Greetings, and welcome to the Travel + Leisure Q3 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Erik Hoag, Chief Financial Officer. Please go ahead, Erik.

Thank you, Kevin. Good morning to everyone. Before we begin, we would like to remind you that our 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. The factors that could cause actual results to differ are discussed in our SEC filings and in our press release accompanying this earnings call. You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our Investor Relations website. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our third quarter results and our longer-term growth strategy. And then I will provide greater detail on the quarter, our balance sheet and outlook for the rest of the year. Following our prepared remarks, we'll open up the call for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated. With that, I'm pleased to turn the call over to Michael Brown.

Good morning, and thanks for joining us. Travel + Leisure delivered another exceptional quarter that reflects the strength of our model and the consistency of our execution. During today's call, Erik will focus on the specifics around our quarterly metrics, and I will dedicate more time to our strategic priorities and progress against them. Our strategy is focused on delivering outstanding vacation experiences for our owners and members while building lasting value for our shareholders. We're executing this strategy by broadening our brand reach, expanding our data-driven marketing, investing in digital innovation and enabling our associates to deliver excellence every day. Leisure demand remains robust and vacations continue to be a priority. In the quarter, we generated over $1 billion in revenue, $266 million in adjusted EBITDA and $1.80 in adjusted earnings per share, all up meaningfully year-over-year. Our strong free cash flow generation allowed us to return $106 million to shareholders during the quarter. These results were fueled by the strength of our Vacation Ownership business with sustained momentum in volume per guest, or VPG. We ended the quarter at $3,304 above the high end of our guidance range. This marks our 18th consecutive quarter with VPGs over 3,000 since we changed our credit quality standards in 2020. Tour flow remained healthy this quarter at 200,000 tours, a clear sign that our consumers' appetite for travel remains strong. By focusing on high-quality tours and owner engagement, we are driving stronger close rates and higher long-term value. These results reflect the core of our business, a resilient customer base built around leisure travel and a compelling value proposition. Beyond this quarter's results, we continue to advance 3 strategic priorities to drive sustainable growth. First, expanding our brand portfolio. In September, we announced our newest Sports Illustrated Resort in Chicago, just…

Thanks, Michael, and good morning, everyone. The third quarter was another strong period of outstanding execution for Travel + Leisure. We delivered solid top line revenue growth, expanded margins and generated strong cash flow and earnings. We also continued to return capital to shareholders and strengthen our balance sheet. These results demonstrate the resiliency of our business model and the consistent cash generation that sets Travel + Leisure apart. We're a capital-efficient compounder, converting steady growth into expanding cash flow, higher per share results and long-term shareholder value. The quarter has reinforced our confidence and highlighted momentum across our business, and we'll keep the pedal down as we close out the year and head into 2026. I'll begin by reviewing our consolidated financial results, followed by segment performance. Lastly, I'll address our cash flow, balance sheet and provide an outlook. Total company revenue in the third quarter was $1.044 billion, up 5% compared to the prior year. Adjusted EBITDA was $266 million, up 10% year-over-year and above the high end of our guidance range. Adjusted EBITDA margin expanded 100 basis points to 25%, reflecting both operating leverage and efficiency gains. We exceeded our $255 million guidance midpoint by $11 million, driven by higher gross VOI sales and effective cost management, resulting in improved profitability in the quarter. This quarter again demonstrated the power of our compounding model where 5% revenue growth translated into 10% adjusted EBITDA growth, 8% adjusted net income growth and 15% adjusted earnings per share growth, reflecting both earnings expansion and the accretive impact of share repurchases. A higher effective tax rate modestly tempered flow-through from adjusted EBITDA to adjusted net income, but 14% adjusted pretax profit growth underscores the strength of our model. Turning to the Vacation Ownership segment, our core growth engine. Revenue grew 6%…

[Operator Instructions] Our first question today is coming from Chris Woronka from Deutsche Bank.

Congratulations on a nice quarter. So I was hoping to start off, Michael, maybe it's a little bit of perspective from you. Your VOI business continues to perform very well. Certainly, this quarter was way ahead of our expectations. What do you think is driving that given the fact that we hear about some consumer weakness in certain pockets? And maybe it's just the demographic situation. If you guys -- if you can maybe remind us of your income levels and things like that and what you've changed in the business to try to not only get the higher income customer, but also pivots you make, if needed to address situations where you maybe see pockets of hesitation among buyers?

Chris, yes, I would agree with you. It was a very strong quarter from top to bottom. I think I would say there's 2 elements that are really driving continued strong performance on VOI as it relates to the strength of the consumer beyond the fact that we just see leisure travel as remaining consistent. We've dedicated over the last few years a lot of energy that includes operating capital that includes digital work and the platform to make getting on vacation and enjoying the resorts, people want to enjoy easier to do and with less friction. And that's why we refer to the app implementation. That's why we talk about the new partnerships we're developing and our consumers enjoying experiences not just in the resort, but the ability to attach other experiences while they're on vacation. All of that's driving our satisfaction scores. And as we said back pre-COVID, I remember one of our -- in one of our calls, we said, when people get on vacation, they enjoy it, they love their vacations and enjoy the product and end up buying more. We are really seeing that compounding effect of all the investments we've put in over the year and the direction we're heading play into our consumer and their performance, especially amongst our owner base. Secondly is, you're correct, we've, over the last 5 years, dedicated to fine-tuning our credit requirements and upgrading our overall consumer profile. Our FICO scores are over 740 in the last quarter. They have increased dramatically over the last 5 years. Our household income, which used to hover right around $100,000, maybe slightly below, have increased to around $115,000 household income. Ultimately, we're trying to make our model as efficient as possible from top to bottom. And part of that effort was really fine-tuning our demographics, which we think we've successfully done. Now the last leg of that is to expand our product offering so that we capture more addressable market. And that's the work that we'll be doing over the next 2 years, and we've already started with our brand expansion.

Okay. Thanks, Michael, very, very helpful perspective. Just as a follow-up, you guys last quarter, I think, announced this other Sports Illustrated development in Chicago. And I know that that's an existing hotel property. Can you maybe talk a little bit about whether you see a lot of additional opportunities there, specifically on that? I know you're going to continue on Margaritaville and now back on Sports Illustrated specifically, do you see a lot of these kind of urban hotels, maybe it's a brand issue or something else where you guys can come in and convert to timeshare. If you could maybe just give us a little bit of a sense as to kind of economics. I think you're on a -- you're going with the asset-light model upfront of those. But a little color on that would be very helpful.

Absolutely. And we're very excited about Sports Illustrated. I know there would be some competitive commentary amongst other urban locations, but we know that Chicago is a great sports town, one of the best in the U.S. And there are many others that definitely have our eye. And given where the real estate market is, we mentioned in the last call, I think the last 2 calls that at this point in time in the cycle, conversions are a better opportunity for us and for many people than greenfield development. We've now got 3 resorts announced for Sports Illustrated. We will start sales by the end of this year as we've previously committed to, no change to that. But at this stage, we'll go where the market leads us, and it's to great urban locations and in the last 2 examples, conversions. I will, though, come back to our original outlook on Sports Illustrated is we see lots of opportunities in college towns. We continue to pursue those options. And just because our last 2 are in urban destinations, don't think that, that's a shift in strategy. We will be announcing over the upcoming quarters more college locations because we think that's a tremendous market as well.

The next question is coming from Ben Chaiken from Mizuho.

I guess one thing that stuck out is traction in the Travel Club transactions up 30%. I guess what did you change there, if anything? And then I'm asking this question in the context of '24 transactions being down 1%. So is this a comp dynamic in 3Q? It seems more than that. Or is it a sequential acceleration in the top line?

Good morning, Ben. yes, it's compounding momentum and work over the last 3 years. We spent a lot of time speaking about Travel and Membership and that we've refined strategies there. And one of the efforts that our team did in 2024 was get back to the profit-producing clubs, the ones that we thought that we could accelerate due to the loyalty and transaction propensity within those clubs. We made that change in '24. We've spent a lot of effort on marketing and getting the commitment from those clubs. What you're seeing in Q3 of this year, as you mentioned, 30% acceleration in transactions on a year-to-year basis. The revenue per transaction has come down, but I think most would agree that's a normal component of the cycle of growth is your first objective is to drive transactions plus 30%. Our revenue per transaction went down 12%. And ultimately, revenue is starting to accelerate very nicely. So it's just really the outcome of multiyear work of getting -- finding out in this new business for us, what works and what doesn't and credit to the team for finally finding those hooks. The next leg of this effort will be about getting the margins up. But for now, we're super pleased with the transaction growth we saw in the Travel Club business.

Got it. That's helpful. And then on SI, you have Chicago, which you referenced on the call, you've got Alabama and Nashville. I believe both Nashville and Chicago are conversions, if I'm not mistaken. I guess, could you remind us what is going to open first between those 2? And then do I have the mechanics correct, as soon as one of those are converted, that puts inventory in the trust and you're able to sell access to the entire portfolio. Am I thinking about that correctly?

You are. So I'll start with the second part of that question first is, it is one of the big benefits of conversions is once it's registered and we can put a conversion into the club. Sports Illustrated in Nashville will open late first quarter, early second of next year. It will go through a conversion. And then we will keep Chicago open during the transition, but it will open as a rebranded property toward the end of 2026. So both will be 2026 branded and occupancy. Sales will begin in Nashville at the end of this year and then sales will begin in Chicago at the beginning of next year.

And so people could buy as soon as the Nashville inventory is in there, then you could in theory buy Alabama, if you were happening to be in Alabama fan.

You'll be a member of the Sports Illustrated club at that point, which will ensure eventual access to Alabama. We will not be selling football weekend in Alabama yet because we're not registered there. And so you can become a member of the club, but Alabama-specific reservations and priorities will be at the time that it's registered and available for sale.

Do you think about these as -- without getting maybe too specific, but like just because I think there's a lot of variability. But historically, when we thought about new dots on the map, whether that's what's called a resort with a sales center, what -- relative to a traditional timeshare opening, like where do you think this lands? With this, do you have higher expectations, lower expectations because of seasonality? Just like what's the thought process there, if you could maybe generalize it?

I have a different perception on seasonality than some of the questions we received. I think sports towns, especially have changed from weekend base to a far less seasonal market. And I remember when people used to say Myrtle Beach was a 4-month market, and now it's an 11-month market, if not 12-month market. I think sports towns, the alumni traveling back to universities are very similar to year-round destinations. And I do expect to see it. I think it will actually be less seasonal than ski locations where you get these peak Presidents' Week and Christmas, New Year's, you're going to get more of those peak weeks at universities and you have all kinds of reasons to return to a college town or in a place like Chicago between the Cubs, the White Sox, Blackhawks, Bears, lots of reasons to -- the WNBA team now that's there, lots of reasons to return to Chicago year-round. So I think they're going to be less seasonal. I think they're going to be highly attractive. And one of the components we really like about the launch of both Sports Illustrated and Eddie Bauer and what we've seen in the core is it's going to start in '26 to '27, adding new owners into our equation at a much higher rate than our existing core brands do. On a percentage basis, not on an absolute basis.

Next question is coming from Patrick Scholes from Truist Securities.

Taking a look at the statistics on your most recent securitization, it looks like the weighted coupon was the lowest in several years. In that regard, I recall 2 or 3 years ago, you were talking about a 2% to -- around a 3% initial EBITDA headwind to growth when you would start the year. How do you think, given the lowering the last couple of years of that coupon, especially the most recent one, for next year, would you have a headwind to start the year, or tailwind? Or would it be sort of neutral to flat?

Patrick, thanks for the question. Last week's ABS transaction priced out at 4.78%, and that's really on the heels of our July transaction, which came in at 5.12%. So rates have continued to head downward. We are starting to see the weighted average cost of funds on the loan portfolio begin to turn. So year-over-year, our weighted average cost of funds in the third quarter was down about 15 basis points. So it's modest, but we are starting to see a benefit, and it's going to set up a multiyear tailwind as spreads continue to move our way.

Okay. And then my next question, I believe you continue to target increasing new owner sales. With new owners, you do historically, to start off with, get a lower margin on that sale. How would you expect that shift for next year, assuming you do continue that increasing new owners? How would you expect that to impact your 2026 margins and expectations for loan loss provision?

Well, let me first agree with you, Patrick, on the margin question is that as you seek to drive new owners, those come with a lower margin and therefore, against your owner sales do provide a little bit of margin pressure. Let's just zoom out to our overall strategic outlook for new owner sales. We want to keep those in the 30s. They're going to fluctuate from the high 30s as a percent of sales to the low 30s in any given quarter. But as long as they stay in that range, we feel comfortable that we've shown over the past several years and we'll continue to execute against a margin range that looks like it did -- like it has looked this entire 2025 into the 20s and drifting up toward 25% this last quarter. So I think you're right in the assumption, you're right in the reality on how it plays out, but I think we've, a, proven; and b, we'll remain disciplined to keep margins in that sort of 22% to 25% range as we drive new owner growth. New owners are the lifeblood of the future of our business. And we think with these new brands that will -- we are leaning into that very clearly while staying within our capital allocation on an operating and inventory basis. And so we think we can balance margins, new owner growth and capital allocation effectively, and we've considered that in our -- both this year guidance and as we start to think about 2026.

[Operator Instructions] Our next question is coming from Brandt Montour from Barclays.

So just the first one, I don't remember or I don't know if you said this or I missed it. But could you just dig into -- new -- specifically new owner close rates or -- and/or sort of new owner demand trends in the quarter?

No, we haven't spent any time on it so far. So happy to jump into that. New owners in the quarter were 31% of percent of sales. We saw overall VPG on a year-on-year basis increase, which is a great sign. It shows that the momentum is there for new owner business. I think you'll recall that over the last year, we've talked quite a bit about calling our marketing programs to create more efficient new owner marketing. We begin to lap that in Q4 of this year. So what you've seen throughout this year is increase in tour flow quarter-on-quarter from negative in Q1 to two consecutive quarters of increases around 2% to 3%. You're going to see that accelerate in Q4, and that is -- that's a very positive momentum. So bottom line, new owner VPG is up, slightly below what our long-term target is for Q3, but -- that's just the result of a number of factors of how we've changed new owners and owner mix over the past year, but really excited about what Q4 tour growth is going to be and ultimately, the partnerships that we've announced throughout this year, which should go back and I won't list them all here, but we've continued to find new partnerships that support that new owner story as we get into 2026. But yes, Q3 was sort of flattish to last year, but we'd expect acceleration as we get into Q4 with the VPGs raising year-on-year.

Okay. That's super helpful. And then just a quick follow-up on the guidance for the fourth quarter. You guys had a really healthy beat in the third quarter. You didn't -- you only flowed through about half of that to the full year. I think the prepared commentary was discipline around approaching -- or disciplined approach to the forecasting. I guess that's what you kind of meant by that. So in the -- is there anything that you want to highlight in terms of why the fourth quarter input implied guide would be slightly below prior? Or is it just sort of conservatism?

Brandt, thanks for the question. So to your point, we did beat the midpoint of Q3 EBITDA by $11 million. We raised the full year low end by $10 million. So if you -- so the implied fourth quarter metrics are 8% growth in gross VOI sales, VPGs that are approaching $3,300 and EBITDA growth of roughly 2%. So let me just double-click on the 2% EBITDA growth for a second, which I think is the heart of your question. First, we got a strong year-over-year comp from the fourth quarter '24, where VPGs were also near $3,300. Secondly, we're making incremental investments in new brands, which does include some level of uncertainty. And then the third point, our fourth quarter reflects the normal cadence of variable comp true-ups as we close out a really strong year for T&L. So we're comfortable with where the guide sits. We think it's measured. We think it's achievable, and we think it reflects the environment that we're operating in.

Next question today is coming from Ian Zaffino from Oppenheimer.

Just wanted to go back to VO for a second. And maybe walk through kind of where you saw some strength maybe on a regional basis. Was there any areas that were a little bit softer? Or do you think you've kind of seen just broad-based demand kind of across the system and across your sales centers?

I, the strength is less about a region and more about a segment. Our owner performance in Q3 was outstanding. Our VPGs were near all-time highs. The performance across all of our regions and all of our teams was just exceptional. And I want to congratulate our teams on what is really a standout quarter. But as good as our new owner VPGs were, especially compared to prior year being up, the performance around the owner side of the equation was truly stand out. And I don't think we ambled into that performance, meaning it just happened. Note, there is work throughout the Travel + Leisure portfolio from our systems, our ability for owners to book to our events team, which are now tying, as I mentioned earlier, in-resort experience to in-market experience, and I could lay out a number of different areas where that continues to be a very strong performer for our owner base, and it's what owners want. They want experiences. We hear it in the headlines every single day. And instead of reading it and not leaning into it, we've leaned into these past few years upticking our technology and upticking our experience. I'll give you a perfect example. As an owner myself, I used to book by calling in and making my reservation. Two months ago, I booked my spring 2026 ski vacation. And from point of opening my app to booking was under 5 minutes. And in my case, there was no human interaction. I could -- I found my availability, I chose my dates and I booked and received a confirmation in under 5 minutes, which for those who know me is record time. So if you multiply that by 500,000-plus Club Wyndham owners and then hearing our Worldmark launch of the app, which was just last week and the downloads are already into the thousands, shows that owners are appreciating what we're doing from a technology and more importantly, using it.

Okay. And then as a follow-up, I kind of want to just delve into travel and membership a little bit. Kind of given the, I guess, the different paths the 2 pieces are following, call it, where do we think the mix in this business will ultimately be maybe on a revenue and also on profitability, just given the margin disparity? And then maybe can you just remind us maybe what the strategic value of the exchange business is at this point, just given that sort of the VO business is doing very well. And I don't know if it's just being hidden a little bit, but by some of the underperformance of that -- the Travel and Membership business, maybe specifically the exchange business. So a little color there would be helpful, maybe kind of strategic kind of thoughts.

Sure. And let's start with our performance in Q3 was a sequential improvement on the year-on-year performance compared to the first half of the year. That team continues to innovate and think of new ways to grow the business or maintain the business. And I want to give a lot of credit to them for the way they've worked these first 9 months of the year. Make no mistake, when we started down this path in '18, '19, this was a purely exchange business, and we saw the structural decline in the exchange business due to what's happening in the industry. The industry is growing, but the consolidation of the industry means that the demand for exchange transactions is pressured. Instead of waiting around for that just to endure the pressure, our team went out, developed the Travel Club business, took some hits early in '21, '22 when expectations weren't what we thought they would be, and it showed resiliency to begin growing that business, again, as we heard through the 30% transaction growth. So the way to -- that all is pretext to the answer to your question, Ian, is that the vast majority of the EBITDA in this space, over 80% is due to the exchange business. So that structural decline can't be, at this stage, fully offset by the performance in the Travel Club side. But it definitely mitigates the challenges there. With that said, our transactions were -- on exchange were modestly down in Q3. EBITDA was modestly down on the exchange side, while the Travel Club business performed well and showing that it can grow on that side of the equation. Strategic value is very clear. We're over $200 million of EBITDA in that segment, closer to $250. The margins are still extremely healthy into the 30s, provides great free cash flow that, as Erik walked you through, can be deployed in very shareholder accretive manners. And at this stage, due to the nature of the business, it doesn't require a lot of capital investment, although we are putting money into the booking platform there as well. So I think it has a lot of integration value, provides us scale over 3 million members with good economic value that we're utilizing to return value to shareholders in many different aspects.

Next question is coming from David Katz from Jefferies.

When -- if we can maybe zoom out and take a little longer-term view here, when we look at the VOI business and the new brands that you're adding, not looking for a guide here, but how do you think about the earnings power of those incremental brands that you're adding to the portfolio? And assuming that the existing core brand is still able to grow, is that a fair assumption? And how do we think about what the earnings power of these could ultimately prove to be 5 years out or so?

Well, David, your question really gets to the heart of our strategic outlook for the next 3 to 5 years. Let me first say, we absolutely believe our core brands, Club Wyndham, World Mark Shell and Margaritaville will continue to grow. We're committed to them. And as you saw in Q3 and in 2025, they continue to grow, and we expect them to grow over the next few years. But the strategic approach that we have is not to collect brands for the sake of collecting brands. We're in a direct marketing industry, we're in a direct marketing business. And therefore, addressable market is super critical to our success. Through our partnership with Authentic Brands, we've been able to bring to market Sports Illustrated, we've been able now to bring to market Eddie Bauer, which is another one of Authentic Brands, we've reinvigorated Margaritaville, and we've acquired a core Vacation Club. All of those are as much about affinity, loyalty databases and increasing our addressable market as they are filling out a brand portfolio or a brand bar. In this business, you've heard over the years, our successful relationship on Blue Thread has allowed us to grow VPGs at a much higher rate for new owners than your general open market. And we believe the same is replicable in each of these new brands. Now as it relates to not providing guidance, but to give a general direction is we think each of these brands can be worth at least $200 million of top line revenue and more depending on the brand, depending on the database. We think each of those will ultimately be a, for the first 5 years, a new owner proportionately higher play. And then as time goes on, primarily an affinity and owner upgrade model similar to our current model. So long term, definitely smaller than where we are today with our Club Wyndham and Worldmark brand and more targeted to an affinity owner upgrade model. And I think our starting hope for each of those brands would be around $200 million of sales. But I think I used the same tone last time, we'll get some points on the board with Sports Illustrated, see -- get some learnings and then we'll probably come out with more clear long-term guidance later in 2026.

And just one follow-up detail, and I apologize if I missed it. Did you give us -- did you size the Blue Thread sales in the quarter or within the guide for the year? And do you have kind of an aspirational level that, that could be out over 5 years?

Yes. We didn't -- you did not miss that. Blue Thread represents around 3% to 4% of our total company sales. It's an important part of our new owner business. The story in Q3 is very similar that it has been over the last 2 quarters, which it's stabilized at around $100 million of annual sales. And that really comes as a result of -- I think we finished last year at $96 million, and we're generally on the same track for this year. What we're seeing in that front is that there has been a dramatic shift in voice to digital booking, which is a major source of our lead generation, which has stalled it. So we haven't given 3- to 5-year guidance. I used to talk about $200 million. I think that's far more challenged than it used to be due to the voice to digital shift. But we work very closely with our brethren up in New Jersey to find new avenues to reinvigorate the growth. This isn't unique to us. I think -- well, I can't speak for anyone else. But this switch from voice to digital booking is something you've heard in the hotel industry across the board for years, and this is one implication of it. I think on the positive side of that is despite that sort of shift, as you saw in Q3, as you've seen throughout this year and as you see in our revised upward guidance on VOI sales, our teams continue to find ways to find new veins of growth, exploit them while still working hard on areas that we think there's still a lot more lives to grow, which is, back to your point, the Blue Thread.

The next question today is coming from Lizzie Dove from Goldman Sachs.

I wanted to touch on the kind of loan loss provision side of things. You mentioned upfront, there's no signs of deterioration there despite some of the headlines we've seen in other industries in the quarter. You reiterated the 21%. I'm curious how you see the kind of longer-term opportunity there for those to kind of come down over time with some of the initiatives you've been doing?

Good morning, Lizzie. So maybe just provide -- maybe I'll contextualize where we are from a loan loss provision perspective. We started the year with a full year provision rate of 20%. We saw some elevated delinquencies to start the year. We changed the full year to 21% with the first quarter call, the second quarter call, we continue to move in line with our historical default curve. The third quarter continued to move in the same direction as well. So -- and then as we stare at the fourth quarter, we're starting to see an inflection of year-over-year provision to start to trend downward. So the long way to get to your question is we would expect that our longer-term provision rate to settle back in, in the upper teens. And I think that that's what you'll see here in the fourth quarter.

Got it. That's helpful. And then kind of unrelated question, I'm sorry if I missed this, but I'm curious on the booking window. I think earlier in the year, you'd mentioned it come down a little bit, maybe like starting off the year like 130 days down to 109 last quarter. Any kind of update you'd share there in terms of that booking window and how it's progressed?

Yes, 2 aspects to that. Booking window hasn't changed from that number we last shared. It's right in that range, a little closer than historical, but not meaningful enough for us to be concerned. Candidly, it's commentary we hear all across hospitality that people are waiting just a little bit longer. The second aspect of that, which we did mention, but didn't dwell on it is that booking pace in Q4 looks very consistent to what we saw last year, which is -- we view as a very positive sign for the outlook into the end of the year.

Next question is coming from Stephen Grambling from Morgan Stanley.

Just one more follow-up on the provision. At this point, the provision compared to the gross financing receivables is kind of near peak-ish levels as you kind of referenced outside of maybe the GSC despite better FICO scores. And historically, it seems like we've seen step-ups if the macro rose. But given we're already elevated, how would you think about the sensitivity to the provision in different backdrops? Like could we already be provisioning above and so there might be less? Or any thoughts would be helpful.

Yes. I think we've got a pretty good sense of where we think the provision is going to be, Stephen. I think when you look across the quarters of the year, historically, the second quarter and the third quarter are above the full year average, first quarter and the fourth quarter are below. To the question from Lizzie, we expect the fourth quarter provision to be the low watermark in 2025 as we exit heading towards 2026.

Great. And maybe one other follow-up. I realize that it's still early for 2026, but I imagine you're still probably in the process of trying to make some implementations or changes around pricing for the managed clubs. Any initial thoughts on where you think kind of year-over-year pricing or HOA fees could end up as we think about kind of flowing through that more perpetuity-like fee stream?

Great question, Stephen, because you often get questions on price, but we think value is more driven in this space through those annual fees. Keep in mind that 80% of our owners have fully paid off their ownership. So their cost of vacation is those maintenance fees. I think the answer to your question is we want to stick right around the CPI level. Although we don't know what CPI will be, we don't expect any outsized changes for 2026. But I will -- I can -- I would say today that in 2026 and beyond, especially given the last 4 to 5 years of inflation, maintenance fees, HOA dues, however we want to term them is a super important focus for us to make sure that we're providing as much value and leveraging our scale to give our owners as much value as possible. We've done a lot on technology and maintenance fees will -- is the other piece of that value that we're going to be super focused on going forward. So that what we want to return to our owners is surprises to the beneficial side as opposed to surprise to the more expensive side.

Next question is a follow-up from Patrick Scholes from Truist Securities.

Great. Just a quick follow-up question here. I've noticed some online message board discussion about closing a handful of your legacy resorts. If, in fact, that's true, it's not something you typically see. If, in fact, that is happening, I'm curious what the rationale for that may be and what, if any, might be the financial impact to your company from that?

Well, Patrick, you're about probably 30 minutes or an hour ahead of us. You'll see it as part of our disclosures exactly this today, as part of our disclosures in our Q. This is really, I would call it, resort portfolio maintenance. And I would describe what we're doing as a catch-up to what we probably should have been doing over the decade -- last decade and what all hospitality companies do, which is you look at your demand -- high and low demand locations, same with satisfaction scores and add new inventory with better demand, better seasonality, newer construction into your system, and we've announced a double-digit number of those resorts over the last few years. And on an annual basis, look at your portfolio and pull out the ones that no longer have that demand are primarily renters or low owner occupancy or low satisfaction scores. And that's exactly what we're doing. It's a relatively small amount. I would say it's maybe 10 or 12 this year, somewhere in that range. I cannot be specific because we haven't finished the process, and therefore, the number isn't finalized, but it's a relatively small amount. It's a catch-up year. And I think the other big implication or awareness that is part of this decision-making is we've been in business a very long time, decades. And as resorts move along, your normal room renovation gets into bigger items such as infrastructure, things like rooms and bigger expense items. And what this also greatly helps to do is avoid any significant special assessments, which is to the benefit of the owners and the overall system. So again, I would say this is a very normal process of bringing new resorts into the systems, all the things we've announced in our press releases and taking out the ones who've reached their natural useful life. And we're providing a lot of optionality for those owners to get back into our system or exit fully. But yes, I think this is normal maintenance and a little bit of a catch-up that we probably should have been doing over the last decade and others continue to do.

Okay. Good color. So fair to think that one of the reasons perhaps for closing these down, if you do have unsold inventory, which is inventory you own, you would not be on the hook for a special assessment. So it might save you money there by closing these down. Is that a one way to think about it?

That's one way to think about it. I think it's only the partial answer as well. The answer I originally gave around overall resort portfolio is primary. The second is, yes, whether it's an individual owner or us as a developer, absolutely, what you said is accurate. The flip side of that is some of these have sales locations. So where you might be thinking, oh, well, this is just an economic plus, there's no economic minus. If any of these resorts do have sales locations, that's the balancing minus. So when you net it all out, the clear benefit is a better, newer, less seasonal, higher demanded, higher occupancy portfolio. And there are economic downstream effects, which we don't -- we haven't estimated or present the estimation, but there's 1 plus and 1 minus, which is less sales at those locations and less carry cost. And that's a balancing that we'll go through should these resorts ultimately end up closed. And if they do, then we'll provide an update on that, I would expect in our Q4 call and as part of any 2026 guidance.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you, Kevin, and thanks again for joining us today. Our third quarter results highlight the strength of our business model, the discipline of our execution and the opportunities ahead. Most importantly, none of this would be possible without the dedication of our associates who deliver exceptional experiences to our owners and members every day. We remain focused on creating value for our customers, associates and shareholders. We look forward to speaking to you throughout the quarter at conferences and on our fourth quarter call in February. Thanks, everyone. Have a great day.

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