Tyler Technologies(TYL) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2020, the company reported adjusted EBITDA of $139 million and adjusted diluted EPS of $0.83, showing a decline from adjusted EBITDA of $267 million and adjusted EPS of $1.57 in the same quarter last year [7][24] - Year-to-date positive adjusted free cash flow reached $120 million, indicating a resilient cash flow position despite ongoing challenges [7] - The loan loss provision as a percentage of gross VOI sales was just under 19%, down from 20% in the same quarter last year [19][26] Business Line Data and Key Metrics Changes - Wyndham Vacation Clubs reported revenue of $477 million with gross VOI sales of $256 million, while tours declined 70% compared to the prior year [25] - New owner tours decreased by 80%, while existing owner tours declined by 55%, but VPG increased by 30% to $3,039 [26] - Panorama segment delivered third quarter revenue of $123 million, down from $161 million in the prior year, with adjusted EBITDA of $59 million compared to $70 million [27] Market Data and Key Metrics Changes - In North America, 97% of resorts have reopened, and occupancy rates reached nearly 60% for open resorts, with a total occupancy of 77% over Labor Day [11][12] - Over 90% of owners drove to resorts for vacations, reflecting a shift in consumer behavior towards drive-to destinations [10] - The company noted that Las Vegas and Central Florida were the only two markets representing more than 10% of VOI sales, with Las Vegas at 13% and Central Florida at 12% [11] Company Strategy and Development Direction - The company remains focused on leisure travel and has a geographically diverse resort footprint to minimize reliance on any single market [8][9] - Plans to grow the non-timeshare relationships through Panorama Travel Solutions, targeting over 100 million North American households that do not own timeshare [20][21] - The company aims to maintain free cash flow positivity for the full year while being cautious of uncertainties such as COVID spikes and economic conditions [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the continued recovery in consumer confidence and travel demand, with expectations for improved performance in Q4 [22][38] - The company anticipates tours to be down 60% year-over-year in Q4, with gross VOI sales expected to be 45% lower year-over-year [23] - Management highlighted the importance of adapting to changing consumer behaviors and maintaining flexibility in booking policies to encourage travel [80][90] Other Important Information - The company paid a third-quarter dividend of $0.30 per share and plans to recommend a similar dividend for the fourth quarter [33] - The company has improved its capital and liquidity position, with $1.3 billion in cash and cash equivalents and a net leverage ratio of 4.1x [31] Q&A Session Summary Question: What is the outlook for VOI sales in October? - Management noted continued momentum in October, expecting to cross the $100 million mark for VOI sales, reflecting improvement against the prior year [37] Question: How is the inventory outlook and opportunities in the market? - Management expressed comfort with current inventory levels and indicated that they would focus on driving free cash flow rather than pursuing new acquisitions this year [42][43] Question: What is the margin performance outlook for the Panorama segment? - Current margins are strong due to cost controls, but future margins may face pressure as ARN grows within the Panorama segment [44] Question: How are bookings and cancellations being affected by COVID spikes? - Management observed that cancellations have not spiked despite rising COVID cases, attributing this to consumer fatigue and increased comfort with safe travel [75][86] Question: Are there any restrictions affecting travel to resorts? - Management indicated that while some consumers remain hesitant to travel, the company's diverse resort locations provide flexibility for owners to choose alternative destinations [90]