Travel + Leisure Co. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. Travel + Leisure Co. operates Vacation Ownership and Travel and Membership segments. The interim financial statements were reviewed by Deloitte, not audited.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net revenue | $916 million | $879 million | +$37 million |
| Operating income | $150 million | $138 million | +$12 million |
| Net income from continuing operations | $66 million | $63 million | +$3 million |
| Net income attributable to shareholders | $66 million | $64 million | +$2 million |
| Diluted EPS | $0.92 | $0.81 | +$0.11 |
| Adjusted EBITDA (non-GAAP) | $191 million | $184 million | +$7 million |
| Operating cash flow | $47 million | $7 million | +$40 million |
Revenue increased 4.2% year over year. Operating margin was approximately 16.4%, versus 15.7%; net margin from continuing operations was approximately 7.2% in both periods. These margins are calculated from reported figures.
Segment results: Vacation Ownership revenue was $725 million (up $40 million) and Adjusted EBITDA was $135 million (up $4 million). Travel and Membership revenue was $193 million (down $7 million), while Adjusted EBITDA increased $4 million to $75 million. Corporate and other reduced Adjusted EBITDA by $19 million.
Cash and debt: Cash and cash equivalents were $479 million at quarter-end, up from $282 million at year-end; restricted cash was $168 million. Total reported debt was $5.924 billion, including $2.057 billion of non-recourse vacation ownership debt; corporate debt was $3.867 billion. Debt increased $292 million during the quarter, primarily from revolver borrowings. The company had $706 million available under its $1.0 billion revolving facility and $512 million available under non-recourse conduit facilities. It reported covenant compliance, with a 4.16x interest coverage ratio and 3.50x first-lien leverage ratio. On April 1, 2024, it repaid $300 million of secured notes due that month.
Material changes and operating drivers
- Vacation Ownership gross VOI sales rose 7.8% to $490 million and tours increased 14.8% to 155,000. Volume per guest declined 5.6% to $3,035, reflecting a higher mix of new-owner tours, which generally have lower VPGs and close rates.
- Vacation Ownership loan-loss provision increased to $78 million from $71 million. The allowance for loan losses was $561 million at March 31, 2024; gross VOI receivables were $3.096 billion.
- Travel and Membership transactions fell 6.3% to 445,000. Management cited a greater share of affiliated-club exchange members, who transact less frequently, partly offset by higher revenue per transaction from pricing.
- Travel and Membership EBITDA improved despite lower revenue, supported by restructuring-related savings, including lower marketing and other operating costs.
- Interest expense rose: corporate interest expense was $64 million versus $58 million, and consumer financing interest expense was $33 million versus $25 million.
- The company acquired Accor Vacation Club on March 1 for $50 million ($44 million net of cash acquired), expanding its Asia-Pacific vacation ownership business. Preliminary purchase accounting included $32 million of goodwill.
Outlook, risks and contingencies
- No full-year revenue, earnings or EBITDA guidance is provided in the supplied filing text. Management expects 2024 vacation ownership development spending of $105–$125 million, below historical levels, and capital expenditures of $80–$85 million.
- Management cited strong leisure-travel demand and improved Vacation Ownership tours, while noting uncertainty from inflation, high interest rates, recession risk, and changes in consumer travel behavior. Higher rates increased interest costs.
- Management said liquidity sources—including operating cash flow, cash, revolver access and debt markets—should meet expected cash needs. Risks include weaker capital-market access, deteriorating VOI receivable performance, conduit-facility renewal or replacement, and securitization triggers. All securitized loan pools were in compliance with applicable triggers at quarter-end.
- Ordinary-course legal accruals were $10 million. Management estimated potential aggregate adverse legal exposure up to $20 million above recorded accruals, while stating it did not expect a material effect on consolidated financial position or liquidity.
- Guarantees and indemnifications related to the former European vacation rentals business had an estimated fair value of $84 million recorded, with $19 million of related receivables from Wyndham Hotels. The company also disclosed $2 million of indemnifications related to the former North American vacation rentals business.
- Quarterly cash dividends were $0.50 per share; the company repurchased 0.6 million shares for $25 million and had approximately $146 million remaining under its repurchase authorization. Future dividends and repurchases remain subject to board approval and other constraints.
- Results are seasonal: VOI sales are generally higher in the third quarter, while vacation exchange fees are generally highest in the first quarter.
Most important facts for investors to verify
- Whether stronger tours and gross VOI sales can offset lower VPGs, close rates, and higher selling and marketing costs.
- Trends in VOI loan delinquencies, write-offs, provision expense, and the $561 million loan-loss allowance.
- Corporate leverage, interest costs, covenant headroom, and funding needs after repayment of the April 2024 notes.
- Execution and financial contribution of the Accor Vacation Club acquisition, including licensing economics and international growth plans.
- Whether Travel and Membership restructuring savings can persist while transactions and revenue remain under pressure.
- Potential cash exposure from legacy guarantees, indemnifications, and legal matters, alongside planned development spending, capital expenditures, dividends, and repurchases.