WYN 2Q12 REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

 WYN 2Q12 REPORT CARD - WYNNNN

 

 

OVERALL

  • LITTLE WORSE:  Numbers were in line, but there was some weakness in the lodging and vacation exchange and rental drivers.  2013 guidance looks solid

REVPAR GUIDANCE

  • WORSE:  RevPAR growth was up 2% or 3% on a constant currency basis.  WYN said that RevPAR growth appears to be slowing partly due more construction and that things have already recovered.  The company expects to be at the lower end of their guidance range for RevPAR.
  • PREVIOUSLY:  Systemwide growth of 5-8%

LODGING SYSTEM GROWTH

  • LITTLE WORSE:  Even with the addition of the 3,000 HPT rooms, room growth was only up 1% YoY.  It looks like WYN is going to end the year at the low end of their guidance range.
  • PREVIOUSLY:  Growth of 1-3%

VACATION EXCHANGE AND RENTAL DRIVERS

  • LITTLE WORSE:  # of exchange members is tracking just below the low end of guidance.  In the release, # of rentals was +3% (our math says +5%) so they either missed the guidance range or came in at the low end.  Pricing on rentals was down 9% YoY or -2% on a constant currency basis, the lower end of company guidance. 
  • PREVIOUSLY:  # exchange members: -2% to flat; # of rentals: +4-7%; rental price per transaction: -3% to flat

VACATION OWNERSHIP

  • BETTER:  Tours came in at +5% above the guidance range as did VPG which also came in at +5% - at the very high end of guidance
  • PREVIOUSLY:  Tours: +1-4%; VPG:+2-5%

BRAND.COM PROGRESS

  • SAME:  Room nights resulting from Brand.com initiative are up 17% YoY (both YTD and quarterly basis).  WYN has completely revamped 13 brand websites, significantly enhancing features, functionality, and content for over 7,000 properties. 
  • PREVIOUSLY:  “We've made significant progress over the past two years with one of our key Apollo initiatives, brand.com. Revenue in room nights across the brand portfolio are up approximately 20% from this channel year-to date in part due to improved content and Web functionality.”

RCI.COM ONLINE TRANSITION

  • SAME:  Because of improvements to RCI.com, WYN is on track to reduce call volume by over 30% from the inception of the project through year-end 2012, and expect a total reduction of almost 40% by 2015.  Their online web share increased from 13% to currently over 40% and it's still rising.  
  • PREVIOUSLY:  “We completed another successful release of rci.com, which included an upgrade to an innovative click-to-chat functionality with multiple language support. From when we started the project in the first quarter of 2008, through the end of 2012, we expect our migration to online transactions to improve our exchange in rentals margin by over 225 basis points.”

TARGET EBITDA GROWTH GUIDANCE BY SEGMENT

  • SAME:  Continue to target annual EBITDA growth of 6% to 8%, high single to low double-digit growth in their Hotel Group and mid single-digit growth in the Exchange and Rentals Group and Wyndham Vacation Ownership. 
  • PREVIOUSLY:  “We are committed to EBITDA growth of 6% to 8% with high single to low double-digit growth in the Hotel Group and mid single-digit growth in the Exchange & Rentals Group and Wyndham Vacation Ownership."

ACTUAL EBITDA PERFORMANCE BY SEGMENT

  • BETTER:  Lodging EBITDA growth exceeded expectations by 28% and 20%, excluding inter-segment fees 
  • WORSE:  Vacation rental and exchange EBITDA fell 9% and was flat ex FX impact
  • PREVIOUSLY:  “We expect Vacation Ownership and Lodging revenues and adjusted EBITDA to be at the high end of their respective ranges. We expect exchange in rentals revenues to be at the low end of its range and adjusted EBITDA to be at the midpoint of its range.

EPS GUIDANCE FOR 3Q12

  • BETTER:  Adjusted 3Q EPS came in at $1.13. Using the 2Q period share count EPS would have come in at the high end of company guidance of $1.10
  • PREVIOUSLY:  “For the third quarter, we expect earnings per share to be $1.07 to $1.10. This is below the consensus, reflecting differences in both share repurchase assumptions and seasonality between the third and fourth quarters, however our guidance for the second half of the year is consistent with street expectations”

AVAILABLE CASH FOR DEPLOYMENT

  • SAME:  same commentary as previous guidance
  • PREVIOUSLY:  “We expect sustainable annual free cash flow of $600 million to $700 million. We remain committed to an investment grade profile, which will enable us to increase debt by $300 million for every $100 million that we add in EBITDA. The result is $1 billion of available cash to deploy each year to increase shareholder value.”

DEAL ENVIRONMENT

  • SAME:  may do a couple of deals in the future
  • PREVIOUSLY:  “We've probably seen a little more activity recently, more deals seem to be coming to market, but it's not a dramatic change in the volume of our activity, and really kind of what has to change is the expectation of the other side because we're very disciplined. We're not going chase anything, so if deals don't make sense, they're not going to fit into our plan… I would probably characterize it as the pipeline is a little bit stronger than it was last year at this time.”

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