What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-09 · 189 added, 377 removed, 232 unchanged (71% of the section changed)

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MD&A is provided as a supplement to — and should be read in conjunction with — our consolidated financial statements and the accompanying notes.

Recent Developments

Agreement to acquire Radisson Hotels Americas

On June 12, 2022, the Company entered into a Share Sale and Purchase Agreement, dated June 12, 2022, by and among the Company, Radisson Holdings, Inc., Radisson Hospitality, Inc., Aplite Holdings AB and Radisson Hospitality Belgium BV/SR to acquire 100% of Radisson Hotels Americas for a base purchase price of approximately $675.2 million, adjusted for Disclosed Leakage (as defined in the Share Sale and Purchase Agreement) and certain other prepaid expenses.

The transaction closed on August 11, 2022 for a purchase price of $673.9 million, net of leakage and certain prepaid expenses.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic has caused and continues to cause disruptions to the global economy and the hospitality industry, including in the United States, where more than 80% of our franchised hotels are located.

Reduced travel as a result of COVID-19 initially adversely impacted the hospitality industry generally and the Company, however, the development and distribution of effective vaccines and other containment efforts have been significant positive developments that have contributed to improved operating metrics since the second quarter of 2021.

The extent to which the COVID-19 pandemic will continue to impact the hospitality industry generally and our operations remains uncertain and will depend in part on future developments, including the severity and duration of resurgences or variants of the virus, the effectiveness of actions by government authorities and the public to continue to contain the pandemic, and the potential for adverse changes in consumer sentiment with respect to travel during the pandemic.

Since the impacts of COVID-19 on the Company's business were first experienced in March 2020, trends have improved steadily, with the third quarter 2022 domestic RevPAR experiencing an increase of approximately 3.4% and 15.2% relative to third quarter 2021 and third quarter 2019, respectively.

As of both September 30, 2022 and September 30, 2021, less than 1% of Company's domestic hotel system had temporarily suspended operations due to governmental restriction or a franchisee’s election.

As the industry recovery continues, the Company believes it will continue to benefit from the faster rebound of leisure demand as a result of its higher share of leisure travel mix relative to competitors.

The Company's properties are also well distributed in drive-to markets, which the Company believes will lead in the demand recovery and foreseeable future for the industry.

We believe these points are illustrated by the Company's RevPAR results for 2021 and 2022, which reflect growth relative to comparable 2019 periods.

While the ultimate impact and duration of COVID-19 is uncertain and will depend on future developments, which are difficult to predict, the Company believes that it will continue to benefit in the long-term from its primarily franchise-only business model, which has historically provided a relatively stable earnings stream and low capital expenditure requirements.

Further, as of September 30, 2022, the Company had approximately $337.5 million in cash and additional borrowing capacity through its senior unsecured revolving credit facility.

Based on our business model and information known at this time, the Company believes that cash flows from operations and available financing capacity are adequate to meet the expected future operating, investing and financing needs of the business, inclusive of the Radisson Hotels Americas transaction, described above.

While the Company believes that the long-term fundamentals of the business remain strong, it will continue to adjust business contingency plans as the COVID-19 pandemic evolves.

For additional information, refer to Risk Factors in Part II, and Part I, Item 1A of the 2021 Form 10-K.

We are primarily a hotel franchisor with franchise agreements and owned hotels representing 7,458 hotels open comprising 627,183 rooms and 970 hotels under construction, awaiting conversion or approved for development comprising 92,141 rooms as of September 30, 2022, located in 50 states, the District of Columbia and approximately 50 countries and territories outside the United States.

We are primarily a hotel franchisor with franchise agreements and owned hotels representing 7,467 hotels open comprising 626,824 rooms and 988 hotels with 96,111 rooms under construction, awaiting conversion, approved for development or committed to future franchise development on outstanding master development agreements ("MDAs") as of March 31, 2023, located in 50 states, the District of Columbia and approximately 50 countries and territories outside the United States.

Our brand names include Comfort Inn®, Comfort Suites®, Quality®, Clarion®, Clarion Pointe™, Ascend Hotel Collection®, Sleep Inn®, Econo Lodge®, Rodeway Inn®, MainStay Suites®, Suburban Studios™, WoodSpring Suites®, Everhome Suites®, and Cambria® Hotels (collectively, the "legacy Choice brands").

Additionally, through the Radisson Hotels Americas acquisition, our brands expanded to include Radisson Blu®, Radisson RED®, Radisson®, Park Plaza®, Country Inn & Suites® by Radisson, Radisson Inn & Suites SM , Park Inn by Radisson®, Radisson Individuals®, and Radisson Collection® (collectively, the "legacy Radisson brands"), which are located across the United States, Canada, Caribbean and Latin America.

The Company's primary segment is the hotel franchising business.

The Company's domestic operations are conducted through direct franchising relationships, the ownership of 7 Cambria and 3 legacy Radisson Hotels Americas hotels, and the management of 13 legacy Radisson Hotels Americas hotels (inclusive of the owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

Additionally, through the Radisson Hotels Americas acquisition completed on August 11, 2022, our brands expanded to include Radisson Blu®, Radisson RED®, Radisson®, Park Plaza®, Country Inn & Suites® by Radisson, Radisson Inn & Suites SM , Park Inn by Radisson®, Radisson Individuals®, and Radisson Collection® (collectively, the "legacy Radisson brands"), which are located across the United States, Canada, the Caribbean and Latin America.

The hotel franchising business represents the Company's primary operations.

The Company's domestic operations are conducted through direct franchising relationships, the ownership of six Cambria and three legacy Radisson Hotels Americas open and operating hotels, and the management of 13 legacy Radisson Hotels Americas hotels (inclusive of the Radisson Hotels Americas owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

Master franchising relationships are governed by master franchising agreements which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region, usually for a fee.

Our business strategy is to conduct direct franchising in those international markets where both franchising is an accepted business model and we believe our brands can achieve significant scale.

We typically elect to enter into master franchise agreements in those markets where direct franchising is currently not a prevalent or viable business model.

When entering into master franchising relationships, we strive to select partners that have professional hotel and asset management capabilities together with the financial capacity to invest in building the Choice brands in their respective markets.

Master franchising relationships typically provide lower revenues to the Company as the master franchisees are responsible for managing certain necessary services (such as training, quality assurance, reservations and marketing) to support the franchised hotels in the master franchise area and, therefore, retain a larger percentage of the hotel franchise fees to cover their expenses.

In certain circumstances, the Company has and may continue to make equity investments in our master franchisees.

As a result of master franchise relationships and international market conditions, our revenues are primarily concentrated in the United States.

Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States.

Our Company generates revenues, income and cash flows primarily from our hotel franchising operations and the initial, relicensing and continuing royalty fees attributable to our franchise agreements.

Our Company generates revenues, income and cash flows primarily from our hotel franchising operations.

Revenues are also generated from partnerships with qualified vendors and travel partners that provide value-added solutions to our platform of guests hotels, owned hotels, and other sources.

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For most hotels, demand is ordinarily lower in November through February than during the remainder of the year.

Our principal source of revenues is franchise fees based on the gross room revenues or number of rooms of our franchised properties.

Our principal source of revenue is franchise fees based on the gross room revenues or number of rooms of our franchised properties.

The Company’s franchise and managed fees, as well as its owned hotels revenues, normally reflect the industry’s seasonality and historically have been lower in the first and fourth quarters than in the second and third quarters.

With a primary focus on hotel franchising, we benefit from the economies of scale inherent in the franchising business.

The fee and cost structure of our franchising business provides opportunities to improve operating results by increasing the number of franchised hotel rooms and effective royalty rates of our franchise contracts resulting in increased initial fee revenue, ongoing royalty fees, and procurement services revenues.

In addition, our operating results can also be improved through our company-wide efforts related to improving property-level performance and expanding the number of partnerships with travel-related companies.

The principal factors that affect the Company’s results are:

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the level of franchise sales and relicensing activity;

the number of qualified vendor arrangements and travel-related partnerships and the level of engagement with these partners by our franchisees and guests;

the number of qualified vendor arrangements and partnerships and the level of engagement with these partners by our franchisees and guests;

and our ability to manage costs.

The number of rooms in our hotel system and the occupancy and room rates at those properties significantly affect the Company’s results because our fees are based upon room revenues or the number of rooms at owned and franchised hotels.

To varying degrees, all of these factors have been and may continue to be disrupted by the COVID-19 pandemic.

The key industry standard for measuring hotel-operating performance is RevPAR, which is calculated by multiplying the percentage of occupied rooms by the average daily room rate realized.

The key industry standard for measuring hotel-operating performance is Revenue per Available Room ("RevPAR"), which is calculated by multiplying the percentage of occupied rooms by the average daily room rate realized.

Our variable overhead costs associated with franchise system growth of our established brands have historically been less than incremental royalty fees generated from new franchises.

Accordingly, over the long-term, any continued growth of our franchise business should enable us to realize benefits from the operating leverage in place and improve operating results.

effects of the COVID-19 pandemic on our third quarter 2022 results and anticipated trends are discussed above under the heading "Impact of the COVID-19 Pandemic" and below under the heading "Operations Review".

Accordingly, over the long-term, continued growth of our franchise business should enable us to realize benefits from the operating leverage in place and improve operating results.

We are required by our legacy Choice franchise agreements to use marketing and reservation system fees we collect for system-wide marketing and reservation system activities.

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We have developed an operating system dedicated to our franchisees’ success that focuses on delivering guests to hotels and reducing hotel operating costs.

The Company has taken and is continuing to take measures to combat the impact of the COVID-19 pandemic on our business and on our franchisees.

We believe these measures support and complement our strategic priorities to create value for our shareholders over the long-term.

These key long-term goals are as follows:

We believe that executing our strategic priorities creates value for our shareholders.

Our Company focuses on the following strategic priorities:

Profitable Growth.

Our success is dependent on improving the performance of our hotels, increasing our system size by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate, expanding our qualified vendor programs and travel-related partnerships and maintaining a disciplined cost structure.

Our success is dependent on improving the performance of our hotels, increasing our system size by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate, expanding our qualified vendor and partnership platform programs and maintaining a disciplined cost structure.

We attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs.

These products and services include national marketing campaigns, a guest loyalty program, a central reservation system, property and yield management programs and systems, revenue management services, quality assurance standards, qualified vendor relationships and partnerships with other travel-related companies that provide services to our franchisees and guests.

These products and services include national marketing campaigns, a guest loyalty program, a central reservation system, property and yield management programs and systems, revenue management services, quality assurance standards, qualified vendor relationships and partnerships with companies that provide services to our franchisees and guests.

We believe that healthy brands, which deliver a compelling return on investment, will enable us to sell additional hotel franchises and raise royalty rates.

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Improving the performance of the hotels in our system, strategically growing the system through additional franchise sales, and improving franchise agreement pricing while maintaining a disciplined cost structure are the keys to profitable growth.

Prior to the second quarter of 2021, the Company's hotels experienced declines in occupancy and RevPAR resulting from the impacts of the COVID-19 pandemic.

The declines impacted the profitability of the Company and the negative impact to the Company could return if a resurgence of the COVID-19 pandemic significantly impacts travel.

The addition of the legacy Radisson brands in the Americas increased Choice's footprint in the upper midscale and upscale chain scales and introduced presence in the upper upscale chain scale.

We expect that the Radisson Americas acquisition will enable us to strengthen our presence in the upper midscale chain scale, expand our market presence in certain geographies in the United States and further build on our momentum in the upscale chain scale, accelerating the growth of our Cambria Hotels and Ascend Hotel Collection brands and allowing us to expand the Radisson portfolio.

Maximizing Financial Returns and Creating Value for Shareholders.

Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders.

We believe our historically strong and predictable cash flows create a strong financial position that provides us a competitive advantage.

We maintain a capital structure intended to generate high financial returns and use our excess cash flow to provide returns to our shareholders primarily through share repurchases, dividends and investing in growth opportunities.

In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends and activity under the Company's share repurchase program.

Given our strong liquidity and credit profile, in May 2021, the Company resumed the payment of quarterly dividends, subject to future declarations by our board of directors, and activity under the share repurchase program.

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, which was paid in January 2022.

On February 24, 2022, May 24, 2022, and September 22, 2022, the Company's board of directors declared a quarterly cash dividend of $0.2375 per share of common stock.

In addition to our hotel franchising business, we have also developed or acquired Cambria and legacy Radisson Hotels Americas hotels.

Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provides the greatest returns to our shareholders, which include acquisitions, share repurchases and dividends.

Refer to the Liquidity and Capital Resources header of MD&A for more information regarding capital returns to shareholders.

In addition to our hotel franchising business, we have also developed or acquired six Cambria and three legacy Radisson Hotels Americas open and operating hotels.

We intend to continue to strategically develop hotels to increase the presence of our brands in the United States, drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded.

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We believe our owned hotels provide us the opportunity to support and accelerate growth of our brands.

We do not anticipate owning hotels on a permanent basis and expect to target dispositions to a franchisee in the future.

We do not anticipate owning hotels on a permanent basis and expect to target dispositions to a franchisee encumbered with a long-term Choice franchise agreement in the future.

The Company also allocates capital to financing, investment and guaranty support to incentivize franchise development for certain brands in strategic markets;

and to explore growth opportunities in business areas that are adjacent or complementary to

our core hotel franchising business, which leverage our core competencies and are additive to our franchising business model.

and to explore growth opportunities in business areas that are adjacent or complementary to our core hotel franchising business, which leverage our core competencies and are additive to our franchising business model.

The timing and amount of these investments are subject to market and other conditions.

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Results of Operations:

Royalty fees, operating income, net income and diluted EPS represent key measurements of our financial performance.

Royalty fees, licensing and management fees, operating income, net income and diluted EPS represent key measurements of our financial performance.

These measurements are primarily driven by the operations of our hotel franchise system and therefore, our analysis of the Company's operations is primarily focused on the size, performance and potential growth of the hotel franchise system as well as our variable overhead costs.

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The Company's legacy Choice franchise agreements require the payment of marketing and reservation system fees to be used exclusively by the Company for expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems.

The Company is obligated to expend the marketing and reservation system fees it collects from franchisees in accordance with the franchise agreements.

The Company is obligated to expend the marketing and

reservation system fees it collects from franchisees in accordance with the franchise agreements.

Furthermore, franchisees are required to reimburse the Company for any deficits generated by these marketing and reservation system activities.

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As a result, the Company generally excludes the other revenues and expenses from franchised and managed properties from the analysis of its operations.

Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support franchise operations, in addition to the Company's incremental spend to support franchisees and lower marketing and reservation system fees for certain periods most significantly impacted by the COVID-19 pandemic, quarterly and/or annual deficits may be generated.

During the nine months ended September 30, 2022, other franchised and managed revenues exceeded expenses by $55.4 million.

During the nine months ended September 30, 2021, other franchised and managed revenues exceeded expenses by $56.7 million.

Refer to MD&A heading "Operations Review" for additional analysis of our results.

Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support franchise operations, quarterly and/or annual deficits may be generated.

During the three months ended March 31, 2023 and 2022, other franchised and managed revenues exceeded expenses by $2.1 million and $13.0 million, respectively.

Refer to the Operations Review header of MD&A for additional analysis of our results.

Liquidity and Capital Resources:

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Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders, which include acquisitions, share repurchases and dividends.

The Company completed the acquisition of Radisson Hotels Americas on August 11, 2022 for a purchase price, net of Disclosed Leakage of approximately $673.9 million.

The Company's declaration of quarterly dividends and activity under the share repurchase program were temporarily suspended at the height of the COVID-19 pandemic, as detailed above within the Maximizing Financial Returns and Creating Value for Shareholders section.

We believe the Company’s cash flow from operations and available financing capacity is sufficient to meet the expected future operating, investing and financing needs of the business.

Refer to MD&A heading Liquidity and Capital Resources for additional analysis.

Refer to Liquidity and Capital Resources header of MD&A for additional analysis.

We believe that moderate increases in the rate of inflation will generally result in comparable or greater increases in hotel room rates.

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We have included a reconciliation of these measures to the comparable GAAP measurement below as well as our reasons for reporting these non-GAAP measures.

Revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee.

Revenues excluding reimbursable revenue from franchised and managed properties.

The Company’s other revenues from franchised and managed properties financial statement line item reflect franchise marketing and reservation system revenues and management agreement cost reimbursements.

The legacy Choice franchise marketing and reservation activities, legacy Radisson Hotels Americas franchise marketing activities, and legacy management agreement cost reimbursements operate at break-even based on the Company's contractual commitments regarding the manner such fees will be utilized.

The legacy Choice franchise marketing and reservation activities and legacy Radisson Hotels Americas franchise marketing activities and management agreement cost reimbursements operate at break-even based on the Company's contractual commitments regarding the manner such fees will be utilized.

The legacy Radisson Hotels Americas reservation revenue, which is also recorded in the other revenues from franchised and managed properties, does not break even, based on the legacy Radisson Hotels Americas franchise contracts.

Additionally, the Company recognized $22.6 million resulting from the exit of 110 WoodSpring units in the third quarter of 2022.

As a result, the Company excludes reimbursable revenue from franchised and managed properties and the extraordinary termination fees from franchisee when analyzing the performance of the business.

As a result, the Company excludes reimbursable revenue from franchised and managed properties when analyzing the performance of the business.

A similar non-GAAP measure is a commonly used measure of performance in our industry and facilitates comparisons between the Company and its competitors.

Calculation of Revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee

Three Months Ended September 30, Nine Months Ended September 30,

Calculation of Revenues excluding reimbursable revenue from franchised and managed properties

Three Months Ended March 31,

(in thousands) 2023 2022

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Reimbursable revenue from franchised and managed properties (157,782) (126,637)

Extraordinary termination fees from franchisee (22,647) — (22,647) —

Revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee

Revenues excluding reimbursable revenue from franchised and managed properties

$ 175,010 $ 131,090

Operations Review

Comparison of Operating Results for the Three-Month Periods Ended September 30, 2022 and 2021

Summarized financial results for the three months ended September 30, 2022 and 2021 are as follows:

Comparison of Operating Results for the Three-Month Periods Ended March 31, 2023 and 2022

Summarized financial results for the three months ended March 31, 2023 and 2022 are set forth in the table below.

In accordance with GAAP, our income statements include Radisson Hotels Americas’ results of operations in the three months ended March 31, 2023, but do not include Radisson Hotels Americas' results of operations in the three months ended March 31, 2022, as we did not acquire Radisson Hotels America until August 11, 2022.

(in thousands) 2023 2022

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Initial franchise fees 7,882 8,402

Procurement services 14,401 13,010

Platform and procurement services fees 13,843 11,683

Owned hotels 22,332 12,037

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Interest income (1,883) (1,280)

Other loss (gain) 2,303 407

Other (gain) loss (1,908) 1,716

Equity in net loss (gain) of affiliates 63 (244)

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Results of Operations

The Company recorded income before income taxes of $136.8 million for the three-month period ended September 30, 2022, a $14.8 million decrease from the same period of the prior year.

The decrease in income before income taxes primarily reflects a $14.1 million decrease in operating income from the three-month period ended September 30, 2021.

Operating income decreased $14.1 million primarily due to a by a $35.1 million increase in SG&A expenses, a $33.8 million decrease in the net surplus generated from other franchised and managed properties activities, and a $2.8 million increase in depreciation and amortization primarily offset by a $22.8 million increase in other revenues, a $16.7 million increase in royalty, licensing and management revenues, a $13.4 million net gain on sale of business and assets recognized during the third quarter of 2022, and a $2.5 million increase in owned hotels revenues in excess of expenses.

The primary reasons for these fluctuations are described in more detail below.

Domestic royalty fees for legacy Choice brands for the three months ended September 30, 2022 increased $3.7 million to $126.7 million from $123.0 million for the three months ended September 30, 2021, an increase of 3.0%.

The increase in domestic royalties for legacy Choice brands reflects a 3.4% increase in domestic RevPAR.

System-wide RevPAR increased due to a 5.8% increase in average daily rates, partially offset by a 150 basis point decrease in occupancy.

The increase in domestic royalties for legacy Choice brands is also due to a 5 basis point increase in the effective royalty rate from 4.99% for the three months ended September 30, 2021 to 5.04% for the three months ended September 30, 2022, partially offset by a 5.9% decrease in the number of domestic franchised hotel rooms in the comparative period.

A summary of the Company's domestic franchised hotels operating information for legacy Choice brands is as follows.

These operating statistics exclude the acquired legacy Radisson brands.

The Company recorded income before income taxes of $67.5 million for the three-month period ended March 31, 2023, a $20.2 million decrease from the same period of the prior year.

The decrease in income before income taxes primarily reflects a $21.5 million decrease in operating income and an increase in interest expense of $2.6 million, partially offset by a decrease in other (gain) loss of $3.6 million from the three-month period ended March 31, 2022.

Operating income decreased $21.5 million primarily due to a $10.8 million decrease in the net surplus generated from other franchised and managed properties activities and a $10.4 million increase in selling, general and administrative ("SG&A") expense related to operational restructuring charges, consisting primarily of salary and benefit continuation payments, and transition costs related to integration of the Radisson Hotels Americas business acquired in August 2022.

In addition, SG&A expenses increased $3.5 million related to increases in the Company's deferred compensation assets based on increases in the underlying investments.

This increase as well as a $3.8 million increase in depreciation and amortization expense due to the acquisition of three hotels and identifiable intangible assets as part of the Radisson Hotels Americas transaction was partially offset by growth of the legacy Choice business and the operations of the newly acquired Radisson Hotels Americas business.

The primary reasons for these fluctuations, inclusive of the impact from the legacy Radisson brands as acquired on August 11, 2022, are described in more detail below.

Royalty, licensing and management fees

Domestic royalty fees increased $11.2 million to $98.2 million for the three months ended March 31, 2023 from $87.0 million for the three months ended March 31, 2022.

The increase in domestic royalties is attributable to $9.4 million of fees from legacy Radisson brands in the three months ended March 31, 2023 and an overall domestic RevPAR increase of 5.9%.

System-wide RevPAR increased due to a 5.2% increase in average daily rates and a 34 basis point increase in occupancy.

The increase in domestic royalties is also due to a system-wide 6 basis point increase in the effective royalty rate from 4.93% for the three months ended March 31, 2022 to 4.99% for the three months ended March 31, 2023, and an 8.2% increase in the number of domestic franchised hotel rooms in the comparative period.

A summary of the Company's domestic franchised hotels operating performance organized by chain scale is as follows.

Three Months Ended Three Months Ended Change

September 30, 2022 September 30, 2021

March 31, 2023 March 31, 2022

Rate Occupancy RevPAR Average

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Rate Occupancy RevPAR

Comfort $ 115.72 67.6 % $ 78.26 $ 110.72 67.8 % $ 75.03 4.5 % (20) bps 4.3 %

Sleep 100.82 63.9 % 64.47 95.70 66.4 % 63.55 5.4 % (250) bps 1.4 %

Quality 97.66 59.6 % 58.24 94.48 62.2 % 58.76 3.4 % (260) bps (0.9) %

Clarion 101.35 51.8 % 52.52 101.17 51.9 % 52.47 0.2 % (10) bps 0.1 %

Econo Lodge 78.12 54.1 % 42.26 76.51 57.1 % 43.66 2.1 % (300) bps (3.2) %

Rodeway 77.99 55.5 % 43.32 76.21 56.9 % 43.37 2.3 % (140) bps (0.1) %

WoodSpring 59.26 81.1 % 48.04 54.11 85.5 % 46.26 9.5 % (440) bps 3.8 %

MainStay 92.26 67.2 % 61.99 87.15 69.1 % 60.18 5.9 % (190) bps 3.0 %

Suburban 61.61 68.4 % 42.12 59.26 73.5 % 43.54 4.0 % (510) bps (3.3) %

Cambria Hotels 164.66 70.1 % 115.42 148.85 62.2 % 94.15 10.6 % 790 bps 22.6 %

Ascend Hotel Collection 174.63 64.5 % 112.56 158.37 63.3 % 98.50 10.3 % 120 bps 14.3 %

Total* $ 100.07 63.4 % $ 63.45 $ 94.59 64.9 % $ 61.37 5.8 % (150) bps 3.4 %

* As noted above, the operating statistics presented exclude the legacy Radisson brands acquired.

Additionally, the operating statistics exclude Choice's Everhome brand since the operating statistics are not representative of a stabilized brand which the Company defines as having at least 25 units open and operating for a twelve month period.

A summary of domestic hotels and rooms for legacy Choice brands in our franchise system at September 30, 2022 and 2021 by brand is as follows:

September 30, 2022 September 30, 2021 Variance

Upscale & Above (1)

$ 139.86 51.2 % $ 71.59 $ 130.68 47.1 % $ 61.57 7.0 % 407 bps 16.3 %

Midscale & Upper Midscale (2)

95.18 52.2 % 49.70 91.65 51.4 % 47.09 3.9 % 83 bps 5.5 %

Extended Stay (3)

62.79 71.3 % 44.74 59.87 73.9 % 44.24 4.9 % (264) bps 1.1 %

67.71 44.8 % 30.34 65.97 45.7 % 30.16 2.6 % (89) bps 0.6 %

$ 91.21 52.7 % $ 48.08 $ 86.67 52.4 % $ 45.38 5.2 % 34 bps 5.9 %

(1) Includes Cambria, Ascend, Radisson Blu, Radisson Red, Park Plaza, Radisson Individuals and Radisson brands.

(2) Includes Country, Comfort, Clarion, Sleep, Quality and Park brands.

(3) Includes WoodSpring, Mainstay, Suburban and Everhome brands.

(4) Includes Econo Lodge and Rodeway brands.

(5) Radisson Hotels Americas was acquired on August 11, 2022.

To enhance comparability, ADR, Occupancy, and RevPAR reflect operating performance for the three months ended March 31, 2022 as if the legacy Radisson brands were acquired on January 1, 2022.

A summary of domestic hotels and rooms in our franchise system at March 31, 2023 and 2022 by brand is as follows:

March 31, 2023 March 31, 2022 Variance

Hotels Rooms Hotels Rooms Hotels Rooms % %

Comfort 1,668 131,140 1,665 131,066 3 74 0.2 % 0.1 %

Sleep 423 29,770 414 29,167 9 603 2.2 % 2.1 %

Ascend Hotel Collection 198 22,528 201 20,639 (3) 1,889 (1.5) % 9.2 %

Cambria Hotels 66 9,000 58 7,996 8 1,004 13.8 % 12.6 %

68 15,887 — — 68 15,887 NM NM

1,684 132,264 1,659 130,644 25 1,620 1.5 % 1.2 %

432 34,494 — — 432 34,494 NM NM

179 19,707 188 21,464 (9) (1,757) (4.8) % (8.2) %

Quality 1,622 120,136 1,641 122,576 (19) (2,440) (1.2) % (2.0) %

Clarion 185 20,642 183 21,917 2 (1,275) 1.1 % (5.8) %

Econo Lodge 704 42,323 734 44,112 (30) (1,789) (4.1) % (4.1) %

Rodeway 491 27,569 531 30,657 (40) (3,088) (7.5) % (10.1) %

WoodSpring 206 24,890 300 36,112 (94) (11,222) (31.3) % (31.1) %

Sleep 425 29,968 416 29,332 9 636 2.2 % 2.2 %

Park 4 363 — — 4 363 NM NM

Everhome 1 98 — — 1 98 NM NM

MainStay 116 7,956 102 7,072 14 884 13.7 % 12.5 %

WoodSpring 214 25,834 306 36,854 (92) (11,020) (30.1) % (29.9) %

Suburban 75 6,700 70 6,246 5 454 7.1 % 7.3 %

Cambria Hotels 61 8,433 58 8,060 3 373 5.2 % 4.6 %

Ascend Hotel Collection 192 20,069 224 28,175 (32) (8,106) (14.3) % (28.8) %

Econo Lodge 690 41,157 726 43,534 (36) (2,377) (5.0) % (5.5) %

Rodeway 494 27,787 521 30,062 (27) (2,275) (5.2) % (7.6) %

Total Domestic Franchises (5)

6,268 493,879 5,888 456,419 380 37,460 6.5 % 8.2 %

(1) Prior to 2022, seven properties located in Caribbean territories were classified as domestic.

In 2022, the seven properties were reclassified to international.

As of both September 30, 2022 and September 30, 2021, less than 1% of the Company's domestic hotel system had temporarily suspended operations due to governmental restriction or a franchisee’s election.

These temporarily suspended hotels are included in the summary table above of domestic hotels in our franchise system.

International royalty fees for legacy Choice brands for the three months ended September 30, 2022 increased $1.0 million to $5.3 million compared to the three months ended September 30, 2021 as a result of improvements in RevPAR performance, despite reductions of the international franchise system size by 53 hotels (from 1,160 as of September 30, 2021 to 1,107 as of September 30, 2022) and 13,139 rooms (from 134,303 as of September 30, 2021 to 121,164 as of September 30, 2022).

September 30, 2022 and September 30, 2021, approximately 1% and 2%, respectively, of the Company's international branded hotels temporarily suspended operations due to governmental restriction or a franchisee’s election.

As a result of the acquisition of AMResorts®, the Company’s relationship with AMResorts® was terminated during the fourth quarter of 2021 and 17 domestic and 37 international open AMResorts®-branded hotels exited the Ascend Hotel Collection portfolio.

In addition, as noted above in Note 2 to our consolidated financial statements, in July 2022 the Company received notice from an ownership group of their intent to exit 110 WoodSpring properties from the Choice system, which occurred in September 2022.

Royalty fees for the newly acquired Radisson Hotels Americas brands since the acquisition date of August 11, 2022 through September 30, 2022 were $7.7 million, and represent total hotels and rooms of 609 and 65,968, respectively, as of September 30, 2022.

Domestic hotels and rooms accounted for 520 and 53,185, respectively, while international hotels and rooms accounted for 89 and 12,783, respectively.

We expect the uncertainty surrounding the potential duration of the pandemic, including resurgences and new variants, as well as the rate, pace and effectiveness of vaccinations around the world, to continue to have the potential to impact the number of domestic and international hotels that remain open and operating.

(1) Includes Radisson Blu, Radisson Red, Radisson Individuals and Radisson brands.

(2) Includes Country Inn & Suites and Park Plaza brands.

(3) Includes Comfort family of brand extensions including Comfort and Comfort Suites.

(4) Includes Clarion family of brand extensions including Clarion and Clarion Pointe.

(5) In 2022, the Company reclassified six properties located in the Caribbean from Domestic Franchises to International Franchises.

International royalty fees increased $2.7 million to $6.4 million for the three months ended March 31, 2023 from $3.8 million three months ended March 31, 2022.

The increase in international royalty fees is attributable to $1.8 million of fees from legacy Radisson brands in the three months ended March 31, 2023 and as a result of improvements in RevPAR performance and an increase of international franchise system size, inclusive of legacy Radisson brands, by 91 hotels (from 1,108 as of March 31, 2022 to 1,199 as of March 31, 2023) and 11,650 rooms (from 121,295 as of March 31, 2022 to 132,945 as of March 31, 2023).

Initial Franchise Fees

Initial franchise fees are fees paid to the Company when a franchisee executes a franchise agreement;

relicensing fees include fees charged to new owners of a franchised property whenever an ownership change occurs and the property remains in the franchise system, as well as fees required to renew existing franchise agreements.

During the third quarter of 2022, the Company awarded 123 domestic franchise agreements to legacy Choice brands representing 10,551 rooms compared to 89 franchising agreements representing 7,640 rooms for the third quarter of 2021.

Domestic franchise agreements awarded to legacy Choice brands for new construction hotels totaled 42 contracts representing 4,060 rooms during the three months ended September 30, 2022, compared to 32 contracts representing 3,178 rooms for the three months ended September 30, 2021.

Conversion hotel awarded franchise agreements to legacy Choice brands totaled 81 representing 6,491 rooms for the three months ended September 30, 2022, compared to 57 agreements representing 4,462 rooms for the three months ended September 30, 2021.

The Company awarded 143 domestic relicensing contracts to legacy Choice brands during the three months ended September 30, 2022, compared to 56 executed during the three months ended September 30, 2021.

The Company awarded 6 domestic renewal agreements to legacy Choice brands during the three months ended September 30, 2022, compared to 6 awarded during the three months ended September 30, 2021.

Since the August 11, 2022 acquisition date through September 30, 2022, the Company awarded 1 franchise agreement to Radisson Hotels Americas brands.

Initial franchise fees are generally collected at the time the franchise agreement is awarded.

However, the recognition of revenue is deferred until the hotel is open or the franchise agreement is terminated.

Initial franchise fee revenue decreased $0.5 million from $8.4 million to $7.9 million for the three months ended March 31, 2022 and March 31, 2023, respectively.

The decline is primarily attributable to the timing of domestic franchise agreements awards, openings, and terminations for new construction hotels as well as domestic relicensing contracts compared to the prior year.

Initial franchise fees are generally paid to the Company when a franchisee executes a franchise agreement for a new property entering the system or an existing franchised property at the time of an ownership change (referred to as a relicensing) or agreement renewal, however, the recognition of revenue is deferred until the hotel associated with the franchise agreement is open or the franchise agreement is terminated.

Upon hotel opening, revenue is recognized ratably as services are provided over the enforceable period of the franchise license agreement.

Upon the termination of a franchise agreement, previously deferred initial and relicensing fees are recognized immediately in the period the agreement is terminated.

Initial franchise fee revenue increased $0.9 million from $6.1 million to $7.0 million for the three months ended September 30, 2021 and September 30, 2022, respectively.

At September 30, 2022, the Company's legacy Choice brands had 861 franchised hotels with 79,313 rooms under construction, awaiting conversion or approved for development in its domestic system as compared to 859 hotels and 71,346 rooms at September 30, 2021.

The number of new construction franchised hotels in the Company's legacy Choice brands domestic pipeline increased from 652 at September 30, 2021 to 629 at September 30, 2022.

New construction hotels typically average 18 to 36 months to open after the franchise agreement is executed.

The number of conversion franchised hotels in the Company's legacy Choice brands domestic pipeline increased from 207 hotels at September 30, 2021 to 232 hotels at September 30, 2022.

Conversion hotels typically open three to six months after the execution of a franchise agreement.

The Company had an additional 40 legacy Choice brands franchised hotels with 4,072 rooms under construction, awaiting conversion or approved for development in its international system as of September 30, 2022, compared to 53 hotels and 7,201 rooms at September 30, 2021.

At September 30, 2022, the Company's Radisson Hotels Americas brands had 69 franchised hotels with 8,756 rooms under construction, awaiting conversion or approved for development in its global system.

Fluctuations in the Company’s pipeline are primarily due to the timing of hotel openings and the timing of signing new franchise agreements.

While the Company's hotel pipeline provides a strong platform for growth, a hotel in the pipeline does

not always result in an open and operating hotel due to various macroeconomic factors which could impact items such as access to liquidity, availability of construction labor and materials, and local governmental approvals and entitlements.

Owned Hotels:

The Company's revenues, net of expenses, from owned hotels increased $2.5 million from $4.3 million for the three months ended September 30, 2021 to $6.8 million for the three months ended September 30, 2022.

These results reflect improved operating performance at our owned hotels and the net addition of 4 owned hotels during the comparative period, driven by the Radisson Hotels Americas acquisition.

Upon the termination of a franchise agreement, previously deferred initial franchise fees are recognized immediately in the period the agreement is terminated.

At March 31, 2023, the Company had 988 franchised hotels with 96,111 rooms under construction, awaiting conversion, approved for development or committed to future franchise development on outstanding MDAs (collectively, "pipeline") in its global system, as compared to 925 franchised hotels and 84,210 rooms at March 31, 2022.

Approximately 94% of our pipeline is located in the United States and approximately 77% of the domestic pipeline is new construction.

After the execution of a franchise agreement, new construction hotels typically average 18 to 36 months to open, while conversion hotels typically average three to six months to open.

Fluctuations in the Company’s pipeline are primarily due to the timing of hotel openings and the timing of awarding new franchise agreements.

While the Company's hotel pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various macroeconomic factors which could impact items such as access to liquidity, availability of construction labor and materials, and local governmental approvals and entitlements.

Platform and procurement services fees:

Revenues increased $2.1 million from $11.7 million for the three months ended March 31, 2022 to $13.8 million the three months ended March 31, 2023.

These results reflect an increase in fees generated from travel-related partnerships and qualified vendors driven by increased occupancy during the first quarter of 2023 at our franchised hotels, inclusive of activity from legacy Radisson brand hotels.

Other Revenues:

Other revenues increased $22.8 million from $8.6 million for the three months ended September 30, 2021 to $31.4 million for the three months ended September 30, 2022 driven by an increase in termination fees, including $22.6 million resulting from the exit of 110 WoodSpring units in the third quarter of 2022, and other franchising revenues.

Other revenues increased $2.4 million from $8.2 million for the three months ended March 31, 2022 to $10.6 million for the three months ended March 31, 2023 driven by an increase in non-compliance fees and other franchising revenues, inclusive of activity from the newly acquired Radisson brand hotels.

Selling, General and Administrative Expenses:

The cost to operate the business is reflected in SG&A on the consolidated statements of income.

SG&A expenses were $70.2 million and $35.1 million for the three months ended September 30, 2022, and 2021, respectively.

SG&A expenses experienced an increase resulting from the acquisition of Radisson Hotels Americas, inclusive of severance and transaction-related costs incurred of $24.9 million.

SG&A expenses further experienced increases resulting from general corporate purposes;

lifting of certain cost mitigation measures related to the COVID-19 pandemic, including compensation, benefits, and travel;

and an increase in provision for credit losses in accounts receivable recorded in accordance with Topic 326.

These were partially offset by a $1.4 million decrease in the Company's deferred compensation liabilities based on decreases in the underlying investments.

Depreciation and amortization :

Depreciation and amortization expense was $8.7 million and $5.9 million for the three months ended September 30, 2022 and 2021, respectively, increasing primarily due to the acquisition of Radisson Hotels Americas on August 11, 2022 and associated amortization from the portion of the purchase price allocated to contract asset acquisition costs.

Gain on sale of business and assets, net :

During the third quarter of 2022, the Company recognized a $13.4 million gain primarily related to the sale of an owned hotel asset of $15.9 million offset by a $2.2 million reduction to the carrying value of an asset held for sale.

Other Loss (Gain):

The Company recorded other net losses of $2.3 million for the three months ended September 30, 2022, compared to other net losses of $0.4 million for the three months ended September 30, 2021.

The current period losses relate to decreases in the Company's deferred compensation assets based on decreases in the underlying investments and foreign currency transaction losses.

Income Tax Expense:

The effective income tax rates were 24.6% and 23.1% for the three months ended September 30, 2022 and 2021, respectively.

The effective income tax rate for the three months ended September 30, 2022 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes.

The effective income tax rate for the three months ended September 30, 2021 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes, partially offset by excess tax benefits from share-based compensation.

Operations Review

Comparison of Operating Results for the Nine-Month Periods Ended September 30, 2022 and 2021

Summarized financial results for the nine months ended September 30, 2022 and 2021 are as follows:

(in thousands) 2022 2021

Royalty, licensing and management fees $ 356,208 $ 299,606

Initial franchise fees 21,635 18,904

Procurement services 47,887 36,293

Owned hotels 49,220 24,724

Other 51,588 20,753

Other revenues from franchised and managed properties 513,429 384,380

Total revenues 1,039,967 784,660

OPERATING EXPENSES

Selling, general and administrative 144,414 99,847

SG&A expenses were $59.3 million and $30.3 million for the three months ended March 31, 2023, and 2022, respectively.

SG&A expenses experienced an increase resulting from the acquisition of Radisson Hotels Americas, inclusive of $10.4 million of operational restructuring, consisting primarily of salary and benefit continuation payments, and transition related-costs incurred;

general corporate purposes, including compensation, benefits, travel, and professional fees;

and the provision for credit losses in accounts receivable in accordance with Topic 326.

SG&A expenses reflect a $3.5 million increase in the Company's deferred compensation liabilities based on increases in the underlying investments.

Depreciation and amortization :

Owned hotels 32,004 16,534

Other expenses from franchised and managed properties 458,037 327,674

Total operating expenses

654,891 462,532

Gain on sale of business and assets, net 16,688 —

Operating income 401,764 322,128

OTHER INCOME AND EXPENSES, NET

Depreciation and amortization expense was $10.0 million and $6.2 million for the three months ended March 31, 2023 and 2022, respectively, increasing primarily due to the acquisition of Radisson Hotels Americas and associated amortization from the portion of the purchase price allocated to contract asset acquisition costs as well as the three hotels acquired in the transaction.

Interest expense:

Interest income (5,256) (3,717)

Other loss (gain) 9,578 (2,906)

Equity in net loss (gain) of affiliates (1,279) 1,492

Total other income and expenses, net 35,127 29,975

Income before income taxes 366,637 292,153

Income tax expense 89,998 67,279

Net income $ 276,639 $ 224,874

Results of Operations

The Company recorded income before income taxes of $366.6 million for the nine-month period ended September 30, 2022, a $74.4 million increase from the same period of the prior year.

The increase in income before income taxes reflects a $79.6 million increase in operating income, a $3.0 million decrease in interest expense, a $2.8 million increase in equity in net loss (gain) of affiliates, a $1.6 million increase in interest income, offset by a $12.5 million increase in other loss (gain).

Operating income increased $79.6 million due to a $56.6 million increase in royalty revenues, a $30.8 million increase in other revenues, a $16.7 million increase from net gain on sale of business and assets, a $11.6 million increase in procurement services revenues, a $9.0 million increase in owned hotels revenues in excess of expenses, a $2.7 million increase in initial franchise fees, offset by a $44.6 million increase in SG&A expenses, a $1.9 million increase in depreciation and amortization, and a $1.3 million decrease in the net surplus generated from other franchised and managed properties activities.

The primary reasons for these fluctuations are described in more detail below.

Domestic royalty fees for legacy Choice brands the nine months ended September 30, 2022 increased $41.5 million to $330.3 million compared to the nine months ended September 30, 2021.

The increase in domestic royalties for legacy Choice brands reflects a 14.2% increase in domestic RevPAR.

System-wide RevPAR increased due to a 12.1% increase in average daily rates and a 110 basis point increase in occupancy.

The increase in domestic royalties for legacy Choice brands is also due to a 5.9% decrease in the number of domestic franchised hotel rooms and a 5 basis point increase in the effective royalty rate from 5.00% for the nine months ended September 30, 2021 to 5.05% for the nine months ended September 30, 2022.

A summary of the Company's domestic franchised hotels operating information for legacy Choice brands is as follows.

These operating statistics exclude the acquired legacy Radisson brands.

Nine Months Ended Nine Months Ended Change

September 30, 2022 September 30, 2021

Rate Occupancy RevPAR Average

Rate Occupancy RevPAR

Comfort $ 109.50 63.0 % $ 68.99 $ 97.74 60.8 % $ 59.40 12.0 % 220 bps 16.1 %

Sleep 96.10 60.9 % 58.56 86.39 59.6 % 51.45 11.2 % 130 bps 13.8 %

Quality 91.68 54.9 % 50.36 83.94 54.5 % 45.77 9.2 % 40 bps 10.0 %

Clarion 95.66 46.3 % 44.28 87.91 43.8 % 38.52 8.8 % 250 bps 15.0 %

Econo Lodge 72.63 50.5 % 36.70 68.35 51.1 % 34.94 6.3 % (60) bps 5.0 %

Rodeway 73.20 52.0 % 38.03 68.20 52.0 % 35.48 7.3 % — bps 7.2 %

WoodSpring 57.98 79.9 % 46.30 50.83 81.9 % 41.63 14.1 % (200) bps 11.2 %

MainStay 88.01 63.3 % 55.75 79.84 62.8 % 50.15 10.2 % 50 bps 11.2 %

Suburban 62.14 69.2 % 43.02 54.49 71.5 % 38.95 14.0 % (230) bps 10.4 %

Cambria Hotels 159.68 64.7 % 103.24 129.62 55.1 % 71.44 23.2 % 960 bps 44.5 %

Ascend Hotel Collection 155.81 57.7 % 89.93 138.31 54.4 % 75.28 12.7 % 330 bps 19.5 %

Total* $ 93.81 59.3 % $ 55.65 $ 83.70 58.2 % $ 48.71 12.1 % 110 bps 14.2 %

* As disclosed above, the operating statistics presented exclude the legacy Radisson brands acquired.

International royalty fees for legacy Choice brands for the nine months ended September 30, 2022 increased $3.1 million to $13.8 million compared to the nine months ended September 30, 2021 as a result of increases in RevPAR performance, despite reductions of the international franchise system decreasing by 53 hotels (from 1,160 as of September 30, 2021 to 1,107 as of September 30, 2022) and 13,139 rooms (from 134,303 as of September 30, 2021 to 121,164 as of September 30, 2022).

As of September 30, 2022 and September 30, 2021, approximately 1% and 2%, respectively, of the Company's international branded hotels temporarily suspended operations due to governmental restriction or a franchisee’s election.

Domestic hotels and rooms accounted for 520 and 53,185, respectively, while international hotels and rooms accounted for 89 and 12,783, respectively.

We expect the uncertainty surrounding the pandemic, including an increase in the prevalence in variants as well as the rate and pace of vaccinations around the world, to continue to impact the number of domestic and international hotels that temporarily suspend operations.

Initial Franchise Fees

Initial franchise fees are fees paid to the Company when a franchisee executes a franchise agreement;

During the nine months ended September 30, 2022, the Company awarded 338 domestic franchise agreements to legacy Choice brands representing 32,715 rooms compared to 289 franchise agreements representing 28,308 rooms for the nine months ended September 30, 2021.

Domestic franchise agreements awarded to legacy Choice brands for new construction hotels totaled 125 representing 12,794 rooms during the nine months ended September 30, 2022 compared to 88 franchise agreements representing 8,471 rooms for the nine months ended September 30, 2021.

Conversion hotel awarded franchise agreements to legacy Choice brands totaled 213 representing 19,921 rooms for the nine months ended September 30, 2022 compared to 201 franchise agreements representing 19,837 rooms for the nine months ended September 30, 2021.

The Company awarded 391 domestic relicensing contracts to legacy Choice brands during the nine months ended September 30, 2022, compared to 236 executed during the nine months ended September 30, 2021.

The Company awarded 18 domestic

renewal agreements to legacy Choice brands during both the nine months ended September 30, 2022, compared to 19 executed during nine months ended September 30, 2021.

Since the August 11, 2022 acquisition date through September 30, 2022, the Company awarded 1 franchise agreement to Radisson Hotels Americas brands.

Initial franchise fees are generally collected at the time the franchise agreement is awarded.

However, the recognition of revenue is deferred until the hotel is open or the franchise agreement is terminated.

Upon hotel opening, revenue is recognized ratably as services are provided over the enforceable period of the franchise license agreement.

Upon the termination of a franchise agreement, previously deferred initial fees are recognized immediately in the period the agreement is terminated.

Initial franchise fee revenue increased $2.7 million from $18.9 million during the nine months ended September 30, 2021 to $21.6 million during nine months ended September 30, 2022.

Procurement Services:

Revenues increased $11.6 million from $36.3 million for the nine months ended September 30, 2021 to $47.9 million for the nine months ended September 30, 2022.

These results reflect an increase in fees generated from travel-related partnerships and qualified vendors resulting from increased occupancy during the first three quarters of 2022 at our franchised hotels, and fees generated from the Company's convention, which occurred in 2022 after a two-year hiatus as a result of the COVID-19 pandemic.

Owned Hotels:

The Company's revenues, net of expenses, from owned hotels increased $9.0 million from $8.2 million for the nine months ended September 30, 2021 to $17.2 million for the nine months ended September 30, 2022.

These results reflect improved operating performance at our owned hotels and the net addition of 4 owned hotels during the comparative period, driven by the Radisson Hotels Americas acquisition.

Other Revenues:

Other revenues increased $30.8 million from $20.8 million for the nine months ended September 30, 2021 to $51.6 million in the same period of the current year driven by an increase termination fees, including $22.6 million resulting from the exit of 110 WoodSpring units in the third quarter of 2022, and other franchising revenues.

Selling, General and Administrative Expenses:

The cost to operate the business is reflected in SG&A on the consolidated statements of income.

SG&A expenses were $144.4 million and $99.8 million for the nine months ended September 30, 2022 and 2021, respectively.

SG&A expenses experienced an increase resulting from the acquisition of Radisson Hotels Americas, inclusive of severance and transaction related-costs incurred of $29.0 million.

SG&A expenses further experienced increases resulting from general corporate purposes;

lifting of certain cost mitigation measures related to the COVID-19 pandemic, including compensation, benefits, travel, and conventions & meetings;

and an increase in provision for credit losses in accounts receivable recorded in accordance with Topic 326.

These were partially offset by a $11.4 million decrease in the Company's deferred compensation liabilities based on decreases in the underlying investments

Gain on sale of business and assets, net :

During the third quarter of 2022, the Company recognized a $13.4 million gain primarily related to the sale of an owned hotel asset offset by a reduction to the carrying value of an asset held for sale.

In addition, during the second quarter of 2022, the Company recognized a gain of $3.3 million related to the sale of an owned asset, in addition to the sale and conversion of an international direct franchising market to a master franchising market.

Other Loss (Gain) :

The Company recorded other net losses of $9.6 million for the nine months ended September 30, 2022, compared to other net gains of $2.9 million, a decrease of $12.5 million for the nine months ended September 30, 2021.

The losses relate to decreases in the Company's deferred compensation assets based on decreases in the underlying investments and foreign currency transaction gains.

Equity in Net Loss (Gain) of Affiliates :

The Company recorded net gain of $1.3 million from its unconsolidated affiliates for the nine months ended September 30, 2022 compared to net losses of $1.5 million for the nine months ended September 30, 2021.

These investments relate to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets.

The fluctuation is primarily attributable to the sales of ownership interests of and distributions from affiliates resulting in gains of $2.6 million in the second quarter of 2021, partially offset by the impairment of an affiliate resulting in a loss of $4.8 million in the first quarter of 2021.

The Company recorded interest expense of $14.1 million for the three months ended March 31, 2023, an increase of $2.6 million from the comparable 2022 period.

The increase in interest expense is a result of increased borrowings and interest rates on the Company's revolving credit facility;

refer to discussion under the Liquidity and Capital Resources header of MD&A.

Other (gain) loss:

The Company recorded other net gain of $1.9 million for the three months ended March 31, 2023, compared to other net loss of $1.7 million for the three months ended March 31, 2022.

The current period gains relate to increases in the Company's deferred compensation assets based on increases in the underlying investments and foreign currency transaction gains.

Income tax expense:

The effective income tax rates were 24.5% and 23.0% for the nine months ended September 30, 2022 and 2021, respectively.

The effective income tax rates for the nine months ended September 30, 2022 and 2021 were higher than the U.S.

The effective income tax rates were 21.7% and 23.2% for the three months ended March 31, 2023 and 2022, respectively.

The effective income tax rates for the three months ended March 31, 2023 and 2022 were higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes, partially offset by excess tax benefits from share-based compensation.

Liquidity and Capital Resources

Our Company historically generates strong and predictable operating cash flows primarily from our hotel franchising operations and the initial, relicensing and continuing royalty fees attributable to our franchise agreements.

Our Company historically generates strong and predictable operating cash flows primarily from our hotel franchising operations.

Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders, while maintaining a strong balance sheet and financial flexibility.

The Company's short-term and long-term liquidity requirements primarily arise from working capital needs, debt obligations, income tax payments, dividend payments, share repurchases, capital expenditures and investments in growth opportunities.

The Company's 2012 Senior Notes matured on July 1, 2022.

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

In April 2020, in light of uncertainty resulting from the COVID-19 pandemic, we suspended future, undeclared dividends and activity under the Company's share repurchase program.

On February 24, 2022, May 24, 2022, and September 22, 2022, the Company's board of directors declared a quarterly cash dividend of $0.2375 per share of common stock.

The Company's primary sources of liquidity as of March 31, 2023 consisted of $345.7 million in cash and available borrowing capacity through its senior unsecured revolving credit facility.

As of March 31, 2023, the Company was in compliance with the financial covenants of its credit agreements and expects to remain in such compliance.

Based on our business model and information known at this time, the Company believes that cash and available borrowing capacity and cash flows from operations provide sufficient liquidity to meet the expected future operating, investing and financing needs of the business.

Our board of directors authorized a program which permits us to offer financing, investment, and guaranty support to qualified franchisees, and allows us to acquire or develop and resell hotels to incentivize franchise development of our brands in strategic markets.

We deploy capital pursuant to this program opportunistically to promote growth of our brands.

With respect to our hotel development and ownership, affiliate investments, and lending, the Company had approximately $486.4 million in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of September 30, 2022, which it generally targets to recycle within a five year period, and expects our outstanding investment to not exceed $975 million at any point in time based on current board of directors' authorization.

The deployment and annual pace of future financial support activities will depend upon market and other conditions.

With respect to these activities, the Company had approximately $502.0 million in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of March 31, 2023, which it generally targets to recycle within a five year period, and expects our outstanding investment to not exceed $975 million at any point in time based on current board of directors' authorization.

The Company also strategically deploys capital in the form of franchise agreement acquisition payments across our brands to incentivize franchise development.

As of September 30, 2022, the Company had commitments to extend an additional $302.5 million for these purposes provided the conditions of the payment are met by its franchisees.

The Company's primary sources of liquidity as of September 30, 2022 consisted of $337.5 million in cash and available borrowing capacity through its senior unsecured revolving credit facility.

As of September 30, 2022, the Company was in compliance with the financial covenants of its credit agreements and expects to remain in such compliance.

Based on our business model and information known at this time, the Company believes that cash, available borrowing capacity, and cash flows from operations will provide sufficient liquidity to meet the expected future operating, investing and financing needs of the business for at least the next 12 months, inclusive of the pending Radisson Hotels Americas transaction.

As of March 31, 2023, the Company had commitments to extend an additional $334.6 million for these purposes provided the conditions of the payment are met by its franchisees.

The Company has historically generated cash flow from operating activities in excess of capital needed to invest in growth opportunities and service debt obligations.

As a result, the Company maintains a share repurchase program and pays a quarterly dividend.

As of March 31, 2023, the Company had 3.4 million shares remaining under the current share repurchase authorization.

In addition, in March 2023, the Company's board of directors approved a 21% increase in the quarterly cash dividend to $0.2875 per share, effective with the dividend payable on April 18, 2023 to shareholders of record on April 3, 2023.

This increase will result in a projected 2023 annual dividend rate of $1.15 per share or approximately $56.5 million in aggregate dividend payments, subject to future declarations by our board of directors.

Operating Activities

During the nine months ended September 30, 2022 and 2021, net cash provided by operating activities totaled $265.2 million and $245.2 million, respectively.

Operating cash flows increased $20.0 million primarily due to an increase in operating income, excluding certain non-cash charges, and timing of working capital items.

During the three months ended March 31, 2023 and 2022, net cash provided by operating activities totaled $12.0 million and $63.9 million, respectively.

Operating cash flows decreased $51.9 million primarily due to a decrease in the net surplus generated from other franchised and managed properties activities;

an increase in SG&A expenses related to operational restructuring charges;

due diligence and transition costs related to the integration of the Radisson Hotels Americas business acquired in August 2022;

an increase in franchise agreement acquisition cost payments;

an increase in borrowing costs;

and timing of working capital items.

In conjunction with brand and development programs, we strategically make certain payments to franchisees as an incentive to enter into new franchise agreements or perform designated improvements to properties under existing franchise agreements ("franchise agreement acquisition costs").

1 unchanged sentence

If the franchisee exits our franchise system or is not operating their franchise in accordance with our quality or credit standards and is terminated, the franchisee must repay the unamortized incentive payment plus interest.

During the nine months ended September 30, 2022 and 2021, the Company's net advances for these purposes totaled $32.9 million and $28.5 million, respectively.

The timing and amount of these cash flows are dependent on various factors including the implementation of various development and brand incentive programs, the level of franchise sales and the ability of our franchisees to complete construction or convert their hotels to one of the Company’s brands.

At September 30, 2022, the Company had commitments to extend an additional $302.5 million for these purposes provided the conditions of the payment are met by its franchisees.

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

During the three months ended March 31, 2023 and 2022, the Company's net advances for these purposes totaled $28.1 million and $12.4 million, respectively.

The timing and amount of these cash flows are dependent on various factors including the implementation of various development and brand incentive programs, the level

of franchise sales and the ability of our franchisees to complete construction or convert their hotels to one of the Company’s brands.

At March 31, 2023, the Company had commitments to extend an additional $334.6 million for these purposes provided the conditions of the payment are met by its franchisees.

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

In accordance with the terms of our franchise agreements, the Company is obligated to use these marketing and reservation system fees to provide marketing and reservation services.

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

Conversely, to the extent expenditures incurred

exceed revenues collected, the Company has the contractual enforceable right to recover such advances in future periods through additional fee assessments or reduced spending.

During the nine months ended September 30, 2022 and 2021, net surplus generated from other franchised and managed properties activities was $55.4 million and $56.7 million, respectively.

Conversely, to the extent expenditures incurred exceed revenues collected, the Company has the contractual enforceable right to recover such advances in future periods through additional fee assessments or reduced spending.

The franchised and management contracts acquired in the Radisson Hotels Americas acquisition have similar terms as those described above with the exceptions of certain contractual elements concerning reservation fees, which are not required to breakeven over time and which are insignificant to overall operating net income.

During the three months ended March 31, 2023 and 2022, net surplus generated from other franchised and managed properties activities was $2.1 million and $12.9 million, respectively.

Investing Activities

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We are currently engaged in these financial support activities to encourage acceleration of the growth of our Cambria Hotels and Everhome Suites brands, primarily in strategic markets and locations.

With respect to our hotel development and ownership, affiliate investments, and lending, the Company had approximately $486.4 million outstanding in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of September 30, 2022, which it generally targets to recycle within a five year period, and expects our outstanding investment to not exceed $975 million at any point of time based on current board of directors' authorization.

With respect to our hotel development and ownership, affiliate investments, and lending, the Company had approximately $502.0 million outstanding in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of March 31, 2023, which it generally targets to recycle within a five year period, and expects our outstanding investment to not exceed $975 million at any point of time based on current board of directors' authorization.

We expect to continue to deploy capital in these manners in support of our brands.

The deployment and annual pace of future financial support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development and the hotel lending environment, and our assessment of the ongoing impacts of the COVID-19 pandemic.

Cash utilized for investing activities totaled $483.7 million and $52.6 million for the nine months ended September 30, 2022 and 2021, respectively.

The change in cash utilized for investing activities for the nine months ended September 30, 2022 primarily reflects the following:

On August 11, 2022, the Company acquired 100% of the issued and outstanding equity interest of Radisson Hotels Americas for a purchase price, net of Disclosed Leakage of approximately $673.9 million.

The purchase price, net of cash acquired, was $550.4 million.

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 acquisition expands the Company's footprint in international markets and the upper upscale and upscale full service segments and enhances guest offerings in the core upper-midscale segment.

The acquisition accelerates asset-light strategy of growth in higher revenue travel segments and locations.

The total value consideration, net of cash acquired, was approximately $550.4 million.

To fund the transaction, Choice drew $175 million on the Company's existing $600 million unsecured credit facility (the "Revolver"), and funded the remainder with cash on hand.

On the transaction date, the Company acquired approximately $10.4 million in restricted cash due to the mortgage.

As a result of paying the mortgage, the restrictions were lifted.

Refer to Note 15 to our consolidated financial statements for further discussion.

During the nine months ended September 30, 2022 and 2021, capital expenditures in property and equipment totaled $66.1 million and $46.1 million, respectively.

The increase in capital expenditures primarily reflects increased costs incurred to support the continued growth of the Cambria Hotels and Everhome Suites brands, including ongoing construction and acquisition of land parcels in the first and second quarters of 2022 for hotel development.

During the nine months ended September 30, 2022, the Company realized net proceeds of $140.6 million from the sale of two Cambria hotels, one parcel of land, and a sale and conversion of an international direct franchising market to a master franchising market.

During the nine months ended September 30, 2022, the Company recorded $22.6 million related to the termination of 110 WoodSpring units.

The termination fees recognized represent $67.4 million in consideration less the carrying basis of the related contract intangibles.

During the third and fourth quarters of 2022, the Company received cash of $5.7 million and $61.7 million, respectively.

The Company maintains equity method investments in affiliates related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels in strategic markets.

During the nine months ended September 30, 2022 and 2021, the Company invested $4.3 million and $2.2 million, respectively, and received no distributions from these affiliates.

To the extent existing affiliates proceed to the hotel construction phase, the Company is committed to make additional capital contributions totaling $7.7 million to support these efforts.

Cash utilized for investing activities totaled $29.5 million and $22.5 million for the three months ended March 31, 2023 and 2022, respectively.

The change in cash utilized for investing activities for the three months ended March 31, 2023 primarily reflects the following:

During the three months ended March 31, 2023 and 2022, capital expenditures in property and equipment totaled $19.6 million and $26.8 million, respectively.

These capital expenditures primarily reflect costs incurred to support the continued growth of the Cambria Hotels and Everhome Suites brands, including ongoing construction and acquisition of land parcels for hotel development.

During the three months ended March 31, 2022, the Company realized net proceeds of $8.5 million from the sale of one parcel of land.

During the three months ended March 31, 2023 and 2022, the Company invested $3.6 million and $0.3 million, respectively, to support these efforts.

In addition, during the three months ended March 31, 2023, the Company received distributions and sales proceeds from these affiliates totaling $0.9 million.

The Company received no distribution and sales proceeds from these affiliates for the three months ended March 31, 2022.

To the extent that existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make additional capital contributions totaling $11.6 million to support these efforts.

The Company has entered into various limited payment guaranties with regards to the Company’s investments in affiliates.

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

The Company believes the likelihood of having to perform under the aforementioned limited payment guaranties was remote as of September 30, 2022 and September 30, 2021.

The Company believes the likelihood of having to perform under the aforementioned limited payment guaranties was remote as of March 31, 2023 and 2022.

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 our guaranty.

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These loans bear interest and are expected to be repaid in accordance with the terms of the loan arrangements.

During the nine months ended September 30, 2022, the Company advanced $5.6 million and received repayments totaling $0.7 million for these purposes.

For the nine months ended September 30, 2021, the Company advanced no amounts and received repayments totaling $0.1 million for these purposes, and acquired a senior note with collateral in an underlying operating hotel for $17.9 million.

At September 30, 2022, the Company had commitments to extend an additional $1.8 million for these purposes provided certain conditions are met by its franchisees.

During the three months ended March 31, 2023, the Company advanced $3.7 million and received repayments totaling $0.3 million for these purposes.

For the three months ended March 31, 2022, the Company advanced $1.2 million amounts and

received repayments totaling $0.1 million for these purposes.

At March 31, 2023, the Company had commitments to extend an additional $0.7 million for these purposes provided certain conditions are met by its franchisees.

Financing Activities

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

The Company has exercised multiple one-year extension options on the Restated Credit Agreement resulting in a new maturity date of August 20, 2026.

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.

On May 18, 2022, the remainder $60 million of the $600 million total capacity was extended to August 20, 2026 in exchange for fees of $24 thousand.

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.

On February 18, 2020, the Company entered into the First Amendment to the Amended and Restated Senior Unsecured Credit Agreement which, among other things, removed a springing guarantee (requiring subsidiaries to guarantee the Company's obligations under the Restated Credit Agreement if the subsidiary incurs certain recourse debt) and other provisions and references in the Restated Credit Agreement related to the potential existence of subsidiary guarantors.

On February 14, 2023, the Company entered into a Third Amendment to the Amended and Restated Senior Unsecured Credit Agreement.

This amendment provides, among other things, for (i) an increase in the aggregate amount of commitments under the Company's existing $600 million unsecured credit facility (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 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).

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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 September 30, 2022, the Company maintained a total leverage ratio of 2.16x and was in compliance with all financial covenants under the Restated Credit Agreement.

The senior unsecured revolving credit facility was paid down in full during the third quarter of 2020 and remained undrawn as of December 31, 2021.

On August 11, 2022, to fund the Radisson Hotels Americas acquisition, the Company drew $175 million on the Company's existing $600 million unsecured credit facility and funded the remainder with cash on hand.

At March 31, 2023, the Company maintained a total leverage ratio of 2.39x, including outstanding debt of approximately $533.6 million on the senior unsecured revolving credit facility, and was in compliance with all financial covenants under the Restated Credit Agreement.

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.

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The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions and other offering expenses, to repay in full the $250 million Term Loan entered in April 2020 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 15 th and July 15 th 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.

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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 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.

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 shareholders totaling approximately $600.7 million paid on August 23, 2012.

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 2012 Senior Notes subject to increase or decrease.

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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 September 30, 2022, the Company had been fully advanced the amounts due pursuant to these agreements.

At March 31, 2023, the Company had been fully advanced the amounts due pursuant to these agreements.

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

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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 September 30, 2022.

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.

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

Given our strong liquidity and credit profile, in May 2021, the Company resumed the payment of quarterly dividends, subject to future declarations by our board of directors.

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.

On February 24, 2022, May 24, 2022, and September 22, 2022, the Company's board of directors declared a cash dividend of $0.2375 per share of common stock.

During the nine months ended September 30, 2022, the Company paid $39.7 million in cash dividends.

The Company was in material compliance with all applicable current performance conditions as of March 31, 2023.

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

In March 2023, the Company's board of directors approved a 21% increase in the quarterly cash dividend to $0.2875 per share, effective with the dividend payable on April 18, 2023 to shareholders of record on April 3, 2023.

During the three months ended March 31, 2023, the Company paid $12.8 million in cash dividends.

We expect that cash dividends will continue to be paid in the future, subject to declaration by our board of directors, future business performance, economic conditions, changes in tax regulations and other matters.

Based on our present dividend rate and outstanding share count, aggregate annual regular dividends for 2022 are estimated to be approximately $52.6 million.

Based on our present dividend rate and outstanding share count, aggregate annual regular dividends for 2023 are projected to be $1.15 per share or approximately $56.5 million in aggregate dividend payments.

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

Share Repurchases

In 1998, we instituted a share repurchase program which has generated substantial value for our shareholders.

In April 2020 in light of uncertainty resulting from the COVID-19 pandemic, we suspended activity under our share repurchase program.

In May 2021, the Company's board of directors approved resumption of the share repurchase program.

During the nine months ended September 30, 2022, the Company repurchased 2,072,872 shares of its common stock under the share repurchase program at a total cost of $241.2 million.

Through September 30, 2022, the Company repurchased 53.8 million shares of its common stock (including 33.0 million prior to the two-for-one stock split effected in October 2005) under the program at a total cost of $1.7 billion.

Share Repurchases and Redemptions

In 1998, we instituted a share repurchase program.

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

During the three months ended March 31, 2023, the Company repurchased 1.2 million shares of its common stock under the share repurchase program at a total cost of $146.8 million.

In total through March 31, 2023, the Company repurchased 56.6 million shares of its common stock (including 33.0 million prior to the two-for-one stock split effected in October 2005) under the program at a total cost of $2.1 billion.

Considering the effect of the two-for-one stock split, the Company has repurchased 89.6 million shares at an average price of $23.10 per share.

On September 14, 2022, the board of directors approved an increase in the number of shares authorized under its share repurchase program by five million shares.

As of September 30, 2022, the Company had 6.3 million shares remaining under the current share repurchase authorization.

During the nine months ended September 30, 2022, the Company redeemed 35,462 shares of common stock at a total cost of $5.3 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 PVRSUs and restricted stock grants.

As of March 31, 2023, the Company had 3.4 million shares remaining under the current share repurchase authorization.

During the three months ended March 31, 2023, the Company redeemed 0.1 million shares of common stock at a total cost of $13.7 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 PVRSUs and restricted stock grants.

These redemptions were outside the share repurchase program.

During the three months ended March 31, 2023, the Company received proceeds of $5.5 million from stock options exercised by employees.

Critical Accounting Policies

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These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which in turn are based on information currently available to management.

Such statements may relate to projections of the Company's revenue, expenses, Adjusted EBITDA, earnings, debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock, and other financial and operational measures, including occupancy and open hotels, RevPAR, our ability to benefit from any rebound in travel demand, our liquidity, and the impact of COVID-19 and economic conditions on our future operations, among other matters.

We caution you not to place undue reliance on any such forward-looking statements.

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Several factors could cause our actual results, performance or achievements to differ materially from those expressed in or contemplated by the forward-looking statements.

Such risks include, but are not limited to, the consummation of the acquisition of Radisson Hotels Americas, including the related incurrence of additional indebtedness;

Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions, including access to liquidity and capital;

the Company’s ability to successfully integrate Radisson Hotels Americas’ employees and operations;

the ability to realize the anticipated benefits and synergies of the acquisition of Radisson Hotels Americas as rapidly or to the extent anticipated;

the continuation or resurgence of the COVID-19 pandemic, including with respect to new strains or variants;

the rate, pace and effectiveness of vaccination in the broader population;

changes in consumer demand and confidence, including the impact of the COVID-19 pandemic on unemployment rates, consumer discretionary spending and the demand for travel, transient and group business;

the impact of COVID-19 on the global hospitality industry, particularly but not exclusively in the U.S.

the resurgence or worsening of the COVID-19 pandemic, including with respect to new strains or variants, and the related impact on the global hospitality industry, particularly but not exclusively the U.S.

travel market;

the success of our mitigation efforts in response to the COVID-19 pandemic;

the performance of our brands and categories in any recovery from the COVID-19 pandemic disruption;

changes in consumer demand and confidence, including consumer discretionary spending and the demand for travel, transient and group business;

the timing and amount of future dividends and share repurchases;

changes to general, domestic and foreign economic conditions, including access to liquidity and capital as a result of COVID-19;

future domestic or global outbreaks of epidemics, pandemics or contagious diseases or fear of such outbreaks;

changes in law and regulation applicable to the travel, lodging or franchising industries;

changes in law and regulation applicable to the travel, lodging or franchising industries, including with respect to the status of our relationship with employees of our franchisees;

foreign currency fluctuations;

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the level of acceptance of alternative growth strategies we may implement;

the impact of inflation;

cyber security and data breach risks;

climate change and sustainability related concerns;

ownership and financing activities;

hotel closures or financial difficulties of our franchisees;

operating risks associated with our international operations, especially in areas currently most affected by COVID-19;

operating risks associated with our international operations, especially in areas that continue to be affected by the COVID-19 pandemic;

labor shortages;

the outcome of litigation;

and our ability to effectively manage our indebtedness and secure our indebtedness, including additional indebtedness incurred as a result of the acquisition of Radisson Hotels Americas.

These and other risk factors are discussed in detail in the Risk Factors section of this Quarterly Report on Form 10-Q of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, filed with the SEC on August 4, 2022, and of the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022.

These and other risk factors are discussed in detail in the Risk Factors section of this Quarterly Report on Form 10-Q and of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023.

We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

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-Q

Item 2. Management’s Discussion and Analysis