Choice Hotels International, Inc. · NYSE:CHH
Choice Hotels International — Q3 2021 Earnings Presentation
29 slides from Choice Hotels International's earnings presentation, Nov 4, 2021
Slide 1: Investor Presentation
Investor Presentation November 4, 2021 Cambria Hotel, Phoenix Cambria Hotel North Scottsdale Desert Ridge
Slide 2: Forward-looking Statements
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
Slide 3: Non-GAAP Financial Measurements
Non-GAAP Financial Measurements The company evaluates its operations utilizing the performance metrics of adjusted EBITDA, adjusted EBITDA margins, revenues excluding marketing and reservation system activities, adjusted net income and adjusted EPS, which are all non-GAAP financial measurements. The
Slide 4: Company Overview
Company Overview Cambria New Hotel Prototype 4
Slide 5: Choice Hotels is one of the world's largest hotel companies
Choice Hotels is one of the world’s largest hotel companies with over 80 years of success building a portfolio of diversified brands More than Hotels in nearly Over Only lodging Supports over company with 7,100 Open Hotels 40 Countries & Territories 910 Hotels in global ~100% 13,500 Hotels franchise
Slide 6: Strategic investments in brands, systems and franchisee tools continue to drive results
The strategic investments made in launching and enhancing brands, strengthening systems and franchisee tools, and bolstering platform capabilities continue to drive impressive results Strategic Focus Areas Achievements Rapidly growing Extended Stay portfolio • Increased portfolio 4x over past five y
Slide 7: As a franchisor, Choice provides brands, marketing, reservation and training services
As a franchisor, Choice provides powerful brands, marketing, reservation and training services to drive profitability of our independent hotel owners and operators Connecting franchisees to the power of Offering best-in-class franchisee Choice’s customer delivery platform resources and support Awa
Slide 8: Q3 Performance Overview
Q3 Performance Overview Hotel Petaluma, Ascend Hotel Collection 8
Slide 9: Domestic RevPAR
Choice Hotels continues to lead the recovery, exceeding 2019 levels for each month since June and with trends continuing into the fourth quarter 2019 +14.9% $70 2021 +4.5% +6.5% $60 +12.5% Domestic RevPAR $50 -4.3% -4.3% Q3 RevPAR increased 11.4% vs. Q3 2019 $40 driven by both rate improvement due t
Slide 10: Strategic investments drove third quarter results
The strategic investments made in launching and enhancing brands, strengthening systems and franchisee tools, and bolstering platform capabilities drove impressive third quarter results Extended Stay The Extended Stay segment rapidly expanded by over 45 units to 467 domestic hotels o Represents ov
Slide 11: Financial performance, liquidity and credit profile
Given Choice Hotels’ impressive year-to-date financial performance, the company is expecting to surpass 2019 adjusted EBITDA levels for full-year 2021 and continue to produce strong cash flow Balance Sheet / Liquidity Profile Industry-Leading Credit Profile Available liquidity as of September 30, 20
Slide 12: Disciplined approach to capital allocation
Choice Hotels maintains a disciplined approach to capital allocation and is committed to driving long-term shareholder value Growth Capital Initiatives M&A Management Increase the entire platform’s Disciplined approach to Opportunistically return excess value and maintain Choice’s potential M&A oppo
Slide 13: Uniquely Positioned to Outperform
Uniquely Positioned to Outperform Clarion Pointe, Rochester, NY 13
Slide 14: Resilient business model drove Q3 2021 RevPAR results
Choice Hotels’ resilient business model positioned the company to drive Q3 2021 RevPAR results that once again outperformed the industry and chain scales 1 2 3 4 5 6 Franchise- Well- Proven Midscale and Strength Predominately focused segmented Conversion Extended in Leisure Domestic Business Brand E
Slide 15: Franchise-focused business model provides resiliency during COVID-19
The company’s franchise-focused business model has provided a level of resiliency during the COVID-19 crisis Choice is a leading industry franchisor1 % of domestic franchised hotels Choice’s resilient business model 100% Business historically generates strong, predictable free cash flow and ROI 96
Slide 16: Well-segmented portfolio of brands
Choice Hotels’ high-quality, well-segmented portfolio of brands is distinctly positioned to meet the evolving needs of travelers during the demand recovery Long-term strategy of growing the right brands in the right segments and in the right locations 12 96% 5 Distinct Of domestic portfolio New bran
Slide 17: Key Conversion Brands
Choice Hotels has a proven record of accelerating its share of new conversion franchise agreements to fuel unit growth in down cycles Choice Conversions as a % of Total Openings Increase in Conversion Activity 89% 91% 90% The company's domestic franchise agreements for conversion hotels increased
Slide 18: Leader in upper-midscale and midscale segments
Choice Hotels continues to increase market share as a leader in the upper-midscale and midscale segments Choice Midscale Domestic Portfolio versus Competitors Choice’s overall midscale segment represents over # of upper-midscale and midscale hotels two-thirds of company’s total domestic portfolio ~2
Slide 19: Extended stay portfolio is a cycle-resilient segment
Choice Hotels’ extended stay portfolio has proven to be a highly cycle-resilient segment, with WoodSpring Suites’ Q3 RevPAR growth of 23% versus Q3 2019 Choice’s strategic focus and prior investments in extended stay continue to drive a competitive advantage Everhome Suites (January 2020) – first 46
Slide 20: High focus on leisure travel leading the recovery
Choice Hotels benefits from a high focus on leisure travel, which is leading the recovery and rebounding faster than business travel Leisure travel comprises approximately 85% of In Q3 2021, Choice grew RevPAR faster than its local Choice room nights, and the company has limited competitors, increas
Slide 21: Strong presence in domestic drive-to locations
Given its strong presence in domestic drive-to locations, Choice Hotels is benefiting from Americans showing a continued preference for road trips Strong presence in drive-to locations Americans choosing to drive to their destinations due to heightened concern about air travel safety Road trips
Slide 22: Diversity and Human Capital
Diversity and Human Capital Choice Hotels African American resource group (CHAARGE) meeting 22
Slide 23: Committed to diversity and inclusion at all levels
Choice is committed to diversity and inclusion throughout all levels of the enterprise – from the Board of Directors to the front lines of our franchised hotels Over Over Nearly Over Bias Training Combatting Human Trafficking Training 40% 40% 70% 15 years 37K+ 47K+ Corporate female Corporate diverse
Slide 24: History of fostering a diverse franchisee base
Choice has a history of fostering a diverse franchisee base and empowering underrepresented minority owners through dedicated teams for over 15 years Choice is creating opportunities for underrepresented Choice is pioneering diversity initiatives in the and minority owners hotel industry Average of
Slide 25: Investment Thesis
Investment Thesis Premium brand recognition and North America’s midscale/upper midscale 1 segment leader Asset-light franchising model generates predictable high free cash flow and 2 strong returns on investment Recurring fee-for-service business model produces stable cash flows that are 3 resilient
Slide 26: Appendix
Appendix The Cove Hotel, Ascend Collection Long Beach, California Hotel Petaluma, Ascend, CA 26
Slide 27: Fee-for-service model generates stable cash flows through cycles
Choice Hotels’ resilient fee-for-service business model generates stable cash flows throughout economic cycles From 2008 to 2009, Choice saw a 17% decline in EBITDA while peers1 saw an EBITDA decline of 37% and Host2 saw a decline of 40% 15.0% $400 10.0% $350 $300 5.0% $250 0.0% $200 (5.0%) $150 (10
Slide 28: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") ($thousands) Q3 2021* Q3 2019 * Net income $ 116,655 $ 76,239 Income taxes 34,934 9,685 Interest expense 11,638 12,431 Interest income (1,202) (2,220) Other (gains) losses 407 (115)
Slide 29: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA") FULL YEAR FORECAST Midpoint ($thousands) 2021 Guidance Net income $ 255,600 Income taxes 76,900 Interest expense 46,400 Interest income (4,900) Other (gains) losses (2,600) Equity i
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