Choice Hotels International, Inc. · NYSE:CHH
Choice Hotels International — Investor Presentation (July 2020)
30 slides from Choice Hotels International's investor presentation, Jul 8, 2020
Slide 1: Investor Presentation July 8th, 2020
Investor Presentation July 8th, 2020 Cambria Hotel North Scottsdale Desert Ridge Cambria Philadelphia, Pennsylvania Exhibit 99.1
Slide 2: 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," "assu
Slide 3: Non-GAAP Financial Measurements
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 r
Slide 4: Speaker Biography
Speaker Biography Dominic Dragisich is Chief Financial Officer for Choice Hotels International, Inc. (NYSE: CHH), one of the world’s leading hotel companies. In this role, he leads Choice’s overall financial and corporate growth initiatives to drive ongoing expansion across major markets and maximiz
Slide 5: Business Overview
Business Overview Comfort Boise, Idaho
Slide 6: Choice Hotels is one of the world's largest hotel companies
1 Choice owns 5 hotels as of July 3, 2020, with a plan to recycle them within a five-year period. 7,100 40 Choice U.S. Hotels by Chain Scale Upscale Chains Upper Midscale Chains Midscale Chains Economy Chains IG rating 1 of 5 lodging companies with an Franchising Choice Hotels is one of the world’s
Slide 7: Choice attracts and retains franchisees by driving their profitability
Choice Hotels attracts and retains franchisees because of our long-held commitment to drive their profitability Focusing on lowering total cost of ownership to franchisees & driving operating excellence Proprietary channels deliver approx. $6 out of every $10 to franchisees; nearly 1,000 bps increas
Slide 8: Uniquely Positioned to Outperform
Uniquely Positioned to Outperform Margarita European Inn, Ascend, Chicago
Slide 9: Resilient business model uniquely positioned to outperform in COVID-19
Choice Hotels’ resilient business model is uniquely positioned to outperform the industry in the COVID-19 environment 1 Strength in Leisure Travel Mix Well-segmented Brand Portfolio Predominately Domestic Drive-to Locations Franchise-focused Business Model Proven Conversion Engine Abilities Midscale
Slide 10: Franchise-focused business model provided resiliency during COVID-19
The company’s franchise-focused business model has provided a level of resiliency during the COVID-19 crisis Choice’s franchise model historically generates predictable high free cash flow and strong ROI Royalty-based revenue model leverages real estate footprint without significant asset ownership
Slide 11: Well-segmented brand portfolio positioned for demand recovery
Choice Hotels’ well-segmented portfolio of brands is distinctly positioned to meet the evolving needs of travelers during the expected demand recovery Extended Stay Economy Midscale Upper Midscale Upscale Long-term strategy of growing the right brands in the right segments and in the right locations
Slide 12: Proven record of accelerating conversion franchise agreements in down cycles
Recovery Years Recession Years Choice Hotels has a proven record of accelerating its share of new conversion franchise agreements to fuel its unit growth in down cycles Executed nearly 150 new franchise agreements YTD through June 2020, including 80% signed since mid-March and of which nearly half w
Slide 13: Increasing market share in upper-midscale and midscale segments
Choice Hotels continues to increase market share as a leader in the upper-midscale and midscale segments Note: Data as of May 2020. Source: STR. Choice Midscale Domestic Portfolio vs. Competitors # of upper-midscale & midscale hotels Choice overall midscale segment represents 2/3 of company’s total
Slide 14: Extended stay portfolio is a highly cycle-resilient segment
Choice Hotels’ extended stay portfolio has proven to be a highly cycle-resilient segment, with the WoodSpring Suites brand displaying one of the best performances in the hotel industry 410 domestic extended-stay hotels open, a 10% increase YoY (300 in pipeline)1 WoodSpring Suites achieved avg. occup
Slide 15: Benefits from high focus on leisure travel
Choice benefits from a high focus on leisure travel, which is expected to lead the recovery and rebound faster than business travel Low group business exposure <10% Over 2,000 domestic properties near beach locations and National Parks Uniquely positioned to capture demand Leisure travel comprises a
Slide 16: Strong presence in drive-to locations to capture pent-up demand
Given strong presence in drive-to locations, Choice is well-positioned to capture pent-up travel demand as states lift travel restrictions ~90% of Choice domestic properties are in “drive-to” locations1 Strong presence in drive-to locations Americans are choosing to drive to their destinations due t
Slide 17: Mitigating the Impacts of COVID-19
Mitigating the Impacts of COVID-19 Clarion Pointe, Rochester, NY
Slide 18: Occupancy rates have outperformed the industry since the onset of pandemic
Choice Hotels’ occupancy rates have outperformed the industry since the onset of pandemic and continue to grow, reaching 50% Bottomed out ~28% Choice system-wide occupancy beat industry by +590 bps on average weekly since mid-March TOTAL INDUSTRY Source: Smith Travel Research (STR), STR Weekly Hotel
Slide 19: Outperformed competition through resilient franchisee base and company support
Choice outperformed the competition thanks to a combination of its resilient franchise owner base and significant support the company provided to its franchisees throughout the crisis Choice proactive actions to support franchisees during the crisis: Resilient franchise owner base and health of fran
Slide 20: Entered the crisis with a strong balance sheet
Choice entered the crisis with a strong balance sheet due to prudent capital allocation strategy and maintaining low levels of debt Even after adding debt to boost liquidity at the start of the COVID-19 crisis, CHH remains within its long-term leverage target of 3.0x – 4.0x 2013-2019 CAGR: 10.1% 201
Slide 21: Strong balance sheet with liquidity and funding options
The company has a strong balance sheet with the liquidity and funding options to address upcoming debt maturities % of Total Debt BALANCE SHEET / LIQUIDITY PROFILE $734M Available liquidity as of May 31, 2020: ~$420M revolver and $314M cash $250M Obtained a 364-day term loan in April 2020 with the p
Slide 22: Strong credit profile remains well-positioned
Choice Hotels strong credit profile remains well-positioned in 2020 ($ in millions) LTM Q1 2020 2019 Change Total Revenues1 $1,115 $1,115 0% Adjusted EBITDA2 $359 $365 -2% Total Debt $1,227 $863 39% Cash $322 $34 853% Net Debt $905 $829 7% Total Debt3 / Adjusted EBITDA2 3.4x 2.4x Net Debt3 / Adjuste
Slide 23: Maintains strong credit statistics compared to peers
Choice maintains strong credit statistics compared to peers Marriott Hyatt Choice Hilton Wyndham Moody’s / S&P Baa3/BBB- Baa3/BBB- Baa3/BBB- Ba2/BB Ba1/BB
Slide 24: Prudent and disciplined approach to capital allocation
Choice Hotels maintains a prudent and disciplined approach to capital allocation and ensures the level of investment activity is aligned with the current environment Growth Initiatives M&A Capital management Increase the entire platform’s value and maintain our competitive strength with discretionar
Slide 25: Asset-light franchising model generates high free cash flow and returns
Asset-light franchising model generates predictable high free cash flow and strong returns on investment 2 Premium brand recognition and North America’s midscale/upper midscale segment leader Investment thesis Recurring fee-for-service business model produces stable cash flows, resilient through cyc
Slide 26: Appendix
Appendix Hotel Petaluma, Ascend, CA
Slide 27: Pre-COVID, Choice continued to improve each of its key growth levers
Pre-COVID 19 crisis, Choice Hotels continued to improve each of its key growth levers Domestic Royalty Rate
Slide 28: Resilient fee-for-service model generates stable cash flows through the cycle
Choice Hotels’ resilient fee-for-service business model generates stable cash flows throughout the cycle 1 Peers include Hyatt, Marriott and Starwood. 2 Host is the only pure-play Investment Grade Lodging REIT. Source: Smith Travel Research, Management data, Company filings. From 2008 to 2009, CHH s
Slide 29: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures *Figures are calculated using guidelines from the ASC 606 Revenue Recognition Standard.
Slide 30: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures *Figures are calculated using guidelines from the ASC 606 Revenue Recognition Standard. ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") ($millions) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2
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