Marriott Vacations Worldwide(VAC) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Highlights The company reported strong Q2 2025 results, with $69 million net income and $203 million Adjusted EBITDA, reiterating its full-year outlook and modernization program progress - Management highlighted the resilience of the business model, strong first-time buyer sales, and confirmed that its modernization program is on track to deliver $150 million to $200 million in annualized Adjusted EBITDA benefits by the end of next year[4] Q2 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | Net income attributable to common stockholders | $69 million | | Diluted earnings per share (EPS) | $1.77 | | Adjusted net income attributable to common stockholders | $77 million | | Adjusted diluted EPS | $1.96 | | Adjusted EBITDA | $203 million | Segment Performance The Vacation Ownership segment's Adjusted EBITDA increased 28% due to a prior-year adjustment, while Exchange & Third-Party Management saw declines in revenue and Adjusted EBITDA Vacation Ownership Vacation Ownership revenue grew 12% to $775 million and Adjusted EBITDA increased 28% to $231 million, despite a 1% dip in contract sales and 3% VPG decline Vacation Ownership Performance - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues (ex-cost reimbursements) | $775M | $694M | +12% | | Total consolidated contract sales | $445M | $449M | -1% | | VPG | $3,631 | $3,741 | -3% | | Tours | 114,402 | 111,752 | +2% | | Segment Adjusted EBITDA* | $231M | $181M | +28% | - The 28% increase in Segment Adjusted EBITDA was primarily driven by a $57 million sales reserve adjustment in the prior year, which had reduced development profit in Q2 2024[8] Exchange & Third-Party Management Exchange & Third-Party Management revenue decreased 10% to $51 million and Adjusted EBITDA fell 7% to $23 million, primarily due to lower Interval International performance Exchange & Third-Party Management Performance - Q2 2025 vs Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues (ex-cost reimbursements) | $51M | $55M | -10% | | Total active Interval International members | 1,507k | 1,530k | -2% | | Avg. revenue per member | $37.40 | $38.30 | -2% | | Segment Adjusted EBITDA* | $23M | $25M | -7% | Corporate and Other General and administrative costs rose 12% year-over-year, mainly due to lower variable compensation in the prior year tied to the sales reserve adjustment - General and administrative costs increased 12% compared to the prior year due to lower variable compensation in the prior year tied to the sales reserve adjustment[10] Balance Sheet and Liquidity The company ended Q2 with $799 million in liquidity, including $205 million cash, and total debt of $5 billion split between corporate and non-recourse obligations - The company ended the quarter with $799 million in liquidity, including $205 million of cash and cash equivalents and $539 million of available capacity under its revolving corporate credit facility[11] - Total debt at the end of Q2 was composed of $3 billion in corporate debt and $2 billion in non-recourse debt related to securitized vacation ownership notes receivable[12] Full Year 2025 Outlook The company reiterated its full-year 2025 guidance, projecting contract sales between $1,740 million and $1,830 million and Adjusted EBITDA between $750 million and $780 million Full Year 2025 Guidance (Reiterated) | Metric | 2025 Guidance Range | | :--- | :--- | | Contract sales | $1,740M to $1,830M | | Adjusted EBITDA* | $750M to $780M | | Adjusted net income* | $250M to $280M | | Adjusted diluted EPS* | $6.40 to $7.10 | | Adjusted free cash flow* | $270M to $330M | 2025 Supplemental Estimates | Metric | 2025 Guidance Range | | :--- | :--- | | Interest expense, net | $175M to $172M | | Depreciation and amortization | $150M to $148M | | Tax rate (for adjusted net income) | 34% to 33% | Financial Schedules Summary Financial Information (A-1) Q2 2025 saw total revenues increase 9% to $1.246 billion and net income rise 89% to $69 million, with Adjusted EBITDA growing 29% to $203 million Q2 2025 Financial Summary (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | GAAP Measures | | | | | Revenues | $1,246M | $1,140M | +9% | | Net Income | $69M | $37M | +89% | | Diluted EPS | $1.77 | $0.98 | +81% | | Non-GAAP Measures | | | | | Adjusted EBITDA* | $203M | $158M | +29% | | Adjusted Net Income* | $77M | $42M | +84% | | Adjusted Diluted EPS* | $1.96 | $1.10 | +78% | Interim Consolidated Statements of Income (A-2) Q2 2025 income statement shows total revenues of $1.246 billion, driven by increased vacation ownership product sales, resulting in $69 million net income Q2 2025 Income Statement Highlights (vs. Q2 2024) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sale of vacation ownership products | $370M | $309M | | Total Revenues | $1,246M | $1,140M | | Total Expenses | $1,134M | $1,038M | | Net Income Attributable to Common Stockholders | $69M | $37M | Non-GAAP Reconciliations (A-3 to A-6) This section details reconciliations from GAAP to non-GAAP metrics, with Q2 2025 adjustments bridging $69 million GAAP Net Income to $77 million Adjusted Net Income and $203 million Adjusted EBITDA Adjusted Net Income and EPS (A-3) GAAP net income of $69 million was adjusted for items like a $34 million restructuring charge, resulting in $77 million Adjusted Net Income and $1.96 Adjusted Diluted EPS for Q2 2025 Q2 2025 Reconciliation to Adjusted Net Income | Line Item | Amount | | :--- | :--- | | Net income attributable to common stockholders (GAAP) | $69M | | Add: Provision for income taxes | $25M | | Add/Subtract: Certain items (Restructuring, Gains, etc.) | $8M | | Adjusted pretax income* | $110M | | Less: Provision for income taxes (adjusted) | ($33M) | | Adjusted net income attributable to common stockholders* | $77M | Adjusted EBITDA (A-4 & A-5) Q2 2025 Adjusted EBITDA reached $203 million, reconciled from $69 million GAAP net income, with Vacation Ownership contributing $231 million and Exchange & Third-Party Management $23 million Q2 2025 Reconciliation to Adjusted EBITDA | Line Item | Amount | | :--- | :--- | | Net income attributable to common stockholders (GAAP) | $69M | | Add: Interest expense, net | $42M | | Add: Provision for income taxes | $25M | | Add: Depreciation and amortization | $38M | | Add/Subtract: Other adjustments | $29M | | Adjusted EBITDA* | $203M | - On a segment basis for Q2 2025, Vacation Ownership generated $231 million in Adjusted EBITDA, while Exchange & Third-Party Management generated $23 million[38][39] Consolidated Contract Sales to Development Profit (A-6) Consolidated contract sales of $445 million in Q2 2025 reconciled to $92 million Development Profit, with a 24.7% margin, significantly up from 14.7% in the prior year Q2 2025 Reconciliation to Development Profit | Line Item | Amount | | :--- | :--- | | Consolidated contract sales | $445M | | Adjustments (resales, reserves, etc.) | ($75M) | | Sale of vacation ownership products | $370M | | Less: Cost of products | ($41M) | | Less: Marketing and sales | ($237M) | | Development Profit | $92M | | Development Profit Margin | 24.7% | Supplemental Information (A-7 to A-10) This section details profitability by business line and revenue sources, with Q2 2025 Development Profit more than doubling to $92 million and Rental Profit decreasing 16% Profitability by Business Line (A-7 & A-8) In Q2 2025, Development Profit surged 101% to $92 million, Financing Profit grew 7% to $53 million, while Rental Profit declined 16% to $35 million Q2 2025 Profit by Line (vs. Q2 2024) | Profit Line | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Development Profit | $92M | $45M | +101% | | Management and Exchange Profit | $98M | $96M | +3% | | Rental Profit | $35M | $42M | -16% | | Financing Profit | $53M | $50M | +7% | Management and Exchange Revenue Breakdown (A-9 & A-10) Total Management and Exchange revenue for Q2 2025 increased 2% to $219 million, driven by 5% growth in Ancillary Revenue and 4% in Management Fee Revenue Q2 2025 Management & Exchange Revenue (vs. Q2 2024) | Revenue Source | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Ancillary Revenue | $76M | $73M | +5% | | Management Fee Revenue | $56M | $52M | +4% | | Exchange and Other Services Revenue | $87M | $90M | -2% | | Total | $219M | $215M | +2% | Balance Sheet and Cash Flow (A-11) As of June 30, 2025, the company held $205 million in cash and $3.197 billion in net debt, with $40 million cash used in operating activities for the first six months Key Balance Sheet Items (June 30, 2025) | Item | Amount | | :--- | :--- | | Cash and cash equivalents | $205M | | Vacation ownership notes receivable, net | $2,485M | | Debt, net | $3,197M | | Stockholders' equity | $2,484M | Summary Cash Flow - Six Months Ended June 30 | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | ($40M) | $33M | | Investing activities | ($43M) | ($88M) | | Financing activities | $19M | ($59M) | | Net change in cash | ($60M) | ($117M) | 2025 Outlook - Adjusted Free Cash Flow (A-12) The company reiterated its full-year 2025 Adjusted Free Cash Flow guidance of $270 million to $330 million, derived from an Adjusted EBITDA range of $750 million to $780 million 2025 Adjusted Free Cash Flow Outlook | Component | Low | High | | :--- | :--- | :--- | | Adjusted EBITDA* | $750M | $780M | | Cash interest | ($150M) | ($145M) | | Cash taxes | ($150M) | ($155M) | | Corporate capital expenditures | ($65M) | ($65M) | | Inventory | ($75M) | ($60M) | | Financing activity and other | ($40M) | ($25M) | | Adjusted free cash flow* | $270M | $330M | Quarterly Operating Metrics (A-13) Q2 2025 operating metrics show a 2% increase in tours to 114,402, but Volume Per Guest (VPG) declined to $3,631, and active Interval International members decreased to 1.507 million Key Operating Metrics - Q2 2025 vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Consolidated contract sales | $445M | $449M | | VPG | $3,631 | $3,741 | | Tours | 114,402 | 111,752 | | Total active Interval International members | 1,507,051 | 1,530,490 | Non-GAAP Financial Measures (A-14) This section explains the rationale for using non-GAAP financial measures like Adjusted EBITDA, Adjusted Net Income, and Adjusted Free Cash Flow for clearer period-over-period comparisons of core operations - The company reports non-GAAP financial measures to allow for period-over-period comparisons of its on-going core operations before the impact of certain excluded items[67] - Definitions and rationale are provided for key non-GAAP metrics including Adjusted EBITDA, Adjusted Net Income Attributable to Common Stockholders, and Adjusted Free Cash Flow[69][73][74]