VAC Q4 2022 Earnings

Call Details

• Call Title: Marriott Vacations Q4 2022 Earnings Call
• Date: February 23, 2023 at 1:30 PM UTC
• Management Team:
  • Neal Goldner (Vice President, Investor Relations)
  • John Geller' (Chief Executive Officer)
  • Tony Terry (Chief Financial Officer)

Call Summary

Financial Performance

• The company generated $1.8B in contract sales and produced $744M of adjusted free cash flow in 2022.
• Fourth quarter occupancy was 90% overall and exceeded 95% in Hawaii for the quarter.
• Tours increased 18% year-over-year in Q4 and finished just below pre-pandemic levels.
• Contract sales in Q4 increased 12% year-over-year and would have increased 15% excluding a $13M hurricane impact.
• Adjusted development profit grew 13% year-over-year to $126M in Q4 with development margin above 31%, which is 500 basis points higher than 2019.
• Vacation ownership segment adjusted EBITDA grew 12% in Q4 excluding the $7M hurricane impact with segment margin near 35%.
• Exchange and third-party management adjusted EBITDA increased 11% in Q4 with margin up 300 basis points to 55% excluding the sold VRI Americas results.

Guidance

• The company is targeting 5% to 9% contract sales growth in 2023 with the midpoint implying 7% growth.
• The company expects adjusted EBITDA of $950M to $1.0B in 2023, which implies approximately 6.5% year-over-year growth at the midpoint excluding the $51M alignment benefit recorded in 2022.
• Adjusted free cash flow is expected to be $600M to $670M in 2023 with adjusted EBITDA to free cash flow conversion of about 65%.
• Rental profit is expected to increase more than 10% for the year, but rental results are expected to be weaker in Q1 due to higher owner and preview utilization.
• Financing profit is expected to be largely unchanged for the year excluding the 2022 alignment benefit as higher contract sales and financing propensity are expected to be offset by a higher cost of funds.
• Interval members are projected to remain relatively stable and adjusted EBITDA for the exchange and third-party management segment is expected to grow 4% to 6% in 2023.
• Corporate G&A is expected to increase 10% to 15% year-over-year in 2023 driven by investments in technology and analytics.