Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-32876

WYNDHAM DESTINATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)



Delaware		20-0052541
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

6277 Sea Harbor Drive		32821
Orlando,	Florida	(Zip Code)
(Address of Principal Executive Offices)

(407) 626-5200

(Registrant’s Telephone Number, Including Area Code)

None

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value per share	WYND	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐
		Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date:

85,134,818 shares of common stock outstanding as of March 31, 2020.

Table of Contents



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Report of Independent Registered Public Accounting Firm	3
	Condensed Consolidated Statements of (Loss)/Income	4
	Condensed Consolidated Statements of Comprehensive (Loss)/Income	5
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Deficit	8
	Notes to Condensed Consolidated Financial Statements	9
	Note 1 - Background and Basis of Presentation	9
	Note 2 - New Accounting Pronouncements	10
	Note 3 - Revenue Recognition	10
	Note 4 - Earnings/(Loss) Per Share	14
	Note 5 - Acquisitions	15
	Note 6 - Discontinued Operations	15
	Note 7 - Held-for-Sale Business	16
	Note 8 - Vacation Ownership Contract Receivables	16
	Note 9 - Inventory	18
	Note 10 - Property and Equipment	19
	Note 11 - Debt	20
	Note 12 - Variable Interest Entities	22
	Note 13 - Fair Value	23
	Note 14 - Derivative Instruments and Hedging Activities	24
	Note 15 - Income Taxes	24
	Note 16 - Leases	25
	Note 17 - Commitments and Contingencies	27
	Note 18 - Accumulated Other Comprehensive (Loss)/Income	28
	Note 19 - Stock-Based Compensation	29
	Note 20 - Segment Information	31
	Note 21 - Separation and Related Costs	33
	Note 22 - COVID-19 Related Items	33
	Note 23 - Impairments	34
	Note 24 - Restructuring	34
	Note 25 - Transactions with Former Parent and Former Subsidiaries	34
	Note 26 - Related Party Transactions	36
	Note 27 - Subsequent Events	36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
	Forward-Looking Statements	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	51
Item 4.	Controls and Procedures	51
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56
	Signatures	57

Table of Contents

GLOSSARY OF TERMS

The following terms and acronyms appear in the text of this report and have the definitions indicated below:



Adjusted EBITDA	A non-GAAP measure, defined by the Company as Net (loss)/income before Depreciation and amortization, Interest expense (excluding Consumer financing interest), early extinguishment of debt, Interest income (excluding Consumer financing revenues) and income taxes. Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, transaction costs, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent.
AOCL	Accumulated Other Comprehensive Loss
ARN	Alliance Reservations Network
AUD	Australian Dollar
Board	Board of Directors
CARES	Coronavirus Aid, Relief, and Economic Security Act
Company	Wyndham Destinations, Inc. and its subsidiaries
Compass	Compass IV Limited, an affiliate of Platinum Equity, LLC
COVID-19	Novel coronavirus global pandemic
EPS	Earnings/(loss) Per Share
Exchange Act	Securities Exchange Act of 1934
FASB	Financial Accounting Standards Board
FICO	Fair Isaac Corporation
GAAP	Generally Accepted Accounting Principles in the United States
LIBOR	London Interbank Offered Rate
NQ	Non-Qualified stock options
NZD	New Zealand Dollar
PCAOB	Public Company Accounting Oversight Board
PSU	Performance-vested restricted Stock Units
RSU	Restricted Stock Unit
SEC	Securities and Exchange Commission
SPE	Special Purpose Entity
Spin-off	Spin-off of Wyndham Hotels & Resorts, Inc.
SSAR	Stock-Settled Appreciation Rights
U.S.	United States of America
USD	United States of America Dollar
Vacasa	Vacasa LLC
VIE	Variable Interest Entity
VOCR	Vacation Ownership Contract Receivable
VOI	Vacation Ownership Interest
VPG	Volume Per Guest
Wyndham Hotels	Wyndham Hotels & Resorts, Inc.
Wyndham Destinations	Wyndham Destinations, Inc.
Wyndham Worldwide	Wyndham Worldwide Corporation

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Wyndham Destinations, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Wyndham Destinations, Inc. and subsidiaries (the "Company") as of March 31, 2020, the related condensed consolidated statements of (loss)/income, comprehensive (loss)/income, (deficit) and cash flows, for the three-month periods ended March 31, 2020 and 2019, and the related notes (collectively referred to as the "interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2019, and the related consolidated statements of income, comprehensive income, cash flows and equity/(deficit) for the year then ended (not presented herein); and in our report dated February 26, 2020, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

/s/ Deloitte & Touche LLP

Tampa, FL

May 6, 2020

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS)/INCOME

(In millions, except per share amounts)

(Unaudited)



	Three Months Ended
	March 31,
	2020			2019
Net revenues
Service and membership fees	$	327		$	405
Consumer financing	127			125
Vacation ownership interest sales	90			375
Other	14			13
Net revenues	558			918
Expenses
Operating	398			397
Consumer financing interest	25			26
(Recovery)/cost of vacation ownership interests	(31		)	30
Marketing	131			147
General and administrative	110			129
COVID-19 related costs	23			—
Asset impairments	10			—
Restructuring	2			3
Separation and related costs	—			15
Depreciation and amortization	31			31
Total expenses	699			778
Operating (loss)/income	(141		)	140
Other (income), net	(2		)	(11		)
Interest expense	41			41
Interest (income)	(2		)	(2		)
(Loss)/income before income taxes	(178		)	112
(Benefit)/provision for income taxes	(44		)	31
Net (loss)/income from continuing operations	(134		)	81
Loss on disposal of discontinued businesses, net of income taxes	—			(1		)
Net (loss)/income attributable to Wyndham Destinations shareholders	$	(134	)	$	80

Basic earnings/(loss) per share
Continuing operations	$	(1.54	)	$	0.86
Discontinued operations	—			(0.01		)
	$	(1.54	)	$	0.85
Diluted earnings/(loss) per share
Continuing operations	$	(1.54	)	$	0.85
Discontinued operations	—			—
	$	(1.54	)	$	0.85

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

(In millions)

(Unaudited)



	Three Months Ended
	March 31,
	2020			2019
Net (loss)/income attributable to Wyndham Destinations shareholders	$	(134	)	$	80
Other comprehensive (loss)/income, net of tax
Foreign currency translation adjustments	(65		)	2
Other comprehensive (loss)/income, net of tax	(65		)	2
Comprehensive (loss)/income	$	(199	)	$	82

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)



	March 31, 2020			December 31, 2019
Assets
Cash and cash equivalents	$	1,018		$	355
Restricted cash (VIE - $118 as of 2020 and $110 as of 2019)	153			147
Trade receivables, net	137			144
Vacation ownership contract receivables, net (VIE - $3,018 as of 2020 and $2,984 as of 2019)	2,792			3,120
Inventory	1,218			1,199
Prepaid expenses	221			221
Property and equipment, net	682			680
Goodwill	962			970
Other intangibles, net	135			143
Other assets	458			474
Total assets	$	7,776		$	7,453
Liabilities and (deficit)
Accounts payable	$	71		$	73
Accrued expenses and other liabilities	885			973
Deferred income	553			541
Non-recourse vacation ownership debt (VIE)	2,413			2,541
Debt	3,981			3,034
Deferred income taxes	764			815
Total liabilities	8,667			7,977
Commitments and contingencies (Note 17)
Stockholders' (deficit):
Preferred stock, $.01 par value, authorized 6,000,000 shares, none issued and outstanding	—			—
Common stock, $.01 par value, 600,000,000 shares authorized, 220,959,494 issued as of 2020 and 220,863,070 as of 2019	2			2
Treasury stock, at cost – 135,824,676 shares as of 2020 and 132,759,876 shares as of 2019	(6,508		)	(6,383		)
Additional paid-in capital	4,119			4,118
Retained earnings	1,607			1,785
Accumulated other comprehensive loss	(117		)	(52		)
Total stockholders’ (deficit)	(897		)	(530		)
Noncontrolling interest	6			6
Total (deficit)	(891		)	(524		)
Total liabilities and (deficit)	$	7,776		$	7,453

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)



	Three Months Ended
	March 31,
	2020			2019
Operating activities
Net (loss)/income	$	(134	)	$	80
Loss on disposal of discontinued businesses, net of income taxes	—			1
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Depreciation and amortization	31			31
Provision for loan losses	315			109
Deferred income taxes	(50		)	14
Stock-based compensation	1			5
Asset impairments	10			—
Non-cash lease expense	6			8
Non-cash interest	5			5
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
Trade receivables	4			(45		)
Vacation ownership contract receivables	(15		)	(91		)
Inventory	(40		)	(18		)
Deferred income	18			45
Accounts payable, accrued expenses, prepaid expenses, other assets and other liabilities	(96		)	12
Other, net	2			(4		)
Net cash provided by operating activities	57			152
Investing activities
Property and equipment additions	(21		)	(20		)
Proceeds from asset sales	—			6
Other, net	3			(1		)
Net cash used in investing activities - continuing operations	(18		)	(15		)
Net cash used in investing activities - discontinued operations	—			(27		)
Net cash used in investing activities	(18		)	(42		)
Financing activities
Proceeds from non-recourse vacation ownership debt	250			672
Principal payments on non-recourse vacation ownership debt	(372		)	(572		)
Proceeds from debt	1,064			608
Principal payments on debt	(77		)	(660		)
Repayment of notes	(41		)	(1		)
Repayments of vacation ownership inventory arrangement	(5		)	(7		)
Dividends to shareholders	(43		)	(42		)
Repurchase of common stock	(128		)	(61		)
Debt issuance costs	(1		)	(5		)
Net share settlement of incentive equity awards	(1		)	—
Net cash provided by/(used in) financing activities	646			(68		)
Effect of changes in exchange rates on cash, cash equivalents and restricted cash	(16		)	1
Net change in cash, cash equivalents and restricted cash	669			43
Cash, cash equivalents and restricted cash, beginning of period	502			404
Cash, cash equivalents and restricted cash, end of period	1,171			447
Less: Restricted cash	153			186
Less: Cash and restricted cash included in assets of discontinued operations and held-for-sale business	—			44
Cash and cash equivalents	$	1,018		$	217

See Notes to Condensed Consolidated Financial Statements.

WYNDHAM DESTINATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF DEFICIT

(In millions)

(Unaudited)



	Common Shares Outstanding		Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interest		Total Deficit
Balance as of December 31, 2019	88		$	2	$	(6,383	)	$	4,118	$	1,785		$	(52	)	$	6	$	(524	)
Net loss	—		—		—			—		(134		)	—			—		(134		)
Other comprehensive loss	—		—		—			—		—			(65		)	—		(65		)
Change in stock-based compensation	—		—		—			1		—			—			—		1
Repurchase of common stock	(3	)	—		(125		)	—		—			—			—		(125		)
Dividends ($0.50 per share)	—		—		—			—		(44		)	—			—		(44		)
Balance as of March 31, 2020	85		$	2	$	(6,508	)	$	4,119	$	1,607		$	(117	)	$	6	$	(891	)



	Common Shares Outstanding		Common Stock		Treasury Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Non-controlling Interest		Total Deficit
Balance as of December 31, 2018	95		$	2	$	(6,043	)	$	4,077	$	1,442		$	(52	)	$	5	$	(569	)
Net income	—		—		—			—		80			—			—		80
Other comprehensive income	—		—		—			—		—			2			—		2
Change in stock-based compensation	—		—		—			5		—			—			—		5
Repurchase of common stock	(1	)	—		(60		)	—		—			—			—		(60		)
Dividends ($0.45 per share)	—		—		—			—		(42		)	—			—		(42		)
Balance as of March 31, 2019	94		$	2	$	(6,103	)	$	4,082	$	1,480		$	(50	)	$	5	$	(584	)

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

WYNDHAM DESTINATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all amounts are in millions, except share and per share amounts)

(Unaudited)


1.	Background and Basis of Presentation

Background

Wyndham Destinations, Inc. and its subsidiaries (collectively, “Wyndham Destinations” or the “Company”), is a global provider of hospitality services and products. The Company operates in two segments: Vacation Ownership and Vacation Exchange. The Vacation Ownership segment develops, markets and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. The Vacation Exchange segment provides leisure travelers with flexibility and access to a wide variety of accommodation options that include vacation ownership resorts, hotels, privately-owned vacation homes, apartments, and condominiums around the world.

The results of operations during the first quarter of 2020 include impacts related to the novel coronavirus global pandemic (“COVID-19”), which have been significantly negative for the travel industry, the Company, its customers and employees. In response to COVID-19, the Company temporarily closed its resorts in mid-March across the globe and suspended its sales and marketing operations. As a result, the Company significantly reduced its workforce and furloughed thousands of employees. Given these significant events, the Company’s revenues were negatively impacted and it also incurred $241 million of charges related to COVID-19, which are discussed in further detail in Note 22—COVID-19 Related Items. As a precautionary measure to enhance liquidity, the Company drew down its $1.0 billion revolving credit facility at the end of the first quarter, and suspended its share repurchase activity.

On August 7, 2019, the Company acquired Alliance Reservations Network (“ARN”) for $102 million ($97 million net of cash acquired). ARN provides private-label travel booking technology solutions. This acquisition was undertaken for the purpose of accelerating growth at RCI by increasing the offerings available to its members and affiliates. The Company has recognized the assets and liabilities of ARN based on estimates of their acquisition date fair values. ARN is reported within the Vacation Exchange segment. See Note 5—Acquisitions for additional details.

During 2018, the Company decided to explore strategic alternatives for its North American vacation rentals business and on October 22, 2019, completed the sale of this business for $162 million. The assets and liabilities of this business were classified as held-for-sale. This business did not meet the criteria to be classified as a discontinued operation; therefore, the results of operations through the date of sale were reflected within continuing operations on the Condensed Consolidated Statements of (Loss)/Income. See Note 7—Held-for-Sale Business for further details.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q include the accounts and transactions of Wyndham Destinations, as well as the entities in which Wyndham Destinations directly or indirectly has a controlling financial interest. The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”). All intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements. In addition, certain prior period amounts have been reclassified to comply with newly adopted accounting standards.

In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates and assumptions. In management’s opinion, the Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These Condensed Consolidated Financial Statements should be read in conjunction with the Company’s 2019 Consolidated Financial Statements included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2020.

Table of Contents


2.	New Accounting Pronouncements

Recently Issued Accounting Pronouncements

Simplifying the Accounting for Income Taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify the accounting for income taxes and clarifies the financial statement presentation for tax benefits related to tax deductible dividends. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.

Reference Rate Reform. In March 2020, the FASB issued guidance which provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria that reference the London Interbank Offered Rate or another reference rate expected to be discontinued. This guidance is effective as of March 12, 2020, and will apply through December 31, 2022. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

Financial Instruments - Credit Losses. In June 2016, the FASB issued guidance which amends the guidance on measuring credit losses on financial assets held at amortized cost. The guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance was effective for the Company on January 1, 2020, including interim periods within the fiscal year. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures as the Company’s prior approach in estimating the allowance for loan losses generally aligned with the expected credit loss model required upon adoption of this guidance. The Company has included additional disclosures in accordance with the adoption of this guidance, which are included in Note 8—Vacation Ownership Contract Receivables.

Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued guidance which simplifies the current two-step goodwill impairment test by eliminating step two of the test. The guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. This guidance was effective for the Company on January 1, 2020, including interim periods within the fiscal year, and should be applied on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s financial statements and related disclosures.


3.	Revenue Recognition

Vacation Ownership

The Company develops, markets and sells VOIs to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts. The Company’s sales of VOIs are either cash sales or developer-financed sales. Developer financed sales are typically collateralized by the underlying VOI. Revenue is recognized on VOI sales upon transfer of control, which is defined as the point in time when a binding sales contract has been executed, the financing contract has been executed for the remaining transaction price, the statutory rescission period has expired, and the transaction price has been deemed to be collectible.

For developer-financed sales, the Company reduces the VOI sales transaction price by an estimate of uncollectible consideration at the time of the sale. The Company’s estimates of uncollectible amounts are based largely on the results of the Company’s static pool analysis which relies on historical payment data by customer class.

In connection with entering into a VOI sale, the Company may provide its customers with certain non-cash incentives, such as credits for future stays at its resorts. For those VOI sales, the Company bifurcates the sale and allocates the sales price between the VOI sale and the non-cash incentive. Non-cash incentives generally have expiration periods of 18 months or less and are recognized at a point in time upon transfer of control.

The Company provides day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs. These services may also include reservation and resort renovation activities. Such agreements are generally for terms of one year or less, and are renewed automatically on an annual basis. The Company’s management agreements contain cancellation clauses, which allow for either party to cancel the agreement, by either a majority board vote or a majority vote of non-developer interests. The Company receives fees for such property management services which are collected monthly in advance and are based upon total costs to operate such resorts (or as services are provided in the case of resort renovation

Table of Contents

activities). Fees for property management services typically approximate 10% of budgeted operating expenses. The Company is entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing management services (“reimbursable revenue”). These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where the Company is the employer and are reflected as a component of Operating expenses on the Condensed Consolidated Statements of (Loss)/Income. The Company reduces its management fees for amounts it has paid to the property owners’ association that reflect maintenance fees for VOIs for which it retains ownership, as the Company has concluded that such payments are consideration payable to a customer.

Property management fee revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Condensed Consolidated Statements of (Loss)/Income. Property management revenues, which are comprised of management fee revenue and reimbursable revenue, were $176 million and $170 million during the three months ended March 31, 2020 and 2019. Management fee revenues were $98 million and $97 million during the three months ended March 31, 2020 and 2019. Reimbursable revenues were $78 million and $73 million during the three months ended March 31, 2020 and 2019. One of the associations that the Company manages paid its Vacation Exchange segment $7 million for exchange services during both the three months ended March 31, 2020 and 2019.

Vacation Exchange

As a provider of vacation exchange services, the Company enters into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with the Company’s vacation exchange network and, for some members, for other leisure-related services and products.

The Company’s vacation exchange business derives a majority of revenues from membership dues and fees for facilitating members’ trading of their intervals. Revenues from membership dues represent the fees paid by members or affiliated clubs on their behalf. The Company recognizes revenues from membership dues paid by the member on a straight-line basis over the membership period as the performance obligations are fulfilled through delivery of publications, if applicable, and by providing access to travel-related products and services. Estimated net contract consideration payable by affiliated clubs for memberships is recognized as revenue over the term of the contract with the affiliated club in proportion to the estimated average monthly member count. Such estimates are adjusted periodically for changes in the actual and forecasted member activity. For additional fees, members have the right to exchange their intervals for intervals at other properties affiliated with the Company’s vacation exchange networks and, for certain members, for other leisure-related services and products. The Company also derives revenue from facilitating bookings of travel accommodations for both members and non-members. Revenue is recognized when these transactions have been confirmed, net of expected cancellations.

The Company’s vacation exchange business also derives revenues from programs with affiliated resorts, club servicing, and loyalty programs; and additional exchange-related products that provide members with the ability to protect trading power or points, extend the life of deposits, and combine two or more deposits for the opportunity to exchange into intervals with higher trading power. Other vacation exchange related product fees are deferred and recognized as revenue upon the occurrence of a future exchange, event, or other related transaction.

The Company earns revenue from its RCI Elite Rewards co–branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders. The advance payments received under the program are recognized as a contract liability until the Company’s performance obligations have been satisfied. The primary performance obligation for the program relates to brand performance services. Total contract consideration is estimated and recognized on a straight-line basis over the contract term.

Prior to the sale of the vacation rental businesses, the Company’s vacation rental brands derived revenue from fees associated with the rental of vacation properties managed and marketed by the Company on behalf of independent owners. The Company remitted the rental fee received from the renter to the independent owner, net of the Company’s agreed-upon fee. The related revenue from such fees, net of expected refunds, was recognized over the renter’s stay. The Company’s vacation rental brands also derived revenues from additional services delivered to independent owners, vacation rental guests, and property owners’ associations which were generally recognized when the service was delivered.

Other Items

The Company records property management services revenues and RCI Elite Rewards revenues for its Vacation Ownership and Vacation Exchange segments in accordance with the guidance for reporting revenues gross as a principal versus net as an agent, which requires that these revenues be recorded on a gross basis.

Table of Contents

Contract Liabilities

Contract liabilities generally represent payments or consideration received in advance for goods or services that the Company has not yet transferred to the customer. Contract liabilities as of March 31, 2020 and December 31, 2019, were as follows (in millions):



Contract Liabilities	March 31, 2020		December 31, 2019
Deferred subscription revenue	$	205	$	206
Deferred VOI trial package revenue	144		145
Deferred VOI incentive revenue	105		107
Deferred exchange-related revenue ^(a)	76		58
Deferred co-branded credit card programs revenue	18		19
Deferred other revenue	10		4
Total	$	558	$	539


^(a)	Balance includes contractual liabilities to accommodate members for cancellations initiated by the Company due to unexpected events. These amounts are included within Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets.

In the Company’s vacation ownership business, deferred VOI trial package revenue represents consideration received in advance for a trial VOI, which allows customers to utilize a vacation package typically within one year of purchase. Deferred VOI incentive revenue represents payments received in advance for additional travel-related services and products at the time of a VOI sale. Revenue is recognized when a customer utilizes the additional services and products, which is typically within one year of the VOI sale.

Within the Company’s vacation exchange business, deferred subscription revenue represents billings and payments received in advance from members and affiliated clubs for memberships in the Company’s vacation exchange programs which are recognized in future periods. Deferred exchange-related revenue primarily represents payments received in advance from members for the right to exchange their intervals for intervals at other properties affiliated with the Company’s vacation exchange networks and for other leisure-related services and products which are generally recognized as revenue within one year.

Changes in contract liabilities for the three months ended March 31, 2020 and 2019, follow (in millions):



	Amount
Contract liabilities as of December 31, 2019	$	539
Additions	103
Revenue recognized	(84		)
Contract liabilities as of March 31, 2020	$	558



	Amount
Contract liabilities as of December 31, 2018	$	519
Additions	125
Revenue recognized	(92		)
Contract liabilities as of March 31, 2019	$	552

Capitalized Contract Costs

The Company’s vacation ownership business incurs certain direct and incremental selling costs in connection with VOI trial package and incentive revenues. Such costs are capitalized and subsequently amortized over the utilization period, which is typically within one year of the sale. As of March 31, 2020 and December 31, 2019, these capitalized costs were $54 million and $53 million; and are included within Other assets on the Condensed Consolidated Balance Sheets.

The Company’s vacation exchange business incurs certain direct and incremental selling costs to obtain contracts with customers in connection with subscription revenues and exchange–related revenues. Such costs, which are primarily comprised of commissions paid to internal and external parties and credit card processing fees, are deferred at the inception of the contract and recognized when the benefit is transferred to the customer. As of March 31, 2020 and December 31, 2019, these capitalized costs were $18 million and $20 million; and are included within Other assets on the Condensed Consolidated Balance Sheets.

Table of Contents

Practical Expedients

The Company has not adjusted the consideration for the effects of a significant financing component if it expected, at contract inception, that the period between when the Company satisfied the performance obligation and when the customer paid for that good or service was one year or less.

For contracts with customers that were modified prior to 2015, the Company did not retrospectively restate the revenue associated with the contract for those modifications. Instead, it reflected the aggregate effect of all prior modifications in determining (i) the performance obligations and transaction prices, and (ii) the allocation of such transaction prices to the performance obligations.

Performance Obligations

A performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer. The consideration received from a customer is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied.

The following table summarizes the Company’s remaining performance obligations for the 12-month periods set forth below (in millions):



	4/1/2020 - 3/31/2021		4/1/2021 - 3/31/2022		4/1/2022 - 3/31/2023		Thereafter		Total
Subscription revenue	$	121	$	48	$	20	$	16	$	205
VOI trial package revenue	144		—		—		—		144
VOI incentive revenue	105		—		—		—		105
Exchange-related revenue	72		3		1		—		76
Co-branded credit card programs revenue	4		3		3		8		18
Other revenue	10		—		—		—		10
Total	$	456	$	54	$	24	$	24	$	558

Disaggregation of Net Revenues

The table below presents a disaggregation of the Company’s net revenues from contracts with customers by major services and products for each of the Company’s segments (in millions):



	Three Months Ended
	March 31,
	2020			2019
Vacation Ownership
Property management fees and reimbursable revenues	$	176		$	170
Consumer financing	127			125
Vacation ownership interest sales ^(a)	90			375
Fee-for-Service commissions	3			—
Ancillary revenues	13			13
Total Vacation Ownership	409			683

Vacation Exchange
Exchange revenues	133			180
Vacation rental revenues	—			38
Ancillary revenues	17			18
Total Vacation Exchange	150			236

Corporate and other
Eliminations	(1		)	(1		)

Net revenues	$	558		$	918

Table of Contents


^(a)	As a result of higher unemployment associated with COVID-19, the Company increased its loan loss allowance by $225 million in the quarter ended March 31, 2020, which is reflected as a reduction to Vacation ownership interest sales on the Condensed Consolidated Statements of (Loss)/Income.


4.	Earnings/(Loss) Per Share

The computation of basic and diluted earnings/(loss) per share (“EPS”) are based on net (loss)/income attributable to Wyndham Destinations shareholders divided by the basic weighted average number of common shares and diluted weighted average number of common shares outstanding. The following table sets forth the computation of basic and diluted EPS (in millions, except per share data):



	Three Months Ended
	March 31,
	2020			2019
Net (loss)/income from continuing operations attributable to Wyndham Destinations shareholders	$	(134	)	$	81
Loss on disposal of discontinued businesses attributable to Wyndham Destinations shareholders, net of tax	—			(1		)
Net (loss)/income attributable to Wyndham Destinations shareholders	$	(134	)	$	80

Basic earnings/(loss) per share
Continuing operations	$	(1.54	)	$	0.86
Discontinued operations	—			(0.01		)
	$	(1.54	)	$	0.85
Diluted earnings/(loss) per share
Continuing operations	$	(1.54	)	$	0.85