Marriott Vacations Worldwide (VAC) Q2 2025 Earnings Call August 05, 2025 10:00 AM ET Company ParticipantsNeal Goldner - VP - IRJohn Geller - CEO, President & DirectorJason Marino - EVP & CFOC. Patrick Scholes - Managing Director - Lodging & Leisure Equity ResearchBrandt Montour - Director - Equity ResearchDavid Katz - Managing DirectorConference Call ParticipantsBenjamin Chaiken - Equity AnalystStephen Grambling - MD & Senior Equity Research AnalystOperatorGreetings, and welcome to the Marriott Vacations Wo ...

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $203 million for the quarter, reflecting a 29% increase year-over-year with margins improving by 360 basis points [4][18] - Contract sales were down less than 1% for the quarter, an improvement compared to Q1, with first-time buyer sales up 6% year-over-year [6][15] - Delinquencies declined by 50 basis points sequentially and 110 basis points year-over-year, reaching the lowest levels in two years [15][29] Business Line Data and Key Metrics Changes - Owner sales declined by 4% due to lower VPGs, while owner tours remained flat [15] - Total company rental profit decreased by $7 million or 16% to $35 million, driven by increased unsold maintenance fees and marketing expenses [17] - Management exchange profit increased by 3% to $98 million, attributed to increased revenue in the vacation ownership segment [17] Market Data and Key Metrics Changes - The company achieved nearly 90% resort occupancy, with strong performance in Maui, Coastal Florida, and The Caribbean, while Las Vegas showed relative weakness [5] - First-time buyers represented a third of total contract sales in the quarter, up 200 basis points from a year ago [7] Company Strategy and Development Direction - The company is focused on modernization initiatives expected to deliver $150 million to $200 million in run rate benefits by the end of 2026, with half from revenue initiatives and half from cost savings [6][11] - The modernization program aims to enhance decision-making speed, optimize IT platforms, and drive growth in the leisure-focused business [7][12] - The company plans to restrict inventory spending to low-cost reacquired inventory and capital-efficient arrangements [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model and the continued prioritization of leisure travel by consumers [4][13] - Despite external uncertainties, the company expects high occupancy rates to continue and anticipates strong owner keys for the second half of the year [12][14] - The long-term financial model remains unchanged, with expectations for high single-digit to low double-digit EPS growth over time [14] Other Important Information - The company ended the quarter with $800 million in liquidity and a leverage ratio of 3.9 times [18] - Adjusted free cash flow is expected to be between $270 million and $330 million for the year, excluding one-time cash costs related to modernization initiatives [20] Q&A Session Summary Question: Contract sales trends in June and July - Management confirmed that July contract sales were up slightly from June, with June showing a 3% year-over-year increase [26][27] Question: Loan loss provision expectations - The loan loss provision guidance increased to 12.5%, which is about half a point higher than previous expectations, reflecting ongoing improvements in delinquencies [28][29] Question: Expanded owner benefits and EBITDA impact - The expanded owner benefit provides more options for owners but is not expected to significantly impact EBITDA growth [33][34] Question: Share buyback restrictions - Management indicated that there were blackout periods preventing share buybacks, but they plan to be opportunistic in the future [36][37] Question: Inventory efficiency and cost implications - The company aims to reduce inventory levels to one to two years on hand, with a slight increase in product costs expected over the next few years [45][46] Question: Loan loss provision increase despite improving delinquencies - Management explained that while delinquencies are improving, they are still higher than desired, prompting a conservative approach to the loan loss provision [53][54] Question: Sales performance in Maui - Maui showed strong year-over-year performance, with contract sales and occupancy rates improving, although some challenges remain [59]

Company Performance - Marcus reported quarterly earnings of $0.23 per share, exceeding the Zacks Consensus Estimate of $0.19 per share, compared to a loss of $0.17 per share a year ago, representing an earnings surprise of +21.05% [1] - The company posted revenues of $206.04 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.63%, and showing an increase from year-ago revenues of $176.03 million [2] - Over the last four quarters, Marcus has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance and Outlook - Marcus shares have declined approximately 23.9% since the beginning of the year, while the S&P 500 has gained 7.8% [3] - The current consensus EPS estimate for the upcoming quarter is $0.58 on revenues of $222.5 million, and for the current fiscal year, it is $0.40 on revenues of $776.99 million [7] - The estimate revisions trend for Marcus was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Leisure and Recreation Services industry, to which Marcus belongs, is currently ranked in the bottom 28% of over 250 Zacks industries, suggesting potential challenges for stocks in this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment and stock performance [5]

Core Viewpoint - Hilton Grand Vacations (NYSE: HGV) has underperformed in the past year, with a loss of approximately 7% in value due to rising credit losses in its timeshare loan portfolio [1] Company Performance - The company has faced increasing credit losses on its timeshare loan portfolio, which has contributed to its poor stock performance [1] Analyst Perspective - The analysis is based on over fifteen years of experience in making contrarian bets and focusing on stock-specific turnaround stories to achieve favorable risk/reward profiles [1]

Financial Data and Key Metrics Changes - Total company revenue increased year over year, enabling a 3% higher adjusted EBITDA [13][22] - Adjusted EBITDA reached $192 million, with margins remaining strong at 23% [15][22] - Total company contract sales declined 2% compared to the prior year, with first-time buyer sales increasing 6% year over year [14][22] Business Line Data and Key Metrics Changes - Development profit increased 4% compared to the prior year, with development margin increasing by 70 basis points [15] - Total company rental profit declined 10% year over year to $46 million, impacted by higher unsold maintenance fees and other variable costs [15] - Financing profit increased 6%, driven by higher interest income [15] Market Data and Key Metrics Changes - Resort occupancy ran over 90% in the first quarter, with strong forward bookings [6] - Nearly 70% of Marriott Vacations points reservations for stays at resorts were booked online, a significant increase from previous years [10] - Loan and maintenance fee delinquencies improved year over year, with a 60 basis point decrease [14] Company Strategy and Development Direction - The company is focused on modernization initiatives to accelerate revenue growth, reduce costs, and enhance operational efficiencies, targeting $150 million to $200 million in run rate benefits by the end of 2026 [5][12] - A comprehensive digital strategy is being implemented to increase product utilization and expand e-commerce [8] - The company plans to generate $75 million to $100 million of adjusted EBITDA benefits from revenue initiatives [20] Management's Comments on Operating Environment and Future Outlook - Management noted the current economic environment is volatile but consumer demand remains strong [12] - The company is confident in its updated contract sales guidance, expecting to see improvements in owner arrivals as the year progresses [7][12] - Management emphasized the importance of high-margin recurring revenue streams, which contribute around 40% of adjusted EBITDA [12][22] Other Important Information - The company ended the quarter with $865 million in liquidity and no corporate debt maturities until early 2026 [16] - Share buybacks increased, with $91 million returned to shareholders in the first quarter [18] - The company is actively working on disposing of non-core assets, including the Sheraton Kauai Resort [21] Q&A Session Summary Question: Can you talk about contract sales in March or April? - Contract sales were down about 4% in March and similar in April, but there was an increase in VPGs and contract sales for first-time buyers in April [26][27] Question: Can you elaborate on the cost savings mentioned? - The company expects $35 million in savings from modernization initiatives, with product costs being better than initially anticipated [28][30] Question: What is being done to drive tour flow? - The company is focused on driving tour flow through various initiatives and incentives, enhancing the value proposition for consumers [36] Question: Can you explain the inventory mix adjustment? - The inventory mix is being adjusted by selling different products and modulating the inventory to drive costs down [39][40] Question: How is the availability of new inventory? - The company is in a good position regarding inventory availability across all brands, with ongoing upgrades and buybacks [43] Question: What is the expectation for share repurchases going forward? - The company plans to balance share repurchases with getting back to target leverage, viewing shares as undervalued [46][48] Question: Can you discuss the non-core asset sales? - The company is working on selling excess assets, including a hotel in Kauai and retail space in Waikiki [56][57] Question: What is the trend in owner growth? - The company aims to drive owner growth above 35%, focusing on first-time buyers for long-term health [62][64]

Core Viewpoint - Marriott Vacations Worldwide reported quarterly earnings of $1.66 per share, exceeding the Zacks Consensus Estimate of $1.56 per share, but down from $1.80 per share a year ago, indicating a 7.78% year-over-year decline [1] - The company posted revenues of $1.2 billion for the quarter, matching the previous year's revenue but missing the Zacks Consensus Estimate by 1.93% [2] Financial Performance - The earnings surprise for the latest quarter was 6.41%, and the company has surpassed consensus EPS estimates three times over the last four quarters [1][2] - The company had a previous quarter earnings expectation of $1.51 per share but reported $1.86, resulting in a surprise of 23.18% [1] - The current consensus EPS estimate for the upcoming quarter is $1.67, with expected revenues of $1.25 billion, and for the current fiscal year, the EPS estimate is $6.54 on revenues of $5.17 billion [7] Stock Performance - Marriott Vacations Worldwide shares have declined approximately 35.4% since the beginning of the year, compared to a 4.7% decline in the S&P 500 [3] - The stock currently holds a Zacks Rank of 4 (Sell), indicating expectations of underperformance in the near future [6] Industry Outlook - The Leisure and Recreation Services industry, to which Marriott Vacations Worldwide belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, suggesting a challenging environment [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact investor sentiment [5]