Geoff Ballotti: Yes, it’s a fair question, Dan. And we can’t give you a percentage. As we mentioned in the script, we did see an immediate negative reaction from Choice’s press release last Tuesday in terms of what they put out and actually began feeling the impact from the Wall Street Journal leak as far back as May from both existing franchises and prospective franchisees who’ve been expressing uncertainty and concern over what a change in ownership would mean. There are not change of control provisions in our contracts. But franchisees are choosing us more so than they’re choosing Choice’s. You’ve seen over the last few years and they’re doing business with us because we say all the time to our teams, they know us, they like us, and they trust us.
And they’re very concerned about losing that culture that we’ve built. They value our team’s approachability and accessibility and flexibility. I think COVID was a great example of that in terms of how throughout that pandemic and crisis we supported them. And so, it’s been very empowering for our teams to hear the stories of why our franchisees want to stay with us and it is really what defines our culture. I mean, our franchisees, two-thirds of our franchisees and two-thirds of Choice’s franchisees are [AHOA] (ph) members and we have a very long history supporting AHOA. We believe in the power of dialogue and we are standing with our franchisees and are for all the reasons we talked about not in favor of the deals currently proposed.
Operator: Our next question is from Patrick Scholes of Truist Securities.
Patrick Scholes: Hi. Good morning everyone. [indiscernible] for Steve. And I asked if you could be as granular as possible in your answer here. Clearly you’ve outlined that Wyndham Hotels & Resorts would be materially harmed if an offer was made and then it was rejected by the Department of Justice for antitrust reasons or whatever. Could you be as granular as possible? What do you think would be a fair compensation or breakup fee to Wyndham if you were to agree to an offer?
Stephen Holmes: Well, Patrick, it’s good to hear from you. I haven’t heard your voice in a while. But the answer is, no. I cannot be more granular because I don’t think that’s any — there’s no reason for us to discuss that on this call. We have tried to raise it with Choice at one point. They’ve been in denial for quite some time. Initially, they didn’t think the antitrust issue was even an issue. Then they came back and said, well, maybe it’ll take three months to clear it. And it took us many, many meetings with our professionals meeting with theirs for them to acknowledge that no, this could be a 12 to 18 month process. So what do you think the odds are of us getting them to understand the impact it could have on our business?
They have no risk. This is — they’re playing with house money here. And frankly, they’d be playing with our money if they can get a deal done, because that’s how they would finance the purchase. We don’t need them to do that. And so I think it’s just — I think it’s inappropriate for me to try to address your question on this call. And I haven’t heard from them, so I don’t know what their ideas are.
Operator: Our next question is from Brandt Montour of Barclays.
Brandt Montour: Hey, good morning, everybody. Thanks for taking the question. Just following up along those lines. The risks that you listed out here of the combination doesn’t necessarily address culture risk, right? Which is something that thematically seems to be coming up in a lot of these discussions today, which is that, in a combination situation, given that your culture with your owners seems to be a primary driver of your organic growth, do you think that would be at risk in a combination outside of — on top of the leverage and extended balance sheet?
Geoff Ballotti: Yes, I think it absolutely is, Brandt, a concern and risk of our team. I mean, we’ve made tremendous progress over the last several years improving our retention rate. And retention rates, we feel, are really the best measure of franchisee engagement. Our economy retention rates are several hundred basis points ahead of Choice’s. And again, it gets back to the comment I made in terms of how our franchisees feel about our teams in terms of wanting to do business with us, in terms of the way we conduct business with them, and that would be at risk.
Operator: Our next question is from Michael Bellisario of Baird.
Michael Bellisario: Thanks. Good morning, everyone. Just want to revisit your comment on the third-party opportunities. I guess sort of two parts, maybe one, why haven’t you, or two, maybe when will you run a more formal process to proactively evaluate potential transactions with either financial or strategic partners that could maybe maximize value in a more attractive risk-adjusted manner.
Stephen Holmes: Well, thanks for that question. I’ll take it and then Goeff or Michele can add in if they think they need to add anything. But we did not run a process. They approached us. There was first a leak. Not sure where that came from, but there was a leak. So this has been out there for a while. And if anybody had a great idea that they wanted to bring to the table, we’re all ears. I mean, when I first heard from the other side, their question was, are you prepared to transact? And I said, well, I’m always prepared to transact if it’s in the best interest of our shareholders. I’m transactional if that’s the right thing for our shareholders. But there hasn’t been anything that I consider really close to transactional. So yes, I don’t know what to add to that to answer your question. Goeff or Michele, if you have anything, feel free to weigh in there. They’re shaking their heads, no.
Geoff Ballotti: Yes. No, nothing to add, Steve. Thanks.
Stephen Holmes: Okay.
Operator: Our next question is from Dany Asad of Bank of America.
Dany Asad: Good morning, everybody. The — I mean, thank you for all the details on the deck. In there, you did kind of lay out like an outlook, an EBITDA outlook of $690 million to $700 million in 2024, and that’s about 7% to 8% growth. Can you help us walk through the building blocks of how we get there? And then translating that into the $700 million to $750 million of capital allocation capacity, what forms could that take of realizing that $8.50 a share of value that you kind of lay out?
Michele Allen: Sure. Good morning. Thank you. Thank you for the question. Good morning. So for 2024, the outlook implies 7% to 8% organic growth, and our business is already growing at 6%. So the only change there really is we’re expecting 1 point to 2 points from growth initiatives that are currently underway and for which we have significant momentum built. That includes the infrastructure bill benefit, as well as the royalty rate improvements we’ve been discussing, continued momentum on our retention rate, and then some occupancy recovery as well. With respect to the $700 million to $750 million number, which is just a 2024 illustrative example of how much cash we would have available to deploy at the midpoint of our target leverage range.
And I would note that that goes up to $1 billion at the four-time high end of our target leverage range. I think we’re just trying to show that is capital we have available to invest to drive future growth at the EBITDA line or obviously to return to shareholders at the EPS line should no growth initiatives present themselves as compelling opportunities.
Operator: We’ll take a question from Meredith Jensen of HSBC. Your line is open.
