VAC Q2 2021 Earnings

Call Details

• Call Title: Marriott Vacations Q2 2021 Earnings Call
• Date: July 28, 2021 at 12:30 PM UTC
• Management Team:
  • Neal Goldner (Vice President, Investor Relations)
  • Stephen Weisz (Chief Executive Officer)
  • John Geller' (President and Chief Financial Officer)

Call Summary

Financial Performance

• Contract sales increased 60% sequentially to $362 million in Q2, and were 6% below Q2 2019 levels.
• First-time buyers represented more than 30% of Q2 contract sales, which was up over 500 basis points versus Q1.
• VPG in Q2 was more than $1,000, or 30%, higher than 2019 levels, with the lift coming from both first-time buyers and existing owners.
• Development profit was $65 million in Q2 with a reported margin of 22%, and adjusted development profit was $81 million with a 26% margin, approximately 240 basis points above 2019.
• Rental revenues increased 43% sequentially in Q2 resulting in $15 million of rental profit for the quarter.
• Vacation ownership adjusted EBITDA increased sequentially to $182 million, representing roughly 90% of Q2 2019 vacation ownership EBITDA.
• Interval exchange transactions were down sequentially due to seasonality but were only down 1% versus Q2 2019, and average revenue per member was up 7% versus two years ago.
• Financing profit increased 20% sequentially and was in line with Q2 2019 levels after including the Welk acquisition contribution.
• Resort management profit increased $18 million sequentially driven by ancillary activity that was nearly back to 2019 levels and the inclusion of Welk results.

Guidance

• The company did not provide full-year guidance and stated it is not giving formal guidance for the year.
• The company expects Q3 contract sales to be between $380 million and $410 million, which it said is up around 9% at the midpoint and roughly in line to slightly above Q3 2019 contract sales.
• The company expects adjusted EBITDA to grow sequentially in Q3 but cautioned it may not reach the $190 million of adjusted EBITDA generated in Q3 2019.
• The company expects contract sales and rental revenue in Europe and Asia Pacific to remain below 2019 levels in the near term.
• The company expects rental profit in North America to remain below 2019 because more rental keys were allocated to owners to get owners back on vacation.
• The company said it is not providing free cash flow guidance, but expects adjusted EBITDA to adjusted free cash flow conversion to be well above the normal 55% range for a number of years due to more than $650 million of excess inventory.
• Bookings for the second half were described as stronger than 2019 in certain leading indicators, including 16% more owner and preview reservations on the books for H2 versus the same time in 2019.