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Wyndham Worldwide (WYN)
Q1 2013 Earnings Call
April 24, 2013 8:30 am ET
Margo C. Happer - Senior Vice President of Investor Relations
Stephen P. Holmes - Chairman, Chief Executive Officer and Chairman of Executive Committee
Thomas G. Conforti - Chief Financial Officer and Executive Vice President
Joseph Greff - JP Morgan Chase & Co, Research Division
Steven E. Kent - Goldman Sachs Group Inc., Research Division
Christopher Agnew - MKM Partners LLC, Research Division
Charles Patrick Scholes - SunTrust Robinson Humphrey, Inc., Research Division
Robert A. LaFleur - Cantor Fitzgerald & Co., Research Division
Harry C. Curtis - Nomura Securities Co. Ltd., Research Division
Carlo Santarelli - Deutsche Bank AG, Research Division
Michael Millman - Millman Research Associates
Previous Statements by WYN
» Wyndham Worldwide Management Discusses Q4 2012 Results - Earnings Call Transcript
» Wyndham Worldwide Management Discusses Q3 2012 Results - Earnings Call Transcript
» Wyndham Worldwide Management Discusses Q2 2012 Results - Earnings Call Transcript
Margo C. Happer
Thank you. Good morning. Thank you for joining us. With me today are Steve Holmes, our CEO; and Tom Conforti, our CFO.
Before we get started, I want to remind you that our remarks today contain forward-looking statements. These statements are subject to risk factors that may cause our actual results to differ materially from those expressed or implied. These risk factors are discussed in detail in our Form 10-K filed February 15, 2013, with the SEC. We will also be referring to a number of non-GAAP measures. The reconciliation of these measures to GAAP is provided in the tables to the press release and is available on the Investor Relations section of our website at wyndhamworldwide.com.
Stephen P. Holmes
Thanks, Margo. Good morning, and welcome to our first quarter call. I am pleased to report another great quarter resulting from strong operating performance across our businesses and enhanced by our disciplined shareholder-friendly capital allocation philosophy. We made great progress in the quarter on a number of strategic growth initiatives throughout our businesses. In the Hotel group, we had our best first quarter ever for room openings supported by several bulk conversions of existing hotels to our brands. This is a sign that we are gaining greater traction in multiple property owner relationships, which is expected to be a driving force for growth going forward. Nowhere is this more evident than with our Wyndham brand, where we've grown our footprint by over 30% since the first quarter of 2012, and in our managed portfolio, where we have doubled the number of properties in the past year.
We believe these achievements are due, in good part, to our Apollo initiative, which is about driving reservations to our owners at the lowest possible cost. We are making significant progress in this area. Since we launched Apollo in the first quarter of 2010, we booked more than 27 million incremental room nights and over half of those are through our direct channels. This is translating to positive owner and developer feedback and consequently, to overall system growth.
In Vacation Ownership, we continue to lead the industry in innovation, specifically, we are changing the approach of timeshare development with the Wyndham Asset Affiliation Model or WAAM. We announced the WAAM concept 4 years ago and to date, have launched WAAM 1.0 and WAAM 2.0, producing over $350 million in VOI sales. Today, I am pleased to announce that we recently signed a purchase and sale agreement, which we expect to close in the second quarter, for our first WAAM 3.0 transaction. With WAAM 3.0, we are directing a financial partner to make strategic investments for our future use. This could be either ground-up development or using inventory from our balance sheet. In this transaction, our partner will purchase from us land and work-in-process on a project located in Las Vegas and finish the development on our behalf, delivering it to us on a just-in-time basis. Total proceeds to us will be approximately $80 million.
When we first announced our asset-light model, we targeted 15% to 20% of VOI sales through this structure because we wanted to work down the inventory already on our balance sheet. The success of our already initiated WAAM deals, both for us and for our partners, moves us forward in our transition from capital-intensive product development to a greater emphasis on asset-light by effectively monetizing inventory on our balance sheet. We are in the process of completing other light-structured transactions, which we hope to announce in the near term. We believe that the majority of our timeshare sales within the next 3 to 5 years could be in an asset-light form.
The Exchange and Rentals business is off to a good start this year as well. Results in the Exchange business were especially strong as innovations introduced through rci.com drove additional revenues. With our technology advantage, we are gaining a bigger share of consumers' wallets and enhancing our services to affiliates. And with -- and the results are compelling. Last year, RCI added nearly 100 new affiliations and 150 new resorts to the portfolio. We bring better resorts to exchange members and better technology through affiliates and consumers. This is our formula to drive revenue and market share for years to come.
In the Rentals business, we continue to make great progress in our global expansion. We've increased our footprint in the U.S. vacation rental market by almost 60% since we entered the market in 2010. And the integration of our most recent tuck-in acquisitions is going very well. We consolidated 32 U.S. websites into one on the newly upgraded wyndhamvacationsrental.com (sic) [wyndhamvacationrental.com] platform, which now gives consumers the ability to easily search our entire global inventory on one website. We encourage you to visit wyndhamvacationrentals.com (sic) [wyndhamvacationrental.com] to view the array of product we have available now.