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MARRIOTT VACATIONS WORLDWIDE Corp (VAC)·Q2 2025 Earnings Summary

Executive Summary

  • EPS beat while revenue missed consensus: Adjusted diluted EPS was $1.96 vs S&P Global consensus of $1.73 (+13%), but revenue excluding cost reimbursements came in at $0.839B vs $1.223B (-31%) as estimates appear to have assumed higher cost-reimbursement or top-line levels *.
  • Year-over-year acceleration and margin expansion: Adjusted EBITDA rose 29% to $203M with margin up 360 bps to 24.3%; development profit more than doubled YoY due to lapping the 2024 sales reserve adjustment .
  • Guidance reiterated: Full-year 2025 guidance maintained for contract sales ($1.74B–$1.83B), Adjusted EBITDA ($750M–$780M), adjusted EPS ($6.40–$7.10), and adjusted FCF ($270M–$330M); tax rate assumptions nudged lower (34–33% from 36–34%) and interest expense range modestly higher .
  • Key operating drivers: First-time buyer sales rose and tours increased; occupancy was nearly 90% with strength in Hawaii, Coastal Florida, and the Caribbean, offset by weaker Las Vegas; modernization initiatives are tracking to $150M–$200M run-rate EBITDA benefits by end of 2026 .

What Went Well and What Went Wrong

What Went Well

  • First-time buyer momentum and tour growth: First-time buyer sales up YoY (fourth consecutive quarter) and tours up 2%; management highlighted initiatives to expand new owner experiences and non-traditional channels accounting for >13% of contract sales .
  • Margin expansion and EBITDA growth: Adjusted EBITDA rose 29% with margins up 360 bps on lapping last year’s sales reserve adjustment; VO Segment Adjusted EBITDA up 28% and margin up 380 bps .
  • Hawaii strength and operational execution: “We delivered nearly 90% resort occupancy with strength seen in Maui, Coastal Florida and The Caribbean” (CEO) .

What Went Wrong

  • Top-line vs consensus miss: Revenue excluding cost reimbursements was $0.839B vs S&P Global consensus $1.223B, a material miss that reflects estimate base differences and conservative reportability/sales reserve dynamics *.
  • Rental profit headwinds: Total company rental profit declined $7M (-16%) to $35M due to increased unsold maintenance fees and marketing expense despite higher ADRs .
  • Loan loss reserve and Asia defaults: Sales reserve rose to 13% in Q2 (guidance 12.5% for the year) with ~$2.5M higher defaults in Asia; delinquencies improved but remain above 2022 levels .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Total Revenues ($USD Billions)$1.140 $0.793*$0.739*$1.246
Revenues ex. Cost Reimbursements ($USD Billions)$0.762 $—$—$0.839
Net Income ($USD Millions)$37 $50*$56*$69
Diluted EPS (GAAP, $)$0.98 $1.31*$1.45*$1.77
Adjusted Diluted EPS ($)$1.10 $—$—$1.96
Adjusted EBITDA ($USD Millions)$158 $185 $192 $203
Adjusted EBITDA Margin (%)20.7% —23% 24.3%

Values marked with * retrieved from S&P Global.

Segment breakdown (revenues ex. cost reimbursements and segment EBITDA):

SegmentQ2 2024Q2 2025
Vacation Ownership Revenues ex. CR ($USD Millions)$694 $775
Exchange & Third-Party Mgmt Revenues ex. CR ($USD Millions)$55 $51
VO Segment Adjusted EBITDA ($USD Millions)$181 $231
VO Segment Adjusted EBITDA Margin (%)26.0% 29.8%
Exchange Segment Adjusted EBITDA ($USD Millions)$25 $23
Exchange Segment Adjusted EBITDA Margin (%)44.5% 45.9%

KPIs and operating metrics:

KPIQ2 2024Q1 2025Q2 2025
Consolidated Contract Sales ($USD Millions)$449 $420 $445
VPG ($)$3,741 $3,979 $3,631
Tours (#)111,752 97,998 114,402
Interval Members (000s, end of period)1,530 1,538 1,507
Avg Rev per Interval Member ($)$38.30 $39.94 $37.40

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Contract Sales ($USD Billions)FY 2025$1.74–$1.83 $1.74–$1.83 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$750–$780 $750–$780 Maintained
Adjusted Net Income ($USD Millions)FY 2025$250–$280 $250–$280 Maintained
Adjusted EPS - Diluted ($)FY 2025$6.40–$7.10 $6.40–$7.10 Maintained
Adjusted Free Cash Flow ($USD Millions)FY 2025$270–$330 $270–$330 Maintained
Interest Expense, net ($USD Millions)FY 2025$173–$168 $175–$172 Slightly raised
Depreciation & Amortization ($USD Millions)FY 2025$150–$148 $150–$148 Maintained
Tax Rate (Adj. net income calc)FY 202536%–34% 34%–33% Lowered

CFO call color: Expect rental profit to decline ~$20–$25M in 2025 due to higher cost of rental inventory; sales reserve ~12.5% for the year (Q2 actual ~13%) .

Earnings Call Themes & Trends

TopicQ4 2024 (Prev Mentions)Q1 2025 (Prev Mentions)Q2 2025 (Current)Trend
AI/Technology initiativesDigitizing consumer capabilities; plan to enhance customer interactions through technology AI-powered phone agent; launch direct booking into ~9,000 Marriott hotels using points; expand e-commerce AI-based propensity model for renter-to-owner conversion; predictive models to support sales; automation to drive efficiencies Increasing deployment
Macro/consumerLeisure travel resilient; 90% occupancy; cautious on broader environment Consumer strong; volatile environment; healthy forward KPIs Macro uncertainty persists (jobs report), but tours and occupancy remain strong Stable but cautious
Product performance (VOI)Contract sales +7% in Q4; first-time buyer mix rising First-time buyer sales +6%; tours up; owner arrivals normalized later in year Contract sales down <1%; first-time buyer sales up; owner VPG lower; tours +2% Mixed: strong new buyers, softer owner VPG
Regional trendsHawaii occupancy 95% in Q4 —Hawaii strong; Maui transient up; Vegas relatively weak Hawaii strength; Vegas softness
Inventory strategyReacquired inventory to manage product cost; plan new Nashville resort; Asia units Adjusting inventory mix; lower product costs via repurchases $1B inventory; commitments for Waikiki, Thailand, Bali, Nashville; aim for 1.5–2 years on hand Strategic optimization
Financing/loan bookSecuritizations efficient; delinquency stable Delinquencies improved YoY; sales reserve ~12% Delinquencies at two-year low; reserve ~13% in Q2; Asia defaults ~$2.5M Improving delinquency; cautious reserve
Modernization programTarget $150–$200M run-rate by end 2026 Savings accelerated; ~$35M current-year benefit; balance later On track; $150–$200M run-rate by end next year; $35M this year; +$60–$80M next year Executing and scaling

Management Commentary

  • “We delivered strong results in the quarter… and reiterating our full year guidance… we remain on track to deliver $150 million to $200 million in annualized Adjusted EBITDA benefits from our modernization program by the end of next year.” — John Geller, CEO .
  • “We delivered nearly 90% resort occupancy with strength seen in Maui, Coastal Florida and The Caribbean, while Vegas was relatively weak.” — John Geller .
  • “We expect these… revenue-enhancing initiatives will help us deliver $75 million to $100 million in incremental EBITDA… and another $75 million to $100 million from cost savings and efficiencies.” — John Geller .
  • “Adjusted EBITDA increased 29% to $203 million… lapping last year’s sales reserve adjustment.” — Jason Marino, CFO .

Q&A Highlights

  • Sequential sales cadence: June contract sales up ~3% YoY; July up slightly vs June, reflecting improved trends through the quarter .
  • Loan loss reserve: Full-year reserve guided to ~12.5% (from ~12%); Q2 at ~13% driven in part by ~$2.5M higher Asia defaults; delinquencies at lowest in two years but still above 2022 .
  • Product optionality: Owners can use points to directly book thousands of Marriott hotels via automated process; primarily enhances value proposition rather than a direct EBITDA driver .
  • Capital allocation: Blackout limited buybacks during the quarter; expect opportunistic repurchases as modernization benefits materialize; 0% convert maturity in January and backstopped via delayed-draw term loan .
  • Inventory and securitization: $1B inventory on balance sheet; commitments for Waikiki, Thailand, Bali, Nashville; securitizations at ~98% advance rate considered efficient vs private credit alternatives .
  • Regional specifics: Hawaii strong; Maui transient ADR up ~89% YoY; Maui sales flat, impacted by repiping project and lingering owner return dynamics .

Estimates Context

MetricQ2 2025 EstimateQ2 2025 ActualSurprise (%)# of Estimates
Adjusted Diluted EPS ($)1.73*1.96 +13%*7*
Revenue ex. Cost Reimbursements ($USD Billions)1.223*0.839 -31%*8*

Values marked with * retrieved from S&P Global.

  • Results suggest analysts may lift EPS forecasts on margin execution and modernization savings but reassess revenue modeling (notably cost reimbursements and reportability effects). Guidance maintenance reduces the need for wholesale estimate changes but CFO’s rental profit headwind and reserve update could temper top-line or segment assumptions .

Key Takeaways for Investors

  • Mixed headline: Strong EPS/margin performance and reiterated guidance, but a notable top-line miss vs consensus due to estimate base assumptions and lapping prior-year reserve dynamics; stock reaction may hinge on confidence in margin trajectory and modernization execution *.
  • Modernization is the core thesis: Clear pathway to $150M–$200M run-rate Adjusted EBITDA by end of next year; tangible 2025 P&L benefits ($35M) with a further $60–$80M in 2026, supporting EPS growth and potential buybacks .
  • First-time buyer growth supports LT sales: Sustained momentum, enhanced data-driven marketing, AI propensity tools, and non-traditional channels should build future owner upgrades despite near-term VPG mix pressure .
  • Balance sheet optionality: Liquidity ~$799M including $205M cash and ~$539M revolver capacity; convert backstopped; asset sales ($150–$200M potential) earmarked for deleveraging and buybacks .
  • Watch rental segment and reserve trends: Rental profit expected down $20–$25M this year; loan loss reserve raised to ~12.5% even as delinquencies improve—monitor Asia loan book performance and VPG trajectory .
  • Regional dynamics favor leisure strength: Hawaii/Maui transients are strong despite operational constraints; Vegas softness a drag; occupancy near 90% remains supportive of tours and on-site sales .
  • Short-term trading lens: Expect focus on EPS beat vs revenue miss and confirmation of guidance; medium-term thesis centers on modernization-driven earnings power, capital returns, and tour/VPG recovery.

References:

  • Q2 2025 Press Release and Financial Schedules (Form 8-K, Item 2.02, Exhibit 99.1):
  • Q2 2025 Earnings Call Transcript:
  • Prior Quarter Calls (Q1 2025, Q4 2024):
  • S&P Global consensus and actuals (GetEstimates): EPS and revenue estimates/actuals and counts for Q2 2025*.

Values marked with * retrieved from S&P Global.