Travel + Leisure Co.

Good morning and welcome to Wyndham Destination's second quarter 2019 earnings conference call. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during that time, simply press star and one on your telephone keypad. If you would like to withdraw your question, please press the pound key on your telephone keypad. As a reminder, ladies and gentlemen, this conference call is being recorded. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Chris Agnew. Please go ahead.

Thanks, Keith. Good morning and welcome. Before we begin, we'd like to remind you that our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in our SEC filings, and you can find a reconciliation of the non-GAAP financial measures discussed in today's call and our earnings press release on our website at investor.windhamdestinations.com. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview on our strategic initiatives and our second quarter results. and Mike Hugg, our Chief Financial Officer, will then provide greater detail on our results and discuss our outlook. Following these remarks, we will be available to respond to your questions. With that, I'm pleased to turn the call over to Michael Brown.

Thank you, Chris. Good morning, everyone, and thank you for joining us today. As we celebrate our one-year anniversary, this call marks our fourth as Wyndham Destinations. We are proud of the progress made since the spin was announced in 2017 and the accomplishments achieved in our first year as a public company. The progress confirms that we are executing our strategy to put owners and members on great vacations, to deliver mid single digit organic growth, to generate strong and consistent free cash flow, and to return significant capital to shareholders. On this last point, we have now returned $585 million in capital to shareholders since the spend in June of 2018. Earlier this morning, Wyndham Destinations reported another strong quarter with adjusted EBITDA of $255 million and adjusted EPS of $1.45. EPS was above our guidance range and 16% higher than the prior year. We were pleased with our operating performance, in particular the strength in owner arrivals, the growth of blue thread sales, and the year-over-year and sequential improvement in our loan loss provision rate. We are increasing our full-year outlook for adjusted free cash flow to a range of $555 million to $575 million, and we are also increasing our adjusted EPS guidance range to $5.38 to $5.58. Our new EPS range represents 13% year-over-year growth at the midpoint, and we are reaffirming our outlook for full-year adjusted EBITDA guidance of $995 million to $1 billion and $15 million. As we announced this morning, we concluded our strategic review of Wyndham Vacation Rentals. The sale of this business to Vacasa for $162 million is expected to close in the fall. We believe Vacasa is the ideal buyer of the business, and as a result, we will receive a small equity interest in their company as part of the transaction. The sale will be comprised of $45 million cash at closing, up to $30 million of Vacasa equity, and the remaining balance in either seller financing or cash at closing. As we previously discussed, the rationale for the strategic review was to allow a dedicated focus on growth in our core business of vacation ownership and exchange. Our strong financial performance this quarter was a result of solid gross VOI sales growth of 4% in total and 5% in North America. We also benefited from increased owner engagement, which delivered significantly higher owner arrivals and increased owner sales. Furthering the performance in the second quarter was a slightly better than expected loan loss provision and consistent RCI performance. Let me now turn to discuss the provision. I continue to believe we are making all the right decisions to reduce loan loss provision for the long term. This quarter affirms that fact, and although this is not best measured quarter to quarter, our full year guidance demonstrates the progress we are making. You have heard me discuss at length the importance of owner engagement. Our numerous efforts have led to second quarter net occupancy being 400 basis points higher than the prior year and also resulted in an increase of 17,000 owner arrivals in our North American resorts. This is on the back of 13,000 more arrivals in the first quarter. We also saw excellent performance in our Blue Thread initiatives this quarter. Sales volume increased 50% year-over-year, driven by a 37% increase in tour flow. Year-to-date, Blue Thread sales are 33% higher than prior year. Speaking more broadly about total tour flow, tours increased 3% in the quarter over the prior year and 4% in North America. Tour flow has been slightly lighter in the first half due to a delay in our new Nashville sales site, an intentional change to our international tour mix, which we began in the fourth quarter of 2018, and underperformance from one of our marketing partners. These are finite impacts, as we have since opened Nashville, we will lap international mix issues in the fourth quarter, and we are working closely with our marketing partner to realign tour flow expectations. We are confident that growth will accelerate in the second half, and we are now likely towards the lower half of the 5% to 7% growth that we guided for the full year. One of the outcomes from stronger owner arrivals and sales is a natural reduction in our new owner sales mix as a percent of total sales. We expect new owner sales to be up year over year, and over a two-year period, that being 2018 and 19, we expect new owner sales mix to increase 300 basis points. We continue to see strong sales to Gen Xers and Millennials, which combined for 62% of our second quarter new owner sales. This represented an increase of 500 basis points from the prior year. One of the strategies we have in place to continue to attract new owners is to establish more distinctly each of our vacation clubs brand identities. Powerful brands deliver great development opportunities but they also drive increased owner engagement. At the end of May, we launch new brand identities with an exciting, modern look and feel that brings the essence of being an owner to life for our flagship timeshare clubs, Club Wyndham and Worldmark by Wyndham. We have refreshed the brands through a lens that appeals to our owners at every touchpoint across their life cycle, from both a creative and digital perspective. The tagline for Club Wyndham is Live Your Bucket List and speaks to how the brand is not just about owning a timeshare, it connects owners' passions for travel with exciting new destinations. For Walmart owners, vacations serve as the backdrop for ongoing traditions and the catalyst to create new ones, which leads to the brand's tagline of More Time to Share. In fact, I recently attended the grand opening of our Walmart by Wyndham in Portland, Oregon, and had the opportunity to speak directly with our owners. The feedback was overwhelmingly positive. We are the first timeshare company in this urban market, and it was great for us to see the new branding come to life at this location. These brand changes, along with the CRM initiatives we discussed on the first quarter call, will continue to enhance our owner engagement efforts. In exchange and rentals, the announcement of the sale of window vacation rentals was a key initiative, and I would like to thank everyone on our team who worked on the strategic review of the business. We are also making tremendous strides on the exchange side of our business. RCI is investing as part of its existing capital plan in supply and technology enhancements that focus on improving the member experience. Several initiatives have taken hold, with more to come in the second half of the year. In addition, RCI continues to look for new options for its members and in the second quarter added 21 new affiliates or 42 new properties to its destination portfolio. Lastly, with regard to capital allocation, we continue to demonstrate our commitment to returning cash to shareholders with $240 million in dividends and share repurchases year-to-date through the end of July. our capital allocation outlook remains the same. We are committed to our quarterly dividend, which expresses confidence in our ability to consistently generate free cash flow, and in the absence of compelling transactions, we believe the best use of excess free cash flow remains share repurchases. To conclude, I'd like to reinforce three major takeaways from our second quarter. First, the quarter delivered very tangible results around increased owner engagement. Second, the announcement to sell Wyndham vacation rentals highlights our focus on optimizing our balance sheet and driving incremental free cash flow. Lastly, regarding our outlook for the full year, we are reaffirming our adjusted EBITDA guidance and increasing adjusted EPS and adjusted free cash flow guidance. With that, I would like to hand the call over to Mike Hugg.