Marriott Vacations Worldwide ("MVW") Reports Second Quarter 2020 Financial Results

ORLANDO, Fla., July 29, 2020 /PRNewswire/ -- Marriott Vacations Worldwide Corporation (NYSE: VAC) today reported second quarter 2020 financial results and provided an update on business conditions in light of the COVID-19 pandemic.

Marriott Vacations Worldwide Corporation. (PRNewsFoto/Marriott Vacations Worldwide)

"The COVID-19 pandemic continues to severely impact our business and create nearer term uncertainty," said Stephen P. Weisz, president and chief executive officer. "However, beginning in late May, we saw our resort occupancies quickly build in states where restrictions had been lifted, illustrating the resilience of our customers and our leisure-focused business model.  With occupancies returning, we have already reopened approximately 70% of our sales centers and are very encouraged as sales start to return. With results improving, we now expect cash flow in the second half of the year to be positive."

Second Quarter 2020 Highlights and Operational Update:

  • Consolidated Vacation Ownership contract sales totaled $30 million in the second quarter of 2020.
  • Net loss attributable to common shareholders was $70 million, or $1.68 loss per fully diluted share.
  • Adjusted net loss attributable to common shareholders was $72 million and Adjusted fully diluted loss per share was $1.76.
  • Adjusted EBITDA reflected a loss of $10 million in the second quarter of 2020.
  • Cash and cash equivalents totaled $566 million at the end of the second quarter of 2020 and the Company had nearly all of its capacity available under its $600 million Revolving Corporate Credit Facility.
  • Subsequent to the end of the second quarter, the Company completed a securitization of timeshare receivables, issuing $375 million of notes at an overall weighted average interest rate of 2.53% and a 98% gross advance rate, generating net proceeds of $53 million after payoff of the Company's Warehouse Credit Facility and required expenses.

Second Quarter 2020 Segment Results

Vacation Ownership

Revenues excluding cost reimbursements decreased 69% in the second quarter of 2020. Growth in management fees and financing revenue was offset by a 92% decline in contract sales and a 91% decrease in rental revenues due to substantially lower resort occupancies resulting from the COVID-19 pandemic.

Vacation Ownership segment financial results were a loss of $34 million in the second quarter of 2020. Vacation Ownership segment Adjusted EBITDA was a loss of $19 million in the second quarter of 2020.

Exchange & Third-Party Management

Exchange & Third-Party Management revenues decreased 50% in the second quarter of 2020 primarily due to lower exchange and rental transactions due to the impact of the COVID-19 pandemic on its Interval International business. Interval International average revenue per member decreased 30% to $30.17 compared to the prior year and active members declined 7% to 1.6 million.

Exchange & Third-Party Management segment financial results were $14 million for the second quarter of 2020. Exchange & Third-Party Management segment Adjusted EBITDA was $19 million in the second quarter of 2020.

Corporate and Other

General and administrative costs improved $45 million in the second quarter of 2020 related mainly to synergy savings and lower costs associated with the furlough and reduced work week programs, including reduced salary related costs, as well as a $6 million credit available under the CARES Act legislation, which incentivized companies to continue paying associates' benefit costs while not working.

Operational Update to COVID - 19

The Company has begun reopening its resorts and sales centers.

  • In its vacation ownership business, eight of the Company's sales centers were open as of the end of the second quarter of 2020 with an additional 34 sales centers having since re-opened;
  • In its Interval International business, fewer than 240 resorts remain closed today;
  • The Company has 40% of its associates still on furlough and 16% on reduced work week or reduced pay. Of the associates who have returned from furlough, 80% are in the resort operations area.
  • Share repurchases and dividends continue to be temporarily suspended.

Balance Sheet and Liquidity

On June 30, 2020, cash and cash equivalents totaled $566 million and the Company had $47 million of gross notes receivable that are eligible for securitization.

The Company had $4.6 billion in debt outstanding, net of unamortized debt issuance costs, at the end of the second quarter of 2020, an increase of $0.5 billion from year-end 2019. This debt included $2.7 billion of corporate debt and $1.9 billion of non-recourse debt related to its securitized notes receivable.

During the second quarter of 2020, the Company issued $500 million of senior secured notes and repaid the entire outstanding balance on its Revolving Corporate Credit Facility.

Subsequent to the end of the second quarter, the Company completed a securitization of timeshare receivables, issuing $375 million of notes at an overall weighted average interest rate of 2.53% and a 98% gross advance rate, generating net proceeds of $53 million after payoff of the Company's Warehouse Credit Facility and required expenses.

Non-GAAP Financial Information

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

Second Quarter 2020 Financial Results Conference Call

The Company will hold a conference call on July 30, 2020 at 9:00 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 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. The Company cautions you that these statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including, without limitation, conditions beyond our control such as the length and severity of the current COVID-19 pandemic and its effect on our operations; the effect of any governmental actions, including restrictions on travel, or mandated employer-paid benefits in response to the COVID-19 pandemic; the Company's ability to manage and reduce expenditures in a low revenue environment;  volatility in the economy and the credit markets, changes in supply and demand for vacation ownership products, competitive conditions, the availability of additional financing when and if required, and other matters disclosed 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 the date of issuance 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

MARRIOTT VACATIONS WORLDWIDE CORPORATION

FINANCIAL SCHEDULES

QUARTER 2, 2020



TABLE OF CONTENTS



Summary Financial Information

A-1

Consolidated Statements of Income

A-2

Adjusted Net Income Attributable to Common Shareholders, Adjusted Earnings Per Share - Diluted, Adjusted EBITDA and Adjusted EBITDA by Segment

A-3

Vacation Ownership Segment Financial Results

A-4

Consolidated Contract Sales to Adjusted Development Margin

A-5

Exchange & Third-Party Management Segment Financial Results

A-6

Corporate and Other Financial Results

A-7

Segment Adjusted EBITDA

A-8

Quarterly Operating Metrics

A-9

Non-GAAP Financial Measures

A-10

 

A-1


MARRIOTT VACATIONS WORLDWIDE CORPORATION

SUMMARY FINANCIAL INFORMATION

(In millions, except VPG, total active members, average revenue per member and per share amounts)



Three Months Ended


Change %


Six Months Ended


Change %


June 30,
2020


June 30,
2019



June 30,
2020


June 30,
2019


Key Measures












Total consolidated contract sales

$

30


$

386


(92%)


$

336


$

740


(55%)

VPG(2)

N/M  


$

3,299


N/M


N/M   


$

3,323


N/M

Total Interval International active members (000's)(1)

1,571


1,691


(7%)


1,571


1,691


(7%)

Average revenue per member(1)

$

30.17


$

43.23


(30%)


$

71.74


$

89.38


(20%)













GAAP Measures












Revenues

$

480


$

1,043


(54%)


$

1,490


$

2,077


(28%)

(Loss) income before income taxes and noncontrolling interests

$

(81)


$

74


(209%)


$

(244)


$

113


(314%)

Net (loss) income attributable to common shareholders

$

(70)


$

49


(239%)


$

(176)


$

73


(340%)

(Loss) earnings per share - diluted

$

(1.68)


$

1.10


(253%)


$

(4.25)


$

1.61


(364%)













Non-GAAP Measures












Adjusted EBITDA **

$

(10)


$

195


(105%)


$

128


$

361


(69%)

Adjusted pretax (loss) income**

$

(78)


$

126


(161%)


$

5


$

226


(97%)

Adjusted net (loss) income attributable to common shareholders **

$

(72)


$

90


(181%)


$

17


$

157


(89%)

Adjusted (loss) earnings per share - diluted **

$

(1.76)


$

2.00


(188%)


$

0.40


$

3.44


(88%)


** 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.


(1) Includes members at the end of each period for the Interval International exchange network only.


(2) Not meaningful given that the majority of the sales in the quarter were from our enhanced phone sales program that do not count as a tour in the VPG calculation and there were limited site-based tours in the second quarter due to sales center closures.

 

A-2


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

REVENUES








Sale of vacation ownership products

$

53



$

341



$

311



$

634


Management and exchange

145



231



372



470


Rental

18



150



153



297


Financing

70



69



142



137


Cost reimbursements

194



252



512



539


TOTAL REVENUES

480



1,043



1,490



2,077


EXPENSES








Cost of vacation ownership products

23



91



83



169


Marketing and sales

57



189



240



375


Management and exchange

77



123



215



256


Rental

73



97



171



177


Financing

23



21



61



43


General and administrative

19



64



89



131


Depreciation and amortization

31



36



63



73


Litigation charges



1



2



2


Royalty fee

23



26



49



52


Impairment

1





96



26


Cost reimbursements

194



252



512



539


TOTAL EXPENSES

521



900



1,581



1,843


Gains (losses) and other income (expense), net

14



2



(42)



10


Interest expense

(42)



(35)



(75)



(69)


ILG acquisition-related costs

(12)



(36)



(33)



(62)


Other





(3)




(LOSS) INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

(81)



74



(244)



113


Benefit (provision) for income taxes

19



(25)



77



(40)


NET (LOSS) INCOME

(62)



49



(167)



73


Net income attributable to noncontrolling interests

(8)





(9)




NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(70)



$

49



$

(176)



$

73










(LOSS) EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS








Basic

$

(1.68)



$

1.11



$

(4.25)



$

1.62


Diluted

$

(1.68)



$

1.10



$

(4.25)



$

1.61










NOTE: Earnings per share - Basic and Earnings per share - Diluted are calculated using whole dollars.

 

A-3


MARRIOTT VACATIONS WORLDWIDE CORPORATION

(In millions, except per share amounts)

(Unaudited)


ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS AND

ADJUSTED EARNINGS PER SHARE - DILUTED



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

Net (loss) income attributable to common shareholders

$

(70)



$

49



$

(176)



$

73


(Benefit) provision for income taxes

(19)



25



(77)



40


(Loss) income before income taxes attributable to common shareholders

(89)



74



(253)



113


Certain items:








Litigation charges



1



2



2


(Gains) losses and other (income) expense, net

(14)



(2)



42



(10)


ILG acquisition-related costs

12



36



33



62


Impairment charges

1





96



26


Purchase price adjustments

14



17



30



32


Other

(2)





55



1


Adjusted pretax (loss) income **

(78)



126



5



226


Benefit (provision) for income taxes

6



(36)



12



(69)


Adjusted net (loss) income attributable to common shareholders**

$

(72)



$

90



$

17



$

157


Diluted shares

41.2



45.2



41.4



45.6


Adjusted (loss) earnings per share - Diluted **

$

(1.76)



$

2.00



$

0.40



$

3.44


















ADJUSTED EBITDA



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

Net (loss) income attributable to common shareholders

$

(70)



$

49



$

(176)



$

73


Interest expense(1)

42



35



75



69


Tax (benefit) provision

(19)



25



(77)



40


Depreciation and amortization

31



36



63



73


Share-based compensation

9



11



13



20


Certain items before income taxes(2)

(3)



39



230



86


Adjusted EBITDA **

$

(10)



$

195



$

128



$

361










(1) Interest expense excludes consumer financing interest expense associated with term loan securitization transactions.

(2) Excludes certain items included in depreciation and amortization. Please see "Non-GAAP Financial Measures" for additional information about certain items.


ADJUSTED EBITDA BY SEGMENT



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

Vacation Ownership

$

(19)



$

203



$

128



$

375


Exchange & Third-Party Management

19



46



60



100


Segment adjusted EBITDA**



249



188



475


General and administrative

(13)



(56)



(64)



(117)


Consolidated property owners' associations

3



2



4



3


Adjusted EBITDA**

$

(10)



$

195



$

128



$

361




** 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-4


MARRIOTT VACATIONS WORLDWIDE CORPORATION

VACATION OWNERSHIP SEGMENT FINANCIAL RESULTS

(In millions)

(Unaudited)



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

REVENUES








Sale of vacation ownership products

$

53



$

341



$

311



$

634


Resort management and other services

73



124



185



249


Rental

12



133



134



262


Financing

69



68



140



135


Cost reimbursements

198



258



543



549


TOTAL REVENUES

405



924



1,313



1,829


EXPENSES








Cost of vacation ownership products

23



91



83



169


Marketing and sales

49



176



219



348


Resort management and other services

22



54



78



117


Rental

87



102



194



187


Financing

23



20



60



42


Depreciation and amortization

18



17



36



34


Litigation charges



1



2



2


Royalty fee

23



26



49



52


Impairment

1





5



26


Cost reimbursements

198



258



543



549


TOTAL EXPENSES

444



745



1,269



1,526


Gains (losses) and other income (expense), net

5



(1)



6



8


Other





(3)




SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

(34)



178



47



311


Net loss attributable to noncontrolling interests







1


SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(34)



$

178



$

47



$

312


 

A-5


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CONSOLIDATED CONTRACT SALES TO ADJUSTED DEVELOPMENT MARGIN

(In millions)

(Unaudited)



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

Consolidated contract sales

$

30



$

386



$

336



$

740


Less resales contract sales

(1)



(8)



(8)



(16)


Consolidated contract sales, net of resales

29



378



328



724


Plus:








Settlement revenue

2



7



8



12


Resales revenue

1



4



5



7


Revenue recognition adjustments:








Reportability

32



(8)



66



(38)


Sales reserve

(9)



(27)



(80)



(46)


Other(1)

(2)



(13)



(16)



(25)


Sale of vacation ownership products

53



341



311



634


Less:








Cost of vacation ownership products

(23)



(91)



(83)



(169)


Marketing and sales

(49)



(176)



(219)



(348)


Development margin

(19)



74



9



117


Revenue recognition reportability adjustment

(21)



5



(44)



26


Other(3)



3



29



5


Adjusted development margin **

$

(40)



$

82



$

(6)



$

148


Development margin percentage(2)

(34.8%)



21.7%



3.0%



18.5%


Adjusted development margin percentage(2)

(168.4%)



23.8%



(2.1%)



22.4%




** 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.


(1) 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.


(2) Development margin percentage represents Development margin divided by Sale of vacation ownership products. Adjusted development margin percentage represents Adjusted development margin divided by Sale of vacation ownership products revenue after adjusting for revenue reportability and other charges.


(3) Includes sales reserve charge related to COVID-19 and purchase price adjustments.

 

A-6


MARRIOTT VACATIONS WORLDWIDE CORPORATION

EXCHANGE & THIRD-PARTY MANAGEMENT SEGMENT FINANCIAL RESULTS

(In millions)

(Unaudited)



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

REVENUES








Management and exchange

$

39



$

76



$

111



$

158


Rental

6



17



19



34


Financing

1



1



2



2


Cost reimbursements

12



22



33



46


TOTAL REVENUES

58



116



165



240


EXPENSES








Marketing and sales

8



13



21



27


Management and exchange

18



26



45



52


Rental

1



9



6



17


Financing



1



1



1


Depreciation and amortization

4



12



9



24


Impairment





91




Cost reimbursements

12



22



33



46


TOTAL EXPENSES

43



83



206



167


Losses and other expense, net

(1)








SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS

14



33



(41)



73


Net loss attributable to noncontrolling interests








SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

14



$

33



$

(41)



$

73


 

A-7


MARRIOTT VACATIONS WORLDWIDE CORPORATION

CORPORATE AND OTHER FINANCIAL RESULTS

(In millions)

(Unaudited)



Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

REVENUES








Management and exchange(1)

33



$

31



$

76



$

63


Rental(1)







1


Cost reimbursements(1)

(16)



(28)



(64)



(56)


TOTAL REVENUES

17



3



12



8


EXPENSES








Management and exchange(1)

37



43



92



87


Rental(1)

(15)



(14)



(29)



(27)


General and administrative

19



64



89



131


Depreciation and amortization

9



7



18



15


Cost reimbursements(1)

(16)



(28)



(64)



(56)


TOTAL EXPENSES

34



72



106



150


Gains (losses) and other income (expense), net

10



3



(48)



2


Interest expense

(42)



(35)



(75)



(69)


ILG acquisition-related costs

(12)



(36)



(33)



(62)


FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS

(61)



(137)



(250)



(271)


Benefit (provision) for income taxes

19



(25)



77



(40)


Net income attributable to noncontrolling interests(1)

(8)





(9)



(1)


FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(50)



$

(162)



$

(182)



$

(312)




(1) Represents the impact of the consolidation of owners' associations of the acquired Legacy-ILG vacation ownership properties under the voting interest model, which represents the portion related to individual or third-party vacation ownership interest ("VOI") owners.

 

A-8


MARRIOTT VACATIONS WORLDWIDE CORPORATION

SEGMENT ADJUSTED EBITDA

(In millions)

(Unaudited)


VACATION OWNERSHIP


Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(34)



$

178



$

47



$

312


Depreciation and amortization

18



17



36



34


Share-based compensation expense

1



2



2



4


Certain items(1)(2)

(4)



6



43



25


SEGMENT ADJUSTED EBITDA **

$

(19)



$

203



$

128



$

375


















EXCHANGE & THIRD-PARTY MANAGEMENT


Three Months Ended


Six Months Ended


June 30, 2020


June 30, 2019


June 30, 2020


June 30, 2019

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

14



$

33



$

(41)



$

73


Depreciation and amortization

4



12



9



24


Share-based compensation expense



1



1



2


Certain items(3)(4)

1





91



1


SEGMENT ADJUSTED EBITDA **

$

19



$

46



$

60



$

100




** 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.


(1) Certain items in the Vacation Ownership segment for the second quarter of 2020 consisted of $5 million of gains and other income, partially offset by a $1 million asset (inventory) impairment charge.

 

Certain items in the Vacation Ownership segment for the second quarter of 2019 consisted of $4 million of purchase accounting adjustments, $1 million of litigation charges and $1 million of losses and other expense.


(2) Certain items in the Vacation Ownership segment for the first half of 2020 consisted of $2 million of litigation charges, $3 million related to transaction costs associated with our asset light inventory arrangements, $5 million of asset (inventory) impairment charges, $37 million related to the net sales reserve adjustment, and $2 million of purchase accounting adjustments, partially offset by $6 million of gains and other income.

 

Certain items in the Vacation Ownership segment for the first half of 2019 consisted of $26 million of asset impairments, $5 million of purchase accounting adjustments and $2 million of litigation charges, partially offset by $8 million of gains and other income.


(3) Certain items in the Exchange & Third-Party Management segment for the second quarter of 2020 consisted of $1 million of losses and other expense. 


(4) Certain items in the Exchange & Third-Party Management segment for the first half of 2020 consisted of $91 million of impairment charges (Goodwill and Indefinite-Lived Intangibles).

 

Certain items in the Exchange & Third-Party Management segment for the first half of 2019 consisted of $1 million of purchase accounting adjustments.

 

A-9


MARRIOTT VACATIONS WORLDWIDE CORPORATION

QUARTERLY OPERATING METRICS

(Contract sales in millions)



Year


Quarter Ended





March 31


June 30


September 30


December 31


Full Year

Vacation Ownership












Consolidated Contract Sales












Total

2020


$

306



$

30







$

336



2019


$

354



$

386



$

390



$

394



$

1,524



2018(1)


$

337



$

365



$

372



$

358



$

1,432














Legacy-MVW

2020


$

185



$

25







$

210



2019


$

223



$

246



$

244



$

239



$

952



2018


$

204



$

232



$

242



$

224



$

902














Legacy-ILG

2020


$

121



$

5







$

126



2019


$

131



$

140



$

146



$

155



$

572



2018(1)


$

133



$

133



$

130



$

134



$

530














VPG












Total

2020(4)


$

3,680



N/M







N/M



2019


$

3,350



$

3,299



$

3,461



$

3,499



$

3,403



2018(1)


$

3,426



$

3,248



$

3,367



$

3,208



$

3,308














Legacy-MVW(2)

2020(4)


$

3,989



N/M







N/M



2019


$

3,777



$

3,700



$

3,789



$

3,727



$

3,747



2018


$

3,728



$

3,672



$

3,781



$

3,496



$

3,666














Legacy-ILG

2020(4)


$

3,442



N/M







N/M



2019


$

3,042



$

2,981



$

3,232



$

3,394



$

3,163



2018(1)


$

3,227



$

2,857



$

2,966



$

3,039



$

3,017














Exchange & Third-Party Management












Total active members (000's)(3)

2020


1,636



1,571







1,571



2019


1,694



1,691



1,701



1,670



1,670



2018(1)


1,822



1,800



1,802



1,802



1,802














Average revenue per member(3)

2020


$

41.37



$

30.17







$

71.74



2019


$

46.24



$

43.23



$

40.89



$

38.38



$

168.73



2018(1)


$

47.61



$

42.10



$

39.97



$

37.37



$

167.12




(1) Includes Legacy-ILG as if acquired at the beginning of fiscal year 2018.


(2) Represents Legacy-MVW North America VPG.


(3) Includes members at the end of each period for the Interval International exchange network only.


(4) Not meaningful given that the majority of the sales in the quarter were from our enhanced phone sales program that do not count as a tour in the VPG calculation and there were limited site-based tours in the second quarter due to sales center closures.

 

A-10

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 a double 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 attributable to common shareholders, earnings per share or any other comparable operating measure prescribed by GAAP. In addition, these non-GAAP financial measures may be calculated and / or presented differently than measures with the same or similar names that are reported by other companies, and as a result, the non-GAAP financial measures we report may not be comparable to those reported by others.

Certain Items Excluded from Adjusted Net Income Attributable to Common Shareholders, Adjusted EBITDA and Adjusted Development Margin

We evaluate non-GAAP financial measures, including Adjusted Pretax Income, Adjusted Net Income Attributable to Common Shareholders, Adjusted EBITDA and Adjusted Development Margin, that exclude certain items in the three and six months ended June 30, 2020 and June 30, 2019, 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 our comparison of results from our on-going core operations before these items with results from other vacation ownership companies.

Certain items - Quarter and First Half Ended June 30, 2020 

Certain items for the second quarter of 2020 consisted of $2 million related to the charge for VAT interest (true-up to the offsetting charge is included in the Interest expense line) and $14 million of gains and other income (including $8 million related to foreign currency translation, $1 million related to a true-up to a Marriott International indemnification receivable upon settlement (true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane, and $1 million related to miscellaneous gains and other income), partially offset by $12 million of ILG acquisition-related costs and $1 million of an asset impairment charge.

Certain items for the first half of 2020 consisted of $33 million of ILG acquisition-related costs, $2 million of litigation charges, $42 million of losses and other expense (including $24 million related to foreign currency translation and $32 million related to a true-up to a Marriott International indemnification receivable upon settlement (true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), partially offset by $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane, $3 million related to other insurance proceeds, $6 million receivable related to an indemnification from Marriott International for certain VAT charges, and $1 million related to miscellaneous gains and other income), $96 million of impairment charges, $2 million of purchase accounting adjustments, $3 million related to transaction costs related to our asset light inventory arrangements, $48 million other charges (including $37 million related to the net sales reserve adjustment and $11 million related to an accrual for the health and welfare costs for furloughed associates), and $4 million related to the charge for VAT penalties and interest (see offset included in indemnification above).

Certain items - Quarter and First Half Ended June 30, 2019

Certain items for the second quarter of 2019 consisted of  $36 million of ILG acquisition-related costs, $4 million of purchase price adjustments and $1 million of litigation charges, partially offset by $2 million of gains and other income.

Certain items for the first half of 2019 consisted of $62 million of ILG acquisition-related costs, $26 million of asset impairments, $5 million of purchase accounting adjustments, $2 million of litigation charges and $1 million of other severance costs, partially offset by $10 million of gains and other income.

Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses)

We evaluate Adjusted Development Margin (Adjusted Sale of Vacation Ownership Products Net of Expenses) as an indicator of operating performance. Adjusted Development Margin adjusts Sale of vacation ownership products revenues for the impact of revenue reportability, includes corresponding adjustments to Cost of vacation ownership products expense and Marketing and sales expense associated with the change in revenues from the Sale of vacation ownership products, and may include adjustments for certain items as itemized in the discussion in the preceding paragraph. We evaluate Adjusted Development Margin because it allows for period-over-period comparisons of our on-going core operations before the impact of revenue reportability and certain items to our Development Margin.

Earnings Before Interest Expense, Taxes, Depreciation and Amortization ("EBITDA") and Adjusted EBITDA

EBITDA is defined as earnings, or net income attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term loan securitization transactions), provision for income taxes, depreciation and amortization. For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense associated with term loan securitization transactions because we consider it to be an operating expense of our business. We consider EBITDA and Adjusted EBITDA to be indicators of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business. We also use EBITDA and Adjusted EBITDA, as do analysts, lenders, investors and others, because these measures exclude 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 provision for income taxes can vary considerably among companies. EBITDA and Adjusted 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. Adjusted EBITDA reflects additional adjustments for certain items, as itemized in the discussion of Adjusted Net Income Attributable to Common Shareholders above, 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. Prior period presentation has been recast for consistency. We evaluate Adjusted EBITDA 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. Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of these items with results from our competitors.

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SOURCE Marriott Vacations Worldwide

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