Travel + Leisure(US:TNL)2022-07-30 14:43Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $230 million and adjusted EPS of $1.27 for Q2 2022, reflecting strong performance compared to $193 million in EBITDA and $0.88 in EPS in the prior year [7][23] - The adjusted EBITDA margin improved to 24.9%, an increase of 70 basis points year-over-year and 40 basis points compared to Q2 2019 [8] - The company expects Q3 adjusted EBITDA to be between $230 million and $240 million, raising full-year adjusted EBITDA guidance to $860 million to $880 million [20][34] Business Line Data and Key Metrics Changes - The Vacation Ownership segment reported revenue of $735 million and EBITDA of $187 million, increases of 22% and 36% respectively over Q2 2021 [24] - The Travel and Membership segment saw a revenue decline of 3% in Q2 but finished up 5% for the first half of the year, with subscription revenue increasing by 5% and transaction revenue declining by 6% [16][27] Market Data and Key Metrics Changes - The company noted that the South, Southwest, and Hawaii regions showed the most demand, while the West Coast and international markets lagged [10] - Drive-to arrivals increased from 73% in March to 79% in June, indicating a shift in consumer behavior towards more accessible vacation options [10] Company Strategy and Development Direction - The company is focused on increasing the percentage of sales financed, which rose to approximately 65% from 55% in the prior year, aiming to grow high-margin net interest income [14] - The company plans to return $350 million to $400 million to shareholders through buybacks and dividends, representing about 10% of its market cap [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued robust vacation ownership demand, with booking pace at 2019 levels and nearly 90% of 2019 second-half room nights already booked [9][52] - The management highlighted that inflation is seen as a net positive for the business model, as rising hotel and vacation rental rates enhance the value proposition for customers [15] Other Important Information - The company added nine new Travel Clubs in Q2 and expects more in Q3, with a focus on driving transactions to these new clubs [17][19] - The company reported a strong balance sheet and cash flow generation, with a net corporate leverage ratio of 3.7 times at the end of the quarter [31] Q&A Session All Questions and Answers Question: Can you talk about what's going on in the West and whether that's just a year-over-year comparison issue? - Management noted that the West Coast is marginally lagging, with occupancy differences of only 2-3 percentage points, which could improve with remaining bookings [40] Question: Are you seeing consumers trade from a fly-to market to a drive-to market? - Management indicated that the increase in drive-to arrivals is a natural shift due to longer airport lines and ease of travel, but it is not a dramatic change [42] Question: How do you grow the Travel and Membership segment from here? - Management expects high-single-digit growth in the Travel and Membership segment for the second half of the year, driven by strategic shifts and increased affiliate engagement [44] Question: Can you share any perspectives on the economic context for later this year and early next year? - Management reiterated confidence in the second half of the year, with booking pace remaining strong and low cancellation rates indicating consumer certainty [52][54] Question: What are the key variables driving volatility in the new fee-based businesses? - Management identified four key variables, including demand for the travel platform and the propensity of memberships, indicating a positive outlook for growth [55] Question: How do you think about the VPG range going up? - Management attributed the increase in VPG to improved close rates and a combination of factors including inflation and demand, with a slight moderation expected due to the new owner mix [59][60] Question: Can you discuss the recent securitization and changes in advance rates? - Management explained that the decrease in advance rates was due to higher interest rates, not performance issues, and highlighted the strength of the portfolio [62][63] Question: Is there enough inventory available in the vacation exchange business? - Management acknowledged that higher owner occupancies could impact available inventory but did not indicate significant revenue or EBITDA impacts from this [104]