Travel + Leisure Q2 2023 Earnings Call Transcript

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Provided by Quartr
July 26, 2023

There are 10 speakers on the call.

Operator

Greetings and welcome to the Travel and Leisure Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Agnew, Senior Vice President, Investor Relations.

Operator

Thank you. Please go ahead.

Speaker 1

Thanks, Donna, and good morning to everybody. Before we begin, we'd like to remind you that the 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.

Speaker 1

The factors that could cause Actual results to differ are discussed in our SEC filings and in our earnings press release accompanying this earnings call. And you can find a reconciliation of the non GAAP financial measures discussed in today's call in the earnings press release available on our website at travelandleisureco.com/investors. This morning, Michael Brown, our President and Chief Executive Officer, We'll provide an overview of our 2nd quarter results and full year outlook and Mike Hug, our Chief Financial Officer, We'll then provide greater detail on the quarter, our balance sheet and liquidity position. Following our prepared remarks, we look forward to responding to your questions. And with that, I'm pleased

Speaker 2

to turn the call over to Michael Brown. Thanks, Chris. Good morning, everyone, and thanks for joining us today. We are pleased to report solid second quarter results and the continued return of capital to shareholders. With our solid results In the forward owner bookings at our resorts, we are reaffirming our full year adjusted EBITDA guidance.

Speaker 2

For the Q2, we reported adjusted EBITDA of $236,000,000 a 3% increase over the prior year And adjusted earnings per share of $1.33 a 5% improvement over Q2 2022. Adjusted EBITDA margin was 25%, which was flat compared to the prior year and reflects headwinds from higher interest expense from ABS Transactions and our investment in growing new owner mix. In the second quarter, we returned $135,000,000 To shareholders, we paid a $0.45 per share dividend on June 30 and repurchased 2,600,000 shares For $100,000,000 Over the last 12 months, our share count has been reduced by 10,000,000 shares, 12% of the shares outstanding at the end of June 2022. Now let me discuss Some of the key performance indicators that we monitor to gauge the health of the travel consumer, forward bookings, Volume per guest or VPG and the performance of our consumer finance portfolio. First, forward bookings.

Speaker 2

Owner nights on the books for the second half of the year continue to track ahead of 2019, providing us good visibility into the remainder of the year. 2nd is volume per guest. Our Q2 VPG of $3,150 was at the top end of our guidance range and 30% above 2019. VPG remains well above our long term guidance range of 2,700 to $3,000 On an absolute basis, VPGs are healthy and reflect the strong value proposition of our product. On a relative basis, we saw modest reduction in close rates through the quarter, which likely reflects a pullback of pent up demand in the prior year.

Speaker 2

Our VPG guidance for the full year is unchanged at $3,050 to $3,150 Sequentially, VPG declined $65 or 2%, with 60% of this related to mix impacts. Year over year, VPG declined $3.39 or 10% with close rates accounting for 64% of the year over year The balance was mix related with new owner transactions increasing to 34% of total transactions in the quarter, Up 200 basis points from the prior year. This investment in new owners adds to our pipeline of future upgrade sales Turning to our consumer finance portfolio, we saw a similar picture emerge in the 2nd quarter. Delinquencies are performing well on an absolute basis, but we did see further normalization in the quarter. However, there is nothing in these changes that we would expect to impact our full year loan loss provision guidance.

Speaker 2

The strategic moves we made in 2020 to raise credit standards have positioned us well for the current economic environment. At the end of the Q2, 11% of our portfolio had a FICO below 640 and year to date the average The PICA score for originations is 738. The prepaid nature of timeshare ownership is a key differentiator for our business model. 80% of our owners have fully paid for their timeshare and therefore the choice to vacation is less dependent on economic conditions. As we've said before, our healthy mix of recurring and predictable revenues is one of the reasons we expect our business will continue to be resilient If we enter a more challenging economic environment, this resilience in demand among timeshare owners Has been proven time and time again, most recently coming out of COVID.

Speaker 2

Blue Thread sales, our new owner marketing channel Aligned with Wyndham Hotels continues to exceed expectations. Blue Thread Tours increased 20% year over year in the second quarter compared to 15% growth in overall tours. At Travel and Membership, transaction propensity continues to be a headwind at RCI With transactions declining 7% year over year in the Q2. This was somewhat offset by 5% increase in exchange revenue per transaction On the back of mix improvements and price increases, Travel Club transactions declined 9% year over year, which was consistent with the expectation that we communicated on our Q1 call. Shifting to our 2023 outlook, We are reaffirming our adjusted EBITDA guidance range of $925,000,000 to $945,000,000 as well as our expectation for Gross VOI sales to be within a range of $2,100,000,000 to $2,200,000,000 We recognize the uncertainties related to the outlook For the economy, but we are optimistic about the company's ability to deliver strong performance.

Speaker 2

Although we expect consumers will Continue to prioritize vacations, we came into the year anticipating some normalization of demand trends. We saw some of this in the Q2 and our guidance for the second half of the year reflects a range of outcomes, including at the low end potential softening For more detail on our performance, I would now like to hand the call over to Mike Hub.

Speaker 3

Thanks, Michael, and good morning to everyone. As well as discussing our Q2 results, I will provide more color on our balance sheet and cash flow. All my comments will refer to comparisons to the prior year We reported 2nd quarter adjusted EBITDA of $236,000,000 Adjusted diluted earnings per share of $1.33 increases of 3% 5%, respectively. Adjusted EPS was impacted by approximately $0.03 due to the cumulative impact on our tax rate of income tax legislation passed in certain states during the quarter. Looking at the performance of our 2 business segments in the 2nd quarter, Vacation Ownership reported segment revenue of $768,000,000 an increase of 4%, while adjusted EBITDA of $187,000,000 Was flat to the prior year.

Speaker 3

We delivered 170,000 tours in the 2nd quarter, 15% growth year over year And BPG was $3,150 meeting the top end of our expectation. Adjusted EBITDA growth in the 2nd quarter was primarily impacted by the normalization of the provision as well as higher interest expense on the ABS transaction, which have closed over the past 12 months. Revenue in our Travel and Membership segment was $179,000,000 in the quarter compared to $188,000,000 in the prior year. Adjusted EBITDA was $62,000,000 compared to $64,000,000 in the Q2 of 2022. Exchange member count has started to recover, but not enough to offset the reduction in transaction propensity.

Speaker 3

Turning to our balance sheet, our financial position remains strong and in the second We continue to return capital to shareholders through share repurchases and our regular quarterly dividend of $0.45 per share. In the first half of the year, we repurchased $202,000,000 of common stock, representing 7% of shares outstanding compared to year end 2022. We have $275,000,000 remaining under our approved share repurchase program. In July, we closed on our 2nd ABS transaction of the year, A $300,000,000 transaction with a weighted average coupon of 6.72% and advanced rate of 92%. The transaction has thought over subscription levels underlying the strength and resiliency of our ABS program and the market's confidence in our business model.

Speaker 3

Adjusted free cash flow was $11,000,000 in the first half of the year compared to $121,000,000 in the same period last year. Due to higher year over year originations in our loan portfolio, certain other working capital items and an increase in interest payments on our corporate debt, Our net corporate leverage ratio for covenant purposes was 3.7 times at the end of the second quarter. We continue to expect our leverage ratio to decline by the end of the year to below 3.5 times. Now I will provide some more detail about our expectations for the 3rd quarter. Overall, we expect adjusted EBITDA to be in the range of $245,000,000 to $260,000,000 with Travel membership to be in the range of $60,000,000 to $65,000,000 Gross VOI sales in the 3rd quarter are We are expected to be in the range of $580,000,000 to $600,000,000 with VPG in the range of

Speaker 4

$3,000 to

Speaker 3

$3,100 With respect to our provision for loan loss, we continue to expect a range of 18% to 19% for the full year, with the 3rd quarter provision to be over 19%. Historically, it is not unusual for our 3rd core provision to be the highest of the year. Related to EPS, we are expecting our The tax rate to be between 27% 28% for the full year, with stock based compensation expected to be around $12,000,000 per quarter And net interest expense of approximately $60,000,000 per quarter for the remainder of the year. Overall, our strong second quarter performance continued growth in adjusted diluted EPS and return of capital to our shareholders. These results met our expectations Allow to reaffirm our outlook for the balance of the year.

Speaker 3

With that, Donna, can you please open up the call to take questions?

Operator

Thank you. The floor is now open for questions.

Speaker 5

Michael, you talked about the close rates coming down towards the end of the second quarter. Can you talk about close rate trends for both new and existing owners and bucket it in those two categories? What are you seeing there?

Speaker 2

Absolutely. And I'll bucket it for Q2 and then give you a perspective of how we're looking At that those close rates going forward. We saw pretty much across the board What I'd call normalization because the close rates are still well above our historical norms for owner, Our Blue Thread tours and our non affinity new owner tours, They normalize throughout the quarter. And then what we saw as we've moved into July and The way we're looking at the remainder of the year is those June close rates are what we would expect Going forward in what we're already seeing in July. So those components, there's been nothing that stood out particularly Between the three channels, highlighting strength or weakness in any of them, they've just been a slight normalization.

Speaker 2

And then those have continued into July and what we expect for the remainder of this year.

Speaker 5

Got it. Okay. And then margins were down year over year in VO in the second quarter. Can you talk about Margin expectations in the 3Q and 4Q and VL? Yes.

Speaker 3

Hey, Joe, this is Mike. As it relates to margins in the 2nd quarter, we talked about the fact We did invest in the new owner growth, so that's a positive sign for the business. Year over year, there was some pressure as it relates to Provision for loan losses in the Q2 of last year compared to the Q2 this year. And then the same thing on the interest expense on the ABS debt. The transactions we've done over the last 12 months Had been a little bit more expensive.

Speaker 3

So, overall, for the consolidated business, margins remained strong, but there was some pressure, like I said, on those 2 items from a year

Speaker 5

And then do you expect them to be down similarly in the 3Q and 4Q?

Speaker 3

Well, I'd say that the comparisons become easier when you look at the provision in the second half of last year compared to second half of this year and same thing with the interest Expenses kind of start to normalize on a year over year basis as we progress throughout the year.

Speaker 5

So then that means margins Would be up then if the comparisons are I mean, can you sort of quantify that?

Speaker 3

Yes. I would suspect that you're exactly right that margins Continue to improve, especially in the Q4, right? Think about the timing, right? 3rd quarter, you have pressure because it's your largest new owner tour volume. And then Q4, I would expect that The tail moves back up.

Speaker 3

Yes.

Speaker 2

Just the interest in the provision were punitive. We're the most punitive earlier in the year. And as the year Progress as they become less punitive to the overall margin. And as you look into the 4th quarter, That's one of the reasons our 4th quarter VOI margin accelerates.

Speaker 5

Thank you, guys.

Speaker 2

Thanks, Jeff.

Operator

The next question is coming from Chris Woronka of Deutsche Bank. Please go ahead.

Speaker 6

Hey, good morning guys.

Speaker 3

Good morning, Chris.

Speaker 6

Good morning. So maybe we can start on the travel membership side. I know you've talked about kind of this structural Challenge of lower propensity to transact on the exchange side. Is there anything you can do To try to reverse that, I know it's folks that are exchanging within the networks more often, but is there anything you can do, I I don't know what it might be, but to kind of stimulate that or is that a business where this is really just going to be about managing costs and things like that?

Speaker 2

There are a number of things that we can do, Chris. And yes, managing cost is always one component, but We believe this platform, which has been actually helped by the Travel Club business, allows us A greater suite of options. So there's propensity, there's transaction price, but then there's overall share of wallet. And one of the components that could help the exchange business is to provide a greater suite of travel This is simply then the exchange fee. That is one of the initiatives that we have in place.

Speaker 2

And even if propensity does not bounce back to where it was pre COVID, there are opportunities along that line. And Hopefully, which is a bit more longer term looking at spaces just outside of pure timeshare to provide So I think those are 2 good opportunities for us as we go forward.

Speaker 6

Okay. Thanks, Michael. And then as a follow-up On the timeshare on the core VOI piece, I know you guys obviously cover a wide range of customer demographics. But is there any thought to with your brand portfolio? Are there any, I guess, white spaces where You might see an opportunity to introduce new brands or something like that.

Speaker 6

We've seen Wyndham do that on the resort side with With new all inclusive brands, so just any thoughts on whether there could be brand changes coming?

Speaker 2

Absolutely. I think it's a great question. We've always felt that there were 2 opportunities for diversification of our business Post COVID, the first is the travel club side, which is allowing us to diversify to a degree On the Traveler membership side, but we absolutely believe that there's a lot of white space on the BO side of the business to continue to support The great run we're having with Wyndham and continue to grow that in the future. However, there are more white spaces that we feel that there are opportunities To grow into, we communicated that just over 18 months ago at our Investor Day. As we roll forward, the timeline on that, our pipeline is as strong in that space as it's ever been.

Speaker 2

And although we are not ready to announce anything today, we do express confidence in our pipeline and believe that That is an opportunity for us as we move forward.

Speaker 6

Okay, very helpful. Thanks, guys.

Speaker 2

Thanks, Greg.

Operator

Thank you. The next question is coming from Patrick Scholes of Truist Securities. Please go ahead.

Speaker 4

Hi, guys. Good morning, gentlemen.

Speaker 3

Good morning, Patrick.

Speaker 4

Michael, you talked about owner I think there's no reservations being ahead for the second half. Can you give a little more granularity on that? Is that up 1% or is it up 15%, a little more color, please. Thank you.

Speaker 2

Yes, absolutely, which The owner arrivals and length of stay is a critical part of our business. We are on arrivals for our owner base flat 2019, but on a room night basis, up 4%. It's a reflection that Owners are staying longer and the whole work from anywhere environment is still going strong. We really haven't seen an adjustment to the length of stay from this year To last, we also closely watch booking windows because usually when confidence wanes, booking windows Compressed and we are at about 120 days booking window, which is very consistent with what we've seen historically. It's just interesting stat.

Speaker 2

We're starting to see search patterns begin 160 days in advance, which means Yes, people are already looking into the end of this year and into next year, which again just expresses confidence in people's Desire to get to travel and I think we've seen a very similar confidence level come out in the recent consumer Sentiment Index, it was released, I believe, earlier this week. I think one other unique aspect or just granularity is We're not seeing it particularly by region any particular strength or weakness. That's one of the real benefits of our portfolio. We have 250 resorts around the world, 180 destinations. And therefore, we're not Overly reliant on any particular geography.

Speaker 2

Of course, Orlando, Myrtle Beach, Tennessee, Las Vegas are big markets, but We really don't we aren't overly reliant on a particular destination and Makes us feel good about the geographies and the diversification we have and any particular exposures.

Speaker 4

Okay. Thank you. And then regarding the travel and membership sector, it looks like your Guidance for 3Q is below Street expectations, but it's possible 4Q could be above. Is there anything in that 3Q guidance number regarding timing of costs That hurts you in 3Q that you might get back in 4Q or maybe helped you in 2Q or anything to think about there? Thank you.

Speaker 2

Well, actually, I there's nothing particular in Q3 or Q4 related to travel and membership. The primary focus that we have in that space is around propensity. And as propensity goes, really The outcomes of that segment, I know we get questions on travel clubs, but those are That segment is less than 5% of our company EBITDA. So moves in that space don't really affect the outcome. It really becomes a matter of our And we continue to work hard at that to offset the opportunity the risk related to But with our membership growing again and above last year, it is a slight tailwind that We don't have to face in Q1 or Q2 sort of a year on year lower membership.

Speaker 2

So we think As the membership grows, you start to see even more benefit in Q4.

Speaker 4

Okay. And then lastly related to that, How are you doing with getting organizations to sign up? On the call, you didn't really mention Anything new with that? Anything accelerating? Is that ahead of schedule, behind schedule?

Speaker 4

Just some color, please. Thank you.

Speaker 2

I assume you mean the Travel Club. Is that

Speaker 4

correct? Yes.

Speaker 2

So we continue to have Really good interest and company sign ups. We didn't mention anything this particular quarter, although we have had Plenty of sign ups. It's really now a matter of driving transactions and our energy is spent around elevating the We have the necessary population in that area. It is growing. Transactions are growing In the second half of this year.

Speaker 2

So for us, it's around just being intelligent in the Marketing dollars and the propensity to transact. And again, it's a profitable piece of our business, which Helps to offset propensity and although it's not growing at the level that we had originally anticipated, it provides a positive offset to The exchange propensity headwind that we talked about, which is the big mover in the T and M space.

Speaker 4

And sorry, one last, I kind of ask this every quarter, but it's safe to assume that For your long term guidance, vacation ownership tracking ahead, travel and membership not tracking behind, but still Overall tracking to that?

Speaker 2

Well, that's the best way to characterize it, Patrick. I mean, we're only 18 months into a 4 year plan and The last 6 months have definitely been full of interest rate and macroeconomic uncertainty, But the characterization of travel membership running behind vacation ownership ahead With 2.5 years to go and I think referencing back to Chris Woronka's question and our ability to Diversify on the BO side, which is the vast majority of our EBITDA and where we have some white space. I I think as we start to get into next year and some of those things unfold and the uncertainty clears up and turns into more economic And interest rate certainty, we'll be able to really start to sharpen our pencil on the 2025 plan. But directionally, exactly what you said is the right way to characterize it.

Speaker 4

Okay. Thank you. I'm all set.

Operator

Thank you. The next question is coming from Ian Zaffino of Oppenheimer. Please go ahead.

Speaker 7

Hi. Thank you very much. Can you guys maybe talk about as far as like geographic spread of demand, What centers were kind of the strongest? Did you see any less strong markets? And then maybe if you were to like just wrap in RCI into that as well, What are you seeing domestically versus international?

Speaker 7

Thanks.

Speaker 2

Yes, great question. Just To pull it back up for a second, as I mentioned earlier, 250 resorts, 90% of our sales are going to happen in North America and our key Centers, our key concentrations, Las Vegas, Tennessee, Myrtle Beach, Florida, primarily Central Florida, Really is where the vast majority of our sales will occur with Any of them peaking out at around 10% of our total volume. So again, we're not overly concentrated in any particular market. And when you look at demand and close rates across our geographies, we're really not seeing Particular variation, in the last quarter, I think we've all seen the news that Central Florida is a bit down, but Our demand remains very consistent in Central Florida, which again speaks to the timeshare model. The beach locations, The Southeast destinations have been very popular as far as bookings.

Speaker 2

And as it relates to RCI, We serve the Latin community and particularly Mexico and really seen a resurgence and strength in In the Mexican exchange market and just generally the timeshare market there. So that shift from Drive to right coming out of COVID to a bit more mid haul demand It's showing up in the Mexican market. And in the end, like I said, the diversification that we have really gives us Hedges in when there's headwinds in some markets, there's tailwinds in others. And across the board, we're really seeing

Speaker 7

And then Maybe talk about the inventory side. I guess with rates going up, what are you doing in that inventory environment? Do you think there Less inventory being built, how you kind of position yourself? Thanks.

Speaker 3

Good morning, Ian. This is Mike Hogue. So as it relates to inventory, we've talked about the fact that we've got 4 years of inventory on our balance sheet. So really right Now our inventory spend is pretty minimal, dollars 100,000,000 or less, and that will continue for the next several years. So as it relates to lack of inventory being built Or when it is being built, it being more expensive.

Speaker 3

One of the things about having that inventory on the balance sheet is we don't have exposure to increasing costs and things like that. So We're in a good spot from an inventory standpoint for the next several years for sure. So really don't have any pressure as it relates to Going out and sourcing inventory, if the right opportunity came to us, we could do an asset light deal for the market that we really wanted something like that. But right now, we aren't Looking for a whole lot of inventory because of the nice position we have on our balance sheet. And I would like to jump back To Joe's question on margin, I think when I first answered the question as it relates to the first part of the question, I was thinking about the year over year margins and the pressure related provision and The interest expense, the second part of the question was basically margins in the second half of the year and kind of what we do expect for the vacation ownership business To end the year at margins that are comparable to where we ended 2022.

Speaker 2

Hey, Ian, if I could just add and maybe it's a little Promotion of one of our projects is the last project that was delivered for the company was in Atlanta. It was a dual branded Club Wyndham Margaritaville Vacation Club, 2 different markets consumer wise, 1 Building and maybe one of the finest timeshare resorts in North America, But that was our last in process construction. It's completed. So when we look at our inventory spend today, it's Not as if we're mid cycle on anything. Our commitments are really aligned to reducing our balance sheet And using sales to burn off several years of inventory that's sitting there.

Speaker 2

But for those of you who have not been to our Atlantic project, I invite you all to visit next time here in the city.

Speaker 7

Okay. Thank you very much.

Speaker 2

Thanks, Ian.

Operator

Thank you. The next question is coming from Brandt Montour of Barclays. Please go ahead.

Speaker 8

Great. Thanks For taking my questions, everybody. So a follow-up to Joe's question on the close rates throughout the quarter, loud and clear, Mike, that they sort of subsided into July or using that in the back half of your guidance. But I want to dig in a little bit in terms of what like how far back we are to 2019 levels in that sort July close rate level after you adjust out the repeat versus owner mix, after you adjust out the channel mix, I know which is a big driver you guys chopping out a lot of the lower efficiency channels. And the point is how defensible Are the close rates that you guys have that you're seeing in July on that sort of same store basis?

Speaker 2

So let me start With the statement that if the close rates stay where they are right now, which is A bit of a normalization from last year's pent up demand that puts us well above the high end of our long range guidance plan. So We're very satisfied with where close rates ended the quarter and where they continue in July. The answer to your question is They're about midway back from the peak point to where they were pre COVID And you heard us layout of the VPG component what was due on a sequential basis and What was on a year on year basis due to mix and what was due to the normalization. What I just these are round numbers, but just to put it, if our pre COVID level was 10% and at the peak last year's 13, we're about at 115, 11.7. So that is a very Positive close rate number and we've seen that throughout June and throughout July, and really that level of normalization we've incorporated into our outlook for the remainder of this year.

Speaker 2

Does that answer your question?

Speaker 8

No, that was super clear and very helpful. The second question is about Consumer behavior and we don't usually talk about the higher end consumer, the lower end consumer. Sometimes you guys Talk about your FICO under 640 set. But when you think about or what you see in terms of Timeshare purchase or points per transaction or timeshare purchase per closure, Are you seeing softer, less consumer propensity to purchase A lot of points for sort of larger transactions. Is that something happening under the surface?

Speaker 2

No. The impact of VPG, if you strip out mix because There is a mix effect. It's not an average price per transaction. It is almost solely due to Close rate. So there isn't any underlying nuance that should be shared.

Speaker 2

It's simply We had an incredible pent up demand in Q2 of last year that followed through the summer season of 2022 and then it began to normalize in the fall of last year, and the primary difference is close rates. What I would say because we sort of brushed through mix and but I think there is an important Hold it up of the mix story, which is I've consistently said over the last year, we over the next few years want to get to 35% to 40% And in Q2, we are at 34% already And my expectation is we will be above that in Q3 because it's summer season. It's our primary new owner The margins we're achieving, the outlook that we're providing is in light of A new owner mix that is filling the pipeline for future owner sales ahead of the expectations we had laid out over the past year. So again, the team is really and we said at the beginning of the year, the team has dedicated itself to growing the new owner side of the equation and investing in our business early In this part of the cycle to set ourselves up for future success and the 34% that we achieved in Q2 It was a very strong result and I think we're going to see the same strength come out of Q3 as well.

Speaker 8

That's great. Extra color. Thanks for all that.

Operator

Thank you. The next question is coming from David Katz of Jefferies. Please go ahead.

Speaker 9

Good morning, everybody. Thanks for taking my questions. Good morning, sir. Good morning. So I wanted to go back to a comment or discussion point I had with Mike Hug A while back regarding the terms on securitizations and the impact of narrowing credit spreads, Where those terms could be expected to improve.

Speaker 9

Can we just have an updated Chat about that and where we could see it in some more detail?

Speaker 3

Yes, sure, sure. Happy to do that and thanks for I guess when we look at spreads, they have continued to tighten, which I said they had room to do. If we look at the Transaction we just did in July compared to the transaction we had last October, spreads on the tranches tightened anywhere between 25 bps and 105 bps Between the April transaction and the July transaction, the spreads were flat to better by 70 bps. What we need is uncertainty in interest rates, right? When there's uncertainty in interest rates, those spreads are wider.

Speaker 3

So As we progress through the next several months and hopefully start to get some certainty as to where interest rates are going to sell out, I would like to think that those spreads continue to have The opportunity is tightened. Obviously, the benchmark had moved up from the April to July transaction, which is why the overall rate came in at 6.72 compared to 6.33 percent for the April transaction, but overall good solid execution, good solid demand. And Like I said, I would like to think that once the interest rate environment starts to become a little more certain, there's still some opportunity for the spreads to tighten further.

Speaker 9

So I just want to make sure I'm clear on this. Meaning, if market interest rates stop going up, right, and stay flat, We could see some other terms within these securitizations improve a little bit, even and that Includes or excludes the coupon on them?

Speaker 3

You are correct and that includes the coupon. I think we have the opportunity On future transactions to come in below 6.7%, which is what the July transaction was at.

Speaker 9

Okay. Thanks very much. Interesting. Sure.

Speaker 3

Thank you.

Operator

The next question is coming from Danny Asad of Bank of America. Please go ahead.

Speaker 7

Hi, good morning everybody. Your my question is on buybacks. Your current Pace of buybacks, if we just run rate that into the rest of the year, we're kind of have you delevering slightly from a debt to EBITDA perspective, and we are further along in the year now. So I My question is just how do we think about capital allocation and the pace of buybacks for

Speaker 2

the balance of the year?

Speaker 3

Thanks for the question, Danny. We look at capital allocation basically on a monthly basis. So when we look at our cash flows for this year, we had the guidance out there of 55% to 60% With 2 ABS transactions having been completed now when you take into account the transaction we did in July coming in at 92% or a little under. I would say the high end of the cash flow guidance is probably out of the picture. However, as it relates to share repurchases, we'll And evaluate that every month, like we've always done and I would expect that we'll continue to repurchase shares, as we progress through the end of the year.

Speaker 3

Once again, that amount, we usually don't give guidance on that because it is a decision we're making really on a monthly basis depending on other We have as far as capital and our evaluation of free cash flow on the full year on a continuous basis.

Speaker 9

Got it. Thank you very much.

Speaker 3

Sure. Thank you.

Operator

Thank you. At this time, I'd like to turn the floor back over to management for any additional or closing comments.

Speaker 2

Thank you, Donna. We're pleased with how the 2nd quarter finished as our team worked hard to deliver solid results with year over year growth in revenue, adjusted EBITDA Thank you for our listeners and guests. Thanks and have a great day.

Operator

Ladies and gentlemen, thank you for your participation. This concludes today's conference. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

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Travel + Leisure Q2 2023
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