CHOICE HOTELS INTERNATIONAL REPORTS 2022 FOURTH QUARTER AND FULL-YEAR RESULTS
Domestic RevPAR accelerated in fourth quarter to 20.4% versus 2019; full-year net income and adjusted EBITDA surpassed 2019 levels by 49% and 28%, respectively
ROCKVILLE, Md., Feb. 15, 2023 – Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest lodging franchisors, today reported its fourth quarter and full-year 2022 results.
“2022 was a landmark year for Choice Hotels, in which we drove step function growth with adjusted EBITDA surpassing 2019 levels by 28%. We generated significant organic growth over 2021 and acquired the Radisson Hotels Americas brands in August, which has accelerated our long-term growth potential,” said Patrick Pacious, president and chief executive officer. “Our distinct strategy of growing our brand portfolio with hotels that generate higher royalties per unit is driving impressive results. The new capabilities we have built to improve the profitability of each franchisee have resulted in three straight years of RevPAR growth that exceeded the industry, strengthening our competitive position and creating additional runway for growth in 2023 and beyond.”
Highlights of fourth quarter and full-year 2022 results include:1,2
•Total revenues reached a company record of $1.4 billion for full-year 2022, a 31% increase compared to the same period of 2021. For full-year 2022, Radisson Hotels Americas contributed $104.2 million in total revenues.
•Net income reached a company record of $332.2 million for full-year 2022, a 15% increase compared to the same period of 2021, representing diluted earnings per share (EPS) of $5.99.
•Full-year 2022 adjusted net income, excluding certain items described in Exhibit 7, was $292.6 million, a 21% increase from the same period of 2021. The company’s adjusted diluted EPS increased 23% to $5.27, compared to the same period of 2021.
•Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for full-year 2022 reached a company record of $478.6 million, a 19% increase compared to the same
1 2019 RevPAR comparison data is shown for comparable prior year periods for context throughout this press release in light of the pandemic’s impact on industry performance in 2021.
2 For comparative purposes, RevPAR and effective royalty rate exclude the impact of the Radisson Hotels Americas acquisition, while financial results, unit growth, pipeline and franchise agreements include the impact of the Radisson Hotels Americas acquisition unless otherwise noted. All outlook figures are inclusive of the Radisson Americas acquisition.
period of 2021 and exceeded the top end of the company's full-year 2022 guidance by nearly $9 million. Excluding the $18.3 million adjusted EBITDA contribution from Radisson Hotels Americas, adjusted EBITDA for full-year 2022 increased by 14% compared to full-year 2021 and by 23% compared to full-year 2019.
•Domestic revenue per available room (RevPAR) growth accelerated quarter-over-quarter, increasing by 20.4% for fourth quarter 2022, compared to the same period of 2019, outperforming the total industry by 700 basis points.
•The company repurchased 3.7 million shares of common stock during full-year 2022, representing 7% of the average shares outstanding for the year ended December 31, 2022.3 This increased year-to-date returns to shareholders to over $487 million in the form of cash dividends and share repurchases, as of December 31, 2022.
•The company's total domestic pipeline as of December 31, 2022, increased 14% to 1,029 hotels representing approximately 100,000 rooms, from December 31, 2021.4
•The company's domestic effective royalty rate was 5.05% for full-year 2022, an increase of 4 basis points compared to the same period of 2021.
•The company sold the Cambria Hotel New Haven, Connecticut, property in October 2022 for approximately $30 million and secured a 30-year franchise agreement with the buyer to continue to operate the hotel as a Cambria Hotel. The sale of this hotel increased the recycling of prior investments in Cambria Hotels development projects for the 12 months ended December 31, 2022 to approximately $170 million.
RevPAR Performance Trends
•RevPAR increased 14.6% for full-year 2022, compared to the same period of 2019, meeting the top end of full-year 2022 guidance.
•RevPAR increased 20.4% for fourth quarter 2022, compared to the same period of 2019, driven by an increase in average daily rate (ADR) of 17.4% and a 130-basis-point increase in occupancy levels, compared to fourth quarter 2019.
•Domestic systemwide RevPAR growth surpassed 2019 levels for 19 consecutive months through December 31, 2022. The trend has continued in the first quarter of 2023, with January RevPAR increasing over 6%, compared to January of 2022.5
•The company’s extended-stay portfolio has exceeded 2019 RevPAR levels every month since April 2021 and achieved domestic RevPAR growth of 27.8% in fourth quarter 2022 compared to the same period of 2019. The WoodSpring Suites brand achieved RevPAR growth of 33.4% in fourth quarter 2022, compared to the same period of 2019.
3 The percentage of shares repurchased is calculated based on 54.6 million weighted average number of shares outstanding year-to-date through December 31, 2022.
4 The pipeline number also includes 45 Radisson Hotels Americas units representing over 5,100 rooms.
5 RevPAR results for January 2023 are inclusive of the Radisson Americas acquisition.
•The company’s overall midscale portfolio has consistently surpassed 2019 RevPAR levels since June 2021 and achieved domestic RevPAR growth of 17.3% in fourth quarter 2022, compared to the same period of 2019. In 2022, the Comfort brand continued to achieve RevPAR share gains versus local competitors, and the brand's domestic RevPAR growth continued to outperform the upper-midscale chain scale, compared to the same period of 2019.
•The company's upscale portfolio achieved domestic RevPAR growth of 10.4% for full-year 2022, compared to the same period of 2019, outperforming the upscale chain scale by nearly 10 percentage points.
Financial Performance
•Fourth quarter 2022 total revenues increased 27% to $362 million, compared to the same period of 2021, including a $64 million revenue contribution from Radisson Hotels Americas.
•Total revenues, excluding reimbursable revenue from franchised and managed properties, increased 33% to $186 million for fourth quarter 2022, compared to the same period of 2021, and included a $40.6 million revenue contribution from Radisson Hotels Americas.
•Net income was $55.5 million for fourth quarter 2022, representing diluted EPS of $1.04.
•Fourth quarter 2022 adjusted net income, excluding certain items described in Exhibit 7, reached $67.2 million, a 20% increase compared to the same period of 2021, representing adjusted diluted EPS of $1.26, a 27% increase from the same period of 2021.
•Adjusted EBITDA for fourth quarter 2022 increased 18% to $112.5 million from the same period of 2021 and included $11.5 million of adjusted EBITDA contribution from Radisson Hotels Americas.
•Domestic royalties totaled $434.3 million for full-year 2022, a 14% increase from the same period of 2021, and $102.6 million for fourth quarter 2022, a 10% increase compared to the same period of 2021.
•Procurement services revenues increased 27% to $63.8 million for full-year 2022, compared to the same period of 2021.
Development
•The company awarded 590 domestic franchise agreements in 2022, an 11% increase compared to the prior year. Of the total agreements awarded in 2022, 87% were for the company’s upscale, midscale and extended-stay brands. In addition, the company awarded a record number of franchise agreements to underrepresented and minority owners in 2022, bringing the total number of executed contracts to 345 since the inception of the program.
•The number of domestic franchise agreements awarded for the company’s extended-stay segment for full-year 2022 marked a company record, increasing 77% compared to the same period of 2021. The Cambria brand doubled the number of domestic franchise agreements awarded for full-year 2022, compared to the same period of 2021.
•The company's extended-stay domestic pipeline reached 496 hotels as of December 31, 2022, a 34% increase since December 31, 2021. In 2022, the Everhome Suites brand, an all-new construction midscale extended-stay brand, celebrated the opening of its first hotel and expanded its domestic pipeline to 60 hotels as of December 31, 2022.
•The company’s upscale, extended-stay and midscale segments reported a 9.5% increase in hotels and 10.5% increase in rooms since December 31, 2021. The total number of domestic hotels and rooms, as of December 31, 2022, increased 6.5% and 7.9%, respectively, from December 31, 2021.
•As of December 31, 2022, the domestic system size for the company’s upscale segment grew by 29% since December 31, 2021, driven by an increase in the number of hotels due to the acquisition of Radisson Hotels Americas and the growth of Cambria Hotels brand. The domestic system size for the company’s upper-midscale segment grew by 24% in 2022, compared to the same period of 2021.
Shareholder Returns
During full-year 2022, the company paid cash dividends totaling approximately $53 million, compared to total dividends of $25 million paid in 2021.
During full-year 2022, the company repurchased $434.7 million of common stock, including $188.2 million during the fourth quarter, under its stock repurchase program as well as through repurchases from employees in connection with tax withholding and option exercises relating to awards under the company's equity incentive plans. As of December 31, 2022, the company had 4.7 million shares of common stock remaining under the current share repurchase authorization.
Outlook
The outlook information provided below is inclusive of the Radisson Americas acquisition unless otherwise noted and includes forward-looking non-GAAP financial measures, which management uses in measuring performance. The adjusted numbers in the company's outlook below exclude the net surplus or deficit generated from reimbursable revenue from franchised and managed properties, gain (loss) on sales of assets, due diligence and transition costs and other items:
Full-Year 2023
•Net Income for full-year 2023 is expected to range between $245 million and $265 million.
•Adjusted EBITDA for full-year 2023 is expected to range between $520 million and $540 million, representing an approximately 11% increase at the midpoint from the company’s adjusted EBITDA for full-year 2022. The company’s full-year 2023 outlook for adjusted EBITDA includes an adjusted EBITDA contribution of more than $60 million from the Radisson Hotels Americas business unit.
•Excluding the impact of Radisson Hotels Americas, adjusted EBITDA for full-year 2023 on a comparable basis is expected to grow by approximately 7% versus full-year 2022.6
•Domestic RevPAR for full-year 2023 is expected to increase approximately 2%, compared to full-year 2022.
6 For comparative purposes, excludes the impact of long-term strategic decisions, including the sale of three owned Cambria assets, the one-time exit of the 110 WoodSpring Suites hotels and other one-time 2022 non-recurring items.
•The domestic effective royalty rate for full-year 2023 is expected to continue to grow on a comparable basis in the mid-single digits versus full-year 2022, off a 4.93% baseline in 2022.7
•The domestic number of units for the company’s upscale, extended-stay and midscale segments is expected to grow approximately 1% for full-year 2023, compared to full-year 2022.
First Quarter 2023
•Net Income for first quarter 2023 is expected to range between $28 million and $32 million.
•Adjusted EBITDA for first quarter 2023 is expected to range between $100 million and $105 million.
Conference Call
Choice Hotels International will conduct a conference call on February 15, 2023, at 10:00 a.m. Eastern Time to discuss the company’s fourth quarter and full-year 2022 earnings results. The dial-in number to listen to the call domestically is (888) 886-7786 and the number for international participants is (416) 764-8658 and use conference ID 21655006. A live webcast and accompanying materials will also be available on the company’s investor relations website, http://investor.choicehotels.com/ and can be accessed via the Events and Presentations tab.
About Choice Hotels®
Choice Hotels International, Inc. (NYSE: CHH) is one of the largest lodging franchisors in the world. With nearly 7,500 hotels, representing nearly 630,000 rooms, in 47 countries and territories as of December 31, 2022, the Choice® family of hotel brands provides business and leisure travelers with a range of high-quality lodging options from limited service to full-service hotels in the upper upscale, upper midscale, extended-stay and economy segments. The award-winning Choice Privileges® loyalty program offers members a faster way to rewards, with personalized benefits starting on day one. For more information, visit www.choicehotels.com.
Forward-Looking Statements
Certain matters discussed in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "expect," "estimate," "believe," "anticipate," "should," "will," "forecast," "plan," "project," "assume," or similar words of futurity. All statements other than historical facts are 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, adjusted EBITDA, 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, RevPAR, the company's ability to benefit from any rebound in travel demand, the company's liquidity, 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.
7 For comparative purposes, domestic effective royalty rate baseline for full-year 2022 is inclusive of the Radisson Hotels Americas acquisition.
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, changes to general, domestic and foreign economic conditions, including access to liquidity and capital; the company’s ability to successfully integrate Radisson Hotels Americas’ employees and operations; the ability to realize the anticipated benefits and synergies of the acquisition of Radisson Hotels Americas as rapidly or to the extent anticipated; the continuation or resurgence of the COVID-19 pandemic, including with respect to new strains or variants; changes in consumer demand and confidence, including the potential for long-term adverse changes in consumer sentiment with respect to travel as a result of the pandemic; the timing and amount of future dividends and share repurchases; future domestic or global outbreaks of epidemics, pandemics or contagious diseases, or fear of such outbreaks; changes in law and regulation applicable to the travel, lodging or franchising industries, including with respect to the status of the relationship with employees of our franchisees; 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 (“SaaS”) 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; the impact of inflation; cyber security and data breach risks; climate change and sustainability related concerns; 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; labor shortages; the outcome of litigation; and our ability to effectively manage our indebtedness, and secure our indebtedness, including additional indebtedness incurred as a result of the acquisition of Radisson Hotels Americas. 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, where applicable, our Quarter 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 and Other Definitions
The company evaluates its operations utilizing the performance metrics of adjusted EBITDA, adjusted EBITDA margins, adjusted selling, general and administrative (SG&A) expenses, revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee, 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 7, 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, SG&A, 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, exceptional allowances recorded as a result of COVID-19’s impact on the collectability of receivables, expenses associated with legal claims, acquisition related due diligence, transition and transaction costs, one-time franchise
agreement termination fees received related to the purchase and rebranding of a 110 hotel portfolio of WoodSpring Suites hotels, and gains/losses on sale/disposal and impairment of assets primarily related to hotel ownership and development activities to allow for period-over-period comparison of ongoing core operations before the impact of these discrete and infrequent charges.
Adjusted SG&A, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization and Margin: Adjusted SG&A, Adjusted EBITDA and Adjusted EBITDA Margin 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 reimbursable revenue from franchised and managed properties. We consider adjusted EBITDA and adjusted EBITDA margins 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 these measures, 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. These measures also exclude 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 reimbursable revenues from franchised and managed properties are excluded, as the company's franchise and management agreements require these revenues to be used exclusively for expenses associated with providing franchise and management services, such as central reservation and property-management systems, hotel employee and operating costs, reservation delivery and national marketing and media advertising. Franchised and managed property owners are required to reimburse the company for any deficits generated from these 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 reimbursable revenue from franchised and managed properties. Surpluses and deficits generated from reimbursable revenue from franchised and managed properties are excluded, as the company's franchise agreements require these revenues to be used exclusively for expenses associated with providing franchised and managed services, such as central reservation and property-management systems, hotel employee and operating costs, reservation delivery and national marketing and media advertising. Franchised and
managed property owners are required to reimburse the company for any deficits generated from 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 Reimbursable Revenue from Franchised and Managed Properties and Extraordinary Termination Fees from Franchisee: The company reports revenues, excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee. These non-GAAP measures we present are commonly used measures of performance in our industry and facilitate comparisons between the company and its competitors. Reimbursable revenues from franchised and managed properties are excluded, as the company’s franchise and management agreements require revenues to be used exclusively for expenses associated with providing franchise and management services, such as central reservation and property-management systems, hotel employee and operating costs, reservation delivery and national marketing and media advertising. Franchisees are required to reimburse the company for any deficits generated from these 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. During the third quarter of 2022, the company earned one-time franchise agreement termination fees related to the purchase by a third-party from an existing franchisee and the subsequent rebranding of a 110 hotel portfolio of WoodSpring Suites hotels. These termination fees received are considered infrequent in nature and not representative of on-going operations and therefore have been excluded from the measurements utilized to assess the company’s operating performance.
Occupancy
Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel for a given period. Occupancy measures the utilization of the hotels' available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. The company calculates occupancy based on information as reported by its franchisees. To accurately reflect occupancy, the company may revise its prior years’ operating statistics for the most current information provided.
Average Daily Rate (ADR)
ADR represents hotel room revenue divided by the total number of room nights sold for a given period. ADR measures the average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and management uses ADR to assess pricing levels that the company is able to generate.The company calculates ADR based on information as reported by its franchisees. To accurately reflect ADR, the company may revise its prior years’ operating statistics for the most current information provided.
RevPAR
RevPAR is calculated by dividing hotel room revenue by the total number of room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of hotel performance and therefore company royalty and system revenues as it provides a metric correlated to the two key drivers of operations at a hotel: occupancy and ADR. The company calculates RevPAR based on information as reported by its franchisees. To accurately reflect RevPAR, the
company may revise its prior years’ operating statistics for the most current information provided. RevPAR is also a useful indicator in measuring performance over comparable periods.
Pipeline
Pipeline is defined as hotels awaiting conversion, under construction or approved for development and master development agreements committing owners to future franchise development.
Contacts
Scott Oaksmith, Senior Vice President, Real Estate and Finance
Choice Hotels International, Inc. and Subsidiaries
Exhibit 1
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended December 31,
Year Ended December 31,
Variance
Variance
2022
2021
$
%
2022
2021
$
%
REVENUES
Royalty, licensing and management fees
$
115,551
$
97,612
$
17,939
18
%
$
471,759
$
397,218
$
74,541
19
%
Initial franchise fees
6,439
7,438
(999)
(13)
%
28,074
26,342
1,732
7
%
Procurement services
15,913
14,100
1,813
13
%
63,800
50,393
13,407
27
%
Other revenues from franchised and managed properties
189,321
144,463
44,858
31
%
702,750
528,843
173,907
33
%
Owned hotels
21,606
13,109
8,497
65
%
70,826
37,833
32,993
87
%
Other
13,152
7,916
5,236
66
%
64,740
28,669
36,071
126
%
Total revenues
361,982
284,638
77,344
27
%
1,401,949
1,069,298
332,651
31
%
OPERATING EXPENSES
Selling, general and administrative
62,861
45,776
17,085
37
%
207,275
145,623
61,652
42
%
Depreciation and amortization
9,989
6,296
3,693
59
%
30,425
24,773
5,652
23
%
Other expenses from franchised and managed properties
195,023
117,272
77,751
66
%
653,060
444,946
208,114
47
%
Owned hotels
16,833
8,220
8,613
105
%
48,837
24,754
24,083
97
%
Total operating expenses
284,706
177,564
107,142
60
%
939,597
640,096
299,501
47
%
Gain (loss) on sale of business & assets, and impairments, net
(439)
(269)
(170)
63
%
16,249
(269)
16,518
(6146)
%
Operating income
76,837
106,805
(29,968)
(28)
%
478,601
428,933
49,668
12
%
OTHER INCOME AND EXPENSES, NET
Interest expense
11,713
11,574
139
1
%
43,797
46,680
(2,883)
(6)
%
Interest income
(2,032)
(1,264)
(768)
61
%
(7,288)
(4,981)
(2,307)
46
%
Other (gain) loss
(2,560)
(2,228)
(332)
15
%
7,018
(5,134)
12,152
(237)
%
Equity in net (gain) loss of affiliates
(453)
14,384
(14,837)
(103)
%
(1,732)
15,876
(17,608)
(111)
%
Total other income and expenses, net
6,668
22,466
(15,798)
(70)
%
41,795
52,441
(10,646)
(20)
%
Income before income taxes
70,169
84,339
(14,170)
(17)
%
436,806
376,492
60,314
16
%
Income tax expense
14,656
20,256
(5,600)
(28)
%
104,654
87,535
17,119
20
%
Net income
$
55,513
$
64,083
$
(8,570)
(13)
%
$
332,152
$
288,957
$
43,195
15
%
Basic earnings per share
$
1.05
$
1.15
$
(0.10)
(9)
%
$
6.05
$
5.20
$
0.85
16
%
Diluted earnings per share
$
1.04
$
1.14
$
(0.10)
(9)
%
$
5.99
$
5.15
$
0.84
16
%
Choice Hotels International, Inc. and Subsidiaries
Exhibit 2
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
December 31,
December 31,
2022
2021
ASSETS
Cash and cash equivalents
$
41,566
$
511,605
Accounts receivable, net
216,614
153,147
Other current assets
89,742
96,909
Total current assets
347,922
761,661
Property and equipment, net
427,306
377,367
Intangible assets, net
742,190
312,389
Goodwill
218,653
159,196
Notes receivable, net of allowances
55,577
66,451
Investments in affiliates
30,647
27,967
Operating lease right-of-use assets
68,985
34,183
Investments, employee benefit plans, at fair value
31,645
33,946
Other assets
179,250
158,664
Total assets
$
2,102,175
$
1,931,824
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable
$
118,863
$
81,169
Accrued expenses and other current liabilities
131,410
104,472
Deferred revenue
92,695
81,538
Liability for guest loyalty program
89,954
86,765
Current portion of long-term debt
2,976
216,351
Total current liabilities
435,898
570,295
Long-term debt
1,200,547
844,123
Deferred revenue
134,149
105,785
Liability for guest loyalty program
47,381
41,785
Operating lease liabilities
70,994
35,492
Deferred compensation & retirement plan obligations
36,673
38,690
Other liabilities
21,873
29,772
Total liabilities
1,947,515
1,665,942
Total shareholders’ equity
154,660
265,882
Total liabilities and shareholders’ equity
$
2,102,175
$
1,931,824
Choice Hotels International, Inc. and Subsidiaries
Exhibit 3
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Year Ended December 31,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
332,152
$
288,957
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
30,425
24,773
Depreciation and amortization - marketing and reservation system
33,488
25,721
Franchise agreement acquisition cost amortization
15,666
13,222
Impairment of long-lived assets
—
282
(Gain) loss on sale and disposal of assets, net
(16,251)
530
Non-cash stock compensation and other charges
42,974
35,731
Non-cash interest, investment, and affiliate (income) loss, net
7,365
(13,509)
Deferred income taxes
(19,642)
(1,006)
Equity in net loss of affiliates, less distributions received
489
23,985
Franchise agreement acquisition costs, net of reimbursements
(54,527)
(38,230)
Change in working capital and other, net of acquisition
(5,078)
23,240
NET CASH PROVIDED BY OPERATING ACTIVITIES
367,061
383,696
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment
(89,954)
(74,294)
Investment in intangible assets
(3,631)
(3,573)
Proceeds from sales of assets
166,568
6,119
Asset acquisitions, net of cash acquired
(856)
—
Business acquisition, net of cash acquired
(550,431)
—
Proceeds from termination of intangibles
44,711
—
Contributions to investments in affiliates
(3,148)
(2,778)
Distributions and sales proceeds from investments in affiliates
—
15,554
Purchases of investments, employee benefit plans
(4,185)
(1,705)
Proceeds from sales of investments, employee benefit plans
1,908
2,609
Issuance of notes receivable
(5,647)
(20,133)
Collections of notes receivable
975
213
Other items, net
1,260
(938)
NET CASH USED IN INVESTING ACTIVITIES
(442,430)
(78,926)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings pursuant to revolving credit facilities
360,000
—
Principal payments on long-term debt
(216,571)
—
Payments to extinguish acquired debt
(55,975)
—
Proceeds from acquired derivative
1,943
—
Debt issuance costs
(44)
(365)
Purchases of treasury stock
(434,767)
(13,365)
Dividends paid
(52,545)
(25,044)
Proceeds from exercise of stock options
3,809
11,054
NET CASH USED IN FINANCING ACTIVITIES
(394,150)
(27,720)
Net change in cash and cash equivalents
(469,519)
277,050
Effect of foreign exchange rate changes on cash and cash equivalents
(520)
(224)
Cash and cash equivalents at beginning of period
511,605
234,779
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
41,566
$
511,605
Exhibit 4
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Year Ended December 31, 2022
For the Year Ended December 31, 2021
Change
Average Daily
Average Daily
Average Daily
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Comfort(1)
$
108.31
61.8
%
$
66.88
$
98.22
60.1
%
$
59.05
10.3
%
170
bps
13.3
%
Sleep
95.29
59.5
%
56.72
86.55
58.7
%
50.85
10.1
%
80
bps
11.5
%
Quality
90.64
53.5
%
48.53
83.88
53.5
%
44.84
8.1
%
—
bps
8.2
%
Clarion(2)
94.83
45.5
%
43.13
88.09
43.1
%
37.99
7.7
%
240
bps
13.5
%
Econo Lodge
72.04
49.6
%
35.72
68.08
50.1
%
34.08
5.8
%
(50)
bps
4.8
%
Rodeway
72.55
50.9
%
36.96
68.01
50.9
%
34.64
6.7
%
—
bps
6.7
%
WoodSpring Suites
58.02
79.2
%
45.94
51.66
79.6
%
41.10
12.3
%
(40)
bps
11.8
%
MainStay
87.07
62.3
%
54.24
80.25
62.1
%
49.79
8.5
%
20
bps
8.9
%
Suburban
59.94
67.5
%
40.46
55.36
70.0
%
38.77
8.3
%
(250)
bps
4.4
%
Cambria Hotels
159.18
64.2
%
102.13
132.48
56.2
%
74.47
20.2
%
800
bps
37.1
%
Ascend Hotel Collection
154.32
56.3
%
86.83
138.01
53.7
%
74.11
11.8
%
260
bps
17.2
%
Total
$
93.17
58.0
%
$
54.06
$
84.06
57.2
%
$
48.10
10.8
%
80
bps
12.4
%
For comparability purposes, the above operating statistics include only the Choice legacy brands. Additionally, the operating statistics exclude Choice's Everhome brand since the operating statistics are not representative of a stabilized brand which the Company defines as having at least 25 units open and operating for the twelve month period.
For the Three Months December 31, 2022
For the Three Months December 31, 2021
Change
Average Daily
Average Daily
Average Daily
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Comfort(1)
$
104.54
58.2
%
$
60.84
$
99.68
58.2
%
$
58.02
4.9
%
—
bps
4.9
%
Sleep
92.67
55.4
%
51.34
87.05
56.4
%
49.06
6.5
%
(100)
bps
4.6
%
Quality
87.19
49.4
%
43.03
83.70
50.2
%
42.04
4.2
%
(80)
bps
2.4
%
Clarion(2)
91.99
43.1
%
39.62
88.67
41.1
%
36.40
3.7
%
200
bps
8.8
%
Econo Lodge
70.06
46.6
%
32.67
67.18
46.8
%
31.44
4.3
%
(20)
bps
3.9
%
Rodeway
70.42
47.8
%
33.67
67.45
47.5
%
32.07
4.4
%
30
bps
5.0
%
WoodSpring Suites
57.85
75.6
%
43.75
54.09
75.8
%
40.00
7.0
%
(20)
bps
9.4
%
MainStay
84.25
59.4
%
50.01
81.48
59.9
%
48.78
3.4
%
(50)
bps
2.5
%
Suburban
58.69
62.9
%
36.91
58.40
65.8
%
38.42
0.5
%
(290)
bps
(3.9)
%
Cambria Hotels
157.78
62.8
%
99.06
140.35
59.5
%
83.48
12.4
%
330
bps
18.7
%
Ascend Hotel Collection
149.13
51.8
%
77.18
137.09
51.6
%
70.73
8.8
%
20
bps
9.1
%
Total
$
91.30
54.1
%
$
49.40
$
85.13
54.7
%
$
46.54
7.2
%
(60)
bps
6.1
%
For comparability purposes, the above operating statistics include only the Choice legacy brands. Additionally, the operating statistics exclude Choice's Everhome brand since the operating statistics are not representative of a stabilized brand which the Company defines as having at least 25 units open and operating for the twelve month period.
Effective Royalty Rate
For the Quarter Ended
For the Year Ended
12/31/2022
12/31/2021
12/31/2022
12/31/2021
System-wide
5.06%
5.04%
5.05%
5.01%
(1) Includes Comfort family of brand extensions including Comfort and Comfort Suites
(2) Includes Clarion family of brand extensions including Clarion and Clarion Pointe
Exhibit 5
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL OPERATING INFORMATION
DOMESTIC HOTEL SYSTEM
(UNAUDITED)
For the Year Ended December 31, 2022
For the Year Ended December 31, 2019
Change
Average Daily
Average Daily
Average Daily
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Comfort(1)
$
108.31
61.8
%
$
66.88
$
95.84
62.2
%
$
59.65
13.0
%
(40)
bps
12.1
%
Sleep
95.29
59.5
%
56.72
85.28
61.1
%
52.09
11.7
%
(160)
bps
8.9
%
Quality
90.64
53.5
%
48.53
80.11
54.1
%
43.34
13.1
%
(60)
bps
12.0
%
Clarion(2)
94.83
45.5
%
43.13
84.73
49.3
%
41.81
11.9
%
(380)
bps
3.2
%
Econo Lodge
72.04
49.6
%
35.72
63.75
47.7
%
30.43
13.0
%
190
bps
17.4
%
Rodeway
72.55
50.9
%
36.96
64.25
49.0
%
31.48
12.9
%
190
bps
17.4
%
WoodSpring Suites
58.02
79.2
%
45.94
47.10
75.3
%
35.44
23.2
%
390
bps
29.6
%
MainStay
87.07
62.3
%
54.24
85.28
63.9
%
54.49
2.1
%
(160)
bps
(0.5)
%
Suburban
59.94
67.5
%
40.46
57.46
66.0
%
37.91
4.3
%
150
bps
6.7
%
Cambria Hotels
159.18
64.2
%
102.13
145.45
67.5
%
98.12
9.4
%
(330)
bps
4.1
%
Ascend Hotel Collection
154.32
56.3
%
86.83
125.16
61.2
%
76.57
23.3
%
(490)
bps
13.4
%
Total
$
93.17
58.0
%
$
54.06
$
81.86
57.6
%
$
47.18
13.8
%
40
bps
14.6
%
For comparability purposes, the above operating statistics include only the Choice legacy brands. Additionally, the operating statistics exclude Choice's Everhome brand since the operating statistics are not representative of a stabilized brand which the Company defines as having at least 25 units open and operating for the twelve month period.
For the Three Months December 31, 2022
For the Three Months December 31, 2019
Change
Average Daily
Average Daily
Average Daily
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Rate
Occupancy
RevPAR
Comfort(1)
$
104.54
58.2
%
$
60.84
$
90.72
57.3
%
$
51.96
15.2
%
90
bps
17.1
%
Sleep
92.67
55.4
%
51.34
81.19
55.5
%
45.06
14.1
%
(10)
bps
13.9
%
Quality
87.19
49.4
%
43.03
75.35
48.8
%
36.78
15.7
%
60
bps
17.0
%
Clarion(2)
91.99
43.1
%
39.62
79.29
43.8
%
34.71
16.0
%
(70)
bps
14.1
%
Econo Lodge
70.06
46.6
%
32.67
60.30
43.7
%
26.32
16.2
%
290
bps
24.1
%
Rodeway
70.42
47.8
%
33.67
60.73
44.9
%
27.25
16.0
%
290
bps
23.6
%
WoodSpring Suites
57.85
75.6
%
43.75
46.35
70.7
%
32.79
24.8
%
490
bps
33.4
%
MainStay
84.25
59.4
%
50.01
81.33
58.3
%
47.45
3.6
%
110
bps
5.4
%
Suburban
58.69
62.9
%
36.91
53.75
60.9
%
32.73
9.2
%
200
bps
12.8
%
Cambria Hotels
157.78
62.8
%
99.06
146.52
62.1
%
91.05
7.7
%
70
bps
8.8
%
Ascend Hotel Collection
149.13
51.8
%
77.18
120.31
56.7
%
68.25
24.0
%
(490)
bps
13.1
%
Total
$
91.30
54.1
%
$
49.40
$
77.77
52.8
%
$
41.04
17.4
%
130
bps
20.4
%
For comparability purposes, the above operating statistics include only the Choice legacy brands. Additionally, the operating statistics exclude Choice's Everhome brand since the operating statistics are not representative of a stabilized brand which the Company defines as having at least 25 units open and operating for the twelve month period.
Effective Royalty Rate
For the Quarter Ended
For the Year Ended
12/31/2022
12/31/2019
12/31/2022
12/31/2019
System-wide
5.06%
4.91%
5.05%
4.86%
(1) Includes Comfort family of brand extensions including Comfort and Comfort Suites
(2) Includes Clarion family of brand extensions including Clarion and Clarion Pointe
Exhibit 6
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA
(UNAUDITED)
December 31, 2022
December 31, 2021
Variance
Hotels
Rooms
Hotels
Rooms
Hotels
Rooms
%
%
Comfort(1)
1,685
132,523
1,665
130,963
20
1,560
1.2
%
1.2
%
Sleep
423
29,775
414
29,194
9
581
2.2
%
2.0
%
Quality
1,633
121,275
1,652
123,549
(19)
(2,274)
(1.2)
%
(1.8)
%
Clarion(2)
178
19,630
189
21,837
(11)
(2,207)
(5.8)
%
(10.1)
%
Econo Lodge
702
42,112
734
44,107
(32)
(1,995)
(4.4)
%
(4.5)
%
Rodeway
503
28,364
528
30,275
(25)
(1,911)
(4.7)
%
(6.3)
%
WoodSpring Suites
212
25,592
302
36,374
(90)
(10,782)
(29.8)
%
(29.6)
%
Everhome
1
99
—
—
1
99
NM
NM
MainStay
115
7,891
101
6,994
14
897
13.9
%
12.8
%
Suburban
75
6,719
71
6,395
4
324
5.6
%
5.1
%
Cambria Hotels
65
8,865
57
7,869
8
996
14.0
%
12.7
%
Ascend Hotel Collection
196
20,091
200
20,473
(4)
(382)
(2.0)
%
(1.9)
%
Radisson(3)
508
51,473
—
—
508
51,473
NM
NM
Domestic Franchises(4)
6,296
494,409
5,913
458,030
383
36,379
6.5
%
7.9
%
International Choice
1,101
120,468
1,117
121,716
(16)
(1,248)
(1.4)
%
(1.0)
%
International Radisson(3)
90
12,927
—
—
90
12,927
NM
NM
International Franchises(4)
1,191
133,395
1,117
121,716
74
11,679
6.6
%
9.6
%
Total Franchises
7,487
627,804
7,030
579,746
457
48,058
6.5
%
8.3
%
(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) Radisson Hotels Americas brands are referred to as Radisson within this table
(4) In 2022, the Company reclassified seven properties located in the Caribbean from Domestic Franchises to International Franchises. Prior year hotel and room data have been reclassfied for comparability.
Exhibit 7
CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTAL NON-GAAP FINANCIAL INFORMATION
(UNAUDITED)
REVENUES EXCLUDING REIMBURSABLE REVENUE FROM FRANCHISED AND MANAGED PROPERTIES AND EXTRAORDINARY TERMINATION FEES FROM FRANCHISEE
(dollar amounts in thousands)
Three Months Ended December 31,
Year Ended December 31,
2022
2021
2022
2021
Total Revenues
$
361,982
$
284,638
$
1,401,949
$
1,069,298
Adjustments:
Reimbursable revenue from franchised and managed properties
(175,967)
(144,463)
(682,612)
(528,843)
Extraordinary termination fees from franchisee
—
—
(22,647)
—
Revenues, excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee
$
186,015
$
140,175
$
696,690
$
540,455
ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(dollar amounts in thousands)
Three Months Ended December 31,
Year Ended December 31,
2022
2021
2022
2021
Total Selling, General and Administrative Expenses
$
62,861
$
45,776
$
207,275
$
145,623
Mark to market adjustments on non-qualified retirement plan investments
(2,050)
(2,153)
5,929
(5,555)
Operational restructuring charges
(1,298)
(89)
(6,714)
(813)
Share-based compensation
(6,268)
(3,028)
(19,137)
(11,427)
Due diligence and transition costs
(9,306)
—
(32,863)
—
Exceptional allowances attributable to COVID-19
1,241
(2,080)
1,241
(5,167)
Expenses associated with legal claims
—
—
—
(3,000)
Adjusted Selling, General and Administrative Expenses
$
45,180
$
38,426
$
155,731
$
119,661
ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") AND ADJUSTED EBITDA MARGINS
(dollar amounts in thousands)
Three Months Ended December 31,
Year Ended December 31,
2022
2021
2022
2021
Net income
$
55,513
$
64,083
$
332,152
$
288,957
Income tax expense
14,656
20,256
104,654
87,535
Interest expense
11,713
11,574
43,797
46,680
Interest income
(2,032)
(1,264)
(7,288)
(4,981)
Other (gain) loss
(2,560)
(2,228)
7,018
(5,134)
Equity in operating net (gain) loss of affiliates, net of impairments
(637)
(140)
(1,916)
3,408
Loss (gain) on sale of affiliates, business & assets, and impairments, net
623
14,793
(16,065)
12,737
Depreciation and amortization
9,989
6,296
30,425
24,773
Mark to market adjustments on non-qualified retirement plan investments
2,050
2,153
(5,929)
5,555
Operational restructuring charges
1,298
89
6,714
813
Share-based compensation
6,268
3,028
19,137
11,427
Due diligence and transition costs
9,306
—
32,863
—
Exceptional allowances attributable to COVID-19
(1,241)
2,080
(1,241)
5,167
Expenses associated with legal claims
—
—
—
3,000
Extraordinary termination fees from franchisee
—
—
(22,647)
—
Net reimbursable deficit (surplus) from franchised and managed properties
