Wyndham Worldwide Reports Third Quarter 2016 Results

26/10/2016 04:30

Source: PR News

PARSIPPANY, N.J., Oct. 26, 2016 /PRNewswire/ -- Wyndham Worldwide Corporation (NYSE: WYN) today announced results for the three months ended September 30, 2016.

Third quarter revenues were $1.6 billion, up 1% compared with the prior year period. In constant currency and excluding acquisitions, revenues also increased 1%.  Full reconciliations of GAAP results to non-GAAP measures appear in the tables to this press release.

Net income for the third quarter of 2016 was $196 million, or $1.78 per diluted share, compared with $190 million, or $1.61 per diluted share, for the third quarter of 2015. Adjusted net income for the third quarter of 2016 was $207 million, or $1.89 per diluted share, compared with $210 million, or $1.78 per diluted share, for the third quarter of 2015. EPS benefited from the Company's share repurchase program. 

Third quarter EBITDA was $402 million, compared with $382 million in the prior year period, an increase of 5%. Adjusted EBITDA, which excludes charges in both 2016 and 2015 as detailed in Table 8 of this press release, was $423 million, compared with $412 million in the prior year period, an increase of 3%. On a currency-neutral basis and excluding acquisitions, adjusted EBITDA increased 5%.

"Wyndham continues to deliver solid earnings and strong cash flow," said Stephen P. Holmes, chairman and CEO.  "These results reflect successful execution of our strategy, a resilient portfolio of complementary, fee-based businesses, and disciplined capital allocation."

For the nine months ended September 30, 2016, net cash provided by operating activities was $786 million, compared with $817 million in the prior year period. The decrease reflects unfavorable currency movements of $34 million, including a $24 million devaluation of the Venezuelan bolivar in the first quarter of 2016.

Free cash flow was $650 million for the nine months ended September 30, 2016, compared with $660 million for the same period in 2015, reflecting the currency movements referenced above partially offset by lower capital expenditures. The Company defines free cash flow as net cash provided by operating activities less capital expenditures. 

THIRD QUARTER 2016 BUSINESS UNIT RESULTS

Hotel Group
Revenues were $364 million in the third quarter of 2016, compared with $357 million in the third quarter of 2015. Revenues reflected higher royalties, growth in the Company's Wyndham Rewards credit card program and fees associated with the Company's global franchise conference, partially offset by lower reimbursable property management revenues.

EBITDA was $107 million in the third quarter compared with $83 million in the prior year quarter. Adjusted EBITDA, which excludes charges and benefits during both 2016 and 2015 as detailed in Table 8 of this press release, grew 8% to $117 million. This reflects higher royalties, growth in the Company's Wyndham Rewards credit card program and expense management.

Third quarter domestic RevPAR increased 1.9%. In constant currency, total system-wide same store RevPAR increased 1.4% compared with the third quarter of 2015, which reflects ongoing pressure in domestic and Canadian oil markets and decelerating industry RevPAR trends. 

As of September 30, 2016, the Company's hotel system consisted of approximately 7,930 properties and approximately 689,800 rooms, a 2.7% net room increase compared with the third quarter of 2015. The development pipeline included nearly 1,100 hotels and approximately 133,800 rooms, of which 60% were international and 66% were new construction.

Destination Network
Revenues were $486 million in the third quarter of 2016, compared with $476 million in the third quarter of 2015, an increase of 2%. In constant currency and excluding acquisitions, revenues increased 5%.

Exchange revenues were $159 million compared with $157 million in the prior year quarter. In constant currency, exchange revenues grew 2% as exchange revenue per member increased 1.4% and the average number of members increased 0.9%.

Vacation rental revenues were $304 million compared with $296 million in the prior year quarter. In constant currency and excluding the impact of acquisitions, vacation rental revenues were up 6%, reflecting an 8.0% increase in transaction volume, partially offset by a 1.7% decrease in average net price per vacation rental. Transaction growth benefited from our dynamic pricing initiative as well as capacity increases. Faster growth in our more moderately priced products decreased the average net price per rental.

EBITDA was $138 million during the third quarter compared with $134 million in the prior year quarter. Adjusted EBITDA, which excludes restructuring costs, was $142 million for the third quarter of 2016, a 4% increase compared with the prior year quarter. On a currency-neutral basis and excluding the impact of acquisitions, adjusted EBITDA increased 8% compared with the prior year period.

Vacation Ownership
Revenues were $744 million in the third quarter of 2016, compared with $750 million in the third quarter of 2015. 

Net VOI sales in the third quarter of 2016 declined 2% due to a higher provision for loan losses and flat Gross VOI sales. Results reflect tour flow growth of 1.3%, offset by a volume per guest (VPG) decline of 1.4%, reflecting proportionally higher sales to new owners. The number of new owners added increased 10% from the third quarter of 2015.

EBITDA was $189 million during the third quarter compared with $200 million in the prior year quarter. Adjusted EBITDA, which excludes restructuring costs, was $195 million for the third quarter of 2016, a decline of 3% compared with the prior year quarter. This reflects a higher loan loss provision and higher marketing costs, partially offset by higher property management fees, increased consumer financing income and expense management.

OTHER ITEMS

  • The Company repurchased 2.1 million shares of common stock for $150 million during the third quarter of 2016. From October 1 through October 25, 2016, the Company repurchased an additional 0.7 million shares for $50 million
  • Net interest expense in the third quarter of 2016 was $32 million, compared with $31 million in the third quarter of 2015.
  • Depreciation and amortization in the third quarter of 2016 was $63 million, compared with $59 million in the third quarter of 2015, reflecting new projects that were placed into service. 

Balance Sheet Information as of September 30, 2016:

  • Cash and cash equivalents of $332 million, compared with $171 million at December 31, 2015
  • Vacation ownership contract receivables, net, of $2.8 billion, compared with $2.7 billion at December 31, 2015
  • Vacation ownership and other inventory of $1.3 billion, unchanged from December 31, 2015
  • Securitized vacation ownership debt of $2.1 billion, unchanged from December 31, 2015
  • Long-term debt of $3.4 billion, compared with $3.1 billion at December 31, 2015. The remaining borrowing capacity on the revolving credit facility, net of commercial paper borrowings, was $1.1 billion as of September 30, 2016, compared with $1.4 billion at December 31, 2015.

A schedule of debt is included in Table 12 of this press release.

OUTLOOK

Note to Editors: The guidance excludes possible future share repurchases, while analysts' estimates often include share repurchases. This results in discrepancies between Company guidance and database consensus forecasts.

Full reconciliations of the outlook for adjusted net income, adjusted EBITDA and adjusted EPS to GAAP results appear in Table 10 of this press release.

The Company provides the following guidance for the full year 2016:

  • Revenues of approximately $5.650 billion.
  • Adjusted net income of approximately $630 million.
  • Adjusted EBITDA of approximately $1.375 billion.
  • Adjusted diluted EPS of approximately $5.68 - $5.71 based on a diluted share count of 111 million.

The Company will post guidance information on its website following the conference call.

CONFERENCE CALL INFORMATION
Wyndham Worldwide Corporation will hold a conference call with investors to discuss the Company's results, outlook and guidance on Wednesday, October 26, 2016 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 dialing 888-632-3384 and providing the pass code "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 12:00pm ET on October 26, 2016.  A telephone replay will be available for approximately 10 days beginning at 12:00pm ET on October 26, 2016 at 800-388-6197.

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 core 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.  A reconciliation of reported GAAP results to the comparable non-GAAP information appears in the financial tables section of the press release.  A reconciliation of forecasted adjusted net income, adjusted EBITDA and adjusted EPS to the most directly comparable GAAP measures is provided in Table 10 of this press release.

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, holiday parks, and managed home rentals. With a collective inventory of more than 120,000 places to stay across 100 countries on six continents, Wyndham Worldwide and its 38,000 associates welcomes people to experience travel the way they want. This is enhanced by Wyndham Rewards®, the Company's re-imagined 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.

FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, conveying management's expectations as to the future based on plans, estimates and projections at the time the Company makes the statements.  Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company 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, cash flow and related financial and operating measures.

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, as well as those described in the Company's Annual Report on Form 10-K, filed with the SEC on February 12, 2016.  Except for the Company'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.

 

Wyndham Worldwide Corporation

Earnings Release Schedules

Quarter Three - September 30, 2016

Table of Contents




Table No.



Consolidated Statements of Income (Unaudited)

1



Operating Results of Reportable Segments

2



Operating Statistics

3



Condensed Consolidated Statements of Cash Flows and Reconciliation of Free Cash Flows (Unaudited)

4



Revenue Detail by Reportable Segment

5



Brand System Details

6



Non-GAAP Reconciliation of Adjusted Net Income and EPS

7



Non-GAAP Reconciliation of Adjusted EBITDA by Reportable Segment

8



Non-GAAP Reconciliation of Gross VOI Sales

9



Non-GAAP Reconciliation of 2016 Outlook

10



Non-GAAP Reconciliation - Constant Currency and Currency Neutral

11



Schedule of Debt

12

 

 















Table 1

Wyndham Worldwide Corporation

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)



































 Three Months Ended 


 Nine Months Ended 





 September 30, 


 September 30, 





2016


2015


2016


2015

Net revenues














Service and membership fees


$

735


$

734


$

2,001


$

1,957


Vacation ownership interest sales



441



448



1,191



1,201


Franchise fees



203



192



513



517


Consumer financing



112



108



327



318


Other




82



82



247



231

Net revenues



1,573



1,564



4,279



4,224
















Expenses















Operating



679



691



1,915



1,865


Cost of vacation ownership interests 



47



43



115



123


Consumer financing interest



19



18



55



55


Marketing and reservation



242



218



645



624


General and administrative



173



200



545



562


Asset impairments



-



7



-



7


Restructuring



14



8



14



8


Depreciation and amortization



63



59



187



173

Total expenses



1,237



1,244



3,476



3,417
















Operating income



336



320



803



807

Other (income)/expense, net



(3)



(3)



(19)



(11)

Interest expense



34



33



102



89

Early extinguishment of debt



-



-



11



-

Interest income



(2)



(2)



(6)



(7)
















Income before income taxes



307



292



715



736

Provision for income taxes



110



102



267



265

Net income




197



190



448



471

Net income attributable to noncontrolling interest


(1)



-



(1)



-

Net income attributable to Wyndham shareholders

$

196


$

190


$

447


$

471
















Earnings per share














Basic



$

1.79


$

1.62


$

4.03


$

3.96


Diluted



1.78



1.61



4.01



3.93
















Weighted average shares outstanding














Basic




109



117



111



119


Diluted



110



118



112



120































Note: For a description of adjustments to Net Income, see Table 7.

 



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Table 2















(1 of 2)


Wyndham Worldwide Corporation

OPERATING RESULTS OF REPORTABLE SEGMENTS

(In millions)































In addition to other measures, management evaluates the operating results of each of its reportable segments based upon net revenues and "EBITDA", which is defined as net income before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues) and income taxes, each of which is presented on the Company's Consolidated Statements of Income.  The Company also uses adjusted EBITDA as a financial measure of its operating performance.  The Company believes that EBITDA and Adjusted EBITDA are useful measures of assessing performance of the Company and for the Company's segments which, when considered with GAAP measures, give a more complete understanding of its operating performance and assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which may be recurring or nonrecurring and which in our view do not necessarily reflect ongoing operating performance. We also internally use these measures to assess our operating performance, both in absolute terms and in comparison to other companies, and in evaluating or making selected compensation decisions.  These supplemental disclosures are in addition to GAAP reported measures.  The Company's presentation of EBITDA and Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.






















The following tables summarize net revenues and EBITDA for the Company's reportable segments, as well as reconcile EBITDA to Net income attributable to Wyndham shareholders for the three months ended September 30, 2016 and 2015:




















Three Months Ended September 30, 





2016


2015





 Net Revenues 


 EBITDA 


 Net Revenues 


 EBITDA 


Hotel Group

$

364


$

107


$

357


$

83


Destination Network


486



138



476



134


Vacation Ownership


744



189



750



200


     Total Reportable Segments


1,594



434



1,583



417


Corporate and Other (a)


(21)



(32)



(19)



(35)


     Total Company

$

1,573


$

402


$

1,564


$

382

















Reconciliation of EBITDA to Net income attributable to Wyndham shareholders