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WYND costs

Railman83

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I’ve seen multiple posts about WYND stock as an investment. I’m thinking they just got a $325M loan line to carry thru the short term and if a pinch comes, they have a dividend to cut.

What I wonder is how much costs are borne by owners vs. Wyndham? The management and maintenance for resorts all seem covered from owner mf, including, one presumes some reserve for owner delinquency. It therefore seems they will take a lower hit than a comparable hotel chain who pays all costs out of revenue.

I get that if owners bail they have a problem, but I suspect wit CWS and Ovations and other programs they have inoculated themselves a bit more than during the last recession.

Thoughts?
 

Eric B

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Don't forget that WYND also has RCI, The Registry Collection, AFVC, DAE, etc., as revenue sources that are likely taking a hit right now due to the reduction in exchanges being consummated. In addition, their sales and extra holidays rental revenue streams must be lower. While owners still pay MFs, the majority of those go to HOAs to cover costs; WYND gets some of that where they are providing the management and they also get the program fees. I'm not sure I could estimate which would come out better in this type of situation.
 

dgalati

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I’ve seen multiple posts about WYND stock as an investment. I’m thinking they just got a $325M loan line to carry thru the short term and if a pinch comes, they have a dividend to cut.

What I wonder is how much costs are borne by owners vs. Wyndham? The management and maintenance for resorts all seem covered from owner mf, including, one presumes some reserve for owner delinquency. It therefore seems they will take a lower hit than a comparable hotel chain who pays all costs out of revenue.

I get that if owners bail they have a problem, but I suspect wit CWS and Ovations and other programs they have inoculated themselves a bit more than during the last recession.

Thoughts?
A divi cut is very possible and is a great way to hold on to cash if needed. I would be suprised if Wyndham continues Ovations. Why take on the additional expense of maintenance fees if they have no sales for the Ovations inventory?
 

Railman83

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A divi cut is very possible and is a great way to hold on to cash if needed. I would be suprised if Wyndham continues Ovations. Why take on the additional expense of maintenance fees if they have no sales for the Ovations inventory?
If you are going to take it back anyway in foreclosure it would be cheaper to deed back
 

dgalati

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If you are going to take it back anyway in foreclosure it would be cheaper to deed back
If loan is paid in full Wyndham cares less if maintenance fees are current unless you are booking a reservation or selling. The HOA's have to foreclose on owners that are delinquent on maintenance fees. This adds to higher Maintenance fees for all the other owners because the value of a timeshare is usually Less then the cost of a cup of coffee. If Wyndham doesn't have enough sales to support additional Ovations inventory they will stop taking back. Especially if cash flow is tight. Why would they add the extra expense of maintenance fees on inventory that cant be sold?
 

Fredflintstone

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I do see short term pain with the entire travel industry. As for WYND, there may be a dividend cut but in the long haul, they will do well. Why? They have 875 k plus owners that will be itching to spend money once things stabilize. Even during this down turn, the fees are still flowing in.

What folks forget was there were more millionaires created in the Great Depression because as people ran for the hills, those who bought up cheap were well rewarded later on.

There are debates on whether we will see hyperinflation or deflation. My guess is inflation and in inflation gold and real estate fair the best. In deflation, the opposite is true.

All I know is when this is over the timeshare companies will fair the best BECAUSE they have a herd of owners having to fork out. Yes, some will be lost but overall the rest will remain paying all day long.

I know their arm businesses like RCI are still raking it in in fees. It’s a huge profit business.

I can’t say the same for Cruise industries as they don’t have locked in owners. It’s going to be a tough road for them going forward. Airlines ditto. Most will recover but at a much longer period of time then timeshare companies with their locked in owner/payers.


Sent from my iPad using Tapatalk
 

Fredflintstone

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I should say my current strategy is I have an on stop buy at 15. I bought the majority of my position (14 k) at 15 on March 23.

Yes, I have lost on the 6k balance. I paid between 39.75 to 27 with those. However, I am still a bit ahead at 24 current price.

I am a long term holder. I still think they are going to do great in a couple of years.


Sent from my iPad using Tapatalk
 

HitchHiker71

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The current COVID-19 scenario is something that is incomparable to anything else in Wyndham's history. If this drags on and we see spikes and reinfections that further limit travel over the longer term - meaning many months into the future - which is a real possibility - I predict Wyndham will enter Chapter 11 bankruptcy by the end of the calendar year 2020. Why? Let's look at Wyndham's numbers from last year:

1588689319835.png


So Wyndham made 507MM on revenues of 4.043BB, with expenses of 3.299B. How does Wyndham's revenues break down? 46% VOI (Vacation Ownership Interests - developer sales), 40% fee based revenues (MFs, Program Fees, RCI booking fees, etc.). 14% from "other" revenue sources. So the majority of revenues are sourced from sales, which has tanked completely as we all know. However, their expenses have not tanked. Expenses net a cash burn of 3.3B/12 = 275MM per month. Let's assume for a moment that Wyndham can reduce their cash burn by 30% - which is quite aggressive in reality - that puts 275MM*0.7=~193MM per month. Let's round it up to 200MM/month for ease of analysis. At the end of 2019, Wyndham total cash and cash equivalents of 355MM on hand. In March, Wyndham drew down on a 1B credit facility, and they just secured additional 325MM at 85% draw - or 276.25MM. At the end of Q1 2020 - Wyndham stated, after drawing down on their 1B credit line, they had "a little over 1B in cash and cash equivalents on hand." That means they burned through whatever revenues they pulled in Q1 2020 - plus the majority of the 355MM they had on hand at year end - which makes sense as they would have burned through 275MMx3=825MM in Q1 2020. Let's assume they started paring back operations in March in a big way - so their burn would probably decrease to 750MM during Q1 2020. Point being, they have about 1.2BB in cash and cash equivalents including the credit facility drawdown and the 325MM securitized facility. At a 200MM/month burn rate - with no sales revenues to speak of, that gives them six months maximum before their coffers run dry. Even if we assume partial normalcy - a new normal - that's not going to be anywhere close to the old normal any time soon - and I don't see anyone buying luxury items in the foreseeable future with unemployment close to 20% realistically - and GDP taking a 4.8% hit in Q1 2020 - with a worse number expected for Q2 2020. Wyndham is in trouble IMHO, along with every other debt laden organization out there with notable declining revenue to support the debt:

1588690828151.png
 

Eric B

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The current COVID-19 scenario is something that is incomparable to anything else in Wyndham's history. If this drags on and we see spikes and reinfections that further limit travel over the longer term - meaning many months into the future - which is a real possibility - I predict Wyndham will enter Chapter 11 bankruptcy by the end of the calendar year 2020. Why? Let's look at Wyndham's numbers from last year:

View attachment 20190

So Wyndham made 507MM on revenues of 4.043BB, with expenses of 3.299B. How does Wyndham's revenues break down? 46% VOI (Vacation Ownership Interests - developer sales), 40% fee based revenues (MFs, Program Fees, RCI booking fees, etc.). 14% from "other" revenue sources. So the majority of revenues are sourced from sales, which has tanked completely as we all know. However, their expenses have not tanked. Expenses net a cash burn of 3.3B/12 = 275MM per month. Let's assume for a moment that Wyndham can reduce their cash burn by 30% - which is quite aggressive in reality - that puts 275MM*0.7=~193MM per month. Let's round it up to 200MM/month for ease of analysis. At the end of 2019, Wyndham total cash and cash equivalents of 355MM on hand. In March, Wyndham drew down on a 1B credit facility, and they just secured additional 325MM at 85% draw - or 276.25MM. At the end of Q1 2020 - Wyndham stated, after drawing down on their 1B credit line, they had "a little over 1B in cash and cash equivalents on hand." That means they burned through whatever revenues they pulled in Q1 2020 - plus the majority of the 355MM they had on hand at year end - which makes sense as they would have burned through 275MMx3=825MM in Q1 2020. Let's assume they started paring back operations in March in a big way - so their burn would probably decrease to 750MM during Q1 2020. Point being, they have about 1.2BB in cash and cash equivalents including the credit facility drawdown and the 325MM securitized facility. At a 200MM/month burn rate - with no sales revenues to speak of, that gives them six months maximum before their coffers run dry. Even if we assume partial normalcy - a new normal - that's not going to be anywhere close to the old normal any time soon - and I don't see anyone buying luxury items in the foreseeable future with unemployment close to 20% realistically - and GDP taking a 4.8% hit in Q1 2020 - with a worse number expected for Q2 2020. Wyndham is in trouble IMHO, along with every other debt laden organization out there with notable declining revenue to support the debt:

View attachment 20192

Kind of nice seeing some actually data to supplement the speculation. It makes me wonder how the constituent parts would do on their own if separated from sales. That is, would Club Wyndham, WorldMark, and RCI be able to continue operating without or separate from the sales that drives Wyndham Vacations profits? I get that it would likely eliminate the VIP benefits I get, but most of my ownership in Club Wyndham is at Bali Hai, which is about a third of the cost of CWA, so I can live without them and I don't use Club Pass anyway. What I have in WorldMark is all resale, so the loss of TravelShare would have no effect, and I wouldn't use Club Pass there, either. I'd miss having the opportunity to chat with some representatives for a few hours and get free coffee, a few pastries and some gift cards, but think I could put up with that in the end.
 

HitchHiker71

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Kind of nice seeing some actually data to supplement the speculation. It makes me wonder how the constituent parts would do on their own if separated from sales. That is, would Club Wyndham, WorldMark, and RCI be able to continue operating without or separate from the sales that drives Wyndham Vacations profits? I get that it would likely eliminate the VIP benefits I get, but most of my ownership in Club Wyndham is at Bali Hai, which is about a third of the cost of CWA, so I can live without them and I don't use Club Pass anyway. What I have in WorldMark is all resale, so the loss of TravelShare would have no effect, and I wouldn't use Club Pass there, either. I'd miss having the opportunity to chat with some representatives for a few hours and get free coffee, a few pastries and some gift cards, but think I could put up with that in the end.

I wonder aloud if this "new normal" may net a restructuring of Wyndham Destinations altogether. Along the lines of operations vs sales and marketing entity separation. The operations division (Owner Care, Finance, IT, etc.) pretty much supports itself via the MFs and underlying HOAs along with the Program Fees (which includes the cost of the VIP program to the best of my understanding). The sales and marketing division covers a mix of continued developer investments along with self-preservation of the division itself (commissions, salaries, etc.). If the sales aspects of timesharing are going to be effectively dead for the foreseeable future - then they will need to re-think their entire approach. This whole COVID-19 scenario could easily end up being the change catalyst that results in major changes to timeshare sales and marketing. Only time will tell.
 

Richelle

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I wonder aloud if this "new normal" may net a restructuring of Wyndham Destinations altogether. Along the lines of operations vs sales and marketing entity separation. The operations division (Owner Care, Finance, IT, etc.) pretty much supports itself via the MFs and underlying HOAs along with the Program Fees (which includes the cost of the VIP program to the best of my understanding). The sales and marketing division covers a mix of continued developer investments along with self-preservation of the division itself (commissions, salaries, etc.). If the sales aspects of timesharing are going to be effectively dead for the foreseeable future - then they will need to re-think their entire approach. This whole COVID-19 scenario could easily end up being the change catalyst that results in major changes to timeshare sales and marketing. Only time will tell.

I've always felt they should allow existing owners to buy more points online. They should sell the Discovery packages online for new potential owners. But that would mess with their sales model and salespeople wouldn't get their commissions. I do hope all this does make a difference and change the way they do business. I don't see them having many sales presentations. I could see them pushing the surveys more, so they can sell from the comfort of the owner's room. They also would not have to worry as much about social distancing 25 people in one room. They do need another venue to sell points, at least in the short term. Online sales may be one option.
 

dgalati

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I've always felt they should allow existing owners to buy more points online. They should sell the Discovery packages online for new potential owners. But that would mess with their sales model and salespeople wouldn't get their commissions. I do hope all this does make a difference and change the way they do business. I don't see them having many sales presentations. I could see them pushing the surveys more, so they can sell from the comfort of the owner's room. They also would not have to worry as much about social distancing 25 people in one room. They do need another venue to sell points, at least in the short term. Online sales may be one option.
Who cares about the sales weasels getting a commission? Wyndham will have to change their sales model if they want to survive. Same as car dealers not willing to or embracing change. On line sales is the future. If new car dealers and Wyndham don't change their business model it will cost them in near future.
 
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cbyrne1174

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They also need to change their type of ownership. Not everyone wants a deed or a trust. They should sell memberships as right to use in increments of 5 years and make it cheaper per year the longer the person signs. They should also keep a VIP model for how many points you buy rights to.
 

Richelle

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Who cares about the sales weasels getting a commission? Wyndham will have to change their sales model if they want to survive. Same as car dealers not willimg to embracing change will cost them in near future.

I personally don't care about their commission, and I don't think many here would care either. Wyndham cares though. Or at least they did before all this. I was once told that 93% of their points sales come from resorts, so they are very protective of that area. I was told this because I was one of 100 people that told the owner to rescind. After talking to them for a while, they asked for a telesales referral. I gave them one. They were not happy when they found out I told him to rescind and then sent him to telesales. They didn't care that I was only one of a hundred voices. You would think they would be happy they at least salvaged the sale. There were 100 other people telling them to run away or buy resale. But nope, they did not care. After that, there was a rule put out that if a telesales rep finds out an owner is in their rescission period or currently at a resort, they were not allowed to even speak with them until they left the resort or the rescission period is over. Telesales is not as well protected, but I think things will change for them, at least in the short term, since they will be one of their few sources of revenue at the moment.

What I would love to see is piggyback deeds come up for sale without the requirement to buy points at regular cost. if it counted towards VIP, they would sell out fast. It would be a quick way to unload deeds currently in default.
 

Richelle

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They also need to change their type of ownership. Not everyone wants a deed or a trust. They should sell memberships as right to use in increments of 5 years and make it cheaper per year the longer the person signs. They should also keep a VIP model for how many points you buy rights to.
That was one of the things they said they were working on at the Austin meeting. In my opinion, it would have to be a stripped-down version like Discovery. Otherwise, owners who made the commitment to become full-fledged owners will ask why they should keep their ownership when they can have a commitment-free option that is exactly the same as owning.
 

cbyrne1174

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Not if a deed is cheaper in the long run. They could set the break even point to 20 to 25 years.
 

OutSkiing

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The current COVID-19 scenario is something that is incomparable to anything else in Wyndham's history. If this drags on and we see spikes and reinfections that further limit travel over the longer term - meaning many months into the future - which is a real possibility - I predict Wyndham will enter Chapter 11 bankruptcy by the end of the calendar year 2020. Why? Let's look at Wyndham's numbers from last year:

View attachment 20190

So Wyndham made 507MM on revenues of 4.043BB, with expenses of 3.299B. How does Wyndham's revenues break down? 46% VOI (Vacation Ownership Interests - developer sales), 40% fee based revenues (MFs, Program Fees, RCI booking fees, etc.). 14% from "other" revenue sources. So the majority of revenues are sourced from sales, which has tanked completely as we all know. However, their expenses have not tanked. Expenses net a cash burn of 3.3B/12 = 275MM per month. Let's assume for a moment that Wyndham can reduce their cash burn by 30% - which is quite aggressive in reality - that puts 275MM*0.7=~193MM per month. Let's round it up to 200MM/month for ease of analysis. At the end of 2019, Wyndham total cash and cash equivalents of 355MM on hand. In March, Wyndham drew down on a 1B credit facility, and they just secured additional 325MM at 85% draw - or 276.25MM. At the end of Q1 2020 - Wyndham stated, after drawing down on their 1B credit line, they had "a little over 1B in cash and cash equivalents on hand." That means they burned through whatever revenues they pulled in Q1 2020 - plus the majority of the 355MM they had on hand at year end - which makes sense as they would have burned through 275MMx3=825MM in Q1 2020. Let's assume they started paring back operations in March in a big way - so their burn would probably decrease to 750MM during Q1 2020. Point being, they have about 1.2BB in cash and cash equivalents including the credit facility drawdown and the 325MM securitized facility. At a 200MM/month burn rate - with no sales revenues to speak of, that gives them six months maximum before their coffers run dry. Even if we assume partial normalcy - a new normal - that's not going to be anywhere close to the old normal any time soon - and I don't see anyone buying luxury items in the foreseeable future with unemployment close to 20% realistically - and GDP taking a 4.8% hit in Q1 2020 - with a worse number expected for Q2 2020. Wyndham is in trouble IMHO, along with every other debt laden organization out there with notable declining revenue to support the debt:

View attachment 20192
I wonder where sales commissions and the cost of keeping the sales offices going come into the p&l? The marketing line? I always thought sales expense was over half of the cost of developer purchased recycled inventory. I am sure commissions have hit $0 which would save on expenses.
Not that I’ve felt Wyndham stock was a big performer. I guess I’ve overlooked dividends.

Bob
 

Richelle

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Not if a deed is cheaper in the long run. They could set the break even point to 20 to 25 years.

Many don’t care about the long term. They are looking at what it is now. Someone who paid a membership fee to get something I spent $20,000 for. If they limit it like they do Discovery, it would keep owners happy, and give the sales people another way to see the product. “If you pay $20,000, you’ll never have to pay a membership fee every again AND you’ll get access to even more resorts”. They will conveniently leave out the part about the monthly maintenance fees.
 

cbyrne1174

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I'm just suggesting that they offer multiple ways of ownership. DVC is a right to use system where it expires after 50 years. I like the idea of having an expiration date on being a member.
 

Richelle

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I'm just suggesting that they offer multiple ways of ownership. DVC is a right to use system where it expires after 50 years. I like the idea of having an expiration date on being a member.

Can I ask why you l.ike the expiration date?
 

cbyrne1174

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To release me from liability when I'm too old to travel. In 50 years, I'll be 80 years old.
 

HitchHiker71

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Kind of nice seeing some actually data to supplement the speculation. It makes me wonder how the constituent parts would do on their own if separated from sales. That is, would Club Wyndham, WorldMark, and RCI be able to continue operating without or separate from the sales that drives Wyndham Vacations profits? I get that it would likely eliminate the VIP benefits I get, but most of my ownership in Club Wyndham is at Bali Hai, which is about a third of the cost of CWA, so I can live without them and I don't use Club Pass anyway. What I have in WorldMark is all resale, so the loss of TravelShare would have no effect, and I wouldn't use Club Pass there, either. I'd miss having the opportunity to chat with some representatives for a few hours and get free coffee, a few pastries and some gift cards, but think I could put up with that in the end.

Today Wyndham released their Q1 2020 results, here's a link to the full press release:


Here's the bullet points from the release:

• Net VOI sales of $90 million; gross VOI sales of $413 million(1)
• Diluted loss per share from continuing operations of $1.54 (adjusted diluted loss per share of $0.98)
• Net loss from continuing operations of $134 million and negative adjusted EBITDA of $44 million
• In anticipation of increased defaults due to the impact of COVID-19, a $225 million provision charge impacted revenue, resulting in a $170 million negative impact to adjusted EBITDA
• Completed a $325 million private securitization in April
• Net cash provided by operating activities from continuing operations of $57 million (negative adjusted free cash flow of $78 million)
• Expect net cash provided by operating activities from continuing operations and adjusted free cash flow to be positive in the first half of 2020
• Cash and cash equivalents of $1.0 billion at the end of March
• The Company's Board of Directors reaffirmed its dividend policy and intends to declare the second quarter cash dividend of $0.50 per share in mid-May

So what can we glean from the numbers? Their cash position deteriorated by 78 million during Q1 2020. Cash is king during downturns like this - so don't pay much attention to the net losses and so forth since those are all GAAP based calculations. At the end of March, they had $1B in cash and cash equivalents. Here's the commentary on their cash balances:

Cash Flow— For the three months ended March 31, 2020, net cash provided by operating activities from continuing operations was $57 million, compared to $152 million in the prior year period. Negative adjusted free cash flow from continuing operations was $78 million for the three months ended March 31,2020, compared to positive adjusted free cash flow from continuing operations of $249 million in the same period of 2019. The Company is pursuing actions to further improve liquidity by reducing annual capital expenditures and inventory spending, which have been reduced by approximately $100 million for 2020. Additionally, the Company is reducing operating expenses, which is expected to result in incremental savings of approximately $205 million annually.

Here's the chart version:

1588787021040.png


It's difficult to decipher the financials embedded in their statements and the GAAP methods of reporting leave gaps where it's harder to figure out the actual cash burn of a company. The above listed chart is scoped only to a subset of "operating activities" and is not truly representative of the cash burn. On the surface it looks like they're only burned 78MM net negative cash flow for all of Q1 2020 - but that's not really the case. We know Wyndham had 355MM in cash and cash equivalents at year end 2019, and we also know that Wyndham only had 1B in cash and cash equivalents on hand as of the end of March - and that includes the 1B drawdown on their credit line. This means that Wyndham burned through at least 355MM in cash on hand between end of year and end of March, plus whatever actual cash they brought in during Q1 2020. I would estimate a cash burn of 150MM/month based upon the new data. So the numbers I originally provided get a bit better since my initial cash burn assumption was 200MM/month. With roughly 1.3B on hand - that gives them about 8.5 months - assuming revenue stays neutral which is unlikely. Since the lockdown didn't really negatively impact Wyndham until March 2020, I think Q2 2020 will actually deliver worse financial results than Q1 2020 did. Q2 2020 results will tell the tale. Hopefully by then we're seeing some real economic recovery - but I think there's still a lot of uncertainty surrounding any substantive economic recovery in the short term especially in the hospitality sectors.
 
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