Wyndham Destinations reports second quarter 2018 results
Wyndham Destinations, Inc. (NYSE:WYND), which began trading under the ticker WYND on June 1, 2018, today reported second quarter 2018 financial results for the three months ended June 30, 2018. |
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Wyndham Destinations reports second quarter 2018 results
Wyndham Destinations, Inc. (NYSE:WYND), which began trading under the ticker WYND on June 1, 2018, today reported second quarter 2018 financial results for the three months ended June 30, 2018. |
Category: Worldwide - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2018-08-13
Results are reported in accordance with U.S. generally accepted accounting principles (GAAP) and are also reported adjusting for certain items (non-GAAP). The Company is also presenting non-GAAP results for the three and six month periods ended June 30, 2018 and 2017 on a further adjusted basis as if the spin-off of its hotel business and the sale of its European vacation rentals business had occurred for all periods presented. A full reconciliation of GAAP results to the Company's non-GAAP measures for all reported periods are available in the financial tables section of this press release. Highlights include: - Reported revenue, net income and diluted earnings per share (EPS) of $1.0 billion, $378 million and $3.77, respectively.
- Further adjusted net income increased 9% to $125 million. Further adjusted diluted EPS increased 14% to $1.25, compared to guidance of $1.13 - $1.23.
- Further adjusted EBITDA increased 7% to $249 million, compared to guidance of $240 - $250 million.
- Repurchased $42 million of stock in the second quarter, including $15 million in June.
- Reaffirmed full-year 2018 revenue and further adjusted EBITDA guidance and increased further adjusted diluted EPS guidance to $4.74 - $4.94.
"During the second quarter Wyndham Destinations completed the spin-off of Wyndham Hotels & Resorts to become a pure-play vacation ownership and exchange company," said Michael D. Brown, president and chief executive officer of Wyndham Destinations.
"Our team has executed extremely well on our key strategic priorities over a busy period. We are very pleased with a strong second quarter to finish a robust first half of 2018, with solid results in both of our operating segments. During the second quarter, we increased further adjusted EBITDA by 7%, EBITDA margin by 90 basis points, new owner mix by 260 basis points and initiated our first post-spin buyback of Wyndham Destinations shares."
"Looking ahead, we are committed to driving growth in our core business and delivering value to our shareholders. Wyndham Destinations is on track and today we reaffirm our full-year revenue and further adjusted EBITDA guidance and commitment to return capital to shareholders through dividends and share repurchases," said Brown.Results From Continuing OperationsOn May 9, 2018, the Company sold its European vacation rentals business to an affiliate of Platinum Equity, LLC, generating net proceeds of $1.03 billion and on May 31, 2018, the Company completed the spin-off of its hotel business into a separate publicly traded company. Wyndham Destinations is the world’s largest vacation ownership and exchange company. For all periods presented, the results of operations for the hotel business and the European vacation rentals business have been classified as discontinued operations.
During the second quarter of 2018, reported revenues, loss from continuing operations and loss from continuing operations per diluted share from continuing operations were $1.0 billion, $(12) million and $(0.12), respectively. This compared to reported revenues of $978 million, income from continuing operations of $14 million and diluted EPS from continuing operations of $0.13 in the second quarter of 2017. Total second quarter 2018 adjusted EBITDA from continuing operations increased 7% to $243 million.Company Results — Further AdjustedSecond quarter 2018 and 2017 further adjusted results are presented as if Wyndham Destinations were separated from Wyndham Hotels & Resorts for all periods presented.
During the second quarter of 2018, further adjusted net income was $125 million and further adjusted diluted EPS was $1.25 based on 100 million diluted shares outstanding. Further adjusted EBITDA was $249 million compared to $233 million in the second quarter of 2017 and was within the Company's guidance of $240 million to $250 million.
In the second quarter of 2018, further adjusted EBITDA as compared to adjusted EBITDA included $5 million of incremental license fee expense and other changes being effected in conjunction with the spin-off for the first two months of the second quarter of 2018. In addition, results excluded $11 million of corporate and other costs to reflect the Company’s position as if the spin-off of its hotel business and the sale of its European vacation rentals business had occurred for all periods presented.
In the second quarter of 2017, further adjusted EBITDA, as compared to adjusted EBITDA, included $7 million of incremental license fee expense and other changes being effected in conjunction with the spin-off for the entire second quarter of 2017. In addition, results excluded $12 million of corporate and other costs to reflect the Company’s position as if the spin-off of its hotel business and the sale of its European vacation rentals business had occurred for all periods presented.
Vacation ownership revenues increased 3%, primarily due to a 7% increase in gross vacation ownership interest (VOI) sales of $602 million and offset by increases in the mix of fee-for-service sales as well as an increase in the loan loss provision. Tour flow increased 3% and Volume Per Guest (VPG) increased 5%. The mix of new owner sales increased 260 basis points year-over-year and new owner sales volume increased 16%.
Vacation Ownership further adjusted EBITDA increased 5% to $188 million, primarily due to revenue growth of 3%, consumer finance income growth and cost efficiencies in general and administrative expenses.
Consumer finance gross receivables grew 5% year-over-year to $3.6 billion. The provision for loan loss as a percentage of gross VOI sales, net of fee-for-service sales was 21.4% at the end of the second quarter of 2018. The provision for loan loss increased to $126 million, with the $16 million year-over-year increase due to $7 million of higher financing volume and $9 million of higher default activity. The allowance for loan losses as a percentage of the Company's loan portfolio was 19.5% at the end of the second quarter of 2018, compared to 19.2% at the end of first quarter of 2018.
Exchange & Rentals revenues increased 2%, primarily due to 1% growth in average members. Further adjusted EBITDA increased $5 million, or 8%, including a $3 million benefit from currency. Excluding the effect of currency, further adjusted EBITDA would have increased 3%.Balance Sheet and LiquidityNet Debt — As of June 30, 2018, the Company's leverage ratio was 2.9x. The Company had $3.0 billion of corporate debt outstanding, which excluded $2.1 billion of non-recourse debt related to its securitized notes receivable. Additionally, the Company had cash and cash equivalents of $155 million. The Company used the proceeds from the sale of the European Vacation Rentals business primarily to repay outstanding debt. Refer to Table 9 for definitions of net debt and leverage ratio.
Cash Flow — For the six months ended June 30, 2018, net cash provided by continuing operations was $93 million, compared to $231 million in the prior year period. Free cash flow from continuing operations was $45 million for the six months ended June 30, 2018, compared to $88 million for the same period in 2017, primarily due to separation-related cash outlays in 2018. Further adjusted free cash flow was $195 million and $165 million for the same periods, respectively.
Share Repurchases — During the first two months of the second quarter of 2018, the Company repurchased 0.2 million shares of common stock for $27 million at a weighted average price of $112.14 per share. Following the spin-off of its hotel business and during the month of June, the Company repurchased 0.3 million shares of common stock for $15 million at a weighted average price of $46.01 per share. As of June 30, 2018, the Company had $1.0 billion remaining in its share repurchase authorization.
Dividend — The Company announced a cash dividend of $0.41 per share on July 27, 2018.
Securitization — On April 18, 2018, the Company closed a private placement term securitization of $350 million with a weighted average coupon of 3.73% and an advance rate of 90.0%. Subsequent to the end of the quarter, on July 18, 2018, the Company closed a $500 million term securitization with a weighted average coupon of 3.65% and an advance rate of 88.7%.OutlookThe Company is reaffirming its full-year 2018 revenue and further adjusted EBITDA guidance as follows: - Revenues of $3.975 billion to $4.085 billion
- Further adjusted EBITDA of $955 million to $975 million
The Company is revising its further adjusted full-year 2018 net income and diluted EPS guidance as follows: - Further adjusted net income of $476 million to $496 million, compared to the previous expectation of $463 million to $483 million
- Stock based compensation of $16 million to $20 million, compared to the previous expectation of $33 million to $37 million
- Further adjusted diluted EPS of $4.74 to $4.94, compared to the previous expectation of $4.55 to $4.75, to reflect a lower share count of 101 million shares outstanding and lower stock based compensation
The Company's guidance assumes that the spin-off of its hotel business and the sale of its European vacation rentals business had been completed on January 1, 2018.
In determining further adjusted net income, further adjusted EBITDA and further adjusted diluted EPS, the Company excludes certain items which are otherwise included in determining the comparable GAAP financial measures, as described in Table 5 of this press release. The Company is providing guidance on a further adjusted basis for net income, EBITDA and diluted EPS. This guidance is presented only on a non-GAAP further adjusted basis because not all of the information necessary for a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure is available without unreasonable effort, primarily due to uncertainties relating to the occurrence or amount of these adjustments that may arise in the future. Unavailable reconciling items could significantly impact the Company’s financial results. Please refer to Table 8 for further information.Conference Call InformationWyndham Destinations will hold a conference call with investors to discuss the Company’s results and outlook today at 8:30 a.m. ET. Participants may listen to a simultaneous webcast of the conference call, which may be accessed through the Company's website at investor.wyndhamdestinations.com, or by dialing 877-876-9177, passcode WYND2Q, approximately 10 minutes before the scheduled start time. For those unable to listen to the live broadcast, an archive of the webcast will be available on the Company's website for approximately 90 days beginning at 12:00 p.m. ET today. Additionally, a telephone replay will be available for approximately 10 days beginning at 12:00 p.m. ET today at 800-677-6124.Presentation of Financial InformationFinancial information discussed in this press release includes non-GAAP measures, which include or exclude certain items. The Company utilizes non-GAAP measures on a regular basis to assess performance of its reportable segments and allocate resources. 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. Management also internally uses these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. 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 DestinationsWyndham Destinations (NYSE:WYND) believes in putting the world on vacation. Our global presence in 110 countries at more than 220 vacation ownership resorts and 4,300+ affiliated exchange properties distinguishes Wyndham Destinations as the world's largest vacation ownership and exchange company, with North America's largest professionally managed rental business. Each year our team of 25,000 associates delivers great vacations to millions of families as they make memories of a lifetime.
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