Travel + Leisure (NYSE:TNL) 2025 Conference December 02, 2025 08:00 AM ET Company ParticipantsMichael Brown - CEOErik Hoag - CFOConference Call ParticipantsStephen Grambling - AnalystStephen GramblingI think they're just kicking it right off. What a better way to kick off our Global Retail and Consumer Conference on Travel Tuesday than with Travel + Leisure. Michael, Eric, thank you for joining us. We were talking this morning about how Travel + Leisure is actually one of the best-performing stocks in my en ...

Core Insights - U.S. small/mid-cap equities showed solid performance in Q3 2025, with Aristotle Capital's strategy returning 2.57% net of fees, underperforming the Russell 2500 Index's 9.00% total return [1] Company Overview - Hilton Grand Vacations Inc. (NYSE:HGV) is a leading global timeshare company that develops and operates high-quality vacation ownership resorts under various brand names [3] - The company has a proprietary relationship with Hilton Worldwide Holdings, allowing it to market to Hilton Honors members, which enhances its growth potential in the travel sector [3] Financial Performance - Hilton Grand Vacations Inc. reported a total revenue growth of 12% in Q3 2025, reaching $1.3 billion [4] - The stock experienced a one-month return of -5.47% but gained 10.44% over the last 52 weeks, closing at $41.45 per share on October 31, 2025, with a market capitalization of $3.546 billion [2][4] Investment Sentiment - Hilton Grand Vacations Inc. was held by 32 hedge fund portfolios at the end of Q2 2025, indicating a slight increase from 31 in the previous quarter [4] - Despite its potential, the company is viewed as having less upside compared to certain AI stocks, which are considered to carry greater upside potential and less downside risk [4]

Financial Data and Key Metrics Changes - Contract sales increased by 17% to a record $907 million, driving significant improvements in real estate business profitability [4][6][20] - Adjusted EBITDA reached $302 million with margins excluding reimbursements at 24%, consistent with the prior year [20][24] - Total revenue before cost reimbursement grew by 12% to $1.3 billion [20] Business Line Data and Key Metrics Changes - Real estate profit was $178 million with margins of 27%, up 300 basis points year-over-year [23] - Financing business revenue was $128 million with a profit of $75 million, resulting in margins of 59% [23] - Member count reached nearly 722,000, reflecting increased recapture rates [9][24] Market Data and Key Metrics Changes - VPG (Volume Per Guest) increased by 15% year-over-year to $3,900, with broad strength across both owner and new buyer channels [21][24] - Consolidated tour growth was up 2% year-over-year, with 232,000 tours conducted [20][24] - Occupancy remained stable at 83%, with fourth-quarter arrivals ahead of the prior year [8][20] Company Strategy and Development Direction - The company is focused on enhancing its value proposition and improving cost efficiencies while continuing to invest in long-term capabilities [5][17] - Strategic initiatives include growing lead flow, improving execution, and enhancing the customer experience through technology and partnerships [10][16] - The integration of Bluegreen Vacations is progressing well, with $94 million in run-rate cost synergies achieved [14][20] Management's Comments on Operating Environment and Future Outlook - The consumer environment remains stable, with healthy travel demand indicated by forward indicators and member surveys [5][6] - The company expects to maintain high single-digit contract sales growth and reiterated its existing EBITDA guidance for the year [6][28] - Management expressed confidence in the investments made, which are anticipated to drive sustainable value creation [5][17] Other Important Information - The company repurchased 3.3 million shares for $150 million during the quarter, with a total of 12.4 million shares repurchased year-to-date [10][28] - The liquidity position as of September 30 included $215 million in unrestricted cash and $632 million available under a revolving credit facility [28][29] Q&A Session Summary Question: Expectations for 2026 and financing profit - Management indicated strong momentum heading into 2026, expecting good tour flow growth driven by investments made [33][40] - Financing profitability may face headwinds but is expected to hold steady due to a growing portfolio and optimization efforts [56][57] Question: Strong VPG results compared to the travel industry - The company attributed the 15% VPG growth to effective execution, innovative membership programs, and high satisfaction rates among members [62][66] Question: Flow through and marketing package expenses - Higher marketing package expenses of approximately $7 million were incurred, which will convert to revenue in future periods [72][81] - Reportability issues were noted, with an $8 million increase in contract sales during the last 10 days of the quarter [82] Question: Rental business recovery - Recovery in the rental business is expected to be gradual, driven by contract sales and recaptured inventory [102][104] Question: Delinquency rates and consumer stability - Delinquency rates for subprime loans remain stable, attributed to strong consumer engagement and satisfaction [147][150]

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Marriott Vacations Worldwide despite higher revenues, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is expected on November 5, with a consensus EPS estimate of $1.64, reflecting an 8.9% decrease year-over-year. Revenues are projected at $1.33 billion, a 2.1% increase from the previous year [3][12]. Estimate Revisions - The consensus EPS estimate has been revised 0.87% higher in the last 30 days, indicating a positive reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a positive Earnings ESP of +0.80% for Marriott Vacations Worldwide, suggesting a likelihood of beating the consensus EPS estimate [12]. Historical Performance - In the last reported quarter, the company exceeded the expected EPS of $1.72 by delivering $1.96, resulting in a surprise of +13.95%. Over the last four quarters, the company has consistently beaten consensus EPS estimates [13][14]. Investment Considerations - While a potential earnings beat is a positive indicator, other factors may influence stock performance, making it essential to consider the broader context [15][17].

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $203 million for the quarter, reflecting a 29% increase year-over-year with margins improving by 360 basis points [4][18] - Contract sales were down less than 1% for the quarter, an improvement compared to Q1, with first-time buyer sales up 6% year-over-year [6][15] - Delinquencies declined by 50 basis points sequentially and 110 basis points year-over-year, reaching the lowest levels in two years [15][29] Business Line Data and Key Metrics Changes - Owner sales declined by 4% due to lower VPGs, while owner tours remained flat [15] - Total company rental profit decreased by $7 million or 16% to $35 million, driven by increased unsold maintenance fees and marketing expenses [17] - Management exchange profit increased by 3% to $98 million, attributed to increased revenue in the vacation ownership segment [17] Market Data and Key Metrics Changes - The company achieved nearly 90% resort occupancy, with strong performance in Maui, Coastal Florida, and The Caribbean, while Las Vegas showed relative weakness [5] - First-time buyers represented a third of total contract sales in the quarter, up 200 basis points from a year ago [7] Company Strategy and Development Direction - The company is focused on modernization initiatives expected to deliver $150 million to $200 million in run rate benefits by the end of 2026, with half from revenue initiatives and half from cost savings [6][11] - The modernization program aims to enhance decision-making speed, optimize IT platforms, and drive growth in the leisure-focused business [7][12] - The company plans to restrict inventory spending to low-cost reacquired inventory and capital-efficient arrangements [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model and the continued prioritization of leisure travel by consumers [4][13] - Despite external uncertainties, the company expects high occupancy rates to continue and anticipates strong owner keys for the second half of the year [12][14] - The long-term financial model remains unchanged, with expectations for high single-digit to low double-digit EPS growth over time [14] Other Important Information - The company ended the quarter with $800 million in liquidity and a leverage ratio of 3.9 times [18] - Adjusted free cash flow is expected to be between $270 million and $330 million for the year, excluding one-time cash costs related to modernization initiatives [20] Q&A Session Summary Question: Contract sales trends in June and July - Management confirmed that July contract sales were up slightly from June, with June showing a 3% year-over-year increase [26][27] Question: Loan loss provision expectations - The loan loss provision guidance increased to 12.5%, which is about half a point higher than previous expectations, reflecting ongoing improvements in delinquencies [28][29] Question: Expanded owner benefits and EBITDA impact - The expanded owner benefit provides more options for owners but is not expected to significantly impact EBITDA growth [33][34] Question: Share buyback restrictions - Management indicated that there were blackout periods preventing share buybacks, but they plan to be opportunistic in the future [36][37] Question: Inventory efficiency and cost implications - The company aims to reduce inventory levels to one to two years on hand, with a slight increase in product costs expected over the next few years [45][46] Question: Loan loss provision increase despite improving delinquencies - Management explained that while delinquencies are improving, they are still higher than desired, prompting a conservative approach to the loan loss provision [53][54] Question: Sales performance in Maui - Maui showed strong year-over-year performance, with contract sales and occupancy rates improving, although some challenges remain [59]

Core Insights - Hilton Grand Vacations (HGV) reported Q2 2025 results with strong contract sales but missed Wall Street forecasts for both GAAP revenue and adjusted EPS [1][5][14] - The company emphasized ongoing integration of acquired businesses, particularly Bluegreen Vacations, as a key strategic focus [1][4] Financial Performance - GAAP revenue was $1.266 billion, below the estimated $1.378 billion, while adjusted EPS (non-GAAP) was $0.54 compared to an expected $0.81 [1][2] - Adjusted EBITDA attributable to stockholders was $233 million, down 11.1% from $262 million in Q2 2024 [2] - Adjusted free cash flow dropped 63.5% year-over-year to $135 million, with free cash flow at $28 million, a 70.5% decline from the previous year [2][13] Business Segments - Contract sales increased by 10.2% to $834 million in Q2 2025, indicating solid top-line growth [2][5] - The real estate sales and financing segment generated $760 million in revenue, but profit margins faced pressure due to a $45 million net deferral related to ongoing projects [6] - Resort operations and club management revenue grew to $405 million, but adjusted EBITDA decreased from $152 million to $149 million, with a profit margin drop to 36.8% [7] - The rental and ancillary services segment reported flat revenue of $195 million but moved to a loss of $8 million from a $7 million profit compared to Q2 2024 [8] Strategic Focus - The company is focusing on expansion through acquisitions and brand partnerships, with the Bluegreen Vacations acquisition broadening its product range [4] - Inventory management is crucial, with a pipeline valued at $13.3 billion and owned inventory representing 90.6% of total contract sales pipeline [11] Shareholder Actions - In Q2 2025, the company repurchased 4.1 million shares for $150 million and approved an additional $600 million repurchase authorization [13] - The net leverage ratio remained at approximately 3.9x trailing-twelve-month EBITDA as of June 30, 2025 [13] Outlook - Management maintained its 2025 guidance for full-year adjusted EBITDA in the range of $1.125 billion to $1.165 billion, with no updates on revenue or earnings per share [14] - Key watch points include membership growth, integration pace of Bluegreen, and recovery in profit margins [15]

Group 1 - Travel + Leisure Co. (NYSE: TNL) experienced a ~7% increase in stock price following its Q2 2025 earnings release on July 23, contributing to a year-to-date increase of over 25% [1] - The performance of TNL is notable given the overall weakness in consumer discretionary stocks this year [1] Group 2 - Manika, a macroeconomist with over 20 years of experience in investment management and related industries, runs the profile Long Term Tips (LTT), focusing on opportunities in the green economy [1] - The investing group Green Growth Giants, associated with Manika, delves deeper into opportunities within the green economy segment [1]

Group 1 - Marriott Vacations is a significant player in the timeshare industry, competing with Hilton Grand Vacations and Travel + Leisure [1] - Unlike its competitors, Marriott Vacations has experienced a notable boom in its business [1]

Leisure Consumer Space Analysis - Bank of America Securities provided a cross-sector analysis of the leisure consumer space, highlighting that while performance trends vary by category, segments like cruises and premium travel are showing steady performance, while value-focused areas are experiencing weakness [1] - In the lodging sector, aggregated credit and debit card data for April indicated a 3% year-over-year decline in spending, consistent with March figures [1] Las Vegas Room Rates - The Las Vegas room rate survey indicated a weakness, with forward rates down 11% [2] Hotel Performance Insights - Analysts noted that Bank of America's card data skews towards leisure spending, aligning with comments from Hilton Worldwide Holdings Inc., Hyatt Hotels Corporation, and Marriott International, all of which reported softer low-end RevPAR trends [3] Ski Industry Performance - Vail Resorts reported a 3% drop in ski visits this season, underperforming the overall industry, which saw a 2% increase [4] - Despite a decline in the number of passes sold, total dollars collected are up through April 20, with Memorial Day being a key trigger for pass sales, although an increase in web traffic has not yet been observed [5] Cruise Industry Trends - Spending in the cruise segment has slowed from strong double-digit growth late last year to flat year-over-year in April, attributed to economic uncertainty and the timing of Easter [5][6] - Norwegian Cruise Line Holdings flagged a slowdown in booking activity, particularly for longer European sailings, while Royal Caribbean Cruises maintained its full-year 2025 net yield guidance unchanged [6] - Overall, cruise operators remain well booked for 2025 and have time to secure additional bookings for 2026 as the year progresses [7]