CareersNewsroom

Marriott Vacations Worldwide Reports Second Quarter Financial Results

ORLANDO, Fla. – July 21, 2016 Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter financial results and reaffirmed its guidance for the full year 2016.

“Our second quarter results, including contract sales, were solid and in line with our expectations,” said Stephen P. Weisz, president and chief executive officer. “And even more importantly, contract sales growth gained momentum as we moved through the second half of the quarter. Additionally, tour activations for the second half of 2016 are substantially ahead of this time last year, and four of our six new sales centers are open and gaining momentum, giving us confidence that we will achieve our 2016 goals and are well positioned for solid growth in the years to come.”

Second quarter 2016 highlights:

Non-GAAP financial measures, such as adjusted EBITDA, adjusted net income, adjusted fully diluted earnings per share, and adjusted development margin are reconciled and adjustments are shown and described in further detail on pages A-10 and A-11 of the Financial Schedules that follow.

Second quarter 2016 Results

Company Results
Second quarter 2016 company net income was $36.3 million, a $2.3 million increase from the second quarter of 2015. These results were driven mainly by a $10.5 million gain on the bulk sale of the remaining 19 units at the San Francisco property, $3.0 million of higher resort management and other services revenues net of expenses, $1.7 million of higher financing revenues net of expenses, a $1.7 million reversal of a liability associated with the disposition of a golf course and related assets in Kauai, Hawaii, and $0.7 million of higher development margin. These increases were partially offset by an $8.7 million gain associated with the sale of undeveloped land in Kauai, Hawaii in the prior year, $1.8 million of lower rental revenues net of expenses, $1.7 million of higher general and administrative costs, a $1.5 million loss on the disposition of the non-timeshare portion of the Surfers Paradise, Australia property, $0.7 million of higher acquisition related transaction costs, and $0.6 million of higher royalty fees.

Total company vacation ownership contract sales were $166.0 million, $0.1 million higher than the second quarter of last year. These results reflect increased contract sales of $2.6 million and $2.5 million, respectively, from the company’s Europe and Asia Pacific segments, partially offset by $5.0 million of lower contract sales in the company’s North America segment, as the first half of the prior year second quarter benefited from enhancements the company made to owner recognition levels. Also contributing to the decrease, the company’s Latin America sales channels were down roughly $2.1 million compared to the second quarter of last year, as the company continued to be impacted by a stronger U.S. dollar.

Development margin was $33.8 million, a $0.7 million increase from the second quarter of 2015. Development margin percentage was 23.1 percent compared to 21.3 percent in the prior year quarter, reflecting $9.1 million of lower product costs driven primarily by $6.9 million of favorable product cost true-up activity year-over-year, offset partially by $3.2 million related to higher usage of Plus Points for sales incentives, $3.0 million from higher sales reserve activity mainly associated with a 30 percent, or 12.5 percentage point, increase in financing propensity, and $2.2 million of higher marketing and sales costs driven primarily from start-up costs associated with the company’s new sales distributions. Adjusted development margin percentage, which excludes the impact of revenue reportability year-over-year, was 22.8 percent in the second quarter of 2016 compared to 21.0 percent in the second quarter of 2015.

Rental revenues totaled $75.1 million, a $2.4 million increase from the second quarter of 2015. Results were driven mainly by $1.9 million of revenue from the non-timeshare portion of the Surfers Paradise, Australia property the company sold at the end of the second quarter and $1.8 million from a 3 percent increase in transient keys rented, partially offset by $1.6 million from a 3 percent decrease in average transient rate resulting from the mix of inventory available to rent. Rental revenues net of expenses were $9.0 million, a $1.8 million decrease from the second quarter of 2015, primarily reflecting a $0.7 million loss from the portion of the Australia property sold in the quarter as well as higher operating expenses primarily on increased transient keys rented in the quarter.

Resort management and other services revenues totaled $80.9 million, a $6.9 million increase from the second quarter of 2015. Resort management and other services revenues, net of expenses, totaled $31.6 million, a $3.0 million increase, or 10.6 percent, from the second quarter of 2015.

Financing revenues totaled $28.7 million, a $0.4 million increase from the second quarter of 2015. Financing revenues, net of expenses and consumer financing interest expense, were $18.7 million, a $1.7 million increase, or 10.1 percent, from the second quarter of 2015.

General and administrative expenses were $24.6 million in the second quarter of 2016, a $1.7 million increase from the second quarter of 2015, driven by higher spending related to enhancements to the company’s owner facing technology as well as inflationary cost increases.

Net income was $36.3 million, compared to net income of $34.0 million in the second quarter of 2015, an increase of $2.3 million, or 6.7 percent. Adjusted EBITDA was $64.2 million in the second quarter of 2016, a $2.5 million, or 4.1 percent, increase from $61.7 million in the second quarter of 2015.

Segment Results

North America
North America vacation ownership contract sales were $145.6 million in the second quarter of 2016, a decrease of $5.0 million, or 3.3 percent, from the prior year period, as the first half of the prior year second quarter benefited from enhancements the company made to owner recognition levels. Also contributing to the decrease, the company’s Latin America sales channels were down roughly $2.1 million compared to the second quarter of last year, as the company continued to be impacted by a stronger U.S. dollar.

Total tours in the second quarter of 2016 increased 0.3 percent, driven by a 4 percent increase in first time buyer tours, partially offset by a 2 percent decline in owner tours driven in part by the impact of the enhancements to the owner recognition levels in the first half of last year’s second quarter. VPG decreased $20 to $3,384 in the second quarter of 2016 from the second quarter of 2015.

Second quarter 2016 North America segment financial results were $111.7 million, an increase of $7.1 million from the second quarter of 2015. The increase was driven primarily by the $10.5 million gain on the bulk sale at the San Francisco property, $3.0 million of higher development margin, $2.9 million of higher resort management and other services revenues net of expenses, the $1.7 million reversal of a liability associated with the disposition in Kauai, Hawaii, and $0.5 million of higher financing revenues. These increases were partially offset by the $8.7 million gain in the prior year, $1.8 million of acquisition related transaction costs, $0.6 million of higher royalty fees, and $0.6 million of lower rental revenues net of expenses. North America adjusted segment financial results, which exclude the transaction costs in the current year and the gains and other income in both years, were $101.2 million in the second quarter of 2016, a $5.3 million increase from $96.0 million of adjusted segment results in the second quarter of 2015.

Development margin was $36.5 million, a $3.0 million increase from the second quarter of 2015. Development margin percentage was 27.5 percent compared to 23.6 percent in the prior year quarter, reflecting $9.0 million of lower product costs driven primarily by $6.5 million of favorable product cost true-up activity year-over-year, offset partially by $3.2 million related to higher usage of Plus Points for sales incentives, $1.6 million from higher sales reserve activity mainly associated with a 30 percent, or 12.1 percentage point, increase in financing propensity, and $1.3 million of higher marketing and sales costs driven primarily from start-up costs associated with the company’s new sales distributions. Adjusted development margin, which excludes the impact of revenue reportability year-over-year, was $34.1 million, a $1.8 million increase from the prior year quarter. Adjusted development margin percentage was 26.5 percent in the second quarter of 2016 compared to 23.0 percent in the second quarter of 2015.

Asia Pacific
Total vacation ownership contract sales in the segment were $10.5 million, an increase of $2.5 million, or roughly 31 percent, from the second quarter of 2015. Segment financial results were a loss of $2.5 million, a $2.4 million decrease from the second quarter of 2015, driven by a $1.5 million loss on the sale of the non-timeshare portion of the Surfers Paradise property, $1.5 million of lower development margin, and $0.6 million of lower rental revenues net of expenses, partially offset by $1.3 million of transaction related costs in the prior year. The lower development margin reflected the impact of start-up costs in the current year associated with the company’s new sales distribution in Surfers Paradise, Australia, partially offset by the increase in contract sales. The lower rental revenues net of expenses were driven by losses from operating the Surfers Paradise property.

Europe
Second quarter 2016 contract sales were $9.9 million, an increase of $2.6 million, or more than 35 percent, from the second quarter of 2015. Segment financial results were $2.2 million, an $0.8 million decrease from the second quarter of 2015, driven by $0.5 million of lower rental revenues net of expenses.

Share Repurchase Program and Dividends

During the second quarter of 2016, the company repurchased nearly 1.5 million shares of its common stock for a total of $90.1 million under its share repurchase program, of which nearly 1.2 million shares were purchased under an accelerated share repurchase agreement. In addition, the company paid a quarterly cash dividend of $8.5 million. Through the end of the second quarter, the company returned nearly $190 million to its shareholders through the repurchase of 2.8 million shares for $163.4 million and more than $26 million in dividends paid.

Balance Sheet and Liquidity

On June 17, 2016, cash and cash equivalents totaled $97.4 million. Since the beginning of the year, real estate inventory balances increased $33.9 million to $697.9 million, including $296.5 million of finished goods, $76.6 million of work-in-progress, and $324.8 million of land and infrastructure. The company had $746.3 million in gross debt outstanding at the end of the second quarter, an increase of $58.2 million from year-end 2015, consisting primarily of $691.8 million in gross non-recourse securitized notes and $45.0 million in gross debt outstanding under the company’s revolving corporate credit facility. In addition, $40.0 million of gross mandatorily redeemable preferred stock of a subsidiary of the company was outstanding at the end of the second quarter of 2016.

As of June 17, 2016, the company had approximately $151.7 million in available capacity under its revolving credit facility after taking into account outstanding letters of credit and approximately $104.8 million of gross vacation ownership notes receivable eligible for securitization in its warehouse credit facility.

Outlook

Pages A-1 through A-11 of the Financial Schedules reconcile the non-GAAP financial measures set forth below to the following full year 2016 expected GAAP results:

Net income

$130 million to $140 million

 

Fully diluted EPS

$4.57 to $4.92

 

Net cash provided by operating activities

$136 million to $146 million

 

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

Adjusted net income

$126 million to $136 million

 

Adjusted fully diluted EPS
Adjusted EBITDA

$4.43 to $4.78
$261 million to $276 million

 

Adjusted free cash flow

$135 million to $155 million

 

Contract sales

4 percent to 8 percent

 

Adjusted fully diluted EPS increased from the previous guidance of $4.31 to $4.66 due entirely to a reduction in shares outstanding.

Second 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 13640097. The webcast will also be available on the company’s website.

###

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 July 21, 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

Download PDF