• Adjusted EBITDA: $242 million, above the midpoint of guidance range.
• Adjusted EBITDA Margin: 24.4%.
• Adjusted Free Cash Flow: Over $150 million.
• Adjusted Net Income: $110 million or $1.57 per share.
• Revenue Growth (Vacation Ownership): Increased by 2% with gross VOI sales of $606 million.
• New Owner Mix: Above 35% in each quarter this year.
• VPG (Volume Per Guest): Consistently above $3,000.
• FICO Score on Originations: Increased from 725 to 742 over the past four years.
• Adjusted EBITDA (Travel and Membership): Flat on a 3% decline in revenue.
• ABS Transaction: Secured $325 million at a rate of 5.2% with a 98% advance rate.
• Leverage: Just under 3.4 times, expected to remain at this level by year-end.
• Shareholder Returns: $105 million returned through dividends and share buybacks, with $70 million in repurchases.

• Warning! GuruFocus has detected 4 Warning Sign with TNL.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Travel+Leisure Co (NYSE:TNL) reported a strong adjusted EBITDA of $242 million, which was above the midpoint of their guidance range.
• The company achieved a healthy 24.4% adjusted EBITDA margin, demonstrating resilience despite economic headwinds.
• Vacation ownership business showed good momentum with VPG performance consistently above $3,000, reflecting strong customer value perception.
• The average FICO score on originations increased from 725 to 742, indicating improved credit quality.
• Travel+Leisure Co (NYSE:TNL) successfully integrated Accor Vacation Club, achieving initial targets ahead of schedule and generating over $3 million in adjusted EBITDA year-to-date.

Negative Points

• Higher interest rates and variable compensation resulted in a $14 million headwind, slightly impacting adjusted EBITDA year-over-year.
• Gross VOI sales growth was modestly below expectations, primarily due to weaker performance in Las Vegas and hurricane impacts.
• Exchange volumes faced pressure due to industry consolidation and transformation challenges in the Travel and Membership segment.
• The company experienced a $5 million volume impact due to hurricanes, affecting tour arrivals and resort operations.
• There is potential for increased cost of sales in the future as newly developed inventory becomes a larger portion of the mix.

Q & A Highlights

Q: Can you discuss the impact of lower-end consumer trends and FICO scores on your business? A: Michael Hug, CFO, explained that they are not planning to lower FICO scores for new owners in the near term, as they are satisfied with the current credit quality. The portfolio performed as expected, with delinquencies moving in the usual direction but not as unfavorably as anticipated. They are using more data beyond FICO scores to drive incremental tour flow, especially for existing owners.

Q: What is your approach to M&A, and how did recent hurricanes affect your operations? A: Michael Hug, CFO, stated that their capital return strategy focuses on dividends and share buybacks, with M&A opportunities evaluated consistently. Recent hurricanes affected operations, but the impact was not significant enough to adjust financial results. The closures were mainly due to infrastructure challenges rather than significant damage to resorts.

Q: Are you implementing higher down payments for sub-700 FICO score customers? A: Michael Hug, CFO, mentioned they are considering higher down payments to manage portfolio risk, but it won't be limited to sub-700 FICO scores. The portfolio performed as expected, and they are satisfied with the consumer's performance, including VPG and portfolio metrics.

Q: How are you addressing the impact of major weather events on your business? A: Michael D. Brown, CEO, emphasized the importance of geographic diversity in mitigating the impact of weather events. They maintain affordable maintenance fees through effective insurance management, ensuring that owners can continue enjoying vacations despite weather-related challenges.

Q: Can you provide an update on the Accor integration and its future growth potential? A: Michael Hug, CFO, reported successful integration of Accor, with revenue synergies already occurring. They plan to expand internationally in the South Pacific and Asia, with more sales galleries opening. The integration has been smooth, and they are optimistic about future growth in sales and resorts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.