Steve Joyce - President, Chief Executive Officer & Director Dave White - Chief Financial Officer, Treasurer & Senior VP

Thomas Allen - Morgan Stanley Felicia Hendrix - Barclays Steven Kent - Goldman Sachs Shaun Kelley - Bank of America Robin Farley - UBS

Good day ladies and gentlemen, and welcome to the Choice Hotels Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this call is being recorded. I'll now like to introduce your host for today's conference CEO, Steve Joyce. Sir, please go ahead.

Thanks very much. Good morning. Welcome to the Choice Hotels earnings conference call. Joining me as always is Dave White, our Chief Financial Officer. This morning we're going to update you on the performance of the second quarter for 2015, which includes the results of our core hotel franchising business and our key strategic growth initiatives. It's clear that we are very pleased to say that the results from this quarter have exceeded our expectations, there are several factors that contributed to the continued growth of our lodging business this quarter. Domestic system wide RevPAR increased nearly 7% in the second quarter of 2015. Occupancy in average daily rates increased 170 basis points and 3.8% respectively. Once again our RevPAR performance outpaced our competition based on the results reported by Smith Travel Research. For the second quarter our RevPAR growth rate was approximately 20 basis points better than the overall industry RevPAR growth rate and RevPAR growth rate has a chain scale where our brands compete. And as expected, seven of our 10 brands reported grew share which is directly related to our distribution marketing selling and revenue management efforts. Turning to development, we executed a 139 new domestic hotel franchise agreements for the second quarter of 2015 which is an 11% increase compared to the prior year second quarter. We believe these results reflect the refresh of our comfort brand and our momentum in the upscale segment and strong conversion activity continue. The company's domestic pipeline of hotels under construction or approved for development increased 30% and the total pipeline increased 22% this quarter compared to the prior year second quarter. On comfort our brand continues to help fuel development. Improvements we implemented for the comfort and in comfort Suites brand have help generate 30 new franchise agreements for the quarter a 67% increase. We are pleased to continue to see new construction agreements drive most of this growth with significant interest on the development community can be attributed impart to the approximately 300 comfort properties that have been extensively updated as part of the landmark property improvement plan to provide incentives for franchises to update their hotels. The properties that have been updated as part of the property improvement plan are seeing average monthly RevPAR grains which are approximately 400 basis points higher than those strong RevPAR results I discussed previously. Within early adopter hotels experienced an average lift of more than 1,000 basis points. We've also implemented higher standard for hotels during the comfort brand required meaningful property improvement plans that contract windows and targeting substandard or non-compliant comforts or termination with a goal of placement with new product. In short we are well ahead of expected results for the reinvention of the comfort family. Let's turn to upscale, we are continuing to enjoy a wave of new openings and signings for our Cambria hotels and Suites brand and our Ascend Hotel Collections. Our upscale brands increased the combined 8% based on the number of hotels opened in online compared to June 30 of last year. We celebrated any of the grand opening of the new Cambria Hotels & Suites in Chelsea in New York City just a few weeks ago. This is our first Cambria open at Manhattan and we are schedule to open another Cambria in the Times Square area before the end of the year. We have signed seven new Cambria franchise agreements since the beginning of the year. This quarter we signed deals to build Cambria's in major markets including Orlando, Philadelphia, Colombia, South Carolina and another hotel just outside of Phoenix. The Ascend Hotel caution also continues to be a strong growth segment, as we add exceptional upscale properties in great markets. Since year end 2012 the Ascend Hotel collection has grown net units at an annualized growth rate of 30%, which compares favorably to the annual growth rate of all the competitors soft brands put together. Our Ascend brand signed new franchise agreements in the quarter including a property called the Peri Hotel in Downtown Salt Lake city that we're particularly excited about. The second half of the year looks even stronger percent as we have hotels scheduled to open in such places as New Orland, Philadelphia, and Minneapolis. The number of upscale Cambria hotels & suites and Ascend Hotel collection properties in our pipeline are executed but not yet open franchise contracts increased approximately 62% compared to year ago levels. We're excited about the momentum we're seeing with our upscale segment brands obviously. Turning to distribution, the revenue generated by our Central Reservation System continues to grow and we are breaking records on a regular basis. The revenue contribution of our Central Reservation System increased to 44.1% in the second quarter up 430 basis points compared to the same time last year and up 720 basis points compared to the second quarter of 2013. We had our first ever $16 million CRS revenue day in May and then saw five more before the end of the quarter. We then achieved our highest ever CRS revenue day to that date on June 22nd at over $17.5 million. Choicehotels.com revenue is up 9.2 in Q2 and accounts for nearly a half of Choice's domestic CRS revenue. Our direct online channels choicehotels.com and mobile had their first $7 million booking day for the year in May and a total of five such days in Q2, 2015 compared to none in 2014, Q2. Bookings via our mobile applications continue to grow at a fast pace and have yielded an increase of 59% in revenue for the quarter compared to the same time last year. Our distribution strategy is delivering great results. We are staying ahead of guest booking needs and we are leveraging our distribution channels to deliver an increasing number of customers to our franchisees hotels. Change in gears I'm going to give a brief update on SkyTouch Technology. The separate division that focuses on developing, marketing and selling cutting edge cloud base technology products to the hotel industry. SkyTouch bodes a large widely distributed cloud based property management system. SkyTouch has now signed agreements with a 181 customers since we established it as a distinct business division and 67 new customers have been signed year-to-date in 2015 representing a total of over 11,000 rooms since the launch. SkyTouch remains on target to achieve the previously provided EBITDA guidance. The business continues to make significant progress and we are excited about its current successes and the potential impact on our future growth. Now, let me turn it over to Dave White, who is going to share with you these results On a little more detail.

Thanks, Steve. As you read in this morning's press release we reported diluted earnings per share of $0.62 which exceeded our previously published outlook for the quarter by $0.4 per share. Our earnings per share our performance for the quarter was attributable to a combination of better than expected performance from our franchising business a $0.1 per share gain on the sale of our interest in an unconsolidated joint venture and lower than anticipated spending in our SkyTouch division. Our second quarter franchise results exceeded our expectations and reflect continued strong domestic RevPAR gains in franchise development results. As Steve mentioned, we achieved a nearly 7% increase in domestic RevPAR, which outpaced the overall industry RevPAR growth rate of 6.5% as reported by Smith Travel Research. The second quarter results represent the third consecutive quarter our RevPAR growth rate has outpaced the industry wide RevPAR results for both the industry and to the primary chains scale assignments in which we compete. And we are pleased with the continued strength of the RevPAR environment and we expect the RevPAR percentage growth rate to continue to increase in the mid single-digit range for the second half of this year. Our projected RevPAR increases for the remainder of the year are even more impressive considering the tough comparison to the third and fourth quarters of last year. As you may recall our RevPAR increased nearly 9% in third quarter of last year and 11% in the fourth quarter. On the supply front, we were able to grow the number of hotels operating in our domestic franchise system by approximately three tenths of 1% compared to June 30, 2014. As we have previously mentioned our domestic supply growth numbers continued to be impacted by our rejuvenations strategy for the Comfort Brand Family. Excluding the impact of this strategy our domestic system increased by nearly a 100 units or approximately 3%. Our efforts to rejuvenate the Comfort brand includes the implementation of higher standards for hotels joining the comfort brand requiring meaningful property from the plan that contract windows and targeting underperformance comforts for termination and replacement of a new construction product. These efforts are helping to fuel growth of our development pipeline for the comfort brand family which increased 33% from June 30, 2014 primarily driven by new construction projects. In addition we have had success in repositioning many of our hotels previously flagged under the comfort brand to other brands within our portfolio including quality and which is increasingly 5% compared to June 30 of 2014. As we mentioned in the first quarter, we are starting to see a reduction in the level of financial incentives required to execute conversion franchise agreements. And this trend continued in the second quarter. Primarily as a result of the opening of these hotels our system-wide effective royalty rate are 4.28% for the second quarter was comparable to the same period of last year and we expect our year-over-year effective royalty rate to increase over the remainder of this year compared to the same periods of last year. Overall these factors result in the domestic royalty revenues increasing by approximately 6% to $75.8 million. The growth in our domestic royalty to the quarter was generally in line with our prior expectations. However our non-domestic royalties declined approximately 17% from 6.5 million to 5.4 million as the benefit of the international system room growth year-over-year was offset primarily on account of the foreign currency impact over stronger U.S. dollar. With respect to franchise development the fundamentals that drive new hotel development and conversion opportunities continued to improve. As a result our initial and relicensing fees increased 23% in the second quarter of 2015. We are particularly pleased with our programs to rejuvenate the comfort brand and incent the development to the Cambria brand are driving development results. Our applications in-house for the Comfort and Cambria brands at the end of June increased 54% and 80% respectively compared to the prior year for these brands. In addition to exceeding our expectations at the franchising revenue line, our franchising SG&A expenses for the quarter were less than we had anticipated as a result of delay and timing of certain expenses that we now expect will occur later this year. Franchising EBITDA for the second quarter increased by 5% over the same period of prior year to $69.8 million. Now let me turn to our outlook for the remainder of this year. As always our outlook assumes no additional share repurchases under the company's share repurchase program. Our outlook also assumes the effective tax rate for continuing operations to be 32% for both the third quarter and for full year 2015. Our franchising activity guidance assumes that our RevPAR will increase approximately 6.5% in the third quarter and range between 6.5% and 7.5% for full year 2015. Our net domestic unit growth assumption is -- net domestic units will increase by approximately 1% and our effective royalty rate will increase by 2 basis points for the full year. Based on these assumptions our guidance for full year 2015 EBITDA from franchising activities is to range between $254 million and $257 million. With regards to SkyTouch, we are projecting reductions in EBITDA for full-year 2015 to range between $15 million and $20 million compared to approximately $16 million in 2014. We expect our third quarter diluted earnings per share to be $0.72, and we are increasing our full-year 2015 diluted EPS to range between $2.18 and $2.22. Our consolidated EBITDA for full-year 2015 is expected to range between $237 million and $241 million. These EPS and consolidated EBITDA estimates assume that we incur net reductions in EBITDA related to SkyTouch at the midpoint of the range for that investment. We are very pleased with our second quarter performance and believe we are well positioned to continue our strong momentum for the remainder of the year. And now, let me turn the call back over to Steve.

Thanks, Dave. So to sum it up we had a very strong quarter. Domestic system RevPAR increased at continue average rate, daily rates increased. RevPAR performance outpaced our competition and development is up. So we believe that the lodging cycle continues to have positive momentum and Choice is well positioned to continue to build on our strong momentum in the back half of the year and for the next several years to come. So with that I'll open it up to any questions.

As a reminder today's call is being recorded. During the course of this conference call, certain predicted or forward-looking statements will be used to assist you in understanding the company and its results, which constitute forward-looking statements under the Safe Harbor provision of the Securities Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as Choice or its management's beliefs, expects, anticipates, foresees, forecasts, estimates, or other words or phrases of similar import. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Please consult the company's Form 10-K for the year ended December 31, 2014 and other SEC filings for information about important risk factors affecting the company that you should consider. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We caution you, do not place undue reliance on forward-looking statements, which reflect obligation to publicly update our forward-looking statements to reflect subsequent events or circumstances. You can find a reconciliation of our non-GAAP financial measures referred to in our remarks as part of our first quarter 2015 earnings press release, which is posted on our Web site at choicehotels.com under the Investor Information section. [Operator Instructions]. Our first question comes from the line of Thomas Allen with Morgan Stanley. Your line is open. Please go ahead.

Two questions on the RevPAR, to resonate on RevPAR the first just. Can you help us -- could you extrapolate how weather impacted your 2Q RevPAR growth obviously there was a lot of rain in places like Texas and I think you have some exposure there. So, I just wanted to understand that. And second part of the question is just on your 2015 RevPAR guidance you took down the high end of the range, but it seems like I mean seems like your trends are pretty good. So, want to understand kind of what why you did that?

Yes. So, let's start with the second part and so look we're viewing the RevPAR environment is obviously still very strong and we look and kind of went back and forth about the guidance. Our sense was because third quarter and fourth quarter of last year were so strong and we're seeing really steady results but were still not seeing sort of the GDP lift is better than obviously than first quarter but we're still not convinced that we're going to see as robust GDP as what we're hearing. And so our view was we're pretty comfortable saying our results being in the seven is a pretty good place to be and so that's why we brought in and our sense was things would have to get better for us to hit that eight and our view was that was probably less likely, so we brought it down to 50 bps, but we -- and our core position we really haven’t changed much and then on the weather piece we haven’t really seen that as a significant impact. Dave?

Yes. So, on the weather side of things, what I would say when we you look at Choice's RevPAR performance for the quarter and compare that by region against the industry generally directionally they stack up fairly comparably, so I just kind of specifically if you look at kind of the west south central region the industry performance was down pretty intense to 1% that includes kind of Texas, Oklahoma, Arkansas, Louisiana and our RevPAR performance in that market was very comparable. So I think what you're seeing in the industry in terms of the weather impact across the different regions is fairly comparable to what's having for us.

Thank you. Our next question comes from the line of Felicia Hendrix with Barclays. Your line is open. Please go ahead.

Steve if I could just touch upon something that you just said in answer to Thomas's question when you are talking about your guidance and you said to hit the eight you would think that things would have to get better so you brought it down. Can you just elaborate on that a little bit. Do you mean better in terms of seeing GDP or are you taking some…

And employment. So, what we're seeing is very steady and very positive, right, so we're thinking in sevens fields about right and then our sense was to hit eight if we look at it sort of because we got pretty good window in the third quarter obviously and so when we look at fourth which is up 11 last year could we hit that eight sure but things would have to you would have to see an improvement in the economy and improvement in jobs from where we are today to probably hit that eight.

Yes. And then you got a factor, right, the fact that we're now halfway through the year right. So as Steve said we've had a really good -- we felt really good about RevPAR performance and then the growth we're seeing particularly as a competitive set which I think is important but now halfway through the year obviously we're at right around 8% just a little bit of our 8% for the year-to-date period and then with Q3 kind of again some tougher comp were there were like 6.5% is kind of the round there it will be to get to eight what is implied for fourth quarter just a pretty big number relative to pretty tough comp last year. So, I just probably to kind of just trim the top end of the range a bit there.

And then just thinking about your unit growth if you look at the numbers it seems like the rooms are declining as the hotels that are leaving the systems seem larger than the ones entering this system. So just wonder if you could touch up on how you see the room growth trending over the next few years?

Yes. I would say if you look back over the last several years our room growth has tended to be slightly below our unit growth in terms of the rate and my sense would be as we think about that over the next several years that you'll probably continue to see that trend a bit but having said that I think what will be important right is that if you look at where we are adding new construction units in particular on the more of our premium brands with Cambria and with Comfort than some of the other new construction brands, I think that we're pretty excited about what that pertains for the possibilities on the RevPAR side and the third unit economics despite here generally a lower room growth. And then I look to the Ascend [3%] right because a lot of times with Ascend those tend to be a more boutique historic hotels that don’t have the same room counts that are more traditional 100 rooms pro-type does. So, but over the next several years I expect that as we've seen in the past several years room growth has trailed unit growth that you try to continue to see a better that going forward.

Just one quick housekeeping, how far through the Comfort reintegration are you? How much more the profitability have to go?

Well. I think we've got roughly about another 150 hotels that we're seeing at this point could exit the system although quite frankly the incentive that people are feeling to do extra ordinary things to retain their flag is surprising us a little bit in terms of the cure rate, so, but what we are planning for is another 150 that at the end it will put us at about 600 hotels that transitioned either into one of our other brands or out of the family entirely. And so -- pretty significant effort obviously, but the exciting thing that we're seeing is and as we mentioned is people are believers and they are signing contracts like crazy and the RevPAR performance of that brand particularly the ones that have done the work is really strong. So, people feel good about the return obviously the -- the incentive feel real good about it but now we've got everybody else talking about doing it. There is a lot of enthusiasm for the redesign of it through the impact that has on our performance and people just like sleep are seeing real ROI for that investment which is exactly what you hope for and so the whole thing just seems be working. And then we are not gaining share of that brand for very long time. We were actually expecting this to a much longer kind of turnaround story we wanted to build within two to three years but basically we started gaining share last December which was probably 18 months ahead of where we anticipated to do it and so we’re pretty excited about the RevPAR performance for those properties. The franchisees see what those folks who have done it are getting, and so there is a bunch of folks jumping on the bands wagon and at some point, like we have done with sleep, we're going to say, okay that’s the standard but everybody is going to live by and so want to be there. But we are -- the really encouraging thing is that people are willing to do big things to make to attain their flag even the little surprising December was.

Thank you. Our next question comes from the line of Steven Kent with Goldman Sachs. Your line is open.

Could you just talk a little bit about the environment for financing and whether that’s changed because as your pipeline is built-up I'm just wondering if it's impart to do a better financing environment? And then in the past you talked about some opportunities in Europe. Can you give us some sense for what you're seeing there? I saw some of the numbers but I just wanted to understand signing trend, appetite to commit capital to accelerate the growth maybe in that market?

Well, I'll do the European side first, the interest we've put some resources over there. We are in several portfolio discussions which include kind of incentive moneys but not dramatically different and what we've typically done domestically and we're seeing a positive response straight to that impart because of willingness to put some capital into the deals. But also impart because the performance of our hotels and our value preposition has improved significantly as we convert those hotels to our technology platform to the SkyTouch platform. So they become much more revenue intensive from a Choice contribution and so as well it's not, still domestic levels it has increased significantly and I think that got people's attention. So, while we still tend to do reasonably well growing sort of organically hotel-by-hotel, what's encouraging is the market's reaction to portfolio discussions and we're in several 10 plus portfolio type transaction discussions that could kind of go our way and we're expecting that to continue to build. And as, we've said for years -- we view Europe as sort of our next really big growth opportunity and I think as our story continues to improve we'll become more attractive option with obviously the low cost option because there is no systems involved in changing over to our brand and it's mostly a conversion opportunity and we're sort of the better; we're one of the premier convertors out there because we're very comfortable about how we go about it and how it works, and -- so we continue to see that as a significant opportunity. We don’t think it's going to add significantly to the numbers for sort of -- I think we're viewing as -- we think we're going start seeing number in that three to five year range versus next year but we're seeing encouraging signs and we're going to continue to be strategic about the capital we put there to try a win more portfolio deals in addition to the organic growth. And you'll take the first?

Yes, sure. I'll take the financing. I think the general answer is that we're continuing to see gradual improvements in the lending environment. I think if you look at our development results you can really kind of see how that impact as we're able to grow. In the first half of the year our new construction executed contracts by about 10%. Actually it does -- you obviously support the fact of the credit environment for hotels of that kind of capital size are financeable. And you think about the franchisees, they're writing to us a descent size check for an initial fee when you sing on these contracts and so I think the fact that they are committing to more deals is certainly supportive to the fact of the credit environment is improving for them and their ability to finance the cost to small business administration across the local lending networks across the various financing company. I guess I would say in terms of the terms that we're seeing out there. Those are probably not dramatically moved over the past couple of quarters in terms of the amount of leverage you can put on our hotel and the other kind of key terms around guarantees and re-coursing what not. So if you think that in the kind of that I guess on '06 or '07 timeframe when the hotel lending market was I guess some would call it [froppy] I don't think we're seeing anything really even close to approaching the froppyness of those six and those seven times of the credit markets for hotels but it's certainly an improving environment, I think that's reflected in our new construction results.

So I think where we see is obviously a better CMBS market because it's sort of almost on the way so that's come back in a significant fashion and then for us you remember a lot of our folks are going to local banks for their lending and those banks are beginning to lend again which is in part with also feeding this. Whereas today's point the leverage levels though haven’t moved a lot we're still seeing our guys are pretty conservative anyway they are not. We have some developers that pushes little bit more but our, we think our average leverage levels is almost from like 50% but the lending terms we're seeing out there in general are sort of in that 65% to 70% range which is up I don’t know we mean it was if we went back two or three years it was probably more like 55 to 65. So it's up it's better but the thing that's encouraging for us and the reason we're so bullish about the next several years is as if you look at the construction levels you are not seeing big numbers even now which you have to look at in terms of performance obviously industry sort of, that's a fairly high level actually historically high levels in terms of overall performance. And so -- but at the same time they are still not -- you are seeing relatively low supply growth particularly in our segments which is why we're so encouraged for the next several years because our borrowing something unforeseen, we've done all this without any real help from the economy and without any real job growth and so now if we actually get some real GDP growth and get some job growth we just think this one is going to continue and it's easy to see this pushing itself into '18 without I think being to overly optimistic about where we are and how things might run. So our view is we are going to just we are obviously going to watch it very closely but our view is now is a good time to continue to be aggressive about expanding our portfolio, our businesses and also be aggressive about the reimaging of our brands and making sure we've got the right product and that we're narrowing consistency around the brands because we think we've got another couple years to run.

Thank you. [Operator Instructions]. Our next question comes from the line of Shaun Kelley with Bank of America. Your line is open. Please go ahead.

I just wanted to ask about two things. First off was kind of where we sit with the ramp up of SkyTouch, so I think you mentioned you are up to 11,000 rooms that are using the system but can you give us a reminder of what kind of breakeven potentially you need to what kind of room can't it be to reach to kind of hit a breakeven type level for the system.

Yes. So, I guess that we're -- we are pretty pleased with where that's going we were in as we've mentioned several big conversations, so we are still on the same track that we were on and discussed before. We're still saying about 2,500 hotels gets us into that sort of positive breakeven level and then it becomes relatively profitable after that. Our expectations is that still happens within sort of the next, I think we had said the '17 was the year and so that's still our expectation and based on where we are in the conversations we're having we still think that's well within our reach. Then obviously we're continuing to evaluate all our options around that to make sure that we're optimizing it for our shareholders and the nice thing is there is a lot of interest. So, we're pretty encouraged about the run rate the operations, the interest in it the conversations that are going on what we need to do the breakeven and so from our stand point we're staying on track and we got a lot of work to do between now and '17 but we think it's well within our reach.

And rough cut the number of hotels right now is roughly a 100 or so give or take based on the 11,000 account measures dividing it up by 100 but is that right?

It's probably little bit smaller than that, but…

We've executed 181 I think more approximately two-thirds so those are already on line, so they come on pretty quickly once we execute them.

And then we're into some included in that our systems that are growing and that are bigger than our capture rate on them is moving up so when we say that number that actually the pipeline is actually pretty encouraging and so the pipeline of signed deals is encouraging of the number of hotels I could represent but more importantly the pipeline in the discussion clearly gets us into the ranges that we are talking about if we execute.

And then my second question is just sort of on the balance sheet and where we sit there I think you guys did buyback a little bit of stock last quarter didn’t look like you've actually repurchased anything this quarter and I'm kind of curious as leverage continues to come down how you are thinking about kind of total leverage and what's the right level for choice?

Yes. Really no change in how we view what our leverage targets are, which we've stated previously to be in the range of three to four times because that EBITDA and I think we finished the quarter based upon the current year EBITDA, net point estimates just about 3 in the third or 3 in the quarter. So, we’re kind of right in the middle part of that range and I think going forward, the company's philosophy around capital allocation and use of capital is really, you know how do we allocate our capital which we do think is significant and the best and highest use and Europe, as we talked about includes some degree of investment in growing our brands particularly at upscale space with Cambria to a lesser degree with them, but I'd say that’s comfort refresh. And ultimately we expect some of that capital as we talked about it before in that way. But over the next over time as we've done in the past we've been -- we think pretty good [stewards] of capital in terms of turning excess capital shareholders through either the dividends or actually we've done a recap back in '12 and we've done share repurchases, and kind of the other market over time and apprehensive fashion you think should expect that to continue that’s kind of a number one priority to return excess capital over time to shareholders.

And I think the way you should think about it is, you will not -- we have convinced ourselves that we should be in that three to four range and not because of lack of opportunity let it drop much below that and we're confident about it what's the best way to utilize this and as David said, we used some to grow the business but the great thing about our model it doesn’t take a lot even -- where the bulk of investors were in Cambria which we're very excited about. I mean the Time Square Property for example, which we invested in, we think more probably, unfortunately be out of that relatively near after opening because the property is going to be so valuable but it will generate close to million dollars in fee for us. So we think that’s a good use for the capital. And we've sort of said over the years what the range will be and we're doing pretty well long against that about deploying it. But then I think the thing that you all keep in mind is that our number one priority is return of capital shareholders period. So when we have excess capacity which we view as the low about 3 or 4 range. You'll probably going to see it utilization it in some form that we think the best way to return it.

Thank you. Our next question comes from the line of Robin Farley with UBS. Your line is open. Please go ahead.

Just to clarify, I just listened to your comments about maybe the EPS in Q2 kind of driven by the timing of SG&A and it sounds like that expense will fall later in the year. So just given that and then kind of lowering your top end of your RevPAR guidance, what would you say is really driving the EPS range for the full year?

Yes, you're right. That’s a good point. So basically the key things are that our expectations around depreciation and amortization have come down a bit in the back half of the year principally because of the timing of the outlay of some of the key money that has been previously scheduled earlier to happen earlier as well as we noted in the press release that we had signed a new five year credit facility, $450 million credit facility and is the descent interest cost savings under that facility compared our old sum assumption. So there we're trying to -- to backlog the gain, the one-penny gain I talked about in my remarks on the sale of one of our joint venture interest, a really kind of a key drivers there.

Thank you I am showing no further questions at this time. I would now like to turn the call back to Steve Joyce for any further remarks.

Well, thanks for joining us. We're obviously very pleased with the performance and sort of where we stand looking forward into a very healthy industry and we'll look forward to talking about more with you on our third quarter call. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does concludes the program and you may all disconnect. Everyone have a great day.