Travel + Leisure Co. Reports Fourth Quarter and Full-Year 2022 Results and Provides 2023 Outlook

Travel + Leisure Co. (NYSE:TNL), the world’s leading membership and leisure travel company, today reported fourth quarter and full-year 2022 financial results for the period ended December 31, 2022.

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Travel + Leisure Co., the world’s leading membership and leisure travel company, today reported 2022 full year financial results, with net income of $357 million, $4.24 diluted earnings per share, on net revenue of $3.6 billion. (Graphic: Business Wire)

Fourth quarter 2022 highlights:

• Net income of $90 million (diluted EPS of $1.12) on net revenue of $899 million
• Adjusted EBITDA of $225 million and Adjusted diluted EPS of $1.30 ⁽¹⁾
• Repurchased $108 million of common stock during the fourth quarter

Full-year 2022 highlights:

• Net income of $357 million (diluted EPS of $4.24) on net revenue of $3.6 billion
• Adjusted EBITDA of $859 million and Adjusted diluted EPS of $4.52
• Net cash provided by operating activities of $442 million and Adjusted free cash flow of $439 million
• Repurchased $351 million of common stock during the full-year

Outlook:

• Full Year 2023 Adjusted EBITDA expected to range from $920 million to $940 million and first quarter 2023 Adjusted EBITDA expected to range from $170 million to $180 million
• The Company will recommend increasing first quarter 2023 dividend to $0.45 per share for approval by the Board of Directors

"Our fourth quarter and full year results demonstrate our ability to capitalize on the strong leisure travel market and deliver great vacations for our owners and members while maximizing return of capital to our shareholders,” said Michael D. Brown, president and CEO of Travel + Leisure Co. “We finished the year with the highest annual sales volume per guest in our company’s history, and returned $486 million of capital to shareholders.”

“December’s strong finish has carried into January and February, and our owner reservations on the books are pacing ahead of 2022, underscoring that consumers see the value of our product and are continuing to prioritize vacations.”

Business Segment Results

The results of operations during the fourth quarter and full-year of 2022 and 2021 include impacts related to the COVID-19 global pandemic. Refer to Table 5 for a breakout of COVID-19 related impacts.

Vacation Ownership

Vacation Ownership revenue increased 5% to $737 million in the fourth quarter of 2022 compared to the same period in the prior year. In the fourth quarter, Gross VOI sales were $521 million compared to $432 million in the prior year period and tours were 147,000 in the fourth quarter compared to 129,000 in the same period last year. Volume Per Guest (VPG) increased 7% to $3,434 due to strong close rates and higher quality tours.

Fourth quarter Adjusted EBITDA was $186 million compared to $184 million in the prior year period. The increase was driven by higher Gross VOI sales due to the ongoing recovery of our operations from COVID-19, partially offset by an adjustment in the prior year to the COVID-19 related allowance for loan losses, which resulted in a $44 million increase to revenue and a $28 million net positive impact to Adjusted EBITDA.

Travel and Membership

Travel and Membership revenue decreased 4% to $163 million in the fourth quarter of 2022 compared to the same period in the prior year, primarily due to a decrease in Exchange subscription revenue related to a lower average member count and a stronger U.S. dollar.

Fourth quarter Adjusted EBITDA was $57 million compared to $62 million in the prior year due to the revenue decrease, partially offset by cost savings.

Balance Sheet and Liquidity

Net Debt — As of December 31, 2022, the Company's leverage ratio for covenant purposes was 3.5x. The Company had $3.7 billion of corporate debt outstanding as of December 31, 2022, which excluded $2.0 billion of non-recourse debt related to its securitized notes receivables portfolio. Additionally, the Company had cash and cash equivalents of $550 million. At the end of the fourth quarter, the Company had $1.6 billion of liquidity in cash and cash equivalents and revolving credit facility availability.

The Company amended the credit agreement governing its $1 billion revolving credit facility and term loan B on December 14, 2022. This amendment provides for an incremental term loan B of $300 million, which will mature on December 14, 2029. We expect to use the net proceeds of the incremental term loan B and revolving credit facility capacity to repay our outstanding $400 million dollar secured notes that mature in March, 2023.

Timeshare Receivables Financing — The Company closed on a $250 million term securitization on October 20, 2022 with a weighted average coupon of 6.91% and an 87.5% advance rate.

Cash Flow — For the full-year 2022, net cash provided by operating activities was $442 million compared to $568 million in the prior year. Adjusted free cash flow was $439 million in 2022 compared to $223 million in the prior year.

Share Repurchases — During the fourth quarter of 2022, the Company repurchased 2.9 million shares of common stock for $108 million at a weighted average price of $37.41 per share. For the full-year 2022, the Company repurchased 8.2 million shares of common stock for $351 million at a weighted average price of $42.97 per share. As of December 31, 2022, the Company had $477 million remaining in its share repurchase authorization.

Dividend — The Company paid $31 million ($0.40 per share) in cash dividends on December 30, 2022 to shareholders of record as of December 15, 2022. For the full-year 2022, Travel + Leisure Co. paid an aggregate $135 million in dividends to shareholders. Management will recommend a first quarter dividend of $0.45 per share for approval by the Company's Board of Directors in March 2023.

Outlook

The Company is providing guidance regarding expectations for the 2023 full year:

• Adjusted EBITDA to range from $920 million to $940 million
• Gross VOI sales of $2.1 billion to $2.2 billion
• VPG of $3,050 to $3,150

The Company is providing guidance regarding expectations for the first quarter 2023:

• Adjusted EBITDA to range from $170 million to $180 million
• Gross VOI sales of $400 million to $420 million
• VPG of $3,100 to $3,200

This guidance is presented only on a non-GAAP basis because not all of the information necessary for a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure is available without unreasonable effort, primarily due to uncertainties relating to the occurrence or amount of these adjustments that may arise in the future. Where one or more of the currently unavailable items is applicable, some items could be material, individually or in the aggregate, to GAAP reported results.

Conference Call Information

Travel + Leisure Co. will hold a conference call with investors to discuss the Company’s results and outlook today at 8:30 a.m. ET. Participants may listen to a simultaneous webcast of the conference call, which may be accessed through the Company's website at travelandleisureco.com/investors, or by dialing 877-733-4794 ten minutes before the scheduled start time. For those unable to listen to the live broadcast, an archive of the webcast will be available on the Company's website for 90 days beginning at 12:00 p.m. ET today. Additionally, a telephone replay will be available for seven days beginning at 12:00 p.m. ET today at 877-660-6853.

Presentation of Financial Information

Financial information discussed in this press release includes non-GAAP measures such as Adjusted EBITDA, Adjusted diluted EPS, Adjusted free cash flow, gross VOI sales and Adjusted net income, which include or exclude certain items, as well as non-GAAP guidance. The Company utilizes non-GAAP measures, defined in Table 6, on a regular basis to assess performance of its reportable segments and allocate resources. These non-GAAP measures differ from reported GAAP results and are intended to illustrate what management believes are relevant period-over-period comparisons and are helpful to investors when considered with GAAP measures as an additional tool for further understanding and assessing the Company’s ongoing operating performance by adjusting for items which in our view do not necessarily reflect ongoing performance. Management also internally uses these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. Exclusion of items in the Company’s non-GAAP presentation should not be considered an inference that these items are unusual, infrequent or non-recurring. Full reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures for the reported periods appear in the financial tables section of the press release. See definitions on Table 6 for an explanation of our non-GAAP measures.

About Travel + Leisure Co.

As the world’s leading membership and leisure travel company, Travel + Leisure Co. (NYSE:TNL) transformed the way families vacation with the introduction of the most dynamic points-based vacation ownership program at Club Wyndham, and the first vacation exchange network, RCI. The company delivers more than six million vacations each year at 245+ timeshare resorts worldwide, through tailored travel and membership products, and via Travel + Leisure GO - the signature subscription travel club inspired by the pages of Travel + Leisure magazine. With hospitality and responsible tourism at the heart of all we do, our 18,000+ dedicated associates bring out the best in people and places around the globe. We put the world on vacation. Learn more at travelandleisureco.com.

Forward-Looking Statements

This press release includes “forward-looking statements” as that term is defined by the Securities and Exchange Commission (“SEC”). Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expects,” “should,” “believes,” “plans,” “anticipates,” “estimates,” “predicts,” “potential,” “continue,” “future” or other words of similar meaning. Forward-looking statements are subject to risks and uncertainties that could cause actual results of Travel + Leisure Co. and its subsidiaries (“Travel + Leisure Co.” or “we”) to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, risks associated with: the acquisition of the Travel + Leisure brand and the future prospects and plans for Travel + Leisure Co., including our ability to execute our strategies to grow our cornerstone timeshare and exchange businesses and expand into the broader leisure travel industry through new business extensions; our ability to compete in the highly competitive timeshare and leisure travel industries; uncertainties related to acquisitions, dispositions and other strategic transactions; the health of the travel industry and declines or disruptions caused by adverse economic conditions (including inflation, higher interest rates, and recessionary pressures), terrorism or acts of gun violence, political strife, war (including hostilities in Ukraine), pandemics, and severe weather events and other natural disasters; adverse changes in consumer travel and vacation patterns, consumer preferences and demand for our products; increased or unanticipated operating costs and other inherent business risks; our ability to comply with financial and restrictive covenants under our indebtedness; our ability to access capital and insurance markets on reasonable terms, at a reasonable cost or at all; maintaining the integrity of internal or customer data and protecting our systems from cyber-attacks; uncertainty with respect to potential resurgences of the novel coronavirus global pandemic (“COVID-19”) and its impacts; the timing and amount of future dividends and share repurchases, if any; and those other factors disclosed as risks under “Risk Factors” in documents we have filed with the SEC, including in Part I, Item 1A of our Annual Report on Form 10-K most recently filed with the SEC. We caution readers that any such statements are based on currently available operational, financial and competitive information, and they should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we undertake no obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

Travel + Leisure Co.

Table of Contents

Table Number

Table 6

Definitions

Adjusted Diluted Earnings per Share: A non-GAAP measure, defined by the Company as Adjusted net income divided by the diluted weighted average number of common shares. Adjusted Diluted Earnings per Share is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods.

Adjusted EBITDA: A non-GAAP measure, defined by the Company as net income from continuing operations before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues) and income taxes, each of which is presented on the Consolidated Statements of Income. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction costs for acquisitions and divestitures, asset impairments/recoveries, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels & Resorts, Inc. and Cendant, and the sale of the vacation rentals businesses. We believe that when considered with GAAP measures, Adjusted EBITDA is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods. We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. Adjusted EBITDA should not be considered in isolation or as a substitute for net income/(loss) or other income statement data prepared in accordance with GAAP and our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

Adjusted EBITDA Margin: A non-GAAP measure, represents Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA Margin is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods.

Adjusted Free Cash Flow: A non-GAAP measure, defined by the Company as net cash provided by operating activities from continuing operations less property and equipment additions (capital expenditures) plus the sum of proceeds and principal payments of non-recourse vacation ownership debt, while also adding back cash paid for transaction costs for acquisitions and divestitures, separation adjustments associated with the spin-off of Wyndham Hotels, and certain adjustments related to COVID-19. TNL believes FCF to be a useful operating performance measure to evaluate the ability of its operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, its ability to grow its business through acquisitions and equity investments, as well as its ability to return cash to shareholders through dividends and share repurchases. A limitation of using Adjusted free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating TNL is that Adjusted free cash flow does not represent the total cash movement for the period as detailed in the consolidated statement of cash flows.

Adjusted Free Cash Flow Conversion: Adjusted free cash flow as a percentage of Adjusted EBITDA. Forward-looking outlook regarding Adjusted Free Cash Flow Conversion is provided only on a non-GAAP basis because not all of the information necessary for a quantitative reconciliation is available without unreasonable effort.

Adjusted Net Income: A non-GAAP measure, defined by the Company as net income from continuing operations adjusted to exclude separation and restructuring costs, legacy items, transaction costs for acquisitions and divestitures, amortization of acquisition-related assets, debt modification costs, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent and the tax effect of such adjustments. Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels and Cendant, and the sale of the vacation rentals businesses. Adjusted Net Income is useful to assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods.

Average Number of Exchange Members: Represents paid members in our vacation exchange programs who are considered to be in good standing.

Free Cash Flow (FCF): A non-GAAP measure, defined by TNL as net cash provided by operating activities from continuing operations less property and equipment additions (capital expenditures) plus the sum of proceeds and principal payments of non-recourse vacation ownership debt. TNL believes FCF to be a useful operating performance measure to evaluate the ability of its operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, its ability to grow its business through acquisitions and equity investments, as well as its ability to return cash to shareholders through dividends and share repurchases. A limitation of using FCF versus the GAAP measure of net cash provided by operating activities as a means for evaluating TNL is that FCF does not represent the total cash movement for the period as detailed in the consolidated statement of cash flows.

Gross Vacation Ownership Interest Sales: A non-GAAP measure, represents sales of vacation ownership interests (VOIs), including sales under the fee-for-service program before the effect of loan loss provisions. We believe that Gross VOI sales provide an enhanced understanding of the performance of our vacation ownership business because it directly measures the sales volume of this business during a given reporting period.

Leverage Ratio: The Company calculates leverage ratio as net debt divided by Adjusted EBITDA as defined in the credit agreement.

Net Debt: Net debt equals total debt outstanding, less non-recourse vacation ownership debt and cash and cash equivalents.

Tours: Represents the number of tours taken by guests in our efforts to sell VOIs.

Travel and Membership Revenue per Transaction: Represents transaction revenue divided by transactions, provided in two categories; Exchange, which is primarily RCI, and Travel Club.

Travel and Membership Transactions: Represents the number of exchanges and travel club bookings recognized as revenue during the period, net of cancellations. This measure is provided in two categories; Exchange, which is primarily RCI, and Travel Club.

Volume Per Guest (VPG): Represents Gross VOI sales (excluding telesales and virtual sales) divided by the number of tours. The Company has excluded non-tour sales in the calculation of VPG because non-tour sales are generated by a different marketing channel. We believe that VPG provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the efficiency of its tour selling efforts during a given reporting period.

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