Wyndham Hotels & Resorts Reports First Quarter 2021 Results

Wyndham Hotels & Resorts (NYSE: WH) today announced results for the three months ended March 31, 2021. Highlights include:

  • Diluted earnings per share was $0.26, and adjusted diluted earnings per share was $0.36.
  • Net income was $24 million and adjusted net income was $33 million.
  • Adjusted EBITDA was $97 million.
  • Generated $64 million of net cash provided by operating activities and $59 million of free cash flow.
  • Global RevPAR declined 11% compared to first quarter 2020 and 31% compared to first quarter 2019 in constant currency.
  • Paid quarterly cash dividend of $0.16 per share.
  • Redeemed all $500 million aggregate principal amount of its outstanding 5.375% Senior Notes due 2026 on April 15, 2021.
  • Company updates its previous 2021 projections.

“Wyndham’s select-service franchise business model delivered a strong start to 2021 as leisure customers hit the road at a pace not experienced since the pandemic started and demand from our everyday business travelers continued to accelerate,” said Geoffrey A. Ballotti, president and chief executive officer. “We were very pleased to see our development pipelines grow sequentially, both domestically and internationally, and our room openings and deletions improve year-over-year. We were also encouraged to see conversion room openings increase year-over-year, representing over 70% of total openings this quarter.”

Revenues declined from $410 million in the first quarter of 2020 to $303 million in the first quarter of 2021. The decline includes lower pass-through cost-reimbursement revenues of $55 million in the Company’s hotel management business, which have no impact on adjusted EBITDA. Excluding cost-reimbursement revenues, revenues declined $52 million primarily reflecting an 11% decline in constant-currency global RevPAR.

The Company generated net income of $24 million, or $0.26 per diluted share, compared to $22 million, or $0.23 per diluted share, in the first quarter of 2020. The increase of $2 million, or $0.03 per diluted share, was a result of the Company’s COVID-19 cost mitigation plan implemented in April 2020, lower volume-related expenses and the absence of restructuring and transaction-related expenses, which were partially offset by the global RevPAR decline.

The following discussion of first quarter operating results focuses on the Company’s key drivers as well as revenue and adjusted EBITDA for each of the Company’s segments. Full reconciliations of GAAP results to the Company’s non-GAAP adjusted measures for all reported periods appear in the tables to this press release.

System Size

March 31, 2021

December 31, 2020

YTD Change (bps)

United States

486,000

487,300

(30)

International

311,200

308,600

80

Global

797,200

795,900

20

During the first quarter of 2021, the Company’s global system grew 20 basis points reflecting strong growth in the Company’s direct-franchising business in China, primarily offset by the impact from supply chain delays on new construction openings in the United States. As expected, terminations normalized in the first quarter and the Company remains solidly on track with its goal of achieving a 95% retention rate for the full year 2021.

RevPAR

First Quarter 2021

First Quarter 2020

First Quarter 2019

YOY % Change

% Change vs. 2019

United States

$

30.62

$

33.45

$

40.56

(8)

(25)

International

15.83

18.45

28.92

(14)

(45)

Global

24.90

27.68

36.21

(10)

(31)

Global and International RevPAR began to lap the onset of the COVID-19 pandemic in January 2021 while the U.S. began to lap its onset in March 2021. As such, comparisons to 2019 (on a two-year basis) are more meaningful when evaluating trends. On this basis, global RevPAR declined 31% reflecting a 25% decline in the U.S. and a 45% decline internationally. The 25% decline in the U.S. represents continued sequential improvement compared to a decline of 31% in the fourth quarter of 2020. The 45% decline internationally is consistent with the fourth quarter 2020 performance.

Business Segment Results

Revenue

Adjusted EBITDA

First Quarter
2021

First Quarter
2020

% Change

First Quarter
2021

First Quarter
2020

% Change

Hotel Franchising

$

209

$

243

(14)

$

105

$

110

(5)

Hotel Management

94

167

(44)

5

17

(71)

Corporate and Other

(13)

(18)

28

Total Company

$

303

$

410

(26)

$

97

$

109

(11)

Hotel Franchising revenues decreased $34 million year-over-year reflecting the global RevPAR decline, while adjusted EBITDA declined $5 million as the impact of the RevPAR decline was almost entirely offset by the Company’s COVID-19 cost mitigation plan implemented in April 2020 and lower volume-related expenses.

Hotel Management revenues decreased $73 million year-over-year reflecting a $55 million reduction in cost-reimbursement revenues, which have no impact on adjusted EBITDA. Absent cost-reimbursements, Hotel Management revenues decreased $18 million due to the global RevPAR decline and lower termination fees. Adjusted EBITDA declined $12 million year-over-year reflecting the revenue decrease, partially offset by lower volume-related expenses.

Development

The Company awarded 112 new contracts this quarter compared to 115 in first quarter 2020 and 124 in first quarter 2019. At March 31, 2021, the Company’s development pipeline consisted of approximately 1,400 hotels and approximately 187,000 rooms, growing sequentially by 120 basis points, 70 basis points domestically and 150 basis points internationally. Approximately 64% of the Company’s development pipeline is international and 75% is new construction. Approximately 34% of the new construction pipeline under development has broken ground.

Cash and Liquidity

The Company generated $64 million of net cash provided by operating activities in the first quarter of 2021 compared to $17 million in first quarter 2020. Free cash flow was $59 million in the first quarter of 2021 compared to $10 million (which included $15 million of special-item cash outlays) in first quarter 2020.

At March 31, 2021, the Company had $531 million of cash on its balance sheet and $1.3 billion in total liquidity. In April 2021, the Company redeemed all $500 million aggregate principal amount of its outstanding 5.375% senior notes due 2026, which also reduced the Company’s total liquidity to approximately $750 million. The Company expects this redemption to reduce its annual cash interest expense by approximately $27 million. Coupled with the issuance of 4.375% senior notes in August of 2020, this redemption effectively returns the Company to pre-pandemic debt and liquidity levels while extending $500 million of maturity by approximately 2.5 years at a 100 basis point (or 19%) lower interest rate.

Dividends

The Company paid common stock dividends of $15 million, or $0.16 per share, in the first quarter of 2021.

2021 Projections

The Company is not providing a complete outlook for full-year 2021 given the RevPAR uncertainties ahead; however, the Company is updating the projections provided in February:

  • Net rooms growth of 1% to 2%, consistent with February’s projection.
  • Every point of RevPAR change versus 2020 is now expected to generate approximately $2.8 million of adjusted EBITDA change versus 2020 (increased from $2.5 million per point in February).
  • License fees are expected to be $70 million reflecting the minimum levels outlined in the underlying agreements, consistent with February’s projection.
  • Marketing, reservation and loyalty expenses are not expected to exceed marketing, reservation and loyalty revenues, consistent with February’s projection. As such, the Company expects no meaningful impact to full-year 2021 adjusted EBITDA from the marketing, reservation and loyalty funds.
  • The Company does not expect any meaningful special-item cash outlays in 2021, consistent with February’s projection.

More detailed projections are available in Table 8 of this press release. The Company is providing certain financial metrics only on a non-GAAP basis because, without unreasonable efforts, it is unable to predict with reasonable certainty the occurrence or amount of all of the adjustments or other potential adjustments that may arise in the future during the forward-looking period, which can be dependent on future events that may not be reliably predicted. Based on past reported results, where one or more of these items have been applicable, such excluded items could be material, individually or in the aggregate, to the reported results.

About Wyndham Hotels & Resorts

Wyndham Hotels & Resorts (NYSE: WH) is the world’s largest hotel franchising company by the number of properties, with over 8,900 hotels across nearly 95 countries on six continents. Through its network of over 797,000 rooms appealing to the everyday traveler, Wyndham commands a leading presence in 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®, La Quinta®, Baymont®, Wingate®, AmericInn®, Hawthorn Suites®, Trademark Collection® and Wyndham®.

Contacts

Investors:

Matt Capuzzi

Senior Vice President, Investor Relations

973 753-6453

ir@wyndham.com

 

Media: 

Dave DeCecco  

Group Vice President, Global Communications 

973 753-6590 

WyndhamHotelsNews@wyndham.com

Table 1

WYNDHAM HOTELS & RESORTS

INCOME STATEMENT

(In millions, except per share data)

(Unaudited)

Three Months Ended March 31,

2021

2020

Net revenues

Royalties and franchise fees

$

78

$

92

Marketing, reservation and loyalty

85

106

Management and other fees

19

32

License and other fees

20

21

Cost reimbursements

71

126

Other

30

33

Net revenues

303

410

Expenses

Marketing, reservation and loyalty

92

118

Operating

27

35

General and administrative

24

28

Cost reimbursements

71

126

Depreciation and amortization

24

25

Separation-related

2

1

Restructuring

13

Transaction-related, net

8

Total expenses

240

354

Operating income

63

56

Interest expense, net

28

25

Income before income taxes

35

31

Provision for income taxes

11

9

Net income

$

24

$

22

Earnings per share

Basic

$

0.26

$

0.23

Diluted

0.26

0.23

Weighted average shares outstanding

Basic

93.4

93.7

Diluted

93.8

93.9

Table 2

WYNDHAM HOTELS & RESORTS

HISTORICAL REVENUE AND ADJUSTED EBITDA BY SEGMENT

The reportable segments presented below represent our operating segments for which separate financial information is available and is utilized on a regular basis by our chief operating decision maker to assess performance and allocate resources. In identifying our reportable segments, we also consider the nature of services provided by our operating segments. Management evaluates the operating results of each of our reportable segments based upon net revenues and adjusted EBITDA. We believe that adjusted EBITDA is a useful measure of performance for our segments which, when considered with GAAP measures, allows a more complete understanding of our operating performance. We use this measure internally to assess operating performance, both absolutely and in comparison to other companies, and to make day to day operating decisions, including in the evaluation of selected compensation decisions. Our presentation of adjusted EBITDA may not be comparable to similarly-titled measures used by other companies. During the first quarter of 2021, we modified the definition of adjusted EBITDA to exclude the amortization of development advance notes to reflect how our chief operating decision maker reviews operating performance beginning in 2021. We have applied the modified definition of adjusted EBITDA to all periods presented.

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Full
Year

Hotel Franchising

Net revenues

2021

$

209

n/a

n/a

n/a

n/a

2020

243

182

236

202

863

2019

269

331

379

300

1,279

Adjusted EBITDA (a)

2021

$

105

n/a

n/a

n/a

n/a

2020

110

86

119

77

392

2019

115

164

197

153

629

Hotel Management

Net revenues

2021

$

94

n/a

n/a

n/a

n/a

2020

167

76

101

94

437

2019

197

201

180

190

768

Adjusted EBITDA

2021

$

5

n/a

n/a

n/a

n/a

2020

17

(4)

2

(1)

13

2019

16

16

13

21

66

Corporate and Other

Net revenues

2021

$

n/a

n/a

n/a

n/a

2020

2019

2

1

1

2

6

Adjusted EBITDA

2021

$

(13)

n/a

n/a

n/a

n/a

2020

(18)

(16)

(18)

(18)

(69)

2019

(18)

(19)

(18)

(19)

(74)

Total Company

Net revenues

2021

$

303

n/a

n/a

n/a

n/a

2020

410

258

337

296

1,300

2019

468

533

560

492

2,053

Net income/(loss)

2021

$

24

n/a

n/a

n/a

n/a

2020

22

(174)

27

(7)

(132)

2019

21

26

45

64

157

Adjusted EBITDA (a)

2021

$

97

n/a

n/a

n/a

n/a

2020

109

66

103

58

336

2019

113

161

192

155

621

NOTE: Amounts may not add across due to rounding. See Table 7 for reconciliations of Total Company non-GAAP measures and

Table 9 for definitions.

(a)

Adjusted EBITDA for 2020 and 2019 has been recast to exclude the amortization of development advance notes to be consistent with the current year presentation.

Table 3

WYNDHAM HOTELS & RESORTS

CONDENSED CASH FLOWS

(In millions)

(Unaudited)

Three Months Ended March 31,

2021

2020

Operating activities

Net income

$

24

$

22

Depreciation and amortization

24

25

Trade receivables

10

(17)

Accounts payable, accrued expenses and other current liabilities

(24)

(14)

Deferred revenues

9

(2)

Other, net

21

3

Net cash provided by operating activities

64

17

Investing activities

Property and equipment additions

(5)

(7)

Net cash used in investing activities

(5)

(7)

Financing activities

Proceeds from borrowings

744

Principal payments on long-term debt

(4)

(14)

Dividends to shareholders

(15)

(30)

Repurchases of common stock

(50)

Other, net

(2)

(3)

Net cash (used in)/provided by financing activities

(21)

647

Effect of changes in exchange rates on cash, cash equivalents and restricted cash

(2)

Net increase in cash, cash equivalents and restricted cash

38

655

Cash, cash equivalents and restricted cash, beginning of period

493

94

Cash, cash equivalents and restricted cash, end of period

$

531

$

749

Free Cash Flow:

We define free cash flow to be net cash provided by operating activities less property and equipment additions, which we also refer to as capital expenditures. We believe free cash flow to be a useful operating performance measure to us and investors to evaluate the ability of our operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, our ability to grow our business through acquisitions and investments, as well as our ability to return cash to shareholders through dividends and share repurchases, to the extent permitted. This non-GAAP measure is not necessarily a representation of how we will use excess cash. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Wyndham Hotels is that free cash flow does not represent the total cash movement for the period as detailed in the condensed consolidated statement of cash flows.

Three Months Ended March 31,

2021

2020

Net cash provided by operating activities

$

64

$

17

Less: Property and equipment additions

(5)

(7)

Free cash flow

$

59

$

10

Adjusted free cash flow (a)

n/a

$

25

(a)

Reflects the adjustment of $15 million for payments in connection with our acquisition of La Quinta, our spin-off from Wyndham Worldwide and our agreement with CorePoint Lodging for the three months ended March 31, 2020. There are no adjustments in the three months ended March 31, 2021.

Table 4

WYNDHAM HOTELS & RESORTS

BALANCE SHEET SUMMARY AND DEBT

(In millions)

(Unaudited)

As of
March 31, 2021

As of
December 31, 2020

Assets

Cash and cash equivalents

531

$

493

Trade receivables, net

274

295

Property and equipment, net

268

278

Goodwill and intangible assets, net

3,230

3,240

Other current and non-current assets

337

338

Total assets

$

4,640

$

4,644

Liabilities and stockholders’ equity

Total debt

$

2,592

$

2,597

Other current liabilities

308

325

Deferred income tax liabilities

364

359

Other non-current liabilities

385

400

Total liabilities

3,649

3,681

Total stockholders’ equity

991

963

Total liabilities and stockholders’ equity

$

4,640

$

4,644

Our outstanding debt was as follows:

As of
March 31, 2021

As of
December 31, 2020

$750 million revolving credit facility (due May 2023)

$

$

Term loan (due May 2025)

1,550

1,554

5.375% senior unsecured notes (due April 2026) (a)

496

496

4.375% senior unsecured notes (due August 2028)

492

492

Finance leases

54

55

Total debt

2,592

2,597

Cash and cash equivalents

531

493

Net debt

$

2,061

$

2,104

Our outstanding debt as of March 31, 2021 matures as follows:

Amount

Within 1 year (b)

$

516

Between 1 and 2 years

21

Between 2 and 3 years

22

Between 3 and 4 years

22

Between 4 and 5 years

1,493

Thereafter

518

Total

$

2,592

(a) 

The Company redeemed these notes on April 15, 2021 primarily with available cash.

(b) 

Includes 5.375% senior unsecured notes, which we redeemed on April 15, 2021.

Table 5

WYNDHAM HOTELS & RESORTS

REVENUE DRIVERS

Three Months Ended March 31,

2021

2020

Change

% Change

Beginning Room Count (January 1)

United States

487,300

510,200

(22,900)

(4%)

International

308,600

320,800

(12,200)

(4)

Global

795,900

831,000

(35,100)

(4)

Additions

United States

3,500

2,900

600

21

International

4,100

3,300

800

24

Global

7,600

6,200

1,400

23

Deletions

United States

(4,800)

(6,300)

1,500

24

International

(1,500)

(2,600)

1,100

42

Global

(6,300)

(8,900)

2,600

29

Ending Room Count (March 31)

United States

486,000

506,800

(20,800)

(4)

International

311,200

321,500

(10,300)

(3)

Global

797,200

828,300

(31,100)

(4%)

As of March 31,

FY 2019 Royalty
Contribution
(b)

2021

2020

Change

% Change (a)

System Size

United States

Economy

249,200

256,800

(7,600)

(3%)

Midscale and Upper Midscale

203,400

209,200

(5,800)

(3)

Extended Stay/Lifestyle

16,800

23,800

(7,000)

(29)

Upscale

16,600

17,000

(400)

(2)

Total United States

486,000

506,800

(20,800)

(4)

86%

International

Greater China

146,500

153,900

(7,400)

(5)

3

Rest of Asia Pacific

27,900

28,600

(700)

(2)

1

Europe, the Middle East and Africa

66,500

68,900

(2,400)

(3)

4

Canada

40,500

40,800

(300)

(1)

5

Latin America

29,800

29,300

500

2

1

Total International

311,200

321,500

(10,300)

(3)

14

Global

797,200

828,300

(31,100)

(4%)

100%

(a)

2021 includes the global impacts from the Company’s previously announced termination events in 2020 resulting in the deletion of approximately 26,700 rooms.

(b)

FY 2019 provided to illustrate pre-pandemic results.

Table 5 (continued)

WYNDHAM HOTELS & RESORTS

REVENUE DRIVERS

Three Months Ended March 31,

2021

2020

% Change

Constant Currency %

  Change (a)

Two-Year Basis %
Change
(b)

Regional RevPAR Growth

United States

Economy

$

27.41

$

26.74

3%

(13%)

Midscale and Upper Midscale

33.12

37.41

(11)

(29)

Extended Stay/Lifestyle

37.85

47.68

(21)

(33)

Upscale

43.89

74.28

(41)

(52)

Total United States

$

30.62

$

33.45

(8)

(25)

International

Greater China

$

13.72

$

5.34

157

139%

(25%)

Rest of Asia Pacific

20.97

26.68

(21)

(28)

(46)

Europe, the Middle East and Africa

15.66

34.01

(54)

(54)

(65)

Canada

20.92

29.09

(28)

(32)

(42)

Latin America

14.60

29.13

(50)

(41)

(43)

Total International

$

15.83

$

18.45

(14)

(17)

(45)

Global

$

24.90

$

27.68

(10%)

(11%)

(31%)

Average Royalty Rate

United States

4.6%

4.6%

International

2.0%

2.2%

(20 bps)

Global

4.0%

4.0%

(a)

Excludes the impact of currency exchange movements.

(b)

Compares 2021 to 2019; international excludes the impact of currency exchange movements.

Table 6

WYNDHAM HOTELS & RESORTS

HISTORICAL REVPAR AND ROOMS

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Full Year

Hotel Franchising

Global RevPAR

2021

$

24.02

n/a

n/a

n/a

n/a

2020

$

25.90

$

17.05

$

28.83

$

23.19

$

23.74

2019

$

33.76

$

42.04

$

45.23

$

34.51

$

38.91

U.S. RevPAR

2021

$

29.68

n/a

n/a

n/a

n/a

2020

$

31.43

$

23.19

$

36.06

$

27.28

$

29.50

2019

$

37.69

$

48.65

$

51.93

$

37.96

$

44.09

International RevPAR

2021

$

15.26

n/a

n/a

n/a

n/a

2020

$

17.39

$

7.66

$

17.39

$

16.71

$

14.75

2019

$

27.56

$

31.59

$

34.79

$

29.15

$

30.80

Global Rooms

2021

748,700

n/a

n/a

n/a

n/a

2020

769,000

754,700

748,200

746,500

746,500

2019

745,300

751,300

758,400

770,200

770,200

U.S. Rooms

2021

452,500

n/a

n/a

n/a

n/a

2020

463,900

460,200

459,600

452,600

452,600

2019

454,900

457,600

460,100

464,600

464,600

International Rooms

2021

296,200

n/a

n/a

n/a

n/a

2020

305,100

294,500

288,600

293,900

293,900

2019

290,400

293,700

298,300

305,600

305,600

Hotel Management

Global RevPAR

2021

$

38.17

n/a

n/a

n/a

n/a

2020

$

50.00

$

20.67

$

34.34

$

32.91

$

34.67

2019

$

63.25

$

66.67

$

66.65

$

59.19

$

64.01

U.S. RevPAR

2021

$

42.89

n/a

n/a

n/a

n/a

2020

$

54.35

$

23.21

$

39.12

$

34.14

$

37.97

2019

$

65.58

$

71.61

$

70.75

$

60.89

$

67.32

International RevPAR

2021

$

27.12

n/a

n/a

n/a

n/a

2020

$

38.07

$

13.78

$

23.16

$

29.86

$

26.21

2019

$

55.12

$

49.53

$

52.49

$

53.67

$

52.69

Global Rooms

2021

48,500

n/a

n/a

n/a

n/a

2020

59,300

58,200

55,800

49,400

49,400

2019

66,800

65,200

63,400

60,800

60,800

U.S. Rooms

2021

33,500

n/a

n/a

n/a

n/a

2020

42,900

41,800

38,100

34,700

34,700

2019

51,700

50,700

49,100

45,600

45,600

International Rooms

2021

15,000

n/a

n/a

n/a

n/a

2020

16,400

16,400

17,700

14,700

14,700

2019

15,100

14,500

14,300

15,200

15,200

Table 6 (continued)

WYNDHAM HOTELS & RESORTS

HISTORICAL REVPAR AND ROOMS

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Full Year

Total System

Global RevPAR

2021

$

24.90

n/a

n/a

n/a

n/a

2020

$

27.68

$

17.31

$

29.23

$

23.84

$

24.51

2019

$

36.21

$

44.06

$

46.94

$

36.36

$

40.92

U.S. RevPAR

2021

$

30.62

n/a

n/a

n/a

n/a

2020

$

33.45

$

23.19

$

36.31

$

27.80

$

30.20

2019

$

40.56

$

50.98

$

53.79

$

40.09

$

46.39

International RevPAR

2021

$

15.83

n/a

n/a

n/a

n/a

2020

$

18.45

$

7.96

$

17.72

$

17.37

$

15.35

2019

$

28.92

$

32.47

$

35.63

$

30.29

$

31.85

Global Rooms

2021

797,200

n/a

n/a

n/a

n/a

2020

828,300

812,900

804,000

795,900

795,900

2019

812,100

816,600

821,800

831,000

831,000

U.S. Rooms

2021

486,000

n/a

n/a

n/a

n/a

2020

506,800

502,000

497,700

487,300

487,300

2019

506,600

508,300

509,200

510,200

510,200

International Rooms

2021

311,200

n/a

n/a

n/a

n/a

2020

321,500

310,900

306,300

308,600

308,600

2019

305,500

308,300

312,600

320,800

320,800

NOTE:

Amounts may not foot due to rounding. Results reflect the reclassification of rooms from the Hotel Management segment to
the Hotel Franchising segment related to the CorePoint Lodging asset sales.

Table 7

WYNDHAM HOTELS & RESORTS

NON-GAAP RECONCILIATIONS

(In millions)

The tables below reconcile certain non-GAAP financial measures. The presentation of these adjustments is intended to permit the comparison of particular adjustments as they appear in the income statement in order to assist investors’ understanding of the overall impact of such adjustments. We believe that adjusted EBITDA, adjusted net income and adjusted EPS financial measures provide useful information to investors about us and our financial condition and results of operations because these measures are used by our management team to evaluate our operating performance and make day-to-day operating decisions and adjusted EBITDA is frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry. These measures also assist our investors in evaluating our ongoing operating performance for the current reporting period and, where provided, over different reporting periods, by adjusting for certain items which may be recurring or non-recurring and which in our view do not necessarily reflect ongoing performance. We also internally use these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making selected compensation decisions. These supplemental disclosures are in addition to GAAP reported measures. These non-GAAP reconciliation tables should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.

Reconciliation of Net Income (Loss) to Adjusted EBITDA:

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Full
Year

2021

Net income

$

24

Provision for income taxes

11

Depreciation and amortization

24

Interest expense, net

28

Stock-based compensation expense

5

Development advance notes amortization (a)

2

Separation-related expenses (b)

2

Foreign currency impact of highly inflationary countries (c)

1

Adjusted EBITDA

$

97

2020

Net income/(loss)

$

22

$

(174)

$

27

$

(7)

$

(132)

Provision for/(benefit from) income taxes

9

(48)

15

(2)

(26)

Depreciation and amortization

25

25

24

24

98

Interest expense, net

25

28

29

30

112

Stock-based compensation expense

4

5

5

5

19

Development advance notes amortization (a)

2

2

2

2

9

Impairments, net (d)

206

206

Restructuring costs (e)

13

16

5

34

Transaction-related expenses, net (f)

8

5

12

Separation-related expenses (b)

1

1

2

Foreign currency impact of highly inflationary countries (c)

1

2

Adjusted EBITDA

$

109

$

66

$

103

$

58

$

336

2019

Net income

$

21

$

26

$

45

$

64

$

157

Provision for income taxes

5

10

21

14

50

Depreciation and amortization

29

27

26

28

109

Interest expense, net

24

26

25

25

100

Stock-based compensation expense

3

4

4

4

15

Development advance notes amortization (a)

2

2

2

2

8

Impairment, net (g)

45

45

Contract termination costs (h)

9

34

(1)

42

Restructuring costs (i)

8

8

Transaction-related expenses, net (f)

7

11

12

10

40

Separation-related expenses (b)

21

1

22

Transaction-related item (j)

20

20

Foreign currency impact of highly inflationary countries (c)

1

3

1

5

Adjusted EBITDA

$

113

$

161

$

192

$

155

$

621

NOTE: Amounts may not add due to rounding.

(a) 

Represents the non-cash amortization of development advance notes, which is now excluded from adjusted EBITDA to reflect how our chief operating decision maker reviews operating performance.

(b) 

Represents costs associated with our spin-off from Wyndham Worldwide.

(c) 

Relates to the foreign currency impact from hyper-inflation in Argentina, which is reflected in operating expenses on the income statement.

(d) 

Represents a non-cash charge to reduce the carrying values of certain intangible assets to their fair values principally attributable to higher discount rates primarily resulting from increased share price volatility, partially offset by $3 million of cash proceeds from a previously impaired asset.

(e) 

Represents charges associated with restructuring initiatives implemented in response to the effects on travel demand as a result of COVID-19.

(f) 

Primarily relates to integration costs incurred in connection with our acquisition of La Quinta.

(g) 

Represents a non-cash charge associated with the termination of certain hotel-management arrangements.

(h) 

Represents costs associated with the termination of certain hotel-management arrangements.

(i)   

 Represents a charge focused on enhancing our organizational efficiency and rationalizing our operations.

(j)  

Represents the one-time fee credit related to our agreement with CorePoint Lodging, which is reflected as a reduction to hotel management revenues on the income statement.

Reconciliation of Adjusted EBITDA Margin:

Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net revenues excluding cost reimbursements. The calculation of adjusted EBITDA margin excludes cost reimbursement revenues, which primarily represent payroll costs for operational employees at certain of the Company’s managed hotels. Although these costs are funded by hotel owners, accounting guidance requires the Company to report these costs on a gross basis as both revenues and expenses. As there are no resultant earnings from these revenues, the Company excludes these amounts from the adjusted EBITDA margin calculation.

Three Months Ended March 31,

2021

2019

Net revenues

$

303

$

468

Less: Cost reimbursements

71

155

Net revenues excluding cost reimbursements

$

232

$

313

Adjusted EBITDA (see table above)

$

97

$

113

Adjusted EBITDA margin

42%

36%

Table 7 (continued)

WYNDHAM HOTELS & RESORTS

NON-GAAP RECONCILIATIONS

(In millions, except per share data)

Reconciliation of Net Income and Diluted EPS to Adjusted Net Income and Adjusted Diluted EPS:

Three Months Ended March 31,

2021

2020

Diluted EPS

$

0.26

$

0.23

Net income

$

24

$

22

Adjustments:

Separation-related expenses

2

1

Restructuring costs

13

Transaction-related expenses, net

8

Foreign currency impact of highly inflationary countries

1

Acquisition-related amortization expense (a)

9

10

Total adjustments before tax

12

32

Income tax provision (b)

3

7

Total adjustments after tax

9

25

Adjusted net income

$

33

$

47

Adjustments – EPS impact

0.10

0.27

Adjusted diluted EPS

$

0.36

$

0.50

Diluted weighted average shares outstanding

93.8

93.9

(a) 

Reflected in depreciation and amortization on the income statement.

(b) 

Reflects the estimated tax effects of the adjustments.

Table 8

WYNDHAM HOTELS & RESORTS

2021 PROJECTIONS

As of April 28, 2021

(In millions)

Projections as of
April 28, 2021

Projections as of
February 10, 2021

Adjusted EBITDA sensitivity to global RevPAR change (a)

$

2.8 per point

$

2.5 per point

License fees (b)

$

70

$

70

Marketing, reservation and loyalty funds

Break even

Break even

Depreciation and amortization expense (c)

$

60 – 62

$

60 – 62

Stock-based compensation expense

$

27 – 29

$

27 – 29

Interest expense, net (d)

$

94 – 96

$

113 – 115

Adjusted tax rate

28%

28%

Capital expenditures

 Approx. $40

Approx. $40

Development advance notes

Approx. $40

Approx. $40

Free cash flow conversion rate (e)

 Approx. 50%

Approx. 50%

Diluted shares (f)

94.1

94.1

Year-over-Year Growth

Number of rooms

1% – 2%

1% – 2%

(a) 

Excludes impacts from license fees and the marketing funds. Change from February reflects better-than-expected results at our two owned hotels and the removal of the conservatism embedded in February’s estimate.

(b) 

Reflects the minimum levels outlined in the underlying agreements.

(c) 

Excludes amortization of acquisition-related intangible assets of $36 – $38 million.

(d) 

Change from February reflects the savings achieved in connection with the Company’s redemption of the 5.375% senior unsecured notes. Excludes redemption premium and non-cash expenses associated with the early extinguishment of the notes.

(e) 

Represents the percentage of adjusted EBITDA that is expected to produce free cash flow.

(f) 

Excludes the impact of any share repurchases in 2021.

In determining adjusted EBITDA sensitivity to global RevPAR, interest expense, net, the adjusted tax rate and the free cash flow conversion rate, we exclude certain items which are otherwise included in determining the comparable GAAP financial measures. We are providing these measures on a non-GAAP basis only because, without unreasonable efforts, we are unable to predict with reasonable certainty the occurrence or amount of all the adjustments or other potential adjustments that may arise in the future during the forward-looking period, which can be dependent on future events that may not be reliably predicted. Based on past reported results, where one or more of these items have been applicable, such excluded items could be material, individually or in the aggregate, to the reported results.

Table 9

WYNDHAM HOTELS & RESORTS

DEFINITIONS

Adjusted Net Income and Adjusted Diluted EPS: Represents net income (loss) and diluted earnings (loss) per share excluding acquisition-related amortization, impairment charges, restructuring and related charges, contract termination costs, transaction-related items (acquisition-, disposition-, or separation-related) and foreign currency impacts of highly inflationary countries. We calculate the income tax effect of the adjustments using an estimated effective tax rate applicable to each adjustment.

Adjusted EBITDA: Represents net income (loss) excluding net interest expense, depreciation and amortization, impairment charges, restructuring and related charges, contract termination costs, transaction-related items (acquisition-, disposition-, or separation-related), foreign currency impacts of highly inflationary countries, stock-based compensation expense, income taxes and development advance notes amortization. Adjusted EBITDA is a financial measure that is not recognized under U.S. GAAP and should not be considered as an alternative to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, our definition of adjusted EBITDA may not be comparable to similarly titled measures of other companies.

During the first quarter of 2021, we modified the definition of adjusted EBITDA to exclude the amortization of development advance notes to reflect how our chief operating decision maker reviews operating performance beginning in 2021. We have applied the modified definition of adjusted EBITDA to all periods presented.

Adjusted Free Cash Flow: Adjusted free cash flow represents free cash flow excluding special-item cash outlays, which are related to our acquisition of La Quinta, our spin-off from Wyndham Worldwide and our agreement with CorePoint Lodging. We believe adjusted free cash flow to be a useful operating performance measure to us and investors to evaluate the ability of our operations to generate cash for uses other than capital expenditures and, after debt service and other obligations, our ability to grow our business through acquisitions and investments, as well as our ability to return cash to shareholders through dividends and share repurchases, to the extent permitted. This non-GAAP measure is not necessarily a representation of how we will use excess cash. A limitation of using adjusted free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Wyndham Hotels is that adjusted free cash flow does not represent the total cash movement for the period as detailed in the consolidated statement of cash flows.

Average Daily Rate (ADR): Represents the average rate charged for renting a lodging room for one day.

Average Occupancy Rate: Represents the percentage of available rooms occupied during the period.

Constant Currency: Represents a comparison eliminating the effects of foreign exchange rate fluctuations between periods (foreign currency translation) and the impact caused by any foreign exchange related activities (i.e., hedges, balance sheet remeasurements and/or adjustments).

Free Cash Flow: See Table 3 for definition.

Number of Rooms: Represents the number of rooms at the end of the period which are (i) either under franchise and/or management agreements or Company-owned and (ii) properties under affiliation agreements for which we receive a fee for reservation and/or other services provided.

RevPAR: Represents revenue per available room and is calculated by multiplying average occupancy rate by ADR.

Royalty Rate: Represents the average royalty rate earned on our franchised properties and is calculated by dividing total royalties, excluding the impact of amortization of development advance notes, by total room revenues.

SOURCE Wyndham Hotels & Resorts