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:
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.