Travel+Leisure Co Aktie

Greetings, and welcome to the Travel & Leisure Third Quarter 2026 Earnings Call. [Operator Instructions]

As a reminder, this conference is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Andrew Burns, Vice President, Investor Relations. Please go ahead, Andrew.

Thank you, Kevin. 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 estimates. 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 also find a reconciliation of 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, earnings per share and free cash flow made during this call are on an adjusted basis as disclosed in our earnings press release. Additionally, all references to earnings per share are on a diluted basis.

This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our results and our longer-term growth strategy.

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'll 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 strong quarter, extending the momentum we built throughout the year. Our owners continue to prioritize travel, demand remains healthy, and we are translating that strength into growth in earnings and cash flow. More broadly, this quarter shows how the actions we have taken over the last several years are improving the quality of the enterprise. The core business is growing. Our multi-brand platform is scaling and our acquisitions and portfolio actions are expanding both our earnings power and long-term revenue potential. .

Quarter after quarter, our results validate that strategy and that compounding impact on our financial results is evident. From 2024 to the midpoint of our 2026 guidance, we expect to grow EBITDA by 16% and earnings per share by 33%. From a profitability standpoint, we are generating industry-leading EBITDA margins of approximately 25% while making meaningful investments in our long-term growth strategies. On the capital allocation front, since 2024, we have increased our annual dividend by 20% and reduced our common shares outstanding by 10% and made 2 strategic acquisitions for approximately $350 million. And we've done all this while maintaining our leverage ratio at around 3.3x and which is the lowest leverage ratio of our peers.

The durability of our model and the free cash flow it generates gives us a distinct advantage. We can invest in growth, pursue strategic acquisitions and return meaningful capital to shareholders at the same time. Each dollar has a clear purpose, strengthening the company and increasing per share value. Our results over the last 24 months demonstrate the power of that approach.

For the quarter, we generated revenue of $1.1 billion, EBITDA of $283 million and earnings per share of $2.21. Gross VOI sales were up 6% year-over-year, driven by strong execution and the initial contribution from recent acquisitions. Tours increased 7%, led by new owner tours, reflecting healthy top-of-funnel demand. Volume per guest on an organic basis was up low single digit and within our guidance range, reflecting consistent execution across our sales and marketing teams. Reported volume per guest of $3,286 was down 1% year-over-year, reflecting the mix impact from recent acquisitions.

On the consumer front, the indicators we track remain healthy. While we continue to monitor the broader consumer environment, our owners continue to make travel and priority. Guest surveys and industry data show our owners plan to take 1 more trip over the next 12 months than the average U.S. traveler. That commitment is also reflected in our bookings, which point to continued momentum through the holiday season. Owner travel behavior, including booking windows, length of stay and distance travel to our resorts, all are stable.

We are also seeing positive underlying portfolio trends in our consumer financing business which Erik will address in more detail later in the call. I'd now like to provide an update on our recent acquisitions, which are already providing immediate accretion to our overall financial performance. We closed the Spinnaker Resorts acquisition ahead of schedule on August 1 and integration across both acquired businesses is progressing well. Our integration approach is straightforward, preserve the local strengths that made these businesses attractive while embracing best practices.

We are quickly deploying our technology and commercial capabilities and expect to be able to realize the full cost benefits of this integration within the first 12 months. We are also investing in the inquiry resorts to enhance the guest experience and add more options for our owners. I have spent significant time with the leaders and associates across both businesses in recent weeks and have visited nearly every resort. Those interactions have only strengthened my confidence in the strategic fit of these acquisitions.

Moving past the near-term integration and cost synergy realization, these 2 acquisitions grow our owner base by over 100,000 owners. In November, we will begin selling Club Wyndham points at select properties alongside their existing product suite. In these early months, we will test and methodically optimize our offerings to appeal to the existing owner base. I see a meaningful long-term opportunity to expand sales across the acquired businesses by bringing our points-based products and expanded resort network to their owner basis. Another growth initiative for us is our multi-brand strategy, which is moving from proof of concept to a scale platform.

This strategy allows us to reach new consumer segments, geographies and vacation experiences while leveraging our established technology and operating infrastructure. Each brand is progressing along its maturity curve from Margaritaville Vacation Club in a core Vacation Club, which are generating outsized growth to Eddie Bauer Club and Sports Illustrated resorts, which are earlier in their commercialization. Each brand broadens our growth opportunities without meaningfully increasing complexity or capital intensity.

During the quarter, we continued to see strong momentum across the portfolio. Margaritaville Vacation Club is on pace to deliver more than $175 million of gross VOI sales this year. Our core Vacation Club is approaching $50 million in annual gross VOI sales in only its third year of operation. Eddie Bauer Adventure Club continues to expand with the announcement of its second resort in the Hill Country outside of Austin, Texas with cabins, geo domes, hiking trails and outdoor activities, it brings the brand to life through an immersive outdoor experience. The resort is scheduled to open by next summer.

Sports Illustrated resorts reached an important milestone with the opening of the Nashville Resort and the early response has been encouraging. To date, we've announced 4 Sports Illustrated resorts, and we are closing in on our first $1 million sales month. Earlier this month, we announced the expansion of our partnership with Wyndham Hotels & Resorts to bring the Sports Illustrated concept to traditional hotels and mixed-use destinations. Together, we see an opportunity to create immersive year-round destinations in college towns and major urban markets featuring distinctive programming, premiere sporting events and unique guest experiences.

With this expanded partnership, I believe that we will be able to enter more markets and scale Sports Illustrated resorts even faster. Our multi-brand strategy is doing exactly what we intended it to do, expanding our addressable market, creating new growth avenues and demonstrating the power of the travel and leisure platform. What began as a collection of individual opportunities is increasingly a meaningful contributor to our long-term growth algorithm. As a reminder, we expect these new brands to be approximately 10% of our total sales mix this year and continue to grow as a percent of the mix in the years ahead.

In closing, we spent the last several years proving the resilience of our model. In 2026, we are showing how much more the platform can become. Since raising our full year outlook last quarter, we've achieved the high end of our third quarter EBITDA guidance, completed 2 acquisitions and continue to scale our multi-brand growth platform. This quarter, we are raising the midpoint of our gross VOI sales and EBITDA guidance once again. Overall, we are delivering results, widening our growth runway and improving the quality of the enterprise, and we are doing it with the financial discipline our shareholders expect.

With that, I'll turn the call over to Erik. Erik?

Thanks, Mike, and good morning, everyone. I'll start with our third quarter results, then cover vacation ownership, our acquired businesses, travel and membership, capital allocation in the balance sheet and finally, our outlook.

Third quarter revenue grew 5% to $1.1 billion and EBITDA increased 6% with 20 basis points of EBITDA margin expansion. Net income grew 16% and earnings per share of $2.21, increased 23% over last year. This third quarter progression mirrors the consistent performance we've delivered all year. Through the first 3 quarters, revenue was up 4%, EBITDA is up 8%. Net income is up 15% and EPS is up 21%. Compounding growth across the P&L consistent with how the business is designed to perform over time, high-quality earnings growth that converts into cash and per share value.

Third quarter Vacation Ownership segment revenue was $953 million and segment EBITDA was $250 million. Gross VOI sales increased 6% year-over-year on top of 13% VOI sales growth we reported in Q3 last year. As Mike referenced earlier, we generated healthy year-over-year tour and VPG growth on an organic basis. On a reported basis, including acquisitions, tours increased 7%, while volume per guest of $3,286 was down 1% year-over-year. With Spinnaker Resorts closing ahead of schedule, it contributed more to the quarter than forecast, resulting in higher tour flow growth and greater VPG dilution.

New owners represented 33% of gross VOI sales during the quarter, consistent with our targeted mix of approximately 1/3 new owners and 2/3 existing owners. We believe this balance supports current sales productivity while building the customer base for future upgrade opportunities. In our consumer finance business, credit performance continued to improve during the quarter. The underlying profile of new originations remained strong with weighted average FICO scores above 740 and average down payment percentages approaching the mid-20s.

In our portfolio, the loan loss provision rate declined approximately 150 basis points year-over-year, reflecting lower overall percent of sales finance. Separately, delinquency and default performance has continued to exceed our expectations, giving us confidence to improve our full year provision outlook from approximately 21% to closer to 20%. On the M&A front, we closed Spinnaker Resorts on August 1, so the third quarter reflects a partial period of ownership. Together, yes and vacations and Spinnaker Resorts contributed approximately $21 million of gross VOI sales and $7 million of EBITDA, tracking to our 2026 accretion guidance of $15 million to $20 million.

The early performance and progress on integration, we are making supports the financial thesis we outlined when the transactions were announced. Immediate earnings accretion, high-quality resorts and owners, identifiable cost synergies and finance receivables that fit directly into our securitization model. Turning to travel and membership. Segment revenue was $150 million and EBITDA was $51 million. Results were in line with our expectations and continued to reflect the ongoing mix shift from higher-margin exchange activity to Travel clubs.

At the same time, we've taken actions to better align our cost structure with the economics of the business, including greater use of shared enterprise capabilities. These actions are expected to generate approximately $16 million in annualized savings with the majority of the benefit realized in 2027.

Moving to the balance sheet. We ended the quarter with net leverage of 3.3x and over $900 million of available liquidity, providing ample flexibility within our capital allocation framework. Subsequent to quarter end, we completed our third ABS transaction of the year. Across our 3 transactions in 2026, we've raised $925 million, all at a 98% advance rate. That consistent execution remains an important part of our free cash flow model, allowing us to efficiently monetize receivables and recycle capital back into the business.

While benchmark rates have moved higher, our ABS spreads remain attractive, reflecting continued investor demand for our receivables. Moving to capital allocation, which continues to be 1 of our highest priorities. Through the third quarter, we returned $364 million to shareholders through dividends and share repurchases and deployed approximately $350 million towards acquisitions. Share repurchases are up 18% year-over-year, and we increased our dividend by 7%.

We've done all of this while maintaining a strong balance sheet and significant financial flexibility. We expect return on invested capital to remain in the high 20s this year, well above our cost of capital. That return discipline is central to how we evaluate organic investment, acquisitions and share repurchases. At current valuation levels, we believe repurchasing our own shares represents a highly attractive use of capital relative to the alternatives available to us. Since the spin, we reduced share count by approximately 40%. As we look ahead, the portfolio actions we completed this year create meaningful incremental cash opportunities in 2027.

Through the resort optimization initiative, we were able to strengthen our balance sheet and operating performance while reducing the capital intensity of the business by retiring 17 lower demand properties, we're creating to monetize the associated real estate for owners, of which we are the largest. Additionally, our acquisitions had receivables that we expect to generate an additional $80 million of cash when securitized. Combined with the underlying free cash flow generation of the business, these actions should provide additional capacity for share repurchases in 2027, while maintaining our leverage and liquidity guardrails.

Turning to our outlook, which we raised last quarter. With 9 months behind us and high visibility into the balance of the year, we are narrowing our full year gross VOI sales and EBITDA guidance to the top end of the range and increasing our earnings per share guidance. For the full year, we expect gross VOI sales in the range of $2.625 billion to $2.675 billion, volume per guest of $3,325, to $3,375 and EBITDA of $1.07 billion to $1.085 billion.

Additional guidance assumptions include a full year adjusted tax rate of approximately 28%, free cash flow conversion of roughly half of EBITDA and earnings per share growth to be a low 20s percent. When we issued guidance back in February, our initial range was above consensus expectations. Since then, we've outperformed on several fronts. We raised our core VOI sales and VPG outlook, raised the midpoint of our EBITDA guidance twice, added accretion from 2 acquisitions and loan loss provision and tax rate assumptions. That progression reflects the strength of our model and demonstrates our financial and operating discipline that converts growth into cash and compound per share value.

In closing, we're exiting the third quarter with the core business growing, credit improving, our acquired businesses performing well and a stronger resort portfolio. But what really matters most is how we translate that into long-term shareholder value. Our goal is straightforward, grow earnings, convert those earnings into cash, invest the cash where returns exceed our cost of capital and return excess capital through dividends and share repurchases when we believe our shares offer an attractive return. Over time, that's how we grow free cash flow, compound per share value and create durable value for our shareholders.

With that, I'll turn the call back over to Kevin for questions.

[Operator Instructions]

Our first question today is coming from Stephen Grambling from Morgan Stanley.

Just to start, there was a release about 1 of your competitors this morning maybe on a little bit of a weaker trend line. I'm just curious if, one, you're seeing any kind of change over the course of the quarter in terms of conversion rates and dynamics between existing and new owners, but then also anything in the competitive dynamics as you think about your salespeople and the cost to keep people -- some of the better people in the system as there's maybe a change in the competitive landscape?

The short answer on both is no, we're not seeing any impact. If you look at our via performance throughout the quarter. There was a lot of consistency, no changes as we came to the close of the quarter and now that we're well in October no modulation whatsoever to our performance, which, as Erik methodically laid out there has been extremely strong and shows a lot of strength in our core vacation ownership business. .

As it relates to talent movement, no, we're not seeing impact as it relates to talent movement. The industry has always reflected constant movement amongst the peers. But a, as you can see from our performance, it's not impacting us. And b, I think culturally, our consistent line of success, our clear strategic outlook is 1 of the best retention components you can have. And all of that really leads to no consumer trend changes throughout the quarter. And in October and no impact as it relates to talent movement, and clearly, that's showing through in our results.

Great. If I can sneak 1 follow-up maybe unrelated. You talked about having increased cash while holding leverage next year. And -- just curious, maybe I missed this on some of the opening remarks, but as we think about some of the building blocks to next year, any major changes that we should be thinking about between VPG and tour flow thinking through kind of the moving parts between the recent acquisitions as well as the ramp in Sports Illustrated and some of the other brands.

Yes. Sure, Stephen. So big picture, as I think about 2027, we still see our 6% to 8% gross VOI sales and mid-single-digit EBITDA growth algorithm intact. The tailwinds as we start the budget process, we're not getting too far ahead of the process, but tailwinds would certainly be the full year contribution from our acquisitions. We do expect further improvement in the loan loss provision as well as some G&A efficiencies. And I think that those benefits will be partially offset by higher ABS funding costs a modest margin headwind as we continue to invest in our new brands.

But right now, no change in the underlying framework, and we'll provide more on that when we get to February, associated with incremental capital -- free cash flow in 2027. Our long-term target remains roughly 50% free cash flow conversion from EBITDA. And we see let's call it, $150 million of incremental liquidity next year with roughly half of that coming from the acquired receivables that we've talked about and the other half coming from the resort optimization initiative.

And we're targeting 2027, although some of those real estate proceeds could certainly extend into 2028. But that gives us additional capacity to return capital. And as I mentioned in my prepared remarks that current valuations buybacks are very compelling.

Your next question today is coming from David Katz from Jefferies.

This may be a premature follow-up to the prior answer. But my question is how do you think longer term. It's a future date about what your algo could become. I appreciate Michael's comments about the incremental brand sales opportunities. Are these intended to accelerate your algo over time? Or should we think about you in the context of where you are today?

I would suggest that our current outlook related to VOI and EBITDA doesn't change. What it does is broaden our platform as as a brand as our -- some of our core brands, continue to mature and get larger in scale, growing at 6% to 8% at $2.5 billion, $2.6 billion this year, becomes more and more challenging in its marketing reach and what these new brands are providing us Margaritaville, Accor, Eddie Bauer Sports Illustrated is a new marketing platform to widened top of funnel.

Take Sports Illustrated this month that will likely hit the $1 million mark. Every single 1 of those, at least as far as I'm aware, is a new owner. These new brands give us that next leg up to keep our long-term algorithm of new owners, combined with owner upgrades to drive these mid-20s margins, a realistic outlook that has clear visibility. So I would say it's more about maintaining the algo with broadening our marketing universe as opposed to digging deeper and deeper into a singular approach.

Understood. And as my follow-up, with respect to the provision, it's possible that I missed it, but I wanted to just understand for the how or why that is happening? Is that circumstantial or that something that you're strategically driving?

Yes, sure. So the provision, as I mentioned, is down in the third quarter, 150 basis points year-over-year. And that's the third consecutive quarterly year-over-year decline. In the quarter, we benefited from lower percentage of sales finance, but more than anything, the underlying credit trends also continue to improve.

Early-stage delinquencies were relatively stable at 5.1% between the second quarter and the third quarter, and that's typically where we would expect a seasonal uptick in delinquencies moving from 2Q to 3Q. We are now expecting the full year loan loss provision to be closer to 20% versus the 21% the default and delinquency trends that we're experiencing, I think give us confidence that not only will 2026 be lower than 2025, but 2027 will be lower than 2026. So the 3 things that we've been pretty methodical about talking about in terms of the actions.

Number 1 is the focus on point-of-sale underwriting. We continue to talk about FICO scores that remain in the mid-700s and increasing down payment rates. The second thing is new owner engagements. And this is really trying to get our new owners on vacation and getting that first vacation booked. And then the third thing is a very proactive approach to improving our servicing and collection efforts. This is better technology, broader outreach, more auto pay. So is it are the actions that we're deliberately taking driving outcomes. The answer is yes.

Next question is coming from Chris Woronka from Deutsche Bank.

So Michael or Erik, I certainly appreciate the kind of mechanics of how your closings of the acquisition of Spinnaker in Q3 impacted your your reported VPG. I guess -- so the question would be, over time, do you guys see an opportunity to kind of close that gap versus your, I guess, legacy CPG. And how should we think about the the timing and potential cadence of that? And then I have a follow-up.

The short answer to that, Chris, is yes. We acquired acquired a business in early Q3, and we're looking closely at what the opportunities are going to be. Interestingly enough, the VPGs on the acquired businesses are about where we were as an enterprise pre-COVID. And you've seen how we've been able to grow those VPGs over time to where they are today from the low 2,000s to the low 3000s, 3,250, 3,350.

So yes, there's clearly opportunity there. We're not going to rush to get there because we're evaluating resort upgrades, broadening the the usage system. And then more importantly, the point system is a new concept. So we want to train up right on that. But absolutely, there's an opportunity to close the gap we're evaluating the way they sell and components that they have that have made them successful until now and maybe there are some things we can incorporate.

But ultimately, it's a great starting point. We see lots of opportunity to grow that business over time. We're focused right now on a world-class integration, ensure that we realize the cost synergies very promptly. And as we start in 2027, we'll get a full year realization of the sales opportunity. But VPG's one of the many opportunities we see with these acquisitions and feel more confident in October of them than we did even when we made the purchases in July.

Okay. That's super helpful. And then my follow-up is a question you're pretty familiar with comes up pretty much every quarter. Anything new that you're thinking about on the travel membership piece. And the reason I ask is, obviously, I think from an industry perspective, we're seeing a pretty decent M&A backdrop despite higher rates. And so I'm just kind of curious whether there's any movement on things that might be a foot that you're considering there? .

Yes. Chris, it's Erik. The T&M business is an important contributor to consolidated EBITDA and cash flow, it helps fund enterprise growth, shareholder returns. We remain open to alternatives and we'll evaluate opportunities when a transaction could unlock greater shareholder value than continued ownership. In the meantime, we are going to try to inflect the revenue curve. We are going to continue to be focused associated with the cost structure of that business to ensure that we're getting a relapsed drop of EBITDA and cash flow out of it.

Our next question is coming from Ben Chaiken from Mizuho.

There's a lot of very helpful commentary in the prepared remarks. I think I caught that you mentioned, Erik, I believe $16 million of cost saves, primarily for '27. This is separate from the portfolio streamlining, correct? Because I think the latter is more maintenance fees, if I'm not mistaken. So assuming this is correct, maybe what brought this opportunity to the surface? And then 1 follow-up.

Yes. So yes, we took out $16 million worth of cost in the Travel and membership business during the third quarter. And more than anything, Ben, this is to further align the cost structure with the revenue trend of the business, fully incorporated into the mid-single-digit expectation on sort of the core business algorithm for 2027. .

Okay. That's helpful. And then now that you have -- yes and and Spinnaker both closed -- how are you thinking about the upgrade penetration across those 100,000-plus owners? Deals we've done in the past of this size what percentage upgrade over time in broad strokes? And how are you framing the opportunity to those customers? Or how do you think someone in their shoes thinks about the opportunity?

Ben unquestionably their ownership are going to see a number of opportunities. I mentioned them, but let me share a little bit more finitely, what those are is -- we are evaluating right now where to put capital into their resorts to upgrade the components of incredible assets, Oceanfront Maui, Ocean front or Waterfront in Hilton Head multiple resorts. They are all places that we don't have locations today.

Our goal is to improve the quality of the resorts, things that have been requested by the ownership base for some time, introduce a points-based product, which was under consideration under one of them and wasn't used by the other. So as we know in the industry, that creates tons of flexibility for the owner base. We're surveying the owners as we speak to get their feedback. And we'll launch our first sales opportunity in November this year. We're not going to go global. We'll focus on a few select sites, get feedback and then adjust from there. So that would -- as we go into 2027, and we've fully integrated our systems to allow sort of ease of transaction, we'll begin deploying that across the enterprise.

So to get to the fundamental question you asked is we've seen those businesses come together across the industry over time, we've seen businesses get acquired over time. I'd be very disappointed if in the next several years, we weren't doubling the size of these businesses, both on the top and the bottom line. We already have a great degree of confidence we're going to realize the cost savings within the 12-month window and as we get to the first quarter call of next year, will have a significant amount of water under the bridge on how our first sales efforts are going and what has taken hold with both our Club Wyndham owner bases as well as the acquired Spinnaker and Yes And businesses.

Our next question today is coming from Ian Zaffino from Oppenheimer.

Just wanted to get into the Tina membership count, it looks like it stabilized this quarter. I mean, any color there. I know there's an acquisition. So -- how do we kind of think about that, where we are now and then also going forward?

So yes, the affiliate member base is relatively stable. As you look at travel of membership over time, the story remains familiar. There's nothing unique in 2026 compared to prior years. Simply that as consolidation has occurred over the last decade in this space. Clubs have gotten bigger and owners are tending to stay within their club more, which means although member count remains consistent, transaction propensity is declining year-on-year.

Our team is making a number of modifications to increase optionality for those members and to reduce friction in transactions. I won't say a lot, but a noticeable investment into the exchange platform to allow self-service booking in 2027, similar to what we've been able to realize with Club Wyndham, World Mark and our apps that we've deployed internally, which have greatly reduced friction in search and book.

Okay. And then maybe if we just stay on this, maybe walk down to the EBITDA line. Anything you could do there to maybe stabilize EBITDA or should we just continue to expect the performance we're seeing now continue like that high single-digit kind of decline?

So let me start and then I'll pass it over to Erik here. The long and the short of the exchange business is what I just mentioned around the consolidation of the industry and therefore, more and more members staying within their clubs to transact, which is understandable. I think what we've been trying to do very aggressively is reshape the business to provide a cost structure that's very aligned to the top line decline, the way you're looking at it in.

And then as well, keep investing in the business to provide better service to the affiliate members. The better the service, the more likely they are to transact. And simply because the top line has been declining for structural reasons, doesn't mean that we're not investing back in the business to create greater optionality for those affiliate members who do want to transact.

And Erik, maybe add a few other comments about the way we're looking at T&M.

Yes. And so Ian, your question associated with what else we can do on the expense line. During the third quarter, we did go through a cost program that impacted roughly 300 employees. We will continue to have a heavy focus associated with what we can do to drive efficiency while that business has got its top line headwind challenges. .

Your next question today is coming from Trey Bowers from Wells Fargo.

This is Nick on for Trey. I just had a question around new owner trends. It seems like that kind of drove the tour growth this quarter. I was just kind of curious, like I'm assuming most of that is coming from the new brands. And I know you talked to how each of these brands, Margaritaville, Accor, Eddie Bauer, Sports Illustrated, they're all at different points in their life cycle. So I guess -- how long do you think of like a tail you have on growing new owner tours and how that plays out with NOG over time?

Thank you for the question. Everything we're doing around extending our brands is about ensuring a long-term outlook on maintaining, first of all, new owner tour growth as well as new owner transactions in the range that we said we want to be in the 30s. That's exactly what we're doing. I remember -- I don't know if it was exactly this time last year, but a lot of the call was around, can you all grow new owners? Are you coming to your end? Year-to-date, our new owner tour growth is up nearly 10%, around 8%.

And with the acquisitions, which are tend to be more new owner mix, with brands just coming out of the ground sports illustrated, totally immaterial to our bottom line results and metrics, but that will change in 3 to 4 years. We are planting the seeds for the crops to grow in a few years beyond what they are today. And if you look at this year's results, we have invested in new owner tours. I just mentioned 8%. We've invested in these new brands that it's slightly compressed margins to just running our core Club Wyndham and Worldmark brands.

And we've been able to growing EBITDA 8%, gross VOI 6% and increased margins in the process by nearly 100 basis points. So every one of the calls, there's these areas that intuitively would say there's pressure, when you look at this year in totality, investing in brands, investing in new owner tours, investing in AI, investing in technology yet maintaining our algorithm and growing margins and improving provisions and the ability to acquire 2 businesses.

So I know I expanded a simple question into something more. But the much shorter answer is we can absolutely continue to grow new owner tours and new owner transactions with the strategy that we've employed.

Thank you. Our next question today is coming from Michael Hart from JPMorgan.

On the third quarter, as you speak to which geographies or segments of your portfolio outperformed and which underperformed your expectations?

It's an extremely fair question in an extremely mundane answer. And the mundane answer is we didn't have weakness in any particular region. We didn't see softness in any particular region. Our core business, our biggest destination, Orlando and Las Vegas, performed very well. the new brand, we opened Nashville, and overnight from when we opened, we saw more tours. You look at our owner metrics as far as how they booked, how long they book, all of that, no noticeable change.

And I think the 1 statistic that a little caught me off guard is people are driving an extra 40 miles to our resorts from the average, which is totally insignificant. But obviously, with all the news and uncertainty going on, our strong quarter, you look for where cracks could be, and we didn't see them by geography, by FICO portfolio remains strong. So it's the right question. We just didn't see any indications from our consumer that weakness is showing up either geographically or metric-wise. And I think Erik is going to add one...

Michael, just when you zoom out on the quarter for us here at T&L, it was just another exceptional quarter. Tour flow was up 7%. Gross VOI sales were up 6%, total revenue up 5%, adjusted EBITDA plus 6% and then compounding down the P&L from there, 16% adjusted net income, earnings per share up 23% or buyback and our spend on buyback this year is up 18%. I think if we wanted to talk about 1 metric that we didn't get deep into on today's call, which is volume per guest, which is down 1% year-over-year.

But if you really decompose performance in volume per guest or VPG, organic VPG was up low single digits and within our guide range we were able to accelerate the closing date of associated with our Spinnaker Resorts acquisition. And by doing that, we generated more revenue, more EBITDA, more earnings, more tours, but slightly more VPG dilution. And I say that only because we're approaching the end of the call, and it's been a fantastic third quarter for us. We're super excited and encouraged by closing out the year.

And just a quick follow-up, if I could. It sounds like the integration of your recent acquisitions are going well. So is there a pipeline for more deals like Spinnaker and -- yes end? And what sort of deal would you take at this point?

It's safe to say that we'll evaluate any opportunities that come our way, both on the VOI side and the travel membership side. We've consistently done that. Since we became public, it ultimately comes down to can the deal be a strategic fit -- and can it be financially accretive. The 2 deals we did are checking both of those boxes. But maybe if I answer it a little differently, our aperture is really opened. It's not just about buying about acquiring traditional VOI companies, not afraid to do that, obviously, with our acquisitions in but also willing to generate new brands with high brand recognition that bring with it an affinity database.

And it's safe to say that Accor, Margaritaville, Sports Illustrated and Eddie Bauer are all world renowned names with existing databases that bring a lifestyle experience for leisure travel. So it's not only about acquisition, it's also about the possibility that's now available to us to grow our brands. that help top of funnel marketing to ultimately get back to the earlier question about our visibility to grow new owners for the long term.

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

Thanks, everyone, once again for joining us today. I'm proud of what our global team of associates has been able to achieve this year. We've delivered outstanding performance in our core business with compounding growth across the P&L. We've acquired 2 businesses, optimized our resort portfolio and scaled our multi-brand strategy, all while returning meaningful capital to shareholders in preserving balance sheet flexibility. These actions improve the quality of the enterprise and position us for sustained growth and shareholder value creation. Erik and I look forward to seeing you at upcoming conferences and eventually on our next call in February. Have a great day, everyone. .

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

All right. I think we can go ahead and get started. It's right at 9:15. So good morning, and thank you so much, everyone, for joining us here at this next session at the Goldman Sachs Retail and Consumer Conference. So my name is Lizzie Dove. I cover gaming, leisure and lodging here. And it is my absolute pleasure to welcome Erik Hoag, CFO of Travel + Leisure; and Andrew Burns, Vice President of Investor Relations. So thank you so much for taking the time to be here. We really appreciate it.

Lizzie, thanks for having us.

Yes. So let's start off. Of course, there's always the quarterly puts and takes, but just kind of stepping back for a second, T&L has been very consistent, been consistently a mid-single-digit EBITDA grower. EPS has been in the double digits. You have recently done a couple of acquisitions. And so when we kind of step back for a second and think about the next 12 to 24 months, how do you think about the sustainability of that algo? And with these acquisitions, has anything or anything else has anything structurally changed at all in that outlook?

Well, thanks for having us, Lizzie. Maybe I'll just zoom out a little bit and talk about our performance year-to-date. I think that that's maybe just to ground everyone in terms of how we're doing. In the first quarter, we outperformed our sales above the high end of our guide. In EBITDA, we outperformed the high end of our guide. In our second quarter results, revenue grew 4%, EBITDA grew 8%. Earnings per share was up 14%, again, sales above the high end of our guide, EBITDA above the high end of our guide.

And then maybe even more interesting in terms of the first 6 months of the year, Lizzie, than the P&L or equally as important is what we've done from a balance sheet and capital allocation perspective. We've increased our dividend by 7% year-over-year. We've increased share buybacks by 25% first half to first half. We've reduced our leverage by 1 quarter turn. And to your point, in the month of July, we added in 2 tuck-in M&A transactions. So we've had a great start to the year.

In terms of the algorithm, to your very specific question, we're already living inside the algo. Our algo is sales growth of 6% to 8%, translating into mid-single-digit EBITDA growth and teens EPS and converting roughly 50% of that EBITDA into free cash flow. So over the next 12 months, we are absolutely focused associated with continuing to execute against the core algo. We want to integrate our M&A transactions. We've got a heavy focus associated with launching our new brands. All of that under the umbrella of continuing to be thoughtful allocators of capital to our shareholders.

Definitely. And there's a lot of interesting points you made there that I certainly want to come back to. But maybe before we go into some of the segments, I'd love to hear -- we're at the consumer conference. We're going to hear from a lot of different consumer verticals here. I'd love to hear from you, from your vantage point, what do you think about the health of the consumer right now? And as we've kind of progressed over the summer, there's been some puts and takes this year. Tax refunds, good guy; higher gas prices, bad guy. What are you seeing -- has there been any kind of divergence between cohorts or anything that you kind of call out as we kind of go into this back-to-school season?

Yes. When I think about Travel + Leisure, our consumer continues to perform pretty well. So again, zooming out a little bit, whether you go back to Liberation Day during the second quarter of 2025, where, again, we sort of outperformed the guide numbers that we had in that period. Whether you go back to the first part of this year when things opened up in the Middle East or look at the summer, we continue to perform on top of a choppy macro, but our consumer continues to be very durable.

And then if you look at some of the KPIs sort of under the hood at Travel + Leisure, whether it's length of stay, our booking window, the distance travel to our resorts, tour flow. We continue to see positive tour flow. We continue to see guests arrive at our properties, tour and purchase our product.

Yes, definitely. And I think one of the kind of selling points also of -- just timeshare generally as an industry has been that it's pretty resilient overall. It's kind of prepaid vacations and so can weather the storm a lot easier usually. Could you maybe talk a little bit about that of just, a, if the macro does worse and how you think about levers? And b, now there's a lot of talk about rates and timeshare is an industry that maybe is not totally positive correlated with that. And so I would love to hear your kind of thoughts there.

Yes. So in terms of levers and things that we could do, number one, I would come back and say we continue to perform on top of choppy macro environment. I think the value proposition of our product where it is a prepaid vacation where roughly 2/3 of our transactions go to existing owners versus new owners, we create a value proposition for our consumers that's very attractive. And when things do get a little bit more expensive for them, they have the fallback to be able to visit our properties, enjoy vacation, very low cost. And again, what that does for us is it gives us the opportunity to get them on tour and potentially upsell those customers.

In terms of levers that we have if things were to get much more protracted, again, I would look at whether it's Liberation Day or the GFC or COVID, the Travel + Leisure business has continued to perform extraordinarily well. But we've got a number of levers that we could pull. We could certainly look at marketing and demand quality. We could look at timing associated with our development projects. We could look at consumer financing in terms of promotions or pricing. And then obviously, the last thing would be we can look at cost. But those are things that we haven't had to take into our purview because the business has performed so consistently over time.

I was going to say we're certainly not there yet. And you've been kind of consistently, as you said, growing VOI around 6% to 8%. And it's interesting because like there's been this debate of what's the right level of tour growth versus VPG growth and the kind of puts and takes there. And obviously, the resort optimization may be slightly complicated things there. But how do you think about that balance longer term going forward?

Yes. I think you used the right word. It's balanced. VPG, tour flow, both super important metrics for us. At the end of the day, we're looking for qualified tours, and we're looking for exceptional sales execution. And in some years, you might see us move new owner transactions up a little bit, which puts a little bit of pressure associated with VPG. And then in other years, you'll see the opposite. But for us, it's really all about having a balanced approach to the business.

Yes. And with that 6% to 8% that you have been doing, it sounds like it's still your target, does tour growth need to accelerate to get there? Or can it be more kind of VPG driven over time?

I think about the long-term 6% to 8% really is having positive tour flow, Positive tour flow with a mix roughly of 1/3, 2/3 between new owners and existing owners.

Yes. okay. On that topic of the new owners versus existing owners. So Q2, I believe your new owners, at least as a percentage of the mix, they accelerated again. And so when you're now here, I think, still in the kind of low 30s range, is that the right place that you want to be? Or is there kind of a drive or a need to kind of move higher to that over time?

Yes. I'll come back and point back to the 2/3 -- 1/3, 2/3. The 1/3, let's say low to mid-30s, allows us to continue to sustain the model and feed the top of the funnel with new owners. One of the great things about our business, Lizzie, is that we have found that when we capture a new owner, we will typically upgrade them 2.5x over the first 10 years of their ownership. So 2/3 of our transactions come from existing owners, but continuing to feed the top of the funnel and get that healthy upgrade cycle going on new owners is also very important.

Makes sense. Makes sense. And has anything changed about that over time? And as you think about getting back to right at that 1/3, like the real 33%, is that something that we should be watching out for as kind of how we think about how that translates in the mix in terms of VPG?

I would say it hasn't really changed over time. I think the 1/3, 2/3 is the right place to be. Again, it feeds the funnel. Again, when you do see us in periods where new owner mix is a little bit higher, new owner transaction purchase price -- average purchase price a little bit lower. So it does put a little bit of pressure on VPG. But again, the word of the day associated with VPG and tour flow is really about ensuring that we have balance.

Yes. Makes sense. Makes sense. Let's switch gears and think about resort optimization. You announced that kind of earlier in the year and by all accounts seems to have been incredibly successful. Before we kind of get into what you've done so far there, I'd love to hear, are you done post of it? Is this -- was this like kind of a one-and-done situation? Or are there other kind of pockets of opportunity of other resorts where you could maybe kind of optimize the portfolio over time?

Yes. So the resort optimization initiative for those maybe new to the story was an opportunity where Travel + Leisure went in, and we took 17 properties out of the network. These are properties that are a little bit older. The occupancy was a little bit lower, customer satisfaction a little bit lower. And then there was some deferred maintenance that needed to be done, more than just your typical deferred maintenance, but a little bit heavier deferred maintenance. And so we took them out of the network, and it did a couple of things to the P&L. There were some sales centers there, so we expected sales to step back, which it really didn't do. Property management fees went down as we didn't have staff and we had 17 less resorts. And then we had lower carry costs. So these are properties that also had inventory, which meant that inventory on our balance sheet and carry costs that ran through the P&L.

So the 17 resorts coming out top graded the portfolio a little bit. And then you mix in 23 properties associated with M&A, and I'm sure we'll get to M&A here later on. But the portfolio at T&L from January to the end of the year has transformed quite a bit. We've taken out the 17 with resort optimization, and then we've done some M&A that's added in 23 resorts. So coming to your question, are we done with it? I think the 17 resorts was a little bit of a catch-up in 2026. I think we'll always be thoughtful around making sure that we've got a very attractive portfolio for our owners top to bottom.

Yes. And where are you in that process with the resort optimization? And has there been anything that's kind of surprised you as you've kind of been going through that over the last 6 or so months?

Yes, it's predominantly done. We've got the cost out in 2026. I think the one thing that has surprised me is the resiliency of the sales organization. So when we guided to the full year back in February, we had talked specifically about there being roughly $100 million sales headwind associated with these sales centers that were -- that we are taking out of the network. But as I mentioned, in the first quarter, we had sales that were above the top end of the guide, second quarter sales above the top end of the guide. Our sales organization is operating at a very high level right now. And despite those fewer sales centers, we're actually operating inside the long-term algo for sales.

Yes. So it sounds like productivity higher, maybe redirection of sales even without all of those kind of...

That's right.

Yes. Okay. Awesome. And then acquisitions. You kind of alluded to it earlier. The 2, the Yes& and the Spinnaker that you announced a couple of months ago. It seems like it's more tuck-in M&A, although it's not small by any means. I think it's increasing your owner base by around 10% or so, if I'm not wrong. And so could you maybe remind us like how to think about or how you thought about the strategic rationale and why these 2 assets specifically made sense?

Yes. So it's really the first M&A of consequence since spun out from Wyndham in 2018. There was a couple of things that were important to us as we started to look at M&A. Number one, we were looking for transactions that were going to be immediately accretive, immediately incremental to our financials. Second, we were looking for an owner base. To your point, pre-acquisition, we had about 800,000 owners. The 2 transactions brought 100,000 new owners with them. So immediately accretive, an owner base that we can upsell and monetize. The third thing was locations, right? One of the transactions brought us Hilton Head Island that we weren't in and the other transaction brought us on the West Coast, Maui, which we weren't in as well. So they were accretive to our map.

The fourth thing that we looked for was transactions that had low risk of integration or maybe even said a little differently, Lizzie, high confidence in terms of value realization. And I think we found those with these 2 transactions. And then the last thing was transactions that had very little balance sheet intensity. So these 2 transactions, it's about 0.2 of 1 turn of leverage. So these 2 transactions, they passed every one of the criteria, accretive, approximately $50 million of incremental EBITDA in the first year, 100,000 owners, resorts that we did not have footprints in, integration complexity, very low and roughly 0.2 of 1 turn of leverage.

Makes sense. And you mentioned the $50 million of incremental EBITDA in year 1. I'm curious how you think about both just short or medium term of kind of the revenue synergies and the cost synergies, but also just longer term, I imagine there's a big kind of owner upsell kind of opportunity there. So could you kind of walk us through how you think about that and how that could phase over time?

Yes. I think you framed it really well, Lizzie. I think that there's 3 pieces to it. There's the base case associated with the 2 companies. We're going to continue to sell the arrivals that come. We're going to continue to try to upgrade the existing owners. The second thing would be the operating expense synergies that we believe we can get out. It's really these first 2 things that aggregate to the $50 million. Again, high confidence of delivery, let's call that the base case. And then this third piece over here is the long tail of owner upgrades, which, again, I'll come back and say that Travel + Leisure has got a pretty predictable pattern of being able to upgrade a new owner, about 2.5x over the first 10 years of ownership. We've now got 100,000 owners that we can begin to sell into the network. And that's really the important point is instead of having a fixed unit in Hilton Head or Las Vegas or Maui, they now have the ability to enter into the network where they can use the entire 300 resort footprint across Travel + Leisure and instead of it being a fixed week, they can travel when they want to and effectively where they want to.

Yes. Makes a lot of sense. And as you said, it's been a while since T&L has done kind of M&A like this. And so when you're thinking about that propensity to upgrade and the kind of integration process, like what gives you the confidence of that? And even since you've announced it, I know it's early, but could you give us an update of kind of where you're at in that cycle?

Yes, it's gone well. So it's been about 6 weeks. We are in the process of really ensuring that the employees feel upbranded under T&L. As we move deeper into the budget season, I think that third piece around what the incremental upgrade opportunity could look like is going to become more and more in focus. But the reception has been great from an employee perspective. The reception has been great from an owner perspective, and we're certainly excited about it.

Yes. And we see you have this kind of multi-brand strategy. And it's been by all accounts, I think, very successful in what you've been able to do with Margaritaville, for example, and Accor. And I think it's now a pretty big piece of your overall business. I think it's around 10% or so. Where can that go over time? And how do you kind of think about that?

Yes. So Travel + Leisure, we operate under 6 brands. And if you think about the 6 brands, I might break them up into 3 different categories. We've got 2 legacy brands, which is Club Wyndham and WorldMark. The majority of our sales come here, continues to perform extraordinarily well. We've got 2 growth brands that over the last 3 or 4 years have continued to perform extraordinarily well. This is Margaritaville and Accor Vacation Club.

And then we've got 2 emerging brands. This is Sports Illustrated and Eddie Bauer. And I think what makes us feel really comfortable and confident in the longer-term algo is that we're going to run the same playbook for Sports Illustrated and Eddie Bauer that we ran with Accor and Margaritaville.

Yes.

So we introduced a percent of revenue for those 4 brands, the 4 being Accor, Margaritaville, Sports Illustrated and Eddie Bauer. And I think that as we move deeper into 2027, you're going to see that number grow.

Yes. And if you think about the kind of economics or even just the demographics of these different brands, like how should we think about that? And is it vastly different one brand versus another? And when you add a brand, does that kind of really broaden your kind of demographic? And I was just curious like the real key differences and how that kind of shows up in the economics of it all.

Yes. So what we're trying to do is we're trying to widen -- trying to grow TAM. I mean at the end of the day, we're trying to find brands with consumer affinity that we can widen the top of the funnel. So coming back to some comments early on, roughly 1/3 of our transactions go to new owners. And as we think about Sports Illustrated and Eddie Bauer and Margaritaville, we are trying to attract a new owner, a different demographic, a younger demographic because we do believe it's a differentiated product. And at the end of the day, what we really want is a wider TAM with more owners.

Yes. Makes sense. So maybe we pivot a little bit to provisions for a second because it feels like that was -- it's been a huge topic for the industry. And what you said at Q1 got a lot of focus and then things really seem to improve a lot at Q2. And so stepping back a bit now what you've seen now 9 months into the year, I guess, was Q1 just noise? And how do you kind of feel about where things sit today from a provisioning standpoint?

The first quarter, I would say, was more about transparency than alarm. I think that's what I would say about the first quarter. In the second quarter, we saw our delinquency rate move back to the seasonal curve plus some. So about double the benefit or double the change from 12/31 to 6/30. So we saw that improvement. And what we've seen over the last 2 months, the first 2 months of the third quarter is very consistent with what we said in the second quarter call.

Yes. Perfect. And then -- so I think you're, all else equal, going to be in that kind of 21% range when all is said and done this year. And I think you've been consistent in saying that upper teens is maybe the longer-term kind of goal. Is that still true today? And how do you -- what are the kind of moving pieces that gets you to that kind of upper teens level?

Yes. So a couple of things. So I mentioned early-stage delinquencies. But if we actually pivot over to the loan loss provision, we guided to be down year-over-year. So -- we did that in February. In April, we guided to be down year-over-year. In July, we guided to be down year-over-year. Here in September, we're guiding to be down year-over-year. So we've got a very consistent message associated with the provision.

We're doing a couple of things to help drive it down. Number one, we've got a tremendous amount of focus associated with credit quality at point of sale. As you'd expect, we've got average FICOs as of 6/30 of about 740. We've got an average household income of about $130,000. We continue -- maybe that's the first thing. The second thing is we're maniacally focused associated with owner engagement when we secure a new owner that we want to get their first vacation booked very quickly. Most of our purchases come while they're on vacation. So it's important that we get them back their next vacation scheduled. And then the third thing, quite frankly, Lizzie, is we're trying to improve the servicing and collections processes within the organization. I think that those are the 3 things: Credit quality at the front, owner engagement and operational excellence.

And correct me if I'm wrong, but I think the recent acquisitions maybe carry like a slightly higher provisioning rate. And so how do you think about that? Is there a path to kind of as you integrate those brands, then kind of moving them closer to kind of what legacy T&L kind of provisioning rate is? And what is the process for that kind of look like?

That's exactly right. So we will provision at the point of sale based on the demographics of the customer that's sold. And over the next several quarters, as we continue to integrate these businesses into our underwriting, into our servicing and into our collections environment, we would expect that the provision on the acquired portfolios to mirror the provision of HoldCo -- of T&L.

Yes, over time. And then we've touched a lot on the kind of Vacation Ownership segment. Maybe we'll just spend a moment on Travel and Membership, which not a surprise to anyone has faced some kind of structural challenges, the reasons that are very well flagged like across the industry. How do you think about that long term? Is the goal to kind of find levers, whether that be cost-wise or anything else to kind of stabilize that business? Or is there kind of more of a structural different solution on the table over time?

Yes. So maybe even zooming out a little bit. So the Travel and Membership business has got 3.3 million subscribers. So we've got scale to begin with. The business is -- we guided the business to be down roughly double digits at the start of the year. And that's generally where we've moved. In terms of a couple of things that we're working on, we're trying to create value for those 3.3 million subscribers, right? These are people who have got timeshare points, and we want to ensure that we're creating value for them. Late last year, we created a way where these timeshare vacationers could redeem their points for cruise vacations, for example. So trying to increase the selection of things that they could redeem their points on is one thing. And then the second thing, Lizzie, is as this business continues to have headwinds at the top line, we continue to be very focused associated with how much -- what we're doing on the cost side and on the investment side, trying to be very thoughtful there.

Yes, makes sense. So if I kind of -- before we get into some of the kind of capital allocation and balance sheet questions, but if I kind of sum up everything I've heard from you, and I don't want to put words in your mouth, but what I'm hearing all sounds very good. We've got M&A that's going to be coming through the system, loan loss provisions that there's space for that to kind of go lower over time. There's the benefit from kind of resort acquisition. And so it feels like that's a lot of tailwinds as we come into 2027. Would you agree with that? Or are there other kind of puts and takes when we kind of think about, again, the drivers of that algo that would be kind of an offset, I suppose?

No, I would agree. I think the business has got a lot of momentum. So whether you look at '25 or you look at '26, some of the macro things that have occurred, the business has continued to perform very well. We continue to add to the owner count. We continue to focus on thoughtful capital allocation, to your point. We're very focused around the quality of the resort footprint that we have, whether it's through resort optimization initiative or through M&A. I think about 2027 very much like living inside the algo with the benefit of some M&A.

Yes, totally. What about from a margin perspective, I feel like your margin growth has also been fairly consistent over time, is there any kind of low-hanging fruit left? Or where are there opportunities as you think about where that kind of margin goes over time?

We're living in the mid-20s right now. I think that that's a fair place for -- as you're thinking about 2027, I think that that's a fair place to be.

Yes. And then on the cash flow side, I think that's also somewhere you've been very consistent at the kind of, call it, mid-50 or 50-or-so percent range in terms of conversion. As the business mix evolves, maybe there's a benefit of scale, you kind of work through some of this inventory, is there a reason that couldn't move a little higher over time? Or how do you kind of think about that? What are the key kind of swing factors, I suppose?

Yes. I think -- first, I think 50% is a fair place to be, roughly half. Last year, we were at 52% free cash flow conversion. I think roughly 50% or half is the right way to be. The swing factors, development spend, working capital, consumer finance, we've got a couple of things that swing one way or another. But more than anything else, Lizzie, I don't want to constrain development spend to try to hit an in-period conversion rate. We've got a very disciplined approach to capital allocation, and I think 50% a fair place to be over the cycle.

Yes. And on those swing factors, inventory has been a topic, I think, ever since we moved through COVID for the industry. Where would you say you're at now? Are you kind of back to the kind of level that you want to be from an inventory perspective?

I'd say 3 to 4 years of inventory right now. I would say aspirationally, maybe closer to 2 at the brand level.

Okay. Yes, makes sense. So let's kind of tie all this together and just from a balance sheet and capital allocation perspective. So as you kind of said earlier, this has really been tuck-in M&A. And you've been able to do that without really slowing down the buybacks at all and you've been able to delever over the last few years. And so sitting here today, I guess, how do you think about that over time? Is there -- is this kind of the right algo from a buyback perspective, for example? Or is there a room for that to change over time?

Yes. So from a capital allocation perspective, maintaining a healthy balance sheet is priority #1. We ended 2025 with leverage right at 3x. We want to continue to pay an attractive dividend. We increased our dividend by 7% earlier this year. I think we're yielding right around -- or between 3% and 4% from a dividend yield perspective. And then beyond that, Lizzie, quite frankly, we will allocate our capital to the projects that drive the highest incremental return to us, the highest risk-adjusted return. I do think about the implied return on buybacks as being our current free cash flow yield plus the longer-term EBIT growth rate. So if you think about those 2 things, you're talking about somewhere in the 16% to 18% implied buyback returns. So we've got a pretty high threshold associated with that. And you're seeing that manifest in terms of the concentration of our dollars that are going to buybacks.

Our weighted shares outstanding are down 6% year-over-year. Buybacks are up 25% year-over-year. So we'll continue to evaluate M&A and alternatives. But right now, the buyback -- sort of the implied buyback return is very attractive.

Yes. And I was going to ask about M&A because obviously, you've recently just done these acquisitions. Does that kind of put M&A on hold for a while? Or for the right opportunity, would you be willing to do more and maybe even lever up a little bit for something?

Listen, we are maniacally focused on ensuring that we get integration right on the M&A. So I would certainly expect us to be focused on that for the next several quarters. And then beyond that, I'll bring it all the way back to we're going to look at risk-adjusted returns for all the alternatives we've got to capital deployment.

Makes sense. So right at the end, I'm going to ask a few kind of rapid fire questions that we're asking all of our consumer and retail companies here. But before that, maybe just let's tie a bow on all of this great insight that you've given. And I like to ask this question like if you and I were sitting here, hopefully, a year from now or 2 years from now, what would you say is the kind of goal before you get there? And where would you think is the highest scope for kind of outperformance versus expectations?

What I would say, Lizzie, is we don't have nor do we need a big bet. So if you think back at just some of the things that we've even covered today, I believe the core algo is going to continue, right? We've lived inside the algo for some time now. So the core algo continues. We could potentially have outperformance associated with the M&A. We could get a faster ramp associated with our multi-brand strategy. We could curtail the loan losses on the portfolio. We could stabilize the Travel and Membership business. We've got an entire suite of potential tailwinds associated with the business right now. So if we're sitting here 3 years from now, and we've wildly outperformed the algo, I think it could be one or all of those.

Yes. Makes sense. All right. Let me hit you with some of these rapid fire, if that's okay. So starting off, health of the consumer. What would you -- what are your expectations for the environment, both in the second half of '26 and as we move into '27 relative to what you've seen year-to-date? Would you expect it to be better, worse, same? How do you think about that?

I think it's pretty steady on the T&L side.

Yes. Yes. And that's second half and '27 steady for both.

Second half, for sure. We're starting the '27 budget process in earnest right now.

Yes. And then AI, how much are you kind of using that? And do you expect your efficiency as related to AI to increase? Or it doesn't move the needle for you next year?

No, I think broadly speaking, AI is going to be a tailwind for us. The tailwind composition of '27, probably not as much. But I think that we've got some things in the pipeline right now that will be accretive.

Okay. And then last one, as it relates to margins, do you see more margin headwinds or tailwinds as you look into 2026?

I think about margins as relatively stable in 2027 vs 2026. We'll have fully rationalized and taken the benefit of the resort optimization initiative by the time we've turned the calendar over, but I think margin is relatively stable.

Okay. Great. That's a great place to end it. Thank you so much, Erik and Andrew. Really appreciate you being here, and thanks for a great session.

Thanks for having us.

Yes. Thank you.

Greetings, and welcome to Travel + Leisure Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Andrew Burns, Vice President, Investor Relations. Please go ahead.

Thank you, Donna. 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 also find a reconciliation of non-GAAP financial measures discussed today in the earnings press release available on our Investor Relations website. Please note that all references to EBITDA, net income, earnings per share, free cash flow made during this call are on an adjusted basis as disclosed in our earnings press release today. Additionally, all references to earnings per share on a diluted basis.

This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our results and our 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'll 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. Our strong second quarter and first half results demonstrate consistent execution and the durability of our business model. Healthy owner trends and robust travel demand translated into recurring upgrade sales, increasing new owner sales, predictable cash flow and meaningful capital returns. I want to thank our associates across Travel + Leisure for delivering the exceptional vacation experiences that are the foundation of our success.

The sustained momentum we have in our business is clearly reflected in the first half results. Revenue growth, combined with EBITDA margin improvement and our shareholder-friendly capital allocation approach, fueled compounding growth across the P&L. Gross VOI sales, the core engine that drives multiple predictable revenue streams, increased 7%. EBITDA grew 9%, fueled by 120 basis point improvement in EBITDA margin. Earnings per share were up 21% year-over-year as share repurchases amplified per share economics.

Through the first half of the year, we've returned $253 million to shareholders through dividends and share repurchases. We've been able to reduce our common shares outstanding by 4%, reflecting our ongoing commitment to disciplined capital allocation.

For the quarter, we generated revenue of $1.06 billion and EBITDA of $269 million. Gross VOI sales increased 6% and was above our guidance range, supported by high-quality tours and strong owner engagement. Volume per guest also exceeded plan at $3,318, up 2% year-over-year.

Our consumer remains healthy and continues to prioritize travel. First half arrivals adjusted for strategic resort closures increased year-over-year, and forward bookings give us clear visibility into continued growth in the second half.

Key booking metrics also remained strong. The booking window was 109 days and average length of stay was 4 days, both at or above prior year levels. Together, these trends reflect the health of our owner base and the value proposition of our products.

Overall, this second half visibility, combined with our strong first half performance, gives us the confidence to raise our full year EBITDA, Vacation Ownership sales and VPG outlook. Our updated guidance also reflects the expected accretion from the acquisitions of Yes& Vacations and Spinnaker Resorts, which we announced last week. These acquisitions add high-quality resorts and high-demand vacation destinations, increase our owner base and are immediately accretive to earnings. Let me share with you the strategic benefits in more detail.

These acquisitions add 23 resorts, including 6 properties in Hilton Head and 7 in Maui. These are highly sought after leisure destinations where new development is challenging. This more than offsets our recent strategic resort closures, demonstrating our commitment to proactively grow our network while improving the quality, reach and relevance of our resorts. Adding premier destinations through acquisitions and development, while removing older, lower demand properties enhances our owner value proposition and supports long-term growth.

We were also adding over 100,000 owners, expanding our owner base by more than 10%. These owners are similar in age and average income to Travel + Leisure's owner base, and approximately 80% of them have fully paid off their timeshare loan. Adding these owners create a larger embedded audience for future upgrade activity, particularly as we introduce these owners to our broader product set and flexible points-based system.

From a capital allocation perspective, these acquisitions clear our returns-based thresholds and offer attractive long-term return profiles and immediate accretion. The size of these transactions preserves our balance sheet flexibility and allows us to maintain our capital allocation strategy, including dividends and share repurchases.

Importantly, we believe these deals have low integration risk. They are well-run platforms and well -- with established owner bases, existing resort operations and familiar business models. We can preserve what is working locally while thoughtfully bringing the businesses onto our platform, which lowers execution risk and allows us to integrate at the correct pace.

During the second quarter, we continue to make meaningful progress scaling our multi-brand strategy. Margaritaville is on track to exceed $150 million in annual VOI sales. Accor Vacation Club sales remain on track to nearly double in 2026, and Eddie Bauer Adventure Club sales are meaningfully exceeding our expectations. Sports Illustrated Resorts is also progressing with our Nashville resort opening in the third quarter and sales already underway at our new sales center.

Each brand gives us a distinct way to reach new travel profiles while leveraging the scale, sales expertise and offering platform of travel and leisure. Combined, VOI sales from these brands remain on track to approach 10% of our sales mix this year.

Our multi-brand strategy is grounded in a simple but powerful insight: consumers increasingly choose leisure travel that reflects who they are and how they want to spend their time. Whether it is a toast in the sand, drink in hand, the energy of Margaritaville, or the excitement surrounding Sports Illustrated Resorts and FEC football weekends, these brands create more personal and emotional connection with travelers. That is what makes the strategy so compelling. And the measurable progress we are making gives us confidence that it is developing as we originally envisioned.

We are also investing in digital infrastructure to support this strategy. We recently launched the Margaritaville app, giving owners a more seamless way to engage with the brand. This is another milestone in advancing our broader digital road map, which is designed [ in ] owner search plan, book and travel through digital channels. By way of example, the award-winning Club Wyndham app, which we launched less than 2 years ago, now represents more than 30% of total club bookings.

Turning to the resort optimization initiative. It continues to perform exceptionally well. As a reminder, this initiative involves removing a small number of aging, lower demanded resorts to strengthen the overall system for our club HOAs and owners and improve the financial health of Travel + Leisure. We are realizing the expense savings that we expected as part of our resort optimization initiatives and, to date, stronger conversion and VPG have more than offset the loss tour volume from closed sales centers, allowing us to maintain our VOI sales growth rate.

To close, our results reflect exceptional execution and reinforce the strength of our model. We are entering the back half of the year with clear visibility into continued growth. At the same time, we are investing in areas that will extend our growth runway, including scaling our multi-brand strategy, enhancing the quality and reach of our resort portfolio and improving the owner experience through digital innovation. All of these factors support sustainable long-term growth and give us the confidence to raise our full year EBITDA, Vacation Ownership sales and VPG guidance.

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 start with our enterprise performance, then discuss our operating segments, capital allocation, our balance sheet and, finally, our outlook. Starting with enterprise performance.

We delivered another strong quarter, generating revenue of $1.06 billion and EBITDA of $269 million. Compounding was evident across the P&L. Revenue grew 4%, EBITDA grew 8% and earnings per share grew 14%. EBITDA margin expanded 70 basis points, reflecting healthy operating leverage across the business.

We believe the quality of our earnings is just as important as the quantity. Once again, those earnings translated into free cash flow, allowing us to continue investing in the business, return meaningful capital to shareholders, execute accretive acquisitions and maintain a strong balance sheet.

Turning to the Vacation Ownership segment. The business continues to perform well across key operating metrics. Gross VOI sales increased 6% to $693 million, segment revenue grew 6% to $907 million, and segment EBITDA increased 13% to $247 million, reflecting healthy demand, continued strength in volume per guest and the ongoing benefits of our resort optimization initiative.

Tours increased 1% during the quarter, reflecting solid demand and new owner acquisition. New owner mix was up slightly year-over-year with healthy new owner transaction volume and close rates.

Our inventory position continues to evolve favorably. We're exiting older, lower demand resorts through our resort optimization initiative and improving the quality of our resort network through new brands and recent acquisitions. The result is a stronger network, a better owner experience and a higher-quality business.

Credit performance in the quarter remained consistent with our underwriting standards. Weighted average FICO scores at origination remained above 740, and down payment levels have improved year-over-year. Our loan provision rate was flat year-over-year and delinquency rates improved sequentially from the first quarter. These results reinforce what differentiates our Vacation Ownership business: a large, engaged owner base, attractive unit economics and multiple avenues for long-term growth, the compounding engine we outlined at the start of the year.

Turning to Travel and Membership. Second quarter revenue declined 5% to $157 million, while segment EBITDA declined 11% to $49 million, reflecting the continued evolution of our exchange business. Our focus continues to be on stabilizing the long-term earnings profile and free cash flow generation of the business through operational improvements, new strategic partnerships and digital initiatives.

Moving to capital allocation, which continues to be one of our highest priorities. We continue to operate against the framework we set in February: invest in the core business, return capital to shareholders through dividends and repurchases, and pursue opportunistic M&A when returns are clearly superior to buying back our own shares. During the quarter, we repurchased approximately $88 million of common stock, an increase of 25% from the prior year, while continuing to pay our quarterly dividend.

Subsequent to quarter-end, we acquired Yes& Vacations and executed an agreement to acquire Spinnaker Resorts. These transactions reflect exactly what we look for: attractive financial returns, high-quality owners that we can upgrade over time, receivables that we can securitize, resorts that enhance our portfolio, recurring management fee streams and businesses we know we can successfully integrate.

The financial math on these transactions clears the framework by a meaningful margin. We're investing approximately $340 million to acquire businesses expected to generate about $50 million of EBITDA on a full year synergized basis. After securitizing roughly $80 million of finance receivables, our net capital deployed falls to about $260 million, resulting in a net investment multiple of approximately 5x EBITDA. The transactions add approximately 0.2 per 1 turn of leverage, and we expect to end 2026 with leverage of 3.2x.

Importantly, our share repurchase program will continue. We expect a similar level of buybacks in 2026 compared to 2025. These transactions were funded through cash and existing debt capacity and do not require any change to our capital return commitment. We're excited to welcome both organizations to Travel + Leisure and look forward to updating you on our integration progress in the quarters ahead.

Turning to the balance sheet. We ended the quarter with a strong liquidity position and leverage below 3.2x, down from 3.4x in the second quarter last year. Liquidity remains strong with over $1.2 billion of available capacity across cash on hand and our revolving credit facility. Earlier this week, we completed our second ABS transaction of the year, raising $300 million at a 98% advance rate and a 5.52% coupon. Overall, our balance sheet continues to provide significant financial flexibility to support investment in the business, shareholder returns and future investment opportunities. Our financial flexibility is a competitive advantage.

Moving to the outlook. We are raising our full year guidance for 2 reasons: stronger-than-expected operating performance across our core business and the expected contribution from the acquisitions of Yes& Vacations and Spinnaker Resorts.

Starting with the core. Our first half performance exceeded our original expectation, driven by strong execution, healthy owner demand and continued strength in volume per guest. Excluding acquisitions, we now expect full year EBITDA to be between $1.05 billion to $1.065 billion.

Turning to the acquisitions. We expect Yes& Vacations and Spinnaker Resort to contribute $15 million to $20 million of incremental EBITDA during 2026. Combining the stronger outlook for the core business with the expected contribution from the acquisitions, we now expect full year gross VOI sales of $2.6 billion to $2.675 billion and EBITDA of $1.065 billion to $1.085 billion.

In our consumer finance business, we still expect our full year provision rate to be modestly below prior year levels before the impact of acquisitions. Including the provision on sales from our recently announced acquisitions, we now expect our consolidated loan loss provision rate to be approximately 21%.

Additional guidance assumptions include a full year adjusted tax rate of approximately 29%, free cash flow conversion of roughly half of EBITDA and year-over-year EPS growth of approximately 20% supported by EBITDA growth, deal accretion and share repurchases.

For the third quarter, we expect gross VOI sales of $700 million to $740 million, EBITDA of $275 million to $285 million and volume per guest of $3,300 to $3,350.

In closing, the business continues to perform as designed, and our updated outlook demonstrates the momentum we're seeing in the business. At the same time, we're not standing still. We're deploying capital to make our company even better.

Our investment thesis remains straightforward and continues to be grounded in 4 characteristics. First, a compelling consumer value proposition that continues to attract new owners while deepening relationships with our existing owner base. Second, a recurring demand business model that generates durable earnings, cash flow and visibility. Third, multiple growth drivers, including our multi-brand strategy and strategic acquisitions that continue to expand our growth runway. And finally, a strong free cash flow and capital allocation framework that's focused on compounding long-term per share value. That's the business we're continuing to build and why we remain confident in our strategy and our ability to create long-term per share value.

Donna, we can now open the line for questions.

[Operator Instructions] Today's first question is coming from Patrick Scholes of Truist Securities.

I'll start out with a high-level question, being that you're the first sort of greater lodging company to report. Mike, just give us your latest thoughts on state of your consumer, how is -- just in general, thoughts around that. And then I'll have a follow-up question for you, Erik.

When we closed out Q1, we were pretty clear that our consumer remained committed to vacations. The metrics supporting them both behaviorally and economically were strong. And as we're 90 days later, nothing's changed in that outlook. When you look at our booking patterns, our forward bookings, length of stay, distance travel to get on vacation, all those are remarkably consistent from what we saw in Q1, in April. You can see through our new owner business, that ticked up. Tours and transactions as well as our owner VPGs being above the range. The economic side of our measurement remains very consistent and very strong.

So as we get to getting toward the end of our summer season, we're very pleased to be moving through Q2 and into Q3, the 2 highest quarters of the year with very strong demand from the consumer. And we've not seen anything in our metrics that would indicate there's a weakening occurring. So consistent and strong.

Okay. And Erik, let's talk just a moment on trends in the loan loss provision. Certainly in 1Q, there had been some concerns about a very modest uptick in the early-stage delinquencies. Can you kind of walk us through what's the latest in 2Q and how that has been trending, as well as any other granular thoughts and observations in the loss provision and just trends around that?

Yes, Patrick. So maybe zooming out a little bit on the consumer finance book, and I'll first maybe start with the point of sale. And I mentioned it in my prepared remarks, but the point-of-sale underwriting remains very consistent. It remains very disciplined. We have had FICO scores that have averaged in the 740 range. Down payment rates have moved into the mid-20s. So I think the punchline associated with point-of-sale underwriting remains consistent and disciplined.

Moving on to early-stage delinquencies, you're right, in the first quarter, we talked about a roughly 20 basis point sequential increase in early-stage delinquencies. Since that time, we've seen a roughly 80 basis point improvement, since the first quarter, which is more pronounced than what we would typically expect to see between the first quarter and the second quarter, which would have roughly been about 40 basis points. So a meaningful improvement in early-stage delinquencies in the second quarter, which puts us right back into the seasonal pattern that we would expect.

And then the third thing associated with the full year loan loss provision, we continue to expect 2026 to be lower than 2025.

One thing specifically associated with early-stage delinquencies, at Travel + Leisure, Patrick, you've got to be current on your loan to book travel and you've got to be current on your loan to actually arrive at one of our resorts. So as we have moved from the quarter into the second quarter, we have seen that delinquency pattern move right back to where we would expect it to be as we move into the heavier travel season of the year.

Our next question is coming from Chris Woronka of Deutsche Bank.

Michael, if you could maybe give us a little bit of a background on these 2 acquisitions you just announced in terms of maybe how they came about and what possibly got you guys over the finish line versus maybe some others, either public or private, that might have also been looking? And then I have a follow-up.

Well, let me first say that our strategy around M&A has been consistent on every one of these calls, that we will look for strategic transactions that are financially accretive. We spoke at length throughout the prepared remarks that both of these hit those marks and hit them right in the bull's eye.

Both of these companies are well-run companies that have resorts and destinations where we had white space. Hilton Head, South Carolina and Maui are 2 locations that are highly demanded for our owner bases and we had a need in both of those, add on to the fact that development in those areas is super-constrained, we really like these opportunities to put, as we said, 13 of the 23 resorts are in those 2 locations alone, aside from other great projects in their system. So resort expansion for our owners over time, very important in key destinations.

On the flip side, opportunities for the Yes& and Spinnaker owner base to see a broader network of what-they-have-available vacations. That's point number one, is resort portfolio and destinations. Number two is owner base, over 100,000 owners. The ability to offer existing owner base of 100,000-plus into our resort network, should they choose points-based system, allowing maximum flexibility. It's just going to be a great offering for the existing owner base that I think will be received extremely well by the embedded owner bases of the 2 companies.

And then lastly, the accretion, the financial accretion. I think Erik walked through very while the reasons that this made a ton of sense financially. So it's -- we had to squint really hard to find a reason to not aggressively pursue both. We did aggressively pursue both. And I think from a standpoint of seller and buyer, everyone wanted in both these equations. And we'll be great stewards of both these companies and help to grow their owner bases and grow, I think, satisfaction of our nearly 800,000 owners plus the 100,000 we'll be adding to our system.

Okay. And then as a follow-up, you guys have talked in the past about potentially looking to create value within the Travel and Membership segment. And I'm just kind of curious, as we sit here now, we see a lot of private capital investing in this broader travel and leisure space all over. Do you think there's a higher likelihood that something value-add could happen now than maybe a year ago or 6 months ago?

So let me start it and then I'll hand it to Erik here. Let me just start by saying on our quarterly performance, we continue to stay committed to growing businesses within the Travel and Membership space. When you step into that business, you see the exchange business is the challenged side of the equation, and we continue to grow transactions, albeit lower margin on the travel club business.

Related to potential other opportunities, we will absolutely look at them. I think, as I hand it to Erik here, we will be very disciplined just like we were with these 2 acquisitions to make sure that we are checking the right boxes. But given that capital allocation is Erik's bailiwick in addition to mine, let me hand it to him to let him conclude.

Yes, Chris, I think, as Mike said, we are open to a couple of things. Number one, we're going to continue to focus on driving this business -- driving returns in this business, in a way where we can match the EBITDA performance to the revenue performance. So we are very focused associated with managing costs and running the business for cash. We're making some modest investments in the business, as I mentioned in my prepared remarks, associated with some digital capabilities, similar to the apps that we have for Club Wyndham and WorldMark and Margaritaville, to reduce the friction associated with the product for the subscribers in the business.

But as far as strategic alternatives for the business, we'll continue to evaluate. We do -- we're very focused associated with total shareholder return and making sure that any decision that we make associated with the portfolio is driving accretion to the shareholder base.

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

I wanted to clarify, I realize it's early, but as we look at the -- I think you said $15 million to $20 million of incremental EBITDA in '26 million from the acquisitions. Is that the right kind of run rate based on the kind of core businesses seasonality to think about for at least a base case for 2027? Are there other puts and takes to consider as we think through the integration and any potential kind of synergies or onetime costs?

So Stephen, this is Mike. Let's start with the fact that we've closed on Yes& about 10 days ago, and although we've signed Spinnaker, we will close on that business in August. So you're not getting you're not getting half year full results this year, which is why, as Erik laid out, $50 million year 1, and we're going to be getting 4.5 to 5 months of that this year. So I think you're better to start with the $50 million year 1 run rate as the starting point.

Our process will be pretty clear, is these are well-run businesses that we'll get in and we'll try to realize our synergies as soon as possible so that we can enjoy full synergized cost in 2027. On the revenue synergies, that takes more time to make sure you do that thoughtfully, measure twice, cut once approach. It's clear that we have the opportunity to move systems on to a points-based, which will create a lot of owner value and their upgrade opportunity, and that's not a quarter-by-quarter transition. It will take -- we'll start to transition this year, but it will take several years to realize the full potential of those upgrades. But the $50 million you heard today for year 1 is primarily run rate that's been synergized for the first 12 months.

Got it. That's helpful. So it's all cost, but the revenue might come later. One other just clarification, you were giving some details around delinquencies improving. As we think about the provision, over the past 3 years, the provision has been above write-offs. They both moved higher. If the delinquencies are stabilizing or down year-over-year, at what point would you start to think through maybe unwinding some of the incremental allowance relative to the write-off trend line?

Yes. Stephen, it's Erik. I think it's a fair question. But let me start with the second quarter early stage delinquency improvement. We were down 80 basis points sequentially, reconfirming that the loan loss provision should be down. There will be some modest pressure associated with the loan loss associated with the acquired business. I think as we get later in the year, Stephen, and start to think about our 2027 expectation, that might be an appropriate time for us to reevaluate what we expect the longer-term provision to look like.

The next question is coming from Ben Chaiken of Mizuho.

Maybe just 1 on M&A with 3 parts, if that's okay. It seems like the major opportunity here is upgrades of existing -- Yes& and Spinnaker owners. I guess, number one, is there a medium term, and we don't have to put like a time frame on it, but medium-term upgrade propensity, you think is reasonable, 15%, 20%, 30%? Or maybe a better way to ask is, what have you seen in the past in these type of deals, again, in terms of upgrade propensity of kind of like legacy owners into the new system?

Question two would be, were these platforms on points or were they needed? And then three, does this also help you -- or maybe I'll stop there and then there's a quick third follow-up.

So let me try to get the second one first, which is One of the companies was not on a points-based system. So it's an obvious move just to honor and recognize their current ownership but give them the opportunity to move to a points-based system. The industry has moved there, high flexibility. And the other company had just a variety of different product types, but not cleanly on a points-based system.

So we look across the 100,000 owner base, you're looking at the opportunity to move them all on to a points-based system. So I would describe the opportunity as pretty full related to that owner base.

I'm not going to today give an upgrade propensity likelihood. What I would say is what we really enjoyed about the process and getting to know both companies is we saw tons of owner synergies between the 2 companies on locations, points usage platforms, and we would expect that, as you rightly said, Ben, the owner opportunity is the first clear and immediate opportunity related to revenue synergies.

What I would also say though, and one of the strategic benefits of these transactions, is we're not marketing today in these 2 primary locations of Maui and Hilton Head, which creates a new opportunity that we did not have 30 days ago. So yes, we've all seen this before in the industry. The owner opportunity is the greatest and it's the most immediate, but we really like the subtle long-term opportunity that sits in both of these markets that are new to our system.

And let's not forget here, they've got other resorts and other destinations, which do overlap us. But having over 50% of the resorts in new destinations -- and destinations of these quality where you can see 2 oceans is really a great win for us.

That's very helpful. And then just a quick third one. Does this help fill in the gaps to reduce some of the leakage, if I may, from the resort optimization? I guess the reason it's come to mind, and maybe it's just a coincidence, but I think 1 of the acquired assets or a few of the acquired assets are in Branson, Missouri, which is a location you referenced on the last call and as part of the streamlining. I just want to say leakage, meaning like, I mean, I guess just picking -- adding some locations where you may have seen customer friction on the VOI sales side.

Yes. I would not describe this as filling gaps where loss in the resort optimization. I would say it's a broad-based upgrade to our system in multiple locations. Part of -- I know you mentioned Branson, but I think Branson is one of those that's still a seasonal location. What we view this is improving our portfolio, moving from lower demand, highly seasonal location, to year-round ocean-front resorts. That to me is where we can turn around to all 3 of these owner bases, Spinnaker, Yes& and our existing platform and say, we at Travel + Leisure are deploying capital for the benefit of owner bases so that you have less compression, less booking friction and better, newer locations that you can enjoy and will more likely result in fulfillment, which is the number one business that we're in, is getting people on their number one vacation as often as possible. And putting these 23 resorts into the system when we've exited 12 full resorts and 5 partial ones is an absolute numerical increase, but also a quality increase to people's vacation options.

Our next question is coming from David Katz of Jefferies.

Enjoying all the detail about the acquired businesses. Just starting off with one follow-up there. It sounds like one of the acquired companies has owned [ deeded ] product versus points. What insights do you have that that owner base didn't buy what they bought because they only want to go that location, meaning some of the revenue synergies are likely driven by the transferability of those owners to sort of buy in other locations also, right? We've seen that in one of your peers over the years with Hawaii, for example.

David, it's a great question, insightful question. We fully expect the owner bases at both of these companies to be sticky to these locations. And whether it was in the Q&A or in our remarks, I forget in which I said it, was we think there's going to be the opportunity over time for people to upgrade into these locations. Why is that the case? There is constant turnover in ownership. As ownerships age, people will look for what's their option, and it could be buying more in a points-based system, it could be exiting the system.

We enter these transactions willing to put in capital, and willing to support basically inventory processing. And that could be upgrading resorts. It could be processing foreclosures. It could be really investing in the rebranding of the resorts to a multitude of brands.

So I think ultimately, David, you've got great locations with embedded bases that will want to go there. And then you've just simply got a population of people who are going to want more options. And we provide, with our scale and our platform and our capital scale, that we can fulfill all of those needs of the owner bases. And ultimately, that's going to create inventory availability in these high-demand destinations.

Understood. I appreciate the growth. I wanted to follow up just quickly on making sure I'm not combining 2 comments and connecting inappropriately. I think in the prepared remarks, you said that 80% of the owners that you're acquiring do not have loans. I think, Erik, you may have suggested that loan loss this year was going to be 21%, if I heard correctly, which is slightly higher than, I think, what we were normally expecting. Am I connecting 2 dots inappropriately to say those other 20% of owners have -- are the driver of pushing that loan loss just a little bit higher? Or again, am I inappropriately connecting 2 dots?

No, David, I think -- so I think there's a couple of things in there. First, let's start with the organic loan loss provision. We expect that number to be down on a full year basis versus 2025. This is exactly what we've been talking about over the last couple of quarters. So you got that point exactly right.

The provision associated with the acquired companies is higher. So as we bring them into the ecosystem here in 2026, we would expect A plus B to be slightly higher than our slightly down on a year-over-year basis. So that's maybe 2026. And then maybe looking a little bit forward, as we apply the same collections and servicing capabilities that we have here at T+L, and run our historical credit performance, I would expect that those operating disciplines to help the acquired portfolio migrate closer to our historical performance.

So that's what it is. We expect the organic loss provision to be down. There is some pressure associated with the acquired portfolios. But more than anything else, we've already talked about it a little bit today, we're not buying these companies for the portfolio. We're buying these companies for the 100,000 owners that come with it and the ability for us to introduce Club Wyndham access, our multi-brand strategy and have the ability to upgrade them over time.

Our next question is coming from Ian Zaffino of Oppenheimer & Co.

On the VPG, it kind of came in better than expected. What drove that? Or at least like what kind of surprised you what you saw in the quarter versus kind of what you had expected going into the quarter, whether it's new owners or existing owners, pricing? What kind of drove that discrepancy with what you're expecting?

Ian, there's really 2 drivers to the favorability in VPG. It's we're seeing larger packages being sold. That's a component. And we're seeing a little bit of price annualization from -- on the package themselves.

And if I could just follow up -- go on.

Ian, I'm just going to add one thing. Erik got it exactly right, but I'm just going to take the opportunity. We just have an incredible sales and marketing team. They do a great job quarter after quarter. And I just not to answer your question, but I just want to give them a shout out because sometimes just great performance is great performance. Sorry, you had a follow-up though.

Yes. And I guess I have a follow-up and then I have a second question. But the follow-up on that would be the larger packages, was that new or existing owners? Where exactly was that? And then my second question would be just on the acquisitions. Maybe talk about where you're going to get synergies, how we think about sales centers, et cetera.

So as it relates to the transaction, you're seeing those consistently on the owner side of the equation. We saw good numbers definitely on the new owner side, but APT on the owners, average -- sorry, average transaction price, ATP, on orders was where we saw the VPG lift as it relates to package size.

Your question on cost synergies?

Yes. So Ian, we've got, in the $50 million that we expect to get in the first year, I think there's really 3 components to it. It's the underlying performance of the business, the operating expense synergies, which is predominantly G&A related. It's G&A, there's a little bit of tech. And then the third thing is inside that $50 million, there's some incremental interest expense associated with the consumer finance book that we're going to securitize.

Next question is coming from Trey Bowers of Wells Fargo.

This is Nick on for Trey. Just wanted to dig in on the deal multiple a bit. I know you spoke to 5x post synergies in the securitization. But can you talk to the pre-synergies multiple for the acquired assets?

Sure. So maybe even zooming out a little bit for you, Nick, when we were looking at the transactions themselves, we looked really through 3 different lenses. We are looking for deals that were immediately accretive, accretive to revenue, accretive to EBITDA, EPS and free cash flow per share. So that's maybe the first thing.

The second lens that we looked through was the return associated with the transactions versus the implied return of just continuing to buy back our own stock. And the lens or the math that we think about there is our current free cash flow yield plus our long-term EBIT growth rate. Exceeded that one as well. And then the third thing was over a longer period of time, that we're driving a higher return on invested capital versus our cost of capital. And these 3 transactions cleared all of those hurdles.

From a purchase multiple perspective, the 2 transactions, we purchased them inside our current trading multiple. And then to your point, once we synergize and securitize associated consumer finance receivable, that pushes that net capital deployed multiple closer to 5x.

The next question is coming from Brandt Montour of Barclays.

The first question would be on tour flow. It looks like tour flow in the second quarter decelerated just a little bit. And I think that we were looking for -- you guys had talked to something in the mid-single-digit range for the year. So just sort of ex acquisitions, is that lower than your internal expectations? Did you expect just sort of a bigger second half? Or things evolved in a different way for the P&L as the way you're looking towards the back half?

They've evolved a little bit different, not much, Brandt. Ultimately, as we started at the beginning of the year, we knew that our resort optimization initiative was going to impact our tour flow this year. What we're excited about and what we saw in Q2 is that our new owner tours accelerated and we saw good growth to really begin to support getting back into the 30s on new owner transactions.

And then the impact started to come through on owner tour flow in Q2 as a result of our strategic resort closures. That's how we expected the year to play out, and we're seeing that come through. What has been the positive surprise to that is that the VPG has allowed us to outpace the tour decline on the owner side to the resort closures resulting in us being able to hit our historical VOI growth rates.

So yes, like with all of this -- all of our KPIs, things bounce up and down within a range. The tours are the same, VPGs are the same, one slightly down, one slightly up. And net effect is VOI sales being above where we originally anticipated at 6%.

Okay, Mike, that's helpful. And then maybe for Erik, I just want to widen the lens out on the loan loss provision and talk more sort of longer term. If we kind of go back last year, I think -- I don't want to put words in your mouth, but the expectation or sort of the upshot for this year was loan loss could get down into the high teens. And then now, or sort of earlier this year, the 2026 expectation sort of came in sort of developed slightly down year-over-year, which would imply still above that 20% mark. Now we have a deal, the deal is going to sort of push the whole thing up a little bit, which is totally understandable. And then there was the first quarter wrinkle that's now -- looks like it's completely reversed and improved.

And so I guess just -- so what, I guess, outside of the deal, what would make '26 not sort of back to that prior path toward high teens? What would make you want to kind of give it another year to sort of hope you could get there?

Yes. So Brandt, so first, let's start with, you're right, the second quarter has completely reversed itself off of what we saw in the first quarter from an early stage delinquency perspective. We guided 2026 to be slightly below 2025's loan loss provision level. And in prior calls, I think that we have talked about the loan loss provision settling in over the longer term in the upper teens.

I think that that thesis continues to hold. I think that we've got some early positive indicators associated with what we've seen from the portfolio here in the second quarter. But I think that as we get further and deeper into 2026 and start to think harder about what the '27 number could look like, we'll be back to you on that.

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

Regarding the acquisitions, it looks like -- and my question is regarding how they may be incorporated into RCI. It looks like the 6 weeks at Spinnaker are already a part of RCI, but if I'm correct, your floating weeks are part of Interval International. Would you see down the road whenever that, in fact, if that's correct, that full international contract rolls off, and I'm reminded here of what happened with the Shell acquisition many years ago, that you would recontract with RCI for the floating weeks, assuming I've got my facts correct here?

Yes, that would definitely be the logical outcome. Some can be immediate depending on the owner base, and I'm not referring to Spinnaker. And then some will occur over time. But there's a good portion of that 100,000 that are not currently affiliated, which creates an opportunity for us over the next 24 months, maybe 36. I don't know exactly the timing on it.

Okay. So sometime in the next 2 to 3 years likely?

Yes.

At this time, I would like to turn the floor back over to Mr. Brown for any additional or closing comments.

Thanks, everyone, again for joining us today. And especially, I'd like to, like Erik, I'd like to welcome the teams of Yes& and Spinnaker to the Travel + Leisure team.

2026 is shaping up to be another great year for Travel + Leisure. Through the first half of the year, we delivered compounding growth across the P&L, 4% revenue growth, 9% EBITDA growth and 21% earnings per share growth. This momentum alongside our 2 recently announced acquisition gives us the confidence to raise the midpoint of our full year EBITDA guidance by more than $30 million. Importantly, we achieved all of this while maintaining our shareholder-friendly capital allocation strategy and balance sheet flexibility.

These results are a direct result of our growth strategy and disciplined capital deployment and we are well positioned to create meaningful long-term value for shareholders. Erik and I look forward to seeing you at upcoming conferences, and thank you for your continued interest in Travel + Leisure.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

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.