Travel Leisure Co.

Good morning and welcome to the first quarter 2022 earnings conference call for Travel and Leisure Company. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. 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.

Thank you, Leo. Good morning. 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 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 in our earnings press release available at our website at investor.travelandleisureco.com. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our first quarter results, and Mike Hugg, our Chief Financial Officer, will then provide greater detail on the quarter, our balance sheet, and liquidity position. Following these remarks, we look forward to responding to your questions. And with that, I'm pleased to turn the call over to Michael Brown.

Thank you, Chris. Good morning, and welcome to our first quarter earnings call. This morning, we are pleased to report adjusted EBITDA of $170 million and adjusted EPS of 69 cents. Leisure travel is in the midst of a sharp recovery that began in February. The strength of the recovery continued through March and has not slowed in the month of April. Anecdotally, here in Central Florida, the strength of leisure travel demand is readily evident when you observe the airport, hotels, theme parks, and, of course, our resorts. The strong demand is also apparent in our results, most notably in our vacation ownership segment, driven by an elevated volume per guest in the first quarter of $3,377. an all-time high for the company, and 40% above 2019. The record BPGs not only have continued through April, but have strengthened further beyond first quarter levels. We expect this to moderate in the summer months as new owner tour mix increases. I'd like to discuss our BPG performance in the context of the leisure travel recovery in the current inflationary environment. Let me say up front, we see rising inflation as a net positive for our business model. Rising hotel and vacation home rental rates create an even more compelling value proposition for our customers. That value has resulted in an increase in sales close rates of over 300 basis points in Q1 compared to 2019 levels. Our owners see great value in timeshare. For example, a seven-night stay this July in two hotel rooms in close proximity to Disney currently costs approximately $6,000, including fees. Contrast that with our flagship Club Wyndham Bonnet Creek Resort in Orlando, where our owners pay a $1,600 annual maintenance fee to stay during high season in a spacious two-bedroom condominium with living room and kitchen, not to mention all of Bonnet Creek's resort amenities. The value proposition is clear, and it is one of the reasons volume per guest at Bonnet Creek is 53% higher compared to the first quarter of 2019. As a reminder, 80% of our owner base have fully paid off their ownership and are traveling for the sole cost of their maintenance fee. It is not just our existing owners that are realizing the value proposition. New owner VPGs are also strong. In the first quarter, new owner VPG was 47% higher than Q1 of 2019. New owner transaction mix increased just over 200 basis points year-over-year to 29%, with blue thread up to 15% of new owner volume from 13% in 2021 and 7% in 2019. Blue thread VPGs typically run 20% higher than other new owner VPGs as a result of higher close rates on leads coming from our affinity partner, Wyndham Hotels and Resorts. With regards to demographics, in Q1, nearly 40% of new owner sales were to Gen Xers and 30% of new owner sales were to Millennials. On the cost side, we do not have exposure to increasing construction costs for the next several years because our inventory costs are locked on our balance sheet. We do recognize labor costs are rising, but those expenses are primarily borne by the homeowners associations at our resorts or are a small fraction of our cost exposure. In the end, our owners are eager to travel, and inflation reinforces the decision they previously made to own with us. That demand is reflected in our expected occupancy for the remainder of 2022, which is currently tracking above 2019 levels. Turning now to travel and membership, revenue per transaction increased 12% year-over-year in the first quarter, and transactions increased 6%. We recognized coming into the year that RCI's growth would be challenged due to lower enrollments as new owner sales continue to recover industry-wide. Our strategic decisions over the last several years to supplement the growth in the exchange business with the launch of new business lines has resulted in travel and membership not only offsetting enrollment headwinds, but generating 15% revenue growth and 12% year-over-year adjusted EBITDA growth in the first quarter. Key to the success of the quarter was the strong contribution from our travel clubs, which saw a 21% year-over-year increase in revenue per transaction and an 18% increase in transactions. A significant element of the growth at Traveler Membership was the activation of RCI members who were incrementally booking non-exchange transactions at a higher rate due to expanded offerings through our travel club platform. March RCI non-exchange travel bookings were the highest since the launch of these expanded offerings in 2020 and doubled the run rate at the end of last year. We expect the momentum from these expanded benefits to continue, driving increased RCI member engagement and creating incremental revenue as members supplement their regular timeshare stays with additional travel bookings. Turning to our outlook, we expect second quarter adjusted EBITDA of $220 to $230 million, and for the full year, adjusted EBITDA between $855 million to $875 million. Reservation nights on our books for Q2 are currently running 10% higher than 2019 for vacation ownership. The reason I mention NITES is that we have seen a marked increase in length of stay, which is yet another positive data point on the strength of consumer demand. Through the end of this year, length of stay is averaging 8% higher than 2019. Consumers are seeing the value in our products, and we continue to be focused on the simple ABC strategy we laid out on our last call. First, we want to A, accelerate the growth of our global business. This was apparent in our revenue growth at our travel clubs in the quarter. Second, we want to B, broaden the strength of our cornerstone brands. And this was apparent in our record VPG and the strengthening of our portfolio performance. And lastly, we want to C, create depth of our products and services. And this was apparent with the progress at our B2B travel clubs, where in the first quarter we activated five new clubs, and B2B travel clubs delivered 43% of total travel and membership transactions. For more detail on our performance, I would now like to hand the call over to Mike Hugg.