Travel + Leisure Co.

Greetings and welcome to the Travel and Leisure second quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Agnew, Senior Vice President, Investor Relations. Thank you. Please go ahead.

Thanks, Donna, and good morning to everybody. Before we begin, we'd like to remind you that discussions today will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in our SEC filings and in our earnings press release accompanying this earnings call. And you can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our website at travelandleisureco.com forward slash investors. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our second quarter results and full year outlook. And Mike Hugg, our Chief Financial Officer, will then provide greater detail on the quarter or balance sheet and liquidity position. Following our prepared remarks, we look forward to responding to your questions. And with that, I'm pleased to turn the call over to Michael Brown.

Thanks, Chris. Good morning, everyone, and thanks for joining us today. We are pleased to report solid second quarter results in the continued return of capital to shareholders. With our solid results and the forward owner bookings at our resorts, we are reaffirming our full year adjusted EBITDA guidance. For the second quarter, we reported adjusted EBITDA of $236 million, a 3% increase over the prior year, and adjusted earnings per share of $1.33, a 5% improvement over Q2 2022. Adjusted EBITDA margin was 25%, which was flat compared to the prior year, and reflects headwinds from higher interest expense from AVS transactions and our investment in growing new owner mix. In the second quarter, we returned $135 million to shareholders. We paid a 45 cents per share dividend on June 30th, and we purchased 2.6 million shares for $100 million. Over the last 12 months, our share count has been reduced by 10 million shares 12% of the shares outstanding at the end of June 2022. Now let me discuss some of the key performance indicators that we monitor to gauge the health of the travel consumer, forward bookings, volume per guest or VPG, and the performance of our consumer finance portfolio. First, forward bookings. Owner nights on the books for the second half of the year continue to track ahead of 2019, providing us good visibility into the remainder of the year. Second is volume per guest. Our Q2 VPG of $3,150 was at the top end of our guidance range and 30% above 2019. VPG remains well above our long-term guidance range of $2,700 to $3,000. On an absolute basis, BPGs are healthy and reflect a strong value proposition of our product. On a relative basis, we saw modest reduction in close rates through the quarter, which likely reflects a pullback of pent-up demand in the prior year. Our BPG guidance for the full year is unchanged at $3,050 to $3,150. Sequentially, BPG declined $65, or 2%, with 60% of this related to mixed impacts. Year over year, VPG declined $339, or 10%, with close rates accounting for 64% of the year over year decline. The balance was mixed related, with new owner transactions increasing to 34% of total transactions in the quarter, up 200 basis points from the prior year. This investment in new owners adds to our pipeline of future upgrade sales opportunities. Turning to our consumer finance portfolio, we saw a similar picture emerge in the second quarter. Delinquencies are performing well on an absolute basis, but we did see further normalization in the quarter. However, there is nothing in these changes that we would expect to impact our full year loan loss provision guidance. The strategic moves we made in 2020 to raise credit standards have positioned us well for the current economic environment. At the end of the second quarter, 11% of our portfolio had a FICO below 640, and year-to-date, the average FICO score for originations is 738. The prepaid nature of timeshare ownership is a key differentiator for our business model. 80% of our owners have fully paid for their timeshare, and therefore the choice to vacation is less dependent on economic conditions. As we've said before, our healthy mix of recurring and predictable revenues is one of the reasons we expect our business will continue to be resilient if we enter a more challenging economic environment. This resilience and demand among timeshare owners has been proven time and time again, most recently coming out of COVID. Blue Thread sales, our new owner marketing channel, aligned with Wyndham Hotels, continues to exceed expectations. Blue Thread tours increased 20% year-over-year in the second quarter, compared to 15% growth in overall tours. At travel and membership, transaction propensity continues to be a headwind at RCI, with transactions declining 7% year-over-year in the second quarter. This was somewhat offset by a 5% increase in exchange revenue per transaction on the back of mixed improvements and price increases. Travel club transactions declined 9% year over year, which was consistent with the expectation that we communicated on our first quarter call. Shifting to our 2023 outlook, we are reaffirming our adjusted EBITDA guidance range of $925 to $945 million as well as our expectation for gross VOI sales to be within a range of $2.1 to $2.2 billion. We recognize the uncertainties related to the outlook for the economy, but we are optimistic about the company's ability to deliver strong performance. Although we expect consumers will continue to prioritize vacations, we came into the year anticipating some normalization of demand trends. We solved some of this in the second quarter, and our guidance for the second half of the year reflects a range of outcomes, including at the low end, potential softening of trends. For more detail on our performance, I would now like to hand the call over to Mike Hugg.