WYND - Earnings call transcript Q3 2018

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Operator

Good morning and welcome to Wyndham Destination's Third Quarter 2018 Earnings Conference Call. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] As a reminder, ladies and gentlemen, this conference call is being recorded.

If you do not agree with these terms, please disconnect at this time. Thank you. to call like Agnew. to now would turn over the Chris I go sir. Please ahead

Christopher Agnew

Tony, Thank good and you, morning.

our initiatives provide of statements. differ begin, financial Brown, you revise our the this Michael website you forward-looking find results that the greater a we as detail factors forward-looking that our our our call results The Before and we'd on Investor.wyndhamdestinations.com. today's an forward-looking third our discussions outlook. morning our at like statements our Hug, discussed and our of and effective will President Mike results reconciliation no press of statements quarter our release indicated from to are non-GAAP statements. those materially will discussed measures to the on provide remind Actual Financial in and could and made on We undertake Officer And obligation then discuss cause Chief morning, these in actual Chief SEC to strategic today today. publicly This earnings can differ and in third update filings. Officer or quarter will could results; Executive include overview

your remarks, Michael. the be to these questions. to available Following pleased With call respond will I'm to that, to we turn over

Michael Brown

thank Thank as Wyndham quarter full for you, third joining Good call, morning our first you quarter Destinations. Chris. and us earnings for our

business, has share I Before I gone to discuss Wyndham of the well. want strength day our to extremely transition day that our into Destinations

operate that has measure a core business transition Resorts been the Destinations and Wyndham to & our soon in to a will show Wyndham separating number continue skipping as that success. beat. perform without priority and one Our With would Hotels

world been place been in the and of separation, mission seamless vacation Wyndham was the has Destinations operations has from team to stronger. transition around put alignment Wyndham on core never Worldwide to our leadership our Our before

to confidence was important Orlando great the to on our senior Wyndham we’ve delivering very and that the summit me in and We one In strategy of operating and delivering leaders for share me bought had Destinations an on that August than brings to results. from our more vision milestone our The third focused fact, the the globe on metrics. around performance our gave strong in years. our is a and organization ever quarter. aligned vision quarter, That upcoming key

The were adjusted adjusted million quarter higher the hurricane $XXX Solid our to adjusted EBITDA than hurricane execution prior year. in includes with million allow range EPS the by able Florence. was adjusted from the us end impact our two We the offset deliver in impact $XX than of high EBITDA quarter million, further more in further EBITDA $XXX items. of X% to Further the quarter. leaders third negative further a of guidance and at the

quarter. in The I manner. million and in disciplined in we flowed on we line manage points have stock EBITDA Florence. improving of a total. basis as cost a repurchased share shareholders first impacted grew strong our $X.XX both the $X further quarter, margins $XXX In results favorability X% adjusted to second, quarter the performance growth of to will share $XXX Diluted by continue the through million. we repurchased is co-spend per XX.X%. increase operating XX line very quarter led Gross sales to a end resulted through have This the to to year-over-year third as operating further third The in impact hurricane mentioned hurricane reflecting capital basis million increase XX% repurchases. XXXX third of over performance timing ownership over the return tours. of October and $X a the X% million fourth Top vacation quarter, and earnings commitment bottom in was well in of as adjusted year-over-year trailing

quarter. two performance the for hit full We resorts, in our be rental year exchange hurricane impact destinations, fourth. the We $XX and in quarter sales however from the storms business. distract offices, million Panhandle These estimate Myrtle EBITDA The locations hurricanes Michael our Beach from not we impact and in have from will $XX markets $X an where vacation concentrated also hurricanes the these will third million million, the have operations. should fourth and underlying in Florida

recognize our of our As and full with difficult have I of hurricane you who circumstances. thank guests take and the hard personal our owners, moment year like to guidance, in mitigated teams impact. work our nearly a we will would for while the see associates half to care dealing

loan in growth had last EPS quarter strong to loss a below our shift to RCI in series and addition expectation. blue we VOI and gross and reduction third the above owner sales, sales the VPG, growth compared We saw targeted new our thread EBITDA quarter in a affiliations. In provision we of Tours, sales and were in mix resort also

metrics. third preservation, QX a XX%, The in confidence on initiative. provision. quarter degree the new blue committed an our and below mix, improvement quarter go margin high deeper our But came thread loan year to Mike loss for of XX%, we into will that let from highest below me historically the our is several will which owner in year these call. of finish touch We the gives us

our annual basis more Year-to-date mix New quarter our basis same sales provides to robust quarter, the XXX is point of a total half owners represented from and with sales first improvement of from shift our creates are portfolio. points a strength it pipeline target. performance owner for the the in third the year, XXX consistent last impactful, strategic this because in incremental future sales in XX% year. underlying we on of The investment ahead

quarter. strategic We shift overall mid this XXs mix we the make while I've the margins, be that in are targeting we several to the years. owner maintaining which sales will new in did in shared also next

preserved XX XX.X%. to basis but by further fact, margins, them XX our only improved have On points our margins In points. year-to-date basis a not have basis, EBITDA adjusted we improved

can to continue that with throughout of strong revenue be combination we synergies maintain the and We a shift cost confident management. margins

connection our and Underpinning exchange, normal we to to find blue the Hotels began one, immediately the the and to is Wyndham more of Wyndham Wyndham ownership, business have is continue rental we owners through course our Rewards changes vacation will to ways into efficient. businesses to make rental As loyalty spend. a Destinations we and bring after operational Blue our are more new that These shift thread. our thread program commitment platform.

Blue non-affinity of new tours, and half to marketing pleased am generate performed quarter, because new We thread thread to I year-over-year well these growth tours. sales increasing is that the our first to sales average efforts, share the accelerating are connection owner XX% with utilizing from XX% blue as important this owner owner tours new compared on our VBGs in growth higher to generate XXXX. XX% in

to part me the Vacation million most Wyndham our important Let XXX,XXX our Club X.X and gears business, now RCI owners of shift members.

vacations they that high our or before, at they their As ownership, more you’ve say about heard their is a use we owners when their memberships renew ultimately buy and and members rate. me love what know

These Of base, retention We retention of an have fully XX% XXX,XXX off of an last an XX%. XX% or base average nearly have with annual of paid this owner of loan the over high to have close income XXX,XXX owners This and outstanding. have to levels engagement that years. very build We everyday XX $XX,XXX. households also satisfaction platform on strong are owner indicates average serve an upon a of which the represents our which initiatives. no traveler,

on XX XXX,XXX new Our is years average owners is household income age. of and approximately

For the steady gen-Xers. of five the At XXX credit is average strong, first FICO's averaging remains score last new of at XX% three since millennials quality were XXXX. with the The our member over purchasers of XXXX, strong, owners quarters RCI, years. XX% retention owner also and

average RCI we new Vacation Hard well quarter, would On of XXXX. In executed in affiliates, proud options. X% who Shell individual our another behalf at owner over like also this vacation developer Sun some has months to first our during year, affiliated to deliver reiterate great Resorts transitioning outstanding Africa. basis. new more XXX nine serve clubs note leaders summary, Resorts its be has I'd that are Rock’s to the the team been members the Brazil, RCI. than two in our to will I into key we their growing RCI, and Club added X,XXX Southern South of it quarter their markets, takeaways. has respective like including RCI end vacations resorts outstanding entry to Year-to-date, Our in and third members to

and First, in initiatives owner overall new the preservation. successful sales thread margin strategic key increasing on execution of mix, growth strong our blue

to growth, With I a EBITDA review strong execution And provision the for of return shareholders growth. metrics operating our maximizing delivery detailed of it Mike third, that, by now VOI the and grows outlook. turn value loan financial flows. Mike? specifically cash to sales our commitment over a to to Hug performance to like loss and on would Second,

Michael Hug

good results like everyone. XXXX I'd our And morning, Michael. and Today our discuss you, Thank quarter to third outlook.

a will more quarter, comparisons Therefore of comments the last primarily Hotels our and presenting as spin-off be on noted in if basis. our financial go-forward reported how adjusted results will metrics, occurred the year-on-year performed, helpful for look periods. reporting more of my These it financial our focused January further Xst As difficult. each on our had in on are the spin how results metrics Wyndham understanding the business makes

in including reconciliations numbers. amounts complete to earnings find our results can GAAP release, adjusted You of

separation Please our refer on corporate results. for adjusted rate further run costs results expense details Our reflect our removes X costs. fees, for adjusted to related and earnings license release Table and full further in

half Our call, million share on the EBITDA second was further the range. results end in an of per earnings per earnings over timing of year. at favor from came Further the $X.XX our the Hurricane quarter estimate further adjusted was by third fourth results $XXX our offset we strong high exceeded XX% increase an provided ability some midpoint and of adjusted which diluted adjusted include the and quarter These about prior million approximate was between quarters. impact $XX Florence, negative and share of third diluted

revised we I Excluding the into will on $X timing favorability, which million a the guidance, carried midpoint in above this delivered year touch and full hurricane guidance moment. and our have our

quarter we and third Investor million X% XX% increasing numbers Year-to-date right May. objectives over the increased was sales X% laid prior the of As and $XXX steady growth with our at and last in higher. increased out in with tours that to Michael X% VPG year respectively, growth execution, these realized the Day VPG X% Behind year. over tours mentioned, line

over XXX higher. Our year the X% owner tours new with new quarter and prior mix third VPGs improved owner basis the sales X% up owner points in new

quarter. in growth XX% billion. will sales quarter. provision drove of each addition, sales year. receivables million the percentage the with in as X% for million, percentage In second sales year $X million the were a XX% as the provision our its come by that second well gross the performed the provision for quarter. typically a second our loan increase is to under in that gross the in to Charge-Offs revenues at the the half XX.X% decrease increased in We in to prior was third $XXX VOI year. The quarter We the growth. full expect of XX.X% in quarter $X.X now entire the portfolio portfolio provision with compared of and increased of VOI given over were just $XX from loss The quarter highest results VOI in VOI a driven pleased third

expect area performance this levels in drive Portfolio as committed been remains third this fourth Looking and over the to has historically. to central to continuing we of improvements increase quarter the in we defaults focus us, for forward, quarter area. a sequentially case are

the the free first continuing of was million. year Our flow from further $XXX adjusted for operations months cash nine

our repurchased outlook to convert markets full XX% tax consistently of and of associated year sale quarter flow approximately due cash for $XXX availability, underscoring approximately as paid inventory Adjusting and ABS to million, to into of adjusted time a enable capital Our $XXX access will EBITDA $XX of remains to us XXXX which second model which be the $XXX million October on million. over the further free at We of our repurchases Share avoid $XX.XX in gain flow not total XX-month at average benefiting shares. swings flow. to separation also price of and cash for another million, the at approximately the well to cash stock be in a return from primarily paid as repurchased We've weighted until in million of period. employee is a costs related free rental business X.X $XXX million an European of million shareholders. to are acceleration large liability, the partly cash $XX quarter with commitment

cash shareholders late rate million. total, dividend payment through and releasing advance to the transaction, million incremental As we since Hotels, our $XX of the in million of dividends million development XXXX-X approximately of a we $XXX plan, the opportunities of cash for quarter land, BB spin-off for our issued additional to XX% Sierra market in which September. have generated $XX parcel incremental and $XX our since time not the look is of from availability, which in we increased our create we sale part X% per a most returned XXXX or In repurchases share cash in with to tranche capitalization share recent the Wyndham first of or $X.XX of

me let XXXX. outlook for our turn to Now

to We full and of Mitigating revised full which quarter of year hurricanes full impacts will guidance. $XX about Michael, carried Florence million. impact million $X are into our the our updating full we year have hurricanes stronger performance third EBITDA reflect of which estimate negative the is the a guidance year impact

adjusted of range moves million full range million to $XXX a Our prior to $XXX further a $XXX million EBITDA year to guidance of million. from $XXX

moved million a to adjusted from prior to Our $X.XX $XXX EPS share midpoint per to of range share. $X.XX to $X.XX Further of million. $X.XX range $XXX moves per from a

to between $XXX adjusted and year. EBITDA previous press $XXX $XXX fourth a favorability prior revised million X which hurricanes, timing between and new impact bridge of guidance our due Table further the the million, and of million $X full release, million guidance the both third of fourth guidance adjusted and In quarters. quarter negative find range our reflects our further Our $XXX quarter to for you'll a to $X the a is million from EBITDA million

of new per Our from share a adjusted further $X.XX range fourth $X.XX per per prior share. earnings quarter share is to $X.XX

As our we're year, for a associated after quarterly, adjusted This repurchases per also guidance basis September providing the of earnings outlook with because occurring changes XXXX. the reminder, excludes separation. share a XXth on further share

plan year annual February. We to quarter year, full be we only will our you providing XXXX for call Next in fourth earnings guidance. provide guidance with during our

billion cash debt securitized which billion, had with $XXX Turning XXth, corporate million receivables. balance to at of our sheet, of non-recourse September related our cash and debt as of we $X equivalents to excludes $X.X

net leverage times. X.X within remains times leverage of Our was and our targeted rate X X.XX times to

markets We our ability Sierra a strong million with XXth XXX XXXX-X demonstrate closed continue ABS which our to transaction, XXXX. October to access on

this tranche a As $XX previously million generate us XXXX our transaction first was included cash. BB to additional since allowing noted, that in

we securitization our AAA in success was conclude, market of the continued this To tranche, pleased the were tightest very which at of is performance reflected the time also spread any share Our and in outlook. our post pricing with crisis. bond

of despite job and impact and X% call turn EBITDA growth delivered open we'd the on in up quarter further With adjusted for questions. the an the to our continue that, do to hurricanes. the to like amazing back third Tony Our executing it priorities of teams strategic

Operator

our Instructions] question open. Katz your you.[Operator We'll Jefferies. Thank from Please go with line take first is David ahead,

David Katz

Hi, good morning everyone.

Michael Brown

Good David. morning,

David Katz

provision, thinking loss we that I hear with the or of should next did most Mike fourth morning. that is the or up think investors quarter. the is come should sequentially it a want sense and I probably pick just the what at the starting I line down Good down choppy which one one that But issue discuss expect commentary I'll in head downward? it, or more this seasonally loan year-over-year. the we may or Look, metric your for we a thing four get Is so? to to quarters really be straight trend and was

Michael Hug

thanks David the things. for of question. couple Hey A

what of a the clarification, charge-offs. First is to all, expect fourth we in our increase quarter

the performance in that, XX% were saw full we the think of been historically quarter a for fourth be than to quarter the up, the and again, down. overall year, expect the quarter third. case. it provision, in all means you're the But, great prior be be but as higher doing are with pleased solid make we very a downtick things be which for well prior we to and owners continuing to expect portfolio Once results. expect we would that provision, to them we're and valuable the fourth in trend product quarter it’s in we provision that were to When the in provision our spot feel they're charge-offs the them, the the about compared to it the will third down relates to performance gross We and quarter, which quarter they to see performance re-engage the portfolio to the has would the to that year, in the and portfolio in compared provision within on paying

David Katz

bit it's I a that year well, downward thinking be if tick as should to harder, this the that starting may, model, is we're and you know expectation? our tad is next correct, Fair, just something that about

Michael Brown

this David, Brown. Michael is

tack me and year. on next shared on what to just Michael touch Let

of as highest color provision Just our quarter was quarter. a the in loan the third is to A quarter. volume party. the call quarter We out on little the third loss wanted third XXX% it I to due think specifically due of and well none that to third more historically

very sign full year. confidence that's just was below us, a the for and being a So us good for XX touch gives what

for it of it want putting -- confidence quarter be and And we're portfolio feel we'll and give drive to what continue in both with where that next going exactly we on push forth would direction to call. projection the continue the down we're our place going guidance year, efforts the in moving operating right for the earnings to -- us that putting it long provision the -- will your to improve -- the range in the hold of engagement to to first the say direction. As we're owner we to relates going that it’s I end the be, tactics to it is multiple until starting we're But right forward.

David Katz

enough. Thanks, much. Perfect. Fair very

Michael Brown

Thanks, David.

Operator

Thank next Scholes from question go SunTrust. our Patrick you. Please We'll take with ahead.

open. line is Your

Patrick Scholes

Good morning Great.

Michael Brown

Patrick, good morning.

Patrick Scholes

hurricane I'm your the or down taking specific the business. here, if number, mostly related your the opposed Couple for as it's units? to vacation of just was phone RCI as of ship on here, but you're mostly – me correct that correct, to questions your Is wrong that owner just sales

Michael Brown

the The think of I were is were markets our of business. Myrtle look the the impact represent the about Williamsburg impacted, the impact XX% driven side biggest ownership by Beach, when the at hurricane; months volume we vacation actually impacted. that in that

are that So biggest primarily impact VOI earnings sales it's the due the to of impact driver revenue the and hurricanes. the the

Patrick Scholes

secondly, rate? And that as barring going -- then year that M&A but over run some next Okay. forward? then ballpark? again any of the million Is little again of Is run one-time you activity. fair a But sort of quarter for repurchases think a to rate XXX did fair roughly in items also mention well,

Michael Brown

we script It tranche. were things that cash repurchase in in land our ability with as share at at incremental million So cash. it to to point repurchase was to $XX level we’re sell out drive did. incremental doing very we BB Also our noted as to we the relates happy the

So, of expect remainder possible that have we we’ll and should at continue as of I remain goal leverage end the share availability as -- for to of XXXX repurchase repurchase just keeping times, be sorry rate aggressive cash the market XXXX. that through in X.X but the continue be would to to XXXX I'm shares the to think mind the we

Patrick Scholes

about Okay. earnings historically about fair How February a Thank think -- folk? assumption about the you. for Is parent And are would then by of growth. the that? it’s lastly, the earnings thinking raise company, you that the you as we to make dividend rate Wyndham come

Michael Brown

our dividend a to out that investors now as right at since the and company. been as the mention We've when yield X%, a we our definitely that healthy we company Yes. comes I is and expect grow we to look that similar very of our that grow we’ll we Day the that so definitely brings pretty grow appreciate the as would value we it dividend shareholders dividend appreciate consistent the would Investor expectation rate. we Pointed grow

Patrick Scholes

Okay. Thank That’s me. all you. from

Michael Brown

you, Thank Patrick.

Michael Hug

Patrick. Thanks,

Operator

with Thank Oppenheimer. our next ahead. you. Please We’ll take question Ian Zaffino go from

open. is line Your

Ian Zaffino

Hi, volume quarter? say you bit versus great. a about Thanks. Thank third-party. guys you. was us? there's that little third-party clarify that didn't comment any that Maybe Or just see the you defaults in Could a for

Michael Brown

for question. Absolutely, Ian. is This Thanks Mike.

What see it loss to defaults, mentioning our we third third-party As driven loan absolute to defaults the that to was the and full no, by parties relates is provisions didn't XXX% we’re the increase third dollar not by any related incremental expectations. volume beyond parties.

engagement wish a we In clear to parts, the their we’re should place, few you make had in in success by third but I've that efforts and to we’re our fact but far feel what our year talked should in our so, engagement. continue seeing Those in third-party to number we’re and points they seeing owner consistently they to seeing or or challenge We share that consumer not there. when address sure ownership, last and increase trends a contact we and our the best we’ve to have holistically good they the we’re only of just to just really about over seeing, voice Maybe as any should in how trends moment owners, I questions clarification. exit of positive actions third-party most questions. to owner with operational activity they the us put regain speak a that parties, the have help take we’re with counteract defaults, a other that the not all but result

to always our there improving we’ll a it things can which evaluate provision, be strong and to our Secondly, ways as lending but and FICOs, strengthen that lower are portfolio continue the do. portfolio in XXX portfolio it’s to continue to of we we

very and platform. digital Third, we’re on Internet the on the active

for to to And regulation. become to the points port very to that today you trying welcome that regulation then we be proactively we’re with in Wyndham our any our it would've in the Wyndham on really – quarter active very – the to litigation first existing going very positive, And anywhere should call the we’re secondary question negative, these regain We’re secondary supportive Cares should increasing But market probably of between program. at by not the we’ve associated voice companies trying is be the so that Wyndham of competition. and out think the scheme. regulated. We the industry and owners and their on that related state it both seen by in to market. lastly, in lower And level then market federal both way schemes what’s through is results the third some regulated are in – several employ

Ian Zaffino

be, back level? follow-up the you’ll be seeing closer are? relates just three, to it get will years against ready one successful how Okay. the four third had say, as achieving third actions it the industries long you to How And ago to that just you where parties. third-party? I what to take Or are guess had on against would given party, you’ve Let’s kind of that

Michael Brown

this Ian, again. Michael is

and I committed you five Worldwide continue fairly that the moderately the steep. is to to that began be and Wyndham on believe from Since upward Just to initially haul. today of this Wyndham an part to trajectory, number effort for out listed go -- long efforts and items this going ongoing being are we or that said we’ve -- cause those Destinations seen we’re I as always an is is

about both Now third talking is sequentially and what we’re provision down year-on-year. here quarter that’s in the a

seize right progress. with. starting indicated across long-term I we’re So, few would that full-year, we But portfolio provision our staying And which in. green have for long-term be projects indicate projection with a We've on that a not we’re that will sorry, we're satisfied shoots the to we making the we’re track. think

Ian Zaffino

the color. for that. Thanks Great. Good right. quarter. All Appreciate

Michael Hug

Thanks Ian.

Operator

question Please you. Thank Goldman next with Stephen Grambling our take Sachs. We’ll ahead. from go

line open. Your is

Stephen Grambling

the for questions. morning. good Thanks taking Hey,

First, FICO’s otherwise are a owners that then defaulted? what’s the existing the How the induced perhaps by age, getting question. new typical owners who base a separate the score And mishap? geography you're compares third-party to had of

Michael Brown

households, and Nashville, extremely question did Myrtle standpoints, I stable household in what Well, new second to the mentioned score your and drive quarter well the Mike I’ll last is new new remarks The Thread correlates look Blue FICO owner income, from mind average FICOs. my and which entering on demographic be similar. in the for on they as more see consumer in we Beach. Austin then markets seeing that look and that keep to the let me XXX. age, South highly Blue owners in question what would hand Rewards we’re as homeownership, you that component of about the we Wyndham owners a new database, it we’re in the whether take From Portland successfully our the to places quarter trying shared Thread as like

We’re from to a to And XX,XXX, age. a of owner starting average our XX to you're then new seeing around age an base up household the move down total of XXX,XXX. seeing about of owner the average income years moved over

that with that to FICO’s the to think is way Mike would move. question. moving it hand hope I for demographically everything and I’ll And in we So wanted

Michael Hug

we’re to stats is with representative loan activity what activity new owner consistent versus is FICO at you’re and morning existing demographics all was pretty average see of of the look the Stephen. Good balance, our current we age, related looking pretty period. the the average When owner, really the PPE FICO the in whether Yes. originating PPE portfolio we at loans so all the that

Stephen Grambling

queue. in Okay. Thanks the I’ll so back jump much.

Michael Brown

Sure. Thank you.

Operator

Please we’ll next Bank. with move And Woronka go ahead. Deutsche you. Thank Chris to

Your line is open.

Chris Woronka

Good guys. Hey. morning,

Michael Brown

morning, Chris. Good

Chris Woronka

initial we was expectations morning. regarding compare to-date? zoom data you’ve out do any is Quinta are of have there could Good your La any part prospects kind penetration question. little there bit greater second And maybe Maybe maybe in to base? those – existing is there progress and that the during of are the to it made to Thread One, coming that a any the Blue spin for is your two-part more is, the the of there brand? over how And Wyndham How laid process? that you you’ve you folks customers than -- there as on weather information

Michael Brown

extremely the pleased Great. connection third XX% which sales Thread the and growth I'm Blue -- been hotel clubs brought as To I'm through would Blue groups ever. fantastic extremely call group around and to quarter. sales And be VOI on we've the execute be effort. we and hotel in we possible. as somewhere been vacation driving how how with And Thanks, that that at very our third the its the But other the the the about that the sales quarter this Chris. moving they it was XX% close platform. also progress in Thread The always how had the is much group day I've through year. to with through supportive. said VPG year. with you reservation it's through a come XX% hotel see the leads will They getting relates the continues at strong We is more we’re a this been the brought encouraging year in as here people. comps right group We system but the execute numbers. early pleased we in talk I our the which effort on higher it and The VOI rental as because to began of we've a rental Thread grow also to It's rate the means, were more using What this having tie-ins to hotel do platform team many locations. it and knows relationships not Blue cheaper know showing the not about day-to-day generate Wyndham a on Thread. difficult last argue qualified is able can program. earnest XX% just in that is This because last second half easily that Blue see OTAs. in really has

So, the very pleased with Thread. Blue

their tremendous As opportunity the heard Quinta you La an They're remains they’re still Quinta, through it XXXX. relates working integration. call La on to progress. for making as

Chris Woronka

of for in then, to maybe the little it And little I with interest guidance -- bit as new the Can any change any finance owner implied talk differences And income your or to go want a rates this there the on to year? spreads moving about great. propensity also back relates Okay, implicit kind bit, a then to on finance? you in is I question. guess

Michael Hug

Good morning, Mike Hug. Chris. This is

the ABS on fixed those $X we to the new up basis of risk increase $X be an current And feel resulting mind risk rate, EBITDA plan a keep plan above any is the passing look exposure do guidance through expense at to interest that owners or have other And the new why rates for the propensity mitigate which about able which we at we’ll is XX a transactions our that the that at haven't the as are increase transaction the the when guidance think so provision propensity. business. rates basis, normally an if transactions. on impact. on long-term propensity transactions about incurred obviously either this areas our consumer in line about finance ABS EBITDA higher relates in we long-term we issue we high ABS bps the will higher year. our in in look either do quarter. we the When because our look As rates annual of modify million on that the that we move XX a we to When have the talk We points on interest in third

Chris Woronka

Thanks Okay, very helpful. guys.

Michael Hug

you. Thank Sure.

Michael Brown

Thanks Chris.

Operator

comes from Thank our question And you. Mcknight Please Suisse. Cameron next with ahead. Credit go

line Your open. is

Cameron Mcknight

morning. Good very Thanks much.

Michael Hug

Good morning, Cameron.

Cameron Mcknight

Question for Mike Brown.

in perhaps of terms In the rates, color you’ve and you in provision around underwriting a more the the little efforts made give parties? collections terms defaults of could decrease third

Michael Brown

we’re default the that. component look me What start the underwriting it of Mike continuing nine Let let team is the has and of this loans. our then year me hand first for at months done of this in to to

wherever Our to means marketing what's that credits unprofitable at are well asking to ones and find business size and defaults, way our eliminating lower payments continue is have to out balances to of generating consumer sales to team marketing the FICO’s team team looking either weekly programs possible higher their down as which sales finance drive low continue they loan speak figure for best well. and

If to And finance them you improvements making the of more underwriting the are of incrementally each Mike default an the And little the each to overall them look color into the across is health can were each portfolio. consumer in the question. maybe of provide impact and you those on metrics, result see portfolio. can of

Michael Hug

Sure.

identify pay and one we Cameron, FICO goes things the their to On day based information ability we when somebody the loan like that. to what our is on and to default balance be have able collection, delinquent, do

mailing So that. things or we stratify on efforts our based efforts calling collection or efforts our like

as higher have you days loan an and calls delinquent five you more you we delinquent, like things you making FICO have and calling and loan and XXX lower if opposed So lower the we’ll go little before a a will then start balance a that. FIOC start later balance to gets if

to and So, by their highest the delinquency to us current. able work we’re be sure giving process risk might base challenge with get more the earlier doing they loan through in making touch they having that time brought whatever consumers

have do the go paying also Obviously be ways we we money, vacation. things them of have of vacation. they collect try on One but try to is not to very get as just to their to to effective well on one

them paying and So talk on they're on obviously for to means their getting with them product, using about product. them vacation get vacation their

delinquency our the risk process. based stratifying efforts and earlier the So our in on resources contracts highest

Cameron Mcknight

assumptions And follow-up, the Thanks. the just change answer around assuming no, any the loss a that but loan methodology or Right. is I’m the provision? in as you've calculating used

Michael Hug

No.

be We continue consistent. to

been curves. for methodology in do how that calculate calculating the required provision of and month using we are every We reserve for consistent our loss years our terms loss ten-year loan for in have We the portfolio.

Cameron Mcknight

if Okay, fantastic. can. I And then one last one

or terms of QX can In out year? next likely the centers are how number into and impacts, sales you QX Will the should the of long last? of hurricane quantify stretch that impact that

Michael Brown

that offices of it Cameron, primary market ancillary as a really to primarily Beach issue, There different Myrtle affects was some positions concentrated had Panhandle. that not was are reminder, time, period the a number we has our continues and market in into then slow flow was of which were was very impacted. that the was Beach And Williamsburg just Panhandle, a sales but have sales for to that as we Destin. markets close only and impact. City there. in the have be locations number both Myrtle the but Myrtle Washington to of operational. Beach getting a back DC, are And we where been Florida the slow So, and slow, was to have back back, two and open and again sales you Panama in result but the centers, has different And they the a owners

However, earlier. from Florida in getting Mike of like and I XX% those is October the one important. very sales that our Myrtle mentioned owners locations September our come to statistic Beach back Panhandle. to and reiterate

hurricane when uniquely we a through. hit comes two markets with get So concentrated those

Michael Hug

centers all January, we final, I them and are sales open in now. think to of open then expect most operational be would actually And those

be So, full talked force? fourth the we quarter of the a of in but as year to little by bit the beginning about, back impact it will

Cameron Mcknight

much. Great. Thank very you

Michael Brown

Cameron. you, Thank Appreciate it.

Operator

Montour go JP our will next Please question from And ahead. you. Morgan. Thank Brandt with come

Your open. line is

Brandt Montour

hear Great. me? Good you morning Can everyone.

Michael Brown

can. Brandt. Good morning. Thanks Yes, we

Brandt Montour

Great. Thanks.

to I And XX% on do great game was achieve on just end what this to that you at back need initiative range think percent Thread the of this far. new in I you the know the Thread. started mix? Blue when mid-single point job thus mix what wondering digits that you of owner So, Blue secondarily was Thread. your then Blue tour to get is

Michael Brown

let total well, can could start tours. me volume if So, and we to with I move

million. this do approximately year sales owner approximately base in $XX we’ll a So on XXX new Thread of million Blue

Thread So relates tour flow, that's of digits. tours the single high math tours of the And XXX,XXX. around mix Blue XX,XXX out about we’ll that’s XX,XXX do our to tour total -- getting as into it

the those already relationship a off XX% we that growing great to percent level. opportunity the million some who've we that. of to down not that, Our Group. grow We’ll will been take But believe time continue goal continue take maintaining and the it But space a be and base we’re this will have growth. the execution when look time, in Hotel in move for across you and is hundred industry higher annual several with percent what to is obviously as -- projecting

we then hundred up several it get through we and we’re million once year So million XX at about this to overtime. get to want

Brandt Montour

the rising Thank you. signs you’re helpful. I relating wondering weakness the was think provisions your guest consumer recognizing just rates prices? pressure there early And around to weren't [ph] customers that That’s interest incremental just from Great. loan-loss and/or then seeing of any if any on general consumer, you on

Michael Brown

and transactions no. to answer to short closely those in really areas. today, The The tour is consumer any of we flow the at weakness see look that if sign there's

full-year tour was sign. expectation at great That's on direction tour we’re maintaining flow. our growth Our and a

whatsoever. tour volume weakness at You no And signs guest both of owners. our and they and flow are look showing owners per new

So, we continue positive. remain to

impacted through only negatively is through we in hurricane performance flowing the and Our QX. really full-year guidance we’re had the

we’re think vacation several So, a to is us, where may I just to this love everyone excited on is go to they When eventually the way importantly are out more their vacation. continue what does they'll in about years saw the great vacation. pattern. consumers change with going. we hopefully recession last And vacation And comes weakness

Brandt Montour

great. Got the Thanks it, for color.

Michael Brown

you. Thank

Operator

go Jared to ahead. Please Wolfe Thank with Next Research. you. [Operator Instructions] move Shojaian we’ll

Jared Shojaian

taking Hi. morning, question. my Thanks for Good everyone.

Michael Brown

Good morning, Jared.

Jared Shojaian

back your where have you table the On growth revenue into from XX your you’re hurricane. XXX then about And of member release impact you midpoint. the exchange per also EBITDA of about you a full-year basis out the at million. guidance, sort points calling lowered $XX by And in million can the about

the midpoint? issues you those of understand to the in from you can you So X only seen full-year we've impacts tours million me the relation some in VPG, then despite the by cut help hurricane. And also the guide, reiterated at because guide the the

So what is sort offsetting of I declines there? guess those

Michael Hug

So this question, Jared. for Thanks is Hug. Mike the

operational the to full-year our XX over performance by down through million. note, impact think bring quarter the XXX I when guidance X in the as million would to previously at the you down the was look guidance and we midpoint million third hurricanes XXX million brought carry

business it good done we've performance to the of As favorable good controlling overhead see to job I mentioned can side on RCI we’ve that's as you – results Continue of as a was about on well. it think the VOI talked making that provision, sure we’re and slightly our the costs. I relates the the having see business. our as And side the from of operations, the impact then

I actually business of it's off So, our hurricanes think all really the full-year and basis. the the you the of that impact increase are, on a hold essence aspects other guidance if back to combined in

Jared Shojaian

of obviously consumer of a sensitive lot other been Okay. we’re timeshare that different you. perceived the think be sectors. ask guess, the just to is From Thank more because economically And and gears macro perspective I to perhaps and and, a bit right wrong there switch late I is concerns cycle here a or question. in

can maybe So more unusual. I you've seen recession talk think XXXX, in what excluding historical that XXXX, all can a you bit agree was specifically we and about that little

just about in you. experience a Thank usually of downturn? talk can you maybe you normal more what So would

Michael Brown

Wyndham we the is different. to recession XXXX into will eventually Michael. compared went The this think Well, looks how into way next go I the that recession, completely

more look occurs. to because I last has here the think of done the its And a we business the we looked the in a model. reason hospitality decade homebuilder re-align team I that over a lot whenever and like company work XXXX is say like next more recession

to efficient are matched as with our sales on the business sales. and to capital outlays side, we our allowing where more a capital very highly more correlate First visibility when to spend inventory moved we've flexibility

the the but marketing As going to in recession, out have makeup maintain on the be our last And adjustments be model. well things talk to of should into recession. would cost make a just that to into overall changed some able not that underlying move there so next shift let about will full organization generate a change was marketing our platform business of the continue the the Mike next ultimately We we side. demand will recession into recession dramatic and the we I'll we we the will

Thread cash model. targeted You always opposed through believe programs conversion, maybe moving of position I our flow underwriting XX% be business about recession we our will -- that as can our and could as would our within tremendous on be downturn marketing cushion us to have business Mike focus maintain to And say maintain in in to recession. compress provides the owners leverage any a just we equation react you the side to helpful. Blue from if margins, of but to we model, EBITDA the that amount a new the free moving able the cash fundamental great last cost levels with that talk would move the be of and we we into next

Michael Hug

Yes.

span-in to sales we and key XXX sub-XXX. underwriting eliminated were in and think in our points we as where today sub XXXX [ph] back FICOs where is the from of approximately XX% I XXXX relates to back the XXXX are were we’ve all

XX% between getting down down; about an basis. You see our on to we’re [ph]. get scores used FICOs now now We XXX of XX% overall north

don't to on relates a significant won’t consumers for borrow if we market underwriting put -- also do we analysis it will level generate, they the as we We owners we balance We vacation how we certain market large a standards ability they underwriting. at look we when certain they Even believe if certain have them. So have and them do and to to above loans. borrow ownership. their through additional more more

is improved years. has significantly fact seven then over margins underwriting we greatly eight the in who So led what and improve the XXXX. process or market has two to last that And XXXX, since

now side We’re business. the the ownership on of vacation

and XX% XX% We’re running margin.

had of is significant much when the were big made we marketing we in our the to underwriting our healthier we compared January to and to the to we really have So business as changes operate what and to XXXX make shift. back downturn way wouldn't occur standards do the if

Jared Shojaian

Thank you very helpful. That's right. All much.

Michael Brown

Appreciate you. it. Thank Sure.

Operator

Thank you. Great.

Engel Next Please with go we’ll Edward move to Macquarie. ahead.

Your line is open.

Michael Brown

Ed. morning, Good

Edward Engel

You there remember your believe trend always was defaults? would kind you ex try working the What to you do I defaults. be? I it on portfolio default X.X% would the it XXXX third just in where loan these rate strip back kind party of of core out think was

Michael Hug

at so provision back the to were provision. we expect third-party the a today reduction XX%, the around impact would XX% If out activity with where we’re the Thanks. Yes. from XX% we of of

similar sorry, in defaults by So then the translate ahead. – being think go that level keep basically level. reduced would that of I’m a that I mind into same And

Edward Engel

No, keep your guns, going?

Michael Hug

an just then annual I X% be to keep would defaults say, on mind basis want around in that

Edward Engel

get and rate? your Okay, you on default to to then, you that driving that thank regards what’s in if an track And to Or to of there, you that I get provision, is sales, last Is changes could recall you financing it quarter you correctly, that. I assumption lower if said guess for XXXX, XX% remember in that? I back earlier? of be VOI are it still do a that

Michael Brown

be believe is at think call, I our did as and on well, QX we XX%. I trajectory said term this to we long projection like on and

the out end and come QX. at and XXXX guidance QX we'll in, official As of we've QX put see we'll seen QX our

and projection we're finer like loss moving in a But we We our that the that in VPG, direction. actual in with long rest a will the the term finer, are sharpen sales, immediate loan but our confident are call. a projection seeing pencil, thread tour and provision growth, of point positive the put in the trends on trends, term put the business, EBITDA blue right

Edward Engel

Congrats quarter. guys. your on Great

Michael Hug

course. I question the appreciate Thanks. of

Operator

And a Please up is Sachs. with from our Goldman you. final Stephen Grambling your follow Thank ahead, open. line question is go

Stephen Grambling

sneaking I Jared's a follow guess Hey quick question. up thanks, to me your in. to for back response

capital adjustable to Or for? versus in or in for reason, just last percentage downturn. what over more being certain requirement sales products whatever shift the a would of time the approach sales? if on much soften your hope words, to just other projects in versus be these have were a Just periods the of you time fixed How capital on still just

Michael Hug

look next we pipeline, over rate think XXXX committed, when we at out and drops significantly. inventory be years, then of So when we get average XXXX, to seeing closer right that to is the the we've we'll that get several million but $XXX when the majority that mentioned pretty XXXX, when about and you the our

more So flexibility further we're we making get, in being $XXX smart some of committed terms say it. ever probably have. million XXXX, is Once and sure of XX% out for to again, that would But not we don't I just commit we leaving flexibility. the the

Stephen Grambling

you. Thank Great.

Operator

remarks. you. back Great. to like answer closing Thank the period. turn does Michael question for to our I Brown conclude This and call would over now

Michael Brown

Thank you.

cash incremental flow for to Let me quarter how execution results return saying with and free our the full first standalone of strategic We ways of plans. to company. remain a operational are great shareholders, deliver Destinations drive focused close by pleased we Wyndham as and on our

to our a we As are result, goals. deliver long term well-positioned

thank we for on each the and focused importantly, strong focus on great More you value. want have joining hard to for our work you associates say their I while on day. shareholder Thank and team world to every a vacation vacations outstanding experiences today. delivering delivering us putting

Operator

conclude does This today's conference. you. Thank

great a day. have and disconnect may You

Travel + Leisure (TNL) 1 Nov 182018 Q3 Earnings call transcript