WYN 3Q13 CONF CALL NOTES

In line not good enough apparently

 

 

“Results for the quarter were excellent, with...strong performance in each of our business units...We have great momentum across the company, which when combined with our disciplined capital allocation strategy, will continue to create value for shareholders.”

 

-  Stephen P. Holmes, chairman and CEO

 

CONF CALL NOTES

  • Enthusiasm from global franchisee conference
  • Expanded relationship with Grand City (17 hotels, 2,400 rooms), bringing WYN brand to Austria; opened Ramada Encore in Turkey
  • Added 4 brands in 12 new countries
  • Hotel group will be the fastest growing segment
  • RCI: premium platinum members eclipsed 200k
  • Rental business performed well despite choppy conditions in Europe
  • WVO
    • asset-light focus
    • sales & marketing initiatives:  
    • 1st sale of Margaritaville Vacation Club by Wyndham
      • Have begun telesales and expect full launch schedule for 1Q 2014
      • Expect strong visitation
    • NY sales that started in August running ahead of expectations; excited about other new city locations (Chicago-starting in November).
  • WAAM 2.0-3.0 will converge to WAAM Just-in-Time. Two deals in pipeline:
    • $10MM land in Beaver Dam, CO
    • Ground-up project with independent developer in Park City, UT
    • Will provide majority of sales in next 3-5 yrs
  • Exchange:  Increases in the average number of members reflects higher retention rates and growth in Latin America and North America, while revenue per member growth was supported by higher volume and better yields from member rentals
  • Lodging
    • $4MM favorable revenues related to Wyndham rewards program
    • Expect spending to catch up to revenues in 4Q, +$7MM YoY expenses
    • International REVPAR hurt by China
  • WYN Vacation Ownership
    • Shell contributed $33MM and $8MM in EBITDA
    • Gross VOI: +7%
    • Tour flow increased 9%
    • VPG down 1.6% YOY; ex Shell, VPG was flat, despite hard comps
  • 3Q WAAM sales: $51MM
  • Property mgmt revenues increased 22% because of Shell portfolio
  • $62MM defaults, down over 12%
  • Provision for losses: $102MM ($124MM year-ago)
  • Cease-and-desist activity in-line with historical trends
  • 3Q $1MM non-cash benefit to P&L from swaps
  • $650MM securitized timeshare receivables conduit facility extended to Aug 2015 (previously Aug 2014)
  • FY 2013 GUIDANCE: result of lower D&A, interest expense and share count
    • D&A: $216MM
    • Interest expense: $120MM
    • EBITDA performing at high end of guidance but currency dragged down results by $14MM
  • 4Q 2013 GUIDANCE:  $0.70-0.72 EPS; vacation rental business seasonally weak and exacerbated by previous acquisitions
  • FCF 2013 ahead of $750MM target
  • FCF 2014 will grow at less than EPS pace; these factors will result in higher cash taxes of $40MM:  AMT credits will expire and the rate of growth of timeshare receivables

Q&A

  • FCF 2014 will grow in-line with 'absolute growth of the business'
  • Have made great strides in cease-and-desist
  • 3Q higher corporate expense- mostly employee costs, nothing unusual
  • 2014 tour flow/VPG:  will be anniversaried with Shell in 4Q 2014
  • No new program for C&P
  • Vacation ownership:  inventory coming down slower 
  • Just-in-time (JIT) will improve cash flow and returns;  in past, inventory has come down $100MM/year but JIT will not necessarily accelerate that process
  • Favorable timing of marketing expenses:  $11MM - didn't spend as much in 3Q as they will spend in 4Q and also benefit of the conference which they didn't have in the prior year
  • RCI:  have continued to increase prices modestly on exchange/membership fees; sees some small developers coming into the marketplace
  • 2014 currency:  15-20% euro impact
  • Financing of receivables and capital available for development coming back slowly; seeing some new developments out there but not as much as seen historically
  • Govt shutdown:  impact heavily felt at national park, presidential libraries; but did not see or fell much impact
  • Europe:  mixed sentiment- Germany/Spain saw markets up but other markets were down; generally, there's a sign of improvement but not across the board; 
  • China:  mix issue (largest growth in Super 8 segment; when they bring Wyndam brands into the mix, they expect China REVPAR improving) 
  • China full service development oversupplied?  
  • Same-store sales REVPAR not much differnet from reported REVPAR results

 

HIGHLIGHTS FROM THE RELEASE

 

WYN 3Q13 CONF CALL NOTES - wyn1

  • Company repurchased 2.7 million shares of its common stock for $160 million. From October 1-22 the Company repurchased an additional 0.8 million shares for $50 million. The Company’s remaining share repurchase authorization totals $732 million as of October 22, 2013.
  • The increases in revenues and adjusted net income reflect stronger operating results across all of the
    Company’s businesses. EPS also benefited from the Company’s share repurchase program, which decreased weighted average diluted share count by 7% year-over-year
  • The growth of free cash flow largely reflects stronger operating performance partially offset by higher
    capital expenditures.
  • Lodging: The [revenue] increase reflects higher revenues from owned hotels, hotel franchise fees and management reimbursable fees as well as incremental global conference fees.  The increase [in EBITDA] was primarily due to higher RevPAR and the favorable timing of marketing expenditures
    • US RevPAR: +5.2% YoY
    • System-wide RevPAR: 3.4% "reflecting proportionally higher growth of lower RevPAR hotels in China."
  • Wyn's hotel system consisted of approximately 7,440 properties and over 638,300 rooms, a 3.3% room increase compared with the third quarter of 2012. The development pipeline included over 900 hotels and
    approximately 114,000 rooms, of which 60% were international and 66% were new construction.
  • Vacation Exchange and Rentals: Rentals benefited from an improved pricing strategy and increased rental unit supply in Europe
  • Vacation Ownership: Excluding the impact of the Shell Vacations Club acquisition, revenues increased 6%, primarily reflecting higher gross VOI sales. 

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