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Wyndham Worldwide Reports Strong Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

Increases 2015 Adjusted EPS Guidance

– Wyndham Worldwide Corporation (NYSE:WYN) today announced results for the three months ended September 30, 2015.

THIRD QUARTER HIGHLIGHTS:

Adjusted diluted earnings per share (EPS) was $1.78, an increase of 7% from adjusted diluted EPS of $1.67 in the third quarter of 2014. Reported diluted EPS was $1.61, compared with $1.64 in the third quarter of 2014.

Revenues for the third quarter of 2015 increased 3% compared with the third quarter of 2014. On a currency neutral basis and excluding the impact of acqui sitions and a divestiture, revenues increased 6% and adjusted EBITDA increased 7%.

Gross vacation ownership sales increased 12% on a constant currency basis.

Vacation rental transactions increased 6% excluding the impact of acquisitions and a divestiture.

The Company repurchased 2.1 million shares of its common stock for $170 million during the quarter.

“We delivered great results in the third quarter across all our businesses, with more guests, staying more often, and more engaged than ever,” said Stephen P. Holmes, chairman and CEO. “This quarter was highlighted by a double digit increase in gross vacation ownership interest sales, strong growth in vacation rental transaction volume, and increased activity through our re-invigorated loyalty program. We are connecting the widest range of guests around the globe with the accommodation options they desire.”

THIRD QUARTER 2015 OPERATING RESULTS

Third quarter revenues were $1.6 billion, an increase of 3% from the prior year period. Excluding acquisitions and a divestiture, constant currency revenues increased 6% reflecting growth in each of the Company’s business segments.

Third quarter adjusted EBITDA was $412 million, compared with $418 million in the prior year period. Year-over-year adjusted EBITDA comparisons were adversely affected by foreign currency effects of $17 million in 2015, and the absence of results in 2015 from Canvas Holiday, a U.K.-based camping business, which contributed $18 million of EBITDA in the third quarter 2014 and was divested in the fourth quarter of 2014. Excluding these items and acquisitions, adjusted EBITDA increased 7%.

Adjusted net income was $210 million, or $1.78 per diluted share, compared with $210 million, or $1.67 per diluted share for the same period in 2014. Net income and earnings per share benefited from strong operations, but were negatively affected by the same factors that influenced adjusted EBITDA comparisons, noted above. EPS also benefited from the Company’s share repurchase program, which decreased the weighted average diluted share count 6% year-over-year.

Reported net income for the third quarter of 2015 was $190 million, or $1.61 per diluted share, compared with $206 million, or $1.64 per diluted share, for the third quarter of 2014. Reported net income in both periods reflects several items excluded from adjusted net income. The net result of these items unfavorably impacted third quarter 2015 net income by $20 million and unfavorably impacted third quarter 2014 net income by $4 million. Full reconciliations of adjusted net income to GAAP results appear in Table 8 of this press release. Year-over-year reported net income third quarter comparisons were negatively impacted by the same factors that influenced adjusted EBITDA comparisons, noted above.

Free cash flow was $660 million for the nine months ended September 30, 2015, compared with $750 million for the same period in 2014. The decline in free cash flow reflects the timing of capital expenditures and working capital, including inventory spending. The Company expects inventory spending in the fourth quarter of 2015 to be significantly lower than in the fourth quarter of 2014. The Company defines free cash flow as net cash provided by operating activities less capital expenditures. For the nine months ended September 30, 2015, net cash provided by operating activities was $817 million, compared with $899 million in the prior year period.

BUSINESS UNIT RESULTS

Lodging (Wyndham Hotel Group)

Revenues were $357 million in the third quarter of 2015, a 13% increase compared with the third quarter 2014. Adjusted EBITDA was $108 million, flat compared with the same period in 2014.

In constant currency and excluding acquisitions, revenues increased 4% and adjusted EBITDA increased 3%, reflecting domestic RevPAR growth, which was partially offset by increased marketing expenditures and higher costs related to the implementation of new property management and central reservation systems.

Domestic RevPAR increased 5.2%. In constant currency, total system-wide RevPAR increased 3.3%.

As of September 30, 2015, the Company’s hotel system consisted of approximately 7,760 properties and 672,000 rooms, a 2.5% room increase compared with the third quarter of 2014. The development pipeline included 910 hotels and over 122,800 rooms, of which 61% were international and 68% were new construction.

Vacation Exchange and Rentals (Wyndham Exchange & Rentals)

Revenues were $476 million in the third quarter of 2015, a 7% decline compared with the third quarter of 2014. In constant currency, and excluding acquisitions and the impact of the divestiture of Canvas Holidays in 2014, revenues increased 6%.

Exchange revenues were $157 million, down 3% compared with the third quarter of 2014. In constant currency, exchange revenues were up 1% compared with the prior year, as the average number of members increased 1.5% while exchange revenue per member was flat.

Vacation rental revenues were $296 million, an 11% decrease compared with the third quarter of 2014. In constant currency and excluding the impact of acquisitions and the divestiture, vacation rental revenues were up 8%, reflecting a 5.8% increase in transaction volume, and a 1.7% increase in average net price per vacation rental.

Adjusted EBITDA for the third quarter of 2015 was $137 million, a 14% decrease compared with the third quarter of 2014. On a currency neutral basis and excluding the impact of acquisitions and the divestiture, adjusted EBITDA increased 5% compared with the prior year period.

Vacation Ownership (Wyndham Vacation Ownership)

Revenues were $750 million in the third quarter of 2015, a 7% increase over the third quarter of 2014. In constant currency, revenues increased 8%.

Gross VOI sales were $565 million in the third quarter of 2015, an increase of 10% compared with the third quarter of 2014. In constant currency, Gross VOI sales increased 12%. Volume per guest (VPG) for the quarter increased 10.6% in constant currency while tour flow increased 0.9%. VPG increases were driven primarily by a higher average transaction size.

Adjusted EBITDA for the third quarter of 2015 was $201 million, an increase of 7% compared with the third quarter of 2014. Results primarily reflect higher VPG. On a currency neutral basis adjusted EBITDA increased 9%.

OTHER ITEMS

The Company repurchased 2.1 million shares of common stock for $170 million during the third quarter of 2015. From October 1 through October 26, 2015, the Company repurchased an additional 0.9 million shares for $70 million. The Company’s remaining share repurchase authorization totals $461 million as of October 26, 2015.

Reported net interest expense in the third quarter of 2015 was $31 million, compared with $26 million in the third quarter of 2014.

Balance Sheet Information as of September 30, 2015:

Cash and cash equivalents of $259 million, compared with $183 million at December 31, 2014

Vacation ownership contract receivables, net, of $2.7 billion, unchanged from December 31, 2014

Vacation ownership and other inventory of $1.3 billion, compared with $1.2 billion at December 31, 2014

Securitized vacation ownership debt of $2.1 billion, compared with $2.2 billion at December 31, 2014

Long-term debt of $3.1 billion, compared with $2.9 billion at December 31, 2014. The remaining borrowing capacity on the revolving credit facility, net of commercial paper borrowings, was $1.4 billion as of September 30, 2015, compared with $1.3 billion at December 31, 2014

A schedule of debt is included in Table 5 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.

For the full year 2015, the Company provides the following guidance:

Revenues of approximately $5.450 - $5.550 billion

Adjusted EBITDA of approximately $1.285 - $1.315 billion. Guidance reflects a $46 million adverse earnings impact from foreign exchange compared with 2014 full year results

Adjusted EPS of approximately $5.06 to $5.09 based on a diluted share count of 119.4 million up from $4.88 to $5.03 based on a diluted share count of 120.2 million

“We were pleased with our performance across the Company in the third quarter, but we’re even more excited by what lies ahead. We have the broadest range of lodging accommodations in the world – including hotels, timeshare and rentals – spanning luxury to budget. We are uniquely positioned to satisfy the burgeoning travel demand around the globe. In 2016, we expect organic adjusted EBITDA growth consistent with our long-term target range of 6 – 8%,” said Mr. Holmes.

Conference Call Information

Wyndham Worldwide Corporation will hold a conference call with investors to discuss the Company’s results, outlook and guidance on Tuesday, October 27, 2015 at 8:30 a.m. EDT. Listeners may access the webcast live through the Company’s website at

www.wyndhamworldwide.com/investors

. An archive of this webcast will be available on the website for approximately 90 days beginning at noon EDT on October 27, 2015. The conference call may also be accessed by dialing 800-369-2125 and providing the passcode "WYNDHAM." Listeners are urged to call at least 10 minutes prior to the scheduled start time. A telephone replay will be available for approximately 90 days beginning at noon EDT on October 27, 2015, at 800-388-4923.

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

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 our non-GAAP presentation should not be considered an...


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