UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 8-K
_________________________
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 6, 2024
_________________________
(Exact name of registrant as specified in its charter)
_________________________
| (State or other jurisdiction | (Commission | (IRS Employer | ||||||||||||
| of incorporation) | File Number) | Identification No.) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||||||||
Registrant’s telephone number, including area code (407 ) 206-6000
N/A
(Former name or former address, if changed since last report)
_________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On November 6, 2024, Marriott Vacations Worldwide Corporation (the “Company”) issued a press release reporting financial results for the quarter ended September 30, 2024. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
As provided in General Instruction B.2 of Form 8-K, the information contained in Item 2.02 of this Current Report on Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act of 1934, as amended, nor shall any such information be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended.
Item 7.01 Regulation FD Disclosure
On November 7, 2024, the Company intends to post a new investor presentation to the Investor Relations – Events and Presentations section of the Company’s website, www.marriottvacationsworldwide.com. The Company’s investor presentation is expected to contain information that may be deemed material to investors. The Company uses its website to disseminate updates to its investor presentation and does not intend to file or furnish a Current Report on Form 8-K to alert investors each time the presentation is updated.
The Company routinely posts important information, including news releases, announcements and other statements about its business and results of operations, that may be deemed material to investors on the Investor Relations section of the Company’s website, www.marriottvacationsworldwide.com. The Company uses its website as a means of disclosing material, nonpublic information and for complying with the Company’s disclosure obligations under Regulation FD. Investors should monitor the Investor Relations section of the Company’s website in addition to following the Company’s press releases, filings with the SEC, public conference calls and webcasts.
Item 9.01 Financial Statements and Exhibits.
(d) The following exhibits are being furnished herewith:
| Exhibit Number | Description | |||||||
Press release reporting financial results for the quarter ended September 30, 2024 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MARRIOTT VACATIONS WORLDWIDE CORPORATION | ||||||||
| (Registrant) | ||||||||
| Dated: November 6, 2024 | By: | /s/ Jason P. Marino | ||||||
| Name: | Jason P. Marino | |||||||
| Title: | Executive Vice President and Chief Financial Officer | |||||||
1
Exhibit 99.1
 | Neal Goldner Investor Relations 407-206-6149 neal.goldner@mvwc.com | ||||||||||
| [DRAFT 9] | Cameron Klaus Global Communications 407-513-6606 cameron.klaus@mvwc.com | ||||||||||
Marriott Vacations Worldwide Reports
Third Quarter 2024 Financial Results
ORLANDO, Fla. – November 6, 2024 – Marriott Vacations Worldwide Corporation (NYSE: VAC) (“MVW,” the “Company,” “we” or “our”) reported third quarter 2024 financial results.
Third Quarter 2024 Highlights
•Consolidated Vacation Ownership contract sales increased 5% compared to the third quarter of 2023 to $459 million.
•Net income attributable to common stockholders was $84 million and fully diluted earnings per share was $2.12.
•Adjusted net income attributable to common stockholders was $72 million and adjusted fully diluted earnings per share was $1.80.
•Adjusted EBITDA was $198 million.
•The Company updates its full-year outlook.
“Our results this quarter reflect our continued progress on enhancing the experience for our owners, members and other customers, as well as the continued recovery from last year's Maui wildfires. We also took a series of targeted actions during the quarter, helping us grow contract sales 5% year-over-year,” said John Geller, president and chief executive officer. “While the macro-economic environment remains dynamic, we have extensive work underway focused on accelerating growth and strengthening profitability, and we believe we can drive $50 to $100 million of annual cost efficiencies over the next two years from this initiative.”
In the tables below “*” denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use.
Vacation Ownership
| Three Months Ended | Change | |||||||||||||||||||
(In millions, except volume per guest (“VPG”) and tours) | September 30, 2024 | September 30, 2023 | ||||||||||||||||||
Revenues excluding cost reimbursement | $ | 766 | $ | 671 | 14% | |||||||||||||||
| Total consolidated contract sales | $ | 459 | $ | 438 | 5% | |||||||||||||||
| VPG | $ | 3,888 | $ | 4,055 | (4%) | |||||||||||||||
| Tours | 110,557 | 100,609 | 10% | |||||||||||||||||
Segment financial results attributable to common stockholders | $ | 205 | $ | 149 | 37% | |||||||||||||||
Segment Adjusted EBITDA* | $ | 231 | $ | 173 | 33% | |||||||||||||||
Segment Adjusted EBITDA margin* | 30.1% | 25.8% | 430 bps | |||||||||||||||||
Consolidated contract sales increased year-over-year driven by higher tours. Segment Adjusted EBITDA increased compared to the prior year driven by higher development, resort management and rental profit, partially offset by lower financing profit.
Marriott Vacations Worldwide Reports Third Quarter 2024 Financial Results / 2
Exchange & Third-Party Management
(In millions, except total active Interval International members and average revenue per member) | Three Months Ended | Change | ||||||||||||||||||
| September 30, 2024 | September 30, 2023 | |||||||||||||||||||
Revenues excluding cost reimbursement | $ | 55 | $ | 60 | (10%) | |||||||||||||||
Total active Interval International members (000's)(1) | 1,545 | 1,571 | (2%) | |||||||||||||||||
| Average revenue per Interval International member | $ | 38.93 | $ | 39.15 | (1%) | |||||||||||||||
Segment financial results attributable to common stockholders | $ | 15 | $ | 23 | (33%) | |||||||||||||||
Segment Adjusted EBITDA* | $ | 23 | $ | 30 | (22%) | |||||||||||||||
Segment Adjusted EBITDA margin* | 43.1% | 49.8% | (670 bps) | |||||||||||||||||
(1) Includes members at the end of each period. | ||||||||||||||||||||
Revenues excluding cost reimbursements and Segment Adjusted EBITDA decreased year-over-year due to lower exchange revenue at Interval International and reduced management fees at Aqua-Aston.
Corporate and Other
General and administrative costs increased $5 million in the third quarter compared to the prior year.
Balance Sheet and Liquidity
The Company ended the quarter with $922 million in liquidity, including $197 million of cash and cash equivalents and $655 million of available capacity under its revolving corporate credit facility. The Company also had more than $1.0 billion of total inventory at the end of the quarter, including $274 million classified as a component of Property and equipment.
The Company had $3.0 billion of corporate debt and $2.2 billion of non-recourse debt related to its securitized vacation ownership notes receivable at the end of the third quarter.
During the third quarter, the Company completed its second securitization of 2024, issuing $445 million of vacation ownership notes with a gross advance rate of 98% and a blended interest rate of 4.52%, 197 basis points lower than its November 2023 securitization. The Company also repurchased 120,000 shares of its common stock for approximately $9 million and declared a $0.76 per share quarterly dividend, which was paid in October.
Full Year 2024 Outlook
The Company updates its full year 2024 guidance as reflected in the chart below. The Financial Schedules that follow reconcile the following full year 2024 expected GAAP results for the Company to the non-GAAP financial measures set forth below.
| (in millions, except per share amounts) | 2024 Guidance | ||||||||||
| Contract sales | $1,790 | to | $1,825 | ||||||||
Net income attributable to common stockholders | $225 | to | $240 | ||||||||
| Earnings per share - diluted | $5.80 | to | $6.15 | ||||||||
| Net cash, cash equivalents and restricted cash provided by operating activities | $233 | to | $262 | ||||||||
| Adjusted EBITDA* | $700 | to | $720 | ||||||||
| Adjusted earnings per share - diluted* | $6.05 | to | $6.40 | ||||||||
| Adjusted free cash flow* | $300 | to | $340 | ||||||||
Non-GAAP Financial Information
Non-GAAP financial measures are reconciled and adjustments are shown and described in further detail in the Financial Schedules that follow. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and
Marriott Vacations Worldwide Reports Third Quarter 2024 Financial Results / 3
limitations on their use. In addition to the foregoing non-GAAP financial measures, we present certain key metrics as performance measures which are further described in our most recent Annual Report on Form 10-K, and which may be updated in our periodic filings with the U.S. Securities and Exchange Commission.
Third Quarter 2024 Financial Results Conference Call
The Company will hold a conference call on November 7, 2024 at 8:30 a.m. ET to discuss these financial results and provide an update on business conditions. Participants may access the call by dialing (877) 407-8289 or (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 ir.mvwc.com. An audio replay of the conference call will be available for 30 days 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 approximately 120 vacation ownership resorts and approximately 700,000 owner families in a diverse portfolio that includes some of the most iconic vacation ownership brands. The Company also operates an exchange network and membership programs comprised of more than 3,200 affiliated resorts in over 90 countries and territories, and provides management services to 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, Inc. and an affiliate of Hyatt Hotels Corporation for the development, sales and marketing of vacation ownership products and services. For more information, please visit www.marriottvacationsworldwide.com.
The Company routinely posts important information, including news releases, announcements and other statements about its business and results of operations, that may be deemed material to investors on the Investor Relations section of the Company’s website, www.marriottvacationsworldwide.com. The Company uses its website as a means of disclosing material, nonpublic information and for complying with the Company’s disclosure obligations under Regulation FD. Investors should monitor the Investor Relations section of the Company’s website in addition to following the Company’s press releases, filings with the SEC, public conference calls and webcasts.
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 our ability to accelerate growth and strengthen profitability and expectations for full year 2024 outlook for contract sales, results of operations and cash flows. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions. The Company cautions you that these statements are not guarantees of future performance and are subject to numerous and evolving risks and uncertainties that we may not be able to predict or assess, such as: a future health crisis and responses to such a health crisis, including possible quarantines or other government imposed travel or health-related restrictions and the effects of a health crisis, including the short and longer-term impact on consumer confidence and demand for travel and the pace of recovery following a health crisis; variations in demand for vacation ownership and exchange products and services; worker absenteeism; price inflation; difficulties associated with implementing new or maintaining existing technology; changes in privacy laws; the impact of a future banking crisis; impacts from natural or man-made disasters and wildfires, including the Maui wildfires; delinquency and default rates; global supply chain disruptions; volatility in the international and national economy and credit markets, including as a result of the ongoing conflicts between Russia
Marriott Vacations Worldwide Reports Third Quarter 2024 Financial Results / 4
and Ukraine, Israel and Gaza, and elsewhere in the world and related sanctions and other measures; our ability to attract and retain our global workforce; competitive conditions; the availability of capital to finance growth; the impact of changes in interest rates; the effects of steps we have taken and may continue to take to reduce operating costs and accelerate growth and profitability; political or social strife; and other matters referred to under the heading “Risk Factors” in our most recent Annual Report on Form 10-K, and which may be updated in our future periodic filings with the U.S. Securities and Exchange Commission. All forward-looking statements in this press release are made as of the date of this press release 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, except as required by law. There may be other risks and uncertainties that we cannot predict at this time or that we currently do not expect will have a material adverse effect on our financial position, results of operations or cash flows. Any such risks could cause our results to differ materially from those we express in forward-looking statements.
Financial Schedules Follow
MARRIOTT VACATIONS WORLDWIDE CORPORATION
FINANCIAL SCHEDULES
QUARTER 3, 2024
TABLE OF CONTENTS
Summary Financial Information and Adjusted EBITDA by Segment | A-1 | ||||||||||
| Interim Consolidated Statements of Income | A-2 | ||||||||||
| Revenues and Profit by Segment | A-3 | to | A-4 | ||||||||
| Consolidated Contract Sales to Adjusted Development Profit | A-5 | ||||||||||
Adjusted Net Income Attributable to Common Stockholders Adjusted Earnings Per Share - Diluted | A-6 | ||||||||||
| Adjusted EBITDA | A-7 | ||||||||||
Segment Adjusted EBITDA Vacation Ownership Exchange & Third-Party Management | A-8 | ||||||||||
Interim Balance Sheet Items and Summary Cash Flow | A-9 | ||||||||||
| 2024 Outlook | |||||||||||
Adjusted Net Income Attributable to Common Stockholders Adjusted Earnings Per Share - Diluted Adjusted EBITDA | A-10 | ||||||||||
| Adjusted Free Cash Flow | A-11 | ||||||||||
| Quarterly Operating Metrics | A-12 | ||||||||||
| Non-GAAP Financial Measures | A-13 | ||||||||||
A-1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
SUMMARY FINANCIAL INFORMATION
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended | Change % | Nine Months Ended | Change % | ||||||||||||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||
| GAAP Measures | |||||||||||||||||||||||||||||||||||
| Revenues | $ | 1,305 | $ | 1,186 | 10% | $ | 3,640 | $ | 3,533 | 3% | |||||||||||||||||||||||||
| Income before income taxes and noncontrolling interests | $ | 118 | $ | 66 | 80% | $ | 247 | $ | 334 | (26%) | |||||||||||||||||||||||||
Net income attributable to common stockholders | $ | 84 | $ | 42 | 99% | $ | 168 | $ | 219 | (24%) | |||||||||||||||||||||||||
| Diluted shares | 42.1 | 43.3 | (3%) | 42.1 | 43.8 | (4%) | |||||||||||||||||||||||||||||
| Earnings per share - diluted | $ | 2.12 | $ | 1.09 | 94% | $ | 4.31 | $ | 5.33 | (19%) | |||||||||||||||||||||||||
| Non-GAAP Measures* | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 198 | $ | 150 | 32% | $ | 542 | $ | 575 | (6%) | |||||||||||||||||||||||||
| Adjusted pretax income | $ | 114 | $ | 75 | 53% | $ | 286 | $ | 345 | (17%) | |||||||||||||||||||||||||
Adjusted net income attributable to common stockholders | $ | 72 | $ | 48 | 50% | $ | 185 | $ | 247 | (25%) | |||||||||||||||||||||||||
| Adjusted earnings per share - diluted | $ | 1.80 | $ | 1.20 | 50% | $ | 4.71 | $ | 5.95 | (21%) | |||||||||||||||||||||||||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | |||||||||||||||||||||||||||||||||||
ADJUSTED EBITDA BY SEGMENT
(In millions)
(Unaudited)
| Three Months Ended | Change % | Nine Months Ended | Change % | ||||||||||||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||||||
| Vacation Ownership | $ | 231 | $ | 173 | 33% | $ | 624 | $ | 647 | (4%) | |||||||||||||||||||||||||
| Exchange & Third-Party Management | 23 | 30 | (22%) | 80 | 99 | (19%) | |||||||||||||||||||||||||||||
| Segment Adjusted EBITDA* | 254 | 203 | 25% | 704 | 746 | (6%) | |||||||||||||||||||||||||||||
| General and administrative | (62) | (57) | (8%) | (179) | (189) | 6% | |||||||||||||||||||||||||||||
Other | 6 | 4 | 40% | 17 | 18 | (8%) | |||||||||||||||||||||||||||||
| Adjusted EBITDA* | $ | 198 | $ | 150 | 32% | $ | 542 | $ | 575 | (6%) | |||||||||||||||||||||||||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | ||
A-2
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Sale of vacation ownership products | $ | 387 | $ | 319 | $ | 1,048 | $ | 1,085 | |||||||||||||||
| Management and exchange | 207 | 205 | 633 | 611 | |||||||||||||||||||
| Rental | 151 | 138 | 462 | 435 | |||||||||||||||||||
| Financing | 87 | 81 | 255 | 239 | |||||||||||||||||||
| Cost reimbursements | 473 | 443 | 1,242 | 1,163 | |||||||||||||||||||
| TOTAL REVENUES | 1,305 | 1,186 | 3,640 | 3,533 | |||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||
| Cost of vacation ownership products | 54 | 50 | 145 | 174 | |||||||||||||||||||
| Marketing and sales | 228 | 202 | 677 | 618 | |||||||||||||||||||
| Management and exchange | 123 | 115 | 358 | 332 | |||||||||||||||||||
| Rental | 113 | 119 | 331 | 344 | |||||||||||||||||||
| Financing | 37 | 30 | 106 | 81 | |||||||||||||||||||
| General and administrative | 62 | 57 | 179 | 189 | |||||||||||||||||||
| Depreciation and amortization | 36 | 33 | 109 | 99 | |||||||||||||||||||
| Litigation charges | 2 | 2 | 15 | 7 | |||||||||||||||||||
| Restructuring | 1 | — | 4 | — | |||||||||||||||||||
| Royalty fee | 28 | 30 | 85 | 88 | |||||||||||||||||||
| Impairment | — | — | 2 | 4 | |||||||||||||||||||
| Cost reimbursements | 473 | 443 | 1,242 | 1,163 | |||||||||||||||||||
| TOTAL EXPENSES | 1,157 | 1,081 | 3,253 | 3,099 | |||||||||||||||||||
| Gains and other income, net | 9 | 3 | 2 | 34 | |||||||||||||||||||
| Interest expense, net | (40) | (36) | (123) | (106) | |||||||||||||||||||
| Transaction and integration costs | — | (5) | (18) | (28) | |||||||||||||||||||
| Other | 1 | (1) | (1) | — | |||||||||||||||||||
INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS | 118 | 66 | 247 | 334 | |||||||||||||||||||
| Provision for income taxes | (34) | (24) | (79) | (115) | |||||||||||||||||||
NET INCOME | 84 | 42 | 168 | 219 | |||||||||||||||||||
| Net income attributable to noncontrolling interests | — | — | — | — | |||||||||||||||||||
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 84 | $ | 42 | $ | 168 | $ | 219 | |||||||||||||||
EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS | |||||||||||||||||||||||
| Basic shares | 35.3 | 36.4 | 35.4 | 36.9 | |||||||||||||||||||
| Basic | $ | 2.38 | $ | 1.16 | $ | 4.74 | $ | 5.96 | |||||||||||||||
| Diluted shares | 42.1 | 43.3 | 42.1 | 43.8 | |||||||||||||||||||
| Diluted | $ | 2.12 | $ | 1.09 | $ | 4.31 | $ | 5.33 | |||||||||||||||
A-3
MARRIOTT VACATIONS WORLDWIDE CORPORATION
REVENUES AND PROFIT BY SEGMENT
for the three months ended September 30, 2024
(In millions)
(Unaudited)
| Reportable Segment | Corporate and Other | Total | |||||||||||||||||||||
| Vacation Ownership | Exchange & Third-Party Management | ||||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Sales of vacation ownership products | $ | 387 | $ | — | $ | — | $ | 387 | |||||||||||||||
Management and exchange(1) | |||||||||||||||||||||||
| Ancillary revenues | 66 | 1 | — | 67 | |||||||||||||||||||
| Management fee revenues | 52 | 3 | (1) | 54 | |||||||||||||||||||
| Exchange and other services revenues | 34 | 40 | 12 | 86 | |||||||||||||||||||
| Management and exchange | 152 | 44 | 11 | 207 | |||||||||||||||||||
| Rental | 140 | 11 | — | 151 | |||||||||||||||||||
| Financing | 87 | — | — | 87 | |||||||||||||||||||
Cost reimbursements(1) | 484 | 1 | (12) | 473 | |||||||||||||||||||
| TOTAL REVENUES | $ | 1,250 | $ | 56 | $ | (1) | $ | 1,305 | |||||||||||||||
| PROFIT | |||||||||||||||||||||||
| Development | $ | 105 | $ | — | $ | — | $ | 105 | |||||||||||||||
Management and exchange(1) | 80 | 11 | (7) | 84 | |||||||||||||||||||
Rental(1) | 20 | 11 | 7 | 38 | |||||||||||||||||||
| Financing | 50 | — | — | 50 | |||||||||||||||||||
| TOTAL PROFIT | 255 | 22 | — | 277 | |||||||||||||||||||
| OTHER | |||||||||||||||||||||||
| General and administrative | — | — | (62) | (62) | |||||||||||||||||||
| Depreciation and amortization | (25) | (7) | (4) | (36) | |||||||||||||||||||
| Litigation charges | (2) | — | — | (2) | |||||||||||||||||||
| Restructuring | (1) | (1) | 1 | (1) | |||||||||||||||||||
| Royalty fee | (28) | — | — | (28) | |||||||||||||||||||
| Gains and other income, net | 4 | 1 | 4 | 9 | |||||||||||||||||||
| Interest expense, net | — | — | (40) | (40) | |||||||||||||||||||
| Other | 2 | — | (1) | 1 | |||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS | 205 | 15 | (102) | 118 | |||||||||||||||||||
| Provision for income taxes | — | — | (34) | (34) | |||||||||||||||||||
| NET INCOME (LOSS) | 205 | 15 | (136) | 84 | |||||||||||||||||||
Net income attributable to noncontrolling interests(1) | — | — | — | — | |||||||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 205 | $ | 15 | $ | (136) | $ | 84 | |||||||||||||||
SEGMENT MARGIN(2) | 26.8% | 27.9% | |||||||||||||||||||||
(1) Amounts included in Corporate and other represent the impact of the consolidation of certain owners’ associations under the relevant accounting guidance, and represent the portion attributable to individual or third-party vacation ownership interest owners. | |||||||||||||||||||||||
(2) Segment margin represents the applicable segment’s net income or loss attributable to common stockholders divided by the applicable segment’s total revenues less cost reimbursement revenues. | |||||||||||||||||||||||
A-4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
REVENUES AND PROFIT BY SEGMENT
for the three months ended September 30, 2023
(In millions)
(Unaudited)
| Reportable Segment | Corporate and Other | Total | |||||||||||||||||||||
| Vacation Ownership | Exchange & Third-Party Management | ||||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Sales of vacation ownership products | $ | 319 | $ | — | $ | — | $ | 319 | |||||||||||||||
Management and exchange(1) | |||||||||||||||||||||||
| Ancillary revenues | 62 | 1 | — | 63 | |||||||||||||||||||
| Management fee revenues | 44 | 5 | — | 49 | |||||||||||||||||||
| Exchange and other services revenues | 37 | 44 | 12 | 93 | |||||||||||||||||||
| Management and exchange | 143 | 50 | 12 | 205 | |||||||||||||||||||
| Rental | 128 | 10 | — | 138 | |||||||||||||||||||
| Financing | 81 | — | — | 81 | |||||||||||||||||||
Cost reimbursements(1) | 455 | 4 | (16) | 443 | |||||||||||||||||||
| TOTAL REVENUES | $ | 1,126 | $ | 64 | $ | (4) | $ | 1,186 | |||||||||||||||
| PROFIT | |||||||||||||||||||||||
| Development | $ | 67 | $ | — | $ | — | $ | 67 | |||||||||||||||
Management and exchange(1) | 74 | 19 | (3) | 90 | |||||||||||||||||||
Rental(1) | 6 | 10 | 3 | 19 | |||||||||||||||||||
| Financing | 51 | — | — | 51 | |||||||||||||||||||
| TOTAL PROFIT | 198 | 29 | — | 227 | |||||||||||||||||||
| OTHER | |||||||||||||||||||||||
| General and administrative | — | — | (57) | (57) | |||||||||||||||||||
| Depreciation and amortization | (23) | (7) | (3) | (33) | |||||||||||||||||||
| Litigation charges | (2) | — | — | (2) | |||||||||||||||||||
| Royalty fee | (30) | — | — | (30) | |||||||||||||||||||
| Gains (losses) and other income (expense), net | 7 | 1 | (5) | 3 | |||||||||||||||||||
| Interest expense, net | — | — | (36) | (36) | |||||||||||||||||||
| Transaction and integration costs | — | — | (5) | (5) | |||||||||||||||||||
| Other | (1) | — | — | (1) | |||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS | 149 | 23 | (106) | 66 | |||||||||||||||||||
| Provision for income taxes | — | — | (24) | (24) | |||||||||||||||||||
| NET INCOME (LOSS) | 149 | 23 | (130) | 42 | |||||||||||||||||||
Net income attributable to noncontrolling interests(1) | — | — | — | — | |||||||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 149 | $ | 23 | $ | (130) | $ | 42 | |||||||||||||||
SEGMENT MARGIN(2) | 22.3% | 37.4% | |||||||||||||||||||||
(1) Amounts included in Corporate and other represent the impact of the consolidation of certain owners’ associations under the relevant accounting guidance, and represent the portion attributable to individual or third-party vacation ownership interest owners. | |||||||||||||||||||||||
(2) Segment margin represents the applicable segment’s net income or loss attributable to common stockholders divided by the applicable segment’s total revenues less cost reimbursement revenues. | |||||||||||||||||||||||
A-5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
CONSOLIDATED CONTRACT SALES TO ADJUSTED DEVELOPMENT PROFIT
(In millions)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
| Consolidated contract sales | $ | 459 | $ | 438 | $ | 1,336 | $ | 1,325 | |||||||||||||||
| Less resales contract sales | (8) | (11) | (29) | (32) | |||||||||||||||||||
| Consolidated contract sales, net of resales | 451 | 427 | 1,307 | 1,293 | |||||||||||||||||||
| Plus: | |||||||||||||||||||||||
| Settlement revenue | 9 | 12 | 27 | 29 | |||||||||||||||||||
| Resales revenue | 5 | 6 | 16 | 18 | |||||||||||||||||||
| Revenue recognition adjustments: | |||||||||||||||||||||||
| Reportability | 4 | — | (4) | 5 | |||||||||||||||||||
Sales reserve(1) | (54) | (102) | (222) | (185) | |||||||||||||||||||
Other(2) | (28) | (24) | (76) | (75) | |||||||||||||||||||
| Sale of vacation ownership products | 387 | 319 | 1,048 | 1,085 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Cost of vacation ownership products | (54) | (50) | (145) | (174) | |||||||||||||||||||
| Marketing and sales | (228) | (202) | (677) | (618) | |||||||||||||||||||
| Development Profit | 105 | 67 | 226 | 293 | |||||||||||||||||||
| Revenue recognition reportability adjustment | (3) | — | 3 | (3) | |||||||||||||||||||
| Purchase accounting adjustments | — | 2 | 1 | 6 | |||||||||||||||||||
| Adjusted development profit* | $ | 102 | $ | 69 | $ | 230 | $ | 296 | |||||||||||||||
| Development profit margin | 27.2% | 20.7% | 21.6% | 27.0% | |||||||||||||||||||
| Adjusted development profit margin* | 26.7% | 21.5% | 21.9% | 27.4% | |||||||||||||||||||
(1) Reflects increases in the Company’s sales reserve of $70 million and $59 million recorded in the second quarter of 2024 and third quarter of 2023, respectively. | |||||||||||||||||||||||
(2) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue. | |||||||||||||||||||||||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | |||||||||||||||||||||||
A-6
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS AND
ADJUSTED EARNINGS PER SHARE - DILUTED
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
Net income attributable to common stockholders | $ | 84 | $ | 42 | $ | 168 | $ | 219 | |||||||||||||||
| Provision for income taxes | 34 | 24 | 79 | 115 | |||||||||||||||||||
Income before income taxes attributable to common stockholders | 118 | 66 | 247 | 334 | |||||||||||||||||||
| Certain items: | |||||||||||||||||||||||
| ILG integration | — | — | — | 15 | |||||||||||||||||||
| Welk acquisition and integration | — | 5 | 18 | 13 | |||||||||||||||||||
| Transaction and integration costs | — | 5 | 18 | 28 | |||||||||||||||||||
| Early redemption of senior secured notes | — | — | — | 10 | |||||||||||||||||||
| Gain on disposition of hotel, land and other | (1) | (1) | (2) | (8) | |||||||||||||||||||
| Foreign currency translation | (6) | 5 | — | 1 | |||||||||||||||||||
| Insurance proceeds | — | (1) | — | (3) | |||||||||||||||||||
| Change in indemnification asset | 2 | (6) | 4 | (30) | |||||||||||||||||||
| Change in estimates relating to pre-acquisition contingencies | (4) | — | (4) | — | |||||||||||||||||||
| Other | — | — | — | (4) | |||||||||||||||||||
Gains and other income, net | (9) | (3) | (2) | (34) | |||||||||||||||||||
| Purchase accounting adjustments | — | 3 | 1 | 6 | |||||||||||||||||||
| Litigation charges | 2 | 2 | 15 | 7 | |||||||||||||||||||
| Restructuring charges | 1 | — | 4 | — | |||||||||||||||||||
| Impairment charges | — | — | 2 | 4 | |||||||||||||||||||
| Other | 2 | 2 | 1 | — | |||||||||||||||||||
| Adjusted pretax income* | 114 | 75 | 286 | 345 | |||||||||||||||||||
| Provision for income taxes | (42) | (27) | (101) | (98) | |||||||||||||||||||
| Adjusted net income attributable to common stockholders* | $ | 72 | $ | 48 | $ | 185 | $ | 247 | |||||||||||||||
| Diluted shares | 42.1 | 43.3 | 42.1 | 43.8 | |||||||||||||||||||
| Adjusted earnings per share - Diluted* | $ | 1.80 | $ | 1.20 | $ | 4.71 | $ | 5.95 | |||||||||||||||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | |||||||||||||||||||||||
A-7
MARRIOTT VACATIONS WORLDWIDE CORPORATION
ADJUSTED EBITDA
(In millions)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
Net income attributable to common stockholders | $ | 84 | $ | 42 | $ | 168 | $ | 219 | |||||||||||||||
| Interest expense, net | 40 | 36 | 123 | 106 | |||||||||||||||||||
| Provision for income taxes | 34 | 24 | 79 | 115 | |||||||||||||||||||
| Depreciation and amortization | 36 | 33 | 109 | 99 | |||||||||||||||||||
| Share-based compensation | 8 | 6 | 24 | 25 | |||||||||||||||||||
| Certain items: | |||||||||||||||||||||||
| ILG integration | — | — | — | 15 | |||||||||||||||||||
| Welk acquisition and integration | — | 5 | 18 | 13 | |||||||||||||||||||
| Transaction and integration costs | — | 5 | 18 | 28 | |||||||||||||||||||
| Early redemption of senior secured notes | — | — | — | 10 | |||||||||||||||||||
| Gain on disposition of hotel, land and other | (1) | (1) | (2) | (8) | |||||||||||||||||||
| Foreign currency translation | (6) | 5 | — | 1 | |||||||||||||||||||
| Insurance proceeds | — | (1) | — | (3) | |||||||||||||||||||
| Change in indemnification asset | 2 | (6) | 4 | (30) | |||||||||||||||||||
| Change in estimates relating to pre-acquisition contingencies | (4) | — | (4) | — | |||||||||||||||||||
| Other | — | — | — | (4) | |||||||||||||||||||
Gains and other income, net | (9) | (3) | (2) | (34) | |||||||||||||||||||
| Purchase accounting adjustments | — | 3 | 1 | 6 | |||||||||||||||||||
| Litigation charges | 2 | 2 | 15 | 7 | |||||||||||||||||||
| Restructuring charges | 1 | — | 4 | — | |||||||||||||||||||
| Impairment charges | — | — | 2 | 4 | |||||||||||||||||||
| Other | 2 | 2 | 1 | — | |||||||||||||||||||
Adjusted EBITDA* | $ | 198 | $ | 150 | $ | 542 | $ | 575 | |||||||||||||||
Adjusted EBITDA Margin* | 23.8% | 20.3% | 22.6% | 24.3% | |||||||||||||||||||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | |||||||||||||||||||||||
A-8
MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In millions)
(Unaudited)
VACATION OWNERSHIP SEGMENT ADJUSTED EBITDA
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
Segment financial results attributable to common stockholders | $ | 205 | $ | 149 | $ | 531 | $ | 578 | |||||||||||||||
| Depreciation and amortization | 25 | 23 | 75 | 69 | |||||||||||||||||||
| Share-based compensation | 2 | 2 | 6 | 6 | |||||||||||||||||||
| Certain items: | |||||||||||||||||||||||
| Gain on disposition of hotel, land and other | — | — | (1) | (7) | |||||||||||||||||||
| Insurance proceeds | — | (1) | — | (3) | |||||||||||||||||||
| Change in indemnification asset | — | (6) | — | (9) | |||||||||||||||||||
| Change in estimates relating to pre-acquisition contingencies | (4) | — | (4) | — | |||||||||||||||||||
| Other | — | — | — | (4) | |||||||||||||||||||
| Gains and other income, net | (4) | (7) | (5) | (23) | |||||||||||||||||||
| Purchase accounting adjustments | — | 3 | 1 | 6 | |||||||||||||||||||
| Litigation charges | 2 | 2 | 15 | 8 | |||||||||||||||||||
| Restructuring charges | 1 | — | 1 | — | |||||||||||||||||||
| Impairment charges | — | — | — | 4 | |||||||||||||||||||
| Other | — | 1 | — | (1) | |||||||||||||||||||
Segment Adjusted EBTIDA* | $ | 231 | $ | 173 | $ | 624 | $ | 647 | |||||||||||||||
Segment Adjusted EBITDA Margin* | 30.1% | 25.8% | 28.5% | 30.1% | |||||||||||||||||||
EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT ADJUSTED EBITDA
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||||
Segment financial results attributable to common stockholders | $ | 15 | $ | 23 | $ | 55 | $ | 75 | |||||||||||||||
| Depreciation and amortization | 7 | 7 | 21 | 23 | |||||||||||||||||||
| Share-based compensation | 1 | — | 2 | 1 | |||||||||||||||||||
| Certain items: | |||||||||||||||||||||||
| Gain on disposition of hotel, land and other | (1) | (1) | (1) | (1) | |||||||||||||||||||
| Restructuring charges | 1 | — | 1 | — | |||||||||||||||||||
| Impairment charges | — | — | 2 | — | |||||||||||||||||||
| Other | — | 1 | — | 1 | |||||||||||||||||||
Segment Adjusted EBTIDA* | $ | 23 | $ | 30 | $ | 80 | $ | 99 | |||||||||||||||
Segment Adjusted EBITDA Margin* | 43.1% | 49.8% | 46.5% | 52.5% | |||||||||||||||||||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | |||||||||||||||||||||||
A-9
MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In millions)
(Unaudited)
INTERIM BALANCE SHEET ITEMS
| September 30, 2024 | December 31, 2023 | ||||||||||
| Cash and cash equivalents | $ | 197 | $ | 248 | |||||||
Vacation ownership notes receivable, net | $ | 2,387 | $ | 2,343 | |||||||
| Inventory | $ | 769 | $ | 634 | |||||||
Property and equipment, net(1) | $ | 1,165 | $ | 1,260 | |||||||
| Goodwill | $ | 3,117 | $ | 3,117 | |||||||
| Intangibles, net | $ | 807 | $ | 854 | |||||||
| Debt, net | $ | 3,038 | $ | 3,049 | |||||||
Stockholders’ equity | $ | 2,419 | $ | 2,382 | |||||||
(1) Includes $274 million and $370 million at September 30, 2024 and December 31, 2023, respectively, of completed vacation ownership units which are classified as a component of Property and equipment, net until the time at which they are available and legally registered for sale as vacation ownership projects. | ||
SUMMARY CASH FLOW
| Nine Months Ended | |||||||||||
| CASH FLOW | September 30, 2024 | September 30, 2023 | |||||||||
Cash, cash equivalents, and restricted cash provided by (used in): | |||||||||||
| Operating activities | $ | 105 | $ | 149 | |||||||
| Investing activities | (106) | (85) | |||||||||
| Financing activities | (26) | (414) | |||||||||
| Effect of changes in exchange rates on cash, cash equivalents, and restricted cash | — | (1) | |||||||||
| Net change in cash, cash equivalents, and restricted cash | $ | (27) | $ | (351) | |||||||
A-10
MARRIOTT VACATIONS WORLDWIDE CORPORATION
(In millions, except per share amounts)
2024 ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS AND
ADJUSTED EARNINGS PER SHARE - DILUTED OUTLOOK
Fiscal Year 2024 | |||||||||||
Low | High | ||||||||||
Net income attributable to common stockholders | $ | 225 | $ | 240 | |||||||
| Provision for income taxes | 93 | 98 | |||||||||
Income before income taxes attributable to common stockholders | 318 | 338 | |||||||||
Certain items(1) | 42 | 42 | |||||||||
| Adjusted pretax income* | 360 | 380 | |||||||||
| Provision for income taxes | (124) | (129) | |||||||||
Adjusted net income attributable to common stockholders* | $ | 236 | $ | 251 | |||||||
Earnings per share - Diluted(2)(3) | $ | 5.80 | $ | 6.15 | |||||||
Adjusted earnings per share - Diluted(2)(3)* | $ | 6.05 | $ | 6.40 | |||||||
Diluted shares(2) | 42.2 | 42.2 | |||||||||
2024 ADJUSTED EBITDA OUTLOOK
Fiscal Year 2024 | |||||||||||
Low | High | ||||||||||
Net income attributable to common stockholders | $ | 225 | $ | 240 | |||||||
| Interest expense | 162 | 162 | |||||||||
| Provision for income taxes | 93 | 98 | |||||||||
| Depreciation and amortization | 146 | 146 | |||||||||
| Share-based compensation | 32 | 32 | |||||||||
Certain items(1) | 42 | 42 | |||||||||
| Adjusted EBITDA* | $ | 700 | $ | 720 | |||||||
(1) Certain items adjustment includes $18 million of transaction and integration costs and $24 million of anticipated litigation charges and other items. | ||
(2) Includes 6.6 million shares from the assumed conversion of our convertible notes. | ||
(3) Includes an add back of $19 million of interest expense related to our convertible notes, net of tax for purposes of calculating net income in the diluted earnings per share calculation. | ||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | ||
A-11
MARRIOTT VACATIONS WORLDWIDE CORPORATION
2024 ADJUSTED FREE CASH FLOW OUTLOOK
(In millions)
Fiscal Year 2024 | ||||||||||||||
Low | High | |||||||||||||
| Net cash, cash equivalents and restricted cash provided by operating activities | $ | 233 | $ | 262 | ||||||||||
| Capital expenditures for property and equipment (excluding inventory) | (60) | (65) | ||||||||||||
| Borrowings from securitizations, net of repayments | 63 | 68 | ||||||||||||
| Securitized debt issuance costs | (12) | (12) | ||||||||||||
| Free cash flow* | 224 | 253 | ||||||||||||
| Adjustments: | ||||||||||||||
Net change in borrowings available from the securitization of eligible vacation ownership notes receivable(1) | 44 | 55 | ||||||||||||
Certain items(2) | 32 | 32 | ||||||||||||
| Adjusted free cash flow* | $ | 300 | $ | 340 | ||||||||||
(1) Represents the anticipated net change in borrowings available from the securitization of eligible vacation ownership notes receivable between the 2023 and 2024 year ends. | ||
(2) Certain items adjustment consists primarily of the after-tax impact of transaction and integration costs and anticipated litigation charges. | ||
| * Denotes non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information about our reasons for providing these alternative financial measures and limitations on their use. | ||
A-12
MARRIOTT VACATIONS WORLDWIDE CORPORATION
QUARTERLY OPERATING METRICS
(Contract sales in millions)
| Year | Quarter Ended | Full Year | |||||||||||||||||||||||||||||||||
| March 31 | June 30 | September 30 | December 31 | ||||||||||||||||||||||||||||||||
| Vacation Ownership | |||||||||||||||||||||||||||||||||||
| Consolidated contract sales | |||||||||||||||||||||||||||||||||||
| 2024 | $ | 428 | $ | 449 | $ | 459 | |||||||||||||||||||||||||||||
| 2023 | $ | 434 | $ | 453 | $ | 438 | $ | 447 | $ | 1,772 | |||||||||||||||||||||||||
| 2022 | $ | 394 | $ | 506 | $ | 483 | $ | 454 | $ | 1,837 | |||||||||||||||||||||||||
| VPG | |||||||||||||||||||||||||||||||||||
| 2024 | $ | 4,129 | $ | 3,741 | $ | 3,888 | |||||||||||||||||||||||||||||
| 2023 | $ | 4,358 | $ | 3,968 | $ | 4,055 | $ | 4,002 | $ | 4,088 | |||||||||||||||||||||||||
| 2022 | $ | 4,706 | $ | 4,613 | $ | 4,353 | $ | 4,088 | $ | 4,421 | |||||||||||||||||||||||||
| Tours | |||||||||||||||||||||||||||||||||||
| 2024 | 96,579 | 111,752 | 110,557 | ||||||||||||||||||||||||||||||||
| 2023 | 92,890 | 106,746 | 100,609 | 105,580 | 405,825 | ||||||||||||||||||||||||||||||
| 2022 | 78,505 | 102,857 | 104,000 | 105,231 | 390,593 | ||||||||||||||||||||||||||||||
| Exchange & Third-Party Management | |||||||||||||||||||||||||||||||||||
Total active Interval International members (000's)(1) | |||||||||||||||||||||||||||||||||||
| 2024 | 1,566 | 1,530 | 1,545 | ||||||||||||||||||||||||||||||||
| 2023 | 1,568 | 1,566 | 1,571 | 1,564 | 1,564 | ||||||||||||||||||||||||||||||
| 2022 | 1,606 | 1,596 | 1,591 | 1,566 | 1,566 | ||||||||||||||||||||||||||||||
| Average revenue per Interval International member | |||||||||||||||||||||||||||||||||||
| 2024 | $ | 41.74 | $ | 38.30 | $ | 38.93 | |||||||||||||||||||||||||||||
| 2023 | $ | 42.07 | $ | 39.30 | $ | 39.15 | $ | 36.16 | $ | 156.65 | |||||||||||||||||||||||||
| 2022 | $ | 44.33 | $ | 38.79 | $ | 38.91 | $ | 35.60 | $ | 157.97 | |||||||||||||||||||||||||
(1) Includes members at the end of each period. | |||||||||||||||||||||||||||||||||||
A-13
MARRIOTT VACATIONS WORLDWIDE CORPORATION
NON-GAAP FINANCIAL MEASURES
In our press release and schedules, and on the related conference call, we report certain financial measures that are not prescribed by GAAP. We discuss our reasons for reporting these non-GAAP financial measures below, and the financial schedules included herein reconcile the most directly comparable GAAP financial measure to each non-GAAP financial measure that we report (identified by an asterisk (“*”) on the preceding pages). Although we evaluate and present these non-GAAP financial measures for the reasons described below, please be aware that these non-GAAP financial measures have limitations and should not be considered in isolation or as a substitute for revenues, net income or loss attributable to common stockholders, earnings or loss per share or any other comparable operating measure prescribed by GAAP. In addition, other companies in our industry may calculate these non-GAAP financial measures differently than we do or may not calculate them at all, limiting their usefulness as comparative measures.
Certain Items Excluded from Non-GAAP Financial Measures
We evaluate non-GAAP financial measures, including those identified by an asterisk (“*”) on the preceding pages, that exclude certain items as further described in the financial schedules included herein, and believe these measures provide useful information to investors because these non-GAAP financial measures allow for period-over-period comparisons of our on-going core operations before the impact of these items. These non-GAAP financial measures also facilitate the comparison of results from our on-going core operations before these items with results from other companies.
Adjusted Development Profit and Adjusted Development Profit Margin
We evaluate Adjusted development profit (Adjusted sale of vacation ownership products, net of expenses) and Adjusted development profit margin as indicators of operating performance. Adjusted development profit margin is calculated by dividing Adjusted development profit by revenues from the Sale of vacation ownership products. Adjusted development profit and Adjusted development profit margin adjust Sale of vacation ownership products revenues for the impact of revenue reportability, include corresponding adjustments to Cost of vacation ownership products associated with the change in revenues from the Sale of vacation ownership products, and may include adjustments for certain items as necessary. We evaluate Adjusted development profit and Adjusted development profit margin and believe they provide useful information to investors because they allow for period-over-period comparisons of our on-going core operations before the impact of revenue reportability and certain items to our Development profit and Development profit margin.
Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA
EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or net income or loss attributable to common stockholders, before interest expense, net (excluding consumer financing interest expense associated with term securitization transactions), income taxes, depreciation and amortization. Adjusted EBITDA reflects additional adjustments for certain items and excludes share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted. For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense associated with term securitization transactions because we consider it to be an operating expense of our business. We consider Adjusted EBITDA to be an indicator of operating performance, which we use to measure our ability to service debt, fund capital expenditures, expand our business, and return cash to stockholders. We also use Adjusted EBITDA, as do analysts, lenders, investors and others, because this measure excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provisions for income taxes can vary considerably among companies. EBITDA and Adjusted
A-14
EBITDA also exclude depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. We believe Adjusted EBITDA is useful as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items. Adjusted EBITDA also facilitates comparison by us, analysts, investors, and others, of results from our on-going core operations before the impact of these items with results from other companies.
Adjusted EBITDA Margin and Segment Adjusted EBITDA Margin
We evaluate Adjusted EBITDA margin and Segment Adjusted EBITDA margin as indicators of operating performance. Adjusted EBITDA margin represents Adjusted EBITDA divided by the Company’s total revenues less cost reimbursement revenues. Segment Adjusted EBITDA margin represents Segment Adjusted EBITDA divided by the applicable segment’s total revenues less cost reimbursement revenues. We evaluate Adjusted EBITDA margin and Segment Adjusted EBITDA margin and believe it provides useful information to investors because it allows for period-over-period comparisons of our on-going core operations before the impact of excluded items.
Free Cash Flow and Adjusted Free Cash Flow
We evaluate Free Cash Flow and Adjusted Free Cash Flow as liquidity measures that provide useful information to management and investors about the amount of cash provided by operating activities after capital expenditures for property and equipment and the borrowing and repayment activity related to our term securitizations, which cash can be used for, among other purposes, strategic opportunities, including acquisitions and strengthening the balance sheet. Adjusted Free Cash Flow, which reflects additional adjustments to Free Cash Flow for the impact of transaction and integration charges, impact of borrowings available from the securitization of eligible vacation ownership notes receivable, and changes in restricted cash, allows for period-over-period comparisons of the cash generated by our business before the impact of these items. Analysis of Free Cash Flow and Adjusted Free Cash Flow also facilitates management’s comparison of our results with our competitors’ results.