PARSIPPANY, N.J., Oct. 29, 2019 // PRNewswire // Wyndham Hotels & Resorts (NYSE: WH) today announced results for the three months ended September 30, 2019. Highlights include:
“Our team’s sharp execution against our strategic and operating plans allowed us to deliver solid results in the third quarter, despite a softening RevPAR environment, highlighted by continued expansion of our system size and significant growth in adjusted EBITDA,” said Geoffrey A. Ballotti, president and chief executive officer. “In addition, we increased our share repurchase authorization to reflect our strong free cash flow and our sustained focus on returning cash to shareholders. We remain confident that our business is well-positioned for continued success.”
Revenues decreased 7% to $560 million, compared with $604 million in the third quarter of 2018. The decline is primarily due to lower cost-reimbursement revenues in our hotel management business, which have no impact on adjusted EBITDA.
Net income was $45 million, or $0.47 per diluted share, compared to $58 million, or $0.58 per diluted share, in the third quarter of 2018. As previously announced, 2019 results reflect contract-termination expenses and transaction-related items. Prior-year results included separation-related and transaction-related expenses associated with the Company’s spin-off and acquisition of La Quinta.
Adjusted net income was $106 million, or $1.10 per diluted share, compared with $85 million, or $0.85 per diluted share, in the third quarter of 2018. Third quarter earnings benefited from higher royalty and franchise fees and other revenues, as well as increased synergies from the acquisition and integration of La Quinta, partially offset by higher marketing expenses. Full reconciliations of GAAP results to the Company’s non- GAAP adjusted measures for all reported periods appear in the tables to this press release.
Third quarter adjusted EBITDA increased 14% to $190 million, compared with $166 million in the third quarter of 2018. The increase in adjusted EBITDA primarily reflected higher fee revenues and increased synergies from the acquisition and integration of La Quinta.
As of September 30, 2019, the Company’s hotel system consisted of over 9,200 properties and approximately 822,000 rooms, a 3% increase compared with the third quarter of 2018. The Company’s development pipeline consisted of 1,450 hotels and approximately 190,000 rooms, a 7% year-over-year room increase. The Company also increased its pipeline sequentially by 1% compared to second quarter 2019. Approximately 56% of the Company’s development pipeline is international and 74% is new construction.
Business Segment Discussion
The following discussion of third quarter operating results focuses on revenue and adjusted EBITDA for each of the Company’s segments.
Hotel Franchising
Revenues increased 9% compared to third quarter 2018, due to higher fee revenues and the timing of the Company's global franchisee conference, which was in April last year but in September this year. Adjusted EBITDA grew 10% to $195 million, reflecting the growth in revenues and increased synergies from the acquisition of La Quinta, partially offset by a $7 million impact from higher marketing expenses.
Hotel Management
Revenues decreased $72 million compared to the prior-year period, primarily due to lower cost-reimbursement revenues, which have no impact on adjusted EBITDA, and a one-time accrual for customer payments we agreed to make, which is considered transaction-related and therefore does not impact Adjusted EBITDA. Adjusted EBITDA increased $8 million compared to the prior-year quarter, primarily reflecting reduced marketing expenses and $2 million of management contract termination fees.
Other Items
Share Repurchases and Dividends – The Company repurchased approximately 1,410,000 shares of its common stock for $75 million in the third quarter. The Company’s Board of Directors also increased the Company’s share repurchase authorization by $300 million in August. The Company paid common stock dividends of $28 million, or $0.29 per share, in the third quarter.
La Quinta Integration – The Company achieved run-rate synergies related to the La Quinta acquisition of $68 million annually during the third quarter, as anticipated.
Agreement with CorePoint Lodging – In October, the Company entered into an agreement with CorePoint Lodging, for whom the Company manages La Quinta-branded hotels, to collaborate on initiatives in support of CorePoint’s operations and to resolve open issues between the two companies. As part of the agreement, the Company will make payments of approximately $20 million to CorePoint, and CorePoint will commit to maintaining cash operating reserves of approximately $20 million. The two companies also agreed to finalize outstanding tax matters related to the Company’s May 2018 acquisition of La Quinta Holdings Inc. As a result of the agreement, the Company recorded charges of approximately $26 million ($21 million after-tax) in the third quarter.
Hotel Management Contract Termination – As previously announced, the Company recorded a $34 million charge in the third quarter to terminate an unprofitable hotel-management arrangement, which was initiated in 2012 and covers eight hotel properties and 2,500 U.S. rooms, all of which will remain in the Company’s franchise system this year. With the termination of this arrangement, the Company’s future maximum annual hotel-management guaranty obligations will be $5 million.
Outlook
View Original for Full Data Table
Conference Call Information
Wyndham Hotels will hold a conference call with investors to discuss the Company’s results and outlook on Tuesday, October 29, 2019 at 8:30 a.m. ET. Listeners can access the webcast live through the Company’s website at www.investor.wyndhamhotels.com. The conference call may also be accessed by dialing 877 876-9174 and providing the passcode “Wyndham”. Listeners are urged to call at least five minutes prior to the scheduled start time. An archive of this webcast will be available on the website for approximately 90 days beginning at noon ET on October 29, 2019. A telephone replay will be available for approximately ten days beginning at noon ET on October 29, 2019 at 800 283-4799.
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 press release.
Wyndham Hotels & Resorts (NYSE: WH) is the world’s largest hotel franchising company, with over 9,200 hotels across more than 80 countries on six continents. Through its network of approximately 822,000 rooms appealing to the everyday traveler, Wyndham commands a leading presence in the economy and midscale segments of the lodging industry. The Company operates a portfolio of 20 hotel brands, including Super 8®, Days Inn®, Ramada®, Microtel Inn & Suites®, La Quinta®, Baymont®, Wingate®, AmericInn®, Hawthorn Suites®, The Trademark Collection® and Wyndham®. Wyndham Hotels & Resorts is also a leading provider of hotel management services, with more than 400 properties under management. The Company’s award- winning Wyndham Rewards loyalty program offers over 79 million enrolled members the opportunity to redeem points at thousands of hotels, vacation club resorts and vacation rentals globally. For more information, visit www.wyndhamhotels.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. Forward-looking statements include those that convey management’s expectations as to the future based on plans, estimates and projections at the time Wyndham Hotels makes the statements and may be identified by words such as “will,” “expect,” “believe,” “plan,” “anticipate,” “intend,” “goal,” “future,” “outlook,” “guidance,” “target,” “estimate,” “projection” and similar words or expressions, including the negative version of such words and expressions. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Wyndham Hotels 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 Wyndham Hotels’ current views and expectations with respect to its future performance and operations, including revenues, earnings, cash flow and other financial and operating measures, share repurchases and dividends.
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, without limitation, general economic conditions, the performance of financial and credit markets, the economic environment for the hospitality industry, operating risks associated with the hotel franchising and management businesses, the impact of war, terrorist activity or political strife, risks related to the acquisition and integration of La Quinta and our relationship with CorePoint Lodging, risks related to our ability to obtain financing and the terms of such financing and the timing and amount of future share repurchases and dividends, as well as the risks described in Wyndham Hotels’ most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and any subsequent reports filed with the Securities and Exchange Commission. Except as required by law, Wyndham Hotels undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, subsequent events or otherwise.
Investors:
Matt Capuzzi
Vice President, Investor Relations
973 753-6453
ir@wyndham.com
Media:
Dave DeCecco
Group Vice President, Global Communications
973 753-7474
WyndhamHotelsNews@wyndham.com
Definitions
Adjusted EBITDA: Represents net income excluding interest expense, depreciation and amortization, impairment charges, restructuring and related charges, contract termination costs, transaction-related items (acquisition-, disposition-, or separation-related), foreign currency impacts of highly inflationary countries, stock-based compensation expense, early extinguishment of debt costs and income taxes. Beginning with the third quarter of 2018, our calculation of adjusted EBITDA excludes the currency effects of hyper-inflationary countries. Adjusted EBITDA is a financial measure that is not recognized under U.S. GAAP and should not be considered as an alternative to net income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Average Daily Rate (ADR): Represents the average rate charged for renting a lodging room for one day.
Average Occupancy Rate: Represents the percentage of available rooms occupied during the period.
Constant Currency: Represents a comparison eliminating the effects of foreign exchange rate fluctuations between periods (foreign currency translation) and the impact caused by any foreign exchange related activities (i.e., hedges, balance sheet remeasurements and/or adjustments).
Number of Rooms: Represents the number of rooms at the end of the period which are (i) either under franchise and/or management agreements or Company-owned and (ii) properties under affiliation agreements for which the Company receives a fee for reservation and/or other services provided.
RevPAR: Represents revenue per available room and is calculated by multiplying average occupancy rate by ADR.
Royalty Rate: Represents the average royalty rate earned on our franchised properties and is calculated by dividing total royalties, excluding the impact of amortization of development advance notes, by total room revenues.
SOURCE Wyndham Hotels & Resorts
Wyndham Hotels & Resorts (NYSE: WH) is a hotel franchising company.