Travel + Leisure(TNL) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Presents the company's unaudited condensed consolidated financial statements for the periods ended June 30, 2024 and 2023 Condensed Consolidated Statements of Income Reports increased net income for Q2 and H1 2024, driven by higher net revenues and a gain on disposal Condensed Consolidated Statements of Income (in millions) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Net revenues | $985 | $949 | $1,900 | $1,829 | | Vacation ownership interest sales | 441 | 401 | 810 | 739 | | Service and membership fees | 413 | 424 | 832 | 844 | | Operating income | 189 | 183 | 339 | 322 | | Net income from continuing operations | 97 | 89 | 163 | 152 | | Gain on disposal of discontinued business | 32 | 5 | 32 | 5 | | Net income attributable to shareholders | $129 | $94 | $195 | $157 | | Diluted EPS | $1.81 | $1.25 | $2.73 | $2.05 | Condensed Consolidated Balance Sheets Details the company's financial position as of June 30, 2024, showing slightly lower assets and liabilities Condensed Consolidated Balance Sheet Highlights (in millions) | | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $6,693 | $6,738 | | Cash and cash equivalents | $166 | $282 | | Vacation ownership contract receivables, net | $2,562 | $2,527 | | Total Liabilities | $7,577 | $7,655 | | Debt | $3,577 | $3,575 | | Non-recourse vacation ownership debt (VIE) | $2,000 | $2,071 | | Total (Deficit) | ($884) | ($917) | Condensed Consolidated Statements of Cash Flows Shows a significant increase in operating cash flow for the first half of 2024 compared to the prior year Six Months Ended June 30 Cash Flow Summary (in millions) | | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $221 | $110 | | Net cash used in investing activities | ($81) | ($33) | | Net cash used in financing activities | ($261) | ($386) | | Net change in cash, cash equivalents and restricted cash | ($126) | ($310) | Notes to Condensed Consolidated Financial Statements Provides detailed explanations of accounting policies, acquisitions, debt, and segment performance Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial results, highlighting strong leisure travel demand and operational performance - Business saw strong demand for leisure travel in H1 2024, leading to higher tours and Gross VOI sales[165] - The Travel and Membership segment's profitability increased due to cost savings from a 2023 strategic realignment[166] - The company is experiencing some pressure on its loan portfolio, with an increase in delinquencies on loans with original FICO scores below 700[168] - On March 1, 2024, the company acquired Accor Vacation Club for $50 million to expand its international portfolio in the Asia Pacific region[170] Results of Operations Details revenue and Adjusted EBITDA growth for Q2 and H1 2024, led by the Vacation Ownership segment Q2 2024 vs Q2 2023 Operating Statistics | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Gross VOI sales (in millions) | $607 | $557 | 8.9% | | Tours (in 000s) | 192 | 170 | 12.7% | | Volume per guest (VPG) | $3,051 | $3,150 | (3.1)% | | Total Transactions (in 000s) | 399 | 416 | (4.1)% | Segment Adjusted EBITDA (in millions) | Segment | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Vacation Ownership | $206 | $187 | $340 | $319 | | Travel and Membership | $62 | $62 | $137 | $133 | | Total Company | $244 | $236 | $435 | $420 | Financial Condition Outlines changes in assets, liabilities, and deficit from year-end 2023 to June 30, 2024 - Total assets decreased by $45 million, driven by a $116 million decrease in cash and a $59 million decrease in Property and equipment, net[204] - Total liabilities decreased by $78 million, primarily due to a $71 million decrease in Non-recourse vacation ownership debt and a $23 million decrease in Accounts payable[204] Liquidity and Capital Resources Confirms sufficient liquidity from operations, cash reserves, and credit facilities to meet obligations - As of June 30, 2024, the company had $166 million of cash and cash equivalents and $694 million of available capacity under its $1.0 billion revolving credit facility[207][208] - The company was in compliance with its debt covenants as of June 30, 2024, with an interest coverage ratio of 4.15 to 1.0 and a first lien leverage ratio of 3.50 to 1.0[210] Material Future Contractual Obligations (in millions) | Obligation | 7/1/24 - 6/30/25 | Total | | :--- | :--- | :--- | | Debt | $297 | $3,601 | | Non-recourse debt | $229 | $2,021 | | Interest on debt | $347 | $1,193 | | Purchase commitments | $250 | $699 | | Operating leases | $29 | $97 | | Total | $1,152 | $7,611 | Capital Deployment Details the strategy for business growth and shareholder returns, including share repurchases and dividends - In H1 2024, the company repurchased 2.2 million shares for $95 million, with $578 million remaining available under the share repurchase authorization[234][235] - The company paid dividends of $0.50 per share in Q1 and Q2 2024, totaling $73 million for the first six months[236] - Anticipated 2024 spending includes $105-$130 million on vacation ownership development and $90-$100 million on capital expenditures[230][231] Item 3. Quantitative and Qualitative Disclosures About Market Risks Assesses market risks from interest rate and currency fluctuations, concluding no material impact is expected - A 100-basis point change in underlying interest rates on variable rate debt would result in a $4 million change in annual consumer financing interest expense and a $12 million change in annual debt interest expense[242] - A hypothetical 10% change in foreign currency exchange rates would result in a change to the fair value of outstanding forward contracts of approximately $6 million[241] Item 4. Controls and Procedures Confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2024 - Based on an evaluation as of June 30, 2024, the principal executive and financial officers concluded that the company's disclosure controls and procedures were effective[243] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[244] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various claims and lawsuits arising in the ordinary course of business - The company is involved in various claims and lawsuits, but none are expected to have a material adverse effect on its results of operations or financial condition[246] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report - As of June 30, 2024, there have been no material changes to the risk factors set forth in the company's 2023 Annual Report on Form 10-K[247] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the company's Q2 2024 share repurchase activity and the remaining authorization under the program Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2024 | 635,888 | $45.62 | | May 2024 | 490,888 | $44.82 | | June 2024 | 430,188 | $44.17 | | Total | 1,556,964 | $44.96 | - The Board of Directors increased the share repurchase program authorization by $500 million in May 2024, with approximately $578 million remaining available under the plan[249] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including amended corporate governance documents and certifications