Wyndham reports net income of $68 million in Q2

Wyndham Hotels & Resorts, for the three months ended June 30, reported net income of $68 million, compared to a net loss of $174 million in the same period last year. Global RevPAR increased 110% compared to second quarter 2020 and declined 17% compared to second quarter 2019 in constant currency.

“With continued increasing demand from our leisure and everyday business travelers, our select-service franchise business model generated another strong quarter of adjusted EBITDA and cash flow, allowing us to increase our dividend by 50%,” said Geoff Ballotti, president/CEO. “Our brands continue to capture market share gains above pre-pandemic levels, while our economy brands here in the U.S. actually exceeded 2019 RevPAR for the quarter. We opened over 70% more rooms than we did last year while growing our development pipeline by 6% vs. prior year, and by 2% sequentially—to more than190,000 rooms. We are extremely proud of all that our team members around the world have achieved, as they remain focused on delivering exceptional value for our owners, guests and shareholders.”

Q2 Highlights include:

  • Second quarter diluted earnings per share (EPS) was $0.73 compared to diluted loss per share of $1.86 in second quarter 2020; second quarter adjusted diluted EPS was $0.95 compared to adjusted diluted EPS of $0.10 in second quarter 2020.
  • Second quarter adjusted net income was $89 million compared to adjusted net income of $9 million in second quarter 2020.
  • Second quarter adjusted EBITDA was $168 million compared to adjusted EBITDA of $66 million in second quarter 2020.
  • Second quarter net cash provided by operating activities was $116 million and free cash flow was $104 million compared to net cash used in operating activities of $57 million and free cash flow of -$68 million in second quarter 2020.
  • Fee-related and other revenues increased 67% to $321 million, compared to $192 million in the second quarter of 2020 primarily reflecting the ongoing recovery in travel demand and its impact on global RevPAR, which has now recovered to 83% of 2019 levels, including domestic RevPAR at 95% of 2019 levels.

The company generated net income of $68 million, or $0.73 per diluted share, compared to a net loss of $174 million, or $1.86 loss per diluted share, in the second quarter of 2020. The increase of $242 million, or $2.59 per diluted share, reflects: the ongoing recovery in travel demand; a $10 million, or $0.11 per diluted share, after-tax benefit from the marketing fund related to timing; and the absence of $176 million, or $1.89 per diluted share, after-tax of special-item charges incurred during second quarter 2020. These results were partially offset by a $14 million, or $0.15 per diluted share, after-tax impact in 2021 related to the early extinguishment of the Company’s 5.375% senior unsecured notes.

System size
During the first half of 2021, Wyndham’s global system grew 30 basis points primarily reflecting continued growth in its direct-franchising business in China. This was partially offset by the anticipated decline in domestic system size as conversion and new-construction activities continue to ramp-up following the pandemic and recent supply chain delays. Year-to-date deletions ran 27% below 2019 levels putting the company on track with its goal of achieving a 95% retention rate for the full year 2021.

RevPAR
Global RevPAR for the quarter was $36.92, with the U.S. at $48.37 and international reporting $18.84. Global and international RevPAR began to lap the onset of the COVID-19 pandemic in January, while the U.S. began to lap its onset in March. As such, comparisons to 2019 (on a two-year, constant currency basis) are more meaningful when evaluating trends. On this basis, global RevPAR declined 17% reflecting a 5% decline in the U.S. and a 44% decline internationally. The 5% decline in the U.S. represents continued sequential improvement compared to a decline of 25% in the first quarter of 2021. RevPAR for the company’s economy brands exceeded 2019 levels by 4% in the second quarter. The 44% international decline primarily represents a 68% decline in the EMEA region and a 7% decline in China.

Business segment results
Hotel franchising revenues increased 55% year-over-year (YOY) to $283 million, primarily reflecting the global RevPAR increase. Adjusted EBITDA increased 93% to $166 million as the growth in revenues and the timing benefit from the marketing fund was partially offset by higher volume-related expenses.

Hotel management revenues increased 62% YOY to $123 million, reflecting a $19 million increase in cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost-reimbursements, hotel management revenues increased 280% to $38 million, primarily due to the global RevPAR increase, as well as improved performance at the company’s owned hotels and incremental management contract termination fees resulting from the sale of CorePoint Lodging properties. Hotel management adjusted EBITDA increased $20 million year-over-year reflecting the revenue increases, partially offset by higher volume-related expenses.

During the quarter, Wyndham’s marketing fund revenues exceeded expenses by $14 million; while in the same period last year, its marketing fund expenses exceeded revenues by $3 million. While the company does not expect the marketing fund to have a significant impact on full-year 2021 adjusted EBITDA, there may continue to be timing differences in quarterly comparisons.

Development
The company awarded 154 new contracts this quarter compared to 116 in second quarter 2020 and 173 in second quarter 2019. On June 30, it’s global development pipeline consisted of more than 1,400 hotels and more than 190,000 rooms. The pipeline grew 580 basis points year-over-year and 170 basis points sequentially—including 70 basis points domestically and 230 basis points internationally. Approximately 64% of the company’s development pipeline is international and 74% is new construction, of which approximately 34% has broken ground.

Cash and liquidity
The company generated $116 million of net cash provided by operating activities in the second quarter of 2021 compared to net cash used in operating activities of $57 million in second quarter 2020. Free cash flow increased $172 million YOY as it generated free cash flow of $104 million in the second quarter of 2021 compared to using $68 million in the second quarter 2020 (which included $33 million of special-item cash outlays).

As of June 30, Wyndham had $103 million of cash on its balance sheet and approximately $840 million in total liquidity.

2021 Outlook

  • The Company provided the following outlook for full-year 2021:
  • Fee-related and other revenues of $1.16 billion to $1.19 billion.
  • Adjusted net income of $244 million to $254 million.
  • Adjusted EBITDA of $525 million to $535 million.
  • Adjusted diluted EPS of $2.60 to $2.70, based on an adjusted diluted share count of 94.0 million that excludes any future share repurchases.
  • Rooms growth of 1% to 2%.
  • A RevPAR increase of approximately 40% vs. 2020, or a decline of approximately 16% compared to 2019.
  • Free cash conversion from Adjusted EBITDA of approximately 55%.

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