Choice Hotels International Inc. (NYSE:CHH) Q3 2018 Earnings Conference Call Transcript

Nov 08, 2018 • 10:00 am ET

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Choice Hotels International Inc. (NYSE:CHH) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the Choice Hotels International Third Quarter 2018 Earnings Conference Call. At this time all lines are in listen-only mode. Later, there will be a question-and-answer session and further instructions will be given at that time. As a reminder, today's call is being recorded.

(Forward-Looking Cautionary Statements)

You can find a reconciliation of our non-GAAP financial measures referred to in the remarks as part of the third quarter 2018 earnings press release, which is posted on our website at choicehotels.com under the Investor Relations section.

With that said, I would like to introduce Pat Pacious, President and Chief Executive Officer of Choice Hotels International, Inc. Please go ahead, sir.

Executive
Pat Pacious

Thank you. Good morning, and welcome to Choice Hotels Third Quarter 2018 Earnings Conference Call. Joining me this morning is Dominic Dragisich, our Chief Financial Officer.

We're pleased to report another quarter of excellent performance, highlighted by reported diluted earnings per share, adjusted for special items, of $1.24, a 31% year-over-year increase.

Our third quarter adjusted EBITDA exceeded our expectations with an 11% year-over-year increase, and our adjusted diluted earnings per share results exceeded the top end of our previous guidance by $0.07 per share.

Our effective royalty rate also continued its impressive growth trajectory with a 12 basis point increase over the third quarter of 2017. Plus, our system size growth continues to meet our expectations.

While our domestic RevPAR performance was lower than our previous guidance, this was driven by short-term and onetime impacts, which Dom will cover in more detail. We expect RevPAR growth to bounce back in the fourth quarter and have already seen a 2% year-over-year increase for the month of October.

Based on our strong third quarter performance and fourth quarter outlook, we are pleased to announce that we have raised our full year adjusted EBITDA guidance by $1.5 million at the midpoint and raised adjusted earnings per share guidance by $0.09 at the midpoint. These strong financial results lay a solid foundation for continued future growth.

It's been a year since my first earnings call with you as President and CEO. And in reflecting on the past year, I thought about what sets us apart and what makes us successful.

First, we are strengthening our well-segmented and proven family of brands in a number of ways, from launching a new mid-scale brand extension to transforming our largest brand, to growing in both the upscale and extended-stay segments. Second, we're having incredible success as a franchisor. In fact, we are on track to have our best development year as a public company as measured by the number of new domestic franchise agreements. Third, we provide tailored franchisee resources to help our owners run profitable businesses by driving their top line revenue and bottom line results.

On my first point, our proven brands, there are four I'd like to highlight this morning. The brand we just launched, Clarion Pointe; the brand we acquired in February