Yahoo Finance Wyndham Hotels & Resorts Inc (WH) Q1 2024 Earnings Call Transcript Highlights: Strategic ...
Share Repurchase Authorization: Increased by $400 million.
Room Openings: Over 13,000 rooms globally, 27% more than last year.
Franchisee Retention Rate: Increased to 95.6%, up by 30 basis points.
Net Room Growth: Record 3.7% increase.
Development Pipeline: Grew by 8% to a record 243,000 rooms.
Domestic System Growth: 3.3% in midscale and above segments.
International Net Rooms: Increased by 1% sequentially and 8% versus prior year.
Domestic RevPAR: Down 5% compared with 2023.
International RevPAR: Increased 14% to prior year in constant currency.
Ancillary Revenues: Increased 8% during the first quarter.
Adjusted EBITDA: $141 million, with a 3% growth on a comparable basis.
Adjusted Diluted EPS: $0.78, up 1% on a comparable basis.
Free Cash Flow: $102 million, up 5% year-over-year.
Shareholder Returns: $89 million through share repurchases and dividends.
Total Liquidity: Over $580 million at quarter end.
Net Leverage Ratio: 3.4x, within target range.
Adjusted Diluted EPS Projection: Increased by $0.07 to a range of $4.18 to $4.30.
Full-Year Global RevPAR Growth: Expected to be 2% to 3%.
Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Geoff, Michele, I know you talk to your developers and developer community frequently. I would love to hear from you about some of your recent conversations that you had with them, particularly after March 11, the date that Choice decided to stop the pursuit of buying you. Are you seeing or are they communicating to you an acceleration or a pivot with respect to development so whatever pause you may have seen, has that reversed? And is there anything within these conversations that may be more brand-specific or conversion-specific that you would call out? A: Yes. Thanks, Joe. Absolutely. We are seeing a lot less uncertainty out there in the development community. We are talking to our franchisees, obviously, daily. Our teams had great successes, I think, was your question last quarter on the first question off. In terms of could last quarter have been better, we had a great fourth quarter, a record full year of openings. And we've had, again, our largest first quarter of openings since going public 6 years ago. But certainly, to your question with the deal noise dissipating, owners who are uncertain on committing to deals with us, those who did not want to wind up in the Choice system have agreed to sign. And I think there's no better example of that than the dozen WaterWalk conversions that we did this month.
Q: Pursuant to the subject of NUG, I wanted to go just a little bit further. One of the things we've been seeing and I think the deal that you included in your announcement exemplifies it where we're seeing some affiliate type deals. Can we just talk more about the NUG environment generally? Should we be seeing more of those kinds of deals? And give us a little bit of understanding about the revenue intensity of those kinds of deals because it seems to be more than just yourselves more of an industry trend. A: Sure. I mean, I think if you look at our pipeline, what you continue to see, David, is it be weighted more to upscale and higher RevPAR brands like WaterWalk, which I'll talk about in a second. I mean, if you look at our openings this quarter, we'll always be leading in the economy segment, but when it comes to the midscale and above segments, our opens in the first quarter, midscale, upper midscale, upscale, they were up 30%. Our executions in terms of what our teams are selling was more in that revenue intense segment. It was up 70% year-over-year in terms of executions. And you're seeing that reflected certainly as we've laid out in our IP, in our pipeline, our midscale and above pipeline in the more revenue-intense segments, which not only have a higher fee PAR attached to them, but they also have a higher royalty fee, ability to drive that royalty fee higher has gone up.
Q: In your prepared remarks, you guys called out domestic occupancy finishing at 90% of 2019. Can you maybe help us just get a sense for the remaining 10 points, where are they coming from, whether it's geographies or segments? A: The remaining 10 points of occupancy are going to come from really all over the United States and then the Southeast Asia China regions, both of which in the U.S. and in Asia Pac, we continue to index below the 2019 levels. We see it not just in midweek, but also in weekend today. So we really think that there's opportunity across the globe to improve occupancy. I think you'll see the rest of the year RevPAR forecast assumes that we're going to pick up another point of occupancy. I don't think it's specific to any one particular region.
Q: Just my first question, I want to go back to net unit growth, but focus on key money in the development advanced notes. Maybe help us understand what are the returns you're targeting on those investments? And then secondarily, we can see the dollars going out the door in the cash flow statement, but maybe help us understand what percentage of deals that are either signed or opening are you actually putting money into. A: Good morning. From a return perspective, we are always targeting hurdle rates that are well in excess of our cost of capital, and that is part of our underwriting process. Geoff just talked about moving into the higher RevPAR chain scales and over 75% of the deals that we funded in the quarter were in this category. And then, of course, we also are still starting to see some of our ECHO funding go out the door as well.
Q: The infrastructure spend and the implied lift that you're looking for in the rest of the year from that segment. Can you just give us a sense of what you think that you did in the 1Q? Or what sort of delta or lift you got in the 1Q from that segment? A: It is a great question, Brandt, in terms of visibility. There's a slide in our investor presentation that we have seen an uptick in federal government allocations from 15% last year to nearly 40% of the incremental $640 billion spend of the $1.5 trillion bill. And it's mostly to the states, but only a fraction of that has been spent from a visibility standpoint. I mean, when you think about those big bridge and road and train projects and airport projects, the shovels haven't hit the ground.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
