MARRIOTT VACATIONS WORLDWIDE CORPORATION 2026 Q2 Earnings Call

I am joined today by Matt Avril, our Chief Executive Officer, Michael Flaskey, our President and Chief Operating 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 in 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 is now my pleasure to turn the call over to Matt.

Thank you, Neal, good morning, everyone, thank you for joining us today. On our last call, I indicated that we would update you on the progress we are making and our outlook ahead. Let me start there. In the second quarter, we exceeded the high end of our guidance for both contract sales and adjusted EBITDA. Contract sales increased 22% over prior year, driven by our industry-leading VPGs of $4,477. Owner contract sales increased 41% compared to the prior year, driven by a 33% lift in owner VPG. On the strength of this performance, adjusted EBITDA grew to $215 million, $12 million over last year, and a $20 million increase over the midpoint of our second quarter guidance.

We generated $87 million of adjusted free cash flow in the second quarter, and $201 million to date, compared to $22 million for the six months in 2025. In light of these results, I want to recognize the impactful efforts of our team across the MVW system. As we navigate this period of rapid change, we are executing with focus and discipline, and our second quarter results are a good indication of the progress we are making. Earlier this year, we laid out our priorities, return the company to revenue growth, drive increased profitability, improve free cash flow, and maintain disciplined capital allocation. Based on our second quarter results, it's fair to say that the execution of that plan has taken hold, and we are now focused on sustaining and furthering that momentum. First was returning the company to growth.

Contract sales increased 22% year-over-year in the quarter, reflecting the benefits of our disciplined sales execution led by our tour logistics and product experience enhancements. Second, an increased emphasis on profitability and cash flow. We continue to manage the business with a clear focus on improving cash generation and maintaining disciplined capital allocation. As a result, we delivered $201 million of adjusted free cash flow in the first half of the year, compared to $22 million over the same period last year. Third, we continue to make progress on the disposition of $200 million worth of non-core assets by the end of 2027, which Jason will discuss in more detail. We also right-sized our Asia Pacific business and are seeing the benefits of those actions in our cash flow.

Our inventory spending in that region is expected to be down $35 million this year compared to last year, and it has reduced our required investment in related receivables. Mike will walk through our commercial initiatives we launched in the second quarter and the results we are already seeing. Let me take a moment to frame why these matter. The operating leverage in our business requires excellence in our sales and marketing capabilities. These are not isolated programs. Enhancing the owner benefit levels, our new event platform, new marketing tools, and our tour logistics are all part of our disciplined model designed to strengthen engagement with our owners and create a more predictable path for revenue growth over time. Our owners consistently use and value the vacations they have purchased.

In the second quarter, our resorts ran at 90% occupancy, providing us a strong platform for our in-house sales and consistent management fee business. As we look to the balance of the year, our focus remains on growing contract sales and translating that into stronger profitability, free cash flow, and adjusted EBITDA.

The opportunity in front of us is substantial. We have industry-leading brands, a highly engaged owner base, and meaningful opportunities to further improve our performance, and they are all within our control. In addition, we enjoy the strong consumer tailwinds driving upper upscale and luxury travel demand. Ultimately, our future is based on our ability to attract, develop, and retain top talent, reinforcing our position as the employer of choice in the industry. We have a motivated associate base that is seeing this year's earlier tough decisions yielding demonstrable results. We also have an engaged owner base of 700,000 owners that is seeing us reinvigorate their vacation experiences, strengthening our connection, and driving utilization and higher levels of satisfaction. Delivering best-in-class hospitality experiences is what our owners expect of us and drives our associates to deliver. Combined, they all drive our results.

The work underway is about driving consistent revenue growth, maintaining disciplined cost management, improving free cash flow, and positioning the company for sustaining performance. The second quarter was an important step on that journey. As a result of our performance and our current outlook, we are raising our guidance for adjusted EBITDA for the full year to $805 million-$830 million, a $50 million increase over our previous guidance. Make no mistake, we are pleased with our progress, yet there is much ahead for us to accomplish. We look forward to providing an update on our strategies and longer-term growth plans at an investor day we are planning for December 9th, in New York City. With that, I'll turn the call over to Mike to discuss the operating initiatives in more detail.

Thanks, Matt, and good morning, everyone. Let me start by saying how encouraged we are with our second quarter results and, more importantly, with the precise execution of our sales and marketing teams that delivered these results on a very aggressive timeline that we had laid out. It took a company-wide effort to get these merchandising tools launched. Today, I will be highlighting the five-step commercial strategy that drove our second quarter results and provide color on each of these initiatives and how they impacted the quarter. I will then focus on how we will sustain the long-term growth of the company. Since joining the company in mid-February, we identified a significant value creation opportunity to improve performance and then created a disciplined five-step commercial strategy. During the second quarter, we completed implementation of that strategy and the results began to show.

We launched the five key commercial initiatives and began executing them across the organization. Each month of the quarter got sequentially better, including May and June, which were the two highest sales months in the company's history. Highlighting our results, our contract sales increased 22% year-over-year in the quarter, while VPG grew 23% to $4,477. These results were the product of our proven strategy, the power of our brands, along with the outstanding execution of our team. Let me walk through the key initiatives we've implemented and what we're seeing so far. First, at the heart of the strategy is Connections. Our commitment to connecting with our owners while they're on vacation and creating deeper interactions throughout their ownership journey. Everything that we are doing is designed to deepen those relationships, create more meaningful engagement, improve the customer experience, and ultimately drive stronger tour flow and contract sales.

I am happy to report that we improved our owner arrival to tour ratio, now branded Connections, by 600 basis points in the second quarter compared to last year. We will continue to improve this key drive. Second, our tour logistics initiative. We launched this data-driven yield management algorithm starting in April to better match the right customer with the right sales executive every tour wave across our company. The goal was to improve both the effectiveness of conversion and the overall guest experience while using propensity data to drive our decision-making. What we're seeing is significantly higher VPGs driven by a higher average transaction size. As the quarter progressed, we saw VPG continue to improve month after month as our tour logistics gained momentum and our teams executed against the strategy.

North America tours increased 3% in the quarter and are now up 1% year-to-date through the end of the quarter, showing excellent demand for our product. Together, these results show that both Connections and tour logistics are driving stronger tour flow and contract sales performance across our sales organization. Third, a complete transformation of our owner loyalty program, including creating and rolling out two new loyalty tiers at the top, Reserve and Pinnacle. These new tiers are driving aspiration to own more and are designed to better engage our owners and help them get even more value from their ownership, given their affinity to our brands. Our average points owner owns just 1.3 weeks equivalency of ownership.