Greetings, and welcome to Marriott Vacations Worldwide First Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is my pleasure to turn the conference over to your host today, Mr. Jeff Hansen, Vice President, Investor Relations. Thank you. You may begin.

Thank you, Rob, and welcome to the Marriott Vacations Worldwide first quarter 2017 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 fact 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, May 4, 2017, 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. This morning, I'll walk through our 2017 first quarter results, highlighted by our continued growth in contract sales and adjusted EBITDA. I'll provide an update on growth from new sales distributions and new marketing programs, as well as some brief thoughts on our outlook for the full year. I'll then hand the call over to John to provide a more detailed view of our performance. In the first quarter, company contract sales were almost $194 million, up over 26% and adjusted EBITDA was over $62 million, up $10.5 million from the first quarter of 2016. Remember that with our change this year to a 12-month reporting calendar, the first 3 quarters will each include roughly 1 additional week, so our year-over-year growth will not be comparable as reported. Adjusting our prior year contract sales for the estimated impact of the additional week, contract sales were up nearly 16% in the quarter. This was driven by our North American segment which, on the same adjusted basis, was up almost 17% in the quarter, including a 6% improvement in VPG to $3,691. Staying in North America, nearly seven percentage points of our strong growth was produced by our 5 new destinations. This was the first full quarter in which we had all of our new sales distributions open, including the larger sales location in New York City and our location in South Beach, which just opens its sales center at the end of 2016, and I'm very pleased with how these new centers have performed. We are particularly pleased with the VPG from our new destinations in the first quarter has reached a level similar to our other locations, a positive signal that they are already performing…

Thank you, Steve, and good morning, everyone. I am very pleased with our strong first quarter results. Contract sales, after adjusting for the estimated impact of the change in our financial reporting calendar, were up nearly 16% to almost $194 million, and adjusted EBITDA totaled $62.1 million, $10.5 million higher than the first quarter of 2016. While these results are not adjusted for the timing of revenue reportability, it is important to highlight that our adjusted EBITDA was unfavorably impacted in the quarter by roughly $3 million of revenue reportability. Without that reportability impact, our first quarter adjusted EBITDA would have approached $65 million. As expected, our development, resort management and financing businesses all contributed to our improvement in adjusted EBITDA. With our strong contract sales performance, development margin grew $4.5 million. Our resort management business grew by $8.8 million, and financing margin was higher by $1.7 million. In our development business, company adjusted development margin increased 33% to $31.6 million, and adjusted development margin percentage grew 60 basis points to 17.9%. As a reminder, for the full year, we continue to expect company development margin of 21% or better. In our North America segment, adjusted development margin increased 30% to $33.3 million in the first quarter, and adjusted development margin percentage was 20.7%, slightly higher than the prior year first quarter. Development margin benefited from roughly 60 basis points of lower product cost, offset by just over 50 basis points of higher marketing and sales cost, as we continue to ramp up our new sales distributions. In our financing business, revenues were up $2.9 million or nearly 10% to $32.1 million in the first quarter of 2017. These results reflect $5.1 million from higher interest income from our growing notes receivable balance, partially offset by additional cost from our…

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

Thanks very much. Good morning. Just wanted to think a little bit about the balance sheet and ask, why no share repurchases in the quarter? I mean, given your net cash position, you are arguably under levered for business with already predictable, stable cash flows. So what are the sort of the strategic options you're thinking about with respect to balance sheet? And why no buybacks this quarter?

Sure, thanks, Chris. This is Jon. Look, in terms of buybacks, obviously, there's a lot of factors that go into when we're buying back shares in and out of the market. And I'm sure, as you can appreciate, we don't comment specifically on those factors. But what I will say is, our strategy to return capital to shareholders, including share repurchases has been a big part of what we do and continues to be a big part of our strategy going forward. So I would expect us to continue that strategy here in the future. And so in terms of the balance sheet, I agree, we have a lot of capacity on the balance sheet, and as we've said in the past, we'll continue to evaluate with our Board how we deploy that capital in the future.

Thank you. And then, given the success in the - with your new sales centers, what's the pipeline or what are your thoughts about expanding into - acquiring additional new resorts or adding additional new sales centers over the next several years?

Yes, thank you, Chris. This is Steve. The simple answer is, we have a very active development group that is out looking for new sites. I mention, obviously, that we are going to be opening our new sales gallery, a new resort in Bali, here towards the end of the year. We continue to look for additional growth in the Asia Pacific region, and there are some specific areas that we are very focused on there. And also in North America, I mean, while we have great distribution in North America and many of the very popular vacation destinations, there are also some places where we don't have a significant presence. And so we continue to look there. So while not being able to disclose anything in particular to you right now, let me simply reiterate that we believe that we're going to be in a fairly consistent cadence of adding new resorts, new sales distributions in the years to come.

Excellent. Thank you.

Our next question comes from with Tyler Batory with Janney Capital Markets. Please proceed with your question.

Good morning. Thanks for taking my questions. So first, on the cost side, just related to the new sales centers. Can you just talk about how marketing and sales came in for the quarter versus your expectations? And then, how you're thinking about that line item going forward here, as you're comping there with some of the opening of the new sales centers?

On the cost side, for the new sales centers, I would say, all in all, in line with our expectations. The key there is ramping those sales to leverage the fixed cost, obviously, in places like New York City. You have rent and other costs that are higher. And so as a percentage of sales, you start out, they're high. And as you get to a more normalized level, you start to get to more of that system wide average. So as we continue to ramp going through this year and into next year, we'll continue to get closer to that, which will help the overall margins as we go forward when you think about development.

And Tyler, if I might add, this is one of the things that we - I spoke to in my remarks was, obviously, the VPG performance at these sales centers, which quite frankly, is pretty close to what we're running at a system wide average. Now admittedly, this is an average of 5 sales centers versus all the remaining in our system. But I would say to you that we are very pleased by what we've seen thus far in the first quarter. And we think it's - it provides optimism for, as we continue to load more tours into these centers and how we'll be able to perform.

Okay, great. And then on inventory, can you talk about how much inventory you have access to right now, and how much of that you would consider to be asset light?

Sure. So rough numbers, I would say, we probably have about 1.5 year of completed inventory, given our sales base on our books today. And then through - our asset-light deals, so this is inventory that we don't own, but are committed to. We probably got another 2 years there. And then, when you think about the amount of inventory that we have in land and infrastructure at existing resorts, that we could build out in that zoned - that we can build out units there, that's probably another 4 years' worth of inventory. And then the other thing, which we don't necessarily control, but obviously part of our program is to repurchase weeks on the secondary market. And given the pace there, that's probably another couple of years' worth of inventory, just if you think about here over the next 3 or 4 years, that we'll be active buying back always a lever that we can increase or decrease as we need inventory. So you're probably talking ballpark, 8 to 10 years when you add up all that.

Okay, that's great. And then last, can you comment on growth for reloads versus first-time buyers? I'm just wondering what you're seeing in those 2 segments.

Yes. Actually, we have said all along that our goal is to add more first-time buyers. I think you heard me say that our first-time buyers were up 6% over the first quarter of last year. Having said that, we were very pleasantly surprised to see the amount of existing owner or reload growth in the quarter. And a lot of that's attributable to the fact that as we added new destinations to the portfolio last year, there were people that were excited about those locations and they've wanted to add to their amount of interest that they hold within our company. And so, we're at the luxury of being able to add first-time buyers for the long-term perspective of being able to get more referrals and all the other things that come along with those. But also enjoy adding more existing ownership to people that are already our members, and we're very pleased with how that works.

Great, that’s all for me. Thank you.

Our next question comes from Brad Dalinka with SunTrust.

On for Patrick Scholes, thanks for taking my question. First, just wanted to close the loop on something someone asked about before. Were you guys blacked out from your purchases in the quarter?

Hey Brad, it's John. Yes, once again, we're not going to comment specifically on the factors that we may or may not be in the market for. So like I said in my previous answer, there's a lot of factors we consider. At any time we're repurchasing shares, so I'm not going to add any more color to that at this point.

Understood. And then just wanted to ask you guys a broader question about your thoughts on timeshare M&A environment today. We're seeing a lot of investor questions on that lately. And that's it for us.

Well, it had a, kind of a 20,000-foot level. You look at this industry, which obviously because of the increased number of publicly companies in the space, I think has attracted more investor interest than say when we first became public 5.5 years ago. And typically, in any industry, when you see increased investor interest, then that rises to the occasion of increased levels of M&A. And as you've seen, some companies have become public, some public companies have gone private. So I think that's a normal, logical iteration of how any industry moves. And I don't think the timeshare industry space is any different from that.

Our next question comes from David Katz with Telsey Group. Please proceed with your question.

Hi, good morning everyone. Nice quarter, nice stock price. I wanted to ask about - go back to the balance sheet. And if you could, John, update us on sort of what your leverage tolerance would be if, of course, hypothetically, there was something that were of interest to you and productive for you to buy, how much leverage do you think you could tolerate?

Sure. Well, strategically, like we said, we're not trying to be at an investment-grade company in terms of our cost of capital. We like to play in that BB range, David. And within the BB, you're probably talking comfortably up to, call it, 3x leverage, so - of EBITDA, excuse me. And so the question would be obviously, if you're acquiring a company, how much EBITDA is that bringing to your existing EBITDA, and you're probably in that 2.5 to 3x. Clearly, depending on the opportunity, there's - we could go higher than that, and that would be something we'd have to talk to our Board about. But that's generally how we think about our long-term capital structure.

All right. And more of a, kind of a big picture strategic question. As you grow and get bigger, through whatever avenues you do, can you talk about the benefits of scale in the timeshare business? I think for us and probably the Street in general, we're still in an education curve in terms of what scale benefit and how the business evolves as it grows. And you're clearly out ahead of the pack in that regard.

Yes, I mean, generally, if you think about it, I mean, single largest cost in the timeshare business is in the sales and marketing arena. And then, obviously, to what degree by adding additional scale to the business allows you to leverage your fixed marketing and sales cost. Obviously, you get a nice gearing effect to the bottom line, in terms of your sales and marketing costs. There, I think, is a general misnomer, however, that some believe that if you add additional scale, all incremental sales and marketing costs go away, which certainly wouldn't be the case. You've still got to run a sales and marketing operation at existing resorts, which has its own inherent cost. So I think that's the biggest area, obviously, there other corporate fixed costs that we have in our overhead bases, that you'd get some leverage out of, which would obviously contribute to growth in your bottom line margins. But those are the 2 areas in particular that I think really kind of jump off the page at you.

Got it. And one of the, I guess, issues or complexities that you usually provide us on an update - with an update on, is the joining of the loyalty programs under the Marriott umbrella between SPG and Marriott Rewards. Is there any update that you can provide us this quarter as to how those discussions may be going?

Basically, you probably have seen what we have seen in the public press, where Marriott has indicated a continuing desire to try to put the 2 programs together, but there's not been any real increase in dialogue between ourselves and Marriott in that regard.

New Dialogue, okay. Perfect. Thanks very much.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I'd like to turn the call back to Steve Weisz for closing comments.

Thank you, Rob. We're off to a great start this year with contract sales growth exceeding our record fourth quarter and adjusted EBITDA, laying the foundation for a solid earnings year. I am excited about what our new destinations and enhanced marketing programs can do, and look forward to discussing our results with you on future calls. And finally, to everyone on the call and your families, enjoy your next vacation. Thank you.

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