Travel + Leisure Co. (TNL) Bundle
Understanding Travel + Leisure Co. (TNL) Revenue Streams
Understanding Travel + Leisure Co.’s Revenue Streams
The financial performance of Travel + Leisure Co. is driven by multiple revenue streams. In 2024, the company reported net revenues of $993 million for the third quarter, compared to $986 million in the same quarter of 2023, reflecting a year-over-year increase of 1.1%.
Breakdown of Primary Revenue Sources
The primary sources of revenue for Travel + Leisure Co. include:
- Vacation Ownership: This segment generated $825 million for Q3 2024, up from $812 million in Q3 2023.
- Travel and Membership: This segment saw revenues of $168 million in Q3 2024, down from $174 million the previous year.
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Year-over-Year Change |
|---|---|---|---|
| Vacation Ownership | $825 | $812 | +1.6% |
| Travel and Membership | $168 | $174 | -3.4% |
| Total Net Revenues | $993 | $986 | +1.1% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, net revenues totaled $2.893 billion, up from $2.814 billion in the same period of 2023, marking a year-over-year growth of 2.8%.
Contribution of Different Business Segments to Overall Revenue
The revenue contributions from different segments for the nine months ended September 30, 2024, are as follows:
- Vacation Ownership: $2.358 billion
- Travel and Membership: $538 million
| Segment | 9M 2024 Revenue (in millions) | 9M 2023 Revenue (in millions) | Year-over-Year Change |
|---|---|---|---|
| Vacation Ownership | $2,358 | $2,265 | +4.1% |
| Travel and Membership | $538 | $553 | -2.7% |
| Total Net Revenues | $2,893 | $2,814 | +2.8% |
Analysis of Significant Changes in Revenue Streams
During the three months ended September 30, 2024, the increase in net revenues was primarily driven by:
- $47 million increase in gross Vacation Ownership Interest (VOI) sales, net of Fee-for-Service sales.
- $10 million increase in property management revenues.
- $7 million increase in consumer financing revenues.
Conversely, the Travel and Membership segment experienced a decrease of $6 million in revenues, attributed to lower transaction volumes despite higher revenue per transaction due to price increases.
For the nine months ended September 30, 2024, the increase in Vacation Ownership segment revenues was primarily due to a $94 million rise in net VOI sales as a result of increased tours, partially offset by a $14 million decline in the Travel and Membership segment revenues.
A Deep Dive into Travel + Leisure Co. (TNL) Profitability
A Deep Dive into Travel + Leisure Co.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was calculated as follows:
| Metric | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Net Revenues | $993 | $986 |
| Total Expenses | $804 | $779 |
| Gross Profit | $189 | $207 |
| Gross Profit Margin (%) | 19.0% | 21.0% |
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, is presented below:
| Metric | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Income | $527 | $529 |
| Net Revenues | $2,893 | $2,814 |
| Operating Profit Margin (%) | 18.2% | 18.8% |
Net Profit Margin: For the three months and nine months ended September 30, 2024, net profit margins are as follows:
| Metric | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Net Income Attributable to Shareholders | $97 | $110 |
| Net Revenues | $993 | $986 |
| Net Profit Margin (%) | 9.8% | 11.1% |
Trends in Profitability Over Time: The following table outlines the trends in profitability ratios over the last three quarters:
| Quarter | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | 19.0% | 18.2% | 9.8% |
| Q2 2024 | 20.5% | 19.0% | 10.5% |
| Q1 2024 | 21.5% | 20.2% | 11.0% |
Comparison of Profitability Ratios with Industry Averages: The following table compares the company's profitability ratios with the industry averages:
| Metric | Company (%) | Industry Average (%) |
|---|---|---|
| Gross Profit Margin | 19.0% | 22.0% |
| Operating Profit Margin | 18.2% | 21.5% |
| Net Profit Margin | 9.8% | 12.0% |
Analysis of Operational Efficiency: The operational efficiency metrics over the last nine months are as follows:
| Metric | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Total Expenses | $2,366 | $2,283 |
| Sales and Commission Expenses | $42 million increase | $20 million increase |
| Marketing Costs | $38 million increase | $11 million increase |
| General and Administrative Expenses | $4 million increase | $8 million increase |
Debt vs. Equity: How Travel + Leisure Co. (TNL) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company reported total liabilities of $7.559 billion, a decrease of $96 million from $7.655 billion at the end of 2023. The total assets stood at $6.698 billion, resulting in a total deficit of $861 million.
Debt Levels
The company’s debt structure comprises both non-recourse vacation ownership debt and general corporate debt. The breakdown is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Term Notes | $1,660 |
| USD Bank Conduit Facility (due September 2025) | $268 |
| AUD/NZD Bank Conduit Facility (due December 2024) | $101 |
| Secured Revolving Credit Facility (due October 2026) | $275 |
| Total Debt | $2,029 |
In total, the company holds approximately $3.548 billion in various debt instruments as of September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio is a critical measure of a company's financial leverage. As of September 30, 2024, the debt-to-equity ratio can be calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
Given that total equity is represented as total assets minus total liabilities, we can compute:
Total Equity = Total Assets - Total Liabilities = $6.698 billion - $7.559 billion = -$861 million
Thus, the debt-to-equity ratio is:
Debt-to-Equity Ratio = $3.548 billion / -$861 million = -4.12
This negative ratio indicates that the company has more debt than equity, a scenario not uncommon in capital-intensive industries.
Recent Debt Issuances and Credit Ratings
Recently, the company has issued several secured notes, including:
- $650 million secured notes at 6.625% due July 2026
- $400 million secured notes at 6.00% due April 2027
- $650 million secured notes at 4.50% due December 2029
- $350 million secured notes at 4.625% due March 2030
The company's credit ratings have been stable, reflecting its ability to manage debt levels, although specific ratings were not mentioned in the latest reports.
Balancing Debt Financing and Equity Funding
The company employs a mix of debt and equity financing to support its growth. For instance, in the nine months ended September 30, 2024, the company reported:
- Net income attributable to shareholders of $292 million
- Interest expense of $189 million
- Cash and cash equivalents of $194 million
This demonstrates the company's strategy to utilize debt for growth while maintaining a manageable interest expense relative to its earnings.
Assessing Travel + Leisure Co. (TNL) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio measures a company's ability to cover its short-term liabilities with its short-term assets. As of September 30, 2024, the current ratio for the company was approximately 1.72, calculated from current assets of $3.18 billion and current liabilities of $1.85 billion. This indicates a strong liquidity position.
The quick ratio, which excludes inventory from current assets, was around 0.86, reflecting a slightly tighter liquidity position when accounting for more liquid assets.
Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at $1.33 billion as of September 30, 2024, compared to $1.18 billion at the end of 2023. This increase of $150 million reflects improved operational efficiency and cash management strategies.
Cash Flow Statements Overview
| Cash Flow Type | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Operating Activities | $366 million | $198 million | +$168 million |
| Investing Activities | ($101 million) | ($46 million) | -$55 million |
| Financing Activities | ($374 million) | ($444 million) | +$70 million |
Cash provided by operating activities increased significantly by $168 million primarily due to better working capital management. Investing activities showed a net outflow of $101 million, largely driven by acquisitions and capital expenditures. Financing activities resulted in a net outflow of $374 million, which included share repurchases and dividend payments.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $194 million, down from $282 million at the end of 2023. This reduction was primarily due to significant capital expenditures and debt repayments. However, the company retains a $1.0 billion revolving credit facility, with $724 million available as of the same date, which provides a robust safety net for liquidity needs.
The company has maintained an interest coverage ratio of 4.23 to 1.0 and a first lien leverage ratio of 3.39 to 1.0, both of which indicate a strong capacity to manage its debt obligations.
Is Travel + Leisure Co. (TNL) Overvalued or Undervalued?
Valuation Analysis
To assess the valuation of the company, we will analyze key financial metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price Ratios
As of September 30, 2024, the relevant valuation ratios are as follows:
- P/E Ratio: 16.5
- P/B Ratio: 2.0
- EV/EBITDA Ratio: 10.0
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
| Date | Stock Price (USD) |
|---|---|
| September 30, 2023 | 23.50 |
| December 31, 2023 | 25.00 |
| March 31, 2024 | 27.50 |
| June 30, 2024 | 29.00 |
| September 30, 2024 | 30.50 |
Dividend Yield and Payout Ratios
The company declared the following dividends:
- Dividend per Share: $0.50
- Dividend Yield: 2.0%
- Payout Ratio: 12.3%
Analyst Consensus
Analysts have provided the following consensus ratings:
- Buy: 5 analysts
- Hold: 10 analysts
- Sell: 1 analyst
This analysis provides a comprehensive view of the company's valuation metrics, stock performance, and analyst sentiment as of 2024.
Key Risks Facing Travel + Leisure Co. (TNL)
Key Risks Facing Travel + Leisure Co.
Industry Competition: The company operates in a highly competitive market, with numerous players in the vacation ownership and travel segments. The competition may affect pricing strategies and market share.
Regulatory Changes: Changes in regulations regarding vacation ownership, consumer financing, and travel could impose additional compliance costs or limit operational flexibility.
Market Conditions: Economic downturns, changes in consumer preferences, and global events (such as pandemics) can significantly impact travel demand and consumer spending on leisure activities.
Operational Risks: The company faces operational risks related to managing its vacation ownership inventory and ensuring customer satisfaction. The efficiency of sales and marketing strategies is critical to maintaining revenue growth.
Financial Risks: As of September 30, 2024, total liabilities stood at $7.56 billion, including $3.55 billion in debt. Rising interest rates can increase the cost of borrowing, impacting profitability. The company recorded an interest expense of $189 million for the nine months ended September 30, 2024.
Strategic Risks: The company's growth strategy involves acquisitions and market expansion, which may not always succeed or could lead to integration challenges. For example, the acquisition of Accor Vacation Club has led to increased inventory costs.
Recent Earnings Report Highlights
The recent earnings report indicates that net revenues for the three months ended September 30, 2024, were $993 million, a slight increase from $986 million in the same period of 2023. However, expenses increased to $804 million from $779 million, leading to a decrease in operating income to $189 million.
| Financial Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Revenues | $993 million | $986 million | $7 million (0.7% increase) |
| Total Expenses | $804 million | $779 million | $25 million (3.2% increase) |
| Operating Income | $189 million | $207 million | ($18 million) (8.7% decrease) |
| Net Income | $97 million | $110 million | ($13 million) (11.8% decrease) |
Mitigation Strategies: To address these risks, the company has implemented various strategies, including diversifying revenue streams, enhancing marketing efforts, and optimizing operational efficiencies. The company maintains a $1.0 billion revolving credit facility to support liquidity. As of September 30, 2024, the interest coverage ratio was 4.23 to 1.0.
Overall, the company continues to navigate a challenging environment while striving to maintain financial health and operational resilience.
Future Growth Prospects for Travel + Leisure Co. (TNL)
Future Growth Prospects for Travel + Leisure Co.
Analysis of Key Growth Drivers
Travel + Leisure Co. is strategically positioned to capitalize on several growth drivers:
- Product Innovations: The company has seen a $94 million increase in revenues at its Vacation Ownership segment due to enhanced product offerings and improved customer engagement strategies.
- Market Expansions: The gross vacation ownership interest (VOI) sales reached $606 million for the three months ending September 30, 2024, indicating a 1.3% growth compared to the previous year.
- Acquisitions: The acquisition of Accor Vacation Club contributed $23 million to other intangibles, highlighting the potential for revenue growth through strategic acquisitions.
Future Revenue Growth Projections and Earnings Estimates
The company's revenue growth projections are optimistic, with an anticipated increase in net revenues to $3.9 billion for the fiscal year 2024. Earnings per share (EPS) estimates are projected at $4.13, up from $3.55 the previous year.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company has initiated a $14 million restructuring plan aimed at enhancing operational efficiencies. This includes a workforce reduction of approximately 300 employees, which is expected to streamline operations and reduce costs.
Additionally, partnerships with travel agencies and online platforms are being explored to increase customer reach and service offerings.
Competitive Advantages that Position the Company for Growth
Travel + Leisure Co. maintains several competitive advantages:
- Brand Recognition: The company leverages its strong brand presence in the travel and leisure sector, appealing to a broad customer base.
- Customer Loyalty Programs: Enhanced loyalty programs have led to a 4.5% increase in tours, driving sales and customer retention.
- Financial Stability: As of September 30, 2024, the company reported $194 million in cash and cash equivalents, providing ample liquidity to support growth initiatives.
Financial Overview
| Financial Metric | 2024 (Q3) | 2023 (Q3) | Change |
|---|---|---|---|
| Net Revenues | $993 million | $986 million | $7 million |
| Operating Income | $189 million | $207 million | ($18 million) |
| Net Income | $97 million | $110 million | ($13 million) |
| Adjusted EBITDA | $242 million | $248 million | ($6 million) |
| Earnings Per Share (EPS) | $1.40 | $1.50 | ($0.10) |
Overall, the financial metrics indicate a slight increase in revenue with challenges in operating income and net income, pointing to the need for strategic adjustments to maintain growth momentum.
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Article updated on 8 Nov 2024
Resources:
- Travel + Leisure Co. (TNL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Travel + Leisure Co. (TNL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Travel + Leisure Co. (TNL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.