Travel + Leisure Q1 2025 Earnings Report

Travel + Leisure EPS Results

• Actual EPS: $1.11
• Consensus EPS: $1.10
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.97

Travel + Leisure Revenue Results

• Actual Revenue: $934.00 million
• Expected Revenue: $933.08 million
• Beat/Miss: Beat by +$923.00 thousand
• YoY Revenue Growth: +2.00%

Travel + Leisure Announcement Details

• Quarter: Q1 2025
• Date: 4/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 23, 2025
• Conference Call Time: 8:30AM ET

Travel + Leisure (NYSE:TNL) Co., together with its subsidiaries, provides hospitality services and travel products in the United States and internationally. The company operates in two segments, Vacation Ownership; and Travel and Membership. The Vacation Ownership segment develops, markets, and sells vacation ownership interests (VOIs) to individual consumers, as well as provides consumer financing in connection with the sale of VOIs; and property management services at resorts. The Travel and Membership segment operates various travel businesses, including three vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals. This segment also offers private-label travel booking technology solutions. The company was formerly known as Wyndham Destinations, Inc. and changed its name to Travel + Leisure Co. in February 2021. Travel + Leisure Co. was founded in 1990 and is headquartered in Orlando, Florida.

Travel + Leisure Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the Leader Q1 twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Then return to the queue. As a reminder, this conference is being recorded.

[Operator]

It's now my pleasure to turn the call over to Mike Hug, Chief Financial Officer. Please go ahead,

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thank you, Kevin. Good morning to everyone. Before we begin, we would 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 update or revise these statements.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

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 in the earnings press release available on our website at travelandleisureco.com/investors. This morning, Michael Brown, our President and Chief Executive Officer will provide an overview of our first quarter results and outlook. And then I will provide greater detail on the quarter, our balance sheet and outlook for the rest of the year. Following our prepared remarks, we will open up the call for questions.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

With that, I'm pleased to turn the call over to Michael Brown.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Good morning and thank you for joining our first quarter earnings call. I look forward to expanding on the strong first quarter results you saw in our press release earlier today as well as handing the call over to Mike Hug for a review of our financial performance. This will be Mike's last earnings call and I would like to thank Mike for his twenty six years with our company and his last seven as the first and only Travel and Leisure CFO. During his leadership Mike has seen us grow revenues from $500,000,000 to $4,000,000,000 has brought the company public, navigated us through the great financial crisis and COVID and has been integral in ensuring we execute against our operational plans and our capital return strategy with incredible consistency. Thank you, Mike.

[Michael Brown, CEO, President & Director at Travel + Leisure]

In quarter one, we delivered $2.00 $2,000,000 of adjusted EBITDA at the high end of our guidance range. Our vacation ownership business once again fueled our success driven by VPGs well above $3,000 Consolidated adjusted EBITDA margins grew from 21% in the prior year to 22%. We also continue to return capital to shareholders through dividends and share repurchases. Our dividend increased 12% to $0.56 per share and share repurchases were $70,000,000 or 1,300,000.0 shares in Q1. Before I address the question we're asked most often which is how is the consumer, let me first take a moment to revisit who are 800,000 plus owners actually are.

[Michael Brown, CEO, President & Director at Travel + Leisure]

On average they're 59 years old with a household income in excess of $110,000 and a tenure of about seventeen years. Eighty percent have fully paid off their ownership and our newest buyers 65% of whom are Gen X, Millennials and Gen Z reflect the appeal of our product across generations. In short, our consumer KPIs performed very well in Q1. Consistent with the broad commentary in the marketplace, we recognize there is incrementally more uncertainty in the macro outlook and the consumer sentiment has fallen progressively in 2025. Our perspective is that we will continue to monitor the available data.

[Michael Brown, CEO, President & Director at Travel + Leisure]

However, we have not seen meaningful changes in our company specific KPIs. Our owners showed continued demand for vacation ownership in the first quarter. This was most clearly reflected in our best daily measure volume per guest or VPG. Our VPG was $3,212 up from 2024 and notably above 3,000. We also measure consumer demand through our owners desire to visit our properties as shown in resort bookings.

[Michael Brown, CEO, President & Director at Travel + Leisure]

We saw an acceleration of resort bookings as the quarter progressed. Mike will speak to a third important KPI performance of the portfolio during his overview. Our performance in Q1 is a great reminder of the characteristics of the timeshare business that are often overlooked starting with the reality that our owners continue to prioritize their travel and generally do not view vacations as discretionary. Travel patterns do tend to shift with economic conditions. And in that regard, we monitor drive to versus fly to arrival percentages as well as booking windows.

[Michael Brown, CEO, President & Director at Travel + Leisure]

There has been no change in the percent of owners driving to our resorts and we have only seen a modest reduction in our booking window. Compared to the same time last year, the booking window has decreased from one hundred and thirty to one hundred and sixteen days. We see strong build for the upcoming months and our second quarter reservations on the books are in line with expectations. When you combine VPGs, forward bookings and travel trends, we currently see our consumer as quite resilient. We also observed that our investments in technology are beginning to yield higher owner satisfaction.

[Michael Brown, CEO, President & Director at Travel + Leisure]

The Club Wyndham app has now been downloaded by nearly 100,000 owners or approximately 20% of our Club Wyndham owner base. This is up from 40,000 downloads when we last reported. The app is driving a search to book conversion rate of 71% representing a 22% increase compared to the booking conversion on the owner website. As I mentioned in our last call, we will deploy a similar app to our 200,000 plus WorldMark owners later this year. Additionally, our resort operations team have deployed texting capabilities increasing on-site satisfaction scores to new highs in Q1.

[Michael Brown, CEO, President & Director at Travel + Leisure]

All of this is to say demand was solid in Q1 and our satisfaction rates are increasing. Moving to Travel and Membership, industry consolidation continues to drive the migration from external to internal exchanges putting continued pressure on the segment. Exchange transactions were down in the quarter. However, the business had its strongest exchange year over year transaction performance toward the end of the quarter. Our Travel Club business showed transaction growth of 3% in the quarter with an expectation of acceleration in Q2, highlighting an opportunity to support the Traveler membership segment.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Q1 is typically the strongest transaction quarter therefore transaction trends and margin will remain our focus in Q2. Our VO strength more than offset weakness in this segment and we expect a similar dynamic throughout 2025 albeit with different orders of magnitude. Lastly, let me touch on our brand strategy. Starting with our partnership with Wyndham Hotels, Blue Thread performance in Q1 contributed 7% of new owner tours with the VPG more than 20% higher than other new owner channels. Our relationship with the core in Asia Pacific has been performing for a year with good success.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Sports Illustrated remains on pace to start sales in 2025 and we have dedicated significant resources to reinvigorate our sales and expansion efforts for Margaritaville. We announced a new Margaritaville resort in Orlando that will open in 2027, placing a vacation ownership resort next to the successful two sixty five room Margaritaville hotel and 900 Margaritaville cottages on the doorsteps of Disney. We have nearly completed an organizational realignment to marry strategy, economic objectives and people around our brands. Although it is a subtle change it is one that ensures we are laser focused on the successful execution of these brands. As we look to Q2 on the back of the strength from Q1 we are projecting $250,000,000 of adjusted EBITDA with a range of $5,000,000 on either side and are reiterating our full year adjusted EBITDA outlook.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Mike will provide more details on this outlook. And with that, let me hand the call over to Mike.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thanks, Michael. And also thanks to everyone for joining us this morning. All of my comments will refer to comparisons to the same period of the prior year unless specifically stated. For the March, we reported adjusted EBITDA of $2.00 $2,000,000 and adjusted diluted earnings per share of $1.11 increases of 614% respectively. Breaking this down into more detail for our two business units.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Vacation Ownership reported segment revenue of $755,000,000 an increase of 4%, while adjusted EBITDA increased 18% to $159,000,000 VPGs continue to remain strong coming in at the higher end of our range. Tour flow was down 1% for the quarter, but we did see year over year tour growth in March, which we expect will continue into the second quarter and the remainder of the year. As it relates to the loan portfolio, during the quarter, the improvement in portfolio delinquencies we usually see from December to March did not occur. With this in mind, our current full year EBITDA guidance, which remains unchanged, reflects a provision rate of 21%, which assumes delinquencies stay at current elevated levels compared to historical trends. Revenue in our Travel and Membership segment was $180,000,000 down 7% and adjusted EBITDA of $68,000,000 for this segment was down 9% driven by a 13% decline in exchange transactions.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

While TravelClub transactions were up year over year, the growth in these transactions are not yet sufficient to cover the drop in exchange propensity. 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 $245,000,000 to $255,000,000 In Vacation Ownership, we expect second quarter gross VOI sales of $620,000,000 to $640,000,000 and VPGs of $3,050 to $3,150 As Michael mentioned, for the full year, we are reiterating our guidance range of $955,000,000 to $985,000,000 for adjusted EBITDA with the range for the Travel Membership segment moving to flat to down 2%. Moving to cash flow and our balance sheet, we generated $121,000,000 of operating cash flow and $152,000,000 of adjusted free cash flow for the quarter. As we previously said, we expect our adjusted EBITDA to free cash flow conversion to be in excess of 50% this year.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

On the balance sheet, we continue to have consistent access to the capital markets and closed our first ABS transaction of the year. $350,000,000 transaction had terms that were identical to our last transaction in 2024, with an advance rate of 98% and an interest rate of 5.2%. We also renewed our $600,000,000 ABS conduit facility in April, pushing the maturity date to August of twenty twenty seven. Our leverage ratio in the first quarter was 3.3 times. Consistent with prior years, we expect our leverage rate to increase the next two quarters and decline in the fourth quarter ending the year below 3.4 times levered.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

With the balance sheet in good shape, our capital allocation is focused on growing the business and returning capital to shareholders. As Michael mentioned, in March, we increased our dividend to $0.56 per share for a total of $41,000,000 in the first quarter. This dividend combined with our share repurchases throughout the quarter resulted in $111,000,000 returned to shareholders through the first three months of the year. We intend to recommend to our board a second quarter dividend at the same rate of $0.56 per share. Before opening up the lines for questions, I would like to thank the entire team at Travel and Leisure for delivering another great quarter, which once again gives us great momentum heading into the busy summer months ahead.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

With that, Kevin, can you please open up the call to take questions?

[Operator]

Certainly. We'll now be conducting a question and answer session. Our first question today is coming from David Katz from Jefferies. Your line is now live.

[David Katz, Managing Director at Jefferies]

Can you talk about what you've seen in April and then talk about T and M? We'd love to try and figure out where the solid core is for a pressured business. Those two things please. Thanks.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Good morning, David. Let me touch on T and M and vacation ownership and then I'll hand it over to Mike just to see what he's seeing in April as it relates to the portfolio. The vacation ownership business continues to perform very well in the month of April. There's been no signs of that uncertainty that we're all feeling at the moment affecting our KPIs as it relates to the business. We just finished as you're well aware the Easter weekend which is the peak of the month and it was a very good weekend for us that reinforce that our consumer remains committed to travel and performing very well as it relates to the VPGs and overall tour flow.

[Michael Brown, CEO, President & Director at Travel + Leisure]

In the Traveler membership business, we've mentioned on multiple calls that consolidation has continued to drive from external to internal exchange. We anticipate that migration does continue, but there does come a floor that we are trying to estimate. What I would say is that as we look forward we were able to fully cover our shortfall in Q1 and in fact exceed the midpoint of our guidance and we've incorporated being slightly down year on year as it relates to exchange as we move through the remainder of this year. As it relates to the portfolio, let me hand that over to Mike in April.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thanks Michael and good morning David. As it relates to portfolio, as I mentioned in my comments, we did see increased delinquencies at the March compared to what we had expected when we had our last call back in February. However, the good news is in April, are seeing improvement in collections. Keep in mind that in order to book a reservation, our owners have to be current on both their loan and their maintenance fees. So it serves as a great collection tool.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

So happy with what we're starting to see in April, but felt it was prudent to go ahead and take the provision in our full year guidance up to 21 based on the elevated levels we saw at the March. And then we'll see obviously as bookings continue in the rest of the quarter kind of how it shakes out as far as where we stand at the June. But April is off to a good start from a collection standpoint on the portfolio.

[David Katz, Managing Director at Jefferies]

You.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Sure.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thank you.

[Operator]

Thank you. Next question is coming from Patrick Scholes from Truist Securities. Your line is now live.

[Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

Great. Good morning. Thank you. Mike, congratulations. I'm wishing you well on your retirement and future travels and endeavors.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thanks, Patrick.

[Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

Great. Let's move on to some questions here. It sounds like the your core legacy owners are especially resilient, something we've seen in past economic downturns. Curious, if you have any visibility or anything you can share with how your summer rental business for non owners, if you have anything you can share how that is looking? Thank you.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Let me try to wrap two things in one here Patrick. First of all summer demand through our rental program remains consistent with what we would expect at this time of the year. There's no noticeable move either up or down. Summer rentals are very solid and as everyone's aware Q2 and Q3 are the peak seasons for us not only for overall volumes but also new owner mix. As it relates to owner demand we did want to point out referencing also back to David's question is our forward bookings in April look to be extremely solid for the summertime.

[Michael Brown, CEO, President & Director at Travel + Leisure]

So again it's a good projection. That's why we added the booking window of one hundred and sixteen days that gives you really a four month view out of how booking demand is and it's right where we expected it to be. So overall the summer seems to be shaping up in the way we had hoped for which gives us confidence in our Q2 outlook.

[Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

Okay. Thank you. And then shifting gears a bit here. As far as your it implies in your 1Q results you had better closing rates than, I guess, the Street expected. What was the mix or trends in the mix of closing to existing owners versus new buyers?

[Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

It might imply that you're selling more upgrades and is that your expectation going forward to sell more upgrades which typically have higher margins than to new owners? Thank you.

[Michael Brown, CEO, President & Director at Travel + Leisure]

There's a few details in your question Patrick that I want to encompass first of all in the more upgrades comment. If you look at our new owner mix in Q1 what happened this year is returned to our historical levels what we saw in 2023 and 2022 for Q1 percentage of sales being new owners. So that was very comforting for us that our mix was right back where we've traditionally seen it in historical years. Last year if you remember was an anomaly where we were over 35% because the investments we put in 2022 and 2023 to really reopen our marketing channels. Saw a lot of tour flow come through in Q1 of last year.

[Michael Brown, CEO, President & Director at Travel + Leisure]

We generated new owners which led to what always happened after the summer as we evaluated all of those channels. We pulled back on some, eliminated some and reinvested in others. So as we start this year at the new owner mix, we're very comfortable where that is and we'd expect that to grow as we move into the summertime. As it relates to individual closing percentages, you've read the room very well as it relates to close rates. Our owner business had stronger close rates year on year.

[Michael Brown, CEO, President & Director at Travel + Leisure]

And I think that makes a lot of sense as uncertainty or questions arise around travel. Owners see the value of their ownership. As we mentioned 80% have fully paid average ten years seventeen years which means people are vacationing for extremely high value and there's no reason for them to defer and they see the value even more when there's uncertainty ahead. So our owner close rates were a tad up in Q1 and I think equally on the new owner side people that haven't enjoyed a decade's worth of tremendous value are a little more hesitant to make the decisions and our new owner close rate was slightly down sort of the similar to how we were slightly up in the owner. But our long term outlook is as it always is we want to be in a 35% to 40% new owner mix over time and it doesn't need to hit it every single quarter.

[Michael Brown, CEO, President & Director at Travel + Leisure]

But as we look through a year and three year cadence, we want to be in that 35% to 40% range for new owners.

[Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities]

Okay. Thank you. I'm all set.

[Operator]

Thank you. Next question is coming from Danny Asad from Bank of America. Your line is now live.

[Dany Asad, Director at Bank of America]

Hi. Good morning, everybody. Maybe one more question on guidance. So if we maintained full year adjusted EBITDA, but we're lowering travel and membership, does that mean we're raising VOI segment for the year? And maybe can you just help us walk us through some of the offsets to lower G and M and higher provision?

[Dany Asad, Director at Bank of America]

Like what is what are we raising on the other side?

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Yes. Hi, good morning, Dan. This is Mike. Great question. Really the lowering of the T and M guidance is really just the shortfall we had in the first quarter which obviously was covered by over performance on the vacation ownership side.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

So the overall takedown of T and M doesn't really change our expectation for the last three quarters of the year. It's more just the first quarter flow through if you will which once again was covered as we came in above the high end of our midpoint. As it relates to the provision, the 21% provision rate that I talked about in my script equates to about 15,000,000 or $16,000,000 in EBITDA. If that were to come only from the BPG, the strong BPG's run that basically require $50 BPG lift. But also keep in mind that we'll look across the entire organization to make sure that we do the things that we need to do to control our cost to be able to cover that.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

The good thing about identifying that at this point in the years, we've got seven months left. So a lot of time to obviously drive the strong BPGs, but just importantly to make sure the organization is focused on covering that. So I think it's just once again rolling through the first quarter on T and M and then identifying that higher provision early and making sure we as I mentioned drive VPGs and control our cost to get to the range that we have out there that as you mentioned we held for the year.

[Dany Asad, Director at Bank of America]

Awesome. Thank you very much. And then the back half of the year has tour flow acceleration that's implied here. Can you maybe just help us like walk us through the drivers of that? Like how do we get from the run rate of let's say the 4% to our floor growth in the second quarter to like maybe what looks like probably a high single digit to our floor growth like what are we going to how do we get there?

[Michael Brown, CEO, President & Director at Travel + Leisure]

Well, I'll circle back around to what I shared with Patrick in the last question as it relates to the cadence over the last three to four years on tour flow. We were down in Q1 simply because we were coming off a really tough comp in Q1 of last year where we had benefited from two years of marketing buildup that culminated in the first half of twenty twenty four. And if you remember our tour flow percentage growth came down as the year progressed and we communicated that that was really a continued fine tuning of which marketing programs we thought were sustainable for the long haul. So there's a combination of easier comps as we move through the year and also some new partnerships and new marketing channels that we started in 2024 that will start to play through and we get our full year run rate in 2025. So it's a combination of those two items that allow us to have confidence that our tour flow will move up to that sort of mid single digit range.

[Dany Asad, Director at Bank of America]

Got it. Thank you very much.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Sure. Thank you.

[Operator]

Thank you. Next question today is coming from Chris Woronka from Deutsche Bank. Your line is now live.

[Chris Woronka, Analyst at Deutsche Bank]

Hey, good morning guys and Mike. Really appreciate all the interactions and perspectives over the years. So all the best to you in retirement.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thanks, Chris.

[Chris Woronka, Analyst at Deutsche Bank]

Yes. Did have a couple of questions. I guess, on the I'm taking up the provision you guys have already covered off the ground there, but any more color to add on just where that I know the slight uptick you mentioned, you mentioned better collections, but the uptick you did see in March, is there any way to break that down a little further, give us some color on where that came from, what type of customer it was, is it the customer you would expect to see defaulting or something else?

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Yes. So really it was a it didn't just turn remarks, it's kind of throughout the quarter we saw kind of higher level of delinquencies and obviously ended up the quarter at a higher level than we expected. It's really coming from all channels. I wouldn't say it's there's one particular channel we can point to or one particular customer we can point to. Obviously, the lower FICOs are impacted a little bit more than that than the higher FICOs when it comes to the ability to pay.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

But overall, it's kind of across the board. Keep in mind we're talking about as I mentioned a number that's 15,000,000 or $16,000,000 as far as the incremental provision. So overall I think we're pretty happy with where the portfolio is coming in with compared to maybe where some people thought it might. And I would also point out that we were able to execute the ABS transaction in March like we always do great terms there and think about the note holders that are buying into that transaction basically they're buying into a portfolio of loans. So to me that's always a good reaffirmation that others believe in the quality of our portfolio as well.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

So look it's 10 loss curves that we use, seeing some movement up kind of across all the bands, But overall, pretty happy with where it's at and hopefully the improvements we're seeing in April will continue through the quarter and throughout the year as people book their vacations.

[Chris Woronka, Analyst at Deutsche Bank]

Okay. Fair enough. Thanks Mike. And as a follow-up, appreciate the incremental data point on the booking window. It still sounds pretty healthy, but the question would be that kind of takes us, I guess, on average into well into August with one hundred and sixteen days now.

[Chris Woronka, Analyst at Deutsche Bank]

Typically, do you see I'm really thinking about Q4, right, and kind of what's left to do? How much of a lift is that to make guidance? And when do you typically start seeing bookings for Q4 come in? Is there any seasonality to the booking of the tour package in that quarter? Or how should we maybe think about what's left to do in Q4?

[Chris Woronka, Analyst at Deutsche Bank]

Thanks.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Yes. So the average is 116 which means we do have the tail that's well beyond that and into the fourth quarter. And although we say that the summer bookings is at our expectation we do have a look and if there's anything showing up with our bookings into Q4 granted there are fewer and they're further out but you can already get early trend lines into Q4 now to see if there's anything any anomalies coming up. And again there's nothing really and it's the point of a lot of our commentary is as you'd expect with the uncertainty that's out there you would expect our business to have tweaks up and down across the enterprise. And that's exactly what we tried to communicate today knowing that, as we've had some metrics come in a bit behind where we expected, Q1 had areas that again covered those shortfalls and even exceeded them.

[Michael Brown, CEO, President & Director at Travel + Leisure]

But right now there's nothing in Q4 that gives us any concern.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

The other thing I'd point about Al about Q4 similar to Q1 is it's our second heaviest owner travel quarter when you look at summer months being the heaviest new owner travels as a percentage. So I think when we think about confidence in Q4 as we saw in Q1, we believe our owners are going to travel. They see the value. They've paid for the product in 80% of cases. So I think that's the other part about Q4 is it's less reliant on new owner tours and more reliant on those resilient owners that we have.

[Chris Woronka, Analyst at Deutsche Bank]

Okay. Super helpful. Thanks guys.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Sure. Thank you.

[Operator]

Thank you. Next question today is coming from Lizzie Dove from Goldman Sachs Asset Management. Your line is now live.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

Hi there. Thanks for taking the question. I guess first one, there's been a lot of headlines about slowdown in international tourism into The U. S, some boycotts of The U. S, along those lines.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

I'm curious just firstly, any disclosure you have around like the percent particularly for your properties that are whether it's Canada, Mexico, just international exposure there and whether you have seen any slowdown whether it be on bookings or anything else on the kind of international side?

[Michael Brown, CEO, President & Director at Travel + Leisure]

Good morning or good afternoon, Dizzy. The makeup of our owner base is or our revenue is about 90% North America and pretty much all in The United States. We do have nearing 10% that's in the Asia Pacific region. So when you look at both sales and bookings, we're not seeing any impact as it relates to the international travel impact. We do have a good number of resorts in Canada and we are seeing a bit more loyalty to the Canadian resorts from our Canadian members, which is very consistent with I think what everyone's seeing broadly.

[Michael Brown, CEO, President & Director at Travel + Leisure]

We have no exposure really to Europe and minimal resorts in Mexico. So all that's to say that, no, it's the international commentary that's out there today is not affecting our business as the Asia Pacific more specifically tends to stay and travel within their region primarily Australia and Thailand and New Zealand.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

Got it. That's helpful. And then I guess when we're in this kind of choppier or more uncertain macro environment, is there any change to how you think about capital allocation? Obviously, you've been pretty consistent with share repurchases, but I'm curious like whether that changes in this kind of environment?

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Hey, Lucy, this is Mike. Thanks for the question. I think we reiterated both our EBITDA and our free cash flow conversion being over 50% of EBITDA. So as we sit here today, I think we're confident in our business, we're confident in our cash flow. Obviously, we executed the ABS transaction.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

We extended the maturity on the ABS conduit to August of twenty seven. So I think everything we did in the quarter in April really sets us up to continue to be consistent with our capital allocation. Obviously, increased the dividend and mentioned that we'll recommend that same level of $0.56 per share and then the share repurchases of $70,000,000 in first quarter were very consistent with what we've done on a quarterly basis the last two years. So I think we remain confident in the business, confident in our cash flow. And at this time, I don't see us needing to really make any significant changes as it relates to capital allocation.

[Lizzie Dove, Vice President Equity Research at Goldman Sachs]

Got it. Thank you.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Sure. Thank you.

[Operator]

Thank you. Our next question is coming from Ben Chaikin from Mizuho Securities. Your line is now live.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Hey, good morning. Mike, congratulations and good luck. Thanks, Ben. Two quick ones. I'd love to dig into exchange a little more.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

I guess the transaction volume declining from industry consolidation, it makes sense, but it also isn't necessarily new. And I guess optically, looks like the decline somewhat accelerated. So was there a comp issue that we can't really see? Or is there a change in the way people are exchanging in the current macro for some reason? Does the question make sense?

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Meaning I totally understand the industry consolidation angle. This optically looks like it stepped down a little more, a little faster than we would have expected in 1Q.

[Michael Brown, CEO, President & Director at Travel + Leisure]

Well, no. In this case the numbers are what the numbers are. There's not a year on year comp issue. I think what we're seeing both in our business because we're a client of the exchange business as well as many other affiliates out there is, as uncertainty rises there is a tendency to want to keep your members within your club because the great thing about timeshare is there's a lot of value. Satisfaction rates are high and they see the value of purchasing more.

[Michael Brown, CEO, President & Director at Travel + Leisure]

So I think it's a natural phenomenon that we saw. Within the quarter there was variation. January and February started slower and we saw a noticeable pickup of exchange transactions as the quarter ended. We'll see if that which one of those trends continue we don't know yet. It's too early to say for Q2.

[Michael Brown, CEO, President & Director at Travel + Leisure]

But candidly Ben I think it's just the reality of how the evolution of the space has evolved and we have not tried to sit quietly and just let it happen. As we shared, we launched a Travel Club business And although it can't offset the exchange reductions, we are seeing growth in that space. We mentioned there'll be an acceleration. And all that's just to sort of flatten the curve and allow the VO business to really shine like it did in Q1. Understood.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

That's very helpful. And then a quick question on SI. I guess what's the is there any updated timing on Tuscaloosa and can you start selling the product? Believe maybe last quarter you put some inventory into the trust if I'm not mistaken. I think you did a conversion if I'm not mistaken.

[Michael Brown, CEO, President & Director at Travel + Leisure]

So I should correct what was understood from last quarter. We will be putting a conversion into the Sports Illustrated Trust this year. We are finalizing a deal as we speak. So look forward to sharing that in the near future. It's not finalized, so can't discuss it quite yet.

[Michael Brown, CEO, President & Director at Travel + Leisure]

But we will be putting that into the trust and that will allow us being a conversion to move into sales very quickly, which is why in our prepared remarks we said we look forward to being in sales this year on Sports Illustrated.

[Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.]

Got it. Understood. Thank you very much.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thanks, Ben.

[Operator]

Thank you. Next question today is coming from Stephen Grambling from Morgan Stanley. Your line is now live.

[Stephen Grambling, Managing Director at Morgan Stanley]

Hey, thank you. I guess in the past when you've seen a deterioration in demand, you've typically kind of pivoted to selling to existing owners. I guess how do you think about the opportunity to upgrade existing owners or how the pulling that lever in today's environment might compare to the past as we look at how your existing owner base looks now versus other instances?

[Michael Brown, CEO, President & Director at Travel + Leisure]

Well, I think the optionality we have that you mentioned Steven is absolutely there. We don't view where any we're at that point, which is why I think it's important you have to look at our Q1 performance compared to sort of 2023 and 2022 as being at a normal run rate. We're investing the same with new owners. Our owners to your question are in very good shape. Our household incomes have moved up.

[Michael Brown, CEO, President & Director at Travel + Leisure]

The age category has moved down for new owners and ultimately our changes that we made coming out of COVID to step up our marketing criteria. I think all in all puts our owner base in a very good space. Maybe a little bit of a softer component of that and it's why we highlighted it in this call is we are spending a lot of our run rate capital, operating capital putting it back into the consumer and the Club Wyndham app is reactivating owners. It's getting them to use more and we're long overdue to update the WorldMark capabilities as well and we think that's going to be extremely well received. So economically it's one answer but ultimately we always know in this business if your consumers are using their product they're going to buy more and our efforts are not sorry, are to really get owners using their ownership more in that with less friction and the less friction is and Mike Hug tells his own anecdote about booking his vacations on our app as well and doing it in a record amount of time.

[Michael Brown, CEO, President & Director at Travel + Leisure]

So we're super excited about where we're going and we're super excited about our owner base being in a really good place to do what exactly what you indicate, we're not at that point yet.

[Stephen Grambling, Managing Director at Morgan Stanley]

That's helpful. And maybe one quick follow-up and maybe I missed this, but did you disclose kind of the composition of owner growth in the quarter and then maybe how that's compared over the past couple of quarters as we think about gross adds, attrition and getting to kind of a net owner growth?

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Yes. I think when you look at the transaction mix, was 31% new owner sales in the quarter, really right in line with where we expected as Tour flow came in, in line with where we expected. We would expect as new owner tours grow throughout Q3 and Q4 and Q2 that we'll get a increase in the new owner mix and kind of end the year in that 35% range. If you looked at owner count, it would be down a little bit, which it always is in the first quarter just because it's the lowest new owner order. But overall for the full year we're still expecting to be in that 35% transaction, new owner transaction range.

[Stephen Grambling, Managing Director at Morgan Stanley]

Thank you.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Sure. Thank you.

[Operator]

Thank you. Next question is coming from Brent Montour from Barclays. Your line is now live.

[Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank]

Good morning everybody. Thanks for taking my question and congrats again to Mike Hogg. I won't miss you. So, on the my first question is a different way of asking Stephen's question. I know that you guys don't have a crystal ball on the economy and I know Michael that, you guys aren't at that point yet.

[Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank]

But what the first thing I mean the first two things that we would expect to see if there was a slowdown in your business would be an uptick in delinquencies and a downtick in new owner close rates both of which you guys called out today to some extent even if it's minor. And so I guess the question is summer is a big new owner sales season, new owner close rates are what you called out was a little bit soft toward the end of the quarter. And you have optionality, you just mentioned that. How quickly could you deploy that optionality? And is there other levers that you'd pull even before that incentives, promotions, hotel points?

[Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank]

What sort of the playbook look like if new owner close rates slow further from here?

[Michael Brown, CEO, President & Director at Travel + Leisure]

Well, let me first say that even during COVID we didn't pull some of those levers you've mentioned of discounting and incremental noticeable incentives. We our performance really tends to be our performance. And we were a strong believer at maintaining steady pricing over time. And in the inflationary period that really helped us because people even more saw the value and it's about creating new owners. Specific to your question, we can react very quickly, but we think our business has a lot of variables that we as a management team will move very quickly to resolve.

[Michael Brown, CEO, President & Director at Travel + Leisure]

And that's not just the owner side of sales, but we have a full cost structure. We also believe that as we move into the second and the third quarter, we have exciting new things coming our way that should propel our business. And ultimately Q1 was a quarter that saw sentiment decline one study from something like 75, 70 eight down to 50. And that's a dramatic drop. And in the midst of all that there were minor adjustments to closing percentages and they were minor.

[Michael Brown, CEO, President & Director at Travel + Leisure]

And I just I think we have a lot of confidence that there will continue to be minor adjustments up and down to portfolio to close rates and ultimately to VPG. But I think it's all within our grasp as far as management's ability to toggle throughout the summer and into the fall should there be changes to the economy that would warrant it. Mike and I often comment that we haven't seen a normal pullback since what 02/2001. We all sort of imagined the great financial crisis which we access the market within months, COVID which we access the market within I think two months and both times we came out with a stronger consumer with higher satisfaction rates. So if this is your normal pullback I think not only Mike and I but the entire management team is well within their capabilities to toggle the owner side of the equation, the cost side of the equation and just new initiatives to make sure we get to the other side.

[Michael Brown, CEO, President & Director at Travel + Leisure]

And if we do, we really are hopeful that we'll be able to turn around and say to you all and to the buy side, we've been saying it for a long time that this is a highly resilient business where vacations aren't discretionary and we can continue to return a high degree of capital to our shareholders in good times and in trough periods in the economy. But let's hope we don't have to see that this summer.

[Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank]

Okay. That's a great answer. A second follow-up would be is separate to the SI portfolio and the sales that you were mentioning just a minute ago. In Tuscaloosa, One of the things that we hear about deals related to college sports programs and sort of the it's really the seasonality that makes it difficult for that model because people all want to stay during football season, right? I mean, that or graduation weekend or etcetera.

[Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank]

And there's sort of good swath of the calendar that you don't have people wanting to utilize that capacity from an owner's perspective. And I apologize if you've addressed this issue or maybe it's not an issue in past calls. I don't remember. And so I just wanted to make sure I understand. Is that something that is a detractor of this model?

[Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank]

And do you think you've sort of gotten past that or figured out a way to smooth that out and making it work from an economic perspective?

[Michael Brown, CEO, President & Director at Travel + Leisure]

Well, let me tackle that on two different fronts maybe professionally and personally. Professionally you think about the ski destinations and places like Park City, Breckenridge, Vail, Aspen, the Northeast and the same commentary was always around ski destinations. Park City today you get great rates during ski season especially Presidents and Christmas New Year. But guess what? They say in Park City is you come for the ski season and you stay for the summer.

[Michael Brown, CEO, President & Director at Travel + Leisure]

And that's what I think is very much the case in College Town. There's a reason why Hilton believed in The Graduate because and I'll maybe transition to the personal side is if you've had a kid that's gone through college you're not there for only football games, you're there for graduations, you're there for the other sporting events, you're there for parents weekend. And although it feels like there's only one sport eventually that's going to be in college sports. It's really a year round calendar that parents are equally as passionate about women's volleyball or men's track as they are about college football just may not be orders of magnitude. So I think that's a very natural reaction similar to what it was in ski destinations but ski destinations have proven that they do very well year round.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Yes. And I would add, mean these college communities are also trying to use the assets they have to drive incremental revenues into their towns. I mean the EPL, the European soccer league is now coming over the summer time and playing in some of these college stadiums. A lot of concerts nowadays are occurring in the summer in the college football stadiums and the basketball arena. So if you look at what Michael mentioned plus what the towns themselves are doing to try to bring additional attractions if you will or entertainment into their destinations during the off season.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

I think that gives us confidence as well that us working with them will be great in terms of just driving additional demand into those communities.

[Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank]

Thank you.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Sure.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thank

[Operator]

Thank you. We reached end of our question and answer session. I'd to turn the floor back over to Michael Brown for any further closing comments.

[Michael Brown, CEO, President & Director at Travel + Leisure]

I do. And there's one component I admitted which I do want to just share with everyone that as Mike exits we are at the final stage of our search process and anticipate announcing Mike's replacement very soon and are pleased that it will allow us for an overlap in a very smooth and orderly transition. Nothing short of what you would expect with Mike. But before we do wrap up, I definitely want to take a moment and acknowledge once again that this is Mike Hug's final earnings call as the CFO of Travel and Leisure. His leadership and commitment to this company have made a lasting impact.

[Michael Brown, CEO, President & Director at Travel + Leisure]

And Mike on behalf of the entire team thank you for everything and it's only appropriate that you provide today's closing remarks.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

Thanks again, Michael. As we close out today's call, I just want to take a moment to reflect and express my gratitude. It's been an incredible experience to serve as CFO of Travel Nature. Over the years, I've had the privilege of working alongside an exceptional team, navigating both opportunities and challenges and helping shape the company that I truly believe in. I'm proud of the progress we've made, the discipline we maintained and the resilience we've shown across market cycles.

[Michael Hug, Chief Financial Officer at Travel + Leisure]

I want to thank all the Travel and Leisure associates whose hard work and dedication continue to drive this business forward. I also want to thank our investors and analysts for your support, your questions and your partnership over the years. I'm confident this company is in a strong position both financially and operationally and I have faith that the team that we have will carry the torch forward. Thank you again for your trust you placed in me. It's been an honor.

[Operator]

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Participants

Executives

• Michael Hug, Chief Financial Officer
• Michael Brown, CEO, President & Director

Analysts

• David Katz, Managing Director at Jefferies
• Patrick Scholes, Managing Director - Lodging & Leisure Equity Research at Truist Securities
• Dany Asad, Director at Bank of America
• Chris Woronka, Analyst at Deutsche Bank
• Lizzie Dove, Vice President Equity Research at Goldman Sachs
• Benjamin Chaiken, Equity Analyst at Mizuho Financial Group, Inc.
• Stephen Grambling, Managing Director at Morgan Stanley
• Brandt Montour, Director, Equity Research Analyst at Barclays Corporate & Investment Bank