Greetings, and welcome to Marriott Vacations Worldwide Fourth Quarter 2015 Earnings Conference Call. At this time, all participates 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. I would now like to turn the conference over to your host, Mr. Jeff Hansen, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Rob. And welcome to the Marriott Vacations Worldwide fourth 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, February 25, 2016, 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 Relation 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 fourth quarter earnings call. This morning I'll spend some time on our 2015 full-year results, highlighted by our strong adjusted EBITDA, which was driven by continued improvements in our diverse lines of business. I will then take some time to discuss our expectations for 2016 before returning the call over to John to provide a more detailed review of our fourth quarter performance, after which we will open up the call for your questions. Adjusted EBITDA exceeded our expectations, ending the year at nearly $236 million, $4 million above the high end of our guidance range and $36 million over 2014. These bottom-line results highlight the strength of our diverse business model, as our adjusted EBITDA growth was driven by improvements in our rental business and continued solid results from our management and ancillary businesses, as well as improvement in the second half of the year from higher financing propensity. Adjusted fully diluted EPS was $3.70 and adjusted free cash flow, which John will speak to in a moment, was $229 million, both exceeding the high end of our guidance. Company-adjusted development margin was 20.9%, just below the lower end of our range of 21% to 22%. Time share contract sales were roughly flat year over year, improving just $1 million to $700 million in 2015, for growth in our North America segment was offset by lower sales in our Europe segment where we remain in sellout mode. In our North American segment, time share contract sales were $631 million, up $12 million or 1.9% from 2014. Tours in North America improved by 2.5% over 2014, while BPG remained strong at $3,386, in line with 2014. Not unexpectedly, we continue to see softness in our Latin American sales channels…

Thank you, Steve and good morning everyone. I am pleased with our strong performance in the fourth quarter. Adjusted EBITDA totaled $69 million, $20 million higher than the fourth quarter of 2014. North America adjusted development margin was 22.1% and Company adjusted development margin was 20.1%; and all of our business lines contributed to our year-over-year adjusted EBITDA growth this quarter. Our rental business continued to outperform, growing $12 million. Our development business contributed $5 million, benefiting, as expected, from the turn around of the unfavorable third-quarter revenue reportability. Our resort management business improved nearly $4 million and, while modest, our financing business also contributed to year-over-year growth for the first time since we spun off from Marriott International. Turning to our North America segment, time share contract sales totaled $182 million, down 2% from the fourth quarter of last year. As Steve discussed, a strong US dollar continued to unfavorably impact our sales, primarily in our Latin American sales channels. Excluding this impact, North America contract sales were up 1.4% in the quarter. Tours in the fourth quarter were up 4.5%; VPG totaled $3,162, down 2.9% from the fourth quarter of 2014. In an effort to mitigate the impact to sales of the strong US dollar in the fourth quarter, we ran a short-term marketing campaign during the fourth quarter that provided incremental incentives for in-house guests in North America to take a tour. While successful in driving increased tour volumes and contract sales, short-term programs like this do come with the risk of being less efficient and negatively impacting VPG, which is exactly what we experienced this past quarter. North America adjusted development margin in the fourth quarter was $37 million. Fourth-quarter adjusted development margin percentage was once again strong at 22.1%. These results reflected a 130 basis-point…

Thank you. [Operator Instructions] Our first question comes from Christopher Agnew with MKM Partners. Please proceed with your question.

Good morning, Chris.

Thanks very much. Good morning. First question, what is your appetite in the near term for additional locations in gateway cities? And maybe give us some idea of the opportunities you have. I'm wondering, would you look for additional locations in New York and, given the weaker performance of hotels and increased supplies, there may be more opportunities presenting themselves to convert into timeshare? Thank you.

Yeah. I - let's kind of step back and think about the points model in general. We believe that there is advantage to having more flags in more cities instead of having multiple flags in the same city. Having said that, under the right set of circumstances, conditions, financial arrangements, et cetera, if there was another great opportunity in New York – as the example you used – we would certainly give it serious consideration. But, by and large, we would rather fly the flag someplace where we don't have a presence today, which are well defined, well demanded vacation destinations.

Got it, thanks. And maybe a couple of little detail model questions. When do you start lapping Latin American weakness? Or should we expect that to be a headwind through the first quarter, given that you're ramping some of these sales locations I think mid-year, third quarter, should we expect the tour flow to be a little back-end loaded as those bring on additional tour flow? And then, finally, when do you anticipate selling through in Europe?

Okay, the Latin American piece. If you look at what the currency fluctuations charts that happen in Latin America, largely, the biggest impact was started in Q3. I would say Q1 and Q2 will probably still be tough comparisons from that standpoint, assuming there is no meaningful change in the FX difference between ourselves and Latin America. As far as tour flow – I'm sorry I lost the question there.

Tour flow, the timing is – you kind of answered it, Chris.

Back-end loaded, yes. Two things. Number one, yes, I would say it's more towards the second half of the year than the first. For two reasons: number one, as we have been activating these tour packages that we talked about, they seem to be skewing more towards the second half of the year than in the first half of the year. Part of that, to be honest with you, is based somewhat on availability. Many of our resorts in the first half of the year are pretty full. So, finding availability to house those tour packages is a little tougher. So it's more in the second half. And then, of course, as we have new sales centers coming online, that's when additional tours will be coming through the system.

And then the final question just on Europe and the wind down. I'll grab that real quick. We're getting close to selling out of our remaining developer inventory here over the next, call it year at 18 months, maybe two years. But remember, we'll always have a resell program over there. We will have a great management business with the resorts that we have. So you'll continue to see our contract sales to come down and then they will kind of normalize once we get into that resale program of existing weeks.

Thanks. Maybe one follow-up. With the new sales centers, is there anything to bear in mind in terms of mix impact on VPG, whether it's closing efficiency or just the selling amount?

Well, clearly, as you bring a new sales centers, almost by definition you're going to get more first-time buyers. As we have discussed in the past, first-time buyers typically have a slightly lower VPG, although when you take everything through the sausage grinder in terms of the profitability of the business, a first-time buyer is every bit as valuable to us over the long term as it is an existing customer. So, yes, as those sales centers come online I would expect to see some continuing pressure in VPG. It's one of the reasons why I mentioned the fact that while, heretofore, much of our improvement in development margin has been a result of improving VPG, the reality is, as we go forward, it will probably be less so VPG-driven but more so by virtue of increasing tours in new sites.

Great. Thank you.

Thank you.

Thanks

Our next question is from Patrick Scholes with SunTrust. Please proceed with your question.

Hi Patrick

Hi, good morning. First question, can you give a little bit more color on how your South American international customers did? Recall, obviously, it was an issue in the previous quarter. Any noticeable changes in propensity to buy your product from them in the most recent quarter?

Yeah. Go ahead.

I was just going to say, I think obviously we were still down on that front year over year. I think the trends that we're seeing, Patrick, in the third quarter, fourth quarter, and then kind of moving into the first quarter this year is we are down less. The trends are going the right direction. We're still down significantly, but not as much year over year when you look at it that way. As Steve mentioned earlier, that -- we'll lap that here at the end of the second quarter. And, the reality is, if you look at what the major currencies in Latin have done, really since the second quarter, beginning of the third quarter last year, they haven't dramatically improved. So, as I think we've mentioned in the past, it becomes a little bit of the new normal in terms of that. We're starting to see that a little bit, at least in terms of some of the moderated decline, but it will continue to be a headwind through the end of the second quarter and then we are lapping some of that down slightly.

Okay, okay. And then, on the Miami deal, which appears to be downsized from the previous property, did that – did you take into account weakness in the South American customer in this new deal?

That was not the primary driver of us making a shift when -- we had a commitment to purchase units at the larger project in South Beach that was subject to certain conditions. And when those conditions weren't met, we decided not to proceed and terminated the contract with no financial liability to us as a result of that. When we found this 49-unit property, The Edgewater, with its great location -- in addition to being an Art Deco project, et cetera -- we decided that, that was an acceptable alternative. Clearly, the Latin customer -- we believe, over time, this will rebound, but that was not the driving force to effectively downsize our presence in Miami.

Okay, thank you for the color. That's all.

Thank you.

Thanks

Our next question is from Ben Chaiken with Credit Suisse. Please proceed with your question.

Hi guys.

Hi

Again, you mentioned down less impact from the LatAm customer, is that consistent with what you've seen in the past? Basically outside of lapping easy comps -- not easy comps but lapping comps in 2H? When you look at previous movements in FX, is there a dynamic where the sticker shock wears off?

Obviously, the sticker shock we experienced here this past year is from a historical perspective that probably significantly higher than anything we have seen before. There's always fluctuations, obviously, in those currencies in Latin. And, exactly what you said, what would typically happen is, even if there's not a rebound in the currency, we are obviously targeting a consumer down there that meets our target market in terms of average household income, things like that. Those consumers like to travel and, over time, if they want to continue to travel and do stuff, they've got to get their head around what the foreign currency translation looks like. And so, that's what we're really starting to see, a little bit of that in terms of its now been almost three quarters, two and a half quarters and there hasn't been much improvement. So, the Latin, still down significantly, but it's starting to be down less here as we've seen it over the last couple quarters.

Ben, I would add one other thing. Unlike where we used to be when we were selling a weeks-based product, selling a points-based product the purchaser can modulate how much money they want to put out of their pocket at any given point in time. So, they might not purchase a full week's worth of vacation points. They could actually buy four or five days to help mitigate some of that impact, and then they can add some points later. So, there's other advantages there, but I agree with John's point

That's helpful. And then, on the call, you mentioned lower margins from increased sales and marketing. Was that on a net basis? Because you also made a comment that there would be a positive impact from lower product cost. I'm just to trying to figure out, is that --?

Net-net we expect to stay where we finished up 2015, which is, call it a 21% or better development margin is our target. In 2016, it will come from a little bit different places is all we were pointing out. Our product cost continues to trend down, and so we expect that the better product cost we'll experience in 2016 -- and, quite frankly, I think those trends in product cost are staying lower, should last even past 2016 based on what we are seeing. And, in the near term, that will help offset some of the pre-opening costs. We talked about that's probably about a 1% headwind relative to 2015 just because you got all these new sales centers that you have to get up and running and you are expensing all those costs before you make your first sale. And then, in addition, as you ramp up some of these tour packages, you could have some higher marketing and sales costs here in the near term. But, net-net, we expect that the product costs should offset or maybe even be a little bit more favorable back the other way.

That's helpful. And then, I could have missed it, but do you guys provide a North American tour flow growth, excluding LatAm?

No, we haven't historically provided any specific tour flow metrics.

I assume you can't?

Yes, we're not…

Okay, thank you.

Thank you.

Our next question is from Steven Kent with Goldman Sachs. Please proceed with your question.

Hi Steve.

Hi, good morning.

Good morning.

I got a couple questions for you. First -- I don't know if you mentioned it -- what's the split between new and existing owners now? And where would you think they would be in, let's say, two years? Also, on that same theme, you said that there is a pickup in people taking financing, but are they also increasing the amount of the loan? Meaning that maybe they're putting a lower deposit down and that's a way to facilitate some of these new customers to decide to buy timeshare for the very first time? And then, on an accounting issue, are you able to book sales from these new sales centers right away? Would they be deeded at that location or at another? I just want to understand how that's going to work.

Steve, I'll take the first one and I am going to let John take the other two.

Okay.

On the first-time buyers versus existing customers, you've heard us say in the past that, historically, as a Company, we have been a roughly 50/50 mix of first-time buyers and existing customers. As 2008, 2009, 2010, 2011 rolled around, that number got to be 40% first-time buyers and 60% existing customers. We have said that we aspire to get back towards that 50/50 number. Exactly when that will happen -- whether that will be in two years or three years or four years -- I can't tell you, except to say that, that is our goal. And the reason for that is, why do we want more first-time buyers? Obviously, first-time buyers do a number of different things for us. A, they have a tendency to, over time, add more ownership during the course of their time. Secondly, they bring a new set of referrals to us that we have not heretofore seen. We get another management fee, another exchange company fee, as a result of all that. And, they have a slightly higher propensity to finance their purchase, which we make money off of financing. What happened in 2015 was a little bit of a pleasant surprise to us when we rolled out our new owner-recognition levels in the first quarter of last year. The take-up rate from our existing owners was meaningful, driving that 10% increase in contract sales on a quarter-over-quarter basis 2015 versus 2014. As a result, it kind of skewed that existing customer versus first-time buyer number by, call it 1 point, 1.5 points, something like that. So, when you get all that to the end of the year, we didn't make as much progress in 2015 as to changing the mix of first-time buyers and existing customers. I would say we moved it by maybe 1.5, 2 points, but we certainly have every intention and aspiration to do so further in the coming years.

Great. And then, on the financing side, Steve, couple things. We haven't changed any of our down payment requirements. We've never really increased our down payment requirements. We require kind of that minimum 10% of the purchase price. Some of our customers decide to put a little bit more down than that. But, if you think about our default rates, I would argue we have probably the lowest default rates in the industry. Or we are pretty darn close. We've got great customers. And, actually, what you're seeing with the higher financing propensity -- and it's a little bit counterintuitive, you are actually seeing FICO scores go up. So we have seen an average of about 9- to 10-point improvement in our average FICO score since we started this program. But what you are actually seeing is folks that might not have otherwise taken the financing are deciding to finance and they actually have higher FICO scores than I think kind of where you were going, are we kind of loosening up our underwriting standards. We haven't changed those at all. And then, on the sales accounting side, remember, we sell a points-based product here in North America and it's a Florida-based land trust. So, people aren't buying deeded weeks at a specific property. They are buying a beneficial interest in all the properties in the trust. So, what we are selling is the inventory that's in the trust. When we announced these deals, they don't go into the trust immediately. In the case of places like New York, we won't actually get that into the trust until fall of 2018, 2019 time frame, the first piece of that inventory. However, through our exchange company, that inventory will be available to owners on an exchange basis. So while it won't actually be owned by the trust for some period of time, the owners will have access to it until it actually gets deeded in there and sold through the trust. That's the nice thing about our capital-efficient model and how we source inventory is we are not selling that site specific, so we can open these new sales centers and we sell the portfolio.

Okay. Thank you.

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

Thank you, Rob. I hope you're as pleased as we are with our 2015 results and your takeaway today is that we are executing our plan and are excited about what 2016 holds for our owners and for our shareholders. 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.