What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-02-24 · 443 added, 409 removed, 1116 unchanged (43% of the section changed)

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Choice Privileges Loyalty Program

Description of the Matter The Company recognized $66.2 million in revenues from loyalty points redeemed, net of the cost of redemptions, and had a point liability and deferred revenue of $128.6 million and $82.7 million, respectively, as of December 31, 2021 associated with the Choice Privileges Loyalty Program (“Loyalty Program”).

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for Guest Loyalty Programs

Description of the Matter The Company recognized $109.3 million in revenues from loyalty points redeemed, net of the cost of redemptions, and had a point liability and deferred revenue of $137.3 million and $93.4 million, respectively, as of December 31, 2022, associated with the Choice Privileges Loyalty Program and the Radisson Americas Loyalty Program that was acquired on August 11, 2022, as part of the acquisition of Radisson Hotels Americas (“the Guest Loyalty Programs”).

As discussed in Note 1 to the consolidated financial statements, loyalty points earned represent a performance obligation attributable to usage of the points, and thus revenues are recognized at the point in time when the loyalty points are redeemed by members for benefits.

The liability for the Loyalty Program is developed based on an estimate of the eventual redemption rates, including the on-going impacts anticipated from the COVID-19 pandemic on future redemption behavior, and point values using various actuarial methods.

The amount of the Loyalty Program fees in excess of the point liability represents deferred revenue, which is recognized to revenue as points are redeemed including an estimate of future forfeitures.

Auditing the Loyalty Program results is complex due to:

(1) the complexity of the models used to account for the Loyalty Program results;

and (2) the complexity of estimating the future redemption rate and Loyalty Program point values.

The liability for the Guest Loyalty Programs is developed based on an estimate of the eventual redemption rates on future redemption behavior and point values using various actuarial methods.

The amount of the Guest Loyalty Programs fees in excess of the point liability represents deferred revenue, which is recognized to revenue as points are redeemed including an estimate of future forfeitures.

Auditing the Guest Loyalty Programs results is complex due to:

(1) the complexity of the models used to account for the Guest Loyalty Programs results;

and (2) the complexity of estimating the future redemption rate and Guest Loyalty Programs point values.

Such estimates are highly judgmental given the significant estimation uncertainty associated with expected redemption activity.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for the Loyalty Program during the year.

For example, we tested controls over management’s review of the assumptions and data inputs used in the accounting model and the actuarial methods used to estimate the ultimate redemption rate of Loyalty Program points.

To test the recognition of revenues and liabilities associated with the Loyalty Program, we performed audit procedures that included, among others, testing the completeness and accuracy of the data and significant assumptions used in the model and assessing the accounting model developed by the Company to recognize the related revenue and the liabilities.

For example, we tested significant inputs into the accounting model, including the Loyalty Program point value and the recognition of points earned and redeemed during the period.

With the assistance of our actuarial specialists, we evaluated management’s methodologies as well as the actuarial assumptions used in estimating the Loyalty Program expected redemption rate.

To test the recognition of revenues and liabilities associated with the Guest Loyalty Programs, we performed audit procedures that included, among others, testing the completeness and accuracy of the data and significant assumptions used in the models and assessing the accounting models developed by the Company to recognize the related revenue and the liabilities.

For example, we tested significant inputs into the accounting models, including the Guest Loyalty Programs point values and the recognition of points earned and redeemed during the period.

With the assistance of our actuarial specialists, we evaluated management’s methodologies as well as the actuarial assumptions used in estimating the Guest Loyalty Programs expected redemption rates.

Accounting for Acquisitions

Description of the Matter On August 11, 2022, the Company completed its acquisition of Radisson Hotels Americas (“Radisson”) for net consideration of approximately $674 million, as disclosed in Note 24 to the consolidated financial statements.

The transaction was accounted for as a business combination.

Auditing the Company's accounting for its acquisition of Radisson was complex due to the significant estimation uncertainty in the Company’s determination of the fair value of identified intangible assets, which principally consisted of in-place franchise agreements and brand intangible assets.

The significant estimation uncertainty was primarily due to the sensitivity of the respective fair values to underlying significant assumptions about the future performance of the acquired business.

The Company used a discounted cash flow model to measure the in-place franchise agreements and brand intangible assets.

The significant assumptions used to estimate the value of these assets included discount rates and certain assumptions that form the basis of the forecasted results (e.g., revenue growth rates and operating profit margin).

These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit We tested the Company's controls over its accounting for acquisitions.

Our tests included controls over the estimation process supporting the recognition and measurement of consideration transferred and the acquired asset values.

We also tested management’s review of assumptions used in the valuation models.

To test the estimated fair value of the in-place franchise agreements and brand intangible assets, we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and testing the significant assumptions used by the Company's valuation specialist.

Our procedures included evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates and reconciling the prospective financial information utilized by the company’s valuation specialists with other prospective financial information prepared by the Company.

We involved our valuation specialists to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates.

For example, we compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other business combinations, to the historical results of the acquired business and to other guidelines used by companies within the same industry.

Specifically, when assessing the key assumptions, we focused on revenue growth rates and operating profit margin that would drive these forecasted growth rates.

/s/ Ernst & Young LLP

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Tysons, Virginia

February 24, 2022

March 1, 2023

CONSOLIDATED FINANCIAL STATEMENTS

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2022 2021 2020

Royalty fees $ 397,218 $ 263,308 $ 388,151

Initial franchise and relicensing fees 26,342 25,906 27,489

Royalty, licensing and management fees $ 471,759 $ 397,218 $ 263,308

Initial franchise fees 28,074 26,342 25,906

Procurement services 63,800 50,393 45,242

Marketing and reservation system 528,843 402,568 577,426

Owned hotels 70,826 37,833 20,168

Other 64,740 28,669 16,880

Other revenues from franchised and managed properties 702,750 528,843 402,568

Total revenues 1,401,949 1,069,298 774,072

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Depreciation and amortization 30,425 24,773 25,831

Marketing and reservation system 444,946 446,847 579,139

Owned hotels 48,837 24,754 16,066

Other expenses from franchised and managed properties 653,060 444,946 446,847

Total operating expenses 939,597 640,096 637,654

Impairment of goodwill — — ( 3,097 )

Impairment of long-lived assets — ( 282 ) ( 14,751 )

Gain (loss) on sale of business and assets, net 13 — ( 4,574 )

Gain on sale of business and assets, net 16,249 13 —

Operating income 478,601 428,933 121,667

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Loss on extinguishment of debt — — 16,565

Other gains, net ( 5,134 ) ( 4,533 ) ( 4,966 )

Equity in net loss of affiliates 15,876 15,289 9,576

Total other expenses (income), net 52,441 68,661 48,609

Other loss (gain) 7,018 ( 5,134 ) ( 4,533 )

Equity in net (gain) loss of affiliates ( 1,732 ) 15,876 15,289

Total other income and expenses, net 41,795 52,441 68,661

Income before income taxes 436,806 376,492 53,006

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Net income $ 332,152 $ 288,957 $ 75,387

Other comprehensive income (loss), net of tax:

Amortization of loss on cash flow hedge — — 1,436

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment ( 637 ) 72 ( 96 )

Other comprehensive income (loss), net of tax 72 ( 96 ) 896

Other comprehensive (loss) income, net of tax:

( 637 ) 72 ( 96 )

Comprehensive income $ 331,515 $ 289,029 $ 75,291

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Total assets $ 2,102,175 $ 1,931,824

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

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Retained earnings 1,555,724 1,275,220

Total shareholders’ equity (deficit) 265,882 ( 5,752 )

Total liabilities and shareholders’ equity (deficit) $ 1,931,824 $ 1,587,333

Total shareholders’ equity 154,660 265,882

Total liabilities and shareholders’ equity $ 2,102,175 $ 1,931,824

The accompanying notes are an integral part of these consolidated financial statements.

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Franchise agreement acquisition cost amortization 15,666 13,222 11,310

Impairment of goodwill — — 3,097

Impairment of long-lived assets — 282 14,751

Loss on sale of business, net — — 4,674

Loss on extinguishment of debt — — 16,565

Loss (gain) on sale and disposal of assets, net 530 — ( 2,103 )

(Gain) loss on sale and disposal of assets, net ( 16,251 ) 530 —

Non-cash stock compensation and other charges 42,974 35,731 9,690

Non-cash interest, investment, and affiliate income ( 13,509 ) ( 6,723 ) ( 4,010 )

Non-cash interest, investment, and affiliate (income) loss, net 7,365 ( 13,509 ) ( 6,723 )

Deferred income taxes ( 19,642 ) ( 1,006 ) ( 44,826 )

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Proceeds from sale of tax credits for rehabilitation of historic building — — 9,197

Payment on business disposition, net — — ( 10,783 )

Business acquisition, net of cash acquired ( 550,431 ) — —

Proceeds from termination of intangibles 44,711 — —

Contributions to investments in affiliates ( 3,148 ) ( 2,778 ) ( 5,454 )

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of long term debt — — 422,376

Proceeds from issuance of Term Loan — — 249,500

Proceeds from issuance of 2020 Senior Notes — — 447,723

Net (repayments) borrowings pursuant to revolving credit facilities — ( 18,480 ) ( 72,400 )

Net borrowings (repayments) pursuant to revolving credit facilities 360,000 — ( 18,480 )

Principal payments on long-term debt ( 216,571 ) — ( 473,857 )

Payments to extinguish long-term debt — — ( 14,347 )

Payments to extinguish acquired debt ( 55,975 ) — —

Proceeds from acquired derivative 1,943 — —

Debt issuance costs ( 44 ) ( 365 ) ( 4,620 )

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Dividends paid ( 52,545 ) ( 25,044 ) ( 25,274 )

Payments on transfer of interest in notes receivable — — ( 24,409 )

Proceeds from exercise of stock options 3,809 11,054 10,203

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Balance as of December 31, 2019 55,702,628 $ 951 $ 231,160 $ ( 4,550 ) $ ( 1,219,905 ) $ 968,833 $ ( 23,511 )

Cumulative-effect adjustment (1)

— — — — — ( 6,831 ) ( 6,831 )

Net income — — — — — 75,387 75,387

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Share-based payment activity (2)

Dividends declared ($ 0.215 per share quarterly)

506,953 — 2,761 — 14,877 ( 437 ) 17,201

Treasury purchases ( 631,273 ) — — — ( 50,638 ) — ( 50,638 )

Dividends declared (2)

— — — — — ( 12,452 ) ( 12,452 )

Treasury purchases ( 674,027 ) — — — ( 55,450 ) — ( 55,450 )

Balance as of December 31, 2020 55,535,554 $ 951 $ 233,921 $ ( 4,646 ) $ ( 1,260,478 ) $ 1,024,500 $ ( 5,752 )

Cumulative-effect adjustment (2)

— — — — — ( 6,831 ) ( 6,831 )

Net income — — — — — 288,957 288,957

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294,095 — 38,736 — 4,941 — 43,677

Dividends declared (3)

Dividends declared ($ 0.2375 per share) (2)

— — — — — ( 51,648 ) ( 51,648 )

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Balance as of December 31, 2022 52,200,903 $ 951 $ 298,053 $ ( 5,211 ) $ ( 1,694,857 ) $ 1,555,724 $ 154,660

(1) Impacts of i) adoption of Topic 606 related to a foreign affiliate accounted for as an equity method investment on Retained Earnings and ii) transaction resulting in an increase in ownership of a consolidated affiliate on Additional Paid-in-Capital.

(1) R eflects the cumulative effect of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) and subsequent amendments issued thereafter (collectively "Topic 326"), which was adopted on January 1, 2020.

Refer to Note 4.

(3) During the fourth quarter of 2019, the Company's board of directors announced a 5 % increase to the quarterly dividend rate to $ 0.225 per share from $ 0.215 per share, beginning with the dividend payable in the first quarter of 2020.

On February 28, 2020, the Company’s board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock.

The dividend was payable on April 16, 2020 to shareholders of record on April 2, 2020.

(2) On February 28, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.225 per share of common stock payable on April 16, 2020.

In April 2020, subsequent to the payment of the dividend and in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends.

During 2020 and 2021, accumulated dividends were paid to certain shareholders upon vesting of certain performance vested restricted stock units ("PVRSU") which are captured in Share-based payment activity.

On May 7, 2021 and September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock.

In May 2021, the Company resumed payment of quarterly dividends, subject to future declarations by the Company's Board of Directors, and declared a quarterly cash dividend of $ 0.225 per share of common stock.

On December 6, 2021, the Company's Board of Directors approved a 6 % increase in the quarterly cash dividend and declared a quarterly cash dividend of $ 0.2375 per share of common stock.

During the year ended December 31, 2022, the Company declared cash dividends at a quarterly rate of $ 0.2375 per share of common stock.

During certain periods presented, accumulated dividends were paid to certain shareholders upon vesting of certain performance vested restricted stock units ("PVRSU") which are captured in Share-based payment activity.

The accompanying notes are an integral part of these consolidated financial statements.

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In the opinion of management, the accompanying consolidated financial statements include all adjustments that are necessary to fairly present the Company's consolidated financial statements.

Certain prior year amounts in our consolidated financial statements have been reclassified in order to maintain comparability with current year presentation.

Foreign currency transaction gains and losses that were previously presented in SG&A expenses are now presented within other gains in the consolidated statements of income.

The reclassification had no effect on the Company’s previously reported net income.

Acquisition of Radisson Hotels Americas

On August 11, 2022, the Company completed the acquisition (the "Transaction") of (1) all of the issued and outstanding shares of Radisson Hospitality, Inc.

and (2) certain trademarks held by Radisson Hospitality Belgium BV/SRL (collectively referred to as "Radisson Hotels Americas").

With the close of this Transaction, Choice Hotels International has added approximately 67,000 rooms across the United States, Canada, Caribbean and Latin America.

The Transaction expands the Company's footprint in international markets and the upper-upscale and upscale full-service chain scales and enhances guest offerings in the core upper-midscale chain scale.

The Transaction also accelerates our asset-light strategy of growth in higher revenue travel chain scales and locations.

The Company has determined it is the accounting acquirer of Radisson Hotels Americas and has accounted for the Transaction as a business combination using the acquisition method of accounting.

Accordingly, assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date, with the exception of certain asset and liabilities which were accounted for in accordance with provisions of ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08").

Refer to Note 24.

The Company's significant accounting policies herein address elements attributable to Radisson Hotels Americas balances and activity.

Revenue Recognition

Franchise agreements

Revenues are primarily derived from franchise agreements with third-party hotel owners.

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These agreements typically have an initial term from 10 to 30 years, with provisions permitting franchisees or the Company to terminate the franchise agreement upon designated anniversaries of the hotel opening before the end of the initial term.

An up-front initial or relicensing fee is assessed to third-party hotel owners to affiliate with our brands, which is typically paid prior to agreement execution and is non-refundable.

After hotel opening, fees are typically generated based on a percentage of gross room revenues or as designated transactions and events occur (such as when a reservation is delivered to the hotel through a specified channel) and are due to the Company in the following month.

An up-front initial franchise fee is assessed to third-party hotel owners to affiliate with our brands, which is typically paid prior to agreement execution and is non-refundable.

The franchise agreements are comprised of multiple performance obligations, which may require significant judgment in identifying.

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• Material rights for free or discounted goods or services to hotel guests:

Primarily consists of the points issued under the Company’s guest loyalty program, Choice Privileges.

Primarily consists of the points issued under the Company’s guest loyalty programs, Choice Privileges and Radisson Rewards Americas.

Brand intellectual property

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These fees are billed and collected monthly and revenues are recognized in the same period that the underlying gross room revenues are earned by the Company’s franchisees.

• Initial franchise and relicensing fees .

Initial and relicensing fees are charged when (i) new hotels enter the franchise system;

Royalty fees are recognized within royalty, licensing and management fees revenue in the consolidated statements of income.

• Initial franchise fees .

Initial franchise fees are charged when (i) new hotels enter the franchise system;

(ii) there is a change of ownership;

or (iii) existing franchise agreements are extended.

These fees are recognized as revenue ratably as services are provided over the enforceable period of the

franchise agreement.

These fees are recognized as revenue ratably as services are provided over the enforceable period of the franchise agreement.

The enforceable period is the period from hotel opening to the first point the franchisee or the Company can terminate the franchise agreement without incurring a significant penalty.

Deferred revenues from initial and relicensing fees will typically be recognized over a five to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts will be recognized to revenue in the period of termination.

Deferred revenues from initial and relicensing fees are typically recognized over a five to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts will be recognized to revenue in the period of termination.

• Other revenue.

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The Company’s franchise agreements require the payment of marketing and reservation system fees.

The Company is obligated to use these marketing and reservation system fees to provide marketing and reservation services such as advertising, providing a centralized reservation and property management system, providing reservation and revenue management services, and performing certain franchise services to support the operation of the overall franchise system.

The Company is obligated to use these marketing and reservation system fees to provide marketing and reservation services such as advertising, access to centralized reservation and property management systems, revenue management services and/or software, and certain franchise services to support the operation of the overall franchise system.

The marketing and reservation system revenues are recognized within other revenues from franchised and managed properties in the consolidated statements of income.

These services are comprised of multiple fees including the following:

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• System implementation fees charged to franchisees are deferred and recognized as revenue over the enforceable period of the franchise agreement.

• Marketing and reservation system activities also include revenues generated from the Company’s guest loyalty program.

The revenue recognition of this program is discussed in Material rights for free or discounted goods or services to hotel guests below .

• Marketing and reservation system activities also include revenues generated from the Company’s guest loyalty programs.

The revenue recognition of these programs is discussed in Material rights for free or discounted goods or services to hotel guests below .

Marketing and reservation system expenses are those expenses incurred to facilitate the delivery of marketing and reservation system services, including direct expenses and an allocation of costs for certain administrative activities required to carry out marketing and reservation services.

Marketing and reservation system expenses are recognized as services are incurred or goods are received, and as such may not equal marketing and reservation system revenues in a specific period but are expected to equal revenues earned from franchisees over time.

Marketing and reservation system expenses are recognized as services are incurred or goods are received within other expenses from franchised and managed properties in the consolidated statements of income, and as such may not equal marketing and reservation system revenues in a specific period but are expected to equal revenues earned from franchisees over time.

The Company’s franchise agreements provide the Company the right to advance monies to the franchise system when the needs of the system surpass the balances currently available and recover such advances in future periods through additional fee assessments or reduced spending.

Material rights for free or discounted goods or services to hotel guests

Choice Privileges is the Company’s frequent guest loyalty program, which enables members to earn points based on their spending levels with the Company’s franchisees.

Choice Privileges and Radisson Rewards Americas are the Company’s frequent guest loyalty programs, which enable members to earn points based on their spending levels with the Company’s franchisees or certain vendors (refer to Partnership agreements header below).

The points, which the Company accumulates and tracks on the members’ behalf, may be redeemed for free accommodations or other benefits (e.g., gift cards to participating retailers).

The Company collects from franchisees a percentage of loyalty program members’ gross room revenue from completed stays to operate the program.

The Company collects from franchisees a percentage of loyalty program members’ gross room revenue from completed

stays to operate the programs.

At such time points are redeemed for free accommodations or other benefits, the Company reimburses franchisees or third parties based on a rate derived in accordance with the franchise or vendor agreement.

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The estimated value of future redemptions is reflected in current and non-current liability for guest loyalty program in our consolidated balance sheets.

The liability for guest loyalty program is developed based on an estimate of the eventual redemption rates, including the on-going impacts anticipated from the COVID-19 pandemic on future redemption behavior, and point values using various actuarial methods.

The liability for guest loyalty programs is developed based on an estimate of the eventual redemption rates and point values using various actuarial methods.

These significant judgments determine the required point liability attributable to outstanding points, which is relieved as redemption costs are processed.

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As of December 31, 2022, the current and non-current deferred revenue balances are $ 61.0 million and $ 32.5 million, respectively.

Loyalty points are typically

redeemed within three years of issuance.

Loyalty program point redemption revenues are recognized within marketing and reservation system revenue in the consolidated statements of income.

Loyalty points are typically redeemed within three years of issuance.

Loyalty program point redemption revenues are recognized within other revenues from franchised and managed properties in the consolidated statements of income.

The Company also earns revenues on contracts incidental to the support of operations for franchised hotels, including purchasing operations.

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The Company maintains various agreements with third-party partners, including the co-branding of the Choice Privileges credit card.

The agreements typically provide for use of the Company’s marks, limited access to the Company’s distribution channels, and sale of Choice Privileges points, in exchange for fees primarily comprising variable consideration paid each month.

Choice Privileges members can earn points through participation in the partner’s program.

The agreements typically provide for use of the Company’s marks, limited access to the Company’s distribution channels, and sale of loyalty points, in exchange for fees primarily comprising variable consideration paid each month.

Loyalty members can earn points through participation in the partner’s program.

Partnership agreements include multiple performance obligations.

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Allocation of fixed and variable consideration to the performance obligations is based on standalone selling price as estimated based on market and income methods, which represent significant judgments.

The amounts allocated to brand intellectual property are recognized on a gross basis over time using the output measure of time elapsed, primarily within procurement services revenue.

The amounts allocated to material rights for free or discounted goods or services to hotel guests are recognized to revenue as points are redeemed including an estimate of breakage, primarily within marketing and reservation system revenue.

The amounts allocated to brand intellectual property are recognized on a gross basis over time using the output measure of time elapsed, primarily within royalty, licensing and management fees and procurement services revenue.

Qualified Vendors

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Variable consideration is determined and recognized in the period when sales to franchisees or guests from vendors are known or cash payment has been remitted.

Qualified vendor revenues are recognized within procurement services revenue.

Qualified vendor revenues are recognized within procurement services revenue in the consolidated statements of income.

The Company is party to other non-franchising agreements that generate revenue within other revenue in the consolidated statements of income which are primarily SaaS arrangements for non-franchised hoteliers.

SaaS agreements typically include fixed consideration for installment and other initiation fees paid at contract onset, and variable consideration for recurring subscription revenue paid monthly.

SaaS agreements comprise a single performance obligation, which is satisfied over time based on the access to the software for the stated duration of the agreement.

SaaS agreements comprise a single performance obligation, which is satisfied over time

based on the access to the software for the stated duration of the agreement.

Fixed consideration is allocated and recognized ratably to each period over the term of the agreement.

Variable consideration is determined at the conclusion of each period, and allocated to and recognized in the current period.

The Company owned six hotels at December 31, 2021 and five hotels at December 31, 2020, from which the Company derives revenues.

Managed Hotels

The Company manages 13 legacy Radisson Hotels Americas hotels (inclusive of the three Radisson Hotels Americas branded owned hotels).

The management agreements provide for use of the Company's marks and hotel management services, include providing day-to-day management services in the operation of the hotels for the hotel owners.

Fees generated from management agrees are recognized to revenue over time as hotel owners pay for access to these services for the duration of the management agreement, and include base and incentive management fees.

Base management fees are generally based on a percentage of the hotel's monthly gross revenue and invoiced and collected monthly.

Incentive management fees are generally based on a percentage of the hotel's operating profits as measured and invoiced on an annual basis.

Base and incentive management fee revenues are recognized within royalties, licensing and management fees in the consolidated statements of income.

Refer to Note 23 regarding discussion of management agreement guarantees.

The Company's management agreements include contemplation of amounts that are contractually reimbursed to us by property owners, either directly or indirectly, relating to certain costs and expenses paid by us in support of the operations of these properties.

These reimbursements include payroll and related costs and certain other operating costs of the managed properties' operations, which are reimbursed to us by the property owners as expenses are incurred.

Revenue related to these direct reimbursements is recognized based on the amount of expenses incurred by the Company, which are presented as other expenses from managed and franchised properties in our consolidated statements of operations, that are then reimbursed to us by the property owner typically on a monthly basis, which results in no net effect on operating income or net income.

Revenues related to marketing and reservations are recognized over time and are intended to reimburse us, indirectly, for expenses incurred in the execution of marketing and reservation services.

These managed revenues are presented within other revenues from managed and franchised properties in our consolidated statements of operations.

The Company owned nine hotels (inclusive of three acquired in the Radisson Hotels Americas transaction) at December 31, 2022 and six hotels at December 31, 2021, from which the Company derives revenues.

As a hotel owner, the Company has performance obligations to provide accommodations to hotel guests and in return the Company earns a nightly fee for an agreed upon period that is generally payable at the time the hotel guest checks out of the hotel.

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These primarily consist of food and beverage, incidentals and parking fees.

Hotel room night and other ancillary hotel ownership revenues are recognized within owned hotels revenue in the consolidated statements of income.

The Company presents taxes collected from customers and remitted to governmental authorities on a net basis and, therefore, they are excluded from revenues in the consolidated financial statements.

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The DSCR represents property-specific net operating income as a percentage of the interest and principal payments incurred (i.e., debt service) on all debt of the borrower for the property and is an indication of the ability of the borrower to timely pay amounts due during the term of the loan.

The LTC or LTV ratios and DSCR are considered during loan underwriting as indications of risk and, accordingly, we believe these factors are the most representative risk indicators for calculating the allowance for credit loss.

allowance for credit loss.

Loans with higher LTC or LTV ratios and lower DSCR ratios generally are representative of loans with greater risk and, accordingly, have higher credit allowances as a percentage of loan principal.

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The Company records provisions for credit losses on accounts receivable in SG&A expenses and marketing and reservation system expenses in the accompanying consolidated statements of income.

When the Company determines that an account is not collectible, the account is written-off to the associated allowance for credit losses.

When the Company determines that a trade or note receivable is not collectible, the account is written-off to the associated allowance for credit losses.

Refer to Note 4 for further discussion of receivables and allowances for credit losses.

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Software licenses pertaining to cloud computing arrangements that are capitalized are amortized using the straight-line method over the shorter of the cloud computing arrangement term or their useful lives.

The Company capitalizes interest incurred during construction of property and equipment.

The Company capitalizes interest incurred during construction and development of property and equipment, including software.

Interest capitalized as a cost of property and equipment totaled $ 2.0 million and $ 0.7 million during the years ended December 31, 2022 and 2021, respectively.

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The fair value of long-lived asset groups are estimated primarily using discounted cash flow analyses representing the highest and best use by an independent market participant.

Significant management judgment is involved in evaluating

indicators of impairment and developing any required projections to test for recoverability or estimate fair value.

Significant management judgment is involved in evaluating indicators of impairment and developing any required projections to test for recoverability or estimate fair value.

Furthermore, if management uses different projections or if different conditions occur in future periods, future-operating results could be materially impacted.

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During 2020, the Company recognized impairments of long-lived assets attributable to a commercial office building and a real estate parcel.

During 2019, the Company recognized impairments for the full amount of long-lived assets attributable to the SaaS for vacation rentals reporting unit of $ 7.3 million.

Refer to Note 6.

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As such, a quantitative test was not required and no impairment was recorded.

Historically, goodwill was partially allocated to the SaaS for vacation rentals reporting unit.

The Company performed the quantitative test for the SaaS for vacation rentals reporting unit during prior periods, including the first quarter of 2019, determining that the carrying value of the reporting unit exceeded the fair value.

As a result, the Company recognized a goodwill impairment of $ 3.1 million in the first quarter of 2019.

The SaaS for vacation rentals reporting unit was sold during the second quarter of 2019, resulting in the derecognition of net assets of the reporting unit, including the remaining goodwill, and the recognition of a loss on sale of $ 4.7 million.

Refer to Note 6.

Other than the SaaS for vacation rentals reporting unit, the Company did no t record any impairment of goodwill or intangible assets with indefinite lives during the years ended December 31, 2021, 2020 and 2019.

Variable Interest Entities

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Fair value is based upon internally-developed discounted cash flow models, third-party appraisals, and if appropriate, current estimated net sales proceeds from pending offers.

There are judgments and assumptions in each of these fair value determinations, including our selection of comparable market transactions, the amount and timing of expected future cash flows, long-term growth rates, and sales capitalization rates.

These nonrecurring fair value measurements are classified as level three of the fair value measurement hierarchy, as the Company utilized unobservable inputs which are significant to the overall fair value.

If the estimated fair value is less than carrying value, management uses its judgment to determine if the decline in value is other-than-temporary.

In determining this, the Company considers factors including, but not limited to, the length of time and extent of the decline, loss of values as a percentage of the cost, financial condition and near-term financial projections, the Company's intent and ability to recover the lost value, and current economic conditions.

For declines in value that are deemed other-than-temporary, impairments are charged to earnings.

During the years ended December 31, 2021 and 2020, the Company recognized impairment charges of $ 19.3 million and $ 7.3 million, respectively, related to multiple investments in affiliates accounted for under the equity method.

The impairment charges are classified as equity in net loss of affiliates in the consolidated statements of income.

The Company recognized no impairment charges during the year ended December 31, 2019.

For declines in value that are deemed other-than-temporary, impairment charges are recorded to earnings.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized impairment charges of $ 0.2 million, $ 19.3 million and $ 7.3 million, respectively, related to multiple investments in affiliates accounted for under the equity method.

The impairment charges are classified as equity in net (gain) loss of affiliates in the consolidated statements of income.

Refer to Note 8.

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The Company includes translation adjustments from foreign exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature as a separate component of shareholders’ equity (deficit).

The Company reports foreign currency transaction gains and losses and the effect of inter-company transactions of a short-term or trading nature in SG&A expenses on the consolidated statements of income.

Foreign currency transaction (gains) losses for the years ended December 31, 2021, 2020 and 2019 were $ 0.4 million, $( 0.4 ) million, and $( 0.1 ) million, respectively.

The Company reports foreign currency transaction gains and losses and the effect of inter-company transactions of a short-term or trading nature within other gains in the consolidated statements of income.

Foreign currency transaction losses (gains) for the years ended December 31, 2022, 2021 and 2020 were $ 1.0 million, $ 0.4 million, and $( 0.4 ) million, respectively.

The Company determines if an arrangement is a lease and classification as operating or financing at lease inception.

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These short-term leases are expensed on a straight-line basis over the lease term.

The Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases ("Topic 842") on January 1, 2019, using the optional transitional method to apply Topic 842 at the effective date rather than at the beginning of the earliest comparative period.

Topic 842 did not have an impact on the Company's consolidated statements of income.

Refer to Note 19.

The Company periodically uses derivative instruments as part of its overall strategy to manage exposure to market risks associated with fluctuations in interest rates.

All outstanding derivative financial instruments are recognized at their fair values as assets or liabilities.

The impact on earnings from recognizing the fair values of these instruments depends on their intended

use, their hedge designation and their effectiveness in offsetting changes in the fair values of the exposures they are hedging.

The Company does not use derivatives for trading purposes.

The effective portion of changes in fair value of derivatives designated as cash flow hedging instruments are recorded as a component of accumulated other comprehensive loss and the ineffective portion is reported currently in earnings.

The amounts included in accumulated other comprehensive loss are reclassified into earnings in the same period during which the hedged item affects earnings.

Amounts reported in earnings are classified consistent with the item being hedged.

The Company formally documents all relationships between its hedging instruments and hedged items at inception, including its risk management objective and strategy for establishing various hedge relationships.

Cash flows from hedging instruments are classified in the consolidated statements of cash flows consistent with the items being hedged.

Hedge accounting is discontinued prospectively when (i) the derivative instrument is no longer effective in offsetting changes in fair value or cash flows of the underlying hedged item, (ii) the derivative instrument expires, is sold, terminated or exercised, or (iii) designating the derivative instrument as a hedge is no longer appropriate.

The effectiveness of derivative instruments is assessed at inception and on an ongoing basis.

At December 31, 2021 and 2020, there were no outstanding derivative positions.

Recently Adopted & Issued Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes ("ASU 2019-12").

ASU 2019-12 enhances and simplifies various aspects of the income tax accounting guidance in Accounting Standards Codification ("ASC") 740, Income Taxes .

The Company adopted ASU 2019-12 on January 1, 2021 and the adoption did not have material impacts on our consolidated financial statements and disclosures.

In October 2021, the FASB issued ASU 2021-08 which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Revenue from Contracts with Customers (Topic 606) , as if the acquirer had originated the contracts at the date of the business combination.

ASU 2021-08 is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years.

Early adoption is permitted.

The Company elected to early adopt ASU 2021-08 in the second quarter of 2022.

There was no retrospective impact to our consolidated financial statement as a result of the adoption.

ASU 2021-08 was applied in the accounting for the acquisition of Radisson Hotels Americas, and accordingly, the Company utilized the carrying values of contract assets and contract liabilities of Radisson Hotels Americas in application of acquisition accounting (refer to Note 24).

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses ("ASU 2022-02").

ASU 2022-02 eliminates the recognition and measurement guidance on troubled debt restructuring for creditors that have adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) ("Topic 326"), requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty, and includes new guidance on current-period gross write-offs presentation.

ASU 2022-02 is effective for annual reporting periods beginning after December 15, 2022 and interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently assessing the potential impact that ASU 2022-02 will have on the consolidated financial statements and disclosures.

Contract Liabilities

Contract liabilities relate to (i) advance consideration received, such as initial franchise and relicensing fees paid when a franchise agreement is executed and system implementation fees paid at time of installation, for services considered to be part of the brand intellectual property performance obligation and (ii) amounts received when Choice Privileges points are issued but for which revenue is not yet recognized since the related points have not been redeemed.

Significant changes in the contract liabilities balances during 2021 are as follows:

Contract liabilities relate to (i) advance consideration received, such as initial franchise fees paid when a franchise agreement is executed and system implementation fees paid at time of installation, for services considered to be part of the brand intellectual property performance obligation and (ii) amounts received when loyalty points are issued but for which revenue is not yet recognized since the related loyalties have not been redeemed.

Deferred revenues from initial fees and system implementation fees are typically recognized over a five - to ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby remaining deferred amounts are recognized to revenue in the period of termination.

Loyalty points are typically redeemed within three years of issuance.

Significant changes in the contract liabilities balances during the year ended December 31, 2022, inclusive of balances assumed in the acquisition of Radisson Hotels Americas (refer to Note 24), are as follows:

(in thousands)

Balance as of December 31, 2021 $ 175,425

Assumption of contract liabilities from Radisson Hotels Americas acquisition 27,682

Increases to the contract liability balance due to cash received 124,103

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Remaining Performance Obligations

The aggregate transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $ 175.4 million as of December 31, 2021.

This amount represents fixed transaction price that will be recognized as revenue in future periods, which is primarily captured in the balance sheet within current and non-current deferred revenue.

Based on practical expedient elections permitted by ASU 2014-09, Revenue From Contracts with Customers (Topic 606) and subsequent amendments ("Topic 606"), the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and SaaS agreements), (ii) variable consideration for which we recognize revenue at the amount to which we have the right to invoice for services performed, or (iii) contracts with an expected original duration of one year or less.

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $ 209.4 million as of December 31, 2022.

This amount represents fixed transaction price that will be recognized as revenue in future periods, which is primarily captured in the consolidated balance sheet as current and non-current deferred revenue.

Based on practical expedient elections permitted by ASU 2014-09, Revenue From Contracts with Customers (Topic 606) and subsequent amendments ("Topic 606"), the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and software as a service ("SaaS") agreements), (ii) variable consideration for which we recognize revenue at the amount to which we have the right to invoice for services performed, or (iii) contracts with an expected original duration of one year or less.

Capitalized Franchise Agreement Costs

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Capitalized franchise sales commission are amortized on a straight-line basis over the estimated benefit period of the arrangement, unless the franchise agreement is terminated and the hotel exits the system whereby remaining capitalized amounts will be expensed in the period of termination.

The estimated benefit period is the Company's estimate of the duration a hotel will remain in the Choice

Capitalized franchise sales commissions are $ 55.5 million and $ 54.3 million within Other assets as of December 31, 2021 and 2020, respectively.

The estimated benefit period is the Company's estimate of the duration a hotel will remain in the Choice system.

Capitalized franchise sales commissions of $ 57.6 million and $ 55.5 million are recorded within Other assets as of December 31, 2022 and 2021, respectively.

Amortization expense and impairment charges for the years ended December 31, 2022, 2021 and 2020 were $ 13.0 million, $ 11.9 million and $ 9.7 million, respectively, and are recorded within SG&A expenses.

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These payments are recognized as an adjustment to transaction price and capitalized as an intangible asset.

Franchise agreement acquisition cost intangibles are amortized on a straight-line basis over the estimated benefit period of the arrangement as an offset to royalty fees and marketing and reservation system fees.

Impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, for the years ended December 31, 2021, 2020 and 2019 were $ 11.1 million, $ 2.0 million and $ 1.0 million, respectively, and are recorded within SG&A expenses and marketing and reservation system expenses.

Franchise agreement acquisition cost intangibles are amortized on a straight-line basis over the estimated benefit period of the arrangement as an offset to royalty, licensing and management fees and other revenues from franchised and managed properties.

Impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, for the years ended December 31, 2022, 2021 and 2020 were $ 2.5 million, $ 11.1 million and $ 2.0 million, respectively, and are recorded within SG&A expenses and other expenses from franchised and managed properties.

Disaggregation of Revenue

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(in thousands) Over time Point in time Total

Royalty fees $ 397,218 $ — $ 397,218

Initial franchise and relicensing fees 26,342 — 26,342

Royalty, licensing and management fees $ 471,601 $ 158 $ 471,759

Initial franchise fees 28,074 — 28,074

Procurement services 60,768 3,032 63,800

Marketing and reservation system 465,184 63,659 528,843

Owned hotels 55,197 15,398 70,595

Other 64,740 — 64,740

Other revenues from franchised and managed properties 596,668 106,082 702,750

Topic 606 revenues $ 1,277,048 $ 124,670 1,401,718

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(in thousands) Over time Point in time Total

Royalty fees $ 263,308 $ — $ 263,308

Initial franchise and relicensing fees 25,906 — 25,906

Royalty, licensing and management fees $ 397,218 $ — $ 397,218

Initial franchise fees 26,342 — 26,342

Procurement services 47,878 2,515 50,393

Marketing and reservation system 325,785 76,783 402,568

Owned hotels 31,747 5,642 37,389

Other 28,669 — 28,669

Other revenues from franchised and managed properties 465,184 63,659 528,843

Topic 606 revenues $ 997,038 $ 71,816 1,068,854

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(in thousands) Over time Point in time Total

Royalty fees $ 388,151 $ — $ 388,151

Initial franchise and relicensing fees 27,489 — 27,489

Royalty, licensing and management fees $ 263,308 $ — $ 263,308

Initial franchise fees 25,906 — 25,906

Procurement services 42,919 2,323 45,242

Marketing and reservation system 499,368 78,058 577,426

Owned hotels 16,824 2,912 19,736

Other 15,838 — 15,838

Other revenues from franchised and managed properties 325,785 76,783 402,568

Topic 606 revenues $ 690,580 $ 82,018 772,598

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Total revenues $ 774,072

Marketing and reservation system and Procurement services point in time revenues represent loyalty points redeemed by members for benefits (with both franchisees and third-party partners), net of the cost of redemptions.

For the years ended

December 31, 2021, 2020 and 2019, these net revenues, inclusive of adjustments to estimated redemption rates, were $ 66.2 million, $ 79.1 million, and $ 81.2 million, respectively.

Non-Topic 606 revenues represent revenue from leasing and are presented in Owned hotels and Other revenues in the consolidated statements of income.

Owned hotels point in time revenues represent goods and services purchased independently of the hotel stay, such as food and beverage, incidentals, and parking fees.

The remaining point in time revenue captions represent loyalty points redeemed by members for benefits (with both franchisees and third-party partners), net of the cost of redemptions.

For the years ended December 31, 2022, 2021 and 2020, these loyalty net revenues, inclusive of adjustments to estimated redemption rates, were $ 109.3 million, $ 66.2 million, and $ 79.1 million, respectively.

For the year ended December 31, 2022, other revenues include contract termination fees of $ 22.6 million related to the termination of 110 WoodSpring units.

The termination fee revenue represents $ 67.4 million in consideration received, less the $ 44.7 million carrying basis of the related contract intangibles initially established at the time of the WoodSpring acquisition.

As presented in Note 20, the Corporate & Other segment amounts represent $ 108.9 million, $ 45.7 million, and $ 28.3 million for the years ended December 31, 2022, 2021 and 2020, respectively, and are included in the Over time column of Other revenues and the Owned hotels and Non-Topic 606 revenues rows.

The remaining revenues relate to the Hotel Franchising segment.

Royalty fees and Marketing and reservation system revenues are presented net of intersegment revenues of $ 2.9 million, $ 1.5 million, and $ 1.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The remaining revenues relate to the Hotel Franchising & Management reportable segment.

Royalty, licensing and management fees and Other revenues from franchised and managed

properties net of intersegment revenues of $ 5.5 million, $ 2.9 million, and $ 1.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Prepaid Expenses and Other Current Assets

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In October 2021, the Company committed to a plan to market the land for sale and executed a purchase and sale agreement.

As a result, the land is deemed to meet held for sale classification during the fourth quarter of 2021, and the Company recognized a $ 0.3 million charge, reflected within Impairment of long-lived assets on the consolidated statements of income, for the carrying value in excess of fair value less costs to sell.

As a result, the land was deemed to meet held for sale classification during the fourth quarter of 2021, and the Company recognized a $ 0.3 million charge, reflected within Impairment of long-lived assets on the consolidated statements of income, for the carrying value in excess of fair value less costs to sell.

The agreed upon transaction price in the purchase and sale agreement was determined to approximate fair value under a market valuation approach.

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Total notes receivable $ 466 $ 10,058 $ 983 $ 106,708 $ 118,215

The adoption of Topic 326 required a cumulative-effect adjustment to the consolidated balance sheet as of the beginning of the first reporting period in which the guidance was effective.

As of the adoption date of January 1, 2020, the Company established an incremental credit allowance on its notes receivable loans of $ 8.3 million.

The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses, including the impacts of adopting Topic 326:

The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses:

(in thousands) 2022 2021

Beginning balance $ 16,779 $ 19,484

Reserves established from adoption of Topic 326 — 8,348 —

Provisions for credit losses ( 938 ) 709

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Ending balance $ 10,172 $ 16,779

The provisions recorded in the year ended December 31, 2021 primarily result from changes in the classification of certain loans as collateral-dependent and associated revisions to their allowances.

The write-offs for the year ended December 31, 2021 are associated with a loan that was settled in exchange for an operating hotel on October 1, 2021;

refer to acquisition disclosures in Note 24.

Allowances for credit losses attributable to collateral-dependent loans are $ 6.3 million and $ 7.8 million as of December 31, 2021 and December 31, 2020, respectively.

As of December 31, 2021, two loans with senior and/or subordinated tranches met the definition of collateral-dependent and are collateralized by the membership interests in the borrowing entities and either the associated land parcels or an operating hotel.

The Company used a DCF technique to project cash flows or a market approach via quoted market prices to value the underlying collateral.

As of December 31, 2022 and December 31, 2021, one and two loans, respectively, with senior and/or subordinated tranches met the definition of collateral-dependent and are collateralized by membership interests in the borrowing entities and either the associated land parcels or an operating hotel.

The Company used a discounted cash flow ("DCF") market approach via quoted market prices to value the underlying collateral.

The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections.

These nonrecurring fair value measurements are classified as level three of the fair value measurement hierarchy, as there are unobservable inputs which are significant to the overall fair value.

Based on these analyses, the fair value of collateral secures the carrying value of each loan to a significant extent.

During the first quarter of 2021, a loan with senior and subordinated tranches, that met the definition of collateral-dependent as of December 31, 2020, was restructured and as a result, no longer meets the classification of collateral-dependent as of December 31, 2021.

As a result of the COVID-19 pandemic, the Company extended interest deferral terms on certain notes receivable.

Based on these analyses, the fair value of collateral secures substantially all of the carrying value of each loan.

Allowances for credit losses attributable to collateral-dependent loans are $ 0.9 million and $ 6.3 million as of December 31, 2022 and December 31, 2021, respectively.

The write-offs recorded in the year ended December 31, 2022 and December 31, 2021 are primarily associated with loans previously classified as collateral-dependent that were settled in exchange for an operating hotel on April 14, 2022 and October 1, 2021, respectively.

Refer to Note 24 regarding the second quarter 2022 and third quarter 2021 asset acquisition accounting.

Additionally, one loan was settled under negotiated terms and therefore written off.

Two loans had revised provisions as a result of loan repayments being made timely and a favorable reassessment of the underlying collateral's performance.

The Company considers loans to be past due when payments are not made when due in accordance with then current loan provisions or terms extended to borrowers, including loans with concessions or interest deferral.

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Accounts receivable consist primarily of franchise and related fees due from hotel franchisees and are recorded at the invoiced amount.

During the year ended December 31, 2020, the Company recorded provisions for credit losses on accounts receivable of $ 15.6 million in SG&A expenses and $ 26.0 million in marketing and reservation system expenses, in consideration of the economic and credit conditions resulting from the COVID-19 pandemic and estimates of other expected credit losses.

During the year ended December 31, 2022, the Company recorded provisions for credit losses on accounts receivable of $ 0.4 million in SG&A expenses and $ 1.4 million in marketing and reservation system expenses.

During the year ended December 31, 2021, the Company recorded reversals of provisions for credit losses on accounts receivable of $ 4.4 million in SG&A expenses and $ 7.3 million in marketing and reservation system expenses, after considering improved collection patterns and economic and credit conditions.

During the years ended December 31, 2022 and December 31, 2021, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 12.4 million and $ 13.5 million, respectively.

The Company assumed $ 41.7 million of trade accounts receivable as a result of the Radisson acquisition .

Property and Equipment

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Depreciation expense, excluding amounts attributable to marketing and reservation activities, for the years ended December 31, 2022, 2021 and 2020 was $ 14.5 million, $ 16.5 million and $ 16.9 million, respectively.

In the first quarter of 2022, the Company acquired a hotel property through a deed in lieu foreclosure at the fair value of $ 20.4 million as of the acquisition date of April 14, 2022.

In the fourth quarter of 2021, the Company acquired a hotel property through a deed in lieu foreclosure at the fair value of $ 21.1 million as of the acquisition date of October 1, 2021.

In the third quarter of 2019, the Company completed an asset acquisition of four Cambria Hotels with a total net asset basis of $ 194.0 million.

Refer to Note 24.

During the third quarter of 2020, the Company recognized a non-cash pre-tax long-lived asset group impairment charge for a commercial office building in the amount of $ 4.3 million.

The Company acquired owned hotel property and equipment at the fair value of $ 125.4 million in the acquisition of Radisson Hotels Americas.

Refer to Note 24.

Goodwill, Impairment of Assets, and Sale of Business and Assets

The following table details the carrying amount of our goodwill:

The following table details the carrying amount of the Company's goodwill, including goodwill arising from the acquisition of Radisson Hotels Americas (refer to Note 24):

(in thousands) 2022 2021

Goodwill $ 166,774 $ 166,774

Goodwill, excluding goodwill arising from Radisson Hotels Americas acquisition $ 166,774 $ 166,774

Accumulated impairment losses ( 7,578 ) ( 7,578 )

Goodwill arising from Radisson Hotels Americas acquisition (refer to Note 24)

Goodwill, net carrying amount $ 218,653 $ 159,196

Goodwill was historically allocated to two reporting units:

(1) Hotel Franchising and (2) SaaS for vacation rentals.

In 2019, the Company recognized non-cash pre-tax impairment charges for the SaaS for vacation rentals long-lived asset group and goodwill.

In January 2019, the Company became aware that a key customer of the SaaS for vacation rentals reporting unit provided the unit’s management team with a letter purporting to terminate the customer’s contract.

Recoverability of the $ 7.3 million SaaS for vacation rentals long-lived asset group was assessed based on undiscounted expected cash flows of the asset group, which were less than the carrying amount of the asset group.

The Company recognized a non-cash pre-tax long-lived asset group impairment charge for the full amount of SaaS for vacation rentals long-lived assets.

The carrying value of the SaaS for vacation rentals reporting unit, after adjustment for the long-lived asset impairment, exceeded the fair value of the reporting unit by $ 3.1 million, resulting in an additional non-cash pre-tax impairment charge on the SaaS for vacation rentals reporting unit's goodwill in this amount.

The SaaS for vacation rentals reporting unit was subsequently sold in 2019, and as a result of costs incurred in completing the disposition and the derecognition of net assets of the reporting unit, including the remaining goodwill of the SaaS for vacation rentals reporting unit, the Company recorded a loss on sale of $ 4.7 million.

The results of the SaaS for vacation rentals reporting unit prior to the disposition are included in the Corporate & Other segment in Note 20.

For the years ended December 31, 2021 and 2020, goodwill is entirely attributable to the Hotel Franchising reporting unit.

As of December 31, 2022 and 2021, goodwill is entirely attributable to the Hotel Franchising reporting unit.

The Company assessed the qualitative factors attributable to the Hotel Franchising reporting unit and determined it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.

The Hotel Franchising reporting unit is

included in the Hotel Franchising reportable segment in Note 20.

There were no changes in the carrying amount of goodwill during the years ended December 31, 2021 and 2020.

The Hotel Franchising reporting unit is included in the Hotel Franchising & Management reportable segment in Note 20.

There were no changes in the carrying amount of goodwill during the year ended December 31, 2021.

Long-lived asset group impairments

Real estate asset sales

Four separate owned Cambria hotel assets or land parcels met held for sale classification and had sales consummated to third-party franchisees, resulting in derecognition from the balance sheet, during the year ended December 31, 2022.

We recognized gains on sale of business and assets, net for the four sales of $ 16.2 million in the Corporate & Other segment during the year ended December 31, 2022.

Commercial office building

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Intangible Assets

The components of the Company's intangible assets are as follows:

The components of the Company's intangible assets, including intangibles established from the acquisition of Radisson Hotels Americas (refer to Note 24), are as follows:

As of December 31, 2022 As of December 31, 2021

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(1) Represents the purchase price assigned to long-term franchise contracts.

The unamortized balance relates primarily to the acquisition of the WoodSpring franchise rights.

The unamortized balance relates primarily to franchise rights established from the Radisson Transaction, as well as WoodSpring franchise rights active since acquisition.

The franchise rights are being amortized over lives ranging from 12 to 15 years on a straight-line basis.

(2) Represents certain payments to customers as an incentive to enter into new franchise agreements generally amortized as an offset to royalty fees and marketing and reservation system fees over lives ranging from 5 to 30 years on a straight-line basis commencing at

hotel opening.

Gross and accumulated amortization amounts are written off upon full amortization recognition, including at termination of an associated franchise agreement.

Refer to Note 2 for discussion of impairments recognized.

(3) Represents definite-lived trademarks and other various amortizing assets generally amortized on a straight-line basis over a period of 8 years to 40 years.

(4) Represents software licenses capitalized under a SaaS agreement generally amortized on a straight-line basis over a period of 3 to 5 years.

(5) Represents the purchase price assigned to the WoodSpring and Suburban trademarks at acquisition.

(3) Represents definite-lived trademarks and other various amortizing assets, including management agreements, generally amortized on a straight-line basis over a period of 10 years to 30 years.

(4) Represents software licenses capitalized under a SaaS agreement which are generally amortized on a straight-line basis over an average period of 3 years.

(5) Represents the purchase price assigned to the Radisson, WoodSpring and Suburban trademarks established at the time of their respective acquisitions.

The trademarks are expected to generate future cash flows for an indefinite period of time and therefore are non-amortizing.

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For the years ended December 31, 2022, 2021 and 2020, the Company recognized losses from investments in VIEs, inclusive of impairments and gains/losses upon sales of ownership interests in or distributions resulting from sales of underlying assets of affiliates, totaling $ 3.7 million, $ 18.9 million and $ 15.4 million, respectively.

These amounts are classified as equity in net loss of affiliates in the consolidated statements of income and captured in the Hotel Franchising reportable segment in Note 20.

During the years ended December 31, 2021 and 2020, the Company recognized impairment charges of $ 19.3 million and $ 7.3 million, respectively, related to certain equity method investments.

These amounts are classified as equity in net (gain) loss of affiliates in the consolidated statements of income and captured in the Hotel Franchising & Management reportable segment in Note 20.

During the years ended December 31, 2022, December 31, 2021, and December 30, 2020 the Company recognized impairment charges of $ 0.2 million, $ 19.3 million, and $ 7.3 million, respectively, related to certain equity method investments.

The Company estimated the fair value of each investment on an individual basis and derived the value from a combination of observable prices from offers received for either the underlying collateral or the ownership interest of the unconsolidated affiliate, comparable market transactions, and DCF techniques to project cash flows for the investment based upon the underlying property.

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As a result, the Company recorded impairment charges from the carrying value to the estimated fair value for each investment.

The Company recognized no impairment charges during the year ended December 31, 2019.

During the years ended December 31, 2021, 2020 and 2019, the Company recognized net gains (losses) upon sales of ownership interests in or distributions resulting from sales of underlying assets of affiliates of $ 6.9 million, $ 0.5 million, and $( 5.0 ) million, respectively.

During the years ended December 31, 2021 and 2020, the Company recognized net gains (losses) upon sales of ownership interests in or distributions resulting from sales of underlying assets of affiliates of $ 6.9 million, and $ 0.5 million, respectively.

The Company recognized no net gains (losses) during the year ended December 31, 2022.

Investment in affiliate ownership interests at December 31, 2022 and 2021 are as follows:

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December 31, 2022 December 31, 2021

Choice Hotels Canada, Inc.

Main Street WP Hotel Associates, LLC 50 % 50 %

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CS Dallas Elm, LLC (2)

Choice Hotels Canada, Inc.

Pine Street Long Beach LLC (2)

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Integrated 32 West Randolph LLC 20 % 20 %

EH Nampa JV LLC 80 % — %

Radisson Hotel La Crosse (1)

(1) Non-VIE investments

(2) The Company sold its ownership interest in the equity method investment or received distributions resulting from the sale of underlying assets of the affiliate during 2021

(3) The Company received distributions from the sale of underlying assets of the affiliate in February 2023.

The equity method investment will be derecognized in the first quarter of 2023.

The following tables present summarized financial information for all unconsolidated ventures in which the Company holds an investment in affiliate that is accounted for under the equity method:

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Revenues $ 58,821 $ 35,514 $ 30,364

Operating (loss) income 2,299 ( 6,494 ) 12,617

Operating income (loss) 7,977 2,299 ( 6,494 )

Income (loss) from continuing operations 1,837 ( 5,227 ) ( 18,366 )

Net (loss) income ( 1,593 ) ( 18,977 ) ( 2,564 )

Net loss ( 1,058 ) ( 1,593 ) ( 18,977 )

As of December 31,

14 unchanged sentences

Land and buildings represents the Company's purchase of real estate as part of its program to stimulate development of certain brands and is classified as Other assets as the real estate is not presently under active construction.

The Company recognized a non-cash pre-tax long-lived asset group impairment charge for a real estate parcel in the amount of $ 9.2 million during the fourth quarter of 2020.

Refer to Note 6.

Accrued Expenses and Other Current Liabilities

9 unchanged sentences

Total $ 131,410 $ 104,472

(1) In light of uncertainty resulting from the COVID-19 pandemic, in the second quarter of 2020 the Company suspended future, undeclared dividends.

In the second quarter of 2021, the Company resumed the declaration of dividends.

Refer to Note 16.

Deferred Revenue

1 unchanged sentence

(in thousands) 2022 2021

Initial franchising and relicensing fees $ 96,628 $ 97,340

Initial franchise fees $ 123,790 $ 96,628

Loyalty programs 93,419 82,742

12 unchanged sentences

395,838 395,237

$ 400 million senior unsecured notes due 2022 ("2012 Senior Notes") with an effective interest rate of 6.0 % less deferred issuance costs of $ 0.2 million and $ 0.7 million at December 31, 2021 and December 31, 2020, respectively

$ 216,351 $ 215,827

$ 600 million senior unsecured credit facility (1)

$ 216.6 million senior unsecured notes due 2022 ("2012 Senior Notes") with an effective interest rate of 6.0 % less deferred issuance costs of $ 0.2 million at December 31, 2021 (2)

$ 600 million senior unsecured credit facility with an effective interest rate of 5.37 % less deferred issuance costs of $ 1.8 million at December 31, 2022 (1)

Economic development loans with an effective interest rate of 3.0 % at December 31, 2022 and December 31, 2021, respectively

Total debt (3)

$ 1,203,523 $ 1,060,474

Less current portion 2,976 216,351

Total long-term debt $ 1,200,547 $ 844,123

(1) During the third quarter of 2020, the Company utilized excess cash on hand to pay down its senior unsecured revolving credit facility balance in full.

As there are no outstanding borrowings at December 31, 2021 and December 31, 2020, deferred issuance costs for the senior unsecured revolving credit facility of $ 2.3 million and $ 2.4 million, respectively, are presented in non-current Other assets in the consolidated balance sheets.

(1) As there are no outstanding borrowings at December 31, 2021, deferred issuance costs for the senior unsecured revolving credit facility of $ 2.3 million are presented in non-current Other assets in the consolidated balance sheets.

Refer to Note 25 regarding an amendment to the senior unsecured revolving credit facility entered into on February 14, 2023.

(2) The 2012 Senior Notes matured on July 1, 2022.

The outstanding principal of $ 216.6 million was re-paid at maturity.

(3) As part of the Radisson Transaction, we assumed debt that was subsequently paid off during the third quarter of 2022.

For additional details, refer Acquired debt and swap derivative Asset sub-header below and Note 24.

Scheduled principal maturities of debt, net of unamortized discounts, premiums and deferred issuance costs, as of December 31, 2022 were as follows:

(in thousands) Senior Notes Other Notes

(in thousands) Senior Notes Revolving Credit

Facility Other Notes

Payable Total

3 unchanged sentences

Total payments $ 840,918 $ 358,189 $ 4,416 $ 1,203,523

Restated Senior Unsecured Credit Facility

On August 20, 2018, the Company entered into the Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"), which amended and restated the Company’s existing senior unsecured revolving credit agreement, dated July 21, 2015.

The Restated Credit Agreement provides for a $ 600 million unsecured credit facility with a maturity date of August 20, 2023, subject to optional one-year extensions that can be requested by the Company prior to each of the first, second and third anniversaries of the closing date of the Restated Credit Agreement.

The effectiveness of such extensions are subject to the consent of the lenders under the Restated Credit Agreement and certain customary conditions.

The Restated Credit Agreement also provides that up to $ 35 million of borrowings under the Restated Credit Agreement may be used for alternative currency loans and up to $ 25 million of borrowings under the Restated Credit Agreement may be used for swingline loans.

The Company may from time to time designate one or more wholly owned subsidiaries of the Company as additional borrowers under the Restated Credit Agreement, subject to the consent of the lenders and certain customary conditions.

On July 2, 2019, the Company exercised a one-year extension option on the Restated Credit Agreement, extending the maturity date from August 20, 2023 to August 20, 2024.

On August 12, 2020, the Company exercised an additional one-year extension on the Restated Credit Agreement for $ 525 million of the $ 600 million total capacity in exchange for a fee of $ 0.3 million.

The extended maturity date is August 20, 2025.

On August 11, 2021, the Company executed a one-year extension on the senior unsecured credit facility for $ 540 million of the $ 600 million total capacity in exchange for fees of $ 0.4 million.

The extended maturity date is August 20, 2026.

There are no subsidiary guarantors under the Restated Credit Agreement.

However, if certain subsidiaries of the Company subsequently incur certain recourse debt or become obligors in respect of certain recourse debt of the Company or certain of its other subsidiaries, the Restated Credit Agreement requires such obligated subsidiaries to guarantee the Company’s obligations under the Restated Credit Agreement (the "springing guarantee").

In the event that these subsidiary guarantees are triggered under the Restated Credit Agreement the same subsidiary guarantees would be required under the Company's $ 400 million senior unsecured notes due 2022 and certain hedging and bank product arrangements, if any, with lenders that are parties to the Restated Credit Agreement.

On February 18, 2020, the Company entered into the First Amendment to the Amended and Restated Senior Unsecured Credit Agreement (the "Amendment") among the Company, Deutsche Bank AG New York Branch, as administrative agent and the lenders party thereto.

The Amendment, among other things, removes the springing guarantee and other provisions and references in the Restated Credit Agreement related to the potential existence of subsidiary guarantors.

The Company may at any time prior to the final maturity date increase the amount of the Restated Credit Agreement or add one or more term loan facilities under the Restated Credit Agreement by up to an additional $ 250 million in the aggregate to the extent that any one or more lenders commit to being a lender for the additional amount of such term loan facility and certain other customary conditions are met.

The Restated Credit Agreement provides that the Company may elect to have borrowings bear interest at a rate equal to (i) LIBOR plus a margin ranging from 90 to 150 basis points or (ii) a base rate plus a margin ranging from 0 to 50 basis points, in each case, with the margin determined according to the Company’s senior unsecured long-term debt rating or under circumstances as set forth in the Restated Credit Agreement, the Company’s total leverage ratio in the event that such total leverage ratio is less than 2.5 to 1.0.

On August 11, 2021, we amended the Restated Credit Agreement to provide customary provisions for the replacement of LIBOR with an alternative benchmark rate if it is publicly announced that the administrator of LIBOR has ceased or will cease to provide LIBOR, or if it is publicly announced by the applicable regulatory supervisor that LIBOR is no longer representative.

The Restated Credit Agreement requires the Company to pay a fee on the total commitments, calculated on the basis of the actual daily amount of the commitments (regardless of usage) times a percentage per annum ranging from 0.075 % to 0.25 % (depending on the Company’s senior unsecured long-term debt rating or under circumstances as set forth in the Restated Credit Agreement, the Company’s total leverage ratio in the event that such total leverage ratio is less than 2.5 to 1.0).

The Restated Credit Agreement requires that the Company and its restricted subsidiaries comply with various covenants, including with respect to restrictions on liens, incurring indebtedness, making investments and effecting mergers and/or asset sales.

With respect to dividends, the Company may not declare or make any payment if there is an existing event of default or if the payment would create an event of default.

The Restated Credit Agreement imposes financial maintenance covenants requiring the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 and a total leverage ratio of not more than 4.5 to 1.0 or, on up to two nonconsecutive occasions, 5.5 to 1.0 for up to three consecutive quarters following a material acquisition commencing with the fiscal quarter in which such material acquisition occurred.

The Company maintains an Investment Grade Rating, as defined in the Restated Credit Agreement, and therefore is not currently required to comply with the consolidated fixed charge coverage ratio covenant.

The Restated Credit Agreement includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations of the Company under the Restated Credit Agreement to be immediately due and payable.

At December 31, 2021, the Company was in compliance with all financial covenants under the Restated Credit Agreement.

In the third quarter of 2020, the Company utilized excess cash on hand to pay down the senior unsecured revolving credit facility balance in full;

the facility remains undrawn as of December 31, 2020 and December 31, 2021.

Debt issuance costs incurred in connection with the Restated Credit Agreement are amortized on a straight-line basis, which is not materially different than the effective interest method, through maturity.

Amortization of these costs is included in interest expense in the consolidated statements of income.

The proceeds of the Restated Credit Agreement are generally expected to be used for general corporate purposes, including working capital, debt repayment, stock repurchases, dividends, investments and other permitted uses set forth in the Restated Credit Agreement.

To preserve financial flexibility and liquidity during the COVID-19 pandemic, on April 16, 2020, the Company entered into a credit agreement (the "Credit Agreement"), which provided for the $ 250 million Term Loan (the "Term Loan") with a scheduled maturity date of April 15, 2021, subject to an optional one-year extension if requested by the Company prior to the initial maturity date.

The Term Loan and all accrued but unpaid interest thereon was required to be repaid in full on the maturity date.

The Credit Agreement provided that the Company may elect to have the Term Loan bear interest at a rate equal to (i) LIBOR (subject to a floor of 1.00 %) plus a margin ranging from 200 to 275 basis points or (ii) a base rate plus a margin ranging from 100 to 175 basis points, in each case, with the margin determined according to the Company’s senior unsecured long-term debt rating.

The proceeds of the Term Loan were utilized to reduce borrowings on the Company’s senior unsecured revolving credit facility.

The Term Loan was subsequently paid off in full in July 2020 utilizing the proceeds of the 2020 Senior Notes described below.

In combination with the Tender Offer, the Company recorded a loss on extinguishment of debt of $ 16.0 million in the third quarter of 2020.

Senior Unsecured Notes Due 2031

On July 23, 2020, the Company issued unsecured senior notes in the principal amount of $ 450 million (the "2020 Senior Notes") bearing a coupon of 3.70 % with an effective rate of 3.86 %.

The 2020 Senior Notes will mature on January 15, 2031, with interest to be paid semi-annually on January 15th and July 15th beginning January 15, 2021.

The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions and other offering expenses, to repay the Term Loan in full and fund the purchase price of the 2012 Senior Notes tendered and accepted by the Company for purchase pursuant to the tender offer (discussed below under "Senior Unsecured Notes due 2022").

Interest on the 2020 Senior Notes is payable semi-annually on January 15th and July 15th of each year, commencing on January 15, 2021.

The interest rate payable on the 2020 Senior Notes will be subject to adjustment based on certain rating events.

The Company may redeem the 2020 Senior Notes, in whole or in part, at its option at the applicable redemption price before maturity.

If the Company redeems the 2020 Senior Notes prior to October 15, 2030 (three months prior to the maturity date) (the “2020 Notes Par Call Date”), the redemption price will be equal to the greater of (a) 100 % of the principal amount of the notes to be redeemed, or (b) the sum of the present values of the remaining scheduled principal and interest payments that would have been payable had the 2020 Senior Notes matured on the 2020 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 50 basis points, plus accrued and unpaid interest.

If the Company redeems the 2020 Senior Notes on or after the 2020 Notes Par Call Date, the redemption price will equal 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest.

Additionally, at the option of the holders of the 2020 Senior Notes, the Company may be required to repurchase all or a portion of the 2020 Senior Notes of a holder upon the occurrence of a change of control event at a price equal to 101 % of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

Senior Unsecured Notes Due 2029

On November 27, 2019, the Company issued unsecured senior notes in the principal amount of $ 400 million (the "2019 Senior Notes") at a discount of $ 2.4 million, bearing a coupon of 3.70 % with an effective rate of 3.88 %.

The 2019 Senior Notes will mature on December 1, 2029, with interest to be paid semi-annually on December 1 st and June 1 st .

The Company used the net proceeds of this offering, after deducting underwriting discounts, commissions and other offering expenses, to repay the previously outstanding senior notes in the principal amount of $ 250 million due August 28, 2020, and for working capital and other general corporate purposes.

Bond discounts and debt issuance costs incurred in connection with the 2019 Senior Notes are amortized on a straight-line basis, which is not materially different than the effective interest method, through maturity.

Amortization of these costs is included in interest expense in the consolidated statements of income.

The Company may redeem the 2019 Senior Notes, in whole or in part, at its option at the applicable redemption price before maturity.

If the Company redeems the 2019 Senior Notes prior to September 1, 2029 (three months prior to the maturity date) (the “2019 Notes Par Call Date”), the redemption price will be equal to the greater of (a) 100 % of the principal amount of the notes to be redeemed, or (b) the sum of the present values of the remaining scheduled principal and interest payments that would have been payable had the 2019 Senior Notes matured on the 2019 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 30 basis points, plus accrued and unpaid interest.

If the Company redeems the 2019 Senior Notes on or after the 2019 Notes Par Call Date, the redemption price will equal 100 % of the principal amount of the notes to be redeemed, plus accrued and unpaid interest.

Additionally, at the option of the holders of the

2019 Senior Notes, the Company may be required to repurchase all or a portion of the 2019 Senior Notes of a holder upon the occurrence of a change of control event at a price equal to 101 % of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

Senior Unsecured Notes Due 2022

On June 27, 2012, the Company issued unsecured senior notes with a principal amount of $ 400 million (the "2012 Senior Notes") at par, bearing a coupon of 5.75 % with an effective rate of 6.00 %.

The 2012 Senior Notes will mature on July 1, 2022, with interest to be paid semi-annually on January 1 st and July 1 st .

The Company utilized the net proceeds of this offering, after deducting underwriting discounts, commissions and other offering expenses, together with borrowings under the Company's senior unsecured senior credit facility, to pay a special cash dividend to stockholders totaling approximately $ 600.7 million paid on August 23, 2012.

Debt issuance costs incurred in connection with the 2012 Senior Notes are amortized, utilizing the effective interest method through maturity.

Amortization of these costs is included in interest expense in the consolidated statements of income.

The Company may redeem the 2012 Senior Notes at its option at a redemption price equal to the greater of (a) 100 % of the principal amount of the notes to be redeemed and (b) the sum of the present values of the remaining scheduled principal and interest payments from the redemption date to the date of maturity, discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 50 basis points.

Additionally, at the option of the holders of the 2012 Senior Notes, the Company may be required to repurchase all or a portion of the 2012 Senior Notes of a holder upon the occurrence of a change of control event at a price equal to 101 % of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

On July 9, 2020, the Company commenced the tender offer (the "Tender Offer") to purchase up to $ 160.0 million aggregate principal amount of the Company’s 2012 Senior Notes subject to increase or decrease.

The Tender Offer was subsequently upsized to $ 180.0 million aggregate principal amount of the 2012 Notes.

On July 23, 2020, the Company amended the Tender Offer by increasing the aggregate principal maximum tender amount from $ 180.0 million to $ 183.4 million.

The Tender Offer settled on July 24, 2020 for $ 197.8 million, including an early tender premium, settlement fees, and accrued interest paid.

In combination with the early pay off of the Term Loan, the Company recorded a loss on extinguishment of debt of $ 16.0 million in the third quarter of 2020.

The Company's 2012 Senior Notes mature on July 1, 2022 with a principal maturity, net of unamortized deferred issuance costs, of $ 216.4 million.

Construction Loan

In March 2018, the Company entered into a construction loan agreement for the rehabilitation and development of a former office building into a Cambria Hotel through a consolidating affiliate with a commercial lender, which is secured by the building.

The construction was completed and the hotel opened in the third quarter of 2019, resulting in the satisfaction of the completion guaranty.

On March 5, 2020, the Company paid off the construction loan in the amount of $ 33.1 million inclusive of accrued and unpaid interest and recorded a loss on extinguishment of debt of $ 0.6 million.

Fixed Rate Collateralized Mortgage

On December 30, 2014, a court awarded the Company title to an office building as settlement for a portion of an outstanding loan receivable for which the building was pledged as collateral.

In conjunction with the court award, the Company also assumed the $ 9.5 million mortgage on the property with a fixed interest rate of 7.26 %.

The mortgage was collateralized by the office building, required monthly payments of principal and interest and matured in December 2020 with a balloon payment due of $ 6.9 million.

Payments were made in each quarter of 2020, with the balloon payment of $ 6.9 million made at maturity in December 2020.

Economic Development Loans

The Company entered into economic development agreements with various governmental entities in conjunction with the relocation of its corporate headquarters in April 2013.

In accordance with these agreements, the governmental entities agreed to advance approximately $ 4.4 million to the Company to offset a portion of the corporate headquarters relocation and tenant improvement costs in consideration of the employment of permanent, full-time employees within the jurisdictions.

At December 31, 2021, the Company had been fully advanced the amounts due pursuant to these agreements.

These advances bear interest at a rate of 3 % per annum.

Repayment of the advances is contingent upon the Company achieving certain performance conditions.

Performance conditions are measured annually on December 31 st and primarily relate to maintaining certain levels of employment within the various jurisdictions.

If the Company fails to meet an annual performance condition, the Company may be required to repay a portion

or all of the advances including accrued interest by April 30 th following the measurement date.

Any outstanding advances at the expiration in 2023 of the Company's current ten-year corporate headquarters lease will be forgiven in full.

The advances will be included in long-term debt in the Company's consolidated balance sheets until the Company determines that the future performance conditions will be met over the entire term of the agreement and the Company will not be required to repay the advances.

The Company accrues interest on the portion of the advances that it expects to repay.

The Company was in compliance with all applicable current performance conditions as of December 31, 2021.

Senior unsecured credit facility

On August 11, 2022, to fund the Radisson Hotels Americas acquisition, the Company drew $ 175.0 million on the senior unsecured revolving credit facility and funded the remainder with cash on hand.

Refer to Note 24.

At December 31, 2022, there is approximately $ 360.0 million outstanding on the senior unsecured revolving credit facility.

Refer to Note 25 regarding an amendment to the senior unsecured revolving credit facility entered into on February 14, 2023.

Acquired debt and swap derivative asset

On August 11, 2022, in connection with the Radisson Hotels Americas acquisition, the Company also acquired three owned hotel properties, one of which had an encumbered mortgage loan with a mortgage principal in the amount of $ 53.5 million with an original maturity date of August 7, 2024.

In addition, the mortgage had an associated interest rate cap agreement (“Interest Swap”) with an effective date of July 30, 2021 through August 6, 2024.

On August 12, 2022, at Choice’s election, cash on hand was wired to pay off the outstanding loan principal, outstanding interest, and certain prepayment, exit and related fees in the amount of $ 56.0 million.

At the same time, several of the loan related escrows were released in the amount of $ 10.4 million.

On August 16, 2022, the Interest Swap derivative was terminated, which resulted in a payment to Choice in the amount of $ 1.9 million.

Non-Qualified Retirement, Savings and Investment Plans

13 unchanged sentences

Compensation expense is recorded in SG&A expense on the Company’s consolidated statements of income based on the change in the deferred compensation obligation related to earnings credited to participants as well as changes in the fair value of diversified investments.

The net increase in compensation expense recorded in SG&A for the years ended December 31, 2021, 2020 and 2019 were $ 6.1 million, $ 4.5 million, and $ 5.3 million, respectively.

The net decrease in compensation expense recorded in SG&A for the year ended December 31, 2022 was $ 5.3 million.

For the years ended December 31, 2021, and 2020, an increase in compensation expense was recorded in SG&A for $ 6.1 million, and $ 4.5 million, respectively.

Under the Deferred Compensation Plan, the Company has invested the employee salary deferrals in diversified long-term investments which are intended to provide investment returns that offset the earnings credited to the participants.

2 unchanged sentences

These investments are considered trading securities and therefore the changes in the fair value of the diversified assets is included in other gains, net in the accompanying consolidated statements of income.

The Company recorded investment gains during the years ended December 31, 2021, 2020 and 2019 of $ 5.6 million, $ 4.2 million, and $ 4.9 million, respectively.

The Company recorded investment loss during December 31, 2022 of $ 6.0 million and gains during the years ended December 31, 2021 and 2020 of $ 5.6 million, and $ 4.2 million, respectively.

The Deferred Compensation Plan held no shares of the Company's common stock at December 31, 2022 and 2021.

31 unchanged sentences

The fair values of the Company's senior unsecured notes are classified as Level 2, as the significant inputs are observable in an active market.

The Company's 2012 Senior Notes matured and were re-paid on July 1, 2022.

Refer to Note 12 for further information on debt.

44 unchanged sentences

Operating lease ROU assets ( 17,703 ) ( 4,350 )

Partnership interests — ( 550 )

Other ( 1,047 ) ( 1,279 )

1 unchanged sentence

Net deferred tax assets $ 88,182 $ 68,643

The Company assesses available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

Based on this evaluation, the Company recorded a net change to its valuation allowance of $ 0.4 million due to a $ 2.9 million decrease in the foreign valuation allowance, primarily related to the Dutch deferred tax asset, partially offset by a $ 2.5 million increase in the valuation allowance related to state tax credits.

In 2021, the Company identified $ 14.2 million of state tax credit carryforwards due to expire between 2030 and 2035.

The Company believes that it is more likely than not that these benefits will not be realized.

Accordingly, the Company has provided a tax-effected valuation allowance of $ 14.2 million for these credits.

Additionally, the Company has provided a tax-effected valuation allowance of $ 5.5 million on its foreign deferred tax assets.

As of December 31, 2021, the Company had gross foreign net operating losses ("NOLs") of $ 26.6 million.

The Company believes that it is more likely than not that some of these benefits will not be realized.

Accordingly, the Company recorded a gross valuation allowance of $ 7.0 million on the deferred tax assets related to these foreign net operating losses.

We have $ 26.0 million of foreign NOLs with an indefinite carryforward life.

On January 1, 2018, the Company adopted ASU 2016-16, Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other than Inventory ("ASU 2016-16"), which provides guidance on recognition of current income tax consequences for intercompany asset transfers (other than inventory) at the time of transfer.

On January 1, 2020, the Company completed a reorganization of its foreign legal entity structure.

In accordance with ASU 2016-16, the Company recorded a tax benefit of $ 34.6 million and a corresponding deferred tax asset due to the reorganization.

In 2020, due to a decrease in our forecasted international income resulting from adverse impacts of the COVID-19 pandemic, the Company recorded a valuation allowance of $ 5.7 million reflecting a change in the anticipated realizability of this deferred tax asset.

In 2021, due to changes in Dutch tax law, the Company reduced the carrying value of the deferred tax asset by $ 4.2 million and decreased the corresponding valuation allowance by $ 2.7 million.

As of December 31, 2021, the balance of this deferred tax asset is $ 21.4 million, net of current year amortization, and the balance of the corresponding valuation allowance is $ 3.0 million.

The Company assesses all positive and negative evidence to estimate whether sufficient future taxable income will be generated to use deferred tax assets.

Based on this evaluation, the Company recorded a net change to its valuation allowance of $ 1.7 million due to a $ 2.2 million increase related to state tax credits, partially offset by a $ 0.5 million decrease related to foreign deferred tax assets.

The Company has $ 16.4 million of state income tax credit carryforwards.

It is more likely than not that these benefits will not be realized.

Accordingly, the Company has provided a full valuation allowance against these credit carryforwards.

The Company has also provided a tax-effected valuation allowance of $ 5.0 million on its foreign deferred tax assets, as it believes it is more likely than not that some of these benefits will not be realized.

As of December 31, 2022, the Company had gross foreign net operating losses ("NOLs") of $ 31.4 million, all of which have indefinite carryforward lives.

The Company has recorded a tax-effected valuation allowance of $ 1.8 million for these NOLs, primarily related to France and India.

In addition, the Company has a Dutch deferred tax asset of $ 17.6 million, for which it has recorded a valuation allowance of $ 3 million.

The Dutch valuation allowance did not change in 2022.

The statutory United States federal income tax rate reconciles to the effective income tax rates for continuing operations as follows:

13 unchanged sentences

The Company's effective income tax rates from continuing operations were 24.0 %, 23.3 %, and ( 42.2 )% for the years ended December 31, 2022, 2021 and 2020, respectively.

The effective income tax rate for the year ended December 31, 2021 was higher than the U.S.

federal income tax rate of 21.0% primarily due to state income taxes, $ 1.7 million of additional tax expense related to compensation, and a $ 1.5 million reduction in the net carrying value of our Dutch deferred tax asset, partially offset by tax credits of $ 3.7 million.

The effective income tax rate for the year ended December 31, 2020 was lower than the U.S.

federal income tax rate of 21% due to the impact of our international reorganization under ASU 2016-16 (partially offset by the related valuation allowance), tax credits of $ 3.0 million, $ 3.1 million of additional tax benefit related to compensation, and the impact of foreign operations, partially offset by state income taxes, and a change in estimated uncertain tax positions.

The effective income tax rates for the years ended December 31, 2022 and December 31, 2021 were higher than the U.S.

federal income tax rate of 21.0% primarily due to state income taxes and tax expense related to compensation, partially offset by federal income tax credits.

The effective income tax rate for the year ended December 31, 2021 was also higher due to a reduction in the net carrying value of its Dutch deferred tax asset.

As of December 31, 2022, 2021 and 2020, the Company’s gross unrecognized tax benefits totaled $ 11.9 million, $ 11.1 million, and $ 10.2 million, respectively.

8 unchanged sentences

It is reasonably possible that the Company’s unrecognized tax benefits could decrease within the next 12 months by as much as $ 10.5 million due to settlements and the expiration of applicable statutes of limitations.

The Company's federal income tax return for tax years 2015 and 2016 are currently under examination by the Internal Revenue Service for a tax credit refund claim.

The Company's federal income tax returns for tax years 2015 and 2016 are currently under examination by the Internal Revenue Service for a tax credit refund claim.

The Company's federal income tax return for tax years 2017 and 2018 are also under examination by the Internal Revenue Service.

5 unchanged sentences

shareholder to a minimum tax on “global intangible low-taxed income” (“GILTI”) earned by certain foreign subsidiaries.

The FASB Staff Q&A, Topic 740 No.

5, Accounting for GILTI states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI resulting from those items in the year the tax is incurred.

The Company has elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred and has incurred tax for the year ended December 31, 2021.

On March 27, 2020, in response to the COVID-19 pandemic, the “Coronavirus Aid, Relief and Economic Security Act” (“CARES”) was signed into law by the President of the United States.

The CARES Act includes, among other things, U.S.

corporate income tax provisions related to net operating loss carryback periods, alternative minimum tax credits, modifications to interest deduction limitations and technical corrections on tax depreciation methods for qualified improvement property.

Many other countries have also introduced various corporate income tax relief provisions in response to the pandemic.

The Company does not believe that any of these changes will have a material effect on our financial statements.

The practice of the Company is to recognize the tax expense on GILTI as a period expense in the period the tax is incurred.

The Company has incurred tax on GILTI for the year ended December 31, 2022.

Share-Based Compensation and Capital Stock

42 unchanged sentences

273,567 8.16 104.87 68,343 104.87

$ 104.88 to $ 117.98

16,667 9.63 117.98 — —

$ 117.99 to $ 146.68

152,584 9.16 146.68 — —

1,010,647 5.58 $ 94.97 523,856 $ 76.77

Restricted Stock

29 unchanged sentences

The Company has currently estimated that between 54 % and 266.7 % of the various award targets will be achieved.

During the year ended December 31, 2020, the Company reduced the leveraging factor for 230,647 unvested PVRSUs granted in the current and prior periods to 0 %, based on management's estimate of achievement of performance targets with contemplation to impacts from the COVI D-19 pandemic.

The following table is a summary of activity related to PVRSU grants:

8 unchanged sentences

31 to 36 months

During the years ended December 31, 2021, 2020 and 2019, PVRSUs totaling 3,986 , 176,471 and 73,242 , respectively, vested at a fair value of $ 0.3 million, $ 17.5 million, and $ 5.5 million, respectively.

During the year ended December 31, 2021, an additional 920 units were awarded because the Company's performance exceeded the conditions provided in the awards.

During the year ended December 31, 2020, an additional 30,116 units were awarded because the Company's performance exceeded the conditions provided in the awards.

During the year ended December 31, 2019, an additional 1,583 units were awarded because the Company's performance exceeded the conditions provided in the awards.

As a result of the Company's operating results not achieving certain performance conditions contained in the PVRSU awards, the number of PVRSUs that expired was 72,944 shares for the year ended December 31, 2021, 16,117 shares for the year ended December 31, 2020, and no shares for the year ended December 31, 2019.

During the year ended December 31, 2022, no PVRSUs vested.

During the years ended December 31, 2021 and 2020, PVRSUs totaling 3,986 and 176,471 vested at a fair value of $ 0.3 million and $ 17.5 million, respectively.

During the years ended December 31, 2021 and 2020, an additional 920 and 30,116 units, respectively, were awarded because the Company's performance exceeded the conditions provided in the awards.

As a result of the Company's operating results not achieving certain performance conditions contained in the PVRSU awards, the number of PVRSUs that expired was 78,370 shares for the year ended December 31, 2022, 72,944 shares for the year ended December 31, 2021, and 16,117 shares for the year ended December 31, 2020.

A summary of stock-based award activity as of December 31, 2022, 2021 and 2020 and the changes during those years are presented below:

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Options exercisable as of December 31, 2022 523,856 $ 76.77 3.3 years

* PVRSU units outstanding have been increased by 74,832 units during the year ended December 31, 2021, due to the Company exceeding the targeted performance conditions contained in PVRSU's granted in prior periods.

* PVRSU units outstanding have been adjusted by 3,484 , net units during the year ended December 31, 2022, due to a decrease in outstanding PVRSU units due to the Company partially meeting the targeted performance conditions offset by an increase in outstanding PVRSU units due to the Company exceeding the targeted performance conditions in PVRSU's granted in prior periods.

Stock Options Restricted Stock Performance Vested

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Total share-based compensation expense $ 40,459 $ 23,380 $ 7,241

Income tax benefit $ 5,648 $ 1,706 $ 4,010

The total unrecognized compensation costs related to stock-based awards that have not yet vested and the related weighted average amortization period over which the costs are to be recognized as of December 31, 2022 are as follows:

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Total $ 76,707

During the fourth quarter of 2021, the Company's board of directors announced a 6 % increase to the quarterly dividend rate to $ 0.2375 per share from $ 0.225 per share, beginning with the dividend payable in the first quarter of 2022.

During the fourth quarter of 2019, the Company's board of directors announced a 5 % increase to the quarterly dividend rate to $ 0.225 per share from $ 0.215 per share, beginning with the dividend payable in the first quarter of 2020.

On February 28, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.225 per share of common stock for $ 12.5 million.

The dividend was payable on April 16, 2020 to shareholders of record on April 2, 2020.

Subsequent to the payment of the dividend, in light of uncertainty resulting from the COVID-19 pandemic, the Company’s board of directors suspended future, undeclared dividends while the pandemic is significantly impacting travel.

On May 7, 2021, the Company's board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock and approved resumption of the share repurchase program.

Additionally, on September 9, 2021, the Company's board of directors declared a quarterly cash dividend of $ 0.225 per share of common stock.

Subsequent to the payment of the dividend, in light of uncertainty resulting from the COVID-19 pandemic, the Company’s Board of Directors suspended future, undeclared dividends.

During the fourth quarter of 2021, the Company's Board of Directors announced a 6 % increase to the quarterly dividend rate to $ 0.2375 per share from $ 0.225 per share, beginning with the dividend payable in the first quarter of 2022.

During the year ended December 31, 2022, the Company's quarterly dividend rate was $ 0.2375 per share.

Annual dividends declared during the year ended December 31, 2022 were $ 0.95 per share or $ 51.7 million.

During the year ended December 31, 2021, the Company's quarterly dividend rate was $ 0.225 per share for the second and third quarter and was $ 0.2375 per share in the fourth quarter of 2021.

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Annual dividends declared during the year ended December 31, 2020 were $ 0.225 per share or $ 12.5 million.

During the year ended December 31, 2019, the Company's quarterly dividend rate was $ 0.215 per share for the first three quarters and was $ 0.225 per share in the fourth quarter of 2019.

Annual dividends declared during the year ended December 31, 2019 were $ 0.87 per share or $ 48.5 million.

The Company may not declare or make any payment if under the Restated Credit agreement there is an existing event of default or if the payment would create an event of default.

In addition, during the years ended December 31, 2021, 2020 and 2019, the Company paid previously declared but unrecorded dividends totaling $ 8 thousand, $ 0.4 million, and $ 0.2 million, respectively, that were contingent upon the vesting of performance vested restricted units.

In addition, during the years ended December 31, 2022, 2021 and 2020, the Company paid previously declared but unrecorded dividends totaling $ 5 thousand, $ 8 thousand, and $ 0.4 million, respectively, that were contingent upon the vesting of performance vested restricted units.

Share Repurchases and Redemptions

The Company may purchase stock under a stock repurchase program to return excess capital to its shareholders.

Treasury stock activity is recorded at cost in the accompanying consolidated financial statements.

During the year ended December 31, 2019, the Company repurchased 0.6 million shares of its common stock under the repurchase program at a total cost of $ 44.1 million.

During the three months ended March 31, 2020, the Company repurchased 0.5 million shares of common stock under the share repurchase program at a total cost of $ 43.3 million.

In 1998, we instituted a share repurchase program.

The Company may purchase stock under the share repurchase program to return excess capital to its shareholders.

Treasury stock activity is recorded at cost in the consolidated balance sheets.

During the three months ended March 31, 2020, the Company repurchased 0.5 million shares of common stock under the repurchase program at a total cost of $ 43.3 million.

In light of uncertainty resulting from the COVID-19 pandemic, the Company subsequently temporarily suspended activity under the share repurchase program and no additional repurchases were made pursuant to the program for the balance of 2020.

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During the year ended December 31, 2021, the Company repurchased 57,754 shares of its common stock under the repurchase program at a total cost of $ 7.3 million.

During the year ended December 31, 2022, the Company repurchased 3,666,298 shares of its common stock under the repurchase program at a total cost of $ 429.4 million.

On a cumulative basis through December 31, 2022, the Company repurchased 88.4 million shares of its common stock (including 33.0 million prior to the two -for-one stock split effected in October 2005) under the share repurchase program at a total cost of $ 1.9 billion.

During 2021, the Company redeemed 54,441 shares of common stock at a total cost of approximately $ 6.0 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of performance vested restricted stock units and restricted stock grants.

During 2020 and 2019, the Company redeemed 0.1 million and 79,603 shares of common stock at a total cost of $ 12.2 million and $ 6.5 million, respectively, from employees to satisfy the option price and minimum tax-withholding requirements related to the exercising of

options and vesting of performance vested restricted stock units and restricted stock grants.

These redemptions were outside the share repurchase program initiated in June 1998.

During the year ended December 31, 2022, the Company redeemed 36,120 shares of common stock at a total cost of approximately $ 5.4 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of performance vested restricted stock units and restricted stock grants.

During 2021 and 2020, the Company redeemed 54,441 and 125,996 shares of common stock at a total cost of $ 6.0 million and $ 12.2 million, respectively, from employees to satisfy the option price and minimum tax-withholding requirements related to the exercising of options and vesting of performance vested restricted stock units and restricted stock grants.

These redemptions were outside the share repurchase program.

Accumulated Other Comprehensive Loss

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Total accumulated other comprehensive loss $ ( 5,211 ) $ ( 4,574 ) $ ( 4,646 )

The following represents the changes in accumulated other comprehensive loss, net of tax by component for the years ended December 31, 2021 and 2020:

The following represents the changes in accumulated other comprehensive loss, net of tax by component:

Year Ended December 31, 2022 Year Ended December 31, 2021

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Beginning Balance $ ( 4,574 ) $ ( 4,574 ) $ ( 4,646 ) $ ( 4,646 )

Other comprehensive gain (loss) before reclassification 72 72 ( 96 ) ( 96 )

Other comprehensive (loss) income before reclassification ( 637 ) ( 637 ) 72 72

Ending Balance $ ( 5,211 ) $ ( 5,211 ) $ ( 4,574 ) $ ( 4,574 )

During the year ended December 31, 2019, $ 0.8 million and $ 0.6 million was reclassified from accumulated other comprehensive loss to Interest expense and Loss on extinguishment of debt, respectively, in the Company's consolidated statements of income with reference to a cash flow hedge loss on an interest rate contract.

There was no income tax expense or benefit.

There were no amounts reclassified during the year ended December 31, 2020 or December 31, 2021, as the debt related to the Interest rate contract was paid off in December 2019.

There were no amounts reclassified from accumulated other comprehensive loss during the year ended December 31, 2021 or December 31, 2022.

Earnings Per Share

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The Company has operating leases primarily for office space, buildings, and equipment.

Our leases have remaining lease terms of one month to eleven years , some of which may include options to extend leases for up to five years and some which may include options to terminate the leases within one year .

Our leases, excluding the assumed ground lease discussed below, have remaining lease terms of one month to ten years , some of which may include options to extend leases for up to five years and some which may include options to terminate the leases within one year .

Additionally, as part of the Radisson Transaction, the Company assumed a ground lease on an owned hotel with a remaining 89 year term.

Inclusive of other assumed operating leases, the Radisson transaction resulted in a lease liability and right-of-use asset at acquisition of $ 40.7 million and $ 40.3 million, respectively (refer to Note 24).

The Company's lease costs were as follows:

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Total lease liabilities $ 81,657 $ 47,490

On October 4, 2021, an office lease with an approximate 10 -year term with an unrelated third party commenced.

On October 4, 2021, an office lease for an approximate 10 -year term with an unrelated third party commenced.

The Company accounted for this lease as an operating lease and established a lease liability and right-of-use asset of approximately $ 34.6 million and $ 25.3 million, respectively, during the fourth quarter of 2021.

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The terms of the lease agreements are consistent with the terms of lease agreements that the Company has entered into with unrelated third parties for use of the aircraft.

During the years ended December 31, 2021 and 2020, the Company received $ 0.2 million and $ 0.2 million, respectively, pursuant to this arrangement.

In December 2013, the Company's board of directors approved an arrangement between the Company and an entity controlled by the family members of the Company's largest shareholder to sublease approximately 2,200 square feet of office space

located in Chevy Chase, Maryland.

The sublease had a month-to-month term, with a 90 -day notice period and annual lease payments totaling approximately $ 0.1 million.

The sublease was not renewed following April 2019.

During the year ended December 31, 2019, the Company received approximately $ 49 thousand in rent payments associated with this lease.

Subsequently, the entity affiliated with the Company's largest shareholder entered into a separate lease with a third-party lessor and the Company reimburses the entity for use of the space by the Company's Chairman.

During the years ended December 31, 2020 and 2019, the Company reimbursed the entity approximately $ 66 thousand and $ 76 thousand, respectively.

During the years ended December 31, 2022 and 2021, the Company received $ 48 thousand and $ 0.2 million, respectively, pursuant to this arrangement.

Reportable Segments

The Hotel Franchising reportable segment includes the Company's hotel franchising operations consisting of its 14 brands.

The 14 brands are aggregated within this segment considering their similar economic characteristics, types of customers, distribution channels and regulatory business environments.

Revenues from the hotel franchising business include royalty fees, initial franchise and relicensing fees, marketing and reservation system fees, procurement services revenue and other hotel franchising related revenue.

The Company is obligated under its hotel franchise agreements to provide marketing and reservation services appropriate for the operation of its systems.

The revenues received from franchisees that are used to pay for part of the Company's ongoing operations are included in hotel franchising revenues and are offset by the related expenses paid for marketing and reservation system activities to calculate hotel franchising operating income.

Equity in earnings or losses from hotel franchising related investments in affiliates is allocated to the Company's hotel franchising segment.

The Company evaluates its hotel franchising segment based primarily on the results of the segment without allocating corporate expenses, indirect general and administrative expenses, interest expense, interest income, other gains and losses or income taxes, which are included in the Corporate & Other column.

Corporate & Other revenues include owned hotel revenues, rental income related to an office building owned by the Company, and revenues related to the Company's SaaS technology solutions division which provide cloud-based property management software to non-franchised hoteliers.

The intersegment revenue adjustment is from the elimination of Hotel Franchising revenue which include royalty and marketing and reservation system fees charged to our owned hotels against franchise fee expense recognized by our owned hotels in Corporate & Other operating income (loss).

The Hotel Franchising & Management reportable segment includes the Company's hotel franchising operations consisting of its 22 brands and brand extensions and hotel management operations of 13 Radisson Hotels Americas hotels (inclusive of 3 owned hotels).

The 22 brands and brand extensions and hotel management operations are aggregated within this reportable segment considering their similar economic characteristics, types of customers, distribution channels and regulatory business environments.

Revenues from the hotel franchising and management business include royalty fees, initial franchise and relicensing fees, cost reimbursement revenues, procurement services revenue, base and incentive management fees, and other hotel franchising and management related revenue.

The Company provides certain services under its hotel franchise and management agreements which result in direct and indirect cost reimbursements.

The cost reimbursement revenues received from franchisees are included in hotel franchising and management revenues and are offset by the related expenses to calculate hotel franchising operating income.

Equity in earnings or losses from hotel franchising related investments in affiliates is allocated to the Company's Hotel Franchising & Management reportable segment.

The Company evaluates its Hotel Franchising & Management reportable segment based primarily on the results of the segment without allocating corporate expenses, indirect general and administrative expenses, interest expense, interest income, other gains and losses or income taxes, which are included in the Corporate & Other column.

Corporate & Other revenues include owned hotel revenues and revenues related to the Company's SaaS technology solutions division which provide cloud-based property management software to non-franchised hoteliers.

The intersegment revenue adjustment is from the elimination of Hotel Franchising & Management revenue which include royalty, management and cost reimbursable fees charged to our owned hotels against franchise and management fee expense recognized by our owned hotels in Corporate & Other operating income (loss).

Our President and Chief Executive Officer, who is our CODM, does not use assets by operating segment when assessing performance or making operating segment resource allocation decisions and therefore assets by segment are not disclosed below.

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For the Year Ended December 31, 2022

(in thousands) Hotel Franchising Corporate

(in thousands) Hotel Franchising

& Management Corporate

& Other Intersegment Eliminations Consolidated

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For the Year Ended December 31, 2021

(in thousands) Hotel Franchising Corporate

(in thousands) Hotel Franchising

& Management Corporate

& Other Intersegment Eliminations Consolidated

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For the Year Ended December 31, 2020

(in thousands) Hotel Franchising Corporate

(in thousands) Hotel Franchising

& Management Corporate

& Other Intersegment Eliminations Consolidated

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Income (loss) before income taxes 176,012 ( 123,006 ) — 53,006

The results of the Company's international operations are included in the Hotel Franchising and Corporate & Other segments.

Revenues generated by foreign operations, including royalty, marketing and reservations system fees and other revenues for the years ended December 31, 2021, 2020 and 2019 were $ 46.8 million, $ 42.6 million, and $ 69.5 million, respectively.

The results of the Company's international operations are included in the Hotel Franchising & Management reportable segment and Corporate & Other.

Revenues generated by foreign operations, including royalty, cost reimbursable fees and other revenues for the years ended December 31, 2022, 2021 and 2020 were $ 70.2 million, $ 46.8 million, and $ 42.6 million, respectively.

Related Party Transactions

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In June 2019, the Company and Sunburst entered into master development agreements which provide Sunburst geographic exclusivity in two specified regions for development of five WoodSpring branded hotels.

For the years ended December 31, 2021 and 2020, there were zero and one new franchise agreement signed between the Company and Sunburst, respectively.

As of December 31, 2021, Sunburst operates four hotels under franchise with the Company.

Total franchise fees, including royalty and marketing and reservation system fees, paid by Sunburst to the Company included in the accompanying consolidated financial statements were $ 0.4 million, $ 0.5 million, and $ 1.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

As of both December 31, 2021 and 2020, accounts receivable due from Sunburst were $ 0.1 million.

For the years ended December 31, 2022 and 2021, there were four and zero new franchise agreements signed between the Company and Sunburst and affiliates, respectively.

As of December 31, 2022, Sunburst and affiliates operate five hotels under franchise with the Company.

Total franchise fees, including royalty and marketing and reservation system fees, paid by Sunburst and affiliates to the Company included in the accompanying consolidated financial statements were $ 0.8 million, $ 0.4 million, and $ 0.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of both December 31, 2022 and 2021, accounts receivable due from Sunburst and affiliates were $ 0.1 million.

Transactions with Unconsolidated Affiliates

The Company extends loans to various unconsolidated affiliates or members of our unconsolidated affiliates.

The Company has a total principal balance on these loans of $ 90.7 million as of both December 31, 2021 and December 31, 2020, respectively.

The Company has a total principal balance on these loans of $ 65.2 million and $ 90.7 million as of December 31, 2022 and December 31, 2021, respectively.

These loans mature at various dates and bear interest at fixed and variable rates.

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The maximum exposure of principal incidental to these limited payment guaranties is $ 5.7 million, plus unpaid expenses and accrued unpaid interest.

As of December 31, 2021 and

December 31, 2020, the Company believed the likelihood of having to perform under the aforementioned limited payment guaranties was remote.

As of December 31, 2022 and December 31, 2021, the Company believed the likelihood of having to perform under the aforementioned limited payment guaranties was remote.

In the event of performance, the Company has recourse for one of the transactions in the form of a membership interest pledge as collateral for the guaranty.

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At December 31, 2022, the Company had commitments to extend an additional $ 330.4 million for these purposes provided the conditions of the payment are met by its franchisees.

• As part of the acquisition of Radisson Hotels Americas, the Company entered into a long-term management arrangement, with an expiration date of July 31, 2031, to manage eight hotel properties owned by a third-party.

In conjunction with the management arrangement, the Company entered into a guarantee with the third-party to fund any shortfalls in the payment of the third-party owner’s priority stipulated in the management agreement up to a specified maximum amount.

On November 1, 2021, an amended and restated management agreement was executed between the Company and the third party.

The maximum guarantee under the agreement is $ 22 million.

There are no potential guaranteed payments until January 2023 and future performance is expected to be sufficient to cover the terms of the agreement.

Accordingly, no liability was recorded as of the acquisition date of Radisson Hotels Americas or December 31, 2022 in accrued liabilities within the consolidated balance sheets.

• To the extent existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make capital contributions totaling $ 14.1 million to support their efforts to construct Cambria hotels.

• The Company committed to provide financing in the form of loans or credit facilities to franchisees for Choice brand development efforts.

For the year ended December 31, 2021, the Company has committed to provide an aggregate of approximately $ 9.7 million, upon certain conditions being met.

As of December 31, 2021, $ 2.2 million has been disbursed.

• The Company’s franchise agreements require the payment of franchise fees, which include marketing and reservation system fees.

In accordance with terms of our franchise agreements, the Company is obligated to use the marketing and reservation system revenues it collects from the current franchisees comprising its various hotel brands to provide marketing and reservation services appropriate to support the operation of the overall system.

As of December 31, 2022, the Company has remaining commitments of approximately $ 1.8 million, upon certain conditions being met.

• The Company’s legacy Choice franchise agreements require the payment of franchise fees, which include marketing and reservation system fees.

In accordance with terms of our legacy Choice franchise agreements, the Company is obligated to use the marketing and reservation system revenues it collects from the current franchisees comprising its various hotel brands to provide marketing and reservation services appropriate to support the operation of the overall system.

The legacy Radisson Hotels Americas franchise agreements have similar provisions regarding marketing fees to be used for marketing activities.

To the extent revenues collected exceed expenditures incurred, the Company has a commitment to the franchisee system to make expenditures in future years.

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With respect to certain of the aforementioned indemnities, such as indemnifications of landlords against third-party claims for the use of real estate property leased by the Company, the Company maintains insurance coverage that mitigates potential liability.

2021 Asset Acquisition

In September 2021, the Company reached a settlement with a borrower holding a senior and mezzanine loan classified as collateral-dependent, collateralized by an operating hotel.

As a collateral-dependent financial asset, the expected credit losses as of September 30, 2021 were determined based on the fair value of the operating hotel.

As of September 30, 2021, the notes receivable, net of allowance for credit losses, balance was $ 21.1 million.

The key terms of the settlement resulted in a deed in lieu of foreclosure on the operating hotel in exchange for releasing obligations pursuant to the senior and mezzanine loans and the associated franchise agreement.

The property was exchanged in full settlement of the senior and mezzanine loans and recorded at the fair value of $ 21.1 million as of the acquisition date of October 1, 2021.

The fair value was estimated using an income approach valuation method based on discounted cash flows of the collateralized operating hotel utilizing historical operating performance, industry projections for the market, and comparable sales capitalization rates.

2021 & 2022 Asset Acquisitions

In September 2021 and April 2022, the Company reached settlements with independent borrowers holding senior and mezzanine loans classified as collateral-dependent, collateralized by operating hotels.

The key terms of the settlements resulted in a deed in lieu of foreclosure on each operating hotel in exchange for releasing obligations pursuant to the senior and mezzanine loans and the associated franchise agreements, as exchanged on October 1, 2021 and April 14, 2022, respectively.

As collateral-dependent financial assets, the expected credit losses as captured in Notes receivable, net of allowance for credit losses, on the consolidated balance sheets immediately prior to exchange were determined based on the fair value of the operating hotels.

The acquisition accounting was also based on the fair value of the operating hotels.

The fair values were estimated using an income approach valuation method based on discounted cash flows of the collateralized operating hotel utilizing historical operating performance, industry projections for the market, and comparable sales capitalization rates.

The acquisition dates for these hotels were October 1, 2021 and April 14, 2022 and had fair values at time of acquisition of $ 21.1 million and $ 20.4 million, respectively.

In accordance with the provisions of ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business ("ASU 2017-01") , the purchase represents an asset acquisition based on the concentration of value in the acquired land and building.

The $ 21.1 million was re-characterized from Notes receivable, net of allowance for credit losses, and attributed to each asset class based on a relative fair value allocation to qualifying assets, resulting in $ 4.8 million to land, $ 14.2 million to building and improvements, $ 1.8 million to furniture, fixtures, and equipment, and $ 0.3 million to net assets assumed (inclusive of cash).

Clarifying the Definition of a Business ("ASU 2017-01") , each purchase represented an asset acquisition based on the concentration of value in the acquired land and building.

The Notes receivable, net of allowance for credit losses, balances were re-characterized and attributed to each asset class based on a relative fair value allocation to qualifying assets.

The relative fair values for each asset class were estimated using a combination of income and market approach valuations methods.

2019 Asset Acquisition

Prior to July 23, 2019, the Company held a 40 % ownership interest of an affiliate that owned five Cambria hotels recorded as an investment in unconsolidated entities.

On July 23, 2019, the Company redeemed the remaining 60 % ownership interest in four of the hotels for approximately $ 169.0 million cash paid (inclusive of $ 0.7 million in capitalized transaction costs), net of cash acquired.

The transaction was funded with cash and borrowings under the Company's revolving credit facility.

In accordance with the provisions of ASU 2017-01, the purchase represents an asset acquisition based on the concentration of value in the acquired land and buildings.

This assessment was performed on the four hotels as a group of similar identifiable assets based on the similar risk characteristics as operating Cambria Hotels.

The $ 25.0 million previously in investments in unconsolidated entities is included in the total net asset basis of $ 194.0 million.

The total net asset basis was attributed to each asset and asset class based on a relative fair value allocation to qualifying assets, resulting in $ 21.7 million to land, $ 148.4 million to building and improvements, $ 27.0 million to furniture, fixtures, and equipment, $ 0.8 million to an in-place lease intangible asset, and $ 3.9 million to net liabilities assumed.

For the October 1, 2021 acquisition, the $ 21.1 million balance was re-characterized as $ 4.8 million to land, $ 14.2 million to building and improvements, $ 1.8 million to furniture, fixtures, and equipment, and $ 0.3 million to net assets assumed.

For the April 14, 2022 acquisition, the $ 20.4 million balance was re-characterized as $ 3.3 million to land, $ 16.6 million to building and improvements, $ 1.3 million to furniture, fixtures, and equipment, and $( 0.8 ) million to net liabilities assumed.

August 2022 Radisson Hotels Americas Acquisition

On August 11, 2022, the Company completed the acquisition of Radisson Hotels Americas.

The accounting purchase price for the Transaction was $ 673.9 million, which includes the base purchase price of $ 675.2 million, adjusted for Disclosed Leakage (as defined in the Share Sale and Purchase Agreement) and certain other prepaid expenses.

To fund the Transaction, Choice drew $ 175.0 million on the Company's existing $ 600.0 million unsecured credit facility (the "Revolver"), and funded the remainder with cash on hand.

Additionally, in connection with the acquisition, we recorded $ 39.6 million of transaction, transition, and severance expense, included within Selling, general and administrative, during the year ended December 31, 2022, respectively.

Preliminary Fair Values of Assets Acquired and Liabilities Assumed

The Company allocated the purchase price based upon a preliminary assessment of the fair value of the assets acquired and liabilities assumed as of August 11, 2022.

These preliminary fair values are based on management’s estimates and assumptions, using the best information available at the time of this filing.

During the fourth quarter of 2022, the Company recorded net measurement period adjustments that decreased goodwill by $ 9.1 million, as presented in the table below.

The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date and did not result from intervening events subsequent to such date.

The measurement period adjustments resulted in no impact to our consolidated statements of income.

The final valuation and related allocation of the purchase price will be completed no later than 12 months after the closing date.

The final acquisition accounting adjustments may be materially different and may include (1) changes in fair value of property and equipment and associated salvage values, (2) changes in allocations to intangible assets, such trade names, acquired franchise and management agreements, above and below market leases, as well as goodwill;

and (3) other changes to assets and liabilities, such as working capital.

The preliminary allocation of the purchase price including measurement period adjustments, as presented in our Consolidated Balance Sheet:

Assets acquired August 11, 2022

Measurement Period Adjustments August 11, 2022

(as adjusted)

Cash and cash equivalents $ 113,023 $ — $ 113,023

Restricted cash 10,403 — 10,403

Accounts receivable 32,972 8,752 41,724

Notes receivables - current 1,709 — 1,709

Prepaid expenses and other current assets 8,139 — 8,139

Property and equipment 125,441 — 125,441

Operating lease right-of-use assets 42,315 ( 2,016 ) 40,299

Intangible assets 447,400 ( 300 ) 447,100

Notes receivable - noncurrent 2,592 — 2,592

Investment in affiliates 471 — 471

Other assets 2,129 — 2,129

Total assets acquired $ 786,594 $ 6,436 $ 793,030

Liabilities assumed

Accounts payable 8,295 ( 1,566 ) 6,729

Accrued expenses and other current liabilities 15,987 425 16,412

Deferred revenue - current (1)

5,745 1,566 7,311

Liability for guest loyalty program - current (1)

3,542 3,792 7,334

Long-term debt 55,975 — 55,975

Long-term deferred revenue (1)

26,499 ( 3,915 ) 22,584

Deferred compensation and retirement plan obligations 9,265 — 9,265

Operating lease liabilities 42,705 ( 2,016 ) 40,689

Liability for guest loyalty program - noncurrent (1)

10,180 ( 1,443 ) 8,737

Other liabilities 3,052 543 3,595

Total liabilities assumed $ 181,245 $ ( 2,614 ) $ 178,631

Fair value of net assets acquired $ 605,349 $ 9,050 $ 614,399

Goodwill 68,507 ( 9,050 ) 59,457

Total purchase consideration $ 673,856 $ — $ 673,856

(1) The Deferred revenue (including deferred affiliation fees) and Liability for guest loyalty program balances were assumed at their carrying value at the date of the acquisition pursuant to the application of ASU 2021-08 (see Note 1).

Property and Equipment

The following table presents the preliminary estimates of fair value of the acquired property and equipment, which is primarily concentrated at three acquired hotel properties, and their estimated weighted average remaining useful lives.

Estimated Useful Life Estimated Fair Value

(in years) (in thousands)

Land N/A $ 7,159

Construction in progress N/A 3,190

Building and leasehold improvements 24.4 93,934

Site improvements 23.1 586

Furniture, fixtures and equipment 3.9 8,334

Computer equipment and software 2.0 12,238

Total $ 125,441

We provisionally estimated the value of the property and equipment through a combination of income, cost and market approaches, which are primarily based on significant Level 2 and Level 3 assumptions, such as estimates of future income growth, discount rates, capitalization rates and capital expenditure needs of the hotels.

We are continuing to assess the marketplace assumptions and property conditions, which could result in changes to these provisional values.

Identified Intangible Assets

The following table presents our preliminary estimates of the fair value of the acquired identified intangible assets and their estimated useful lives:

Estimated Useful Life Estimated Fair Value

(in years) (in thousands)

Trade names N/A $ 223,700

Franchise agreements 15.5 220,100

Management agreements 15.5 3,300

Total $ 447,100

The fair value of the trade names was provisionally estimated using the relief-from-royalty method.

This method applies an estimated royalty rate to forecasted future cash flows, discounted to present value.

The fair value of the franchise and management agreements was preliminarily estimated using a multi-period excess earnings method, a variation of the income approach.

This method uses the present value of incremental after-tax cash flows attributable to the intangible asset to estimate fair value.

These valuation methodologies utilize Level 3 assumptions, and we are continuing to assess the assumptions used in estimating these values as well as the respective useful lives, which could result in changes to these provisional values.

As part of the Transaction, we assumed a mortgage related to an acquired hotel property.

The mortgage had an associated interest rate cap agreement with an effective date of July 30, 2021 through August 6, 2024.

Subsequent to the acquisition closing date, the mortgage, inclusive of outstanding interest and fees, was repaid in full in the amount of $ 56.0 million using cash we acquired.

Additionally, the interest rate cap agreement was terminated, which resulted in a payment to Choice in the amount of $ 1.9 million.

Related to the mortgage, we acquired $ 10.4 million in restricted cash, for which restrictions were lifted upon repayment.

Operating Leases

The Company measured operating lease liabilities assumed at the present value of remaining payments as of the acquisition date, discounted using Choice's applicable incremental borrowing rate, in accordance with Leases (Topic 842) .

The corresponding right-of-use assets acquired were measured at the value of the lease liabilities, further adjusted for favorable or unfavorable lease terms as compared to market terms.

We are continuing to assess market assumptions, which could change our preliminary estimate.

Pursuant to the terms of the Transaction, the parties agree to jointly make a valid, timely election under Section 338(h)(10) of the U.S.

Internal Revenue Code and under any similar provisions of state or local law with respect to the purchase of the shares of Radisson Hotels Americas.

Under this election, the parties agreed to treat the Transaction for federal income tax purposes as if it had been structured as an asset sale and purchase.

As a result of this election, the tax basis of the assets acquired and liabilities assumed by Choice were reset to fair value at the time of the acquisition, which results in the elimination of previously established deferred income tax balances and the establishment of new balances that reflect the new tax basis, including tax deductible goodwill.

Because the accounting for the Transaction is ongoing, the resulting deferred tax balances are still being finalized.

Pro Forma Results of Operations

The following unaudited pro forma information presents the combined results of operations of Choice and Radisson Hotels Americas as if we had completed the Transaction on January 1, 2021, but using our preliminary fair values of assets acquired and liabilities assumed as of the acquisition date.

The unaudited pro forma information reflects adjustments relating to (i) the allocation of purchase price and related adjustments, including incremental depreciation and amortization expense based on the preliminary fair values of the property and equipment assets and intangible assets acquired;

(ii) the incremental impact of the Revolver draw on interest expense and amortization of financing costs;

(iii) nonrecurring transaction costs;

and (iv) income tax impact of the aforementioned pro forma adjustments.

As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies.

Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the transaction had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

Year Ended December 31,

(in thousands) 2022 2021

Revenues $ 1,551,775 $ 1,263,988

Net income 368,449 207,023

Radisson Hotels Americas Results of Operations

The results of Radisson Hotels Americas have been consolidated with the Company since August 11, 2022 and are included in the Company’s Consolidated Statement of Income for the year ended December 31, 2022.

The following table presents these results of the 142 days from the closing date through December 31, 2022.

(in thousands) August 11, 2022-

December 31, 2022

Revenues $ 104,201

Net income 1,249

The $ 59.5 million excess value recorded in goodwill is primarily attributable to value we expect to realize from the existing customer base, improvements in RevPAR, cost synergies and new agreements signed with new franchisees and developers.

Goodwill for the Transaction is fully attributable to the Hotel Franchising & Management reportable segment and is fully deductible for tax purposes.

Refer to Note 6 for reconciliation of the Company's goodwill balance.

Subsequent Events

On February 24, 2022, the Company's board of directors declared a quarterly cash dividend of $ 0.2375 per share of common stock.

The dividend is payable on April 15, 2022 to shareholders of record on April 1, 2022 .

On February 14, 2023, the Company entered into a Third Amendment to the Amended and Restated Senior Unsecured Credit Agreement.

The Amendment provides, among other things, for (i) an increase in the aggregate amount of commitments under the Revolver by $ 250 million (the “Increased Commitments”) to an aggregate amount of $ 850 million and (ii) the replacement of the interest reference rate for U.S.

dollar-denominated borrowings under the Revolver from LIBOR to an adjusted Secured Overnight Financing Rate.

The pricing and other terms applicable to the Increased Commitments are the same as those applicable to the existing revolving loan commitments that were in effect prior to the Amendment.

Except as amended by the Amendment, the remaining terms of the unsecured credit facility remain in full force and effect.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data