Wyndham Hotels & Resorts has reported its fourth quarter and full-year 2022 earnings including a strong close to the year where the company delivered adjusted (earnings before interest, taxes, depreciation, and amortization) EBITDA that reportedly exceeded outlooks. Wyndham generated significant free cash flow and returned a record amount of capital to shareholders. Additional highlights include:
- Global RevPAR grew 15 per cent in the fourth quarter and 20 per cent for the full-year compared to 2021 and exceeded 2019 levels by 16 per cent in the fourth quarter and 7 per cent for the full-year.
- System-wide net room growth of 4 per cent, including 1 per cent of growth in the U.S. and 9 per cent of growth internationally.
- U.S. development signings increased 35 per cent for the full-year, including 170 contracts awarded for ECHO Suites, the new extended-stay brand, in just 9 short months since its launch last March.
- Grew development pipeline 12 per cent year-over-year to a record-level 219,000 rooms, the 10th consecutive quarter of sequential growth.
- Returned record-high $561 million to shareholders for the full-year through $445 million of share repurchases and a quarterly cash dividend of $0.32 per share, representing 7 per cent of its market cap; since spin-off in June 2018, the company has repurchased 15 per cent of its outstanding common stock.
- Board authorized a nine per cent increase of quarterly cash dividend to $0.35 per share beginning with the dividend expected to be declared in first quarter 2023.
- Qualified as a constituent of the 2022 Dow Jones Sustainability Index.
A summary of fourth quarter and full-year 2022 results is as follows. Note that the sale of Wyndham’s two owned hotels and the exit of our select-service management business unfavourably impacted the year-over-year comparability of fee-related and other revenues and adjusted EBITDA by $38 million and $12 million, respectively for the fourth quarter and $125 million and $37 million, respectively for the full-year.
- On a comparable basis, fee-related and other revenue grew 12 per cent and 16 per cent in the fourth quarter and full-year, respectively.
- On a comparable basis, adjusted EBITDA grew 6 per cent and 14 per cent in the fourth quarter and full-year, respectively.
- On a comparable basis, adjusted diluted EPS grew 16 per cent and 29 per cent in the fourth quarter and full-year, respectively.
- Marketing fund revenues exceeded expenses by $20 million; the company has now reported recapturing $38 million of the $49 million investment made back in 2020 during COVID.
- Free cash flow of $360 million, converting adjusted EBITDA at a rate of 55 per cent, in line with the company's outlook.
- Ended the year with $161 million of cash on the balance sheet, approximately $900 million of total liquidity and a net leverage ratio of 2.9 times, just below our 3 to 4 times stated target range.
The full-year 2023 outlook:
- Net rooms growth of 2 per cent to 4 per cent.
- Year-over-year global RevPAR growth of 4 per cent to 6 per cent, or 6 per cent to 8 per cent above 2019 levels, a data point that we still consider to be relevant since the select-service space, which represents over 90 per cent of our U.S. portfolio, recovered to pre-COVID levels much faster than the industry's full-service space.
- Fee-related and other revenues are expected to be $1.38 billion to $1.41 billion.
- Wyndham reports that marketing, reservation and loyalty funds to contribute approximately $10 million to adjusted EBITDA, which is $10 million less than the $20 million contributed in 2022 thereby depressing our year-over-year growth by 160 basis points. With this $10 million, we will have fully recaptured the investment back in 2020 during COVID and thereafter, would not expect any meaningful impact to results on an annual basis.
- Adjusted EBITDA of $650 million to $660 million.
- Adjusted net income of $337 million to $349 million.
- Adjusted diluted EPS is expected to be $3.84 to $3.98, based on a diluted share count of 87.7 million that excludes any potential share repurchases.
- Free cash conversion from adjusted EBITDA of 50 per cent to 55 per cent.
Year-over-year growth rates are not comparable due to the exit of the company’s select-service management business, the sale of its two owned hotels during 2022 and the variability in marketing funds due to the COVID support that Wyndham provided to owners during 2020. On a comparable basis, the 2023 outlook reflects approx. seven per cent growth for fee-related and other revenues and approx. five per cent growth for adjusted EBITDA at the midpoints.
