On August 8, 2024, Choice Hotels International Inc (CHH, Financial) released its 8-K filing reporting its second quarter 2024 results. As of Dec. 31, 2023, Choice Hotels operated 633,000 rooms across 15 brands addressing the economy and midscale segments. Comfort Inn and Comfort Suites are the largest brands (27% of the company's total domestic rooms), while Ascend and Cambria (7% of total domestic rooms) are newer lifestyle and select-service brands. Choice closed on its Radisson acquisition in August 2022, which added around 70,000 rooms. Franchises account for 100% of total revenue, and the United States represent 79% of total rooms in 2023.
Performance Overview
Choice Hotels International Inc (CHH, Financial) reported total revenues of $435.2 million for the second quarter of 2024, marking a 2% increase compared to the same period in 2023. However, this figure fell short of the analyst estimate of $440.74 million. Net income for the quarter increased by 3% to $87.1 million, translating to diluted earnings per share (EPS) of $1.80, which is a 9% increase compared to the same period in 2023 and slightly below the analyst estimate of $1.83.
Adjusted net income, excluding certain items, decreased by 0.4% to $88.8 million, while adjusted diluted EPS increased by 5% to a record $1.84. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the second quarter grew to a quarterly record of $161.7 million, a 6% increase compared to the same period in 2023.
Key Financial Achievements
Choice Hotels International Inc (CHH, Financial) achieved several financial milestones during the second quarter of 2024:
- Global pipeline increased by 22% to over 114,000 rooms, with a significant increase in conversion rooms.
- Global hotel openings increased by 20% year-over-year.
- Domestic franchise agreements for upscale, extended stay, and midscale brands increased by 8% year-to-date.
- The company repurchased 2.4 million shares of common stock for $296.2 million year-to-date.
Income Statement Highlights
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Total Revenues | $435.2 million | $427.4 million | 2% |
| Net Income | $87.1 million | $84.7 million | 3% |
| Diluted EPS | $1.80 | $1.65 | 9% |
| Adjusted EBITDA | $161.7 million | $152.6 million | 6% |
Balance Sheet and Liquidity
As of June 30, 2024, Choice Hotels International Inc (CHH, Financial) had total available liquidity of approximately $530 million, including available borrowing capacity and cash and equivalents. The company amended its revolving credit facility, increasing total commitments from $850 million to $1 billion and extending maturity from 2026 to 2029. Additionally, the company issued $600 million aggregate principal amount of new 5.85% unsecured senior notes due 2034.
Development and Expansion
The company's domestic upscale, extended stay, and midscale portfolio increased by 1.0% for hotels and 0.7% for rooms since June 30, 2023. The domestic extended stay hotels portfolio grew by 14.0% during the same period. The company opened an average of over four domestic hotels per week, totaling 118 domestic hotel openings year-to-date through June 30, 2024, a 10% increase compared to the same period in 2023.
Commentary
"Choice Hotels generated another quarter of record financial performance amid a normalizing domestic RevPAR environment, demonstrating the strength of our versatile business model and proven growth strategy," said Patrick Pacious, President and Chief Executive Officer.
Analysis
Choice Hotels International Inc (CHH, Financial) has shown resilience and growth in its financial performance despite a challenging environment. The increase in global pipeline and hotel openings indicates strong demand for the company's brands. However, the slight miss in revenue estimates suggests potential challenges in achieving expected growth rates. The company's strategic initiatives, including share repurchases and expansion of its credit facility, position it well for future growth and shareholder returns.
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Explore the complete 8-K earnings release (here) from Choice Hotels International Inc for further details.
