CHOICE HOTELS INTERNATIONAL INC /DE (CHH)·Q2 2025 Earnings Summary

Executive Summary

• Record adjusted diluted EPS of $1.92 (+4% y/y) and record adjusted EBITDA of $165.0M (+2% y/y), while total revenues declined 2% y/y to $426.4M; domestic RevPAR fell 2.9% y/y amid macro softness and tough comps (Easter/eclipse), though extended stay and economy transient outperformed peers .
• EPS modestly beat Wall Street consensus by ~$0.02, and adjusted EBITDA was roughly in line; revenue comparisons are definition-sensitive (reimbursable vs. non-reimbursable) and should be interpreted carefully (see Estimates Context)*.
• International expansion accelerated: net international rooms +5% y/y, >140k international rooms, strategic agreements in Brazil, France, China; closed the remaining 50% of Choice Hotels Canada in July (~$112M) with ~$18M FY25 EBITDA expected .
• Mix shift and fee power: effective royalty rate +8 bps y/y to 5.12%; partnership services and fees +7% y/y; adjusted SG&A -4% y/y, expanding EBITDA margin by 120 bps q/q; FY25 domestic RevPAR guidance lowered to -3% to 0% with adjusted EBITDA unchanged at $615–$635M .

What Went Well and What Went Wrong

What Went Well

• “Another quarter of record financial performance despite a softer domestic RevPAR environment,” with adjusted EPS and adjusted EBITDA reaching second-quarter records .
• International momentum: adjusted EBITDA for international grew ~10% and rooms +5% y/y; expansion agreements and the Canada acquisition broaden direct franchising and brand reach .
• Share gains and portfolio quality: “occupancy index share gains versus competitors,” extended-stay outperformed industry by 40 bps, economy transient outperformed economy chain scale by 320 bps in Q2 .

What Went Wrong

• Domestic RevPAR down 2.9% y/y; FY25 domestic RevPAR guidance revised to -3% to 0% amid softer leisure transient demand, reduced government/international travel .
• GAAP net income declined to $81.7M vs $87.1M y/y, reflecting lower total revenue and a $2M operating guarantee payment tied to managed hotels acquired with Radisson Americas .
• Revenue growth headwinds domestically; quarter-over-quarter cadence expected to reflect similar trends, with Q4 comp headwinds from prior-year hurricane demand (125 bps lift last year) .

Financial Results

Headline financials (USD)

Margins

Values marked with * retrieved from S&P Global.

Revenue mix (USD)

KPIs (Domestic)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “We are especially pleased with our strong international performance… accelerated global expansion through a recent strategic acquisition, the signing of key partnerships, and entry into new markets.”
• CEO: “Our distinct strategy continues to deliver strong results… pipeline should generate significantly higher revenue… RevPAR premium of more than 30%, higher effective royalty rate and larger room count per hotel.”
• CFO: “Record second quarter adjusted EBITDA of $165 million… adjusted EPS $1.92… EBITDA margins expanded by 120 bps… adjusted SG&A declined 4%.”
• CEO: “Our extended stay hotels continue to outperform the industry during uncertain times… WoodSpring Suites ranked number one… increased interest from developers.”

Q&A Highlights

• Direct vs. master franchising: Canada moves to direct franchising (greater control, broader brand offering); in South America and China, MFAs used where fundamentals support; post-Canada, mix shifts more to direct franchising internationally .
• RevPAR cadence: Q4 prior-year hurricane-driven lift ~125 bps; remainder of FY expected to track Q2 pace with midpoint aligning to guidance .
• Operating guarantee exposure: Portfolio-level guarantee on 13 managed hotels (Radisson Americas); total potential over life ~$20M; $2M recorded in Q2; no material additional expected at present .
• Loans question: Clarified lending related to launching Park Inn; ~<$80M loans on books across properties; not typical to lend broadly .
• Rooms churn and pipeline: Radisson U.S. churn planned; Chinese rooms not yet open (sit in pipeline); share gains targeted in higher royalty-rate direct markets (Europe/LatAm) .

Estimates Context

Q2 2025 results vs Wall Street consensus (S&P Global):

Notes:

• EPS: modest beat vs consensus (~$0.02). Adjusted EBITDA: essentially in line. Revenue: definitional differences matter; S&P Global often tracks either total revenues or revenues excluding reimbursables—Choice reports both, with reimbursable lines designed to break-even over time .
• Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Mix and fee power intact: Effective royalty rate rose to 5.12% and is guided to mid-single-digit growth, supporting durable fee revenue even in softer RevPAR environments .
• International is a multi-year growth vector: Direct franchising in Canada and Europe, plus China agreements, should lift room count and diversify earnings; Canada adds ~$18M FY25 EBITDA and synergy potential .
• Extended stay resilience is central: Segment continues to outperform with double-digit system growth and leading brand satisfaction, reinforcing cycle-resilient exposure .
• Margin execution: Adjusted SG&A declined 4% y/y and EBITDA margin expanded; technology and revenue optimization tools underpin operating leverage .
• Near-term headwind acknowledged: FY25 domestic RevPAR guidance lowered (-3% to 0%), but FY25 adjusted EBITDA maintained at $615–$635M, aided by mix shift and Canada contribution .
• Capital returns continue: $110M buybacks and $26.9M dividends in 1H25; $587.5M liquidity; leverage ~3.0x net debt, providing flexibility for selective investment and returns .
• Watch Q3/Q4 cadence and definition alignment in revenue: Traders should focus on adjusted EPS/EBITDA prints and fee metrics; revenue consensus alignment (total vs ex reimbursables) can create apparent “misses” that are non-economic .

Disclosure: Consensus and margin values indicated with * were retrieved from S&P Global.