Travel + Leisure Co. (TNL) Earnings Call Transcript & Summary

Good morning. My name is Jim Savina, and I am the General Counsel and Corporate Secretary of Travel + Leisure Co. Welcome to our 2021 Annual Meeting of Shareholders, and thank you for joining us here today. We have already supplied each shareholder with access to a copy of the proxy statement and annual report on Form 10-K, and copies of these documents are also available to any shareholder via the web portal. Before we begin the formal portion of the meeting, let me please call your attention to the agenda and rules of conduct set forth in the web portal. We plan to conduct the meeting according to the agenda and ask that you please abide by the rules of conduct. After we complete the formal business portion of the meeting, our President and Chief Executive Officer, Michael Brown, will make a few remarks, and then there will be a general question-and-answer period for questions relating to the corporation's business. Only validated shareholders may ask questions in the designated field on the web portal. [Operator Instructions] Please note that this meeting is being recorded. However, no one attending via the webcast is permitted to use any audio recording of the device. And now to begin the formal portion of the meeting, I am pleased to introduce Steve Holmes, Chairman of the Board of Travel + Leisure Co. Steve?

Good morning, ladies and gentlemen, and thank you for taking the time to join us today. In accordance with the notice of the meeting, I would like to call this meeting to order. First, I'd like to introduce Michael Brown, the company's President and Chief Executive Officer as well as a Director. Attending today's meeting in addition to Jim and Mike and myself, I would like to recognize the other members of the Board who are attending, and we have full attendance: Louise Brady, Jim Brown -- Jim Buckman, George Herrera, Denny Marie Post, Ron Rickles and Mike Wargotz. On behalf of the shareholders, I would like to thank our directors for their significant dedication and commitment to the corporation and to its shareholders. I would also like to recognize the following members of the company's senior management team as well as representatives from our independent registered public accounting firm, who are present with us here today: Noah Brodsky, President, Travel + Leisure Group and Chief Brand Officer; Olivier Chavy, President of Panorama; Elizabeth Dreyer, Chief Accounting Officer; Mike Hug, Chief Financial Officer; Kim Marshall, Chief Human Resource Officer; Jeffrey Myers, Chief Sales and Marketing Officer, Wyndham Destinations; Barry Robinson, President and Managing Director, International Operations Wyndham Destinations; and Isa Rodriguez and John Zamora, representatives from Deloitte & Touche LLP, the corporation's independent registered public accounting firm. And at this point, I will call upon the secretary to give his report.

Thank you, Mr. Chairman. In order to conduct the formal business of the meeting, it is necessary to first establish that the meeting was duly and -- notice of the meeting was duly and properly mailed and that a quorum is present. To this end, the corporation has appointed [ Cheryl Needling ] as the inspector of election for this meeting. Ms. [ Needling ] is with us today and has previously signed an oath to execute the duties of inspector of election with strict impartiality and according to the best of her ability. Now for the establishment of the meeting requirements. With respect to the notice requirement, I have in my position, a list of shareholders of common stock of Travel + Leisure Co. as of March 22, 2021, the record date set for this meeting and an affidavit of Broadridge Financial Services, the corporation's proxy tabulator, affirming the mailing of a notice of Internet availability of proxy materials to all shareholders of common stock of Travel + Leisure Co. that are entitled to vote at this meeting. Each of these documents will be filed with the records of this meeting, and the list of shareholders is available for inspection on the web portal. With respect to establishment of the quorum, the inspector of election has reported that there were 8,183,011 shares of common stock outstanding on the record date and that the holders of approximately 75,976,035 shares or 88.15% of the total common stock entitled to vote are represented at this meeting. Based on such report, I hereby recognize the presence of a quorum for purposes of proceeding with the business of this meeting. Please note that your designated proxies are present this afternoon and that you do not need to vote via the web portal if you previously sent your proxy or voted online by phone. Any shareholder who has not voted or wishes to change their vote may do so by clicking the voting button on the web portal following the instructions there. Please remember that only holders of shares of common stock held as of March 22, 2021, may vote at this meeting. Thank you for your cooperation. Our Chairman will now conduct the formal business of the meeting.

As stated in the proxy statement for this meeting, there are 3 items on the agenda to be voted on today. Please note that we will give shareholders an opportunity to comment on the proposal themselves after all proposals have been presented. Proposal #1 is the election of 8 directors to serve until the 2022 Annual Meeting of Shareholders of the corporation and until their successors are duly elected and qualified. The following directors have been nominated by the Board of Directors: yours truly, Steve Holmes, Louise Brady, Michael Brown, Jim Buckman, George Herrera, Denny Marie Post, Ron Rickles and Mike Wargotz. Proposal #2 is the approval of a nonbinding advisory resolution to approve executive compensation. And proposal #3 is the ratification of the appointment of Deloitte & Touche LLP to serve as Travel + Leisure Co.'s independent registered public accounting firm for the year ended December 31, 2021. The Board of Directors recommends a for vote for proposals 1, 2 and 3. Before I open the floor for discussion of the proposals, please note that general questions from shareholders will be answered after completion of the business of the meeting. So please wait until the end to comment unless you are discussing these 3 proposals. The floor is now open for discussing these proposals. If you have any comment or question on the proposal, please submit your comment or question through the web portal, and we'll take a moment to see if there are any questions in the queue. Okay. The polls are now open for voting on all proposals. Any shareholder who hasn't yet voted or wishes to change their vote may do so by clicking on the voting button in the web portal and following the instructions there. Shareholders who have sent in proxies or voted via telephone or Internet and do not want to change their vote, do not need to take any further action. I'll now pause for people to vote if they need to. [Voting]

Now that everyone has had the opportunity to vote, I now declare the polls for the 2021 Annual Meeting of Shareholders closed. That concludes the matters to be voted on. I will now ask the Corporate Secretary to report on the preliminary results of voting.

Thank you. For Proposal #1, the election of directors, each nominee received votes representing at least 94.06% of the shares represented at the meeting, so each of the nominees is declared duly elected. For Proposal #2, the approval of the nonbinding advisory resolution to approve our executive compensation program, 90.55% of the shares present at the meeting were cast in favor of the proposal, so the proposal is declared approved. For Proposal #3, ratification of Deloitte & Touche LLP as the corporation's independent registered public accounting firm for the calendar year ending December 31, 2021, 98% of the shares present at the meeting were cast in favor of the ratification, so the proposal is declared approved. With the conclusion of the official business, this meeting is now adjourned. Our President and Chief Executive Officer, Michael Brown, will now provide a few remarks, followed by a brief question-and-answer session. Michael?

Thank you, Jim. Good afternoon, and thank you again for joining us today. This past year was easily the most difficult year in my professional career, the ravages of a global pandemic and the rising awareness in response to social injustice gave our team more than its share of obstacles to overcome, progress to make and changes to effectuate. But most importantly, it gave us an opportunity to improve our business and grow as an organization. Today's business environment is exciting. I believe we are at the tail end of the COVID-19 pandemic. We are in the midst of a strong resurgence in leisure travel and many of the changes we made during 2020 are showing through in our results. I'm honored to be part of the Travel + Leisure Board of Directors and management team that led us through 2020. I'm also proud of what we have achieved, thanks to the hard work of our dedicated team of associates. I also want to thank you, our shareholders, for the trust you have placed in us to act as stewards of the company. Our focus in managing through 2020 was centered on 3 core pillars: resiliency, reinvention and responsiveness. Our business model has proven to be resilient in every economic downturn to century, after 9/11, after the great financial crisis and now after COVID. At the onset of the pandemic, we secured our balance sheet by ensuring access to liquidity and minimize the impact to cash flow by reducing our cost structure. Although we were -- although we lowered our quarterly dividend rate as part of our cost saving measures, notably, we were one of a handful of companies in the consumer discretionary category that continued to pay a dividend throughout the year. The robust reengagement of our owners and members following initial resort closures and travel restrictions also proved once again the durability of demand for vacations. This resiliency in leisure travel continues into 2021 as we begin to return to 2019 levels of vacations on the books. Our management team also took the opportunity to reinvent our business in 2020. Most notably, we acquired Travel + Leisure at the beginning of 2021, renamed the company and announced plans to launch a new travel subscription business, a new licensing arm and an online booking platform. We also launched Panorama Travel Solutions, which is our white label travel benefits club on a B2B basis. This club will open opportunities for us outside of the timeshare industry. As if launching new businesses, business lines was not enough, we also focused on the reinvention of our core timeshare business. Our team made significant changes to our marketing criteria, which is already elevating the credit quality of our portfolio. Our resort operations teams reinvented the check-in and cleaning procedures at our resorts and changed the booking process to increase owner availability across our system. As well, we reprioritized our capital intensity, allowing us more opportunities to preserve cash, strengthen the balance sheet and create greater focus on fewer impactful projects. Lastly, we elevated our responsiveness around ESG. Our efforts were validated just last week when we were recognized by DiversityInc as a company that has made noteworthy progress in the areas of human capital diversity metrics, leadership accountability, talent programs, workplace practices, supplier diversity and philanthropy. As well, we maintained a human rights campaign score of 100% for the third consecutive year. We heard the clarion call for change regarding social issues in 2020, most specifically around racial and equity and have enacted extensive measures designed to create a more diverse and inclusive workplace and a commitment to long-term sustainable progress in this area. This focused approach dovetail well with our broader ESG commitments around fighting opioid addiction, human trafficking and elevating the need for greater environmental sustainability. I'm proud of our progress, but recognize each of these efforts is ongoing. As we enter 2021, Travel + Leisure was positioned to fully participate in the leisure travel recovery with a more diversified business model and a more streamlined team that we expect will drive higher quality earnings in the years ahead. It is difficult to encapsulate a year of work, especially last year in a few short minutes. So I will conclude with this. Our company is stronger than at any point in my tenure, our direction is clear and the opportunities have never been as bountiful. This is only possible because the incredible team assembled at Travel + Leisure and our collective commitment to put the world on vacation. Thank you for your time and support this afternoon. The Board, along with our executive team and 15,500 associates worldwide, remain committing to creating shareholder value for you. With that, I would now like to open the floor for general questions from shareholders. If you have a question, please submit your question through the web portal. Please note, we will attempt to answer as many questions as time allows, but only questions that are germane to the meeting will be addressed. The floor is now open for questions.

And I see that we have our first question. Do you have any plans to increase the dividend? I'd like to start by just saying that the dividend is an important element of our overall capital allocation strategy. As I mentioned in my prepared remarks, we were one of the few consumer discretionary companies that continue to pay any dividend throughout COVID-19. We were proud of that, not only because we view it as critical to our capital allocation strategy. But also, it was a clear demonstration of the resiliency of our business, especially in the travel space. And that was equally important as the return of capital to shareholders. As it relates to future growth, we view that as a decision that we will make on a quarterly basis related to our overall capital allocation strategy. But as I just mentioned, we believe that it is an important component of that return of capital. And we like to view our overriding principle to continue to grow our dividend along with the growth of our business. With that, we'll look for our next question. Are there any other questions at this time? If not, then I would like to thank you for attending the Travel + Leisure Co. 2021 Annual Meeting. That's all the time we have for today. Thank you for attending, and have a great rest of your 2021.