Travel + Leisure(TNL) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Presents Travel + Leisure Co.'s unaudited condensed consolidated financial statements for Q3 2024, including income, balance sheets, cash flows, and notes Condensed Consolidated Statements of Income Q3 2024 net revenues slightly increased to $993 million, but operating and net income attributable to shareholders decreased Condensed Consolidated Statements of Income (In millions, except per share amounts) | | Three Months Ended Sep 30 | | Nine Months Ended Sep 30 | | | :--- | :--- | :--- | :--- | :--- | | | 2024 | 2023 | 2024 | 2023 | | Net revenues | $993 | $986 | $2,893 | $2,814 | | Operating income | $189 | $207 | $527 | $529 | | Income before income taxes | $130 | $148 | $356 | $358 | | Net income from continuing operations | $97 | $110 | $260 | $262 | | Net income attributable to shareholders | $97 | $110 | $292 | $267 | | Diluted EPS from continuing operations | $1.39 | $1.49 | $3.66 | $3.46 | | Diluted EPS | $1.39 | $1.49 | $4.11 | $3.53 | Condensed Consolidated Balance Sheets Total assets decreased slightly to $6.70 billion as of Sep 30, 2024, while total liabilities decreased to $7.56 billion Condensed Consolidated Balance Sheet Highlights (In millions) | | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $194 | $282 | | Vacation ownership contract receivables, net | $2,612 | $2,527 | | Inventory | $1,208 | $1,135 | | Goodwill | $971 | $962 | | Total assets | $6,698 | $6,738 | | Liabilities and (Deficit) | | | | Non-recourse vacation ownership debt | $2,029 | $2,071 | | Debt | $3,548 | $3,575 | | Total liabilities | $7,559 | $7,655 | | Total (deficit) | ($861) | ($917) | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $366 million YTD 2024, while investing and financing activities used cash Cash Flow Summary for Nine Months Ended Sep 30 (In millions) | | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $366 | $198 | | Net cash used in investing activities | ($101) | ($46) | | Net cash used in financing activities | ($374) | ($444) | | Net change in cash, cash equivalents and restricted cash | ($109) | ($296) | Notes to Condensed Consolidated Financial Statements Details segment information, revenue recognition, the $50 million Accor Vacation Club acquisition, debt, and restructuring charges - The company operates through two segments: Vacation Ownership (develops, markets, and sells VOIs) and Travel and Membership (vacation exchange, travel clubs)[17][18] - On March 1, 2024, the company acquired the Accor Vacation Club business for $50 million to expand its international portfolio in the Asia Pacific region[50] - A $32 million gain was recognized in the first nine months of 2024 from the expiration of guarantees related to the sale of the European vacation rentals business[56][141] - In Q3 2024, the company initiated a restructuring plan, incurring $14 million in charges, primarily for personnel-related costs from a reduction of approximately 300 employees[129] Disaggregation of Net Revenues (Nine Months Ended Sep 30, in millions) | Segment/Category | 2024 | 2023 | | :--- | :--- | :--- | | Vacation Ownership | $2,358 | $2,265 | | - Vacation ownership interest sales | $1,265 | $1,172 | | - Property management & reimbursable | $637 | $610 | | - Consumer financing | $335 | $313 | | Travel and Membership | $538 | $553 | | - Transaction revenues | $381 | $395 | | - Subscription revenues | $134 | $137 | | Total Net Revenues | $2,893 | $2,814 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong leisure travel demand driving VOI sales, moderated VPGs, improved Travel and Membership profitability, and capital deployment Results of Operations Q3 2024 net revenues increased slightly, but net income declined due to higher costs; nine-month net income rose from a disposal gain Q3 2024 vs Q3 2023 Operating Statistics | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Gross VOI sales (in millions) | $606 | $598 | 1.3% | | Tours (in 000s) | 195 | 187 | 4.5% | | Volume per guest (VPG) | $3,012 | $3,108 | (3.1)% | | Total Transactions (in 000s) | 378 | 410 | (7.7)% | - Vacation Ownership Q3 revenue increased by $13 million, driven by a 4.5% increase in tours, though VPG decreased 3.1% due to a strategic focus on new owners[168] - Travel and Membership Q3 revenue decreased by $6 million due to lower transaction volumes, but cost savings from restructuring kept Adjusted EBITDA flat year-over-year[169] Financial Condition, Liquidity and Capital Resources Financial condition remains stable with decreased assets and liabilities; liquidity is strong from operations, credit facility, and debt markets - As of Sep 30, 2024, the company had $194 million in cash and $724 million available under its revolving credit facility[196][197] - The company is in compliance with its debt covenants, with an interest coverage ratio of 4.23 to 1.0 (minimum 2.50) and a first lien leverage ratio of 3.39 to 1.0 (maximum 4.25)[76][77][199] - Capital deployment YTD includes $165 million for share repurchases and $108 million for dividends; $509 million remains for future repurchases[222][223][224] Material Cash Requirements (as of Sep 30, 2024, in millions) | Commitment | Next 12 Months | Total | | :--- | :--- | :--- | | Debt | $297 | $3,571 | | Non-recourse debt | $226 | $2,051 | | Interest on debt | $340 | $1,151 | | Purchase commitments | $273 | $695 | | Operating leases | $29 | $101 | | Total | $1,165 | $7,569 | Item 3. Quantitative and Qualitative Disclosures About Market Risks Primary market risks are interest rate and foreign currency fluctuations; a 100 basis point interest rate change would impact annual debt interest expense by $11 million - A 100 basis point change in interest rates would impact annual debt interest expense by $11 million and consumer financing interest expense by $4 million[230] - A hypothetical 10% change in foreign currency exchange rates would change the fair value of outstanding forward contracts by approximately $6 million, generally offset by the underlying exposure being hedged[229] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of the end of the reporting period[231] - No material changes to internal control over financial reporting occurred during the quarter[231] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings not expected to materially affect its financial condition or operations - The company is involved in ordinary course legal proceedings which are not expected to have a material adverse effect on its financial condition[233] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2023 - As of September 30, 2024, no material changes have occurred to the risk factors disclosed in the 2023 Form 10-K[234] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2024, the company repurchased 1,583,100 shares for approximately $70 million, with $509 million remaining for future repurchases Issuer Purchases of Equity Securities (Q3 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2024 | 381,642 | $46.11 | | August 2024 | 0 | N/A | | September 2024 | 1,201,458 | $43.63 | | Total | 1,583,100 | $44.23 | Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32), a letter regarding unaudited interim financial information (15), and Inline XBRL files (101 series)[238]