PARSIPPANY, N.J. (May 2, 2018) – Wyndham Worldwide Corporation (NYSE: WYN) today announced results for the three months ended March 31, 2018. Full reconciliations of GAAP to non-GAAP measures for all reported periods appear in the tables to this press release, available via this link: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA0MjI4fENoa....
First quarter revenues from continuing operations were $1.2 billion, an increase of 3% compared with the prior-year period. Results reflect the required adoption of the new revenue recognition standard, which had an immaterial year-over-year impact on the Company’s results on a comparable basis.
Net income from continuing operations in the first quarter of 2018 was $81 million compared with $127 million for the first quarter of 2017. Diluted earnings per share (EPS) from continuing operations were $0.80, versus $1.20 in the prior-year period. Net income from continuing operations was impacted by $53 million ($0.53 per diluted share) of after-tax separation- and transaction-related costs in first quarter 2018.
Adjusted net income from continuing operations was $134 million or $1.33 per diluted share, compared with $106 million or $1.01 per diluted share in the first quarter of 2017. Adjusted diluted EPS increased 32%, and 10% excluding the benefit of a reduced effective income tax rate. Adjusted results exclude separation costs and other items as detailed in Tables 7 and 8 of this press release, available via this link: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA0MjI4fENoa.... The growth in adjusted earnings primarily reflects higher revenues in all three of the Company’s operating segments, hurricane-related insurance recoveries and lower taxes, partially offset by increased interest expense. Adjusted diluted EPS also reflects the benefit of the Company’s share repurchase program.
“We’ve started the year with strong growth in our businesses,” said Stephen P. Holmes, chairman and CEO. “Our teams delivered solid financial results while executing on several key strategic initiatives, including the pending sale of our European vacation rentals business, the planned spin-off of Wyndham Hotels & Resorts into a separate publicly traded company, and the pending acquisition of La Quinta’s hotel franchising and hotel management business.”
First quarter EBITDA from continuing operations was $221 million, compared with $237 million in the prior-year period, due to separation-related costs recorded in first quarter 2018. Adjusted EBITDA from continuing operations increased 10%, to $274 million, compared with $249 million in the first quarter of 2017. Results primarily reflect the growth in revenues as well as an approximately $5 million net benefit from hurricane-related impacts and insurance proceeds.
FIRST QUARTER 2018 BUSINESS UNIT RESULTS
Revenues increased 4% to $302 million in the first quarter of 2018, compared with $289 million in first quarter 2017. Results reflect higher royalties and franchise fees as well as higher marketing, reservation and Wyndham Rewards revenues, which are generally offset in expenses.
EBITDA was $83 million in the first quarter, unchanged from the prior-year quarter, primarily due to $12 million of separation- and acquisition-related costs. Adjusted EBITDA was $98 million compared with $84 million in the prior-year period, an increase of 17%, primarily reflecting the growth in revenue and a net benefit of $6 million from hurricane-related insurance recoveries and costs.
First quarter domestic RevPAR increased 5.6% compared with first quarter 2017. Global RevPAR increased 7.0%, and 4.7% in constant currency.
As of March 31, 2018, the Company’s hotel system consisted of over 8,300 properties and approximately 723,000 rooms, a 3% increase compared with a year earlier that includes almost 12,000 rooms the Company added with the acquisition of AmericInn in October 2017. The development pipeline increased to over 1,100 hotels and nearly 147,700 rooms, a 3% year-over-year room increase, of which 58% are international and 67% are new construction.
Revenues were $246 million in the first quarter of 2018, compared with $243 million in the first quarter of 2017, an increase of 1%. The average number of members increased 1%, while exchange revenue per member declined 1%.
EBITDA was $66 million compared with $75 million in the first quarter of 2017, reflecting $11 million of separation costs. Adjusted EBITDA was $77 million compared with $75 million in the prior-year period, an increase of 3%, primarily reflecting hurricane-related insurance recoveries and cost savings.
This segment no longer includes the Company’s European vacation rentals business, which is classified as a discontinued operation.
Revenues were $661 million in the first quarter of 2018, compared with $639 million in the first quarter of 2017, an increase of 3%. The increase reflects 6% growth in both gross vacation ownership interest (VOI) sales and consumer financing revenues, partially offset by a higher provision for loan losses. Tour flow increased 8% and sales volume per guest (VPG) declined 2%, driven by increased tours to new owners. New owner sales volume increased 19% year-over-year.
EBITDA was $124 million in the first quarter of 2018 compared with $117 million in the prior-year quarter. Adjusted EBITDA was $129 million compared with $122 million in the prior-year quarter, an increase of 6%. Results primarily reflect the growth in revenues.
- Upcoming Separation – As previously announced, the Company plans to separate into two publicly traded hospitality companies through the spin-off of the Company’s Hotel Group business to shareholders. In the spin-off, Wyndham Hotels & Resorts, Inc. will become an independent hotel franchising and hotel management company whose common stock is expected to trade on the New York Stock Exchange under the ticker “WH.” In conjunction with the spin-off, Wyndham Worldwide will change its name to Wyndham Destinations, Inc. and will be primarily comprised of Wyndham’s Vacation Ownership and Destination Network operations, making it the world’s largest vacation ownership and exchange company. Wyndham Destinations’ stock will trade on the New York Stock Exchange under the ticker “WYND.” The separation process has been proceeding as planned, and the Company expects to complete the spin-off this quarter.
- Sale of European Vacation Rentals Business – In the first quarter, the Company agreed to sell its European vacation rentals business to an affiliate of Platinum Equity for approximately $1.3 billion in cash. This transaction is expected to be completed this quarter.
- La Quinta Acquisition – As previously announced, the Company has agreed to purchase La Quinta Holdings’ hotel franchising and hotel management operations for $1.95 billion in cash. The acquisition will add approximately 900 managed and/or franchised hotels to our Hotel Group’s portfolio and is expected to close this quarter. In preparation for the La Quinta acquisition and the spin-off, Wyndham Hotels & Resorts issued $500 million of senior unsecured notes due 2026 and arranged for commitments from lenders for a $1.6 billion senior secured term loan facility. Wyndham Hotels & Resorts has also arranged a $750 million senior secured revolving credit facility, which it expects to be undrawn at the time of spin-off and acquisition of La Quinta.
- Share Repurchases – The Company repurchased 0.6 million shares of common stock for $75 million during the first quarter of 2018 at an average price of $115.91. From April 1 through May 1, 2018, the Company repurchased an additional 0.2 million shares for $22 million.
- Sale of Knights Inn – In April, the Company agreed to sell its Knights Inn franchise brand, consisting of approximately 350 franchised hotels with 21,000 rooms, to Red Lion Hotels for approximately $27 million in cash. The transaction is expected to close this quarter.
- New Revenue Recognition Standard – In the first quarter, the Company adopted the new U.S. GAAP revenue recognition standard, as required. This new standard reduced previously reported first quarter 2017 revenues and adjusted EBITDA by $14 million and $3 million, respectively, and reduced first quarter 2018 revenues and adjusted EBITDA by $16 million and $3 million, respectively.
Note to Editors: The Company has classified its European vacation rentals business, which it has agreed to sell, as a discontinued operation; its results are therefore excluded from the outlook below. In addition, the outlook excludes possible future share repurchases. Analysts’ estimates may include projections of the European vacation rentals business and/or include projected share repurchases, and may not have been adjusted to reflect the impact of the new U.S. GAAP revenue recognition standard. These factors may result in discrepancies between the Company’s projections and database consensus forecasts.
The Company’s outlook for 2018 adjusted EBITDA from continuing operations is unchanged from the outlook it provided in February. The Company projects the following results for full-year 2018:
- Revenues of $5.195 billion to $5.335 billion, an increase of 4% to 7%. The change from the Company’s prior projection is entirely due to the impact of the new revenue recognition standard, which did not affect projected year-over-year revenue growth calculated on a comparable basis.
- An effective tax rate applicable to adjusted pretax earnings of approximately 25%.
- Adjusted net income from continuing operations of $702 million to $717 million, an increase of 25% to 28%, approximately 19 points of which is due to a lower effective tax rate.
- Adjusted EBITDA of $1.330 billion to $1.355 billion, which represents year-over-year growth of 7% to 9% and is comprised of:
- Hotel Group adjusted EBITDA of $445 million to $455 million
- Destination Network adjusted EBITDA of $265 million to $275 million
- Vacation Ownership adjusted EBITDA of $735 million to $750 million
- Adjusted diluted EPS from continuing operations of $6.96 to $7.11, which is an increase of 28% to 31% and is based on a diluted share count of 100.8 million.
These projections exclude the impact of the La Quinta acquisition and the financing thereof, exclude any impact from our European vacation rentals business, which is treated as a discontinued operation, and exclude costs associated with the Company’s planned separation into two separate publicly traded companies. Projections now reflect the required change in revenue recognition accounting. See Table 12 for detailed projections, available via this link: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA0MjI4fENoa... In addition, we are publishing two presentations on our website (http://investor.wyndhamworldwide.com) with additional information on our projections for the two separate companies post-spin.
In determining adjusted net income, adjusted EBITDA and adjusted EPS, the Company excludes certain items which are otherwise included in determining the comparable GAAP financial measures. A description of the adjustments that have been applicable for the reported periods in determining adjusted net income, adjusted EBITDA and adjusted EPS are reflected in Tables 7 and 8 of this press release, available via this link: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA0MjI4fENoa.... The Company is providing an outlook for net income, EBITDA and EPS only on a non-GAAP basis because the Company is unable to predict with reasonable certainty the totality or ultimate outcome or occurrence of these adjustments or other potential adjustments that may arise in the future during the outlook period, which can be dependent on future events that may not be reliably predicted.
CONFERENCE CALL INFORMATION
Wyndham Worldwide Corporation will hold a conference call with investors to discuss the Company’s results and outlook on Wednesday, May 2, 2018 at 8:30 a.m. ET. Listeners can access the webcast live through the Company’s website at http://www.wyndhamworldwide.com/investors/. The conference call may also be accessed by calling 877-876-9177 and providing the passcode WYNDHAM. Listeners are urged to call at least 10 minutes prior to the scheduled start time. An archive of this webcast will be available on the website for approximately 90 days beginning at 12:00 p.m. ET on May 2, 2018. A telephone replay will be available for approximately 10 days beginning at 12:00 p.m. ET on May 2, 2018 at 800-374-1375.
PRESENTATION OF FINANCIAL INFORMATION
Financial information discussed in this press release includes non-GAAP measures, which include or exclude certain items. These non-GAAP measures differ from reported GAAP results and are intended to illustrate what management believes are relevant period-over-period comparisons and are helpful to investors as an additional tool for further understanding and assessing the Company’s ongoing operating performance. Exclusion of items in the Company’s non-GAAP presentation should not be considered an inference that these items are unusual, infrequent or non-recurring. Full reconciliations of GAAP results to the comparable non-GAAP measures for the reported periods appear in the financial tables section of this release, available via this link: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDA0MjI4fENoa....
ABOUT WYNDHAM WORLDWIDE
Wyndham Worldwide (NYSE: WYN) is one of the largest global hospitality companies, providing travelers with access to a collection of trusted hospitality brands in hotels, vacation ownership, and unique accommodations including vacation exchange and managed vacation rentals. With a collective inventory of over 22,000 places to stay across 110 countries on six continents, Wyndham Worldwide and its 39,000 associates welcome people to experience travel the way they want. This is enhanced by Wyndham Rewards®, the Company’s award-winning guest loyalty program across its businesses, which is making it simpler for members to earn more rewards and redeem their points faster. For more information, please visit www.wyndhamworldwide.com.
This press release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that convey management’s expectations as to the future based on plans, estimates and projections at the time Wyndham Worldwide makes the statements and may be identified by terminology such as “will,” “expect,” “believe,” “plan,” “anticipate,” “goal,” “future,” “outlook,” “guidance,” “target,” “projection,” “estimate” and similar expressions. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Wyndham Worldwide or the post-spin companies to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements contained in this press release include statements related to the Company’s revenues, earnings, taxes, cash flow and related financial and operating measures, dividends, share repurchases, acquisitions, dispositions and expectations with respect to the spin-off and related transactions, as well as the post-spin companies’ future operating, financial and business performance.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Factors that could cause actual results to differ materially from those in the forward-looking statements include general economic conditions, the performance of the financial and credit markets, the economic environment for the hospitality industry, the impact of war, terrorist activity or political strife, operating risks associated with the hotel, vacation exchange and rentals and vacation ownership businesses, differences between the actual impact of recently enacted corporate tax reform and our current expectations, uncertainties that may delay or negatively impact the spin-off or cause the spin-off to not occur at all, uncertainties related to the post-spin companies’ ability to realize the anticipated benefits of the spin-off, uncertainties related to Wyndham Worldwide’s ability to successfully complete the spin-off on a tax-free basis within the expected time frame or at all, unanticipated developments that delay or otherwise negatively affect the spin-off, uncertainties related to Wyndham Worldwide’s ability to obtain financing for the two companies or the terms of such financing, unanticipated developments related to the impact of the spin-off on our relationships with our customers, suppliers, employees and others with whom we have relationships, unanticipated developments resulting from possible disruption to our operations resulting from the proposed spin-off, the potential impact of the spin-off and related transactions on Wyndham Worldwide’s credit rating, uncertainties relating to Wyndham Worldwide’s planned sale of its European vacation rentals business and the outcome and timing of that process, uncertainties relating to Wyndham Worldwide’s pending acquisition of La Quinta Holdings’ hotel franchising and hotel management operations and the outcome and timing of that process, the timing and amount of future share repurchases and dividends, as well as those factors described in Wyndham Worldwide’s Annual Report on Form 10-K, filed with the SEC on February 16, 2018. Except for Wyndham Worldwide’s ongoing obligations to disclose material information under the federal securities laws, it undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
Investor and Media Contacts:
Margo C. Happer
Senior Vice President, Investor Relations
Wyndham Worldwide Corporation
Vice President, Investor Relations
Wyndham Worldwide Corporation