Wyndham Worldwide Reports Second Quarter 2016 Results

PARSIPPANY, N.J., July 27, 2016 (hospitalitybusinessnews.com) — Wyndham Worldwide Corporation today announced results for the three months ended June 30, 2016.

Second quarter revenues were $1.4 billion, flat compared with the prior year period. In constant currency and excluding acquisitions, revenues increased 1%.

Net income for the second quarter of 2016 was $156 million, or $1.39 per diluted share, compared with $159 million, or $1.33 per diluted share, for the second quarter of 2015. Adjusted net income for the second quarter of 2016 was $156 million, or $1.40 per diluted share, compared with $159 million, or $1.32 per diluted share, for the second quarter of 2015.  Net income was impacted by higher interest expense and depreciation, as well as a higher tax rate, which offset growth in EBITDA.  EPS benefited from the Company’s share repurchase program.  Full reconciliations of adjusted net income and adjusted EPS appear on table 7 of this press release.

Second quarter EBITDA was $340 million, compared with $332 million in the prior year period, an increase of 2%.  On a currency-neutral basis and excluding acquisitions, adjusted EBITDA increased 3%. Full reconciliations of EBITDA to net income appear on Table 2 of this press release.

“In the second quarter, we continued to execute our strategy to drive growth and free cash flow while maintaining our disciplined capital allocation framework to enhance shareholder value,” said Stephen P. Holmes, chairman and CEO. “We are looking ahead – making sure we continually innovate and invest for the future in order to ensure strong, continued growth in the years to come.”

For the six months ended June 30, 2016, net cash provided by operating activities was $706 million, compared with $737 million in the prior year period.  The decrease reflects unfavorable currency movements of $35 million, including a $24 million devaluation of the Venezuelan bolivar in the first quarter of 2016.

Free cash flow was $616 million for the six months ended June 30, 2016, compared with $625 million for the same period in 2015, reflecting the changes in net cash provided by operating activities highlighted above in addition to the favorable timing of capital expenditures.  The Company defines free cash flow as net cash provided by operating activities less capital expenditures as illustrated in Table 4 of this press release.

SECOND QUARTER 2016 BUSINESS UNIT RESULTS

Hotel Group
Revenues were $334 million in the second quarter of 2016, flat compared with the second quarter 2015.  Revenues reflected growth in royalties and the Company’s Wyndham Rewards credit card program, offset by the absence of pass-through revenues associated with the Company’s franchisee conference in the second quarter of 2015.

EBITDA grew 5% to $101 million, reflecting growth in royalties and the Company’s Wyndham Rewards credit card program, and expense management.

Second quarter domestic RevPAR increased 2.0%.  In constant currency, total system-wide RevPAR declined by 0.6% compared with the second quarter of 2015, which reflects continued weakness in domestic and Canadian oil markets and higher unit growth in lower RevPAR countries such as China.

As of June 30, 2016, the Company’s hotel system consisted of approximately 7,880 properties and over 683,300 rooms, a 2.2% net room increase compared with the second quarter of 2015.  The development pipeline included over 1,000 hotels and approximately 128,000 rooms, of which 61% were international and 66% were new construction.

Destination Network (formerly Vacation Exchange and Rentals)
Revenues were $384 million in the second quarter of 2016, flat compared with the second quarter of 2015. In constant currency and excluding acquisitions, revenues increased 1%.

Exchange revenues were $159 million. In constant currency, exchange revenues grew 1% as the average number of members increased 0.7% and exchange revenue per member increased 0.3%.

Vacation rental revenues were $202 million.  In constant currency and excluding the impact of acquisitions, vacation rental revenues were up 1%, reflecting a 4.0% increase in transaction volume, partially offset by a 3.3% decrease in average net price per vacation rental reflecting faster growth in our more moderate product offerings.

EBITDA for the second quarter of 2016 was $85 million, a 1% increase compared with the second quarter of 2015.  On a currency-neutral basis and excluding the impact of acquisitions, EBITDA increased 2% compared with the prior year period, largely reflecting growth in rental transactions and exchange members.

Vacation Ownership
Revenues were $705 million in the second quarter of 2016, a 1% increase over the second quarter of 2015.

Net VOI sales declined by 2%, as higher gross VOI sales volume was offset by an increase in the provision for loan losses, which was in line with the Company’s expectations.

Gross VOI sales were $518 million in the second quarter of 2016, an increase of 3% compared with the second quarter of 2015.  Results reflect tour flow growth of 3.4%, partially offset by a volume per guest (VPG) decline of 0.8% in constant currency, reflecting higher sales to new owners.  The number of new owners added increased 13% from the second quarter of 2015.

EBITDA for the second quarter of 2016 was $187 million, an increase of 3% compared with the second quarter of 2015, reflecting higher gross VOI sales, a lower cost of sales and higher management fees, partially offset by an increase in the provision for loan losses.

OTHER ITEMS

  • The Company repurchased 2.1 million shares of common stock for $150 million during the second quarter of 2016.  From July 1 through July 26, 2016, the Company repurchased an additional 0.6 million shares for $42 million.
  • Reported net interest expense in the second quarter of 2016 was $32 million, compared with $28 million in the second quarter of 2015, reflecting increased debt levels including the $350 million 5.10% bond issued in September 2015 and the absence of a fixed-to-floating interest rate swap terminated in 2015.
  • Depreciation and amortization in the second quarter of 2016 was $63 million, compared with $58 million in the second quarter of 2015, reflecting new projects that were placed into service.

Balance Sheet Information as June 30, 2016:

  • Cash and cash equivalents of $478 million, compared with $171 million at December 31, 2015, reflecting higher seasonal cash collections at the Company’s vacation rental businesses
  • Vacation ownership contract receivables, net, of $2.7 billion, unchanged from December 31, 2015
  • Vacation ownership and other inventory of $1.3 billion, unchanged from December 31, 2015
  • Securitized vacation ownership debt of $2.0 billion, compared with $2.1 billion at 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 June 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

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

  • Revenues of approximately $5.650 – $5.800 billion.
  • Adjusted net income of approximately $635 – $651 million.
  • Adjusted EBITDA of approximately $1.375 – $1.400 billion.
  • Adjusted diluted EPS of approximately $5.68 – $5.82 based on a diluted share count of 112 million.

Wyndham Worldwide Corporation

Earnings Release Schedules

Quarter Two – June 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 

 Six Months Ended 

 June 30, 

 June 30, 

2016

2015

2016

2015

Net revenues

Service and membership fees

$

632

$

623

$

1,266

$

1,223

Vacation ownership interest sales

409

417

750

753

Franchise fees

172

178

310

325

Consumer financing

108

105

215

210

Other

82

75

165

150

Net revenues

1,403

1,398

2,706

2,661

Expenses

Operating

622

610

1,236

1,176

Cost of vacation ownership interests 

32

47

68

80

Consumer financing interest

19

19

36

36

Marketing and reservation

211

211

403

406

General and administrative

185

182

372

362

Depreciation and amortization

63

58

125

114

Total expenses

1,132

1,127

2,240

2,174

Operating income

271

271

466

487

Other (income)/expense, net

(6)

(3)

(16)

(8)

Interest expense

34

30

68

56

Early extinguishment of debt

11

Interest income

(2)

(2)

(4)

(5)

Income before income taxes

245

246

407

444

Provision for income taxes

89

87

156

162

Net income

$

156

$

159

$

251

$

282

Earnings per share

Basic

$

1.40

$

1.34

$

2.25

$

2.35

Diluted

1.39

1.33

2.23

2.33

Weighted average shares outstanding

Basic

111

119

112

120

Diluted

112

120

113

121

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

 

 

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.  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 for the three months ended June 30, 2016 and 2015:

Three Months Ended June 30, 

2016

2015

 Net Revenues 

 EBITDA 

 Net Revenues 

 EBITDA 

Hotel Group

$

334

$

101

$

334

$

96

Destination Network

384

85

383

84

Vacation Ownership

705

187

699

182

     Total Reportable Segments

1,423

373

1,416

362

Corporate and Other (a)

(20)

(33)

(18)

(30)

     Total Company

$

1,403

$

340

$

1,398

$

332

Reconciliation of EBITDA to Net income

 Three Months Ended June 30,  

2016

2015

EBITDA

$

340

$

332

Depreciation and amortization

63

58

Interest expense

34

30

Interest income

(2)

(2)

Income before income taxes

245

246

Provision for income taxes

89

87

Net income

$

156

$

159

(a)   Includes the elimination of transactions between segments.  

The following tables summarize net revenues and Adjusted EBITDA for the Company’s reportable segments for the three months ended June 30, 2016 and 2015 (for a description of adjustments and reconciliation by segment, see Table 8):

Three Months Ended June 30, 

2016

2015

Adjusted 

Adjusted 

 Net Revenues 

 EBITDA 

 Net Revenues 

 EBITDA 

Hotel Group

$

334

$

101

$

334

$

97

Destination Network

384

85

383

84

Vacation Ownership

705

187

699

182

     Total Reportable Segments

1,423

373

1,416

363

Corporate and Other

(20)

(33)

(18)

(31)

     Total Company

$

1,403

$

340

$

1,398

$

332

 

 

 

Table 2

(2 of 2)

Wyndham Worldwide Corporation

OPERATING RESULTS OF REPORTABLE SEGMENTS

(In millions)

The following tables summarize net revenues and EBITDA for the Company’s reportable segments, as well as reconcile EBITDA to Net income for the six months ended June 30, 2016 and 2015:

Six Months Ended June 30, 

2016

2015

 Net Revenues 

 EBITDA 

 Net Revenues 

 EBITDA 

Hotel Group

$

629

$

185

$

626

$

172

Destination Network

768

166

752

189

Vacation Ownership

1,345

323

1,316

313

     Total Reportable Segments

2,742

674

2,694

674

Corporate and Other (a)

(36)

(67)

(33)

(65)

     Total Company

$

2,706

$

607

$

2,661

$

609

Reconciliation of EBITDA to Net income

Six Months Ended June 30, 

2016

2015

EBITDA

$

607

$

609

Depreciation and amortization

125

114

Interest expense

68

56

Early extinguishment of debt

11

Interest income

(4)

(5)

Income before income taxes

407

444

Provision for income taxes

156

162

Net income

$

251

$

282

(a)   Includes the elimination of transactions between segments.  

The following tables summarize net revenues and Adjusted EBITDA for the Company’s reportable segments for the six months ended June 30, 2016 and 2015 (for a description of adjustments and reconciliation by segment, see Table 8):

Six Months Ended June 30, 

2016

2015

Adjusted 

Adjusted 

 Net Revenues 

 EBITDA 

 Net Revenues 

 EBITDA 

Hotel Group

$

629

$

185

$

626

$

175

Destination Network

768

190

752

189

Vacation Ownership

1,345

323

1,316

313

     Total Reportable Segments

2,742

698

2,694

677

Corporate and Other

(36)

(66)

(33)

(66)

     Total Company

$

2,706

$

632

$

2,661

$

611

 

 

Table 3

(1 of 2)

Wyndham Worldwide Corporation

OPERATING STATISTICS

The following operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses:

Year

Q1

Q2

Q3

Q4

Full Year

Hotel Group (a)

Number of Rooms 

2016

679,100

683,300

 N/A 

 N/A 

 N/A 

2015

667,400

668,500

671,900

678,000

 N/A 

2014

646,900

650,200

655,300

660,800

 N/A 

2013

631,800

635,100

638,300

645,400

 N/A 

RevPAR

2016

$

31.59

$

39.10

 N/A 

 N/A 

 N/A 

2015

$

32.84

$

39.82

$

43.34

$

32.98

$

37.26

2014

$

32.30

$

40.11

$

43.71

$

34.06

$

37.57

2013

$

31.05

$

38.00

$

41.78

$

33.07

$

36.00

Destination Network

Average Number of Members (in 000s)

2016

3,841

3,857

 N/A 

 N/A 

 N/A 

2015

3,822

3,831

3,835

3,836

3,831

2014

3,727

3,748

3,777

3,808

3,765

2013

3,668

3,686

3,711

3,728

3,698

Exchange Revenue Per Member

2016

$

189.78

$

164.61

 N/A 

 N/A 

 N/A 

2015

$

194.06

$

167.81

$

163.38

$

152.00

$

169.29

2014

$

200.78

$

179.17

$

171.77

$

157.24

$

177.12

2013

$

210.96

$

182.42

$

169.95

$

161.21

$

181.02

Vacation Rental Transactions (in 000s) (a) (b)

2016

500

409

 N/A 

 N/A 

 N/A 

2015

459

390

462

319

1,630

2014

429

376

455

293

1,552

2013

423

355

433

273

1,483

Average Net Price Per Vacation Rental(a) (b)

2016

$

366.08

$

492.83

 N/A 

 N/A 

 N/A 

2015

$

361.20

$

513.14

$

642.00

$

452.19

$

494.92

2014

$

410.04

$

577.13

$

727.40

$

492.25

$

558.95

2013

$

392.64

$

540.38

$

677.81

$

506.62

$

532.11

Vacation Ownership (a)

Gross Vacation Ownership Interest (VOI) Sales (in 000s) (c)

2016

$

428,000

$

518,000

 N/A 

 N/A 

 N/A 

2015

$

390,000

$

502,000

$

565,000

$

507,000

$

1,965,000

2014

$

410,000

$

496,000

$

513,000

$

470,000

$

1,889,000

2013

$

384,000

$

481,000

$

536,000

$

488,000

$

1,889,000

Tours (in 000s)

2016

179

213

 N/A 

 N/A 

 N/A 

2015

168

206

227

200

801

2014

170

208

225

191

794

2013

163

206

225

195

789

Volume Per Guest (VPG)

2016

$

2,244

$

2,328

 N/A 

 N/A 

 N/A 

2015

$

2,177

$

2,353

$

2,354

$

2,390

$

2,326

2014

$

2,272

$

2,280

$

2,158

$

2,336

$

2,257

2013

$

2,211

$

2,256

$

2,278

$

2,370

$

2,281

Note: Full year amounts may not add across due to rounding.

(a)

Includes the impact of acquisitions/dispositions from the acquisition/disposition dates forward. Therefore, the operating statistics are not presented on a comparable basis.

(b)

The destination network operating statistics excluding our U.K.-based camping business sold in Q4 2014 are as follows:

Year

Q1

Q2

Q3

Q4

Full Year

Vacation Rental Transactions (in 000s)

2014

429

367

431

292

1,518

Average Net Price Per Vacation Rental

2014

$

410.02

$

578.02

$

700.56

$

492.64

$

548.93

(c)

Includes Gross VOI sales under the Company’s Wyndham Asset Affiliate Model (WAAM) Just-in-Time. (See Table 9 for a reconciliation of Gross VOI sales to vacation ownership interest sales).

ADDITIONAL DATA

Year

Q1

Q2

Q3

Q4

Full Year

Hotel Group

Number of Properties

2016

7,830

7,880

 N/A 

 N/A 

 N/A 

2015

7,670

7,700

7,760

7,810

 N/A 

2014

7,500

7,540

7,590

7,650

 N/A 

2013

7,380

7,410

7,440

7,490

 N/A 

Vacation Ownership

Provision for Loan Losses (in 000s) (*) 

2016

$

63,000

$

90,000

 N/A 

 N/A 

 N/A 

2015

$

46,000

$

60,000

$

78,000

$

64,000

$

248,000

2014

$

60,000

$

70,000

$

70,000

$

60,000

$

260,000

2013

$

84,000

$

90,000

$

102,000

$

73,000

$

349,000

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