Travel+Leisure Co Aktie

All right. I think we're going to kick off Day 2 here with Travel + Leisure. I'm joined by Michael Brown, President and CEO, Erik Hoag, the CFO. And I know -- to start off, I always kind of like to start with the very high-level questions here. And I guess maybe just level set as we look out over the next kind of 3 years, what do you think are the kind of the major strategic priorities and how you think about positioning the business for success across the different segments?

Well, it's good to be back. I appreciate the opportunity to share our story. As we look forward, I think it looks a lot about how we've come in the last 2 years in the sense that we've been able to consistently grow our top line in that mid to upper single digits. And followed that through incrementally compounding bottom line results in both EBITDA and EPS. We don't see our algorithm, which I think Erik can really speak to in more detail, changing in the next 3 to 5 years. But from our perspective, this business has always been driven by your ability to generate and convert new and existing seats, ownership in the space. And we have a number of initiatives, very focused on making sure that, that strategic outlook remains intact. We're very committed to our core business at both Club Wyndham and world market generating new owners and existing owners with the beginning of a transition where we're bringing new brands on always fun to do new brands, but the reality is those brands lead back to an opportunity to increase the top of the funnel for us.

So as we look out the next 3 to 5 years, the great economic performance we've had the last 2 years, we see continuing and no fundamental changes to the way to think about our business and then an increased focus on driving new lead opportunities as well as keeping our owners satisfied who really generate the predominance of our sales on an annual basis.

You talked about the algorithm, if you will, remaining intact. I'm going to move to Erik here right out of the gate with your first quarter you were above that algorithm in terms of EBITDA growth, double-digit growth in 1Q. You're reiterating kind of the mid-single digits for the year. Maybe talk to us about what you saw in the first quarter relative to that algorithm that drove it higher and maybe the puts and takes to think about for the rest of the year.

Yes. We had a great start to the year in the first quarter. So a couple of data points. Specifically, revenue grew 3% in the first quarter. Our gross VOI sales were up 7% in the first quarter, EBITDA grew 11% in the first quarter, net income, 21% growth in the first quarter, driving all the way down to earnings per share being up 31% in the first quarter. A couple of other interesting data points on the first quarter. We increased our dividend by 7%. And we increased our buyback rate by roughly 25% in the first quarter. So buying back roughly 25% more shares in the first quarter on the back of a new board authorization of roughly $750 million. So when you come full circle associated with what's the Algo, how we're performing against the Algo, I think the first quarter is a good illustration of what that Algo is healthy tour flow growth driving gross VOS sales in the 6% to 8% range, which leads to mid-single-digit EBITDA, which gives us an opportunity to convert roughly half that EBITDA into free cash flow.

An attractive dividend, as I mentioned, which grew 7% here in the first quarter, allows us to absent a better investment, continue to buy back our shares.

And so I guess going back to the bigger picture then for those maybe less again, familiar maybe with timeshare learning about it. What would you say sets Travel + Leisure apart from your peers or even as you think about not just timeshare peers but maybe the broader lodging industry -- travel industry?

Yes, look, there's some differences amongst the individual companies, but I think the best place to always start is the general misunderstanding is about the space in its entirety. And we're sitting here at the start of June 2026. I think Michigan Consumer Sentiment hit its mid-century low last week.

People concerned about inflation, macroeconomic issues, yet Erik talks about in Q1, despite our last 2 years of incredible performance, Q1 was better than the last 2 years, and we're now 2/3 away through Q2 and our strength that we talked about and the strong performance in Q1 has probably accelerated in Q2.

So I think the real consideration for us in Q2 and the industry at large is that people want to correlate very heavily with what's going on in the noise in the macro world. And the reality is 65%, 70% of our sales are to people who already own with us. They see the value of their ownership. They see the quality of the vacations, and they understand the quality that a brand brings to your vacation experience. And with all of that, there is this divergence that seems almost counter intuitive about how well this space does in a time that your consumer sentiment is at an all-time low or 50-year low. And I'll just sort of come back to reinforcing the message of -- we've had a great 2 years. I think I said something along the lines, I don't think we could have scripted a better Q1 and I would say more than the momentum continues, if anything, it's accelerated in Q2.

So we're seeing a lot of strength in our consumer. We're seeing people decide to be in this space. Because they see the value in it, they see the quality of the product and they see the brands. And I think that's true for the entire industry. We're doing some things a little different, which gets to our strategic outlook on what I mentioned in your first question, which is we want to continue to broaden the funnel. And I think where hospitality is moving is people don't want to aggregate demand into big brands necessarily, they want to match their vacation experience to their personal lifestyle, which is why we're pursuing what we're pursuing.

And we're early innings on that, but early signs say that people want to attach what they love about Club Wyndham into other brands in their vacation time.

Remind us who your existing owner base is, like what are the demographics there. And then also as you're expanding into some of these new brands and you're expanding the funnel, is that changing the demographics that you're finding coming in? Or is it kind of the same? You're just adding more of them?

Right? So try to get rid of some misperceptions out there is Club Wyndham is our base. And we have about 800,000 owners in our entire owner universe. Our average income is now approaching 120,000, it used to be under 100,000 average FICO is now over 740, it used to be in the 720s and the demographic of our new owner is coming down. And what we're positioning ourselves is for long-term growth and as we start to expand brands, we want to maintain the quality of our consumer which tends to be in the K-shape economy, I'd say our consumer looks much more like the upper part of the K and the lower part for sure. And the profile would suggest that as well. We're now -- it's not about necessarily just the demographic. It's about the vacation style because not everyone wants the vacation in the same way.

We have consumers that want a vacation in an urban destination and a big resort in a place like Orlando, and you've got equal amount of people that want to vacation in a place like we just announced our first location in Moab, Utah. They want to wake up and then go out and do some hiking all day. It's very different than sitting in Fast Pass at Disney, two different consumers. They're both great, but there's different demands and the same as sports illustrated is a different type of travel behavior.

I think there's been always this concern that the younger consumer, maybe it's not resonating as much. Are you finding that your new owners and tour flow is resonating with the consumer? And how do these brands that you're launching maybe tap into that?

Well, a lot about the education. And when you were to go down to Times Square and ask people, you'd say, "What's the timeshare they'd say, "Well, of course, you've got to Fort Myers, you go to March, you have the same unit, the same week, and that's the timeshares. That timeshare disappeared in the early 2000s. But if you were to say, would you like to vacation in the 2-bedroom 2015 prices in 2026? And would you would you like to do that with a branded company? The answer is yes. They would probably think you're talking about an Airbnb or VRBO, but you're talking about what our product is with the brand overlay and with amenity. So a lot of what we do in the process of the sales process is explaining how the industry has evolved. And it's evolved in an incredible way. And I think the macro tourism environment of wanting more space, wanting more flexibility has come to where we are as opposed to us trying to unnaturally go to where the macro trends are.

So we've been there for a long time. We just have some reeducation of next generations and some product modifications.

So aside from broadening out the funnel, are there other benefits to think about or even the other investments that you need to think through with expanding into more brands over time?

There are. I think one of the big questions you always hear is how do you allocate capital, which I would like for Erik to talk about that after I respond to that. And the question is do you invest in your business or do you buy back shares? We're doing both at the moment. And one of the big questions we got throughout 2025, you're doing Eddie Bauer you are doing Sports Illustrated, you're reinvesting back into Margaritaville, et cetera. Your margins are at risk here.

Q1, we really started to see the investments of '25 and '26, start to hit. Our margins went up. We were over 25% in Q1 and when you look at our margin profile going forward, you should see a very disciplined capital allocation of reinvesting in the business to grow our long-term top line and create the algorithm that Erik mentioned. But also at the same time, not at the sacrifice of our margins. Our outlook on margins has not changed. We're doing a bunch of stuff in 2026 regarding the word optimization. But to think we're able to launch new businesses, new brands to solidify our long-term algorithm while continuing to buy back shares at a very quick rate in Q1 and invest in these new businesses on growing margins, really, I think shows the discipline we have in allocating our capital and making sure that we are trying to check every box along the way and maybe you can talk about our share buybacks and capital allocation.

Yes. Broadly speaking, as Mike said, first and foremost, we want to invest in the business. And whether it's brands or technology, we want to continue to invest in the business. Second, we want to maintain a healthy balance sheet. We ended 2025 with leverage at 3x into the first quarter at 3.2x expect to finish the year either at 3x or slightly below 3x. So maintain a healthy balance sheet. We want to pay an attractive dividend.

As I mentioned, we increased the dividend 7% in the first quarter, current dividend yield is about 3.5%. And then beyond that, absent other investments, we're going to continue to buy back shares. We are uber-focused associated with per share economics, whether it's free cash flow per share or earnings per share, we're very focused associated with continuing to compound through the P&L. And I think that whether it's the first quarter, whether it's 2025, I think you're starting to see that really manifest into the P&L.

It is often on the margin side, maybe a question that we get from investors around. Free cash flow margins, in particular, lumpiness associated with inventory. Are you on more of a steady state at this point in terms of how you think about the amount of inventory deployed each year? Or is there still some lumpiness to think?

Yes. So a couple of things on inventory. If you go back to COVID, our inventory drifted up towards 5 or 6 years of inventory on the balance sheet. Since that time, we've been working it down. In February, we announced something called our resort optimization initiative, which further reduces our inventory.

As we sit here today, inventory balance between 3 and 4 years, we want to continue to push that further down towards 2. From a free cash flow perspective, we expect over the cycle to continue to generate roughly 50% of our -- convert roughly 50% of our EBITDA into free cash. We have moved to an asset-light model, so the lumpiness associated with free cash flow generation and our net inventory spend is somewhat marginalized, but you will see us from time to time move slightly above 50% and slightly below 50%. In 2025, our free cash flow conversion was 52%. And as we sit here today, we're still expecting roughly 50%.

I mean going back to a comment, Michael, you made about meeting the consumer kind of where they are in these different channels, where Blue Thread and Wyndham the connection there fit into that? And is there still opportunity to better leverage that relationship?

That relationship has been very impactful. I've joined and grew. We are getting to the point in that channel that given the nature of how hotel reservations are made seems to be more flat and doesn't have a lot of tremendous upside. But I guess when you lay it out against the whole gamut of our diversified marketing. I think that's one of our strengths as a business is we have an incredibly diversified geographic footprint, and we have an incredibly diversified marketing footprint.

So I think our largest market is Orlando and it's barely 10% of our total revenue. And when you look at Blue Thread, I think Blue Thread represents roughly 3% of our total revenue, roughly there. So we are not overly dependent on one channel. But we like to put a lot of channels into the system. And I think when you start to look at how our team deploys its resources, it's around regions, small marketing deals in every single region that we're in, so that we're not overly dependent either geographically or marketing-wise. That's reflected, I think, in the stability of our top line and our bottom.

When you made a comment earlier about potentially seeing accelerating trends in some ways, demand trends despite the survey data or sentiment data. Is that specific to what you're seeing from booked packages? Or how do you think about the visibility that you're trying to track in that?

No, I was being a lot more finite. We're now -- at the end of Q1, we were 20% through the top line of our year. It's an entire quarter. Our first quarter is 20%. At that time, I think we were -- it was within a 48-hour window of ground invasion, where the first hospitality group out. There's a lot of uncertainty we went for the third week of April. We're now into the summer season. May is always a very good month. Now we're into June, we've completed June. We actually know how our top line is on the first 2 out of the 3 months of the quarter. So we know where top line VOI is through 2/3 of the second quarter.

And that's what I'm being very finite that we saw a very strong Q1. And if anything, it's accelerated in Q2. There are some more forward-looking that are less visible, but still you have clarity on, which is forward bookings, forward packages, all of that. That remains in fact, bookings -- forward bookings throughout the summer and into the fall remain at or slightly above 2025, but I was actually referencing on the demand side, what we already know in Q2 about top line and what drives our business as being extremely positive.

So it seemed like there was a lot of, I would say, uncertainty you're questioning at least from investors at one point over the sustainability of VPG trends. What are some of the drivers of the strength in VPG that's happened? And how do you think about the sustainability from here as we think about both conversion, pricing, helping the consumer altogether?

Well, let me start with. There's been nothing unnatural in driving our VPGs up. We get a lot of questions about discounting or special promotion. This is all natural. And we've now left COVID. We've never come even close back to $3,000. If anything, our VPGs continue to grow. We've done nothing unnatural on pricing. Our pricing has been right in that sort of 3% to 5% range by brand. Our maintenance fees are consistently right around CPI.

Our VPG growth is a combination of a reflection of a great team that we have, a great culture of success, leaving in the product that we have. In addition, we really believe we made the right moves coming out of COVID to elevate the quality of our consumer from a demographic standpoint, and we've stuck very firmly to that. And I think lastly is -- and Erik mentioned it, is we not only invest in projects, but we invest in our business operationally. And a lot of our investment is heading into technology, and you're starting to see some of that technology play through in the consumer interfaces. So VPG is one, but that's going to continue to be supported by a better and better consumer experience in getting the places they want to get to, ease-of-use, frictionless transactions with...

And the idea being there that you increase engagement, to reduce any kind of churn from the existing base. Is that what is happening?

Well, what we know about our consumers, when they get on vacation they love it and they buy more. And with 800,000 owners, you want to reach as many of them as possible to make sure they're using a 100% of their -- the utilization is absolute high as it could possibly be and we still have room to get that utilization up. So the more people we get on their vacations, whether they go to where sales gallery is or not, it doesn't matter. Maximum usage means maximum opportunity for our VPG to grow.

So a lot of our technology investments to create frictionless booking, ease of booking, Optimum destinations is about ultimately customer satisfaction continuing to move up from an already high level. So that ultimately it's reinforcing their decisions and they continue to buy more.

In terms of how that then works from a new owner versus existing owner, are we at the right balance there and could we see a point in time where owner growth actually starts to move positive, especially as you add some of these brands in?

Absolutely. And I don't think you have to squint to see what that is. We have very clear objectives to get to the curve sort of plateauing and moving up. And just as a reminder, because I think it is sort of one of the commentaries I've heard is the owner base is declining. Two things are very real that are unique in our business and our business alone. Travel + Leisure, which was one has been in business for about 50 years, which means people that bought 50 years ago, they should be exiting because at some point, you just...

Probably do the math. What's your average?

Yes. So we have a natural churning of our ownership. And at the same time, which is great, we have, I think, 11 or 12 different ways people when it's time for them to leave. We facilitate that on their behalf. Number 2 is we've also coming out of COVID, elevated the standard. So if we wanted to plateau or grow back, we could have been plowing in lower FICO owners and then we'd be dealing with a different challenge on the back end.

So we made a commitment maintain our margins, to grow the quality of our consumer and to strengthen the foundation of our business that came with the price. That price we sort of paid with our tour flow went down and our ability to regenerate the owners and move the curve back up, suffered for a period of time, but you'll see our owner base start to move back up.

Great. Erik, you did mention the resort optimization. I think that there -- we definitely get questions around that part of the business because it is touted as this high visibility fee stream. So how do we balance resort optimization and maybe removing some of those with thinking about that segment long term and also what maybe the benefits are from going through this process?

Yes. So the resort optimization program for those unaware, was an initiative where we took out roughly 17 resorts out of the portfolio. And there's really 3 components associated with the program itself. Number one, as we closed a small handful of sales sites, which we would expect to have an impact to revenue, yet we haven't seen. The second component is lower maintenance fees associated with properties that were closing. And then the third component is carry costs associated with inventory.

In February, we guided to roughly $15 million to $25 million of incremental EBITDA contributing from this initiative. The program is going exceptionally well and currently steering towards the high end of that.

Great. Another thing that popped up after the quarter was just some questions around delinquencies and specific owner types. Can you just clarify what you're seeing in the receivables portfolio? And what leading indicators do you track to assess what the right level of provisioning is?

Yes. So we've got a pretty sophisticated model for loan loss for loan loss provision. We use loss curves over a significant period of time. What really -- the comments in the first quarter, let me give you a little bit of context here, Stephen. From [indiscernible] we saw roughly a 20 basis point increase in our early-stage delinquency. And the intent really was transparency, not to really highlight a concern.

Since that time here in the second quarter, we've seen roughly a 40 to 50 basis point decrease. We've moved back into our historical pattern. So it's much more normalized. I would also add that in the fourth quarter of '25, we saw our loan loss provision decline year-over-year. First quarter, a decline in the loan loss provision year-over-year. And then guided to a loan loss provision for the full year that we expect to be down year-over-year, and we've got a lot of conviction associated with that.

In general, with improving the owner base, higher incomes, better FICO scores, you look at the provision versus history, it's still elevated. How do you think about the right level of provision and comparing that versus history?

We've lived in this range for more than a decade. So when I think about our provision and characteristics around our portfolio, I view it as a second-tier KPI that we monitor.

Obviously, others do it more. When I look at our first tier, I look at VPGs stores, owner satisfaction. So we're very cleanly in the range that we want to be. And we balance that against 2 other things is growing your top line and 6% to 8% on VOI on a $2.5 billion base is not easy. You're constantly growing your marketing channels and exposing yourself to good channels and bad channels and constantly culling that. So we're very comfortable where we are, and we've lived in this space for quite a bit of time. And our performance, when it moves, it moves micro moves, not big moves because we have a 10-year portfolio. We're not doing anything different quarter-to-quarter.

So I think we've done all the right things to create the right consumer foundation while managing a number that just will constantly fluctuate up 100 basis points, 150 up or down and that's our business model.

And you had mentioned there were at one point, concerns around margins being impacted by expanding into new brands. You also said that there's maybe opportunities to improve margins potentially through technology. What are some of the puts and takes to think about margins within the Vacation Ownership segment? And where are there opportunities to increase marketing efficiencies or leverage technology specifically?

I think first of all, when you step back, we mentioned on the Q1 call that our new branded sales were approaching 10%. This is our big first step into a number that's not zero or not 3%, something like that. So a lot of our capital investment to growing our pipeline is happening as we speak. And as we're doing that, we're growing our -- we grew our margins in Q1. So I think as you look into '27, you're not going to have the incremental add of the new brand spend. But you also -- and we've said it several times, is this was sort of a catch-up year on our resort optimization. You're not going to see 17 more come out next year. You might see 1, 2, 3 next year.

So those are the puts and takes on the inventory side. And I think ultimately, beyond that, there's not going to be tremendous changes in what you're going to see in puts and takes on.

I think you hit it, new brand investments, to optimization initiative. The business has got operating leverage in it as well. If you look at our -- over a multiyear period, you see it gradual continued trend upward and to the right associated.

I do think what technology allows us to do is process the top of the funnel a lot more. The lead base that we have either in our house or comes in through our partnerships is at a rate that we need this technology to more rapidly move people down the funnel to eventually a face-to-face contact. We don't think you all of a sudden going to be running through an AI funnel that's going to be result in sales by nonhuman. We view it as we view it as getting through more of the top half of the funnel through technology, moving more traditional face-to-face at that point.

And some people are talking about distribution, shifting towards start with intent, the intent to go on vacation, the intent to travel and Agentic AI playing into that. Does that -- how do you think about Agentic AI's impact to your business? Or are there generally speaking, other opportunities to think through with AI implementation within your business?

Well, I think AI can go in a lot of different directions. First and foremost is the biggest element that we're focused on at the moment is reducing the friction and getting people on vacation. If you start with search and book and work out from there and your customer journey, you're in a good place because as I said, maybe 30 minutes ago is if we get people on vacation, people enjoy it, either value their ownership and they want more. So start with search and book removing friction.

The flip side of that is whether it's intent or the fact that people that have already shown their intent that are within our ecosystem, getting them to the right place. And Erik and I's vacation travels may be different. And if we can express that and then get ourselves to the right type of resort, the right brand, someone in the room is a Margaritaville fan and others of sports. If we can get them to that place faster, the likelihood of their engagement with us is going to go up. So we think, first and foremost, it's customer interface.

Second is on b, on a is getting our funnel better aligned to service intent.

We got through most of the conversation without touching on the travel and membership side, which is not the biggest driver of the business, but still a high free cash flow business. What's the trajectory on that business? Does the strengthening demand translate to any kind of stabilization on that side as well?

So our travel membership is roughly 18%, 20% of our company EBITDA in a structurally difficult side of the business because as the industry has consolidated, the natural demand has slowed down. We were double digits decline year on year in Q1. At the risk of over saying it is we had double-digit decline in this space and still had a knockout quarter in Q1.

So we recognize there's structural headwinds in that space. Our objective there is to bend that curve to reduce the decline on an annual basis. We have initiatives in place. You're going to see them as we move throughout the year to continue to work that problem. When the structural headwinds began, it was roughly 30% of our business. Its now roughly 18% to 20%, yet we've maintained extremely strong growth over the last 2 years.

So we think it's an extremely manageable issue. We think there's opportunities to bend the curve and our full year outlook as it was in Q2 and talk about what that will be in Q1, how that adjusted Q2. But the bottom line is, we think we have that fully within our grasp and all of our outlets reflects what of that challenge in the space.

And a portion of that is just member count in the exchange segment, I would imagine.

It's not so much member count because when you look at a number of transactions and when you look at member count, they're not really moving. It's actually the revenue per transaction. And the reason the revenue per transaction is down is because logically so, people are staying within their own because we're the facilitator of our affiliates vacations. And if your affiliates stay within their own brand, which is logical as they get bigger, their ecosystems get bigger, their resort systems. It's less need to go from your brand to another, which means your revenue per transaction goes down.

So it is not a transaction issue per se. It's not a member count issue per se. It is literally a revenue per transaction.

Is there a leveling-off point then where you see that kind of stabilize on a specific level?

We think there is a floor, but I don't want to -- I've been wrong on this before. What I would say to that is if it does continue to decline at this rate, we think there is an outlet elsewhere on non-exchange type of revenue that is an opportunity for us that if that doesn't stabilize, we have a stabilizing mechanism that will continue to grow on side of travel...

And perhaps remind us of some of the initiatives that you're thinking about to bend the curve?

Yes. So coming back to your sort of AI and where technology could help is revenue per transaction is typically on the actual transaction. But people don't go on vacation only for their accommodation. They have it from the moment they leave their home to them to get back and then planning for their next one. And we see opportunities to expand the revenue streams outside of simply exchange transaction. We've had nibbles of fishing analogy. We're getting some bites on some of those initiatives and think that those are only going to grow the second half of this year.

Great. Well, we are right at the time. So please join me in thanking Travel + Leisure for all their insights.

Greetings. Welcome to Travel & Leisure First Quarter 2021 Earnings Call -- Conference Call and Webcast. [Operator Instructions] Question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. At this time, it is now my pleasure to turn the conference over to Andrew Burns, Vice President, Investor Relations. Thank you, Andrew. You may now begin.

Thank you, Rob. Good morning, everyone. Before we begin, I'd like to remind you that our discussion 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 our press release accompanying this earnings call. .

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. Please note that all references to EBITDA, net income, diluted earnings per share and free cash flow made during the call are on an adjusted basis as disclosed in our earnings release.

This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our results in our longer-term growth strategy. And then Eric Coke, our Chief Financial Officer, will provide greater detail on our results, capital allocation strategy and outlook for 2026. Following our prepared remarks, we will open the call up for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated. With that, I'll turn the call over to Mike.

Good morning, and thank you for joining us. Travel & Leisure delivered another great quarter. Thanks to the hard work of our team, we are carrying forward the positive momentum achieved in 2025. We First quarter EBITDA exceeded guidance, driven by strong execution in our Vacation Ownership business and resilient owner demand. In the quarter, we achieved gross VOI sales growth of 7% and EBITDA margin expansion of 180 basis points and EPS growth of 31%. Our strategy starts with delivering outstanding vacation experiences for our owners and members. .

We convert that owner satisfaction into recurring demand, predictable cash flow and consistent capital returns. Our first quarter results are a clear validation of that strategy and a proof point of the durability of our model even as the macro environment remains uncertain. In the quarter, we generated revenue of $961 million, EBITDA of $225 million and EPS of $1.45, with compounding growth across the P&L.

We are seeing continued strength in our Vacation Ownership business with 7% gross VOI sales growth and above plan VPG. We tour growth of 5% was above our 2025 tour growth rate of 3%. I'd like to emphasize that we achieved these results -- these impressive results while executing on our resort optimization initiative, which naturally pressures those metrics.

During the quarter, we returned $128 million to shareholders through dividends and share repurchases. Our dividend increased 7% to $0.60 per share, and we repurchased 1.2 million shares in the quarter. At the same time, we are investing in the business to drive long-term profitable growth. We continue to make meaningful progress advancing our multi-brand strategy and digital road map, and this balanced approach, delivering near-term results and returning meaningful cash to investors while investing for the future is central to how we create long-term shareholder value.

Since our last call, macroeconomic uncertainty and geopolitical risks have been prominent in the news. I'd like to start with recent trends we are seeing with our consumer and across the business. Overall, our owner base remains healthy. They are prioritized and travel, and we are not seeing any meaningful shifts in their behavior. First quarter gross bookings were up year-over-year. The booking window remains steady at approximately 100 days and average length of stay is unchanged year-over-year at just over 4 days.

The distance travel to our resorts in Q1 was actually up slightly to last year, indicating consumers' willingness to travel to our resorts. The data suggests that in uncertain economic times, our value proposition becomes even more relevant. For the 80% of owners that have paid off their loan, their vacationing for the cost of annual maintenance fees. This value proposition is clear to our owners and is best reflected in our 97% retention rate for owners that are current on their loan or paid it off.

As we enter our peak sales season, we are mindful of the macro backdrop and its potential to influence consumer behavior. That said, the trends we are seeing remain healthy, our value proposition continues to resonate, and the model is performing as designed, positioning us to outperform across cycles. During the quarter, we continued to make meaningful progress advancing our multi-brand strategy and saw clear proof points of its success.

Margaritaville is rapidly approaching $150 million in annual VOI sales, reflecting the success of our revitalization efforts and new partnerships. In the Accor Vacation Club brand, we expect to nearly double our VOI sales in 2026. We also began selling Eddie Bauer Venture Club at select sales centers. In March, we welcome guests to our first Eddie Bauer Resort in Moab, Utah. We are seeing strong interest and early momentum has exceeded our expectations.

Sports Illustrated Resorts, sales are now underway at our new Nashville sales center. We also announced our new Sports Illustrated resort location in Baton Rouge, home to Louisiana State University and Southern University. As the brand's fourth resort, Baton Rouge is a highly complementary sports-centric university market that fits well within the club's growing portfolio.

Overall, combined VOI sales from these brands are expected to approach 10% of our sales mix this year, and we expect that to increase further in the years ahead. Scaling our multi-brand strategy remains a critical pillar of our long-term growth plan, enabling us to reach new customer segments and meaningfully expand our addressable market. The progress we are seeing across the portfolio gives us confidence that this strategy is gaining traction and developing as we envisioned.

On the partnership front, we recently renewed and expanded a 5-year agreement with United Parks & Resorts, owner of SeaWorld and Busch Gardens, building on the highly successful strategic partnership that began in 2013. In addition to our current on-site kiosk and promotional activations, the new agreement expands our presence across additional parks. This meaningfully increases our ability to introduce new families to our Vacation Club offerings and provide current owners with exclusive events and experiences.

Overall, the expanded partnership strengthens our top-of-funnel demand prospects and supports new owner growth. Turning to the resort optimization initiative we announced last quarter. This effort involves removing a small number of aging, lower demand resorts to strengthen our overall resort system for owners while also improving the financial health of Travel + Leisure and our club HOAs. I'm pleased to report that we are realizing all the expense savings outlined last quarter, and we've been able to sustain our historical sales growth rates despite the resort closures. In summary, we've started 2026 from a position of strength with clear visibility into the key drivers of our performance and momentum in our core Vacation Ownership business.

We are reiterating our full year outlook, and I remain confident in our ability to drive growth, generate meaningful cash flow and continue creating long-term shareholder value. Now I'll turn the call over to Erik to further elaborate on our results, capital allocation framework and outlook. Erik?

Thanks, Mike, and good morning, everyone. I'll frame my comments in 3 parts: how the business performed, how we ran it and how we're allocating capital. Starting with performance. First quarter results were ahead of our expectations, continuing the trajectory we discussed on our February call despite a more volatile macro backdrop. What stands out is not just the strength of our results, but how the business performs across different environments.

The compounding in the first quarter is clear. Revenue grew 3% EBITDA grew 11%, net income grew 22% and earnings per share grew 31% with tour flow feeding the top line and operating leverage and capital allocation driving outsized growth in earnings per share. Looking at our Vacation Ownership business, this segment continues to operate at a high level with results in the quarter showing steady demand and strong execution.

Gross VOI sales were $549 million, up 7% year-over-year, driven by tour flow growth of 5% and continued strength in volume per guest, which increased 3% to $3,321. Tour flow remained strong in the quarter, consistent with the momentum we saw exiting 2025. While our new owner mix was slightly below prior year levels, we remain confident that it will increase as the year progresses.

Top of funnel demand remains strong, and we view mix in the quarter as more a function of conversion dynamics rather than a change in underlying demand. Segment EBITDA was $191 million, up 20% year-over-year, with margin expansion driven by operating leverage, improved inventory efficiency and the benefits of our resort optimization initiative.

From a broader perspective, demand remains stable. While we're always mindful of the macro environment, it's important to remember that most of our VOI sales come from existing owners who have effectively prepaid for their vacations. As a result, their travel behavior is less sensitive to economic changes, and our performance is driven by the strength of those long-term relationships through repeat usage, retention and ongoing upgrade activity over time. Credit performance remains within our expectations with provision rates slightly down year-over-year in the first quarter. We are seeing some movement in early-stage delinquencies and particularly in more recent vintages, which we would expect to influence provision over time.

With that said, we still expect our full year provision rate to be modestly below prior year levels. The underlying credit profile of new originations remains healthy with weighted average FICO scores remaining above 740 and average down payments trending above 20%.

Turning to travel and membership. In the quarter, transactions were flat year-over-year, reflecting a continued mix shift within the business with declines in exchange activity, offset by growth in travel clubs. Exchange membership was approximately 3.3 million subscribers, down about 2% year-over-year. As expected, the mix shift continues to pressure revenue per transaction and segment revenue was $165 million, down 8% year-over-year. Segment EBITDA was $59 million, down 13%.

This reflects the continued mix shift within the business. with declines in the higher-margin exchange business and growth in lower-margin travel clubs. Travel and membership remains a capital-light, high-margin business that generates significant free cash flow. Our focus is on managing the business for cash and flexibility as we reposition the platform to improve returns over time.

Shifting to the balance sheet. We exited the quarter with in line with our expectations, just below 3.2x. As a reminder, leverage typically trends higher earlier in the year and declines as we generate free cash flow over the course of the year. Liquidity remains strong with over $1 billion of available capacity, including cash on hand and our revolver, supported by consistent free cash flow generation and the continued access to the securitization markets.

In March, we executed our first ABS transaction of the year, raising $325 million at a 98% advance rate and 5.1% coupon. This transaction reflects our ability to access capital at rates well below the average interest rate on our portfolio, creating significant net interest income even in a more volatile macro environment. Overall, the balance sheet provides the liquidity and flexibility to allocate capital across growth opportunities and return meaningful cash to shareholders.

Before I review our outlook, I want to take a moment to discuss capital allocation. Our framework remains unchanged. We focus on deploying capital where it generates the highest risk-adjusted return on a per share basis while maintaining a resilient balance sheet and returning excess capital to shareholders through a consistent dividend and share repurchases. When returns are compelling, we also pursue opportunistic M&A that is well aligned with our strategy and accretive to growth. When you step back, the business rate continues to generate returns well above our cost of capital, while returning a meaningful portion of that value to shareholders. Moving to the outlook.

We are reaffirming our full year 2026 guidance, which reflects continued strength in the Vacation Ownership business, cost management and travel and membership and the impact of our resort optimization initiative. While still early in the year, performance in the first quarter was ahead of our plan and our full year outlook continues to appropriately reflect both the current environment and the trends we're seeing in the business.

For the full year, we continue to expect gross VOI sales to be in the range of $2.5 billion to $2.6 billion. EBITDA in the range of $1.03 billion and $1.055 billion and volume per guest to be in the range of $3,175 and $3,275. Continue to expect to convert roughly half of our full year EBITDA into free cash flow. During the quarter, we took inventory drawdowns in our Chicago and Nashville Sports Illustrated resorts where sales are now underway. That investment did impact first quarter free cash flow, but does not change our full year free cash flow conversion expectation.

We continue to expect our full year adjusted tax rate to be approximately 29% and year-over-year EPS growth to be in the teens, supported by EBITDA growth, lower interest expense and share repurchases. For the second quarter, we expect gross VOI sales to be in the range of $660 million and $690 million, EBITDA in the range of $260 million and $270 million, and volume per guest to be in the range of $3,200 and $3,250. This reflects a continuation of first quarter trends while recognizing that growth can vary across quarters based on mix and timing.

Our outlook reflects a business that's performing as expected with downside appropriately managed given the current environment and upside driven by execution. To close, the business continues to perform as designed. We're seeing steady demand, strong execution across the platform and continued conversion of earnings into cash over time. As we move through 2026, we remain focused on executing against our plan, allocating capital to the highest return opportunities and compound value on a per share basis. Rob, we can now open the line for questions.

Thank you. [Operator Instructions] And the first question comes from the line of Chris Woronka with Deutsche Bank.

Congratulations on a nice start to the year. Michael, you guys have started off with a nice collection here of the Sports Illustrated Edipower and our Greenville resorts. So 3 distinct brands in addition to the core brands that you started with, the question is kind of to what extent do you think you can possibly grow those brands further? And are you seeing any attractive opportunities on the hotel conversion front that kind of enable those? .

We're very pleased with how each of the brands, the additional 1 that I'd add to that is a core Vacation Club, which is the newest one post post-COVID and would since our name change. And that, as we mentioned, we'll double the sales this year. When you look across all of those brands, our anticipation is we want to grow each of them to support the growth of our Battleship brand, the Wyndham brand. As we start to look at how each of them can grow, I think the total revenue potential varies by brand. However, as we've stated on a number of calls is we want to get each of these up to about $200 million plus.

And if you start to think about those 4 brands and stack that level of growth, you can have a lot of visibility into that 6% to 8% total VOI run rate for the foreseeable future. Fundamental to our strategy is to do things pragmatically, do a brand, start executing to another one, start executing. And if you look at the cadence of what we've done in adding brands, adding a core growing that brand, then add the second one in the revitalization of Margaritaville, as you heard, highly successful.

And then the last two, Eddie Bauer, we started lightly last year, and it's really picking up momentum in Q1, and then we'll start Sports Illustrated. So we believe the success of adding new brands is the execution of the ones we already have, starting with Wyndham, ending with our latest announcement -- our latest start-up sales, which is Sports Illustrated. So those are key to our strategy, and we think we're going to grow. And I think that validates and is providing more clarity and precision around our long-term growth rate on VOI.

Okay. Very helpful. Just as a follow-up, I know you guys mentioned a little bit of uptick in early delinquency activity. I guess, I don't know, Eric, if there's any more detail you want to ask the question that comes out of it is do you think that ultimately opens up an opportunity to essentially reacquire some of that inventory at favorable pricing? Or are you not quite down that path yet. .

Thanks for the question, Chris. So maybe a couple of comments on the loan loss provision. Maybe I'll start with how we actually performed. So maybe even going back to the fourth quarter. Fourth quarter provision was roughly 19%. It was down year-over-year. Full year 2025 provision was 20.7%. The first quarter start to the year were down to 19%. And -- so we've had 2 quarters of year-over-year decline.

Second, regarding the early-stage delinquency predominantly in newer cohorts of loans, loans originated over the last several quarters. I do think that these will ultimately manifest into the provision. But third, there are several components to the loan loss provision calculus that I think are worth noting. First, I just mentioned delinquencies. Second, down payment rates, which are up, which is a good guide for the provision for us. FICO scores remained stable and healthy at above 740, which is another good guide for the provision.

And maybe the last thing I'd say associated with this is the percentage of sales financed is also down, which is another good guide for the provision. So it's really those elements that give us confidence in projecting that the full year provision should be down year-over-year. And Chris, to your question, yes, when defaults happen, that does give us the ability for us to take that inventory back and resell it at today's prices with a very low cost of sales.

Our next question comes from the line of Patrick Scholes with Truist Securities.

Mike and Eric. Mike, I wonder if you could just put to bed any concerns, and it sounds like you had already, but just to finalize it -- any changes or concerns for the remaining 3 quarters versus your guidance earlier in year, certainly, the Algebra says if you beat on 1Q versus your guide, but maintain implied the rest of the year down slightly. Is it simply just Iran has happened since you reported in mid-February that kind of keeps you cautious and there's nothing else in your business that has -- as your outlook has changed. Is that a fair assumption? .

You've nailed it, Patrick, but let me first say -- let me first say, let me first speak to our business. We reported in mid-February, it's 2 months later, nothing's changed in our confidence in the building for the remainder of this year, prospectively. You've seen the results in Q1, which I would characterize as an extremely strong quarter, we had a great Q1 last year. I view this quarter as better. We beat the high end of our range.

If you remember last year, we had Liberation Day, April 1, I believe it was, and we expressed that, that uncertainty led through in the way we thought about the rest of the year. this year, there's a war going on, which creates macro and geopolitical uncertainty. And we don't want to be tone out to that reality.

But if you just step back and look at our consumer, great first quarter, 3 weeks into Q2, continued momentum exactly as we saw in Q1 and if you look prospectively, yes, it's great to look in the rearview mirror. But looking forward, we look at our summer bookings. They're up year-on-year, a great sign given that Q2 and Q3 is our high season. We get a daily report card in the form of VPG, continues to perform extremely well. Erik just spoke that we're monitoring early-stage delinquencies, but that's more retrospective. And I think between the macro uncertainty not micro uncertainty, we think our business is performing extremely well.

I think the last piece of this puzzle is that Q1 is about 21% of our full year number at the consensus point. If that number was 29% versus '21, we might be having a different conversation. But early in the year, business is performing well, macro economy, we just want to be cognizant of what's going on outside of our business. And given that it's very early in the year, be thoughtful about that. So that was a very extended way to agree with you.

I just wanted to put that to rest. I'm sure you -- as the quarter progression you may get questions, so we have the answer and writing there. Erik, my question for you. You talked about the earlier-stage delinquencies, specifically in newer cohorts. Does that means the newer first-time buyers, and specifically, what is it about those? Is it maybe a little bit weaker -- relatively weaker financial demographic, a younger customer than, say, your less newer or your legacy cohorts. Could you explain a little bit more about that? .

Yes. Sure, Patrick. So when I say newer cohorts, these are the more recent cohorts, I think the last 3 quarters. When you sort of double-click into the characteristics within the cohorts, there's not a single attribute that I would say is maybe worth calling out. It's not tied to FICO. It's not tied to product type. It's not tied to income band. It's -- we're seeing a little bit of wobble associated with the loans that have originated in the last several quarters.

Our next question is from the line of Stephen Grambling with Morgan Stanley. .

I think I heard in the comments that you said that the new owner mix was a little bit lower than expected and you attribute that to conversion dynamics. So I'm wondering if you could just expand on, what is happening in terms of the conversion dynamics there that might be impacting it and how you expect that to evolve over the course of the year?

Stephen, this is Mike. I would say that's a result of a positive story we have, which is growth in our new owner tour growth. There was a lot of commentary last year around our ability to grow new owner tours in Q1. Although our total tour growth was 5%, our new owner tour growth was 7%, Which is extremely strong. That's always step 1 and driving new owner mix into your total business.

When we talk about conversion dynamics, basically, our close rate was lower in Q1. That's natural. Anytime you scale the business and grow new owner tour flow or any tour flow, you're likely to suffer maybe a little bit of underperformance on close rates. We've got that, but we've got step one accomplished, which is a great new owner tour growth in Q1. We think that will continue to be strong as we head into the high season with both our new partnerships and just the way we've developed some of the smaller ones on a regional basis.

And we believe as we tend to do quarter after quarter improve the execution when we get focused on something that we think is a little bit behind. That's what happened in Q1. But again, I'll just reiterate that, probably the big storyline for us in Q1 was the new order tour growth year-on-year, which was 7%.

That's helpful. And then 1 unrelated question, just on free cash flow. I think you made a couple of comments on the intra remarks, but can you just maybe elaborate on any kind of puts and takes to think about impacting the cash flow conversion over the course of this year? And then maybe if you can remind us how to think through free cash flow conversion differences between the segments even as we think about the vacation ownership versus T&M segment.

Sure. So let's start maybe a little bit with free cash flow, and we can talk about the segments on the back side. Free cash flow for the full year, we're reiterating our roughly 50%, roughly half of adjusted EBITDA should convert to free cash flow. I will say that the pace of free cash flow in 2026 will be backloaded. We've got inventory investments that we're making, we made in the first quarter associated with Nashville and Chicago. We've got inventory investments in the second quarter as well. So you're going to see the concentration of our free cash flow more back loaded. And then from a conversion perspective, with the benefit of our ABS transactions and being able to generate cash off of those, the free cash flow conversion across segments is very similar.

Our next question is from the line of David Katz with Jefferies.

Thanks so much. I think a lot of the commentary around the VOI business is very clear. What I'd love to get just a little more color on is what you're including as we go through the quarters for the remainder of the year in your guidance or, 1, travel and exchange. It is flat the high end of the bracket and down some number at the bottom end, that kind of help is what I'm looking for.

And then with respect to the resort optimization, I'd love to get a clearer sense of what exactly you're baking in for the quarters and the remainder of the year and whether from that, or sort of flat challenge, et cetera. I think hopefully, that's a clear question.

It is, David. So it's Erik. So let me give you a couple of components associated with what's driving the year for us. So we had mid-single-digit tour flow growth in the first quarter. Our second quarter and our full year expect similar trends, mid-single-digit tour flow growth. We expect gross VOI sales to also be mid-single digits in both the second quarter and in the full year.

I think about the Travel and Membership business as a little bit of an extension from where we finished 2025. And some of those stats are the following. The Travel and Membership business was down 9% in 2025. They were down 10% in the fourth quarter. They're down 13% here in the first quarter. So I think an extrapolation of the travel and membership business in 2026 is a fair base case to pursue.

And then the resort optimization initiative has been a bit of a tailwind for us to start the year, when the Q is filed later this morning. You're going to see that the developer obligation, our carry cost, that savings is manifesting itself right into the P&L. And the one thing that we are also seeing is that despite the fact that we've closed several sales centers with the resort optimization initiative, our gross VOI sales have continued to remain very strong. So as I think about the rest of the year, it's very much a continuation of the mid-single-digit guide that we've got for the second quarter. It's an extrapolation of travel and membership. It's the manifestation of the resort optimization savings, and all of that compounding through the P&L to teens EPS growth as we continue to repurchase shares.

Okay. Very helpful. Congrats on the quarter. .

Our next question is from the line of Ben Taken with Mizuho Securities.

Maybe we could talk about Worldmark and Eddie Bauer. I think you said Eddie Bauer was exceeding your expectations. I mean my understanding is that you're effectively combining these 2 portfolios. I would imagine that would create a pretty powerful upgrade opportunity. So my question is, one, am I on the right track regarding this upgrade opportunity; two, if so, have those upgrades started? And with that contributing to some of the strength in 1Q? And then three, as you see it, is the bigger opportunity upgrading the 180,000 or so market customers? Or is it selling the new combined portfolio to new customers entirely the world market of Bauer.

Great question. What we're trying to do is basically put a booster to Worldmark. The Walmart owner base has a clear travel demand. And we've heard time and time again, they love that. outdoor experience, the chance for families to be together for a friendly resorts and in not urban centers. And the plan for Worldmark is to highly, highly align the Eddie Bauer Venture Club with it so that in effect, operates as a singular club. .

The success in Q1 is right along the lines of what you laid out, Ben, is it's a new product offering with a slightly different experience. that owners are going to get to enjoy. What I would say is, though, even though it exceeded our expectation, I don't think we've really unleashed the full power of what that brand is going to be. And what I mean by that is that in our world, it takes time to get fully registered in all jurisdictions, and we're partially -- we're registered in a few, but not all.

We've opened only 9 sales locations. And we've only announced one resort. You can expect more this year and can expect more nice destinations. And I think as the Worldmark base sees those new destinations, the upgrade opportunity, the ability to own world market by incremental opportunity or credits into the Eddie Bauer system will only get strengthened. So ultimately, we want to preserve and grow the Worldmark brand through this brand extension, which is the Eddie Bauer Venture Club.

As you mentioned, it's off to a great start. It's on the back mostly of upgrades, but it is our full intention to start feathering into the Eddie Bauer mix, new owners and I think it really attracts a new opportunity and gives us a new chance to grab some partnerships that maybe otherwise wouldn't be available in some of our other brands.

Understood. That's helpful. And then switching gears a little bit. There's kind of this never-ending question regarding the exchange business. Maybe you can walk us through your feelings on both sides as it pertains to keeping our disposing of the asset and then what your current stance is?

Well, it's as we've always shared, we're -- we will make our decisions on what we think is best for shareholders and the optimization of return for shareholders. we're all clear on the landscape of the traveler membership business. Exchange is in natural industry secular decline for the reasons we've all spoken about in the past. Despite that and despite what's happened over the last 3 to 5 years in that business, we've been able to maintain our overall travel and leisure mid-single-digits growth enterprise-wide on an EBITDA basis.

We believe that is very much in our grasp despite what's happening on the exchange side. We continue to focus first on organic growth and by adding new business lines and new focus. We think the outlook that we laid out in travel and membership is the realistic, but we're looking to outperform that and outperforming it is not easy, but we're constantly looking both inside the timeshare space and outside for new lines of business, and we're actively working on those business lines, and we're going to keep working until we can change in the curve to be additive to our story, not basically absorb it as part of our mid-single-digits growth.

What I would add on top of that is if there is a strategic opportunity, we'll evaluate it. And if it makes sense, we would not hesitate to make that type of move. But at this point, we're super focused on trying to bend the curve from the current decline trajectory because we know with the strength of our VO business that provides an additive nature to our EBITDA growth.

The next question from the line of Ian Zaffino with Oppenheimer.

As far as VPGs, how do we think about that? I know you gave guidance for the full year, but how do we think about that throughout the the year. I'm just thinking about you're talking about mix earlier. Does that kind of impact how you're thinking about the VPG? Because I guess we were to believe that the VPG would be coming down just given more new owner mix and now it seems like the mix is changing a little bit. So any kind of color you could give us on where you think things are going and why.

What you're thinking about -- you're thinking about it the right way, and VPG will take natural pressure on an enterprise basis when you get a higher new owner mix. we're heading into Q2 and Q3, which naturally has a higher new owner mix, which we expect to happen definitely in Q2 and again in Q3. So you would expect some natural pressure on VPG, but that's a mix issue, not a performance or an execution issue. So as you look at the cadence, you would expect those higher VPGs in Q1 with a higher owner mix, which is what we got. But Erik has laid out our range for the year, and I think that's accurately reflecting both the cadence and how we think we'll ultimately perform on VPG.

Okay. And then I guess as a follow-up, I know the question if I ran kind of came up. And any kind of potential softness you might see? Like how do you think that's actually going to play out? Is it a matter of fuel prices are high and that's what might soften demand? Is it just kind of like a sentiment thing where consumers don't want to either travel or spend money on a DO. How does it actually manifest, you think or kind of what's baked into what you're expecting? .

We'll give you our best thinking about how we think it would show early signs of showing up in our individual performance. And it's why we highlighted some of the travel trends we're watching. We would expect a little bit of conservatism in the consumer travel behavior. First and foremost, booking windows would shrink, they have not so far this year. I would expect people to transition away from air travel to drive 2 destinations. That has not inspired so far this year.

I would also look at VPGs to modify. They haven't. They've continued to perform extremely well. We said we're monitoring early-stage delinquencies. There's nothing in the travel trends that's noticeably moved. In fact, it feels like it's actually moved the positive direction, that would cause us to say there's an early radar sign or a signal that says the consumer is weakening.

I say all that, knowing that every week, we look at these because we're looking for early signs, they just -- all we can report is what we know on April 22nd and what we would know on April 22, is early warning signs have not shown up in our travel trends, but we'll continue to monitor them.

Our next question is from the line of Lizzie Dove with Goldman Sachs.

I guess on a similar theme, just thinking about that new owner mix that you mentioned and being a key focus for this year. I guess, like, I think, typically in precedent times where there's a macro slowdown like getting that new owner to make that big purchases typically been tougher. Can you maybe walk through how you're thinking about like levers that you have to drive that new owner growth this year as you push that more for the remainder of the year?

Well, it all starts with what happened in Q1 is you have to see the guest. And then secondly, you have to look at your conversion rates and the 7% growth in Q1, I can't emphasize it enough is a big one coming out of Q1. We have laid the groundwork with our partnerships. We've laid the groundwork with the execution to be able to grow top of funnel key metric. And now our focus will be and our teams already very focused on it is the next stage down the funnel, which is conversion.

Unquestionably, as consumers confidence rises and falls just like every single metric that's in every single business, it fluctuates. And we will have fluctuation in almost all of our metrics on the owner and the new owner side, I think what we rest on is that as we monitor and get ahead of any metric that starts to adjust, our team is quick to react, whether it's in cost management, whether it's changing our strategies, either on the marketing side or the sales side, that we feel as we mentioned in our prepared remarks, we think we can outperform across all cycles because there's a ton of value in the business.

We've got the key metrics in place, being top of funnel, both owner arrivals in the summer and new owner tours that we can execute further down the funnel and have a lot of levers to make sure that we ultimately deliver the results we've put out to the Street.

Got it. That's super clear. And then going back to the strategic review that you're undergoing. I think last quarter, you mentioned the swing factor was somewhere in between $15 million and $25 million in terms of EBITDA benefit. I know we'll get the queue later, but just any sense of like how we're tracking and kind of range of outcomes in terms of like coming in at the low end versus the higher end of that as we get through the year.

So just to clarify, when you say strategic initiative, you're referring to the resort optimization initiative, correct?

Yes, yes.

Yes. So as Erik mentioned, when you see the Q, you'll see great proof points is that we're realizing full, if not slightly above the cost savings. So we're super encouraged first and foremost that -- the cost savings are being fully realized. Our team is doing a great job combining very process-oriented of of extracting those. Again, as a reminder, the resorts we're taking out have an average tenure of, I believe, about 40 years. So we're looking at more aged resorts with lower demand.

And our focus really now is around the consumer and helping them determine having all the facts of their options, whether they want to stay in their ownership or exit, and working through on a one-on-one basis, the population of owners who ultimately need to make a decision. But when it comes back to the economic side of the equation, we're realizing the savings we expected, if not slightly ahead, but it's sort of like our full year guidance. It's early in the process. We have 3 quarters to go, but super encouraged around the execution being at or slightly above plan through the first 90 days.

Next question come from the line of Trey Bowers with Wells Fargo.

Just had a couple of modeling questions on the free cash flow side of things. As we think about inventory for the year, is there a chance that as we look to EBITDA to free cash flow conversion, if another city where you wanted to add inventory popped up, could that shift things or just kind of the pace and timing of VOI sales caused what would be some of this conversion to kind of get pushed into '27? And then second, just around nonrecourse debt. Is that expected to be kind of neutral this year or a bit of a draw or a bit of a positive?

Yes, so free cash flow, the pace of free cash flow in 2026 is going to be back-end loaded. With the Chicago and Nashville spent the inventory investments that we made in the first quarter, we've got additional investment that we're making in the second quarter. So we've got some conviction around converting roughly half of EBITDA into free cash flow on the full year, but you're going to see it really manifest in the back half of the year. From a portfolio perspective, I would say it's generally neutral.

Okay. And then just from the brand perspective, are there other sports illustrators or any Bowers out there that you guys are talking to? Both of those brands are not brands that I think a lot of people are super resonate with consumers, but obviously, it's doing something really positive for you guys. Could you just maybe walk through why Eddie Bauer and SI or kind of brands that are bringing in new owners? Is it the brand itself? Or is it kind of just what you've done with the brand that is causing it to resonate.

Well, I would say that I believe the Sports Illustrated brand highly resonates and is an iconic brand that almost everyone associates with a sports experience. I'd like to equate it to Margaritaville, which is not your typical hospitality brand and yet everyone associates it with the lifestyle. So I think those retail brands that express a lifestyle, both Sports Illustrated and Eddie Bauer are highly reflective of how we think hospitality is changing to be lifestyle based.

And we just simply have taken the opportunity to find new markets through those lifestyle brands. I would add to it is a core is a traditional hospitality brand. And in the grand scheme of things, we're trying to combine lifestyle and our core hospitality brands of Wyndham and a core and ultimately grow the top line. So -- yes, I think, first of all, they're great brands and that they strongly are identifiable with the lifestyle, and that is resonating with the consumers as they make decisions.

And 1 more, if I could sneak it in with the core. Will the license fees around that be similar to what you guys have with the guys at Wyndham or is that a different structure to that deal? .

It's roughly the same.

Our final question is from the line of Brandt Montour with Barclays.

So I'm having a little bit of trouble, for having my head around the delinquency stuff. I wanted to go back to that quickly because it's not really super clear to us what's driving it. If there's no obvious characteristic you'd call out or normally, it seems like that you want to blame the macro for this. So you've seen a lot of many delinquency cycles. You called it a wobble. How would you say it feels this one feels in terms of how it would play out, like is it worse than -- I'm assuming it's better than the one you saw at this time last year?

And then what are you kind of assuming when you say that the provision should still get better and you called out a bunch of good guys. On the bad guy side, what are you kind of assuming in terms of like where it stabilizes, when it stabilizes or anything you can kind of give us there?

Brandt, the first thing I'd say is that it's early stage delinquencies. There -- it's early in the cycle. We've seen it, wanted to communicate it. And the reason I wanted to bring up some of the good guys that are also running against the loan loss provision is just that, that as we sit here in the middle of April, we still got conviction that the loan loss provision will be down year-over-year based on just the confluence of things that make up that calculation. So the delinquencies that we've seen in the early stage delinquencies that we've seen I would say just that there are more recent vintages. But beyond the more recent vintages, there isn't a characteristic that I would specifically call out. And we're monitoring it, and we're working it. We've got aspirations to bring it down.

Okay. And the second question is actually on AI. You guys have showcased some great progress in terms of your guest experience and the technology stuff that you've done. But I wanted to more ask about how you're using or planning to use new AI tools on the distribution side, i.e., enhancing the top of funnel and sort of working with the bigger models out there that are disrupting some of the ways in which consumers find their travel options. And so is that something you're doing directly or planning to do directly with tech companies? Are you working through the brand companies that you partner with to speak to them and work with them? Or what can you tell us about progress on that initiative? .

Let me start with AI and then I'll just move to some technology updates as well to show some, as you said, showcase some positive things we're doing. On the AI front, we view sort of 2 opportunities there is, first is on the customer experiences to start in the search and book window and then expand outward from there. So we really want to get our owner-based engage when they're looking at resorts, planning their resorts, creating as little friction as possible and getting their destination confirmed in their inbox as a confirmed reservation. That's the starting point.

Secondly is, as we look at AI in the distribution side of the equation, I think the bigger opportunity for us on the stage 1, stage 2 basis is going to be on sort of non-full product type of vacations, whether its rental short-term product, low transaction prices that's where you're best to start as opposed to trying to transact on an average transaction price of $25,000-ish through AI. I think we want to start with lower transaction prices and move up the chain from there, and that's work going forward.

On the digital side, a lot of exciting things happened. We talked about Club Wyndham app that we launched and was received very well. We spoke recently about the Worldmark app that we launched last year. We already have 20% of our bookings, which is pretty amazing how recent that app was launched in how quickly that was adopted by our Walmart owners, already 20% of our bookings are happening through the Worldmark app. And we launched the Margaritaville app in Q1. So when you think about the cadence of reducing our friction, some of it's AI, but a lot of it is just the quality of our IT team and the speed at which they've worked with the business to get usable tangible customer experience technology out into the market that we're getting affirmation that it's working through the actual level of bookings we're seeing from our owners.

This now concludes our question-and-answer session. I'd like to turn the floor back over to Michael Brown for closing comments.

Thanks, Rob. Thanks for joining us today, everyone. To wrap up, we've had a great start to 2026, and our strategic priorities are clear. We remain focused on disciplined execution to deliver strong results in 2026, while continuing to scale our multi-brand strategy to drive long-term profitable growth. Erik and I look forward to continuing the conversation with many of you at upcoming conferences and again on our second quarter call. Thank you for your time and continued interest in travel and leisure.

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Travel and Leisure Co. Fourth Quarter 2020 Earnings Call. [Operator Instructions]

It is now my pleasure to introduce your host, Andrew Burns, Vice President, Investor Relations. Thank you. You may begin.

Thank you, Shamali. Good morning, everyone. Before we begin, I would like to remind you that our discussion 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 our press release accompanying this earnings call.

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. Please note that all references to EBITDA, diluted earnings per share, free cash flow and return on invested capital made during this call are on an adjusted basis as disclosed in our earnings press release.

This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our results and longer-term growth strategy. And then Erik Hoag, our Chief Financial Officer, will provide greater detail on our results, capital allocation strategy and outlook for 2026. Following our prepared remarks, we will open the call up for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated. With that, I'll call the turn it over to Mike.

Good morning, and thank you for joining us. 2025 was an outstanding year for Travel & Leisure. Our results reflect sustained momentum in our core vacation ownership business and repeatable execution across the enterprise. Our fourth quarter adjusted EBITDA exceeded the full year outlook, which we raised in Q3. 2025 was an excellent year, and we are off to a strong start in 2026. So I want to thank our associates across Travel and Leisure for their hard work and dedication, which drives our success. In addition to strong financial performance during the year, we advanced our brand expansion strategy, activated new partnerships and continue to invest in our digital road map.

These initiatives strengthen the foundation of the business and position us for long-term profitable growth. At the center of our strategy has a clear focus on delivering exceptional vacation experiences for our owners and members. What differentiates Travel and Leisure is that we convert owner satisfaction into recurring demand predictable cash flow and consistent capital returns. We managed the model end-to-end to deliver shareholder value that compounds over time. Since the 2018 spend, we returned over $2.9 billion to shareholders, reduced our share count by roughly 1/3 and grown the dividend by more than 35%.

As we enter 2026, Leisure demand remains strong. We have momentum in our Vacation Ownership business and clear line of sight to another year of growth and shareholder value creation. At the same time, we are advancing our brand expansion strategy and strategically optimizing our resort portfolio, building the foundation for sustainable profitable growth that extends far beyond this year. In 2025, we generated 4% revenue growth and 7% EBITDA growth. Revenue growth, combined with EBITDA margin improvement and our shareholder-friendly capital allocation approach fueled compounding growth across the P&L. We returned $449 million to shareholders through dividends and share repurchases, reflecting our ongoing commitment to disciplined capital allocation.

These results underscore the strength and resilience of our operating model. 2025 financial performance was led by our vacation ownership business, which is built around a large loyal owner base with recurring -- highly recurring demand. Performance is driven less by short-term travel trends and more by these long-term owner relationships and our intentional approach to operating the business. For the year, strong sales and marketing execution drove 8% gross vacation ownership sales growth. VPG was up 6%, above the high end of our guidance range and tour flow growth steadily improved throughout the year, including 5% growth in the fourth quarter. Q4 represented our fastest year-over-year tour growth in 2025.

In our Travel and Membership segment, we delivered $228 million of EBITDA for the year, demonstrating the profitability and cash generating strength of the business. We remain focused on very tight cost management as we actively mitigate the impact of exchange headwinds. Travel and Membership continues to be an important part of the portfolio, and we are evaluating every opportunity to enhance its performance and create value for shareholders. In 2025, we made meaningful progress advancing our multi-brand strategy, announcing 4 new resorts across our emerging brands. Margaritaville and Accor continued to deliver solid growth, and we began sales at both Eddie Bauer Adventure Club and Sports Illustrated Resorts.

Early consumer response has been very encouraging, and we're focused on scaling these brands in 2026. For consumers, leisure travel has increasingly become an expression of their lifestyle. Our diversified brand portfolio allows us to reach new distinct travel segments. This multi-brand strategy broadens our addressable market and enhances our long-term growth potential. When combined with Club Wyndham and WorldMark, we have a powerful engine to sustain vacation ownership growth balancing existing owner upgrades and new owner sales. Another area of focus for us is enhancing the owner experience. We know that delivering outstanding vacations directly drives owner retention and greater lifetime customer value.

The more frequently our owners vacation with us, the more likely they are to upgrade. On average, owners purchased 2.6x their initial purchase over the first 10 years. That dynamic is central to our model, driving predictable revenue and cash flow. To support this, we're investing in technology that makes the experience more seamless end-to-end from discovering a vacation to booking travel and on-site activities. In 2025, we made progress on our digital road map with the launches of the Club Wyndham and Worldmark apps and launch of our new AI concierge service.

Beyond digital investments, we are focused on deepening owner engagement through special events and experiential offerings. Our partnerships with Live Nation and authentic brands expands our ability to deliver highly differentiated memorable experiences for our owners. Looking ahead to 2026, we are focused on continuing to advance these initiatives, further enhancing our digital capabilities and scaling new partnerships.

In our Vacation Ownership business, we have consistently been an innovator of the product, and in running our timeshare business for the good of our owners and the enterprise. This includes everything from being among the first to adopt a points-based product in the 1990s to recently launching new and innovative brand resorts and experiences. We are constantly modernizing our owner offerings, while seeking better and more efficient ways to grow the business. Last year, we embarked on our latest initiative, which we refer to as the resort optimization initiative.

A handful of our resorts have aged and are consistently at the lower end of our demand scale. As such, we will be removing those resorts from our system similar to what hotel brands do year after year and replace them with higher demand, less seasonal and newer resorts and resort locations. In fact, once we net these reductions against our additions, we will have grown our resort portfolio by over 30 resorts in the last 3 years. We believe this will be a win for our owners as they have demonstrated their resounding support through the individual HOA votes.

As noted in our release, this has resulted in a 2025 balance sheet impact and related onetime charges. Going forward, it will drive a full year 2026 positive EBITDA benefit. EriK will walk through the mechanics and how it impacts our financial performance and outlook. Ultimately, this is an innovative way to strengthen our resort system for our owner base while improving the financial health of Travel & Leisure and our club HOAs.

Turning to the outlook. While the first quarter is still in progress, early trends are consistent with our expectations, and we're seeing momentum carry forward across demand, tour flow and execution. We have started 2026 with strong visibility into the key drivers of our results, and we are well positioned to deliver another year of revenue growth, EBITDA margin expansion and robust free cash flow.

All in, we expect EBITDA in the range of $1.03 billion to $1.055 billion, reflecting 4% to 7% year-over-year growth. Now I'll turn the call over to Erik to further elaborate on our results, capital allocation framework and outlook. Erik?

Thanks, Mike, and good morning, everyone. I'll frame my comments in 3 parts: how the business performed, how we ran it and how that performance translates into capital allocation as we look ahead.

Starting with performance. The fourth quarter marked a strong close to 2025, with revenue of $1.026 billion, EBITDA of $272 million and EPS of $1.83. EBITDA grew 8% year-over-year with margin expansion reflecting operating leverage that built over the course of the year and became more evident in the fourth quarter. These results reflect deliberate and proactive choices we made across pricing, mix, underwriting and capital.

Turning to the Vacation Ownership segment. The core engine of the business continued to perform at a high level. For the quarter, gross VOI sales rose 8% year-over-year, driven by accelerating tour flow growth of 5%, the strongest level of the year, reflecting sustained consumer demand and strong marketing performance. Volume per guest finished above the high end of our expectations at $3,359, reflecting consistent sales execution and disciplined yield management across channels. Segment EBITDA was $252 million, with margins expanding year-over-year as operating leverage and inventory efficiency improved.

Credit performance remained stable with delinquencies and defaults holding within a tight range, consistent with our expectations. Our provision rate was 19.3% in the quarter, with a full year provision rate of 20.7%, slightly better than our 21% guidance. New originations remained high quality with weighted average FICO scores above 740 and average down payments trending above 20%. Those originations, combined with actions we're taking around early owner engagement and collections efficiency give us confidence the loan loss provision will be lower in 2026 than in 2025.

Turning to the Travel and Membership segment. Fourth quarter revenue was $148 million, down 6% year-over-year, while EBITDA was $47 million, down 10%, reflecting ongoing exchange headwinds. We continue to take targeted cost actions to align the expense base with the current revenue profile and maximize profitability. Stepping back and looking at the full year, we delivered revenue of $4.02 billion, EBITDA of $990 million, EPS of $6.34 and and free cash flow of $516 million. These results are compounded. Revenue up 4%, EBITDA up 7%, EPS up 10% and free cash flow up 16%.

That progression reflects operating leverage in the model and return-based capital allocation with buybacks amplifying per share growth. Relative to the initial full year guidance we provided at the start of 2025, we finished at the high end of our gross VOI sales range, above the high end of our VPG range and above the high end of our EBITDA range. For the full year, we converted 52% of EBITDA into free cash flow, right in line with how this business is designed to perform over time. On a GAAP basis, cash flow from operating activities grew year-over-year, reinforcing that the earnings growth we delivered in 2025 translated into real cash generation.

Our return on invested capital remains above 20%, reflecting both the quality of the business and the discipline with which we deploy capital. That's the model at work. Operational execution drives cash, cash funds, capital return and capital return compounds value. We exited the year with leverage under 3.1x reinforcing the balance sheet strength that supports consistent capital return while preserving flexibility. During the year, we returned $449 million to shareholders through a combination of dividends and share repurchases.

We repurchased $300 million of stock, reducing our share count by approximately 6%, and we paid $149 million in dividends. Together, these actions increased per share value while maintaining balance sheet flexibility. Reflecting that confidence, our Board approved a new $750 million share repurchase authorization, which we view as one of the highest return uses of capital at current valuations. We also intend to recommend to our Board a first quarter 2026 dividend of $0.60 per share.

Looking ahead to 2026, our capital allocation priorities remain unchanged. Our top priority is investing in the core business to drive organic growth while returning meaningful capital to shareholders through dividends and share repurchases. We also pursue opportunistic M&A when returns are compelling and clearly expected to be superior to buying back our own shares. Given the strength of our balance sheet and consistency of free cash flow, we expect share repurchases to remain the primary use of excess capital alongside a growing dividend. This approach preserves flexibility across cycles.

As Mike referenced earlier, we've identified a select group of resorts to close. This resulted in a noncash inventory write-down and impairment of $216 million in 2025. From a P&L perspective, there's 3 main components to keep in mind as you model the impact of these actions in 2026. I'll run through some of the high-level estimates to keep -- to help you better understand the mechanics. First, the impact of sales office closures will reduce VOI sales by approximately $100 million and assuming a 35% flow through, this creates a $35 million EBITDA headwind.

Second, fewer resorts in the system will reduced management fees by approximately $20 million. Assuming a 75% flow-through this creates a $15 million headwind to EBITDA. Taken together, this creates a $120 million revenue headwind and a $50 million drag to EBITDA. The third component is lower inventory carry costs, which results in roughly $70 million of expense savings. All in, lower expenses more than offset the impact of lower revenue resulting in a $20 million net EBITDA benefit.

I use specific numbers for this example to illustrate the mechanics, but there are several variables and a range of outcomes to consider. Based on our best estimates as of today, we expect this initiative to provide a net EBITDA benefit in the range of $15 million to $25 million, which is included in our outlook. Importantly, this is not a demand story. It's a deliberate portfolio action that improves the cost and capital intensity of the system while leaving the core engine intact. This is how we actively manage the portfolio. exiting lower return assets, redeploying capital to higher return opportunities and improving returns and cash flow over time.

Turning to the outlook for 2026. We expect gross VOI sales to increase 1% to 5% year-over-year to a range of $2.5 billion to $2.6 billion. Absent the impact of sales office closures, underlying VOI growth would have been 5% to 9%, reflecting continued strength in tour flow, pricing and close rates. For the full year, we expect volume per guest to be in the range of $3,175 to $3,275 modestly lower year-over-year reflecting a deliberate mix shift towards new owners over the course of the year. EBITDA is expected to be in the range of $1.03 billion to $1.055 billion, representing mid-single-digit growth year-over-year. The midpoint of this range reflects our base execution plan for the year and the positive net impact of the resort optimization initiative.

We expect year-over-year EPS growth to be in the teens, supported by EBITDA growth, lower interest expense and share repurchases. As you update your models, a few guardrails may be helpful. We expect depreciation and amortization to be modestly higher in 2026, reflecting our ongoing investments in technology and digital platforms. We expect our adjusted tax rate to be broadly consistent with 2025, and we expect to convert roughly half of our EBITDA into free cash flow. Stepping back, the guide reflects a profile where we believe downside is well contained, while upside is asymmetric and driven by execution. It also reflects our conviction that we can deliver mid-single-digit EBITDA growth and teens EPS growth while investing in our brand expansion strategy and navigating travel and membership headwinds.

For the first quarter, we expect gross VOI sales to be in the range of $520 million to $540 million and EBITDA in the range of $210 million to $220 million. We expect volume per guest in the first quarter to be in the range of $3,200 to $3,250. To close, the business is performing the way it's designed to perform. The results we're delivering are the outcomes of clear priorities, intentional trade-offs and a capital allocation approach designed to compound value over time. Simili, we can now open the line for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Stephen Grambling with Morgan Stanley.

Just wanted to start off on the optimization initiative. And just maybe help us think longer term about maybe the moving parts around the EBITDA or free cash flow contribution from effectively the club management business as we think about maybe clubs coming out, new clubs coming in and price within that.

So Stephen, I would, first of all, consider 2025 as the effort we put into the resort optimization as a catch-up year. You think about our strategy coming out of COVID, it was all about creating efficiency in our model, starting with marketing and now moving over to the resort portfolio system that we have. We use the 3-year comparative because that's when we really started to come out of COVID and prepare our P&L and our overall operation to be highly efficient.

So as we go forward, I would expect the following years to return to your normal cadence of VOI growth, resort management growth. Overall, our resort system on a net basis is going to continue to grow as we add new brands to our overall portfolio system. And maybe going forward, we're talking 1 to 2 resorts just normal maintenance as opposed to a catch-up year, which we had in 2025.

That's helpful. And then 1 other follow-up. There's a bunch of balls in the air between the initiative and then some of the new brand launches as we think about the trajectory of owners. Do you think that we'll get to a point where net owner growth could actually kind of flat line and maybe even grow as we look into 2026 or 2027,.

Yes. That is our full intention. Part of creating a more efficient resort system, a more efficient sales and marketing, organization and supporting the type of growth and launching these initiatives allows us to start to bend that curve back north. I don't think it's going to be too long before we start seeing a northern trajectory on our owner count for 2 reasons. Number 1 is all the initiatives we have in our core brands, Club Wyndham and Worldmark related to our partnerships.

But additional to that is as we launch these new brands, you're going to see a higher mix, especially in the Sports Illustrated resorts on the new owner component versus a Club Wyndham where we've been in the business for decades, where you've got longer owners, a huge owner base. And therefore, the relative new owner to owner growth is a lot tougher. It's one of the benefits that we're going to see as we get these new brands going. But yes, it's our full intention. We don't think it's going to be over the long term, but over the midterm where that owner count begins growing again and the northern trajectory on a consistent basis.

Our next question comes from the line of Patrick Scholes with Truist Securities. Please proceed with your question.

Just from a high level, talk about just how you see your consumer doing right now. Certainly, very bifurcated world out there between the highs and the lower end financial demographics, but give us related thoughts on specifically your consumer.

The short answer, Patrick, is really no change to what we saw in '25, continued strong demand, both for their vacations and for their purchasing. The why, I think it's a little more important is the continued performance is partly due to the changes we made that I referenced in Stephen's question as really focusing on the continued quality of our consumer from a demographic standpoint, our household income has moved up well above $100,000.

Our average FICOs has moved from the 720s to over the 740s over the last few years. But I also think it's reinforced by the quality and value and consistency that people see in the vacations. The macro conversation is all about affordability in a K-shaped economy. But when 80% of your owner base made their purchase and our vacationing for preinflationary prices, it's very easy to see the value, combined with the fact that you're inside of a condominium that's 800 square feet, 1,200 square feet. And that value really plays out. Someone said to me recently that there's something very special about a vacation when you're not in a hotel room and you don't have to go to bed at the same time as your kids.

It's it just really elevates the vacation experience. And when you do that, when you paid $2020 or $2018 or $2015, which is 80% of our owners, people see the value and the quality and the experience at a much more elevated level. And that's played through our performance. And I would add maybe one final forward-looking statistic that reinforces that our Q1 arrivals are above what they were in Q1 of 2025, and we're getting early indications that Q2 is on a really good path as well.

Okay. And then just a follow-up question for Erik, and this is related to consumer performance. I think in the prepared remarks, you said you expected loan loss provision for this year to be down, if I got that correctly. When you're thinking down, is that like 100 basis points from the about 21% that you did in '25. And then related to that, you did drop 100 basis points year-over-year in the fourth quarter. Talk a little bit about what the dynamics for that 4Q were.

Yes. Thanks, Patrick, a couple of things. So we ended the fourth quarter with a loan loss provision of 19.3%. Yes, down roughly 110 basis points year-over-year. It was the only quarter that we were down year-over-year during 2025, and we finished the full year at 20.7%, which is better than what Mike and I have been talking about for the last several quarters at roughly 21%. So as I think about 2026, Patrick, I would guide you towards 20% down year-over-year roughly. We saw larger down payments in the fourth quarter, which is the predominant driver for the more favorable loan loss provision. And I think that we have got real comfort and conviction that will be down year-over-year.

Our next question comes from the line of Ben Chaiken with Mizuho.

We'd love to touch on the strategic review, of the 17 assets, what was the -- what were the occupancy of these assets? Clearly, they were below average, but maybe how sold or unsold were they in broad strokes to the extent you can share? And then maybe what's the swing factor between the [ $15 million and the $25 million ] Is it simply how well you can reallocate those sales to other sales centers? And then 1 follow-up.

So Ben, -- let me hit the -- it's 17 in 12 locations. Significant amount of unsold inventory at those resorts and occupancy is well below 50%. And if you think about the resorts that we focused on -- average age, 40 years, primarily in the Northeast. And if you can think about those assets, highly seasonal, lots of wear and tear, lots of pressure that starts to get put on HOAs that the entire club has to bear. So when we talk about this is a positive for the overall club HOAs, it reduces a lot of burden on what could occur as assets age to 45 and 50 years.

Additionally, and let me use this as an anecdote. In Branson, we have over 600 units. So is the demand for unit 600 to 650 as valuable to our owner base as the first 50 units or 60 units will put it in a place like Chicago, where we have no assets today. And as we evaluated, we looked at the age, we look at that lower demand, the lower sales level, many with fixed weeks and then started to think where would our owners prefer to go and the decision became obvious that let's get them to newer builds, higher demand destinations and less seasonal.

And the HOAs were very much a part of it. And had, obviously, a clear [indiscernible] because they run the individual HOAs or owners. So that was our thinking about it. And just your second question, Ben, I apologize. Your question on the delta between the -- what did you mean the delta between [ $15 million and $25 million ] ?

I believe you said that the EBITDA contribution, if I caught you correctly, originally, I think you said the EBITDA contribution for the year was going to be a tailwind of $15 million to $25 million. And so [indiscernible] the swing factor, which sales...

Let me let Erik run through the mechanics there.

Yes. So Ben, good to hear you. So I think we've got -- we've been able to isolate the revenue components pretty clearly. We've got a point of view associated with the EBITDA contribution associated with the revenue bid. We do still have some open switches associated with gaining all of the homeowners association approvals. We do have a couple that will bleed here into the first quarter. I think that the $20 million at the midpoint is a good place for you to model what the benefit of this program will drive.

Got it. Appreciate it. And then just 1 quick one on Sports Illustrated. I believe you opened up sales of Nashville in December. Maybe you could share any relevant data points to the extent you're willing? And then obviously, recognizing it's very early in the system, have you considered any type of upgrade program for legacy P&L customers where you buy SI and your legacy P&Ls fundable at an exchange rate because, I believe it's a separate platform at the moment.

Let me take the opportunity to give you 2 updates. First on Sports Illustrated. We started our event-based marketing there as we renovate both Nashville and Chicago, we don't have our physical sales gallery open, so we're doing more events. We've done several. We have a good amount of sales with our first Sports Illustrated owners. Those will begin in earnest in our more traditional approach late in Q1 and early in Q2.

So I'd expect more meaningful results to come at that point, but early reception was very positive, very excited about the concept. We were very pleased with the feedback we got from our first event programs. Equally to that, we transitioned in Q1 from virtual sales to physical sales centers for Eddie Bauer collection, and we saw tremendous reception in that approach.

Our Worldmark owner base, which is nearly 250,000 and was looking for more destinations with a slightly different feel. We're giving them that through the Eddie Bauer. It's a different club, but the reception to that product has been really, really impressive. We're very pleased with what we saw in the first 45 days of 2026. So pleased with both of those starts, both for Sports Illustrated and Eddie Bauer.

Our next question comes from the line of Chris Woronka with Deutsche Bank.

I was hoping you could maybe spend a minute talking about kind of the marketing approach this year, and there's been a lot of talk, obviously, about tax refunds, larger refunds, other stimulus. And I'm curious as to whether you guys have adjusted any of your marketing campaigns, either in terms of timing or messaging to kind of coincide with what are expected to be those larger refunds? And whether it's to think about from a P&L aspect maybe in terms of marketing expense being more weighted towards 1 quarter or 1 half.

Chris, I wouldn't say that we've got a different approach as it relates to the singular event around taxes. I think as you look through 2026, we're being more intentional in a few areas. Number 1 is continue to focus on owner arrivals, which indirectly, it's going to be a benefit if there's an economic win for consumers in the April time frame. That means it's likely that, that encourages summer travel. And given that the vast majority of our tours are booked when people are at location that's going to be a big win for us.

But owner arrivals is always our #1 priority for a number of leases. Number one, outside of sales is because that's why we're in business. The other components are, I mentioned it in the prepared remarks, Live Nation, authentic brands, really working in closer partnership. We've been working with both those companies for over a year, and we're finding new and better ways to link up to their organizations and provide some really cool, both new owner and for events there.

And then lastly, as we continue to mine our data, we've got an incredible population of data that we think we've underutilized over the past 5 years and that we think with the launch of our apps, more engagement through AI that we can start moving more of our data through the marketing funnel to the point that we can get them into market and ultimately have a sales opportunity.

I think that's more of a mid- to long-term opportunity, but we've made tremendous strides in the last 12 months of prepping that platform to really start leveraging it in -- at the end of this year and into the next 3 to 5 years.

Okay. That's very color. A follow-up for you. You just mentioned kind of Live Nation and authentic brands. I'm curious as to how you view the cruise industry. It's not exactly secret. They've been doing pretty well lately. And I think you guys have historically done some level of sales opportunities on ships. And I know that people can also use their points on cruises, although it's not necessarily the most economic use of those points. So is there any thought, any evolution in your thinking of how you interact with that industry to maybe capture some of the same tailwinds that they're seeing?

A little bit down your cheek. I think we've had some pretty good tailwinds in 2025. I thought we had a great year. And I think we would sort of right alongside of crews as enjoying the high leisure demand. But I think the nature of your question is absolutely on point. Our consumer loves not only to visit our resorts, but to cruise. We began to leverage one of our existing partnerships with Margaritaville in 2025 on the Margaritaville cruises, which that lifestyle between Vacation Club, hotels, cruising and retirement communities is an entire ecosystem onto itself and our partnership with Margaritaville continues to grow. And cruise is just one of those components. And I think it will grow from simply cross-marketing opportunity is something bigger as time goes by. Success in that brand will yield more dots on the map and if they happen to float, then even better.

That doesn't mean that it's only Margaritaville. I think we've really stepped up through partnerships tying into other cruise lines in 2025. We've made some changes there. And we've recently seen an uptick in the cruise side. And again, we like to take things methodically is if we see a partnership, we'll start working with the company. And if it grows, then we'll invest more heavily, Margaritaville the first example, but we have others in the works as well.

Our next question comes from the line of David Katz with Jefferies.

The quarter -- and I think I may have asked this maybe last quarter or some prior quarter. When we look at SI, we look at Eddie Bauer, Accor, do you have a notional sales amount with each of those that you've sort of laid out for some untimed future opportunity for you to chew into that we can sort of paint the long-term vision of?

Let me come at it the other way, David, which is on a high level. We want to see the 4 brands, Margaritaville, of course, Sports Illustrated and Eddie Bauer, as a growing percentage of our overall mix as we progress year-over-year, simply to take pressure off in the law of big numbers, Club Wyndham and Worldmark are $2.3 billion. 6% to 8% growth gets harder and harder as you progress through that. So the addition of these new brands allow us to either augment to maintain that 6% to 8% or give us potentially upside. So I'm looking at it more top down is 3 years ago, that number represented about $50 million of sales 2 years ago. In 2026, we think that number gets to $200 million or north. And if you think about our overall guidance, you're starting to approach a 10% number.

So as we move to '27, '28, that number should be moving to double digits and then to the teens and up to 20%. So we just wanted to be a growing percentage of the overall mix. I still would say and that's an absolute direction that we have. What I would say on the individual brands is they should be obviously outsized growth compared to our core 6% to 8%. And and then how we divide that growth into '27, we just want to see how both of these brands are received and how we change the offering as we get consumer feedback. But the macro answer to your question is it's going to be high single digits this year as a percentage of total sales moving into double digits and then to teens after that.

Excellent. And as my follow-up, I wanted to spend a second on the blue thread, which we haven't talked about much in a while. What is the aspiration of the vision for Blue Thread? I'm not sure if you gave us a sales number rate, which you have in the past? And how does that sort of fit into launching your app right? Does your app connect with their app? And -- or is it -- should we sort of see this as heading in down opposite path?

So Wyndham Hotels in the Blue Thread remained a critical and important and a very strong partnership for us. We have continued to see success with the affinities between Wyndham Hotels and our Club Wyndham brand. And it will remain a core part of all of our growth as we move forward. So no new news there. I think the reality of the sales contribution from the Wyndham Rewards member has reached to a point where there are logistics or mechanics way beyond the timeshare realm that has changed the way people book hotel reservations. We've worked very collaboratively with the hotel group to find new ways to reach those customers. We found a few avenues.

But we really see that sales level stabilize at about 3% of our total sales. And it remains and will remain an extremely important part of who we are here at Travel and Leisure.

Okay.

And sorry, the app. Well, we are focused on our app of the Club Wyndham and Worldmark. We'll get apps for all of our brands. And then we will absolutely look for connectivity across to anyone we're working with. So the technicalities of that I couldn't say, but we're trying to establish our platform first, but in all respects, where we can link across to work collaboratively with Wyndham Hotels, we'll absolutely do it.

Our next question comes from the line of Lizzie Dove with Goldman Sachs.

I just wanted to ask about VPG. You had a really good year. And then for this year, there's some moving pieces. You called out the deliberate mix shift, but your guidance does factor in quite a deceleration in trends throughout the years. Could you maybe just give us some more color on how to think about that and the impact of the mix shift.

We finished the year with our fourth quarter PGI right under $3,400. VPG was up 6% year-over-year and VPG was at a 3-year high. So we feel great about the momentum that we have associated with demand. You're right, the midpoint of our guide has got VPG down. I think it's between 1% and 2% year-over-year. Full year new owner transactions in 2025 was 31%. So we're trying to move from low 30s to mid-30s. And the flattish VPG is 100% attributable to our desire to nudge new owner transactions from low 30s to mid-30s.

Got it. That makes sense. And just a follow-up on that. I apologize if I missed this in the opening, but anything you can share in terms of specifically around new owner close rates or just kind of new owner demands and how that's been tracking versus existing in the fourth quarter.

Well, 2025 and in the fourth quarter, our new owner performance was very consistent throughout the year. So no meaningful change. What you saw in 2025 was just extremely strong owner performance. So if we hold what we did in Q4 and 2026 on our new owner performance, we'll be very pleased. We'll have an acceleration on tour growth year-over-year. And our teams have been able to very much handle that acceleration, and they did in the fourth quarter, and we were very pleased with that.

Our next question comes from the line of Trey Bowers with Wells Fargo.

Just a follow-up to, I think, it was Patrick's question on the provisions. As we look forward a little longer term, where do you see that number heading? Is there something about kind of optimized level of recycling that having a provision level at '20 and an associated write-off level is kind of the right place to be? Or on the flip side, as you've improved your FICO scores and you have a higher income bracket for most of the owners now, should that number kind of continue to migrate down.

Trey, as I mentioned, we finished the fourth quarter with a provision of 19.3% and a full year of 20.7% and we expect it to go down in 2026. So super pleased with the direction of travel and the trajectory with the loan loss provision. I've said over the last couple of quarters that we expect over time that the provisions settle back into the high teens. Do I think we can do that? I do. Do I think that the business needs for us to settle back into the high teens, I don't. You look at 2025, the full year provision was 20.7%.

We wound up beating our budget. We were above the top end of our guide in EBITDA. We feel good about the programs and the initiatives that we have in place to drive the provision down and we do think it settles into the high teens over time. And I think 2026 is a step in that direction, moving from 20.7% to something lower and then aspirationally into the teens after that.

And unrelated, but just a follow-up. Could you guys just talk about the travel and membership business going forward? Just expectations for when that kind of bases out? Or do you expect that 1 to continue to have some top line pressure for the foreseeable future.

Yes. So the travel and membership business, we're modeling 2026 very consistent with the 2025 trend line. No heroic assumptions, just disciplined cost management. We're trying to be very pragmatic and opportunistic associated with leveraging partners. We had announced a partnership during the fourth quarter. So we're trying to be very pragmatic associated with the roughly 3.5 million members that we have there. The business continues to be a very important contributor to our EBITDA growth as well as a very important contributor to cash flow generation. But right now, we're modeling our base case in 2026 off of the 2025 trend line. Thanks for the question.

Our next question comes from the line of Brandt Montour Winter with Barclays.

On the sales optimization announcement. Was there any benefit from that to the bottom line in the fourth quarter?

There was no Q4 benefit. We'll start to see some benefit in Q1. The impact was balance sheet related.

Okay. And then just a follow-up because I don't think we've really ever talked about this sort of what happens to the older resorts when when you guys eventually move on, which makes total sense. And I guess that's really not your problem. What happens to it. It's up to the age, the residual HOA and what they decide to do with the property because it's their property. But -- and maybe it's negligible, but 17 resorts might sort of add up. Is there sort of a contingent of folks that have owned for a long time that are not part of your points program that then you kind of do outreach to try and get them to sort of maybe convert so that they're not only left behind. And maybe it's just such a small amount of people at that point, it doesn't matter. But Yes, just curious on how that sort of plays out.

Well, for us, it does matter. We we'll go through a sale process of the resorts and it wasn't a 1 option for the owners. And keep in mind, we're a big owner here. We've worked with the owner base. We've worked with the HOAs to really provide 2 options for them. Number 1 is to receive proceeds from the eventual sale of the properties, which has been well received or to move their ownership back right back with us. And we are in the middle of a pretty intensive outreach to the owner base of all these resorts to make sure that they understand fully the 2 options.

And what we've learned as we've moved along, even though I don't know we're 1/3 halfway through is that once people understand their options, we're seeing a good number. We want to stay in their ownership and move across to Club Wyndham or another type of product. So it's an intensive outreach program, and we've we've learned that there's a lot of surprise at the options that have been given and that there's some excitement about, some people just at their point in time, said I never thought that I would see proceeds from from this?

Or I see great value in it. I want to keep my ownership, and that's what we're in the process of doing, and that's how we've moved along. So -- did I answer a full of your question? Or was there anything trailing there?

No, that was great. It doesn't sound like there's a cost component with trying to make -- trying to sort of help those folks out at par of this.

No, in some cases, it's going to be the opposite where there are proceeds. But I think ultimately, just to come back to the bigger point here is we took that 3-year example of netting 30 resorts positive. But if you go back even further, it's net growth of more than that. And hindsight 2020 would have liked to have started this earlier, so sort of onesies and twosies along the way. But at some point, you just got to catch up. And we've spoken at all our conferences about we have 4 to 5 years of inventory. We want to get it down to 2.5, 3 -- and this helps along that path.

And additionally, one of the value equations for owners is I don't want special assessments, I don't want maintenance fees going up beyond a reasonable level. And when you're looking at older resorts that have a lot of wear and tear, this really helps to reduce the likelihood that those elements occur and really help to preserve value and trade it out for higher demand destinations.

Our next question comes from the line of Ian Zaffino with Oppenheimer & Company.

This is Isaac Sellhausen on for Ian. I just had a follow-up on travel membership from the previous questions that were asked. Maybe if you can touch on the profitability of the segment with the exchange revenue headwinds? And if the mid-30s EBITDA margin is sustainable with the cost actions that were previously taken. Just any puts and takes on the margin would be great.

Yes. So I would start with some of my prior comments around the 2025 trend line sort of extrapolating into 2026 as sort of the baseline starting point for modeling. We do see a dynamic, right? So we have got exchange headwinds. We have got our Travel Clubs business that it's continuing to grow very nicely. It was up mid-teens in the fourth quarter. There is a structural contribution margin difference between the 2 things -- between those 2 business that over the longer term, if the trend continues that we will see some broad-based erosion in segment margins for travel on membership.

We have reached the end of the question-and-answer session. I would like to turn the floor back to CEO, Michael Brown for closing remarks.

Well, thanks once again for joining us today. I'm proud of what our global team of more than 19,000 associates was able to achieve in 2025. They drove our results, which exceeded expectations on nearly every metric. But we're not content with just having a strong 2025. We're focused on delivering outstanding results again in 2026. We are entering the year with confidence, momentum and a clear path for growth and value creation.

Erik and I look forward to seeing you at upcoming conferences and eventually on the Q1 call. Have a great day, everyone.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Hello, everybody. I hope you guys had a good lunch. We're here with Erik Hoag from Travel + Leisure, the Chief Financial Officer. Eric, maybe we'll start with a very brief overview of the business, and you can kind of take that right into an overview of how the timeshare consumer feels? As near term as you're allowed to say.

Sure. Brandt, thanks for having us today. So Travel + Leisure is the largest vacation ownership and exchange company. We are headquartered in Orlando, Florida, and we operate under 2 operating segments.

The first is Vacation Ownership, which is roughly 3/4 of our company. And this is a points-based Vacation Ownership product, really backed by our 280 resort inventory. The business is marked by highly predictable revenue, strong cash flows.

Our second operating segment is Travel and Membership. This is roughly 1/4 of the company. This is a product and a platform that allows customers to exchange their timeshare across multiple different providers. This business is marked by a member base of roughly 3 million individual exchange members, multiyear contracts, high recurring revenue.

The business itself from a financial perspective, we generate roughly $4 billion of revenue, a little less than $1 billion of EBITDA. We convert roughly 50% of our EBITDA into free cash flow. And through the first 9-months of the year, revenue grew roughly 4%, EBITDA grew roughly 6%, EPS up 14% and free cash flow per share up roughly 20-plus percent. Really good start to the year, through the first 3 quarters. The consumer for Travel + Leisure continues to be very durable. Zooming out on our third quarter results, we raised our guidance, our outlook associated with gross Vacation Ownership interest sales. We raised our outlook associated with volume per guest. This is a key metric of ours, a key demand metric of ours, VPG. We raised the outlook there, and we raised the outlook for adjusted EBITDA, and we modestly increased the outlook associated with free cash flow.

Since that time, since October 22, when we had our third quarter call in the 7 weeks that have elapsed since then, the story is roughly the same. Our consumer is roughly the same. When we look at some of the key KPIs associated with the business, whether it's booking window or arrivals or our provision, we're seeing very consistent trends through the first 2-months of the fourth quarter.

That's a great overview. Thanks for that. I want to double-click on the consumer a little bit more. And the reason why is because across pretty much every other travel vertical, we've seen either outright softness or maybe some softness. And I think that this year has been choppy for the consumer. It seems to have hit different businesses in different ways. So maybe talk about how the Travel + Leisure consumer seems to be bucking that trend? And then talk about any variation you're seeing between geographies or like fly-to drive-to and that sort of thing?

Sure. So our consumer has been strong. When you zoom out and look at some of the characteristics of our owner base, our new owners are in their early 50s. We've got average income close -- average household income, roughly $120,000. Roughly 70% of our buyers are Gen X, Gen Z or millennials. We continue to lean-in on improving credit quality.

We changed our minimum FICO score in 2022, and we have consistently seen sequential improvement in weighted average FICO score at origination and weighted average FICO score on the portfolio. So the consumer that's buying from us has been very predictable and very consistent. And we continue to see roughly 2/3 of our transactions come from existing owners. So I think the volume of transactions that are coming from existing owners, really speaks to the value proposition and the product that we have to offer. From a geography perspective, we're not seeing any ebbs or flows, of note, within any of our geographies.

You touched on repeat sales as a portion of your overall sales. One of the interesting things about this business is the levers that you have between, let's say, repeat and new. And for the audience, I think traditionally, maybe new owner sales are a little harder to engender, right, because these are folks that don't know the product, don't like the product they are sort of new to it. And so in times of macro, let's say, macro softness, new owners would seem to be a tougher -- even a tougher business versus repeat business. So talk about what's in your control and which of those levers have you pulled throughout this year to sort of react to the macro?

So as I mentioned, roughly 2/3 of our transactions come from existing owners. Our target long-term mix between new owners and existing owners is 35%. During the third quarter, it was 31%. Second quarter, it was 30%. Full year 2024, it was 35%.

So what we've seen in 2025 isn't so much softness on new owners. We've had a good year with new owners. We just had a really good year with existing owners. So the existing owners, when they arrive at a property, we have an opportunity to tour them. When we do -- to drive incremental sales, an existing owner might upgrade for a couple of different reasons. They want to spend more nights at our resorts. They want larger properties at our resorts. They want to move from a 1-bedroom to a 2-bedroom or 2-bedroom to a 3-bedroom, or they want better amenities. So there's many different flavors associated with what's driving sort of the upgrade, the volume of upgrades.

And then on the new owner side, I think one of the things that really differentiates us is that we're very front-footed. We do direct marketing. We don't wait for the phone, we make the call. And that's been -- I think that, that is a key differentiator when you zoom out and you look at some of the macro choppiness that we're seeing. And you know that Travel + Leisure is in a unique position to be able to drive some of our own demand.

Okay. Maybe we can roll that up into 2026. What are some of the puts and takes that we should take into account when thinking about how T&L can sort of grow? Is the Big Beautiful Bill a tailwind? Is that something that's even on the radar? Or how are you looking at '26 right now?

Yes. So maybe a couple of things on 2026, and I don't want to get too ahead of the guide or too ahead of the budget that's still in process.

But broadly speaking, we have got an owner base today that continues to want to upgrade. We've got a history of being able to take a new owner and upgrade them 2.5x over the first 10 years of ownership. So $1 of new customer sales today, over the next 10 years becomes $2.5. So we've got a very predictable conversion of upgrades. So the continued momentum that we're seeing now. We've got to focus on new owners as we head into 2026.

In addition to the focus on new owners, we've got new brands that we're feathering in with Sports Illustrated and Eddie Bauer, continued momentum with Margaritaville and the Accor Vacation Club that we acquired in 2024. So we feel good about what we're doing from an owner and a nonowner perspective.

Our Consumer Finance portfolio, we've got relatively static rates that we originate with our customers. As we move into a declining rate environment, there should be some modest pickup associated with spreads in the Consumer Finance business. And then along the same lines with interest rates, roughly 1/3 of our corporate debt is variable based. So as we move deeper into a declining rate environment, we should also have a tailwind associated with interest expense.

And then the one question that we get a lot of discussion about is our loan loss provision. So as we move into 2026 and as we talked about on our third quarter call, we're expecting our loan loss provision to be lower in '26 than it was in 2025.

Everybody wants to know how much lower. In the right direction, it's something material, which you've said publicly...

Which we did say publicly. So maybe a little bit of dialogue on the loan loss provision as we've moved through 2025. So we started the year, we guided to a loan loss provision of 20%. As we moved towards Liberation Day, we saw some softness in delinquencies. We changed -- we modified the full year provision from 20% to 21%. And that 21% moved through the second quarter, reaffirmed on the second quarter call, it moved through the third quarter, reaffirmed on the third quarter call. Two months later, we feel good about it being 21%.

So I would expect the fourth quarter to be lower than the third quarter and '26 to be lower than '25. On the third quarter call, Brandt, I loosely talked about the number settling in potentially at or below 20% in 2026 and over the longer term into the upper teens.

High teens. Okay. Great. Now that we're well into the consumer finance section of the call, so we'll just keep going with that. When you look at the delinquencies were trending upward throughout the year -- well, 30 to 60 days, that's the only stat I have in front of me. But you did call out an inflection positively.

So I guess what you're saying is that the inflection that you saw as of the third quarter call has put you on a run rate that would suggest with the reserve next year should be lower than this year. Is that kind of what you're saying? Or do you need that delinquency to keep getting better to make what you just said?

We feel good. Number one, we've been pretty consistent about 21% through the year. And it does take a couple of quarters for us to change the full year provision number upwards or downwards. And as we head towards 2026, we've done several things in 2025, including the continued improvement in the FICO scores at the point of origination, some investments that we've made associated with the owner experience and then broad-based improvements in our collection capabilities, whether it's with data or technology as we head into '26 that give us comfort that we'll be down year-over-year.

Okay. One of the things that stand out to folks that look at this industry is -- yes, is that reserve rate, which hasn't really changed, right? I mean if you look back, it's even -- I mean, I don't want to misstate these, but its reserve rate is around the highest it's been post-COVID, and it's higher than it was immediately pre-COVID. And yet the customer credit continues to move better. It's the best customer -- it's the best FICOs you've had in the history of Wyndham. And so people look at those two things together and say this doesn't seem sustainable, right? Are there any other things going on? Maybe it's propensity to lend, maybe it's just conserving? What is -- why is there -- why are those two metrics not more correlated, inversely correlated? Let's say.

I just -- if I could just zoom out and maybe talk again about some of the things that we've done. We made some investments in the business. We're deliberately pursuing higher-quality tours, the higher quality tours with higher-quality customers, better credit quality on the front door, which leads us to have more and more comfort as we exit the year that we're heading towards 2026 with a provision rate that's going to be lower.

And Brandt, there's one other component that I might pull into the discussion associated with the provision, and it's our cost of sales. So as Travel + Leisure has got an elevated loan loss provision, that provides us the opportunity to recycle inventory when it comes back to Travel + Leisure and put it on the balance sheet with a very low cost of sales, we're able to take that inventory and reprice it to today's prices and remarket it back out. So one of the things that I've done over the first couple of quarters here at T&L is start to look a little bit through the lens of, you got the gross provision and then you've got the provision net of the cost of sales. And I think when you look at the two things together, T&L versus maybe some of the other operators, operate in a much more narrow band.

That's interesting. Okay. We will be running that math right after we get off stage. I appreciate that. You talked about feathering in new brands. I want to talk about how big the feather is? You have 4 new brands, right, Sports Illustrated, Eddie Bauer, Margaritaville's Momentum still going and then Accor, of course. And I think we have an idea of size-wise what these should be stand-alone over time. I think you said $250 million to $500 million annual gross contract sales. What are we -- how should we think about next year in terms of what it could mean and maybe specifically between which brands are going to contribute what?

So let me talk about the 2 brands that we have today that we're marketing, that we're selling, that we're growing. So Accor Vacation Club International, bought it in 2024, performing very well, outstripping the business case, associated with the deal, feel very good about the continued growth of Accor.

Our Margaritaville Vacation Club also performing very well. Mature -- more mature business for us, but continuing to grow nicely. And then the 2 new ones in 2025, it's the Eddie Bauer Adventure Club and Sports Illustrated. So Eddie Bauer, we've got one dot on the map. It's in Moab, Utah. And then Sports Illustrated, we've got 3. We've got Chicago, Nashville and Tuscaloosa. So as you try to frame -- speaking specifically around Eddie Bauer and Sports Illustrated, as you try to frame 2026, it really is a year for us to get them off the ground. So I wouldn't think about inclusion in modeling at this point. This is a year where we're trying to -- we're trying to get some scale in the brands. You'll see more dots on the map and really try to grow the individual clubs.

So dots on the map are projects -- work in progress. They're not open.

Right.

Okay. Just making sure. Sports Illustrated has captured a lot of people's attention. And I think a lot of -- I don't know if a lot of people have looked at doing these over the years, but I know that some folks have and they were afraid of the seasonality. And I think you guys probably looked at that pretty closely when you first started looking at these deals.

And so college towns revolve around, let's say, football, maybe it revolves around basketball, maybe it revolves around the graduates and the undergraduate schedules and things like that. What are the differences in sort of operating guidelines when you think about getting that product off the ground? Because I think you'll be the first one ever to do a sports college town timeshare. What do you think -- how will it be different? And why are you not at least cognizant of some of the seasonality factors?

Yes. Let me first address the question associated with college towns and football season, right? So we're going to have a location in Tuscaloosa, Alabama. And it's not just 6-weekends a year, right? I mean one of the benefits of having a real points-based system is having that sports enthusiast be able to go to Chicago to catch a Black Hawk's game, to be able to go to Nashville and catch the Titans. And as we expand that network, we're going to have more and more locations for them to visit.

And the same thing with Eddie Bauer Adventure Club, Moab, Utah, think trails, think mountain biking. As we continue to expand into experiences, you're going to see more and more locations for Eddie Bauer, more and more locations for Sports Illustrated. And it's well more than the 6 football weekends per year. It's coming to Tuscaloosa for a basketball game or graduation or to just see your child. But the points-based system allows the owner to transact and visit and stay within the network, growing network.

Do you think that Sports Illustrated will have a greater or lesser network effect than a standard timeshare resort? Given the fact that maybe some folks just want to go to their Alma Mater versus go to a game in every SEC school, let's say, down the road versus in the resorts where people do want to try every resort. Is that something that you think might be a factor as well?

I think it could. I think the fact that we're going to ultimately build a network, we could stay with the example of SEC football. So you purchase at Tuscaloosa, Alabama, but we put a location in a different location, whether it's College Station or Gainesville. That gives you the opportunity to visit there for that game. But more broadly, it gives you the ability to travel within the network and visit other locations with that same affinity to Sports Illustrated.

Okay. Let's move to some of the other parts of the business. You're not just a timeshare company. You have Travel Clubs. Let's do Travel Clubs first. They were a focus immediately coming out of the pandemic. The Travel Clubs, I'm sort of lumping in both the B2C and the B2B. But that was sort of an exciting new business. It didn't take off right away. We -- I personally witnessed sort of a focus, call it, maybe like a downshift in focus there and maybe a turn of focus back toward timeshare and what we would call maybe the core business. But then out of nowhere, clubs had a great third quarter.

Clubs did have a great third quarter nowhere.

What exactly is happening there? Did the focus ever retreat a little bit? Or was it just something you guys didn't talk about, under the surface or keeping it? And then please sort of differentiate between B2C versus B2B because those are different businesses.

I would say that the travel club is predominantly B2B. So let me just start with that. The Investor Day that happened a couple of years ago, there was a refocus associated with what that business could ultimately become. So we have refocused it to B2B. It did have a great third quarter. Transactions were strong in the third quarter. Revenue growth strong in the third quarter, positioned well for a strong fourth quarter.

The Travel Clubs business itself represents between 4% or 5% of total company revenue. So it's important because it's growing. We continue to focus on driving transactions to improve overall contribution margins and its contribution to EBITDA. And it's part of the Travel and Membership segment where we are continuing to focus on resource allocation to make sure that we're driving every dollar of EBITDA and generating every dollar of cash that we can out of that business.

Okay. That's helpful. I do want to touch on Exchange. That business is sort of a structurally declining business or it has been for a long period of time. You've been at the company for 6 months. Have you uncovered in your short time a network effect or a synergy or a reason why that business won't continue to sort of shrink over the longterm? No pressure, [indiscernible] here of exchange? Or what have you learned so far?

So the business does have a structural challenge. So I mean a couple of things. The business has got a structural challenge. The business also has 3 million members. So -- and those 3 million members have got multiyear contracts with us. So the real challenge for us, Brandt, is how do we reinvent that business in a way where we can bend the curve on that business.

As I look at 2026, it looks a lot like 2025. So -- but there is a lot of focus, energy and effort underway within the Travel and Membership business for that real unlock associated with leveraging those 3 million members that we've currently got.

Okay. Let's maybe talk a little bit about M&A. I think the industry has consolidated in the last -- over the last decade, there's 3 major timeshare companies. You guys are the only major and the largest, but you're the only major without a very -- without a big hotel affinity brand. Is that something that you think is an interest for you as an organization over the long term? Do you think that the interest in that has gone down with the recent performance you guys have found without having that?

I mean you do have an affinity program with Wyndham. I don't want to say you don't, but it's a minority of your traffic versus your peer -- your branded peers that have a majority of their traffic. So it is a very big difference in business models. How much do you think you need a brand long term?

I look at -- we very deliberately re-branded ourselves to Travel + Leisure. So we could operate Margaritaville and Accor and Eddie Bauer and Club Wyndham, the WorldMark Club, all independently. And so I think the fact that we don't have -- we've got the brand affiliation with Wyndham. As you said, our Blue Thread relationship is very strong. But I do think the fact that we operate under Travel + Leisure is a bit of a differentiator for us, and it does provide us with a little bit more flexibility.

Do you think you're getting network effects in the system? Do you think that customers who are a Margaritaville member or a Club Wyndham member, are they cognizant of the travel and leisure umbrella? Is that creating any sort of buzz or consumer proposition?

I think the proposition will ultimately manifest itself in a Club Wyndham owner who sees us continue to build the Sports Illustrated network or the Eddie Bauer network. And that provides them -- affords them the ability to exchange into one of those clubs. So I do think that there is a level of affinity associated with the Travel + Leisure brand bar.

So even though they're part of one club, they can trade into the other club?

Two things. Number one, we want to build each of these brands independently. So as we sell into the brands that there is availability for the buyers. But there is the ability for us to exchange in, think RCI into some of the new brands that could consume inventory.

Okay. Is there a pool of potential acquisition targets, not necessarily for you, but just in the broader timeshare space, is there a -- how many sort of smaller subscale branded or non-branded timeshare players are there left that haven't been acquired?

Well, I think that there's 8 providers. In aggregate, I think there's 8 providers.

When you think about M&A in the space, the universe has gotten much more narrow. So I mean it's a smaller universe of potential targets. Over the next several years, you could certainly see some of the smaller, more regional players trade, bigger operators very hard. But for us at Travel + Leisure, we're focused on driving shareholder return and when we stack M&A up against buybacks or internal investments, the best project wins, and we're going to continue to be very focused associated with capital allocation, ensuring that we've got the appropriate reinvestment returns or project returns when thinking about either M&A or other alternatives.

Okay. You've got four big new or existing brands that you're focused on for next year. Are you hunting for more stand-alone brands? Or is this maybe longer term? Or do you think you have enough interesting things going on for now?

Well, we've got a lot of interesting things going on right now. I would say that we're always interested in looking at -- looking through the lens of, are there things that could potentially be accretive, accretive to the top line, accretive to the bottom line. I think right now, we feel good about where we are from a brand perspective.

Okay. All right. So moving on to the balance sheet. Can you remind us the current inventory position, leverage and sort of long-term targets for both inventory and the balance sheet?

Yes. So current inventory position is roughly 5 years, 4 to 5 years. The majority of our new inventory is coming through our new brands. And then that is augmented by the recapture or the recycling of inventory that will come through defaults.

And then from a leverage perspective, our stated leverage is 2.25x to 3x, that was concurrent with the spin. We're operating at roughly 3.3x. Leverage went up on the backside of COVID, and we've naturally been de-leveraging since that time, should exit the year at roughly 3.2x leverage. I think we feel good about where we're at, and we would expect to see continued progress downward as EBITDA continues to grow.

Okay. 4 to 5 years of inventory on the balance sheet. I kind of remember a lower number being sort of optimal, but there was excess inventory coming out of COVID and then maybe the new brands are requiring more inventory. What is the optimal level of inventory?

It's the optimal level of inventory between 2 and 3 years. 3 years, right.

Okay. So -- but you're at 5. So is that just an opportunity? Or are you running that higher because of the brands?

What I would say about inventory is we've got one initiative in 2026 that should help prune inventory. So as we've gone through 2025, we've looked at the entire resort infrastructure -- the entire inventory of our resorts and really look to see if there were nonperforming, lower customer satisfaction, lower owner satisfaction, lower occupancy and potentially had significant infrastructure-related deferred maintenance.

And in the back half of 2025, we've decided to take out roughly a dozen of them. And what that does for us is a couple of things. One, let me walk you through all of the pieces here, Brandt. One, there is lower property management fees associated with this dozen resorts, two, less rental income associated with the resorts, three, a couple of them had a sales center, so an impact from VOI sales. But four, lower carry costs. So it gives us the opportunity as we prune down the balance sheet, it's lower carry costs associated with this small population of resorts, which helps get us back towards a more normalized inventory level.

Okay. One other thing that you pruned was the channels, the channel mix coming out of COVID. What was the -- maybe you can remind me the number of tours that you -- in terms of percentage of tours of the channels, the lower-quality channels that you took out something like 40%, right, where it was a large number, maybe you never gave that number. Don't respond. Because it wasn't published. But that was -- you sort of zigged, you have the rest of the industry zagged, right? They sort of went all in on growing sales and you guys pulled back on the lower quality channels. Can you do a postmortem on -- clearly, that was the right thing for you guys to do. Can you do a postmortem on what that's done for the organization and the business as a whole sitting here today, now having fully recovered EBITDA 4 years later, brought it up with a higher quality.

You're right. So we moved our minimum FICO score from 600 to 640, and it did a couple of things. Number one, it's a drag on sales, right? So it's a drag on tours, drag on sales. But the flip side to that is lower sales and marketing expenses, lower provision, higher quality tours, higher-quality customers and more EBITDA and a better quality of earnings.

Okay. Is there any questions in the audience for Eric? Anybody want to buy a timeshare? Okay.

Maybe later. Last question is on capital allocation. And again, pre your time, but T&L has a long history of being very good stewards of capital and good capital returns. Investor-friendly management team in terms of capital returns. Is the -- what is the philosophy on dividends versus buybacks? How has that changed, if at all, over the sort of longer-term evolution of the company?

Let's talk about -- I might even start further upstream with CapEx. So CapEx as a percent of revenue in 2025, roughly 3% to 4%. I think 3% to 4% is a good starting point for 2026.

The company generates almost $1 billion of EBITDA. We convert roughly 50% of it to free cash flow. And of that 50% that we convert to free cash flow, roughly 80% of it is going back to our shareholders. So we continue to invest for growth. That's the first thing that I would say in the business. Number two, we're committed to our dividend. We've grown our dividend double digits over the last several years. And as I stare into 2026, I think you'll continue to see the dividend move with earnings.

And then beyond that, and absent other investments, we continue to very programmatically buy back shares. Through the first 3 quarters of the year, we've repurchased roughly $210 million worth of shares. Our dividend yield sits between 3% and 4%. Our buyback yield is roughly 6% to 7%. So sort of total shareholder yield right now is double digits. And our free cash flow yield, looked at today's market cap, roughly 11% to 12%. And we're doing that all in an environment where we've got a recurring revenue business that's asset-light with a return on invested capital in the 30s and a weighted average cost of capital at approximately 10%. So a 20-point spread between ROIC and WACC. We feel really good about our capital allocation and the discipline that we've had over the last several years at T&L.

Last chance in the room.

Maybe a bit tangential. I'm hoping you might indulge me since you're in Orlando. Maybe you've seen what's going on with the theme park operators. I wonder how much you overlap with them and what do you think is maybe going on with that consumer right now? If there's anything you willing to...

So we do some direct marketing within a couple of the theme parks. I would say that arrivals to Orlando seems relatively static. And the performance that we get out of the theme parks is generally strong, a very qualified customer.

But all of your customers in that market are domestic?

They are.

And a lot of the theme parks have international that's been weaker...

That comment was specific to Orlando.

Yes. Anybody else?

Do you perceive any exact perception from Airbnb business [indiscernible].

I think the one thing that I'd say, if you were to compare and contrast Travel + Leisure timeshare versus Airbnb, there's a couple of very predictable things that we get. You get consistent quality of the resorts, you get consistent amenities and a consistent experience. I think that might be how I contrast T&L versus what you might experience at Airbnb.

Okay. We're out of time. Eric, thanks for the time. I appreciate it.

Good to see you. Thanks for having me.

I think they're just kicking it right off and what a better way to kick off our Global Retail and Consumer Conference on travel Tuesday then with Travel and Leisure. So Michael, Erik, thank you for joining us.

We're talking this morning about how Travel and Leisure is actually one of the best-performing stocks in my entire coverage. You've almost doubled the performance of the S&P 500 year-to-date. That's excluding a very healthy dividend. And it's also a big dichotomy versus even some of your closest peers. So excited to dig into how you're doing that, how you continue to drive idiosyncratic growth. One of the things that you've talked about are your 3 priorities. So maybe we can start there in terms of what those priorities are and why they're the right priorities for the company today and how they're going to continue to drive growth.

Sure. Well, why don't we start with one of the biggest priorities is just staying focused on our core business. Our company is successful when we don't take our eye off the ball, and that is attaching to an addressable market, direct marketing, getting them on tour to buy a vacation product that is part of the macro trend, which is bigger accommodation supported by a brand. We've been very successful in doing that.

I believe fundamentally, the biggest reason our equity has moved beyond our capital allocation is just consistent and steady execution. We've also been very straightforward in that we want to grow our addressable market. And we believe the best way to grow that addressable market is very simply to start launching new brands. We are a very strong executor of our core business, as I just mentioned. But that core execution isn't limited to our current Wyndham brand. We believe we can apply the model, not something new, just apply our existing model to brands that bring with them a new addressable market. What do I mean by that? Sports Illustrated, Margaritaville, Accor and our latest launch, Eddie Bauer, all bring with them incremental TAM, which is what the timeshare space is all about is getting more addressable market.

So let's dig in there a little bit because we get this question with some of the branded hotel companies. Can you have too many brands? So as you expand, is there the potential that you have too many tie-ins as it dilute aspects of the existing base? Or is it more of a 1 plus 1 equals 3?

For me, it's 1 plus 1 equals 3. And I think sometimes the rationale for hotel brands expanding is different than for us. There's all kinds of reasons you would do it in the hotel space. For us, it really comes down to 2 core elements. The first is the macro travel trend, which is people want to associate their vacation experience to their personal lifestyle. I think Hilton has done a wealth of graduate, and I think our Sports Illustrated is going to do really well in college towns and in sports towns. So we're trying, first of all, to give people a reason to use their vacation time to tie it into their personal time, just launching Eddie Bauer Adventure Club, which is about outdoor travel. again, a macro trend.

But sports, outdoor travel, Margaritaville, cruises, drink in your hand, feet in the sand type of thing. But then the business imperative is growing our addressable market because we are more -- unlike the hotel business, a much more direct marketing. So to the extent that we can bring with the brand's experience and get with that new marketing opportunities for us that we're not currently hitting, that's incrementality to our business that we don't have to go invent a new mousetrap. We're just going to apply the same mousetrap to a new addressable market and give consumers what they want is the travel that really they desire.

And so maybe just remind those less familiar, what's the typical repurchase or upgrade rate? And any initial inklings of how you could assess whether some of these new customers and these new brands will follow that same pattern?

Sure. It's -- simple answer to your question is if someone spends $1 with us today for the first-time purchase in the next 10 years, they will spend $2.60 more. So it's a very statistically validated model. As we have gotten into a core, we'll watch very closely if there's any variance to that. So far, we're not seeing any changes, but it's -- we're still only 2 years in. And that replication is what we're looking for, for our consumers.

And beyond the economic side, what I find very interesting and is often lost in that statistic is if you bought $1 of timeshare today, people are buying 20% of their vacation time, 30% of their vacation time max on their first purchase. What they're saying is I've learned what this product is. I like how our family vacation or I'm vacationing and I want more. It's the ultimate validation statement. And we love the economic part of it, but more importantly is the consumer affirmation of the product that they own.

One of the things you referenced is the experience that they have, and there's an initiative or a priority that you have is around the guest experience. So can you talk about some of the things you're doing there to improve every aspect of the guest experience as we think about from booking their vacation to even how they go on a tour?

Yes. Well, I think pre-COVID, I would describe our situation as being in the technology deficit. We were operating the way we operate always operated. And we made a very conscious decision that we were going to reallocate our internal capital to purely -- not purely, but almost the vast majority of our internal capital to the customer experience. And you have to build foundations and you have to stack on top of it before it eventually gets to the consumer. But that is the -- from the booking all the way to your consumer finance servicing, ultimately, the optionality to not have to deal with another person in the process. Now that is a multiyear journey that touches marketing, sales, consumer finance, booking your next vacation, maybe booking your marketing tour. But we are on that journey.

We've launched our Club Wyndham app, which is getting great reception. We just launched our WorldMark app. We're doing digital marketing and trying to develop a digital funnel for our marketing leads being a direct marketing company. It's a journey that we will be on for years to come, but we're deeply committed to it. And we've already had tons of learnings here in our first few years of starting to explore the right app, how consumers want to use it, how we can get more of our consumers maximum utilization of their ownership every single year.

And then the last priority was around operational discipline. And you talked about even just now the data-driven marketing and enabling associates. Maybe you could expand on some of the initiatives there on just operational discipline and how that then scales as you add in these brands.

Well, just to come back for a second on your question about brands and how many is too many. The way we are looking at that business today is we could add many more brands, I believe, today if we really put our foot to the pedal. Our early work has driven a lot of interest. But we are fully aware that if we don't execute on the brands we have, we won't have those opportunities in the future. So part of your operating discipline question is really about we need to make sure we never lose sight of growing our Wyndham brand. Then we need to make sure that the brand that we've brought on with Accor, we're great brand stewards, and that is proving to be a growth vehicle. Then it's reinvigorating Margaritaville, then it's Sports Illustrated, then it's Eddie Bauer. If we don't do those right, we don't earn the right for the next brand.

So the operating discipline that we are all about is, first of all, on our P&L in every aspect of every brand, making sure that we do not take our eye off the ball. 10 brands executed okay, is far worse than 6 executed as best as we can. And I think as part of that, we are in an evolution. We have learned a lot in 2025 about how to launch these brands. And we -- '26 will be another learning year. And we will have a lot of successes, and we already are, but we will also have some learnings. And I think as we get through 2026, we'll be communicating to you and to the market. This is what's working well in Sports Illustrated. We're adjusting. We want to make sure that by the time we leave 2026, we have dialed into micro changes as opposed to macro changes so that we then will be ready to get to our next brand or our next 2 brands. And if that happens, that's where you can see our growth algorithm just keep stacking on top of each other as opposed to being cannibalistic.

Right. So -- let's go back then to the question around data-driven marketing. It sounds like you're going to be changing as you see data come in. But are there things that you're already doing that have changed? Like maybe walk us through what marketing looked like 5 years ago and what that looks like now in terms of the different channels that you have people coming through and maybe where those preferences are.

So let's talk about our owner base. Our owner base is about 65% of our annual sales. And every marketing outreach, virtually every marketing outreach pre-COVID was face-to-face. It was a conversation. It was a welcome to the resort, let's learn more about our ownership. With the download of the Club Wyndham app, we now have booking capabilities I've spoken about on our earnings calls. The next opportunity that comes from there is you're going to be at Bonnet Creek in Orlando, you're going to be within a shuttle ride of Disney. Do you want to go ahead and purchase your tickets? Do you want to go ahead and organize your trip to SeaWorld to Universal? If you do that, would you like us to pay for your tickets as a premium to go take a tour. All of a sudden, a highly manual process moves to a percentage of those now being done at the consumer with their hands on the wheel, making the decisions when they want to make it.

WorldMark is the same way is WorldMark owners want different things. That whole booking, itinerary planning and then ultimately, tour booking can all be done. We've just launched 60 days ago of an AI customer service agent. So let's say that you're on with our customer service talking AI and you -- or with an AI agent, it's called Voya with us and you say, is this available? It goes through and checks availability. Okay, if I go to Maui, what is my itinerary, 4-day itinerary. And then at that point, it will take you over to the app. And then at that point, you can book directly with us. So the experience -- and I did it, I think I referenced it on my last -- our last earnings call, I did it with Park City and where I've skied several times, and I asked for a 4-day itinerary. And I went through that 4-day itinerary, and I'm like, this is great. This would be a great itinerary. And that evolution of what we're doing, we believe, is really going to raise satisfaction and get more people going to our resorts.

It just needs to add in the predicted snowfall so that you can really time it right. One other consumer shift that's happened is that your FICO scores have moved higher. Maybe elaborate on how you've been able to do that. Is that just underwriting? Is it a change in how people perceive the brand? What -- and how much higher could it go?

Let me let Erik talk about the FICO and maybe I'll hit on some strategies.

Thanks for having us today, Stephen. So on the backside of COVID, we changed our minimum FICO score from 600 to 640. And it did a couple of things. Obviously, it dampened the top line a little bit. But what it really did was drove leverage through the bottom line through a lower provision rate, lower delinquencies, lower defaults. And we're targeting customers that have got a higher propensity to purchase.

Yes. And from our standpoint, it's about getting back to your other question about operating discipline. At that point, we were hiring less -- we were having less churn on the sales and marketing side. Our best salespeople who knew the product best, we're seeing more clients.

And the ultimate outcome is that we went into COVID, I'd say, with a VPG 2,300, 2,400. And coming out of COVID, we've not touched below 3,000. So what is that? 60% VPG. That makes managing your business from our standpoint a lot cleaner, a lot more -- our ability to be focused on the things that really matter as opposed to running a quantity-based business. And I think it allows us to refocus a lot of our financial and human resources on fewer things that allow the customer experience to actually improve along the way. So at the time, I was a little concerned. We took a leap of faith, and I think it was absolutely the right move.

But does that mean that you're now saying, well, what if we brought into 650? What if we said the minimum is going to be 670? Why not try to push the envelope further? Is there kind of an efficient frontier that you think you've reached?

Well, first of all, I don't think there is a silver bullet at 640. There's -- we didn't wake up and 640 is the promise land. We picked the number based off default curves, and we said this is probably a good balance. I think, candidly, the next step of really defining which customers are at the right level and the right propensity to pay and can afford the product and all of those factors that are important is less about a finite FICO score and a more sophisticated data gathering, which could -- there are 625 FICOs that are in a better position to own our product than 655. That FICO is a great tool, but it's not the silver bullet. And as we go forward, you'll see us continue to fine-tune all of those elements.

And Erik, I want to bring you back in because it's -- I think you've been 6 months roughly in the seat. So maybe talk to us about initial learnings. What surprised you in those first 6 months where you've been spending your time?

So yes, it's been a great 2 quarters, a couple of quarters. I think the first thing I'd say, Stephen, is surprised by the overarching durability of the core business. Mike started his conversation associated with the strength of the core business. And despite really a choppy macro, the consistency of that core business to generate positive tour flow, to generate strong VPGs, to have consistent close rates has been a bit of an aha, and I think it really demonstrates the strength of the model.

I think the second thing would be the overarching strength of the existing owner base. As Mike said, roughly 65% of our sales are coming from existing owners. And I knew that the existing owner base was foundational to T&L's success. But I do think that propensity to upgrade, existing owner satisfaction, I think it really speaks to the product.

And I think the third thing I'd say, initial learnings first 6 months is maybe a little bit opportunistic, the ability for us to sharpen our focus around resource allocation, maybe broader than capital allocation, but resource allocation. So the level of investment in legacy brands versus new brands, greenfield development versus conversions, the level of investment that we put into our Travel and Membership business. So I think that there's a lot of value connected to resource allocation or capital allocation. And we want to sharpen our focus to see what additional shareholder value we can unlock.

So they make you buy into a certain amount of timeshare when you first started? Are you now a happy customer who is going to be spending $2.60 for every dollar you spent?

I am an owner.

There we go. Got to eat what you're cooking. Maybe on the health of the consumer, talk to us about what you see in the portfolio. You talked about the durability, but are there other things that you're watching for when you're trying to assess the health of your owner base and potential owners?

Why don't we share this one together and let Erik speak about the portfolio. But broadly, the last time we checked in was -- I believe the date was October 22 on our earnings call. We shared that we saw a consumer that was doing well, a consumer that with our demographic continued to buy volume per guest was strong at the time, had a really good third quarter. 6 weeks later, and the communication we had at the end of Q3 as we saw for the first 22 days in October has continued into early December. That's been very encouraging. And this is a second half quarter with Thanksgiving having just passed and Christmas, the holiday seasons where the gifts are given, so to speak.

And then we also look at forward bookings. And again, when we checked into Q3, our forward bookings into Q4 were very strong. We're modestly ahead of 2024. 6 weeks later, we're now into booking for Q1. There's been no real change to that pattern. And it's a little difficult. It's been a little difficult this year because between Liberation Day, the K-shaped economy, macro issues, geopolitical issues, the one thread for us that's been super consistent has been the performance of our consumer.

So as we sit here entering the 12 month of the year, 6 weeks after our earnings call, I'd say virtually all of the messaging we delivered on that day, I would cut and paste it and put it to the beginning of December. We've got 30 days to go. So the -- you got to play to the last whistle, but we're very pleased with how we've continued to execute the business, how our consumer has held up very nicely and looking forward to stepping into 2026, definitely on our front foot. So I'm sorry, could we just touch on the portfolio question?

I'm going to pile on Mike's word around -- on the word consistency. So early in the year, full year, we guided 20% full year loan loss provision. In the run-up to Liberation Day, we saw some elevated delinquencies changed the full year to 21%. Second quarter call, reaffirmed the 21% third quarter call reaffirmed the full year at 21%. And again, 6 weeks post earnings call, I think the message remains roughly the same. We continue to generally fall our historical default curve a little bit up here, a little bit down there. And we feel like we've got line of sight to finish the year at that 21% provision rate.

So a couple of follow-ups just on the provision and the portfolio, the financing receivables portfolio. Just remind us how that process works in terms of the default curve. Is it more about delinquencies ahead of the losses and you're trying to generally match what's going to happen in the future? So is it about what we're seeing in delinquencies right now? There's been, I think, a lot of concern that, at least in the auto space that subprime delinquencies are going up. You're not really going after that customer per your minimum FICO scores. But anything to read into in terms of what you're seeing in delinquencies?

So they're very connected to your point, delinquencies and the provision, obviously. And Travel and Leisure are not immune from the broader macro associated with delinquencies and losses. I think broadly speaking, when you zoom out on our consumer finance process, it's very, very much interconnected with our VO business. As we sit here today, I think, as I mentioned, we feel pretty good about the 21%. We haven't seen anything notable associated with the delinquency curve that would change the loss curve and the overall loan loss provision rate that we're forecasting.

This might be more of a dated question, but in the past, there was third-party default noise, things like that, that were coming up. Is that still out there as something that drives defaults? And in general, I think when a typical financials analysts, maybe not a traditional gaming lodging leisure analyst, but financials analysts might look at, hey, 21% is a pretty big number for a FICO score that's over 700. So maybe talk to us a little bit about that dynamic. Why is the provision where it is? And what are some of the other drivers that are at play?

Well, let's take your first question. If you're in any of the metro markets and you turn on the radio, there's always advertisements of get out of your timeshare. That megaphone is still out there. But let me share some things, and it's created a perception that I think is easily dispelled with just simple facts. And here's a few simple facts as it relates to our company. 7 out of 8 of our consumers have fully paid off their loan, 7 out of 8. Of that group, the retention rate on an annual basis from 1 year to the next is roughly 98%. That's -- those are people who are vacationing for the price of their maintenance fees.

And that's a very high retention rate because there's natural life circumstances that would cause people to leave. In the 1/8 of people who actually have a loan with us, you heard what Erik said around our portfolio. We're a direct marketing business. We're not a passive marketing business. which is 2 sides of the same coin. The first is that if we can really drive demand. And coming out of the GFC, coming out of COVID, we made -- people that were on vacation in those times were people we could market to. And it's a different dynamic than it is in many passive marketing businesses. And I think it really lowers our risk profile from what people think around our business. That's the huge positive.

In a direct marketing business and sales, you do have elevation of delinquencies and defaults. And although it is that 20 -- roughly 20% historically that we've been at, the reality of the entire space, it's similar. It's sort of the nature of the business. We know that once people get in, the 7 out of 8, they use it, they love it and they buy more to that 2.6x. There is that window where between not having used it very much at taking on a loan that there is a slightly higher fallout rate. But that's the nature of the business. And with the nature of that business, we're driving mid-20s margins. We're driving 50% cash flow to EBITDA. We're you can quote the EPS stats, and we're returning a pretty dramatic amount to our shareholders. So it's a component of our business that...

But with that all said, it sounds like historically, I think that, that 21% would still be elevated versus history. So if we end up with a more normal environment, the general expectation is that, that should come down.

That's structural that's changed, right?

That's right. So during the third quarter call, we talked about the fourth quarter being lower than the third quarter and '26 being lower than 2025. So we do believe that we're on a downward trajectory and that over the medium term, we'll settle back into the high teens. Maybe the one other component that I might mention, Stephen, associated with defaults is we have the ability to recycle that inventory back onto our balance sheet, resell it at today's prices. And I think that, that ultimately manifests itself as a very low cost of sales to the organization as well.

Right. The cost of that is effectively the maintenance cost, right? The effective until you resell it.

And these are properties that had already been -- they were already in a maintenance cycle. These are -- so we're taking back inventory that's in good shape that we can resell at today's prices, low cost of sales. And I think if you look at cost of sales and provision in conjunction together, you'll see that all 3 of those operate in a pretty narrow band.

And there's been lots of chatter about the trajectory of rates as well. If I look at your stock versus rates, there's a window of time where it seemed like it was very, very correlated -- inversely correlated to the direct trajectory of rates. So where are we in terms of should we be rooting for lower rates? Are you at a point where rates at this point are neutral to both the financing business and the corporate borrowing? Or is there opportunity there?

I think there's 2 elements to rates. So first, on the ABS side, we've got -- we've generally got flat rates that we sell our product at. So as rates continue, as we move into a declining rate environment, we have the ability to transact ABS deals at favorable rates. In 2025, we've seen sequential decreases in our ABS pricing through the year. So we're widening the spread on the portfolio.

And there were several years where it was a headwind to T&L as rates were increasing. And as we head into a declining rate environment, we would expect to see some favorability in the P&L through the spread. And then the second thing on interest rates is roughly 30% of our corporate debt is variable based as well. So we've got the top side of the P&L associated with widening spreads and then below the line favorability associated with favorable rates against our corporate debt.

Maybe if we work down the P&L, the other thing to think through is margins. So you referenced kind of healthy margin structure, but what are some of the puts and takes that we should be thinking about in the year ahead, but also as we look longer term that will impact the margins. And I realize most of this is maybe focused on the VOI business, but you could tie in the travel and membership side as well.

Well, I think you're appropriate to focus on the VOI business because when you look at our brand strategy, there's not a lot to see in our core Wyndham brand, which is the vast majority of our sales and will continue to be with growth over the next few years. So our ability to look forward between takeback of the inventory, what we have existing on our balance sheet, there's not a lot of need to go build a lot of new projects. Sales and marketing is highly consistent and then you have provisions. So the predictability and our ability to manage our VO business as long as the top line continues to deliver is, I'd say, highly predictable.

As we layer in growth, Sports Illustrated, Eddie Bauer, these are new projects. We're not taking back low-cost inventory. There is a higher COGS, cost of goods sold, product cost for those new brands, but I view that as investment in the business and not material to the overall margin as we go forward. It will be a slight margin drag, but the emphasis is on slight, not drag just because if you're doing $2.5 billion of VOI sales on an annual basis and you add in $100 million of sales, that margin differential is not going to be significant enough to change the overall narrative of our business.

I think the one other component to consider -- 2 components to consider for next year. Erik was talking about interest rates. For the last 3 years, we've been talking about a headwind of compressed interest rate to our ABS markets. That's now expanding and will unfold over time. It's turning an interest rate headwind into an interest rate tailwind going forward. That's important to look at some in '26, but even more so in '27. Number two, and we talked about it on our last call is -- and I think Erik said it really well, is we're looking at sharpening the pencil on what we do internally. And we've consistently announced new projects but next year, we've identified -- there are some projects that have been with us for 40 years and are in less demanded location, and we're just carrying those costs on our balance sheet on behalf of our owners and ourselves.

And we're getting to this sort of special assessment point, and we view it better to extract them from the system. We're doing a little bit of a catch-up next year. But that will ultimately, as we get into early next year, there will be some dynamics about some KPIs, but the bottom line to all that is we'll end up with a better system, better locations for our consumers to go to, avoid what would be special assessments and neutral to better to our bottom line.

So maybe we can dig in there real quick. So that's effectively on the HOA/club management side, right? So you're effectively saying, normally, you collect a percentage above whatever your HOA fee effectively is for managing the club.

Cost plus.

Cost plus. So one, remind us how big that business is, but also you were describing it as you were maybe carrying some of those costs. So is that underearning in some capacity?

Yes. But there are a few pieces of the puzzle you have to put on the table. So let me just put the pieces on there. And then we'll talk about them as time goes on because we're in the process right now. There is the carry cost of that inventory. We're the biggest owner of our own timeshare.

So if you have an older club that people don't want to book into, you're carrying the cost there?

Or it's unsold but contributed to the club. So that is the biggest carry of this piece of the equation of constantly hygiene resorts. That will take our inventory on hand maybe from 4 to 3 years, rough. We don't know yet, but we'll fine-tune that. Piece of the puzzle number one is carry cost of the inventory, big expense. When those units come out, a few things also come out if you have any sales locations, which the ones we're looking at, we could be 2 or 3 sales locations. That will impact sales to a degree.

Number three is you lose some management fees because of those inventory -- that inventory comes out. And then rental income, which is a very small piece. But those are the 4 pieces. But come back to my original answer that was the summary, which is this will all modestly change our KPIs, and we'll communicate that upfront. But the net effect is going to be -- should be neutral to positive to the company and definitely positive for the consumer.

And I mean, it sounds kind of like what you did with -- this may be a bad analogy, but the FICO scores, you're raising the FICO, the minimum there. And ultimately, this is improving the overall health of the portfolio.

It's a great analogy. And we kept doing press releases. We're in Austin, we're in Atlanta. We just announced Chicago in Nashville and Tuscaloosa. We constantly do press releases on that, but it is normal course of business in the hospitality industry that flags come in and out, and you should constantly be evaluating which flags meet what is best for your consumers. And they are run by HOAs. It's ultimately the HOA's decision as to whether -- what's the right path for these resorts. And we've been in very transparent conversations with the HOAs. And once they've come to understand it, they're sort of excited about it, and they can choose to exit their ownership or they transfer it to a different club. So something we probably should have done a few years ago, but better late than never.

Yes. I've got other questions there, but I want to make sure that we touch on capital allocation since that's a big part of the story. So remind us capital allocation priorities and any changes that you'd expect as maybe you're both evaluating some of these new brands coming in, but I think you also referenced potentially opportunities within conversion properties versus new builds. Anything to call out there?

Sure. So capital allocation, first and foremost, we want to make sure that we continue to invest in the business, right? Through CapEx, through development, we want to make sure that we're carrying for the business, and we're positioning the business for growth. Beyond that, we're committed to our dividend. We've increased our dividend double digits over the last several years and expect that to continue to grow with earnings. Beyond that, absent something with a more favorable return, we will continue to buy back shares. We'll continue to evaluate M&A.

Through the first 3 quarters of 2025, we've repurchased $210 million worth of shares very programmatically this year. Our dividend yield is between 3% and 4%. Our buyback yield is roughly 6%. So total shareholder yield right now, roughly double digits. Free cash flow yield at current market cap, 11% to 12%. So I would expect us to continue to lean in on buybacks. We're very committed to the dividend, and we'll continue to run everything through a return on incremental invested capital lens.

That's great. On the CapEx side and investing in the business, do you generally expect that -- like where is that going? Is that going predominantly into technology to serve the guests? Would you think that the technology aspect in times is going up?

Our total internal spend -- capital spend is modestly up, but the share of the pie toward technology is way up. As it relates to inventory, our inventory spend will be up as well, but that's just to support locations like Chicago and Nashville that are supporting the new brand incrementality.

Great. Well, we're right out of time. So please join me in thanking Travel and Leisure with Michael and Erik, thank you both for joining us.

Thanks a lot.

Greetings, and welcome to the Travel + Leisure Q3 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Erik Hoag, Chief Financial Officer. Please go ahead, Erik.

Thank you, Kevin. Good morning to everyone.

Before we begin, we would 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 in our press release accompanying this earnings call. 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.

This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our third quarter results and our longer-term growth strategy. And then I will provide greater detail on the quarter, our balance sheet and outlook for the rest of the year. Following our prepared remarks, we'll open up the call for questions.

Finally, all comparisons today are to the same period of the prior year, unless specifically stated.

With that, I'm pleased to turn the call over to Michael Brown.

Good morning, and thanks for joining us. Travel + Leisure delivered another exceptional quarter that reflects the strength of our model and the consistency of our execution. During today's call, Erik will focus on the specifics around our quarterly metrics, and I will dedicate more time to our strategic priorities and progress against them.

Our strategy is focused on delivering outstanding vacation experiences for our owners and members while building lasting value for our shareholders. We're executing this strategy by broadening our brand reach, expanding our data-driven marketing, investing in digital innovation and enabling our associates to deliver excellence every day. Leisure demand remains robust and vacations continue to be a priority.

In the quarter, we generated over $1 billion in revenue, $266 million in adjusted EBITDA and $1.80 in adjusted earnings per share, all up meaningfully year-over-year. Our strong free cash flow generation allowed us to return $106 million to shareholders during the quarter. These results were fueled by the strength of our Vacation Ownership business with sustained momentum in volume per guest, or VPG. We ended the quarter at $3,304, above the high end of our guidance range. This marks our 18th consecutive quarter with VPG's over $3,000 since we changed our credit quality standards in 2020.

Tour flow remained healthy this quarter at 200,000 tours, a clear sign that our consumers' appetite for travel remains strong. By focusing on high-quality tours and owner engagement, we are driving stronger close rates and higher long-term value. These results reflect the core of our business, a resilient customer base built around leisure travel and a compelling value proposition.

Beyond this quarter's results, we continue to advance 3 strategic priorities to drive sustainable growth. First, expanding our brand portfolio. In September, we announced our newest Sports Illustrated resort in Chicago, just one block off Michigan Avenue. The property will be transformed into approximately 250 units by late 2026, while remaining open during construction. We also recently launched the Eddie Bauer Adventure Club in partnership with Authentic Brands Group. Sales are now underway, and the first resort in Moab, Utah is set to welcome owners in early 2026.

This progress builds on a year of expansion, where we've grown our portfolio with Sports Illustrated Resorts, Accor Vacation Club and Margaritaville Vacation Club locations. Each brand targets a distinct traveler profile, expanding our reach and diversifying revenue streams. Sports Illustrated Resorts delivers immersive sports-themed experiences. Accor Vacation Club expands our reach into a growing international market. Margaritaville Vacation Club offers a late back lifestyle built around fun and relaxation, and Eddie Bauer Adventure Club introduces an outdoor-focused brand. Together, these brands expand our addressable market, deepen engagement with younger and more diverse travelers, and generate incremental VOI sales from customers seeking fresh and distinctive vacation experiences.

Second, we are focused on elevating the owner and guest experience. We are investing in digital and AI tools that make vacation planning seamless, while redesigning our on-property experience to be more immersive and personalized. This goes beyond satisfaction scores. Our goal is to drive deeper engagement, repeat usage and ultimately greater lifetime value.

In 2025, our owner engagement scores have increased over 120 basis points versus the prior year. We have also reached 215,000 downloads on our Club Wyndham app, with 28% of bookings coming through the app, a clear sign that our digital investments are enhancing engagement. We are pleased to announce that our WorldMark app officially launched in the App Store as well.

Lastly, on the third strategic priority, driving operational discipline and scale. We continue to focus on efficiency and sustainable growth. By leveraging our scale, we are driving healthy margins even against a more dynamic macroeconomic backdrop. This approach has allowed us to expand our adjusted EBITDA margin year-over-year from 24% to 25%, positioning us to balance strong near-term performance and long-term value creation.

Looking ahead to the final quarter of 2025, we've seen no significant change in our customer behavior related to VPG, portfolio performance and booking pace. Booking pace is consistent to the prior year, which gives us confidence that our consumers are prioritizing travel.

We are also encouraged by the growing interest from younger generations, with almost 70% of new buyers coming from Gen X, millennial and Gen Z households. We are building a platform that combines a recurring revenue model with strong cash generation, enabling the enterprise to invest in new opportunities.

Looking ahead, we see opportunities to expand our owner base, deepen engagement and leverage our scale in ways that enhance revenue and profitability. At the same time, we remain disciplined in how we invest and allocate capital, ensuring that each decision supports shareholder value creation through sustainable growth and our consistent dividend and share repurchase program.

Since [ spin ], we have returned $2.8 billion to shareholders. During that time, we have consistently paid a dividend and reduced our share count by 35%, giving our shareholders a bigger stake in a growing business.

With that, I will hand it over to Erik to walk through our financial performance, capital allocation and how we are positioning the business for the remainder of the year. Erik?

Thanks, Michael, and good morning, everyone. The third quarter was another strong period of outstanding execution for Travel + Leisure. We delivered solid top line revenue growth, expanded margins and generated strong cash flow and earnings. We also continued to return capital to shareholders and strengthen our balance sheet. These results demonstrate the resiliency of our business model and the consistent cash generation that sets Travel + Leisure apart. We're a capital-efficient compounder, converting steady growth into expanding cash flow, higher per share results and long-term shareholder value. The quarter has reinforced our confidence and highlighted momentum across our business, and we'll keep the pedal down as we close out the year and head into 2026.

I'll begin by reviewing our consolidated financial results, followed by segment performance. Lastly, I'll address our cash flow, balance sheet and provide an outlook.

Total company revenue in the third quarter was $1.44 billion, up 5% compared to the prior year. Adjusted EBITDA was $266 million, up 10% year-over-year and above the high end of our guidance range. Adjusted EBITDA margin expanded 100 basis points to 25%, reflecting both operating leverage and efficiency gains. We exceeded our $255 million guidance midpoint by $11 million, driven by higher gross VOI sales and effective cost management, resulting in improved profitability in the quarter.

This quarter again demonstrated the power of our compounding model, where 5% revenue growth translated into 10% adjusted EBITDA growth, 8% adjusted net income growth and 15% adjusted earnings per share growth, reflecting both earnings expansion and the accretive impact of share repurchases. A higher effective tax rate modestly tempered flow-through from adjusted EBITDA to adjusted net income, but 14% adjusted pretax profit growth underscores the strength of our model.

Turning to the Vacation Ownership segment, our core growth engine. Revenue grew 6% to $876 million, while adjusted EBITDA increased 14% to $231 million, demonstrating both strong demand and inventory efficiency. This growth fuels our free cash flow engine, which in turn funds reinvestment and consistent shareholder returns. Gross VOI sales accelerated to $682 million, supported by 2% tour flow growth and VPG of $3,304, up 10%. This reflects strong execution from our sales and marketing team.

Vacation Ownership adjusted EBITDA margin expanded 200 basis points year-over-year, reflecting measured cost management and efficient inventory deployment. Our disciplined capital-light development strategy and low-cost recovery programs that help us recycle inventory efficiently allows us to support growth while preserving returns on invested capital.

Our consumer finance portfolio remained stable and consistent with expectations. Delinquencies and defaults are showing no signs of deterioration. The full year loan loss provision is expected to finish at 21%, unchanged from our prior guidance. Weighted average FICO scores for new originations stayed above 740, demonstrating the continued strength of our underwriting standards.

Now turning to our Travel and Membership segment. Segment revenue was $169 million, up 1% year-over-year, while adjusted EBITDA was $58 million, down 6%. Through this platform, we booked 422,000 transactions, putting over 1 million customers on vacation, a clear reminder of the scale and relevance of this business. We remain focused on optimizing profitability and cash generation, while managing the ongoing mix shift between travel clubs and exchange. The Travel and Membership segment represents about 20% of our consolidated revenue and continues to be an important source of cash flow that supports both reinvestment and shareholder returns.

Across the company, adjusted free cash flow continues to be the clearest proof of our model strength and discipline as capital allocators. Through the third quarter, adjusted free cash flow grew 23% year-over-year, and we now expect to generate approximately $500 million for the full year, converting about half of our adjusted EBITDA into cash. This is a powerful engine when considering our track record of consistently paying a dividend and reducing shares outstanding.

During the quarter, we returned $106 million to our shareholders, including $36 million in dividends and $70 million in share repurchases. Through the third quarter, we've repurchased $210 million of stock, representing 6% of our beginning share count, underscoring our commitment to disciplined capital allocation. Our dividend remains healthy, providing a compelling and reliable return. Combined with repurchases, this has driven meaningful total shareholder return year-to-date. We ended the quarter with net leverage of 3.3x, down from 3.4x a year ago, and we now expect leverage to be below 3.3x by year-end.

Our liquidity position remains strong, nearing $1.1 billion, including $240 million in cash and $815 million available on our revolver. During the quarter, we issued $500 million in new bonds priced at 6.125%. This pricing was slightly favorable to the maturing bond that we refinanced. And last week, we completed our third and final ABS transaction of the year, raising $300 million at a 98% advance rate and a 4.78% coupon, our most efficient ABS execution this year.

As CFO, my focus remains clearly and fully aligned with our long-term strategy, driving sustainable growth, disciplined capital allocation and a resilient balance sheet. First, we invest in growth, including new brands, our sales infrastructure and digital platforms to enhance customer experiences and engagement. Second, we returned capital to shareholders through a compelling dividend and a consistent share repurchase program. And third, we maintain balance sheet strength and flexibility, positioning us well to both invest in growth and navigate a wide range of economic environments with confidence.

Turning to our outlook for the year. For the full year, we're raising the midpoint of our adjusted EBITDA guidance to $975 million, with a new range of $965 million to $985 million, reflecting our strong third quarter performance. With the momentum in our Vacation Ownership business, we're also increasing our gross VOI sales midpoint with a new range of $2.45 billion to $2.50 billion, and raising our full year VPG to between $3,250 to $3,275.

While third quarter results were ahead of expectations, our outlook for the remainder of the year reflects a disciplined approach to forecasting and the seasonality we typically see in the fourth quarter.

To sum up, the third quarter was a strong one for Travel + Leisure. As we close out the year, we'll keep the pedal down, focused on disciplined capital allocation, maximizing free cash flow per share and positioning the company for sustained compounding growth. The fundamentals of our business are solid, and our teams are executing with discipline as we prepare for the opportunities ahead in 2026.

I also want to thank our associates across Travel + Leisure for their continued focus and execution. They are the driving force behind our results, and their dedication gives us confidence as we close out the year and position the company for continued success in 2026.

Kevin, we can now open the line for questions.

[Operator Instructions] Our first question today is coming from Chris Woronka from Deutsche Bank.

Congratulations on a nice quarter. So I was hoping to start off, Michael, maybe a bit of perspective from you, your VOI business continues to perform very well. Certainly, this quarter was way ahead of our expectations. What do you think is driving that, given the fact that we hear about some consumer weakness in certain pockets. And maybe it's just a demographic situation. If you guide -- if you can maybe remind us of your income levels and things like that. And what you've changed in the business to try to not only get the higher income customer but also pivots you make, if needed, to address situations where you maybe see pockets of hesitation on buyers.

Well, Chris, yes, I would agree with you, it was a very strong quarter from top to bottom. I think -- I would say there's 2 elements that are really driving continued strong performance on VOI as it relates to the strength of the consumer beyond the fact that we just see leisure travel as remaining consistent.

We've dedicated, over the last few years, a lot of energy, that includes operating capital, that includes digital work and the platform to make getting on vacation and enjoying the resorts people want to enjoy easier to do and with less friction, and that's why we refer to the app implementation. That's why we talk about the new partnerships we're developing and our consumers enjoying experiences, not just in the resort, but the ability to attach other experiences while they're on vacation. All of that's driving our satisfaction scores.

And as we said back pre-COVID, I remember one of our -- in one of our calls, we said, when people get on vacation, they enjoy it, they love their vacations and enjoy the product and end up buying more. We are really seeing that compounding effect of all the investments we've put in over the year and the direction we're heading play into our consumer and their performance, especially amongst our owner base.

Secondly is, you're correct, we've, over the last 5 years, dedicated to fine-tuning our credit requirements and upgrading our overall consumer profile. Our FICO scores are over 740 in the last quarter. They have increased dramatically over the last 5 years. Our household income, which used to hover right around $100,000, maybe slightly below, have increased to around $115,000 household income.

Ultimately, we're trying to make our model as efficient as possible from top to bottom. And part of that effort was really fine-tuning our demographics, which we think we've successfully done. Now the last leg of that is to expand our product offering so that we capture more addressable market, and that's the work that we'll be doing over the next 2 years, and we've already started with our brand expansion.

Okay. Very [indiscernible] perspective. Just as a follow-up, you guys, last quarter, I think, announced this other Sports Illustrated development in Chicago. And I know that that's an existing hotel property. Can you maybe talk a little bit about whether we see a lot of additional opportunities there, specifically on that. I know you're going to continue on Margaritaville and now a [indiscernible] Sports Illustrated, specifically. Do you see a lot of these kind of urban hotels, maybe it's a brand issue or something else where you guys can come in and convert to timeshare. If you could maybe just give us a little bit of a sense as to kind of economics. I think you're going with the asset-light model upfront of those. But a little color on that would be [indiscernible].

Absolutely, and we're very excited about Sports Illustrated. I know there would be some competitive commentary amongst other urban locations, but we know that Chicago is a great sports town, one of the best in the U.S. And there are many others that definitely have our eye.

And given where the real estate market is, we mentioned in the last call, I think, the last 2 calls, that at this point in time in the cycle, conversions are a better opportunity for us and for many people than greenfield development. We've now got 3 resorts announced for Sports Illustrated. We will start sales by the end of this year, as we previously committed to, and no change to that. But at this stage, we'll go where the market leads us, and it's to great urban locations. And in the last 2 examples, conversions.

I will, though, come back to our original outlook on Sports Illustrated is we see lots of opportunities in college towns. We continue to pursue those options. And just because our last 2 are in urban destinations, don't think that, that's a shift in strategy. We will be announcing, over the upcoming quarters, more college locations because we think that's a tremendous market as well.

Next question is coming from Ben Chaiken from Mizuho.

I guess one thing that stuck out is traction in the Travel Club transactions up 30%. I guess, what did you change there, if anything? And then I'm asking this question in the context of '24 transactions being down 1. So is it a comp dynamic in 3Q? It seems more than that. Or is it a sequential acceleration in the top line?

Ben, yes, it's compounding momentum and work over the last 3 years. We spend a lot of time speaking about Travel and Membership and that we've refined strategies there. And one of the efforts that our team did in 2024 was get back to the profit producing clubs, the ones that we felt that we could accelerate due to the loyalty and transaction propensity within those clubs. We made that change in '24. We've spent a lot of effort on marketing and getting the commitment from those clubs.

What you're seeing in Q3 of this year, as you mentioned, 30% acceleration in transactions on a year-to-year basis. The revenue per transaction has come down, but I think most would agree that's a normal component of the cycle of growth is, your first objective is to drive transactions, plus 30%. Our revenue per transaction went down 12%, and ultimately, revenue is starting to accelerate very nicely.

So it's just really the outcome of multiyear work of getting -- finding out in this new business for us, what works and what doesn't. And credit to the team for finally finding those books. The next leg of this effort will be about getting the margins up. But for now, we're super pleased with the transaction growth we saw in the Travel Club business.

Got it. That's helpful. And then on SI, you have Chicago, which you referenced on the call. You've got Alabama, Nashville. I believe both Nashville and Chicago are conversions, if I'm not mistaken. I guess, could you remind us what is going to open first between those 2? And then do I have the mechanics correct? As soon as one of those are converted, that puts inventory in the [ trust ] and you're able to sell access to the entire portfolio. Am I thinking about that correctly?

You are. So I'll start with the second part of that question first is it is one of the big benefits of conversions is once it's registered, and we can put a conversion into the club. Sports Illustrated in Nashville will open late first quarter, early second of next year. It will go through a conversion. And then we will keep Chicago open during the transition, but it will open as a rebranded property at the -- toward the end of 2026. So both will be 2026 branded. And occupancy sales will begin in Nashville at the end of this year, and then sales will begin in Chicago at the beginning of next year.

And so people could buy as soon as the Nashville inventory is in there, then you could [indiscernible] buy Alabama, if you were -- happen to be [indiscernible].

You'll be a member of the -- you'll be a member of the Sports Illustrated Club at that point, which will ensure eventual access to Alabama. We will not be selling football week in Alabama yet because we're not registered there. And so you can become a member of the club, but Alabama's specific reservations and priorities will be at the time that it's registered and available for sale.

Do you think about these as -- without getting maybe too specific, but it just because I think there's a lot of variability. But historically, when we thought about new dots on the map, whether that's -- what's called a resort with a sales center. What -- relative to a traditional timeshare opening, like where do you think this lands? Is this you have higher expectations, lower expectations because of seasonality? Just like what's the thought process there? If you could maybe generalize it.

I have a different perception on seasonality than some of the questions we received. I think sports towns, especially, have changed from weakened base to a far less seasonal market. And I remember when people used to say Myrtle Beach was a 4-month market, and now it's -- now it's an 11-month market, if not a 12-month market.

I think sports towns, the alumni traveling back to universities are very similar to year-round destinations. And I do expect to see it. I think it will actually be less seasonal than ski locations where you get these peak Presidents Week and Christmas, New Year's. You're going to get more of those peak weeks at universities, and you have all kinds of reasons to return to a college town or a place like Chicago between the Cubs, the White Sox, Black Hawk, Bears, lots of reasons to -- the WNBA team now that's there, lots of reasons to return to Chicago year-round.

So I think they're going to be less seasonal. I think they're going to be highly attractive. And one of the components we really like about the launch of both Sports Illustrated and Eddie Bauer, and what we've seen in the core is it's going to start in '26 to '27, adding new owners into our equation at a much higher rate than our existing core brands do on a percentage basis, not on an absolute basis.

Our next question is coming from Patrick Scholes from Truist Securities.

Great. Taking a look at the statistics on your most recent securitization, it looks like the weighted coupon was the lowest in several years. In that regard, I recall 2 or 3 years ago, you were talking about a 2 to 3 -- around a 3% initial EBITDA headwind to growth when you would start the year. How do you think, given the lowering the last couple of years of that coupon and especially the most recent one for next year, would you have a headwind to start the year, a tailwind? Or would it be sort of neutral to flat?

Patrick, thanks for the question. Last week's ABS transaction priced out at 4.78%, and that's really on the heels of our July transaction that came in at [ 5 12 ] so rates have continued to head downward. We are starting to see the weighted average cost of funds on the loan portfolio begin to turn. So year-over-year, our weighted average cost of funds in the third quarter was down about 15 basis points. So it's modest, but we are starting to see a benefit, and it's going to set up a multiyear tailwind as spreads continue to move our way.

Okay. And then my next question, I believe you continue to target increasing new owner sales. With new owners, you do, historically, to start off with, get a lower margin on that sale. How would you expect that shift for next year, assuming you do continue that increasing new owners. How would you expect that to impact your 2026 margins and expectations for loan loss provision?

Well, let me first agree with you, Patrick, on the margin question is that as you seek to drive new owners, those come with a lower margin, and therefore, against your owner sales do provide a little bit of margin pressure.

Let's just zoom out to our overall strategic outlook for new owner sales. We want to keep those in the 30s. They're going to fluctuate from the high 30s as a percent of sales to the low 30s in any given quarter. But as long as they stay in that range, we feel comfortable that we've shown over the past several years, and we'll continue to execute against a margin range that looks like it did -- like it has looked at this entire 2025 into the 20s and drifting up towards 25% this last quarter.

So I think you're right in the assumption. You're right in the reality on how it plays out. But I think we've a, proven; and b, we'll remain disciplined to keep margins in that sort of 22% to 25% range as we drive new owner growth. New owners are the lifeblood of the future of our business. And we think with these new brands that will -- we are leaning into that very clearly, while staying within our capital allocation on an operating and inventory basis. And we -- so we think we can balance margins, new owner growth and capital allocation effectively, and we've considered that in our -- both this year guidance and as we start to think about 2026.

[Operator Instructions] Our next question is coming from Brandt Montour from Barclays.

So just the first one. I don't remember -- or I don't know if you said this or I missed it. But could you just dig into new -- specifically new owner close rates or -- and/or sort of new owner demand trends in the quarter?

No, we haven't spent any time on it so far, so happy to jump into that. New owners in the quarter were 31% of sales. We saw overall VPG on a year-on-year basis increase, which is a great sign. It shows that the momentum is there for new owner business.

I think you'll recall that over the last year, we've talked quite a bit about calling our marketing programs to create more efficient new owner marketing. We begin to lap that in Q4 of this year. So what you've seen throughout this year is increase in tour flow quarter-on-quarter from negative in Q1 to 2 consecutive quarters of increases around 2% to 3%. You're going to see that accelerate in Q4, and that is that's a very positive momentum. So bottom line, new owner, VPG is up, slightly below what our long-term target is for Q3, but that's just the result of a number of factors of how we change new owners and owner mix over the past year. But really excited about what Q4 tour growth is going to be. And ultimately, the partnerships that we've announced throughout this year, which should go back and I won't list them all here, but we've continued to find new partnerships that support that new owner story as we get into 2026. But yes, Q3 was sort of flattish to last year, but we'd expect acceleration as we get into Q4 with VPGs raising year-on-year.

Okay. That's super helpful. And then just a quick follow-up on the guidance for the fourth quarter. You guys had a really healthy beat in the third quarter. You didn't -- you only flowed through about half of that to the full year. I think the prepared commentary was discipline around approaching -- or disciplined approach to the forecasting. I guess that's what you kind of meant by that. So in the fourth -- is there anything that you want to highlight in terms of why the fourth quarter implied guide would be slightly below prior? Or is it just sort of conservatism?

Brandt, thanks for the question. So to your point, we did beat the midpoint of Q3 EBITDA by 11. We raised the full year low end by 10. So if you -- so the implied fourth quarter metrics are 8% growth in gross VOI sales, VPGs that are approaching $3,300, and EBITDA growth of roughly 2%.

So let me just double-click on the 2% EBITDA growth for a second, which I think is the heart of your question first. First, we've got a strong year-over-year comp from the fourth quarter '24, where VPGs were also near $3,300. Secondly, we're making incremental investments in new brands, which does include some level of uncertainty. And then the third point, our fourth quarter reflects the normal cadence of variable comp true-ups as we close out a really strong year for TNL. So we're comfortable with where the guidance sits. We think it's measured, we think it's achievable and we think it reflects the environment that we're operating in.

Next question today is coming from Ian Zaffino from Oppenheimer.

Just wanted to go back to VO for a second and maybe walk through kind of where you saw some strength maybe on a regional basis, was there any areas that were a little bit softer? Or do you think you've kind of seen just broad-based demand kind of across the system and across your sales centers?

Ian, yes, the strength is less about a region and more about a segment. Our owner performance in Q3 was outstanding. Our VPGs were near all-time highs. The performance across all of our regions and all of our teams was just exceptional. And I want to congratulate our teams on what is really a standout quarter. But as good as our new owner VPGs were, especially compared to prior year, being up, the performance around the owner side of the equation was truly stand out. And I don't think we ambled into that performance, meaning it just happened.

Now there is work throughout the Travel + Leisure portfolio from our systems, our ability for owners to book to -- our events team, which are now trying, as I mentioned earlier, in resort experience to in-market experience, and I could lay out a number of different areas where that continues to be a very strong performer for our owner base, and it's what owners want. They want experience as we hear it in the headlines every single day. And instead of reading it and not leaning into it, we've leaned into these past few years upticking our technology and upticking our experience.

I'll give you a perfect example. As an owner myself, I used to book by calling in and making my reservation. Two months ago, I booked my spring 2026 ski vacation. And from point of opening my app to booking was under 5 minutes. And in my case, there was no human interaction. I found my availability. I chose my dates and I booked and received a confirmation in under 5 minutes, which for those who know me is record time. So if you can multiply that by 500,000-plus Club Wyndham owners and then hearing our WorldMark launch of the app, which was just last week and the downloads are already into the thousands, shows that owners are appreciating what we're doing from a technology, and more importantly, using it.

Okay. And then as a follow-up, I kind of want to just delve into travel membership a little bit. Kind of given -- I guess the different paths to 2 pieces are following, call it, where do we think the mix in this business will ultimately be, maybe on a revenue and also profitability, just given the margin disparity.

And then maybe can you just remind us maybe what the strategic value of the exchange business is at this point, just given that sort of the VO business is doing very well, and I don't know if it's just being hidden a little bit by some of the underperformance of that, the travel membership business, maybe specifically the exchange business. So a little color there would be helpful, maybe kind of strategic kind of thoughts.

Sure. And let's start with our performance in Q3 was a sequential improvement on the year-on-year performance compared to the first half of the year. So that team continues to innovate and think of new ways to grow the business or maintain the business. And I want to give a lot of credit to them for the way they worked these first 9 months of the year.

Make no mistake, when we started down this path in '18, '19, this was a purely exchange business, and we saw the structural decline in the exchange business due to what's happening in the industry. The industry is growing, but the consolidation of the industry means that the demand for exchange transactions is pressured.

Instead of waiting around for that just to endure the pressure, our team went out, developed a travel club business, took some hits early in '21, '22 when expectations weren't what we thought they would be. And it showed resiliency to begin growing that business, again, as we heard through the 30% transaction growth.

So the way that all is [indiscernible] to the answer to your question, Ian, is that the vast majority of the EBITDA in this space, over 80%, is due to the exchange business. So that structural decline can't be at this stage, fully offset by the performance of the Travel Club side. But it definitely mitigates the challenges there. With that said, our transactions were -- on exchange were modestly down in Q3. EBITDA was modestly down on the exchange side, while the Travel Club business performed well and showing that it can grow on that side of the equation.

Strategic value is very clear. We're over $200 million of EBITDA in that segment, closer to $250 million. The margins are still extremely healthy into the [ 30 ], provides great free cash flow that, as Erik walked you through, can be deployed in very shareholder-accretive manners. And at this stage due to the nature of the business, it doesn't require a lot of capital investment, although we are putting money into the booking platform there as well. So I think it has a lot of integration, value, provides us scale, over 3 million of members with good economic value that we're utilizing to return value to shareholders in many different aspects.

Our next question is coming from David Katz from Jefferies.

When -- if we can maybe zoom out and take a little longer-term view here. When we look at the VOI business and the new brands that you're adding, not looking for a guide here, but how do you think about the earnings power of those incremental brands that you're adding to the portfolio? And assuming that the existing core brand is still able to grow, is that a fair assumption? And how do we think about what the earnings power of these could ultimately prove to be 5 years out or so?

Well, David, your question really gets to the heart of our strategic outlook for the next 3 to 5 years. Let me first say, we absolutely believe our core brands, Club Wyndham, WorldMark, Shell and Margaritaville will continue to grow. We're committed to them. And as you saw in Q3 and in 2025, they continue to grow, and we expect them to grow over the next few years.

But the strategic approach that we have is not to collect brands for the sake of collecting brands. We're in a direct marketing industry. We're in a direct marketing business. And therefore, addressable market is super critical to our success. Through our partnership with Authentic Brands, we've been able to bring to market, Sports Illustrated. We've been able now to bring to market, Eddie Bauer, which is another one of Authentic's brands. We've reinvigorated Margaritaville and we've acquired Accor Vacation Club. All of those are as much about affinity, loyalty databases and increasing our addressable market as they are of filling out a brand portfolio or a brand bar.

In this business, you've heard over the years, our successful relationship on Blue Thread has allowed us to grow VPG at a much higher rate for new owners than your general open market, and we believe the same is replicable in each of these new brands.

Now as it relates to not providing guidance, but to give a general direction is we think each of these brands can be worth at least $200 million of top line revenue and more depending on the brand, depending on the database. We think each of those will ultimately be a -- for the first 5 years, a new owner, proportionately higher play. And then as time goes on, primarily an affinity and owner upgrade model similar to our current model. So long term, definitely smaller than where we are today with our Club Wyndham and WorldMark brand and more targeted to an affinity owner upgrade model. And I think our starting hope for each of those brands would be around $200 million of sales. But I think I used the same time last time. We'll get some points on the board with Sports Illustrated, get some learnings and then we'll probably come out with more clear long-term guidance later in 2026.

And just one follow-up detail, and I apologize if I missed it. Did you give us -- did you size the Blue Thread sales in the quarter or within the guide for the year? And do you have kind of an aspirational level that, that could be out over 5 years?

Yes. We didn't. You did not miss that. Blue Thread represents around 3% to 4% of our total company sales. It's an important part of our new owner business.

The story in Q3 is very similar than it has been over the last few quarters, which it's stabilized at around $100 million of annual sales. And that really comes as a result of -- I think we finished last year at $96 million, and we're generally on the same track for this year. What we're seeing in that front is that there's been a dramatic shift in voice to digital booking, which is a major source of our lead generation, which is [indiscernible] it. So we haven't give 3- to 5-year guidance. I used to talk about $200 million. I think that's far more challenged than it used to be due to the voice to digital shift. But we work very closely with our brethren up in New Jersey to find new avenues to reinvigorate the growth.

This isn't unique to us. I think -- well, I can't speak for anyone else, but this switch from voice to digital booking is something you've heard in the hotel industry across the board for years, and this is one application of it. I think on the positive side of that is despite that sort of shift as you saw in Q3, as you've seen throughout this year and as you see in our revised upward guidance on VOI sales, our teams continue to find ways to find new veins of growth, exploit them while still working hard on areas that we think there's still a lot more live to grow, which is back to your point, the Blue Thread.

Next question today is coming from Lizzie Dove from Goldman Sachs.

I just wanted to touch on the kind of loan loss provision side of things. You mentioned upfront, there's no signs of deterioration there despite some of the headlines we've seen in other industries in the quarter. You reiterated the 21%. I'm curious how you see the kind of longer-term opportunity there for those to kind of come down over time with some of the initiatives you've been doing?

Lizzie, so maybe just provide -- maybe I'll contextualize where we are from a loan loss provision perspective. We started the year with a full year provision rate at 20%. We saw some elevated delinquencies to start the year. We changed the full year to 21% with the first quarter call. The second quarter call, we continued to move in line with our historical default curve. The third quarter continued to move in the same direction as well. So -- and then as we stare at the fourth quarter, we're starting to see an inflection of year-over-year provision to start to trend downward. So the long way to get to your question is we would expect that our longer-term provision rate to settle back in, in the upper teens. And I think that, that's what you'll see here in the fourth quarter.

Got it. That's helpful. And then kind of a related question. I'm sorry if I missed this. But I'm curious on the booking window. I think earlier in the year, you'd mentioned it come down a little bit, maybe like starting off the year like 130 days down to 109 last quarter. Any kind of update you'd share there in terms of that booking window and how it's progressed.

Yes, 2 aspects of that. Booking window hasn't changed from that number we last shared. It's right in that range. A little closer than historical, but not meaningful enough for us to be concerned. Candidly, it's commentary we hear all across hospitality, that people are waiting just a little bit longer. The second aspect of that, which we did mention, but didn't dwell on it is that booking pace in Q4 looks very consistent to what we saw last year, which is -- we view as a very positive sign for the outlook into the end of the year.

Next question is coming from Stephen Grambling from Morgan Stanley.

Just one more follow-up on the provision. At this point, the provision compared to the gross financing receivables is kind of near peak-ish levels as you kind of referenced outside of maybe the GSE despite better FICO scores. And historically, it seems like we've seen step-ups if the macro arose. But given we're already elevated, how would you think about the sensitivity to the provision in different backdrops? Like could we already be provisioning above and so there might be less? Or -- any thoughts would be helpful.

Yes. I think we've got a pretty good sense of where we think the provision is going to be, Steve. I think when you look across the quarters of the year, historically, the second quarter and the third quarter are above the full year average, first quarter and the fourth quarter below.

To the question from Lizzie, we expect the fourth quarter provision to be the low watermark in 2025 as we exit heading towards 2026.

Great. And maybe one other follow-up. I realize that it's still early for 2026, but I imagine you're still probably in the process of trying to make some implementations or changes around pricing for the managed clubs. Any initial thoughts on where you think kind of year-over-year pricing or HOA fees could end up as we think about kind of flowing through that more perpetuity like [indiscernible]?

Great question, Stephen, because you often get questions on price, but we think value is more driven in this space through those annual fees. Keep in mind that 80% of our owners have fully paid off their ownership. So their cost of vacation is those maintenance fees.

I think the answer to your question is we want to stick right around the CPI level. Although we don't know what CPI will be, we don't expect any outsized changes for 2026. But I will -- I can -- I would say today that in 2026 and beyond, especially given the last 4 to 5 years of inflation, maintenance fees, HOA dues, however we want to term them, is a super important focus for us to make sure that we're providing as much value and leveraging our scale to give our owners as much value as possible. We've done a lot on technology and maintenance fees will -- is the other piece of that value that we're going to be super focused on going forward. So that what we want to return to our owners is surprises to the beneficial side as opposed to surprise to the more expensive side.

Next question is a follow-up from Patrick Scholes from Truist Securities.

Great. Just a quick follow-up question here. I've noticed some online message board discussion about closing a handful of your legacy resorts. If in fact that's true, it's not something you typically see. If in fact that is happening, I'm curious what the rationale for that may be. And what, if any, might be the financial impact to your company from [ EPS ]?

We'll, Patrick here about [indiscernible] probably 30 minutes or an hour ahead of us. You'll see it as part of our disclosures exactly this today as part of our disclosures in our Q. This is really, I would call it, resort portfolio maintenance, and I would describe what we're doing as a catch-up to what we probably should have been doing over the decade -- last decade of what all hospitality companies do, which is you look at your demand, high and low demand locations, same with satisfaction scores and add new inventory with better demand, better seasonality, newer construction into your system, and we've announced double-digit number of those resorts over the last few years. And on an annual basis, look at your portfolio and pull out the ones that no longer have that demand are primarily renters or low owner occupancy or low satisfaction scores.

And that's exactly what we're doing. It's a relatively small amount, I would say, it's maybe 10 or 12 this year, somewhere in that range. I cannot be specific because we haven't finished the process and therefore, the number isn't finalized, but it's a relatively small amount. It's a catch-up year. And I think the other big implication or awareness that is part of this decision making is we've been in business a very long time, decades. And as resorts move along, your normal room renovation gets into bigger items such as infrastructure, things like rooms and bigger expense items. And what this also greatly helps to do is avoid any significant special assessments, which is to the benefit of the owners and the overall system.

So again, I would say this is a very normal process of bringing new resorts into the systems, all the things we've announced in our press releases and taking out the ones who've reached their natural useful life. And we're providing a lot of optionality for those owners to get back into our system or exit fully. But yes, I think this is normal maintenance and a little bit of a catch-up that we probably should have been doing over the last decade, and others continue to do.

Okay. Good color. So fair to think that one of the reasons perhaps for closing these down, if you do have unsold inventory or which is inventory you own, you would not be on the hook for a special assessment. So might save money there by closing the [ stats ] that...

That's one way to think about it. I think it's only the partial answer as well. The answer I originally gave around overall resort portfolio is primary. The second is, yes, whether it's an individual owner or us as a developer, absolutely what you said is accurate.

The flip side of that is some of these have sales locations. So where you might be thinking, "Oh, well, this is just an economic plus. There's no economic minus. If any of these resorts do have sales locations, that's the balancing minus. So when you net it all out, the clear benefit is a better, newer, less seasonal, higher demanded, higher occupancy portfolio. And there are economic downstream effects, which we don't -- we have an estimated or presented the estimation. But there is one plus and one minus, which is less sales at those locations and less carry cost. And that's a balancing that we'll go through, should these resorts ultimately end up close. And if they do, then we'll provide an update on that. I would expect in our Q4 call and as part of any 2026 guidance.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Thank you, Kevin, and thanks again for joining us today. Our third quarter results highlight the strength of our business model, the discipline of our execution and the opportunities ahead. Most importantly, none of this would be possible without the dedication of our associates who deliver exceptional experiences to our owners and members every day. We remain focused on creating value for our customers, associates and shareholders. We look forward to speaking to you throughout the quarter at conferences and on our fourth quarter call in February. Thanks, everyone. Have a great day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to the

Travel + Leisure Second Quarter 2025 Earnings Conference Call Webcast.

[Operator Instructions]

As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Erik Hoag, Chief Financial Officer. Please go ahead, sir.

Thank you, Kevin. Good morning to everyone. Before we begin, we would 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 in our press release accompanying the earnings call.

You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on the Investor Relations website. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of the second quarter results and our longer-term growth strategy. And then I'll provide greater detail on the quarter, our balance sheet and outlook for the rest of the year. Following our prepared remarks, we'll open up the call for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated. With that, I'm pleased to turn the call over to Michael Brown.

Good morning, and thanks for joining us. Travel & Leisure delivered another solid quarter of revenue and adjusted EBITDA growth. Our strong adjusted EBITDA or free cash flow allowed us to return $100 and $7 million of capital to shareholders in the quarter. This performance underscores the strength of our brands, the resilience of leisure travel and our owner base, and the disciplined execution of our strategy. Against the dynamic macroeconomic backdrop, our teams remain focused on driving growth, managing costs and delivering exceptional experiences to our owners, members and guests.

In the quarter, we generated over $1 billion in revenue, $250 million in adjusted EBITDA and $1.65 in adjusted earnings per share, all up year-over-year. Our results were driven by continued strength in our Vacation Ownership business, which more than offset softer performance in travel and membership. We saw a healthy year-over-year growth in VOI sales, with gains in both tour flow and volume per guest. Notably, volume per guest of $3.251 was above the high end of our guidance range and adjusted EBITDA margin remained consistent with the prior year at 25%. These results support the core foundation of our business, a resilient customer base built around leisure travel, a compelling value proposition and consistent returns to our shareholders.

Demand remained strong across our core timeshare business. We see encouraging engagement from consumers as tour growth improved sequentially from the first quarter and 3% compared to 2024. The resilience of our platform is directly related to the quality of our customers. There's been plenty of noise around the economy, but from where we sit, our consumers are healthy and prioritizing travel. Spending on leisure travel is expected to grow mid-single digits per year over the next 5 years. Our business is built on recurring behavior and less so on short-term trends, making us less sensitive to the macro economy as we benefit from a highly visible recurring revenue base. More than 75% of our revenue is tied to predictable sources like owner upgrades, financing and management fees, which leads to a nearly $20 billion pipeline of future potential revenue over 10 years.

We see our strategy play out through our bookings, sales tours and owner engagement metrics. Our owners are traveling, supporting what we've long believed that vacations are not discretionary, they're essential. We have seen no significant change in buyer behavior related to booking pace, VPG and portfolio performance. Booking pace is relatively consistent to the prior year. And with a [ 109-day ] average booking window, we have clear visibility into the remainder of the year. VPG performance continues to be strong, and our portfolio remains stable. Our owners know what they are getting. They've already planned for it and 80% of them have fully paid for their ownership. Today, we serve more than 800,000 owner families with an average tenure of 17 years.

Here are some key characteristics of our owner base. The average household income for our owners is approximately $118,000. The average FICO score of our $3 billion portfolio is above 720. Since 2020, we have seen FICO loans declined 4 points as a percentage of the overall portfolio. The average FICO score of new originations is 746. This is an over 20-point increase since we updated our credit quality standards. Our owners take an average of 4 to 5 vacations annually with more than 50% of their vacation time being utilized through their ownership. We are seeing consistent interest from younger generations with over 65% of new buyers coming from Gen-X, millennial and Gen Z households. Our product delivers exactly what these new owners want, flexibility, convenience and personalized experiences.

During the quarter, we continued to invest in technology, marketing and product innovation to enhance the customer journey and extend our reach. Our Club Wyndham app, which offers frictionless engagement now has 162,000 downloads and accounts for 19% of bookings. Additionally, we are preparing for the launch of our WorldMark app in Q4. We are progressing with investments in AI on our web and app channels driving recommendations for personalized experiences and seamless booking process. During the quarter, we announced an exclusive marketing partnership with Hornblower focused on creating memorable experiences for our owners as well as new owner tour generation. Hornblower Group is an experience-based tourism leader across 22 destinations in the United States, Canada and the U.K. Looking ahead, we are focused on growing the core vacation ownership business leveraging data and technology to enhance the customer experience across all platforms. We are taking targeted revenue and cost actions to mitigate the headwinds in our Traveler Membership segment leaving us well positioned to deliver sustainable growth and consistent returns.

Now turning to execution on our multi-brand strategy. This strategy is not just about scale, it's about customer segment, it's about both customer segment and geographic expansion. Our Club Wyndham and WorldMark brands will continue to be the cornerstone of our vacation ownership business, along with our Blue Thread partnership with Wyndham Hotels. In June, we expanded our Margaritaville footprint with a new sales location in Nashville on Broadway and a new marketing channel on the Margaritaville cruise ship. We launched and expanded the Accor Vacation Club with the formation of a new Asia-based club, the first resort is the Novotel Nusa Dua in Indonesia. And last, -- and last week, we announced our newest Sports Illustrated Resorts location in Nashville, Tennessee. Located on Music Row in the heart of Midtown just one mile from downtown, the planned resort will feature 185 units and is expected to open in the spring of 2027. These new brands will help us expand into key markets, reach new audiences and offer experiences suited to their lifestyles.

Our strong free cash flow allows us to invest in the right places, brand, digital and targeted inventory. We are confident these investments will continue to drive value. Alongside these investments, we continue to consistently return capital to our shareholders, through our dividend and share repurchase program. Since then, we have returned $2.7 billion to shareholders. Before I hand it over, I'd like to take a moment to welcome Erik Hoag, our new Chief Financial Officer. Erik brings a strong background in strategy, operational finance and capital allocation. Erik has hit the ground running since he joined the company. In his first 2 months, he's attended 5 conferences and met with 49 investors over 27 meetings. I'm confident his leadership will help us continue delivering disciplined execution and long-term value for our shareholders. With that, I'll hand it over to Erik to walk through our financial performance and capital allocation in more detail. Erik?

Thanks, Michael, and good morning. Let me start by saying how excited I am to be part of Travel + Leisure. This is a company with a strong leadership team a highly recognizable brand portfolio and a resilient business model that delivers dependable cash flow and long-term value creation. In my first few months, I've been especially impressed by the financial discipline and operational focus embedded across the organization. This came through clearly in our second quarter results with strong revenue and adjusted EBITDA growth, alongside robust adjusted free cash flow.

I'll walk through the quarter's key drivers and highlight how we're deploying capital to drive shareholder value. Revenue for the quarter was $1.02 billion, up 3% year-over-year, driven by strong VOI volume and VPGs that exceeded our expectation. Adjusted EBITDA was $250 million, up 2% over the prior year and at the midpoint of our guidance range. This translates to a 4% adjusted EBITDA growth for the first half of the year. Adjusted earnings per share grew 9% in the quarter, driven by strong performance in vacation ownership and the benefit from ongoing share repurchases.

Turning to the Vacation Ownership segment, our core growth engine. The business delivered accelerating revenue, rising tour flow, historically high VPGs and double-digit growth in average transaction size. Revenue grew 6% to $853 million for the quarter, driven by a 3% increase in tours and VPG of $3,251, up 7% from last year. The increase in average transaction size reflects strong consumer demand, effective upsell strategies and continued sales force productivity across our resorts. Adjusted EBITDA grew 6%, with margin performance remaining steady, underscoring the health and the consistency of the platform.

We are also making disciplined progress with our inventory pipeline with several key resort projects underway to support future growth, while maintaining our capital light mix. Our loan loss provision and delinquencies were in line with expectations, and we remain on track to deliver a full year provision of 21%. Credit quality remained strong in the quarter with new origination FICO scores above 740, which reflects our consistent and disciplined underwriting approach. Our second quarter delinquency trends moderated after the uptick we noted last quarter. With no signs of material deterioration we're confident in the portfolio's strength. Our provision has historically ranged from the high teens to the low 20s as a percentage of VOI sales, and we see potential for this to trend below 20% over time, enhancing capital efficiency and supporting durable free cash flow.

In our Travel and Membership segment, revenue was $166 million for the quarter, down 6% year-over-year and adjusted EBITDA declined 11% to $55 million. The exchange business continues to face industry consolidation headwinds. Additionally, recent M&A activity disrupted transaction volumes from certain affiliates and was not anticipated in our original guidance. While not the sole driver of the underperformance, the impact was meaningful, and we remain focused on maximizing cash flow and operational flexibility with an emphasis on long-term shareholder value. Turning to cash generation and capital deployment. We generated $123 million in adjusted free cash flow and $353 million in operating cash flow in the first 6 months of the year, supported by strong sales efficiency, capital-efficient sales execution, and the ongoing contribution of our consumer finance portfolio.

These factors, alongside both our highly recurring revenue mix and capital-light development strategy drive consistent and dependable cash generation even in a complex macroeconomic and political environment. During the quarter, we returned $107 million of our adjusted free cash flow to shareholders, $37 million through dividends and $70 million in share repurchases, retiring more than 2% of our shares outstanding in the quarter. Our capital allocation strategy remains unchanged, reinvest in high-return growth, maintain a resilient balance sheet and return excess cash to shareholders, all while preserving financial flexibility.

We continue to evaluate reinvestment returns vigorously, prioritizing initiatives where we see strong IRRs, capital efficiency and clear pathways to shareholder value. Our liquidity position remains strong. We ended the quarter with over $800 million, including $212 million of cash and cash equivalents and $596 million available on our revolver. We ended the quarter at 3.4x levered and with normal seasonality, we expect our leverage rate to slightly increase in the third quarter and then end the year below 3.4x. During the quarter, we amended our $1 billion revolving credit facility with improved terms. And yesterday, we completed our second ABS transaction of the year, raising $300 million at a 98% advance rate and a 5.1% coupon, the lowest we've seen since 2022.

We continue to actively manage maturities and expect to refinance the $350 million note coming due in the fourth quarter. Looking ahead, we continue to expect full year adjusted EBITDA to be in line with our prior guidance, supported by the strength of our vacation ownership business. We expect travel and membership to remain challenged through year-end. That said, we are committed to executing on our core business, launching new brands, delivering strong free cash flow and allocating capital in ways that enhance shareholder value. For the third quarter, we expect travel and leisure adjusted EBITDA to be in the range of $250 million to $260 million. Vacation Ownership gross VOI sales are expected to be in the range of $650 million to $680 million with VPGs in the range of $3,200 to $3,250.

For the full year, we continue to expect adjusted EBITDA to be in the range of $955 million to $985 million, gross VOI sales between $2.4 billion to $2.5 billion and VPGs in the range of 3,200 to $3,250, an increase from our prior range of $3,050 to $3,150. Please refer to our earnings material for full details and underlying assumptions by segment. Thank you for your time and continued interest in Travel + Leisure. I look forward to connecting with many of you in the weeks ahead. Kevin, we can now open the line for questions.

[Operator Instructions]

Our first question is coming from Chris Woronka from Deutsche Bank.

Erik, welcome. We're looking forward to working with you. So I guess, Michael, maybe start with the kind of the more obvious question this quarter on the travel and membership side. I know you mentioned that there was some M&A impact with partnerships. But do you feel like visibility that segment is declining. It used to be very stable and predictable within $1 million or so? And if so, how confident are you that you can turn this around? Or are you in some ways, possibly considering something more strategic with that segment?

Chris, let me recap Q1 or the first half of the year. So we recognize the 2 components of the travel of membership decline. In the organic side of the business, yes, we saw a decline as it relates to exchange transactions a conversation we've been having on this call for several years now. That side of the business remains challenged through consolidation and the fact that the way bigger clubs are doing business has changed. And we've done a pretty significant job over the last few years stemming the tide of that.

In fact, if you remember, last year, we actually had growth in this segment. Over 50% of the decline in the first half of the year was based on this component of the business. The other piece, which Erik mentioned was there was consolidation in the space. and that impacted those related to affiliates of ours, and that obviously was an unforecasted impact in the first half of this year. As we digest that and look at new alternatives on how to address mitigate the impact of that transaction, but b, just the general trend of what's happening on exchange external exchange transactions, there's a number of measures we continue to take. We want to grow the Travel Club business, which grew 7% in Q2 as far as transactions. We continue to look at innovative ways to deploy our inventory and to grow revenue on that side of the equation. And then obviously, we manage costs associated with where our top line goes.

I think we've been very clear that we understand the structural challenges of the space. But we've been very proactive over the past few years, and we will continue to look at smart strategic investments or alternatives to make sure that we're doing the right thing for this business. And creating our objective to get back to a growth trajectory over time here.

Just as a follow-up. I think you mentioned a double-digit increase in average size of transaction in the quarter. A question on that is kind of in the context of financing? And how does that play into when you think about transactions getting bigger propensity to finance in the context of a lot of wealth effect that's being generated with the stock market, and maybe other forms of real estate. Does that change the calculus at all for your, I guess, your average customer in terms of that propensity to finance or what's driving that larger transaction size?

Well, we haven't really seen any change to our propensity to finance. Those statistics are very consistent. I think what you've seen in the first or the second quarter -- and the reference was really a combination of 2 components. First is we continue to take measured price increases over time and that results in some component of the average transaction price increasing. The other piece is -- and we mentioned it a number of times in our prepared remarks related to experiences and greater owner engagement.

We're starting to see, we believe, some of the -- those elements come into play and the fact that people continue to buy more, 4 to 5 vacations a year through their ownership with us, about 50% of their vacation time being dedicated to us at Wyndham. That means people are buying more, and that's only because they're satisfied. And they're enjoying their ownership. So I think it is a combination of price increases and people just continuing to be loyal and committed to this type of leisure travel.

Next question today is coming from Lizzie Dove from Goldman Sachs.

First one just on -- you raised the VPG guidance, obviously, a really strong number in but you didn't take up gross VOI sales number. Is the assumption that maybe to growth is a little lower or something. I know telesales was a little lower in 2Q than expected. Just curious kind of what factored into that.

Really, really the factor is we wanted to recognize the very strong PPG performance in the first half of the year, and that led to our raise for the full year. I think what that really says, Lizzie, is that we have greater confidence that our gross VOI is going to be at the mid to maybe the top end of that range. So at this point, being halfway through the year, knowing that we're entering July being one of the biggest months of the year and same with August with summer travel, we thought we were better off to simply be more confident in the top half of the range at this point, and we'll see where we are in Q3. But at the end of Q3.

But what I would say is both tours being up 3% in Q2, 2% for the first half. That's showing sequential acceleration. We were quite pleased with our Q2 tour performance, and we think that tour increase will continue in the second half. And obviously, our VPG raise of guidance reflects what we're already seeing and that we don't see the consumer weakening in the second half of the year.

Got it. And then on the delinquency side, I think last quarter, you said March ticked up a little bit, but then you saw an improvement in April. Curious how that's been tracking over the last few months and into July. And you mentioned there may be some opportunity for the provision to kind of trend below 20% over time. Just curious, these kind of steps to get that timing would be helpful to know.

Lizzie, it's Erik Hoag. You are right. So early in the year, we saw elevated delinquencies in the first quarter. However, they did moderate near the end of the first quarter. And we saw that moderation persist through the second quarter. And frankly, we've seen that moderation persist through the first half of July as well. So we have got a full year provision of 21%. We feel like we are in a good spot with that 21% provision.

In terms of the longer-range comments associated with getting back into the teens from a provision perspective, there's a couple of things that I would say about that. First, we've got disciplined underwriting quality with FICO scores above 740 and we consistently have seen improvement associated with the credit quality that's coming through the front door. And then the second piece is the adoption of our app. As we continue to focus on the usability of our products, the adoption increase that we're seeing from our customers, making it easier for customers to actually get on to vacation.

And maybe one other comment associated with the provision 60 days in. One of the meaningful ahas that I've had, Lizzie, coming into the seat, is that -- and Mike mentioned, I've had roughly 50 investor conferences or touch points in the last 2 months. We've got a really robust, efficient and effective inventory recovery process. So as delinquencies occur, we have a way to get the inventory back. We're able to reprice the inventory. We repriced the inventory at favorable rates with a cost of sales rate that's under 10%, a very effective way for us to get that back.

Our next question is coming from Patrick Scholes from Truist Securities.

Welcome, Erik. Michael, I'll start off with a question for you. You touched briefly about the health of your consumer I'm wondering if you can dig down a little bit more. You talked about average household income of about 120. But I'm sure within the average, you probably have some, say, 80,000 and some 150,000 and above. Talk about sort of at the various ends of the spectrum, what are the behaviors and propensity strengths and weaknesses, any noticeable differences between the lower end and the upper end within your customer network and potential customer network?

Absolutely, Patrick. I'll hit this in a few different ways. And I think most simply, we get a good read on performance of our household incomes of FICOs and through our default curves. And it's one of the reasons that as we came out of COVID, we thought the most efficient way to reestablish our foundation was by raising our FICO to 640. That move, as you heard, has brought our average FICOs up to 746. And there's clear stratification with higher performance at higher household incomes and clearly, higher delinquencies on the lower end.

I think interestingly enough, there's an odd phenomenon there, one maybe not so odd is that the higher the income, the more likely there is for prepayment of the loans. So there's always this sort of balance of -- you love to hire FICO sales, and you definitely want people to pay off and get using their ownership. But you do have a drop off with the higher FICOs in the first year of ownership. Let me hit it this the second way of really how I look at it is the bifurcation between owners and new owners.

In an economy like this with uncertainty and if the economy accelerates or decelerates, the first place you tend to see that is on the new owner side. As we talked about in our prepared remarks, the first half of the year was super strong for our owner base, high engagement, value what they own, continue to buy more at very high rates. Our new owner business continues to be strong as well. We were very pleased with our tour flow. But I think, specifically related to your question, when we look back to pre-COVID 2019, our close rates, our VPGs and our transaction size, all related to new owners are meaningfully up from pre-COVID, and that's really a reflection to your question about the performance of all strata of household incomes and looking at a different perspective of new owners and owners because I think most people are looking for weakness to show up in our new owner segment as a sign that the economy is weakening. And we could say after the first 6 months, if that's not the case.

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And then I do have a follow-up question for Erik. Erik, with the VPG expectation going up, -- what are your expectations for the buyer mix in that expectations for closing rates versus your prior guidance for VPG. And I think on the last earnings call, you had expected the new owner mix or Mike has expected new owner mix still to be around towards to be around 35%.

So we do expect in our financial forecast to see acceleration of the new owner mix, not -- so the long-range target remains 35% from a new owner mix perspective. We sat at 30% here in the second quarter. Our forecast does expect some improvement in that in the back half of the year.

The next question today is coming from Stephen Grambling from Morgan Stanley.

Just a follow-up on the new owner mix improvement. I guess are there any things that you're doing and that you're thinking about to help drive some of the incremental new owners or anything that you're thinking about in terms of trying to improve the conversion rate on new owners as we think about initiatives going into the back half of this year or even into next year?

Yes. So just add on to what Erik was saying was, we've always communicated this percentage. And I just want to make sure everyone's got the context of it. We had an incredible first half of the year on our owner side of the business, which is naturally going to push down our percentage of new owner percentage. We had a really good first half of the year as it relates to newer business. It just happens when you perform so well on the owner side, our target of 35% naturally, it's further away from 35%. And we're going to continue to get to.

Our long-term target, our short-term target is 35%. And if quarter-by-quarter, we have strength in one segment, it will fluctuate. Remember, I believe it was first quarter last year, maybe it was second that we were at 38%, 37%, and that was just a quarter. So related to some things we're doing as it relates to driving new owners, there's a lot feathered throughout the script related to that. But I really want to focus on. Number one, we continue to focus on getting the right partners. We were pleased with the announcement in Q2 of one such partner in Hornblower. We also believe that the addition of these new brands, Margaritaville, which we're reinvigorating up double digits in sales year-on-year the addition of a core up double digits in sales year-on-year.

Sports Illustrated, launching new sales later in the year. All of these are going to be bringing new owners to our overall ecosystem. And lastly, just in addition to all of that, we have 6 regions, and each single one of them is out doing smaller partnerships in their region that are more pertinent to their region. And all that put together, I do just want to put a stamp on, I think you mentioned something about performance of new owners. I think close rates are up roughly 11 percentage points from pre-COVID level. So our teams are performing well above where they were pre-COVID. And I think it's a combination of having a great team, very focused on execution and raising our marketing standards.

[Operator Instructions]

Our next question is coming from David Katz from Jefferies.

Thanks for all the commentary so far. I noticed that the Accor brand seems to be more of an international play. And I wonder if you could give us some updated thoughts on what you think the international opportunity or TAM really is? And at what point does it become a increasingly meaningful driver of the enterprise in total?

Well, there's 2 sides to that story. First of all, Accor is if my stats are right, the largest international operator of hospitality outside the United States, the brand is powerful. It's impactful. It's got a multitude of brands and its TAM is on par with the best hospitality companies -- in the largest hospitality companies in the world. That's all the positive. And the second, if I could add a second positive is the integration with their teams in the Asia Pacific region and considerations in other regions has been super supportive to help us grow, and that's meaningful in the assistance of growth, which has led us to announcing our first resort since having the brand about 14 months after the acquisition.

The flip side of that coin is timeshare is by far globally strongest in the United States. We've got an accepted product in after 30 years of operation, the industry has evolved to be primarily hospitality branded companies. People are highly loyal to Wyndham to Hilton to Marriott to Disney to Holiday Inn just to name a few. At our Margaritaville brand, and the industry is over 80% hospitality branded the regulatory environment protects consumers and gives them avenues to for their ownership and comfort that their purchase is protected. So we remain super bullish about the U.S. market. We remain super bullish about our Wyndham brand.

We have incremental opportunity outside the U.S. with the core. And we view most of these new brands, whether it's a core, sports illustrated and you go down the line to be sort of $200 million to $400 million of sales brands. But you stack 4 or 5 those together and you can start to look at a growth trajectory over 5 to 7 years that allows for us to maintain our current growth rate over time.

Understood. And just to follow that up. When we think about international sales, maybe $1 of sales or $100 of sales. Should we think about the economic intensity in terms of what you earn being similar, better, worse than what you have here in the U.S.?

I would expect it to be similar as far as profitability margins. I would also expect it to be similar 3 years from now what it is today as far as the mix, we do about 90% of our revenue in the U.S. and about 10% internationally. So I wouldn't expect any significant trajectory or incremental risk for currency fluctuation as a result of our expansion. Our objective back to Stephen's question and tying in years is we want to look for new customers geographically, database wise and the core provides us both those avenues.

Your next question today is coming from Ben Chaiken from Mizuho.

Maybe to start off, as you think about the remainder of the year, can you help remind us the different variables influencing the back half -- if I'm not mistaken, I believe you began selling SI in 3Q, 4Q. Maybe help us with the timing and magnitude of that and any other considerations. I guess the premise of the question is, I think prior to today, there was an implied acceleration in contract sales in the back half. And I just want to maybe dive into what those considerations are? And then one follow-up.

Of course, Ben. And the implication that you're reading through is correct. The anticipation on the back half of the year is that we would be lapping tough comps in the first half of the year on tour flow. So year-on-year, tour flow increases in the latter half of this year. You combine that acceleration to an increase of EPG guidance diving back into Lizzie's question there is that you start to see a lot more confidence on the high end of the VOI range, which, in turn, gives us confidence that continued softness on the Travel and Membership segment can be covered, ultimately leading us to confirmation of our guidance range on adjusted EBITDA.

So you should expect to see continued strength on the VOI side, covering off any weakness we see on the travel and membership side. And albeit only 3 weeks into July. I think it's safe to say that the trends that we've seen in Q2 on consumer resilience, key KPIs that led to a good Q2 portfolio performance, VPG, booking patterns, trends we saw in travel membership. All of those have remained consistent in the first 3 weeks of July. A reminder, our largest month of the year, those trends are consistent that we saw in Q2.

Got it. And then anything from a -- just to touch on SI, Doesn't that start to hit in '25 as well, helping you out in the back half?

Yes and no. Yes. We will open in the spring of 2026. We expect to start sales at the end of 2025, so we can, pun intended, to put our first points on the board. And -- but as far as meaningful bottom line, not at all. Continuing to grow Accor this year, continuing to grow Margaritaville and continued excellent execution on Club Wyndham will be the determinant of how we end the year and where in our guidance range will finish.

Understood. And then for my follow-up, maybe just stepping back a little bit on some of these new projects. Maybe you could help us understand the importance and why you're excited about new Margaritaville in Orlando, opening in as well as the SI in Nashville, whether it's strategically or geographically why it's important to the network?

Yes. Ultimately, I zoom way out and just look at how hospitality is transitioning where people are attaching their individual lifestyle to the way they want to spend their leisure time. I don't know exactly the year. I probably should, but Margaritaville was a song and a drink a decade ago. And today, it's a hospitality company with dozens of hotels.

Why? Because people love to listen to music and have a drink in their hand on the beach. And leisure travel has become an expression of that lifestyle and you transition that across just what's illustrated in the affiliation excitement and passion people have for college sports, and we're simply meeting consumers where they are today. And I -- and most importantly for our business, especially being direct marketing is, we need to constantly be finding incremental database incremental addressable markets that we can't reach otherwise.

And that's why we have aspirations on each of these not to become the behemoth that Wyndham is today, which will continue to grow. We -- that's where our strength is. But adding $200 million to $400 million of sales with an individual brand that has a unique database that we otherwise wouldn't reach. That's why I'm excited. And a year ago, we shared with you our aspirations. It's a year later. We -- I mentioned it in one of my last answers, we're double-digit growth in MargarAritinerceptville, were double-digit growth in Accor. And with Sports Illustrated coming, that -- those are all going to have to have outsized growth to our total VOI sales projections that we have today.

Your next question is coming from Brandt Montour from Barclays.

So just a more nuanced version of a question you heard earlier about the 2Q and the new owner sales. I think when we went back -- if we go back to March, April, when you were exiting the first quarter, you highlighted like slightly soft, I don't want to put words in your new owner sales trends. It sounds like it came out pretty well for you and those sort of held up in the 2Q. But with the sort of lowering in the mix in the 2Q, I wonder -- and the question is you guys have levers, right, in terms of what kind of tour flow you want new owner versus repeat. Did you sort of tactically move toward repeat in the and that kind of helps keep a higher-quality new owner tour coming in and keeping those metrics high, that makes sense?

So let me go back to my commentary at the end of Q1. We've just gone through Liberation Day. I think everyone was super nervous around the uncertainty in the macro economy. We've now gone 3 months through the quarter and there's not really been a change. We've not changed what we're trying to do. We're not trying to force any issue. I'm not going to ask my team to force the 35%. We're going to do -- we're going to execute against our business.

If we didn't bring up 35% to you all, we wouldn't even discuss it because the industry sits their companies in 30%. There's companies at 40%. And in that range, you can run a highly successful timeshare business. So we're going to stay consistent to the way we generate new owners. And if there's fluctuation down to 30%, up to 40%, we are North Star for this business long term and the second half of this year will be 35%, but it will be no sweat if we hit 32%, 33%, and I'm not going to get overly excited at 37%, 38%. The normal cadence of adding marketing, taking it away, refining the business means we will end up over time at 35%.

And keeping a highly executing sales and marketing team without dropping in changes in the middle of quarters inorganically or unnaturally doesn't help the overall enterprise. So this is -- our percentage in Q2 was natural. We didn't do anything unique to drive or decelerate the number and the performance specifically a new owner, the KPIs, as I mentioned in Stephen's question, are really strong and set up well for the long term.

That's super helpful and crystal clear. This is, I guess, the a follow-up to that and maybe more of a mathematical question then is -- and I know that there's no hard target on the back half for new owners. But if you are looking for a sequential improvement, what gives you confidence you can get a sequential improvement while also keeping VPGs in line sequentially while tour flow grows, right? I would think like the logic or the math would tell me that you'd have -- if you did improve a new owner mix throughout the back half, you would see sequential pressure on VPG. So maybe I'm missing something.

Yes. So again, let me just come back to -- I'm going to worry less about the percentage, and I'm going to spend more energy and our team spend more energy of are we growing our tour mix. Are we lapping our harder comps? Are we executing against our new partnerships? And are we opening on time, the new channels and the new in-house opportunities that we have. What we're seeing is that first 3 weeks of July is our marketing teams on the new owner side are executing extremely well.

They're executing against new partnerships. They're activating in the regions in a high new owner period being in July. So percentage aside, the new owner channel is growing the way we wanted to. And yes, there needs to be acceleration in Q3 from the 3% in Q2 growth and 2% first half of the year, year-on-year growth. So yes, we expect acceleration. Early indications are we're going to get that acceleration. And the key now is we raised our full year VPG guidance, but the big win in the second half of the year is if we accelerate tour flow and maintain VPG where they were in Q2, but it is a balance. And right now, our team is balancing it extremely well.

Our next question is a follow-up from Patrick Scholes from Truist Securities.

Great. Just a quick follow-up question on the Sports Illustrated brand. Just give us an update on when you expect Alabama to open? It sounds like Nashville will be next year, but where do you staying with Alabama? And then specifically on Nashville. How is that being financed? Is that asset light? Or is that something that you're putting perhaps partially or fully on balance sheet?

So let me hit each of the markets one by one. So Nashville is a conversion property. It will be just in time inventory to match revenue to sales, 185 units opening in the spring of 2026 and expectation is to start sales at some point in Q4 this year. Tuscaloosa is a purpose-built project, which we've gone through the permitting process, which put us about a quarter behind from our original expectations. So it's going to be early '27 for delivery.

I would expect the -- to sort of split those 2 goalposts is that we will do another announcement this year on a third Sports Illustrated resort more than likely to be conversion, but more to come on that. We told you on the last call, we'd announced by this call, we did. I'd expect that we'd do one more announcement this year for our third location, which, again, I'd expect to be just in time, and I'd expect to be conversion as well.

We reach end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Thanks, Kevin, and thanks again for joining us today. We're proud of what our team has accomplished so far this year and are excited about what's ahead. We remain focused on executing our strategy, driving long-term value and navigating the market with discipline and agility. As we look forward, we're confident in the strength of our business, the resilience of our model and our future opportunities.

We appreciate your time today and look forward to keeping you updated on our progress in the quarters to come. Thanks. Have a great day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.