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Wyndham Hotels & Resorts reports strong Q2 2024 results

Wyndham Hotels & Resorts has reported Q2 2024 earnings of comparable adjusted EBITDA growth, despite a normalizing domestic RevPAR environment, driven by solid net room growth, higher royalty rates and ancillary fee growth, as well as a benefit from insurance recoveries.

July 25th, 2024

In addition, the company reaffirmed its long-term growth-adjusted EBITDA outlook of 7 to 10 per cent and raised its FY 2024 EPS outlook.

Additional highlights include:

System-wide net room growth of 4 per cent year-over-year, including 1 per cent growth in the U.S. and 8 per cent growth internationally.
Opened over 18,000 rooms globally, including over 7,000 in the U.S., which represented a year-over-year increase of 16 per cent.
Opened the first ECHO Suites Extended Stay by Wyndham in Spartanburg, S.C.
Awarded 180 development contracts globally, including 96 contracts in the U.S., which represented an increase of 33 per cent year-over-year.
Grew our development pipeline by 7 per cent year-over-year to a record-level 245,000 rooms, the 16th consecutive quarter of sequential growth.
Global RevPAR growth of 2 per cent year-over-year in constant currency, reflecting flat growth in the U.S. and 7 per cent growth internationally.
Ancillary revenue growth of 6 per cent year-over-year.
Returned $162 million to shareholders through $131 million of share repurchases and quarterly cash dividends of $0.38 per share.
Completed the repricing of its term loan B Facility, reducing its interest rate by 60 bps to SOFR plus 1.75 per cent, and upsizing the facility by $400 million.
Named one of the World's Most Ethical Companies in 2024 by Ethisphere for the 4th time.

A summary of the second quarter 2024 results is as follows. Note that the variability in marketing funds favourably impacted the year-over-year comparability of adjusted EBITDA by $10 million:

Fee-related and other revenues increased by $8 million year-over-year, reflecting increases in royalties and franchise fees, marketing revenues, and ancillary fee streams.
On a comparable basis, adjusted EBITDA grew 6 per cent and adjusted diluted EPS grew 12 per cent.
Generated year-to-date adjusted free cash flow of $171 million.

As it relates to its full-year 2024 outlook:

The company is updating its RevPAR growth outlook to be essentially flat year-over-year.
Consequently, its outlook for fee-related and other revenue is now $1.41 to $1.43 billion.
The company is also revising its adjusted net income outlook to $338 million to $348 million to reflect higher interest expense associated with the upsizing of its term loan B, partially offset by savings on the spread reduction from the repricing.
The company is increasing its adjusted diluted EPS projection to $4.20 to $4.32 to account for its second-quarter share repurchase activity, partially offset by the slight decline in its adjusted net income outlook. This outlook is based on a lower diluted share count of 80.6 million shares, and, as usual, assumes no additional share repurchases or incremental interest expense associated with any potential borrowing activity to maintain its leverage at 3.5x.
There are no changes to its outlook for net room growth, adjusted EBITDA or adjusted free cash flow conversion.
The company is increasing its expectation for development advance spend by approximately $20 million to $110 million.
The company is planning to finish the year at a leverage ratio of at least 3.5x, which provides approximately $500 million of capital available for investment in the business or share repurchases this year, only roughly half of which has been allocated through the end of the second quarter.