Travel + Leisure(TNL) - 2024 Q1 - Quarterly Report

Form 10-Q Filing Information - The report is a Quarterly Report on Form 10-Q for the period ended March 31, 2024[2] - The registrant is TRAVEL + LEISURE CO., with common stock traded on the New York Stock Exchange under the symbol TNL[2][3] - As of March 31, 2024, there were 71,263,534 shares of common stock outstanding[4] Table of Contents Glossary of Terms - The glossary defines key terms and acronyms used throughout the report, such as Adjusted EBITDA, AOCL, EPS, and VOCR, to ensure clarity and consistent understanding[9] PART I — FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of Travel + Leisure Co., including statements of income, comprehensive income, balance sheets, cash flows, and deficit, along with detailed notes. The independent auditors reviewed these statements and found no material modifications needed for GAAP conformity Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP reviewed the interim financial statements for the three-month periods ended March 31, 2024 and 2023, and found no material modifications should be made for conformity with GAAP[11] - The firm previously audited the consolidated balance sheet as of December 31, 2023, expressing an unqualified opinion, and confirmed the accompanying condensed balance sheet information is fairly stated[12] Condensed Consolidated Statements of Income | Metric | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net revenues | $916 | $879 | | Operating income | $150 | $138 | | Income before income taxes | $92 | $85 | | Net income from continuing operations | $66 | $63 | | Net income attributable to Travel + Leisure Co. shareholders | $66 | $64 | | Basic earnings per share (Continuing operations) | $0.93 | $0.81 | | Diluted earnings per share (Continuing operations) | $0.92 | $0.81 | - Net revenues increased by $37 million (4.2%) year-over-year, while operating income grew by $12 million (8.7%)[17] - Net income attributable to shareholders increased by $2 million (3.1%) to $66 million, and diluted EPS from continuing operations rose to $0.92 from $0.81[17] Condensed Consolidated Statements of Comprehensive Income | Metric | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Net income attributable to Travel + Leisure Co. shareholders | $66 | $64 | | Foreign currency translation adjustments, net of tax | $(15) | $(2) | | Other comprehensive loss, net of tax | $(15) | $(2) | | Comprehensive income attributable to Travel + Leisure Co. shareholders | $51 | $62 | - Comprehensive income attributable to shareholders decreased by $11 million year-over-year, primarily due to a $13 million increase in foreign currency translation adjustments, net of tax[18] Condensed Consolidated Balance Sheets | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | Change (Millions) | | :------------------------------------ | :-------------------------- | :--------------------------- | :---------------- | | Total assets | $7,023 | $6,738 | $285 | | Cash and cash equivalents | $479 | $282 | $197 | | Vacation ownership contract receivables, net | $2,535 | $2,527 | $8 | | Inventory | $1,187 | $1,135 | $52 | | Total liabilities | $7,948 | $7,655 | $293 | | Debt | $3,867 | $3,575 | $292 | | Total stockholders' (deficit) | $(926) | $(918) | $(8) | - Total assets increased by $285 million (4.2%) from December 31, 2023, to March 31, 2024, driven by increases in cash and cash equivalents, inventory, and prepaid expenses[21][180] - Total liabilities increased by $293 million (3.8%), primarily due to a $292 million increase in debt, partially offset by a decrease in non-recourse vacation ownership debt[21][180] Condensed Consolidated Statements of Cash Flows | Metric | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $47 | $7 | | Net cash used in investing activities | $(57) | $(17) | | Net cash provided by/(used in) financing activities | $203 | $(343) | | Net change in cash, cash equivalents and restricted cash | $189 | $(354) | | Cash and cash equivalents, end of period | $479 | $196 | - Net cash provided by operating activities significantly increased to $47 million in Q1 2024 from $7 million in Q1 2023, primarily due to a decrease in cash utilized for working capital[23][203] - Net cash provided by financing activities was $203 million in Q1 2024, a substantial improvement from $343 million used in Q1 2023, driven by net borrowings on the revolving credit facility and notes, and reduced share repurchases[23][205] Condensed Consolidated Statements of Deficit - Total stockholders' deficit increased by $8 million from December 31, 2023, to March 31, 2024, reaching $(925) million[25] - This increase was primarily due to $36 million in dividends, $25 million in share repurchases, and $15 million in unfavorable currency translation adjustments, partially offset by $66 million in net income[25][181] - The company paid cash dividends of $0.50 per share in Q1 2024, totaling $36 million, compared to $0.45 per share ($36 million total) in Q1 2023[25] Notes to Condensed Consolidated Financial Statements Note 1 - Background and Basis of Presentation - Travel + Leisure Co. operates in two reportable segments: Vacation Ownership (VOIs, consumer financing, property management) and Travel and Membership (vacation exchange, travel technology, memberships, rentals)[26][27][28] - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP and include all normal recurring adjustments necessary for a fair presentation of interim results[29][31] Note 2 - New Accounting Pronouncements - The FASB issued new guidance on Business Combinations—Joint Venture Formations (effective Jan 1, 2025), Disclosure Improvements (effective upon SEC's removal of related disclosure), Segment Reporting (effective for fiscal years beginning after Dec 15, 2023, and interim periods within fiscal years beginning after Dec 15, 2024), and Improvements to Income Tax Disclosures (effective for annual periods beginning after Dec 15, 2024)[32][33][34][36] - The Company is currently evaluating the impact of these new accounting pronouncements on its financial statements and related disclosures[32][33][35][36] Note 3 - Revenue Recognition - Revenue from Vacation Ownership Interest (VOI) sales is recognized upon transfer of control, expiration of the statutory rescission period, and deemed collectibility of the transaction price[37] Property Management Fees and Reimbursable Revenues | Metric | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Management fee revenues | $113 | $107 | | Reimbursable revenues | $98 | $92 | | Property management fees and reimbursable revenues | $211 | $199 | Disaggregation of Net Revenues by Segment | Revenue Source | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Vacation Ownership: | | | | Vacation ownership interest sales | $369 | $338 | | Property management fees and reimbursable revenues | $211 | $199 | | Consumer financing | $110 | $103 | | Fee-for-Service commissions | $18 | $27 | | Ancillary revenues | $17 | $18 | | Total Vacation Ownership | $725 | $685 | | Travel and Membership: | | | | Transaction revenues | $140 | $147 | | Subscription revenues | $45 | $45 | | Ancillary revenues | $8 | $8 | | Total Travel and Membership | $193 | $200 | | Net Revenues (Total Company) | $916 | $879 | Note 4 - Earnings Per Share Basic and Diluted EPS (Continuing Operations) | Metric | 3 Months Ended March 31, 2024 | 3 Months Ended March 31, 2023 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Basic earnings per share | $0.93 | $0.81 | | Diluted earnings per share | $0.92 | $0.81 | Weighted Average Shares Outstanding | Metric | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Basic weighted average shares outstanding | 71.5 | 77.5 | | Diluted weighted average shares outstanding | 72.0 | 78.3 | - The company repurchased 0.6 million shares for $25 million during Q1 2024, with $146 million remaining availability under the share repurchase program as of March 31, 2024[56][57] Note 5 - Acquisitions - 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 and adding 24 resorts and nearly 30,000 members[58][156] - On January 3, 2023, the company acquired Playbook365 for $13 million, integrating it with Travel Club's event lodging management platform to broaden products and services in the youth sports market[60][61] - The company acquired the Travel + Leisure brand on January 5, 2021, for $100 million, with the remaining $10 million payment due in June 2024[62] Note 6 - Discontinued Operations - During the three months ended March 31, 2023, the company recognized a $1 million gain on disposal of its European vacation rentals business, net of income taxes, related to value-added tax refunds[63] Note 7 - Vacation Ownership Contract Receivables Vacation Ownership Contract Receivables, Net | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | | :------------------------------------ | :-------------------------- | :--------------------------- | | Vacation ownership contract receivables, gross | $3,096 | $3,101 | | Less: allowance for loan losses | $561 | $574 | | Vacation ownership contract receivables, net | $2,535 | $2,527 | - The weighted average interest rate on outstanding VOCRs was 14.6% as of March 31, 2024, slightly down from 14.7% at December 31, 2023[65] Allowance for Loan Losses on VOCRs | Metric | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Provision for loan losses, net | $78 | $71 | | Contract receivables write-offs, net | $(91) | $(82) | Note 8 - Inventory Inventory Composition | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | | Completed VOI inventory | $938 | $899 | | Estimated VOI recoveries | $206 | $207 | | Land held for VOI development | $29 | $20 | | VOI construction in process | $10 | $5 | | Vacation exchange credits and other | $4 | $4 | | Total inventory | $1,187 | $1,135 | - Total inventory increased by $52 million from December 31, 2023, to March 31, 2024, primarily due to a $39 million net transfer of completed VOI inventory from property and equipment[71][180] Note 9 - Property and Equipment Property and Equipment, Net | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Total property and equipment | $1,662 | $1,682 | | Less: accumulated depreciation and amortization | $1,048 | $1,027 | | Property and equipment, net | $614 | $655 | - Property and equipment, net, decreased by $41 million from December 31, 2023, to March 31, 2024, primarily due to $39 million of net transfers of completed VOI inventory to inventory[74][180] Note 10 - Debt Company Indebtedness | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Non-recourse vacation ownership debt | $2,057 | $2,071 | | Debt | $3,867 | $3,575 | | Total Indebtedness | $5,924 | $5,646 | - On March 21, 2024, the company closed on a placement of $350 million in term notes payable, secured by VOCRs, with a weighted average coupon rate of 5.66%[76] Available Borrowing Capacity (March 31, 2024) | Facility | Total Capacity (Millions) | Outstanding Borrowings (Millions) | Available Capacity (Millions) | | :-------------------------- | :------------------------ | :------------------------------ | :---------------------------- | | Non-recourse Conduit Facilities | $745 | $233 | $512 | | Revolving Credit Facilities | $1,000 | $292 | $706 | - As of March 31, 2024, the company was in compliance with its financial covenants, with an interest coverage ratio of 4.16 to 1.0 and a first lien leverage ratio of 3.50 to 1.0[80] Note 11 - Variable Interest Entities - The company consolidates bankruptcy-remote special purpose entities (SPEs) used for securitizing VOCRs, where the receivables and non-recourse debt are legally separate from the company[86] SPE Assets and Liabilities | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | | Total SPE assets | $2,357 | $2,418 | | Total SPE liabilities | $2,060 | $2,075 | | SPE assets in excess of SPE liabilities | $297 | $343 | - Non-securitized contract receivables totaled $874 million as of March 31, 2024, up from $810 million at December 31, 2023[88] Note 12 - Fair Value - The company measures financial assets and liabilities at fair value using a three-level hierarchy: Level 1 (quoted active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[90][91] Fair Value of Financial Instruments (March 31, 2024) | Instrument | Carrying Amount (Millions) | Estimated Fair Value (Millions) | Level | | :------------------------------------ | :-------------------------- | :------------------------------ | :---- | | Vacation ownership contract receivables, net | $2,535 | $2,836 | Level 3 | | Debt | $5,924 | $5,845 | Level 2 | - Fair value of VOCRs is estimated using a discounted cash flow model (Level 3 inputs), while non-recourse vacation ownership debt and corporate debt fair values are based on indicative bids from investment banks (Level 2 inputs)[98][99] Note 13 - Derivative Instruments and Hedging Activities - The company uses freestanding foreign currency forward contracts to manage exposure to foreign currency exchange rate fluctuations, particularly for the Euro, British pound sterling, Australian and Canadian dollars, and Mexican peso[100] - Interest rate caps are periodically used to strategically adjust the mix of fixed to floating rate debt and manage overall interest cost[101] - As of March 31, 2024, and 2023, the company had no interest rate derivatives designated as fair value or cash flow hedges[101] Note 14 - Income Taxes - The effective tax rate was 28.5% for Q1 2024, up from 25.5% in Q1 2023, primarily impacted by the portion of stock-based compensation expense that is not deductible for tax purposes[104] - Income tax payments, net of tax refunds, were $6 million in Q1 2024, compared to $5 million in Q1 2023[105] Note 15 - Leases Lease Costs (3 Months Ended March 31) | Metric | 2024 (Millions) | 2023 (Millions) | | :-------------------------- | :-------------- | :-------------- | | Operating lease cost | $5 | $5 | | Short-term lease cost | $3 | $3 | | Total finance lease cost | $3 | $2 | Lease-Related Assets and Liabilities (March 31) | Metric | 2024 (Millions) | 2023 (Millions) | | :-------------------------- | :-------------- | :-------------- | | Operating lease right-of-use assets | $44 | $46 | | Operating lease liabilities | $82 | $87 | | Finance lease assets | $21 | $21 | | Finance lease liabilities | $21 | $20 | - The weighted average remaining lease term for operating leases is 4.6 years, and for finance leases, it is 2.8 years as of March 31, 2024[108] Note 16 - Commitments and Contingencies - The company records an accrual for legal contingencies when a liability is probable and estimable, with reserves of $10 million as of March 31, 2024, up from $7 million at December 31, 2023[112][114] - Potential exposure from adverse outcomes of legal proceedings could range up to $20 million in excess of recorded accruals, but management does not expect a material liability to consolidated financial position or liquidity[114] - The company enters into standard guarantees and indemnifications in the ordinary course of business, but the maximum potential amount of future payments is not estimable[116] Note 17 - Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss (Net of Tax) | Metric | December 31, 2023 (Millions) | March 31, 2024 (Millions) | | :-------------------------- | :--------------------------- | :-------------------------- | | Balance | $(70) | $(85) | | Other comprehensive loss | — | $(15) | - Accumulated other comprehensive loss (net of tax) increased by $15 million during Q1 2024, primarily due to foreign currency translation adjustments[119] Note 18 - Stock-Based Compensation - During Q1 2024, the company granted $32 million in RSUs and $10 million in PSUs to key employees and senior officers[122] - Stock-based compensation expense was $9 million in Q1 2024, down from $10 million in Q1 2023, with associated tax benefits of $2 million and $3 million, respectively[127] - Unrecognized compensation expense for RSUs was $72 million as of March 31, 2024 (expected over 3.0 years), and for PSUs (probable of vesting) was $16 million (expected over 2.3 years)[125] Note 19 - Segment Information Net Revenues by Segment (3 Months Ended March 31) | Segment | 2024 (Millions) | 2023 (Millions) | | :-------------------- | :-------------- | :-------------- | | Vacation Ownership | $725 | $685 | | Travel and Membership | $193 | $200 | | Total reportable segments | $918 | $885 | Adjusted EBITDA by Segment (3 Months Ended March 31) | Segment | 2024 (Millions) | 2023 (Millions) | | :-------------------- | :-------------- | :-------------- | | Vacation Ownership | $135 | $131 | | Travel and Membership | $75 | $71 | | Total reportable segments | $210 | $202 | | Total Company | $191 | $184 | - Vacation Ownership segment assets were $5,064 million and Travel and Membership segment assets were $1,362 million as of March 31, 2024[132] Note 20 - Restructuring - The 2023 restructuring plan incurred $26 million in charges, primarily for personnel-related costs (reduction of approximately 250 employees) and facility reductions, aimed at enhancing organizational efficiency[132][176] Restructuring Liability Activity | Metric | Liability as of Dec 31, 2023 (Millions) | Cash Payments (Millions) | Liability as of March 31, 2024 (Millions) | | :---------------- | :-------------------------------------- | :----------------------- | :---------------------------------------- | | Facility-related | $17 | $(1) | $16 | | Personnel-related | $16 | $(9) | $7 | | Total | $33 | $(10) | $23 | - All material initiative and related expenses for the 2023 restructuring plan have been incurred as of March 31, 2024[176] Note 21 - Transactions with Former Parent and Former Subsidiaries - As of March 31, 2024, Cendant separation and related tax liabilities totaled $23 million[136] - Travel + Leisure Co. is responsible for two-thirds of certain contingent corporate liabilities and is entitled to two-thirds of certain contingent corporate assets incurred prior to the Spin-off from Wyndham Hotels[139] - The estimated fair value of guarantees and indemnifications for which Travel + Leisure Co. is responsible related to the sale of the European vacation rentals business totaled $84 million as of March 31, 2024[144] Note 22 - Related Party Transactions - The company incurred less than $1 million in expenses during Q1 2024 and Q1 2023 for subletting an aircraft from its former CEO and current Chairman of the Board for business travel[147] Note 23 - Subsequent Event - On April 1, 2024, the company repaid its $300 million 5.65% secured notes that matured in April 2024[148] 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 liquidity for the three months ended March 31, 2024. It covers key business trends, the impact of recent acquisitions, operational results by segment, restructuring efforts, and strategies for capital deployment, including share repurchases and dividends Forward-Looking Statements - The report contains forward-looking statements that are subject to risks and uncertainties, including economic conditions, competition, acquisitions, and changes in consumer travel patterns, which could cause actual results to differ materially[150] - Readers are cautioned not to place undue reliance on these statements, which reflect management's opinion only as of the date they were made[150] Business and Overview - The company operates in two segments: Vacation Ownership (developing, marketing, and selling VOIs, consumer financing, property management) and Travel and Membership (vacation exchange, travel technology, memberships, and direct-to-consumer rentals)[154] - Q1 2024 saw strong demand for leisure travel, leading to higher tours and Gross VOI sales in the Vacation Ownership business, with VPGs performing above pre-pandemic levels despite a strategic shift to increase new owners[151] - The Travel and Membership segment experienced increased net income and Adjusted EBITDA due to cost savings from strategic realignment and pricing increases, despite lower transaction volumes[152] - The acquisition of Accor Vacation Club on March 1, 2024, for $50 million ($44 million net of cash acquired), expands the company's international portfolio in the Asia Pacific region[156] Results of Operations Operating Statistics Vacation Ownership Operating Statistics | Metric | 3 Months Ended March 31, 2024 | 3 Months Ended March 31, 2023 | % Change | | :-------------------- | :---------------------------- | :---------------------------- | :------- | | Gross VOI sales (in millions) | $490 | $454 | 7.8 | | Tours (in 000s) | 155 | 135 | 14.8 | | Volume per guest | $3,035 | $3,215 | (5.6) | Travel and Membership Operating Statistics | Metric | 3 Months Ended March 31, 2024 | 3 Months Ended March 31, 2023 | % Change | | :-------------------- | :---------------------------- | :---------------------------- | :------- | | Total transactions (in 000s) | 445 | 475 | (6.3) | | Total revenue per transaction | $315 | $310 | 1.4 | | Average number of exchange members (in 000s) | 3,493 | 3,512 | (0.5) | Three Months Ended March 31, 2024 vs. Three Months Ended March 31, 2023 (Consolidated) Consolidated Financial Performance | Metric | 3 Months Ended March 31, 2024 (Millions) | 3 Months Ended March 31, 2023 (Millions) | Favorable/(Unfavorable) (Millions) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------- | | Net revenues | $916 | $879 | $37 | | Expenses | $766 | $739 | $(27) | | Operating income | $150 | $138 | $12 | | Interest expense | $64 | $58 | $(6) | | Income before income taxes | $92 | $85 | $7 | | Net income attributable to Travel + Leisure Co. shareholders | $66 | $64 | $2 | - The $37 million increase in net revenues was primarily driven by a $41 million increase in the Vacation Ownership segment, partially offset by a $7 million decrease in the Travel and Membership segment[165] - The $27 million increase in expenses was mainly due to higher sales and commission expenses, increased marketing costs, and higher property management and consumer financing interest expenses[165] Segment Results - Vacation Ownership net revenues increased by $40 million and Adjusted EBITDA increased by $4 million in Q1 2024 compared to Q1 2023[167] - The Vacation Ownership revenue increase was driven by a $39 million increase in gross VOI sales (due to 14.8% increase in tours, despite a 5.6% decrease in VPG), a $13 million increase in property management revenues, and a $7 million increase in consumer financing revenues[168] - Travel and Membership net revenues decreased by $7 million, but Adjusted EBITDA increased by $4 million, primarily due to lower transactions offset by price increases and significant cost savings from strategic restructuring[171][172][173] Restructuring Plans - The 2023 restructuring plan incurred $26 million in charges, primarily for personnel-related costs (reducing approximately 250 employees) and facility reductions, aimed at enhancing organizational efficiency[176] - All material initiative and related expenses for the 2023 restructuring plan have been incurred as of March 31, 2024[176] Financial Condition Financial Condition Summary | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | Change (Millions) | | :---------------- | :-------------------------- | :--------------------------- | :---------------- | | Total assets | $7,023 | $6,738 | $285 | | Total liabilities | $7,948 | $7,655 | $293 | | Total (deficit) | $(925) | $(917) | $(8) | - Total assets increased by $285 million, driven by a $197 million increase in cash and cash equivalents, $52 million in inventory, $40 million in prepaid expenses, and $31 million in goodwill[180] - Total liabilities increased by $293 million, primarily due to a $292 million increase in debt and a $22 million increase in deferred income taxes, partially offset by a $14 million decrease in non-recourse vacation ownership debt[180] Liquidity and Capital Resources Cash and Cash Equivalents - As of March 31, 2024, the company had $479 million in cash and cash equivalents[183] $1.0 Billion Revolving Credit Facility - The company's $1.0 billion revolving credit facility, expiring in October 2026, had $706 million of available capacity as of March 31, 2024[184] - As of March 31, 2024, the company was in compliance with its financial covenants, reporting an interest coverage ratio of 4.16 to 1.0 and a first lien leverage ratio of 3.50 to 1.0[187] - The benchmark rate on the revolving credit facility and the 2018 Term Loan B Facility was changed from LIBOR to Term SOFR effective March 31, 2023[188] Secured Notes and Term Loan B facilities - As of March 31, 2024, the company had $3.55 billion of outstanding borrowings under its secured notes and term loan B facilities, with maturities ranging from 2024 to 2030[190] - Subsequent to the quarter-end, the company repaid its $300 million 5.65% secured notes that came due in April 2024[190] Non-recourse Vacation Ownership Debt - The Vacation Ownership business finances VOCRs through non-recourse asset-backed conduit facilities and term asset-backed securitizations[191] - The company closed on $350 million of securitization financings during Q1 2024[192] - As of March 31, 2024, all securitized loan pools were in compliance with applicable contractual triggers[194] Material Cash Requirements Material Future Contractual Obligations (as of March 31, 2024) | Obligation Type | Total (Millions) | | :---------------------- | :--------------- | | Debt | $3,879 | | Non-recourse debt | $2,081 | | Interest on debt | $1,295 | | Purchase commitments | $711 | | Operating leases | $97 | | Total | $8,063 | - The company had $542 million in surety bonds outstanding as of March 31, 2024, for sales and development transactions[199] Cash Flow Summary of Cash Flow Changes (3 Months Ended March 31) | Activity | 2024 (Millions) | 2023 (Millions) | Change (Millions) | | :------------------------------------------ | :-------------- | :-------------- | :---------------- | | Operating activities | $47 | $7 | $40 | | Investing activities | $(57) | $(17) | $(40) | | Financing activities | $203 | $(343) | $546 | | Net change in cash, cash equivalents and restricted cash | $189 | $(354) | $543 | - The $40 million increase in net cash provided by operating activities was primarily due to a decrease in cash utilized for working capital[203] - The $546 million increase in net cash provided by financing activities was mainly due to $288 million of net borrowings on the revolving credit facility and notes, and a $76 million decrease in share repurchases[205] Capital Deployment - The company spent $34 million on vacation ownership development projects (inventory) in Q1 2024, with anticipated spending between $105 million and $125 million for the full year 2024[207] - Capital expenditures were $17 million in Q1 2024, primarily for information technology and sales center improvement projects, with anticipated spending between $80 million and $85 million for the full year 2024[208] - The company continues its 'asset-light' efforts in vacation ownership through 'Just-in-Time' partnerships, where financial partners develop assets and the company purchases finished inventory as needed[209] Share Repurchase Program - The company's share repurchase program has a total authorization of $6.5 billion, with $146 million remaining availability as of March 31, 2024[213] - During Q1 2024, the company repurchased 0.6 million shares at an average price of $40.07, for a total cost of $25 million[214] Dividends - The company paid cash dividends of $0.50 per share in Q1 2024, totaling $38 million, compared to $0.45 per share ($37 million total) in Q1 2023[215] - The long-term plan is to grow the dividend at a minimum rate of earnings growth, with future declarations subject to Board discretion and various financial factors[215] Seasonality - The company experiences seasonal fluctuations, with revenues from VOI sales generally higher in the third quarter due to increased leisure travel[216] - Revenues from vacation exchange fees are typically highest in the first quarter, when members usually book their vacations for the year[216] Commitments and Contingencies - The company is involved in various claims and legal proceedings, none of which are expected to have a material effect on its results of operations or financial condition[218] - Further details on commitments and contingencies are provided in Note 16 and Note 21 to the Condensed Consolidated Financial Statements[218] Critical Accounting Estimates - The Condensed Consolidated Financial Statements rely on estimates and assumptions that are inherently uncertain, and significant unfavorable changes could materially impact reported results[219] - Management believes the estimates and assumptions used were appropriate at the time of preparation[219] Item 3. Quantitative and Qualitative Disclosures About Market Risks This section assesses the company's market risks related to interest rate and foreign currency exchange rate fluctuations using a sensitivity analysis. It concludes that a hypothetical 10% change in these rates would not materially affect the company's prices, earnings, fair values, or cash flows - A hypothetical 10% change in interest rates or foreign currency exchange rates would not have a material effect on the company's prices, earnings, fair values, or cash flows[220] - A 100-basis point change in underlying interest rates would result in a $2 million increase or decrease in annual consumer financing interest expense and a $12 million increase or decrease in annual debt interest expense[221] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024. There were no material changes in internal control over financial reporting during the period - As of March 31, 2024, the company's disclosure controls and procedures were designed and functioning effectively to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[223] - There have been no material changes in the company's internal control over financial reporting during the period covered by this report[223] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various claims and lawsuits arising in the ordinary course of business, none of which are expected to have a material adverse effect on its results of operations or financial condition - The company is involved in various claims and lawsuits in the ordinary course of business, but management does not expect any to have a material adverse effect on its results of operations or financial condition[224] - Further details on legal actions are provided in Note 16 and Note 21 to the Condensed Consolidated Financial Statements[224] Item 1A. Risk Factors This section refers to the comprehensive discussion of risk factors contained in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and states that there have been no material changes to these risks as of March 31, 2024 - There have been 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, 2023, as of March 31, 2024[225] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section summarizes the company's common stock repurchase activity for the quarter ended March 31, 2024, detailing the number of shares purchased, average price, and remaining authorization under the Share Repurchase Program Common Stock Repurchases (Quarter Ended March 31, 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Cost (Millions) | | :------------------------ | :------------------------------- | :--------------------------- | :-------------------- | | January 2024 | 439,240 | $39.87 | $17.5 | | February 2024 | 185,154 | $40.54 | $7.5 | | March 2024 | — | — | — | | Total | 624,394 | $40.07 | $25.0 | - As of March 31, 2024, the approximate dollar value of shares that may yet be purchased under the publicly announced plan was $145.6 million[226] Item 3. Defaults Upon Senior Securities This item states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[229] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[230] Item 5. Other Information This item indicates that there is no other information to report - No other information is reported under this item[231] Item 6. Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including corporate governance documents, equity incentive plans, award agreements, and certifications - The exhibits include corporate documents (Restated Certificate of Incorporation, Bylaws), equity incentive plans, award agreements, and certifications (President and CEO, CFO)[232] Signatures - The report was signed on April 24, 2024, by Michael A. Hug, Chief Financial Officer, and Thomas M. Duncan, Chief Accounting Officer[235]