Greetings and welcome to Marriott Vacations’ Third Quarter 2015 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to turn the conference over to your host, Jeff Hansen, Vice President of Investor Relations. You may begin.

Thank you, Rob. And welcome to the Marriott Vacations Worldwide third quarter 2015 earnings conference call. I’m 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, October 15, 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 third quarter earnings call. Adjusted EBITDA was $52 million in the quarter, $2 million below the third quarter of last year. However, excluding the impact of revenue reportability in the quarter, adjusted EBITDA would have been nearly $59 million. While contract sales were negatively impacted by a stronger U.S. dollar that affected certain sales locations our third quarter performance highlights strength of our diverse lines of business. Results in our resort management business were up over $3 million, compared to last year and our rental business improved by more than $2 million year-over-year. However this performance was offset by $9 million of lower development margin stemming from unfavorable revenue reportability all of which we expect to turnaround in the fourth quarter. In addition, results reflect lower contract sales volumes and higher, marketing and sales program costs. Let me take a few moments to provide some insights into our third quarter results. I will then turn the call over to John to provide more detail into our performance. We’ll then take your questions. Total company contract sales excluding residential were $160 million, a $7 million decreased from last year. This consisted of decreases of $1 million in each of our Europe and Asia-Pacific segments and $5 million in our North American segment. In North America, VPG was down roughly 1% to $3,428 and tours were also down about 1%. However, these headlines do not tell the whole story. To better understand the drivers of our performance let me go a little deeper into the North America segment where in several markets, primarily in Latin America as well as sales to Japanese customers at a resort on Oahu we have seen the impact of weakening foreign currencies against the U.S. dollar.…

Thank you, Steve and good morning everyone. Adjusted EBITDA totaled $52 million, $2 million below the third quarter of 2014. While these results are not adjusted for the impact of revenue reportability it is important to highlight that reportability negatively impacted our adjusted EBITDA, by nearly $7 million in the third quarter. All of which we expect to turnaround in the fourth quarter. Adjusting both the years for the impact of revenue reportability, adjusted EBITDA would have been nearly $59 million in the third quarter of 2015, a $2 million or 3% increase from $57 million in the third quarter of 2014. For the quarter, company adjusted development margin was 21.2% and North America adjusted development margin was 23.1%. Rental margin outperformed the prior year by $2.5 million. And our resort management and other services business improved over $3 million, as compared to last year. Turning to our North America segment contract sales, excluding residential sales, totaled $143 million, down $5 million from the third quarter of last year. As Steve discussed, a strong U.S. dollar unfavorably impacted sales primarily in our Latin American sales channels, as well as sales to Japanese customers at our resort on Oahu. North America adjusted development margin in the third quarter was $31 million, the third quarter adjusted development margin percentage was once again strong at 23.1%. Excluding the impact of residential sales in the prior year, this quarter’s margin percentage was down 250 basis points from the third quarter of 2014, driven by a 50 basis point increase in product cost, which was impacted by the mix of inventory sold and by a 200 basis point increase in marketing and sales costs. As we’ve discussed throughout the year, we’ve been ramping up our investments in new programs to help generate future incremental tour…

Thank you. At this time we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Patrick Scholes with SunTrust. Please proceed with your question.

Hi.

Hi, how are you?

Good, good morning. Can you hear me okay?

Yes, certainly can.

Yes, just one question about – a little confused on – or one area, excuse me, I’m confused on is reconciling taking down your contract sales, I would say, quite significantly. Yet EBITDA is going to be a bit higher. Is there VPG – changes to your VPG – I’m sorry, changes to your, sorry, your loan-loss provision impacting why that may be?

No, loan loss provision, I think was fairly, flat on a gross dollar basis year-over-year. Really what you’re seeing is as we talk to the other lines of business, Patrick outside of the development margin continue to outperform as rentals did well, the management business. And as I talked about – and we talked about this briefly, I think in the second quarter, we had rolled out some revised financing programs and we have seen a pickup a little bit sooner than we expected on some of the financing propensity, which now we expect financing profit which has been negative every quarter really since we’ve been a public company to really start to turn and provide some upside as we start to move into the fourth quarter. So I think when you have the outperformance in the third quarter continued outperformance in those other lines of business in the fourth even with some of the softness that we talked about in the Latin sales channel which was most of the impact. And there you saw I mean if you look at just in the third quarter if you go back and look at currencies in both Mexico, Colombia, as well as Brazil, you saw a decline against U.S. dollar in those currencies of anywhere between 15% and 40% in the quarter. So that was a little bit of a surprise and we obviously, we deal with foreign currency all the time that had some real near-term impact. As we said we think that will have some impact as we move into the fourth quarter. But overtime that become, if it doesn’t move back the other way and I think in the fourth quarter, we’ve seen a comeback the other way slightly from a currency -- it hasn’t made up where it’s at, but that becomes a little bit of the new normal, and that will stabilize at some point here too. So that’s really the near-term impact.

Okay, thank you. That’s it.

Thank you.

Our next question comes from Chris Agnew with MKM Partners. Please proceed with your question.

Hi, Chris.

Thanks very much. Good morning.

Good morning.

Maybe a little bit of follow-up to that. I think you said, and I just want to confirm, that less – 10% of sales were from Latin America. If you include Japan, what’s the mix? And then maybe – you said Mexico, Colombia, Brazil – is that in order, the source of demand from Latin America? And a third one on the same topic, headwind continues into fourth quarter, but presumably it will also continue into 2016. And Brazil in particular, economy is challenged as well as currency impacts. What are your thoughts around offsetting that weakness in demand? Can you do that from domestically, and what are you trying to do to mitigate some of that weakness? Thanks.

Yes, a lot of stuff in there, so let me try here on some of these. Yes, I mean the devaluation of the yen was really, I mean, that’s we’ve had some headwinds all year on that, because that, you haven’t seen that move as much year, this year was really in the fourth quarter of last year. So that was a couple million dollars probably, Patrick, in the quarter. I don’t have the overall piece of that, we did say Latin was – historically it’s been about 10% of our sales, I think that’s two of them. What was the question?

Just if you could – maybe the sources of demand from Latin America. You mentioned Mexico, Colombia, Brazil. I was just wondering was that in order of…

It would be predominantly Mexico, Brazil and then Colombia in that order of those three. Those are not the only three markets that we participated in Latin America those are the ones they have the biggest fluctuations in terms of the local currency versus the U.S. dollar. And it depends on market, for instance, Brazil is a huge source market in the Central Florida area as an example. So it does vary. But again, I think, the other question was, what you’re going to do to offset some of those shortfalls assuming that the currency situation doesn’t correct yourself in the short-term. And the simple answer there is obviously as we talked about by dialing up things on tour generation for first-time buyers through our call transfer program with Marriott, the increased success of our Encore program or universal Encore program, those are both very positive trends going forward for new tour generations. Throw on top of that as we open up these new sales centers, they will be generating new demand, new source markets that we’ve not been in before. So that’s what gives us confidence going forward clearly, while we’ve been certainly like to wave a magic wand and be able to correct the currency problems that exist in the Latin countries, or even in Japan, which is to a much lesser degree of what we experienced in Latin America we can’t do that. So how do we turn on some other channels, how do we stimulate growth in other areas to offset that? That is the goal.

Got you. And then maybe just thinking about 2016, will tour flow and VPG be challenged as long as LatAm remains a headwind? So I’m thinking about first half of 2016. Is that something we should be prepared for?

We obviously haven’t gotten around to providing 2016 guidance yet. I would expect that what we will guide will be that our top-line sales volume in contract sales will go up. I would expect that our VPG will go up and we’ll get that from a couple of different places. Clearly same-store volume, just by the virtue of price increases, we should get in – this is what we talked about on our Investor Day, should go up, call it roughly inflation. The additional tours that we have been loading in throughout the course of this year and we’ll continue to do so between now and the end of the year for 2016, will certainly help. And then you start to bring on the new sales distribution centers in the early to middle of next year. I think all of those things kind of come together to give you confidence that our top line sales volumes in terms of contract sales will continue to go up.

Great. Thank you, that’s helpful. Thanks.

Thank you.

Our next question comes from the line of Steven Kent with Goldman Sachs. Please proceed with your question.

Good morning, Steve.

Hi, good morning. Can you hear me okay?

Yes. Absolutely.

Okay, so just a couple things. Maybe you could give us an update on a couple of the new marketing programs that you were rolling out in the past couple of quarters. Which ones have worked the best, and which ones do you need to maybe take another look at? And then just new versus existing, can you give us a sense for how those sales to either new customers or existing customers are playing out?

Sure. So I would say pretty much on an equal basis, both our call transfer program with Marriot and our new enhanced universal Encore Program have both contributed very meaningfully to that 20,000 tour increase over what we saw same time last year. When you think about where those customers come from, clearly from the call transfer program, can say 100%, but I would say a vast majority of those customers will be first-time buyers. They will be new to us, people we haven’t talked to before that will come through and take a tour and hopefully make a purchase. On the universal Encore Program, I think, that will be a mix between first-time buyers, they came through and decided not to buy on their tour but want to come back and take another bite at the apple. And some existing customers that for whatever reason are owners they say, yes, I want to buy some more I just want to buy some more right now. So that would be the balance that I would see, but I would tell you both of those programs that we began work on late last year have really performed very well for us. Having said that, we continue to look at other things, as we always do, as ways to continue to grow more contract sales more tour flow and more top line and we will continue to tinker around with some stuff. But as far as those two programs are concerned we’re very pleased with how they’re operating today. And I think, Steve, the other question, the mix.

I’m sorry…

It still hasn’t grew too much it’s still about 60/40 first time, excuse me, existing owners versus first-time buyers. As Steve mentioned, as more of those tour, that tour pipeline we talked about at 20,000 plus they have started to show up. We will continue to expect that trend to get close. We’ll start moving towards the fifty-fifty.

Okay, thanks Steve.

Thank you.

Our next question comes from the line of Bob LaFleur, with JMP Securities. Please proceed with your question.

Hi, Bob.

Hi guys. Could you talk a little bit about the reportability issue, why the number was so high this quarter, what specific type of reportability issue is that? So I’ll start with that one.

Sure, so we’ve had issues with that in the past Bob in terms of what impacts reportability have, just the timing of sales so that could be a recession at the end of the quarter given your normal 10-day recession period. So it’s in your contract sales which is the recession period has included yet. So there’s a portion of that. And probable the other pieces I talked about our new financing incentives we’re running. With that, there’s down payment requirements when you have finance contracts and what can happen is when we – when that ramps up a little bit quicker than we were expecting, that could have some near-term impact. Once the payment start those will come, that deferral of those sales, once they start making their principle and interest payments here in the fourth quarter will come back and we recognize. So we tweak the payment requirements to minimize that impact and like we said all along, yes you always are going to have some impact quarter-to-quarter, we had a little bit more with the financing really this time. But on a year-over-year basis, typically we’ll get the programs tweaked and operating, right, in terms of minimizing the impact in any given year and that’s our goal for this year.

So it’s primarily incentivizing people to take financing as opposed incentivizing people to make the purchase of the timeshare itself?

Yes, we try to without getting into the details of our program we just try to make it a little bit more favorable in terms of the financing options we offer so we’re seeing a pickup in that. Now at the end of the day is that a deciding factor in terms of the sales? It’s hard to put a direct correlation on that, but we haven’t obviously, in the overall sales, even pulling out the foreign currency the third quarter sales were up as Steve mentioned, couple of million bucks. Most of that was on VPG. So – and we expect, as we look at the fourth quarter, similar type impact. I think the core North America sales centers will show higher VPG hopefully slightly better on the kind of the tour side. And we’ll do our best to manage the Latin and the some of the downside there. But that’s going to be some of that headwind and Steve hit on that. But I think, like I’ve tried to say in my earlier comments, I think, even if foreign currency doesn’t move back the other way dramatically it does become a little bit of a new normal overtime and that becomes what people in Latin channel have to live with terms of buying. So hopefully that gives you a little bit more color there.

Hey Bob, just certainly back on the reportability thing. Just think of the – think of it as a two-step dance. We talk to someone about purchasing with us, signing a contract to purchase points from us, there are certain incentives associated with that. Then we talk to them about how they want to pay for it, whether they want to pay in cash. And as I think you know our customer demographic is pretty well equipped to be able to make a cash purchase. We do in fact and we spent time earlier this year designing incentive programs to get people to take our financing, which as you know is fairly lucrative for the business. And that’s where we put it away. So there is really two different incentives, one from the sale, one from the financing. At the end of the day, obviously we believe that it’s right for the business in terms of the bottom line to approach it in both of those fashions. And again reportability is a tough thing, I certainly understand that. I think the takeaway should be that the sales are going to be there. Financially reported sales are going to be there. It’s just when do they report. In this case, they didn’t show up in three, they’ll show up in four and that’s again one of the things that lead us to be very confident in coming up and saying that we think that we’re end the year at the upper end of our guidance from an adjusted EBITDA standpoint.

What’s a – so with the typical financing incentive package, what’s the typical lag between closing the sales then and recording the sales? Do they need to make one mortgage payment? Three mortgage payments? What kind of a lag period are we talking here?

Obviously it depends, that the goal is that, it’s not more than a couple of payments Bob, that the sale closes and then ones again we can – we’ve got to work on tweaking the down payment requirements. Ultimately, yes, the goal would be that there would be very little impact or no payments but you’re always going to have a little bit of fluctuation in terms of that, but it’s not a lot.

Okay. And on a different topic, you said you were out of the repurchase markets since mid-August. Is that your typical blackout window, or is there something else that had you out of the market?

No, our typical blackout period would be, when our quarter closes, so it was little bit earlier than that. Obviously, I’m not going to get into specifics but I can give you the generic obviously there’s all business and other legal reasons that we always look at our repurchase program and when we cannot be in the market. But as I mentioned on the call we’ll be back in, we expect to be back in early next week.

Okay. And then my last question, which I guess is sort of a bigger-picture question – obviously the stock is doing very poorly today. And there’s a lot of focus about sort of the sustainability of consumer demand for timeshare – will consumers keep buying timeshare given the other alternatives that are available to them. And it always seems like in this space, there’s either a problem with tours, there’s a problem with VPG. How do you convince people that this 20,000 extra tours you put into your pipeline, they are going to have a good propensity to buy timeshare and that this is a long-term, viable consumer product as opposed to something where we are constantly struggling to get these things sold every quarter? And always for the second quarter in a row, we’re dealing with sort of a post earning selloff related to perceived softness in consumer demand for timeshare? It’s a big question.

Well, let me see if I can address into that. I will remind you by the way that our third quarter 2014 comparable was a 6.9% increase in VPG. So it wasn’t like we hit, we were up against some sort of a soft comp. But having said all that, our universal Encore program generates a very high VPG in closing rate higher than our numerical average. So we feel very good about that. And while still relatively young, our call transfer program tours, those few that have come through the house, we are also very encouraged by what we see there. So I would say to you that, I mean, you heard us say we are relatively bullish about what those 20,000 tours mean for us going forward. I would say to you that we wouldn’t just throw that out in a cavalier fashion. We were very thoughtful about that because we believe that, in fact, they will be a substantial impetus for top-line growth for next year. The other what I would just like to add to Steve’s is closing efficiency actually was up year-over-year. So we still see the folks that were getting in there, the likelihood of them buying out obviously is little bit better than it was last year, so the trends are right. The underlying business perform okay in the third quarter, as we talked about in North America, with sales up a couple of million dollars and that’s the core part of the business. So as Steve has talked about we’ve got confidence in growing the tour pipeline with new sales centers, as well as the programs. We feel very confident in terms of the longer growth prospects in the top line growth. And it was really as we talked about a lot of the foreign currency impact during the near-term in the quarter.

Okay, thank you.

Thank you.

There are no further questions. At this time, I would like to turn the call back over to Steve Weisz for closing comments.

Thank you very much Rob. I’m pleased to say that we’re poised to produce our strongest earnings year yet, I’m excited about what lies ahead. Despite near-term headwinds from the stronger U.S. dollar our development margin remains strong. Our rentals and resort management businesses are performing at a high level. Our financing business is beginning to grow. And we have a growing tour pipeline generated from the strength of our new marketing programs. In 2016 we will begin to experience growth from new sales centers, and we continue to search for even more new distributions in wonderful new locations in North America and in the Asia Pacific region. I look forward to reporting on strong final quarter 2015 to you and more of what you can expect from us in the future. 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.

This concludes today’s teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.