Welcome to the Marriott Vacations Worldwide First Quarter 2015 Earnings Call. [Operator Instructions]. I would now like to turn the conference of to your host, Jeff Hansen, Vice President Investor Relations. Thank you. Mr. Hansen, you may now begin.

Thank you, Rob. And welcome to the Marriott Vacations Worldwide first quarter 2015 earnings conference call. I am joined today by Steve Weisz, President and CEO and John Geller, Executive Vice President and CFO. I do need to remind everyone that many of our comments today are not historical facts and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued this morning, along with our comments on this call, are effective only today, April 30th, 2015 and will not be updated as actual events unfold. Throughout the call, we will make references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in the schedules attached to our press release, as well as the Investor Relations page on our website at ir.mvwc.com. I will now turn the call over to Steve Weisz, President and CEO of Marriott Vacations Worldwide.

Thanks, Jeff. Good morning, everyone and thank you for joining our first-quarter earnings call. If you've seen our earnings release this morning, then you know that we're very pleased with our performance to start the year. With that said, let me spend a moment providing some color around how we achieved such a great quarter. Then I'll hand the call over to John to provide more details around our results and outlook. Adjusted EBITDA in the first quarter was $57.5 million, a $17 million or 43% increase over the first quarter of 2014. This was driven by improvements in virtually every area of the business. Total company contract sales, excluding residential, increased almost $15 million or 9.5% quarter over quarter, to $170 million. VPG improved 4.7% over the first quarter of 2014, to $3640. However, even more importantly, VPG was actually outpaced by growth in tour flow which improved by over 5%. Tour flow in the quarter was helped by enhancements we announced to our owner recognition levels which created a near-term incentive for our owners to increase their ownership level in the first quarter. Just to provide a quick backdrop, owner recognition levels are like most customer loyalty programs wherein our owners have additional benefits and offerings depending on how many points they own. Our overall strategy remains to increase our tours and sales to first-time buyers. To that end, we saw traction in our first-time buyer tours in the first quarter and are continuing to ramp up our new owner tour programs throughout the year. Shifting to our resort management and other services business, results improved over $3 million or 18% over the first quarter of last year, to $22 million. Results in the quarter reflected improved ancillary operations and higher fees earned from our exchange company and…

Thank you, Steve. And good morning, everyone. Like Steve, I am also very pleased with what we've accomplished to start off 2015. We've generated adjusted EBITDA $57.5 million, an increase of over $17 million year over year, as we saw improvements in our development, rentals and resort management businesses. Total company contract sales grew $36 million or 23%, to $198 million in the first quarter of 2015. And after excluding residential sales, sales of our core vacation ownership products grew 9.5%, to $170 million, driven mainly by our North America segment. And lastly, total company adjusted development margin was 21.6% in the first quarter of 2015, a 180 basis point improvement from 19.8% in the prior-year quarter. Looking specifically at North America, the vacation ownership contract sales increased 11%, to $156 million in the quarter, driven by solid VPG and tour growth. VPG increased nearly 5%, to $3,640, reflecting stronger closing efficiency and higher pricing. In building off the momentum from the fourth quarter last year, tour volumes continued to increase, up 5% over the prior year, assisted by the enhancements announced in the first quarter related to our owner recognition levels that Steve mentioned. In the first quarter, North America adjusted development margin increased roughly 170 basis points, to 23.7%. Product cost decreased 300 basis points in the first quarter of 2015. About half of this improvement resulted from residential sales in the prior-year first quarter which carried a higher product cost. The remaining improvement, call it 130 basis points, resulted from sales of our lower-cost inventory associated with our inventory repurchase program. Marketing and sales costs increased 130 basis points in the quarter, as last year's first quarter was favorably impacted by residential sales. Excluding the impact of those residential sales, marketing and sales costs actually improved slightly…

[Operator Instructions]. Our first question is coming from the line of Steven Kent of Goldman Sachs. Please proceed with your question.

A couple of questions. There was a recent press article noting the Marriott Vacation Club had acquired something in Australia. Can you just talk about that and maybe your broader thoughts for exploring opportunities more and more outside of North America? And then, recent asset-light announcements made so far show you're making progress there. Can you just talk about how the takedown will be structured and what to think about over the next couple of years?

Sure. I'll take the first one. I'll ask John to opine on the second part. As you might imagine, we don't comment on speculation of things that you see in the media. Obviously, if we have something to report, we'll certainly be very forthcoming with our answer on something like that. Our strategy in Asia-Pacific remains the same as we've articulated before, as we're looking for new destinations and exciting locations that we'll have an on-site sales presence. We're pursuing several different options in that space. But at this point in time, we don't have anything definitive to report. And John, you want to talk about asset-light?

Sure. On the asset-light, obviously the one we officially completed was Marco Island and building out that resort. We've structured that to start taking those units down beginning in early 2017 and will take a little bit down over the next couple years. In terms of Miami, where we're working on that, the idea would be we would take -- and our free cash flow guidance assumes we take a portion of that inventory down this year and then we'll structure that, as well as any other asset-light deals we do to give us the greatest flexibility going forward to continue to add new flags, new destinations and allow us to take that inventory down over time so that we're not putting excess inventory on the balance sheet.

And then maybe could you just talk about your rental business? We don't talk about it too often. But you've really shown some improvement in the operating profit production. Are there certain programs that are helping you achieve better results? You've spoken about Ritz-Carlton costs going away. But are there other levers to pull on that business?

Yes. Steve, I think you think of it in kind of two perspectives. One is on the top-line revenue side. And as we have been able to put our Destination Club in place and it's really gotten a lot of traction, keep in mind that when our owners decide that they want to use their Vacation Club points for something other than staying in one of our resorts, whether they want to take a cruise or they want to take a tour or go to the Masters or whatever, they give us back those points for the year, we turn around and take them into the open market and we rent them. So that drives the revenue side of things. If it all works right, we actually make a little bit in the arbitrage between what we rent it for and what we have to pay for the cost to fulfill the particular thing that they asked for, whether it be the cruise or the trip. Secondly, as we have worked down through the inventory line that was on the balance sheet, each one of those pieces of inventory that was unsold carried an unsold maintenance fee that we had to pay. You may recall that at the time of the spend, those unsold maintenance fees were in the neighborhood of $60 million. They have come down rather substantially as we've worked down the inventory balance. So we also have that working in our favor. Last, but not least, the last couple years, obviously, the economic environment in the lodging side in terms of rentals with ADRs and rev pars has increased, so we've gotten some benefit there.

Our next question is from the line of Christopher Agnew with MKM. Please go ahead with your question.

First question, on tour flow, interesting to see very strong turnaround. Now, how much did the enhancement program benefit in the first quarter? Does that program extend through the rest of the year? And if it doesn't, as it rolls off, what should our expectations be for tour flow? I know it was negative last year and you have these new initiatives to drive new owner tours. Thanks.

As we have communicated now for some time, we've been on a mission to try to increase our tour flow. I think as we've discussed, when the downturn came in the 2008, 2009 time frame, we very deliberately closed down some distribution centers and thereby reduced tour flow, et cetera. And now we have been selectively turning on new channels and source markets. We've been doing it very deliberately to try to make sure that we're doing it in the most cost-effective manner that we can. It'd be difficult in the first quarter to say that X percentage points of the tour flow improvement was because of the change in owner recognition levels. Although, if we had to take a swag, I would say it's in a couple of point range. But you don't know who would have shown up in your tour center from our owners had we not done the owner recognition level change. We don't ask that question, nor would we think it appropriate. We're going to continue to build our new buyer tour programs throughout the year. I think we've signaled last year it would be sequential improvement and we're seeing that. We have a call transfer program in place with Marriott which is producing great results for us. We continue to open up selective new sites for distribution, some of which we have previously closed down. But again, we're doing it very modestly in an effort to try to do it cost-effectively.

Just a follow-up on that. Is the owner recognition program, is that set to extend or is that one time and a particular promotion in the first quarter?

No, that's a great question. I'm sorry. I should have answered that. No. The program officially kicks off tomorrow on May the 1st. What we obviously did was we communicated to our existing owners that there would be some changes coming. We actually gave them a little bit of incentive to sign up early to try to expand the number of points that they have so that they could reach one of the five different levels in the program that they might aspire to. But the program will remain in place from now for quite some time. You might suggest a change at some point in time in the future, although we don't anticipate it. But, no, it's very viable. It's not a kind of one-and-done thing. But by virtue of the way in which we've established this, we do have five different levels in the program and depending on where people see themselves in the various perks that come along with various benefit levels, we expect it to be very successful for us.

And then on the strong rental business in the quarter, you talked about the increase in [indiscernible] keys and that related to bringing in new inventory last year. And so that can create lumpiness. Is it fair, is it right to think that as you work through that inventory that the keys available from that sort of bump higher sort of kind of erode so the growth rate should fade and then as you bring on new inventory we could see another pop from time to time?

Yes. I think you kind of answered your question there as you went through it. But yes, clearly, as that inventory gets put into the system and is sold through, that's less maintenance fees for us, but less keys that, therefore, we have the ability to rent. But as you bring on the next phase of inventory and depending on the size, you've got to remember, as we talked about Vegas was the entire tower, 200-plus units. So that was a big slug of inventory. Typically, not saying that won't happen again, you're probably not going to see that much inventory come online in one quarter as we've talked about, especially as we structure these asset-light deals. We'll bring them on in slightly smaller pieces, so -- but, yes, to your point, you could always have a little bit of lumpiness depending on year over year and when that inventory comes online.

Chris, I could add to that, keep in mind, that even as that inventory gets sold, some people will choose to occupy, some people will choose to take one of the alternative vacationing options that I discussed earlier. So it isn't necessarily it's once it's sold it's out of the rental pool. In all likelihood, we'll get a meaningful amount of that back in the rental pool at one point in time or another.

Got you. No, that was good color on just the pacing of Vegas and the big chunk. Final question, just you sitting there with a nice large cash balance, how do you think about that? Is that more of a function of how you think about pacing your share buybacks? Or is it more a function of what do you want to keep as dry powder for M&A and asset acquisitions? And I'm thinking that you're sort of increasingly looking to do things on a more, I guess capital efficient manner. So I don't know if that has a bearing. Thanks.

Yes. No, it is a little bit about pacing. Obviously, given our float and how much volume trades, we're somewhat limited in terms of how much we can buy back over a certain period of time. So that cash balance I think has continued to come down over the last year as we continue to redeploy that. But as we've talked about, we're always looking for strategic acquisitions. If you're talking inventory, the goal there, right, on the inventory is to get that even lower than it is today and be more efficient in terms of how we spend that. Now, in any given quarter or year, you might spend a little bit more, little bit less in terms of the inventory acquisition. So what you're really talking about with the excess powder is those strategic opportunities. And we'll continue to look at those. But as we've said, they've got to make strategic sense and they've also got to be at the right price and get the right returns for our shareholders. And short of that, we'll continue along with our returning excess capital. But we clearly don't look at it like we need to sit with $270 million in cash on the balance sheet. And I think I've talked about in the past, a working capital balance for us is probably more in the $50 million to $75 million of cash, given some of the high points and low points during the year, if you think about what's permanently invested in the business. But with that too, we're also creating excess debt capacity like we talked about before. So in the interim too, that gives us some dry powder if the right opportunity came along.

Gentlemen, at this time we have no additional questions.

Thank you, Rob. Well, as we said earlier, we're off to a great start and we're focused on continuing to drive that performance throughout the year. I'm obviously very pleased with the quarter. However, I am equally pleased with the longer-term views and business strategies we'll be discussing at our Investor Day on May 15th, in New York. I'm hopeful that you can join us either in person or on our webcast and look forward to seeing you there. Thank you for your participation on our call today and your continued interest in Marriott Vacations Worldwide. And finally, to everyone on the call and your families, enjoy your next vacation. Thank you very much.

This will conclude today's teleconference. You may disconnect your lines at this time. We thank you for your participation.