Choice Hotels(CHH) - 2024 Q1 - Quarterly Results

Q1 2024 Earnings Release Performance Highlights Record adjusted EBITDA and EPS in Q1 2024, with significant pipeline growth and capital returns Q1 2024 Key Performance Indicators | Metric | Q1 2024 ($) | Change vs. Q1 2023 | | :--- | :--- | :--- | | Net Income | $31.0 million | -41% | | Diluted EPS | $0.62 | -39% | | Adjusted Net Income | $63.7 million | +9% | | Adjusted Diluted EPS | $1.28 | +14% | | Adjusted EBITDA | $124.3 million | +17% | - The global pipeline reached a company record of over 115,000 rooms as of March 31, 2024, a 10% increase from December 31, 2023, with conversion rooms seeing a 36% increase[9] - The company repurchased 1.5 million shares for $196.6 million year-to-date through April 30, 2024, with an additional 5 million shares authorized for repurchase[10] - The Park Inn by Radisson brand was relaunched in April 2024, positioned as a premium conversion brand[11] Financial Performance Total revenues slightly decreased in Q1 2024, while revenues excluding reimbursables increased, and domestic RevPAR declined Q1 2024 Revenue Breakdown | Metric | Q1 2024 ($ million) | Change vs. Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $331.9 million | -0.3% | | Revenues (ex-reimbursables) | $203.0 million | +16% | | Royalty, licensing, and management fees | $105.5 million | -1.9% | - Domestic RevPAR decreased by 5.9% in Q1 2024 compared to Q1 2023, but increased by 8.2% compared to Q1 2019[15] - The domestic effective royalty rate increased by 4 basis points to 5.03% in Q1 2024[14] Development and Portfolio Growth Strong development momentum in Q1 2024, with domestic extended stay portfolio growing 17.4% and 55 new hotels opened - The domestic extended stay hotel portfolio grew by 17.4% since March 31, 2023[16] - The international portfolio expanded by 1.3% in hotels and 2.3% in rooms year-over-year as of March 31, 2024[17] - The company opened 55 hotels in Q1 2024, a 20% increase year-over-year, with 80% of domestic franchise agreements for conversion hotels[18][19] Shareholder Returns The company returned capital via $14.7 million in dividends and $60.6 million in share repurchases in Q1 2024 - Cash dividends totaling $14.7 million were paid in Q1 2024[20] - Approximately 0.4 million shares were repurchased for $60.6 million in Q1 2024, with an additional 1.1 million shares for $136.0 million through April 30, 2024[21] - As of April 30, 2024, 5.3 million shares remained authorized for repurchase[22] Full-Year 2024 Outlook The company reiterated its full-year 2024 guidance for Net Income and Adjusted EBITDA, increasing Diluted EPS outlook Full-Year 2024 Guidance | Metric | Full-Year 2024 Outlook ($/%) | Prior Outlook ($/%) | | :--- | :--- | :--- | | Net Income | $260 – $274 million | $260 – $274 million | | Adjusted EBITDA | $580 – $600 million | $580 – $600 million | | Diluted EPS | $5.35 – $5.65 | $5.19 – $5.49 | | Adjusted Diluted EPS | $6.30 – $6.60 | $6.30 – $6.60 | | Domestic RevPAR Growth | Flat to 2% | Flat to 2% | | Domestic Net Unit Growth | Approx. 2% | Approx. 2% | Consolidated Financial Statements Q1 2024 consolidated financial statements detail total revenues, net income, and total assets, with net cash from operations at $1.7 million Condensed Consolidated Statements of Income Q1 2024 income statement shows total revenues of $331.9 million, operating income down 23%, and net income down 41% Q1 2024 vs. Q1 2023 Income Statement Highlights | Account | Q1 2024 ($ thousands) | Q1 2023 ($ thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $331,949 | $332,792 | -0.3% | | Operating Income | $60,149 | $77,851 | -23% | | Net Income | $31,009 | $52,820 | -41% | | Diluted EPS | $0.62 | $1.02 | -39% | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets reached $2.48 billion, total liabilities increased, and shareholders' equity significantly decreased to $6.7 million Balance Sheet Highlights | Account | March 31, 2024 ($ thousands) | Dec 31, 2023 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | $338,501 | $296,530 | | Total Assets | $2,475,078 | $2,394,799 | | Total Current Liabilities | $919,512 | $942,690 | | Long-Term Debt | $1,195,730 | $1,068,751 | | Total Liabilities | $2,468,351 | $2,359,201 | | Total Shareholders' Equity | $6,727 | $35,598 | Condensed Consolidated Statements of Cash Flows Q1 2024 net cash from operating activities was $1.7 million, a significant decrease, with net cash from financing activities at $56.5 million Cash Flow Summary | Activity | Three Months Ended March 31, 2024 ($ thousands) | Three Months Ended March 31, 2023 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,741 | $12,033 | | Net cash used in investing activities | ($42,736) | ($29,463) | | Net cash provided by financing activities | $56,473 | $7,440 | | Net change in cash | $15,478 | ($9,990) | Supplemental Information Supplemental data for Q1 2024 shows a 5.9% domestic RevPAR decline and total franchise system growth to 7,488 hotels and 630,128 rooms Domestic Hotel System Operating Information Q1 2024 domestic hotel system RevPAR decreased by 5.9% to $45.24, driven by ADR and occupancy declines, with Upscale & Above showing resilience Q1 2024 vs. Q1 2023 Domestic Operating Metrics Change | Segment | RevPAR Change (%) | ADR Change (%) | Occupancy Change (bps) | | :--- | :--- | :--- | :--- | | Total | (5.9)% | (2.1)% | (200) bps | | Upscale & Above | 1.3% | 2.3% | (50) bps | | Midscale & Upper Midscale | (7.0)% | (2.1)% | (260) bps | | Extended Stay | (6.2)% | (3.7)% | (190) bps | | Economy | (5.8)% | (1.6)% | (190) bps | Hotel and Room Supply Data As of March 31, 2024, the total franchise system grew to 7,488 hotels and 630,128 rooms, driven by domestic extended stay and international expansion Hotel & Room Count (YoY Change as of March 31, 2024) | Segment | Hotels (Count & % Change) | Rooms (Count & % Change) | | :--- | :--- | :--- | | Total Franchises | 7,488 (+0.3%) | 630,128 (+0.5%) | | Domestic Franchises | 6,273 (+0.1%) | 494,096 (+0.0%) | | International Franchises | 1,215 (+1.3%) | 136,032 (+2.3%) | Non-GAAP Financial Measures Non-GAAP measures for Q1 2024 show Adjusted EBITDA increased 17% to $124.3 million, and Adjusted Diluted EPS grew 14% Reconciliation of Net Income to Adjusted EBITDA Q1 2024 Adjusted EBITDA was $124.3 million, a 17% increase from Q1 2023, after reconciling from GAAP Net Income Net Income to Adjusted EBITDA Reconciliation | Metric | Q1 2024 ($ thousands) | Q1 2023 ($ thousands) | | :--- | :--- | :--- | | Net Income | $31,009 | $52,820 | | EBITDA | $71,084 | $87,874 | | Adjusted EBITDA | $124,341 | $106,446 | Reconciliation of Net Income to Adjusted Net Income & EPS Q1 2024 Adjusted Net Income was $63.7 million, resulting in Adjusted Diluted EPS of $1.28, a 14% increase Adjusted Net Income & EPS Reconciliation | Metric | Q1 2024 ($) | Q1 2023 ($) | | :--- | :--- | :--- | | Net Income | $31.0M | $52.8M | | Adjusted Net Income | $63.7M | $58.2M | | Diluted EPS | $0.62 | $1.02 | | Adjusted Diluted EPS | $1.28 | $1.12 | 2024 Outlook Non-GAAP Reconciliation Full-year 2024 outlook projects Net Income between $260 million and $274 million, with Adjusted Diluted EPS of $6.30 to $6.60 Full-Year 2024 Outlook Reconciliation | Metric | Lower Range ($ thousands/share) | Upper Range ($ thousands/share) | | :--- | :--- | :--- | | Net Income | $260,000 | $274,000 | | Adjusted Net Income | $306,000 | $320,000 | | Diluted EPS | $5.35 | $5.65 | | Adjusted Diluted EPS | $6.30 | $6.60 |