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VAC 4th Quarter and Full Year 2015 Earnings Call

SueDonJ

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Marriott Barony Beach and SurfWatch
"ORLANDO, Fla. – February 25, 2016 – Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported fourth quarter and full year 2015 financial results and provided its outlook for the full year 2016. ..."

Press Release
 

JIMinNC

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Waiohai Beach Club
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HGVC at Sea World
Some interesting information in Marriotts' Earnings Release and conference call today (I've bolded some of the more interesting info from listening to the live stream of the conference call with analysts):


New Locations:
- Previously announced locations in New York, South Beach, San Diego, and the Big Island. Onsite sales to start in NYC, DC, and San Diego mid-year, South Beach late 2016-early 2017. The Big Island "capital efficient transaction" is not yet completed, but they expect it to be completed in the first half of the year with sales beginning in 3Q 2016.

- No New York units will be deeded to the Trust until 2018 or 2019, at the earliest. In the meantime, inventory will be made available in the MVC Exchange Company.

- Surfer's Paradise in Australia - timeshare sales to begin by end of March and moving forward to sell-off the remaining part of the hotel that will not be part of MVC

- Announced two new locations in Bali. One will be co-located with a Courtyard hotel and is targeted for mid-2017. The second Bali location will be co-located with a Renaissance hotel and is targeted for 2019. A major focus of Asia/Pacific will be to grow locations and sales channels.

- They will continue to look for opportunities like the New York, San Diego, and South Beach locations in other gateway cities. They would prefer to raise their flag in more cities rather than additional locations in their existing gateway cities, but would not rule out additional locations in existing gateway cities (like New York) if the right opportunity comes along.

- The focus in Europe is selling through their existing development inventory. They would expect European sellout within 18 to 24 months. After that, they will focus on boosting their European weeks resales program.



Sales:
- Timeshare sales were essentially flat in the fourth quarter year-over-year at $204 million. That was down $7.4 million from 4Q 2014. North America was down $3.7 million, Europe was down $2.1 million, and Asia/Pacific was down $1.6 million.

- The North American sales of $182 million were negatively impacted by a $6.1 million drop in sales at their Latin American sales channels due to foreign exchange headwinds driven by the strong U.S. dollar which increased the cost of their product in Latin America, reducing sales. Excluding contract sales from the Latin American channels, North America contract sales were $169.8 million, up 1.4 percent.

- Europe sales were impacted by being in the late phases of sell-out at their European properties

- Development margin was 22.1% in 4Q 2015 vs 19.8 % in 4Q 2014. Development margin improvement was impacted by the continued success of their Inventory Repurchase Program in acquiring low-cost repurchased inventory.

- Rental revenue was $83.5 million in 4Q 2015, a $10.2 million increase from 4Q 2014 (up 12%). Growth reflects a 4 percent increase in transient rates, a 2 percent increase in transient keys rented, $4.4 million from revenue associated with operating hotels prior to conversion to timeshare, and $0.8 million of higher plus points revenue.

- Resort management revenue was $95 million, up $6.1 million (+6%)

- In North America, tours increased 4.5% year-over-year, but closing efficiency decreased. The decrease in closing efficiency was not unexpected as the company made a major push to increase tours in the 4Q, so a lower closing percentage often accompanies a major tour push.

- They are making a major push in late 2015 and into 2016 to encourage financing purchases to increase financing revenues. Financing propensity in 2015 was 56%. The incentives were resulting in buyers with higher FICO scores because the incentives were resulting in better qualified buyers who would not normally finance, instead opting to finance.



Other:
- Sales are still roughly split 60% - 40% in favor of sales to existing owners, as it has been since the 2008 recession. They hope to eventually migrate back closer to the historical target of 50-50, but in 2015 sales to existing owners was positively impacted by excellent take up of the new owner recognition levels which increased points sales to existing owners upgrading their status.

- Technology improvements. Planning further enhancements in 2016 to the owner-facing web platforms



Earnings:
- Earnings per share were $1.11 in the fourth quarter of 2015, up over 60% from $0.69 in 4Q 2014. Analysts had expected earnings of $0.92 per share, so it was a significant beat. The big earnings increase from 4Q 2014 to 4Q 2015 was partially due to the 2014 results being negatively impacted by a one-time charge of $23.8 million related to the sale of the Abaco, Bahamas property; $10.8 million in increased rental revenues net of expenses; $4.9 million from increased development margin; and $3.4 million of higher resort management and other services revenues net of expenses.

- Full year 2015 EBITDA(earnings before interest, taxes, depreciation, and amortization) totaled $235.9 million, an 18.1% increase over 2014.

- As of about noon EST on Feb 25, VAC stock is up $7.60 today to $61.75 (+14%)



2016 Outlook:
- Increased tour flow due to new marketing programs and package sales (including Encore packages)

- Add sales distribution channels at the new locations

- Continue to increase financing propensity in 2016

- They expect year-over-year sales to be down in 1Q 2016 due to continued Latin America foreign exchange headwinds. Second half of the year looks better.

- Forecasting contract sales growth of 4% to 8% for 2016



..
 
Last edited:

JIMinNC

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HGVC at Sea World
Some additional tidbits from the 2015 Form 10-K filed with the SEC:

- As of the end of 2015, over 146,000 weeks-based owners have enrolled nearly 253,000 weeks in the MVCD program since its launch. By contrast, as of the end of 2014, over 139,000 weeks-based owners had enrolled nearly 243,000 weeks in the MVCD program since its launch - so 7,000 more weeks-based owners have enrolled 10,000 additional weeks in the last year. (At the end of 2013, 134,000 weeks-based owners had enrolled 233,000 weeks - so in two years, 12,000 more enrolled owners and 20,000 more enrolled weeks).

- Total owners are 410,000 vs 415,000 owners in 2014 and 420,000 in 2013 - that's a drop of 5,000 in a year and 10,000 in two years. I would assume this is from increasing use of ROFR and buybacks, based on the statement in the conference call that they have been successful in acquiring low cost inventory through the inventory buy back programs.

- In 2015, based on over 222,000 survey responses, approximately 90 percent of respondents indicated that they were highly satisfied with MVC products, sales and owner services and their on-site experiences (by selecting 8, 9 or 10 on a 10-point scale). Average resort occupancy was nearly 90 percent in 2015, significantly higher than the overall vacation ownership industry average of just over 78 percent in 2014, the most recent year for which average resort occupancy data was reported by ARDA.

- Total units systemwide are 12,807 with 2,341 "planned". They list 781 units as "units available for sale". That is down from 967 a year ago. This does not include the 423 units in San Diego, Washington, D.C, and Surfer's Paradise (nor NYC or South Beach).

- No plans for new development in the European region
 
Last edited:

GregT

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Marriott: Maui Ocean Club Lahaina Villas (3BRx5), Ko Olina, Shadow Ridge II, Willow Ridge, Aruba Ocean Club, DC Points HGVC: Flamingo, Sea World, I-Drive, Starwood Bella (x4), SDO, TradeWinds, Worldmark
Jim, interesting information, thank you for finding these details and posting for us.

Best,

Greg
 

dioxide45

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I am interested to know what they plan to do with Surfers Paradise. Are they separating a parcel of land to build purpose built units and then sell the remaining hotel property?

In the press release they mention several times "Surfers Paradise, Australia hotel that the Company intends to sell," Though they seem to have plans to add a MVCI property there. So are they going to convert some of the current hotel to villas, or build from the ground up?
 

JIMinNC

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Marriott:
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Barony Beach Club
Abound ClubPoints
HGVC:
HGVC at Sea World
I am interested to know what they plan to do with Surfers Paradise. Are they separating a parcel of land to build purpose built units and then sell the remaining hotel property?

In the press release they mention several times "Surfers Paradise, Australia hotel that the Company intends to sell," Though they seem to have plans to add a MVCI property there. So are they going to convert some of the current hotel to villas, or build from the ground up?

From the 10-K:

Represents a 329 room operating hotel in Surfers Paradise, Australia, acquired during the third quarter of 2015, which is operated by a third party. We intend to convert a portion of this hotel into vacation ownership interests for future use in our Asia Pacific segment, and sell the remaining downsized hotel to a third party.
 
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