Choice Hotels(CHH) - 2025 Q1 - Quarterly Results

Performance Highlights & CEO Commentary Choice Hotels achieved a record Q1 2025 with significant growth in net income and adjusted EPS, driven by a 2.3% domestic RevPAR increase and global system expansion, particularly in extended stay Q1 2025 Key Financial Highlights (vs. Q1 2024) | Metric | Q1 2025 | Change vs. Q1 2024 | | :--- | :--- | :--- | | Net Income | $44.5 million | +44% | | Diluted EPS | $0.94 | +52% | | Adjusted EBITDA | $129.6 million | +4% | | Adjusted Diluted EPS | $1.34 | +5% | - Domestic RevPAR grew 2.3% YoY, outperforming competitive chain scales by 60 basis points, driven by strong performance in extended stay (+6.8%), economy (+7.1%), and midscale (+1.7%) portfolios[1] - Global net rooms system size increased by 2.8% YoY, with revenue-intense upscale, extended stay, and midscale portfolios growing by 3.9%[1] - CEO Patrick Pacious stated that the company's unique positioning and diversified growth avenues have enabled market share gains and a stronger foundation for stability and long-term growth[2] Financial and Operational Performance Total revenues for Q1 2025 were flat at $333 million, while net income surged 44% to $45 million, supported by global room system expansion and an improved domestic effective royalty rate Financial Performance Summary Q1 2025 saw total revenues of $333 million, with significant profitability improvement as net income rose to $45 million and Adjusted EBITDA grew 4% to a record $130 million Q1 2025 Financial Results Summary | ($ in millions, except per share) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $333 | $332 | | Net Income | $45 | $31 | | Adjusted Net Income | $64 | $64 | | Diluted EPS | $0.94 | $0.62 | | Adjusted Diluted EPS | $1.34 | $1.28 | | Adjusted EBITDA | $130 | $124 | - The domestic effective royalty rate increased by 8 basis points to 5.11% for Q1 2025 compared to the same period in 2024[5] - Partnership services and fees revenue increased by 28% to $25.4 million for Q1 2025 compared to Q1 2024[5] System Size and Development As of March 31, 2025, global system size grew 2.8% to 647,587 rooms, driven by strong international and domestic upscale, extended stay, and midscale segment growth, with a global pipeline exceeding 95,000 rooms Global System Size Growth (as of March 31) | Region | Rooms 2025 | Rooms 2024 | Change | | :--- | :--- | :--- | :--- | | Domestic | 505,601 | 494,096 | +2.3% | | International | 141,986 | 136,032 | +4.4% | | Global | 647,587 | 630,128 | +2.8% | - The domestic extended stay segment's room portfolio grew by 10.8% compared to March 31, 2024, and its pipeline reached over 40,000 rooms[1] - The global pipeline was over 95,000 rooms as of March 31, 2025, with the global upscale pipeline growing 8% since December 31, 2024, to over 26,000 rooms[9] Capital Management and Shareholder Returns The company maintained a strong financial position with $593.8 million in total available liquidity and a net debt leverage ratio of 3.0x as of Q1 2025, returning $78.1 million to shareholders - As of March 31, 2025, the company had total available liquidity of $593.8 million and a net debt leverage ratio of 3.0 times[6] - Cash flows from operating activities increased significantly to $20.5 million in Q1 2025, an $18.7 million increase from Q1 2024[6] Q1 2025 Shareholder Returns ($ in millions) | Activity | Amount | | :--- | :--- | | Cash Dividends Paid | $13.5 million | | Share Repurchases | $64.6 million | - As of March 31, 2025, 3.4 million shares of common stock remained available for repurchase under the current authorization[7] Full-Year 2025 Outlook Choice Hotels adjusted its full-year 2025 outlook, lowering domestic RevPAR growth expectations to -1% to 1%, which consequently revised Net Income, Adjusted EBITDA, and Adjusted Diluted EPS guidance downward Full-Year 2025 Outlook vs. Prior Outlook ($ in millions, except per share) | Metric | Full-Year 2025 Outlook | Prior Outlook | | :--- | :--- | :--- | | Net Income | $275 – $290 million | $288 – $300 million | | Adjusted EBITDA | $615 – $635 million | $625 – $640 million | | Adjusted Diluted EPS | $6.90 – $7.22 | $6.98 – $7.24 | | Domestic RevPAR Growth | -1% to 1% | 1% to 2% | - The outlook was adjusted to reflect a "more moderate domestic RevPAR growth expectation amidst a changing macro backdrop"[8] Appendix The appendix provides detailed financial information, including condensed consolidated financial statements, supplemental operating data, hotel and room supply figures, non-GAAP measure definitions, and reconciliations for historical results and the 2025 outlook Financial Statements The unaudited condensed consolidated financial statements for Q1 2025 detail revenues of $332.9 million, net income of $44.5 million, total assets of $2.58 billion, and net cash from operating activities of $20.5 million - Provides detailed financial data including the Condensed Consolidated Statements of Income (Exhibit 1), Balance Sheets (Exhibit 2), and Statements of Cash Flows (Exhibit 3)[38][39][40] Supplemental Operating and Supply Data This section details Q1 2025 domestic hotel system performance, showing 2.3% RevPAR growth driven by strong Economy (+7.1%) and Extended Stay (+6.8%) segments, alongside comprehensive hotel and room supply changes by brand Q1 2025 Domestic Hotel System Performance Change (YoY) | Segment | RevPAR Change | ADR Change | Occupancy Change | | :--- | :--- | :--- | :--- | | Upscale & Above | (4.3)% | (2.4)% | (110) bps | | Midscale & Upper Midscale | 1.7% | 1.2% | 20 bps | | Extended Stay | 6.8% | 8.5% | (100) bps | | Economy | 7.1% | 5.1% | 80 bps | | Total | 2.3% | 1.7% | 30 bps | - Supplemental data shows detailed hotel and room counts by brand as of March 31, 2025, compared to the prior year, illustrating the sources of the company's system growth[46] Non-GAAP Reconciliations and Definitions This section defines non-GAAP measures such as EBITDA, Adjusted EBITDA, and Adjusted EPS, providing detailed reconciliations to their GAAP equivalents for Q1 2025, Q1 2024, and the full-year 2025 outlook - The company uses non-GAAP measures like Adjusted EBITDA and Adjusted EPS to evaluate core operating performance, excluding items such as restructuring costs, acquisition-related costs, and the net deficit from reimbursable revenues[16][17] - Detailed reconciliations are provided for Adjusted SG&A, EBITDA to Adjusted EBITDA, and Net Income to Adjusted Net Income and Adjusted Diluted EPS for Q1 2025 and Q1 2024[48][49][50] - Reconciliations for the full-year 2025 outlook are also provided, bridging Net Income to Adjusted EBITDA and Adjusted Net Income[52][53] Financial Statement Reclassification Update In Q1 2025, the company reclassified several income statement line items to better reflect operations, including renaming revenue lines like 'Franchise and management fees' and 'Partnership services and fees', without impacting total revenues or net income - In Q1 2025, the company reclassified certain income statement items to better align with the nature of its business activities, with no effect on previously reported total revenues, operating income, or net income[28][29] - Key changes include revising 'Royalty, licensing and management fees' to 'Franchise and management fees' and 'Platform and procurement services fees' to 'Partnership services and fees', among other adjustments to both revenue and expense lines[30][32][36]