Wyndham Hotels & Resorts Reports Second Quarter 2021 Results

PARSIPPANY, N.J., July 28, 2021 /PRNewswire/ -- Wyndham Hotels & Resorts (NYSE: WH) today announced results for the three months ended June 30, 2021. Highlights include:

• Second quarter diluted earnings per share 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 net income was $68 million compared to a net loss of $174 million 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.
• Global RevPAR increased 110% compared to second quarter 2020 and declined 17% compared to second quarter 2019 in constant currency.
• Paid quarterly cash dividend of $0.16 per share in second quarter and Board of Directors recently authorized a 50% increase in the quarterly cash dividend to $0.24 per share beginning with the dividend expected to be declared in third quarter 2021.
• Company provides full-year 2021 outlook.

"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 Geoffrey A. Ballotti, president and chief executive officer. "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 over 190,000 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."

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.

The following discussion of second 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

During the first half of 2021, the Company's global system grew 30 basis points primarily reflecting continued growth in the Company's 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 solidly on track with its goal of achieving a 95% retention rate for the full year 2021.

RevPAR

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, 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. Importantly, 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 Company's EMEA region and a 7% decline in China.

Business Segment Results

Hotel Franchising revenues increased 55% year-over-year 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% year-over-year 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 second quarter 2021, the Company's marketing fund revenues exceeded expenses by $14 million; while in second quarter 2020, the Company's 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, 2021, the Company's global development pipeline consisted of over 1,400 hotels and over 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 year-over-year as the Company 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).

At June 30, 2021, the Company had $103 million of cash on its balance sheet and approximately $840 million in total liquidity.

Dividends

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

The Company's Board of Directors authorized a 50% increase in the quarterly cash dividend to $0.24 per share from $0.16 per share, beginning with the dividend that is expected to be declared in third quarter 2021.

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% versus 2020, or a decline of approximately 16% compared to 2019.
• Free cash conversion from Adjusted EBITDA of approximately 55%.

More detailed projections are available in Table 8 of this press release. Outlook assumes continued recovery in travel demand in the second half of 2021. 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.

Conference Call Information

Wyndham Hotels will hold a conference call with investors to discuss the Company's results and outlook on Thursday, July 29, 2021 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 877 876-9173 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 beginning at noon ET on July 29, 2021. A telephone replay will be available for approximately ten days beginning at noon ET on July 29, 2021 at 800 757-4761.

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. The Company uses these measures internally to assess its 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. 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 this press release.

About Wyndham Hotels & Resorts

Wyndham Hotels & Resorts (NYSE: WH) is the world's largest hotel franchising company by the number of properties, with approximately 9,000 hotels across nearly 95 countries on six continents. Through its network of approximately 798,000 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 21 hotel brands, including Super 8®, Days Inn®, Ramada®, Microtel®, La Quinta®, Baymont®, Wingate®, AmericInn®, Hawthorn Suites®, Trademark Collection® and Wyndham®. Wyndham Hotels & Resorts is also a leading provider of hotel management services. The Company's award-winning Wyndham Rewards loyalty program offers 89 million enrolled members the opportunity to redeem points at thousands of hotels, vacation club resorts and vacation rentals globally. For more information, visit www.wyndhamhotels.com. The Company may use its website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Disclosures of this nature will be included on the Company's website in the Investors section, which can currently be accessed at www.investor.wyndhamhotels.com. Accordingly, investors should monitor this section of the Company's website in addition to following the Company's press releases, filings submitted with the Securities and Exchange Commission and any public conference calls or webcasts.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws, including statements related to Wyndham Hotels' current views and expectations with respect to its future performance and operations, including revenues, earnings, cash flow and other financial and operating measures and dividends, restructuring charges and statements related to the coronavirus pandemic ("COVID-19"). 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," "objective," "estimate," "projection" 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. 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 continuation or worsening of the effects from COVID-19, its scope, duration and impact on the Company's business operations, financial results, cash flows and liquidity, as well as the impact on the Company's franchisees and property owners, guests and team members, the hospitality industry and overall demand for travel; the success of the Company's mitigation efforts in response to COVID-19; the Company's performance in any recovery from COVID-19; the performance of the financial and credit markets; the economic environment for the hospitality industry; operating risks associated with the hotel franchising and management businesses; the Company's relationships with franchisees and property owners; the impact of war, terrorist activity, political instability or political strife; concerns with or threats of pandemics, contagious diseases or health epidemics, including the effects of COVID-19 and any resurgence or mutations of the virus and actions governments, businesses and individuals take in response to the pandemic, including stay-in-place directives and other travel restrictions; risks related to restructuring or strategic initiatives; risks related to the Company's relationship with CorePoint Lodging; the Company's ability to satisfy obligations and agreements under its outstanding indebtedness, including the payment of principal and interest and compliance with the covenants thereunder; risks related to the Company's ability to obtain financing and the terms of such financing, including access to liquidity and capital as a result of COVID-19; and the Company's ability to make or pay, plans for, and the timing and amount of any future share repurchases and/or dividends, as well as the risks described in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and any subsequent reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, subsequent events or otherwise.

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