Q1 2024 Travel + Leisure Co Earnings Call

Operator: Greetings and welcome to the Travel and Leisure First Quarter 2024 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, Jill Greer, Vice President of Investor Relations. Thank you. You may begin.

Greetings and welcome to the travel and leisure first quarter 2024 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.

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As a reminder, this conference is being recorded it is now my pleasure to introduce your host Jill Greer Vice President of Investor Relations. Thank you you may begin thanks.

Joseph Greff: Thanks, Maria. Good morning to everyone, and thank you for dialing in to our first quarterly call. Joining us this morning are Michael Brown, our President and Chief Executive Officer, and Mike Hug, our Chief Financial Officer. Michael will provide an overview of our financial results and our longer-term growth strategy, and Mike will then provide greater detail on the quarter, our balance sheet, and our outlook for the rest of the year. Following our prepared remarks, we'll open the call up for questions.

Joseph Greff: Thanks, Maria good morning to everyone and thank you for dialing into our first quarter call. Joining us. This morning are Michael Brown, our President and Chief Executive Officer, and Mike Hug, Our Chief Financial Officer, Michael will provide an overview of our financial results and our longer term growth strategy and Mike will then provide greater detail on the quarter, our balance sheet and outlook for the rest of the year.

Joseph Greff: Following our prepared remarks, well open the call up for questions before we begin we'd like to remind you that our 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.

Joseph Greff: Before we begin, we'd like to remind you that our discussions today will include forward-looking statements. The 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. You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our Investor Relations website. Finally, all comments today are comparisons to the same period of the prior year unless specifically stated. With that, I'm pleased to turn the call over to Michael Brown.

Joseph Greff: 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, you can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our Investor Relations website.

Finally, all comments today, our comparisons to the same period of the prior year unless specifically stated.

Joseph Greff: With that I'm pleased to turn the call over to Michael Brown.

Michael Brown: Good morning, everyone. Welcome to our first quarterly call, and welcome, Jill, to the Travel & Leisure team. During our last call, we highlighted two themes, robust demand for vacation ownership, and our team's focus on execution. Our Q1 results show these trends continuing with 4% revenue growth, $191 million in adjusted EBITDA, and adjusted earnings per share of $0.97. I want to extend my personal thanks to the entire T&L team for their excellent performance, which has gotten our year off to a great start.

Michael Brown: Good morning, everyone welcome to our first quarter call and welcome Joe to the travel and leisure team.

Michael Brown: During our last call, we highlighted two things robust demand for vacation ownership and our team's focus on execution.

Michael Brown: Our Q1 results show these trends continuing with 4% revenue growth $191 million and adjusted EBITDA and adjusted earnings per share of <unk> 97.

Michael Brown: I want to extend my personal thanks to the entire T. N O team for their excellent performance, which has gotten our year off to a great start.

Michael Brown: Tours increased 15% year-over-year, with new owner tours up 28%. The sizable tour increase is important because it reflects strong interest in our product, as well as the benefit of investments we've made in our marketing operations, including the addition of new locations. Q1 VPG ended at $3,035 above the high end of our guidance range, which strengthened as the quarter progressed.

Michael Brown: Towards increased 15% year over year with new owner tours up 28%. The sizable tour increase is important because it reflects strong interest in our product as well as the benefit of investments we've made in our marketing operations, including the addition of new locations.

Michael Brown: Q1, BTG ended at $3035.

Michael Brown: Love the high end of our guidance range, which strengthened as the quarter progressed. We are also pleased with the BTG thus far in April.

Michael Brown: We are also pleased with the VPG thus far in April. The combination of higher new owner tour growth and strong VPGs helps answer the central question I'm asked by media and investors most often: how is the consumer? From our view, demand for leisure travel remains robust. As we look ahead, we have a 7% increase in owner room nights for the remainder of the year compared to the same period last year.

Michael Brown: The combination of higher new owner tour growth and strong <unk> helps answer the central question I'm asked my median investors most often how is the consumer from our view demand for leisure travel remains robust.

Michael Brown: As we look ahead, we have a 7% increase in owner room nights for the remainder of the year compared to the same period last year.

Michael Brown: Both booking windows and arrivals by car have normalized, more signs that the consumer is confident to book future travel, and the trends we are seeing in our business are consistent with broader industry sentiment. A recent Future Partners report showed that financial optimism among travelers has improved, and excitement for travel remains elevated. With a strong industry macro backdrop, good momentum at Travel & Leisure specifically, and the visibility that we have for this year's summer travel season, we have increased confidence in our near-term outlook.

Michael Brown: Both booking windows and arrivals by car have normalized more signs that the consumer is confident to book future travel and the trends. We are seeing in our business are consistent with broader industry sentiment. A recent future partners report showed that financial optimism among travelers has improved and excitement to <unk>.

Michael Brown: Oh remains elevated with.

Michael Brown: With a strong industry macro by backdrop, good momentum at travel leisure, specifically and the visibility that we have for this year's summer travel season, we have increased confidence in our near term outlook as we think about longer term growth in the vacation ownership business, we're focused on expanding our product portfolio.

Michael Brown: As we think about longer-term growth in the vacation ownership business, we're focused on expanding our product portfolio and growing the business both organically and through strategic acquisitions and partnerships. On the product side, the Accor Vacation Club transaction closed in early March, adding a premium product in the international market to our portfolio. With this acquisition, we now have more than 270 resorts worldwide, giving us more opportunities to put the world on vacation every day.

Michael Brown: And growing the business, both organically and through strategic acquisitions and partnerships.

Michael Brown: On the product side, the core vacation club transaction closed in early March adding a premium product in the international market to our portfolio with this acquisition. We now have more than 270 resorts worldwide, giving us more opportunities to put the world on vacation every day.

Michael Brown: Our team is already focused on its ramping up of sales as well as the transition of the overall business. I'd specifically like to thank the leadership team at Accor for working with us on making this a very smooth transition and for their thoughtfulness on how to grow going forward. We are also making progress toward the start of sales next year for the initial Sports Illustrated brand new resort. This will be the first of a network of sports-themed resorts and lifestyle complexes, which we expect will include both university locations and leading leisure destinations.

Michael Brown: Our team is already focused on its ramping up sales as well as the transition of the overall business.

Michael Brown: Specifically like to thank the leadership team at a core for working with us on making this a very smooth transition and their thoughtfulness on how to grow going forward.

Michael Brown: We are also making progress toward the start of sales next year for initial sports illustrated brand new resort.

Michael Brown: This will be the first of a network of sports themed resort in lifestyle complexes, which we expect will include both university locations and leading leisure destinations.

Michael Brown: With multiple brands and a broad geographic footprint, our network of resorts provides a natural hedge against individual market fluctuations. In fact, as a result of our highly diversified resort system, we only have one market that produces more than 10% of VOI sales volume.

Michael Brown: With multiple brands and a broad geographic footprint our network of resorts provides a natural hedge to individual market fluctuations in fact, as a result of our highly diversified resort system. We only have one market that produces more than 10% of VOI sales volume.

Michael Brown: In terms of growth, we are continuing to innovate and invest in acquiring new owners. Our Blue Thread partnership with Wyndham delivered great results, with sales up nearly 10% year over year. As a reminder, the Blue Thread channel typically generates 10 to 20% of our new owner tours with a VPG more than 20% higher than other new owner tours.

Michael Brown: In terms of growth, we are continuing to innovate and invest in acquiring new owners are blue thread partnership with Wyndham delivered great results with sales up nearly 10% year over year as a reminder, the blue thread channels typically generates 10% to 20% of our new owner tours with <unk> more than.

Michael Brown: 20% higher than other new owner tours.

Michael Brown: Our new owner transactions were 37% of the total up four points sequentially and six points year over year, putting us well within our long term targeted new owner mix.

Michael Brown: Our new owner transactions were 37% of the total, up four points sequentially and six points year over year, putting us well within our long-term targeted new owner mix. This is an important pipeline of future revenue, as historically, we have seen that a new owner will spend an average of 2.6 times their initial purchase in future years after vacationing with us. This consumer behavior is consistent with ARDA's February sentiment survey, which found that nearly half of all timeshare owners plan to upgrade their current ownership in the next two years.

Michael Brown: This is an important pipeline of future revenue as historically, we have seen that a new owner will spend an average of two six times their initial purchase in future years after vacationing with us.

Michael Brown: This consumer behavior is consistent with artist February sentiment survey, which found that nearly half of all timeshare owners plan to upgrade their current ownership in the next two years. So overall, we're in a really good position to grow the vacation ownership business on the travel the membership side. The results came in within our guidance range, which.

Michael Brown: So overall, we're in a really good position to grow the vacation ownership business. On the Travel & Membership side, the results came in within our guidance range, which shows our focus on aligning cost with revenue generation is paying dividends as we drive the business for its high margins and free cash flow generation. To summarize, consumer demand for Leisure Travel remains robust, and we are delivering against plans to efficiently grow our business.

Our focus on aligning cost with revenue generation is paying dividends as we drive the business for its high margins and free cash flow generation.

Michael Brown: To summarize consumer demand for leisure travel remains robust and we are delivering against plans to efficiently grow our business. We have a great team in place with a record of solid execution and we are on track to meet our 2024 commitments to grow revenue and EBITDA and deliver strong returns to our shareholders with that I would now.

Michael Brown: We have a great team in place with a record of solid execution, and we are on track to meet our 2024 commitments to grow revenue in EBITDA and deliver strong returns to our shareholders. With that, I would now like to hand the call over to Mike Hug.

Michael A. Hug: To hand, the call over to Mike hug.

Michael A. Hug: Thanks, Michael, and also thanks to everyone for dialing in this morning. For the March quarter, we reported adjusted EBITDA of $191 million and adjusted diluted earnings per share of 97 cents, increases of 4% and 9%, respectively. This result is even more impressive given the interest expense headwinds we noted coming into this year. Breaking this down into more detail for our two business units. Vacation ownership reported a segment revenue of $725 million, an increase of 6%, while adjusted to EBITDA increased 3% to $135 million.

Michael A. Hug: Thanks, Michael and also thanks to everyone for dialing in this morning.

Michael A. Hug: For the March quarter, we reported adjusted EBITDA of $191 million and adjusted diluted earnings per share of <unk> 97.

Michael A. Hug: Increases of 4% and 9% respectively.

Michael A. Hug: This result is even more impressive given the interest expense headwinds, we noted coming into this year.

Michael A. Hug: Breaking this down into more detail for our two business units vacation ownership reported segment revenue of $725 million an increase of 6%.

Michael A. Hug: While adjusted EBITDA increased 3% to $135 million as Michael described the trends we are seeing in tours, new owner mix and BTG gives us good momentum in this business.

Michael A. Hug: As Michael described, the trends we are seeing in tours, new owner mix, and BPG give us good momentum in this business. Revenue in our travel and membership segment was $193 million. However, revenue in this segment continues to be challenged, so we are focused on driving cost efficiencies to improve returns. These cost initiatives helped us deliver solid adjusted EBITDA growth of 6% for this segment. While exchange transaction growth will remain pressured due to the previously discussed shift in mix of exchange members, we're expecting Travel Club transactions to grow for the remainder of the year as we recover from last year's loss of a large customer.

Michael A. Hug: Revenue in our travel and membership segment was $193 million down 4% on a 6% decline in transactions rare.

Michael A. Hug: Revenue in this segment continues to be challenged so we're focused on driving cost efficiencies to improve returns.

Michael A. Hug: These cost initiatives helped us deliver solid adjusted EBITDA growth of 6% for this segment.

Michael A. Hug: While exchange transaction growth will remain pressured due to the previously discussed shift in mix of exchange members, we're expecting travel club transactions to grow for the remainder of the year as we have lapped last year's loss of a large customer.

Speaker Change: Now, let me provide some more detail about our expectations for the second quarter and full year.

Michael A. Hug: Now, let me provide some more detail about our expectations for the second quarter and full year. For the second quarter, overall, we expect adjusted EBITDA in the range of $235 to $245 million, which includes the year-over-year impact of higher interest rates and variable compensation expense. In vacation ownership, we expect second quarter gross VOI sales of $580 to $610 million and BPGs of $2,900 to $3,000.

Speaker Change: For the second quarter overall, we expect adjusted EBITDA in the range of $235 million to $245 million, which includes the year over year impact of higher interest rates and variable compensation expense.

Speaker Change: In vacation ownership, we expect second quarter gross realized sales of $580 million to $610 million and <unk> of 2900 to $3000.

Michael A. Hug: For travel membership, we're guiding to adjusted EBITDA in the second quarter of $60 to $65 million. For the full year, we are reiterating our guidance range of $910 to $930 million for adjusted EBITDA. The business is performing well, and we're pleased with what we see on the books for the summer. As we move through the year and get more visibility into post-summer demand, we'll have the opportunity to revisit our guidance and update it if needed.

Speaker Change: For travel membership, we're guiding to adjusted EBITDA in the second quarter of $60 million to $65 million.

Speaker Change: For the full year, we are reiterating our guidance range of $910 million to $930 million for adjusted EBITDA.

Speaker Change: The business is performing well and we're pleased with what we see on the books for the summer.

Speaker Change: As we move through the year and get more visibility into post summer demand will have the opportunity to revisit our guidance and update if needed.

Speaker Change: Moving to cash flow and our balance sheet, we generated $47 million of operating cash flow and $22 million of adjusted free cash flow for the quarter.

Michael A. Hug: Moving to cash flow on our balance sheet, we generated $47 million of operating cash flow and $22 million of adjusted pre-cash flow for the quarter. As we previously said, we expect our just EBITDA to free cash flow conversion to be roughly 50% this year. On the balance sheet, we continue to have solid access to the capital markets and closed on our first ABS transaction of the year. The 5.7% interest rate is the lowest rate we've achieved since July 2022.

As we previously said, we expect our adjusted EBITDA to free cash flow conversion to be roughly 50% this year.

Speaker Change: On the balance sheet, we continue to have solid access to the capital markets and close on our first ABS transaction of the year.

Speaker Change: Five 7% interest rate is the lowest rate we have achieved since July 2022.

Speaker Change: We were also very pleased to see the advance rate move up to over 95%.

And earlier this month, we paid off our $300 million of debt maturity using the proceeds from the incremental term loan b that we issued last year.

Speaker Change: We have no remaining debt maturities for the next 12 months.

Michael A. Hug: We were also very pleased to see the advance rate move up to over 95%. Earlier this month, we paid off our $300 million debt maturity using the proceeds from the incremental Terminal B that we issued last year. We have no remaining debt maturities for the next 12 months. Our leverage ratio increased in the first quarter to 3.5 times. Consistent with the prior year, we expect this trend to continue for the next two quarters and then reverse in the fourth quarter. This sets us up to end the year below 3.5 times leverage.

Speaker Change: Our leverage ratio increase in the first quarter to three five times.

Speaker Change: Consistent with prior year, we expect this trend to continue for the next two quarters and then reverse in the fourth quarter.

Speaker Change: Sets us up to end the year below three five times levered.

Speaker Change: With the balance sheet in good shape, our capital allocation is focused on growing the business and returning capital to shareholders.

Speaker Change: On the growth side, we used $46 million in the quarter for the core acquisition. We're excited for the longer term growth prospects that are core provides.

Speaker Change: In March we increased our dividend of <unk> 50 per share for a total of $38 million in the first quarter.

Speaker Change: We're regularly in the market buying background stock and in the first quarter, we repurchased 624000 shares at average price of $40 seven.

Michael A. Hug: With the balance sheet in good shape, our capital allocation is focused on growing the business and returning capital to shareholders. On the growth side, we used $46 million in the quarter for the core acquisition. We are excited for the longer-term growth prospects that Accor provides. In March, we increased our dividend to 50 cents per share for a total of $38 million in the first quarter. We're regularly in the market buying background stock, and in the first quarter, we repurchased 624,000 shares at an average price of $40.07 for a total of $25 million.

Speaker Change: For a total of $25 million.

Speaker Change: Between dividends and buybacks, we returned a total of $63 million and have returned an average of about 10% of our market cap annually since our spin demonstrating a strong shareholder focus.

Speaker Change: I should also mention that we intend to request approval for an additional $500 million in share repurchase authorization at our upcoming board meeting.

Speaker Change: In closing I'll join Michael and thanking the entire travel and leisure team for delivering great results this quarter.

Speaker Change: These results demonstrate the strength of our business and provide us with great momentum heading into the busy summer season.

Speaker Change: With that Maria can you. Please open up the call to take questions.

Michael A. Hug: Between dividends and buybacks, we returned a total of $63 million and have returned an average of about 10% of our market cap annually since our spin, demonstrating a strong shareholder focus. I should also mention that we intend to request approval for an additional $500 million in share repurchase authorization at our upcoming board meeting. In closing, I'll join Mike in thanking the entire Travel & Leisure team for delivering great results this quarter. These results demonstrate the strength of our business and provide us with great momentum heading into the busy summer season. With that said, Maria, can you please open up the call to take questions?

Maria: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you.

Maria: You May press Star two if you would like to remove your question from the queue.

Maria: We ask that you limit yourself to one question and a follow up so that others may have an opportunity to ask questions for participants using speaker equipment. It may be necessary to pick up your handset before pressing the sarky one moment. Please while we poll for questions.

Maria: Our first question comes from Joe Greff with J P. Morgan. Please proceed with your question.

Maria: Okay.

Joseph Greff: Good morning, everybody.

Joseph Greff: Morning, Jim Michael Mike It seems like volume per guest.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question area. You may press star 2 if you would like to remove your question from the... We ask that you limit yourself to one question and a follow-up so that others may have an opportunity to ask questions.

Joseph Greff: Tracking better even as you improve your new owner mix.

Joseph Greff: And it's basically there or knocking on your targeted new owner mix percentage threshold.

Joseph Greff: Can you talk about maybe what's driving that maybe more favorable relationship between BTG new owner mix.

Joseph Greff: And you mentioned, a little bit about blue thread, but that's not necessarily new or incremental is there something else that maybe driving that more favorable relationship and how you see that going forward.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start. One moment, please, while we poll for questions. Our first question comes from Joe Greff with J.P. Morgan. Please proceed with your question.

Joseph Greff: Well, let me, let me first share as it relates to tour flow because the 28% new owner tour growth year on year is.

Joseph Greff: Is really.

Joseph Greff: A number that sets us up well not only for Q1, but going forward.

Michael Brown: Good morning, everybody. Michael, Mike, it seems like volume per guest is tracking better even as you improve your new owner mix. And it's basically, you know, they're knocking on your targeted new owner mix percentage threshold. Can you talk about maybe what's driving that maybe more favorable relationship between VPG and new owner mix? I mean, you mentioned a little bit about blue thread, but that's not necessarily new or incremental. Is there something else that's maybe driving that more favorable relationship, and how do you see that going forward?

Joseph Greff: Over the last two years, we've said we were going to grow our new owner tours at a steady pace, making sure that everything we added was profitable and we felt was.

Joseph Greff: Good incremental new owner tour.

Joseph Greff: We opened over 30, new marketing locations in 2023.

Joseph Greff: We got the partial year benefit of that and now this year, we're going to get the full year.

Joseph Greff: Positive impact of those new older locations. Additionally, in the third quarter of last year, we started to discuss that we were investing heavier into.

Michael Brown: Well, let me share first as it relates to tour flow because the 28% new owner tour growth year-on-year is really, um.., a number that sets us up well, not only for Q1 but going forward. Over the last two years, we've said we were going to grow our new owner tours at a steady pace, making sure that everything we added was profitable and, we felt, was a good incremental new owner tour. We opened over 30 new marketing locations in 2023.

Joseph Greff: The marketing package pipeline and those are beginning to come through so that sort of puts the gross or absolute number on towards growing forward.

Joseph Greff: I would say across the board what you are seeing.

Joseph Greff: Is just really good execution, both Mike and I mentioned.

You mentioned it in our prepared remarks that the team is just executing really well I.

Joseph Greff: I think our move to increase credit quality coming out of the pandemic.

Joseph Greff: The steady growth of new owner tours has allowed us to manage that growth.

Michael Brown: We got the partial year benefit of that. And now, this year, we're going to get the full year positive impact of those new owner locations. Additionally, in the third quarter of last year, we started to discuss that we were investing heavier into the Marketing Package Pipeline, and those are beginning to come through. So that sort of puts the gross or absolute number on tours growing forward.

Joseph Greff: Efficiently effectively.

Joseph Greff: Not getting ahead of ourselves and really stretching the organization and as a result of it I put a lot of it down just a great execution by the team.

Joseph Greff: And.

Joseph Greff: Setting ourselves up for what should be a really.

Joseph Greff: A really good continuation of new owner tours.

Joseph Greff: I think you've mentioned it and I know this answers a bit long, but the 37% of new owner transactions is an incredibly impressive number in Q1 Q1 is typically our high owner sale quarter and the fact that we've already got within that range and well within our 35% to 40% range.

Michael Brown: I would say across the board that what you're seeing is just really good execution. Both Mike and I mentioned it in our prepared remarks that the team is just executing really well. I think our move to increase credit quality coming out of the pandemic and the steady growth of new owner tours has allowed us to manage that growth efficiently and effectively, not getting ahead of ourselves and really stretching the organization. And as a result, I put a lot of it down to great execution by the team and setting ourselves up for what should be a really good continuation of new owner tours.

Joseph Greff: What was the highlight of Q1.

Joseph Greff: Great.

Joseph Greff: And then maybe you can talk about in the consumer financing segment of the occasion ownership.

Joseph Greff: Have your expectations changed more recently for that segment of the business.

Joseph Greff: Given maybe a different perception of where the fed may take interest rates.

Michael Brown: I think you mentioned it, and I know this answer is a bit long, but the 37% of new owner transactions is an incredibly impressive number in Q1. Q1 is typically our high owner sale quarter, and the fact that we've already got within that range and well within our 35 to 40% range was a highlight of Q1.

Joseph Greff: In terms of delayed interest rate cuts.

Joseph Greff: How are you thinking about that relative to a few months ago or did you.

Incorporate some level of conservatism to take into account.

Joseph Greff: A different kind of interest rate expectations versus maybe what the overall market might be pricing it.

Joseph Greff: Sure. Thanks, Joe This is Mike hug.

Joseph Greff: <unk>.

Michael A. Hug: Two things as it relates to consumer finance business I'll start off with the ABS transactions and interest rates and then ill jump over into the portfolio, but you know on the interest rate side, obviously, great execution by the team with the March transaction to your point since that time things have changed as far as views on interest rates. If we did that transaction today the interest rate would probably be about <unk>.

Michael Brown: And then maybe you can talk about the consumer financing segment of vacation ownership, you know, have your expectations changed more recently for that segment of the business, given maybe a different perception of where the Fed may take interest rates in terms of delayed interest rate cuts? How are you thinking about that relative to a few months ago? Or did you incorporate some level of conservatism to take into account a different set of interest rate expectations versus, maybe, what the overall market might be pricing it?

Michael A. Hug: Bps higher than it was when we execute the transaction back in March so they have moved up some but still below the rates that we really had starting in the second half of 2022 and through 2023. So we will not be a big EBITDA impact this year because all we have left to do as you know the secondary transaction will only be.

Michael A. Hug: And that's all for me, thank you, transactions and interest rates, and then I'll jump over to the portfolio. But, you know, on the interest rate side, obviously, great execution by the team with the March transaction. But to your point, things have changed as far as views on interest rates have changed since that time.

Michael A. Hug: EBITDA for the partial year, so don't expect much EBITDA impact this year I think.

We're looking at most closely as we do expect over the next 18 to 24 months that interest headwind to become a tailwind and that's really where the interest rates might impact us is that tailwind might not kick in as early as we thought but obviously that's going to be determined over what happens over the next several months with interest rates on the corporate debt side.

Michael A. Hug: If we did that transaction today, the interest rate would probably be about 50 bps higher than it was when we executed the transaction back in March. So they have moved up some, but still below the rates that we really had starting in the second half of 2022 and through 2023. So we'll not have a big EBITDA impact this year because all we have left to do is, you know, the second and third transaction will only impact EBITDA for the partial year.

Michael A. Hug: 30% of our.

Michael A. Hug: Corporate debt is variable.

Michael A. Hug: We probably have about $3 million in exposure.

Michael A. Hug: On corporate interest and.

Michael A. Hug: Therefore cash flow because of the move up in rates compared to what we expect the beginning of the year, but but nothing significant there. So overall, we're watching it closely but don't expect a lot of risk in this year's EBITDA.

Michael A. Hug: As it relates to the other piece of the consumer finance business. The portfolio you all saw the provision for the quarter coming in at 17, 4%, we're very happy with that.

Michael A. Hug: So don't expect much of an EBITDA impact this year, I think. What we're looking at most closely is that we do expect, over the next 18 to 24 months, that interest headwind to become a tailwind, and that's really where the interest rates might impact us, because that tailwind might not kick in as early as we thought. But obviously, that's going to be determined over what happens in the next several months with interest rates. On the corporate debt side, 30% of our corporate debt is variable.

Michael A. Hug: But I would note that as we head into Q2 and Q3, two things that impact our delinquencies are the portfolio continues to grow which means it's less season, which leads to higher delinquencies and then that new owner mix coming in at 37%, which we're very excited about also lead to higher levels of delinquencies. So even though were.

Michael A. Hug: We remain confident in our provision for the full year being below 19% you will see it move up in Q2, and Q3 to the higher end of that range and maybe even a little bit over but overall very happy with the portfolio, Mike talked about the credit standards, we put in place as we exited COVID-19 and in the first quarter, our average FICO was <unk>.

Michael A. Hug: We probably have about $3 million in exposure on corporate interest and, therefore, cash flow because of the move-up in rates compared to what we expected at the beginning of the year, but nothing significant there. So overall, we're watching it closely, but don't expect a lot of risk in this year's EBITDA. As it relates to the other piece of the consumer finance business, the portfolio, you all saw the provision for the quarter come in at 17.4%. We're very happy with that.

742 for new origination, which is the highest average box that we've ever had in a quarter. So that business remains strong.

Michael A. Hug: Delinquencies will move up but it's because of the good growth in the portfolio.

Michael A. Hug: A high percentage of sales that we've been focusing on to you.

Net interest income to grow again.

Speaker Change: Great. Thank you very much.

Michael A. Hug: Sure.

Michael A. Hug: Our next question comes from David Katz with Jefferies. Please proceed with your question.

David Katz: Hi, good morning, Thanks for taking my question.

Michael A. Hug: But I would note that as we head into Q2 and Q3, two things that impact delinquencies are the portfolio continues to grow, which means it's list season, which leads to higher delinquencies. And then that new owner mix coming in at 37%, which we're very excited about, also leads to a higher level of delinquency. So even though we remain confident in our provision for the full year being below 19%, we'll see it move up in Q2 and Q3 to the higher end of that range and maybe even a little bit over.

David Katz: I wanted to ask about just broadly speaking the criteria for repurchases.

David Katz: Noting.

David Katz: We had.

David Katz: We had a little higher number of repurchases and for this quarter and whether the degree to which acquisitions or other investments may have played a part in this quarter, but just how we might think about repurchases rolling through for the rest of the year. Please.

Speaker Change: Yeah, Good morning, David and thanks for the question.

Speaker Change: Youre exactly right as far as the level of repurchases in the first quarter being impacted by the $46 million, we spend on our core we've been pretty clear with our capital allocation strategy grow the dividend as we grow the business, which we did in the first quarter, where you took the dividend up to 50 cents.

Michael A. Hug: But overall, I am very happy with the portfolio. Mike talked about the credit standards we put in place as we exited COVID. And in the first quarter, our average FICA was 742 for new originations, which is the highest average FICA we've ever had in a quarter. So, business remains strong. Delinquencies will move up, but it's because of the good growth in the portfolio and the high percentage of sales that we've been focusing on to get that net interest income to grow again.

Speaker Change: We then look at M&A, if we find the right strategic opportunity, which we believe we found with the core then we'll invest in that which was about 46 million and then we spent $25 million.

Share repurchases, so you're roughly in that low seventy's range as far as capital allocation for the for the first quarter. If you look at last year on average our share repurchases were about $77 million. So.

Speaker Change: We utilized $72 million in the first quarter of this year kind of puts us on track with what we average for each quarter last year.

Speaker Change: Your point is valid in terms of absent.

unknown: Great, thank you very much.

Speaker Change: Our core the level of share repurchase probably would've been higher than I, obviously mentioned as well that.

Operator: Our next question comes from David Katz with Jeffries. Please proceed with your question.

Speaker Change: Our share repurchase level, our authorization is down to $146 million at the end of Q1, and we will be at the upcoming board meeting requesting an additional 500 million in authorization there. So.

unknown: Hi, good morning. Thanks for taking my question. I wanted to ask about, just broadly speaking, the criteria for repurchases. Just noting that we had a little higher number of repurchases in for this quarter, and whether the degree to which acquisitions or other investments may have played a part this quarter, but just how we might think about repurchases rolling through for the rest of the year.

Speaker Change: Should have plenty of capacity to.

Speaker Change: Do an elevated level of share repurchase compared to what we did in the first quarter.

Speaker Change: Perfect.

Speaker Change: Just to sort of follow that up right to that and are there how do you see the landscape of potential.

Speaker Change: M&A out there and opportunities.

Speaker Change: Tuck in or otherwise are you seeing more or less than what you might have seen one or two quarters ago.

Michael A. Hug: Good morning, David, and thanks for the question. You're exactly right as far as the level of repurchases in the first quarter being impacted by the $46 million we spent on Accor. We've been pretty clear with our capital allocation strategy, you know, grow the dividends, grow the business, which we did in the first quarter when we took the dividend up to $0.50, and then we look at M&A.

Speaker Change: I don't think the landscape has really changed the industry as we all are well aware has consolidated it dramatically over the last decade I think.

Speaker Change: All lead to the favor of the entire industry. When you look at more than 80% of the industry sales now approximately.

Speaker Change: Or from branded hospitality company that the industries.

Speaker Change: Got a very strong balance sheet consumer flexibility as their reputation is paramount consumer protection is paramount. So I think it's all let's say where the industry, but as it relates to M&A.

Michael A. Hug: If we find the right strategic opportunity, which we believe we have found with Accor, then we'll invest in that, which was about $46 million. And then we spent, you know, $25 million on share repurchases. So you're roughly in that low 70s range as far as capital allocation for the first quarter. If you look at last year, on average, our share repurchases were about $77 million. So, you know, we utilized $72 million in the first quarter of this year, which kind of puts us on track with what we averaged for each quarter last year.

Speaker Change: There are there continue to be a variety of companies that are out there and as we have done since we spun in 2018, we will continue to evaluate them as as opportunities arise but.

Speaker Change: Ultimately, we're very committed to our organic strategy.

Speaker Change: We've had a nice.

Speaker Change: Addition to our partnership and acquisition of Sports illustrated.

Michael A. Hug: Your point is valid in terms of absent Accor, the level of share repurchase probably would have been higher. And then I obviously mentioned as well that, you know, our share repurchase level, and our authorization was down to $146 million at the end of Q1. And we will be at the upcoming board meeting requesting an additional $500 million in authorization there, so we should have plenty of capacity to do an elevated level of share repurchase compared to what we did in the first quarter.

Which we're happy with it and then a pure M&A with a core.

Speaker Change: International So.

Speaker Change: We think our opportunities are organic partnerships and acquisitions that diversify the ability to grow is what really gives us. What we think is a very strong foundation to solidify our growth going forward.

Speaker Change: Perfect. Thanks very much.

Speaker Change: Our next question comes from Chris <unk> with Deutsche Bank. Please proceed with your question.

Chris: Hey, good morning, guys and congratulations on another really nice quarter.

unknown: And just to sort of follow that up, right, to that end, how do you see the landscape of potential, you know, M&A out there and opportunities, you know, tuck in or otherwise, you're seeing more or less of what you might have seen one or two quarters ago?

Chris: I guess I guess first question would be kind of on the.

Chris: And the new owner.

Chris: <unk> for the quarter, both the tour flow and the higher mix.

Chris: We're pretty impressive right.

Chris: I guess, Michael was there any you talked about more channels contributing to that was there any one type or specific channel that contributed more than others.

Michael Brown: I don't think the landscape's really changed. The industry, as we all are well aware, has consolidated dramatically over the last decade, broadly to the benefit of the entire industry. When you look at more than 80% of the industry's sales now, approximately, are from branded hospitality companies, you know, the industry's got a very strong balance. The consumer flexibility is there, reputation is paramount, and consumer protection is paramount. So I think it's all in favor of the industry.

Chris: Or some geographic region, just trying to get a sense as to you know kind.

Michael Brown: Kind of how sustainable that that level of new owner growth is.

Michael Brown: Well first of all let me say simply the growth is sustainable.

Michael Brown: We have.

Michael Brown: Really three core areas that we focused on over the last few years being owner owner growth and the team has done a great job, adding incremental arrivals and room nights to the older mix, which means more availability for owner tours, that's probably the smallest.

Michael Brown: But as it relates to M&A, you know, there are, and continue to be, a variety of companies that are out there, and as we have done since we spun out in 2018, we'll continue to evaluate them as opportunities arise. But ultimately, we're very committed to our organic strategy. We've had a nice addition to a partnership and acquisition of Sports Illustrated, which we're happy with, and then a pure M&A with Accor International. So we think our opportunities are organic partnerships and acquisitions. And that diversified ability to grow is what really gives us what we think is a very strong foundation to solidify our VO growth going forward.

Michael Brown: <unk>, but still an important one.

Michael Brown: The partnership with Wyndham hotels has continued to be fruitful.

Michael Brown: Both parties work very well together and that continues to grow from what was zero to over $100 million last year as you heard growing in Q1.

Michael Brown: This steady drumbeat of our marketing team on methodically region by region opening new locations means that we're not overly reliant on a singular market or a singular channel within a region.

unknown: Perfect. Thanks very much.

Operator: Our next question comes from Chris Woronka with Deutsche Bank. Please proceed with your question.

Michael Brown: It's it's just the law.

Michael Brown: Having that scale in getting.

unknown: Hey, good morning, guys, and congratulations on another really nice quarter. I guess the first question would be kind of on the new owner results for the quarter, both the tour flow and the higher mix, which were pretty impressive, right? I guess, Michael, was there any – you talked about more channels contributing to that. Was there any one type or specific channel that contributed more than others or some geographic region? Just trying to get a sense as to kind of how sustainable that level of

Michael Brown: One or two locations by region that add up over the course of 36 months Thats really creating that and it's all kicking in and then I had mentioned the more new aspect is we've.

Michael Brown: We had travel leisure have never been overly focused on package.

Michael Brown: Package sales, which is pipeline generation for future tours.

Michael Brown: We've added that focus, which I would say as a fourth leg to the stool.

Michael Brown: Well, first of all, let me say simply, the growth is sustainable. Really, the three core areas that we focused on the last few years were owner growth, and the team has done a great job adding incremental arrivals and room nights to the owner mix, which means more availability for owner tours. That's probably the smallest component, but still an important one.

Michael Brown: And that is gaining great traction the team does an incredible job there and it's been a very positive impact.

Michael Brown: Have to invest in that and we talked about it late last year that we were investing in our package pipeline, which tends to drive costs slightly up and we're very early in the year starting to bear fruit on that investment and then what's not in the numbers, but where we're I would say.

Michael Brown: The partnership with Wyndham Hotels has continued to be fruitful. Both parties work very well together, and that continues to grow from what was zero to over 100 million last year, and it's, as you heard, growing in Q1. The steady drumbeat of our marketing team methodically opening new locations in regions means that we're not overly reliant on a singular market or a singular channel within a region. It's just the law of having that scale and getting one or two locations by region that add up over the course of 36 months that's really creating that, and it's all kicking in.

Michael Brown: It will be sustainable as we go forward as you add.

Michael Brown: Incremental relationships, whether it's sports illustrated our own core they bring with them as well incremental databases that knows.

Michael Brown: Provide incremental leads and ultimately towards so.

Michael Brown: I don't think its an anomaly I think it's great execution and the result of our commitment over the last 36 months.

Michael Brown: Growing our new owner tours.

Speaker Change: Great. Thanks, Michael very helpful. The follow up is.

Speaker Change: Transitioning over to the sports illustrated.

Speaker Change: You've talked about I know you said you expect to begin sales next year, but is it. So a two part question one is it possible to.

Michael Brown: And then I mentioned the more new aspect is that we at Travel & Leisure have never been overly focused on package sales, which is pipeline generation for future tours. We've added that focus, which I would say is a fourth leg to the stool, and that is gaining great traction. The team does an incredible job there, and it's had a very positive impact. You have to invest in that, and we talked about it late last year that we were investing in our package pipeline, which tends to drive costs slightly up, and we're, very early in the year, starting to bear fruit on that investment.

Speaker Change: Announced other deals before the four other markets before Alabama begin sales and then the second part of that is.

Speaker Change: Just mechanically resolve this going to go into the VOI segment or are there going to be components that go into the travel and membership segment as well. Thanks.

Speaker Change: The short answer on the first question is absolutely we anticipate announcing more locations before next year.

Michael Brown: And then what's not in the numbers but where I would say it will be sustainable as we go forward: as you add incremental relationships, whether it's Sports Illustrated or Accor, they bring with them as well incremental databases, and those provide incremental leads and ultimately tours. So I don't think it's an anomaly. I think it's a great execution and the result of an commitment over the last 36 months to growing our new order tours.

Speaker Change: The pipeline is.

Speaker Change: As robust as it's ever been as it relates to opportunities for sports illustrated both in University towns and at other locations. So we do look forward to sharing more locations as we move throughout this year.

Speaker Change: As it relates to which segment.

Speaker Change: Sports illustrated it'll be it'll be.

Be it in the vacation ownership.

Speaker Change: Side of the business.

unknown: Great. Thanks, Michael. Very helpful.

Speaker Change:

Speaker Change: As we start to produce results what I would just add although you didn't specifically ask is as you start to look at the economics of sports illustrated our overall plan looks a lot like it did with club Wyndham as far as.

Michael Brown: The follow-up is kind of transitioning over to Sports Illustrated, which you've talked about. I know you said you expected to begin sales next year, but it's a two-part question. One, is it possible to announce other deals for other markets before Alabama begins sales? And then, the second part of that is, just mechanically, is all this going to go into the VOI segment, or are there going to be components that go into the travel and membership segment as well? Thanks. Uh...

Speaker Change: Aligning inventory build and spend to topline revenue.

Speaker Change: Production.

Speaker Change: Obviously as you do your first resort you do have some front end investment that's a little more intensive than usual, but once we get.

Speaker Change: Sports illustrated.

Speaker Change: Clubs up and running and announcing a second third and fourth resolved our full intention is to match inventory spend with the success of sales.

Michael Brown: The short answer on the first question is absolutely yes, we anticipate announcing more locations before next year. The pipeline is as robust as it's ever been as it relates to opportunities for Sports Illustrated, both in University Towns and in other locations.

Speaker Change: And the profile of the P&L should look very similar to what we what we see on a couple of them side.

Speaker Change: Okay very good thanks, Michael.

Speaker Change: Appreciate it Chris.

Michael Brown: So we do look forward to sharing more locations as we move throughout this year. As for which segment Sports Illustrated will be in, it will be on the vacation ownership side of the business as we start to produce results. What I would just add, although you didn't specifically ask, is as you start to look at the economics of Sports Illustrated, our overall plan looks a lot like it did with Club Wyndham as far as really aligning inventory build and spend to top-line revenue production.

Speaker Change: Our next question comes from Patrick Schultz The Truth Securities. Please proceed with your question.

Patrick Schultz: Hi, Good morning, Michael and Mike.

Patrick Schultz: Morning, Patrick and Patrick Great.

Patrick Schultz: Michael.

Speaker Change: In your remarks, you painted a pretty optimistic picture of.

Patrick Schultz: Youre leisure customer.

Patrick Schultz: When I look at the.

Patrick Schultz: Sure.

Patrick Schultz: Revpar trends for your parent company Wyndham, specifically domestically in <unk>, we saw some negative year over year Revpar.

Michael Brown: Obviously, as you do your first resort, you do have some front-end investment that's a little more intensive than usual. But once we get Sports Illustrated, the club, up and running and announce a second, third, and fourth resort, our full intention is to match inventory spend with the success of sales. And the profile of the P&L should look very similar to what we see on Club Wyndham.

Patrick Schultz: One reconcile your optimism versus.

Patrick Schultz: Possibly negative revpar for.

Speaker Change: Domestic wind amendment in the first quarter. Thank you.

Speaker Change: Well I don't think I don't first of all I wouldn't overly correlate our results to <unk>.

Speaker Change: Any brand within the hotel space first of all.

Speaker Change: And I think secondly, I would reiterate a comment that Mike hug made which was our FICO in Q1 was 742, which is the highest its ever been.

unknown: Okay, very good. Thanks, Michael.

Operator: Our next question comes from Patrick Schultz with Truist Securities. Please proceed with your question.

Speaker Change: For the company, which shows the results of a precise decision we made several years ago to start elevating our customer.

unknown: Good morning, Michael and Mike.

Michael Brown: Morning, Patrick. Good morning, Patrick.

Speaker Change: Customer characteristics in the end I think you have to come back to the underlying premise of vacation ownership, which is.

Michael Brown: Michael, in your remarks, you painted a pretty optimistic picture of your Leisure customer. When I look at the... RevPAR trends for your parent company, Wyndham, specifically domestically, in one cue, we saw some negative year-over-year RevPAR. How might one reconcile, you know, your optimism versus..., you know, possibly negative REV PAR for domestic wind in the first quarter? Thank you.

Speaker Change: 87 out of eight of our owners have fully paid for their ownership.

Speaker Change: Which means our owners are definitely another travel because they love the bigger accommodation.

Speaker Change: See the value in their ownership and more broadly on leisure travel.

Speaker Change: Being based in Orlando you see it every single day at the airport.

Speaker Change: Travel is tremendous at the moment and.

Michael Brown: Well, I don't think, first of all, I would not overly correlate our results to any brand within the hotel space, first of all. And, secondly, I would reiterate a comment that Mike Hug made, which was our FICO in Q1 was 742, which is the highest it's ever been for the company, which shows the results of a precise decision we made several years ago to start elevating our customer characteristics.

Speaker Change: So I think we look more broadly at leisure travel as opposed to Comping to either a hotel group the airline cruise line.

Speaker Change: We just look across to the parks and what we see.

You go to Vegas, one of our big markets. The one that's over 10%.

Speaker Change: Biggest travel is very strong.

Speaker Change: And I would say our success is a combination of.

Michael Brown: In the end, I think you have to come back to the underlying premise of vacation ownership, which is that 87 out of 8 of our owners have fully paid for their ownership, which means our owners are definitely going to travel because they love the bigger accommodation. They see the value in their ownership, and more broadly on leisure travel. Being based in Orlando, you see it every single day at the airport. Travel is tremendous at the moment and, um...

Speaker Change: The overall business model, our teams execution and third that leisure travel is strong.

Speaker Change: Okay, and I would note Jay sorry, just one thing I would note that even though Vegas is over 10%. It comes in at 12%. So you know the diversity, we have in our portfolio that we've talked about many times definitely pays often while we noted only want being over 10, I think it's important to understand that over 10 means really only 12% so don't have any.

Michael Brown: So I think we look more broadly at leisure travel as opposed to competing with either a hotel group, an airline, or a cruise line. We just look across to the parks and what we see. You go to Vegas, one of our big markets, the one that's over 10%, and Vegas travel is very strong. I would say our success is a combination of the overall business model, our team's execution, and third, that leisure travel is strong.

Speaker Change: That's 15% of our or even folks that are.

Speaker Change: Okay, certainly encouraging.

Speaker Change: Michael a follow up question here.

Michael Brown: You do have some OE exposure can you talk about how Maui is recovery and how far.

Michael Brown: Okay. Sorry, just one thing, Patrick.

Speaker Change: Off you are still from I.

Michael Brown: I would note that even though Vegas is over 10%, it comes in at 12%. So, you know, the diversity we have in our portfolio that we've talked about many times definitely pays off. And while we noted only one being over 10, I think it's important to understand that over 10 means really only 12%. So don't have anything that's 15% or higher or even 12% or higher.

Michael Brown: I would say.

Michael Brown: Pre fire levels. Thank you.

Michael Brown: So.

Michael Brown: We are for the state of Hawaii.

Michael Brown: I have no incremental or additional exposure to Maui.

Michael Brown: We really have very very minimal sales on Maui.

Michael Brown: More of our exposure is on Oahu, and the Big Island so for us.

Michael Brown: Hum.

Michael Brown: Okay, certainly encouraging. Michael, a follow-up question here: you do have some Maui exposure. Can you talk about, you know, how Maui is recovering, and how far you are still from, I would say, pre-fire levels? Thank you.

Michael Brown: The economic impact to our P&L is.

Michael Brown: Non existent for for Valley.

Michael Brown: Okay.

Speaker Change: Alright, you have some more questions, but ill get back in queue. Thank you.

Speaker Change: Thank you Patrick.

Our next question comes from Patrick <unk>.

Michael Brown: So, we are, for the state of Hawaii, have no incremental or additional exposure to Maui. We really have very, very minimal sails on Maui. More of our exposure is on Oahu and the Big Island, so for us, the economic impact to our P&L is non-existent for now.

Speaker Change: Excuse me. Our next question comes from Ben Chaiken with Mizuho. Please proceed with your question.

Ben Chaiken: Hey, How's it going thanks for taking my question.

Ben Chaiken: Sorry, if I missed it regarding our core can you talk about the opportunity for upgrades from those 30000 owners is there an opportunity to sell the broader system to the existing pool.

unknown: All right, I do have some more questions. I'll get back in queue. Thank you.

Ben Chaiken: And then I guess under the under the assumption that they do upgrades to the owners of legacy ownership stay with a core or would that get upgraded have you guys.

Operator: Our next question comes from Patrick Scholz. Sorry, excuse me. Our next question comes from Ben Chaykin on Mzuhu. Please proceed with your question.

Ben Chaiken: Find that out yet.

Ben Chaiken: No.

Speaker Change: Morning, Ben you didn't Miss you to Miss and answer it.

unknown: Hey, how's it going? Thanks for taking my question. Sorry if I missed it.

It's a good question.

Speaker Change: Our core vacation clubs operated independently so should they we own a core vacation club. So if they upgrade they're going to stay in our core vacation club member they'll simply or more.

unknown: Regarding Accor, can you talk about the opportunity for upgrades from those 30,000 owners? Is there an opportunity to sell the broader system to this existing pool? And then, on the assumption that they do upgrade, does the owner's legacy ownership stay with Accor? Or would that get upgraded?

Speaker Change: And it is an opportunity for us what we're excited about that transaction beyond.

Speaker Change: <unk>.

Speaker Change: The quality of the resorts and the existing owner base that's already.

unknown: Have you guys

Michael Brown: Good morning, Ben. You didn't miss an answer.

Michael Brown: It's a good question. Accor Vacation Club's operated independently, so should they... We own Accor Vacation Club, so if they upgrade, they're going to stay an Accor Vacation Club member. They'll simply own more, and it is an opportunity for us. Well, we're excited about that transaction beyond the quality of the resorts and the existing owner base that's already members of the Accord Vacation Club, which is over 20,000. They really haven't been nurtured and marketed to and part of an Accord Vacation Club sales operation for several years coming out of COVID.

Speaker Change: Members of the court vacation club, which is over 20000.

Speaker Change: <unk>.

Speaker Change: They really haven't been nurtured and marketed to end.

Speaker Change: Part of it a core vacation club sales operation for several years coming out of Covid that part of the region was especially restricted and.

Speaker Change: That was one of the great opportunities of working with the a core team was there's a lot of potential in the business.

Speaker Change: We felt we were the best ones and I think they did as well to activate that.

Speaker Change: And when we closed on the deal.

Speaker Change: March was the first month that we began.

Michael Brown: That part of the region was especially restricted, and that was one of the great opportunities of working with the Accord team was that there was a lot of potential in the business, reopening, re-ramping, and growing that side of the business. So whether it's upgrades or new owner potential, there's a lot of opportunity going forward to grow that brand and expand it geographically as well as, you know, replicate all the great work that's been done with Wyndham and create more loyal customers and ones that are using the Vacation Club product.

Speaker Change: Reopening re ramping and growing that side of the business, so whether it's upgrades or new owner potential there.

Speaker Change: There's a lot of opportunity going forward to to grow that brand.

Speaker Change: And expand it geographically as well as.

Speaker Change: Replicate all the great work, that's been done with Wyndham.

Speaker Change: And.

Speaker Change: Creating more loyal customers.

Speaker Change: Ones that are used to the vacation of a product.

Speaker Change: Understood. That's helpful and then one quick one.

Speaker Change: <unk> been pretty well covered on beginning on the <unk> call, but do you have a couple of things working against you. This year, you've got the variable comp headwind.

unknown: This has been pretty well covered at the beginning of the 4Q call, but you have a couple things working against you this year. You've got the variable comp, headwind. Transcripts provided by Transcription Outsourcing, LLC. Wanted Done, but the new owner mix, Edwin, either from an EBITDA or margin standpoint in 24.

Speaker Change: You've got some interest expense.

Speaker Change: Quantified the new owner mix margin and obviously these things don't it's kind of like.

One and done, but the new owner mix headwind either from an EBITDA margin standpoint in 2004.

Speaker Change: Sure so.

unknown: So, um... In the sense of how much of our guidance of 910 to 930 is based on the headwind, how much is that incorporated into that guidance?

Speaker Change: In the sense of how much how.

Speaker Change: How much of the of our guidance of 910 to 930.

Speaker Change: What the what that headwind is incorporated into that guidance.

Michael A. Hug: I guess so, yeah. Like you've got the $17 million variable comp, you've got $30 million on the interest expense side. Yeah. How to maybe quantify or bracket the new owner mix?

Speaker Change: Oh, yeah, yeah like that you've got the 17 million variable comp he's got $30 million on the interest expense side, yes, there how to maybe quantify or bracket, the new owner mix well basically the way we're looking at as kind.

Michael A. Hug: Well, basically, the way we're looking at it is kind of when we spun off and started this focus on new owners, we're working to cover that through other areas of the business. So, when we look at our overall margins for the year, and you can see in the first quarter, basically, our margins are flat year over year, despite the percent of new owner sales moving up to 37%. So, when we think about margins for the year, we expect to be able to cover the impact of moving up to the mid to high 30s on new owners.

Speaker Change: When we spun off and started this focus on new owners were working to cover that through other areas of the business. So when we look at our overall margins for the year and you can see in the first quarter, where basically our margins are flat year over year. Despite the percent.

Speaker Change: A newer sales moving up 37%. So when we think about margins for the year, we expect to be able to cover the impact of moving up to mid to high Thirty's on new owners. The part that obviously it we've been most challenged with is covering the incremental interest in compensation expense that you mentioned so when you think about margins overall I would just factor in.

Speaker Change: The two items that you mentioned as it relates to kind of the full year and we will work in other areas like we did in the first quarter to cover the impact of the growth in new owners.

Michael A. Hug: The part that, obviously, we've been most challenged with is covering the incremental interest and compensation expense that you mentioned. So, when you think about margins overall, I would just factor in the two items that you mentioned as it relates to kind of the full year. And we'll work in other areas, like we did in the first quarter, to cover the impact of the growth in new owners.

Speaker Change: Understood. Yeah. My point was more so going into 'twenty, but that you don't have that it sounds like this is the new owner mix that you want to be at and so yeah. Okay. So heading into 'twenty five if if the year progresses like it started.

Speaker Change: We would be going into 'twenty five.

Michael A. Hug: understood. Yeah, my point was more so going into 25, like that phase, you don't have that. It sounds like this is the new owner mix that you want to be at. And so yeah, okay, so heading into 25, if, if the year progresses,

Speaker Change: Not having the commentary more than likely that we want to move up 200 basis points on the order of mix that would be.

Speaker Change: Decision, we would make early in the year of where are we do we want to put more into the new order to grow that mix or not but coming out of Q1 at 37%.

Speaker Change: It starts 24, and a great place so that we don't need to face that headwind in 'twenty five if it continues for the remainder of this year.

Michael A. Hug: We're still heading into 25. If the year progresses like it started, we would be going into 25, not having the commentary more than likely that we want to move up 200 basis points on new owner mix. That would be a decision we would make early in the year about where we are, do we want to put more into the new owner to grow that mix or not. But coming out of Q1 at 37%, it starts 24 in a great place so that we don't need to face that headwind at 25 if it continues the remainder of the year.

Speaker Change: Understood. Thank you.

Thanks Beth.

Speaker Change: Our next question comes from Ian Zaffino with Oppenheimer. Please proceed with your question.

Alright, Thank you very much.

Ian Zaffino: I know you guys touched on the part that's growing a little bit.

Ian Zaffino: Talk about maybe how each cohort.

Ian Zaffino: On the hotel side columns.

Ian Zaffino: It was performing as expected in some.

Ian Zaffino: This outperformance or underperformance.

Speaker Change: I have a follow up <unk>.

Speaker Change: Yeah good morning.

Speaker Change: It was a little fuzzy, but I think your question was kind of how the portfolio is performing kind of by FICO band and as you would expect what we're saying is the most pressure on the lower end of the FICO bands.

Operator: Our next question comes from Ian Zaffino with Oppenheimer. Please proceed with your question.

unknown: All right, thank you very much. I know you guys touched on the FICO score a little bit. Can you maybe talk about how each cohort is doing on the FICO side? If you're kind of, are you seeing any areas of outperformance or underperformance? And I have a follow-up. Thanks.

Speaker Change: And as you move up.

Speaker Change: Less pressure overall I think the portfolio for the most part is in line with what we expected the improvement in credit quality that we.

Speaker Change: We focused on as we exit the Covid is definitely paying off so the provision for the full year, 19%, we're seeing a little bit of pressure, but you know you look at the provision coming down for the quarter at $17. Four so nothing that I would say is unusual by FICO band just the normal more pressure at the lower end and overall you know.

Michael A. Hug: Yeah, good morning. It was a little fuzzy, but I think your question was kind of about how the portfolio is performing in the FICO band. And as you would expect, what we're seeing is the most pressure on the lower end of the FICO bands, and as you move up, less pressure. Overall, I think the portfolio, for the most part, is in line with what we expected. The improvement in credit quality that we focused on as we exited COVID is definitely paying off.

Speaker Change: Comfortable with where the portfolio sits as it relates to performance.

Speaker Change: Okay. So not much notable.

Speaker Change: Maybe on the lines or anything like that so.

Speaker Change: And then can you also maybe touch upon.

Speaker Change: That's been the strongest sales centers that you saw and maybe what we can kind of blind from Mt.

Speaker Change: More.

Speaker Change: Areas of more.

Michael A. Hug: So, you know, the provision for the full year under 19%, we're seeing a little bit of pressure. But, you know, you look at the provision coming in for the quarter at 17.4%, so nothing that I would say is unusual by FICO band. Just the normal more pressure at the lower ends and overall, you know, comfortable with where the portfolio sits as it relates to performance.

Speaker Change: Right.

Speaker Change: Oh, and Dallas and other areas.

Speaker Change: That'd be helpful. Thanks.

So.

Speaker Change: I think the question is just a little muffled was around the regions that if theres any specific cohort.

Speaker Change: To me too.

Speaker Change: Two of the data points.

Speaker Change: That reaffirmed the booking window delinquencies.

unknown: Okay, so you're not necessarily seeing anything notable, um, maybe on the low-end or anything like that, so... And then can you also maybe touch upon, you know, some of the strongest sales centers that you saw and maybe what we could kind of divine from that, you know, whether it's more destination areas or more, you know, additional drive-throughs, say, was it more Vegas and Orlando? Was it other areas? Any other color you can give us would be helpful. Thanks.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: I always like to look at booking windows and our booking window of 120 days, it's very typical of what we've seen.

Speaker Change: And good leisure travel times as well if.

Speaker Change: If you remember during the pandemic, we got up to 90% to 95%.

Speaker Change:

Speaker Change: Drive to locations.

Speaker Change: That number is back to 70, <unk> low seventies, which means the consumer is behaving like they always sort of had had with us I would say therefore theres nothing sticking out other than there is a lot of reconfirmation that leisure travel is behaving like it does in good.

Michael Brown: So, I think the question is just a little muffled, was around the regions and if there's any specific cohort. To me, two of the data points... that reaffirmed the booking window delinquencies BPGs. I always like to look at booking windows and... Our booking window of 120 days is very typical of what we've seen in good leisure travel times. As well, if you remember during the pandemic, we got up to 90 to 95 percent in drive-to locations, that number is back to the low 70s, which means the consumer is behaving like they always sort of had with us.

Speaker Change: Times for Us top destinations in the first quarter were for our bookings are really Orlando Myrtle Beach.

Speaker Change: Tennessee, Great drive to destinations Daytona Beach was a big.

Speaker Change: Booking.

Speaker Change: For us in Q1, as well, so nothing standing out as unusual and with the.

Michael Brown: I would say, therefore, there's nothing sticking out other than there's a lot of re-confirmation that leisure travel is behaving like it does in good times for us. Top destinations in the first quarter for our bookings were really Orlando, Myrtle Beach, and Tennessee, great drive-to destinations. Daytona Beach was a big booking for us in Q1 as well, so nothing stood out as unusual, and with a very diversified resort system, we don't have any overexposure.

Speaker Change: Very diversified resort system, we don't have any other exposure I will say and we announced it last night, where.

Speaker Change: For that 28% that's flying to the destination.

Speaker Change: We're definitely excited about our new partnership with the Legionnaire that has about 125 destinations in the U S. It's a great partnership that is.

Michael Brown: I will say, and we announced it last night, for that 28% that's flying to the destination, we're definitely excited about our new partnership with the Legionnaire, which has about 125 destinations in the U.S. It's a great partnership that is complementary to our accommodation and their mode of transportation. So we're excited to announce that partnership last night and another example of working with other great brands to help grow our package pipeline but also to be a positive partner to put business back into their business, in this case, air travel.

Speaker Change: As complementary for our accommodation to their motive.

Speaker Change: Transportation. So we're excited to announce that partnership last night.

Speaker Change: And another example of working with other great brands to help grow our our package pipeline, but also to be.

Speaker Change: A positive partner to put business back into.

Speaker Change: Their business in this case air travel.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thanks Ian.

Speaker Change: Yeah.

Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Brandt Montour with Barclays. Please proceed with your question. Thanks, everybody.

Speaker Change: Our next question comes from Brent Taylor with Barclays. Please proceed with your question.

Brandt Montour: Thanks, everybody.

Brandt Montour: So Mike on that.

unknown: Thanks everybody. Hi Mike, on that Allegiant comment, my first question was about Allegiant. That channel, can you just maybe size it up for us and compare and contrast it with sort of some of the other third-party channels you have and when we can sort of, and then timing, when we can sort of expect that to layer into Tour Flow?

Brandt Montour: At Allegiant comment My first question was on Allegiant that channel can you just maybe size that up for us and compare and contrast, it with <unk>.

Brandt Montour: Sort of.

Brandt Montour: Some of the other third party channels, you have and when we can sort of and then tiny when we can sort of expect that to layer into tour flow.

Brandt Montour: Well.

Brandt Montour:

Michael Brown: You know, Allegiant's a great airline. They have 15 million loyalty members and 125 destinations in the U.S., getting to a lot of our destinations there's a lot of overlap with where we're located. So that partnership We've been highly successful working with Wyndham Hotels and their database, tying in people with affinities, so the initial plan is to do cross-promotional marketing, air and stay. I can't size it up today on this call because we just finalized the agreement last week. You would expect more and more Allegiant, Wyndham, or Margaritaville package sales that combine the two brands and destinations where we have the So you'll, over time, see it play out in our package pipeline and in our marketing spend back to Allegiant.

Brandt Montour: Allegiance is a great airline they have 15 million loyalty members and 125 destinations in the U S.

Brandt Montour: Getting to a lot of our Theres a lot of overlap with where we're located.

Brandt Montour: So that partnership.

Brandt Montour: We've been highly successful working with Wyndham hotels and their database tying in.

Brandt Montour: People with affinity so.

Brandt Montour: Plan is to do.

Brandt Montour: Cross promotional marketing.

Brandt Montour: There and stay.

Brandt Montour: I can't size it up today on this call because we just finalized the agreement last week, but you would expect.

Brandt Montour: More and more Allegiant wind or a Margarita bill package sales.

Brandt Montour:

Brandt Montour: That combined the two brands and destinations where we have the overlap in that.

Brandt Montour: That's where we'll get.

Brandt Montour: You will over time see it play out in our package pipeline.

Brandt Montour: And in our marketing spend back to Allegiant.

unknown: Okay, that's helpful. And then a question on the new owner. All the new owner metrics you guys gave were really encouraging, and new owners are the toughest sales out there, so that's great. I guess maybe asking it from a different angle to put a finer point on it. When you look at your new owner close rates on a sort of a quarter over quarter basis, and obviously we're all looking at the consumer and looking for cracks to start showing, how has that sort of like-for-like new owner close rate evolved over the past one, two, or three quarters and into this year?

Speaker Change: Okay. That's that's helpful. And then and then a question on the new owner all the new owner metrics you guys gave was really encouraging.

Speaker Change: Or is it are the toughest sales out there.

Speaker Change: Great I guess.

Speaker Change: Maybe putting it asking it from a different direction.

Speaker Change: To put a finer point on it.

Speaker Change: When you look at your new owner.

Speaker Change: Close rates are on a sort of a quarter over quarter basis, and obviously, we're all looking at the consumer and looking for cracks to start showing.

Speaker Change: How is that.

Sort of like for like new owner close rate evolved over the past, one two or three quarters and yeah and into the spend into this year that would be I think maybe.

Michael Brown: That would be, I think, maybe helpful for us. Yeah, I

Maybe helpful for us.

Michael Brown: Yeah, I mentioned the three segments, owner, blue thread, and new owner, sort of an open market. When you look at close rates on owners and blue thread, those have been pretty consistent over the last few quarters. Close rates on the open market have come down slightly. I would put that as much to do with scale as I would. The Consumer, you grow your new owner towards 28% and... you're going to more than likely lose a little bit of your close rate.

Speaker Change: I've mentioned, the three segments owner blue thread and new owner or a sort of open market.

Speaker Change: When you look at close rates on owners and Blue thread those have been pretty consistent over the last few quarters close rates on open market have come down slightly.

Speaker Change: I would put that as much to do with scale as I would.

Speaker Change: Consumer the consumer.

Speaker Change: You grow your new owner tours, 28% and <unk>.

Speaker Change: You're you're going to you're going to more than likely lose a little bit of close rate just 28% is a lot to add in a quarter year on year. So.

Michael Brown: 28% is a lot to add in a quarter year-on-year. So right now, when I look at that slight decline, I put it more towards scale than I do towards consumers. But obviously, it's a trend. I think every company is looking at their lower-end FICOs and wondering where that's gonna go in the next six months. We're no different. We've got a good portfolio, Mike made comments about it, but close rates, specifically, slightly down on the open market, and I'd put that to scale. Okay, great.

Speaker Change: Right now when I look at that slight decline I'd put it more towards scale than I do consumer.

Speaker Change: But obviously it is a trend I think every company is looking at their lower in FICO, and wondering where thats going to go for the next six months, we're no different.

Speaker Change: We've got good portfolio, Mike My comments about it but close rates, specifically slightly down on the open market and I'd put that to scale.

Speaker Change: Okay, great congrats on the quarter. Thanks.

unknown: Okay, great. Congratulations on the quarter. Thanks.

Speaker Change: Thanks Brent.

Speaker Change: Our next question comes from Patrick Schultz with <unk> Securities. Please proceed with your question.

Operator: Our next question comes from Pax Scholes with True Securities. Please proceed with your question.

unknown: Thank you. Thank you. Michael, another question.

Patrick Schultz: Thank you.

Patrick Schultz: Michael My question.

unknown: Give us a little bit more color or an update on progress in signing up companies for the B2B business. Have you seen any attrition from the initial signups and also any additional color on the B2C portion of the business? Thank you.

Patrick Schultz: There's a little bit more color or an update on progress and timing.

Patrick Schultz: Signing up companies after the B to B b to B business.

Patrick Schultz: Have you seen any attrition from the initial sign ups and also any additional color.

Patrick Schultz: The biggest.

Speaker Change: A portion of the business. Thank you again.

Michael Brown: Absolutely, very good question. In the fourth quarter, we made a few decisions. Number one was to align the cost more precisely with revenue generation and forward expectations, and number two, we wanted to go deeper with the existing relationships we had as opposed to signing up more. Why?

Speaker Change: Absolutely very good question.

Speaker Change: In the fourth quarter, we made.

Speaker Change: A few decisions number one was to align the costs more precisely with the revenue generation and the forward expectations and number two is we wanted to go deeper with the existing relationships, we had as opposed to signing up more.

Speaker Change: Why the.

Michael Brown: It created a lot more internal work to continue to sign up more members with lower utilization. So our plan is to grow the existing ones to a point and more targeted at new B2B relationships. So we have added a few, but where we're getting our transaction growth on travel clubs, you know, X, the bigger group that dropped out in Q1 of last year, is by going deeper and getting greater conversion on the members that are already part of our ecosystem.

Speaker Change: It created a lot more internal work too.

Speaker Change: Continuing to sign up more and more members with lower utilization. So our plan is to grow the existing ones to a point and more.

Speaker Change: Targeted add new new <unk> relationships. So we have added a few but where we're getting our transaction growth on travel clubs.

Speaker Change: Ex the.

Speaker Change: The bigger group that dropped out in Q1 of last year.

It is by going deeper and getting greater conversion on the members that are already a part of our ecosystem sort of like everything else. It's like recruiting is.

Michael Brown: Sort of like everything else, recruiting is, you know, nurturing what you have inside the house, making those the most effective before just going in and recruiting more, in this case, B2B customers, and that's what we're doing this year. And when you look at our travel club growth and transactions in 2024, which we're projecting high single digits on transaction club growth this year, that is through the deeper conversion of clubs that we already have in-house. It's not relying on us going and finding new clubs to be part of our system.

Speaker Change: Nurture what you have in inside the house.

Speaker Change: Those are the most effective before just going in recruiting more in this case b to b customers and that's that's what we're doing this year and when you look at our travel club growth in transactions in 2024, which we're projecting.

Speaker Change: High single digits on transaction club growth this year.

Speaker Change: That is through the the deeper.

Speaker Change: Conversion of clubs.

Speaker Change: Clubs that we already have in house, it's not reliant on us going and finding.

Speaker Change: New new clubs to be part of our system.

Michael A. Hug: And Patrick, the reason we're confident in that high single-digit growth is if you exclude the... The one customer we lost from the first quarter, year-over-year comp, our transaction growth is actually 10%. So, you know, the investments we've made, as Mike said, to focus on the existing customers to drive more transactions are paying off. And once again, 10% year-over-year growth, exclusive of that large customer we lost.

Speaker Change: And Patrick the reason, we're confident in that high single digit growth is if you exclude the.

Speaker Change: The one customer we lost from the first quarter a year over year comp our transaction growth was actually 10%. So you know.

Speaker Change: The investments we've made as Mike said to focus on the existing customers to drive more transactions are paying off and once again, 10% year over year growth exclusive of that large customer we lost.

Speaker Change: Okay gentlemen, thank you for the updates sure. Thank you thanks Patrick.

unknown: Okay, gentlemen, thank you for the update. Sure, thank you.

unknown: Sure, thank you. Thanks, Patrick

Speaker Change: There are no further questions at this time I would now like to turn the floor back over to Michael Brown for closing comments.

Operator: There are no further questions at this time. I would now like to turn the floor back over to Michael Brown for closing. Thank you, Maria.

Michael Brown: Thank you, Maria. In closing, I would just like to reiterate that we're off to a great start to the year with 15% tour growth, strong PPGs, and a 37% new owner mix. This performance not only drove a great result this quarter, but it also lays the foundation for continued growth in the future. I again want to thank the entire T&L team for all their hard work in getting us here, and we look forward to speaking to you all again on our next call in July.

Michael Brown: Thank you Maria and closing I would just like to reiterate that we're off to a great start to the year with 15% to our growth strong ppg's and a 37% in new owner mix. This performance not only drove a great result, this quarter, but it also lays the foundation for continued growth in the future I again want to thank the <unk>.

Michael Brown: Entire <unk> team for all their hard work in getting US here and we look forward to speaking to you all again on our next call in July.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Michael Brown: <unk>.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

[music].

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Speaker Change: Okay.