Travel Leisure Co.

Q1 2024 Earnings Conference Call

4/24/2024

spk02: Greetings, and welcome to the Travel and Leisure First Quarter 2024 Earnings Conference Call. At this time, all participants are in 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, Jill Greer, Vice President of Investor Relations. Thank you. You may begin.
spk00: Thanks, Maria. Good morning to everyone, and thank you for dialing in to our first quarter call. Joining us this morning are Michael Brown, our President and Chief Executive Officer, and Mike Hugg, our Chief Financial Officer. Michael will provide an overview of our financial results and our longer-term growth strategy, and Mike will then provide greater detail on the quarter, our balance sheet, and outlook for the rest of the year. Following our prepared remarks, we'll open the call up for questions. 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 filing and in our earnings press release. You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our Investor Relations website. Finally, all comments today are comparisons to the same period of the prior year unless specifically stated. With that, I'm pleased to turn the call over to Michael Brown.
spk03: Good morning, everyone. Welcome to our first quarter call, and welcome, Jill, to the Travel and Leisure team. During our last call, we highlighted two themes, robust demand for vacation ownership and our team's focus on execution. Our Q1 results show these trends continuing with 4% revenue growth $191 million in adjusted EBITDA and adjusted earnings per share of 97 cents. I want to extend my personal thanks to the entire T&L team for their excellent performance, which has gotten our year off to a great start. Tours increased 15% year-over-year, with new owner tours up 28%. The sizable tour increase is important because it reflects strong interest in our product, as well as the benefit of investments we've made in our marketing operations, including the addition of new locations. Q1 VPG ended at $3,035, above the high end of our guidance range, which strengthened as the quarter progressed. We are also pleased with the VPG thus far in April. The combination of higher new owner tour growth and strong VPGs helps answer the central question I'm asked by media and investors most often, how is the consumer? From our view, demand for leisure travel remains robust. As we look ahead, we have a 7% increase in owner room nights for the remainder of the year compared to the same period last year. Both booking windows and arrivals by car have normalized, more signs that the consumer is confident to book future travel, and the trends we are seeing in our business are consistent with broader industry sentiment. A recent Future Partners report showed that financial optimism among travelers has improved and excitement to travel remains elevated. With a strong industry macro backdrop, good momentum at Travel Leisure specifically, and the visibility that we have for this year's summer travel season, we have increased confidence in our near-term outlook. As we think about longer-term growth in the vacation ownership business, we're focused on expanding our product portfolio and growing the business both organically and through strategic acquisitions and partnerships. On the product side, the Accor Vacation Club transaction closed in early March, adding a premium product in the international market to our portfolio. With this acquisition, we now have more than 270 resorts worldwide, giving us more opportunities to put the world on vacation every day. Our team is already focused on its ramping of sales, as well as the transition of the overall business. I specifically like to thank the leadership team at Accor for working with us on making this a very smooth transition and their thoughtfulness on how to grow going forward. We are also making progress toward the start of sales next year for initial Sports Illustrated brand new resort. This will be the first of a network of sports themed resort and lifestyle complexes, which we expect will include both university locations and leading leisure destinations. With multiple brands and a broad geographic footprint, our network of resorts provides a natural hedge to individual market fluctuations. In fact, as a result of our highly diversified resort system, we only have one market that produces more than 10% of VOI sales volume. In terms of growth, we are continuing to innovate and invest in acquiring new owners. Our Blue Thread partnership with Wyndham delivered great results with sales up nearly 10% year over year. As a reminder, the Blue Thread channel typically generates 10 to 20% of our new owner tours with a VPG more than 20% higher than other new owner tours. Our new owner transactions were 37% of the total. up four points sequentially and six points year over year, putting us well within our long-term targeted new owner mix. This is an important pipeline of future revenue as historically we have seen that a new owner will spend an average of 2.6 times their initial purchase in future years after vacationing with us. This consumer behavior is consistent with ARDA's February sentiment survey, which found that nearly half of all timeshare owners plan to upgrade their current ownership in the next two years. So overall, we're in a really good position to grow the vacation ownership business. On the travel and membership side, the results came in within our guidance range, which shows our focus on aligning cost with revenue generation is paying dividends as we drive the business for its high margins and free cash flow generation. To summarize, consumer demand for leisure travel remains robust, and we are delivering against plans to efficiently grow our business. We have a great team in place with a record of solid execution, and we are on track to meet our 2024 commitments to grow revenue in EBITDA and deliver strong returns to our shareholders. With that, I would now like to hand the call over to Mike Hugg.
spk10: Thanks, Michael, and also thanks to everyone for dialing in this morning. For the March quarter, we reported adjusted EBITDA of $191 million and adjusted diluted earnings per share of 97 cents, increases of 4% and 9% respectively. This result is even more impressive given the interest expense headwinds we noted coming into this year. Breaking this down into more detail for our two business units, vacation ownership reported a segment revenue of $725 million, an increase of 6%. while adjusted to EBITDA increased 3% to $135 million. As Michael described, the trends we are seeing in Tours, New Owner Mix, and BPG gives us good momentum in this business. Revenue in our travel and membership segment was $193 million, down 4% on a 6% decline in transactions. Revenue in this segment continues to be challenged, so we are focused on driving cost efficiencies to improve returns. These cost initiatives helped us deliver solid adjusted EBITDA growth of 6% for this segment. While exchange transaction growth will remain pressured due to the previously discussed shift in mix of exchange members, we're expecting travel club transactions to grow for the remainder of the year as we have lapped last year's loss of a large customer. 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 $235 to $245 million, which includes the year-over-year impact of higher interest rates and variable compensation expense. In vacation ownership, we expect second quarter gross VOI sales of $580 to $610 million and BPGs of $2,900 to $3,000. For travel membership, we're guiding to adjusted EBITDA in the second quarter of $60 to $65 million. For the full year, we are reiterating our guidance range of $910 to $930 million for adjusted EBITDA. The business is performing well, and we're pleased with what we see on the books for the summer. As we move through the year and get more visibility into post-summer demand, we'll have the opportunity to revisit our guidance and update if needed. Moving to cash flow in our balance sheet, we generated $47 million of operating cash flow and $22 million of adjusted pre-cash flow for the quarter. As we previously said, we expect our adjusted EBITDA to pre-cash flow conversion to be roughly 50% this year. On the balance sheet, we continue to have sought access to the capital markets and closed on our first ABS transaction of the year. The 5.7% interest rate is the lowest rate we've achieved since July 2022. We were also very pleased to see the advance rate move up to over 95%. In our error this month, we paid off our $300 million debt maturity using the proceeds from the incremental Term Loan B that we issued last year. We have no remaining debt maturities for the next 12 months. Our leverage ratio increased in the first quarter to 3.5 times. Consistent with prior year, we expect this trend to continue for the next two quarters and then reverse in the fourth quarter. This sets us up to end the year below 3.5 times levered. With the balance sheet in good shape, our capital allocation is focused on growing the business and returning capital to shareholders. On the growth side, we used $46 million in the quarter for the Accor acquisition. We are excited for the longer-term growth prospects that Accor provides. In March, we increased our dividend to 50 cents per share for a total of $38 million in the first quarter. We're regularly in the market buying back our own stock, and in the first quarter, we repurchased 624,000 shares at an average price of $40.07 for a total of $25 million. Between dividends and buybacks, we returned a total of $63 million and have returned an average of about 10% of our market cap annually since our spin, demonstrating a strong shareholder focus. I should also mention that we intend to request approval for an additional $500 million in share repurchase authorization at our upcoming board meeting. In closing, I'll join Mike on thanking the entire Travel and Leisure team for delivering great results this quarter. These results demonstrate the strength of our business and provide us with great momentum heading into the busy summer season. With that, Maria, can you please open up the call to take questions?
spk02: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. We ask that you limit yourself to one question and a follow-up so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Joe Gref with JPMorgan. Please proceed with your question.
spk06: Good morning, everybody. Good morning, Joe. Michael, Mike, it seems like volume per guest is tracking better even as you improve your new owner mix, and it's basically, you know, there or knocking on your targeted new owner mix percentage threshold. Can you talk about maybe what's driving that maybe more favorable relationship between VPG and new owner mix? I mean, you mentioned a little bit about blue thread, but that's not necessarily new or incremental. Is there something else that's maybe driving that more favorable relationship and how you see that going forward?
spk03: Well, let me first share as it relates to tour flow, because the 28% new owner tour growth year on year is really – a number that sets us up well, not only for Q1, but going forward. Over the last two years, we've said we were going to grow our new owner tours at a steady pace, making sure that everything we added was profitable and we felt was a good incremental new owner tour. We opened over 30 new marketing locations in 2023. We got the partial year benefit of that, and now this year we're going to get the full year positive impact of those new owner locations. Additionally, in the third quarter of last year, we started to discuss that we were investing heavier into the marketing package pipeline, and those are beginning to come through. So that sort of puts the gross or absolute number on tours going forward. I would say, across the board, what you're seeing is just really good execution. Both Mike and I mentioned it in our prepared remarks that the team is just executing really well. I think our move to increase credit quality coming out of the pandemic, the steady growth of new owner tours has allowed us to manage that growth. efficiently, effectively, not getting ahead of ourselves and really stretching the organization. And as a result of it, I put a lot of it down just to great execution by the team and setting ourselves up for what should be a really good continuation of New Order Tours. I think you mentioned it, and I know this answer is a bit long, but the 37% of new owner transactions is an incredibly impressive number in Q1. Q1 is typically our high owner sale quarter, and the fact that we've already got within that range and well within our 35% to 40% range was a highlight of Q1. Great.
spk06: And then maybe you can talk about in the consumer financing segment of vacation ownership, have your expectations changed more recently for that segment of the business, given maybe a different perception of where the Fed may take interest rates in terms of delayed interest rate cuts? How are you thinking about that relative to a few months ago? Or did you incorporate some level of conservatism to take into account a different set of interest rate expectations versus maybe what the overall market might be pricing it. And that's all for me. Thank you.
spk10: Sure. Thanks, Joe. This is Mike Hugg. So two things as it relates to consumer finance business. I'll start off with the ABS transactions and interest rates, and then I'll jump over into the portfolio. But on the interest rate side, obviously great execution by the team with the March transaction. To your point, since that time, things have changed as far as views on interest rates. If we did that transaction today, the interest rate would probably be about 50 bps higher than it was when we executed the transaction back in March. So they have moved up some, but still below the rates that we really had starting in the second half of 2022 and through 2023. So it will not be a big EBITDA impact this year because all we have left to do is, you know, the second, third transaction will only be, you know, impact EBITDA for the partial year. So don't expect much EBITDA impact this year, I think. What we're looking at most closely is we do expect over the next 18 to 24 months that interest headwind to become a tailwind, and that's really where the interest rates might impact us is that tailwind might not kick in as early as we thought, but obviously that's going to be determined over what happens the next several months with interest rates. On the corporate debt side, you know, 30% of our corporate debt is variable. We probably have about $3 million in exposure on corporate interest and, therefore, cash flow because of the move up in rates compared to what we expect at the beginning of the year, but nothing significant there. So, overall, we're watching it closely, but don't expect a lot of risk in this year's EBITDA. As it relates to the other piece of the consumer finance business, the portfolio, You all saw the provision for the quarter come in at 17.4%. We're very happy with that. But I would note that as we head into Q2 and Q3, two things that impact delinquencies are the portfolio continues to grow, which means it's less seasoned, which leads to higher delinquencies. And then that no-owner mix coming in at 37%, which we're very excited about, also leads to a higher level of delinquencies. Even though we remain confident in our provision for the full year being below 19%, we'll see it move up in Q2 and Q3 to the higher end of that range and maybe even a little bit over. But overall, very happy with the portfolio. Mike talked about the credit standards we put in place as we exited COVID and In the first quarter, our average FICA was 742 for new originations, which is the highest average FICA we've ever had in a quarter. So that business remains strong. You know, delinquencies will move up, but it's because of the good growth in the portfolio and the high percentage of sales that we've been focusing on to get, you know, that net interest income to grow again.
spk06: Great. Thank you very much. Sure.
spk02: Our next question comes from David Cass with Jefferies. Please proceed with your question.
spk07: Hi, good morning. Thanks for taking my question. I wanted to ask about just broadly speaking the criteria for repurchases. Just noting that we had a little higher number of repurchases in for this quarter and whether the degree to which acquisitions or other investments may have played a part this quarter, but just how we might think about repurchases rolling through for the rest of the year, please.
spk10: Yep. Good morning, David, and thanks for the question. You're exactly right as far as the level of repurchases in the first quarter being impacted by the $46 million we spent on a quarter. We've been pretty clear with our capital allocation strategy, you know, grow the dividends, we grow the business, which we did in the first quarter when we took the dividend up to 50 cents. We then look at M&A. If we find the right strategic opportunity, which we believe we found with the core, then we'll invest in that, which was about $46 million. And then we spent, you know, $25 million in share repurchases. So you're roughly in that low 70s range as far as capital allocation for the first quarter. If you look at last year, on average, our share repurchases were about $77 million or so. We, you know, we utilized $72 million in the first quarter this year, kind of puts us on track with what we averaged for each quarter last year. And your point is valid in terms of absent a core, the level of share repurchase probably would have been higher. And then I obviously mentioned as well that, you know, our share repurchase level, our authorization is down to $146 million at the end of Q1, and we will be at the upcoming board meeting requesting an additional $500 million in authorization there. So we should have plenty of capacity to do an elevated level of share repurchase compared to what we did in the first quarter.
spk07: Perfect. And just to sort of follow that up, to that end, how do you see the landscape of potential M&A out there and opportunities tuck in or otherwise You know, you're seeing more or less than what you might have seen one or two quarters ago.
spk03: I don't think the landscape's really changed. The industry, as we all are well aware, has consolidated dramatically over the last decade. I think broadly to the favor of the entire industry, when you look at more than 80% of the industry sales now approximately are from branded hospitality companies, you know, the industry's Got a very strong balance. Consumer flexibility is there. Reputation is paramount. Consumer protection is paramount. So I think it's all in favor of the industry. But as it relates to M&A, there continue to be a variety of companies that are out there. And as we have done since we spun in 2018, we'll continue to evaluate them as opportunities arise. But Ultimately, we're very committed to our organic strategy. We've had a nice addition to a partnership and acquisition of Sports Illustrated, which we're happy with, and then a pure M&A with Accor International. So we think our opportunities are organic. partnerships and acquisitions, and that diversified ability to grow is what really gives us what we think is a very strong foundation to solidify our VO growth going forward.
spk07: Perfect. Thanks very much.
spk02: Our next question comes from Chris Maranco with Deutsche Bank. Please proceed with your question.
spk01: Hey, good morning, guys, and congratulations on another really nice quarter. I guess the first question would be kind of on the new owner results for the quarter, both the tour flow and the higher mix, which were pretty impressive, right? I guess, Michael, was there any – you talked about more channels contributing to that. Is there any one type or specific channel that contributed more than others or some geographic region? Just trying to get a sense as to kind of how sustainable that – that level of new owner growth is?
spk03: Well, first of all, let me say simply the growth is sustainable. We have really three core areas that we focused on the last few years being owner growth, and the team has done a great job adding incremental arrivals and room nights to the owner mix, which means more availability for owner tours. That's probably the smallest component, but still an important one. The partnership with Wyndham Hotels has continued to be fruitful. Both parties work very well together, and that continues to grow from what was zero to over 100 million last year, and it's, as you heard, growing in Q1. The steady drumbeat of our marketing team on methodically region by region opening new locations means that we're not overly reliant on a singular market or a singular channel within a region. It's just a law of, you know, having that scale and getting, you know, one or two locations by region that add up over the course of 36 months that's really creating that and it's all kicking in. And then I mentioned the more new aspect is we at Travel Leisure have never been overly focused on package sales, which is pipeline generation for future tours. We've added that focus, which I would say is a fourth leg to the stool, and that is gaining great traction. The team does an incredible job there, and it's been a very positive impact. You have to invest in that, and we talked about it late last year that we were investing in our package pipeline, which tends to drive costs slightly up, and we're very early in the year starting to bear fruit on that investment. And then what's not in the numbers but where I would say it will be sustainable as we go forward, as you add incremental relationships, whether it's Sports Illustrated or Accor, they bring with them as well incremental databases, and those provide incremental leads and ultimately tours. So I don't think it's an anomaly. I think it's great execution and the result of a commitment over the last 36 months of growing our new owner tours.
spk01: Great. Thanks, Michael. Very helpful. The follow-up is kind of transitioning over to the with Sports Illustrated, which you've talked about. I know you said you expect to begin sales next year, but is it, you know, it's a two-part question. One, is it possible to, you know, announce other deals before the, for other markets before Alabama begins sales? And then the second part of that is, just mechanically, is all this going to go into the VOI segment or are there going to be components that go into the travel and membership segment as well? Thanks.
spk03: The short answer on the first question is absolutely. We anticipate announcing more locations before next year. The pipeline is as robust as it's ever been as it relates to opportunities for Sports Illustrated, both in university towns and in other locations. So we do look forward to sharing more locations as we move throughout this year. As it relates to which segment Sports Illustrated will be in, it will be in the vacation ownership side of the business as we start to produce results. What I would just add, although you didn't specifically ask, is as you start to look at the economics of Sports Illustrated, Our overall plan looks a lot like it did with Club Wyndham as far as really aligning inventory, build and spend to top-line revenue production. Obviously, as you do your first resort, you do have some front-end investment that's a little more intensive than usual, but once we get Sports Illustrated, the club up and running and announcing a second, third, and fourth result. Our full intention is to match inventory spend with the success of sales, and the profile of the P&L should look very similar to what we see on the Club Wyndham side.
spk01: Okay. Very good. Thanks, Michael. I appreciate it, Chris.
spk02: Our next question comes from Patrick Schultz with Truist Securities. Please proceed with your question.
spk08: Hi. Good morning, Michael and Mike. Good morning, Patrick. Good morning, Patrick. Great. Michael, in your remarks, you painted a pretty optimistic picture of your leisure customer. When I look at the Revpar trends for your parent company, Wyndham, specifically domestically in 1Q. We saw some negative year-over-year Revpar. How might one reconcile your optimism versus possibly negative Revpar for domestic Wyndham in the first quarter? Thank you.
spk03: Well, I don't think – first of all, I wouldn't overly correlate our results to any brand within the hotel space, first of all. And I think, secondly, I would reiterate a comment that Mike Hugg made, which was our FICO in Q1 was 742, which is the highest it's ever been for the company, which shows the results of a precise decision we made several years ago to start elevating our customer characteristics. In the end, I think you have to come back to the underlying premise of vacation ownership, which is seven out of eight of our owners have fully paid for their ownership. which means our owners are definitely going to travel because they love the bigger accommodation. They see the value in their ownership. And more broadly on leisure travel, being based in Orlando, you see it every single day at the airport. Travel is tremendous at the moment. And so I think we look more broadly at leisure travel as opposed to comping to either a hotel group, an airline, a cruise line. We just look across to the parks and what we see. You go to Vegas, one of our big markets, the one that's over 10%. Vegas travel is very strong. And I would say our success is a combination of the overall business model, our team's execution, and third, that leisure travel is strong.
spk08: Okay.
spk10: And I would note that, Dave, sorry, just one thing, Patrick. I would note that even though Vegas is over 10%, it comes in at 12%. So, you know, the diversity we have in our portfolio that we've talked about many times definitely pays off. And while we noted only one being over 10, I think it's important to understand that over 10 means really only 12%. So don't have anything that's 15% or higher or even 12% or higher. Okay.
spk08: Certainly encouraging. Michael, a follow-up question here. You do have some Maui exposure. Can you talk about how Maui is recovering, how far off you are still from, I would say, pre-fire levels? Thank you.
spk03: So we are, for the state of Hawaii, have no incremental or additional exposure to Maui. We really have very, very minimal sales on Maui. more of our exposure is on Oahu and the Big Island. So for us, the economic impact to our P&L is non-existent for Maui.
spk08: Okay. All right. I do have some more questions, but I'll get back in queue. Thank you. Thank you, Patrick.
spk02: Our next question comes from Patrick Scholl. All right, excuse me. Our next question comes from Ben Chaikin with Mzuhu. Please proceed with your question.
spk04: Hey, how's it going? Thanks for taking my question. Sorry if I missed it. Regarding Accor, can you talk about the opportunity for upgrades from those 30,000 owners? Is there an opportunity to sell the broader system to this existing pool? And then I guess under the assumption that they do upgrade, did the owner's legacy ownership stay with Accor or would that get upgraded? Have you guys find that out yet?
spk03: Good morning, Ben. You didn't miss an answer. It's a good question. Accor Vacation Club is operated independently, so should they – we own Accor Vacation Club. So if they upgrade, they're going to stay an Accor Vacation Club member. They'll simply own more. And it is an opportunity for us. What we're excited about that transaction beyond – the quality of the resorts and the existing owner base that's already members of the Accor Vacation Club, which is over 20,000, they really haven't been nurtured and marketed to and part of an Accor Vacation Club. sales operation for several years coming out of COVID. That part of the region was especially restricted, and that was one of the great opportunities of working with the Accord team was there's a lot of potential in the business. We felt we were the best ones, and I think they did as well to activate that. And when we closed on the deal, March was the first month that we began reopening, re-ramping and growing that side of the business. So whether it's upgrades or new owner potential, there's a lot of opportunity going forward to grow that brand and expand it geographically as well as replicate all the great work that's been done with Wyndham and creating more loyal customers and ones that are using the Vacation Club product.
spk04: Understood. That's helpful. And then one quick one, you know, this has been pretty well covered on beginning on the 4Q call, but you have a couple of things working against you this year. You've got the variable comp headwind. You've got some interest expense. Have you quantified the new owner mix margin? And obviously these things don't, it's just kind of like one and done, but the new owner mix headwind either from an EBITDA or margin standpoint in 24. So, um,
spk03: In the sense of how much of our guidance of 910 to 930, what the headwind is incorporated into that guidance? I guess so, yeah.
spk04: Yeah, like you've got the $17 million variable comp. You've got $30 million on the interest expense side. Yeah, is there – how to maybe quantify or bracket the new owner mix?
spk10: Well, basically the way we're looking at it is – kind of when we spun off and started this focus on new owners, we're working to cover that through other areas of the business. So when we look at our overall margins for the year, and you can see in the first quarter, basically our margins are flat year over year, despite the percent of newer sales moving up to 37%. So when we think about margins for the year, we expect to be able to cover the impact of moving up to, you know, mid to high 30s on new owners. The part that obviously we've been most challenged with is covering the incremental interest in compensation expense that you mentioned. So when you think about margins overall, I would just factor in the two items that you mentioned as it relates to kind of the full year and we'll work in other areas like we did in the first quarter to cover the impact of the growth in new owners.
spk04: Understood. Yeah, my point was more so going into 25, like that phase. You don't have that. It sounds like this is the new owner mix that you want to be at.
spk03: Yeah, okay. So heading into 25, if If the year progresses like it started, we would be going into 25 not having the commentary more than likely that, oh, we want to move up 200 basis points on new owner mix. That would be a decision we would make early in the year of where are we, do we want to put more into the new owner to grow that mix or not. But coming out of Q1 at 37%. It starts 24 in a great place so that we don't need to face that headwind in 25 if it continues the remainder of this year.
spk04: Understood. Thank you.
spk03: Thanks, Ben.
spk02: Our next question comes from Ian Ciccino with Oppenheimer. Please proceed with your question.
spk05: Great. Thank you very much. I know you guys touched on the FICO score a little bit. Can you maybe talk about maybe how each cohort is doing on the FICO side? If you're kind of, every cohort is maybe performing as expected. Are you seeing any areas of outperformance or underperformance? We have a follow-up. Thanks.
spk10: Yeah. Good morning, everyone. It was a little fuzzy, but I think your question was kind of how the portfolio is performing kind of by FICO band. And as you would expect, what we're seeing is the most pressure on the lower end of the FICO bands. And as you move up, less pressure. Overall, you know, I think the portfolio for the most part is in line with what we expected. The improvement in credit quality that we focused on as we exited COVID is definitely paying off. So, you know, the provision for the full year under 19%. We're seeing a little bit of pressure, but, you know, you look at the provision coming in for the quarter at 17.4, so nothing that I would say is unusual by FICO Bank, just a normal more pressure at the lower ends and overall, you know, comfortable with where the portfolio sits as it relates to performance.
spk05: Okay, so you're not necessarily seeing anything notable maybe on the low end or anything like that, so... And then can you also maybe touch upon, you know, some of the strongest sales centers that you saw and maybe what we could kind of divine from that, you know, whether it's more destination areas or more, you know, traditional drive-thrus, say, you know, some more Vegas and Orlando or some other areas. Any other kind that you could give us there would be helpful. Thanks. Thanks.
spk03: So I think the question is just a little muffled, was around the regions and if there's any specific cohort. To me, two of the data points that reaffirm the booking window, delinquencies, VPGs, I always like to look at booking windows and Our booking window of 120 days is very typical of what we've seen in good leisure travel times. As well, if you remember during the pandemic, we got up to 90% to 95% drive-to locations. That number is back to low 70s, which means the consumer is behaving like they always sort of had with us I would say, therefore, there's nothing sticking out other than there's a lot of reconfirmation that leisure travel is behaving like it does in good times for us. Top destinations in the first quarter for our bookings were really Orlando, Myrtle Beach, Tennessee, great drive-to destinations. Daytona Beach was a big booking for us in Q1 as well. So nothing's standing out as unusual, and with a very diversified resort system, we don't have any overexposure. I will say, and we announced it last night, for that 28% that's flying to the destination, we're definitely excited about our new partnership with the Legionnaire that has about 125 destinations in the U.S. It's a great partnership that is complementary from our accommodation to their mode of transportation. So we're excited to announce that partnership last night and another example of working with other great brands to help grow our package pipeline, but also to be a positive partner to put business back into their business, in this case, air travel.
spk05: Okay, thank you very much.
spk03: Thanks, Ian.
spk02: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Brant Montour with Barclays. Please proceed with your question.
spk09: Thanks, everybody. Hi. So, Mike, on that Allegiant comment, my first question was on Allegiant. That channel, can you just maybe size it up for us and compare and contrast it with sort of some of the other third-party channels you have and when we can sort of, and then timing, when we can sort of expect that to layer into tour flow?
spk03: Well, you know, Allegiant's a great airline. They have 15 million loyalty members and 125 destinations in the U.S. Getting to a lot of our, there's a lot of overlap with where we're located and So that partnership, we've been highly successful working with Wyndham Hotels and their database, tying in people with affinity. So the initial plan is to do cross-promotional marketing, air and stay. I can't size it up today on this call because we just finalized the agreement last week, but you would expect more and more Allegiant, Wyndham, or Margaritaville package sales that combine the two brands and destinations where we have the overlap. And that's where we'll get. you'll over time see it play out in our package pipeline and in our marketing spend back to Allegiant.
spk09: Okay, that's helpful. And then a question on the new owner, all the new owner metrics you guys gave was really encouraging, and new owners are the toughest sales out there, so that's great. I guess maybe asking it from a different direction to put a finer point on it, when you look at your new owner metrics, close rates on a sort of a quarter-over-quarter basis. And obviously, we're all looking at the consumer and looking for cracks to start showing. How has that sort of like-for-like new owner close rate evolved over the past one, two, or three quarters and into this year? That would be, I think, maybe helpful for us.
spk03: Yeah, I mentioned the three segments, owner, blue thread, and new owner, sort of open market. When you look at close rates on owners and blue thread, those have been pretty consistent over the last few quarters. Close rates on open market have come down slightly. I would put that as much to do with scale as I would the consumer, you grow your new owner tours 28%, and you're going to more than likely lose a little bit of close rate. Just 28% is a lot to add in a quarter year on year. So right now when I look at that slight decline, I put it more towards scale than I do consumer, but obviously it's a trend. I think every company is looking at their lower-end FICOs and wondering where that's going to go for the next six months. We're no different. We've got a good portfolio. Mike made comments about it. But close rates specifically, slightly down on the open market, and I'd put that to scale.
spk09: Okay, great. Congrats on the quarter. Thanks.
spk03: Thanks, Brent.
spk02: Our next question comes from Patrick Schulz with True Securities. Please proceed with your question.
spk08: Thank you. Michael, another question. Give us a little bit more color or an update on progress in signing up companies for the B2B business. Have you seen any attrition from the initial signups and also any additional color on the B to C portion of the business. Thank you.
spk03: Absolutely. Very good question. In the fourth quarter, we made a few decisions. Number one was to align the cost more precisely with the revenue generation and the forward expectations. And number two is we wanted to go deeper with the existing relationships we had as opposed to signing up more. Why? that created a lot more internal work to continue to sign up more members with lower utilization. So our plan is to grow the existing ones to a point and more targeted add new B2B relationships. So we have added a few, but where we're getting our transaction growth on travel clubs X, the bigger group that dropped out in Q1 of last year, is by going deeper and getting greater conversion on the members that are already part of our ecosystem. Sort of like everything else, it's like recruiting is. you know, nurture what you have inside the house, make those the most effective before just going in, recruiting more, in this case, B2B customers. And that's what we're doing this year. And when you look at our travel club growth in transactions in 2024, which we're projecting high single digits on transaction club growth this year, that is through the deeper conversion of clients. clubs that we already have in-house. It's not relying on us going and finding new clubs to be part of our system.
spk10: And, Patrick, the reason we're confident in that high single-digit growth is if you exclude the one customer we lost from the first quarter year-over-year comp, our transaction growth is actually 10%. So, you know, the investments we've made, as Mike said, to focus on the existing customers to drive more transactions are paying off. And, once again, 10% year-over-year growth exclusive. of that large customer we lost.
spk08: Okay, John, thank you for the updates.
spk10: Sure, thank you. Thanks, Patrick.
spk02: There are no further questions at this time. I would now like to turn the floor back over to Michael Brown for closing comments.
spk03: Thank you, Maria. In closing, I would just like to reiterate that we're off to a great start to the year with 15% tour growth, strong TPGs, and a 37% new owner mix. This performance not only drove a great result this quarter, but it also lays the foundation for continued growth in the future. I again want to thank the entire T&L team for all their hard work in getting us here, and we look forward to speaking to you all again on our next call in July. Thank you.
spk02: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-