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

Thank you, Rob, and welcome to the Marriott Vacations Worldwide Third Quarter 2017 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 security 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, November 2, 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 third quarter earnings call. This morning, I'll briefly update you on the impact from the recent hurricanes, and then I'll discuss our solid 2017 third quarter results along with my thoughts on our outlook for the remainder of the year. I'll then hand the call over to John to provide a more detailed review of our results. First, our thoughts and prayers go out to those who have been affected by the hurricanes in North America and the Caribbean as well as the fires in California, the earthquake in Mexico City and the tragedies in Las Vegas and New York City. Specifically, as these events relate to us in what has obviously been a very active hurricane season, two storms in particular, Hurricanes Irma and Maria, affected our operations most directly. We felt the impact of Hurricane Irma almost immediately on the island of St. Thomas before the storm continued on its path, eventually affecting Florida and the East Coast. Hurricane Irma was followed closely by Hurricane Maria, which impacted our resort in St. Kitts and compounded an already serious situation on the island of St. Thomas. The bright spot in the immediate aftermath of these terrible storms was that all of our associates, owners and guests remained safe, and recovery efforts effectively began almost as soon as the storms had passed. Hurricane Irma heavily impacted our resort on Marco Island. And due to the enormous size of the storm, it also impacted our resorts from Miami and the Fort Lauderdale area to Orlando and as far north as Hilton Head Island. The majority of our resorts and sales centers reopened within a couple of weeks after the storm, and I'm very pleased to say that all but one…

Thank you, Steve, and good morning, everyone. I too am very pleased with our strong third quarter results. Adjusted EBITDA totaled $74 million, $23 million or 46% higher than the third quarter of 2016. As a reminder, we do not exclude the timing impact of revenue reportability when calculating adjusted EBITDA. As such, it's important to remember that last year's third quarter adjusted EBITDA was unfavorably impacted by roughly $12 million of revenue reportability, much of which was recognized in the fourth quarter of 2016. Contract sales, after adjusting for the estimated impact of the financial reporting calendar change, were up 6% to $198 million. And as Steve mentioned, excluding the adverse impact of the hurricanes in the quarter, we estimate that contract sales would have grown nearly 13%. As it relates to the hurricanes, we estimate that lower contract sales as well as lost revenues in other parts of the business negatively impacted our adjusted EBITDA by over $3 million in the quarter. Despite the estimated $3 million of loss-adjusted EBITDA from the hurricanes, our development, resort management and financing businesses all contributed to our year-over-year improvement in adjusted EBITDA. Development margin grew $22 million or 126%. Our financing margin increased $4 million or 21%. And our resort management business grew $2 million or 6%. For the third quarter, company-adjusted development margin increased $9 million or 29% to $38 million from the third quarter of 2016. And our adjusted development margin percentage totaled 21.3% in the quarter, 160 basis points higher than the third quarter of 2016. In addition, we estimate that the hurricanes negatively impacted adjusted development margin by 0.5 point in the third quarter. While our full year 2017 goal for development margin was 21% or better, given the impact of the hurricanes, we do expect the…

[Operator Instructions] Our first question comes from Brian Dobson with Nomura. Please proceed with your question.

You could delve into in a little bit more detail the moving parts in tour flow and VPG and what allowed you to increase VPG while increasing tour flow so dramatically?

Well, a part of that is, I think I referenced in my remarks, 20 basis point improvement in closing rate. When you get that, that obviously has an impact on VPG. The other thing is, as we continue to adapt to more tour flow from first-time buyers, our first-time buyer tours, I should say, we have become more adept at being able to close on them as well. So I personally think, when you step back and say, well, how does the VPG calculation will look like, it's really a function of the average of sale price and the closing rate. So you get a little bit of inflation as your cost per point goes up and as the closing rate goes up, and that's what really drives the VPG.

So the majority of it is really fine-tuning that sales approach for the new type of consumer?

Yes, yes, that is correct. Yes.

And as you're looking out over the next two years, what key regions would you like to see the company expand into?

Well, we've said all along that we have a footprint in Europe, which we have said that for the foreseeable future, we don't see a lot of growth in that area. We still have some residual inventory to sell there, not much. And obviously, we'll always be in kind of a resale environment over there. Our two primary focuses are North America, which I would tie into that Latin America as well. And then Asia Pacific is the primary areas we're looking to focus on our growth.

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

First, can you remind us where you stand now on your long-term target of first-time buyers versus the upgraded sales? How was that progressing?

Well, as you will recall, kind of post-Great Recession, we were at roughly 60-40 reloads versus first-time buyers. I think we've got that down maybe 1.5 points to almost 2 points in terms of our tour flow. But as we said all along, while there's no magic in the number of a roughly 50-50 goal, we want to continue to move in that direction, because we believe for the long-term health of the business, adding more first-time buyers is good for us.

Yes, the only thing I'd add to that is, so this year, Patrick, I mean, we've got double-digit growth in contract sales to the first-time buyers. So those programs are kicking in. In terms of the mix, that's actually -- we're selling that much to existing owners too. So the mix has moved a little bit, to Steve's point, but we're not going to apologize for selling more to our owners who love our product. But our real goal is to continue to drive that first-time buyer growth.

Moving on, my next question, have you seen any impact on your expectations for your loan loss provision due to the hurricanes? And what I mean by that specifically is the ability to pay a timeshare loan for people who may be based in a hurricane-impacted market?

Yes. We see really no impact. I think we've got a handful of calls from folks that have a mortgage with us that are in those hurricane disaster areas. And when that happens, we work with those owners and give them the relief or whatever they need to keep going. So -- but like I said, it's been a handful of folks, Patrick.

Maybe my next question related -- a little too granular. Those folks you just described, is that going to be more of your lower credit score type of customer or maybe I'm just getting too specific here, I don't know?

We'll just talk about a handful of people.

Okay. Fair enough, fair enough. Just a couple of more questions here. In previous call -- in a previous call, you had mentioned for the right acquisition, key word right, that you would still be comfortable -- you would be comfortable with up to 3x leverage. Is that still your view?

Yes. I mean -- look, it's facts and circumstances, right, for whatever that right acquisition would be. The key for us is what I've talked about is long term, we feel for our company somewhere in that 2 and 2.5x of normalized leverage run in the business is probably about the right leverage as we think about it today. Now for the right acquisition, would I go above three, would I go higher with the plan to pay that down? Sure. I mean, like I said, it's going to be facts and circumstances. I wouldn't look at it as a sustained leverage if we went above it, but a way to bring that leverage back down overtime.

And then the last question on your buyback program in the quarter. Is this a programmatic -- a discretionary or programmatic buyback program?

Well, I would just say programmatic. I mean, what we've done -- I think if you look at over the last couple of years, we've been fairly programmatic in buying our shares back. We -- when the stock price goes down, we probably are more opportunistic in buying more. So we do pay attention of what's going on in the market. But we continue to look at our stock as a good value, and we'll continue to buy back with excess capital overtime.

Our next question is from Chris Agnew with MKM Partners.

First question, if I think about your year-to-date, your comparable contract sales growth, am I right in thinking it's about 13%? And therefore, that implies in the fourth quarter a range of, I think, flat to around 12%, or let's say, low double digit in the fourth quarter. I'm just curious, what gets you to the high end of that range versus the low end? And what have you been seeing so far in the fourth quarter?

Well, I think the first thing is, as these new sales centers have continued to ramp up, you start to see that now. With that said, obviously, we have kind of some built-in comparable headwind, given the fact that they were new and coming online in the fourth quarter of last year. But I think your arithmetic works pretty well. And I think the goal is to continue -- I mean, if we can drive double-digit growth in contract sales on a quarter-over-quarter basis, so we're pretty happy about that.

And then when you talked about some of your high growth expectations, you mentioned additional linkage arrangements. Can you just give us an update on how low the linkage arrangements you already set up are progressing and what sort of additional arrangements you're thinking of?

Sure. Just as a reminder, to everybody on the call, we've had linkage arrangements with Marriott Hotels throughout our existence as an organization. And as Marriott has expanded its portfolio by organic growth or by acquisitions of additional properties, including the Starwood acquisition last year, we've taken advantage of that expansion by signing some agreements with several Western and Sheraton hotels. And we're very pleased with how that is progressing. And we are currently in good negotiations on more locations within the legacy Starwood brands to continue to grow our linkage platform.

And then final question, can you give an update on what your pipeline -- or maybe I'll ask another question. When and where do you start thinking about additional sales centers and expanding the portfolio?

Yes. We have -- as we've stated, our goal all along is -- wherever possible is to think about new resort destinations, including new sales distributions and locations where we have no presence today. We -- as I mentioned, we just closed on the transaction in Bali and will be opening that new sales center in conjunction with that in the next couple of months. And we continue to look at other opportunities in Asia Pacific, got several things that are kind of active, nothing that I'm really prepared to talk to in specifics at this point in time. And then, of course, we always continue to look in North America. There are still several kind of world-class vacation destinations where we don't have a presence today here in North America, and we're very active in that arena as well.

Our next question is from Tyler Batory with Janney Capital Markets.

So wanted to ask a little bit more on 2018 when you called out the potential negative impacts here from St. Thomas and then Marco Island. But do you have an expectation that you're going to see maybe a potential lift, potentially from people that canceled here in the third quarter or fourth quarter from the hurricane, maybe rebooking those trips in 2018?

Yes, I think there's clearly -- I believe there is some opportunity there. In my evidence, it sells more on the rental side than in the vacation ownership side. But if we do our job right, if there's more rental activity, then we'll try to entice some people to take some tours and make some sales to them. Just for clarity, Marco Island, the tower that we're talking about in Marco, the 112 units, there is currently 102 units that are open and operational in Marco Island. So when that additional tower comes on, which will be, we anticipate, sometime in the first quarter, then we'll obviously double the size of the resort. With that said, we've had a sales presence on Marco Island now for several years. So essentially, we'll begin as we get some more tour possibilities from in-house and people that are exchanging their rentals. So I think that will have some modest impact to us next year, although not dramatic. St. Thomas is a little different situation. Our sales center on St. Thomas was in the Frenchman's Reef Marriott Hotel. That hotel, according to the hotel owner, DiamondRock, they've announced that, that hotel will be closed throughout 2018. Our goal will be to try to figure out how we can establish some sort of a sales presence on St. Thomas to generate some sales from that location. But as I mentioned in my remarks, that location, the previous sales center was generating $20 million to $22 million worth of sales. My expectation will be that it will be something less than that if we get a small sales presence there, although it's too soon to tell. And we'll give you a lot more color on the next call.

And then another follow-up here on the new sales centers. Can you discuss the VPG at those locations, how they compare to your existing sales centers and how the VPG there is trending versus your expectations?

It's generally pretty close. And you've got to remember you've got a mix. So you take a new sales center in New York City, which by definition, given the profile of the customer and everything else we see there, has a tendency to run relatively higher VPG. You can trans that to, say, San Diego, which maybe just a little bit lower, but on balance, the VPGs between our new sales centers and our existing sales centers, there's no meaningful difference between them.

Ladies and gentlemen, we've reached the end of the question-and-answer session. At this time, I'd like to hand the call back to Steve Weisz for closing comments.

Thank you, Rob. I'm very pleased with our third quarter results. We're performing very well. We were performing very well prior to the hurricanes. And during and after their arrival, our associates proved themselves to be resilient as they faced the challenges brought by the storms. It's in these moments that you see who people truly are. And I cannot be more proud of what our teams have overcome. I'm confident in our ability to deliver on our current growth strategy and look forward to speaking you with you again on our next call. And finally, to everyone on the call and your families, enjoy your next vacation.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.