Revenue during the quarter grew 10.79 percent to $267.58 million from $241.53 million in the previous year period. Total expenses were 70.62 percent of quarterly revenues, up from 69.44 percent for the same period last year. That has resulted in a contraction of 118 basis points in operating margin to 29.38 percent.

Operating income for the quarter was $78.62 million, compared with $73.80 million in the previous year period.

However, the adjusted EBITDA for the quarter stood at $81.20 million compared with $76.91 million in the prior year period. At the same time, adjusted EBITDA margin contracted 150 basis points in the quarter to 30.35 percent from 31.84 percent in the last year period.

"We are pleased with our results for the third quarter, which were highlighted by a 17 percent increase in diluted earnings per share and a 4.5% increase in our domestic RevPAR which continues to outpace the RevPAR performance of the industry," said Stephen P. Joyce, chief executive officer, Choice Hotels. "In addition, our efforts to rejuvenate the Comfort brand are working, including the implementation of higher standards for hotels joining the brand, requiring meaningful property improvement plans at contract windows and targeting underperforming Comforts for termination and replacement with new construction product. These efforts have resulted in 24 consecutive months of RevPAR index gains and are helping to fuel the growth of our new construction development pipeline."

For financial year 2016, Choice Hotels International, Inc. forecasts diluted earnings per share to be in the range of $2.41 to $2.44. The company forecasts diluted earnings per share to be in the range of $2.43 to $2.46 on adjusted basis.

For the fourth-quarter 2016, Choice Hotels International, Inc. projects diluted earnings per share to be $0.51. 

Operating cash flow declines
Choice Hotels International, Inc. has generated cash of $88.41 million from operating activities during the nine month period, down 14.71 percent or $15.25 million, when compared with the last year period.

The company has spent $66 million cash to meet investing activities during the nine month period as against cash outgo of $63.10 million in the last year period. It has incurred net capital expenditure of $9.22 million on net basis during the nine month period, down 40.35 percent or $6.24 million from year ago period.

The company has spent $10.15 million cash to carry out financing activities during the nine month period as against cash outgo of $54.40 million in the last year period.

Cash and cash equivalents stood at $205.95 million as on Sep. 30, 2016, up 3.36 percent or $6.69 million from $199.26 million on Sep. 30, 2015.

Working capital drops significantly
Choice Hotels International, Inc. has witnessed a decline in the working capital over the last year. It stood at $113.43 million as at Sep. 30, 2016, down 32.65 percent or $54.98 million from $168.42 million on Sep. 30, 2015. Current ratio was at 1.44 as on Sep. 30, 2016, down from 1.88 on Sep. 30, 2015.

Days sales outstanding went down to 43 days for the quarter compared with 45 days for the same period last year.