All right. I think we're going to kick off day two here with Travel + Leisure. I'm joined by Michael Brown, President and CEO, Erik Hoag, the CFO. To start off, I always like to start with the very high-level questions here, and I guess maybe just level set as we look out over the next three years. What do you think are 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.
Yeah.
Appreciate the opportunity to share our story. As we look forward, I think it looks a lot about how we've come the last two 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 the next three to five years. From our perspective, this business has always been driven by your ability to generate and convert new and existing leads to ownership in the space. We have a number of initiatives very focused on making sure that strategic outlook remains intact. We're very committed to our core business at both Club Wyndham and WorldMark in generating new owners and existing owners.
With the beginning of a transition where we're bringing new brands on, it's 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. As we look out the next three to five years, the great economic performance we've had the last two years, we see continuing and no fundamental changes to the way to think about our business. Then an increased focus on driving the 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 loop in Erik here right out of the gate with your first quarter, you were above that algorithm in terms of EBITDA growth, double-digit growth, 1Q. You're reiterating 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.
Yeah, we had a great start to the year in the first quarter. 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 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. Buying back roughly 25% more shares in the first quarter on the back of a new board authorization of roughly $750 million.
When you come full circle associated with what's the algo, how are we performing against the algo, I think the first quarter is a good illustration of what that algo is. Healthy tour flow growth, driving gross VOI sales in the 6%-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.
I guess going back to the bigger picture then, for those maybe less, again, familiar maybe with timeshare or 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?
Look, there's some differences amongst the individual companies, I think the best place to always start is the general misunderstanding is about the space in its entirety. 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 two years of incredible performance, Q1 was better than the last two years.
Oh, yeah.
We're now two-thirds of the way through Q2, and our strength that we talked about and the strong performance of Q1, has probably accelerated in Q2. 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. 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. With all of that, there's this divergence that seems almost counterintuitive about how well this space does when a time that your consumer sentiment is at an all-time low or 50-year low.
I'll just sort of come back to reinforcing the message of we've had a great two years. I think I said something along the lines, I don't think we could have scripted a better Q1, I would say more than the momentum continues, if anything, it's accelerated in Q2. 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. I think that's true for the entire industry. We're doing some things a little different.
Yep.
Which gets to our strategic outlook on what I mentioned in your first question, which is we want to continue to broaden the funnel.
Yep.
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. We're early innings on that, but early signs say that people want to attach what they love about Club Wyndham into other brands and their vacation time.
Remind us who your existing owner base is? What are the demographics there? 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? Is it kind of the same, you're just getting more of them?
Right. 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. The demographic of our new owner is coming down. What we're positioning ourself is for long-term growth.
Yep.
As we start to expand brands, we want to maintain the quality of our consumer, which tends to be in the K-shaped economy, I'd say our consumer looks much more like the upper part of the K than the lower part, for sure. The profile would suggest that as well. What we're now, it's not about necessarily just the demographic, it's about the vacation style because not everyone wants to vacation the same way. We have consumers that want to vacation in an urban destination, 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. That's very different than sitting in FastPass at Disney.
Yeah.
Two different consumers. They're both great, there's different demands. 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? How do these brands that you're launching maybe tap into that?
Well, a lot's about the education. When you were to go down to Times Square and ask people, you'd say, "What's a timeshare?" They'd say, "Well, of course, you go to Fort Myers, you go in March, you have the same unit, the same week," and that's what a timeshare is.
Yeah.
That timeshare disappeared in the early 2000s. If you were to say, "Would you like to vacation in a two bedroom, pay 2015 prices in 2026? And 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 a Vrbo, but you're talking about what our product is-
Right.
With the brand overlay and with amenities. A lot of what we do in the process of the sales process is explaining how the industry's evolved. It's evolved in an incredible way. 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. We've been there for a long time. We just have some reeducation of the next generations and some product modifications.
Aside from broadening out the funnel, are there other benefits to think about or even are there 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.
Yep.
After I respond to that. The question is: Do you invest in your business, or do you buy back shares? We're doing both at the moment. One of the big questions we got throughout 2025, you're doing Eddie Bauer, you're 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 2025 and 2026 start to hit. Our margins went up. We were over 25% in Q1. When you look at our margin profile going forward, you should see a very disciplined capital allocation of reinvesting in our business to grow our long-term top line and create the algorithm that Erik mentioned. 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 resort optimization.
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 while growing margins, really, I think shows the discipline we have in allocating our capital and making sure that we're.
Trying to check every box along the way, and maybe you can talk about our share buybacks and capital allocation.
Yeah. Broadly speaking, as Mike said, first and foremost, we want to invest in the business. 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 three times, into the first quarter at 3.2 times. Expect to finish the year either at three times or slightly below three times. We want to 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%. Beyond that, absent other investments, we're going to continue to buy back shares. David, 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.
I think that whether it's the first quarter or whether it's 2025, I think you're starting to see that really manifest into the P&L.
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?
Yeah. A couple things about inventory. Excuse me. If you go back to COVID, our inventory drifted up towards five or six years of inventory on the balance sheet. Since that time, we've been working it down. In February, we announced something called a Resort Optimization Initiative, which further reduces our inventory. As we sit here today, inventory balance between three and four years. We want to continue to push that further down towards two. From a free cash flow perspective, we expect over the cycle to convert roughly 50% of our EBITDA into free cash. We have moved to an asset-light model, 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%.
Good. Going back to a comment, Michael, you made about meeting the consumer where they are in these different channels, where does Blue Thread and Wyndham, the connection there, fit into that, and is there still opportunity to better leverage that relationship?
Yeah. That relationship has been very impactful since 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. 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. I think our largest market is Orlando, and it's barely 10% of our total revenue. When you look at Blue Thread, I think Blue Thread represents roughly 3% of our total revenue.
3%.
Roughly there. 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? How do you think about the visibility that you're trying to track in the?
No, I was being a lot more finite. At the end of Q1, we were 20% through the top line of our year, even though it's an entire quarter.
Yeah.
Our first quarter is 20%. At the time, I think it was within a 48-hour window of a ground invasion. We're the first hospitality group out. There was a lot of uncertainty when 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 two out of the three months of the quarter. We know where top line VOI is through two-thirds of the second quarter.
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 intact. Bookings, forward bookings throughout the summer and into the fall remain at or slightly above 2025. 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.
It seemed like there was a lot of, I would say, uncertainty or 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. 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%-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, great culture of success, believing 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.
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. VPGs 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.
The idea being there that you increase engagement, reduce any kind of churn from the existing base. Is that partly happening?
Well, what we know about our consumers, when they get on vacation, they love it and they buy more.
With 800,000 owners, you want to reach as many of them as possible to make sure The utilization is as absolute high as it could possibly be, and we still have room to get that utilization up. The more people we get on their vacations, whether they go to where our sales gallery is or not, it doesn't matter. Maximum usage means maximum opportunity for our VPG to grow. A lot of our technology investments to create frictionless booking, ease of booking, top-demand 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. I don't think you have to squint to see where that is. We have very clear objectives to get the curve sort of plateauing, then moving up. Just as a reminder, because I think it is sort of one of the commentaries I've heard is, well, their owner base is declining. Two things are very real that are unique in our business and our business alone. Travel + Leisure, which was Wyndham, 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.
Well, you probably do the math of what's the average.
Right. Well, yes.
Yeah.
Yeah. We have a natural churning of our ownership.
Right.
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 two is we've also, coming out of COVID, elevated the standards. If we wanted to plateau or grow back, we could have been plowing in lower FICO's owners.
Right.
We'd be dealing with a different challenge on the back end. We made a commitment to 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. We definitely get questions around that part of the business because it is touted as this high visibility fee stream. 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?
Yeah. The Resort Optimization Program, for those unaware, was an initiative where we took out roughly 17 resorts out of the portfolio. There's really three components associated with the program itself. Number one is 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 we're closing. The third component is carry cost associated with inventory. In February, we guided to roughly $15 million-$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 in 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?
We've got a pretty sophisticated model for our loan loss provision. We use loss curves over a significant period of time. The comments in the first quarter, let me give you a little bit of context here, Stephen. From 12/31 to 3/31, we saw roughly a 20 basis point increase in our early stage delinquencies. 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- 50 basis points decrease. We've moved back into our historical pattern, it's much more normalized. I would also add that in the fourth quarter of 2025, 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. When I think about our provision and characteristics around our portfolio, I view it as a 2-tier KPI that we monitor. Obviously, others view it more.
Yeah.
When I look at our first tier, I look at VPGs, tours, owner satisfaction. We're very cleanly in the range that, A, we want to be, and we balance that against two other things is growing your top line 6%-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. We're very comfortable where we are, and we've lived in this space for quite a bit of time. Our performance, when it moves, it moves micro moves, not big moves, because we have that 10-year portfolio. We're not doing anything different quarter-to-quarter.
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.
You'd 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? Where are there opportunity 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.
Yeah.
Or not 3%, something like that. A lot of our capital investment to growing our pipeline is happening as we speak, and as we're doing that, we grow our margins in Q1. I think as you look into 2027, you're not going to have the incremental add of the new brand spend. 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 one, two, three max next year. Those are the puts and takes on the inventory side. I think ultimately beyond that, there's not going to be tremendous changes in what you're going to see in 2027. The puts and takes on more.
I think you hit it. New brand investments, resort optimization initiative. The business has got operating leverage in it as well. If you look over a multiyear period, you see a 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 tomorrow you're all of a sudden going to be running through an AI funnel that's going to result in sales by a non-human.
Right.
We view it as getting through more of the top half of the funnel through technology, moving to a bit more traditional face-to-face at that point.
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. How do you think about agentic AI's impact to your business? 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 in getting people on vacation. If you start with search and book and work out from there in 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, see the value of their ownership, and they want more. 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.
Right.
Erik and I's vacation travels may be different, if we can express that and then get ourselves to the right type of resort, the right brand. Someone in the room's a Margaritaville fan, others are sports. If we can get them to that place faster, the likelihood of their engagement with us is going to go up. We think first and foremost, it's customer interface. Second, it's 1B, 1A. 1A is getting our funnel better aligned to consumer's 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.
Yeah.
What's the trajectory on that business? Does the strengthening demand translate to any kind of stabilization on that side as well?
Our Travel and Membership is roughly 18%-20% of our company EBITDA. Been a structurally difficult side of the business because as the industry's consolidated, the natural demand has slowed down. We were double-digit 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.
Yeah.
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. It's now roughly 18%-20%, yet we've maintained extremely strong growth over the last two years. 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'll be in Q1.
Q1.
How that adjusts in Q2. The bottom line is, we think we have that fully within our grasp and all of our outlooks reflects sort of that challenge in the space.
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 number of transactions and when you look at member count, they're not really moving. It's actually the revenue per transaction. The reason the revenue per transaction's down is because logically so, people are staying-
Staying in the system.
They're staying within their own, because we're the facilitator of our affiliates' vacations.
Yeah.
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. 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 at a specific level?
We think there is a floor, but 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 that side of Travel and Membership.
Perhaps remind us of some of the initiatives that you're thinking about to bend the curve.
Yeah. Going back to your sort of AI and where technology can 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 the moment they get back, and then planning for their next one. We see opportunities to expand the revenue streams outside of simply the 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. We have Marriott Vacations up next.