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Marriott Vacations Worldwide Reports First Quarter Financial Results

ORLANDO, Fla. – April 28, 2016 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2016.

 “Our first quarter results were in-line with our expectations as we continue our journey to execute our long term growth strategies,” said Stephen P. Weisz, president and chief executive officer. “First time buyer tours were up in the quarter, sales of new tour packages continue to grow ahead of expectations, and we have six new sales distributions coming on-line this year.  For these reasons and more, I remain confident in our overall strategy and in reaffirming our previously provided full year 2016 guidance.”

First quarter 2016 highlights:

First quarter 2016 net income was $24.4 million, or $0.82 diluted EPS, compared to net income of $34.1 million, or $1.03 diluted EPS, in the first quarter of 2015.

Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted earnings per share, adjusted development margin and adjusted free cash flow are reconciled and adjustments are shown and described in further detail on pages A-1 through A-12 of the Financial Schedules that follow.

First Quarter 2016 Results

Company Results
Total company vacation ownership contract sales were $153.5 million, $16.5 million lower than the first quarter of last year. The decrease was driven mainly by $15.9 million of lower contract sales to existing owners in the company’s North America segment, as the prior year benefited from enhancements the company made to owner recognition levels. These enhancements helped drive a 7 percent increase in owner tours and a 1.4 point improvement in owner closing efficiency last year, resulting in contract sales growth of over 10 percent as compared to the first quarter of 2014. In addition, our Latin America sales channels were down roughly $2.5 million compared to the first quarter of last year, as the company continued to be impacted by a stronger U.S. dollar.

Adjusted development margin was $23.7 million, a $10.1 million decrease from the first quarter of 2015. Adjusted development margin percentage was 17.3 percent in the first quarter of 2016 compared to 21.6 percent in the first quarter of 2015 reflecting higher marketing and sales spending which included costs to drive future tour flow and start-up costs associated with the company’s new sales distributions as well as the impact of lower contract sales volumes. Development margin was $24.3 million, a $14.6 million decrease from the first quarter of 2015. Development margin percentage was 17.6 percent in the first quarter of 2016 compared to 21.2 percent in the first quarter of 2015.

Excluding the results of operations for the portion of the Surfers Paradise, Australia property that the company intends to sell, adjusted rental revenues totaled $78.2 million, a $2.0 million increase from the first quarter of 2015. Results reflected $1.4 million of higher revenue from operating properties we intend to convert to timeshare inventory, and $0.4 million of higher plus points revenue. Rental revenues net of expenses were $15.6 million, a $0.4 million decrease from the first quarter of 2015.

Excluding the results of operations for the portion of the Surfers Paradise, Australia property that the company intends to sell, adjusted resort management and other services revenues totaled $67.9 million, a $3.5 million increase from the first quarter of 2015. Adjusted resort management and other services revenues, net of expenses, were $23.6 million, a $1.6 million increase, or 7.4 percent, over the first quarter of 2015. Resort management and other services revenues, net of expenses, totaled $23.8 million, a $1.8 million increase, or 8.3 percent, from the first quarter of 2015.

Financing revenues totaled $29.2 million, a $0.2 million increase from the first quarter of 2015. Financing revenues, net of expenses and consumer financing interest expense, were $19.2 million, a $1.1 million increase, or 6.1 percent, from the first quarter of 2015.

General and administrative expenses were $25.3 million in the first quarter of 2016, a $2.5 million increase from the first quarter of 2015, driven by nearly $2 million of higher spending related to enhancements to the company’s owner facing technology as well as inflationary cost increases.

Adjusted EBITDA was $51.6 million in the first quarter of 2016, an $8.6 million, or 14.2 percent, decrease from $60.2 million in the first quarter of 2015.

Segment Results

North America
North America vacation ownership contract sales were $139.7 million in the first quarter of 2016, a decrease of $16.3 million, or 10.5 percent, from the prior year period. The decrease was driven mainly by $15.9 million of lower contract sales to existing owners, as the prior year benefited from enhancements the company made to owner recognition levels that helped drive a 7 percent increase in owner tours and a 1.4 point improvement in owner closing efficiency, resulting in contract sales growth of over 10 percent as compared to the first quarter of 2014. In addition, our Latin America sales channels were down roughly $2.5 million, as the company continued to be impacted by a stronger U.S. dollar.

Total tours in the first quarter of 2016 decreased 4.0 percent, driven by a decline in owner tours, which were down nearly 7 percent year-over-year. VPG decreased 3.9 percent to $3,496 in the first quarter of 2016 from $3,640 in the first quarter of 2015, driven by an 8 percent decline in owner VPG.  The overall decline in VPG in the quarter was driven by lower closing efficiency, offset partially by higher points purchased per contract and pricing. 

First quarter 2016 North America adjusted segment financial results were $91.5 million, a decrease of $5.2 million from the first quarter of 2015. The decrease was driven primarily by $6.5 million of lower development margin and $0.6 million of lower rental revenues net of expenses. These decreases were partially offset by $1.9 million of higher resort management and other services revenues net of expenses and $0.4 million of higher financing revenues. North America segment financial results were $89.5 million, an $8.2 million decrease from the first quarter of 2015.

Adjusted development margin was $25.7 million, an $8.7 million decrease from the prior year quarter. Adjusted development margin percentage was 20.6 percent in the first quarter of 2016 compared to 23.7 percent in the first quarter of 2015. Development margin was $25.7 million, a $6.5 million decrease from the first quarter of 2015. Development margin percentage was 20.6 percent in the first quarter of 2016 compared to 22.7 percent in the prior year quarter.

Asia Pacific
Total vacation ownership contract sales in the segment were $9.4 million, an increase of $0.8 million, or nearly 9 percent, from the first quarter of 2015. Adjusted segment financial results were $1.0 million, a $2.5 million decrease from the first quarter of 2015. Adjusted development margin was $2.2 million lower than the first quarter of last year, reflecting $0.8 million of higher marketing and sales costs related to start-up costs associated with the company’s new sales distribution in Surfers Paradise, Australia and $1.1 million of positive product cost true-up activity in 2015. Segment financial results were $1.0 million, an $8.4 million decrease from the first quarter of 2015 also reflecting $5.9 million of development margin in the prior year quarter related to the sale of all 18 residential units at the company’s former Macau location.

Europe
First quarter 2016 contract sales were $4.4 million, a decrease of $0.9 million from the first quarter of 2015. Segment financial results were $0.4 million, a $0.4 million increase from the first quarter of 2015 due primarily to higher development margin.

Share Repurchase Program and Dividends

During the first quarter of 2016, the company repurchased over 1.3 million shares of its common stock for a total of $73.2 million under its share repurchase program and paid two quarterly cash dividends totaling $17.6 million.

Balance Sheet and Liquidity

On March 25, 2016, cash and cash equivalents totaled $106.6 million. Since the beginning of the year, real estate inventory balances increased $46.0 million to $709.9 million, including $317.8 million of finished goods, $30.0 million of work-in-progress, and $362.1 million of land and infrastructure. The company had $699.3 million in gross debt outstanding at the end of the first quarter, an increase of $11.2 million from year-end 2015, consisting primarily of $688.0 million in gross non-recourse securitized notes. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the first quarter of 2016.

As of March 25, 2016, the company had approximately $196.7 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $102.3 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.

Outlook

The company is reaffirming the following guidance for the full year 2016:

Adjusted EBITDA

$261 million to $276 million

 

Adjusted fully diluted EPS

$4.31 to $4.66

 

Adjusted net income

$126 million to $136 million

 

Adjusted free cash flow

$135 million to $155 million

 

Company contract sales growth

4 percent to 8 percent

 

              
Pages A-1 through A-12 of the Financial Schedules reconcile the non-GAAP financial measures set forth above to the following full year 2016 expected GAAP results: net income of $123 million to $134 million; net cash provided by operating activities of $136 million to $146 million; and fully diluted EPS of $4.21 to $4.59, which increased from the previous guidance of $4.16 to $4.50 due entirely to a reduction in shares outstanding.

First Quarter 2016 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. ET today to discuss these results and its guidance for full year 2016. Participants may access the call by dialing (877) 407-8289 or (201) 689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company’s website at www.marriottvacationsworldwide.com.

An audio replay of the conference call will be available for seven days and can be accessed at (877) 660-6853 or (201) 612-7415 for international callers. The conference ID for the recording is 13633825. The webcast will also be available on the company’s website.

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About Marriott Vacations Worldwide Corporation
Marriott Vacations Worldwide Corporation is a leading global pure-play vacation ownership company, offering a diverse portfolio of quality products, programs and management expertise with over 60 resorts. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Since entering the industry in 1984 as part of Marriott International, Inc., the company earned its position as a leader and innovator in vacation ownership products. The company preserves high standards of excellence in serving its customers, investors and associates while maintaining a long-term relationship with Marriott International. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements: This press release and accompanying schedules contain “forward-looking statements” within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, supply and demand changes for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained in the company’s most recent Annual Report on Form 10-K filed with the U.S Securities and Exchange Commission (the “SEC”) and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of April 28, 2016 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Financial Schedules Follow

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