Greetings, and welcome to the Marriott Vacations Worldwide Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Neal Goldner, Vice President, Investor Relations.

Thanks, Rob, and welcome to the Marriott Vacations Worldwide third quarter earnings conference call. I am joined today by John Geller, our President and Chief Executive Officer; and Jason Marino, our Executive Vice President and Chief Financial Officer. I need to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release, as well as comments on this call, are effective only when made and will not be updated as actual events unfold. Throughout the call, we will make references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures in the schedules attached to our press release and on our website. With that, it's now my pleasure to turn the call over to John Geller.

Thanks, Neal. Good morning, everyone, and thank you for joining our third quarter earnings call. Our thoughts go out to all those in North Carolina, Florida, and other areas affected by Hurricanes Helene and Milton. Fortunately, all of our associates are safe, and none of our Vacation Ownership resorts suffered significant damage. Looking at our results for the quarter, we've consistently observed that people want to take vacations regardless of the economic climate. This quarter reflected that trend with nearly 90% resort occupancy and an increase in contract sales compared to last year. Although consumers are facing economic pressures, they continue to value the experiences our brands offer. During the quarter, we implemented targeted actions to drive revenue, expand our sales reach, and introduce attractive incentives for first-time buyers. For instance, we modified our promotional strategy, which led to improved trends in our first-time buyer VPG starting in August. We are also utilizing virtual tours and non-traditional sales methods, like road shows and owner cruises, to engage potential customers who are not with us on vacation. This approach accounted for 10% of our tours this quarter, representing over a 30% increase from last year, and we see further opportunities for expansion. Additionally, we launched a new financing promotion for first-time buyers to make ownership more affordable. These strategies, coupled with the ongoing recovery from last year's Maui wildfires and the overall stability in our business, resulted in a 5% year-over-year growth in contract sales. First-time buyer tours increased by double digits compared to the previous year, with a 6% sequential rise in first-time buyer VPG. Year-over-year first-time buyer sales also increased, and these tours made up about 55% of our total tours, the highest level since 2019, as we work to bring new owners into our system. Owner sales rose compared to last year as tours increased and VPG improved. We finished the quarter with nearly 270,000 preview packages in our pipeline, a 3% increase from last year, providing a solid start for next year. We are advancing our strategy to expand our presence in key markets, having opened our new 110-unit Waikiki resort in early October. Our owners are consistently asking for new experiences like Waikiki, which will also attract our Japanese customers in addition to those from North America. We anticipate that the new sales center will generate annual contract sales of $30 million to $50 million within a few years. We plan to finance the inventory over three years, aligning with the expected sales ramp. There has been a high level of enthusiasm among owners for this new resort, and we continue to see strong demand for 2025. We are also excited to announce plans for a new Hyatt Vacation Club resort in Orlando, marking the first organic addition to our Hyatt vacation ownership portfolio in over a decade and the first Hyatt-branded vacation ownership resort in the Orlando area. Orlando is the world's largest timeshare market, and this resort will significantly enhance our Hyatt portfolio when it opens in a few years. The accompanying new sales center will also contribute positively to contract sales. To effectively manage our cash flow for large projects, our aim is to partner with capital-efficient builders. In our Exchange and Third-Party Management business, our Interval International team is diligently working to secure inventory for 2025 to stimulate transactions. With recent additions, Interval is now affiliated with more than 160 all-inclusive resorts, offering a broader range of usage options for our members. On the IT side, we've made significant progress over the years in updating our legacy systems. While further improvements are needed, these advancements are critical for enhancing our product offerings. We are also digitizing our consumer capabilities, allowing our owners to interact with us in their preferred ways, and we have already made major advancements. For example, we anticipate that the majority of reservations will be booked online this year, a notable increase from a few years ago. The use of low-cost Virtual Voice Assistants has also expanded throughout the company, with 85% of users who engage with our chatbot able to complete transactions without needing to talk to an agent. Furthermore, our VO websites process over a billion dollars in payments annually, facilitating seamless maintenance fee and loan payments for our owners. Currently, almost 60% of our booking and transaction capabilities are available digitally through self-service, and we see significant potential for further enhancements that will drive efficiencies within the organization. We also have the opportunity to harness data through advanced analytics to improve operations and promote top-line growth, and we are making solid progress. We are refining our first-time buyer propensity models with advanced data and analytics across our marketing channels to boost response rates for our direct marketing offers. These models enhance our first-time buyer sales by helping us effectively target the right customers with appropriate offers in the suitable channels. Additionally, we've recently expanded the owner propensity model, which enhances our targeting processes for onsite owners by identifying those with the highest likelihood of making a purchase. We've also created a robust inventory forecasting and optimization model at Interval. Utilizing this information is expected to lower burn rates and drive extra transactions. We are now live on our new Salesforce-enabled enterprise platform for owner data and plan to integrate the remainder of our VO customer data by the middle of next year, which is essential for providing personalized products and services to our owners and customers. The common thread across all of these initiatives is our commitment to improving customer experience while bolstering both our top and bottom lines. Technology is a crucial enabler, and given that much of our business dates back 40 years, it's imperative to ensure our infrastructure and digital tools evolve to support our ability to capitalize on our iconic brands. Although we have work ahead, we have made significant strides over the past five years. Despite the dynamic macroeconomic environment, we believe many of the major challenges that affected our performance are now behind us. Fifteen months following the severe Maui wildfires, all our resorts are operational, our sales team is properly staffed, and occupancy rates are exceeding 90%. I am confident our business will fully recover in a few years, if not sooner. We have also managed through rising interest rates and inflation pressures. Despite these challenges, we have successfully maintained mid-single-digit average increases in maintenance fees for our points-based products over the past five years while upholding the same high standards our owners expect. Moreover, we project that maintenance fees for these products will only rise in the low single digits for 2025. We've navigated these challenges while implementing the Abound by Marriott Vacation program. As we've noted previously, the implementation is now complete, and our Marriott, Westin, and Sheraton Vacation Club owners can conveniently use their points to move around our system of over 90 resorts, facilitating booking and expanding their choices, which is crucial for ongoing contract sales growth. While we have faced several uneven years, it's essential to recognize that we remain a profitable and resilient business with a solid foundation and a promising future. Our brands are the best in the Vacation Ownership sector. Our products resonate with today's consumers, offering excellent accommodations at key tourist destinations with substantial flexibility. We generate our own demand, and approximately 35% of our adjusted EBITDA contribution derives from high-margin recurring revenue streams. Our loyal and highly satisfied owners depend on us for memorable vacations for their families, and through regular surveys, owners express their enjoyment of our timeshares year after year. That connection is part of the reason why nearly 70% of our year-to-date sales have been from existing owners, and why our guest satisfaction scores have improved compared to last year and 2022. This year, we've welcomed nearly 16,000 first-time buyers, totaling over 80,000 since the start of 2020 despite the pandemic. Historically, more than 40% of these new owners are expected to purchase additional points. We are expanding our portfolio with new resorts in Orlando, Savannah, Charleston, Thailand, and Bali. With our investments in technology and talent, we are leveraging consumer insights to personalize and simplify the guest experience, positioning us to reap the benefits in future years. Looking forward, we believe we have strong opportunities to accelerate growth and enhance operating efficiencies by continuing to modernize and evolve our business. To fast-track these initiatives, I've established the Strategic Business Operations Office, overseen by a senior leader who reports directly to me. We anticipate that this will enable us to achieve an additional $50 million to $100 million in annual efficiencies over the next two years, along with the existing cost savings we've already attained. We plan to reinvest some of these savings back into the business to further drive revenue growth by improving our customer platforms, products, and services. We also expect to generate additional savings that will favorably impact our owners' maintenance fees. This initiative will encompass all areas of the organization, and I am eager to provide more updates in our next earnings call. With that, I will hand it over to Jason to delve into our results in greater detail.

Thanks, John. Today I'm going to review our third quarter results, our balance sheet and liquidity position, and our outlook for the year. Starting with our Vacation Ownership segment, contract sales increased 5% in the quarter compared to last year and increased nearly 2%, excluding Maui. While existing owners continued to buy additional points, we also grew first-time buyer sales in the quarter, reflecting our focus on adding new owners. Tours increased 10% year-over-year, while VPG was 4% lower, and Asian Pacific sales grew more than 40% year-over-year. Importantly, owner VPG increased year-over-year, reflecting the value owners put on vacations. Delinquencies appear to have stabilized and were roughly flat versus our second quarter, and our sales reserve was in line with our previous guidance. As a result, development profit increased year-over-year to $105 million. Rental occupancy increased 700 basis points year-over-year, helping us drive 9% revenue growth in our Vacation Ownership segment. Rental profit increased $14 million compared to the prior year, driven by higher revenue, and $8 million of additional costs allocated to marketing and sales expense to drive tours. Management profit increased year-over-year, while financing profit was down due to higher borrowing costs. As a result, we generated $231 million of adjusted EBITDA in our Vacation Ownership segment in the quarter, with a 30% margin. Moving to our Exchange and Third-Party Management segment, adjusted EBITDA declined $7 million year-over-year, with roughly half of the decline related to lower profit at Aqua-Aston due to the Maui wildfires and the balance due to lower transactions at Interval. As a result, total company adjusted EBITDA increased year-over-year to $198 million. Our balance sheet remains firm, ending the quarter with more than $900 million in liquidity and no corporate debt maturities until 2026. We also ended the quarter with $1 billion of inventory, which we think is the appropriate level to run the business. Our leverage declined a half a turn sequentially to 3.9 times, reflecting our higher LTM adjusted EBITDA and lower debt balances. We completed our second securitization of the year, raising $445 million at a blended interest rate of 4.5%, with a 98% advance rate. The interest rate on this transaction was nearly 200 basis points lower than our November 2023 securitization and roughly 100 basis points lower than our March deal. Looking forward, we increased our full-year adjusted EBITDA guidance to reflect our strong third quarter results. We still expect contract sales to grow 1% to 3% for the year, driven by increased tours and lower VPG. We have a significant presence in Florida, and we lost a few selling days due to Hurricane Milton, which we estimate cost us around $8 million in contract sales and a few million dollars of adjusted EBITDA in the fourth quarter. Our VO rental business had a strong third quarter, and we expect rental profit to increase in the $35 million range for the year. In our Exchange and Third-Party Management segment, we now expect adjusted EBITDA to decline approximately $30 million for the year, with roughly half of the decline related to our Aqua-Aston business. Finally, G&A is expected to be down around $20 million for the year, driven by our cost-saving initiatives. Moving to cash flow, we expect our adjusted free cash flow will be in the $300 million to $340 million range, and we remain focused on reducing leverage by the end of 2025 while still returning cash to shareholders. So, to summarize, we had a solid third quarter, growing contract sales, and adjusted EBITDA while reducing our leverage. And while consumers are still facing economic pressures, they also continue to spend on experiences like travel. This puts us in a great position to continue to grow while supporting the balance sheet and returning cash to shareholders. It's also important to remember that our industry generates its own demand, which you can see in our 10% tour growth this quarter. We took a number of steps during the third quarter focused on driving contract sales growth, adjusting our promotional strategy, increasing our use of non-traditional sales channels, and launching new promotions geared to drive first-time buyer tours. We're also making good progress updating our legacy IT systems, enabling our customers to transact with us digitally more than ever, and unlocking the power of data and analytics to drive efficiencies and growth. And as John mentioned, we believe we have substantial opportunities to modernize and evolve our business, and have already started working to achieve this. Our initial analysis shows we can drive an incremental $50 million to $100 million of annual run rate benefits over the next two years by improving our cost structure, streamlining our operations, and driving efficiencies across our company, providing opportunities to invest in attractive growth initiatives, expand margins, and enhance our IT platforms. With that, we'll be happy to answer your questions.

Thank you. At this time we'll be conducting a question-and-answer session. Our first question comes from Brandt Montour with Barclays. Please proceed with your question.

Good morning, everybody. Thanks for taking my question. So first question, I guess it's just the first-time buyer financing strategy that you mentioned, John. It doesn't sound like anything that's not sort of normal course of business or sort of minor strategic shifts, but just curious if that's something that's going to meaningfully alter the sort of the way that we think about loan loss revisions or the mix that then would influence that line or anything else that we should be thinking about in terms of you moving in the credit spectrum in new owner sales and the like?

No, no. The underwriting standards didn't change in terms of FICO and all that. So there shouldn't be any impact to your question as it relates to loan loss.

Okay, great. Thanks for that. And then on the full-year guidance, which was raised modestly at the midpoint of EBITDA, I think you guys kept contract sales unchanged, and then free cash flow was also unchanged, but that was for sort of other reasons. Is the way to think about the revisions today that there's, you know, that really sort of on the sales side, things are progressing as expected, but you did get some of the efficiencies that you talked about in the third and fourth quarter, maybe the fourth quarter. And then a follow-up to that question is maybe you could just talk about how much of the savings of the $50 million to $100 million over the next two years, how much of that will be in G&A versus the rest of the business?

Yeah, yeah. So the initiatives we're talking about are really for next year in 2025, right? We're always, you know, coming into this year, we talked about some of the savings initiatives. You see that in our full-year G&A, but those are all things that we're in process. This is really building on those in our incremental, if you will, going forward. We'll have more on the February call around the timing, and we're working through all that. The goal is to have the $50 million to $100 million in place by the end of ’26. We're going to accelerate as many of those as we can, but some of them are going to take a little bit more time, and we can give you more color on that, like I said, in February.

And Brandt, to guide up, as you think about it, our third quarter was a little bit better than we had originally contemplated, so not necessarily on the contract sales but in some of the other parts of the business, and that's what you see, which is why you don't see the change to the contract sales guidance.

Our next question comes from Ben Chaiken with Mizuho. Please proceed with your question.

Hey, how's it going? Can you hear me all right?

Yeah.

Good morning, Ben.

Thanks. Hey, good morning. So, nice quarter. You know, when we step back, your contract sales are now higher year-over-year as we lap Maui, implied 4Q, a little bit lower year-over-year. I know it sounds like there's some 4Q hurricane impact as well that you called out. Is there anything else wampy that we need to consider here, just in terms of moving parts as we lap year-over-year?

No, no.

Nothing that comes to mind. Okay.

Got it. And then, and I guess, similarly, you had a nice 3Q. Contract sales are ramping. As we just step back, your sales and marketing expense is higher year-over-year. Can you talk about some of the puts and takes here, and do you see this as an opportunity on a go-forward to bring lower?

Sure. And you're obviously talking based on reported revenues. So, some of it is the higher sales reserve, right, which is a deduction from our contract sales. And that's the revenues down. So, you know, with our reserves, which we've talked about, we're providing at a higher level. That obviously impacts the marketing and sales costs on a percentage basis. A lot of the initiatives that we're working on and are already in place, whether that's how we target and market and do that more efficiently, those continue to be the opportunities to get the right customers on tour that are going to drive higher VPGs, which will help your marketing and sales costs. So, that continues to be the way to improve, right, more efficient marketing, better VPGs to drive marketing and sales costs as a percentage of revenue.

Our next question comes from Patrick Scholes with Truist Security. Please proceed with your question.

Thank you. Good morning, John and Jason. A couple of questions here. On the 2Q earnings, you had really highlighted softening of VPG on first-time buyers and the lower end of the FICO band really underperforming. Can you give us a little bit more color on what you've observed since 2Q earnings and expectations for those going forward? Thank you.

Yeah, sure. Yeah, as we talked about on the second quarter, if you recall, our year-over-year VPG to owners, I think, was flat in the second quarter. So, owners still love the product. We weren't seeing the softening. Where we started to see some softening in, like, May in the second quarter was around first-time buyers. And, you know, not surprising given the broader macro. And when we talked about it on the second quarter call in early August, we rolled out, we changed our promotional grid that we talk about in terms of how, the more you buy, obviously, you potentially get a higher first-day benefit and those types of things. And moved that around overall, as well as change the financing incentive for first-time buyers in that program a little bit. And what you saw as you went through sequentially in the quarter, because we had put the incentives in place in July, for example, VPGs were still down double digits year-over-year. After those incentives went in place, we saw the benefit sequentially in August and September, where all of a sudden VPGs were down 3% to 4% year-over-year, right? So, that's where you saw the traction on some of the adjustments we made on the sales side. And we didn't get a full quarter benefit of that, but we expect to get that year-over-year and continue to improve here as we go through the fourth quarter.

Okay. Thank you. One more question here for Jason. Certainly on your most recent securitization versus prior over the last 18 months, better terms and net spreads, certainly over the last two years, we've seen those net spreads be a headwind to EBITDA growth. Assuming interest rate trends continue the way they've been going of late, when might you expect those net spread headwinds to possibly turn into a tailwind? Thank you.

Yeah. Thanks, Patrick. So, as we've talked about in the past, we expect to have higher financing interest expense here going forward for the next couple of years as the interest rates that we issued securitizations at over the last few years at, call it 2% thereabouts for a while roll off and we put on the higher interest costs going forward. So, from a margin perspective, we're going to continue to see that impact over the next couple of years. But what we've said is that our revenue on the financing side should start to outpace that expense growth. So, we do expect here in 2025 to have higher financing profit in the business, but those interest expenses are going to continue to increase here going forward for a little bit longer.

Yeah. So, on a net basis, we should see financing profit grow in 2025 versus 2024 where it has been a net headwind.

Our next question is from David Katz with Jefferies. Please proceed with your question.

Hi, good morning. Thanks for taking my question, John. I wanted to go back to some of the prepared remarks about the Strategic Business Operations Office. Can you just elaborate a bit on sort of what that is, what that is designed to do and sort of how it works and what we can expect to see and or hear from it? It's quite interesting.

Sure. Sure. Yeah, no, it's a great question, David. A lot of these initiatives and things aren't new, right? They're things that we're working on. The idea with the Strategic Business Operations just create not only new ideas, but add velocity to execution to accelerate these opportunities over the next couple of years. So, I wanted to make sure we had, call it a hyper focus on growth opportunities, cost efficiencies with detailed plans on execution and a team to work with the broader business to deliver. And it's really about adding that velocity there, what we're trying to accomplish.

So, can I follow that up and just double click on the growth opportunities part of the answer? What is the, how would you define the boundaries on what that opportunity set is? Is that more internal, tuck-in acquisitions, what kinds of stuff?

Yeah, no, it's going to be a lot on our internal. We've got, I think, great opportunities in our core Vacation Ownership as well as our Exchange business to grow. So, it's really, those initiatives and moving those along are faster and other new ideas and things that we want to get into place. So, but it's also, we're always going to continue to look at whether it's a tuck-in acquisition, potentially launching new products that are in the Vacation Ownership, right, different products than we have today. We've got a lot of work going on that front. So it's both, call it the organic products we have today and growth there, but we are looking at adjacent opportunities. We always are. We've got some good things that we're looking at.

Great, thank you. Just a quick follow-up question regarding your cost-saving initiatives. Marriott Corporation, your former parent company, also just launched a large cost-saving initiative. I'm just curious if your initiative, is this anything in conjunction with them, or is this just purely coincidental?

Yeah. Thank you. I think you recall, we spun out of Marriott back in 2011, Patrick. So, we, yes, our licensor and stuff, how they run their business and how we run our business, are totally coincidental. I guess that they were looking at obviously probably different initiatives for their business than we're doing for our business, but no, totally unrelated.

Okay. I was just curious. Thank you. I'm all set.

Okay. Thank you.

Thanks.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to John Geller for closing comments.

Thanks, Rob. Thank you, everyone, for joining our call today. We had a solid third quarter and reservations look strong for the balance of ’24 and into next year. Our strategies are working and we're driving first-time buyer sales, which is good for the system. We also ended the quarter with nearly 270,000 preview packages in our pipeline, positioning us well going into next year. We kept maintenance fee increases for our points-based products to low single-digits for next year, which we think will be well-received by owners. Delinquencies and defaults have stabilized. We're updating our IT platforms to support our growth and we're using advanced data and analytics to improve efficiency and drive top-line growth. We've navigated many headwinds over the past few years from a mixed consumer environment to higher interest rates and inflation to the Abound implementation and came through it with a solid foundation for future growth. Through it all, we've remained a resilient, highly profitable, and cash-generative business. We also have a significant opportunity to continue to leverage our strategic and competitive advantages to drive substantial recurring benefits over the next two years. On behalf of all of our associates, owners, members, and customers around the world, I want to thank you for your continued interest in our company and hope to see you on vacation soon. Thank you.

This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.