• Total revenues, excluding reimbursable revenue from franchised and managed properties, increased 9% to $219.6 million for third quarter 2023 compared to the same period of 2022.   

Choice Hotels;

Choice Hotels International, Inc. (NYSE: CHH), one of the world's largest lodging franchisors, today reported its third quarter 2023 results.

"We generated another record quarter of impressive financial growth, driven by our best-in-class business delivery engine, the successful integration of Radisson Americas, and organic growth of our brand portfolio focused on hotels that generate higher royalties per unit," said Patrick Pacious, President and Chief Executive Officer of Choice Hotels. "We believe we are well-positioned to effectively grow our business in the current hotel development environment with a superior hotel conversion capability. We will continue to execute our robust organic earnings growth strategy and pursue inorganic growth to drive long-term shareholder value."

Mr. Pacious continued, "At its core, our proposed combination with Wyndham is about the natural fit of the two companies coming together to accelerate value creation for all stakeholders. We made our proposal public so that all groups could evaluate its benefits. For Wyndham shareholders, we provide a substantial premium and immediate value for their shares with participation in the future value of the combined entity. For Wyndham franchisees, we provide a proven model to lower costs and increase direct revenue to their hotels. We urge the Wyndham Board of Directors to resume discussions for the benefit of both companies' franchisees, shareholders, associates, and guests." 

Highlights of third quarter 2023 results include:1

  • Total revenues were $425.6 million for third quarter 2023, a third quarter record and a 3% increase compared to the same period of 2022.
  • Total revenues, excluding reimbursable revenue from franchised and managed properties, increased 9% to $219.6 million for third quarter 2023 compared to the same period of 2022.
  • Net income was $92.0 million for third quarter 2023, representing diluted earnings per share (EPS) of $1.81. As a result of one-time items, including Radisson Hotels Americas integration costs, gains from the sale of the Cambria Hotel Nashville owned asset and extraordinary franchisee termination fees in third quarter 2022, and the timing of net reimbursable expenses, net income and diluted EPS were 11% and 2% lower, respectively, for third quarter 2023 compared to the same period of 2022.
  • Third quarter 2023 adjusted net income, excluding certain items described in Exhibit 6, increased 6% to $92.4 million compared to the same period of 2022, and adjusted diluted EPS increased 17% to $1.82 compared to the same period of 2022.
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for third quarter 2023 grew to $155.9 million, a third quarter record and a 12% increase compared to the same period of 2022.
  • Global rooms pipeline as of September 30, 2023 increased 6% to over 99,000 rooms from June 30, 2023. Global rooms pipeline for conversion rooms increased 11% from September 30, 2022 and 27% from June 30, 2023.
  • Expanded international pipeline as of September 30, 2023, nearly doubling rooms count from September 30, 2022, inclusive of over 30 properties representing approximately 6,000 rooms associated with the company's strategic alliance with one of the largest hotel operators in Mexico known for its portfolio of upscale, upper-upscale, luxury hotels and resorts in Mexico and the Caribbean.
  • Achieved $84 million of annual recurring synergies through the integration of Radisson Hotels Americas, exceeding prior target by 5%.
  • The company raised its financial guidance for full-year 2023. 

Financial Performance 

  • Platform and procurement services fees increased 8% to $15.5 million for third quarter 2023 compared to the same period of 2022.
  • Royalty, licensing, and management fees increased 3% to $148.5 million for third quarter 2023 compared to the same period of 2022. Excluding the one-time exit of the 110 Woodspring Suites hotels in third quarter 2022, royalty, licensing, and management fees for third quarter increased 6% compared to the same period of 2022.
  • Domestic revenue per available room (RevPAR) decreased 80 basis points and increased 140 basis points for the three and nine-month periods ended September 30, 2023, respectively, compared to the same periods of 2022. The company's third quarter average daily rate increased 1.3% compared to the same period of 2022 while occupancy reached 62%.
  • Domestic effective royalty rate for both the three-month and nine-month periods ended September 30, 2023 increased 6 basis points to 4.99% compared to the respective 2022 periods.

Development

  • The company executed an average of more than four hotel openings per week, for a total of 159 hotel openings year-to-date through September 30, 2023, a 24% increase compared to the same period of 2022. For the first nine months of 2023, the company grew hotel openings across all segments, increasing openings in the upscale segment by 50%, the extended stay segment by 38%, the midscale segment by 14%, and the economy segment by 27% compared to the same period of 2022.
  • Of the total domestic franchise agreements awarded in the nine months ended September 30, 2023, 84% were for the company's upscale, extended stay, and midscale brands, and 72% were for conversion hotels. Of the domestic franchise agreements awarded for conversion hotels in the nine months ended September 30, 2023, 67% have already opened or are expected to open by December 31, 2023.
  • Domestic upscale and extended-stay portfolio grew by 11% and 13%, respectively, since September 30, 2022, driven by an increase in the number of Cambria Hotels, Ascend Hotel Collection, WoodSpring Suites, MainStay Suites, and Suburban Studios units. The company's total domestic system size was over 6,200 hotels and 490,000 rooms as of September 30, 2023.
  • The total number of international upscale hotels, as of September 30, 2023, increased 13% from September 30, 2022. The company's total international system size approached 1,200 hotels as of September 30, 2023.
  • The extended stay domestic pipeline increased 12% to over 47,000 rooms from September 30, 2022. Domestic pipeline reached nearly 86,000 rooms as of September 30, 2023.

Shareholder Returns

During the nine months ended September 30, 2023, the company paid cash dividends of $42.1 million and $54.8 million over the trailing twelve months ended September 30, 2023.

During the nine months ended September 30, 2023, the company repurchased 2.5 million shares of common stock for $306.9 million 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. Over the trailing twelve months ended September 30, 2023, the company repurchased 4.1 million shares of common stock totaling $495.2 million, representing nearly 8% of the shares outstanding as of September 30, 2022.

As of September 30, 2023, the company had 2.3 million shares of common stock remaining under the current share repurchase authorization.

Outlook

The outlook information provided below is inclusive of the Radisson Hotels Americas acquisition, which was completed in August 2022, 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, due diligence and transition costs, and other items:

Full-Year 2023

Prior Outlook

Net Income

$259 – $264 million

$251 – $259 million

Adjusted Net Income

$302 – $308 million

$298 – $306 million

Adjusted EBITDA

$535 – $540 million

$530 – $540 million

Adjusted Diluted EPS

$5.95 – $6.03

$5.86 – $6.01

Effective Income Tax Rate

24 %

24 %

Full-Year 2023

Prior Outlook

vs. Full-Year 2022

Domestic RevPAR Growth2

Approximately 1%

Approximately 2%

Domestic Effective Royalty Rate Growth3

Mid-single digits

Mid-single digits

Domestic Net Unit Growth

Approximately 1%

Approximately 1%

(upscale, extended stay, and midscale segments)

Proposed Transaction with Wyndham Resorts & Hotels

On October 17, 2023, Choice Hotels made public its highly compelling proposal to acquire all outstanding shares of Wyndham Resorts & Hotels at an implied value of $90.00 per share, payable in a mix of cash and stock. The proposal represented a 14.9x multiple of Wyndham's consensus 2023 EBITDA, a forward multiple that Wyndham has never achieved absent COVID disruptions. The offer represents a meaningful premium for Wyndham shareholders, while also providing the opportunity for further upside through shared value creation.

A combination of Choice and Wyndham creates a premier hotel franchising company that would bring Choice's proven franchisee success system to a broader set of owners. With an asset-light, fee-for-service model, the combined company would generate predictable, high free cash flow, and impressive returns, providing resiliency through all economic cycles. The combination is expected to generate approximately $150 million in annual run-rate synergies through rationalization of operational redundancies, duplicate public company costs, and topline growth potential. The $150 million synergy opportunity is expected to translate into more than $2 billion in incremental shareholder value. 

Choice's management team has a strong history in maximizing value to shareholders through organic growth and acquisitions, delivering market leading revenue and adjusted EBITDA growth. We believe this growth will continue going forward, demonstrated by our forecasted adjusted EBITDA growth in 2024 and today's upward revision in our 2023 financial guidance. The proposed transaction creates additional capacity to further support Choice's distinct strategy focused on hotels that generate higher royalties per unit, ultimately helping drive growth across its organic revenue levers. 

Choice has attempted to engage with Wyndham for nearly six months and urges Wyndham's Board of Directors to resume discussions toward reaching an agreement for the benefit of all stakeholders.

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 46 countries and territories as of September 30, 2023. A diverse portfolio of 22 brands that run the gamut from full-service, upper upscale properties to midscale, extended stay, and economy enables Choice to meet travelers' needs in more places and for more occasions while driving more value for franchise owners and shareholders.

___________________________

1 For comparative purposes, domestic RevPAR and the effective royalty rate assume the Radisson Hotels Americas brands were acquired on January 1, 2022.

2 For comparative purposes, domestic RevPAR baseline for full-year 2022 is inclusive of the Radisson Hotels Americas acquisition. 

3 For comparative purposes, the domestic effective royalty rate 4.93% baseline for full-year 2022 is inclusive of the Radisson Hotels Americas acquisition.

Choice Hotels International, Inc.

Exhibit 1

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Variance

Variance

2023

2022

$

%

2023

2022

$

%

REVENUES

Royalty, licensing and management fees

$    148,512

$    144,020

$       4,492

3 %

$    396,503

$    356,208

$      40,295

11 %

Initial franchise fees

6,194

7,011

(817)

(12) %

21,240

21,635

(395)

(2) %

Platform and procurement services fees

15,542

14,401

1,141

8 %

58,186

47,887

10,299

22 %

Owned hotels

26,239

19,992

6,247

31 %

74,075

49,220

24,855

50 %

Other

11,436

31,432

(19,996)

(64) %

33,211

51,588

(18,377)

(36) %

Other revenues from franchised and managed properties

217,634

197,410

20,224

10 %

602,554

513,429

89,125

17 %

Total revenues

425,557

414,266

11,291

3 %

1,185,769

1,039,967

255,307

14 %

OPERATING EXPENSES

Selling, general and administrative

54,913

70,202

(15,289)

(22) %

182,000

144,414

37,586

26 %

Depreciation and amortization

9,633

8,726

907

10 %

29,468

20,436

9,032

44 %

Owned hotels

18,628

13,158

5,470

42 %

53,924

32,004

21,920

68 %

Other expenses from franchised and managed properties

207,341

190,541

16,800

9 %

583,095

458,037

125,058

27 %

       Total operating expenses

290,515

282,627

7,888

3 %

848,487

654,891

193,596

30 %

Gain on sale of business and assets, net

—

13,379

(13,379)

(100) %

—

16,688

(16,688)

(100) %

Operating income

135,042

145,018

(9,976)

(7) %

337,282

401,764

45,023

(16) %

OTHER INCOME AND EXPENSES, NET

Interest expense

16,168

9,362

6,806

73 %

46,522

32,084

14,438

45 %

Interest income

(1,897)

(2,348)

451

(19) %

(5,836)

(5,256)

(580)

11 %

Other loss (gain)

1,343

2,303

(960)

(42) %

(2,752)

9,578

(12,330)

(129) %

Equity in net gain of affiliates

(1,801)

(1,075)

(726)

68 %

(1,923)

(1,279)

(644)

50 %

Total other income and expenses, net

13,813

8,242

5,571

68 %

36,011

35,127

884

3 %

Income before income taxes

121,229

136,776

(15,547)

(11) %

301,271

366,637

(65,366)

(18) %

Income tax expense

29,205

33,696

(4,491)

(13) %

71,717

89,998

(18,281)

(20) %

Net income

$      92,024

$    103,080

$    (11,056)

(11) %

$    229,554

$    276,639

$    (47,085)

(17) %

Basic earnings per share

$         1.83

$         1.87

$        (0.04)

(2) %

$         4.51

$         4.98

$        (0.47)

(9) %

Diluted earnings per share

$         1.81

$         1.85

$        (0.04)

(2) %

$         4.47

$         4.93

$        (0.46)

(9) %

Choice Hotels International, Inc.

Exhibit 2

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

September 30,

December 31,

2023

2022

ASSETS

Cash and cash equivalents

$                          36,432

$                          41,566

Accounts receivable, net

223,781

216,614

Other current assets

92,599

89,742

Total current assets

352,812

347,922

Property and equipment, net

469,771

427,306

Intangible assets, net

781,101

742,190

Goodwill

220,187

218,653

Notes receivable, net of allowances

49,831

55,577

Investments in affiliates

55,081

30,647

Operating lease right-of-use assets

90,474

68,985

Investments, employee benefit plans, at fair value

35,815

31,645

Other assets

177,165

179,250

Total assets

$                     2,232,237

$                     2,102,175

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable

$                        124,113

$                        118,863

Accrued expenses and other current liabilities

96,523

131,410

Deferred revenue

107,802

92,695

Current portion of long-term debt

4,416

2,976

Liability for guest loyalty program

86,140

89,954

 Total current liabilities

418,994

435,898

Long-term debt

1,391,272

1,200,547

Deferred revenue

135,009

134,149

Liability for guest loyalty program

44,320

47,381

Operating lease liabilities

109,746

70,994

Deferred compensation & retirement plan obligations

41,200

36,673

Other liabilities

19,283

21,873

Total liabilities

2,159,824

1,947,515

Total shareholders' equity

72,413

154,660

Total liabilities and

shareholders' equity

$                     2,232,237

$                     2,102,175

Choice Hotels International, Inc.

Exhibit 3

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Nine Months Ended September 30,

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$                      229,554

$                      276,639

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

29,468

20,436

Depreciation and amortization – marketing and reservation system

27,544

23,237

Gain on sale of business and assets, net

—

(16,688)

Franchise agreement acquisition cost amortization

14,616

11,558

Non-cash share-based compensation and other charges

34,670

28,621

Non-cash interest, investment, and affiliate (income) loss, net

(1,709)

9,135

Deferred income taxes

(4,315)

(22,402)

Equity in net (gain) loss of affiliates, less distributions received

(621)

2,451

Franchise agreement acquisition costs, net of reimbursements

(72,867)

(32,947)

Change in working capital and other

(9,150)

(34,838)

 NET CASH PROVIDED BY OPERATING ACTIVITIES

247,190

265,202

CASH FLOWS FROM INVESTING ACTIVITIES:

Investments in property and equipment

(81,403)

(66,084)

Investments in intangible assets

(1,893)

(3,247)

Asset acquisitions, net of cash paid

—

(856)

Proceeds from the sale of assets and business

—

140,554

Proceeds from the termination of intangible assets

—

5,698

Business acquisitions, net of cash acquired

—

(550,431)

Contributions to investments in affiliates

(24,573)

(4,264)

Proceeds from the sale of affiliates

868

—

Purchases of investments for employee benefit plans

(3,678)

(3,719)

Proceeds from sales of investments for employee benefit plans

1,263

1,896

Issuances of notes receivable

(4,319)

(5,617)

Collections of notes receivable

9,923

701

Other items, net

547

1,708

 NET CASH USED IN INVESTING ACTIVITIES

(103,265)

(483,661)

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments to extinguish acquired debt

—

(55,975)

Proceeds from acquired derivative

—

1,943

Net borrowings pursuant to revolving credit facilities

191,500

315,000

Principal payments on 2012 senior notes

—

(216,571)

Debt issuance costs

(755)

(24)

Purchases of treasury stock

(304,400)

(246,530)

Proceeds from exercise of stock options

6,719

2,361

Dividends paid

(42,073)

(39,697)

 NET CASH USED IN FINANCING ACTIVITIES

(149,009)

(239,493)

Net change in cash and cash equivalents

(5,084)

(457,952)

Effect of foreign exchange rate changes on cash and cash equivalents

(50)

(1,112)

Cash and cash equivalents at beginning of period

41,566

511,605

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$                       36,432

$                       52,541

Exhibit 4

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL OPERATING INFORMATION

DOMESTIC HOTEL SYSTEM

(UNAUDITED)

For the Three Months Ended September 30,

2023

For the Three Months Ended September 30,

2022

Change

Average Daily

Average Daily

Average Daily

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Upscale & Above(1)

$       160.49

63.1 %

$      101.29

$       157.10

62.4 %

$         98.09

2.2 %

70

bps

3.3 %

Midscale & Upper Midscale(2)

107.77

62.2 %

67.07

107.49

63.1 %

67.88

0.3 %

(90)

bps

(1.2) %

Extended Stay(3)

64.64

74.5 %

48.18

63.83

77.5 %

49.46

1.3 %

(300)

bps

(2.6) %

Economy(4)

77.00

51.6 %

39.74

77.51

54.5 %

42.25

(0.7) %

(290)

bps

(5.9) %

Total(5)

$       103.33

62.0 %

$        64.02

$       101.99

63.3 %

$         64.53

1.3 %

(130)

bps

(0.8) %

For the Nine Months Ended September 30,

2023

For the Nine Months Ended September 30,

2022

Change

Average Daily

Average Daily

Average Daily

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Rate

Occupancy

RevPAR

Upscale & Above(1)

$       152.58

58.2 %

$        88.86

$       146.91

56.7 %

$         83.26

3.9 %

150

bps

6.7 %

Midscale & Upper Midscale(2)

102.91

58.3 %

60.02

101.47

58.7 %

59.52

1.4 %

(40)

bps

0.8 %

Extended Stay(3)

64.26

73.5 %

47.23

61.85

76.9 %

47.58

3.9 %

(340)

bps

(0.7) %

Economy(4)

72.66

49.0 %

35.57

72.44

51.1 %

36.99

0.3 %

(210)

bps

(3.8) %

Total(5)

$        98.60

58.3 %

$        57.52

$        95.75

59.3 %

$         56.74

3.0 %

(100)

bps

1.4 %

Effective Royalty Rate

For the Three Months Ended

For the Nine Months Ended

September 30,

2023

September 30,

2022

September 30,

2023

September 30,

2022

System-wide(5)

4.99 %

4.93 %

4.99 %

4.93 %

(1) Includes Cambria, Ascend, Radisson Blu, Radisson Red, Park Plaza, Radisson Individuals and Radisson brands.

(2) Includes Country, Comfort, Clarion, Sleep, Quality, Park Inn, and Radisson Inn brands.

(3) Includes WoodSpring, Mainstay, Suburban and Everhome brands.

(4) Includes Econo Lodge and Rodeway brands.

(5) Radisson Hotels Americas was acquired on August 11, 2022. To enhance comparability, ADR, Occupancy, RevPAR, and effective royalty rate reflect operating performance for the three and nine months ended September 30, 2022 as if the legacy Radisson brands were acquired on January 1, 2022.

Exhibit 5

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL HOTEL AND ROOM SUPPLY DATA

(UNAUDITED)

September 30, 2023

September 30, 2022

Variance

Hotels

Rooms

Hotels

Rooms

Hotels

Rooms

%

%

Ascend Hotel Collection

231

24,955

192

20,069

39

4,886

20.3 %

24.3 %

Cambria Hotels

69

9,398

61

8,433

8

965

13.1 %

11.4 %

Radisson(1)

66

15,499

77

17,643

(11)

(2,144)

(14.3) %

(12.2) %

Comfort(2)

1,660

130,380

1,668

131,140

(8)

(760)

(0.5) %

(0.6) %

Country(3)

426

33,928

439

35,179

(13)

(1,251)

(3.0) %

(3.6) %

Clarion(4)

177

19,327

185

20,642

(8)

(1,315)

(4.3) %

(6.4) %

Quality

1,611

118,874

1,625

120,708

(14)

(1,834)

(0.9) %

(1.5) %

Sleep

425

30,005

423

29,770

2

235

0.5 %

0.8 %

Park Inn

4

363

4

363

—

—

0.0 %

0.0 %

Everhome

1

98

1

98

—

—

0.0 %

0.0 %

MainStay

123

8,471

113

7,843

10

628

8.8 %

8.0 %

WoodSpring(5)

231

27,862

206

24,890

25

2,972

12.1 %

11.9 %

Suburban

90

7,888

73

6,565

17

1,323

23.3 %

20.2 %

Econo Lodge

671

39,429

704

42,323

(33)

(2,894)

(4.7) %

(6.8) %

Rodeway

471

26,557

491

27,569

(20)

(1,012)

(4.1) %

(3.7) %

Domestic Franchises

6,256

493,034

6,262

493,235

(6)

(201)

(0.1) %

— %

International Franchises

1,207

134,660

1,196

133,947

11

713

0.9 %

0.5 %

Total Franchises

7,463

627,694

7,458

627,182

5

512

0.1 %

0.1 %

(1) Includes Radisson Blu, Radisson Red, Radisson Individuals and Radisson brands.

(2) Includes Comfort family of brand extensions including Comfort and Comfort Suites.

(3)  Includes Country Inn & Suites, Park Plaza, and Radisson Inn brands.

(4) Includes Clarion family of brand extensions including Clarion and Clarion Pointe.

(5) In July 2022, the Company received notice from an ownership group of its intent to exit 110 WoodSpring properties from the Choice system, which occurred in September 2022.

Exhibit 6

CHOICE HOTELS INTERNATIONAL, INC.

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 September 30,

2023

Nine Months Ended September 30,

2023

2023

2022

2023

2022

Total Revenues

$          425,557

$          414,266

$      1,185,769

$      1,039,967

Adjustments:

  Reimbursable revenue from franchised and managed properties

(205,965)

(190,627)

(563,391)

(506,646)

  Extraordinary termination fees from franchisee

—

(22,647)

—

(22,647)

Revenues excluding reimbursable revenue from franchised and managed properties

and extraordinary termination fees from franchisee

$          219,592

$          200,992

$         622,378

$         510,674

ADJUSTED SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

(dollar amounts in thousands)

Three Months Ended September 30,

2023

Nine Months Ended September 30,

2023

2023

2022

2023

2022

Total Selling, General and Administrative Expenses

$            54,913

$              70,202

$           182,000

144,414

Mark to market adjustments on non-qualified retirement plan investments

913

1,419

(2,955)

7,979

Operational restructuring charges

(1,448)

(5,416)

(6,788)

(5,416)

Share-based compensation

(5,890)

(4,662)

(16,503)

(12,869)

Due diligence and transition costs

(9,698)

(19,496)

(25,669)

(23,557)

Limited payment guarantee charge

—

—

(1,551)

—

Adjusted Selling, General and Administrative Expenses

$            38,790

$            42,047

$         128,534

$         110,551

ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")

(dollar amounts in thousands)

Three Months Ended September 30,

2023

Nine Months Ended September 30,

2023

2023

2022

2023

2022

Net income

$              92,024

$            103,080

$           229,554

$           276,639

Income tax expense

29,205

33,696

71,717

89,998

Interest expense

16,168

9,362

46,522

32,084

Interest income

(1,897)

(2,348)

(5,836)

(5,256)

Other loss (gain)

1,343

2,303

(2,752)

9,578

Equity in net gain of affiliates

(1,801)

(1,075)

(1,923)

(1,279)

Gain on sale of business and assets, net

—

(13,379)

—

(16,688)

Depreciation and amortization

9,633

8,726

29,468

20,436

Mark to market adjustments on non-qualified retirement plan investments

(913)

(1,419)

2,955

(7,979)

Operational restructuring charges

1,448

5,416

6,788

5,416

Share-based compensation

5,890

4,662

16,503

12,869

Due diligence and transition costs

9,698

19,496

25,669

23,557

Extraordinary termination fees from franchisee

—

(22,647)

—

(22,647)

Limited payment guarantee charge

—

—

1,551

—

Net reimbursable surplus from franchised and managed properties

(7,889)

(8,760)

(13,150)

(57,283)

Franchise agreement acquisition costs amortization

2,972

2,262

8,368

6,620

Adjusted EBITDA

$          155,881

$          139,375

$         415,434

$         366,065

ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE (EPS)

(dollar amounts in thousands, except per share amounts)

Three Months Ended September 30,

2023

Nine Months Ended September 30,

2023

2023

2022

2023

2022

Net income

$            92,024

$          103,080

$         229,554

$         276,639

Adjustments:

Gain on sale of business and assets, net

—

(10,087)

—

(12,583)

Operational restructuring charges

1,083

4,084

5,125

4,084

Extraordinary termination fees from franchisee

—

(17,076)

—

(17,076)

Due diligence and transition costs

7,290

14,700

19,380

17,762

Limited payment guarantee charge

—

—

1,174

—

Net reimbursable surplus from franchised and managed properties

(7,975)

(7,238)

(15,525)

(43,436)

Adjusted Net Income

$            92,422

$            87,463

$         239,708

$         225,390

Diluted Earnings Per Share

$               1.81

$               1.85

$              4.47

$              4.93

Adjustments:

Gain on sale of business and assets, net

—

(0.18)

—

(0.22)

Operational restructuring charges

0.02

0.07

0.10

0.07

Due diligence and transition costs

0.14

0.26

0.38

0.32

Extraordinary termination fees from franchisee

—

(0.31)

—

(0.30)

Limited payment guarantee charge

—

—

0.02

—

Net reimbursable surplus from franchised and managed properties

(0.15)

(0.13)

(0.30)

(0.78)

Adjusted Diluted Earnings Per Share (EPS)

$               1.82

$               1.56

$              4.67

$              4.02

Exhibit 7

CHOICE HOTELS INTERNATIONAL, INC.

SUPPLEMENTAL INFORMATION - 2023 OUTLOOK

(UNAUDITED)

Guidance represents the midpoint of the company's range of estimated outcomes for the year ended December 31, 2023

ADJUSTED EBITDA FULL YEAR FORECAST

(in thousands)

Midpoint

2023 Guidance

Net income

$           261,400

Income tax expense

81,800

Interest expense

63,300

Interest income

(7,300)

Other gain

(2,500)

Equity in net gain of affiliates

(2,200)

Depreciation and amortization

38,900

Mark to market adjustments on non-qualified retirement plan investments

3,000

Share-based compensation

21,500

Operational restructuring, due diligence and transition costs

43,100

Limited payment guarantee charge

1,600

Net reimbursable deficit from franchised and managed properties

24,000

Franchise agreement acquisition costs amortization

10,900

Adjusted EBITDA

$           537,500

ADJUSTED NET INCOME & DILUTED EARNINGS PER SHARE (EPS) FULL YEAR FORECAST

(in thousands, except per share amounts)

Midpoint

2023 Guidance

Net income

$           261,400

Adjustments:

Operational restructuring, due diligence and transition costs

32,600

Limited payment guarantee charge

1,200

Net reimbursable deficit from franchised and managed properties

10,100

Adjusted Net Income

$             305,300

Diluted Earnings Per Share

$                  5.11

Adjustments:

Operational restructuring, due diligence and transition costs

0.64

Limited payment guarantee charge

0.02

Net reimbursable deficit from franchised and managed properties

0.22

Adjusted Diluted Earnings Per Share (EPS)

$                  5.99

SOURCE Choice Hotels International, Inc.