PARSIPPANY, N.J. (Oct. 25, 2017) -- Wyndham Worldwide Corporation (NYSE: WYN) today announced results for the three months ended September 30, 2017. The Company's results were in line with its prior expectations despite recent hurricanes negatively impacting the Company's operations.
THIRD QUARTER 2017 OPERATING RESULTS
Third quarter revenues were $1.6 billion, up 4% compared with the prior-year period. Full reconciliations of GAAP results to non-GAAP measures for all reported periods appear in the tables to this press release.
Net income in the third quarter of 2017 was $203 million compared with $196 million for the third quarter of 2016. Diluted earnings per share (EPS) increased 11% to $1.97, versus $1.78 in the prior-year period.
Adjusted net income for the third quarter of 2017 was $209 million or $2.03 per diluted share, compared with $207 million or $1.89 per diluted share in the third quarter of 2016. Adjusted results exclude restructuring and separation costs and other items as detailed in Tables 7 and 8 of this press release. Third quarter earnings benefited from the growth in revenues, partially offset by higher year-over-year interest, depreciation and variable compensation expenses along with the impact of Hurricanes Irma and Maria. The increase in adjusted diluted EPS also reflects the benefit of the Company's share repurchase program.
Third quarter EBITDA was $422 million, compared with $402 million in the prior-year period. Adjusted EBITDA was $436 million, compared with $423 million in the third quarter of 2016. Results primarily reflect the growth in revenues, partially offset by higher variable compensation expenses and the hurricane impacts.
Weather events in the third quarter had an unusually pronounced effect on operating results. In particular, the Company estimates that the third quarter hurricanes reduced revenues, net income and EBITDA by $13 million, $6 million, and $9 million, respectively. The reductions primarily reflect the temporary closure of vacation ownership sales centers in the Caribbean and Florida, the closure of portions of the Company's Wyndham Rio Mar hotel in Puerto Rico, and reduced timeshare exchanges due to travel disruptions. Two of the Company's vacation ownership sales centers in the Caribbean remain closed.
"Our team's sharp focus on executing against our strategic and operating plans allowed us to deliver solid growth in line with our prior projections," said Stephen P. Holmes, chairman and CEO. "While the barrage of recent hurricanes negatively impacted our results, our efforts to drive revenue and control costs successfully mitigated their impact in the quarter. I am especially proud of how our employees and affiliates in affected areas have served our guests throughout a difficult period.
"Despite the weather-related challenges in the quarter, we generated a strong increase in new timeshare owners and year-over-year growth in our earnings per share. We have also strengthened our presence in the midscale hotel segment with the addition of the AmericInn brand and its 200 franchised hotels in October. Furthermore, we have increased our share repurchase authorization to reflect our continued focus on returning cash to shareholders, and we are working tirelessly to execute our previously announced separation into two publicly-traded companies," Mr. Holmes added.
For the nine months ended September 30, 2017, net cash provided by operating activities was $666 million, compared with $786 million in the prior-year period. The decrease primarily reflects timing differences and additions to the Company's vacation ownership receivables portfolio.
Free cash flow was $541 million for the nine months ended September 30, 2017, compared with $650 million for the same period in 2016, primarily reflecting the changes in net cash provided by operating activities. The Company defines free cash flow as net cash provided by operating activities less capital expenditures.
THIRD QUARTER 2017 BUSINESS UNIT RESULTS
Revenues were $368 million in the third quarter of 2017, compared with $364 million in the third quarter of 2016. Results reflect 9% higher royalties and franchise fees, as well as increased other revenue due to growth in the Wyndham Rewards credit card program. In addition, results reflected the absence in 2017 of $13 million of global franchisee conference revenues, which are "pass-through" revenues that were fully offset by reduced expenses.
EBITDA was $121 million in the third quarter compared with $107 million in the prior-year quarter. Adjusted EBITDA was $122 million compared with $117 million in the prior-year period, an increase of 4%, primarily reflecting the growth in revenues.
Third quarter domestic same-store RevPAR increased 2.3% compared with third quarter 2016. In constant currency, global same-store RevPAR increased 3.3%.
As of September 30, 2017, the Company's hotel system consisted of over 8,100 properties and over 708,500 rooms, a 3% increase compared with the third quarter of 2016. The development pipeline increased to nearly 1,190 hotels and over 146,900 rooms, a 10% year-over-year room increase, of which 57% are international and 68% are new construction. In addition, we are adding almost 12,000 rooms to our system with the acquisition of AmericInn that we completed in October.
Revenues were $511 million in the third quarter of 2017, compared with $486 million in the third quarter of 2016, an increase of 5%. In constant currency and excluding acquisitions, revenues increased 2%.
Vacation rental revenues were $327 million compared with $304 million in the prior-year quarter. In constant currency and excluding acquisitions, vacation rental revenues increased 3%, reflecting a 2% increase in transaction volume and a 1% increase in the average net price per rental.
Exchange revenues were $158 million, a decline of 1% compared with the prior-year quarter, reflecting the adverse impact of the hurricanes. Exchange revenue per member increased 1% and the average number of members declined 2%.
EBITDA was $154 million in the third quarter of 2017, compared with $138 million in the third quarter of 2016. Adjusted EBITDA was $150 million compared with $142 million in the prior-year quarter, an increase of 6%, reflecting increased vacation rental volumes and favorable foreign currency movements, partially offset by the adverse impact of the hurricanes.
Revenues were $773 million in the third quarter of 2017, compared with $744 million in the third quarter of 2016, an increase of 4%. The increase reflects a 7% increase in gross VOI sales as well as higher consumer financing revenues, even though the third quarter hurricanes negatively impacted VOI sales.
Tour flow increased 7%, driven by increased tours to new owners. Volume per guest (VPG) declined 1%, primarily reflecting a 16% increase in sales in North America to new owners, which produce a lower VPG.
EBITDA was $190 million in the third quarter of 2017 compared with $189 million in the prior-year quarter. Adjusted EBITDA was $190 million compared with $195 million in the prior-year quarter, a decline of 3%. Results reflect higher gross VOI sales and consumer financing revenue, offset by a higher provision for loan losses and increased variable compensation expenses.
- The Company repurchased 1.5 million shares of common stock for $150 million during the third quarter of 2017 at an average price of $101.18. From October 1 through October 24, 2017, the Company repurchased an additional 0.3 million shares for $34 million.
- The Company's Board of Directors approved a $1.0 billion increase in the share repurchase authorization. Including the increase, the Company's remaining share repurchase authorization totals $1.3 billion as of October 24, 2017.
- Net interest expense in the third quarter of 2017 was $40 million compared with $32 million in the third quarter of 2016, reflecting higher corporate debt levels.
- Depreciation and amortization in the third quarter of 2017 was $69 million, compared with $63 million in the third quarter of 2016, as additional long-term capital projects came into service, strengthening the Company's technology capabilities.
- As previously announced, the Company plans to become two publicly-traded hospitality companies through the spin-off of the Company's Hotel Group to shareholders. The process is proceeding as planned, and the Company expects to complete the separation in the second quarter of 2018, although there can be no assurance regarding the timing of the separation or that the separation will ultimately occur. The Company is also continuing to explore strategic alternatives for its European vacation rentals business.
- The Company completed the acquisition of AmericInn on October 2, adding 200 franchised properties with nearly 12,000 rooms to the Company's midscale hotel portfolio. The net purchase price was $142 million, which included a simultaneous sale of ten owned hotels to an unrelated third party for $28 million.
Balance Sheet Information as of September 30, 2017:
- Cash and cash equivalents were $289 million, compared with $185 million at December 31, 2016.
- Vacation ownership contract receivables, net totaled $2.9 billion, compared with $2.8 billion at December 31, 2016.
- Vacation ownership and other inventory was $1.3 billion, compared with $1.4 billion at December 31, 2016.
- Securitized vacation ownership debt was $2.0 billion, compared with $2.1 billion at December 31, 2016.
- Long-term debt totaled $3.9 billion, compared with $3.4 billion at December 31, 2016. The increase in debt reflects higher vacation ownership contract receivables, higher VOI inventory, lower securitized borrowings and an increase in the Company's cash balance. The remaining borrowing capacity under the Company's revolving credit facility, net of commercial paper borrowings, was $0.9 billion as of September 30, 2017, compared with $1.1 billion at December 31, 2016.
A schedule of debt is included in Table 12, available via this link: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MzkxNzk1fENoa...
Note to Editors: The outlook below excludes possible future share repurchases, while analysts' estimates often include projected share repurchases. This results in discrepancies between the Company's projections and database consensus forecasts.
The Company has updated the following projections for the full year 2017 to reflect the financial effects of the recent weather events on both our third quarter and fourth quarter results:
- Revenues of $5.80 billion to $5.85 billion.
- Adjusted net income of $618 million to $628 million.
- Adjusted EBITDA of $1.380 billion to $1.395 billion.
- Adjusted diluted EPS to $5.95 to $6.05, based on a diluted share count of 103.9 million.
The third quarter weather events will affect the Company's fourth quarter results, particularly in its Vacation Ownership and Hotel Group segments. The Company estimates the weather events will reduce fourth quarter revenues by $20 to $30 million, net income by $9 to $15 million, and EBITDA by $15 to $23 million. For the full year, the Company estimates the weather events will reduce revenues by $33 to $43 million, net income by $15 to $21 million and EBITDA by $24 to $32 million. While the Company's business interruption insurance may ultimately offset a portion of these effects, any such insurance recoveries are unlikely to be realized in 2017.
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. 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. See Table 10 for certain non-GAAP information concerning the outlook period.
The Company will post more detailed projections 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 and outlook on Wednesday, October 25, 2017 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 800-862-9098 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 October 25, 2017. A telephone replay will be available for approximately 10 days beginning at 12:00 p.m. ET on October 25, 2017 at 800-688-7036.
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 the 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 nearly 130,000 places to stay across more than 110 countries on six continents, Wyndham Worldwide and its 38,000 associates welcome 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.
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," "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, cash flow, related financial and operating measures 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, 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 exploration of strategic alternatives for its European rentals brands and the outcome and timing of that process, the timing and amount of future share repurchases, as well as those factors described in Wyndham Worldwide's Annual Report on Form 10-K, filed with the SEC on February 17, 2017, and in Wyndham Worldwide's subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. 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.