Wyndham Worldwide Corp (WYN)

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Wyndham Worldwide (WYN)

Q3 2012 Earnings Call

October 24, 2012 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


Steven E. Kent - Goldman Sachs Group Inc., Research Division

Joseph Greff - JP Morgan Chase & Co, Research Division

Carlo Santarelli - Deutsche Bank AG, Research Division

Christopher Agnew - MKM Partners LLC, Research Division

Charles Patrick Scholes - SunTrust Robinson Humphrey, Inc., Research Division

Nikhil Bhalla - FBR Capital Markets & Co., Research Division

Robert A. LaFleur - Cantor Fitzgerald & Co., Research Division

Harry C. Curtis - Nomura Securities Co. Ltd., Research Division

Michael Millman - Millman Research Associates



Welcome to the Wyndham Worldwide Third 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. You may begin.

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 just 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-Q filed July 25, 2012, with the SEC.

We will also be referring to a number of non-GAAP measures. The reconciliation of these members -- 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 P. Holmes

Thanks, Margo, and good morning, everyone. Our third quarter results reflect continued strong operations, as well as our ongoing commitment to deploy capital to increase shareholder value. While there's some noise related to FX in the numbers this quarter, especially in Exchange and Rentals, on a constant currency basis, revenues and adjusted EBITDA increased 6%, and adjusted earnings per share increased 24%.

Each of our business units exceeded our expectations. The Wyndham Hotel Group benefited from domestic RevPAR increases. Wyndham Exchange and Rentals continued to deliver solid results despite the economic turmoil in Europe. And our timeshare business, Wyndham Vacation Ownership, continued to drive tour flow and VPG growth while delivering on our new owner goals.

In terms of our capital allocation, in addition to 2 tuck-in acquisitions we completed in the quarter, we used $133 million to purchase 2.6 million shares of our stock during the quarter. Year-to-date, we have purchased 10.9 million shares for $522 million. This reflects our consistently strong cash flow and our confidence in the company's prospects. We continue to believe that our stock is a great investment. Our capital allocation philosophy is consistent and is built to drive shareholder value. We will invest in our core businesses, pay dividends, repurchase shares and do opportunistic accretive acquisitions.

Now moving to our business unit review. At the Hotel group, industry fundamentals continue to improve, albeit at a slower pace. While RevPAR recovery seems to be moderating, we believe development opportunities are expanding. This bodes well for room growth as we go forward. With our strong array of brands, we are exceptionally well positioned to capture franchise and management opportunities, giving owners the ability to choose the right flag to best maximize their assets.

For example, in India, we led with Ramada, an established international brand, and then introduced the Wyndham, Days Inn and Howard Johnson brands. In China, we began in the '90s with Days Inn and Howard Johnson master franchises and added Super 8, again a master franchise, and then Ramada as a direct franchise in 2004. Since then, we have introduced Ramada Encore, TRYP and Wyndham, resulting in a total presence of over 63,000 rooms.

Looking at more recent opportunities. I just returned from a 7-day trip to Brazil and Uruguay to visit the large customers and prospects for both our RCI and hotel businesses. There is strong hotel and timeshare growth in Brazil right now, and our participation in that growth is another great example of how wide brand footprint creates enhanced development opportunities. We are in Brazil with our TRYP by Wyndham brand and have seen great demand for our other offerings, including Ramada, Super 8, Days Inn, Howard Johnson and Wyndham.

Developers understand the value of our distribution capabilities, as well as the opportunity of our multiple brand strategy, and they are eager to partner with us. Building strategic alliances with multiunit developers has proven successful in growing international regions. Also, in the Hotel group, we continue to make excellent progress on Apollo, our series of technology and business initiatives that aim to improve the value proposition to our franchisees by maximizing our system contribution.

In August, we relaunched the Wyndham Hotel and Resorts website, completing the most complex project of our brand.com initiative. We have now completely revamped 13 brand websites, significantly enhancing features, functionality and content for over 7,000 properties. Room nights resulting from brand.com initiative are up 17% versus prior year on both a year-to-date and a quarterly basis. In another phase of Apollo, we are embracing the significant shift to mobile devices by improving our click-to-chat functionality, which simplifies the booking process and enhances the consumer experience.

Now moving to Wyndham Exchange and Rentals. During the seasonally largest quarter of the year, the team continued to do a great job, despite the challenges in Europe and limited growth in the broader timeshare industry. Four of our 5 European rental businesses had increases in transaction volume without significant discounting. This speaks to our leadership in the industry and our ability to grow transactions.

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