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Wyndham Hotels Resorts, Inc. (WH) SEC Filing 8-K Material Event for the period ending Monday, May 4, 2020

Wyndham Hotels Resorts, Inc.

CIK: 1722684 Ticker: WH
Exhibit 99.1


whra15.jpg

WYNDHAM HOTELS & RESORTS REPORTS FIRST QUARTER 2020 RESULTS

Company Completes Amendment to Credit Facility
Waiving Covenant Testing until Second Quarter of 2021
PARSIPPANY, N.J., May 4, 2020 - Wyndham Hotels & Resorts (NYSE: WH) today announced results for the three months ended March 31, 2020. Highlights include:
Diluted earnings per share increased 5% to $0.23, and adjusted diluted EPS decreased 4% to $0.50.
Net income was $22 million for the first quarter, a 5% increase over the prior-year quarter; adjusted net income was $47 million, an 8% decrease over the prior-year quarter.
Adjusted EBITDA decreased 4% compared with the prior-year quarter, to $107 million.
System-wide rooms grew 2% year-over-year.
The Company's development pipeline grew 4% year-over-year to 189,000 rooms.
Global RevPAR declined 23% year-over-year in constant currency.
“During the most challenging crisis the hotel industry has ever endured, our highest priority has remained the well-being and safety of our guests, owners and team members.  We have taken the difficult but prudent measures to reduce our costs and bolster our liquidity while providing support and relief for our franchisees to help them weather this downturn,” said Geoffrey A. Ballotti, chief executive officer. “Nearly 5,900 of our 6,300 hotels in the U.S. remain open, and with nearly 90% of those properties located outside of major cities in drive-to destinations that cater to a leisure customer base, we believe that our asset-light business is well positioned for a quick recovery when travel demand returns.”
Revenues decreased 12% to $410 million, compared with $468 million in the first quarter of 2019. The decline includes lower pass-through cost-reimbursement revenues, which have little to no impact on adjusted EBITDA, in the Company's hotel management business. Excluding cost-reimbursement revenues, revenues declined $29 million or 9%, reflecting a 23% decline in constant-currency RevPAR, as well as lower license fees which were adversely impacted by declining travel demand.
Net income increased 5% to $22 million, or $0.23 per diluted share, compared to $21 million, or $0.22 per diluted share, in the first quarter of 2019 due to lower separation-related expenses associated with the Company's spin-off and a decline in overall expenses due to cost reduction initiatives, partially offset by the decline in revenue (excluding cost-reimbursement revenues). 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.


1


Business Segment Discussion
The following discussion of first quarter operating results focuses on revenue and adjusted EBITDA for each of the Company’s segments.
Hotel Franchising
 
2020

 
2019

 
% Change

System size
769,000

 
745,300

 
3

Global RevPAR
$
25.90

 
$
33.76

 
(23
)
 
 
 
 
 
 
Revenue (millions)
$
243

 
$
269

 
(10
)
Adjusted EBITDA (millions)
108

 
113

 
(4
)
The Company's franchised system increased 3% globally, which included the transfer of 7,100 rooms from the hotel management segment related to the CorePoint Lodging asset sales. Excluding the transfer, franchised net rooms grew 2% globally, including 40 basis point growth in the U.S. and 5% growth internationally.
RevPAR declined 23% globally due to travel restrictions related to COVID-19. In the U.S., RevPAR declined 17%, and internationally RevPAR declined 37% primarily due to a 70% decline in China.
Revenues decreased $26 million, or 10%, compared to first quarter 2019 reflecting the impact of COVID-19 on travel demand globally, while a decline in Adjusted EBITDA of $5 million, or 4%, was partially mitigated by cost savings initiatives.
Hotel Management
 
2020

 
2019

 
% Change

System size
59,300
 
66,800
 
(11
)
Global RevPAR
$
50.00

 
$
63.25

 
(21
)
 
 
 
 
 
 
Revenue (millions)
$
167

 
$
197

 
(15
)
Adjusted EBITDA (millions)
17

 
16

 
6

The Company's managed system decreased 11% globally primarily reflecting the transfer of 7,100 rooms to the hotel franchising segment as a result of CorePoint Lodging asset sales. Excluding the transfer of rooms to the hotel franchising segment, the Company's managed system decreased 1% primarily due to the loss of rooms in the U.S. that were previously covered by unprofitable hotel management guarantees.
RevPAR declined 21% globally, primarily reflecting a 17% decline in the U.S. and a 31% decline internationally.
Revenues decreased $30 million compared to the prior-year period due to lower cost-reimbursement revenues, which have little to no impact on adjusted EBITDA. The decline in cost-reimbursement revenues is due to the loss of management properties resulting from the CorePoint Lodging asset sales and the termination of unprofitable hotel-management guarantees. Absent cost-reimbursements, revenues and adjusted EBITDA were unchanged as the unfavorable impact of COVID-19 on our owned and managed properties was offset by $5 million of management contract termination fees received from CorePoint Lodging asset sales.


2


Development
During the first quarter of 2020, the Company opened 58 new hotels totaling 6,200 rooms, a year-over-year decline of 47% as new construction openings were delayed in China and conversion volumes were materially lower in the U.S. during March. The Company retained 94.8% of its hotel system over the last twelve months compared to 94.7% during the same period last year. As of March 31, 2020, the Company’s hotel system consisted of approximately 9,300 properties and over 828,000 rooms, a 2% year-over-year increase.
The Company’s development pipeline consisted of 1,500 hotels and approximately 189,000 rooms, a 4% year-over-year room increase, or 2% decline sequentially. Approximately 58% of the Company’s development pipeline is international and 72% is new construction, of which nearly 40% have broken ground.
Balance Sheet and Liquidity
As of March 31, 2020, the Company had $749 million of cash on hand and $2.9 billion of debt outstanding, of which $2.4 billion was first lien debt. The Company's first lien leverage ratio was 2.6x as of March 31, 2020, within the 5.0x limitation of its quarterly tested leverage covenant under its credit agreement. In April, the Company amended its credit agreement and obtained a waiver of the quarterly tested leverage covenant through and including the first quarter of 2021 (unless earlier terminated by the Company, subject to certain conditions). The Company is not required to test this covenant until June 30, 2021. The covenant calculation was also modified for the second, third and fourth quarters of 2021 to use annualized EBITDA rather than the last-twelve-months EBITDA, as previously required. In return for the amendment, among other modifications, the Company agreed to maintain minimum liquidity of $200 million, pay 25 basis points of higher interest on outstanding borrowings and restrict share repurchases. The Company has the ability to make future quarterly dividend payments up to the amount of $0.16 per share, so long as liquidity is greater than $300 million. In addition, the Company has the right to elect out of the waiver period at its discretion, at which time the restrictions on dividends and share repurchases would be lifted.
For the three months ended March 31, 2020, net cash provided by operating activities was $17 million, compared to $7 million in the prior year period. The increase was driven by lower separation and transaction cash outlays.
Share Repurchases and Dividends
During the first quarter of 2020, the Company repurchased approximately 878,000 shares of its common stock for $45 million at an average price of $51.57 per share. The Company suspended its share repurchase activities in March.
The Company paid common stock dividends of $30 million, or $0.32 per share, in the first quarter of 2020.
Due to the material adverse impact on the global economy and travel demand resulting from COVID-19, the Company’s Board of Directors approved a reduction in the quarterly cash dividend policy from $0.32 per share to $0.08 per share, beginning with the dividend that is expected to be declared, at the Board's discretion, in the second quarter of 2020.


3


Other Items
In response to the effects on travel demand as a result of COVID-19, the Company identified approximately $255 million of cash savings. In connection with these initiatives, the Company has eliminated approximately 440 positions, reduced capital spend to focus only on the highest priority projects, eliminated all non-essential spend, consolidated certain facilities and indefinitely suspended Mr. Ballotti's salary and the Company's Board of Directors' cash compensation. As a result, the Company recorded a restructuring charge of $13 million during the first quarter of 2020 and expects to incur an additional charge of $18 million during the second quarter of 2020.
The first quarter charge primarily represents future cash expenditures for the payment of severance and related benefits costs resulting from the elimination of approximately 260 positions. The Company expects this initiative to be substantially complete in the second quarter of 2020 and that annual savings realized will be approximately $30 million.
The second quarter charge will represent future cash expenditures of approximately $13 million for the payment of severance and related benefit costs resulting from the elimination of approximately 180 positions and approximately $5 million of lease-related costs. The Company expects this initiative to be substantially complete in the second quarter of 2020 and that annual savings realized will be approximately $21 million to $25 million.
Outlook
The Company's ability to assess the impact of COVID-19 on its full-year financial results continues to be limited due to the rapidly evolving circumstances and uncertainty in travel demand. As a result, the Company remains unable, at this time, to accurately predict and provide 2020 outlook.
Conference Call Information
Wyndham Hotels will hold a conference call with investors to discuss the Company’s results and outlook on Tuesday, May 5, 2020 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 for approximately 90 days beginning at noon ET on May 5, 2020. A telephone replay will be available for approximately ten days beginning at noon ET on May 5, 2020 at 800 839-1162.
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


4


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 9,300 hotels across approximately 90 countries on six continents. Through its network of over 828,000 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 Inn & Suites®, La Quinta®, Baymont®, Wingate®, AmericInn®, Hawthorn Suites®, The 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 83 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 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, share repurchases and dividends, restructuring charges and statements related to the COVID-19 pandemic. 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,” “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 the COVID-19 pandemic, 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 the COVID-19 pandemic; the Company’s performance in any recovery from the COVID-19 pandemic; the performance of 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 or political


5


strife; concerns with or threats of pandemics, contagious diseases or health epidemics, including the effects of the COVID-19 pandemic and actions governments, businesses and individuals take in response to the pandemic, including stay-in-place directives and other travel restrictions; risks related to the acquisition of La Quinta and 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 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 and plans to pay dividends and to repurchase shares including the timing and amount of any future share repurchases and 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.

# # #
Contacts
Investors:
Matt Capuzzi
Senior Vice President, Investor Relations
973 753-6453
ir@wyndham.com

Media: 
Dave DeCecco  
Group Vice President, Global Communications 
973 753-7474 
WyndhamHotelsNews@wyndham.com




6


Table 1
WYNDHAM HOTELS & RESORTS
INCOME STATEMENT
(In millions, except per share data)
(Unaudited)
 
 
 
 
 
Three Months Ended March 31,
 
2020
 
2019
Net revenues
 
 
 
Royalties and franchise fees
$
92

 
$
101

Marketing, reservation and loyalty
106

 
113

Management and other fees
32

 
39

License and other fees
21

 
29

Cost reimbursements
126

 
155

Other
33

 
31

Net revenues
410

 
468

 
 
 
 
Expenses
 
 
 
Marketing, reservation and loyalty
118

 
129

Operating
35

 
43

General and administrative
28

 
34

Cost reimbursements
126

 
155

Depreciation and amortization
25

 
29

Restructuring
13

 

Transaction-related, net
8

 
7

Separation-related
1

 
21

Total expenses
354

 
418

 

 
 
Operating income
56

 
50

Interest expense, net
25

 
24

 

 
 
Income before income taxes
31

 
26

Provision for income taxes
9

 
5

Net income
$
22

 
$
21

 
 
 
 
Earnings per share
 
 
 
Basic
$
0.23

 
$
0.22

Diluted
0.23

 
0.22

 
 
 
 
Weighted average shares outstanding
 
 
 
Basic
93.7

 
97.9

Diluted
93.9

 
98.2





 
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 these measures 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Full Year
 
Hotel Franchising
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
 
 
 
 
 
 
 
 
 
 
2020
$
243

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
269

 
331

 
379

 
300

 
1,279

 
 
2018
203

 
289

 
348

 
295

 
1,135

 
 
Adjusted EBITDA


 
 
 
 
 
 
 
 
 
 
2020
$
108

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
113

 
162

 
195

 
151

 
622

 
 
2018
86

 
129

 
178

 
122

 
515

 
 
 
 
 
 
 
 
 
 
 
 
 
Hotel Management

 
 
 
 
 
 
 
 
 
 
Net revenues
 
 
 
 
 
 
 
 
 
 
 
2020
$
167

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
197

 
201

 
180

 
190

 
768

 
 
2018
99

 
146

 
252

 
229

 
726

 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
2020
$
17

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
16

 
16

 
13

 
21

 
66

 
 
2018
16

 
8

 
5

 
18

 
47

 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate and Other
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
 
 
 
 
 
 
 
 
 
 
2020
$

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
2

 
1

 
1

 
2

 
6

 
 
2018

 

 
4

 
3

 
7

 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
2020
$
(18
)
 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
(18
)
 
(19
)
 
(18
)
 
(19
)
 
(75
)
 
 
2018
(10
)
 
(12
)
 
(17
)
 
(15
)
 
(55
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Company
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
 
 
 
 
 
 
 
 
 
 
2020
$
410

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
468

 
533

 
560

 
492

 
2,053

 
 
2018
302

 
435

 
604

 
527

 
1,868

 
 
Net income
 
 
 
 
 
 
 
 
 
 
 
2020
$
22

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
21

 
26

 
45

 
64

 
157

 
 
2018
39

 
21

 
58

 
43

 
162

 
 
Adjusted EBITDA


 


 


 


 


 
 
2020
$
107

 
n/a

 
n/a

 
n/a

 
n/a

 
 
2019
111

 
159

 
190

 
153

 
613

 
 
2018
92

 
125

 
166

 
125

 
507

 
NOTE: Amounts may not add across or foot due to rounding.
See Table 7 for definitions and Table 8 for reconciliations of Total Company non-GAAP measures.



Table 3
WYNDHAM HOTELS & RESORTS
CASH FLOWS
(In millions)
(Unaudited)
 
 
 
 
 
Three Months Ended March 31,
 
2020
 
2019
Operating activities
 
 
 
Net income
$
22

 
$
21

Depreciation and amortization
25

 
29

Working capital changes and other, net
(30
)
 
(43
)
Net cash provided by operating activities
17

 
7

Investing activities
 
 
 
Property and equipment additions
(7
)
 
(9
)
All other, net

 
(2
)
Net cash used in investing activities
(7
)
 
(11
)
Financing activities
 
 
 
Proceeds from borrowings
744

 

Dividends to shareholders
(30
)
 
(28
)
Repurchases of common stock
(50
)
 
(45
)
All other, net
(17
)
 
(5
)
Net cash provided by/(used in) financing activities
647

 
(78
)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash
(2
)
 

Net increase/(decrease) in cash, cash equivalents and restricted cash
655

 
(82
)
Cash, cash equivalents and restricted cash, beginning of period
94

 
366

Cash, cash equivalents and restricted cash, end of period
$
749

 
$
284

 
 
 
 
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. 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,
 
2020
 
2019
Net cash provided by operating activities (a)
$
17

 
$
7

Less: Property and equipment additions
(7
)
 
(9
)
Free cash flow
$
10

 
$
(2
)
 
(a) 
Includes $15 million and $32 million of 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 and 2019, respectively.



Table 4
WYNDHAM HOTELS & RESORTS
DEBT
(In millions)
(Unaudited)
 
 
 
 
 
As of
March 31, 2020
 
As of
December 31, 2019
 
 
$750 million revolving credit facility (due May 2023)
$
734

 
$

Term loan (due May 2025)
1,564

 
1,568

5.375% senior unsecured notes (due April 2026)
495

 
494

Finance leases
59

 
60

Total debt
2,852

 
2,122

Cash and cash equivalents
749

 
94

Net debt
$
2,103

 
$
2,028

 

 

Our outstanding debt as of March 31, 2020 matures as follows:
 
 
 
 
 
 
Amount
Within 1 year
 
 
$
21

Between 1 and 2 years
 
 
21

Between 2 and 3 years
 
 
21

Between 3 and 4 years
 
 
756

Between 4 and 5 years

 
10

Thereafter
 
 
2,023

Total

 
$
2,852






Table 5
WYNDHAM HOTELS & RESORTS
REVENUE DRIVERS
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
 
2020
 
2019
 
Change
 
% Change
 
 
Beginning Room Count (January 1)
 
 
 
 


 

 
 
United States
510,200

 
506,100

 
4,100

 
   1%
 
 
International
320,800

 
303,800

 
17,000

 
6
 
 
Total
831,000

 
809,900

 
21,100

 
3
 
 
 
 
 
 
 


 

 
 
Additions
 
 
 
 


 

 
 
United States
2,900

 
5,800

 
(2,900
)
 
(50)
 
 
International
3,300

 
5,900

 
(2,600
)
 
(44)
 
 
Total
6,200

 
11,700

 
(5,500
)
 
(47)
 
 
 
 
 
 
 


 

 
 
Deletions
 
 
 
 


 

 
 
United States
(6,300
)
 
(5,300
)
 
(1,000
)
 
(19)
 
 
International
(2,600
)
 
(4,200
)
 
1,600

 
38
 
 
Total
(8,900
)
 
(9,500
)
 
600

 
6
 
 
 
 
 
 
 
 
 
 
 
 
Ending Room Count (March 31)
 
 
 
 
 
 
 
 
 
United States
506,800

 
506,600

 
200

 
 
 
International
321,500

 
305,500

 
16,000

 
5
 
 
Total
828,300

 
812,100

 
16,200

 
   2%
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
FY 2019 Royalties Breakout
 
2020
 
2019
 
Change
 
% Change
 
System Size
 
 
 
 
 
 
 
 
 
United States
 
 
 
 

 
 
 
 
Economy
256,800

 
264,100

 
(7,300
)
 
   (3%)
 
 
Midscale and Upper Midscale
209,200

 
206,500

 
2,700

 
1
 
 
Extended Stay/Lifestyle
23,800

 
18,300

 
5,500

 
30
 
 
Upscale
17,000

 
17,700

 
(700
)
 
(4)
 
 
Total United States
506,800

 
506,600

 
200

 
 
   86%
 
 
 
 
 
 
 
 
 
 
International
 
 
 
 


 

 
 
Greater China
153,900

 
147,000

 
6,900

 
5
 
3
Rest of Asia Pacific
28,600

 
24,300

 
4,300

 
18
 
1
Europe, the Middle East and Africa
68,900

 
66,300

 
2,600

 
4
 
4
Canada
40,800

 
39,900

 
900

 
2
 
5
Latin America
29,300

 
28,000

 
1,300

 
5
 
1
Total International
321,500

 
305,500

 
16,000

 
5
 
14
 
 
 
 
 
 
 
 
 
 
Global
828,300

 
812,100

 
16,200

 
   2%
 
  100%



Table 5 (continued)
WYNDHAM HOTELS & RESORTS
REVENUE DRIVERS
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
 
2020
 
2019
 
% Change
 
Constant Currency %
  Change (a)
 
 
Regional RevPAR Growth
 
 
 
 
 
 
 
 
 
United States
 
 
 
 
 
 
 
 
 
Economy
$
26.74

 
$
31.51

 
  (15%)
 
 
 
 
Midscale and Upper Midscale
37.41

 
46.89

 
(20)
 
 
 
 
Extended Stay/Lifestyle
47.68

 
56.62

 
(16)
 
 
 
 
Upscale
74.28

 
91.88

 
(19)
 
 
 
 
Total United States
33.45

 
40.56

 
(18)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
International
 
 
 
 
 
 
 
 
 
Greater China
5.34

 
17.60

 
(70)
 
   (69%)
 
 
Rest of Asia Pacific
26.68

 
37.37

 
(29)
 
(27)
 
 
Europe, the Middle East and Africa
34.01

 
45.72

 
(26)
 
(23)
 
 
Canada
29.09

 
34.22

 
(15)
 
(14)
 
 
Latin America
29.13

 
34.60

 
(16)
 
(3)
 
 
Total International
18.45

 
28.92

 
(36)
 
(33)
 
 
 
 
 
 
 
 
 
 
 
 
Global
$
27.68

 
$
36.21

 
  (24%)
 
   (23%)
 
 
 
 
 
 
 
 
 
 
 
 
Average Royalty Rate
 
 
 
 
 
 
 
 
 
United States
4.6
%
 
4.6
%
 

 
 
 
 
International
2.2
%
 
2.1
%
 
10 bps

 
 
 
 
Global
4.0
%
 
3.8
%
 
20 bps

 
 
 
 
 
(a)
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 (a)
 
 
 
 
 
 
 
 
 
 
2020
 
$
25.90

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
33.76

 
$
42.04

 
$
45.23

 
$
34.51

 
$
38.91

 
2018
 
$
32.34

 
$
41.07

 
$
46.34

 
$
35.39

 
$
38.86

 
U.S. RevPAR (a)
 
 
 
 
 
 
 
 
 
 
 
2020
 
$
31.43

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
37.69

 
$
48.65

 
$
51.93

 
$
37.96

 
$
44.09

 
2018
 
$
34.20

 
$
46.17

 
$
52.36

 
$
38.92

 
$
43.04

 
International RevPAR
 
 
 
 
 
 
 
 
 
2020
 
$
17.39

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
27.56

 
$
31.59

 
$
34.79

 
$
29.15

 
$
30.80

 
2018
 
$
29.39

 
$
32.85

 
$
36.42

 
$
29.68

 
$
32.09

 
Global Rooms (a,b,c)
 
 
 
 
 
 
 
 
 
 
2020
 
769,000

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
745,300

 
751,300

 
758,400

 
770,200

 
770,200

 
2018
 
697,300

 
725,700

 
731,200

 
742,800

 
742,800

 
U.S. Rooms (a,c)
 
 
 
 
 
 
 
 
 
 
 
2020
 
463,900

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
454,900

 
457,600

 
460,100

 
464,600

 
464,600

 
2018
 
424,500

 
450,900

 
451,100

 
453,900

 
453,900

 
International Rooms (b,c)
 
 
 
 
 
 
 
 
 
2020
 
305,100

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
290,400

 
293,700

 
298,300

 
305,600

 
305,600

 
2018
 
272,800

 
274,700

 
280,100

 
288,900

 
288,900

 
 
 
 
 
 
 
 
 
 
 
 
Hotel Management
 
 
 
 
 
 
 
 
 
 
Global RevPAR (a,b)
 
 
 
 
 
 
 
 
 
 
2020
 
$
50.00

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
63.25

 
$
66.67

 
$
66.65

 
$
59.19

 
$
64.01

 
2018
 
$
77.61

 
$
76.52

 
$
68.53

 
$
61.00

 
$
68.72

 
U.S. RevPAR (a)
 
 
 
 
 
 
 
 
 
 
 
2020
 
$
54.35

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
65.58

 
$
71.61

 
$
70.75

 
$
60.89

 
$
67.32

 
2018
 
$
94.28

 
$
87.43

 
$
71.95

 
$
61.43

 
$
72.76

 
International RevPAR (b)
 
 
 
 
 
 
 
 
 
2020
 
$
38.07

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
55.12

 
$
49.53

 
$
52.49

 
$
53.67

 
$
52.69

 
2018
 
$
61.82

 
$
55.08

 
$
55.19

 
$
59.36

 
$
57.84

 
Global Rooms (a,b,d)
 
 
 
 
 
 
 
 
 
 
2020
 
59,300

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
66,800

 
65,300

 
63,400

 
60,800

 
60,800

 
2018
 
25,700

 
66,700

 
67,000

 
67,200

 
67,200

 
U.S. Rooms (a,d)
 
 
 
 
 
 
 
 
 
 
 
2020
 
42,900

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
51,700

 
50,800

 
49,100

 
45,600

 
45,600

 
2018
 
12,800

 
53,400

 
53,300

 
52,200

 
52,200

 
International Rooms (b)
 
 
 
 
 
 
 
 
 
2020
 
16,400

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
15,100

 
14,500

 
14,300

 
15,200

 
15,200

 
2018
 
12,900

 
13,300

 
13,700

 
15,000

 
15,000




Table 6 (continued)
WYNDHAM HOTELS & RESORTS
HISTORICAL REVPAR AND ROOMS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Full Year
Total System
 
 
 
 
 
 
 
 
 
 
 
Global RevPAR
 
 
 
 
 
 
 
 
 
 
2020
 
$
27.68

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
36.21

 
$
44.06

 
$
46.94

 
$
36.36

 
$
40.92

 
2018
 
$
33.95

 
$
42.95

 
$
48.21

 
$
37.54

 
$
40.80

 
U.S. RevPAR
 
 
 
 
 
 
 
 
 
 
 
2020
 
$
33.45

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
40.56

 
$
50.98

 
$
53.79

 
$
40.09

 
$
46.39

 
2018
 
$
35.91

 
$
48.50

 
$
54.42

 
$
41.28

 
$
45.30

 
International RevPAR
 
 
 
 
 
 
 
 
 
2020
 
$
18.45

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
$
28.92

 
$
32.47

 
$
35.63

 
$
30.29

 
$
31.85

 
2018
 
$
30.90

 
$
33.89

 
$
37.31

 
$
31.08

 
$
33.31

 
Global Rooms
 
 
 
 
 
 
 
 
 
 
2020
 
828,300

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
812,100

 
816,600

 
821,800

 
831,000

 
831,000

 
2018
 
723,000

 
792,300

 
798,300

 
809,900

 
809,900

 
U.S. Rooms
 
 
 
 
 
 
 
 
 
 
 
2020
 
506,800

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
506,600

 
508,300

 
509,200

 
510,200

 
510,200

 
2018
 
437,200

 
504,300

 
504,500

 
506,100

 
506,100

 
International Rooms
 
 
 
 
 
 
 
 
 
 
2020
 
321,500

 
n/a

 
n/a

 
n/a

 
n/a

 
2019
 
305,500

 
308,300

 
312,600

 
320,800

 
320,800

 
2018
 
285,800

 
288,000

 
293,800

 
303,800

 
303,800

 
(a)
First quarter 2020 results reflect the reclassification of 7,100 rooms from the Hotel Management segment to the Hotel Franchising segment.
(b)
Second quarter 2018 results were updated for the reclassification of 200 rooms from the Hotel Franchising segment to the Hotel Management segment.
(c)
Second quarter 2018 reflects the addition of 48,200 La Quinta rooms (46,300 U.S. and 1,900 international) acquired in May 2018 and the deletion of 21,300 Knights Inn rooms (20,100 U.S. and 1,200 international) divested in May 2018.
(d)
Second quarter 2018 reflects the addition of 40,400 La Quinta rooms in the U.S. acquired in May 2018.







Table 7
WYNDHAM HOTELS & RESORTS
DEFINITIONS

Adjusted Net Income and Adjusted Diluted EPS: Represents net income and diluted earnings 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 excluding 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 and income taxes. 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 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.
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).
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.



Table 8
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 to Adjusted EBITDA:
 
 
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Full Year
2020
 
 
 
 
 
 
 
 
 
Net income
$
22

 
 
 
 
 
 
 
 
Provision for income taxes
9

 
 
 
 
 
 
 
 
Depreciation and amortization
25

 
 
 
 
 
 
 
 
Interest expense, net
25

 
 
 
 
 
 
 
 
Stock-based compensation expense
4

 
 
 
 
 
 
 
 
Restructuring costs (a)
13

 
 
 
 
 
 
 
 
Transaction-related expenses, net (b)
8

 
 
 
 
 
 
 
 
Separation-related expenses (c)
1

 
 
 
 
 
 
 
 
Adjusted EBITDA
$
107

 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
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

Impairment, net (d)

 
45

 

 

 
45

Contract termination costs (e)

 
9

 
34

 
(1
)
 
42

Restructuring costs (f)

 

 

 
8

 
8

Transaction-related expenses, net (b)
7

 
11

 
12

 
10

 
40

Separation-related expenses (c)
21

 
1

 

 

 
22

Transaction-related item (g)

 

 
20

 

 
20

Foreign currency impact of highly inflationary countries (h)
1

 

 
3

 
1

 
5

Adjusted EBITDA
$
111

 
$
159

 
$
190

 
$
153

 
$
613

 
 
 
 
 
 
 
 
 
 
2018
 
Net income
$
39

 
$
21

 
$
58

 
$
43

 
$
162

Provision for income taxes
16

 
8

 
23

 
14

 
61

Depreciation and amortization
19

 
22

 
30

 
29

 
99

Interest expense, net
1

 
10

 
24

 
25

 
60

Stock-based compensation expense
3

 
1

 
3

 
2

 
9

Transaction-related expenses, net (b)
2

 
28

 
7

 
(1
)
 
36

Separation-related expenses (c)
12

 
35

 
17

 
14

 
77

Foreign currency impact of highly inflationary countries (h)

 

 
4

 
(1
)
 
3

Adjusted EBITDA
$
92

 
$
125

 
$
166

 
$
125

 
$
507






 
NOTE: Amounts may not add across due to rounding.
(a)
Represents a charge associated with restructuring initiatives implemented in response to the effects on travel demand as a result of COVID-19.
(b)
Primarily relates to integration costs incurred in connection with our acquisition of La Quinta.
(c)
Represents costs associated with our spin-off from Wyndham Worldwide.
(d)
Represents a non-cash charge associated with the termination of certain hotel-management arrangements.
(e)
Represents costs associated with the termination of certain hotel-management arrangements.
(f)
Represents a charge focused on enhancing our organizational efficiency and rationalizing our operations.
(g)
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.
(h)
Relates to the foreign currency impact from hyper-inflation in Argentina, which is reflected in operating expenses on the income statement.





Table 8 (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,
 
2020
 
2019
Diluted EPS
$
0.23

 
$
0.22

 
 
 
 
Net income
$
22

 
$
21

 
 
 
 
Adjustments:
 
 
 
Restructuring costs
13

 

Transaction-related expenses, net
8

 
7

Separation-related expenses
1

 
21

Foreign currency impact of highly inflationary countries

 
1

Acquisition-related amortization expense (a)
10

 
9

Total adjustments before tax
32

 
38

Income tax provision (b)
7

 
8

Total adjustments after tax
25

 
30

Adjusted net income
$
47

 
$
51

Adjustments - EPS impact
0.27

 
0.30

Adjusted diluted EPS
$
0.50

 
$
0.52

 
 
 
 
Diluted weighted average shares outstanding
93.9

 
98.2

 
(a)
Reflected in depreciation and amortization on the income statement.
(b)
Reflects the tax effects of the adjustments.




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