Travel + Leisure(TNL) - 2025 Q3 - Quarterly Report

Form 10-Q Filing Information This section provides the basic filing details for the Quarterly Report on Form 10-Q for Travel + Leisure Co. for the period ended September 30, 2025, including company identification and filer status - Travel + Leisure Co. is a large accelerated filer[3][4] - As of September 30, 2025, there were 64,325,188 shares of common stock outstanding[4] Glossary of Terms This section defines key financial and operational terms and acronyms used throughout the report to ensure clarity and consistent understanding of the company's disclosures - Adjusted EBITDA is a non-GAAP measure defined as net income from continuing operations before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues), and income taxes. It also excludes stock-based compensation, separation and restructuring costs, legacy items, transaction and integration costs, asset impairments/recoveries, and gains/losses on sale/disposition of business[10] - Key acronyms defined include AOCL (Accumulated Other Comprehensive Loss), EPS (Earnings Per Share), VIE (Variable Interest Entity), VOCR (Vacation Ownership Contract Receivable), VOI (Vacation Ownership Interest), and VPG (Volume Per Guest)[10] PART I — FINANCIAL INFORMATION Part I presents unaudited financial statements, notes, and management's discussion of financial condition and results Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited interim financial statements of Travel + Leisure Co., including statements of income, comprehensive income, balance sheets, cash flows, and deficit, along with detailed notes, providing a comprehensive overview of the company's financial status and performance for the reported periods Report of Independent Registered Public Accounting Firm This section presents the independent auditor's review of interim financial information, confirming GAAP conformity - Deloitte & Touche LLP reviewed the interim financial information and found no material modifications needed for conformity with GAAP[12] - The firm previously issued an unqualified opinion on the Company's consolidated financial statements as of December 31, 2024[13] - The review of interim financial information is substantially less in scope than an audit, and thus, no audit opinion is expressed[15] Condensed Consolidated Statements of Income This section presents the unaudited condensed consolidated statements of income for the reported periods Condensed Consolidated Statements of Income | Metric | Three Months Ended Sep 30, 2025 (in millions) | Three Months Ended Sep 30, 2024 (in millions) | Nine Months Ended Sep 30, 2025 (in millions) | Nine Months Ended Sep 30, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $1,044 | $993 | $2,996 | $2,893 | | Operating income | $214 | $189 | $576 | $527 | | Income before income taxes | $158 | $130 | $410 | $356 | | Net income from continuing operations | $111 | $97 | $291 | $260 | | Net income attributable to Travel + Leisure Co. shareholders | $111 | $97 | $291 | $292 | | Basic earnings per share (Continuing operations) | $1.70 | $1.40 | $4.40 | $3.68 | | Diluted earnings per share (Continuing operations) | $1.67 | $1.39 | $4.35 | $3.66 | - Net income attributable to Travel + Leisure Co. shareholders increased by $14 million (14.4%) for the three months ended September 30, 2025, compared to the same period in 2024[18] - For the nine months ended September 30, 2025, net income attributable to Travel + Leisure Co. shareholders decreased by $1 million (0.3%) compared to the same period in 2024, primarily due to a $32 million gain on disposal of discontinued business in 2024[18] Condensed Consolidated Statements of Comprehensive Income This section presents the unaudited condensed consolidated statements of comprehensive income for the reported periods Condensed Consolidated Statements of Comprehensive Income | Metric | Three Months Ended Sep 30, 2025 (in millions) | Three Months Ended Sep 30, 2024 (in millions) | Nine Months Ended Sep 30, 2025 (in millions) | Nine Months Ended Sep 30, 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to Travel + Leisure Co. shareholders | $111 | $97 | $291 | $292 | | Foreign currency translation adjustments, net of tax | $(3) | $21 | $43 | $9 | | Other comprehensive (loss)/income, net of tax | $(3) | $21 | $43 | $9 | | Comprehensive income attributable to Travel + Leisure Co. shareholders | $108 | $118 | $334 | $301 | - Comprehensive income attributable to shareholders increased by $33 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily driven by foreign currency translation adjustments[19] Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets | Metric | September 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total assets | $6,892 | $6,735 | | Total liabilities | $7,713 | $7,615 | | Total stockholders' (deficit) | $(821) | $(881) | | Cash and cash equivalents | $240 | $167 | | Vacation ownership contract receivables, net | $2,592 | $2,619 | | Inventory | $1,269 | $1,227 | | Debt | $3,554 | $3,468 | | Non-recourse vacation ownership debt | $2,024 | $2,123 | - Total assets increased by $157 million from December 31, 2024, to September 30, 2025, primarily due to increases in cash, inventory, and trade receivables[22] - Total stockholders' deficit decreased by $59 million, improving from $(881) million to $(821) million, driven by net income and favorable currency translation adjustments, partially offset by share repurchases and dividends[22] Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows, categorizing cash activities Changes in Cash, Cash Equivalents, and Restricted Cash (in millions) | Activity | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $516 | $366 | $150 | | Investing activities | $(78) | $(101) | $23 | | Financing activities | $(360) | $(374) | $14 | | Net change in cash, cash equivalents and restricted cash | $85 | $(109) | $194 | - Net cash provided by operating activities increased by $150 million for the nine months ended September 30, 2025, compared to the prior year, primarily due to higher non-cash addbacks and decreased working capital deductions[24] - Net cash used in investing activities decreased by $23 million, while net cash used in financing activities decreased by $14 million for the nine months ended September 30, 2025, compared to the prior year[24] Condensed Consolidated Statements of Deficit This section presents the unaudited condensed consolidated statements of deficit, detailing changes in equity Condensed Consolidated Statements of Deficit | Metric | Balance as of Dec 31, 2024 (in millions) | Balance as of Sep 30, 2025 (in millions) | | :--- | :--- | :--- | | Common Stock | $2 | $3 | | Treasury Stock | $(7,433) | $(7,645) | | Additional Paid-in Capital | $4,328 | $4,380 | | Retained Earnings | $2,334 | $2,510 | | Accumulated Other Comprehensive Loss | $(112) | $(69) | | Non-controlling Interest | $1 | $0 | | Total Deficit | $(880) | $(821) | - Total deficit improved by $59 million from December 31, 2024, to September 30, 2025, primarily driven by net income and favorable currency translation adjustments, partially offset by share repurchases and dividends[26][28] - The company repurchased common stock totaling $210 million and paid $116 million in dividends during the nine months ended September 30, 2025[26] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information that are integral to understanding the condensed consolidated financial statements, covering accounting policies, significant estimates, and specific financial line items Note 1 - Background and Basis of Presentation Travel + Leisure Co. is a global provider of hospitality services and travel products, operating through two reportable segments: Vacation Ownership and Travel and Membership. The financial statements are prepared in accordance with GAAP, with an unclassified balance sheet conforming to industry practice - The Company operates in two reportable segments: Vacation Ownership (developing, marketing, and selling VOIs, providing consumer financing and property management) and Travel and Membership (operating vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals)[29][30][31] - The Condensed Consolidated Financial Statements are prepared in accordance with GAAP and present an unclassified balance sheet, consistent with industry practice[32][33] Note 2 - New Accounting Pronouncements This note outlines recently issued and adopted accounting pronouncements by the FASB, including upcoming changes to disclosure requirements for income taxes, income statement expenses, and variable interest entities, as well as the adoption of guidance on joint venture formations and segment reporting - Recently issued FASB guidance includes updates on disclosure improvements (Oct 2023), income tax disclosures (Dec 2023), disaggregation of income statement expenses (Nov 2024), determining the accounting acquirer for VIEs (May 2025), financial instruments—credit losses (July 2025), and software costs (Sep 2025)[35][36][37][38][39][40][41] - The Company adopted guidance on Business Combinations—Joint Venture Formations (effective Jan 1, 2025) and Segment Reporting (effective for fiscal years beginning after Dec 15, 2023), with the latter only affecting disclosures[42][43] Note 3 - Revenue Recognition This note details the company's revenue recognition policies across its Vacation Ownership and Travel and Membership segments, covering VOI sales, property management fees, membership dues, and co-branded credit card programs. It also provides information on contract liabilities, capitalized contract costs, and disaggregated net revenues - Revenue from VOI sales is recognized upon transfer of control, execution of binding and financing contracts, expiration of the rescission period, and collectibility. Uncollectible amounts are estimated and reduce the transaction price[44][45] - Property management fee revenues and reimbursable revenues are recognized when services are performed and recorded as Service and membership fees. For the nine months ended September 30, 2025, these totaled $657 million, up from $637 million in 2024[47][48] Disaggregation of Net Revenues by Segment (in millions) | Segment | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Vacation Ownership | $876 | $825 | $2,486 | $2,358 | | Travel and Membership | $169 | $168 | $514 | $538 | | Corporate and other | $(1) | $0 | $(4) | $(3) | | Total Net Revenues | $1,044 | $993 | $2,996 | $2,893 | Note 4 - Earnings Per Share This note details the calculation of basic and diluted earnings per share (EPS) for continuing and discontinued operations, along with information on the company's share repurchase program and dividends paid Basic and Diluted EPS (Continuing Operations) | Metric | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $1.70 | $1.40 | $4.40 | $3.68 | | Diluted EPS | $1.67 | $1.39 | $4.35 | $3.66 | - Basic weighted average shares outstanding were 65.2 million for Q3 2025 (down from 69.8 million in Q3 2024) and 66.1 million for YTD 2025 (down from 70.7 million in YTD 2024)[63] - The company repurchased 4.0 million shares for $210 million during the nine months ended September 30, 2025, with $253 million remaining availability in its $7.0 billion share repurchase program[64] - Dividends paid to shareholders were $114 million ($1.68 per share) for the nine months ended September 30, 2025, compared to $108 million ($1.50 per share) in the prior year[63] Note 5 - Acquisitions This note details the company's acquisition activities, including a $3 million business acquisition in Q1 2025 and the $50 million acquisition of Accor Vacation Club in March 2024, outlining the purchase consideration and recognized assets and liabilities - During Q1 2025, the Company completed a business acquisition for $3 million, recognizing $2 million in definite-lived intangible assets and $1 million in Property and equipment, net, within the Vacation Ownership segment[66] - On March 1, 2024, the Company acquired Accor Vacation Club for $50 million ($44 million net of cash acquired), expanding its international portfolio in the Asia Pacific region[67] - The Accor Vacation Club acquisition resulted in the recognition of $23 million in definite-lived intangible assets, $9 million in Inventory, $8 million in Trade receivables, net, and $6 million in Goodwill[68] Note 6 - Discontinued Operations This note reports a $32 million gain on disposal of discontinued business, net of income taxes, recognized during the nine months ended September 30, 2024, related to the sale of the European vacation rentals business - A $32 million Gain on disposal of discontinued business, net of income taxes, was recognized during the nine months ended September 30, 2024[69] - This gain resulted from the expiration of certain guarantees made in connection with the 2018 sale of the European vacation rentals business[69] Note 7 - Vacation Ownership Contract Receivables This note details the company's vacation ownership contract receivables (VOCRs), including their securitized and non-securitized components, interest income generated, originations, principal collections, and the allowance for loan losses. It also provides a credit quality analysis based on FICO scores and an aging analysis Vacation Ownership Contract Receivables, Net (in millions) | Metric | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Securitized | $2,170 | $2,293 | | Non-securitized | $1,076 | $940 | | VOCRs, gross | $3,246 | $3,233 | | Less: allowance for loan losses | $654 | $614 | | VOCRs, net | $2,592 | $2,619 | - Securitized VOCRs generated interest income of $248 million for the nine months ended September 30, 2025, compared to $243 million in the prior year[72] - Net VOCR originations were $1.18 billion and principal collections were $839 million for the nine months ended September 30, 2025. The weighted average interest rate on outstanding VOCRs was 14.6% as of September 30, 2025[73] Allowance for Loan Losses on VOCRs (in millions) | Metric | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Beginning balance | $614 | $574 | | Provision for loan losses, net | $365 | $316 | | Contract receivables write-offs, net | $(325) | $(286) | | Ending balance | $654 | $604 | Note 8 - Inventory This note details the composition of the company's inventory, which includes completed VOI inventory, estimated VOI recoveries, land held for development, and construction in process. It also summarizes activity related to inventory obligations with third-party developers Inventory Composition (in millions) | Category | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Completed VOI inventory | $998 | $970 | | Estimated VOI recoveries | $225 | $214 | | Land held for VOI development | $29 | $29 | | VOI construction in process | $13 | $10 | | Vacation exchange credits and other | $4 | $4 | | Total inventory | $1,269 | $1,227 | - Net transfers of VOI inventory from property and equipment were $8 million for the nine months ended September 30, 2025, compared to $56 million in the prior year[81] - Inventory obligations with third-party developers totaled $5 million as of September 30, 2025, down from $7 million at December 31, 2024[83] Note 9 - Property and Equipment This note provides a breakdown of the company's property and equipment, net, including capitalized software, buildings, leasehold improvements, furniture, fixtures, equipment, finance lease assets, construction in progress, and land Property and Equipment, Net (in millions) | Category | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Capitalized software | $837 | $794 | | Building and leasehold improvements | $632 | $625 | | Furniture, fixtures and equipment | $144 | $144 | | Finance lease assets | $56 | $50 | | Construction in progress | $50 | $21 | | Land | $28 | $28 | | Total property and equipment | $1,747 | $1,662 | | Less: accumulated depreciation and amortization | $1,150 | $1,071 | | Property and equipment, net | $597 | $591 | - Property and equipment, net, increased by $6 million from December 31, 2024, to September 30, 2025[84] Note 10 - Debt This note provides a detailed overview of the company's indebtedness, including non-recourse vacation ownership debt and corporate debt. It highlights recent financing activities such as new term notes, revolving credit facility renewal, and secured notes offering, along with debt maturities and compliance with financial covenants Company Indebtedness (in millions) | Category | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Non-recourse vacation ownership debt | $2,024 | $2,123 | | Debt (corporate) | $3,554 | $3,468 | | Total Indebtedness | $5,578 | $5,591 | - The Company closed on two term notes payable securitizations in 2025: $350 million (March 2025, 5.20% weighted average coupon) and $300 million (July 2025, 5.10% weighted average coupon)[87][88] - The $600 million USD bank conduit facility was renewed in April 2025, extending its commitment period to August 2027 and reducing the interest rate spread[89] - A private offering of $500 million secured notes (6.125% interest, due September 2033) was closed in August 2025, with proceeds used to redeem $350 million 6.60% secured notes due October 2025 and for general corporate purposes[91] - As of September 30, 2025, the Company was in compliance with debt covenants, with an interest coverage ratio of 4.70 to 1.0 and a first lien leverage ratio of 3.27 to 1.0[97] Note 11 - Variable Interest Entities This note explains the company's accounting for Variable Interest Entities (VIEs), primarily related to vacation ownership contract receivables (VOCRs) securitizations. It clarifies that these bankruptcy-remote Special Purpose Entities (SPEs) are consolidated, but their assets and non-recourse debt are legally separate from the company - The Company consolidates bankruptcy-remote SPEs used for VOCR securitizations, meaning their assets and liabilities are included in the Condensed Consolidated Financial Statements[103] - As of September 30, 2025, total SPE assets were $2,281 million and total SPE liabilities were $2,027 million, resulting in SPE assets in excess of SPE liabilities of $254 million[104] - Non-securitized VOCRs amounted to $1.08 billion as of September 30, 2025[107] Note 12 - Fair Value This note describes the company's fair value measurements for financial assets and liabilities, categorizing them into Level 1, 2, or 3 of the fair value hierarchy based on input observability. It also details the valuation methodologies for derivative instruments, VOCRs, and debt - Financial assets and liabilities are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), or Level 3 (unobservable inputs) of the fair value hierarchy[108][109] - As of September 30, 2025, the fair value of vacation ownership contract receivables, net (Level 3) was $2,827 million (carrying amount $2,592 million), and the fair value of debt (Level 2) was $5,571 million (carrying amount $5,578 million)[116] - The company's derivative instruments, consisting of foreign exchange forward contracts and interest rate caps, are primarily valued using Level 2 inputs[111][112][113] Note 13 - Derivative Instruments and Hedging Activities This note outlines the company's strategies for managing foreign currency and interest rate risks through the use of derivative instruments. It specifies the types of derivatives used, such as foreign currency forward contracts and interest rate caps, and their accounting treatment - The Company uses freestanding foreign currency forward contracts to manage exposure to exchange rate fluctuations, particularly for the Euro, British pound sterling, Australian and Canadian dollars, and Mexican peso[118] - Interest rate swaps (fair value hedges) and interest rate caps (undesignated hedges) are used to strategically adjust the mix of fixed to floating rate debt and manage overall interest cost[119] - There were no losses on derivatives recognized in Accumulated Other Comprehensive Loss (AOCL) for the three and nine months ended September 30, 2025 or 2024[120] Note 14 - Income Taxes This note provides information on the company's income tax returns, effective tax rates, and income tax payments. It highlights the primary factors influencing the effective tax rates for the three and nine months ended September 30, 2025 and 2024 Effective Tax Rates | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | 30.0% | 25.3% | | Nine Months Ended Sep 30 | 29.1% | 26.9% | - The effective tax rate for Q3 2025 was primarily impacted by an increase in taxes on foreign income. For Q3 2024, it was impacted by a decrease in the valuation allowance on foreign tax credits[122] - For YTD 2025, the effective tax rate was primarily impacted by an increase in unrecognized tax benefits and taxes on foreign income, offset by a decrease in state taxes. For YTD 2024, it was impacted by non-deductible stock-based compensation, increased foreign income taxes, and unrecognized tax benefits, partially offset by a decrease in valuation allowance on foreign tax credits[123][124] - Income tax payments, net of refunds, were $69 million for the nine months ended September 30, 2025, compared to $74 million in the prior year[124] Note 15 - Leases This note details the company's finance and operating leases for property and equipment, including lease costs, assets, liabilities, weighted average remaining lease terms, and discount rates. It also provides supplemental cash flow information related to leases and maturities of lease liabilities Lease Costs (in millions) | Lease Type | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $5 | $5 | $15 | $15 | | Short-term lease cost | $4 | $3 | $11 | $10 | | Total finance lease cost | $3 | $3 | $10 | $9 | Lease-Related Assets and Liabilities (in millions) | Metric | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Operating lease right-of-use assets | $86 | $47 | | Operating lease liabilities | $139 | $79 | | Finance lease assets | $19 | $21 | | Finance lease liabilities | $19 | $21 | - The weighted average remaining lease term for operating leases is 9.7 years (4.9 years in 2024) and for finance leases is 2.5 years (2.6 years in 2024)[128] - The Company entered into a 15-year lease for its new corporate headquarters, commencing September 1, 2025, with estimated average annual lease payments of $7 million[129] Note 16 - Commitments and Contingencies This note addresses the company's involvement in various claims, legal and regulatory proceedings, and governmental inquiries arising in the ordinary course of business. It also discusses the company's standard guarantees and indemnifications, noting that no material effect on results or financial condition is expected - The Company accrues for legal contingencies when a liability is probable and estimable, with reserves of $4 million as of both September 30, 2025, and December 31, 2024[132] - Potential exposure from adverse outcomes of legal proceedings could range up to $10 million in excess of recorded accruals as of September 30, 2025[132] - The Company enters into standard guarantees and indemnities in the ordinary course of business, but the maximum potential amount of future payments is not estimable due to unpredictable triggering events[134][135] Note 17 - Accumulated Other Comprehensive Loss This note presents the components of accumulated other comprehensive loss (AOCL), primarily foreign currency translation adjustments and defined benefit pension plans, and details the changes in these components for the periods presented Components of Accumulated Other Comprehensive Loss (Net of Tax, in millions) | Component | Balance, Dec 31, 2024 | Other Comprehensive Income | Balance, Sep 30, 2025 | | :--- | :--- | :--- | :--- | | Foreign Currency Translation Adjustments | $(113) | $43 | $(70) | | Defined Benefit Pension Plans | $1 | $0 | $1 | | Total AOCL | $(112) | $43 | $(69) | - AOCL improved from $(112) million at December 31, 2024, to $(69) million at September 30, 2025, primarily due to $43 million in other comprehensive income from foreign currency translation adjustments[137] - There were no reclassifications out of AOCL for the nine months ended September 30, 2025 or 2024[138] Note 18 - Stock-Based Compensation This note describes the company's stock-based compensation plan, including the types of awards granted (RSUs, PSUs, NQs), their vesting schedules, and the associated compensation expense and tax benefits recognized. It also covers stock option exercises and the employee stock purchase plan - During the nine months ended September 30, 2025, the Company granted $39 million in RSUs and $10 million in PSUs to key employees and senior officers[142] - Aggregate unrecognized compensation expense related to RSUs was $59 million (expected to be recognized over 2.6 years), and for PSUs was $15 million (expected over 2.1 years) as of September 30, 2025[144] - Stock-based compensation expense recognized was $38 million for the nine months ended September 30, 2025 (up from $29 million in 2024), with associated tax benefits of $11 million (up from $8 million in 2024)[147] - The Company issued 0.1 million shares under its employee stock purchase plan during both the nine months ended September 30, 2025 and 2024, recognizing $1 million of compensation expense for each period[149] Note 19 - Segment Information This note provides detailed financial information for the company's two reportable segments: Vacation Ownership and Travel and Membership. It includes segment net revenues, Adjusted EBITDA, and capital expenditures, along with a reconciliation of Adjusted EBITDA to net income - The Company's two reportable segments are Vacation Ownership and Travel and Membership, with the CEO serving as the Chief Operating Decision Maker (CODM) and Adjusted EBITDA as the primary profitability measure[150][151][152][153] Reportable Segment Adjusted EBITDA (in millions) | Segment | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Vacation Ownership | $231 | $202 | $608 | $543 | | Travel and Membership | $58 | $62 | $181 | $198 | | Total reportable segments | $289 | $264 | $789 | $741 | | Corporate and other | $(23) | $(22) | $(71) | $(64) | | Total Company Adjusted EBITDA | $266 | $242 | $718 | $677 | Capital Expenditures by Segment (in millions) | Segment | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Vacation Ownership | $39 | $38 | | Travel and Membership | $13 | $15 | | Corporate and other | $33 | $5 | | Total Company | $85 | $58 | Note 20 - Impairments and other charges This note reports inventory impairment charges of $6 million at the Vacation Ownership segment for the three and nine months ended September 30, 2025, related to strategic resort restructuring. It also details other asset impairments, including held-for-sale assets and a tradename impairment at the Travel and Membership segment - The Company recorded $6 million of inventory impairments at the Vacation Ownership segment during the three and nine months ended September 30, 2025, linked to the strategic resort restructuring initiative[170] - Asset impairments, net, totaled $1 million for Q3 2025 and $2 million for YTD 2025, including impairments related to held-for-sale assets and a tradename at the Travel and Membership segment[171] - For the three and nine months ended September 30, 2024, the Company recorded $2 million in asset impairments, including a trademark impairment and cloud computing arrangements at the Travel and Membership segment[172] Note 21 - Restructuring This note details the company's strategic resort restructuring initiative, which aims to optimize its vacation ownership resort portfolio, resulting in $6 million of inventory impairment charges and $1 million in employee costs. It also provides updates on the 2024 restructuring plan and prior restructuring plans, including associated charges and remaining liabilities - A strategic review identified 14 resorts for restructuring to optimize portfolio quality and affordability of maintenance fees; 3 resorts received HOA board and member approvals by September 30, 2025[173] - In Q3 2025, $6 million in inventory impairment charges and $1 million in employee costs were incurred at the Vacation Ownership segment due to the strategic resort restructuring[174][175] - The 2024 restructuring plan incurred $15 million in charges, primarily personnel-related, and had a remaining liability of $1 million as of September 30, 2025, after $7 million in cash payments[176] - Prior restructuring plans had a remaining liability of $13 million as of September 30, 2025, after $2 million in cash payments during the nine months ended September 30, 2025[177][178] Note 22 - Transactions with Former Parent and Former Subsidiaries This note details ongoing matters related to the company's separation from its former parent, Avis Budget Group (ABG), the spin-off of Wyndham Hotels & Resorts, Inc., and the sales of its European and North American vacation rentals businesses. It covers contingent liabilities, tax matters, guarantees, and indemnifications - The Company paid $24 million for its share of taxes and interest related to a legacy ABG tax matter in May 2025, with $8 million reimbursed by Wyndham Hotels[180] - As of September 30, 2025, the Company had $1 million in ABG separation and related liabilities, down from $24 million at December 31, 2024[181] - In connection with the sale of the European vacation rentals business, a $32 million Gain on disposal of discontinued business, net of income taxes, was recognized in Q2 2024 due to the expiration of indemnifications[187] - The estimated fair value of guarantees and indemnifications for which Travel + Leisure Co. is responsible related to the European vacation rentals business sale totaled $48 million as of September 30, 2025[189] Note 23 - Related Party Transactions This note discloses a related party transaction where the company sublets an aircraft from its former CEO and current Chairman of the Board for business travel through a timesharing arrangement - The Company incurred less than $1 million of expenses related to subletting an aircraft from its former CEO and current Chairman of the Board for business travel during the nine months ended September 30, 2025 and 2024[191] Note 24 - Subsequent Event This note reports a subsequent event: the closing of a $300 million securitization financing on October 15, 2025, through Sierra Timeshare 2025-3 Receivables Funding LLC - On October 15, 2025, the Company closed on a placement of term notes payable, issued by Sierra Timeshare 2025-3 Receivables Funding LLC, with an initial principal amount of $300 million, secured by VOCRs and bearing interest at a weighted average coupon rate of 4.78%[192] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and results of operations, including forward-looking statements, a business overview, analysis of economic conditions, strategic initiatives, and a detailed discussion of liquidity and capital resources Forward-Looking Statements This section highlights forward-looking statements and associated risks that could impact future financial results - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations[194] - Key risks include those associated with acquisitions/dispositions, the health of the travel industry, adverse economic conditions (inflation, interest rates, recession), consumer behavior, compliance with debt covenants, cyber-attacks, and the strategic resort restructuring[194] Business and Overview This section provides an overview of the company's business, market conditions, and strategic initiatives - The Company experienced continued demand for leisure travel, resulting in higher Gross VOI sales and Adjusted EBITDA growth in its Vacation Ownership business for the three and nine months ended September 30, 2025[195] - Tours and Volume Per Guest (VPGs) increased in Q3 2025, highlighting the value proposition of the Company's products, especially during inflationary periods[195] - The Travel and Membership business saw lower revenues in the first nine months of 2025 due to industry consolidation, reduced member counts, and an increasing mix of exchange members with club affiliations, partially offset by growth in Travel Club transactions[196] - The Company is experiencing pressure on its loan portfolio due to elevated delinquencies, but has benefited from improved interest rates on variable rate corporate borrowings and successful securitization financings[199][200] Strategic Resort Restructuring This section details the company's initiative to optimize its vacation ownership resort portfolio and associated impacts - The Company initiated a strategic review to optimize its vacation ownership resort portfolio, identifying fourteen resorts for potential removal or unit reduction to maintain affordability and mitigate costly special assessments[203] - By September 30, 2025, three of the fourteen identified resorts received HOA board and member approvals for the proposed actions, leading to $6 million in inventory impairment charges[205] - If all actions are approved for the remaining eleven resorts, an estimated additional $22 million in inventory impairment charges could be incurred[205] - The restructuring is expected to result in significant annual savings from maintenance fees on unsold VOIs, partially offset by reduced resort management fees[204] Pillar Two This section discusses the impact of the OECD's Pillar Two global minimum tax rules on the company's tax rate - The OECD's Pillar Two rules, introducing a global minimum tax of 15%, have been implemented by EU member states and other countries[208] - As of September 30, 2025, the impact of these rules on the Company's effective tax rate was not material, but this may change with further legislation and guidance[209] Recent Legislation This section outlines recent tax legislation and its non-material impact on the company's effective tax rate - The 'One Big Beautiful Bill Act,' signed on July 4, 2025, permanently extends and modifies tax provisions from the 2017 Tax Cuts and Jobs Act[210] - The legislation had no material impact on the Company's effective tax rate for Q3 2025, and no material impact is expected for the full year 2025[210] Results of Operations This section provides a detailed analysis of the company's consolidated and segment-specific financial results for the three and nine months ended September 30, 2025, compared to the prior year, focusing on key performance indicators such as net revenues, expenses, operating income, and Adjusted EBITDA Operating Statistics This section provides key operating metrics for the Vacation Ownership and Travel and Membership segments Vacation Ownership Operating Statistics (Q3 2025 vs Q3 2024) | Metric | Sep 30, 2025 | Sep 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Gross VOI sales (in millions) | $682 | $606 | 12.6% | | Tours (in 000s) | 200 | 195 | 2.3% | | Volume per guest (VPG) | $3,304 | $3,012 | 9.7% | Travel and Membership Operating Statistics (Q3 2025 vs Q3 2024) | Metric | Sep 30, 2025 | Sep 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Exchange Transactions (in 000s) | 206 | 212 | (2.9%) | | Travel Club Transactions (in 000s) | 216 | 166 | 30.0% | | Total Transactions (in 000s) | 422 | 378 | 11.6% | | Exchange Revenue per transaction | $351 | $354 | (0.8%) | | Travel Club Revenue per transaction | $215 | $244 | (12.1%) | | Total Revenue per transaction | $281 | $306 | (8.0%) | | Average number of exchange members (in 000s) | 3,322 | 3,386 | (1.9%) | Three Months Ended September 30, 2025 vs. Three Months Ended September 30, 2024 This section compares the company's consolidated financial performance for the three months ended September 30 Consolidated Financial Performance (Q3 2025 vs Q3 2024, in millions) | Metric | 2025 | 2024 | Favorable/(Unfavorable) | | :--- | :--- | :--- | :--- | | Net revenues | $1,044 | $993 | $51 | | Expenses | $830 | $804 | $(26) | | Operating income | $214 | $189 | $25 | | Income before income taxes | $158 | $130 | $28 | | Net income attributable to Travel + Leisure Co. shareholders | $111 | $97 | $14 | - Net revenues increased by $51 million, primarily driven by a $52 million increase in the Vacation Ownership segment (higher net VOI sales, commission revenues, and trial package/incentive revenues) and a $1 million increase in the Travel and Membership segment (higher Travel Club transactions)[218] - Expenses increased by $26 million, mainly due to higher sales and commission expenses ($18M), general and administrative expenses ($11M), marketing costs ($10M), Travel and Membership cost of sales ($7M), inventory impairment ($6M), and property management expenses ($5M)[222] - Interest expense decreased by $3 million due to lower effective interest rates on variable rate corporate borrowings[219] Nine Months Ended September 30, 2025 vs. Nine Months Ended September 30, 2024 This section compares the company's consolidated financial performance for the nine months ended September 30 Consolidated Financial Performance (YTD 2025 vs YTD 2024, in millions) | Metric | 2025 | 2024 | Favorable/(Unfavorable) | | :--- | :--- | :--- | :--- | | Net revenues | $2,996 | $2,893 | $103 | | Expenses | $2,420 | $2,366 | $(54) | | Operating income | $576 | $527 | $49 | | Income before income taxes | $410 | $356 | $54 | | Net income from continuing operations | $291 | $260 | $31 | | Net income attributable to Travel + Leisure Co. shareholders | $291 | $292 | $(1) | - Net revenues increased by $103 million, primarily from a $133 million increase in the Vacation Ownership segment (higher net VOI sales, property management revenues, travel package/incentive revenues), partially offset by a $23 million decrease in the Travel and Membership segment (lower exchange transactions and revenue per transaction)[232] - Expenses increased by $54 million, mainly due to higher sales and commission expenses ($34M), property management expenses ($28M), marketing costs ($21M), general and administrative expenses ($9M), Travel and Membership cost of sales ($7M), depreciation and amortization ($6M), and inventory impairment ($6M)[232] - Net income attributable to shareholders decreased by $1 million, primarily due to a $32 million gain on disposal of discontinued business in the prior year[236] Restructuring Plans This section details the financial impacts and liabilities associated with the company's various restructuring plans - The Strategic Resort Restructuring initiative resulted in $6 million of inventory impairment charges and $1 million of employee costs in Q3 2025[245] - The 2024 restructuring plan, which incurred $15 million in charges, had a remaining liability of $1 million as of September 30, 2025, after $7 million in cash payments during the nine months ended September 30, 2025[246] - Prior restructuring plans had a remaining liability of $13 million as of September 30, 2025, after $2 million in cash payments during the nine months ended September 30, 2025[247] Financial Condition This section analyzes the company's balance sheet, including changes in assets, liabilities, and stockholders' deficit Financial Condition (in millions) | Metric | September 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total assets | $6,892 | $6,735 | $157 | | Total liabilities | $7,713 | $7,615 | $98 | | Total (deficit) | $(821) | $(880) | $59 | - Total assets increased by $157 million, primarily due to increases in cash and cash equivalents ($73M), inventory ($42M), trade receivables ($18M), and prepaid expenses ($16M), partially offset by a $27 million decrease in Vacation ownership contract receivables, net[249][253] - Total liabilities increased by $98 million, mainly driven by increases in debt ($86M), deferred income taxes ($41M), accrued expenses and other liabilities ($39M), and deferred income ($32M), partially offset by a $99 million decrease in non-recourse vacation ownership debt[250][253] - Total deficit decreased by $59 million, primarily due to net income ($291M), favorable currency translation adjustments ($43M), and stock-based compensation changes ($38M), partially offset by share repurchases ($210M) and dividends ($116M)[251] Liquidity and Capital Resources This section discusses the company's sources of liquidity, capital structure, and future contractual obligations - The Company has sufficient liquidity from net cash from operations, cash and cash equivalents ($240M as of Sep 30, 2025), a $1.0 billion revolving credit facility ($815M available), bank conduit facilities ($350M available), and access to debt markets[252][254][255][261] - The revolving credit facility's maturity was extended to June 2030, and pricing spreads on borrowings were reduced by 25 basis points[255] - New secured notes of $500 million (due Sep 2033) were issued, and $350 million of 6.60% secured notes (due Oct 2025) were redeemed[259] - The Company closed on $650 million in securitization financings during the first nine months of 2025, with an additional $300 million closed subsequent to the quarter end[262] Material Future Contractual Obligations as of September 30, 2025 (in millions) | Obligation | Within 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Debt | $667 | $415 | $12 | $9 | $1,976 | $500 | $3,579 | | Non-recourse debt | $243 | $221 | $433 | $195 | $196 | $758 | $2,046 | | Interest on debt | $312 | $255 | $223 | $204 | $111 | $111 | $1,216 | | Purchase commitments | $292 | $396 | $160 | $118 | $19 | $99 | $1,084 | | Operating leases | $26 | $24 | $22 | $21 | $13 | $86 | $192 | | Total | $1,540 | $1,311 | $850 | $547 | $2,315 | $1,554 | $8,117 | - The Company repurchased 4.0 million shares for $210 million during the nine months ended September 30, 2025, with $253 million remaining in its share repurchase program[281] - Dividends paid to shareholders totaled $114 million during the nine months ended September 30, 2025[283] Cash Flow This section analyzes the company's cash flows from operating, investing, and financing activities Changes in Cash, Cash Equivalents, and Restricted Cash (in millions) | Activity | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $516 | $366 | $150 | | Investing activities | $(78) | $(101) | $23 | | Financing activities | $(360) | $(374) | $14 | | Net change in cash, cash equivalents and restricted cash | $85 | $(109) | $194 | - Net cash provided by operating activities increased by $150 million, primarily due to higher non-cash addbacks (provision for loan losses, prior year gain on disposal) and decreased working capital deductions[273] - Net cash used in investing activities decreased by $23 million, mainly due to the prior year acquisition of Accor Vacation Club and current year proceeds from investment sales, partially offset by increased capital expenditures[274] - Net cash used in financing activities decreased by $14 million, driven by increased net proceeds from corporate debt, partially offset by higher net payments on non-recourse debt and increased share repurchases[275] Seasonality This section describes the seasonal fluctuations in the company's revenues from VOI sales and exchange fees - The Company experiences seasonal fluctuations, with revenues from VOI sales generally higher in the third quarter due to increased leisure travel[284] - Revenues from vacation exchange fees are typically highest in the first quarter, when members usually book their vacations for the year[284] Commitments and Contingencies This section addresses the company's legal proceedings, claims, and standard guarantees and indemnifications - The Company is involved in various claims, legal, and regulatory proceedings, and governmental inquiries, none of which are expected to have a material adverse effect on its results of operations or financial condition[286] - Further details on claims, legal actions, guarantees, and indemnifications are provided in Note 16 and Note 22 to the Condensed Consolidated Financial Statements[287] Critical Accounting Estimates This section confirms no material changes to critical accounting estimates and highlights inherent uncertainties - There have been no material changes to the critical accounting estimates since the filing of the Annual Report on Form 10-K for the year ended December 31, 2024[288] - Management emphasizes that estimates and assumptions are inherently uncertain and actual results could differ, potentially impacting consolidated results, financial position, and liquidity[288] Item 3. Quantitative and Qualitative Disclosures About Market Risks This section assesses the company's exposure to market risks, primarily from changes in interest rates and foreign currency exchange rates, using sensitivity analysis. It concludes that a hypothetical 10% change in these rates would not materially affect the company's financial position or cash flows - A hypothetical 10% change in interest rates would result in a $2 million increase or decrease in annual consumer financing interest expense and a $4 million increase or decrease in annual debt interest expense for the nine months ended September 30, 2025[290] - A hypothetical 10% change in foreign currency exchange rates would result in a $7 million increase or decrease in the fair value of outstanding forward foreign currency exchange contracts for the nine months ended September 30, 2025[290] - As of September 30, 2025, variable rate borrowings totaled $397 million in non-recourse debt and $998 million in corporate debt. A 100 basis point change in underlying interest rates would result in a $4 million increase/decrease in annual consumer financing interest expense and a $10 million increase/decrease in annual debt interest expense[291] Item 4. Controls and Procedures This section confirms that management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of September 30, 2025. It also states that there were no material changes in internal control over financial reporting during the period - Management concluded that disclosure controls and procedures were designed and functioning effectively as of September 30, 2025[292] - There have been no material changes in internal control over financial reporting during the period covered by this report[293] PART II — OTHER INFORMATION Part II includes legal proceedings, risk factors, unregistered equity sales, use of proceeds, and exhibits Item 1. Legal Proceedings This section refers to Note 16 and Note 22 of the Condensed Consolidated Financial Statements for details on legal claims and lawsuits, reiterating management's opinion that none are expected to have a material adverse effect on the company's results of operations or financial condition - The Company is involved in various claims and lawsuits in the ordinary course of business, none of which are expected to have a material adverse effect on results or financial condition[294] - Further details are available in Note 16 (Commitments and Contingencies) and Note 22 (Transactions with Former Parent and Former Subsidiaries)[294] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to the risk factors set forth in Part I, Item 1A of the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as of September 30, 2025[295] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides a summary of the company's common stock repurchase activity for the quarter ended September 30, 2025, under its publicly announced share repurchase program Common Stock Repurchases for Q3 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plan | Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan | | :--- | :--- | :--- | :--- | :--- | | July 2025 | 448,278 | $58.42 | 448,278 | $296,686,688 | | August 2025 | 523,190 | $60.19 | 523,190 | $265,197,761 | | September 2025 | 197,292 | $62.48 | 197,292 | $252,871,901 | | Total | 1,168,760 | $59.90 | 1,168,760 | $252,871,901 | - The Board authorized a $7.0 billion share repurchase program, most recently increased by $500 million in May 2024. As of September 30, 2025, $253 million of availability remained under the program[298] Item 3. Defaults Upon Senior Securities This section explicitly states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[299] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the Company[300] Item 5. Other Information This section states that there is no other information to report for the period - No other information is reported in this section[301] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, indentures, certifications, and XBRL data files, which provide supporting documentation for the report - Exhibits include the Third Amended and Restated Certificate of Incorporation, Fourth Amended and Restated Bylaws, Indentures, Form of 6.125% Note due 2033, Letter re: Unaudited Interim Financial Information, and Certifications of the President and CEO and CFO[302] - The filing also includes Inline XBRL Instance Document and Taxonomy Extension documents[302] Signatures This section contains the required signatures, certifying the due authorization and filing of the report by the company's Chief Financial Officer and Chief Accounting Officer - The report was signed by Erik Hoag, Chief Financial Officer, and Thomas M. Duncan, Chief Accounting Officer, on October 22, 2025[306]