Travel + Leisure(TNL) - 2022 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the first half of 2022 Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents unaudited consolidated financial statements for Q2 and H1 2022, showing increased revenues and net income driven by Vacation Ownership Condensed Consolidated Statements of Income Highlights (Q2 & H1 2022 vs 2021) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $922 million | $797 million | $1,731 million | $1,425 million | | Operating Income | $185 million | $151 million | $302 million | $237 million | | Net Income from Continuing Operations | $100 million | $74 million | $151 million | $102 million | | Net Income Attributable to Shareholders | $100 million | $72 million | $151 million | $100 million | | Diluted EPS from Continuing Operations | $1.16 | $0.84 | $1.75 | $1.17 | Condensed Consolidated Balance Sheet Highlights (As of June 30, 2022) | Metric | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $241 million | $369 million | | Vacation ownership contract receivables, net | $2,304 million | $2,309 million | | Total assets | $6,477 million | $6,588 million | | Non-recourse vacation ownership debt | $1,842 million | $1,934 million | | Debt | $3,379 million | $3,379 million | | Total liabilities | $7,323 million | $7,382 million | | Total stockholders' (deficit) | ($854 million) | ($801 million) | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Metric | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $230 million | $290 million | | Net cash used in investing activities | ($29 million) | ($62 million) | | Net cash used in financing activities | ($315 million) | ($1,098 million) | | Net change in cash, cash equivalents and restricted cash | ($119 million) | ($871 million) | Note 1 - Background and Basis of Presentation The company operates two segments: Vacation Ownership and Travel and Membership, with Extra Holidays reclassified to Vacation Ownership in Q2 2022 - The company's two reportable segments are Vacation Ownership (comprising the Wyndham Destinations business line) and Travel and Membership (comprising Panorama and Travel + Leisure Group business lines)[31][32][33] - Organizational changes in Q2 2022 led to the reclassification of the Extra Holidays business from the Travel and Membership segment to the Vacation Ownership segment, with prior period data restated[32][34] Note 3 - Revenue Recognition This note details revenue recognition policies and disaggregates revenues by segment, showing significant growth in Vacation Ownership sales Disaggregation of Net Revenues by Segment (Six Months Ended June 30) | Segment & Revenue Source | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Vacation Ownership | | | | Vacation ownership interest sales | $697 million | $466 million | | Property management & reimbursable | $374 million | $327 million | | Consumer financing | $198 million | $201 million | | Total Vacation Ownership | $1,344 million | $1,057 million | | Travel and Membership | | | | Transaction revenues | $282 million | $268 million | | Subscription revenues | $90 million | $84 million | | Total Travel and Membership | $389 million | $370 million | | Total Net Revenues | $1,731 million | $1,425 million | - Contract liabilities, representing advance payments for services not yet rendered, stood at $391 million as of June 30, 2022, up from $382 million at year-end 2021, primarily deferred subscription and VOI trial package revenue[51] Note 10 - Debt As of June 30, 2022, total debt was $5.221 billion, with the company in compliance with all debt covenants and $1.4 billion available capacity Debt Composition as of June 30, 2022 | Debt Category | Amount (in millions) | | :--- | :--- | | Non-recourse vacation ownership debt | $1,842 million | | Corporate Debt (Secured Notes, Term Loan, etc.) | $3,379 million | | Total Debt | $5,221 million | - The company renewed its USD timeshare receivables conduit facility in March 2022, extending the term to July 2024 and reducing capacity from $800 million to $600 million[83] - As of June 30, 2022, the company was in compliance with its key financial covenants: a maximum first lien leverage ratio of 4.75 to 1.0 (actual 3.72 to 1.0) and a minimum interest coverage ratio of 2.50 to 1.0 (actual 4.62 to 1.0)[89][90] Note 19 - Segment Information This note breaks down financial performance by segment, showing significant revenue and Adjusted EBITDA growth in Vacation Ownership for H1 2022 Segment Performance (Six Months Ended June 30) | Segment | Net Revenues 2022 (in millions) | Net Revenues 2021 (in millions) | Adjusted EBITDA 2022 (in millions) | Adjusted EBITDA 2021 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Vacation Ownership | $1,344 million | $1,057 million | $291 million | $204 million | | Travel and Membership | $389 million | $370 million | $146 million | $146 million | | Total Reportable Segments | $1,733 million | $1,427 million | $437 million | $350 million | - The company uses Net Revenues and Adjusted EBITDA as key metrics to assess segment performance, with Adjusted EBITDA reconciled to Net Income[144] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong recovery in Vacation Ownership driving H1 2022 growth, liquidity, capital resources, and capital deployment strategies Key Operating Statistics (Q2 2022 vs Q2 2021) | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Vacation Ownership | | | | | Gross VOI sales | $527 million | $383 million | 37.7% | | Tours (in thousands) | 148 | 117 | 26.6% | | Volume Per Guest (VPG) | $3,489 | $3,151 | 10.7% | | Travel and Membership | | | | | Total transactions (in thousands) | 443 | 457 | (3.1%) | - For Q2 2022, consolidated net revenues increased by $125 million year-over-year, primarily driven by a $159 million increase in the Vacation Ownership segment, partially offset by a $5 million decrease in Travel and Membership[182][183][186] - The company maintains a strong liquidity position with $998 million available on its revolving credit facility as of June 30, 2022, sufficient to meet obligations including $400 million in notes due March 2023[214][215] Liquidity and Capital Resources The company's liquidity sources include cash from operations, cash on hand, a $1.0 billion revolving credit facility, and access to debt markets - The company's credit facility was renewed in 2021, extending the commitment period to October 2026, with compliance with all financial covenants as of June 30, 2022[215][219] - The company actively uses asset-backed securitizations to finance its VOCRs, closing a $275 million financing in Q1 2022 and another $275 million subsequent to quarter-end in July 2022[222][223][171] Material Future Contractual Obligations | Obligation Type | Total Amount (in millions) | | :--- | :--- | | Debt | $3,379 million | | Non-recourse debt | $1,842 million | | Interest on debt | $975 million | | Purchase commitments | $799 million | | Operating leases | $145 million | | Total | $7,205 million | Capital Deployment Capital deployment focuses on business growth, cash flow optimization, and shareholder value, including share repurchases and dividend payments - The company repurchased 2.5 million shares for $128 million in the first six months of 2022, with $700 million remaining available under the share repurchase program as of June 30, 2022[242][243] - Cash dividends of $0.40 per share were paid in Q1 and Q2 2022, totaling $70 million for the first half, an increase from $0.30 per share in the prior year[244] - Anticipated spending for 2022 includes $150-$170 million for vacation ownership development projects and $55-$60 million for capital expenditures[237][238] Item 3. Quantitative and Qualitative Disclosures About Market Risks The company faces interest rate and foreign currency risks, with a 10% change not materially affecting earnings or cash flows - The company's primary market risks are interest rate and foreign currency exchange rate fluctuations[250] - A 100 basis point change in interest rates on variable rate debt would result in a $4 million change in annual consumer financing interest expense and a $3 million change in annual corporate debt interest expense[251] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2022, 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 period[254] - No material changes to internal control over financial reporting occurred during the quarter[254] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and exhibits for the reporting period Item 1. Legal Proceedings The company is involved in various claims and lawsuits, none of which are expected to have a material adverse effect on financial results - The company states that ongoing legal proceedings are not expected to have a material impact on its financial results[255] Item 1A. Risk Factors No material changes to the company's risk factors were reported for the period ended June 30, 2022 - No material changes to the company's risk factors were reported for the period ended June 30, 2022[256] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchases in Q2 2022, totaling 1,724,986 shares at an average price of $48.12 per share Share Repurchases for Q2 2022 | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | April 2022 | 214,530 | $53.66 | | May 2022 | 818,319 | $50.08 | | June 2022 | 692,137 | $44.08 | | Total Q2 | 1,724,986 | $48.12 | - The Board of Directors increased the share repurchase program authorization by $500 million in April 2022, bringing the total authorization to $6.5 billion[259] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed include CEO and CFO certifications (31.1, 31.2, 32) and various Inline XBRL documents (101 series)[263]