Greetings, and welcome to the Marriott Vacations Worldwide Fourth Quarter 2024 Earnings Call. At this time, all participants 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. It is now my pleasure to introduce, Neal Goldner, Vice President, Investor Relations. Neil, you may begin.

Thank you, and welcome to the Marriott Vacations Worldwide fourth quarter earnings call -- conference call. I am joined today by John Geller, our President and Chief Executive Officer; and Jason Marino, our Executive Vice President and Chief Financial Officer. 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, which could cause future results to differ, materially from those expressed in or implied by our comments. Forward-looking statements in the press release, as well as 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 in the schedules attached to our press release and on our website. With that, it's now my pleasure to turn the call over to John Geller.

Thanks, Neil. Good morning, everyone, and thank you for joining our fourth quarter earnings call. We had a solid fourth quarter reflecting our team’s hard work and the resilience of our leisure focused business model, demonstrating that our proactive steps to strengthen performance are working. One notable area of strength in the economy continues to be leisure travel. And the steps we’ve taken to expand our sales reach and adjust our promotions are enabling us to capitalize on this. I’ve always believed that people prioritize their vacations and following the pandemic, this has been even more pronounced. This trend continued in the most recent quarter where we ran system wide resort occupancy of 90%, including 95% occupancy in Hawaii and we remain committed to meeting the needs of our customers as they prioritize spending on vacation to enjoy time with their families and friends. We believe our resorts with their extensive amenities and spacious accommodations are the best place to do it and our customers agree with us. Before we get too deep into the fourth quarter results, I’d like to reflect on what we accomplished last year as well as give you my view for 2025. Our owners and our other customers continue to put a high value on our brands and the experiences we offer, but they also are facing economic pressures. So last year, we launched a number of initiatives focused on driving revenue, expanding our sales reach and adjusting our promotional strategy. We also expanded our use of virtual tours and non-traditional sales channels like roadshows and owner cruises. The result was a 7% increase in contract sales in the fourth quarter with first time buyer sales growing even faster. It was also great to see Hawaii sales grow double digits year-over-year in the quarter. On…

Thanks, John. Today, I’m going to review our fourth quarter results, our balance sheet and liquidity position, our cost savings and efficiencies initiative and our outlook for the year. Starting with our Vacation Ownership segment. We ended the year on a very strong note, growing contract sales by 7% year-over-year and outperforming our expectations on adjusted EBITDA. First time buyer contract sales increased 9% year-over-year, our best performance in nearly two years, and owner sales increased 6%. Defaults and delinquencies were largely unchanged on a year-over-year basis in the fourth quarter, and our sales reserve was nearly 12%, in line with our expectations. As we have talked about in the past, we have always had high underwriting standards. Even through the pandemic, we’ve not lowered them. We have also taken steps to improve the underwriting standards of our acquired brands. This commitment is reflected in the rising average FICO scores of our originated notes, which have increased each year since 2020. In addition to keeping maintenance fee increases for our points-based products to low single digits this year, we’ve also implemented enhanced collection processes and increased staffing to address our default and delinquency issues, which we believe are having a positive impact. As a result, our delinquencies have stabilized over the past few quarters. Continuing down the P&L, product cost was relatively flat year-over-year on a percentage basis, while marketing and sales cost increased. As a result, development margin was a strong 26%. Moving to the rest of our VO business. Rental occupancy increased 300 basis points and profit increased 20% compared to last year, driven by additional costs allocated to marketing and sales expense to drive tours. Resort management profit increased 6% and financing profit was 6% lower due to higher borrowing costs. As a result, adjusted EBITDA in…

Thank you. We’ll now be conducting a question-and-answer session. The first question today is from the line of Chris Woronka with Deutsche Bank. Please proceed with your questions.

Hey, good morning, guys. Thanks for taking the question. Good morning. So, you mentioned in the prepared comments the new owner mix, it was up nicely in 2024. Is that a trend you expect to continue in 2025? And then kind of along with that, are you seeing any changes in propensity to finance among your first time buyers?

Thanks. Yes. Thanks, Chris. Yes, I mean, as we’ve talked about with all the package tours and driving first time buyer growth, Yes, the goal is to continue to get outsized performance and more first time buyers. That’s what you saw the benefit in terms of some of the contract sales growth in the fourth quarter. The offset is, as we’ve always talked about is the acquisition costs, the marketing and sales costs related to those first-time buyers is higher than it is for existing owners. So but yes, for the long term health, as we’ve always talked about, we want to continue to grow first time buyers. We’re investing in those tours and excited to see some of that change in mix in the fourth quarter and expect some more of that here as we go into next year. In terms of financing propensity for first time buyers, we haven’t really seen a big change in propensity.

Okay. Thanks, John. And then the follow-up would be okay, thanks. So the follow-up would be, you mentioned, I think $90 million to $95 million of inventory repurchase this year. Does that correlate with the kind of that increased reserve you took last year? In other words, are those units kind of being realized into, I guess, repurchase, if that makes sense?

Yes. I mean, when you think about what we’re talking about there, it is more owners that have owned a long time that aren’t using their getting on vacation as much and we’re taking stuff back. There’s maintenance fee defaults, smaller piece that we take get back from the homeowners association and all that. So that’s fairly stabilized as we look at it, just kind of churn, if you will, in the existing owner base.

Okay, got you. Fair enough. Thanks, John.

Our next question is from the line of Ben Chaike with Mizuho. Please proceed with your questions.

Hey, how’s it going? Thanks for taking my questions. Hey, how’s it going? I’d love to just maybe think about the bridge from '24 EBITDA to the '25 guide maybe at the midpoint without getting too in the weeds. I know you mentioned there was some pressure on rentals, I believe if I pick that up of around $15 million, I guess maybe just like clarifying that headwind and then also on top of that, was there a compensation headwind in 2025 versus 2024 from a management compensation perspective? If so, I don’t know if I caught that headwind in the prepared remarks. And then could you also help us presumably there was a 1Q year-over-year provision headwind just because things ramped in kind of 2Q, 3Q of last year. So I’d imagine that created a tough comp, but just maybe providing a little more context to those numbers? Thanks.

Sure. And I’ll start here. Jason can talk a little bit about the provision stuff. Yes, on the rental side, look, ’24 was a great rental year for us. We had a couple of things going on that benefited ’24 versus where we started the year. We knew we had plus points which are we had given out higher plus points to incent people to buy coming out of COVID. So think 2021, ’20 ’20 ’2 timeframe. And because of COVID, we gave people longer time to use those two, three years. So there was a kind of a convergence of expirations, if you will, of some of those COVID points, which we would normally those plus points would be our inventory we could otherwise rent, right. But there was slightly higher expiration and we picked that up and then we were also able to drive as we talked about higher occupancies and rentals. So we got call it about a $10 million benefit give or take as the year wrapped up in rentals that really benefited ’24. We just don’t have that in ’25. I think as you look at 2025% a little bit as we’ve always talked about on the rental side, different than a hotel company, right. The mix of inventory that we were going to have to rent depends on how people exchange and owner usage and where they’re staying. And we do expect it to skew towards some core ADR markets. I think the desert in Orlando this year, which is a bit of a headwind. That said, with all the modernization work and things we’re focused on, we’re hoping to do a lot better again in rentals like we did last year. So the team’s focused on it. But just as we sit here…

Yes, Ben. On the loan loss, I guess the way I think about it is as we go through the year, it will be a slight headwind year-over-year in Q1, assuming we’re kind of at that 12% number for Q1. And then we’ll obviously have the tailwind as we pass Q2 with the sales reserve increase last year and then the second half of the year should be relatively flat year-over-year. So that’s the way I think about it. And then net, it will be a tailwind for 2025, but it will be a slight headwind here in Q1 as we lap Q1.

Okay, got it. That’s very helpful. Maybe just a quick clarification. So on the rental side, just maybe like maybe di-still it down or simplify it, $10 million hard comp from benefit in 2024 and then the way your customers are choosing to travel in 2025 SKUs to lower ADR rentals being available?

Correct.

And then it sounds like so you’ve got $15 million to $20 million higher variable comp, which makes sense. And then I guess you were saying you slowed some project investments in 2024 and then those are picking back up in 2025. So that creates another $8 million just to maybe just di-still everything?

Yes, I think I said $8 million to $10 million in that range. That’s right.

Yes. Thank you. Appreciate it, more background or context around the sort of cost and revenue initiatives and sort of how they I guess how they came about, right? I imagine there’s some ramp post-COVID where we’re just trying to get the business running again and maybe now taking attendance on some things that you may not need. How did all this sort of start come about and that would be helpful?

Sure. Yes. I mean, as you’re aware, we’ve obviously done a few acquisitions here. And so a lot of these initiatives were already identified things we were working on. The real as we took a step back, the real driver was, what’s holding us back on some of our growth initiatives and what do we need to do to accelerate those. So these were all things not all things, because we also engage the organization more broadly on other ideas and things that we could really do to either drive efficiencies or drive growth and really put a program around that. That’s what we call our modernization effort. And then it was really about sequencing. But the costs we’re talking about is really just an acceleration of a lot of things we wanted to do, especially on the technology side. Jason talked about some of the one time investments. These were expected to happen over time, but we weren’t getting the growth opportunities by waiting. And so as we took a hard look at it, we said how do we accelerate all this, which will both take costs out because you’ll get off of duplicate applications, consolidate, but also use applications that will help drive better marketing and sales efficiencies, right? Better technology for digitizing how our consumers interact with us. Technology that we’ve rolled out in the call center on virtual voice to service our customers and enabling more things in that area. So it was really putting a hard focus and what I’m excited about is just all the energy it’s created with our leaders that have been involved in this and the opportunities to really accelerate growth and having a clear plan as to how we’re going to move forward.

Thank you. Our next question is from the line of Patrick Scholes with Truist Securities. Please proceed with your question.

Hi. Good morning, everyone. Looking forward to the Investor Day in the fall. A granular question, specifically on the G&A, we’ve got a couple pushes and pulls here and perhaps for modeling purposes. We’re starting with a, I guess, a GAAP figure for the full year 2024, $243 million specifically on a growth rate or perhaps slight decline off of the $243 million How should we think about that sort of percentage wise? Thank you. Hopefully, that made sense.

I think the $243 million yes. So, I think as we’ve talked about, I mean, we’re going to have a return, as John already mentioned, of call it $15 million to $20 million of incentive comp and then some of that higher IT project spending. So I think you just take those two and figure out the growth rate there.

Are we missing maybe we’re not understanding your question, Patrick. Well, you have some cost savings, but then you have the higher IT, the higher set of comp. I’m just trying to see like what’s the net of the pushes and pulls in there just so we can quarterly model. And remember, cost savings and things that we’re pursuing, those aren’t all in G&A, right? Those get spread through some of the different business lines. Now there’s a piece in G&A. I don’t know, I’m looking at Jason. I don’t know how much we kind of spread into the G&A for cost savings from the SVO.

Yes, it’s about $10 million right now.

Thank you. At this time, I would like to hand the floor back to Mr. Geller for closing remarks.

Great. Thank you everyone for joining our call today. We had another solid quarter growing contract sales 7% year-over-year with first time buyer sales growing 9%. We also ended the quarter with 260,000 preview packages, which puts us in a good spot as we enter the year. Consumers around the world are choosing to spend their discretionary dollars on travel and we have strategies in place to capitalize on that including adding new resorts in The US. And in Asia Pacific along with new sales centers. We also expect to generate $150 million to $200 million in run rate adjusted EBITDA benefits by the end of 2026 through our business modernization initiatives. I believe our company is positioned well and the excitement from our modernization initiative to accelerate growth has energized our organization. I hope many of you come to our Investor Day later this year to hear about how we plan to grow in the future as well as speak with our senior leaders. Finally, on behalf of our associates, our owners, members and customers around the world, I want to thank you for your continued interest in our company and hope to see you on vacation soon. Thank you.

Thank you. This does conclude today’s teleconference. We thank you for your participation. You may now disconnect your lines at this time.