Wyndham Hotels & Resorts Reports Second Quarter 2018 Results
PARSIPPANY, N.J., August 1, 2018 – Wyndham Hotels & Resorts (NYSE: WH) today announced results for the three months ended June 30, 2018, which included its spin-off as an independent public company and the acquisition of La Quinta, adding over 900 hotels and nearly 89,000 rooms to its franchise system. Highlights include:
Revenues increased 31% compared with second quarter 2017, to $435 million.
Net income was $21 million for the second quarter; adjusted net income was $73 million, a 43% increase over the prior-year quarter.
Diluted earnings per share were $0.21 and adjusted diluted EPS were $0.73.
Further Adjusted diluted EPS (calculated as if our spin-off and our acquisition and integration of La Quinta had occurred on January 1) were $0.86, above our projection of $0.79 to $0.84.
Adjusted EBITDA increased 19% compared with the prior-year quarter, to $125 million.
Further Adjusted EBITDA was $159 million, consistent with our projection of $150 to $160 million.
Global RevPAR increased 9% year-over-year and 4% in constant currency and excluding our 2018 acquisitions and divestitures.
System-wide rooms grew 12% year-over-year, and 3% excluding our 2018 acquisitions and divestitures.
“Our team’s sharp focus on executing against our strategic and operating plans allowed us to deliver solid growth, in line with our prior projections, in our initial quarter as an independent public company,” said Geoffrey A. Ballotti, chief executive officer. “We also continued to strengthen our presence in the midscale hotel segment with the addition of the La Quinta brand and its over 900 hotels in May.”
Revenues were $435 million, compared with $331 million in the second quarter of 2017. Results reflect $77 million of incremental revenues from La Quinta. Excluding the impact from the acquisition of La Quinta, revenues increased 8% primarily due to 8% higher royalties and franchise fees, as well as a 17% increase in marketing, reservation and loyalty fees that in 2018 included global franchisee conference revenues that were fully offset by conference-related expenses.
Net income was $21 million compared with $48 million for the second quarter of 2017, reflecting separation-related and transaction-related costs incurred this year. Diluted EPS was $0.21.
Adjusted net income was $73 million, or $0.73 per diluted share, compared with $51 million in the second quarter of 2017. Second quarter earnings benefited from our revenue growth and lower taxes, partially offset by the timing of marketing expenses and higher interest expense. Full reconciliations of GAAP results to our non-GAAP adjusted measures for all reported periods appear in the tables to this press release.
Second quarter adjusted EBITDA was $125 million, compared with $105 million in the second quarter of 2017. Results primarily reflect the growth in revenues and $12 million of adjusted EBITDA from the La Quinta acquisition, partially offset by the timing of marketing expenses.
The Company estimates that, if it had completed its spin-off and had acquired and fully integrated La Quinta prior to April, its Further Adjusted EBITDA in the second quarter would have been $159 million, and its Further Adjusted diluted earnings per share would have been $0.86. See Tables 5 and 6 for additional information.
As of June 30, 2018, the Company’s hotel system consisted of nearly 9,000 properties and more than 792,000 rooms, a 12% increase compared with the second quarter of 2017. Room count is up 3% year-over-year excluding our 2018 acquisitions and divestitures. Our development pipeline increased to nearly 1,400 hotels and over 171,000 rooms, a 13% year-over-year room increase, reflecting the addition of 24,000 La Quinta pipeline rooms and the removal of 2,000 Knights Inn pipeline rooms. Approximately 51% of our pipeline is international and 70% is new construction.
Business Segment Discussion
The following discussion of second quarter operating results focuses on revenue and Adjusted EBITDA for each of our segments.
Revenues increased 24% compared to second quarter 2017, including $26 million of incremental revenues from La Quinta. Excluding the impact of the acquisition of La Quinta and the divestiture of Knights Inn, revenues increased 13% primarily due to 9% higher royalties and franchise fees, as well as a 17% increase in marketing, reservation and loyalty fees that included global franchisee conference revenues. The 9% growth in royalties and franchise fees reflected our 3% room growth and 5% RevPAR growth, excluding 2018 acquisitions and divestitures. Adjusted EBITDA grew 16% to $129 million, including $9 million of incremental Adjusted EBITDA from La Quinta. Excluding the impact from the acquisition of La Quinta, Adjusted EBITDA grew 8% reflecting the growth in royalties and franchise fee revenues, partially offset by a $3 million timing-related increase in marketing expenses compared to marketing fund revenues.
Revenues increased 49% compared to the prior-year period, reflecting $51 million of incremental revenues from La Quinta (including $46 million of cost-reimbursement revenues). Excluding the impact from the acquisition of La Quinta, revenues declined $3 million reflecting lower cost-reimbursement revenues and lower owned-hotel revenues. Adjusted EBITDA increased by $4 million compared to the prior-year quarter, reflecting $3 million of Adjusted EBITDA from La Quinta.
Acquisition of La Quinta – The Company completed the acquisition of La Quinta on May 30, 2018, adding over 900 franchised properties with nearly 89,000 rooms to the Company’s midscale hotel system. The aggregate purchase price was approximately $2 billion, including $240 million of taxes and other items, which we are obligated to pay on behalf of La Quinta Holdings Inc. during the third quarter of 2018. The Company continues to expect to generate $55 million to $70 million in annual synergies in connection with this transaction.
Divestiture of Knights Inn – The Company in May 2018 completed the sale of its Knights Inn brand, consisting of approximately 350 franchised hotels with approximately 21,000 rooms. Knights Inn’s typical franchise agreements were much shorter, and its average U.S. RevPAR was much lower, than the Company’s other brands.
Spin-off from Former Parent Company – On May 31, 2018, the Company completed its spin-off from Wyndham Worldwide through the tax-free distribution of the Company’s stock to shareholders of Wyndham Worldwide Corporation. The Company’s stock began regular-way trading on the New York Stock Exchange under the symbol “WH” on June 1, 2018.
Share Repurchases – Following the completion of the spin-off, the Company repurchased approximately 246,000 shares of its common stock for $15 million in the second quarter.
The Company provided the following outlook, which assumes that its spin-off and the acquisition and integration of La Quinta had all been completed on January 1, 2018, for full-year 2018:
Further Adjusted revenues of $1.99 billion to $2.04 billion.
Further Adjusted net income of $300 million to $320 million.
Further Adjusted EBITDA of $590 million to $610 million.
Further Adjusted diluted EPS of $2.98 to $3.18, based on a Further Adjusted diluted share count of 100.6 million, which excludes future share repurchases.
Rooms growth of 11% to 13%, or 2% to 4% excluding our 2018 acquisitions and divestitures.
Constant-currency RevPAR growth of 7% to 8%, or approximately 3% excluding our 2018 acquisitions and divestitures.
More detailed projections are available in Table 6 of this press release. In determining adjusted net income, adjusted EBITDA and adjusted 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 an outlook for net income, EBITDA and EPS only on a non-GAAP basis because it is unable to predict with reasonable certainty the occurrence or amount of these adjustments or other potential adjustments that may arise in the future.
Conference Call Information
Wyndham Hotels will hold a conference call with investors to discuss the Company’s results and outlook on Wednesday, August 1, 2018 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 877 876-9176 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 August 1, 2018. A telephone replay will be available for approximately ten days beginning at noon ET on August 1, 2018 at 800 695-1624.
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 the press release.
About Wyndham Hotels & Resorts
Wyndham Hotels & Resorts (NYSE: WH) is the world’s largest hotel franchising company, with nearly 9,000 hotels across more than 80 countries on six continents. Through its network of more than 792,000 rooms appealing to the everyday traveler, Wyndham commands a leading presence in both 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®, 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 approximately 58 million enrolled members the opportunity to redeem points at thousands of hotels, condominiums and holiday homes globally. For more information, visit www.wyndhamhotels.com.
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” 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 the Company’s revenues, earnings, cash flow and other financial and operating measures.
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 the financial and credit markets, the economic environment for the hospitality industry, the impact of war, terrorist activity or political strife, operating risks associated with the hotel business, risks related to our spin-off as a newly independent company, uncertainties related to Wyndham Hotels’ ability to obtain financing or the terms of such financing, unanticipated developments related to the impact of the spin-off on our relationships with our customers, suppliers, employees and others with whom we have relationships, unanticipated developments resulting from possible disruption to our operations resulting from the spin-off, risks related to our acquisition of the La Quinta hotel franchising and hotel management business, including our ability to achieve expected benefits associated with the transaction, as well as those other risks and uncertainties described in the section titled “Risk Factors” and elsewhere in Wyndham Hotels’ Registration Statement on Form 10, in this press release and in Wyndham Hotels’ other filings with the Securities and Exchange Commission. Except as required by law, Wyndham Hotels undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, subsequent events or otherwise.