Q1 2024 Marriott Vacations Worldwide Corp Earnings Call

Operator: Greetings and welcome to the Marriott Vacations Worldwide first quarter 2024 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Neal Goldner, Vice President and Treasurer for Marriott Vacations Worldwide. Thank you. You may begin.

Greetings and welcome to the Marriott vacations worldwide first quarter 2024 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.

Keypad as a reminder, this conference is being recorded.

With that I'd like to turn the conference over to your host Mr. Neal Goldner, Vice President Investor Relations for Marriott vacations worldwide. Thank you you may begin.

Neal H. Goldner: Thank you, Melissa, and welcome to the Marriott Vacations Worldwide first quarter earnings call. I'm joined today by John Geller, our President and Chief Executive Officer, and Jason Marino, our Executive Vice President and Chief Financial Officer.

Neal H. Goldner: Thank you Melissa and welcome to the Marriott vacations worldwide first quarter earnings Conference call I'm joined today by John Geller, Our President and Chief Executive Officer, and Jason in Reno.

Jason: Decorative vice President and Chief Financial Officer.

Neal H. Goldner: 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 that we issued last night, as well as comments on this call, are effective only when made and will not be updated as actual events unfold.

Jason: 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 who knows expressed in or implied by our comments.

Jason: I wasn't looking statements in the press release that we issued last night as well as comments on this call are effective only when made and will not be updated as actual events unfold.

Neal H. Goldner: Throughout the call, we will make references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in the schedules attached to our press release and on our website.

Jason: Throughout the call we will make references to non-GAAP financial information you can find a reconciliation of non-GAAP financial measures referred to in our remarks in the schedules attached to our press release and on our website with that it's now my pleasure to turn the call over to John Gallagher.

John E. Geller: Thanks, Neal. Good morning, everyone, and thank you for joining us on our first quarter earnings call. It was great to see so many guests enjoying time with their family and friends at our resorts, making lasting memories during the first quarter. That's why they come back year in and year out, and with a system-wide occupancy running at 90% in Q1, we grew contract sales by 3% excluding Maui, despite having a difficult VPG comparison, with first-time buyer tours growing 9%.

John E. Geller: Thanks, Neil Good morning, everyone and thank you for joining our first quarter earnings call.

John E. Geller: It was great to see so many guests enjoying time with their family and friends at our resorts, making lasting memories during the first quarter.

John E. Geller: That's why they come back year in and you're out and with our system wide occupancy running 90% in Q1, we grew contract sales by 3%, excluding Maui, despite having a difficult D. P. G comparison with first time buyer tours growing 9%.

John E. Geller: We also started taking reservations for our new Marriott Vacation Club Resort in Waikiki at the end of the quarter, which remains on track to open later this year, and reservations have been strong for this new property. Owners have consistently told us they wanted us to add a location in Waikiki, and this new resort is already bringing excitement to the system. Concurrent with the resort opening, we plan to open a new sales gallery that we believe could be a meaningful contributor as it ramps up over a few years.

John E. Geller: We also started taking reservations for our new Marriott vacation club resorts and Waikiki at the end of the quarter, which remains on track to open later this year and reservations have been strong for this new property.

John E. Geller: Owners have consistently told us they wanted us to add the location in Waikiki and this new look new resort is already bringing excitement to the system.

John E. Geller: Concurrent with the resort opening we plan to open a new sales galleries that we believe could be a meaningful contributor as it ramps up over a few years.

John E. Geller: And with Japanese arrivals to Hawaii up almost 75% year over year in the first quarter, the timing of this new resort couldn't be better. We've made good progress adding new marketing and sales executives in Maui and still expect contract sales to be up around $5 million this year. International contract sales grew more than 25% year-over-year, driven by double-digit growth in Asia Pacific as the market continues to recover.

John E. Geller: And with Japanese arrivals to Hawaii up almost 75% year over year in the first quarter the timing of this new resort couldn't be better.

John E. Geller: We've made good progress, adding new marketing and sales executives in Maui and still expect contract sales to be up around 5 million this year.

John E. Geller: International contract sales grew more than 25% year over year, driven by double digit growth in Asia Pacific as the market continues to recover.

John E. Geller: I'm also happy to announce that we recently signed an agreement to develop a new 60-unit Marriott Vacation Club Resort in Thailand. The resort will be co-located with an existing JW Marriott Hotel in Kalak and will include a new on-site sales gallery when it opens in a few years. This will be our seventh resort in the Asia Pacific region, and the team is busy working on other potential development opportunities around the world.

John E. Geller: I'm also happy to announce that we recently signed an agreement to develop a new 60 unit Marriott vacation club resort in Thailand, there is.

John E. Geller: <unk> will be co located with an existing GW Marriott hotel in catalog and will include a new on site sales gallery when it opens in a few years. This will be our seventh resort in the Asia Pacific region and the team is busy working on other potential development development opportunities around the world.

John E. Geller: Our Hyatt business also continues to progress nicely. By leveraging proven branded channels, we've been able to grow our Hyatt package pipeline while simultaneously replacing lower quality tours with higher quality, more cost-effective tours. Our Hyatt Vacation Club owners continue to utilize and enjoy the new owner benefits that we rolled out last year through the BEYOND program, and we continue to work toward launching a consolidated Hyatt product. In our exchange and third-party management business, Interval International performed in line with our expectations for the quarter, with active members unchanged year over year and membership and getaway revenue increasing.

John E. Geller: Our Hyatt business also continues to progress nicely.

John E. Geller: By leveraging proven branded channels, we've been able to grow our highest package pipeline, while simultaneously, replacing lower quality tours with higher quality more cost effective tours.

John E. Geller: Our Hyatt vacation club owners continue to utilize and enjoy the new owner benefits that we rolled out last year due to the beyond program and we continue to work toward launching a consolidated Hyatt product.

John E. Geller: In our exchange <unk> third party management business interval International performed in line with our expectations for the quarter with active members unchanged year over year, and remember shifting getaway revenue increasing.

John E. Geller: As previously discussed, last year we hired a new Chief Information Officer to drive our IT transformation efforts, and he spent a considerable amount of time analyzing where our opportunities lie. While this is a multi-year journey, our IT efforts this year will continue to be centered around consolidating legacy systems, modernizing our software, and increasing automation, while continuing to enhance our data and analytics capabilities to improve the efficiency of our marketing campaigns. Looking forward, we ended the quarter with 270,000 packages, and our team is working hard to get these customers on vacation.

John E. Geller: As previously discussed last year, we hired a new chief information officer to drive our transformation efforts and he spent a considerable amount of time analyzing where our opportunities lie.

John E. Geller: Well this is a multiyear journey alright T efforts. This year will continue to be centered around consolidating legacy systems, modernizing our software and increasing automation, while continuing to enhance our data and analytics capabilities to improve the efficiency of our marketing campaigns.

John E. Geller: Looking forward, we ended the quarter with 270000 packages and our team is working hard to get these customers on vacation.

John E. Geller: At the same time, the consumer shift to experiences continues to benefit our business, with 84% of people recently surveyed planning to spend more or the same amount of money on travel this year compared to last year. International inbound travel to the U.S. continues to recover and is expected to approach pre-pandemic levels this year. Meanwhile, although the economy remains on solid footing, consumers are concerned about elevated price levels, which could impact their spending.

John E. Geller: At the same time, the consumer shift to experience.

John E. Geller: This continues to benefit our business with 84% of people recently surveyed planning to spend more or the same amount of money on travel this year compared to last year.

John E. Geller: International inbound travel to the U S continues to recover and is expected to approach pre pandemic levels. This year.

John E. Geller: And while although the economy remains on solid footing consumers are concerned about elevated price levels, which could impact their spending.

John E. Geller: Finally, as we approach the important summer vacation months, key on the books in both North America and internationally are up a few points year over year. With that, I'll turn the call over to Jason to discuss our results. Thanks, John.

John E. Geller: Finally, as we approach the important summer vacation months keys on the books in both North America and internationally are off a few points year over year with that I'll turn the call over to Jason to discuss our results. Thanks John.

Jason Marino: Thanks, John. Today I'm going to review our first quarter results, our balance sheet and liquidity position, and our outlook for the rest of the year, starting with our vacation ownership segment. Coming into the year, we knew our most difficult sales comparison was going to be in Q1, so we feel very good about our first quarter results. Contract sales declined 1% due to Maui and the difficult VPG comp, while tours increased 4% year-over-year.

Jason: Today I'm going to review, our first quarter results, our balance sheet and liquidity position and our outlook for the rest of the year.

Jason: Starting with our vacation ownership segment.

Jason: Coming into the year, we knew our most difficult sales comparison was going to be in Q1. So we feel very good about our first quarter results contract sales declined 1% due to Maui and the difficult V. P. G comp well tours increased 4% year over year and as John mentioned contract sales grew 3% year over year, excluding Maui.

Jason Marino: And, as John mentioned, contract sales grew 3% year-over-year, excluding Maui. As expected, development margin declined year over year due to lower VPGs, higher marketing and sales costs, and a higher sales reserve, as well as unfavorable reportability. Delinquencies and defaults continue to run higher than history would suggest, which is a continuation of last year's trends.

Jason: As expected development margin declined year over year due to lower V. P g's higher marketing and sales costs and higher sales reserves as well as unfavorable where portability.

Jason: Delinquencies and defaults continue to run higher than history would suggest which is a continuation of last year's trends. We continue to work hard to get delinquencies down and we believe our reserve is currently at appropriate levels now, we do need to see loan performance improve.

Jason Marino: We continue to work hard to get delinquencies down, and we believe our reserve is currently at appropriate levels, though we do need to see loan performance improve. Rental profit increased by $12 million year-over-year, driven by increased rental revenue and lower expenses as more preview nights were used for marketing purposes. Financing profit declined 4%, driven by higher interest expense, partially offset by higher financing revenue, while resort management profit increased 8%. As a result, adjusted EBITDA on our vacation ownership segment declined 7% year-over-year, driven primarily by lower development profit, while margins remained strong at 29% in the quarter.

Jason: Rental profit increased $12 million year over year, driven by increased rental revenue and lower expenses as more preview nights for used for marketing purposes.

Jason: Financing profit declined 4% driven by higher interest expense, partially offset by higher financing revenue well resort management profit increased 8%.

Jason: As a result, adjusted EBITDA in our vacation ownership segment declined 7% year over year, driven primarily by lower development profit while margins remained strong at 29% in the quarter.

Jason Marino: Moving to our exchange and third-party management business, Adjusted EBITDA declined $5 million compared to the prior year, with lower average revenue per member and exchange volume being partially offset by higher getaways at interval, while profit at Aqua Aston declined year-over-year due to softness in Hawaii. As a result, total company adjusted EBITDA declined 8%.

Jason: Moving to our exchange and third party management business, adjusted EBITDA declined $5 million compared to the prior year with lower average revenue per member and exchange volume being partially offset by higher getaways are interval, while profit at Aqua Aston declined year over year due to softness in Hawaii.

Jason: As a result total company adjusted EBITDA declined 8%.

Jason Marino: Moving to the balance sheet, we returned $78 million to shareholders during the first quarter, repurchasing $24 million of common stock and paying $54 million in dividends. And with the shares we've repurchased over the last 12 months, diluted shares outstanding declined 5% year over year. Given the seasonality of our cash flows, we ended the quarter with net debt to adjusted EBITDA of 3.9 times and $855 million in liquidity. At the beginning of April, we refinanced our term loan, which is our only near-term maturity, extending it out to 2031.

Jason: Moving to the balance sheet, we returned $78 million to shareholders. During the first quarter repurchasing $24 million of common stock and.

Jason: Paying $54 million in dividends and with the shares we've repurchased over the last 12 months diluted shares outstanding declined 5% year over year.

Jason: Given the seasonality of our cash flows we ended the quarter with net debt to adjusted EBITDA of three nine times and $855 million in liquidity.

Jason: At the beginning of April we refinanced our term loan which is our only near term maturity extending it out to 2031.

Jason Marino: As a result, our next maturity isn't until Q1 2026. We also have nearly $1 billion of inventory on the balance sheet, including inventory and PP&E, enough to support more than two years of future sales. We also completed our first securitization of the year, raising $430 million at a blended interest rate of 5.5%, which is approximately 100 basis points below our last ABS deal. Moving to guidance.

Jason: As a result, our next maturity isn't until Q1 2026.

Jason: We also have nearly $1 billion of inventory on our balance sheet, including inventory and PP&E enough to support more than two years of future sales.

Jason: We also completed our first securitization of the year raising $430 million at a blended interest rate of five 5%, which is approximately 100 basis points below our last ABS deal.

Jason Marino: Our full-year adjusted EBITDA guidance remains unchanged at $760 million to $800 million. We still expect contract sales to grow 6% to 9% this year, with our strongest sales growth coming in the second half of the year as we lap the Maui wildfires, and for development margin to be down a few points, including in the second quarter. Financing profit will continue to be a headwind to growth this year due to higher securitized debt costs, and while we do expect rates to be a headwind again next year, financing profit should increase.

Jason: Moving to guidance, our full year adjusted EBITDA guidance remains unchanged at 760 million to $800 million, we still expect contract sales to grow 6% to 9% this year with our strongest sales growth coming in the second half of the year as we lap the Maui wildfires and for development margin to be down a few points, including in the <unk>.

Jason: Second quarter.

Jason: Financing profit will continue to be a headwind to growth this year due to higher securitized debt cost and while we do expect rates to be a headwind again next year financing profit should increase.

Jason Marino: Our rental business had a good first quarter, and we're working hard to drive incremental demand and manage our costs. And management profits should show fairly consistent year-over-year growth over the balance of the year. In our exchange and third-party management business, we expect interval members to be down slightly and for average revenue per member to increase. Finally, we still expect G&A expense to be up slightly year-over-year. Moving to cash flow, we expect our adjusted free cash flow to be in the $400 to $450 million range this year.

Jason: Our rental business had a good first quarter and we're working hard to drive incremental demand and manage our cost.

Jason: And manage my profits should show a fairly consistent year over year growth over the balance of the year.

Jason: In our exchange and third party management business, we expect interval members to be down slightly and for average revenue per member to increase <unk>.

Jason: Finally, we still expect G&A expense to be slightly up slightly year over year.

Jason: Moving to cash flow.

Jason: We expect our adjusted free cash flow to be in the $400 million to $450 million range. This year. Our plan is to deploy our free cash to repay some of our corporate debt as well as return cash to shareholders through dividends and buybacks, while targeting to get our leverage back to three times by the end of 2025.

Jason Marino: Our plan is to deploy our free cash to repay some of our corporate debt, as well as return cash to shareholders through dividends and buybacks, while targeting to get our leverage back to three times by the end of 2025. With that, we'll be happy to answer your questions.

Speaker Change: With that we'll be happy to answer your questions operator.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Ben Chaykin with Mizuho Securities. Please proceed with your question.

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Jason: Confirmation tone will indicate your line is in the question Kim You May press star two if you'd like to remove your question from the queue.

Jason: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.

Jason: Our first question comes from the line of Ben taken with Mizuho Securities. Please proceed with your question.

Ben Chaykin: Hey, good morning. Thanks for taking my question. Would love to dig into the strength in rentals. It sounds like from the prepared remarks that there were more preview nights. Is that pretty lumpy through the year? Do you expect it to stay elevated for the rest of the year? And then, related. Do the higher preview nights play a role in the higher VOI sales and marketing? If not, what drove that up?

Ben: Hey, good morning, Thanks for taking my question.

Operator: Thanks.

Ben: Like to dig into the strength in rental it sounds like from the prepared remarks that with more preview nights is that pretty lumpy through the year or do you expect to stay elevated.

Ben: Rest of the year, and then I guess related.

Ben: Due to higher preview nights play a role in the higher VOI sales and marketing is not what drove that up thanks.

Jason Marino: Sure. Hey, Ben.

Speaker Change: Sure Hey, Ben.

Ben: Yeah, I think as you look at rentals for the year and what happened in the first quarter. You added you had a couple of things you mentioned the preview nights and given all the packages we have in and what we're seeing on the books. We do expect those to continue to be much higher than than the previews that we've done last year. So that obviously helps from a tour.

Jason Marino: Yeah, I think as you look at rental for the year and what happened in the first quarter, you have a couple things. You mentioned the preview nights. And given all the packages we have and what we're seeing on the books, we do expect those to, you know, continue to be much higher than the previews that we did last year. So that obviously helps from a tour perspective on the sales side. And with that, as you also mentioned, it's a bit of geography on the P&L. There was about $6 million of higher cost, right? We use rental inventory to supply them, and that cost gets charged to marketing and sales.

Speaker Change: Perspective on the sales side.

Speaker Change: And with that is as you also mentioned, it's a bit of geography on the P&L. There was about $6 million up higher costs right, we use rental inventory to supply those and that cost gets charged over to marketing and sales. So it was a headwind on the development margin.

Jason Marino: So it was a headwind on the development margin but a benefit of about $6 million on the rental side of the business. The other area that outperformed a little bit in the first quarter over last year were our uses of plus points. So those are the single-use points we give out as incentives. They were up in terms of the timing of their usage.

Speaker Change: But a benefit to about $6 million on on the rental side of the business.

Speaker Change: The other area that outperformed a little bit in the first quarter over last year, where our usage of plus points. So those are the single use points. We give out is incentives. They were up in terms of the timing of those usage and so that also benefited the first quarter year over year. So as we set up for the.

Jason Marino: And so that also benefited the first quarter year over year. So as we set up for the balance of the year, you know, we feel better about the rentals and where we're heading. The other thing I should mention, too, on the rental side, our red pack was up about 3%. So, you know, the actual rentals, we are mostly through occupancy rate were relatively flat, but we were able to do a lot of our marketing campaigns to continue to get those rentals on the books. We talked about overall occupancies being up a couple points as we go into the summer months. So people want to go on vacation, and we're seeing that in our rental results.

Ben Chaykin: Gotcha. Now, just a quick follow-up.

Speaker Change: The balance of the year, Yeah, we feel better about rentals in and where we're heading.

Speaker Change: The other thing I should mention too on the rental side, a rat pack was up about 3%. So you know the the actual rentals. We are mostly through occupancy rate was relatively flat, but we're able to do a lot of our marketing campaigns to continued to get those oh, there's rentals on the books, we've talked about overall occupancy.

Speaker Change: <unk> be it up a couple of points as we go into the summer months. So people want to get on vacation and then we're seeing that in our rental results.

Jason Marino: In Maui, it sounds like demand is coming back. I think your baseline expectation is limited year-over-year growth. In Maui, you mentioned $5 million in contract sales or so. Is the major headwind still on the sales side, meaning the personnel side? And then, if so, what's being done to alleviate that?

Speaker Change: Got you and then just a quick follow up in Maui. It sounds like demand is coming back.

Speaker Change: Your baseline expectation is limited year over year growth in Maui, you mentioned $5 million of contract sales or so is the major headwind still on the on the.

Speaker Change: The sale side like meaning the personnel side and then if so what's being done to alleviate that how do you. How do you think that business going forward. Thanks sure. Yes in Maui, It's a couple of things one resort occupancies in the first quarter.

Jason Marino: How do you think about the business going forward? Thanks. Sure.

Jason Marino: Yeah, in Maui, there are a couple things. One, resort occupancies in the first quarter were in the low 90s. So not back, you know, typically in Maui, we were running 97% type occupancy. So occupancies are coming back.

Speaker Change: We're in the low nineties, so not back yet we're typically in Maui were running 97% type occupancies. So occupancies are coming back so that that's obviously a bit of a headwind just in terms of in house tour flow, but.

Jason Marino: So that's obviously, you know, a bit of a headwind just in terms of in-house tour flow, but we expect to hopefully see that continue to come back over the balance of the year and get back to more pre-fire levels. And then it's on the, you know, sales and marketing talent. We've made good progress in terms of replacing some of the talent we lost, but we're not completely back to fully staffed yet. The trade-off a little bit is, you know, you're bringing in, you know, potentially new talent, right, versus losing experienced talent.

Speaker Change: We expect to hopefully see that continue to come back over the balance of the year and get back to more pre fire levels and then it is on the sales and marketing talent. We've made good progress in terms of replacing.

Speaker Change: Replacing some of the tower, we lost or not completely back to fully staffed yet.

Speaker Change: The trade off a little bit as youre, bringing in potentially new talent right versus losing experienced talent. So there is a bit of a ramp up time getting.

Jason Marino: So there is a bit of a ramp-up time, getting those sales people up to, you know, kind of normal production. But yeah, the setup right now is pretty good. We expect it to continue to get better as we go through the year. And, as you mentioned, and I talked about in my remarks, we should be up year over year. And obviously, we got, you know, easier comps in the second half of the year in Maui with, you know, the impact of the wildfires last year.

Speaker Change: Getting those sales people up to kind of that normal production, but yeah.

Speaker Change: Right now is pretty good and we expect it to continue to get better as we go through the year and as you mentioned and I talked about in my remarks, we should be up year over year, and and obviously, we got easier.

Speaker Change: Easier comps in the second half of the year and Maui with with the you know the impact of the wildfires last year.

Ben Chaykin: I understand. Thank you. Nice quarter.

Speaker Change: Understood. Thank you nice quarter.

Speaker Change: Thanks Ben.

Operator: Thank you. Our next question comes from the line of Patrick Scholes with Truist Securities. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Patrick Scholes with TD Securities. Please proceed with your question.

Charles Patrick Scholes: Hi, good morning. Good morning, Patrick.

Charles Patrick Scholes: Hi, good morning, Patrick.

Speaker Change:

Operator: I want to follow up on what I thought was a bit of a cryptic comment in the prepared remarks. This concerned the loan loss provision. You talked about needing to see performance improve. I assume that means, if it does, am I correct?

Charles Patrick Scholes: Wanted to follow up on what I thought was a bit of a cryptic comment in the prepared remarks.

Charles Patrick Scholes: Concern the loan loss provision.

Charles Patrick Scholes: You talked about needing to see performance improve I assume that means that the.

unknown: Am I correct.

Charles Patrick Scholes: to interpret that. If it doesn't improve, you would have to take another charge. Maybe you can flush it out, talk a little bit more about that. Sure. Yeah, I'll give you some comments, and then Jason can add too.

Speaker Change: We interpret that if it doesn't then group you would have to take another charge, maybe can wash I'll talk a little bit more about that sure.

Speaker Change: I'll give you some comments and then Jason can add too.

John E. Geller: You know, when we took the reserve last year in the third quarter, obviously, we were seeing higher delinquencies and higher defaults, and we made an estimate as to how those would kind of play out. But we said at the time, you know, the expectation would be that over the next, you know, three, four quarters, right, we'd start to see the improvements, some of the timing, and what we thought was the impact of, you know, the defaults really coming from some of the higher CPI inflation, things like that, that were impacting some of the customers.

Jason: Yeah. When we took the reserve last year in the third quarter, obviously, we're seeing higher delinquencies higher defaults and we took an estimate as to how those would kind of play out, but we said at the time the expectation would be over the next.

Jason: Three or four quarters right, we'd start to see the improvement in some of the timing and what we thought was the impact of of.

Jason: The defaults really coming from some of the.

Jason: Higher CPI inflation things like that that were impacting some of the customers. So.

John E. Geller: So the good news in the first quarter was, while delinquencies were higher than they were last year, over the course of the quarter, we saw those delinquencies improve sequentially. And even through April here, we saw some more improvements. So the trends are still good, but yeah, if our delinquencies, I guess Patrick to answer your point, if your delinquencies never came down from what we were experiencing, yeah, that would potentially be, you know, more loan loss reserves we'd have to take. We feel good about where we are at in the trajectory, but we still need to see some more improvement here over the next quarter or two to get back to more normalized Okay, thank you.

Jason: The good news in the first quarter was while delinquencies were higher than they were last year.

Jason: Over the course of the quarter, we saw those delinquencies improved sequentially.

Jason: And even through April here, we saw some more improvement so that the trends are still good but yes, if our delinquencies I guess Patrick dance your point, if you'd delinquencies never came down from what we were experiencing.

Charles Patrick Scholes: Yes that would potentially be more loan loss reserves, we'd have to take out we feel good about where we're at in that trajectory, but we still need to see some more improvement here over the next quarter or two to get back to more normalized delinquency trends.

Charles Patrick Scholes: And then some follow-up questions on Maui, you know, starting in August, you'd be laughing at the horrible fires of last year. You know, John, in your view, do you think that sets you up for, you know, the proverbial, easy year-over-year comparison? Or do you think Maui is still gonna be struggling where you wouldn't necessarily refer to it as an easy year-over-year comparison beginning in August

Charles Patrick Scholes: Okay.

Charles Patrick Scholes: And then.

Speaker Change: Follow up question on <unk>.

Speaker Change: Starting in August.

Speaker Change: You'll be lapping the horrible fires of last year.

Speaker Change: John do you have you do you think that.

Speaker Change: Sets you up for.

Speaker Change: <unk> year over year comparison, or do you think value is still going to be struggling where you wouldn't necessarily refer to ADESA.

Speaker Change: Year over year comparison, beginning in August.

John E. Geller: Simply, yes, it'll be an easier year-over-year comparison because, for a period of time, obviously, we're shut down. We're running 90-plus percent occupancies, as I mentioned, right now. We're back.

John: Well, yes, simply yes, it'll be an easier year over year comparison, because for a period of time, obviously were shut down right, where we're running 90 plus percent occupancies as I mentioned right now.

John: Yes, we're back we've got most of our sales force replace hopefully as we get to August right a lot of those newer salespeople be.

John E. Geller: We've got most of our sales floors replaced. Hopefully, as we get to August, a lot of those newer salespeople will be hitting more normalized production levels for salespeople. And so, yeah, on an absolute basis, we should do much better in August forward than we did last year, just given the trajectory of where we're at right now.

John: Hitting more.

John: Normalized production levels for salespeople.

John: And so yeah.

John: Absolute basis.

John: We should do much better August forward than we did last year, just given the trajectory of where we're at right now.

Charles Patrick Scholes: Okay, that does make sense. And then, just one last question on Maui. John, you probably saw there was some news about some increased regulations around Airbnb. Can I get your initial take on that? You know, could that really be a needle mover for you folks? Certainly, regulations in New York City have really helped the hotel industry. But, you know, is this a non-event, or could, again, this be a potential needle mover for legacy properties like yourselves?

Speaker Change: Okay that does makes sense and then just last.

Speaker Change: Last question on Maui, John you probably saw there was some.

Speaker Change: News about some increased regulations around airbnb.

Speaker Change: I get your initial take on back no could that really be a needle mover for you folks certainly regulations in New York City.

Speaker Change: It really helped the hotel industry, but is it just a non event.

Speaker Change: The potential needle mover for.

Speaker Change: Legacy properties like yourselves.

John E. Geller: Yeah, I think what you're referring to is the governor signing some legislation that kind of gives the power to the mayors of each island to, potentially, and this is where we don't really know yet exactly what the outcome could be or how it might impact us positively or negatively, but, you know, have greater decision-making around short-term rentals. So we're obviously watching it. We'll, one, make sure we understand exactly what's in the legislation, how it could potentially impact us, but part of it will be actually what the mayors actually decide to do, right? So, kind of early days. At this point, I don't necessarily see anything. Hopefully, that'll impact us in the near term, but we're going to keep an eye on it. Okay.

Speaker Change: Yeah, Hey, what you're referring to is the governor.

Speaker Change: Assigned some legislation that kind of gives the I think the power to the mayors of each island.

John: To potentially buy and this is where we don't really know yet exactly what the outcome could be or how it might impact is positive positively or negatively but you'll.

John: You'll have greater decision, making around short term rentals. So we're obviously watching it woeful one make sure we understand exactly what what's in the legislation how it could potentially impact us, but part of it will be actually what actually the mayor's decide to do.

Speaker Change: Right so.

Speaker Change: Kind of early days at this point I don't necessarily see anything hopefully that'll impact us in the in the near term, but we're going to keep an eye on it.

Charles Patrick Scholes: Okay, thank you. I'm all set for the moment.

Speaker Change: Okay. Thank you I'm all set in a moment.

Speaker Change: Great.

Operator: Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your question.

John: Thank you. Our next question comes from the line of Chris <unk> with Deutsche Bank. Please proceed with your question.

Chris Jon Woronka: Hey, good morning, Chris. Hey, John.

Chris: Hey, good morning, Chris.

Operator: So you mentioned the new development you're going to be doing in Thailand. I think you said it was part of the JW complex that already exists. And so I'm curious, looking forward, are you seeing more opportunities to do things on the sites of existing hotels, whether domestic or international? Because I think we're starting to see transactional activity pick up a little bit in the States. So I'm curious whether that's going to be an opportunity going forward.

Chris: Hey, John.

Chris: You mentioned the new.

Chris: New development Youre going to be doing in Thailand, I think you said it's <unk>.

Chris: Part of the J W complex already exists and so I'm curious looking forward are you seeing more opportunities to do things on sites of existing hotels, whether domestic or international because I think we're starting to see transactional activity pick up a little bit in the states I'm curious, whether it's going to be an opportunity going forward.

John E. Geller: Yeah, great question, Chris. The short answer is yes, in both locations. We've always had more opportunities just given resort development, I'd say in Asia Pacific, right? More opportunities, more resorts still getting done over there, and brand new construction. But we've got some opportunities we're looking at here currently in the U.S. as well, so I would expect us to potentially do some more of those deals here in both locations as we go forward. But yeah, development is coming back.

Speaker Change: Yeah, It's a great question, Chris that the short answer is yes in both locations.

Speaker Change: We've always had more opportunity just given resort development I'd say, an Asia Pacific right more opportunities more resort is still getting done over there brand new construction, but we've got some opportunities where we're looking at here are currently in the U S. As well so I would expect us to potentially do some more of those deals here.

Speaker Change: In both locations as we go forward.

John E. Geller: It's just a little bit location by location. And as you know, the co-located ones actually work well where we can leverage in-house across the co-located hotel. At the same time, we've got our units and leverage the amenities in the facility. So it'll be a little bit of facts and circumstances, but there are some good opportunities out there right now.

Speaker Change: But yes, the development is coming back it's just a little bit location by location and yeah. As you know the co located ones actually work well, where we can leverage in house across the co located hotel.

Speaker Change: At the same time, we've got our units and leverage the amenities in the facility. So.

Speaker Change: It'll be a little bit facts and circumstances, but there are some good opportunities out there right now.

Speaker Change: Okay.

Chris Jon Woronka: Okay, good to hear. Thanks, John. The follow-up is on kind of a loan portfolio, but in a different direction, which is I'm curious what you're seeing on current day originations: is the propensity for finance or down payment or any of that on new loans changing at all and without affecting your, you know, how you think about that, that going forward.

Speaker Change: Okay. Good to hear thanks, Sean follow up is on kind of the loan portfolio, but in a different direction, which is I'm curious of what youre seeing on yes.

Speaker Change: Current day originations as the propensity to finance, our down payment or any of that on new loans changing at all and without affect your how you think about that going forward.

Jason Marino: Yeah, Chris, this is Jason. We haven't seen too much, you know, too many changes and sort of day-to-day behavior. Propensity was down a little bit in the quarter, a couple points, but Q1 is always seasonally our lowest propensity quarter, just given the mix of buyers was 70% first time buyers, sorry, 70% existing owners in Q1 this quarter. So sometimes it just goes with that mix as well. But nothing else was really different.

Speaker Change: Yes, Chris This is Jason we haven't seen too much yet.

Jason Marino: Too many changes and sort of day one.

Jason Marino: Behavior.

Jason Marino: It was down a little bit in the quarter or a couple of points, but Q1 is always seasonally our lowest.

Jason: <unk>, just given the mix of buyers, where 70% first time buyers sorry, 70% existing owners and in Q1. This quarter. So that sometimes gets just goes with with that mix as well, but nothing else really different.

Jason Marino: Okay.

Chris Jon Woronka: Very good. Thanks, guys.

Speaker Change: Very good thanks, guys.

Speaker Change: Thanks, Chris.

Operator: Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

Chris Jon Woronka: Thank you. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

David Brian Katz: Hi, good morning, everyone. Good morning, David.

David Brian Katz: Hi, Good morning, everyone wondering David Thanks for.

Operator: Thanks for... Morning, thanks for taking all the questions and for taking my question. John, you made what seems like maybe a passing comment about, you know, pricing and consumers' behavior toward pricing. Could you just go back to that and elaborate a bit more on sort of how that's showing up or, you know, what the sort of basis is for that? Hearing bits and pieces of it, you know, through earnings season in different ways, and wanted to make sure we got yours right. Yeah, sure.

David Brian Katz: Good morning, Thanks for taking all the for all the commentary and for taking my question.

Operator: John you made what seems like maybe a passing comment about pricing and consumers' behavior towards pricing could you just go back to that and elaborate a bit more on sort of how that's showing up or what the sort of basis as you know.

Speaker Change: For that.

Operator: Hearing bits and pieces of it through earning season in different ways and wanted to make sure we get yours right.

John E. Geller: As you saw, even adjusted for Maui, our VPGs were down slightly in the first quarter. And I would argue, if you go back to last year, we had a strong first quarter. So it was a tough comp.

Speaker Change: Yeah sure.

John: Yeah as you saw even adjusted from OE or <unk> were down slightly in the first quarter and I would argue.

John E. Geller: If you go back to last year, we had a strong first quarter. So it was a tough comp as we went through last year, we did see a little bit more normalization for lack of a better description of <unk> and then things for the most part as we got through the third and fourth quarter.

John E. Geller: As we went through last year, we did see a little bit more normalization, for lack of a better description of VPGs. And then things, for the most part, as we got through the third and fourth quarters, kind of stabilized, right? And so that's where we see it. You know, at the end of the day, David is a little bit in the VPGs.

John E. Geller: Kind of stabilized right and so.

John E. Geller: That's where we see it at the end of the day, David is a little bit in the V. P. Geez I would say the.

John E. Geller: I would say, you know, the broader macro, while the overall economy is still, you know, headlines are pretty good, as we've talked about, no different than we've seen on the loan portfolio, right? Higher costs, you know, I think at some level, and you see it in other businesses, right? There's some stress on the consumer. But I think the good news, as I also said in my prepared remarks, is that people seem, you know, in terms of their wallet spend, they're prioritizing experiences and vacations, right?

John E. Geller: The broader macro while the overall economy is still headlines are pretty good as we've talked about no different than we've seen on the loan portfolio rate higher costs, you know I think at some level when you see it in other businesses right. There there is some stress on the consumer.

John E. Geller: I think the good news is I also said in my prepared remarks is people seem as you know in terms of their wallet spend they're prioritizing experiences and vacations right and Thats what were seeing or are on the books are up as you know and they were strong last year right going into the summer and they are up a bit right people are getting on vacation.

John E. Geller: And that's what we're seeing on the books or up as, you know, and they were strong last year, right, going into the summer, and they're up a bit, right? People are getting on vacation, people are spending. And so that's a positive dynamic for us, the business we're in, and where people want to want to spend their money. And that is, as we've always talked about a bit of the post-COVID era, right, people have kind of shifted to how they want to spend their disposable income and go on vacation.

John E. Geller: People are spending.

John E. Geller: And so that that's a positive dynamic for us the business, we're in and where people want to want to spend their money and that is as we've always talked about a bit of the kind of the post COVID-19 bright people kind of shifted to how they want to spend their disposable income and get on vacation. So that that's a good tailwind for us.

John E. Geller: So that that's a good tailwind for us. Understandable. And one more, and if we're, you know, triple clicking on this, apologies, but the depreciation change that's embedded in the guidance, could we just be clear about, Right, it's sort of changing the EPS guidance, but not the EBITDA. And I just wanted to make sure we totally understand. Sure, David, at a high level.

Speaker Change: Understood and one more.

John E. Geller: Sure.

John E. Geller: Triple clicking on this apologies but.

Speaker Change: The depreciation change.

David: Embedded in the guidance.

John E. Geller: Could we just be clear about.

David: Right, it's sort of changing the EPS guide, but not the EBITDA and I just wanted to make sure we totally understand that.

Jason Marino: Sure, David. At a high level, we changed some estimates versus our guidance in terms of the timing of depreciation, just when some newer assets were, you know, going online, and the estimated useful lives of assets. So it's not a cash flow impact by any means, it's just the timing of some of the depreciation versus what we estimated at the beginning of the year from our guidance, just fine-tuning that a bit.

David: Sure David.

Jason Marino: At a high level, we changed some estimates versus our guidance in terms of the timing of depreciation just win some newer assets were going online estimated useful lives of assets. So it's not a cash flow impact by any means it's just the timing of some of the depreciation versus what we what we estimated at the beginning.

Operator: Thank you. Our next question comes from the line of Shaun Kelley with Bank of America. Please proceed with your question.

Shaun Clisby Kelley: The year from our guidance just fine tuning that a bit.

Shaun Clisby Kelley: Okay fair enough.

Shaun Clisby Kelley: Thank you.

Shaun Clisby Kelley: Alright, Thanks, David.

Operator: Thank you. Our next question comes from the line of Shaun Kelley with Bank of America. Please proceed with your question.

Shaun Clisby Kelley: Hi, good morning. Good morning, John. Thanks for taking my question. I just want to go back to the loan loss commentary for a minute or the provision commentary.

Shaun Clisby Kelley: Hi, good morning, Sean.

Shaun Clisby Kelley: John Thanks for taking my question I, just want to go back to the to the loan loss commentary for a minute.

Shaun Clisby Kelley: <unk> commentary I am just kind of trying to follow that more just the expectation that you guys have embedded here so.

Shaun Clisby Kelley: I'm just kind of trying to follow more just the expectation that you guys have embedded here. So, obviously, there was an increase last year, and I think the way you packaged it in the answer to the former question was that the expectation was that it would normalize a little bit after we kind of got through some issues last year with the consumer. But as we just kind of look at it on a percentage basis, it looks like it's actually continuing to increase sequentially.

Shaun Clisby Kelley: Obviously, there was a there was an increase last year and I think the way you package it and the answer to the former question.

Shaun Clisby Kelley: Was that the expectation was that would normalize a little bit after we kind of got through some issues last year with the consumer.

Shaun Clisby Kelley: But as we just kind of look at it on a percentage basis. It looks like it's actually continuing to increase sequentially. So my question is sort of what level of normalization, where you're kind of embedding or are you embedding today and you know what if we were to stay at the current run rate.

Shaun Clisby Kelley: So my question is sort of what level of normalization were you kind of embedding or are you embedding today? And, you know, what if we were to stay at the current run rate and just sort of current behavior? What would that imply or how big of an impact would that have?

Shaun Clisby Kelley: And just sort of current behavior.

Shaun Clisby Kelley: What would that imply or how big of a an impact would that have.

Jason Marino: Yeah, Shaun, so to your first question, when we looked forward as of 2-3 last year and looked at the environment that we were in, we knew it was going to take some time for those delinquencies and then ultimately the defaults to kind of run through the system. So we're seeing that today, and it's continuing as we thought.

Speaker Change: Yes, Sean so to your first question.

Jason Marino: When we look forward as of Q3 last year and looked at the environment that we're in we knew it was going to take some time for those delinquencies and then ultimately that it falls to kind of run through the system. So we're seeing that today and it's continuing.

Jason Marino: As we thought so I think when we provided the guidance here in February we indicated that the loan loss was going to be higher.

Jason Marino: So I think when we provided the guidance here in February, we indicated that the loan loss was going to be higher year over year in Q1, and that's what we're seeing. So really, as we look forward in terms of estimating any kind of future delinquencies and defaults, it's hard to give you an estimate as to what the impact could be. As John mentioned, as I mentioned on the call too, we do need those delinquencies to improve, and that's what we've been seeing at the end of the first quarter and here into April.

Jason Marino: Year over year in Q1, and Thats what were seeing so.

Jason Marino: Really as we look forward.

Jason Marino: In terms of estimating any kind of future delinquencies and defaults, it's hard to give you an estimate as to what the impact could be as John mentioned.

Jason Marino: As I mentioned on the call too we do how we do need those delinquencies to improve here and that's what we've been seeing over kind of the end of the first quarter and here into April so.

John E. Geller: So, Shaun, the only other thing I'd add there, I think in terms of a more normalized run rate, as we talked about, because the way the models work on the defaults, right, if you have higher defaults, that goes into your static pools, and therefore, you're using that to predict the future. So, yeah, we talked about our run rate loan loss for this year and going forward could be 100, 150 basis points higher, right, in terms of higher, more normalized loan loss.

Speaker Change: So the only other thing I'd add there I think in terms of a more normalized run rate, we did talk about <unk>.

John E. Geller: Because the way the models work on the on the defaults right. If you have higher defaults that goes into your static pools, and therefore, you're using that to predict the future. So yeah, we talked about our run rate loan loss for this year and going forward could be 100 150 basis points.

John E. Geller: Higher right in terms of higher more normalized loan loss, so that does get kind of embedded into the future in terms of new loans. So that that's embedded in our overall development margin and what we've talked about is that we are going to need to continue to provide for new loans at a slightly higher rate than we've done historically because of the <unk>.

John E. Geller: So, that does get kind of embedded into the future in terms of new loans. So, you know, that's embedded in our overall development margin, and what we've talked about is that we are going to need to continue to provide for new loans at a slightly higher rate than we've done historically because of the higher defaults we've experienced.

John E. Geller: Higher defaults we've experienced.

Shaun Clisby Kelley: So John, just to recite that back to you then, sort of 100-150 basis points off of... Let's call it a normalized level. That would be what's kind of embedded in the outlook as you see it today. We're obviously a little bit above that percentage. I think we look at it year on year, and it's like closer to 200 basis points. Is that, am I kind of in the ballpark of how to think about it? Yeah,

John E. Geller: John just to relate that back to you then sort of 100 150 basis points off of.

Shaun Clisby Kelley: Let's call it a normalized level.

Shaun Clisby Kelley: Would be what's kind of embedded in the outlook as you see it today, we're obviously a little bit above that percentage I think we're looking at year on year, it's like closer to 200 basis points is that am I am I kind of in the ballpark of how to think about it.

John E. Geller: Yeah, that's right. And remember, the first quarter of last year was before we started seeing some of this increased delinquency activity. So 2-1 last year was lower than the rest of the year. So that's why the first quarter looked lower, year-over-year worse than kind of the guidance for the full year.

John: That's right and remember the first quarter of last year was before we started seeing some of this increased delinquency activity. So Q1 last year was lower than the rest of the year. So that's why in the first quarter looked year over year of worse than kind of the guidance for the full year, yes, Okay. I'll follow up thank you and then.

Jason Marino: Yeah. Okay. I'll follow that, Jason. Thank you.

Jason Marino: And then my follow-up would be just sort of the puts and takes between development and rental margins, as you outlined it. So, if I caught it correctly, I thought coming into the year that with rental, the issue was going to be that you were going to have higher HOA fees and then that was going to be a bit of a headwind on the cost side because you were having to pay to support some of that inventory that you hadn't sold So I misunderstood that, but where does that kind of net out today because, obviously, you're able to utilize some of this rental pool and move some of those dollars around, but on an aggregate basis for the year, including Q1 now, how do you think about that rental profit? And then I think development. You just said a couple of hundred basis points for the year below last year. Is that kind of the right ballpark for those two line items? Sure, yeah.

Speaker Change: My follow up would be just sort of the puts and takes between development and rental margins as you outlined it as you outlined it so if I caught it correctly I thought coming into the year with rental the issue is going to be that youre going to have higher HOA fees, and then that was going to be a bit of a headwind on the cost side, because youre having to <unk>.

Speaker Change: Hey, <unk>.

Jason Marino: <unk> to support some of that inventory that you had sold yet perhaps.

Jason Marino: I misunderstood that but where does that kind of net out today, because obviously you were able to utilize some of this rental pool and move some of those dollars between but on an aggregate basis for the year, including Q1 now how do you think about that rental profit and then I think development you just had a couple of hundred basis points for the year below last year is that kind of the right ballpark for those two line items.

Jason Marino: Thanks.

Jason Marino: Sure, yeah, on the development margin side, yeah, for the full year, we expect, you know, that development margin, and we talked about this in our original kind of guidance for the year to be down a couple hundred basis points year over year, you know, some of that is, you know, the higher loan loss reserves, right, that's a deduct from revenue and impacts your margin, and some higher marketing and sales costs, yes, on the preview packages as we do more preview packages and allocate the rental income, you are charging, because of the higher unsold maintenance fees and costs of that inventory, you are charging over to marketing and sales, a slightly higher cost, but there's also a lot more keys getting used in the previews, so that was the six million or so I mentioned earlier, which is just a bit of geography, right, that's improving the rental profits, it's an impact on your development margin a little bit, yeah, for the full year for rentals, we're feeling better just given as, you know, as the year is shaping up, as I talked about, our occupancy was up, you know, call it about two and a half, three percent year over year, and last year was a good first quarter, so team's doing a great job getting Rentals there and, you know, as we've also talked about, when you think about the cost of our rentals overall, you know, about 85% is a bit fixed coming into the year. So for us to, you know, really drive better profitability, and that's what we did in the first quarter, we got occupancies up, right, and we were able to keep, you know, the average rate, you know, fairly flat year over year.

Jason Marino: Sure Yeah on the development margin side for the full year, we expect.

Jason Marino: Development margin, we talked about this in our original guidance for the year to be down a couple hundred basis points year over year. Some of that is yes.

Jason Marino: The higher loan loss reserves right, that's a deduct from revenue and impacts your margin.

Jason Marino: Some higher marketing and sales costs, yes on the on the preview packages as we do more preview packages and allocate the rental income you are charging because of the higher unsold maintenance fees and cost of that inventory you are charging over to marketing and sales with slightly higher costs, but there's also a lot more keys getting used in the <unk>.

Jason Marino: View, so that was the $6 million or so I mentioned earlier, which is just a bit of geography, right that's improving the rental profits.

Jason Marino: Impact on your development margin a little bit.

Jason Marino: For the full year for rentals were feeling better just given as zero shaping up as I've talked about our occupancy was up call. It about 253% year over year and last year was a good first quarter. So team is doing a great job getting.

Jason Marino: Rentals are in.

Jason Marino: And as we've also talked about when you think about the cost of our rentals overall.

Jason Marino: About 85% is a bit fixed coming into the year, so for us to really drive better profitability and Thats. What we did in the first quarter, we got Occupancies up right and we were able to keep the average rate fairly flat year over year or so.

Jason Marino: So our setup for the year is looking better, you know, still early days, but we're hopeful that, you know, maybe rental rates could be where we were last year or maybe a little bit better. So we'll see how the year goes, but we got off to a good start here in the first quarter. Thanks so much.

Jason Marino: Our setup for the year is looking better still a bit early days, but we're hopeful that maybe rentals.

Jason Marino: Could be where we're at last year or maybe a little bit better. So we'll see how the year goes but we got off to a good start here in the first quarter.

Speaker Change: Thanks, so much.

Speaker Change: Thank you.

Operator: Thank you. Our next question comes from Ryan Lambert with JPMorgan. Please proceed with your question.

Jason Marino: Thank you. Our next question comes from the line of Ryan Lambert with Jpmorgan. Please proceed with your question.

Ryan Douglas Lambert: Hey, good morning.

Ryan Douglas Lambert: Good morning, Thanks for taking my question and congrats on some of the progress you're seeing with demand at your new Waikiki property and in terms of some of the puts and takes it with guidance changes it looks like at least to me and correct me if I'm wrong.

Ryan Douglas Lambert: Thanks for taking my question and congrats on some of the progress you're seeing with demand at your new Waikiki property. In terms of some of the puts and takes with guidance changes, it looked like, at least to me, and correct me if I'm wrong, a little bit more spend this year on inventory. I'm wondering if that's just a function of timing or if you're seeing anything on the development side with higher input costs.

Ryan Douglas Lambert: A little bit more spend this year on an inventory I'm wondering if that's just a function of timing or if you're seeing anything on the development side with higher input costs.

Jason Marino: Yeah, Ryan, this is Jason. What you're really seeing there is the add back from net income or adjusted EBITDA. So it's really, we've had a little bit lower product costs, and we think that's going to continue versus our initial expectations. So it's not necessarily on the spending side, it's really on the add back, and really impacted by a little bit lower product costs than we had originally anticipated.

Ryan Douglas Lambert: Yes, Ryan this is Jason what you're really seeing there is the add back.

Jason Marino: Net income or adjusted EBITDA.

Jason Marino: We had a little bit lower product cost and we think thats going to continue versus our initial expectations. So it's not necessarily on the spending side, it's really on that add back.

Jason Marino: And really impacted by a little bit lower product costs than we had originally anticipated.

Ryan Douglas Lambert: Okay, great. And following up on some of the rental comments, it sounds, you know, a lot more positive for this year. When you look into next year with some additional inventory, are your expectations for 2025 incrementally better, or would that just be kind of a continuation of the trends you're seeing in 2024? Yeah, it's a great question.

Speaker Change: Okay great.

Speaker Change: Following up on some of the round comments it sounds a lot more positive for this year. When you look into next year with some some additional inventory is that.

Ryan Douglas Lambert: Are your expectations for 2025 incrementally better or would that just be kind of a continuation of the trends youre seeing in 2024.

John E. Geller: Yeah, it's a great question. It's a little early for 25, I guess, in terms of working through all that, but given YKK is coming online, that, to your point, I think, will give us, you know, additional keys, right? Some of those will obviously be used by owners and all that, but that'll create other rental availability at other properties, depending on where people stay. So, I think, you know, we'll know more as we get through the year.

Speaker Change: Yes, it's a great question, it's a little early for 25, I guess in terms of working through all that but.

John E. Geller: Given waikiki coming online that to your point I think will give us.

John E. Geller: Additional keys right. Some of those will obviously be used by owners and all that but that'll create other rental availability at other properties, depending on where people stay so.

John E. Geller: I think we'll know more as should we get through the year like every year. The way to go rentals right is driving your Rab pack every year and also big focus this year on keeping maintenance fee increases.

John E. Geller: Like every year, the way to go rental cars, right? You know, driving your red pack every year, and also, a big focus this year on keeping maintenance fee increases back to more historical levels, which will help with the cost of that inventory, given our unsold maintenance fees we have. So, but yeah, if, you know, we're able to continue to drive some rate and occupancy as we go on to 25, on potentially, you know, some more keys, if you will, with some of the new inventory coming online, that should bode well.

John E. Geller: Back to more historical levels, which will help on the cost of that inventory given our unsold maintenance fees, we have so.

John E. Geller: But yes, we are.

John E. Geller: Able to continue to drive some rate and occupancy as we go into 'twenty five.

John E. Geller: On potentially some more keys, if you will with some of the new inventory coming online that should bode well.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Operator: Thank you. Our next question comes from the line of Patrick Scholes with Truist Securities. Please proceed with your question.

John E. Geller: Thank you. Our next question comes from the line of Patrick Scholes with <unk> Securities. Please proceed with your question.

Charles Patrick Scholes: I, uh, good morning again. Uh, this is our question.

Operator: Hi.

Charles Patrick Scholes: Good morning again.

Charles Patrick Scholes: Good question.

Charles Patrick Scholes: Hello.

Operator: Yeah, you're breaking up a little bit. Go ahead, Patrick. Okay, can you hear me?

Charles Patrick Scholes: Yeah, you're breaking up a little bit go ahead Patrick.

Charles Patrick Scholes: Okay, can you hear me okay? We can, yeah. Yeah, great. I just wanted to follow up on... The bound sales program, you know, had been an issue last summer. Can you, I guess, safely say sort of those hiccups have been put to rest here and, you know, how has the, I believe the challenges were with the legacy Weston customer, you know, how is that going with that customer at this point? Thank you.

Charles Patrick Scholes: Okay can you hear me okay.

Charles Patrick Scholes: Yep.

Charles Patrick Scholes: Great.

Charles Patrick Scholes: Just wanted to follow up a little bit on.

Charles Patrick Scholes: You're bound sales program.

Charles Patrick Scholes: It had been a issue.

Charles Patrick Scholes: Last summer.

Charles Patrick Scholes: Can you I guess safely say sort of both hiccups.

Charles Patrick Scholes: Put to rest here.

Charles Patrick Scholes: How has the I believe the challenges with the legacy western customer how is that going.

Charles Patrick Scholes: Now with that customer at this point thank you.

John E. Geller: Yeah, sure. As we talked about on the last call, yeah, you know, the transitions are behind us, right? You know, the impact we saw, you know, more in the second quarter because, if we recall the third quarter last year, we actually saw VPGs improve significantly off of what we kind of saw at the transition site in the second quarter. It was really around just the marketing and sales teams selling the product, getting up to speed better and getting confidence in selling the new product.

Speaker Change: Yes sure.

Speaker Change: Yes, as we talked about on the last call the transitions are behind us right.

John E. Geller: Yes.

John E. Geller: The impact we saw.

John E. Geller: More in the second quarter, because if you recall third quarter last year, we actually saw <unk> improved significantly off of what we kind of saw it the transition site in the second quarter.

Speaker Change: Yeah. It was really around just the.

John E. Geller: The marketing sales teams selling the product getting up to speed better and getting confidence in selling the new product was a different cell cell in the system and all the abound.

John E. Geller: It was a different sell, selling the system and all the Abound exchange opportunities. But we also talked about, and we talked about the fact that more people in the legacy systems, your Weston and Sheraton, are now enrolled in Abound. They're using the product, right? And then there's that familiarity with the benefits of the program and actually using it. So those two things, you know, continue to go well. And you know, we've seen those VPGs, you know, over the balance of last year really kind of come back to where we were before we launched Abound. So behind us, like we said on last call, I don't expect any, you know, impact going forward.

John E. Geller: Change opportunities.

John E. Geller: But we also talked about and we talked about the fact that more people in the legacy <unk> systems. Your Westin and Sheraton are now enrolled in a bound they're using the product right. There is that getting familiarity with the benefits of the program and actually using it. So those two things continue to go well.

John E. Geller: And we've seen we've seen those <unk> over the balance of last year really kind of come back to where we were before we launched about so.

John E. Geller: It's behind US like we said last call that I don't expect any impact going forward.

Speaker Change: Okay. Good and then just a last follow up question here.

John E. Geller: Last year, you had announced.

John E. Geller: Two new Western club projects, Charleston, and Savannah do you have.

John E. Geller: Opening dates could be is that is that next year or the following and then related to that are those going to be part of the.

John E. Geller: Did that did those go into the truck.

John E. Geller: Each separate.

John E. Geller: Those will go into the trust into the <unk>.

John E. Geller: Marriott Vacation club Trust right as we've talked about feeding all kind of new U S inventory into that trough. So.

John E. Geller: Both of those will create points in the trust.

Charles Patrick Scholes: Okay, good. And then just the last follow-up question here. Last year, you announced two new Weston Club projects, Charleston and Savannah. Do you have opening dates? Is that next year or the following? And then related to that, are those going to be part of the Abound Trust? Do those go into the trust system, or will those be separate? Those will go into the trust, into the, you know, now Marriott Vacation Club Trust, right, as we've talked about, feeding all kinds of new U.S. inventory into that trust. So both of those will create points in the trust.

John E. Geller: From an opening date perspective I think.

John E. Geller: You know, from an opening date perspective, I think we've got Charleston in 26 and then Savannah's 27. Okay, and did I hear correctly previously that the YKT new Marriott Vacation Club Resort is still scheduled to open in the back half of this year? They have a sales center, correct?

Charles Patrick Scholes: We've got.

John E. Geller: Charleston in 'twenty six.

John E. Geller: And then.

John E. Geller: Savannah is 27.

John E. Geller: Okay and did I hear correctly previously the Waikiki.

John E. Geller: Our application probably George is that still scheduled to open in the back half of this year.

John E. Geller: Yeah, I was just out there visiting our teams in Hawaii, and got to see and tour the new Waikiki property. It's coming along great, and it'll open. We started taking reservations already beginning in October, so we're on track there. Uh, I think...

John E. Geller: Center correct.

John E. Geller: I was just out there visiting our teams in Hawaii I got to see.

John E. Geller: And towards the new Waikiki property is coming along great.

John E. Geller: And it will open up we started taking reservations already beginning in October so we're on track there.

Charles Patrick Scholes: I think that's it for me. Thank you.

Speaker Change: Great I think that's it thank you.

Speaker Change: Thanks, Patrick.

Operator: Thank you. Our next question is a follow-up from the line of Ben Chagin with Missouho Securities.

Speaker Change: Thank you. Our next question is a follow up from the line have been taken with Mizuho Securities. Please proceed with your question.

Ben Chaykin: Hey, thanks for taking these calls. I appreciate it. Thank you.

Benjamin Nicolas Chaiken: Hey, Thanks for taking you saw that that'd be great. Thank you.

Benjamin Nicolas Chaiken: I think you said in the prepared remarks, the management business profit should be constant through the year. If I heard you correctly just to kind of like Doubleclick on that are you referring to the management profit within PEO that with class eight are you referring to kind of like the consolidated P&L management and exchange profit that was part two just to.

Operator: I think you said in the prepared remarks that the management business profit should be constant through the year. If I heard you correctly, just to kind of like double-click on that, are you referring to the management profit within VO that was plus eight, or are you referring to something like the consolidated P&L management and exchange profit that was plus two? That was really a comment on the vacation ownership management business. The Plus A management business with NVO, correct?

Speaker Change: Clarify yes.

Operator: Can you comment on the vacation ownership management business.

Operator: Plus eight.

Operator: Management business with NPL correct.

Operator: Yes.

Operator: Yes. Great. And then we'd love to dig back into Maui, I guess, going back to kind of one of the previous answers, what do you think closes the gap between the 90 and 97% occupancy? The 90 that you're experiencing today, the 97 you've had historically, and then, and then kind of part two on the sales personnel side. Not to belabor the point, but do you have all the bodies in place? Is this just a function of learning and ramping, or are you still trying to hire and onboard? I just would love to kind of like learn more about that process. Thanks.

Operator: Great and then would love to dig back into Maui, I guess going back to kind of.

Operator: One of the previous answers what do you think closes the gap between the 90% 97% occupancy.

Operator: The 90 that you're experiencing today in the 97 that you've had historically and then.

Operator: And then kind of part two on the sales personnel side.

Operator: Not to belabor the point, but do you have all the bodies in place is this just a function of learning and ramping are you still trying to hire and onboard just would love to kind of like more and more about that process. Thanks.

Jason Marino: Yeah, Ben, just on the occupancy, we were running call at 93, 94% in Maui, so just a couple points off. I think what closes the gap is, you know, just people continuing to go to Maui, talking about how great it is and things like that. You know, John was just there, and the devastation is still quite real around the properties, and that's going to take several years to come back. So we do think it will come back, but, you know, how fast it gets back from 93 to 94 to 97, time will tell. And then your second question was about sales. Can you repeat the second part?

Operator: Yes.

Operator: Yes.

Operator: We were running $93, 94% in Maui. So just a couple of points off I think what closes the gap is.

Jason Marino: People continuing to go to Maui talking about how great it is and and things like that.

Jason Marino: John was just there and the devastation is still quite real around the properties and that's going to take several years to come back. So we do think it comes back but how fast it gets back from 93% to 94% 97 time will tell.

Speaker Change: And then your second question was about the.

Speaker Change: The sales exempt Phil can you repeat the second part, yes, I was saying on the on the sales personnel side. It sounds like Theres still a ramp and my question was do you have everyone in place like do you have all the hires that you want and you're just in terms now theyre, just learning and ramping or you're still trying to source sales personnel.

Ben Chaykin: Yeah, I was saying on the sales personnel side, it sounds like there's still a ramp. And my question was, do you have everyone in place? Like, do you have all the hires that you want? And are they just in terms now, they're just learning and ramping? Or are you still trying to source sales personnel?

Jason Marino: Yeah, for the for the tour flow that we have because, you know, we're still down a little bit. Yes, we've got the teams in place. We need to get, you know, a little bit more on the sales side, as occupancies continue to rise and tours continue to rise. But we're in a good spot relative to handling the demand for tours right now. But we still aren't back to kind of 100%, if you will. So we'll continue to manage through that as occupancy and tours come back.

Ben Chaykin: For the for the level of tour flow that we have because we're still down a little bit yes. We've got we've got the teams in place.

Jason Marino: We need to get a little bit more on the sales side.

Jason Marino: As Occupancies continue to ramp towards continue to ramp so we're in a good spot relative to handling the demand for tours right now, but we still aren't back to kind of a 100%. If you will so we'll continue to manage through that as occupancy and tourists come back.

Speaker Change: Got it. Thank you appreciate it.

Speaker Change: Thank you.

Jason Marino: Yeah.

John E. Geller: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Geller for any final comments.

Mr. Taylor: Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Mr. Taylor for any final comments.

John E. Geller: Thank you everyone for joining our call today. As I hope you can tell, we feel very good about the way the year has started. We ran 90% occupancy in the quarter, contract sales grew 3% excluding Maui, and first-time buyer tours grew by 9%. And with a pipeline of 270,000 packages, international inbound travelers returning to the U.S., and reservations on the books for the summer months up a few points, we feel good about the balance of the year. On behalf of all of our associates, owners, members, and customers around the world, I want to thank you for your continued interest in our company and hope to see you on vacation soon. Thank you.

John E. Geller: Thank you everyone for joining our call today as I Hope you can tell we feel very good about the way. The year started we ran 90% occupancy in the quarter contract sales grew 3%, excluding Maui and first time buyer tours grew by 9% and with a pipeline of 270000.

John E. Geller: <unk> International inbound travelers returning to the U S and reservations on the books for the summer months up a few points, we feel good about the balance of the year on behalf of all of our associates owners members and customers around the world I want to thank you for your continued interest in our company and hope to see you on vacation.

Speaker Change: Soon thank you.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.