Travel + Leisure(US:TNL)2023-02-22 15:36Financial Data and Key Metrics Changes - In Q4 2022, the company reported adjusted EBITDA of $225 million and adjusted earnings per share of $1.30, with adjusted free cash flow of $245 million [4][13] - For the full year 2022, adjusted EBITDA increased 10% year-over-year to $859 million, and adjusted free cash flow doubled to $439 million compared to the prior year [5][15] - The company returned $486 million of cash capital to shareholders, representing 15% of its current market cap [5] Business Line Data and Key Metrics Changes - Vacation ownership segment reported revenue of $737 million and adjusted EBITDA of $186 million, increases of 5% and 1% respectively over Q4 2021 [13] - Travel and Membership segment revenue was $163 million, a 4% decrease year-over-year, with adjusted EBITDA down 8% to $57 million [14] - The company delivered 147,000 tours in Q4 2022, with a volume per guest (VPG) of $3,434, representing increases of 14% and 7% respectively over the prior year [13] Market Data and Key Metrics Changes - The company experienced robust leisure travel demand, which has continued into Q1 2023 [4][9] - RCI's North American revenue per transaction increased 10%, although international RPT decreased [8] - Owner reservations for the first quarter are pacing 6% ahead of the prior year [9] Company Strategy and Development Direction - The overarching strategic goal is to increase historical growth rates while generating substantial cash flow [4][11] - The company aims to strengthen cornerstone businesses and add growth through travel clubs, with a focus on maintaining high margins [11][12] - The guidance for 2023 includes adjusted EBITDA between $920 million and $940 million, with gross VOI sales of $2.1 billion to $2.2 billion [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued strength of leisure travel and the company's ability to capitalize on this trend [18] - The company anticipates a slight headwind in the first half of 2023 due to lower RCI member count but expects growth in the second half [17][24] - Management highlighted that the business model remains resilient and predictable, with confidence in achieving guidance despite economic uncertainties [54] Other Important Information - The company repurchased $351 million of common stock and paid $135 million in dividends in 2022 [15] - Adjusted free cash flow conversion from adjusted EBITDA was 51%, with expectations to reach 55% to 60% by the end of 2023 [15][16] - The company expects to maintain a net corporate leverage ratio below 3.5 times by the end of the year [16] Q&A Session Summary Question: M&A Opportunities and Subscription Revenue Growth - Management stated that they continue to evaluate M&A opportunities but prioritize strategic and accretive options [20] - Subscription revenue is expected to face a slight headwind in the first half of the year due to lower member count, but growth is anticipated in the second half [22] Question: Confidence in Q2 to Q4 Guidance - Management expressed confidence in guidance due to strong performance in cornerstone businesses, particularly vacation ownership [23][24] Question: Loan Loss Provision and Portfolio Performance - The loan loss provision is guided at 18% to 19% for the year, reflecting strategic decisions to grow the portfolio [26][53] - Portfolio performance has improved, with delinquency rates dropping in the fourth quarter [27] Question: New Owner Demographics and Travel Club Growth - Management noted that new owner tours are primarily driven by traditional marketing channels, with no change in demographic criteria [31][32] - Travel Club transaction growth was 37% in 2022, with guidance of 20% to 25% for 2023 [33] Question: Tours and VPG Expectations - The company expects nearly 20% growth in tour count for 2023, with VPGs anticipated to remain strong despite some dilution [40][41] Question: Travel and Membership Growth Outlook - Management indicated that the majority of transaction growth in Travel and Membership will come from existing clubs, with proper marketing planned for the year [47]