Wyndham Destinations Results

Wyndham Destinations Reports Third Quarter 2019 Results

Wyndham Destinations, Inc. (NYSE: WYND) today reported third quarter 2019 financial results for the three months ended September 30, 2019. Highlights include:

  • Net revenue increased 4% to $1,105 million 
  • Net VOI sales increased 5% to $528 million; gross VOI sales increased 4% to $663 million 
  • Net income from continuing operations increased 3% to $135 million ($1.47 diluted EPS) 
  • Adjusted net income from continuing operations decreased 3% to $144 million ($1.57 adjusted diluted EPS) 
  • Adjusted EBITDA decreased 1% to $267 million (1) 
  • Net cash provided by operating activities from continuing operations year-to-date increased 57% to $321 million and adjusted freecash flow increased 31% to $466 million 
  • Repurchased 5.6 million shares of common stock for $245 million year-to-date through October 29 
  • Increased 2019 adjusted diluted EPS from continuing operations guidance to a range of $5.54 to $5.62 and increased 2019 adjusted free cash flow from continuing operations guidance to a range of $565 to $585 million 
  • Narrowed 2019 adjusted EBITDA guidance to a range of $990 to $1,000 million, after adjusting for the impact of Hurricane Dorian

Michael D. Brown, president and CEO of Wyndham Destinations, commented, "Our company reported strong quarterly results and increased our guidance for adjusted diluted EPS. We are continuing to see an expansion of Blue Thread sales and robust gross VOI sales, which increased 4% in the quarter. We remain committed to generating strong free cash flows and year-to-date we have returned $371 million of capital to shareholders in the form of dividends and share repurchases."

"We recently completed two key transactions the sale of Wyndham Vacation Rentals to Vacasa for $162 million and the acquisition by RCI of Alliance Reservations Network for $102 million. These transactions were important milestones for RCI and Wyndham Destinations as we focus on our core business and continue to execute on our key strategic objectives," said Brown.

(1) The comparison and variance between 2019 Adjusted EBITDA, adjusted diluted EPS from continuing operations and adjusted net income from continuing operations compared to the prior year was calculated using 2019 Adjusted data and 2018 Further Adjusted data in order to provide a more accurate comparison. See "Presentation of Financial Information" and the tables for the definitions and reconciliations of these non-GAAP measures in accordance with GAAP.

 Business Segment Results

Vacation Ownership

$ in millions

2019

2018

% change

Revenue

$858

$820

5

%

Adjusted EBITDA

$203

$203

%

Vacation Ownership revenues increased 5%, primarily due to a 4% increase in gross vacation ownership interest (VOI) sales to $663 million. Tours increased 4% year-over-year and Volume Per Guest (VPG) decreased 1%.

Adjusted EBITDA was flat at $203 million, with revenue growth of 5% offset by higher inventory costs and increased costs in sales and marketing.

Gross vacation ownership contract receivables grew 4% year-over-year to $3.9 billion. The provision for loan loss as a percentage of gross VOI sales, net of fee-for-service sales, was 20.3% for the third quarter of 2019, an improvement from 20.8% during the third quarter of 2018.

Exchange & Rentals

$ in millions

2019

2018

% change

Revenue

$250

$243

3

%

Adjusted EBITDA

$83

$79

5

%

Exchange & Rentals revenue increased 3%, primarily due to incremental revenue from the acquisition of Alliance Reservations Network, partially offset by a loss of Wyndham Hotels and Resorts servicing revenue as a result of the spin-off.

Adjusted EBITDA increased 5% to $83 million, primarily driven by lower general and administrative costs.

Balance Sheet and Liquidity

Net DebtAs of September 30, 2019, the Company's leverage ratio was 2.9x, within the Company's target range of 2.25x to 3.0x. The Company had $3.0 billion of corporate debt outstanding, which excluded $2.5 billion of non-recourse debt related to securitized notes receivable. Additionally, the Company had cash and cash equivalents of $250 million. Refer to Table 9 for definitions of net debt and leverage ratio.

Cash Flow For the nine months ended September 30, 2019, net cash provided by operating activities from continuing operations was $321 million, compared to $205 million in the prior year period. The increase was driven by higher net income and a decrease in cash used for working capital, partially offset by lower stock-based compensation. Adjusted free cash flow from continuing operations was $466 million for the nine months ended September 30, 2019, compared to $356 million in the same period of 2018. The increase in adjusted free cash flow was due to the increase in net cash provided by operating activities, lower separation-related payments and higher net securitization activity.

Share Repurchases During the third quarter of 2019, the Company repurchased 2.0 million shares of common stock for $90 million at a weighted average price of $44.45 per share. As of September 30, 2019, the Company had $601 million remaining in its share repurchase authorization. Subsequent to the end of the third quarter, the Company repurchased an additional $30 million of shares through October 29.

Dividend The Company paid a cash dividend of $0.45 per share on September 30, 2019 to shareholders of record as of September 13, 2019. The cash dividend represents a 10% increase over dividends paid in the third quarter of 2018.

Timeshare Receivables Financing — The Company closed a $450 million term securitization on July 24, 2019 with a weighted average coupon rate of 2.96% and an advance rate of 98%. Subsequent to the end of the quarter, the Company closed a $300 million term securitization on October 23, 2019 with a weighted average coupon rate of 2.76% and an advance rate of 98%.

Other

Alliance Reservations Network — On August 7, 2019, RCI acquired Alliance Reservations Network, a travel technology platform, for $102 million, comprised of $48 million in cash and $10 million in WYND equity at closing, with $21 million in cash and $13 million in WYND equity to be paid over the next 24 months, and $10 million of contingent consideration based on achieving certain financial and operational metrics.

Wyndham Vacation Rentals — On October 22, 2019, the Company completed the sale of Wyndham Vacation Rentals to Vacasa for $162 million. After customary closing adjustments, Wyndham Destinations received $156 million in cash and $10 million in Vacasa equity. The purchase agreement contains customary post-closing adjustments.

Outlook

The Company revised the following full-year 2019 guidance:

  • Net revenue of $4,040 million to $4,140 million, compared to the previous expectation of $4,120 million to $4,220 million. The guidance has been revised in part due to a disruption of business from Hurricane Dorian
  • Adjusted EBITDA of $990 million to $1,000 million, compared to the previous expectation of $995 million to $1,015 million. The guidance has been revised due to a disruption of business from Hurricane Dorian
  • Adjusted net income of $514 million to $522 million, compared to the previous expectation of $503 million to $521 million. The guidance has increased to reflect lower interest expense and lower taxes
  • Adjusted diluted EPS of $5.54 to $5.62, based on a diluted share count of 92.8 million, which assumes no future share repurchases after September 30, 2019. This compared to the previous guidance of $5.38 to $5.58.The guidance has increased to reflect a lower share count from share repurchases, lower interest expense and lower taxes
  • Adjusted free cash flow of $565 million to $585 million, compared to the previous expectation of $555 million to $575 million

The Company reaffirmed the following full-year 2019 guidance:

  • Provision for loan loss as a percentage of gross VOI sales, net of fee-for-service sales, to be comparable to 2018, which was 20.5%



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