Greetings and welcome to Marriott Vacations Worldwide Second Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today’s call, Jeff Hansen, Vice President, Investor Relations. Thank you. You may begin.

Thank you, Rob and welcome everyone to Marriott Vacations Worldwide second quarter 2018 earnings conference call. I am joined today by Steve Weisz, President and Chief Executive Officer and John Geller, Executive Vice President and Chief Financial and Administrative officer. 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, August 2, 2018, 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 second quarter earnings call. It’s been an active summer for us as we continue to achieve the many milestones required to close on our acquisition of ILG, which we expect to complete later this month. Before I step through our progress as it relates to the transaction, let me take a few minutes to provide some background on our performance in the quarter, much of which we released last week. Then I will hand the call over to John to share additional detail about the quarter, after which we will be happy to take your questions. In the second quarter, company contract sales were $233 million, up more than 8% over the second quarter of last year. Adjusted EBITDA was $76 million, a decrease of almost $8 million over the second quarter of 2017. This stemmed from expected revenue reportability impacts, which John will speak to in more detail in a moment. In North America, contract sales improved 8%, driven by a 3% improvement in VPG to $3,672 and a 5% increase in tour flow. Tour flow to first-time buyers continues to grow, improving 5% over the second quarter of last year. As we mentioned last quarter, we are substantially past the impacts from last year’s hurricanes, opening our new units on Marco Island and a temporary sales center on St. Thomas during the first quarter. With that said, it is important to keep in mind that the lack of hotel linkage tours in St. Thomas and the smaller onsite sales center will continue to impact our ability to generate sales there and we expect it will deliver less than half the volume generated under normal operations for the full year. Adjusting for these hurricane-related impacts, we believe second…

Thank you, Steve and good morning everyone. I am very pleased with our strong second quarter results. Adjusted EBITDA totaled $76 million and reflects year-over-year growth from our resort management, financing and rental businesses. Contract sales grew by 8% in the second quarter. However, our development margin reflected lower year-over-year results due to nearly $10 million of unfavorable revenue reportability. As I mentioned on our last earnings call, with the adoption of the new revenue recognition accounting standard this year, we now recognize development revenue when contract sales are closed which ends up deferring revenue from when it was previously recognized by roughly 35 days. In our 2018 second quarter, while we did benefit from the recognition of revenue deferred from the first quarter, that benefit was more than offset by a higher deferral in the second quarter as contract sales in the last 35 days of the second quarter were stronger than at the end of the first quarter, resulting in $3 million of unfavorable revenue reportability. In contrast, in our second quarter last year, we had $7 million of favorable revenue reportability as last year benefited from higher unclosed contracts at the end of 2016. In our development business, contract sales were up over 8% to nearly $233 million in the second quarter, driven by an 8% increase in sales in our North America segment and a 19% increase in our Asia-Pacific segment. As Steve mentioned, the 2017 hurricanes continued to have a negative impact on our second quarter performance. Adjusting for that estimated impact, total company and North America contract sales would have each grown nearly 10%. Our development margin in the first quarter was $39 million, down $13 million to the prior year. Adjusting for the impact of revenue reportability in both years, adjusted development margin…

Thank you. [Operator Instructions] Our first question is from Cameron McKnight with Credit Suisse. Please proceed with your question.

Hi, good morning and thanks very much. Question maybe for John or perhaps Steve. A few quarters ago, you gave commentary on the contribution to sales growth from the new assets. Are you able to give us an update in terms of what those newer assets are contributing to contract sales growth?

Yes. So, this is Steve, I assume you are referring to our new sales center. So on a percentage basis of the 8 points roughly half of that call it 4 points is because of the new sales centers.

Okay, got it. Thanks very much. And just as a follow-up, in terms of the linkage agreements that you have been signing for the past few quarters now, are you able to give any directional indication in terms of how those linkage agreements are contributing?

I think it’s still relatively early on some of the new stuff that we have added. And as you might imagine, as we have been sorting through the integration efforts with ILG, etcetera, we have kind of throttled back a bit on getting out aggressively, signing up new linkage agreements until such time as this gets closed, but we are still very encouraged not only about what the potential holds there for us, but also about in the various markets where we want to add additional tour flow generation from people that are in market at the time. So we are very encouraged by that. We just haven’t had too much of a chance to do a great deal more. It takes a while from the time that you make the initial contact. We first have to go through Marriott to get their approval to do it and then we have to work with local hotel ownership to negotiate a presence, get it contracted, etcetera. So it just takes a little while to get them put together.

Understood. Thanks very much.

Thank you.

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

Hi, good morning. Good morning, gentlemen. That $75 million of interval synergies, how are you feeling about that now, is that going to be beatable?

Well, yes. And we have said all along, as you will recall that we said it’s a minimum of $75 million. As we have gotten more visibility into it, we feel increasingly positive about not only our ability to make that number, but to exceed that number. As you might imagine now with kind of 30 days less of run-time between now and getting the closing in place, we are still trying to get more visibility in a shorter amount of time, but we feel very good about it. And I would underscore once again while cost savings are certainly something that you hope to produce as a result of this acquisition, the real upside for us that we see is on the revenue side.

Is it fair to think that perhaps the revenue side of it could eclipse the cost savings side?

That would be my expectation. Having said that, we are still kind of working through the various areas in terms of not only what the opportunity is, but how to go after them in sequence to get the biggest bang for the buck.

Okay. And then on the combined digital marketing, do you have a rough timeline of when that’s going to be up and running?

Well, yes, I think I may have reported even in the last call, a lot of this has to do with Marriott’s ability to turn their attention to it. As I think you probably have heard, they have August 18 date to combine the two loyalty programs. So, they are right in the midst of trying to figure out, I think they are not only figuring out, but they are executing on the system side of things, on the loyalty side. The next thing they have to do is just try to find a way to combine the two reservation platforms. We have been told and we have known this for some time that Marriott is very committed to turning to this, but it will have to fall in sequence behind their priority of getting the reservation system. So, our expectation is that they will start to begin to focus on this more probably in the first quarter of next year and then we will see how long it takes to produce it.

Okay. And then last question and I might have actually asked this last earnings call, but on the interval what they laid down on their 2020 projections due to the conversion of those hotels, do those projections continue to be on track?

Yes. Obviously, we haven’t closed on the transaction yet, Patrick. So once we do, obviously, we will be updating you on kind of the outlook of how we are thinking about a lot of the interval stuff, but today we are not prepared to comment on that.

Okay, fair enough. Thank you.

Thank you.

Our next question comes from Edward Engel with Macquarie Group. Please proceed with your question.

Good morning. Thanks for taking my question. Just into the digital marketing opportunity, have you put any more thought in potentially quantifying that opportunity and in the long run, do you think you could be potentially as big as maybe the Marriott Rewards, SPG loyalty program merger?

Well, let me try to separate the two pieces. And let me start with the second one first. As the two loyalty programs have come together and as this merger gets closed, then we will have the ability to market to not only the Marriott Rewards members, but also to these SPG members and we think that obviously is a very important generator of potential tours for us and ergo sales. So we are very encouraged about that. As far as the digital marketing opportunities, let me just remind you what that is. Today, we have a call transfer program in place, which means when somebody calls one of the Marriott’s reservation centers and they want to book a hotel room for a normal stay or whatever, they are given the opportunity to understand a value vacation opportunity with Marriott Vacations, call that a mini vac and that call gets transferred to us and if we do our job right, we interest them in booking a tour and hopefully then a sale thereafter. All the digital marketing piece of that on the reservation side is taking that same concept and applying it to people that are booking on the digital analog to a Marriott call center, call it marriott.com. Marriott.com is a very, very important viable retail website. So, the ability to actually get to people there, which we heretofore have not had the ability to do and give them the same kind of opportunity to engage with us about booking a tour is really what this is all about. So given obviously the way the world has worked, more and more people are now booking their hotel reservations online versus booking them over the phone, we have every expectation that this will be as good or better than the call transfer program that we have been successful with the last couple of years.

And then I guess what makes this opportunity different than maybe just an umbrella marketing strategy, which traditionally hasn’t really worked in the timeshare industry?

Well, first of all, you have got loyal Marriott and now cast that umbrella larger, because it’s not only the traditional Marriott customers through the various Marriott brands, but also all the former Starwood brands that are now in this umbrella. So, 30 brands of loyal customers that are engaging in commerce with the hotel company and we know that loyal customers have a tendency to have a stronger affinity to accept one of our offers than people that have broadly. We have never been active so to speak and kind of broaden that marketing campaigns, trying to ferret out people by doing radio, TV, print advertising, things of that nature. So, we think just as the call transfer program has been successful for us, we think this digital version of that will be equally or better in terms of volume.

Great, thanks. And then just a quick housekeeping, when the ILG acquisition closes, are you still expecting 3x of net leverage or with incremental securitizations, could that be a bit lower?

Well, the 3x, when you say net leverage, that’s excluding securitization debt, so that will be the...

I guess the recent cash flows you have gotten now.

I am sorry, what about the recent cash flow?

The cash flows that you have gotten from the securitizations, does that...

Oh, yes. Those are all factored into our outlook. Our cash that we knew we have generated by closing to use in terms of the additional debt we needed to raise. So, it’s not a meaningful difference. On a net leverage basis, we will probably be south of – just south of 3x, but not much at closing. Obviously, as we have talked about our goal, it will be to continue to pay that down a little bit with excess cash flow to get to more of a 2x to 2.5x, which I think gives us more flexibility in the future too for other growth opportunities and giving us more flexibility just longer term with our balance sheet.

Okay, thanks. And then just one last one, have you ever given what percent of your tours or your sales come from the call transfer?

No, we have not disclosed that.

Alright, great. Thank you for the questions.

Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session. At this time, I would like to turn the call back over to Steve Weisz for closing comments.

Thank you, Rob. Our performance for the first half of the year provided a foundation for a solid 2018. Contract sales are on pace for a strong second half. We are very close to closing on our acquisition of ILG. We have a lot to do in a short time to ensure a successful close at the end of August, but I have tremendous confidence in the teams on both sides to accomplish what needs to get done. I look forward to what the future will bring and to updating you on future calls as a combined company 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.