Travel + Leisure(US:TNL)2023-10-25 15:36Financial Data and Key Metrics Changes - The third quarter adjusted EBITDA was reported at $248 million, reflecting a 6% increase year-over-year, while adjusted diluted earnings per share rose by 20% to $1.54 [16][27] - The adjusted EBITDA margin for the third quarter remained flat at 25% compared to the prior quarter and the previous year [2] - Year-to-date adjusted EBITDA growth is 5%, and adjusted EPS growth is 16% [16] Business Line Data and Key Metrics Changes - The Vacation Ownership segment reported revenues of $812 million, an 8% increase, with adjusted EBITDA also increasing by 8% to $203 million [39] - The Travel Membership segment generated $174 million in revenue, down from $183 million in the prior year, with adjusted EBITDA decreasing to $62 million from $65 million [18] - Total owner arrivals were ahead, with a length of stay 5% above the fourth quarter of 2019 [29] Market Data and Key Metrics Changes - Forward resort booking sales volume per guest increased, with Q4 owner nights on the books 7% ahead of the same period in 2019 [3] - The exchange member count has started to recover, but the transaction propensity remains below pre-COVID levels [18][24] Company Strategy and Development Direction - The company acquired the rights to the Vacation Ownership business of Sports Hospitality Ventures, aiming to develop a network of sports-themed resorts [12][35] - The strategic goal includes adding incremental Vacation Ownership revenue streams under the Travel + Leisure brand, with a focus on capital-efficient development [13][35] - The company plans to streamline operations in the Travel and Membership segment to align costs with revised revenue forecasts [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the Travel and Membership segment will see growth in 2024, citing stabilization in transaction propensity [48] - The company anticipates that the fourth quarter will mark the trough in revenue momentum for the Travel and Membership segment [34] - Management noted that 80% of owners have fully paid for their timeshare, indicating resilience against economic downturns [14] Other Important Information - The company returned $98 million to shareholders in Q3 through dividends and share repurchases, aiming to reduce outstanding shares by 10% for the full year [8] - The adjusted free cash flow for the nine months was $81 million, down from $195 million in the same period last year, primarily due to higher originations and interest payments [41] Q&A Session Summary Question: What gives confidence that Travel and Membership will trough in Q4? - Management noted stabilization in transaction propensity and a rebound in membership growth as key factors [48][49] Question: Can you walk through the guidance cut for this year? - The guidance cut was primarily due to a $15 million reduction in the Travel and Membership business forecast for Q4 [60] Question: What are the dynamics affecting free cash flow conversion? - The free cash flow conversion is expected to be around 50%, influenced by timing in the receivable portfolio and increased corporate interest expense [83][84] Question: How significant is the Sports Illustrated acquisition? - The acquisition is expected to be capital efficient, with most costs being cash out the door that will be recovered through product sales [134] Question: What is the outlook for tour flow? - Tour flow expectations are for double-digit growth in Q4 and for the full year, with higher teens anticipated [118]