• Contract Sales Growth: Increased by 7% year over year in Q4.
• First-Time Buyer Sales: Increased by 9% year over year.
• Owner Sales: Increased by 6% year over year.
• Development Margin: Achieved a strong 26%.
• Adjusted EBITDA (Vacation Ownership Segment): $221 million with a margin of 27%.
• Exchange and Third Party Management Segment EBITDA: Declined by $9 million year over year.
• Corporate G&A Expense: Declined by 23% year over year.
• Leverage: Approximately 4 times, with a long-term goal of 3 times.
• Liquidity: Over $900 million with no corporate debt maturities until early 2026.
• Shareholder Returns: $163 million returned through dividends and share repurchases in the past year.
• Inventory Spending: Plan to spend $90 to $95 million on reacquired inventory this year.
• Adjusted Free Cash Flow: Expected to be $290 to $350 million for the year.
• Modernization Initiative Savings: Expected to generate $150 to $200 million in annualized adjusted EBITDA by the end of 2026.

• Warning! GuruFocus has detected 2 Warning Signs with VAC.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Marriott Vacations Worldwide Corp (NYSE:VAC) reported a 7% increase in contract sales in the fourth quarter, with first-time buyer sales growing even faster.
• The company achieved a system-wide resort occupancy of 90%, including 95% occupancy in Hawaii, demonstrating strong demand for leisure travel.
• Marriott Vacations Worldwide Corp (NYSE:VAC) expanded its sales reach through virtual tours and non-traditional sales channels, contributing to sales growth.
• The company announced plans for new developments, including a Marriott Vacation Club in Thailand, additional units in Bali, and the first Hyatt Vacation Club in Orlando.
• Marriott Vacations Worldwide Corp (NYSE:VAC) is making significant strides in harnessing data and analytics to boost efficiency and growth, with expectations to generate $150 to $200 million in annualized adjusted EBITDA by the end of 2026.

Negative Points

• Economic pressures are affecting customers, prompting Marriott Vacations Worldwide Corp (NYSE:VAC) to adjust its promotional strategy.
• Marketing and sales costs increased, impacting development margins despite strong sales growth.
• The exchange and third-party management segment saw a decline in adjusted EBITDA, partly due to lower profit at Aqua Aston and reduced transactions at Interval.
• The company faces higher borrowing costs, which contributed to a 6% decrease in financing profit.
• Marriott Vacations Worldwide Corp (NYSE:VAC) anticipates incurring one-time costs related to its modernization initiative, which will impact short-term financial performance.

Q & A Highlights

Q: You mentioned the new owner mix was up nicely in 2024. Is this trend expected to continue in 2025, and are there any changes in the propensity to finance among first-time buyers? A: Yes, we aim to continue growing first-time buyers, which contributed to contract sales growth in Q4. Although acquisition costs for first-time buyers are higher, it's crucial for long-term health. Regarding financing, we haven't seen significant changes in the propensity among first-time buyers. - John Geller, President, CEO

Q: You mentioned $90 to $95 million of inventory repurchase this year. Does this correlate with the increased reserve taken last year? A: No, the inventory repurchase is more about owners who have owned for a long time and aren't using their vacations as much. It's a stable churn in the existing owner base, not directly related to last year's reserve. - John Geller, President, CEO

Q: Can you explain the bridge from 2024 to the 2025 guidance, particularly regarding rental pressures and management compensation? A: In 2024, we benefited from higher plus points due to COVID, which won't repeat in 2025, creating a $10 million headwind. Additionally, there's a $15 to $20 million increase in variable compensation and $8 to $10 million in project spending that was delayed last year. - John Geller, President, CEO

Q: Can you provide more context on the cost and revenue initiatives and how they came about? A: These initiatives stem from our acquisitions and the need to accelerate growth. We focused on driving efficiency and growth, particularly through technology investments. This modernization effort aims to consolidate applications and enhance marketing and sales efficiencies. - John Geller, President, CEO

Q: Regarding G&A, with cost savings and higher IT and incentive costs, what's the net effect for modeling purposes? A: We expect a return of $15 to $20 million in incentive compensation and increased IT project spending. Cost savings from modernization efforts are spread across business lines, with about $10 million impacting G&A. - Jason Marino, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.