Wyndham Worldwide Corp (WYN)

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Wyndham Worldwide (WYN)

Q1 2011 Earnings Call

April 27, 2011 8:30 am ET


Stephen Holmes - Chairman, Chief Executive Officer and Chairman of Executive Committee

Margo Happer - Senior Vice President of Investor Relations

Thomas Conforti - Chief Financial Officer and Executive Vice President


Michael Millman - Millman Research Associates

Christopher Agnew - MKM Partners LLC

Chris Woronka - Deutsche Bank AG

Joseph Greff - JP Morgan Chase & Co

Charles Scholes - FBR Capital Markets & Co.

Steven Kent - Goldman Sachs Group Inc.



Welcome to the Wyndham First Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded, if you have any objections you may disconnect at this time. I will now turn the call over to Margo Happer, Senior Vice President of Investor Relations. Thank you, you may begin.

Margo 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 information. This information is subject to a number of 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 22, 2011 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. It is also available on the Investor Relations section of our website at wyndhamworldwide.com. Steve?

Stephen Holmes

Thank you, Margo. Good morning, everyone, and thanks for joining us. We are starting the year on a high note. First quarter revenues increased 7% and adjusted EBITDA increased 13%. Adjusted EPS for the quarter grew 29% and came in $0.03 above the top end of our guidance range.

These results reflect continued economic improvement in the U.S. and strong operational performance in each of our businesses. They also reflect the growing benefit from our commitment to ongoing share repurchases. Performance was strong across the company with each of our businesses delivering solid growth in adjusted EBITDA.

In the Lodging business, RevPAR [revenue per available room] was up a strong 7%, with gains in both occupancy and rates. Wyndham Exchange and Rentals delivered another great quarter. In Vacation Ownership, we saw a good growth in property management revenues and continuing improvement in delinquency and default rates in the Loan portfolio.

Free cash flow was robust in the quarter at over $1 per share. We completed our most successful timeshare securitization deal and also repurchased most of our outstanding convert and warrants, reducing our full-year diluted share count by 2 million shares.

And finally, our board authorized a $500 million increase to our share repurchase program. Overall, great results across the board.

The World Travel and Tourism Council forecast that over the next 10 years, the global travel and tourism economy will grow by 4.3% per year. This implies the travel and tourism share of the global economy will rise to just over 10%. We believe that, that growth will be broad-based, spanning many regions and product offerings. We are strongly positioned to benefit from that growth.

Our product portfolio is geographically and demographically diverse. The breadth of our offerings protected our results in the downturn and is now supporting our growth in the recovery. And it will continue to fuel our expansion for years to come.

Let me spend a moment on some recent announcement in our space that have generated a lot of questions from investors. The first is the announced spinoff of Marriott's Timeshare business. Over the next several months, we will all hear more about the way this transaction will be structured, and we look forward to the opportunity for investors to get more familiar with the Timeshare business.

While recent private transaction has been priced around 10x EBITDA, existing multiples ascribed to timeshare businesses of public companies are still far below the valuations that existed prior to the economic downturn.

Another recent development was the filing on March 11 by HomeAway, Inc. for the $230 million initial public offering. HomeAway is an online vacation rental company with 2010 revenues of $168 million. The vacation rentals market is a large and highly fragmented market with significant growth opportunities globally.

There are 2 operating models in this market today. First is the rent by owner or listings model. In this model, the vacation homeowner lists his or her property on a website for a listing fee. The listings company refers the potential renter back to the homeowner to inquire about availability, make the reservation and process payment.

The second model is the professionally managed model. This is primarily how our European rentals and ResortQuest businesses operate. Of course, we also list properties on the Internet and over 60% of our bookings are transacted online. We provide real-time, bookable inventory that we hand-select and annually inspect.

Homeowners provide homes to us primarily on an exclusive and commissionable basis. Unlike the listings model, the consumer rarely deals with the homeowner. We process all payments and handle customer service for their stay. When in vacations model leverages our years of expertise in sales, marketing and vacation rental operations. From check-in to check out, consumers can book with trust and confidence because Wyndham is standing behind them every step of the way.

Our acquisition of ResortQuest, combined with our leadership position in Europe, makes us the world's largest company in the professionally managed segment of this growing market. Revenues from our Vacation Rental businesses in 2010 were approximately $500 million. We have approximately 93,000 properties in 32 countries, representing over 51,000 homeowners. We are highly trusted by over 1 million families who vacation with us each year. It's an excellent base for continued growth.

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