Greetings and welcome to the Marriott Vacations Worldwide first quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require Operator assistance during the conference, please press star, zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Tony Terry, Executive Vice President and Chief Financial Officer for Marriott Vacations Worldwide. Thank you, you may begin.

Thank you and welcome to the Marriott Vacations Worldwide first quarter 2022 earnings conference call. I am joined today by Steve Weisz, Chief Executive Officer and our President, John Geller. I 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 last night and the presentation we added to our website this morning, as well as our comments on this call, are effective only when made 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 of our website at ir.mvwc.com. It is now my pleasure to turn the call over to our CEO, Steve Weisz.

Thanks Tony. Good morning everyone and thank you for joining our first quarter earnings call. Before we share our financial results, I want to recognize the continued uncertainty in the world today. From significant geopolitical issues, supply chain disruptions and inflationary pressures impacting our day-to-day lives to adjusting to a new normal as the pandemic wanes, the world definitely continues to be a complex place; however, despite these uncertainties, I couldn’t be more proud of our associates and their continued dedication to our owners, members, guests and each other. I want to take a moment to acknowledge every one of them at our destinations across the world, our corporate and regional offices, and our sales centers. Their continued dedication is the driving force behind our success. While we are operating in a challenging landscape, there is something that remains true: people want to spend time and create memories together and one of the best ways to do this is through a vacation, and we are perfectly positioned to make that happen. As I look at some of the compelling statistics about the state of leisure travel right now, I see that despite some of the inflationary headwinds, Americans continue to spend on travel. In fact, in one survey 61% of Americans said that travel will be a high budget priority over the next three months, reflecting strong leisure demand. Specific to our owners, over 108,000 destination searches were completed on our owner website in March, a 20% increase versus March of last year, so that tells me that demand for leisure travel continues to be robust. Consumer sentiment around international travel is also showing some green shoots, and for us that means international travelers are starting to come back to key domestic markets like Florida and Hawaii. In fact, though…

Thanks Steve and good morning everyone. Today I’m going to review our first quarter results and discuss the continued strong recovery we’ve seen across our businesses. After that, I’ll turn the call over to Tony to discuss the strength of our balance sheet and liquidity position as well as provide color around our 2022 expectations. Starting with our vacation ownership business, while we did see some impact from the omicron variant in the early part of the first quarter, we still saw significant year-over-year improvement in all parts of the business as our operations continued to recover and ramped back up to and, in most areas, exceed pre-pandemic levels. Our product continues to resonate very well with customers and our tour channel optimization work once again has generated strong results. Tours were up 71% from the prior year. Contract sales in the quarter grew 75% to $394 million and contract sales for all of North America, even after excluding Welk, were over 7% higher than Q1 2019. Our VPGs remain strong, reaching $4,706, up 9% sequentially. First time buyers represented 29% of contract sales, a 300 basis point improvement from last year’s first quarter and in line with the fourth quarter of 2021. As I’ve mentioned in the past, growing first time buyers is a key part of our overall strategy as they historically double their revenue contribution within the first five years of ownership. As we progress throughout 2022, we expect continued recovery of first time buyer tours to pre-pandemic levels and higher demand from direct marketing offers has also produced strong package growth. As of the end of the first quarter, our package pipeline remains strong at nearly 200,000 tours with 40% of those packages already activated for future arrivals. We saw significant year-over-year improvement in development profit,…

Thanks John. I too am very happy with our strong results this quarter. Starting with our balance sheet and liquidity position, you may have seen that we amended our revolving credit facility at the end of the first quarter, increasing the capacity by $150 million to $750 million and extending the term to March 31, 2027. With that increased capacity, we ended the quarter with $1.2 billion in liquidity, including $354 million of cash, $120 million of gross notes receivable eligible for securitization, and $748 million of available capacity under our revolver. At the end of the first quarter of 2022, we also had $2.7 billion of net corporate debt outstanding and $1.8 billion of non-recourse debt related to our securitized notes receivable. In our financing business with our notes balance currently approaching the average balance for 2019, a full year of Welk results included and contract sales expected to grow double digits this year, we expect financing profit to also increase double digits compared to last year. We also expect to complete a securitization in the second quarter, but with rising interest rates we anticipate a higher cost of funds for this transaction than what we’ve seen in rent years, but still comparatively low on a historical basis. We had already factored these increases into our guidance for the year. As it relates to our net corporate debt, we believe we are well positioned with only $230 million of near term debt maturities and 90% of our net corporate debt effectively fixed. Given our continued strong performance in the first quarter, we returned approximately $168 million of cash to shareholders, including repurchasing $119 million of our common stock at an average price per share of $156.50 and paying two quarterly dividends totaling $49 million. As of March 31, 2022,…

Our first question comes from the line of Patrick Scholes with Truist Securities. Please proceed with your question.

Good morning everyone. A couple questions here, and I apologize if you did say this in the prepared remarks. Do you have any statistics on how your prepaid packages are tracking for the rest of the year versus, say, 2019, and then any initial indications on that versus--I’m sorry, for 2023, how packages are tracking? Thank you.

I can give you some numbers, and it’s a combination of owner and preview package bookings, Patrick, compared to ’19. For the first half of the year, it’s 9% over 2019; for the second half of the year, it’s 14% over 2019, so you put the two together arithmetically, it’s 11%. I don’t have in front of me the 2023 numbers; however, I would surmise that it continues to be strong. Obviously you again get to the point from a comparison standpoint that obviously working off of a base, the percentage numbers may be a little bit smaller, but I still think it’s very positive.

The only other color I would add is just on the package offerings. We are seeing a substantially higher uptake on those offerings versus 2019, to the point where in some cases we’ve actually pushed the price of the vacation package. In certain areas, as we’ve talked about, we’ve had very high owner occupancy, which will continue here as we move through this year. It will start to abate, I think, as we go into next year, but that--you know, once again same thing on the rentals, but same thing on the packages, it does limit some of the availability, but the overall demand for the packages is the best I’ve ever seen it.

Okay, very good. My follow-up question is on the unchanged EBITDA guidance for the rest of the year. From the tone of the call, it certainly sounded like 1Q was above your expectations, it was above street expectations. I understand and I appreciate conservatism certainly in this world, but is it fair to think that without--barring any black swan events, that rest of the year is--the implied guidance is in fact conservative unless, again, something we can’t forecast happens? Again, I don’t mean to put words in your mouth there.

No, I think it’s a fair question, and I think you heard Tony said clearly we’re--at least our dialog is about guiding towards a higher end of our guidance. As you will recall, in about a month we’ve got an investor day and I would expect us to be more declarative about where we think things are going to go. I mean, depending on the news of the day and the macro environment, we have a tendency to always want to not only meet but exceed the expectations of our investors and the street. You could get out a little further over your skis and all of a sudden have something run amok in the economy, which would cause that to be probably too aggressive, so that’s the reason why we typically have been a little bit more conservative, but we’ll have a lot more to share in a little over a month.

Great, I appreciate it, and I’m looking forward to the investor day. Thank you.

Thank you.

Thank you. Our next question comes from the line Ben Chaiken with Credit Suisse. Please proceed with your question.

Hey, how’s it going? There’s been a nice mix shift down in your cost of product on the VLI side--I guess your inventory cost, rather, presumably as you collected inventory the last two years through defaults and repurchases, etc. of other low cost channels, which is visible today in the quarter. If you look at your balance sheet today, you have several years of unsold inventory. Does the benefit that we’re currently seeing apply to the rest of that inventory, or is this just kind of a one or two quarter tailwind? How do you think about it?

Yes, I could tell you that we expect these inventory product cost levels to continue for the next few years. We are continuing repurchase activity right now. We do get low cost inventory back from our owners routinely and we have agreements with our associations to take their inventory back, so that’s ongoing year-over-year. We do have some new developer inventory we’ve gotten from asset-like transactions or self developed inventory - on the balance sheet, that could be a little bit higher product cost, but you have that lower inventory, the lower product cost inventory coming in for our normal repurchase activity, so when you blend those two together, we believe that going forward we can maintain those lower inventory product cost levels for a while.

That’s really helpful, thank you. Then I think you mentioned on the call reportability, I believe was a touch higher than we were expecting. Can you just remind us, I know that’s just a timing issue and it will come back later, but can you remind how that occurs? Is that a function of sales accelerating towards the end of the quarter thus creating a timing issue when there’s a decision period? Thanks.

Yes, you’re exactly right, Ben. If you go back even to Q1 of 2021, it had a similar--you know, notwithstanding lower contract sales, but it had a similar deferred revenue impact, if you will. So yes, what’s basically happening is because of how we recognize for GAAP revenue those contract sales based on closing, it just means that your contract sales accelerated at the end of the first quarter much higher than what you finished the year at, right, so just the natural result is that that revenue’s coming and the associated EBITDA that I mentioned, the $24 million, and that will happen in the second quarter. The cadence throughout the year generally is you have your biggest higher deferred impact for the first quarter, you have some in the second quarter because usually you end the second quarter stronger, right, in June than you end the first quarter, and then as you start to move through the third, most of that ultimately comes back in the fourth quarter. That’s kind of been the cadence. It wasn’t necessarily that much higher than we were expecting. It was somewhat in line and not really unusual from a historical perspective.

Thank you very much.

Thank you. Ladies and gentlemen, as a reminder, if you’d like to join the question queue, please press star, one on your telephone keypad. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your question.

Hey, good morning guys. I think you mentioned the mix of first time buyers was 29% and that was up 300 basis points year-over-year. I know longer term you guys want to get it as high as possible. What do you think it takes to kind of get there, and is there anything--you know, how much more can you do to juice things to get it there, and how much of it has to happen naturally?

Yes, I think historically--you know, kind of pre spin-off, it was kind of a heyday, we were like a 50/50 mix. Keep in mind, we had a much lower owner base at the time, so again you apply the arithmetic and that gets in the way a little bit. I think if you think about 40% to 45% first time buyers as kind of the optimal point that you’re trying to get to, you’re trying to bring more people into the system for a variety of reasons. Number one, obviously, you expand your ability to sell more financing to these folks, the upgrade program after the typical results are in the first five years after their purchase, they have a tendency to buy as much as they did the first time out. You get more maintenance fees, more club fees, etc., plus you get referrals from those owners that you haven’t been able to enjoy otherwise. Typically how that will happen is as you open up new source channels to bring people in, then you’ll start to see increased first time buyers. The one thing that--you know, there have been some things that we’ve stepped away from. I think you’ve heard us talk about the OPC channel, which while it can be a source of first time buyers, it’s a relatively inefficient allocation of your cost to do so; in other words, it’s a high cost, low yield channel. Aside from Hawaii where we still maintain some OPC locations, and in the Welk business right now who they’ve done reasonably well with OPC, and that will change over time as we switch to more Hyatt-sourced channels, you’ll see some of that. The other place that you typically get first time buyers is through linkage locations, and as you might imagine over the last couple years, we’ve stepped away from a lot of those linkage locations because the hotels were empty. We are now starting to turn those back on selectively and you’ll see that start to come. We’ll see that number continue to rise. I’m not the least bit embarrassed to tell you that our owners want to buy more of our product. We’re happy to have that, so we can walk and chew gum at the same time, but if we can get up in that 40%, 45% range, I think that would be pretty optimal for us.

Okay, thanks Steve. Then a follow-up question was on labor, but more in the sense of in the sales centers, I’m thinking your top producers, they do pretty well, they’re on commission, but is there any issue attracting younger folks or entry level sales people because maybe they can get a much higher wage at a retail operation of some kind, versus taking a chance on a commission? Are you seeing any challenges there?

Well, let me break it down into the two components parts, which is both the marketing side and the sales side. On the sales side, yes, I think we’ve made great progress on the sales side, we’re pretty well staffed on the sales front, not to say that we won’t add more sales people between now and the end of the year. But we’ve had to do that with some sign-on incentives, etc., but that’s all manageable because, as you mentioned, it is largely a commission-based sales force. On the marketing side, we’ve had more of a challenge. Again, marketing folks do make a commission, although it’s a different scale, etc., and we’ve had some difficulties getting marketing people. Again, that’s starting to improve, but I would not want to mislead you by saying we’ve got--we’ve solved the Gordian knot here, we haven’t. You’ve seen the statistics about the number of people that continue to leave the hospitality industry, etc., and we will continue to be very vigilant about how we go out and try to recruit and find talent and add them to the organization. The good news is once people join us, as you have mentioned, you can make a pretty good living by being part of this organization, and they’re generally pretty satisfied; but because of the pandemic, obviously, we had to scale back, and when we did so, we shed some jobs which we are now in the process of trying to recoup and add back to the system.

Okay, very helpful. Thanks Steve.

Thank you.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I’ll turn the floor back to Mr. Weisz for any final comments.

Thanks Melissa. As we close today’s call, I want to touch on the idea that vacations today are infinitely more meaningful than they were over 10 years ago when we first became a publicly traded company. Over that same time frame, the pace of life has significantly accelerated and life overall has become more complex, particularly during the past two years. While digital innovations have helped many stay more connected, the pressure of doing so has taken away from something special that we at Marriott Vacations Worldwide can provide: togetherness. Vacations let you disconnect and reignite the relationships and interactions that do not always occur during the normal pace of life today, and definitely not through video call or Facetime. As a business, we are 100% focused on leisure activities and providing the power of vacations. Our business is vibrant, resilient and well positioned not only today but for the future. I’ll be excited to see many of you next month at our investor day in New York City and as always, thank you for your interest. We wish you continued health and treasured time with your family and friends, and finally to everyone on the call and your families, stay safe and enjoy your next vacation.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.