANNED INITIATIVES ~$125M+ Total ~$60M • Back of house technology and synergies 2019 Synergies process consolidation COMPLETED INITIATIVES • Digital transformation • Reduced systems • Duplicate leadership positions a
Slide 122: Powerful Cash Flow Engine
AGENDA Powerful Cash Flow Engine. Delivering Sustainable Growth and Strong Shareholder Returns • Performance highlights • Delivering on synergy targets • Disciplined capital allocation • Long-term outlook MARRIOTT VACATIONS WORLDWIDE I 122
Slide 123: Capital Allocation Framework
Capital Allocation Framework 1 Strategic M&A • Strategic and financially attractive 2 Return capital • Share repurchases to shareholders • Dividends 3 Reduce leverage • Target range of 2.0x to 2.5x MARRIOTT VACATIONS WORLDWIDE I 123
Slide 124: Capital Efficient Inventory Acquisition Model Drives Strong Free Cash Flow
Capital Efficient Inventory Acquisition Model Drives Strong Free Cash Flow Adjusted Free Cash Flow ($M) $440-$490 $253 $265 $160 2016 2017 2018 2019E Adjusted free cash flow is a non-GAAP measure. For definition and reconciliation, please see appendix. MARRIOTT VACATIONS WORLDWIDE I 124
Slide 125: A Powerful Free Cash Flow Engine 2015 to 2018
A Powerful Free Cash Flow Engine 2015 to 2018 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 $147M to Shareholders Cumulative 2015 to 2018. Free Cash Flow a
Slide 126: Powerful Cash Flow Engine
AGENDA Powerful Cash Flow Engine. Delivering Sustainable Growth and Strong Shareholder Returns • Performance highlights • Delivering on synergy targets • Disciplined capital allocation • Long-term outlook MARRIOTT VACATIONS WORLDWIDE I 126
Slide 127: Three Year Outlook – Delivering Strong Earnings Growth
Three Year Outlook – Delivering Strong Earnings Growth and Investments Revenues Adjusted EBITDA Cumulative Inventory & ($B) ($M) Capital Expenditures (2020-2022) ~7% ~9% ($M) CAGR CAGR $3.8-$4.1 $1,550 $930-$1,060 $3.25-$3.30 $1,400 $750-$780 Margin Margin ~23%~25% midpoint midpoint 2019E 2022 2019E
Slide 128: Adjusted EBITDA Growth Drivers 2020 to 2022
Adjusted EBITDA Growth Drivers 2020 to 2022 CAGR CAGR Low High Growth Drivers Vacation Ownership • Contract sales, improved Development margin 8% 15% efficiencies Resort management • New managed properties, net of expenses 5% 7% operating costs Financing • Contract sales, propensity, net of expenses
Slide 129: Three Year Outlook – Cumulative Adjusted Free Cash Flow
Three Year Outlook – Delivering Strong Cumulative Adjusted Free Cash Flow 2020 to 2022 ($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: Transformatio
Slide 130: Committed and Disciplined Capital Deployment
Committed and Disciplined Capital Deployment Strategic M&A Cash Available $1.5B to Share Repurchases $2.3B 2020-2022 Dividends MARRIOTT VACATIONS WORLDWIDE I 130
Slide 131: Strong Balance Sheet with No Long-Term Debt Maturities Before 2022
Strong Balance Sheet with No Long-Term Debt Maturities Before 2022 Debt Maturity Schedule ($M) Net Leverage $848 Target: $750 2.0x to 2.5x $350 $230 2020 2021 2022 2023 2024 2025 2026 2027 2028 Pro-forma for September 2019 Senior Notes issuance. Excludes the 1% annual term loan amortization, capital
Slide 132: Powerful Cash Flow Engine Summary
IN SUMMARY Powerful Cash Flow Engine. Delivering Sustainable Growth and Strong Shareholder Returns • Proven track record • Diversified and resilient business model • Strong balance sheet • Targeting meaningful growth • Strong cash flow and disciplined capital deployment MARRIOTT VACATIONS WORLDWIDE
Slide 133: Appendix
MARRIOTT VACATIONS WORLDWIDE
Slide 134: 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 135: 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), provision for income taxes, depreciation and amort
Slide 136: Non-GAAP Financial Measures
Non-GAAP Financial Measures Revenues Excluding Cost Reimbursements – Total Company and Segment Revenues (cont.). Exchange & 2018 VO and Exchange % Vacation % Exchange and Exchange & Less: Third Party Vacation Corporate and Combined (1) & Third Party Ownership Third Party (In millions) Third Party VR
Slide 137: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted Financial Information. The unaudited adjusted financial information for the 2018 full year included in the Reconciliation of Adjusted Financial Information and the Reconciliation of Vacation Ownership Segment Interim Adjusted Financial Results was derived by subt
Slide 138: Non-GAAP Financial Measures
Non-GAAP Financial Measures 2018 Legacy MVW and ILG and Combined Revenues Excluding Cost Reimbursements, Revenue Contribution, Mix of Non-Development Revenues, Adjusted EBITDA, and Adjusted EBITDA Margin Legacy Legacy 2018 Revenue (1) ($'s in millions) MVW ILG Combined Contribution (2) Sale of vacat
Slide 139: Non-GAAP Financial Measures
Non-GAAP Financial Measures Historical Adjusted EBITDA - Total Company, Legacy-MVW and Legacy-MVW Vacation Ownership MVW Legacy-MVW Legacy-MVW Vacation Ownership ($'s in millions) 2016 2017 2018 2018 2015 2018 Net income / Segment results 1 $ 122 $ 235 $ 55 $ 57 $ 336 $ 380 Interest expense 9 10 54
Slide 140: Non-GAAP Financial Measures
Non-GAAP Financial Measures 2018 Adjusted EBITDA Contribution and Adjusted EBITDA 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 Deprec
Slide 141: Non-GAAP Financial Measures
Non-GAAP Financial Measures 2018 Revenues Excluding Reimbursed Costs, Revenue Contribution and Adjusted EBITDA Contribution Vacation Ownership Combined (1) Vacation Ownership 2018 Revenue ($'s in millions) 2018 Contribution(2) Sale of vacation ownership products $ 1,321 51% Resort management 494 19%
Slide 142: Non-GAAP Financial Measures
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 143: Non-GAAP Financial Measures
Non-GAAP Financial Measures 2018 Adjusted Financial Information – MVW and Vacation Ownership Combined Company Vacation Ownership Segment 2018 2018 Less: Legacy-ILG Less: Legacy-ILG ($'s in millions) As reported 122 Days As adjusted As reported 122 Days As adjusted Revenues Sale of vacation ownership
Slide 144: Non-GAAP Financial Measures
Non-GAAP Financial Measures 2017 and 2018 MVW Adjusted Development Margin ($'s in millions) 2018 2017 Consolidated contract sales $ 1,073 $ 826 Less: Resales contract sales (30) (23) Consolidated contract sales, net of resales 1,043 803 Plus: Settlement revenue 1 26 15 Resales revenue 1 12 8 Revenue
Slide 145: Non-GAAP Financial Measures
Non-GAAP Financial Measures 2019 and 2022 Outlook - Adjusted EBITDA and Adjusted Free Cash Flow (In millions) 2019 2022 Adjusted EBITDA Low High Low High Net income attributable to common shareholders $ 214 $ 221 $ 426 $ 523 Interest expense (1) 132 132 125 125 Tax provision 108 111 194 227 Deprecia
Marriott Vacations Worldwide — Investor Day (October 2019) on 6ix