Marriott Vacations Worldwide ("MVW") Reports First Quarter Financial Results

ORLANDO, Fla., May 7, 2019 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported first quarter financial results and reaffirmed its guidance for the full year 2019.

On September 1, 2018, the company completed its acquisition of ILG, Inc. ("ILG"). In addition to a discussion of first quarter reported results presented in accordance with United States generally accepted accounting principles ("GAAP"), the company is providing adjusted results of operations from January 1 to March 31, 2019 to further assist investors. Throughout this press release, the results from the business associated with the brands that existed prior to the ILG Acquisition are referred to as "Legacy-MVW," while the results from the business and brands that were acquired from ILG are referred to as "Legacy-ILG."  In addition, to provide a more meaningful year-over-year comparison of financial results, the company is providing Q1 2018 financial information in the Financial Schedules that follow that combine Legacy-MVW's and Legacy-ILG's Q1 2018 financial results, conformed to the current year presentation.

First Quarter 2019 Highlights:

• Consolidated vacation ownership contract sales increased 74% to $354 million compared to the first quarter of 2018.
• Legacy-MVW vacation ownership contract sales increased 10%.
• Combined vacation ownership contract sales increased 5%.
• Net income attributable to common shareholders was $24 million, or $0.51 per fully diluted share ("EPS"), compared to net income attributable to common shareholders of $36 million, or $1.32 per fully diluted share, in the first quarter of 2018.
• Adjusted net income attributable to common shareholders increased 76% to $67 million compared to the first quarter of 2018 and Adjusted fully diluted EPS increased 4% to $1.45.
• Adjusted EBITDA increased to $166 million in the first quarter of 2019 compared to $63 million in the first quarter of 2018. Revenue reportability negatively impacted Adjusted EBITDA in the first quarter of 2019 by $21 million, $13 million higher than the first quarter of 2018.
• Legacy-MVW Adjusted EBITDA increased 16%.
• On a combined basis, Adjusted EBITDA increased 4% and, excluding the impact of the disposition of VRI Europe, which was sold in the fourth quarter of 2018, Adjusted EBITDA increased 6%.
• The company repurchased 1.2 million shares of its common stock for $106 million in the first quarter of 2019 at an average price per share of $86.32 and paid dividends of $41 million.
• The company reaffirms its 2019 full year Adjusted EBITDA, Adjusted Free Cash Flow and contract sales guidance and raises its full year Adjusted fully diluted EPS projection.

"I am very pleased with our strong start to the year with Legacy-MVW contract sales increasing 10% and Legacy-MVW Adjusted EBITDA growing 16%," said Stephen P. Weisz, President and Chief Executive Officer. "The integration of ILG is progressing well, and we started to gain traction on sales initiatives as we progressed through the quarter.  We remain on track to realize more than $100 million of synergies from this acquisition and are very excited about the opportunities provided by this transformational business combination."

First Quarter 2019 Segment Results

Vacation Ownership

Consolidated vacation ownership contract sales were $354 million, an increase of 74% compared to the prior year.  Legacy-MVW contract sales grew 10% in the quarter and Legacy-MVW North America VPG increased 1%. On a combined basis, consolidated contract sales increased 5% compared to the prior year, reflecting the strong growth from Legacy-MVW, partially offset, as anticipated, by slower growth at Legacy-ILG as we continue to integrate the business.

Development margin was $44 million compared to $24 million in the first quarter of 2018 and development margin percentage was 14.5%. On a combined basis, adjusted development margin, which excludes the impact of revenue reportability and other charges, increased 30% to $67 million in the first quarter of 2019. Adjusted development margin percentage on a combined basis was 20.5% in the quarter compared to 16.8% in the prior year.

Resort management and other services revenues totaled $125 million, an increase of 79% compared to the first quarter of 2018, and were $59 million net of expenses. On a combined basis, resort management and other services net of expenses increased 5% compared to the prior year.

Rental revenues totaled $147 million, an increase of 98% compared to the first quarter of 2018, and were $45 million net of expenses. On a combined basis, rental revenues net of expenses were 4% higher year-over-year.

Financing revenues increased 89% to $67 million compared to the first quarter of 2018 and were $45 million net of expenses. On a combined basis, financing revenues net of expenses increased 12% compared to the prior year.

Vacation Ownership segment financial results were $133 million for the first quarter of 2019, an increase of 64% compared to the prior year. On a combined basis, Vacation Ownership segment Adjusted EBITDA increased 5% to $171 million compared to the prior year.

Exchange & Third-Party Management

Exchange & Third-Party Management revenues totaled $124 million in the first quarter of 2019. Total Interval Network active members at the end of the first quarter of 2019 were 1.7 million and average revenue per member in the first quarter of 2019 was $46.24.

Exchange & Third-Party Management segment financial results and Adjusted EBITDA were $52 million and $66 million, respectively, in the first quarter of 2019.

Balance Sheet and Liquidity

On March 31, 2019, cash and cash equivalents totaled $222 million. The inventory balance at the end of the first quarter included $862 million of finished goods and $37 million of work-in-progress. The company had $3.9 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the first quarter, an increase of $0.1 billion from year-end 2018. This debt included $2.2 billion of corporate debt and $1.7 billion of debt related to the company's securitized notes receivable. As of March 31, 2019, the company's combined debt to adjusted EBITDA ratio was 2.7x.

As of March 31, 2019, the company had $521 million in available capacity under its revolving credit facility and $132 million of gross vacation ownership notes receivable eligible for securitization.

2019 Outlook

The Financial Schedules that follow reconcile the non-GAAP financial measures set forth below to the following full year 2019 expected GAAP results for MVW.

2019 expected GAAP results and guidance above include an estimate of the impact of future spending associated with on-going ILG integration efforts.

The company reaffirms its full year 2019 guidance as reflected in the chart below:

Adjusted fully diluted EPS increased from the previous guidance of $7.23 to $7.83 due to a reduction in shares outstanding.

Non-GAAP Financial Information

Non-GAAP financial measures, such as adjusted net income, adjusted EBITDA, adjusted fully diluted earnings per share, adjusted free cash flow, adjusted development margin and adjusted and combined financial measures are reconciled and adjustments are shown and described in further detail in the Financial Schedules that follow.

First Quarter 2019 Earnings Conference Call

The company will hold a conference call at 10:00 a.m. ET today to discuss these results and the guidance for full year 2019. Participants may access the call by dialing 877-407-8289 or +1-201-689-8341 for international callers. A live webcast of the call will also be available in the Investor Relations section of the company's website at www.marriottvacationsworldwide.com.

An audio replay of the conference call will be available for seven days and can be accessed at 877-660-6853 or +1-201-612-7415 for international callers. The conference ID for the recording is 13689493. The webcast will also be available on the company's website.

About Marriott Vacations Worldwide Corporation

Marriott Vacations Worldwide Corporation is a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products and services. The company has a diverse portfolio that includes seven vacation ownership brands. It also includes exchange networks and membership programs, as well as management of other resorts and lodging properties. As a leader and innovator in the vacation industry, the company upholds the highest standards of excellence in serving its customers, investors and associates while maintaining exclusive, long-term relationships with Marriott International and Hyatt Hotels Corporation for the development, sales and marketing of vacation ownership products and services. For more information, please visit www.marriottvacationsworldwide.com.

Note on forward-looking statements

This press release and accompanying schedules contain "forward-looking statements" within the meaning of federal securities laws, including statements about future operating results, estimates, and assumptions, and similar statements concerning anticipated future events and expectations that are not historical facts, including guidance about full year 2019 results, expected full year 2019 GAAP results and expected synergies from the ILG acquisition. The company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including volatility in the economy and the credit markets, changes in supply and demand for vacation ownership and residential products, competitive conditions, the availability of capital to finance growth, and other matters referred to under the heading "Risk Factors" contained in the company's most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") and in subsequent SEC filings, any of which could cause actual results to differ materially from those expressed in or implied in this press release. These statements are made as of May 7, 2019 and the company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Financial Schedules Follow