VAC Q2 2022 Earnings

Call Details

• Call Title: Marriott Vacations Q2 2022 Earnings Call
• Date: August 9, 2022 at 12:30 PM UTC
• Management Team:
  • Neal Goldner (Vice President, Investor Relations)
  • Stephen Weisz (Chief Executive Officer)
  • John Geller' (President)
  • Tony Terry (Executive Vice President and Chief Financial Officer)

Call Summary

Financial Performance

• The company reported $506M in contract sales for Q2, up 40% versus the prior year.
• Total company adjusted EBITDA increased 55% year-over-year to $255M and adjusted EBITDA margin expanded to 30%, up over 700 basis points versus prior-year quarter.
• Vacation ownership adjusted development profit rose to $147M, an increase of more than 80% year-over-year, with adjusted development profit margin above 33%, up nearly 750 basis points.
• Vacation ownership rental profit more than doubled to $38M in the quarter, with keys rented up 5% and revenue per available key approximately 35% higher year-over-year.
• Resort management profit increased 3% year-over-year and financing profit increased 5% year-over-year, while notes receivable delinquencies and defaults remain in line with 2019 levels.
• Interval International active membership grew 21% year-over-year driven by new affiliations, although average revenue per member declined 16% due to mix and ramp timing of new affiliations.
• The company disposed of two non-core assets during the quarter generating more than $100M in proceeds.

Guidance

• The company expects contract sales to grow double digits in the second half of 2022 versus the same period last year.
• If current trends continue, the company could be at the higher end of the range for full-year contract sales and adjusted EBITDA guidance.
• The company expects average revenue per key in the rental business to increase year-over-year but plans to allocate more rental inventory for owner usage, which will negatively impact second-half rental profit.
• Higher owner usage by Interval members at home resorts is expected to negatively impact exchange and getaway revenues for the remainder of 2022, with the company expecting these headwinds to lessen in 2023.
• The company raised adjusted free cash flow guidance to $650-$730M for 2022 and expects adjusted EBITDA-to-free-cash-flow conversion of approximately 75% for the year.
• The guidance provided excludes a one-time adjusted EBITDA benefit from aligning revenue recognition across Marriott brands in Q3, which will be quantified with Q3 results.
• No quarterly earnings guidance was provided; the commentary focused on second-half metrics and potential to reach the high end of full-year ranges if trends hold.