TNL - Earnings call transcript Q2 2021

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Operator

Good morning, and welcome to the Second Quarter 2021 Earnings Conference Call for Travel + Leisure Co., formerly Wyndham Destinations. [Operator Instructions].

As a reminder, ladies and gentlemen, this conference 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 Please ahead.

Christopher Agnew

Good and you, morning, Thank Britney. welcome.

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

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

Michael Brown

Thank for and you, thank Good everyone, joining Chris. morning, you us today.

from and million operations second results. $XXX We quarter EPS leisure saw travel quarter led strong very EBITDA $X.XX. returned diluted our of of morning, you release this from which reported As our significantly last to quarter, adjusted adjusted continuing second

consumer XX EBITDA margin second second and able would was the of the of in the margin basis participating the quarter tour XXXX, in factors and adjusted reductions despite from this improvement our release, XXXX, interest quarter is XXXX. In below travel margin quality are As approximately put Adjusted vaccination during COVID including demand, fully higher achieve to have and the generation, us allowed XXXX adjusted we equalize than upgrading been the EBITDA portfolio the maintain XX.X% free driving in and meaningful basis to X over lifted, increasing, a net second structural the We perspective, throughout million headwind consumer sheet climb Changes in positive and we exclude points dividend to flow restrictions leisure year. strength reduction of are XX.X%, recovery. income a been quarter of points strength recovery, are the of a fortified XXXX were XX.X%, the in demand to quarter if to margins. made size XXXX. cost domestic of the portfolio. The key to and our on finance our full our cash To remained XX rates the we due $XX resiliency reserve cash the has balance crisis. display business past flow underlying travel

continues forward of we to performance cadence returning regular a to As shareholders. improve, return to to capital look

are ownership respectively, strongest reservations X%, California, ahead and of XXXX half are XXXX the and and X% Florida in out, bookings. and above booking an vacation average levels. now above XXXX booking encouraging owner Specifically is demand, trends days continue consumer as owner now for the growth first the of second window XXXX, Hawaii XXX XXXX. some of be seeing on is sign of it to the Net

reintroduction travel of could we the keeping the are domestic are on careful about and persistence our outlook. the variant in remainder eye delta of the the year, We restrictions the spread but a optimistic impact of spread variant,

internal During expectations. Membership as the quarter, and second well Vacation both Travel Ownership our as exceeded

expected of quarter, increase that to the an the and the faster of million This second XX% $XXX in half emerged trends we first sales higher than than guidance first was we from million In Gross the the earlier were leisure observed end we travel the million, VOI XX% range. at projected. $XXX we and rebound rates improved the $XXX second materialize rebound of quarter, to of benefited VPGs close Although signs from initial our XXXX. were of quarter, ahead XXXX. driven by the

transactions, our VPG Hotels do its Wyndham Vacation levels. our We the Destinations, future well, leverage mix historical mix with of of new Wyndham increase a above committed are have and Resorts a XX% core As reflected fully partnership or division, untapped sales, above continue at we business owner How expectation. enterprise, program, XXX upgrade Wyndham and and growing we loyalty pipeline to large is this? ownership & our our will basis vacation points to of will owner our we about Rewards. new our Ownership

National trade the operating progress quarter, and divestitures. Additionally, new to members. lower to and of QX than in offering club was specializes acquisition in ownership EBITDA remains with Solutions, for an compared travel includes are RCI and the have PTS when or to is segment, business and launched core million offering XX% its Realtors, designing exceeded newly with opportunity XXXX. travel X% expectations X.X with of programs. Membership, this association acquisitions also just the vacation XX% normalized that leisure, the and and by Panorama Travel rebranding the we and Travel membership EBITDA agreement growth which XXXX squarely with a broader of and X.X America's we PTS, in RCI's in PTS space. array Association Adjusted elevating travel BXB brands our made the announcing to million driver focused launch RCI in margin also largest primary revenue on vacation services members.

subscription through our deals to transaction certainly full continue agreements in focus primary of travel continue increasing club for & absence like work the purchased memberships makes us to ability this product towards travel exclusive reasons least, our as we solutions the macro of our the fuel premium upcoming Travel revenue-sharing Travel one launch we products, on & actively not our demand the club to combination of in space partner The was and We but excited marketing leisure offerings Last, launch the by velocity, expect launch. brands. club curated, to inside of Leisure. we The for the September. offer travel Leisure the and

to want the call providing to our we to for over year return turning Mike, expectation year share of I guidance. Before rest the as this full

on of in of year $XXX to $X.X expect we XXX,XXX between and expect approximately million earnings VPG be gross Overall, tours share range net $XXX sales, billion. and would interest these VOI of $XXX the million of income We adjusted $X.XX to to around to we $X,XXX XXX,XXX, anticipate billion per adjusted the Based $X.X to EBITDA full $X.XX. million $XXX and million. for sales

of Hug. $XXX a third to will size in like to to For to would Projected the like as net second over last range pre-COVID represent levels. quarter. between Chief of million quarter over sequential our we anticipate to third million. I'd adjusted notable billion an EBITDA Mike sales year, an from the I Mike? hand to $XXX we EBITDA result, XX% retracing full the will third And million. our income, average $XXX most XX% to Financial believe point months quarter increase $X.X million expected reflects VOI headwind call VOI a quarter, would interest guidance to out $XXX that the that, $X.X to portfolio Officer, With with be range year sales X this our billion of

Michael Hug

$XXX second results. our be color Good for of was million diluted revenue improved respectively. of one owner second We factors provide Tours in quarter, the on results tours. efforts Vacation owner of quarter tour and and on everyone, our the quarter lower of you Michael. XXXX Ownership our a second position you loss of focus VPG decision earnings of benefiting of adjusted These marketing cash I million, morning segment efforts gross more as adjusted $X.XX higher year margin. reported XXXX, strong XX% second and sales quality. share XXXX, today. ago, compared focused very to from Thanks, of thank new $X.XX of to primarily to discuss with adjusted owner total to the will and adjusted reported and were in flow. quarter resulted and liquidity result balance EBITDA $XXX XX% $XXX $XXX comments million. will VOI and us $X,XXX new and joining company than mix our In our My second a contributing EBITDA of million quarter second $XX were increase the to pre-pandemic per our compared deliberate a sheet, than VPG XXXX on higher-quality million quarter

million originally net period quarter, largest an should resulting end which long COVID-specific the of the recorded $XX portfolio, in we first continue was were million. our in million, are on Membership XXXX. to adjusted fueled to and domestic EBITDA. also We of and us you prior by XXXX strong To quality $XXX lines, of million XXX,XXX, the continued have contract the Membership In all the total million as the have $XX portfolio. performance we vacation since vacation second March geographies. year second COVID-related strong expect the a focus COVID-related million benefit nonexchange reserve X.Xx the the term the due At gross quarter XX.X% yield place the of business Travel stronger our end increase adjusted last U.S. million improvements we we reversed second year's XXXX compared as million. put was was $XX North the last reserve our second American default recorded $XX transactions of a compared million, quarter, - at and it. we a $XXX including and Travel end compared the were receivables established, against on percentage The a XX% seeing of higher the quarter, quarter of the provision in in XX.X% we reverse reserve, the recovery than of second at exchanges it to update EBITDA $XX over in $XX same Travel to in to Membership to charged on were ownership to released to reserve quarter we in a reserve the And with $XXX travel of total XXX% of was compared growth quarter to of the when year. in the segment benefit and the off in Revenue

in and nonexchange business, to accounted XX% continue of be pleased growth with Membership's transactions We for of the Travel total the quarter. which

Turning balance to sheet. our

rate net of debt leverage X.Xx. June was corporate billion $X.X Our our and at was the end

second our a We growth, $X.XX quarter of end of paid the to have see of the $X.XX leverage and Directors EBITDA rate demonstrated third We dividend our share remain focused to quarter we dividend to commitment continue return leverage Throughout we X.XXx approval capital reducing year. continued and expect the pandemic, by by below XX, June to decline for with on August. our our to share in recommend per we'll our shareholders. on Board of per the

add estimate that our Ownership was VOI now headwinds may lower that Exchange business interest membership can impact color items XXXX. lower some in for for at half our our discussed second I year sales in net factors fees from how next will by a the drove outlook our at Vacation income Now we of us face year, we those business. the couple those will model XXXX view Based and to our on of Michael and

from lower will XXXX. at adjusted to in of to to It running XXXX. enrollments, our have should $XX these EBITDA million XXXX, be headwinds nearly what about from baseline a years. this interest $XXX as to net As RCI, $X than sales is levels that both highlighting to of be. been has of portfolio $X we we lower the with XXXX, business base our impacted down think end billion will compounding member resilient down billion XXXX. EBITDA impacted compared to up At below our adjusted in for could million by important worth when is X XXXX enter parts income new be our And up With understand impact well these better understand historic

rates cash reduced working cash expense interest as the free to to expect adjusted to temporary of of percentage XXXX of interest XX% XX% corporate EBITDA due to reduction and from of financing, expected on income Finally, consumer adjusted conversion EBITDA. be conversion we to a is higher be XX% flow, free timing net adjusted XX% historical The from flow capital. our

in forward free and conversion closer September. can look we questions. take range. our We our expect open of cash to Day call that, you are very the to XXXX at in up pandemic the summary, historical In please target many flow move emerge from you to person seeing pleased we performance to Investor with as our Britney, With

Operator

will Instructions]. Bank. from question take And Deutsche with we [Operator Chris first our Woronka

Chris Woronka

the all points. Appreciate data

of reaffirming ranges. on X? close going base to as line same I do segment talk be in your time, flow we the kind bit that focus is? rates Is So higher we VOI was to the first VPG tour should How those quality. the of to Is about you about? growing kind think question pruning function just And it the something going with of Or guess in is commitment historical little a at the there square else a all there forward?

Michael Brown

we back get rates and rates. where summary, that VO if historical but just we focus that's comment, around our grow is historically good Chris, a we've business me at, We the to been, believe back not to historical really EBITDA. can let to want above, come

out the seen component, we've do earnings our It play a tour to focus come strategy changing has pandemic, line more efficient through focusing our we've quality, which laid - holistic how quality out seen on more out. of we already of the we growing bottom is a As on plan to that. clear way

are Our chasing out the back the are in higher, our of We're VPGs were the full coming as they pre-COVID. I second of quarter, out, being effect And not are quarter COVID margins. XX% flow. is, industry-leading point we mentioned. should where that tour margins first net already already those And

more to a back levels more preference EBITDA bottom in plan to level. back tour ahead VOI desire of We going our to get pre-COVID focus is efficient is a to back or get margin get and EBITDA - line. our - a forward just a to and to So to ultimately

Chris Woronka

could any there bookings. And Okay. way directionally, specific just what I'm within BXB TAM, longer-term it? look to that but the going any talk we little business, growth part, Very then the you're a to Is bit not was of really second the like? there - way at I kind PTS, the is hoping looking but way a about helpful. of looking for to a I define is that's the the know number, cadence

Michael Brown

revenue on like the or with RCI transition services travel everyone economic on providing business upfront our at transaction model, like When model driving endless. lot associations partner for PTS Realtors we number an out we've call, PTS fees, Association, that that subscription TAM just our companies, to ongoing And out looks are the with effect, really subscription we, a side, is done where fees, in component. recurring there the BXB of great the the and brands then look that them membership there and associations

attraction more names have that So sign bit at I sizing depth which a Day. strong for club your today, I about million be in our Leisure or timeshare fit in that think & have benefit million probably those to speak that having household the is the space XX think really Investor is million Travel to we the announce households, just a in the scale fits And into If is eventually that XX question huge and we companies without TAM September, will the U.S. about half XX We is would people XX million. we'll about households. actual we we that that's a market associations will about that could industry to on And believe of provide that, that that perspective that launch of pipeline that PTS like Realtors, to internally. National transition who very there we hope few as we to other soon. a want

XX So we've side an XX million million. XX U.S. to in million around share, market of the leisure the million subscription got time XX and overall about

Operator

take will Scholes Patrick we question And from with next our Truist.

Charles Scholes

couple of questions here. A

assuming lending the on forward? favorable release demand provision triggered releases on the that and going First in can related provision, from the loss that? loan we expect metrics continue, to what trends more And

Michael Hug

question. we when Thanks positive. that we have portfolio, at the Basically, is metric for look the every

second quarter, less delinquencies of for down second levels. are X.X% at you the portfolio. of the If XXXX now they're look than Deferrals below quarter

down Second were quarter $XX defaults million year-over-year.

quarter I we is year. looking play And about talked that the the performing really say well. it's the unemployment then So into when at we've like what factors all of come took. this would end obviously, trends and portfolio look relief those trends And first and through the next those year of

way out agree it the performance. reserved. at look cash we you we we're right portfolio months, of the the this positive, appropriately the we're X if every flow. to happier in we the of at there. consumer. at think we're when the down might dealing think couldn't trends would - coming great And think with importantly, reserved all remain And it's income, that's And there you wane opportunity But be really there as the as look to I we Obviously, the make when new great through prudent government end sure just variance pandemic quarter impacts appropriately interest months we'll just it X and work here but I it support do. like drives So how next and with now, sit we always drives be

Charles Scholes

securitization Okay. And to sometime later related that, this another we should expect year?

Michael Hug

we year, XX% would we into to about. to range. XX% flow going that obviously, And do year. that of X, another volume be would XX% which up to expect down to the expect we do in cash one being with know, that come see the you reasons XX% would generate reduced Normally, down, We It's next we we're as one to to another the going transaction, been ABS then later X this it's but is talked range. it

remains our the markets but ABS So we year. this do will a very dip, confident temporary execution, strong, yes, transaction and another in later

Charles Scholes

mentioned just there? believe, Okay. about remarks XXXX. over Is drive RCI, question being I that number my would year past And last down your then Mike, that you had loss that of prepared million membership the versus because here. in $XX

Michael Hug

In essence, X and as been we close down across right. exactly entire sales down know, You're been the will years. have to for all industry timeshare

new no historical just new members minimal it's compared coming so levels. And to or in members

business the performing well. operationally, So is very

great had and the You margins their control see North America they transactions at driven quarter great we then that PTS, can by strong costs. primarily

So RCI some - performing it headwinds to have in. is very just happy business members as the relates and with that unfortunately, the way new coming

Operator

Joe we'll from next And JPMorgan. take question our Greff with

Joseph Greff

Michael guided or delta had second the be year providing variant spikes, different for morning? Mike, the of weeks if guidance half would ago before that you're you than what X this the

Michael Brown

not, say, on what's we're for the very over would last a most watchful with It eye surge. have the we as Joe. keeping to going Needless XX months, recent

the impact to consumer an I for were think to period. wants a to say seeing, results on side at good travel we if second that half going this of XX% business, it's are we a too have to in still our are Vacation the us third XXXX on reflect and But results. to quarter, on that XX, XX% Ownership July first visibility July the same above we're little where here it's we pretty so especially of VPGs early the that for have

again, will we a eye. So keep watchful

and that say meaningful not it that early a yet. there impact think any will say July it's be we're little I results to too seeing

the we weeks no. say, If so X same. same been And ago, the call have guidance would would our did I

Joseph Greff

a and quality comments, the was your close talked bit more function Can maybe it and is related customers? about raising prepared little a maybe of being you rate standards. new talk VPG think rate between talk it, to just you Obviously, that's nicely, it. I similar two in about close Got and up changes And existing? probably want think directional, owner it directionally transaction you and size about, those between I of buckets

Michael Brown

detail deeper, because there's great information you know, a It's a you that that detail. lot Absolutely. and of question as comes in dig out as

especially had mean, we've things few of an encouraging I but a incredibly me, that year, half are encouraging. there's the first For

new owner XX%. First mix of would the in about we said all, be that earlier year our

and better is it's XX% are, close that. already we July and Here to even than

is methodical we're tours. new recovery that way we've bring the those are than owner we channels, been that at Thread recovery new and tours we lower market open owner VPGs And bringing back the So despite, is because better back lower growth deliberate channels reopening a a margins. Blue our Joe, very in will decision much good. that made our open that's market bring and

to the were VPGs and business. and as we as in we finish we channels core, year the the higher the especially of half the much of out want pre-pandemic, sustainable that seen first to order market in and those half So year, using to Blue of our than the XXXX Thread the And are as for we've think maximum look move second long already drive how this they we're this into margins open VO haul. of foundation that in year are

Joseph Greff

Great. And then one. one final

$XX million reversed? Your if second of from does how being these the half much some any that from last reserve year case? include that EBITDA And of benefit that's guidance,

Michael Hug

No, in this additional we Mike any is does that benefit that not assume Joe, we covered guidance place. we reserve take the that put have from the Hug.

Joseph Greff

Got it.

embedded as loan the of a percentage embedded a of that kind at guidance is provision that? of Is XX% we what's or sort gross as are what loss looking so for And sales? in VOI

Michael Hug

first Yes. XX%, closer this half historically to under No, actually is going assuming at we're a - of little to which but not be it's bit been year, least right, spoken, or we've while XX%.

assumes release. XX% between reserve provision, exclusive reserve of XX% and any or guidance benefit the So

Operator

our Instructions]. will we Katz take And question next from with [Operator David Jefferies.

David Katz

time? it opportunities just outcome focus minute, long-term a that get And there down a post and I right? target And is minute, the long-term opportunity realistic it. hear Mike, get mid-teens to to to answer over we just for somewhere the the back focus if still did, I COVID? that, how maybe for The was still always can and your on on reserve to wanted about go just in a below is

Michael Hug

Yes.

I over range. get XX% can XX% we to to time, that think

and the our use when we curves challenge big guys seen we have the loss think it I have years, XX-year allowance. you over calculating in

from So XX XX time. over didn't went loss curves those over the go time it up to as allowance overnight, moved

provision for to is those provision when down. add curves a So to we the quality down now quarter, just at focus every XX%, challenge and start loss around we have over it And comes move time we continue takes to on that new time. hopefully,

year, So term, it's to it in to longer the wouldn't about next think think when I I we range but XX% next expect possible, be in the XX% year.

David Katz

And an does an moderating? rather have with that growth correspond tour to necessarily can flow Or or? have than and we

Michael Hug

level every No, payment provision. looking it a payments that's to because is of is, you higher we're at quality; would doesn't. of I on earnings on we that day factors, consumer. First mean it but be current then the based mean lower benefit it's interest income the down sacrifice thing the look from in get the the several for that that future, tour a I the all and secondly, right? all, down you

So to lot grow flow cash but earnings. to starts approach provision that's time, that's keeping keep it just what below we relates But we can levers payment to, when I type tour we we A no, the business. When pull, tour at continue look thing we we XX%. about the and do want run can our to XXXX of level a and down everything and to want, see. think think in mind current what different that we XX% flow over as of XX%

Michael Brown

X we we if And conversation June we COVID, all third-parties. much what of way we provision. Mike just position combined started David, own are we've think us than during our in became I move that, holistic put release today, the years. a of I a tour When in And the point the in with accessibility for continue provision want could latest to the the both were over the around company, the have is 'XX, higher we to I made the out and efforts we've of taken independent add. with this think very view those years, that experience, the which quality made of of we've flow, of ongoing improve owner reserve X X position on next last our strong laid has all into efforts to the how very us to inventory,

correlated I fully not flow. dependent an actions more think to the as it's enterprise. tour not - Mike, So agree with we're - directly it's that taking It's to holistic I it's correlated

Michael Hug

since continue a your a the just $X defaults right? that mean And X thing, And margins, provision. the strong business had of that obviously, there. portfolio I Our we we pandemic in pandemic XX% very the to had on a we a ran proven run that not still the other like? is billion I to portfolio XX%, hit. at portfolio. looks quality on, additional When north but questions margins we when what - How industry-leading mean, provision we've were think only the of through I lot million of out was at we've going impact $XX

interest that we recurring know provision, but also focused I net gets brings. everybody stream it revenue income on So and that the like

is for look just quality net to lower of the we do an the income not we're So payments, that that, interest grow brings provision that future. in that the tours in I necessarily of seeing. the and indicator understand think if portfolio it's down important quicker But

portfolio think again, there of that performed gave about opportunity incredibly our a well. that. lot strength and once questions has And prove a the lot us just drive of the pandemic were that portfolio So I to the factors

David Katz

risk X probably just Michael, some can follow-up, you thunder that the Day. taking I if planned at And Perfect. ask Analyst of for the

that think the mix view would about long-term of you side T&L a we seems for us TAM the If how a quite kind of laid of You've evolves, out things large. took how the company all it of the Is new your closer to core over term? of things you've mix possible XX-XX timeshare be time? business a laid current that much the out other could over it with have longer that

Michael Brown

So back business. our thinking just core come on reground how we're let everyone me and of

years, few the and RCI, our Vacation those of because engine next billion and our $X business, laid core the pre-pandemic out absolute simply guidance EBITDA, basis, here. are Our were we we've of fuel Ownership on an nearly for

that at law other are years. the it's they that preponderance next of sort at is this but historical With growing we in that a you I the mirror then be want few don't talk to the reducing on my to streams start September, above business. want the fast And business. of Ownership more will our of to how we mix So EBITDA our predictable growing - healthy we stream. can can we maybe our I be historical that's math, is just But in about why separate if in toward do rate going recurring that require shift. new talk overall committed we start on to it you above because it's see rates business, years. we as RCI of and business business numbers And to pretty got our will core continuing party, to the intention in core above call, will don't heavy we a that question, but clear dictates perspective reiterate more capital big rate lines grow in the that what's not business a our What think, which the the is comments in as revenue expects that's model. into and continue think And is do beginning our not to what our and revenue know stay we committed to recurring to grow of happen dramatic require Vacation that show rates. shift on achieve. we the only that us on said, grow And side the XX-XX, there commitments. Vacation to detail public we're everyone I a focused to or Obviously, We and about business. would capital I in at Exchange these that are that it next few much know investment will

Operator

remarks. now to to the call concludes would Brown That question-and-answer like period. our back for closing turn Michael I over

Michael Brown

today. growth sharing answers Investor all outlook future our I by look businesses City. Day to XX on at New I'd business Travel at in September York just saying details we're like and our Absolutely. to and Thank appreciate our and core & the our our very you, about excited forward for Leisure plan about more questions of Britney. conclude new the

always, turning great service I out and thank team season. members to embark have everyone, a and Thank our have owners, for to their is As what on to guests as busy our day. a summer very you, we be

Operator

Second Earnings Conference Thank & you. XXXX That concludes Quarter Travel Leisure Call.

a your now wonderful line may day. this You have time, and disconnect at

Travel + Leisure (TNL) 1 Aug 212021 Q2 Earnings call transcript