Q2 2023 Travel + Leisure Co Earnings Call

Greetings and welcome to the travel and leisure second quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press.

Star Zero on your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Chris Agnew Senior Vice President Investor Relations. Thank you. Please go ahead.

Thanks, Donna and good morning to everybody.

Before we begin we'd like to remind you that discussions today will include forward looking statements actual results could differ materially from those indicated in the forward looking statements and the forward looking statements made today are effective only as of today, we undertake no obligation to publicly update or revise these statements.

The factors that could cause actual results to differ are discussed in our SEC filings and in our earnings press release accompanying this earnings call and you can find a reconciliation of the non-GAAP financial measures discussed in today's call and the earnings press release available on our website at travel and leisure co dotcom.

Forward slash investors.

This morning, Michael Brown, our President and Chief Executive Officer, who will provide an overview of our second quarter results and full year outlook.

And Mike Hug, our Chief Financial Officer will then provide greater detail on the quarter, our balance sheet and liquidity position.

During our prepared remarks, we look forward to responding to your questions and with that I'm pleased to turn the call over to Michael Brown.

Thanks, Chris Good morning, everyone and thanks for joining us today.

We are pleased to report solid second quarter results and the continued return of capital to shareholders with our solid results and the board owner bookings at our resorts, we are re or for reaffirming our full year adjusted EBITDA guidance.

For the second quarter, we reported adjusted EBITDA of $236 million, a 3% increase over the prior year and adjusted earnings per share of $1 33.

5% improvement over Q2 2022.

Adjusted EBITDA margin was 25%, which was flat compared to the prior year and reflects headwinds from higher interest expense from ABS transactions.

And our investment in growing new owner mix.

In the second quarter, we returned $135 million to shareholders. We paid a <unk> 45 cents per share dividend on June 30th and repurchased two 6 million shares for $100 million.

Over the last 12 months, our share count has been reduced by 10 million shares 12% of the shares outstanding at the end of June 2022.

Now let me discuss some of the key performance indicators that we monitor to gauge the health of the travel consumer.

Forward bookings volume per guest or BTG, and the performance of our consumer finance portfolio.

First forward bookings owner nights on the books for the second half of the year continued to track ahead of 2019, providing us good visibility into the remainder of the year.

Second is volume per guest.

Our Q2 <unk> $3150 was at the top end of our guidance range and 30% above 2019.

<unk> remains well above our long term guidance range of 2700 to $3000.

On an absolute basis btg's are healthy and reflect the strong value proposition of our product.

On a relative basis, we saw a modest reduction in close rates through the quarter, which likely reflects a pullback of pent up demand in the prior year.

Our <unk> guidance for the full year is unchanged at 3058 to $3150.

Sequentially, <unk> declined $65 or 2% with 60% of this related to mix impact you.

Year over year, <unk> declined $339 or 10% with close rates accounting for 64% of the year over year decline.

The balance was mix related with new owner transactions, increasing to 34% of total transactions in the quarter up 200 basis points from the prior year.

This investment in new owners owners adds to our pipeline of future upgrade sales opportunities.

Turning to our consumer finance portfolio, we saw a similar picture emerge in the second quarter delinquencies are performing well on an absolute basis, but we did see further normalization in the quarter.

However, there is nothing in these changes that we would expect to impact our full year loan loss provision guidance the.

The strategic moves we made in 2020 to raise credit credit standards have positioned us well for the current economic environment.

At the end of the second quarter, 11% of our portfolio had a FICO below 640 and year to date. The average FICO score for originations is 738.

The prepaid nature of timeshare ownership is a key differentiator for our business model, 80% of our owners have fully paid for their timeshare and therefore, the choice to vacation is less dependent on economic conditions.

As we've said before our healthy mix of recurring and predictable revenues is one of the reasons. We expect our business will continue to be resilient, if we enter a more challenging economic environment.

This resilience in demand among timeshare owners has been proven time and time again, most recently coming out of Covid.

Blue thread sales, our new owner marketing channel aligned with Wyndham hotels continues to exceed expectations.

Blue thread tours increased 20% year over year in the second quarter compared to 15% growth in overall tours.

At travel and membership transaction propensity continues to be a headwind at RCI with transactions declined 7% year over year in the second quarter.

This was somewhat offset by a 5% increase in exchange revenue per transaction on the back of mix improvements and price increases.

Oh club transactions declined 9% year over year, which was consistent with the expectation that we communicated on our first quarter call.

Shifting to our 2023 outlook, we are reaffirming our adjusted EBIT guidance range of $925 million to $945 million as well as our expectation for gross VOI sales to be within a range of $2 one to $2 $2 billion.

We recognize the uncertainties related to the outlook for the economy, but we are optimistic about the company's ability to deliver strong performance.

Although we expect consumers will continue to.

To prioritize vacations, we came into the year anticipating some normalization of demand trends.

We saw some of this in the second quarter and our guidance for the second half of the year reflects a range of unquote outcomes, including at the low end potential softening of trends for.

For more detail on our performance I would now like to hand, the call over to Mike.

Thanks, Michael and good morning to everyone as.

As well as discussing our second quarter results I'll provide more color on our balance sheet and cash flow.

All my comments will refer to comparisons to the prior year unless specifically stated.

We reported second quarter, adjusted EBITDA of $236 million and adjusted diluted earnings per share of $1 33.

Increases of 3% and 5% respectively.

Adjusted EPS was impacted by approximately <unk> <unk> due to the cumulative impact on our tax rate of income tax legislation passed in certain states during the quarter.

Looking at the performance of our two business segments in the second quarter.

Vacation ownership reported segment revenue of $768 million, an increase of 4%.

Adjusted EBITDA of $197 million was flat to the prior year.

We delivered 170000 tours in the second quarter, 15% growth year over year, and <unk> was $3150 meeting the top end of our expectation.

Adjusted EBITDA growth in the second quarter was primarily impacted by the normalization of the provision as well as higher interest expense on the ABS transactions.

Which have closed over the past 12 months.

Revenue in our travel and membership segment was $179 million in the quarter compared to $188 million in the prior year.

Adjusted EBITDA was $52 million compared to $64 million in the second quarter of 2022.

Exchange member Count has started to recover but not enough to offset the reduction in transaction propensity.

Turning to our balance sheet, our financial position remains strong and in the second quarter. We continued to return capital to shareholders through share repurchases and our regular quarterly dividend of <unk> 45 per share.

In the first half of the year, we repurchased $202 million of common stock representing 7% of shares outstanding compared to year end 2022.

We have $275 million remaining under our approved share repurchase program.

In July we closed on our second ABS transaction of the year of $300 million transaction with a weighted average coupon of 672% and advanced rate of 92%.

The transaction had thought oversubscription levels underlying the strength and resiliency of our ABS program and the market's confidence in our business model.

Adjusted free cash flow was $11 million in the first half of the year compared to $121 million in the same period last year due to higher year over year originations in our loan portfolio certain other working capital items and an increase in interest payments on our corporate debt.

Our net corporate leverage ratio for covenant purposes was three seven times at the end of the second quarter.

We continue to expect our leverage ratio to decline by the end of the year to below three five times.

Now, let me provide some more detail about our expectations for the third quarter.

Overall, we expect adjusted EBITDA to be in the range of $245 million to $260 million.

With travel and membership to be in the range of 60% to $65 million.

Gross VOI sales in the third quarter are expected to be in the range of $580 million to $600 million with.

With BTG in the range of 3000 to $3100.

With respect to our provision for loan loss, we continue to expect a range of 18% to 19% for the full year.

With the third quarter provision to be over 19%.

Historically it is not unusual for our third core provision to be the highest of the year.

Related to EPS, we are expecting our effective tax rate to be between 27%, 28% for the full year with stock based compensation is expected to be around $12 million per quarter, and net interest expense of approximately $60 million per quarter for the remainder of the year.

Overall, our strong second quarter performance drove continued growth in adjusted diluted EPS and return of capital to our shareholders.

Results met our expectations allow us reaffirm our outlook for balance of the year.

With that Donna can you. Please open up the call to take questions.

Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.

Once again Thats star one for any questions. At this time. This morning's first question is coming from Joe Greff of J P. Morgan. Please go ahead.

Good morning, everybody.

Michael you talked about the close rates.

Coming down towards the end of the second quarter can you talk about close rate trends for both new and existing owners and bucket. It in those two categories.

What are you seeing there.

Absolutely and I'll, then I'll bucket. It for Q2, and then give you a perspective of how we're looking at that those close rates going forward.

We saw pretty much across the board.

What I would call it normalization because the close rates are still well above our historical norms for owner.

Blue thread tours, and our non affinity new owner tours.

The normalized throughout the quarter and then.

What we saw as we've moved into July and the way we're looking at the remainder of the year as those July close those June close rates are what we would expect going forward and what we're already seeing in July so those components.

There's been nothing that stood out particularly.

Between the three channels.

Highlighting strength or weakness in any of them they've just been a slight normalization and then those have continued into July .

What we expect for the remainder of this year.

Got it Okay and then.

Margins were down year over year in <unk> in the second quarter can you talk about.

Margin expectation in the <unk>.

Yep.

Yeah, Hey, Joe This is Mike.

As it relates to margins in the second quarter, we talked about the fact that.

We did invest in the.

New owner growth. So that's a positive sign for the business.

Year over year, there was some pressure as it relates to the provision for loan losses.

Second quarter of last year compared to the second quarter. This year and then the same thing on the interest expense on the ABS debt. The transactions we've done over the last 12 months have been a little bit more expensive. So overall for the consolidated business margins.

It remains strong, but there was some pressure like I said on those two items from a year over year standpoint, as it relates to the vacation ownership business.

And then do you expect them to be down similarly in the <unk> and <unk>.

Well I would say that the comparisons become easier when you look at the provision in the second half of last year compared to second half of this year and the same thing with the <unk>.

Interest expense those kind of start to normalize on a year over year basis, as we progress throughout the year.

So then that means margins would.

Would be up and the comparisons I mean can you just sort of quantify that.

Yes, I would suspect that you are exactly right that margins continue to improve especially in the fourth quarter I think about the timing right third quarter, you have pressure because it's your largest new owner tour volume.

And then fourth quarter I would expect that bill that they'll move back up.

Yeah, just just the interest in that provision where punitive.

We're the most punitive earlier in the year and as the year progresses, they become less punitive to the overall margin.

As you look into the fourth quarter, that's one of one of the reasons, our fourth quarter VOI margin accelerates.

Thank you guys.

Yes.

Thank you. The next question is coming from Chris <unk> of Deutsche Bank. Please go ahead.

Hey, good morning, guys.

Alright, great.

Good morning, So maybe we start on the travel membership side I know you've talked about kind of this.

Structural challenge of lower propensity to transact on the exchange side is there anything you can do to.

Just try to reverse that and I know its folks that are exchanging within the networks more often but is there anything you can do.

I don't know what it might be but to kind of stimulate that or is that is that a business where this is really just going to be about managing costs and things like that.

There were a number of things that we can do Chris and then yes, managing cost is always one component but.

We believe this platform.

Which has been actually helped by the travel club business allows us greater suite of options. So theres propensity there's transaction price, but then there is overall share of wallet and one of the components that could help the exchange business is to provide a greater suite of travel services simply than the <unk>.

Change fee.

That is that is one of the initiatives that we have in place.

And even if propensity does not bounce back to where it was pre COVID-19 there are opportunities along that line.

Hope.

Hopefully it which is a bit more longer term looking at spaces, just outside of pure timeshare to provide exchange services to so I think those are two good opportunities for us as we go forward.

Okay. Thanks, Thanks, Michael and then as a follow up.

On the timeshare on the core Voip's.

I know you guys, obviously cover a wide range of customer demographics.

But is there any thought to with your brand portfolio are there any.

White spaces, where you might see an opportunity to introduce new brands or something like that we have seen wyndham do that on the on the resort side with all new all inclusive brands. So just any any thoughts on whether.

There could be.

Brand changes coming.

Absolutely I think it's a great question is we've always felt that there were two opportunities for diversification of our business.

Post Covid. The first is the travel club side.

<unk>.

Is allowing us to diversify to a degree on the travel of membership side, but we absolutely believe that there is a lot of white space on the video.

Side of the business.

To continue to support the <unk>.

Ryan, we're having with Wyndham and continue to grow that in the future. However, there are more white spaces that we feel that there are opportunities.

To grow into.

We communicated that.

Just over 18 months ago at our Investor Day.

As we've rolled forward the timeline on that our pipeline is as strong in that space as it's ever been and although we are not ready to announce anything today, we do express confidence in.

In our pipeline and believe that that is an opportunity for us as we move forward.

Okay very helpful. Thanks, guys.

Thanks, Chris.

Thank you. The next question is coming from Patrick <unk> of Truth Securities. Please go ahead.

Hi, good morning, gentlemen.

Good morning, Patrick.

Michael you talked about owner.

I think it is on our reservations being ahead for the second half can you give a little more granularity on that.

1% or is it up.

15%.

One more caller, please okay, yes, absolutely which.

Yes.

The owner arrivals and length of stay is a critical part of our business. We are on arrivals for owner base flat to 2019, but on a room night basis.

4%.

It's a reflection that owners are staying longer and the whole work from anywhere environment.

It is still going strong we really haven't seen an adjustment to the length of stay from this year to last.

We also closely watch booking windows, because usually when confidence wanes booking windows compress.

And we are at about 120 days booking window, which is very consistent with what we've seen historically.

Just interesting stat, we were starting to see search patterns begin 160 days in advance which means people are already looking into the end of this year and into next year, which again just expresses confidence in people's desire to get the travel and I think we've seen.

Very similar confidence level come out in the recent consumer sentiment index. It was released I believe earlier this week I think one other unique aspect.

Or just granularity as we're.

We're not seeing it.

Particularly by region, any particular strength or weakness.

One of the real benefits of our portfolio, we have 250 resorts around the world 180 destinations and therefore, we're not overly reliant on any particular geography.

Of course, Orlando, Myrtle Beach, Tennessee, Las Vegas, our big markets, but.

We really don't.

We aren't overly reliant on a particular destination.

And.

Makes us feel good about.

The geographies and the diversification we have.

And any particular exposures.

Okay. Thank you and then.

Regarding.

The travel and memberships sector. It looks like you are.

Guidance for <unk> is below street expectations, but it's it's.

It's possible <unk> could be about.

Is there anything in.

In that <unk> guidance number regarding timing of costs that hurts you in <unk> that you might get back in <unk> or maybe helped you in <unk> or.

Anything to think about there. Thank you.

Well actually.

There is nothing particular in Q3 or Q4 related to travel and membership.

The <unk>.

The primary focus that we have in that space is around full density and as propensity goes really well flags.

The outcomes of that segment.

We get questions on travel clubs, but those are.

That segment is less than 5% of our company EBITDA. So moves in that space don't really affect the outcome. It really becomes a matter of our effectiveness on propensity.

And we continue to work hard at that.

To offset the opportunity there.

The risk related to propensity, but.

With our membership growing again and above last year.

It is a slight tailwind that we don't have to face in Q1 or Q2.

Sort of.

A year on year lower membership. So we think as the membership grows you'll start to see even more benefit in Q4.

And then lastly related to.

To that.

How are you how are you doing with <unk>.

Getting organizations to sign up.

On the call you Didnt really mention any anything new with that anything accelerating is that ahead of schedule behind schedule.

Just some color. Please thank you.

I assume you mean, the travel club is that correct.

That would be yes.

So we continue to have really good interest and.

Company sign ups, we didn't mention any anything this particular quarter. Although we have had plenty of sign ups. It's really now a matter of driving transactions and our energy is spent around elevating the propensity to transact in that space, we have the necessary population in.

That area is growing transactions are growing in the second half of this year. So for us it's around just being intelligent and the <unk>.

Marketing dollars and the propensity to transact.

And again, it's a it's a profitable piece of our business, which helps to offset propensity and although it is not growing at the level that we had originally anticipated it provides a positive offset too.

The the exchange propensity headwind that we talked about which is which is the big mover in the space.

And sorry, one last year.

I ask this every quarter, but.

Safe to assume that.

For your long term guidance vacation ownership tracking ahead travel and membership.

Yeah tracking behind but still overall on overall tracking to that.

That's the best way to characterize it Patrick I mean, we're only 18 months into a four year plan and.

The last six months have definitely been.

Full of interest rate and macroeconomic uncertainty.

But the characterization characterization of travel a membership running behind vacation ownership ahead.

With two and a half years to go and I think referencing back to Chris <unk> question, and our ability to diversify on the video side, which is the vast majority of our EBITDA and where we have some wise white space.

As we start to get into next year and some of those things unfold and the uncertainty clears up and turns into more economic and interest rate certainty.

We'll be able to really start to sharpen our pencil on the 2025 plan.

Okay rationally exactly what you said is the right way to characterize it okay. Thank you Pamela.

Thank you. The next question is coming from Ian.

<unk> of Oppenheimer. Please go ahead.

Hi, yes, thank you very much.

Can you guys maybe talk about.

As far as geographic spread of demand what centers, where kind of the strongest did you see any.

Less strong markets and then maybe if you like just wrapping RCI into that as well.

What are you seeing domestically versus international.

Yes, great question.

To pull it back up for a second.

As I mentioned early 250 resorts.

90% of our sales are going to happen in North America, and our key centers are key concentrations Las Vegas, Tennessee, and Myrtle Beach.

<unk>.

Primarily central Florida.

Really is where the vast majority of our sales will occur with with.

Each any of them, peaking out at around around 10% of our total volume. So again, we're not overly concentrated in any particular market.

And when you look at demand and close rates across our geographies, we're really not seeing particular variation.

In the last quarter I think we've all seen the news that central Florida is a bit down, but our our demand remains very consistent in central Florida, which again speaks to the timeshare model.

The beach locations, that's the southeast destinations have been very popular as far as bookings.

And as it relates to RCI.

We have.

We served.

Latin community and particularly in Mexico.

<unk> really seen a resurgence and strength in the Mexican exchange market and just generally the timeshare market there so.

That shift from drive too right coming out of Covid to a bit more mid haul.

Demand.

It's showing up in the Mexican market.

And in the end like I said, the diversification that we have really gives us.

Hedges in.

Headwinds in some markets there is tailwind in others.

And across the board, we're really seeing consistent demand for the second half of this year nothing that stands out really.

Worth pointing out.

Okay. Thank you and then maybe talk about.

The inventory side, I guess with with rates going up.

What are you doing in that inventory in an environment do you think this can be with inventory being built.

And how do you kind of.

Turning yourself thanks, yes.

Good morning, Ian This is Mike hug.

So as it relates to inventory we've talked about the fact that we've got four years of inventory on our balance sheet. So really right now our inventory spend is pretty minimal $100 million of lesson and that will continue for the next several years. So as it relates to a lack of inventory being built or when it is being built and more expensive one of the things about.

Having that inventory on the balance sheet is we don't have exposure to increasing costs and things like that so we're in a good spot from an inventory standpoint.

For the next several years for sure.

So really don't have any pressure as it relates to.

Going out and sourcing inventory if the right opportunity came to US we can do an asset might be up as a market that we really wanted to something like that but right now we arent outlook.

Looking for a whole lot of inventory because of the nice position, we have on our balance sheet.

And I would like to jump back to Joe's question on margin.

First answered the question as relates to the first part of the question.

Thinking about the year over year margins and the price related provisioning.

The interest expense for the second part of the question was basically margins in the second half of the year and kind of what we'd expect for the vacation ownership business at the end of the year at margins that are comparable to where we ended 2022.

Okay.

If I could just add and maybe it's a little promotion of one of our projects as the last project that was delivered for the company was in Atlanta. It was a dual branded club Wyndham Margarita Bill vacation club.

Two different two different markets consumer wise, one building and.

Maybe one of the finest timeshare resorts.

In North America, but that was our last in process construction is completed.

So when we look at our inventory spend today, it's not as if we're we're mid cycle than anything our commitments are really aligned to reducing our balance sheet and using sales to burn off.

Several years of inventory Thats sitting there, but for those of you who have not been to Atlanta project I'd invite you all to visit next time here in the city.

Okay. Thank you very much thanks, Dan.

Thank you. The next question is coming from Brent Montara of Barclays. Please go ahead.

Great. Thanks.

For taking my questions everybody.

Follow up to Joe's question on the close rates throughout the quarter loud and clear Mike that.

Hey.

Sort of.

Got it into July or using that in the back half and you guys.

I wanted to dig in a little bit in terms of what like how far back we are.

Two 2019 levels in that sort of July close rate level. After you adjust out.

The repeat versus owner mix. After you adjust out the channel mix, which I know, which is a big driver you guys sure.

Wrapping out a lot of the lower efficiency channels.

The point is.

How defensible.

The close rates that you guys have that youre seeing in July on that sort of same store basis.

So let me let me start with the statement that.

The close rates stay where they are right now which is a bit of a normalization from last year's pent up demand that puts us well above the high end of our long range guidance plan. So.

We're very satisfied with where our close rates ended the quarter at where they continue in July the answer the answer to your question is is there are about 40 thereabout mid way back from the peak point to where they were pre COVID-19.

And.

You heard us lay out of the BTG component what was due on a sequential basis and what was the what was on a year on year basis due to mix and what was due to.

The normalization.

Just these are round numbers, but just to put it.

Pre COVID-19 level was 10%.

At the peak last year's 13 were about at 511 seven so.

That is a very.

Positive close rate number and.

We've seen that.

Throughout June and throughout July .

And really that level of normalization, we have incorporated into our outlook for the remainder of this year.

Does that answer your question that.

It was super Super clear and very helpful.

The second question is about sort of consumer behavior, and we don't usually talk about the higher end consumers of lower end consumer.

Thanks, you guys talk about your.

Your cycle under 640 <unk>.

Yes.

When you think about or what you see in terms of.

Timeshare purchase.

Points per transaction or timeshare purchase per per closure.

Are you seeing.

Softer.

Less consumer propensity to purchase a lot of points for sort of larger transactions is that something happening under the surface.

No.

The the impacted <unk>.

If you strip out mix because.

<unk>.

There is a mix effect, it's not at an average price per transaction. It is it is almost solely due to close rate.

So there isn't any underlying nuance that.

Should be shared it's simply.

We had a incredible pent up demand in Q2 of last year that followed through the summer season of 2022, and then it began to normalize in the fall of last year.

And the primary differences close rates, what I would say, because we sort of brushed through mix in it and.

But I think there is.

<unk> component.

The mixed story, which is.

I've consistently said over the last year, we over the next few years, we'll get to 35% to 40%.

New owner mix.

And in Q2, we were at 34% already and my expectation is we will be above that in Q3, because its summer season, it's our primary new owner quarter.

The margins, we're achieving the outlook that we're providing is in light of a new order mix that is filling the pipeline for future owner sales ahead of the expectations, we laid out over the past year. So the team's really and we said at the beginning of the year. The team has dedicated itself to grow in the new one.

Of our side of the equation and investing in our business early in this part of the cycle to set ourselves up for future success and.

The 34% that we achieved in Q2 was a very strong result, and I think we're going to see the same strain come out of Q3 as well.

Okay.

Great extra color thanks for all that.

Thank you. The next question is coming from David Katz of Jefferies. Please go ahead.

Good morning, everybody. Thanks for taking my questions.

Morning.

Good morning so.

I wanted to go back to a comment.

Or a discussion point ahead with Mike hug.

A while back regarding the terms on securitizations.

The impact of narrowing credit spreads.

Were those terms could could be expected to improve.

Can we just have an updated chat about that in.

Where we could see it in some more detail yes.

Sure sure happy to do that and thanks for the question David I guess, when we look at spreads. They have continued to tighten which I said they had room to do if we look at the transaction. We just did in July compared to the transaction last October spreads on the tranches tied to anywhere between 25 bps and 105 bps.

The April transaction and the July transaction, you know the spreads were flat to better by 70 bps. So you know.

What we need is some certainty in interest rates right. When there is uncertainty in interest rates. So the spreads are wider so as we progress through the next several months and hopefully start to get some certainty as to where interest rates are going to so I would like to think that those.

Those spreads continue to have the opportunity to tighten and obviously the benchmark had moved up from the.

Faithful to July transaction, which is why the overall rate came in at $6, 72% compared to $6 33 for the April transaction, but overall, good solid execution and good solid demand in.

I would like to think that once the interest rate environment starts to become a little more certain theres still some opportunity for spreads to tighten further.

So I just want to make sure I'm clear on this I mean, meaning if market interest rates stop going up and stay flat.

We could see some other terms within the securitizations improve a little bit even.

And that.

It includes or excludes the coupon on them.

You are correct and that includes the coupon I think we have the opportunity on future transactions to come in below six 7%, which is what the July transaction with that.

Okay. Thanks, very much interesting. Thank you.

Once again that is star one for any additional questions.

The next question is coming from Danny Assad of Bank of America. Please go ahead.

Hi, good morning, everybody.

Your.

My question is on on buybacks, our current pace of buybacks. If we just run rate that into the rest of the year, what kind of have you de levering slightly from net debt to EBITDA perspective.

And we are further along than a year now so I guess my question is just how do we think about capital allocation and the pace of buybacks for the balance of the year.

Thanks for the question Dan.

We look at capital allocation basically on a monthly basis. So when we look at our cash flows for this year.

We had a guidance out there at 55% to 60% with two ABS.

As transactions, having being completed now when you when you take in account the transaction, we did July coming in at 92% or a little under I would say the high end of the cash flow guidance is probably out of the picture.

However, as it relates to share repurchases will will sit down and evaluate that every month.

Like we've always done and I would expect that we will continue to repurchase shares as we progress through the through the end of the year. Once again that amount, we usually don't give guidance on that because it is a decision we're making really on a monthly basis, depending on other opportunities we have as far as capital in our evaluation of that.

Free cash flow on a full year on a on a continuous basis.

Got it thank you very much.

Sure. Thank you.

Thank you at this time I would like to turn the floor back over to management for any additional or closing comments.

Thank you Donna we're pleased with how the second quarter finished as our team worked hard to deliver solid results with year over year growth in revenue adjusted EBITDA and earnings per share I want to thank all of our associates, who are working hard during this busy summer travel season to deliver great vacations borrowers and guests thanks and have a great day.

Ladies and gentlemen, thank you for your participation. This concludes today's conference you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

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[music].

Sure.

Right.

Yes.

Okay.

Yes.

Yes.

Yes.

And.

Okay.

Sure.

Yes.

Yes.

Yes.

No.

Correct.

[music].

Okay.