Market Overview

Choice Hotels International Reports 2020 Third Quarter Results

Share:

ROCKVILLE, Md., Nov. 5, 2020 /PRNewswire/ -- Choice Hotels International, Inc. (NYSE:CHH), one of the world's largest lodging franchisors, today reported its results for the three and nine months ended September 30, 2020.

"Choice Hotels' proven portfolio of well-segmented brands, geographic footprint, and strength in leisure travel continued to drive results that outperformed the industry and position the company to benefit from the recent shifts in consumer behavior," said Patrick Pacious, president and chief executive officer, Choice Hotels. "We believe that our strategy of growing our limited-service brands in the right segments and the right locations will allow us to continue to grow our share of travel demand over the long term."

In the third quarter of 2020, Choice Hotels continued to provide a broad range of support to its franchisees, guests, and communities while improving its overall financial and liquidity position. Highlights of third quarter and year to date 2020 results include:

  • Domestic systemwide revenue per available room (RevPAR) outperformed the total industry by nearly 20 percentage points, declining 28.8% for third quarter 2020 compared to the same period of the prior year, and exceeded the chain scale segments in which the company competes, as reported by STR.
  • Fourth quarter domestic RevPAR through October 24, 2020 has continued the pattern of sequential quarterly improvement, and October 2020 RevPAR is expected to decline by approximately 25% from the same period of 2019 (see Exhibit 7 for weekly RevPAR trends).
  • The company awarded 232 new domestic franchise agreements year to date through September 30, 2020, a 38% decrease compared to the same period of the prior year. Nearly 70% of the agreements awarded year to date through September 30, 2020 were for conversion hotels.
  • Net income was $14.5 million for the third quarter, representing diluted earnings per share of $0.26.
  • Third quarter adjusted net income, excluding certain items described in Exhibit 6, decreased 52% to $36.8 million from third quarter 2019. 
  • Adjusted diluted earnings per share for the third quarter were $0.66, a 52% decrease from third quarter 2019.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the third quarter were $74.9 million, a 34% decrease from third quarter 2019.
  • The company reported cash flow from operations of over $68 million in the third quarter 2020.

Performance Trends

  • Domestic systemwide RevPAR decreased 28.8% for third quarter 2020 compared to the third quarter 2019, exceeding overall industry performance by nearly 20 percentage points. In the third quarter 2020, Choice Hotels outperformed the respective chain scales in which the company competes by more than 580 basis points.
  • The company's domestic systemwide occupancy rate has improved since the trough of 28% in early April, with average weekly occupancy consistently exceeding 50% since the week of June 21, 2020 through October 24. For the month of October, domestic systemwide occupancy is expected at 52%.
  • The company's upscale portfolio achieved material domestic systemwide RevPAR share gains versus its local competitors for third quarter 2020, compared to the same period of the prior year, with the Ascend Hotel Collection achieving gains of nearly 19 percentage points. In addition, the company's upscale brands' year-over-year change in domestic systemwide RevPAR outperformed the upscale segment by 14 percentage points. 
  • The company's extended-stay portfolio continued to outperform the industry throughout the third quarter, with average domestic systemwide occupancy rates of 74%. The portfolio achieved average weekly occupancy rates of 70% since the onset of the pandemic in mid-March through October 24, 2020 — exceeding the industry average by 29 percentage points. Specifically, the WoodSpring Suites brand experienced occupancy levels of 77% in the third quarter, outperforming the industry by nearly 29 percentage points, and the brand's monthly occupancy levels have remained above 75% since the last week of June. In addition, the Suburban brand's occupancy rates increased by 60 basis points in the third quarter compared to the same period of 2019.
  • All select-service midscale brands achieved domestic systemwide RevPAR share gains versus their local competitors for third quarter 2020 compared to the same period of the prior year. The Comfort brand family's domestic systemwide year-over-year RevPAR change outperformed the upper-midscale chain scale by 840 basis points.
  • In the third quarter, the company outperformed the industry on the year-over-year domestic RevPAR change and achieved RevPAR share gains versus its local competitors across all location types, as reported by STR.

Additional details for the company's third quarter 2020 results are as follows:

Revenues

  • Total revenues decreased 32% to $210.8 million for third quarter 2020, compared to the same period of 2019.
  • Total revenues excluding marketing and reservation system fees decreased 33% to $103.6 million for third quarter 2020, compared to the same period of 2019.
  • Third quarter 2020 domestic royalties decreased 29% to $76 million, compared to the same period of 2019.
  • The company's domestic effective royalty rate for third quarter 2020 increased 7 basis points over the prior year third quarter to 4.91%, and has increased 9 basis points year to date through September 30, 2020, compared to the same period of the prior year. 

Development

  • The company awarded 81 domestic franchise agreements in third quarter 2020, a 19% decrease compared to the same period of the prior year. Of the total domestic franchise agreements awarded in the quarter, nearly three-fourths were for conversion hotels and over 40% were executed in the month of September. In addition, the company signed the largest minority-owned multi-unit franchise agreement in the history of its emerging markets development program, increasing diversity among Choice Hotels' owner base and across the industry.
  • The company's extended-stay portfolio continued to expand, reaching 421 domestic hotels as of September 30, 2020, a 6% increase since September 30, 2019, with the domestic extended-stay pipeline expanding to over 290 hotels awaiting conversion, under construction or approved for development. Since September 30, 2019, the WoodSpring Suites brand grew the number of open domestic hotels by 7% and its domestic pipeline by 15%.
  • As of September 30, 2020, the number of domestic rooms in the company's upscale portfolio expanded 33% since September 30, 2019, driven by an increase in room count of 14% for the Cambria Hotels brand and 42% for the Ascend Hotel Collection, the latter of which includes 17 properties associated with the company's strategic partnership with AMResorts, an Apple Leisure Group brand.
  • The number of domestic hotels and rooms, as of September 30, 2020, increased 0.7% and 1.9%, respectively, from September 30, 2019. The company's domestic upscale, extended stay, and midscale segments reported a 2.1% aggregate increase in units and a 3.4% increase in rooms since September 30, 2019. The number of international hotels and rooms as of September 30, 2020, increased 0.9% and 10.7%, respectively, from the comparable period of 2019.
  • The company's total domestic pipeline of hotels awaiting conversion, under construction, or approved for development as of September 30, 2020, reached 945 hotels that represent over 76,000 rooms.

Balance Sheet and Liquidity

The company ended the third quarter of 2020 with a strong balance sheet and continues to benefit from its primarily franchise-only business model, which has historically provided a relatively stable earnings stream, low capital expenditure requirements, and significant free cash flow.

In July 2020, the company capitalized on favorable credit markets to issue $450 million in an aggregate principal amount of new 3.700% senior notes due 2031. The net proceeds from the offering were used to repay the 364-day, $250 million term loan obtained in April 2020, and to fund the early repurchase of a portion of the company's 5.750% senior notes due 2022, reducing the company's effective borrowing costs.

During the third quarter of 2020, the company's net debt decreased approximately $50 million for total net debt of $886 million as of September 30, 2020, compared to $936 million as of June 30, 2020. The company reported cash flow from operations of $70 million for the nine months ended September 30, of which over $68 million was generated in the third quarter alone. As of September 30, 2020, the company's total available liquidity consisting of cash and available borrowing capacity through the revolving credit facility was approximately $792 million.

Shareholder Returns

During the three months ended September 30, 2020, the company repurchased approximately 8,000 shares of common stock for approximately $0.7 million through repurchases from employees in connection with tax withholding and option exercises relating to awards under the company's equity incentive plans. As of September 30, 2020, the company had 3.4 million shares remaining under the current share repurchase authorization. The company has temporarily suspended share repurchases under the stock repurchase program as previously disclosed on April 8, 2020 but may continue to repurchase stock from employees in conjunction with tax withholding and option exercises under the company's equity incentive plans.

As previously disclosed, the company suspended the payout of future dividends for at least the remainder of 2020. As a result, total dividends paid during 2020 will be approximately $25 million.

The company continues to follow a prudent and disciplined capital allocation strategy, ensuring the level of investment activity is aligned with the current environment.

Outlook

On March 17, 2020, the company announced that it withdrew its previously issued outlook for 2020. The ultimate and precise impact of COVID-19 on full year 2020 is still unknown at this time and will depend on the level of resurgence in COVID-19 cases, duration and scope of mandated travel and other restrictions, confidence level of consumers to travel and the pace, and level of the broader macroeconomic recovery. As a result, the company is not providing formal guidance for 2020 at this time.

The company currently expects the impact of COVID-19 on its year-over-year RevPAR change will be less significant for the quarter ended December 31, 2020 than the quarter ended September 30, 2020 based on the continued resilience of leisure demand and Choice's relative outperformance versus the industry.

The company will continue to evaluate the impact of COVID-19 across its business and will provide further updates in the next earnings report based on the best information then available.

Conference Call

Choice Hotels International will conduct a conference call on Thursday, November 5, 2020, at 10:00 a.m. Eastern Time to discuss the company's third quarter 2020 earnings results. The dial-in number to listen to the call domestically is (888) 428-7458 and the number for international participants is (862) 298-0702. A live webcast will also be available on the company's investor relations website, http://investor.choicehotels.com/, and can be accessed via the Financial Performance and Presentations tab.

About Choice Hotels

Choice Hotels International, Inc. (NYSE:CHH) is one of the largest lodging franchisors in the world. With more than 7,100 hotels, representing nearly 600,000 rooms, in over 40 countries and territories as of September 30, 2020, the Choice® family of hotel brands provide business and leisure travelers with a range of high-quality lodging options from limited service to full-service hotels in the upscale, midscale, extended-stay and economy segments. The award-winning Choice Privileges® loyalty program offers members benefits ranging from everyday rewards to exceptional experiences. For more information, visit www.choicehotels.com.

Forward-Looking Statements

Certain matters discussed in this presentation constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, our use of words such as "expect," "estimate," "believe," "anticipate," "should," "will," "forecast," "plan," "project," "assume," or similar words of futurity identify such forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions, and expectations regarding future events, which, in turn, are based on information currently available to management. Such statements may relate to projections of the company's revenue, expenses, earnings, debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock, and other financial and operational measures, including occupancy and open hotels, the company's ability to benefit from any rebound in travel demand, the company's liquidity, the company's ability to assist franchisees through relief or other financial measures, the company's ability to minimize or manage disruptions posed by COVID-19, the company's ability to achieve cost savings and reduce discretionary spending and investments, and the impact of COVID-19 and economic conditions on our future operations, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties, and other factors.

Several factors could cause actual results, performance, or achievements of the company to differ materially from those expressed in or contemplated by the forward-looking statements. Such risks include, but are not limited to, continuation, resurgence, or worsening of the COVID-19 pandemic, including quarantines, "shelter-in-place" orders, or other travel restrictions; new information which may emerge concerning the severity or impact of the COVID-19 pandemic and the development of vaccines and treatments for COVID-19; changes in consumer demand and confidence, including the impact of the COVID-19 pandemic on unemployment rates, consumer discretionary spending, and the demand for travel, transient, and group business; volatility or increases in oil and gas prices that may deter consumers from using their vehicles and impact the demand for leisure travel; the impact of COVID-19 on the global hospitality industry, particularly but not exclusively in the U.S. travel market; the success of our mitigation efforts in response to the COVID-19 pandemic; the performance of our brands and categories in any recovery from the COVID-19 pandemic disruption; the timing and amount of future dividends and share repurchases; changes to general, domestic, and foreign economic conditions, including access to liquidity and capital as a result of COVID-19; future domestic or global outbreaks of COVID-19 or other epidemics, pandemics, or contagious diseases, or fear of such outbreaks; changes in law and regulation applicable to the travel, lodging, or franchising industries; foreign currency fluctuations; impairments or declines in the value of the company's assets; operating risks common in the travel, lodging, or franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees and our relationships with our franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; the commercial acceptance of our software as a service technology solutions division's products and services; our ability to grow our franchise system; exposure to risks related to our hotel development, financing, and ownership activities; exposures to risks associated with our investments in new businesses; fluctuations in the supply and demand for hotel rooms; our ability to realize anticipated benefits from acquired businesses; impairments or losses relating to acquired businesses; the level of acceptance of alternative growth strategies we may implement; cyber security and data breach risks; ownership and financing activities; hotel closures or financial difficulties of our franchisees; operating risks associated with our international operations, especially in areas currently most affected by COVID-19; the outcome of litigation; our ability to effectively manage our indebtedness and secure our indebtedness; and any future resurgence of COVID-19. These and other risk factors are discussed in detail in the company's filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Non-GAAP Financial Measurements

The company evaluates its operations utilizing the performance metrics of adjusted EBITDA, revenues excluding marketing and reservation system activities, adjusted net income, and adjusted EPS, which are all non-GAAP financial measurements. These measures, which are reconciled to the comparable GAAP measures in Exhibit 6, should not be considered as an alternative to any measure of performance or liquidity as promulgated under or authorized by GAAP, such as net income, EPS, and total revenues. The company's calculation of these measurements may be different from the calculations used by other companies and comparability may therefore be limited. We discuss management's reasons for reporting these non-GAAP measures and how each non-GAAP measure is calculated below.

In addition to the specific adjustments noted below with respect to each measure, the non-GAAP measures presented herein also exclude restructuring of the company's operations including employee severance benefit, income taxes and legal costs, debt-restructuring costs, tax credits related to the rehabilitation and re-use of historic buildings, exceptional allowances recorded as a result of COVID-19's impact on the collectability of receivables and gains and losses on sale/disposal and impairment of assets primarily related to the company's operations that provide Software as a Service ("SaaS") technology solutions to vacation-rental management companies, an abandoned hotel development project; and an office building leased to a third-party to allow for period-over-period comparison of ongoing core operations before the impact of these discrete and infrequent charges.

Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization: Adjusted EBITDA reflects net income excluding the impact of interest expense, interest income, provision for income taxes, depreciation and amortization, franchise-agreement acquisition cost amortization, other (gains) and losses, equity in net income (loss) of unconsolidated affiliates, mark-to-market adjustments on non-qualified retirement plan investments, share based compensation expense (benefit) and surplus or deficits generated by marketing and reservation-system activities. We consider adjusted EBITDA to be an indicator of operating performance because it measures our ability to service debt, fund capital expenditures, and expand our business. We also use adjusted EBITDA, as do analysts, lenders, investors, and others, to evaluate companies because it excludes certain items that can vary widely across industries or among companies within the same industry. For example, interest expense can be dependent on a company's capital structure, debt levels, and credit ratings and share based compensation expense (benefit) is dependent on the design of compensation plans in place and the usage of them. Accordingly, the impact of interest expense and share based compensation expense (benefit) on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provision for income taxes can vary considerably among companies. Adjusted EBITDA also excludes depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets or amortizing franchise-agreement acquisition costs. These differences can result in considerable variability in the relative asset costs and estimated lives and, therefore, the depreciation and amortization expense among companies. Mark-to-market adjustments on non-qualified retirement-plan investments recorded in SG&A are excluded from EBITDA, as the company accounts for these investments in accordance with accounting for deferred-compensation arrangements when investments are held in a rabbi trust and invested. Changes in the fair value of the investments are recognized as both compensation expense in SG&A and other gains and losses. As a result, the changes in the fair value of the investments do not have a material impact on the company's net income. Surpluses and deficits generated from marketing and reservation activities are excluded, as the company's franchise agreements require the marketing and reservation-system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance.

Adjusted Net Income and Adjusted Earnings Per Share: Adjusted net income and EPS exclude the impact of surpluses or deficits generated from marketing and reservation-system activities. Surpluses and deficits generated from marketing and reservation activities are excluded, as the company's franchise agreements require the marketing and reservation system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance. We consider adjusted net income and adjusted EPS to be indicators of operating performance because excluding these items allow for period-over-period comparisons of our ongoing operations.

Revenues, Excluding Marketing and Reservation System Activities: The company reports revenues, excluding marketing and reservation-system activities. These non-GAAP measures we present are commonly used measures of performance in our industry and facilitate comparisons between the company and its competitors. Marketing and reservation-system activities are excluded, as the company's franchise agreements require the marketing and reservation-system revenues to be used exclusively for expenses associated with providing franchise services, such as central reservation and property-management systems, reservation delivery, and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these marketing and reservation-system activities and the company is required to spend any surpluses generated in future periods. Since these activities will be managed to break-even over time, quarterly or annual surpluses and deficits have been excluded from the measurements utilized to assess the company's operating performance.

Net Debt: The company's net debt is calculated as total long-term debt (including current portion) excluding unamortized financing costs and discounts minus cash and cash equivalents. Net Debt is a non-GAAP financial measure.

© 2020 Choice Hotels International, Inc. All rights reserved.

 

Choice Hotels International, Inc. and Subsidiaries











Exhibit 1

Condensed Consolidated Statements of Income










(Unaudited)




































































Three Months Ended September 30,


Nine Months Ended September 30,








Variance






Variance




2020


2019


$


%


2020


2019


$


%


(In thousands, except per share amounts)




































REVENUES




































Royalty fees


$               79,666


$           113,688


$   (34,022)


(30%)


$         200,157


$           300,468


$ (100,311)


(33%)


Initial franchise and relicensing fees


6,071


6,741


(670)


(10%)


20,031


20,223


(192)


(1%)


Procurement services


10,115


14,814


(4,699)


(32%)


34,609


47,590


(12,981)


(27%)


Marketing and reservation system


107,141


157,024


(49,883)


(32%)


297,203


439,553


(142,350)


(32%)


Owned hotels


4,201


8,710


(4,509)


(52%)


15,731


8,710


7,021


81%


Other


3,577


9,755


(6,178)


(63%)


12,948


30,192


(17,244)


(57%)


      Total revenues


210,771


310,732


(99,961)


(32%)


580,679


846,736


(266,057)


(31%)




















OPERATING EXPENSES




































Selling, general and administrative


31,413


38,308


(6,895)


(18%)


104,212


124,802


(20,590)


(16%)


Depreciation and amortization


6,382


5,568


814


15%


19,309


12,589


6,720


53%


Marketing and reservation system


113,808


158,430


(44,622)


(28%)


333,564


438,390


(104,826)


(24%)


Owned hotels


3,812


6,014


(2,202)


(37%)


12,822


6,014


6,808


113%




















Total operating expenses


155,415


208,320


(52,905)


(25%)


469,907


581,795


(111,888)


(19%)




















Gain (loss) on sale, disposition and impairment of assets, net


(4,290)


8


(4,298)


NM


(5,516)


(14,934)


9,418


63%




















Operating income


51,066


102,420


(51,354)


(50%)


105,256


250,007


(144,751)


(58%)




















OTHER INCOME AND EXPENSES, NET


















Interest expense


12,691


12,431


260


2%


37,153


34,735


2,418


7%


Interest income


(1,744)


(2,220)


476


(21%)


(6,277)


(7,617)


1,340


(18%)


Loss on extinguishment of debt


15,958


-


15,958


NM


16,565


-


16,565


NM


Other gains


(1,664)


(115)


(1,549)


1347%


(972)


(3,219)


2,247


(70%)


Equity in net loss of affiliates


1,731


6,400


(4,669)


(73%)


7,172


9,551


(2,379)


(25%)


Total other income and expenses, net


26,972


16,496


10,476


64%


53,641


33,450


20,191


60%




















Income before income taxes


24,094


85,924


(61,830)


(72%)


51,615


216,557


(164,942)


(76%)


Income tax (benefit) expense


9,594


9,685


(91)


(1%)


(15,907)


35,848


(51,755)


(144%)


Net (loss) income 


$               14,500


$             76,239


$   (61,739)


(81%)


$           67,522


$           180,709


$ (113,187)


(63%)






































Basic earnings per share


$                   0.26


$                 1.37


$      (1.11)


(81%)


$               1.22


$                3.25


$       (2.03)


(62%)






































Diluted earnings per share


$                   0.26


$                 1.36


$      (1.10)


(81%)


$               1.21


$                3.23


$       (2.02)


(63%)


 

Choice Hotels International, Inc. and Subsidiaries



Exhibit 2

Condensed Consolidated Balance Sheets





(Unaudited)

















(In thousands, except per share amounts)

 September 30, 


 December 31, 







2020


2019












ASSETS

















Cash and cash equivalents



$           191,967


$           33,766


Accounts receivable, net



175,375


141,566


Other current assets



48,228


61,257



Total current assets



415,570


236,589











Intangible assets, net



290,913


290,421


Goodwill




159,196


159,196


Property and equipment, net


339,000


351,502


Investments in unconsolidated entities

72,571


78,655


Notes receivable, net of allowances


97,809


103,054


Investments, employee benefit plans, at fair value

26,454


24,978


Operating lease right-of-use-assets


19,774


24,088


Other assets




148,859


118,189













Total assets


$        1,570,146


$       1,386,672





























LIABILITIES AND SHAREHOLDERS' DEFICIT














Accounts payable 



$             80,191


$           73,449


Accrued expenses and other current liabilities

67,699


90,364


Deferred revenue



51,487


71,594


Current portion of long-term debt


6,977


7,511


Liability for guest loyalty program


46,066


82,970



Total current liabilities


252,420


325,888











Long-term debt



1,058,309


844,102


Deferred revenue



122,285


112,662


Liability for guest loyalty program


79,777


46,698


Operating lease liabilities



15,037


21,270


Deferred compensation and retirement plan obligations  

31,039


29,949


Other liabilities




32,683


29,614












Total liabilities



1,591,550


1,410,183












Total shareholders' deficit


(21,404)


(23,511)













Total liabilities and shareholders' deficit

$        1,570,146


$       1,386,672


 

Choice Hotels International, Inc. and Subsidiaries



Exhibit 3



Condensed Consolidated Statements of Cash Flows







(Unaudited)


























(In thousands)

Nine Months Ended September 30,












2020


2019




CASH FLOWS FROM OPERATING ACTIVITIES:














Net income

$                   67,522


$            180,709











Adjustments to reconcile net income to net cash provided by operating activities:







  Depreciation and amortization  

19,309


12,589




  Depreciation and amortization - marketing and reservation system 

14,994


12,355




  Franchise agreement acquisition cost amortization

8,343


7,537




  Gain on disposal of assets

-


(2,181)




  Loss on asset disposition and impairment of long-lived assets

5,516


15,034




  Loss on extinguishment of debt

16,565


-




  Non-cash stock compensation and other charges

4,748


12,433




  Non-cash interest and other income

(465)


(2,615)




  Deferred income taxes

(31,411)


3,268




  Equity in net losses from unconsolidated joint ventures, less distributions received

7,320


12,234




  Franchise agreement acquisition costs, net of reimbursements

(16,960)


(25,592)




  Change in working capital and other, net of acquisition

(25,801)


(34,794)











 NET CASH PROVIDED BY OPERATING ACTIVITIES 

69,680


190,977











CASH FLOWS FROM INVESTING ACTIVITIES:














Investment in property and equipment

(32,176)


(46,135)




Investment in intangible assets

(1,212)


(3,659)




Proceeds from sales of assets

-


10,585




Payment on business disposition, net

-


(10,783)




Asset acquisition, net of cash acquired

-


(168,954)




Proceeds from sale of unconsolidated joint venture

-


8,937




Contributions to equity method investments

(4,620)


(17,329)




Distributions from equity method investments

3,362


9,841




Purchases of investments, employee benefit plans

(2,254)


(2,748)




Proceeds from sales of investments, employee benefit plans

2,372


2,197




Issuance of notes receivable

(9,845)


(10,767)




Collections of notes receivable

5,113


10,491




Proceeds from sale of tax credits

9,197


-




Other items, net

(473)


(1,842)











 NET CASH USED IN INVESTING ACTIVITIES 

(30,536)


(220,166)











CASH FLOWS FROM FINANCING ACTIVITIES:














Net (repayments) borrowings pursuant to revolving credit facilities

(18,200)


97,800




Proceeds from issuance of term loan

249,500


-




Proceeds from issuance of 2020 Senior Notes

447,723


-




Principal payments on long-term debt

(466,915)


(371)




Payments to extinguish long-term debt

(14,347)


-




Purchase of treasury stock

(55,158)


(44,770)




Dividends paid

(25,274)


(36,103)




Debt issuance costs

(4,620)


(300)




Proceeds from issuance of long-term debt

-


23,863




Payments on transfer of interest in notes receivable

-


(24,409)




Proceeds from exercise of stock options

6,615


18,519











 NET CASH PROVIDED BY FINANCING ACTIVITIES

119,324


34,229











Net change in cash and cash equivalents

158,468


5,040




Effect of foreign exchange rate changes on cash and cash equivalents

(267)


(113)




Cash and cash equivalents at beginning of period

33,766


26,642











CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                 191,967


$              31,569


















 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 4

SUPPLEMENTAL OPERATING INFORMATION 


DOMESTIC HOTEL SYSTEM(1)


(UNAUDITED)






































































For the Nine Months Ended September 30, 2020


For the Nine Months Ended September 30, 2019


Change



























Average Daily






Average Daily






Average Daily










Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR

























Comfort(2)


$             85.22


46.2%


$                    39.40


$             97.39


63.9%


$       62.26


(12.5%)


(1,770)

bps


(36.7%)



Sleep


77.36


46.5%


35.98


86.50


63.0%


54.48


(10.6%)


(1,650)

bps


(34.0%)



Quality


73.23


42.1%


30.81


81.51


55.9%


45.55


(10.2%)


(1,380)

bps


(32.4%)



Clarion(3)


74.79


33.4%


24.97


86.31


51.3%


44.32


(13.3%)


(1,790)

bps


(43.7%)



Econo Lodge


59.65


41.2%


24.55


64.75


49.1%


31.78


(7.9%)


(790)

bps


(22.8%)



Rodeway


60.15


44.0%


26.45


65.29


50.4%


32.89


(7.9%)


(640)

bps


(19.6%)



WoodSpring Suites


46.15


72.0%


33.23


47.34


76.9%


36.40


(2.5%)


(490)

bps


(8.7%)



MainStay


77.38


55.1%


42.61


86.38


65.8%


56.86


(10.4%)


(1,070)

bps


(25.1%)



Suburban


52.14


63.7%


33.22


58.36


68.9%


40.18


(10.7%)


(520)

bps


(17.3%)



Cambria Hotels


116.78


38.3%


44.78


145.08


69.5%


100.88


(19.5%)


(3,120)

bps


(55.6%)



Ascend Hotel Collection


120.21


43.9%


52.73


126.66


62.7%


79.41


(5.1%)


(1,880)

bps


(33.6%)



Total


$             72.71


45.9%


$                    33.36


$             83.07


59.3%


$       49.26


(12.5%)


(1,340)

bps


(32.3%)







































































For the Three Months Ended September 30, 2020


For the Three Months Ended September 30, 2019


Change



























Average Daily






Average Daily






Average Daily










Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR


Rate


Occupancy


RevPAR

























Comfort(2)


$             86.81


53.3%


$                    46.26


$           101.48


68.4%


$       69.39


(14.5%)


(1,510)

bps


(33.3%)



Sleep


78.07


52.4%


40.89


88.32


66.4%


58.62


(11.6%)


(1,400)

bps


(30.2%)



Quality


76.57


48.7%


37.25


85.60


60.6%


51.87


(10.5%)


(1,190)

bps


(28.2%)



Clarion(3)


78.58


37.3%


29.34


91.80


55.7%


51.16


(14.4%)


(1,840)

bps


(42.7%)



Econo Lodge


63.63


47.2%


30.01


68.67


53.3%


36.62


(7.3%)


(610)

bps


(18.1%)



Rodeway


63.02


50.2%


31.62


68.98


54.3%


37.45


(8.6%)


(410)

bps


(15.6%)



WoodSpring Suites


46.42


76.5%


35.50


48.69


77.4%


37.67


(4.7%)


(90)

bps


(5.8%)



MainStay


79.23


62.4%


49.43


88.05


70.5%


62.07


(10.0%)


(810)

bps


(20.4%)



Suburban


51.46


68.3%


35.16


57.55


67.9%


39.11


(10.6%)


40

bps


(10.1%)



Cambria Hotels


110.04


41.3%


45.44


145.78


72.0%


104.95


(24.5%)


(3,070)

bps


(56.7%)



Ascend Hotel Collection


126.71


51.2%


64.84


135.09


67.6%


91.29


(6.2%)


(1,640)

bps


(29.0%)



Total


$             75.30


52.1%


$                    39.25


$             86.95


63.4%


$       55.10


(13.4%)


(1,130)

bps


(28.8%)



























































































Effective Royalty Rate










































For the Quarter Ended


For the Nine Months Ended
















09/30/2020


09/30/2019


09/30/2020


09/30/2019




































System-wide(4)


4.91%


4.84%


4.93%


4.84%






































































































(1)In response to partial hotel closures resulting from the COVID-19 pandemic, the Company revised its calculation of Occupancy to be reflective of full room availability.

    Additionally, the Company also made minor revisions to its ADR calculations, with respect to complimentary rooms.   The revised ADR, Occupancy and RevPAR are reflected in the tables above for all periods noted. 

(2)Includes Comfort family of brand extensions including Comfort and Comfort Suites












(3)Includes Clarion family of brand extensions including Clarion and Clarion Pointe











(4)Includes United States and Caribbean countries and territories










 

CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES

Exhibit 5

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA


(UNAUDITED)


























































September 30, 2020


September 30, 2019


Variance






















Hotels


Rooms


Hotels


Rooms


Hotels


Rooms


%


%




















Comfort(1)


1,629


128,213


1,618


126,931


11


1,282


0.7%


1.0%


Sleep


403


28,534


398


28,072


5


462


1.3%


1.6%


Quality


1,688


128,751


1,670


128,092


18


659


1.1%


0.5%


Clarion(2)


179


22,364


176


22,113


3


251


1.7%


1.1%


Econo Lodge


781


47,036


815


49,197


(34)


(2,161)


(4.2%)


(4.4%)


Rodeway


567


32,251


585


34,090


(18)


(1,839)


(3.1%)


(5.4%)


WoodSpring Suites


285


34,290


266


31,927


19


2,363


7.1%


7.4%


MainStay


74


4,673


72


4,642


2


31


2.8%


0.7%


Suburban


62


6,236


59


6,026


3


210


5.1%


3.5%


Cambria Hotels


53


7,599


47


6,679


6


920


12.8%


13.8%


Ascend Hotel Collection


213


22,192


187


15,670


26


6,522


13.9%


41.6%




















Domestic Franchises(3)


5,934


462,139


5,893


453,439


41


8,700


0.7%


1.9%




















International Franchises


1,192


134,316


1,181


121,287


11


13,029


0.9%


10.7%




















Total Franchises


7,126


596,455


7,074


574,726


52


21,729


0.7%


3.8%










































































(1)Includes Comfort family of brand extensions including Comfort and Comfort Suites



(2)Includes Clarion family of brand extensions including Clarion and Clarion Pointe


(3)Includes United States and Caribbean countries and territories


 


CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES


Exhibit 6



SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION






(UNAUDITED)

















REVENUES AND ADJUSTED OPERATING MARGINS, EXCLUDING MARKETING AND RESERVATION ACTIVITIES



















(dollar amounts in thousands)


Three Months Ended September 30, 


Nine Months Ended September 30, 


















2020


2019


2020


2019




Revenues, Excluding Marketing and Reservation Activities
























Total Revenues


$                210,771


$                     310,732


$              580,679


$               846,736




Adjustments:












     Marketing and reservation system revenues


(107,141)


(157,024)


(297,203)


(439,553)




Revenues, excluding marketing and reservation activities


$                103,630


$                     153,708


$              283,476


$               407,183



















































ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")




















(dollar amounts in thousands)














Three Months Ended September 30, 


Nine Months Ended September 30, 

















2020


2019


2020


2019















Net income 


$                  14,500


$                       76,239


$                67,522


$               180,709




Income tax (benefit) expense


9,594


9,685


(15,907)


35,848




Interest expense


12,691


12,431


37,153


34,735




Interest income


(1,744)


(2,220)


(6,277)


(7,617)




Other gains


(1,664)


(115)


(972)


(3,219)




Loss on extinguishment of debt


15,958


-


16,565


-




Equity in net loss of affiliates


1,731


6,400


7,172


9,551




Depreciation and amortization


6,382


5,568


19,309


12,589




Loss (gain) on sale and dispositions & impairment of assets, net


4,290


(8)


5,516


14,934




Mark to market adjustments on non-qualified retirement plan investments


1,709


97


928


3,152




Operational restructuring charges


128


-


8,646


-




Share-based compensation


1,765


2,020


1,624


6,211




Exceptional allowances attributable to COVID-19


1,285


-


3,963


-




Marketing and reservation system reimbursable (surplus) deficit


6,667


1,406


36,361


(1,163)




Franchise agreement acquisition costs amortization


1,582


1,487


4,759


4,329



Adjusted EBITDA


$                  74,874


$                     112,990


$              186,362


$               290,059

































ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)





















(dollar amounts in thousands, except per share amounts)


Three Months Ended September 30, 


Nine Months Ended September 30, 


















2020


2019


2020


2019















Net income 


$                  14,500


$                       76,239


$                67,522


$               180,709



Adjustments:












Marketing and reservation system reimbursable (surplus) deficit


3,376


1,095


28,431


(932)




Operational restructuring charges


97


-


6,392


-




Loss on sale and disposition & impairment of assets, net


3,123


5,187


4,087


16,516




Loss on extinguishment of debt


11,617


-


12,275


-




Exceptional allowances attributable to COVID-19


651


-


2,937


-




Sale of tax credits on historic building


(1,688)


(6,035)


(1,857)


(6,035)




Foreign tax benefit on international restructuring


5,118


-


(25,454)


-



Adjusted Net Income


$                  36,794


$                       76,486


$                94,333


$               190,258



























Diluted Earnings Per Share


$                     0.26


$                          1.36


$                   1.21


$                     3.23



Adjustments:












Marketing and reservation system reimbursable (surplus) deficit


0.06


0.02


0.51


(0.02)




Operational restructuring charges


-


-


0.12


-




Loss on sale and disposition & impairment of assets, net


0.06


0.09


0.07


0.29




Loss on extinguishment of debt


0.21


-


0.22


-




Exceptional allowances attributable to COVID-19


0.01


-


0.05


-




Sale of tax credits on historic building


(0.03)


(0.10)


(0.03)


(0.10)




Foreign tax benefit on international restructuring


0.09


-


(0.46)


-



Adjusted Diluted Earnings Per Share (EPS)


$                     0.66


$                          1.37


$                   1.69


$                     3.40







































NET DEBT























(dollar amounts in thousands)


September 30, 


June 30,










2020


2020



















Long-term debt


$             1,058,309


$                  1,232,136







Current portion of long-term debt


6,977


7,157







Total Debt


1,065,286


1,239,293







Adjustments:












Unamortized financing fees and discounts


12,678


10,780










1,077,964


1,250,073



















Cash and cash equivalents


191,967


314,139







Net Debt


$                885,997


$                     935,934







 


CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES


Exhibit 7


DOMESTIC SYSTEM-WIDE REVPAR YEAR OVER YEAR 




FLUCTUATION VERSUS INDUSTRY(1)




(UNAUDITED)























Week beginning


Choice Hotels


Total Industry





03/08/2020


-22.4%


-32.4%





03/15/2020


-46.4%


-69.5%





03/22/2020


-60.9%


-80.6%





03/29/2020


-63.1%


-81.3%





04/05/2020


-65.7%


-83.0%





04/12/2020


-57.5%


-78.7%





04/19/2020


-60.4%


-78.2%





04/26/2020


-56.8%


-76.5%





05/03/2020


-53.5%


-74.1%





05/10/2020


-54.6%


-73.4%





05/17/2020


-50.8%


-69.6%





05/24/2020


-44.0%


-62.1%





05/31/2020


-44.0%


-64.8%





06/07/2020


-42.4%


-62.5%





06/14/2020


-42.2%


-60.0%





06/21/2020


-37.9%


-56.3%





06/28/2020


-27.9%


-44.5%





07/05/2020


-35.8%


-54.4%





07/12/2020


-38.3%


-55.9%





07/19/2020


-37.5%


-54.8%





07/262020


-33.1%


-51.1%





08/02/2020


-29.5%


-49.1%





08/09/2020


-26.6%


-45.9%





08/16/2020


-25.8%


-45.9%





08/23/2020


-25.6%


-44.3%





08/30/2020


-14.0%


-32.7%





09/06/2020


-26.2%


-48.1%





09/13/2020


-28.6%


-51.6%





09/20/2020


-28.3%


-51.7%





09/27/2020


-26.9%


-48.0%





10/04/2020


-27.0%


-47.5%





10/11/2020


-27.4%


-50.3%





10/18/2020


-26.7%


-51.8%














(1) Source:  Smith Travel Research (STR) Weekly Hotel Review



 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/choice-hotels-international-reports-2020-third-quarter-results-301166897.html

SOURCE Choice Hotels International, Inc.

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com