Travel + Leisure Co. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Performance: Delivered solid revenue and adjusted EBITDA growth, returning $107 million to shareholders. VOI sales showed healthy year-over-year growth with gains in tour flow and VPG.
• Business Resilience: Consumer demand for leisure travel remains strong. Over 75% of revenue is tied to recurring sources like owner upgrades and management fees. The owner base is resilient with an average household income of ~$118,000 and strong FICO scores.
• Multi-brand Strategy: Expanded brands such as Margaritaville, Accor Vacation Club, and Sports Illustrated Resorts. Invested in technology, marketing, and product innovation, including the Club Wyndham app and WorldMark app launch.
• Capital Return: Returned $2.7 billion to shareholders through dividends and share repurchases since a certain point.

Segment Performance

• Vacation Ownership (VOI): Generated revenue of $853 million in the quarter, up 6% year-over-year. Adjusted EBITDA grew 6% with a margin of 25% remaining consistent. Tour flow increased 3%, and volume per guest (VPG) was $3,251, above the high end of guidance.
• Travel and Membership: Revenue was $166 million, down 6% year-over-year. Adjusted EBITDA declined 11% to $55 million due to industry consolidation headwinds and unforecasted M&A impact.

Guidance

• Full Year: Expected adjusted EBITDA to be in the range of $955 million to $985 million, gross VOI sales between $2.4 billion to $2.5 billion, and VPG in the range of $3,200 to $3,250.
• Third Quarter: Travel and leisure adjusted EBITDA projected to be $250 million to $260 million. VOI gross sales expected $650 million to $680 million with VPG $3,200 to $3,250.
• Long-Term: Confident in sustained growth driven by recurring revenue base and multi-brand expansion, with plans to continue investing in growth and returning capital to shareholders.

Risks

• Travel and Membership Segment: Facing industry consolidation headwinds and unforecasted M&A impact affecting transaction volumes.
• Macroeconomic Uncertainty: Broader macroeconomic conditions could impact performance despite strong consumer demand for leisure travel.
• Credit Quality: Delinquency trends monitored, but provisioning remains in line with expectations, with potential for provision to trend below 20% over time.

Question and Answer

Q: Impact of M&A on Travel and Membership segment A: Michael Brown stated that M&A activity disrupted transaction volumes from certain affiliates, but efforts are ongoing to grow the Travel Club business and manage costs to mitigate the impact.

Q: Drivers of larger transaction sizes A: Michael Brown explained it's a combination of measured price increases over time and greater owner engagement leading to loyal customers buying more vacations.

Q: New owner mix and VPG expectations A: Erik Hoag mentioned expecting acceleration in the new owner mix, with close rates up from pre-COVID levels, and VPG guidance raised due to strong performance in the quarter.

Q: International opportunity with Accor brand A: Michael Brown said international sales are expected to have similar profitability margins, with focus on geographically expanding the customer database through the Accor brand.

Q: Timing and impact of new brands like Sports Illustrated A: Michael Brown noted the Sports Illustrated Resorts in Nashville will open spring 2026 with sales starting in Q4 2025, and new brands aim to expand into key markets and reach new audiences to drive growth.