Prompt:
Human: Actual results could vary materially from such statements.
Earnings for the quarter were $0.95 per share compared to $0.94 in the prior year quarter.
Adjusted earnings per share increased to $2.14 in the quarter compared to $1.33 in 2020.
Net sales in the quarter were up 34% from the prior year primarily due to increased volumes across all segments, favorable foreign currency translation, and the pass-through of higher material cost.
Segment income improved to $395 million in the quarter compared to $250 million in the prior year primarily due to higher sales unit volumes including recovery in many locations affected by COVID in last year's second quarter.
As outlined in the release, we currently estimate third quarter 2021 adjusted earnings of between $1.90 and $2 per share.
This estimate includes the results of the European Tinplate operations through August 31st.
We are increasing the midpoint of our full year adjusted earnings guidance from $6.70 per share to $7.35 per share again assuming the sale of the Europe Tinplate business closes at the end of August.
Our expected adjusted tax rate for the full year remains at 24% to 25%.
Demand remained strong across all product lines, and geographies, and importantly the company continues to convert this growth into record earnings.
Average segment income from continuing operations over the last four quarters, or last 12 months June 2021 is approximately $100 million per quarter higher than the average of the four preceding quarters or LTM June 2020, with approximately $60 million of that income growth found in the Americas Beverage segment, clearly a step change in our earnings outlook.
We look forward to commercializing significant new capacity in the second half of this year into next to take the next step change up.
The results of the European Tinplate operations are now shown as discontinued.
Had the business been included in continuing operations, LTM June EBITDA would have approximated $2.1 billion.
Before reviewing the operating segments, we remind you that delivered aluminum in North America is approximately 65% higher today than at this time last year.
LME and delivery premium are contractual pass-throughs, so reported beverage revenues reflected both the volume increase, and the higher aluminum cost.
As last year's second quarter was the so called COVID quarter, we will also provide beverage growth percentages for the first half of 2021 versus the first half of 2019 to give a bit more information perhaps relevance related to our beverage can unit volume growth.
In Americas Beverage demand remained strong across all the markets we serve with overall segment volumes up 18% compared to the second quarter of 2020.
First half '21 versus first half '19 volumes advanced 19%.
As described previously, we expect demand will continue to outweigh supply for the foreseeable future.
Commercial shipments from the first line of the company's new beverage can plant in Bowling Green, Kentucky commenced in June with shipments from the second line scheduled to begin in September.
The third line in Olympia, Washington and the second line in Rio Verde, Brazil are now scheduled for an early fourth quarter start-up.
As previously announced, the company will commercialize five new can lines in 2022.
New two line beverage can plants are being constructed in both Uberaba, Brazil; and Martinsville, Virginia along with a second can line being installed in Monterrey, Mexico.
Additionally the company announces today that it will construct a new two-line beverage can plant in the Southwestern United States with commercial shipments commencing late second quarter of 2023.
Customer commitments have already been secured for the plants' production capacity.
Unit volumes in European Beverage advanced 28% over the prior year second quarter, and 14% for the first half compared to the first half of 2019.
Income reflects contribution from the volume growth, which was recorded throughout the segment.
Asia-Pacific recorded 15% volume growth in the quarter, and 8% for the first half versus the first half of 2019, as most operations across Southeast Asia were able to grow despite numerous COVID lockdowns and movement control orders.
We do expect both Crown and customer operations to be subject to various and intermittent COVID lockdown measures throughout the balance of the year.
Commissioning will commence at the new plant in Vung Tau, Vietnam in September with customer shipments beginning in October.
Results in Transit Packaging were significantly higher than last year, and in line with our expectations, as strong demand for transit products and solutions mirrored the surge in overall industrial activity.
The business did well to navigate transportation delays, cost increases, and supply shortages, and is well-positioned for continued earnings growth as these conditions gradually ease.
We expect earnings growth in the back half of the year to approximately approximate first half growth.
Demand remained firm across North American food and aerosols along with the beverage can equipment making businesses.
In summary, a record first half for the company.
New capacity was commercialized during the quarter, and significant new capacity will be commissioned over the back half of the year.
Importantly, we continue to convert growth into expanded earnings and cash flow.
Segment income, and adjusted earnings in the first half up 50% to 60% over the prior year, and leverage at 3.6 times after repurchasing $300 million of company common stock is ahead of plan.
As Tom discussed, we have raised full year guidance, and the expected closing of the Tinplate sale still remains in the third quarter.
And with that Harley, we are now ready to take questions.
 Assistant:

Chosen response:
compname reports q2 earnings per share $0.95.
q2 adjusted earnings per share $2.14.
q2 earnings per share $0.95.
sees q3 adjusted earnings per share $1.90 to $2.00.


Prompt:
Human: Before we begin, I'd like to recognize all Church & Dwight employees around the world for their continued dedication to keeping our Company going during the pandemic, especially our supply chain and R&D teams as we overcame raw material shortages in Q1 as a result of the Texas freeze.
Now, let's talk about the results.
Q1 was another exceptional quarter.
Reported sales growth was 6.3%, and adjusted earnings per share was $0.83, and that's $0.03 better than our outlook.
Organic sales grew 4.9%, driven by higher consumption.
E-commerce shows no signs of slowing.
In Q1, our online sales increased by 54% year-over-year and as a percentage of total sales were 14.8% in Q1 compared to 10.2% in Q1 of 2020.
We continue to expect online sales for the full year to be 15% as a percentage of total sales.
Vaccinations will significantly influence consumer behavior.
The U.S. is slowly opening up, which means consumers are more mobile.
60% of vaccinated consumers are optimistic that they will return to a normal or new normal as we are seeing the first signs that consumers are willing to spend more time in stores based on a study by IRI.
In contrast, many countries outside the U.S. continue to experience lockdowns.
As described in the release, we have been facing shortages of raw materials due to the Texas freeze.
Raw material and transportation costs spiked higher in February and were exacerbated by the Texas freeze.
We expect the tight supply and higher input cost to continue for the balance of the year.
To mitigate the cost increases, we have announced price increases in laundry and across our international portfolio, and we have reduced couponing and promotional spending.
Rick will discuss this further in a couple of minutes.
At our Analyst Day in January, we outlined which categories and brands we expected to stay elevated throughout 2021, recover from COVID lows, decline from COVID highs and which ones would remain steady.
Overall, our full-year thinking has not changed.
To name a few categories, demand for vitamins, laundry additives and cat litter are expected to remain elevated in 2021.
Condoms, dry shampoo, power flossers and women's grooming are expected to deliver year-over-year growth as society opens up and consumers have greater mobility.
Baking soda, pregnancy test kits and oral analgesics are expected to decline from COVID highs.
Of the 16 categories in which we compete, 8 grew consumption in Q1, in some cases, on top of big consumption gains in Q1 of 2020.
Of those 8 categories, 5 saw a double-digit growth, gummy vitamins, toothache, battery-powered toothbrush, pregnancy test kits and women's electric grooming.
Household categories, such as laundry detergent and baking soda were down in the quarter and unable to comp the huge COVID-19 sales spikes seen in Q1 2020.
Looking at market shares in Q1, 8 out of our 13 power brands met or gained share within our U.S. Consumer Domestic business, which grew organic sales 5.1%.
I'll comment on a few of the brands right now.
Consumers have made health and wellness a priority.
VITAFUSION and L'IL CRITTERS gummy vitamins saw great consumption growth in Q1, up 24% with the help of the new launches described in the release.
It appears that new consumers are coming into the category and they're staying.
One survey showed that consumers who are new to the category had a 90% repeat rate.
WATERPIK grew consumption 15% in Q1 as it continues to recover from COVID lows and benefit from the heightened consumer focus on health and wellness.
WATERPIK is also benefiting from dental offices returning to pre-COVID patient levels.
We expect the frequency of our lunch 'n learn program to return to normal levels in the second half of this year.
While BATISTE remains impacted by social distancing, consumption was up 6%, and we achieved a record high quarterly balance share of 39%, behind our International Women's Day campaign.
Now, I want to talk about the International division.
Despite European lockdowns, our International business came through with 3.2% organic growth in the quarter, primarily driven by strong growth in our Global Markets Group.
Asia continues to be a strong growth engine for us.
WATERPIK, FEMFRESH and ARM & HAMMER led the growth for the International division in the quarter.
Our Specialty Products business delivered a positive quarter with 6% growth, primarily due to higher pricing.
Milk prices were stable in Q1 and are projected to increase later in the year due to higher demand.
Now, turning to New Products.
Innovative new products will continue to attract consumers.
In the household products portfolio, we are introducing OXICLEAN Laundry and Home Sanitizer.
It is the first and only sanitizing laundry additives that boost stain fighting and eliminates 99.9% of bacteria and viruses.
The product is also designed for cleaning throughout the house and on a variety of surfaces.
In the personal care portfolio, VITAFUSION launched Elderberry gummies, Super Immune gummies and POWER ZINC gummies to capitalize on increased consumer interest in immunity.
WATERPIK launched WATERPIK ION, a water flosser which is 30% smaller and contains a long-lasting lithium ion battery and is specifically designed for smaller bathroom spaces.
To capitalize on its earlier success, WATERPIK SONIC-FUSION, the world's first flossing toothbrush, was upgraded to SONIC-FUSION 2.0 with two brush head sizes and two brush speeds.
And finally, FLAWLESS is taking advantage of the at-home beauty and self-care trends with a facial cleanser system, a shower wand for a full-body spa-like experience and at-home manicure and pedicure solutions.
Now, let's turn to the outlook.
We're off to a good start in Q1.
We continue to expect full year adjusted earnings per share growth of 6% to 8%, which is in line with our Evergreen target, despite the heightened input cost.
Given our expectations, for consumer consumption, we have raised our full year outlook for reported sales growth from 4.5% to now 5% to 6%.
Organic sales growth expectations were raised from 3% to 4% to 5%.
And if you look at consumption trends through the middle of April, 14 of our 16 categories were up in consumption year-over-year.
Now, in conclusion, I'd like to remind everyone of the many reasons to have confidence in Church & Dwight.
Our track record shows that we are positioned to do well in both good and bad times and in uncertain economic times such as now.
Categories in which we play are essential to consumers.
We have a balance sheet of value and -- pardon me, we have a balance of value and premium products.
Our power brands are number one or number two in their categories.
And we have low exposure to private label.
And with a strong balance sheet, we continue to be open to acquiring TSR-accretive businesses.
Next up is Rick to give us details on Q1.
We'll start with EPS.
First quarter adjusted EPS, which excludes the positive earn-out adjustment, was $0.83, flat to prior year.
And as we discussed in previous calls, the quarterly earn-out adjustment will continue until Q4, which is the conclusion of the earn-out period.
$0.83 was better than our $0.80 outlook, primarily due to continued increase in consumer demand for many of our products.
Reported revenue was up 6.3%.
Organic sales were up 4.9%, driven by a volume increase of 3.1% and a positive price mix of 1.8%.
Now, let's review the segments.
Organic sales increased by 5.1% due to the higher volume and positive price mix.
Overall, growth was led VITAFUSION, L'IL CRITTERS gummy vitamins, WATERPIK oral care products, FLAWLESS beauty products, ARM & HAMMER clumping cat litter and KABOOM bathroom cleaners as well as VIVISCAL hair thinning products.
Consumer International delivered 3.2% organic growth due to higher volume, partially offset by lower price and product mix.
This was a great result despite European writedowns.
For our SPD business, organic sales increased 6% due to higher pricing, partially offset by lower volume.
Milk prices have remained stable month-to-month and are projected to rise as 2021 moves forward.
Now turning to gross margin.
Our first quarter gross margin was 44.5%, a 120 basis-point decrease from a year ago.
Gross margin drag was impacted by 350 basis points of higher manufacturing costs, primarily related to commodities, distribution, tariffs and COVID impacts.
Commodities, which were exacerbated due to the Texas freeze were a 90 basis-point drag on margin.
Tariff costs negatively impacted gross margin by 40 basis points.
These costs were partially offset by a plus 190 basis points from price/volume mix and a positive 170 basis points from productivity programs as well as a 10 basis-point positive impact from favorable currency.
As a reminder, our outlook for the quarter on gross margin was down 50 basis points.
The entire variance was related to the spike in commodities and tight transportation market.
The good news is for the back half of the year, we expect margin expansion behind the pricing and promotional actions we laid out in the release as well as we start to lap some of the higher inflation and tariffs that we experienced in the back half of 2020.
Marketing was up $2.3 million year-over-year as we invested behind our brand.
Marketing expense as a percentage of net sales decreased 30 basis points to 8%.
For SG&A, Q1 adjusted SG&A increased 60 basis points year-over-year, primarily due to acquisition-related intangible amortization.
We also had higher investments within IT and R&D as well as some transition costs from the ZICAM acquisition.
Other expense all-in was $11.6 million, a $3.6 million decline due to lower interest expense from lower interest rates.
And for income tax, our effective rate for the quarter was 24.2% compared to 23.2% in 2020, an increase of 100 basis points, primarily driven by lower stock option exercises.
And now to cash.
For the first three months of 2021, cash from operating activities decreased 57% to $100 million due to higher cash earnings, which was offset by an increase in working capital.
Inventory is higher to support increase in sales as we continue to improve customer fill levels.
Accounts payable and accrued expenses decreased due to the timing of payments.
As of March 31st, cash on hand was $128 million.
Our full year capex plan continues to be approximately $180 million as we continue to expand manufacturing and distribution capacity, primarily focused on laundry, litter and vitamins.
For Q2, we expect reported sales growth of approximately 4.5%, organic sales growth of approximately 4% and gross margin contraction of 350 basis points as higher input costs continue and we lap artificially low promotional levels from a year ago.
Adjusted earnings per share is expected to be $0.69 per share, a 10% decrease from last year's adjusted Q2 EPS.
As you read in the release, we did a voluntary recall of selected products within our vitamin business.
We expect the earnings per share impact in Q2 to be approximately $0.04 for the quarter and we are seeking reimbursement by insurance.
And now for the full year outlook.
We now expect full year 2021 reported sales growth to be 5% to 6%, which is above our previous 4.5% outlook.
We're also raising our full year organic sales growth to approximately 4% to 5%, up from the previous outlook of 3%.
Turning to gross margin.
We now expect full year gross margin to be flat for the year, primarily due to the impact of higher raw material and transportation costs and the Texas freeze in March.
We had previously expected gross margin expansion of 50 basis points for the year.
And recently, we have seen a large increase in raw materials and transportation costs.
We're absorbing $90 million of incremental costs for the full year.
Higher sales, reductions in promotions and price increases across all three of our divisions represented about one-third of our portfolio, offset a large part of the cost increases.
As a reminder, we price to protect gross profit dollars, not necessarily margin.
Our full year tax rate expectations are now 22%, higher versus our last expectations due to lower stock option exercises.
This is a $0.02 headwind versus our previous full year outlook.
Adjusted earnings per share expectations continue to be in the range of $0.03 to $3.06, a 6% to 8% increase year-over-year.
Our cash from operations outlook continues to be $1 billion, while we continue to pursue accretive acquisitions.
As you heard from Matt, the Company is off to a great start, and we expect 2021 to be another strong year.
And with that, Matt and I would be happy to take any questions.
 Assistant:

Chosen response:
church & dwight co q1 adjusted earnings per share $0.83 excluding items.
q1 adjusted earnings per share $0.83 excluding items.
sees q2 adjusted earnings per share $0.69.
sees fy adjusted earnings per share $3.00 to $3.06.
sees fy sales up 5 to 6 percent.
sees q2 sales up about 4.5 percent.
sees fy organic sales growth to be 4-5%.


Prompt:
Human: They will be joined by Scott Oaksmith, Senior Vice President, Real Estate & Finance.
We're glad you could join us and hope you are all well.
Our company, like the hotel industry overall, continues to be significantly impacted by the COVID-19 pandemic, which is far from over.
The response of our franchisees, their hotel staff and Choice associates has been remarkable.
Despite the pandemic, I'm pleased to report that Choice Hotels has continued to drive results that significantly outperform the industry in the third quarter.
Systemwide domestic RevPAR outperformed the industry by nearly 20 percentage points, declining only 28.8% from the third quarter of 2019.
All of our limited service brands had significant RevPAR index gains against their local competitors.
We continued to grow our effective royalty rate, a reflection of the continuously improving value proposition to our franchisees.
And we grew our total system size, especially in our more revenue intense, upscale, mid-scale and extended-stay segments.
We attribute this success to Choice's key differentiators, including our diversified brand portfolio, the geographic footprint of our domestic system, the profile of our core customer and our franchise-focused business model.
These core strengths have positioned us well to capture the shifts in consumer demand that occurred over the last eight months.
We believe that the strategy of growing our limited service brands in the right segments and the right locations will allow us to continue to increase our share of travel demand over the long term.
And now that we're entering the ninth month of the pandemic, we are beginning to see trends emerge that are likely to have a long-term impact on the travel industry.
Let me begin with the trend of remote work and virtual learning.
The significant investment in remote access technology by businesses, schools and consumers is creating more options in where and when traditional activities take place.
In a post-pandemic world, this may afford Americans even more flexibility in their schedules to travel for leisure.
For the last several years, we've seen a trend in leisure travel demand spreading more evenly throughout the month of the year, which we attribute in part to school schedules shifting over the years as well as the increase in baby boomers retiring and having more time and disposable income to travel.
More employees can now work from anywhere with an Internet connection, while their children attend virtual schooling.
For the past two months, we saw continued leisure demand extending into weekdays.
A second trend is the increase in road trips.
which we're benefiting from with our high concentration of hotels in drive-to markets.
Consumers' appetite for road trips has only accelerated since the onset of the pandemic as Americans are showing a clear preference for trips that are closer to home.
Destinations that may have been overlooked before the onset of COVID-19 are getting fresh consideration.
With over 4,000 domestic hotels located within a mile of an interstate exit, our hotels are well positioned to serve travelers as they hit the open road.
And with over 2,000 domestic hotels near beaches and national parks, our hotels are also located in the right markets to capture growing demand from travelers who increasingly are looking to rediscover the great American outdoors.
Another emerging trend is the economic disruption brought on by the pandemic and its effect on consumers as the recovery takes place.
We believe that in uncertain times, as in previous down cycles, consumers will be looking for more moderately priced limited service hotel offerings, presenting an opportunity for our portfolio to capture this demand.
Another anticipated economic effect of the pandemic is higher relocation rates.
As people shift jobs and industries, demand for longer-term hotel stays rises, a trend we believe will benefit our brands, particularly those in the moderately priced extended-stay segment.
And finally, there are signs that consumers' risk tolerance is climbing, even before a vaccine is available.
According to a recent survey, the perception of travel safety is up, and Americans likelihood to take a domestic leisure trip and stay in a hotel during the next six months is the highest since mid-March.
As a result of these trends, we've seen a rise in our weekday occupancy quarter-over-quarter, on top of the existing base of weekend leisure demand we've historically enjoyed.
In fact, our weekday RevPAR index is up eight percentage points year-over-year in the third quarter.
Our year-over-year RevPAR change continued to improve month-over-month in the third quarter.
At this time, we remain optimistic that we will see sequential month-over-month improvements related to our year-over-year RevPAR change.
Our loyalty program has remained a key driver of our business throughout the pandemic enhancing our ability to drive franchisees top line revenue.
We particularly benefited from Choice Privileges Diamond Elite members, our best customers, who contributed an even higher percentage of overall revenue year-to-date versus last year.
We expect this bedrock of loyalty business to deliver even higher value going forward as more Americans return to travel and enrollments in our award-winning Choice Privileges loyalty program continues to climb.
Our long-term strategy of growing the right brands in the right segments in the right markets allow Choice brand hotels to continue to outperform the competition.
Throughout the third quarter, we generated significant month-over-month increases in our proprietary revenue contribution to our hotels.
More specifically, our website contribution increased by 400 basis points and our loyalty contribution increased by 120 basis points quarter-over-quarter.
This has helped drive RevPAR index share gains versus our local competitors across all location types as reported by STR.
For the past 34 weeks through October 31, we observed significant RevPAR share gains against the competition.
In the third quarter, all of our select service brands achieved material RevPAR index gains versus their local competitors, with each of our upscale and extended-stay brands experiencing share gains of over 10 percentage points.
I'll now provide a brief update on our segments.
Our upscale portfolio once again achieved impressive year-over-year growth in the third quarter, where we increased our domestic upscale room count by 33%.
The Ascend Hotel Collection is the industry's first and largest soft brand.
Now with nearly 300 hotels around the globe and fast approaching its 200th domestic location, Ascend Hotels achieved the following performance in the third quarter: RevPAR change outperformance by over 26 percentage points versus the upscale segment; RevPAR share gains against local competitors of nearly 19 percentage points; and average daily rate index gains of approximately nine percentage points.
In fact, for the past six months, Ascend has significantly outperformed the upscale soft brands as well as the segment as a whole in terms of year-over-year RevPAR change.
Our extended-stay hotels are purpose-built for long-term guests.
Choice Hotels brands in this cycle-resilient segment continue to outperform in this unprecedented environment, and our portfolio of over 420 extended-stay hotels grew 6% year-over-year in the third quarter.
Our WoodSpring Suites brand achieved an average occupancy rate of 77% in the third quarter, and the brand's monthly occupancy levels have remained north of 75% since the last week of June.
Our Suburban extended-stay brand experienced year-over-year occupancy gains in the third quarter, further enhancing the brand's attractiveness to developers looking for a smart, extended-stay conversion opportunity.
At the same time, our MainStay Suites mid-scale extended-stay brand gained more than 16 percentage points in RevPAR index versus its local competitors in the third quarter.
We remain optimistic about the growth potential of our extended-stay portfolio whose pipeline increased by 9% year-over-year in the third quarter.
Year-to-date through September, Choice has awarded over 40 extended-stay franchise agreements, demonstrating sustained interest in both new construction and conversion opportunities during a challenging time for the industry.
I'd now like to turn to our mid-scale segment, whose brands represent 2/3 of our total domestic portfolio and over half of the franchise agreements executed year-to-date.
All of our select-service mid-scale brands achieved year-over-year RevPAR index and average daily rate index gains versus their local competitors through the third quarter.
The Comfort brand captured RevPAR share gains of over seven percentage points versus local competitors in the third quarter.
And Clarion Pointe, a conversion brand extension of Clarion that launched less than two years ago, recently opened its 20th hotel in the U.S. and now has over 50 hotels open or in the pipeline, demonstrating its strong growth as the brand continues its coast-to-coast expansion.
Demand for Choice's brands continues despite the challenging environment, aided by our strong value proposition and recent outperformance.
Developers choose our brands as they seek to boost the value of their hotels.
We have a conversion brand to fit most developers' price points which has driven our development growth through past downturns.
Year-to-date, through the end of September, we have awarded over 230 new domestic franchise agreements, nearly 70% of which were for conversion hotels.
In the third quarter alone, we executed over 80 domestic agreements, of which nearly 3/4 were for conversions and over 40% of which were executed in the month of September.
We have a long history of enhancing the diversity of our ownership base through our one-of-a-kind emerging markets development team, which helps underrepresented individuals such as minority and veteran entrepreneurs enter the rewarding business of hotel franchising.
Nearly 70% of our hotels have minority ownership.
Despite the pandemic, we have awarded and financially supported 17 franchise contracts with black and Hispanic entrepreneurs year-to-date.
Most recently, we entered into the largest minority-owned multiunit franchise agreement in the program's history.
Our long-standing commitment to diversity and further details regarding our efforts to improve the communities we serve will be outlined in our forthcoming ESG report.
While this year's challenges have been unique, the cyclical nature of our industry is known.
It's something our experienced and disciplined management team, many of whom have led the company through previous down cycles, planned for.
Our resilient franchisee base also has deep experience leading their small businesses through down cycles, and they are at the center of everything we do.
Over the course of the pandemic, we have supported our franchisees in a number of ways.
First, by reducing costs through extending brand program deadlines, implementing cost savings, operational initiatives, reducing certain fixed fees, implementing a tailored fee deferral program and modifying brand standards.
Second, by capturing business through our global sales efforts aimed at first responders and other essential travel; a multichannel, multi-brand marketing campaign; and tailored promotional programs.
Finally, by leveraging hygiene and infection prevention experts like Ecolab in launching our Commitment to Clean initiative, helping to make sure their hotels are clean and safe.
We also have been advocating and will continue to advocate with policymakers for additional relief measures aimed at assisting small businesses to provide targeted help for the travel industry.
Specifically, we've been urging enactment of a second draw loan program for existing Paycheck Protection Program borrowers, greater accommodation and more streamlining for borrowers to obtain forgiveness and liability protections for hotel owners who comply with health and safety protocols during the pandemic.
We've also called for additional stimulus to support American discretionary spending, including in areas such as travel.
In closing, Choice Hotels is positioned to emerge from these trying times stronger just as we have before in our 80-year history.
Our proven portfolio of well-segmented brands, geographic footprint, and asset-light business model position us well to benefit from current consumer trends as they continue to evolve.
I'll now invite our CFO to provide his update.
I hope that you and your families are well and healthy.
Today, I'd like to provide additional insights around our third quarter performance, update you on our balance sheet and liquidity, as well as our approach to capital allocation, and finally, share our thoughts on the outlook for the road ahead.
Let's now take a closer look at our results.
For the third quarter of 2020, total revenues, excluding marketing and reservation system fees, were $103.6 million.
Adjusted EBITDA totaled $74.9 million representing an adjusted EBITDA margin of over 72% and adjusted earnings per share were $0.66.
Our domestic systemwide RevPAR for the third quarter outperformed the overall industry by nearly 20 percentage points, declining only 28.8% from the same quarter of 2019.
In addition, our results exceeded the primary chain scale segments in which we compete as reported by STR by six percentage points.
We've long focused our brand strategy on driving growth across the higher value and more revenue intense upscale, extended-stay and mid-scale segments, and it's paying off.
In the third quarter, all three segments achieved year-over-year RevPAR outperformance against their respective industry chain scales and gains versus their local competitors.
Specifically, the RevPAR change of our upscale portfolio exceeded that of the overall segment by 14 percentage points, and our upscale portfolio outperformed its local competitive set by over nine percentage points.
With average domestic systemwide occupancy rates of 74%, our extended-stay portfolio outperformed the industry's RevPAR change by an impressive 40 percentage points beating its local competitive set by 14 percentage points.
And finally, RevPAR change for our mid-scale portfolio exceeded the segment by nearly eight percentage points.
This RevPAR outperformance is the result of both continued occupancy gains and our franchisees' ability to maintain rate.
Our domestic systemwide occupancy rate has seen improvements since the trough of 28% that occurred back in early April.
Since the week of June 21 through late October, our average weekly occupancy rates have consistently exceeded 50%.
In addition, we continue to see gains in our average daily rate index, which was up 1.7 percentage points against local competitors in the third quarter.
These experts have been advising our franchisees on the best use of tools to maximize their pricing strategies and provide sophisticated market intelligence and channel management.
Despite the challenging environment, we expanded our system size, growing the number of domestic hotels by 0.7% and rooms by 1.9% year-over-year.
Across our more revenue intense brands in the upscale, extended-stay and mid-scale segments, we experienced even greater growth, increasing the number of hotels by 2.1% and rooms by 3.4% year-over-year.
We're especially pleased that Comfort, our flagship brand, continue to experience positive unit and rooms growth in the third quarter following its brand transformation.
Comfort's development success, amid unprecedented circumstances, is perhaps the clearest endorsement of the brand's value proposition.
Comfort now represents nearly 1/3 of our total domestic pipeline, which will fuel revenue intense growth for years to come.
In addition, the brand's conversion pipeline increased by nearly 50% in the third quarter year-over-year.
We are particularly pleased with the company's performance-related to our effective royalty rate, which is driven by the attractive value proposition we provide to our franchisees, their continued desire to be affiliated with our strong brands and our current pipeline.
Our royalty rate remains a significant driver of our revenue growth.
The company's domestic effective royalty rate increased seven basis points year-over-year to 4.91% in the third quarter and has increased nine basis points year-to-date compared to the prior year.
We expect to observe continued growth of this lever for the remainder of the year as owners seek a shelter of a large proven franchisor that delivers strong top line results to their hotels and helps them maximize their return on investment.
I'd now like to say a few words about our balance sheet and capital allocation strategy.
Throughout the third quarter, we continue to focus on reducing discretionary costs, exercising discipline around capital allocation and effectively allocating resources to drive top line outperformance, all of which allowed us to improve our cash position and further bolster our liquidity.
In fact, we reduced our net debt by approximately $50 million during the third quarter and are proud to report cash flow from operations of $70 million for the nine months ended September 30, over $68 million of which was generated in the third quarter alone.
Our cash and liquidity profile remains exceptionally strong.
At the end of the third quarter, the company had over $790 million in cash and available borrowing capacity through our revolving credit facility.
We remain on track to achieve our previously announced SG&A cost savings of nearly 25% in 2020 and expect to maintain a run rate of SG&A cost savings of approximately 15% in 2021 and beyond.
The decisions we have made to better align our cost structure in the post-pandemic environment position us well to capitalize on opportunities as travel demand recovers, while allowing us to continue to invest for the long term.
Our capital allocation approach, defined by prudence and discipline, remains key to our success.
Choice's first priority in this area has always been to increase organic growth by strategically investing back into the business, and that won't change.
We are confident that our capacity and cash flows will allow us to not only weather the storm but also increase the organic growth of our business by strategically investing in growing our brands and system size, executing our technology road map and delivering proprietary franchisee-facing tools that help drive top line revenues.
Based on our demonstrated track record of success in organic growth, we believe these internal investments will drive attractive returns for years to come.
We will continue to evaluate other investments in capital return opportunities in the context of developing market conditions and our overall capital allocation strategy on a go-forward basis.
Before closing, I'd like to offer some thoughts on what lies ahead.
The ultimate and precise impact of the pandemic on our business for the remainder of 2020 and beyond remains largely unknown, as is the exact trajectory of our industry's recovery.
While we are not issuing formal guidance today, we currently expect that the impact of COVID-19 on the company's year-over-year RevPAR change will be less significant for the fourth quarter versus the third quarter of this year.
Our sentiment is based on the following.
First, we are observing continued resilience of leisure demand and continue to drive relative outperformance versus the industry.
Second, despite entering fall when demand is historically lower, we are pleased that our fourth quarter domestic RevPAR change has continued the pattern of sequential quarterly improvement through the week of October 24.
In fact, we expect our October 2020 RevPAR to decline by approximately 25% from the same period of 2019.
The final reason we are optimistic is the nature of the current environment.
Unlike the Great Recession, which was caused by underlying fundamental economic problems, the current economic downturn is tied to the course of the COVID-19 pandemic, which we believe could contribute to a faster recovery.
We will continue to evaluate the impact of COVID-19 across the business, and we'll provide further updates in February during our next earnings call.
In closing, we are optimistic that Choice Hotels is well positioned to succeed for the remainder of 2020 and beyond.
We continue to benefit from our resilient, primarily asset-light, franchise-focused business model, which has historically delivered stable returns throughout economic cycles and provided a degree of cushion from market risks.
While we are not immune to the pressures faced by the industry, we believe that our long-term focus and prudent, disciplined capital allocation strategy will allow us to continue to capitalize on opportunities during the recovery.
At this time, Pat and I would be happy to answer any questions.
 Assistant:

Chosen response:
choice hotels international q3 adjusted earnings per share $0.66.
q3 adjusted earnings per share $0.66.
domestic systemwide revpar decreased 28.8% for q3 2020 compared to q3 2019.
not providing formal guidance for 2020 at this time.
currently expects impact of covid-19 on its year-over-year revpar change will be less significant for q4 than q3.


Prompt:
Human: They will be joined by Scott Oaksmith, Senior Vice President, Real Estate & Finance.
We appreciate you taking the time to join us and hope you are all well.
This week we lost a leader who had a major impact on our industry and on the lives of many who call the travel industry their home.
On behalf of all of us at Choice Hotels, I'd like to express our deepest condolences to Arne Sorenson's family and to the many people across our industry who are inspired by his personal and professional leadership.
We will all miss him.
As we look back, 2020 was a year unlike any other, a year that challenged leaders and companies around the globe and Choice Hotels was no exception.
But it was the collective response, dedication and resilience of our franchise owners, their hotel staff and Choice associates that made all the difference for our Company and franchise system.
During a year of significant challenges brought upon the industry by the pandemic, Choice Hotels achieved a number of key milestones that demonstrate our long-term strategy of growing our presence in more revenue-intense segments and locations is working.
2020 was the year that our flagship Comfort brand returned to unit growth after its successful transformation, increasing its domestic system size by 2%.
As we celebrate Comfort's 40th anniversary this year, the success of the brand is proof positive that we invest for the long term.
And as you can see by both unit growth and impressive RevPAR performance, those investments are paying off and position the brand for growth into the future.
2020 was also the year our extended stay segment rapidly expanded by 44 units to nearly 450 domestic hotels and the domestic pipeline for that segment alone reached over 315 hotels.
The segment now represents nearly 8% of our total domestic portfolio and strong developer interest reaffirms that our strategic commitment and continued investments in this highly cycle-resilient segment are driving a competitive advantage.
And finally, 2020 was a year of continued growth for our upscale portfolio, highlighted by an 8% growth of Cambria Hotels.
The brand now has a pipeline of nearly 80 hotels and is expected to accelerate its unit growth in 2021.
Consumer confidence in our upscale products drove the brand's outperformance versus their local competitors and is a proof point to current and prospective owners of Choice Hotels' value proposition in the upscale segment.
The results we achieved confirm our strategic focus to grow in these segments, which will further fuel the long-term revenue intensity of our system.
I'm also pleased to report that we have continued to drive RevPAR results that significantly outperformed the industry in the fourth quarter and 2020 as a whole.
Our domestic, systemwide year-over-year RevPAR change surpassed the industry by nearly 17 percentage points for the full year, declining 30.7% from 2019.
Since the onset of the pandemic in mid-March, our performance has achieved sequential quarter-over-quarter improvement with our fourth quarter domestic systemwide RevPAR declining 25.1% from the same quarter of 2019.
Our results continued to outpace the overall industry and our chain scales segments.
In fact our outperformance expanded in the fourth quarter.
In 2020 Choice Hotels grew RevPAR faster than our local competitors, increasing RevPAR index by over 5 percentage points through notable lifts in weekday and weekend RevPAR index.
Our RevPAR index growth strengthened in the fourth quarter of 2020 and continued to improve through year-end.
Throughout 2020 we also continued to grow our effective royalty rate, a reflection of the improving value proposition we deliver to our franchise owners.
Our success is highlighted by Choice Hotels' key differentiators, including the strength of our proven and well-distributed brands, our customer profile and the continued resilience of leisure travel demand, our powerful reservations delivery system and loyalty program and our franchise-focused business model.
These four attributes, along with our relative outperformance versus the industry, reaffirmed our confidence in our strategy.
Therefore, in the fourth quarter we decided to accelerate certain strategic investments in our product portfolio and value proposition capabilities to position the Company for continued success in the future.
Consumer and developer demand for our products encouraged us to invest in new prototype development and brand initiatives in our key strategic segments.
We also advanced our pricing optimization and merchandising capabilities to further enable our owners to reach their target customers and effectively drive top line revenue to their hotels.
Turning to 2021, we expect our momentum to continue into the first quarter, allowing Choice Hotels to further outperform the industry in the current environment.
We recognize that a high degree of uncertainty remains and our Company, like the hotel industry overall, continues to be significantly affected by the pandemic.
Nevertheless, we are observing positive signs that give us confidence for 2021 and beyond.
First, given the vaccine rollout we believe consumers are beginning to feel more optimistic about future travel prospects.
In fact, we've observed that our customers are beginning to plan their travel further in advance as noted by improvements in our 31-day-plus bookings since November.
Furthermore, we expect the trend of American vacationing domestically and taking road trips will continue.
Second stimulus checks from the December federal relief package, the prospect of additional government aid this year and high household savings point to a continued recovery for our small business owners and middle class consumers, our core customers.
Finally, and as discussed on our last call, we believe that long-term consumer trends such as remote work and virtual learning will likely continue to provide Americans flexibility in where and when they travel for leisure.
We feel confident that our core strengths, combined with the tactics we deployed in response to the pandemic, have positioned us well to continue to capture and increase our share of travel demand over the long term.
Our long-term strategy of growing the right brands in the right segments in the right locations, while enhancing our distribution capabilities, continues to pay off.
In the fourth quarter, we generated significant quarter-over-quarter growth in our proprietary revenue contribution mix which drove our full-year results to match our prior year's strong performance.
More specifically, our website contribution increased by 150 basis points, ending the year with the three strongest months in 2020 while our loyalty program increased its contribution by 280 basis points quarter-over-quarter.
In addition, we continued to benefit from our most loyal customers Choice Privileges Diamond Elite members who contributed an even higher percentage of overall revenue for full year 2020 as compared to the prior year.
These results have helped drive RevPAR index share gains of over 600 basis points in the fourth quarter versus our local competitors, up significantly across all location types as reported by STR.
In the past 46 consecutive weeks through mid-February, we've observed significant RevPAR share gains against the competition, giving us further optimism about our future revenue trajectory.
I'll now provide a brief update on our key brand segments.
Our mid-scale brands represent two-thirds of our domestic portfolio, nearly half of the franchise agreements executed last year and over half of the total domestic pipeline.
All of our select service mid-scale brands achieved year-over-year RevPAR index gains driven by occupancy and average daily rate index gains versus their local competitors through the fourth quarter and full year.
We're especially pleased with the performance of our Comfort portfolio where our efforts to transform the brand have led to RevPAR index gains versus its local competitors of nearly 9 percentage points and a RevPAR change that was over 10 percentage points more favorable than the upper mid-scale chain scale in the fourth quarter.
At the same time, we continue to add new construction hotels to the Comfort pipeline and attract high quality franchise conversion agreements to the brand that will fuel revenue intense growth in the near term.
And finally, Clarion Pointe, a relatively new conversion brand extension to our Clarion portfolio, ended the year by opening the doors of its 25th hotel in the US, a fourfold increase of its portfolio since the prior year.
The brand now has over 50 domestic hotels open or in the pipeline.
Moving onto our extended stay segment where we nearly quadrupled the size of the portfolio during the last five years.
Once again, our purpose-built brands tailored for long-term guests outperformed the competition in this cycle-resilient segment.
Our WoodSpring Suites brand achieved an average occupancy rate of 72% for full year 2020 and experienced year-over-year RevPAR growth of 2% in the month of December, a truly remarkable achievement given the current environment.
The brand's pipeline continues to expand and reached 150 domestic hotels at the end of 2020.
At the same time our Suburban extended stay brand experienced year-over-year occupancy gains in the fourth quarter and an over 40% increase in franchise agreements activity for the full year.
Our MainStay Suites mid-scale extended stay brand captured more than 20 percentage points in RevPAR index gains versus its local competitors both in the fourth quarter and full year and developer interest is growing.
Most recently we signed and on-boarded the largest multi-unit transaction in MainStay's history, 15 units which significantly increased the brand's presence in the segment.
Last year alone, the brand's portfolio expanded to 90 domestic hotels open and over 20% increase year-over-year and its pipeline has swelled to more than 140 domestic properties.
For full year 2020 Choice Hotels awarded nearly 110 extended stay franchise agreements, validating our strategic focus on this segment for both new construction and conversion opportunities.
Given these results, we remain optimistic about the growth potential of our extended stay portfolio.
I'd now like to turn to our upscale portfolio whose choicehotels.com contribution increased by nearly 500 basis points year-over-year in the fourth quarter and marked the strongest quarterly revenue share in 2020.
Our upscale Cambria Hotels brand continues its ongoing momentum, growing its portfolio size by 8% and its pipeline to nearly 80 domestic hotels, 19 of which were already under construction at year-end.
Developer interest in the brand remains high with 16 franchise agreements executed for the full year, including one-third of those awarded in the fourth quarter.
The Ascend Hotel Collection continues to lead the industry as the first and largest soft brand.
With nearly 300 hotels open around the globe Ascend Hotels outperformed the upscale segment in year-over-year fourth quarter RevPAR change by over 20 percentage points.
The brand also achieved RevPAR index gains of nearly 13 percentage points against its local competitors for the full year, further enhancing the brand's attractiveness to developers looking for a smart conversion opportunity.
Choice Hotels brands remain in demand despite the challenging environment aided by our strong value proposition and continued outperformance.
Developers continue to choose our brands as they seek to improve their operations and boost the long-term value of their hotels.
For full year 2020 we awarded 427 new domestic franchise agreements of which over 70% were for conversion hotels.
Demand continued to accelerate throughout the year with over one quarter of the total agreements executed in the month of December.
In the fourth quarter alone, we executed 195 domestic agreements, of which over 70% were for conversions.
Additionally, our developers remain optimistic about the long-term fundamentals of lodging industry.
In fact, nearly 30% of total domestic franchise agreements we awarded in 2020 were for new construction contracts.
Our emerging markets development team, which is dedicated to driving diverse ownership of Choice franchised hotels among underrepresented minority owners awarded two dozen franchise contracts in 2020 including the largest minority owned multi-unit franchise agreement in the program's history.
These results and critical initiatives are major drivers for our optimism in the years ahead.
We're also committed to enhancing our value proposition by growing our platform business.
We recently announced the further expansion of our attractive upscale platform with the addition of 22 Penn National Gaming casino resort properties, representing nearly 7,000 rooms joining our Ascend Hotel Collection.
This strategic agreement will offer more than 47 million Choice Privileges members the opportunity to earn and redeem points at these Penn properties by booking their stay directly on choicehotels.com.
Our focus remains centered on franchisee profitability through reducing the cost of ownership at the hotel level and driving top line outperformance versus competitors.
Our franchisees are at the core of everything we do and we are committed to helping them along the road to economic recovery.
Throughout 2020 we conducted 49,000 individual consultations with hotel owners and operators that helped our franchisees remain open and continue serving guests.
We've also rolled out offerings like grab-and-go breakfast, housekeeping on-demand and contactless check in that further lowered franchisees' total cost of ownership, while ensuring appropriate safety precautions for our owners, hotel staff and guests.
We are particularly pleased that legislation we advocated for became law in December, providing additional relief and stimulus to small businesses like our franchisees.
Specifically, we supported the establishment of a second draw loan program for existing Paycheck Protection Program borrowers that were hit hard by the pandemic, the extension and improvement of the program itself and increased flexibility for lenders.
We will continue to advocate with the new Congress and administration for additional relief measures aimed at assisting small businesses and providing targeted help for the travel industry.
In closing, I'm confident that these trying times have made us even more resilient and agile as a company.
Looking beyond the crisis, I am convinced we will emerge even stronger over the long term.
Our long-term view, resilient business model, proven brands and strong balance sheet will help us to further capitalize on growth opportunities in 2021 and beyond.
With that, I'll hand it over to our CFO.
I hope that you and your families are all well and healthy.
Today, I'd like to provide additional color around our fourth quarter and full year results and share updates regarding our balance sheet, liquidity and approach to capital allocation.
I'll close with our thoughts on the outlook for the road ahead.
Taking a closer look at our results, for full year 2020 total revenues, excluding marketing and reservation system fees, were $371.5 million, $88 million of which was generated in the fourth quarter and adjusted EBITDA totaled $241.1 million, $54.7 million of which was generated in the fourth quarter.
And our adjusted EBITDA margin for full year 2020 was 65%.
As a result, our adjusted earnings per share were $2.22 and $0.51 for full year 2020 and the fourth quarter respectively.
Let me now dive into our three key revenue levers, beginning with RevPAR.
Our domestic systemwide RevPAR outperformed the overall industry by nearly 17 percentage points for the full year, declining 30.7% from the prior year.
Our fourth quarter 2020 domestic systemwide RevPAR surpassed the industry by nearly 26 percentage points, declining 25.1% from the same period of the prior year and improved by 370 basis points from the third quarter.
In addition, our results exceeded the primary chain scale segments in which we compete as reported by STR by over 5 percentage points for full year 2020 and nearly 8 percentage points for the fourth quarter.
We've long focused our brand strategy on driving growth across the higher value and more revenue intense upscale, extended stay and mid-scale segments and the investments we've made are paying off.
In the fourth quarter these strategic segments helped us achieve material year-over-year RevPAR outperformance against our respective industry chain scales and drove gains versus our local competitors.
Specifically, our upscale portfolio increased relative to its local competitive set by over 12 percentage points.
Our extended stay portfolio outperformed the industry's RevPAR change by an impressive 49 percentage points and grew versus its local competitive sets by 14 percentage points.
And finally the RevPAR change for our mid-scale and upper mid-scale portfolio exceeded these segments by 10 percentage points.
For full-year 2020 all of our select service brands achieved significant RevPAR index gains versus their local competitors with each of our upscale and extended stay brands experiencing share gains of more than 10 percentage points.
In fact, we were able to increase our overall RevPAR index against local competitors by over 600 basis points in the fourth quarter through notable lifts in both continued occupancy gains and our franchisees' ability to maintain rate integrity.
More specifically, our average daily rate index increased 2.4 percentage points.
We expect that our recent investments in these capabilities will further enhance revenue management for our franchisees.
Despite the unprecedented circumstances, we experienced positive unit and room growth year-over-year.
Across our more revenue intense brands in the upscale, extended stay and mid-scale segments we observed stronger unit growth, increasing the number of hotels by 1.8% year-over-year.
We expect our unit growth rate of these key segments to accelerate beyond 2020's growth rate.
We're especially pleased to report that following the completion of its brand transformation the Comfort brand family returned to growth in 2020, increasing the number of domestic units by 2% year-over-year.
The brand reached over 260 hotels in its domestic pipeline one quarter of which are hotels awaiting conversion, which we believe will fuel the brand's growth in the near term.
Demand for our conversion brands has only increased, aided by our strong value proposition and recent outperformance.
In fact, the number of our conversion agreements executed and opened in 2020 was more favorable than we previously projected when accounting for the impact of the pandemic.
And additionally we awarded a higher number of conversion agreements in the month of December than previously expected.
These trends give us further optimism for continued growth in 2021 and beyond.
Our royalty rate remains a significant source of our revenue growth, which is driven by the attractive value proposition we provide to our franchisees, their continued desire to be affiliated with our proven brands and our pipeline.
The Company's domestic effective royalty rate increased 7 basis points year-over-year to 4.98% in the fourth quarter and grew 8 basis points for full year 2020 compared to the prior year.
We expect to maintain the historical growth trajectory of this lever in 2021 as owners seek Choice Hotels proven capabilities of delivering strong top line revenues to their hotels while helping them maximize return on investment.
I'd now like to turn to our balance sheet and our capital allocation strategy.
Throughout 2020, we transformed our cost structure, exercised prudent discipline around capital allocation and effectively allocated resources to drive top line outperformance, all of which allowed us to improve our cash position and further bolster our liquidity.
We successfully navigated the impact of the pandemic without having to renegotiate debt covenants.
We refinanced a portion of debt to extend our debt maturity profile and capitalized on favorable credit markets to significantly reduce the effective cost of our borrowings.
In fact, we reduced our net debt by approximately $50 million during the fourth quarter and are pleased to report cash flow from operations of over $115 million for 2020, over $45 million of which was generated in the fourth quarter alone despite the historically lower seasonal demand environment.
Our cash and liquidity profile continued to be strong.
At the end of last year, the Company had approximately $835 million in cash and available borrowing capacity through its revolving credit facility.
Our strong results relative to the industry and the chain scales in which we compete since the onset of the pandemic as well as our adjusted SG&A cost savings of 21% realized throughout 2020 gave us confidence to make certain investments in the fourth quarter to position the Company for success in 2021 and beyond.
We will maintain our disciplined approach to managing operating expenses while investing for the long term and capitalizing on opportunities as travel demand recovers.
Our capital allocation philosophy remains unchanged, meaning we will continue to be disciplined stewards of capital and take steps that we believe maximize value for our shareholders.
Choice's primary objective has always been to increase organic growth by strategically investing back into the business.
In particular, our capacity and strong cash flows will allow us to strategically invest in capabilities to further strengthen our presence in more revenue-intense segments, enhance our franchisee value proposition and drive top line revenue through value-added programs and services we offer to our franchisees, guests and other travel partners.
We put a premium on balance sheet flexibility and we expect to continue to utilize our strong leverage position to invest in these growth opportunities.
Based on our demonstrated track record of success in our organic growth, we believe these internal investments will drive attractive returns for years to come.
We will continue to monitor the environment and evaluate capital returns to shareholders in the context of other investment opportunities, our leverage levels, market conditions and our overall capital allocation strategy.
The ultimate and precise impact of the pandemic on our business for 2021 and beyond remains largely unknown as is the exact trajectory of our industry's recovery.
While we are not issuing formal guidance today, we currently expect to see a sequential quarter-over-quarter improvement in RevPAR change in the first quarter 2021 versus both 2020 and 2019.
Our view is based on the following.
First, we are observing continued resilience of leisure demand, especially in drive-to locations and the Company continues to experience stronger year-over-year RevPAR change performance versus the industry and the chain scales in which we compete.
Second, despite entering an historically lower demand season, we are pleased that our first quarter domestic RevPAR change has continued the pattern of sequential quarterly improvement through mid-February.
In fact, our year-to-date 2021 RevPAR has declined by approximately 18% from the same period of 2020.
Finally, to date, we have seen little correlation between the rising COVID-19 cases in the fourth quarter and RevPAR change trajectory for our Company.
This along with optimism and consumer sentiment reflected by our 31-day-plus booking trends even before vaccines were widely distributed signals that consumers' desire to travel is climbing.
We will continue to evaluate the impact of COVID-19 across the business and we'll provide further updates in May during our next earnings call.
In closing, we remain optimistic that Choice Hotels is well positioned to succeed in 2021 and beyond and are confident in how we are managing the Company for the long term.
We continue to benefit from our resilient, primarily asset-light franchise-focused business model, which has historically delivered stable returns throughout economic cycles and provided a degree of cushion from market risks.
While we are not immune to the pressures faced by the industry, we believe that our long-term view, disciplined capital allocation strategy and strong balance sheet will allow us to continue to capitalize on opportunities during the recovery and drive outsized returns for years to come.
At this time, Pat and I would be happy to answer any questions.
 Assistant:

Chosen response:
q4 adjusted earnings per share $0.51.
domestic systemwide revpar decreased 25.1% for q4 2020.
not providing formal guidance for q1 or full year 2021 at this time.
choice hotels international - expects to see a sequential q-o-q improvement in revpar change for quarter ending march 31, 2021.


Prompt:
Human: Slides for today's call are posted on our website, and we invite you to follow along.
Participants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, April 29, 2020.
Information on potential factors and risks that could affect our actual results of operations is included in our SEC filings.
The company undertakes no obligation to revise or publicly release the results of any revisions to the statements made in today's call other than through filings made concerning this reporting period.
In addition, today's discussion will include references to non-GAAP measures.
Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance.
Starting on Slide 3.
Before discussing our Q1 results, I'd like to address the coronavirus pandemic and how we're responding to it.
Obviously, the outbreak has created a healthcare crisis and caused economic disruption around the globe, and I hope that all of you and your families are staying safe.
Here at Clean Harbors, the safety of our employees is part of our culture and the top priority during this pandemic.
As an essential services provider with teams on the frontlines of the COVID-19 crisis, we have instituted rigorous safety protocols and work closely with suppliers to make certain we have the necessary equipment to protect our employees.
During the crisis, our workforce has remained out in the field and at our plants, supporting our customers' needs across North America.
The workforce representing critical administrative functions has supported our field teams from home, and the strength of our systems has allowed that transition to be virtually seamless.
We expect the virus to impede our business in the second quarter, particularly within Safety-Kleen.
In addition to limited driving and business activity across North America, Safety-Kleen also had been affected by the sharp downturn and the value of base oil.
In short, we are faced with some difficult near-term market conditions, and we are making -- taking significant actions in response.
Let me touch on some of those actions.
Starting with alignment of our cost structure with the demand environment, we are rightsizing our workforce through furloughs and other reductions and implemented a nonbillable hiring and wage freeze, and we restricted all travel.
We've also gone back to many of our vendors and suppliers to negotiate for savings or improved payment terms.
In addition, we've temporarily shutted half of our rerefining capacity to reflect the current demand for base oil as well as the likelihood of less available used motor oil in Q2 and beyond.
From a liquidity perspective, we drew down $150 million on our revolver to strengthen our balance sheet in the event that crisis worsens.
We have reset our net CapEx spend plans for 2020, and we've lowered our expected spend by more than $50 million to preserve capital and support our free cash flow for the year.
That said, I believe our strong balance sheet leaves us well-positioned to succeed.
Turning to Q1 financials on Slide 4.
Revenues rose 10% from a year ago as both operating segments recorded solid growth.
At the same time, our adjusted EBITDA increased to a record $122.6 million, driven by our mix of high-value waste streams and high utilization, augmented by projects and emergency response work.
Our adjusted EBITDA margin increased 130 basis points to 14.3%.
Looking at our segment results, beginning on Slide 5.
Environmental Services revenue grew 11% based by contributions from our facilities network and Field Services group and aided by warmer weather nearly all quarter.
Adjusted EBITDA growth of 22% was driven by business mix, disposal volumes, and emergency response revenue.
Emergency response work totaled $21 million, representing COVID-19 de-con work and a cleanup of a chemical plant fire.
Our disposal facilities saw impressive volumes this quarter as incinerator utilization increased to 86% and landfill tonnage grew 39%.
Our average price per pound for incineration in Q1 was up 11%, reflecting the record level of high-margin direct burn streams that we gathered.
Overall, another terrific quarter for our Environmental Service segment.
Moving to Slide 6.
Safety-Kleen revenue was up 8%, primarily by growth in the SK Oil business.
Adjusted EBITDA and margin improved on lower SK Oil transportation costs and higher rerefining production compared with a year ago when volumes were disrupted by frozen rivers and flooding.
Within the SK branch business, core services performed well.
While parts washer services were flat with the prior year, waste ore collection was up slightly to 55 million gallons, blended products accounted for 25% of volume in the quarter, and our direct volume was 7%.
The first quarter began with positive signs that IMO 2020 was going to enable us to expand our refining spread as high sulfur fuel oil values had fallen, and base oil prices were up in early January.
But the oil shock sparked by the global outbreak of the coronavirus, IMO 2020 has largely been sidelined, and base oil has fallen by $1 a gallon.
We entered Q2 with significant pressure on our rerefining spread.
And in this environment, the value of used motor oil is in a charge-for-oil state.
In response to the current market conditions, we've significantly raised our charge-for-oil program.
Driving in the U.S. and Canada needs to normalize before our spread and lubricant demand can rebound.
And we see conditions -- when we see conditions improve, we'll consider reopening our closed rerefineries.
Turning to Slide 7.
Given the current environment, our capital allocation strategy is critical as ever.
As I mentioned earlier, we are reducing our planned net CapEx by more than $50 million.
We divested two businesses in Western Canada in the first quarter as we continued to steadily shrink our direct exposure to energy.
Since we began executing our divestiture program several years ago, we've sold seven businesses for approximately $120 million in proceeds.
In terms of M&A, we're not likely to be active near term.
Long term, we believe we'll emerge from this market downturn stronger, both financially and operationally than some of our peers, which will allow us to be opportunistic.
For our buyback program, we will likely hold off until we are certain that the domestic economy is on a clear path to recovery.
In addition, we'll look to repay the $150 million on the revolver as soon as this crisis shows signs of nearing an end.
Looking ahead to our segments, although we have seen some cancellations and project delays due to COVID-19, we expect our Environmental Service segment to weather the current downturn well.
We expect our decontamination work and growing volumes of infection waste to help offset what would certainly be a larger decline.
Within Safety-Kleen, we expect both our branch business and our SK Oil to be hit fairly hard, particularly here in Q2 as stay at home orders greatly reduce vehicle travel and generate less used motor oil.
Our SK branch business should rebound as shelter-in-place mandates are lifted and low gasoline prices encourage a rebound in driving.
In SK Oil, our rerefining spread has contracted with a drop in crude, and we have aggressively increased our charge-for-oil pricing, but volumes are off and near-term demand for base oil has fallen.
In summary, our Q1 results demonstrated the strength of our business model, the value of our assets and our frontline role in emergency response.
Our market leadership, financial liquidity and positive free cash flow will enable us to navigate this global crisis.
Let me echo Alan's comments about the outstanding work of our team and everyone on the front lines of the crisis.
Through the unprecedented events we've experienced in just a few weeks, I think we all have a deeper appreciation for the professionals, especially healthcare workers, who put themselves at risk every day to help those in need.
Turning to Slide 9 and our income statement.
As Alan indicated, we delivered record first quarter results.
Revenue grew nearly $78 million, while adjusted EBITDA grew by nearly $21 million.
This reflects the mix of business we achieved in the quarter, project work and favorable weather.
From a gross profit perspective, we saw a sharp increase in both absolute dollars and on a percentage basis due to higher utilization, pricing, and a favorable comp with prior year.
Our gross margin increased by 160 basis points from a year ago.
SG&A expenses were up $14.5 million in the quarter due to the higher revenue, investments in our employees, and some onetime expenses from last year -- onetime items from last year.
As we move forward, we are focusing much of our cost reduction efforts in this area to bring expenses in line with our revenue.
Depreciation and amortization in Q1 was down slightly to $47.5 million.
We completed two small bolt-on acquisitions in 2019, while also divesting several businesses.
For 2020, we expect depreciation and amortization in the range of $285 million to $295 million, which is a little lower than last year.
Income from operations increased 92% to $45.5 million, a first-quarter record, reflecting the combination of our revenue growth and improved gross profit.
On a GAAP basis, earnings per share was $0.21 in Q1 versus $0.02 a year ago.
Our adjusted earnings per share was $0.28.
Turning to the balance sheet on Slide 10.
As Alan mentioned, we drew $150 million on our revolver during the first quarter which increased our cash and short-term marketable securities to $494.3 million at quarter end.
We saw reasonable AR collection late in March, which led to a healthy cash balance.
Our strong liquidity position further protects our company and adds financial flexibility should we need it.
Our balance sheet remains in good shape.
Current and long-term debt obligations at quarter end rose to $1.7 billion, reflecting the drawdown on our revolver.
Our weighted average cost of debt is now 4.3% with a healthy mix of fixed and variable debt.
Leverage on a net debt basis was 2.2x for the trailing 12 months ended March 31.
Looking at our most recent cash balance from yesterday, our cash remains essentially flat from where we ended Q1.
The team has done a nice job maintaining its focus on collections and managing our spend.
Turning to cash flows on Slide 11.
Cash from operations in Q1 was up slightly at -- to $33.7 million.
CapEx, net of disposals and the purchase of our headquarters, was $59.9 million, up from a year ago, resulting in adjusted free cash flow in the quarter of a negative $26.2 million, which is consistent with prior year and our expectations.
For the year, we are now targeting CapEx, net of disposals and purchase of our headquarters in a range of $140 million to $160 million.
During the quarter, we repurchased approximately 300,000 shares of our stock at an average price of $57.41 a share for a total of $17.3 million.
As Alan mentioned, we'll be cautious in our approach to buybacks until we see evidence that markets are well into their recovery stage.
As Alan also noted, given the uncertain market environment, we would -- we are withdrawing our 2020 guidance.
We're hopeful we'll be able to reinstate guidance with our Q2 earnings announcement, provided markets have stabilized.
In summary, Q1 was a strong quarter, highlighted by several financial records, including adjusted EBITDA.
If it were not for COVID-19, our Q1 results would have positioned us for the fourth straight year of profitable growth.
We have taken significant actions in response to the pandemic and are prepared to take additional steps in the event of a prolonged recovery.
We are focused on things we can control, carefully -- including carefully managing our costs, and pursuing new waste streams to feed our landfills and incinerators.
 Assistant:

Chosen response:
compname posts q1 earnings per share of $0.21.
q1 earnings per share $0.21.
q1 adjusted earnings per share $0.28.
withdraws 2020 adjusted ebitda and adjusted free cash flow guidance.
downsizing its workforce through furloughs and other actions.
lowering its expected 2020 net capex spend by more than $50 million.
drawing down $150 million on its revolving credit facility.


Prompt:
Human: Slides for today's call are posted on our website, and we invite you to follow along.
Participants are cautioned not to place undue reliance on these statements which reflect management's opinions only as of today, May 5, 2021.
Information on potential factors and risks that could affect our actual results of operations is included in our SEC filings.
The company undertakes no obligation to revise or publicly release the results of any revision to the statements made in today's call other than through filings made concerning this reporting period.
In addition, today's discussion will include references to non-GAAP measures.
Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance.
Starting on Slide 3.
I want to start today with a focus on safety, which is a key component of our corporate strategy and culture.
There's nothing more critical to the success of our company than making sure that every night, every employee goes home to their family uninjured.
Safety is important not only for the well-being of our workforce and the costs associated with industries -- injuries and lost time, but it's a competitive differentiator and a critical selling point with our customers.
You can see on this slide the tremendous progress we have made as an organization over the past two decades, reducing our total recordable incident rate, or TRIR, by 74% since 2002.
It's a metric we take a lot of pride in.
As part of our continuous improvement approach to safety, we relaunched our highly successful Safety Starts with Me: Live It 3-6-5 program this year.
The program really personalizes safety for every employee and includes each employee's five personal reasons why they choose to be safe at work, on the road and at home.
And we believe this relaunch will allow us to sustain this successful journey on safety.
Moving to Slide 4.
After a detailed planning process, we took a new approach to our Safety-Kleen organization that we believe will be beneficial to the company and our shareholders alike.
This approach is based on two critical changes.
First, we consolidated the core Environmental Services of our Safety-Kleen branches into the legacy Environmental Services sales and service regions.
We expect this change to strengthen our allocation of resources, whether that is people, trucks or equipment.
We also expect this to reduce third-party spend, generate even greater cross-selling opportunities across all our environmental lines of business and it also enables efficiency gains in routing and network consolidation.
The second change we made was to combine all the pieces of our sustainable lubricants business.
Our newly formed Safety-Kleen Sustainability Solutions segment, or SKSS, consists of both sides of the spread we manage in our Re-refining business.
It will be focused on providing the best, most environmentally friendly and sustainable lubricant products to our customers.
The collection of services for waste oil, used oil filters, waste antifreeze and other related items will all be tightly managed under a stand-alone organization.
This should enable us to collect more used motor oil and supply our rerefineries with the best available feedstock.
Overall, we believe this new structure better aligns the legacy Safety-Kleen operations within our company and will enable us to maximize the value of those assets.
Turning to Q1 performance.
We kicked off 2021 with a strong start as our results exceeded our expectations.
Our Environmental Services segment, after a difficult February due to the deep freeze in the South, rebounded with an outstanding March, driven by greater volumes of high-value waste streams and the ongoing recovery in many of our service businesses.
Our newly formed SKSS segment delivered better-than-expected profitability due to ongoing base oil pricing gains driven by market conditions.
Adjusted EBITDA in Q1 was $129.5 million, which included $5.4 million in benefits from government assistance programs.
Our margin grew by an impressive 130 basis points to 16%, reflecting the benefits of our cost controls, along with productivity and pricing initiatives.
We also generated strong adjusted free cash flow of more than $62 million.
Turning to our segment results, beginning with Environmental Services on Slide 5.
Revenue was down year-over-year due to the lingering effects of the pandemic both on project work and certain service offerings as well as the effect of the February storm, but we closed Q1 with revenues on an upward trajectory.
Adjusted EBITDA was down 4% from a year ago, mostly due to the lower revenue.
Even so, our margins were up 70 basis points and this was driven by a combination of pricing, cost savings, revenue mix and $4.5 million in government assistance.
Revenue from our COVID-19 decon work totaled $28 million in Q1, which was higher than we anticipated.
We've now completed well over 17,000 total COVID responses since the program began a little over a year ago.
In Q1, our incineration utilization dipped to 80%, entirely due to the lost days in February at both our Deer Park and El Dorado incinerator as a result of the storm.
At the same time, we continue to gather a lot of high-value waste streams and record number of drums, which pushed our average price up 8% from a year ago.
The adverse weather and strong volumes drove our deferred revenue to the highest level in our history at $83.2 million, providing us with a terrific backlog heading into Q2.
Landfill volumes were down 29% due to less projects, while average pricing rose 24%, which helped to offset a portion of that volume decline.
The pace of parts washer services picked up nicely in the quarter, growing 6% from Q4 to 235,000 services.
In Q1, we saw most of the Safety-Kleen Environmental branch core offerings in the U.S. trending up from a year-end as people began driving more with the rollout of vaccines and SK's nonautomotive service customers also beginning to rebound.
Moving to Slide 6.
Revenue for Safety-Kleen Sustainability Solutions was essentially flat with the prior year as higher base oil pricing and charge for oil rates were offset by slightly lower volumes, particularly on the waste oil collection side.
On a sequential basis, SKSS revenue increased 19% from Q4, fueled by stronger demand and higher pricing.
Adjusted EBITDA in this segment climbed 31% to go along with a 480 basis point margin improvement, which reflects the widening of our rerefining spread.
The SKSS margin was driven higher by the productivity and cost initiatives we implemented as part of our organizational changes over the past year.
Government programs accounted for $800,000 of contribution in Q1 in this segment.
Waste oil collections were modest at 47 million gallons.
Our percentages of blended products and direct volumes came in as expected in Q1 and consistent with the prior year.
Given the market environment, we prioritized opportunities to move larger volumes of base oil at higher than normal margins.
Turning to Slide 7.
Given our cash balance, low leverage and 2021 cash flow, we remain in excellent position from a capital allocation standpoint.
We expect to focus on internal growth capital on our plants and other assets that will generate the best returns.
Our M&A pipeline is robust.
And as the U.S. emerges from the pandemic, we see more acquisition candidates are coming to market.
We intend to be active on this front.
We also will continue to -- with our share repurchases program as we believe our stock represents a great value at the current levels.
Our focus in recent years has been on increasing our return on invested capital.
Our adjusted ROIC has more than doubled since 2016.
Every year since then, we've grown our annual EBITDA, while also acquiring companies that support our core businesses and pruning our portfolio by divesting some energy-related assets.
Our adjusted ROIC today exceeds our cost of capital.
In summary, we are excited about our prospects for this year.
We see a promising environment as North America reopens from the pandemic.
We believe both our segments have favorable outlooks for the remainder of the year.
Within Environmental Services, we began Q2 with a substantial backlog of waste at our plants and significant waste stream opportunities for us to pursue.
We would expect our incinerators, landfills, TSDFs and other permitted disposal and recycling facilities to deliver strong performance in 2021.
In the quarters ahead, we also expect many of our service offerings, including industrial, technical and field services, along with the SK Environmental branches to grow from last year.
Given our Q1 results, we now expect $30 million to $40 million in COVID-related revenues for the full year 2021.
Within SKSS, we intend to capitalize on the positive market conditions, particularly as demand in the base oil market returns to more normalized levels.
We expect our rerefining production levels to remain strong over the next several quarters, and we will continue to actively manage our spread.
We intend to grow our used motor oil gallons collected in the months ahead, in conjunction with the ongoing vaccine rollout and the pent-up travel demand.
Overall, we expect a year of profitable growth in 2021, generating healthy free cash flow to support our capital allocation strategy.
Turning to our income statement on Slide 9.
As Alan detailed, we began 2021 with the same upward trajectory we saw in the back half of 2020.
In fact, we concluded the quarter with the best March performance in our history in terms of both revenue and adjusted EBITDA.
Our Q1 adjusted EBITDA results exceeded the guidance we provided on our last call.
As expected, revenue declined 6% year-over-year, but was up sharply in March versus the same month last year.
Adjusted EBITDA grew 3% to $129.5 million.
We recorded our 13th consecutive quarter of year-over-year margin improvement.
Our cost reduction programs, productivity initiatives and mix of revenue, combined with $5.4 million of government program assistance, resulted in 130 basis points improvement in gross margin.
If you back out the government monies, our EBITDA margin improved a healthy 60 basis points.
SG&A costs declined year-over-year in the quarter, reflecting our lower revenue and were flat on a margin basis due to our effective cost control measures.
For the first -- for the full year, using the midpoint of our guidance range, we would expect SG&A to be up in absolute dollars from the prior year and essentially flat on a percentage basis.
Depreciation and amortization in Q1 declined to $72.2 million, in line with our expectations.
For 2021, we continue to anticipate depreciation and amortization in the range of $280 million to $290 million.
Income from operations increased by 12%, reflecting our cost controls and revenue mix in the quarter.
Turning to Slide 10.
Our balance sheet remains in excellent shape.
Cash and short-term marketable securities at March 31 were $570.7 million, flat with year-end and up more than $76 million from the same quarter a year ago.
Our debt was $1.56 billion at quarter end, with leverage on a net debt basis at 1.8 times.
Our weighted average cost of debt is 4.2% with no debt maturities until 2024.
Our strong balance sheet puts us in an enviable position to execute on our growth strategy.
Turning to cash flows on Slide 11.
Cash from operations in Q1 was extremely strong at $103 million.
One of the drivers behind this performance was improved working capital management from stronger accounts receivable collections and lower AP expenditures driven by cost initiatives.
capex, net of disposals, was down year-over-year at $40.7 million, which was slightly below our expectation, mainly due to timing of some projects.
The result of these two items, along with some other smaller factors, was a record Q1 adjusted free cash flow of $62.3 million.
For 2021, we continue to expect net capex in the range of $185 million to $205 million, which is higher than 2020.
During the quarter, we bought back 300,000 shares at a total cost of $26.5 million.
Of our $600 million authorization, we now just -- we now have just over $180 million remaining.
We remain committed to our repurchase program.
Moving to Slide 12.
Based on our strong Q1 results and current market conditions, we are raising our 2021 guidance.
We now expect adjusted EBITDA in the range of $560 million to $600 million with a midpoint of $580 million.
Looking at guidance from a quarterly perspective, we expect Q2 adjusted EBITDA to be 15% to 20% above prior year levels based on the positive momentum we are experiencing in our business and the pandemic-related slowdown in Q2 a year ago.
At the midpoint of that range, our adjusted EBITDA would be 6% higher than Q2 of 2019.
Here is how our full year 2021 adjusted EBITDA guidance translates to our new segments.
In Environmental Services, we expect adjusted EBITDA to decline in the mid-single digits on a percentage basis from 2020.
We expect to benefit from the growth and profitability within incineration, a rebound in the SK branches and other service businesses and our comprehensive cost measures.
However, these benefits will not offset the decline in high-margin decontamination work, and more significantly, the large contribution from government assistance programs in 2020 that totaled $35.6 million in this segment.
For Safety-Kleen Sustainability Solutions, we anticipate adjusted EBITDA to increase in the range of 50% to 60% from 2020.
We expect our refinery -- our Re-refinery business to have an outstanding year as the spread we manage in that business is extremely wide due to supply driven price increases in base oil and blended products.
As miles driven and lube demand rises in the second half of this year, we expect that spread to begin to normalize.
At the same time, however, our ability to collect more waste oil and cross-sell our other products to those same customers should increase.
These improvements in the SKSS segment in 2021 will more than offset the $3.7 million in government assistance that SKSS received in 2020.
In our Corporate segment, we now expect negative adjusted EBITDA to be up low to mid-single digits from 2020 due to higher incentive comp.
For 2021, our adjusted EBITDA guidance now assumes receiving a total of $7 million to $9 million of government program assistance, primarily from Canada.
Based on our current EBITDA guidance and working capital assumptions, we now expect 2021 adjusted free cash flow in the range of $230 million to $270 million or a midpoint of $250 million.
Turning to Slide 13.
As we emerge from the pandemic and start a new year in 2021, we thought it would be a good time to formalize some longer-term targets for the company.
We review long-term strategic plans and 5-year outlooks with the Board on an annual basis.
We'd like to share some of those longer-term objectives with you today based on our current view of opportunities within our markets.
First, we expect our organic growth each year to be one to two percentage points better than the U.S. GDP.
Second, we expect to improve our adjusted EBITDA margins between 30 to 50 basis points annually, excluding extraordinary items such as government assistance programs.
Third, we are targeting more than $300 million of adjusted free cash flow by 2025.
This 5-year outlook excludes any future acquisitions or divestitures and is based on current market conditions.
In closing, we're off to a great start to the year.
We see a clear path to continued positive momentum through the remainder of 2021 and also see macro trends that should support further profitable growth in the years ahead.
We're excited about the bright future of Clean Harbors, both near and long term.
 Assistant:

Chosen response:
q1 revenue fell 6 percent to $808.1 million.
sees adjusted ebitda in range of $560 million to $600 million for fy 2021.
sees adjusted free cash flow in range of $230 million to $270 million for fy 2021.
for q2 of 2021, expects adjusted ebitda to increase 15 to 20% from prior-year period.