Wyndham Destinations Reports Third Quarter 2018 Results

“Our company reported another outstanding quarter, demonstrated by strong operational results that came in above expectations,” said Michael D. Brown, president and chief executive officer of Wyndham Destinations.

“During the third quarter, gross VOI sales increased 7%, further adjusted EBITDA increased 5% and we maintained margins while we continue to track ahead on new owner sales mix, which increased 330 basis points in the third quarter. We also meaningfully increased the pace of share buybacks in the third quarter, repurchasing $106 million in stock.”

“As we have demonstrated this quarter, Wyndham Destinations continued to execute upon our key strategic initiatives, which included increasing our new owner sales mix and further integration with the Blue Thread, all while preserving our margins. Our elevated level of share repurchases in the third quarter underscored our commitment of returning value to shareholders,” said Brown.

Results From Continuing Operations

In May 2018, the Company sold its European vacation rentals business and completed the spin-off of its hotel business into a separate publicly traded company. For all periods presented, the results of operations for the hotel business and the European vacation rentals business have been classified as discontinued operations.

During the third quarter of 2018, reported revenues, income from continuing operations and income from continuing operations per diluted share were $1.1 billion, $131 million and $1.31, respectively. This compared to reported revenues of $1.0 billion, income from continuing operations of $102 million and income from continuing operations per diluted share of $0.99 in the third quarter of 2017. Total third quarter 2018 adjusted EBITDA from continuing operations increased 6% to $269 million.

Company Results — Further Adjusted

Further adjusted results are presented as if Wyndham Hotels & Resorts were separated from Wyndham Destinations and the sale of the European rentals business was completed for all periods presented.

During the third quarter of 2018, further adjusted net income was $146 million and further adjusted diluted EPS was $1.47 based on 100 million diluted shares outstanding. Further adjusted EBITDA was $271 million, compared to $257 million in the third quarter of 2017, and was near the top-end of the Company’s guidance range of $262 million to $272 million. Hurricane Florence was estimated to have negatively impacted further adjusted EBITDA by $10 million in the third quarter of 2018.

Business Segment Results

Vacation Ownership

Vacation Ownership revenues increased 7%, primarily due to a 7% increase in gross vacation ownership interest (VOI) sales of $640 million. Tours increased 5% year-over-year and Volume Per Guest (VPG) increased 2%. The mix of new owner sales increased 330 basis points over the prior year and new owner sales volume increased 15%.

Vacation Ownership further adjusted EBITDA increased 9% to $203 million, primarily due to revenue growth of 7%, consumer finance income growth and cost efficiencies in general and administrative expenses.

Consumer finance gross receivables grew 5% year-over-year to $3.7 billion. The provision for loan loss as a percentage of gross VOI sales, net of fee-for-service sales, was 20.8% at the end of the third quarter of 2018. The provision for loan loss increased to $132 million, with the $9 million year-over-year increase due to higher gross VOI sales.

Exchange & Rentals

Exchange & Rentals revenues decreased 2%, primarily due to a 5% decline in exchange revenue per member. The decline in exchange revenue per member was due to lower inventory levels, a change in customer mix, economic headwinds in Latin America and Hurricane Florence.

Further adjusted EBITDA decreased $1 million, or 1%, due to lower revenue per member, offset by cost efficiencies within the business.

Balance Sheet and Liquidity

Net Debt — As of September 30, 2018, the Company’s leverage ratio was 2.9x. The Company had $3.0 billion of corporate debt outstanding, which excluded $2.2 billion of non-recourse debt related to its securitized notes receivable. Additionally, the Company had cash and cash equivalents of $164 million. Refer to Table 9 for definitions of net debt and leverage ratio.

Cash Flow — For the nine months ended September 30, 2018, net cash provided by operating activities from continuing operations was $205 million, compared to $264 million in the prior year period. Free cash flow from continuing operations was $236 million for the nine months ended September 30, 2018, compared to $42 million for the same period in 2017, primarily due to securitization activity in 2018. Further adjusted free cash flow from continuing operations was $356 million and $187 million for the same periods, respectively.

Share Repurchases — During the third quarter of 2018, the Company repurchased 2.4 million shares of common stock for $106 million at a weighted average price of $43.39 per share. As of September 30, 2018, the Company had $916 million remaining in its share repurchase authorization. Subsequent to the end of the quarter, the Company repurchased another $32 million of shares in the month of October.

Dividend — The Company announced a cash dividend of $0.41 per share on July 27, 2018, which was paid on September 28, 2018 to shareholders of record as of September 14, 2018.

Securitization — On July 18, 2018, the Company closed a $500 million term securitization with a weighted average coupon of 3.65% and an advance rate of 88.7%. Subsequent to the end of the quarter, the Company closed a $350 million term securitization with a weighted average coupon of 4.02% and an advance rate of 98.0%.

Outlook

The Company is revising its further adjusted full-year 2018 guidance as follows:

• Revenues of $3.925 billion to $3.975 billion, compared to the previous expectation of $3.975 billion to $4.085 billion
• Further adjusted EBITDA of $952 million to $960 million, compared to the previous expectation of $955 million to $975 million
• Further adjusted net income of $475 million to $483 million, compared to the previous expectation of $476 millionto $496 million
• Stock based compensation of $17 million to $19 million, compared to the previous expectation of $16 million to $20 million
• Further adjusted diluted EPS of $4.77 to $4.85, compared to the previous expectation of $4.74 to $4.94

The Company’s guidance assumes that the spin-off of its hotel business and the sale of its European vacation rentals business had been completed on January 1, 2018. This guidance is presented only on a non-GAAP further adjusted basis because not all of the information necessary for a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measure is available without unreasonable effort, primarily due to uncertainties relating to the occurrence or amount of these adjustments that may arise in the future. Please refer to Table 8 for further information.

Conference Call Information
Wyndham Destinations will hold a conference call with investors to discuss the Company’s results and outlook today at 8:30 a.m. ET. Participants may listen to a simultaneous webcast of the conference call, which may be accessed through the Company’s website at investor.wyndhamdestinations.com, or by dialing 877-876-9177, passcode WYND, approximately 10 minutes before the scheduled start time. For those unable to listen to the live broadcast, an archive of the webcast will be available on the Company’s website for approximately 90 days beginning at 12:00 p.m. ET today. Additionally, a telephone replay will be available for approximately 10 days beginning at 12:00 p.m. ET today at 800-723-7372.

Presentation of Financial Information
Financial information discussed in this press release includes non-GAAP measures, which include or exclude certain items. The Company utilizes non-GAAP measures, defined in Table 9, on a regular basis to assess performance of its reportable segments and allocate resources. 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. Management also internally uses these measures to assess our operating performance, both absolutely and in comparison to other companies, and in evaluating or making 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. The Company is also presenting non-GAAP results on a further adjusted basis as if the spin-off of its hotel business and the sale of its European vacation rentals business had occurred for all periods presented. Full reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures for the reported periods appear in the financial tables section of the press release.

About Wyndham Destinations
Wyndham Destinations (NYSE: WYND) believes in putting the world on vacation. As the world’s largest vacation ownership and exchange company, Wyndham Destinations offers everyday travelers the opportunity to own, exchange or rent their vacation experience while enjoying the quality, flexibility and value that Wyndham delivers. The company’s global presence in 110 countries means more vacation choices for its nearly four million members and owner families: Wyndham’s 220 vacation club resorts, which offer a contemporary take on the timeshare model, with signature brands including CLUB WYNDHAM®, WorldMark® by Wyndham, Margaritaville Vacation Club® by Wyndham, and Shell Vacations Club; 4,300+ affiliated resorts through RCI, the world’s leader in vacation exchange; and 10,000 rental properties from coast to coast through Wyndham Vacation Rentals, North America’s largest professionally managed vacation rental business. Year after year, a worldwide team of 25,000 associates delivers exceptional vacation experiences to families around the globe as they make memories to last a lifetime. At Wyndham Destinations, our world is your destination. Learn more at wyndhamdestinations.com.