wh-20220331

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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, 2022

☐ 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: 001-38432

Wyndham Hotels & Resorts, Inc.

(Exact name of registrant as specified in its charter)


Delaware		82-3356232
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

22 Sylvan Way		07054
Parsippany,	New Jersey	(Zip Code)
(Address of principal executive offices)

(973) 753-6000

(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(s)	Name of each exchange on which registered
Common Stock	WH	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 þ No o

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 þ No o

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. o

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

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

92,099,851 shares of common stock outstanding as of March 31, 2022.

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		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited).	1
	Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 )	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statements of Equity	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	18
	Forward Looking Statements	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	26
Item 4.	Controls and Procedures.	27
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings.	28
Item 1A.	Risk Factors.	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	28
Item 3.	Defaults Upon Senior Securities.	28
Item 4.	Mine Safety Disclosures.	28
Item 5.	Other Information.	28
Item 6.	Exhibits.	28
	Signatures	29

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Wyndham Hotels & Resorts, Inc.

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Wyndham Hotels & Resorts, Inc. and subsidiaries (the “Company”) as of March 31, 2022, the related condensed consolidated statements of income, comprehensive income, cash flows and equity for the three-month periods ended March 31, 2022 and 2021 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, 2021, and the related consolidated and combined statements of income, comprehensive income, cash flows, and equity for the year then ended (not presented herein); and in our report dated February 16, 2022, we expressed an unqualified opinion on those consolidated and combined financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

The interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Deloitte & Touche LLP

New York, New York

April 27, 2022

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WYNDHAM HOTELS & RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net revenues
Royalties and franchise fees	$	110	$	78
Marketing, reservation and loyalty	111		85
Management and other fees	35		19
License and other fees	19		20
Other	41		30
Fee-related and other revenues	316		232
Cost reimbursements	55		71
Net revenues	371		303
Expenses
Marketing, reservation and loyalty	104		92
Operating	35		27
General and administrative	29		24
Cost reimbursements	55		71
Depreciation and amortization	24		24
Gain on asset sale	(36)		—
Separation-related	—		2



Total expenses	211		240
Operating income	160		63
Interest expense, net	20		28

Income before income taxes	140		35
Provision for income taxes	34		11
Net income	$	106	$	24

Earnings per share
Basic	$	1.15	$	0.26
Diluted	1.14		0.26

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM HOTELS & RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net income	$	106	$	24
Other comprehensive income, net of tax

Unrealized gains on cash flow hedges	31		14
Other comprehensive income, net of tax	31		14
Comprehensive income	$	137	$	38

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM HOTELS & RESORTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

(Unaudited)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	416	$	171
Trade receivables, net	229		246
Prepaid expenses	56		51
Other current assets	42		98
Assets held for sale	67		154
Total current assets	810		720
Property and equipment, net	106		106
Goodwill	1,525		1,525
Trademarks, net	1,202		1,202
Franchise agreements and other intangibles, net	377		473
Other non-current assets	272		243
Total assets	$	4,292	$	4,269
Liabilities and stockholders’ equity
Current liabilities:
Current portion of long-term debt	$	21	$	21
Accounts payable	27		31
Deferred revenues	84		70
Accrued expenses and other current liabilities	235		258
Liabilities held for sale	13		17
Total current liabilities	380		397
Long-term debt	2,058		2,063
Deferred income taxes	350		366
Deferred revenues	169		165
Other non-current liabilities	176		189
Total liabilities	3,133		3,180
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value, authorized 6.0 shares, none issued and outstanding	—		—
Common stock, $0.01 par value, 101.5 and 101.3 issued at March 31, 2022 and December 31, 2021	1		1
Treasury stock, at cost – 9.5 and 9.0 shares at March 31, 2022 and December 31, 2021	(557)		(519)
Additional paid-in capital	1,544		1,543
Retained earnings	155		79
Accumulated other comprehensive income/(loss)	16		(15)
Total stockholders’ equity	1,159		1,089
Total liabilities and stockholders’ equity	$	4,292	$	4,269

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM HOTELS & RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Operating activities
Net income	$	106	$	24
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and amortization	24		24
Provision for doubtful accounts	1		11

Deferred income taxes	(26)		1
Stock-based compensation	8		5
Gain on asset sale	(36)		—

Net change in assets and liabilities:
Trade receivables	17		10
Prepaid expenses	(4)		(7)
Other current assets	60		13
Accounts payable, accrued expenses and other current liabilities	(32)		(24)
Deferred revenues	19		9
Payments of development advance notes	(7)		(8)
Other, net	5		6
Net cash provided by operating activities	135		64
Investing activities
Property and equipment additions	(10)		(5)

Proceeds from asset sales, net	202		—

Net cash provided by/(used in) investing activities	192		(5)
Financing activities

Principal payments on long-term debt	(4)		(4)

Dividends to stockholders	(30)		(15)
Repurchases of common stock	(39)		—
Net share settlement of incentive equity awards	(9)		(5)
Other, net	—		3
Net cash used in financing activities	(82)		(21)

Net increase in cash, cash equivalents and restricted cash	245		38
Cash, cash equivalents and restricted cash, beginning of period	171		493
Cash, cash equivalents and restricted cash, end of period	$	416	$	531

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM HOTELS & RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In millions)

(Unaudited)


	Common Shares Outstanding	Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income/(Loss)		Total Equity
Balance as of December 31, 2021	92	$	1	$	(519)	$	1,543	$	79	$	(15)	$	1,089
Net income	—	—		—		—		106		—		106
Other comprehensive income	—	—		—		—		—		31		31
Dividends	—	—		—		—		(30)		—		(30)
Repurchase of common stock	—	—		(38)		—		—		—		(38)
Net share settlement of incentive equity awards	—	—		—		(9)		—		—		(9)
Change in deferred compensation	—	—		—		8		—		—		8
Exercise of stock options	—	—		—		2		—		—		2

Balance as of March 31, 2022	92	$	1	$	(557)	$	1,544	$	155	$	16	$	1,159


	Common Shares Outstanding	Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings/(Accumulated Deficit)		Accumulated Other Comprehensive Loss		Total Equity
Balance as of December 31, 2020	93	$	1	$	(408)	$	1,504	$	(82)	$	(52)	$	963
Net income	—	—		—		—		24		—		24
Other comprehensive income	—	—		—		—		—		14		14
Dividends	—	—		—		—		(15)		—		(15)
Net share settlement of incentive equity awards	—	—		—		(5)		—		—		(5)
Change in deferred compensation	—	—		—		5		—		—		5
Exercise of stock options	—	—		—		4		—		—		4
Other	—	—		—		—		1		—		1
Balance as of March 31, 2021	93	$	1	$	(408)	$	1,508	$	(72)	$	(38)	$	991

See Notes to Condensed Consolidated Financial Statements.

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WYNDHAM HOTELS & RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)


1. BASIS OF PRESENTATION

Wyndham Hotels & Resorts, Inc. (collectively with its consolidated subsidiaries, “Wyndham Hotels” or the “Company”) is a leading global hotel franchisor, licensing its renowned hotel brands to hotel owners in over 95 countries around the world.

The Condensed Consolidated Financial Statements have been prepared on a stand-alone basis. The Condensed Consolidated Financial Statements include the Company’s assets, liabilities, revenues, expenses and cash flows and all entities in which it 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. GAAP”). All intercompany balances and transactions have been eliminated in the Condensed Consolidated Financial Statements.

In presenting the Condensed Consolidated Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgment and available information. Accordingly, actual results could differ from those estimates. 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 2021 Consolidated Financial Statements included in its most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and any subsequent reports filed with the SEC.

Business Description

Wyndham Hotels operates in the following segments:

• Hotel Franchising — licenses the Company’s lodging brands and provides related services to third-party hotel owners and others.

• Hotel Management — provides hotel management services for full-service hotels.


2. NEW ACCOUNTING PRONOUNCEMENTS

There were no recently issued accounting pronouncements applicable to the Company during the three months ended March 31, 2022.


3. REVENUE RECOGNITION

Deferred Revenues

Deferred revenues, or contract liabilities, generally represent payments or consideration received in advance for goods or services that the Company has not yet provided to the customer. Deferred revenues as of March 31, 2022 and December 31, 2021 are as follows:


	March 31, 2022		December 31, 2021
Deferred initial franchise fee revenues	$	149	$	145
Deferred loyalty program revenues	79		76
Deferred co-branded credit card program revenues	11		—
Deferred other revenues	14		14
Total	$	253	$	235

Deferred initial franchise fees represent payments received in advance from prospective franchisees upon the signing of a franchise agreement and are generally recognized to revenue within 13 years. Deferred loyalty revenues represent the portion of

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loyalty program fees charged to franchisees, net of redemption costs, that have been deferred and will be recognized over time based upon loyalty point redemption patterns. Deferred co-branded credit card program revenue represents payments received in advance from the Company’s co-branded credit card partners, primarily for card member activity, which is typically recognized within one year.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to a 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 twelve-month periods set forth below:


	4/1/2022 - 3/31/2023		4/1/2023 - 3/31/2024		4/1/2024 - 3/31/2025		Thereafter		Total
Initial franchise fee revenues	$	16	$	8	$	7	$	118	$	149
Loyalty program revenues	49		20		8		2		79
Co-branded credit card program revenues	11		—		—		—		11
Other revenues	8		1		1		4		14
Total	$	84	$	29	$	16	$	124	$	253

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:


	Three Months Ended March 31,
	2022		2021
Hotel Franchising
Royalties and franchise fees	$	103	$	75
Marketing, reservation and loyalty	111		85
License and other fees	19		20
Other	39		29
Total Hotel Franchising	272		209

Hotel Management
Royalties and franchise fees	7		3
Owned hotel revenues	30		13
Management fees	5		6
Cost reimbursements	55		71
Other	2		1
Total Hotel Management	99		94

Net revenues	$	371	$	303

Capitalized Contract Costs

The Company incurs certain direct and incremental sales commissions costs in order to obtain hotel franchise and management contracts. Such costs are capitalized and subsequently amortized beginning upon hotel opening over the first non-cancellable period of the agreement. In the event an agreement is terminated prior to the end of the first non-cancellable period, any unamortized cost is immediately expensed. In addition, the Company also capitalizes costs associated with the sale and installation of property management systems to its franchisees, which are amortized over the remaining non-cancellable period of the franchise agreement. As of both March 31, 2022 and December 31, 2021, capitalized contract costs were $33 million, of which $4 million and $5 million, respectively, was included in other current assets and $29 million and $28 million, respectively, was included in other non-current assets on its Condensed Consolidated Balance Sheets.

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4. EARNINGS PER SHARE

The computation of basic and diluted earnings per share (“EPS”) is based on net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares, respectively.

The following table sets forth the computation of basic and diluted EPS (in millions, except per share data):


	Three Months Ended March 31,
	2022		2021
Net income	$	106	$	24

Basic weighted average shares outstanding	92.5		93.4
Stock options and restricted stock units (“RSUs”)	0.7		0.4
Diluted weighted average shares outstanding	93.2		93.8

Earnings per share:
Basic	$	1.15	$	0.26
Diluted	1.14		0.26

Dividends:
Cash dividends declared per share	$	0.32	$	0.16
Aggregate dividends paid to stockholders	$	30	$	15

Stock Repurchase Program

The following table summarizes stock repurchase activity under the current stock repurchase program (in millions, except per share data):


	Shares	Cost		Average Price Per Share
As of December 31, 2021	9.0	$	519	$	57.55
For the three months ended March 31, 2022	0.5	38		83.72
As of March 31, 2022	9.5	$	557	$	58.81

The Company had $443 million of remaining availability under its program as of March 31, 2022.


5. ACCOUNTS RECEIVABLE

Allowance for Doubtful Accounts

The following table sets forth the activity in the Company’s allowance for doubtful accounts on trade accounts receivables for the three months ended:


	2022		2021
Balance as of January 1,	$	81	$	72
Provision for doubtful accounts	1		11
Bad debt write-offs	(2)		(4)
Balance as of March 31,	$	80	$	79

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6. ASSETS AND LIABILITIES HELD FOR SALE

During the fourth quarter of 2021, the Company’s Board approved a plan to sell its two owned hotels. In March 2022, the Company completed the sale of its Wyndham Grand Bonnet Creek Resort. See Note 15 - Other Expenses and Charges for more information on the sale. As of March 31, 2022, the assets and liabilities of its remaining owned hotel were reported in assets held for sale and liabilities held for sale on the Condensed Consolidated Balance Sheet.

The Company’s Condensed Consolidated Balance Sheets include the following with respect to assets and liabilities held for sale:


	March 31, 2022		December 31, 2021
Assets:
Trade receivables, net	$	3	$	4
Other current assets	2		4
Property and equipment, net	62		146
Total assets held for sale	$	67	$	154

Liabilities:
Accrued expenses and other current liabilities	$	5	$	8
Deferred revenues	5		6
Other liabilities	3		3
Total liabilities held for sale	$	13	$	17


7. INTANGIBLE ASSETS

Intangible assets as of March 31, 2022 and December 31, 2021 consisted of the following:


	March 31, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Impairment		Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment		Net Carrying Amount
Goodwill	$	1,539	$	14	$	1,525	$	1,539	$	14	$	1,525

	March 31, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Unamortized intangible assets:
Trademarks					$	1,201					$	1,201

Amortized intangible assets:
Franchise agreements	$	895	$	520	$	375	$	895	$	513	$	382
Management agreements	16		14		2		135		44		91
Trademarks	2		1		1		2		1		1
Other	—		—		—		1		1		—
	$	913	$	535	$	378	$	1,033	$	559	$	474

In March 2022, the Company completed the exit of its select-service hotel management business and received an $84 million termination fee, under the terms of the agreement with CorePoint Lodging (“CPLG”) which effectively resulted in the sale of the rights to the management contracts which were acquired as part of the La Quinta Holdings purchase in 2018. The termination fee proceeds were completely offset by the write-off of the remaining balance resulting in a full recovery of the related hotel management contract intangible asset. Such proceeds were reported in proceeds from asset sales on the Condensed Consolidated Statement of Cash Flows. The franchise agreements for these hotels remained in place at their stated fee structure.

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8. FRANCHISING, MARKETING AND RESERVATION ACTIVITIES

Royalties and franchise fee revenues on the Condensed Consolidated Statements of Income include initial franchise fees of $3 million for the three months ended March 31, 2022 and 2021.

In accordance with its franchise agreements, the Company is generally contractually obligated to expend the marketing and reservation fees it collects from franchisees for the operation of an international, centralized, brand-specific reservation system and for marketing purposes such as advertising, promotional and co-marketing programs, and training for the respective franchisees.

Development Advance Notes

The Company may, at its discretion, provide development advance notes to certain franchisees or hotel owners in order to assist them in converting to one of its brands, in building a new hotel to be flagged under one of its brands or in assisting in other franchisee expansion efforts. Provided the franchisee/hotel owner is in compliance with the terms of the franchise/management agreement, all or a portion of the development advance notes may be forgiven by the Company over the period of the franchise/management agreement, which typically ranges from 10 to 20 years. Otherwise, the related principal is due and payable to the Company. In certain instances, the Company may earn interest on unpaid franchisee development advance notes.

The Company’s Condensed Consolidated Financial Statements include the following with respect to development advances:


Condensed Consolidated Balance Sheets:	March 31, 2022		December 31, 2021
Other non-current assets	$	112	$	108


Condensed Consolidated Statements of Income:	Three Months Ended March 31,
	2022		2021
Forgiveness of notes (a)	$	3	$	2
Bad debt expense related to notes	1		—

______________________

(a) Amounts are recorded as a reduction of royalties and franchise fees and marketing, reservation and loyalty revenues.


9. INCOME TAXES

The Company files income tax returns in the U.S. federal and state jurisdictions, as well as in foreign jurisdictions. Through May 31, 2018, the Company was part of a consolidated U.S. federal income tax return and consolidated and combined state returns with Wyndham Worldwide (“former Parent”), now known as Travel + Leisure Co. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2015. The Company is no longer subject to state and local, or foreign, income tax examinations for years prior to 2014.

The Company made cash income tax payments, net of refunds, of $2 million and received income tax refunds, net of payments, of $1 million for the three months ended March 31, 2022 and 2021, respectively. Additionally, the Company had $5 million and $48 million of income tax receivables as of March 31, 2022 and December 31, 2021, respectively, which was reported on other current assets on the Consolidated Balance Sheets.

The Company’s effective tax rates were 24.3% and 31.4% during the three months ended March 31, 2022 and 2021, respectively. During 2022, the lower effective tax rate was primarily related to a higher tax benefit associated with stock-based compensation. During 2021, the higher effective tax rate was primarily related to the remeasurement of net deferred tax liabilities as a result of changes in certain state tax rates and non-deductible separation costs.

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10. LONG-TERM DEBT AND BORROWING ARRANGEMENTS

The Company’s indebtedness consisted of:


	March 31, 2022			December 31, 2021
Long-term debt: (a)	Amount		Weighted Average Rate (b)	Amount		Weighted Average Rate (b)
$750 million revolving credit facility (due May 2023)	$	—		$	—
Term loan (due May 2025)	1,537		3.17%	1,541		3.07%
4.375% senior unsecured notes (due August 2028)	493		4.38%	493		4.38%
Finance leases	49		4.50%	50		4.50%
Total long-term debt	2,079			2,084
Less: Current portion of long-term debt	21			21
Long-term debt	$	2,058		$	2,063

______________________

(a) The carrying amount of the term loan and senior unsecured notes are net of deferred debt issuance costs of $14 million and $15 million as of March 31, 2022 and December 31, 2021, respectively.

(b) Weighted average interest rates are based on period-end balances, including the effects from hedging.

The Company amended its term loan and revolving credit facility in April 2022. See Note 17 - Subsequent Event for more information.

Maturities and Capacity

The Company’s outstanding debt as of March 31, 2022 matures as follows:


	Long-Term Debt
Within 1 year	$	21
Between 1 and 2 years	22
Between 2 and 3 years	22
Between 3 and 4 years (a)	1,495
Between 4 and 5 years	7
Thereafter	512
Total	$	2,079

______________________

(a) In connection with the term loan A issuance in April 2022 (see Note 17 - Subsequent Event), $400 million of this amount was extended two additional years.

As of March 31, 2022, the available capacity under the Company’s revolving credit facility was as follows:


	Revolving Credit Facility
Total capacity	$	750
Less: Letters of credit	9
Available capacity	$	741

Deferred Debt Issuance Costs

The Company classifies deferred debt issuance costs related to its revolving credit facility within other non-current assets on the Condensed Consolidated Balance Sheets. Such deferred debt issuance costs were $2 million as of both March 31, 2022 and December 31, 2021.

Cash Flow Hedge

In 2018, the Company hedged a portion of its $1.6 billion term loan. The pay-fixed/receive-variable interest rate swaps hedge $1.1 billion of the Company’s term loan interest rate exposure, of which $600 million expires in the second quarter of

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2024 and has a weighted average fixed rate of 2.51% and $500 million expires in the fourth quarter of 2024 and has a weighted average fixed rate of 0.99%. The variable rates of the swap agreements are based on one-month LIBOR. The aggregate fair value of these interest rate swaps was an asset of $18 million and a liability of $23 million as of March 31, 2022 and December 31, 2021, respectively, which was included within other non-current assets and non-current liabilities on the Condensed Consolidated Balance Sheets, respectively. The effect of interest rate swaps on interest expense, net on the Condensed Consolidated Statements of Income was $5 million and $6 million of expense for the three months ended March 31, 2022 and 2021, respectively.

There was no hedging ineffectiveness recognized in the three months ended March 31, 2022 or 2021. The Company expects to reclassify immaterial gains from accumulated other comprehensive income (“AOCI”) (loss) to interest expense during the next 12 months.

Interest Expense, Net

The Company incurred net interest expense of $20 million and $28 million for the three months ended March 31, 2022 and 2021, respectively. Cash paid related to such interest was $24 million and $26 million for the three months ended March 31, 2022 and 2021, respectively.


11. FAIR VALUE

The Company measures its financial assets and liabilities at fair value on a recurring basis and utilizes the fair value hierarchy to determine such fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1: Quoted prices for identical instruments in active markets.

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value driver is observable.

Level 3: Unobservable inputs used when little or no market data is available. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement falls has been determined based on the lowest level input (closest to Level 3) that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The fair value of financial instruments is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques, as appropriate. The carrying amounts of cash and cash equivalents, trade receivables, accounts payable and accrued expenses and other current liabilities approximate fair value due to the short-term maturities of these assets and liabilities. The carrying amounts and estimated fair values of all other financial instruments are as follows:


	March 31, 2022
	Carrying Amount		Estimated Fair Value
Debt	$	2,079	$	2,062

The Company estimates the fair value of its debt using Level 2 inputs based on indicative bids from investment banks or quoted market prices with the exception of finance leases, which are estimated at carrying value.

Financial Instruments

Changes in interest rates and foreign exchange rates expose the Company to market risk. The Company uses cash flow hedges as part of its overall strategy to manage its exposure to market risks associated with fluctuations in interest rates and foreign currency exchange rates. As a matter of policy, the Company only enters into transactions that it believes will be highly effective at offsetting the underlying risk, and it does not use derivatives for trading or speculative purposes. The Company estimates the fair value of its derivatives using Level 2 inputs.

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Interest Rate Risk

A portion of debt used to finance the Company’s operations is exposed to interest rate fluctuations. The Company uses various hedging strategies and derivative financial instruments to create a desired mix of fixed and floating rate assets and liabilities. Derivative instruments currently used in these hedging strategies include interest rate swaps. The derivatives used to manage the risk associated with the Company’s floating rate debt are derivatives designated as cash flow hedges. See Note 10 - Long-Term Debt and Borrowing Arrangements for the impact of such cash flow hedges.

Foreign Currency Risk

The Company has foreign currency rate exposure to exchange rate fluctuations worldwide, particularly with respect to the Canadian Dollar, Chinese Yuan, Euro, British Pound, Brazilian Real and Argentine Peso. The Company uses foreign currency forward contracts at various times to manage and reduce the foreign currency exchange rate risk associated with its foreign currency denominated receivables and payables, forecasted royalties and forecasted earnings and cash flows of foreign subsidiaries and other transactions. Gains from freestanding foreign currency exchange contracts were not material and $2 million during the three months ended March 31, 2022 and 2021, respectively. Such gains are included in operating expenses in the Condensed Consolidated Statements of Income.

The Company accounts for Argentina as a highly inflationary economy. Foreign currency exchange losses related to Argentina were not material and $1 million during the three months ended March 31, 2022 and 2021, respectively. Such losses are included in operating expenses in the Condensed Consolidated Statements of Income.

Credit Risk and Exposure

The Company is exposed to counterparty credit risk in the event of nonperformance by counterparties to various agreements and sales transactions. The Company manages such risk by evaluating the financial position and creditworthiness of such counterparties and often by requiring collateral in instances in which financing is provided. The Company mitigates counterparty credit risk associated with its derivative contracts by monitoring the amounts at risk with each counterparty to such contracts, periodically evaluating counterparty creditworthiness and financial position, and where possible, dispersing its risk among multiple counterparties.


12. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved, at times, in claims, legal and regulatory proceedings and governmental inquiries arising in the ordinary course of its business, including but not limited to: breach of contract, fraud and bad faith claims with franchisees in connection with franchise agreements and with owners in connection with management contracts, as well as negligence, breach of contract, fraud, employment, consumer protection and other statutory claims asserted in connection with alleged acts or occurrences at owned, franchised or managed properties or in relation to guest reservations and bookings. The Company may also at times be involved in claims, legal and regulatory proceedings and governmental inquiries relating to bankruptcy proceedings involving efforts to collect receivables from a debtor in bankruptcy, employment matters, claims of infringement upon third parties’ intellectual property rights, claims relating to information security, privacy and consumer protection, fiduciary duty/trust claims, tax claims, environmental claims and landlord/tenant disputes. Along with many of its competitors, the Company and/or certain of its subsidiaries have been named as defendants in litigation matters filed in state and federal courts, alleging statutory and common law claims related to purported incidents of sex trafficking at certain franchised and managed hotel facilities. These matters are in the pleading or discovery stages at this time. As of March 31, 2022, the Company is aware of approximately 30 pending matters filed naming the Company and/or subsidiaries. Based upon the status of these matters, the Company has not made a determination as to the likelihood of loss of any one of these matters and is unable to estimate a range of losses at this time.

The Company records an accrual for legal contingencies when it determines, after consultation with outside counsel, that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, the Company evaluates, among other things, the degree of probability of an unfavorable outcome, and when it is probable that a liability has been incurred, its ability to make a reasonable estimate of loss. The Company reviews these accruals each reporting period and makes revisions based on changes in facts and circumstances, including changes to its strategy in dealing with these matters.

The Company believes that it has adequately accrued for such matters with reserves of $6 million as of both March 31, 2022 and December 31, 2021. The Company also had receivables of $4 million and $3 million as of March 31, 2022 and

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December 31, 2021, respectively, for certain matters which are covered by insurance and were included in other current assets on its Condensed Consolidated Balance Sheets. Litigation is inherently unpredictable and, although the Company believes that its accruals are adequate and/or that it has valid defenses in these matters, unfavorable results could occur. As such, an adverse outcome from such proceedings for which claims are awarded in excess of the amounts accrued, if any, could be material to the Company with respect to earnings and/or cash flows in any given reporting period. As of March 31, 2022, the potential exposure resulting from adverse outcomes of such legal proceedings could, in the aggregate, range up to approximately $4 million in excess of recorded accruals. However, the Company does not believe that the impact of such litigation will result in a material liability to the Company in relation to its combined financial position or liquidity.

Guarantees

Separation-related guarantees

The Company assumed one-third of certain contingent and other corporate liabilities of former Parent incurred prior to the spin-off, including liabilities of former Parent related to, arising out of or resulting from certain terminated or divested businesses, certain general corporate matters of former Parent and any actions with respect to the separation plan or the distribution made or brought by any third party.

Former Parent’s Sale of its European Vacation Rentals Business

In connection with the sale of the European Vacation Rentals business, the Company was entitled to one-third of the excess of net proceeds from the sale above a pre-set amount. During 2019, the Buyer notified former Parent of certain proposed post-closing adjustments of approximately $44 million which could serve to reduce the net consideration received from the sale of the European Vacation Rentals business. On December 13, 2021, former Parent entered into a settlement agreement, contingent upon regulatory approval, to settle the post-closing adjustment claims for $7 million which will be split one-third and two-thirds between the Company and former Parent, respectively. The Company had a $2 million reserve for such settlement as of both March 31, 2022 and December 31, 2021.

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13. STOCK-BASED COMPENSATION

The Company has a stock-based compensation plan available to grant non-qualified stock options, incentive stock options, stock-settled appreciation rights (“SSARs”), RSUs, performance-vesting restricted stock units (“PSUs”) and/or other stock-based awards to key employees and non-employee directors. Under the Wyndham Hotels & Resorts, Inc. 2018 Equity and Incentive Plan (“Stock Plan”), which became effective on May 14, 2018, a maximum of 10.0 million shares of common stock may be awarded. As of March 31, 2022, 5.1 million shares remained available.

During March 2022, the Company granted incentive equity awards totaling $27 million to key employees and senior officers in the form of RSUs. The RSUs generally vest ratable over a period of four years based on continuous service. Additionally, the Company approved incentive equity awards to key employees and senior officers in the form of PSUs with a maximum grant value of $12 million. The PSUs generally cliff vest on the third anniversary of the grant date based on continuous service with the number of shares earned (0% to 200% of the target award) depending on the extent of the Company achieving certain performance metrics.

Incentive Equity Awards Granted by the Company

The activity related to the Company’s incentive equity awards for the three months ended March 31, 2022 consisted of the following:


	RSUs				PSUs
	Number of RSUs		Weighted Average Grant Price		Number of PSUs		Weighted Average Grant Price
Balance as of December 31, 2021	1.2		$	60.37	0.3		$	57.51
Granted (a)	0.3		82.74		0.1	(b)	82.74
Vested	(0.3)		52.99		—		—
Canceled	—		—		(0.1)		52.71
Balance as of March 31, 2022	1.2	(c)	$	67.05	0.3	(d)	$	73.04

______________________

(a)Represents awards granted by the Company primarily in March 2022.

(b)Represents awards granted by the Company at the maximum achievement level of 200% of target payout. Actual shares that may be issued can range from 0% to 200% of target.

(c)RSUs outstanding as of March 31, 2022 have an aggregate unrecognized compensation expense of $70 million, which is expected to be recognized over a weighted average period of 3.0 years.

(d)PSUs outstanding as of March 31, 2022 have an aggregate maximum potential unrecognized compensation expense of $21 million, which may be recognized over a weighted average period of 2.3 years based on attainment of targets.

There were no stock options granted in 2022. The activity related to stock options for the three months ended March 31, 2022 consisted of the following:


	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2021	1.1		$	56.04
Granted	—		—
Exercised	—		—
Canceled	—		—

Outstanding as of March 31, 2022	1.1		$	55.93	4.4	$	31
Unvested as of March 31, 2022	0.5	(a)	$	56.13	4.3	$	13
Exercisable as of March 31, 2022	0.6		$	55.79	4.4	$	18

______________________

(a)Unvested options as of March 31, 2022 are expected to vest over time and have an aggregate unrecognized compensation expense of $4 million, which will be recognized over a weighted average period of 2.0 years.

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Stock-Based Compensation Expense

Stock-based compensation expense was $8 million and $5 million for the three months ended March 31, 2022 and 2021, respectively.


14. SEGMENT INFORMATION

The reportable segments presented below represent the Company’s operating segments for which separate financial information is available and is utilized on a regular basis by its chief operating decision maker to assess performance and allocate resources. In identifying its reportable segments, the Company also considers the nature of services provided by its operating segments. Management evaluates the operating results of each of its reportable segments based upon net revenues and “adjusted EBITDA”, which is defined as net income/(loss) excluding net interest expense, depreciation and amortization, early extinguishment of debt charges, impairment charges, restructuring and related charges, contract termination costs, transaction-related items (acquisition-, disposition- or separation-related), gain/(loss) on asset sale, foreign currency impacts of highly inflationary countries, stock-based compensation expense, income taxes and development advance notes amortization. The Company believes that adjusted EBITDA is a useful measure of performance for its segments which, when considered with U.S. GAAP measures, allows a more complete understanding of its operating performance. The Company uses this measure internally to assess operating performance, both absolutely and in comparison to other companies, and to make day to day operating decisions, including in the evaluation of selected compensation decisions. The Company’s presentation of adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.


	Three Months Ended March 31,
	2022				2021
	Net Revenues		Adjusted EBITDA		Net Revenues		Adjusted EBITDA
Hotel Franchising	$	272	$	155	$	209	$	105
Hotel Management	99		20		94		5
Total Reportable Segments	371		175		303		110
Corporate and Other	—		(16)		—		(13)
Total Company	$	371	$	159	$	303	$	97

The table below is a reconciliation of net income to adjusted EBITDA.


	Three Months Ended March 31,
	2022		2021
Net income	$	106	$	24
Provision for income taxes	34		11
Depreciation and amortization	24		24
Interest expense, net	20		28

Stock-based compensation expense	8		5
Development advance notes amortization	3		2
Gain on asset sale	(36)		—
Separation-related expenses	—		2


Foreign currency impact of highly inflationary countries	—		1
Adjusted EBITDA	$	159	$	97


15. OTHER EXPENSES AND CHARGES

Gain on Asset Sale

In March 2022, the Company completed the sale of its Wyndham Grand Bonnet Creek Resort for gross proceeds of $121 million ($118 million, net of transaction costs) and recognized a $36 million gain on sale, net of transaction costs, which was attributable to the Company's hotel management business. Such gain was reported within gain on asset sale on the Condensed Consolidated Statement of Income for the three months ended March 31, 2022. Additionally, the Company entered into a 20 year franchise agreement with the buyer of the property.

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Separation-Related

Separation-related costs associated with the Company’s spin-off from former Parent were $2 million for the three months ended March 31, 2021.


16. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

The components of AOCI are as follows:


Net of Tax	Foreign Currency Translation Adjustments		Cash Flow Hedges		Accumulated Other Comprehensive Income/(Loss)
Balance as of December 31, 2021	$	2	$	(17)	$	(15)
Period change	—		31		31
Balance as of March 31, 2022	$	2	$	14	$	16





Net of Tax
Balance as of December 31, 2020	$	2	$	(54)	$	(52)
Period change	—		14		14
Balance as of March 31, 2021	$	2	$	(40)	$	(38)


17. SUBSEQUENT EVENT

In April 2022, the Company amended its $750 million revolving credit facility, extending the maturity from May 2023 to April 2027 on similar terms as the previous facility, and issued a new $400 million senior secured term loan A facility, which matures in April 2027. The proceeds from the term loan A were used to repay a portion of the Company's existing $1.5 billion term loan facility, which is scheduled to mature in May 2025. There was no increase in rates from the existing $1.5 billion term loan facility to the new term loan A.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. These statements include, but are not limited to, statements related to our expectations regarding our strategy and the performance of our business, our financial results, our liquidity and capital resources, share repurchases and dividends and other non-historical statements. Forward-looking statements include those that convey management’s expectations as to the future based on plans, estimates and projections at the time we make the statements and may be identified by words such as “will,” “expect,” “believe,” “plan,” “anticipate,” “intend,” “goal,” “future,” “outlook,” “guidance,” “target,” “objective,” “estimate,” “projection” and similar words or expressions, including the negative version of such words and expressions. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

Factors that could cause actual results to differ materially from those in the forward-looking statements include without limitation general economic conditions; the continuation or worsening of the effects from the coronavirus pandemic, (“COVID-19”); its scope, duration, resurgence and impact on our business operations, financial results, cash flows and liquidity, as well as the impact on our franchisees and property owners, guests and team members, the hospitality industry and overall demand for and restrictions on travel; the success of our mitigation efforts in response to COVID-19; our continued performance during the recovery fro