What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-09 · 147 added, 108 removed, 537 unchanged (32% of the section changed)

4 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Royalty, licensing and management fees $ 140,499 $ 121,449 $ 247,991 $ 212,188

18 unchanged sentences

Other (gain) loss ( 2,187 ) 5,559 ( 4,095 ) 7,275

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

Equity in net (gain) loss of affiliates ( 185 ) 40 ( 122 ) ( 204 )

Total other income and expenses, net 11,842 15,223 22,198 26,885

10 unchanged sentences

(IN THOUSANDS)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Net income $ 84,710 $ 106,168 $ 137,530 $ 173,559

8 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Current assets

39 unchanged sentences

160,000,000 shares authorized;

95,065,638 shares issued at March 31, 2023 and December 31, 2022;

51,174,432 and 52,200,903 shares outstanding at March 31, 2023 and December 31, 2022, respectively

95,065,638 shares issued at June 30, 2023 and December 31, 2022;

50,565,881 and 52,200,903 shares outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in-capital 311,288 298,053

1 unchanged sentence

Treasury stock, at cost;

43,891,206 and 42,864,735 shares at March 31, 2023 and December 31, 2022, respectively

44,499,757 and 42,864,735 shares at June 30, 2023 and December 31, 2022, respectively

( 1,917,031 ) ( 1,694,857 )

7 unchanged sentences

(IN THOUSANDS)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Gain on sale and disposal of business and assets, net — ( 3,309 )

Amortization - franchise agreement acquisition cost 4,637 3,784

Franchise agreement acquisition cost amortization 9,380 7,623

Non-cash stock compensation and other charges 23,689 17,770

Non-cash interest and investment (income) loss ( 1,442 ) 1,909

Non-cash interest, investment, and affiliate (income) loss, net ( 3,098 ) 7,459

Deferred income taxes 2,157 ( 5,493 )

Equity in net loss of affiliates, less distributions received 421 230

Equity in net gain of affiliates, less distributions received 637 745

Franchise agreement acquisition costs, net of reimbursements ( 46,150 ) ( 27,016 )

4 unchanged sentences

Investment in intangible assets ( 1,385 ) ( 1,824 )

Proceeds from sale of business and assets — 8,494

Proceeds from sale of assets and business — 32,893

Asset acquisition, net of cash acquired — ( 856 )

Contributions to investments in affiliates ( 15,328 ) ( 669 )

10 unchanged sentences

Purchases of treasury stock ( 234,455 ) ( 15,140 )

Dividends paid ( 12,821 ) ( 13,204 )

Proceeds from exercise of stock options 5,616 2,359

Net cash provided by (used in) financing activities 7,440 ( 25,795 )

Dividends paid ( 27,534 ) ( 26,453 )

Net cash used in financing activities ( 72,128 ) ( 39,258 )

Net change in cash and cash equivalents ( 5,539 ) 96,100

9 unchanged sentences

Investment in property, equipment and intangibles acquired in accounts payable and accrued liabilities $ 8,716 $ 5,715

Asset acquisition from extinguishment of note receivable $ — $ 20,446

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

19 unchanged sentences

Balance as of March 31, 2022 55,770,322 $ 951 $ 265,385 $ ( 4,708 ) $ ( 1,276,348 ) $ 1,329,365 $ 314,645

Net income — — — — — 106,168 106,168

Other comprehensive income (loss), net of tax — — — ( 103 ) — — ( 103 )

Share based payment activity (1)

12,422 — 8,999 — 596 — 9,595

Dividends declared ($ 0.2375 per share)

— — — — — ( 13,242 ) ( 13,242 )

Treasury purchases ( 2,422 ) — — — ( 338 ) — ( 338 )

Balance as of June 30, 2022 55,780,322 $ 951 $ 274,384 $ ( 4,811 ) $ ( 1,276,090 ) $ 1,422,291 $ 416,725

Outstanding Common

15 unchanged sentences

Balance as of March 31, 2023 51,174,432 $ 951 $ 299,952 $ ( 4,817 ) $ ( 1,842,913 ) $ 1,593,835 $ 47,008

(1) 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.

This increase will result in a projected 2023 annual dividend rate of $ 1.15 per share, subject to future declarations by the board of directors.

Net income — — — — — 84,710 84,710

Other comprehensive income (loss), net of tax — — — 295 — — 295

Share based payment activity (1)

10,508 — 11,336 — 579 — 11,915

Dividends declared ($ 0.2875 per share)

— — — — — ( 14,540 ) ( 14,540 )

Treasury purchases (2)

( 619,059 ) — — — ( 74,697 ) — ( 74,697 )

Balance as of June 30, 2023 50,565,881 $ 951 $ 311,288 $ ( 4,522 ) $ ( 1,917,031 ) $ 1,664,005 $ 54,691

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

23 unchanged sentences

Refer to Note 14.

Accordingly, our consolidated statements of income include Radisson Hotels Americas' results of operations in the three months ended March 31, 2023, but exclude Radisson Hotels Americas' results of operations in the three months ended March 31, 2022, as this period was prior to the acquisition date of the Transaction.

Accordingly, our consolidated statements of income include Radisson Hotels Americas' results of operations in the three and six months ended June 30, 2023, but exclude Radisson Hotels Americas' results of operations in the three and six months ended June 30, 2022, as this period was prior to the acquisition date of the Transaction.

Summary of Significant Accounting Policies

4 unchanged sentences

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

The Company adopted ASU 2022-02 on a prospective basis effective January 1, 2023, and concluded there is no impact to the consolidated financial statements or disclosures for the first quarter of 2023.

The Company adopted ASU 2022-02 on a prospective basis effective January 1, 2023, and concluded there is no material impact to the consolidated financial statements or disclosures through the second quarter of 2023.

Contract Liabilities

2 unchanged sentences

Loyalty points are typically redeemed within three years of issuance.

Significant changes in the contract liabilities balances during the period December 31, 2022 to March 31, 2023 are as follows:

Significant changes in the contract liabilities balances during the period December 31, 2022 to June 30, 2023 are as follows:

(in thousands)

2 unchanged sentences

Revenue recognized in the period ( 61,597 )

Balance as of March 31, 2023 $ 205,863

Balance as of June 30, 2023 $ 207,791

Remaining Performance Obligations

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $ 205.9 million as of March 31, 2023.

The aggregate amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations is $ 207.8 million as of June 30, 2023.

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

2 unchanged sentences

Three Months Ended Three Months Ended

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

(in thousands) Over time Point in time Total Over time Point in time Total

6 unchanged sentences

Total revenues $ 391,971 $ 35,449 $ 427,420 $ 323,271 $ 44,703 $ 367,974

Six Months Ended Six Months Ended

June 30, 2023 June 30, 2022

(in thousands) Over time Point in time Total Over time Point in time Total

Royalty, licensing and management fees $ 243,502 $ 4,489 $ 247,991 $ 212,188 $ — $ 212,188

Initial franchise fees 15,046 — 15,046 14,624 — 14,624

Platform and procurement services fees 41,237 1,407 42,644 31,876 1,610 33,486

Owned hotels 36,047 11,789 47,836 24,843 4,385 29,228

Other 21,775 — 21,775 20,156 — 20,156

Other revenues from franchised and managed properties 345,934 38,986 384,920 260,382 55,637 316,019

Total revenues $ 703,541 $ 56,671 $ 760,212 $ 564,069 $ 61,632 $ 625,701

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

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

As presented in Note 11, the Corporate & Other segment revenue amounts represent $ 26.1 million and $ 14.3 million for the three months ended March 31, 2023 and 2022, and are included in the Over time column of Other revenue and the Owned hotels revenue row.

As presented in Note 11, the Corporate & Other segment revenue amounts represent $ 26.6 million and $ 19.4 million for the three months ended June 30, 2023 and 2022, respectively, and $ 52.6 million and $ 33.7 million for the six months ended June 30, 2023 and 2022, respectively, and are included in the Over time column of Other revenue and the Owned hotels revenue row.

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

Royalty, licensing and management fees and Other revenues from franchised and managed properties are presented net of intersegment revenues of $ 2.3 million and $ 0.9 million for the three months ended March 31, 2023 and 2022, respectively .

Royalty, licensing and management fees and Other revenues from franchised and managed properties are presented net of intersegment revenues of $ 1.0 million and $ 1.3 million for the three months ended June 30, 2023 and 2022, respectively, and $ 3.3 million and $ 2.2 million for the six months ended June 30, 2023 and 2022, respectively.

Receivables and Allowance for Credit Losses

3 unchanged sentences

The composition of notes receivable balances by credit quality indicator and the allowance for credit losses is as follows:

(in thousands) March 31, 2023 December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Senior $ 86,417 $ 95,466

13 unchanged sentences

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

(in thousands) March 31, 2023 December 31, 2022

(in thousands) June 30, 2023 December 31, 2022

Beginning balance $ 10,172 $ 16,779

Provision for credit losses 154 ( 938 )

Write-offs ( 156 ) ( 5,669 )

Recoveries ( 1,812 ) ( 5,669 )

Ending balance $ 8,514 $ 10,172

As of both March 31, 2023 and December 31, 2022, one loan with a senior tranche met the definition of collateral-dependent and is collateralized by membership interests in the borrowing entities and the associated land parcel.

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

As of both June 30, 2023 and December 31, 2022, one loan with a senior tranche met the definition of collateral-dependent and is collateralized by membership interests in the borrowing entities and the associated land parcel.

The Company used a market approach via quoted market prices to value the underlying collateral.

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

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

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

Allowances for credit losses attributable to collateral-dependent loans are $ 0.9 million as of both March 31, 2023 and December 31, 2022, respectively.

As of December 31, 2022, two loans had revised provisions as a result of loan repayments being made timely and a favorable reassessment of the underlying collateral's performance.

The write-offs for the year ended December 31, 2022 are primarily associated with a loan previously classified as collateral-dependent that was settled in exchange for an operating hotel on April 14, 2022, as well as a loan that was settled under negotiated terms and therefore written off.

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

Allowances for credit losses attributable to collateral-dependent loans are $ 0.9 million as of both June 30, 2023 and December 31, 2022, respectively.

Recoveries for the six months ended June 30, 2023 are primarily associated with cash collections pursuant to a settlement agreement with a borrower.

Recoveries for the year ended December 31, 2022 are primarily associated with a loan previously classified as collateral-dependent that was settled in exchange for an operating hotel on April 14, 2022.

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

2 unchanged sentences

The Company does not resume interest accrual until all delinquent payments are received based on then current loan provisions.

The amortized cost basis of notes receivable on non-accrual status was $ 18.4 million and $ 18.7 million at March 31, 2023 and December 31, 2022, respectively.

The Company has identified loans totaling approximately $ 4.8 million as of both March 31, 2023 and December 31, 2022, respectively, with stated interest rates that are less than market rate, representing a total unamortized discount of $ 0.1 million as of both March 31, 2023 and December 31, 2022, respectively.

The amortized cost basis of notes receivable on non-accrual status was $ 16.6 million and $ 18.7 million at June 30, 2023 and December 31, 2022, respectively.

The Company has identified loans totaling approximately $ 4.6 million and $ 4.8 million as of June 30, 2023 and December 31, 2022, respectively, with stated interest rates that are less than market rate, representing a total unamortized discount of $ 0.1 million as of both June 30, 2023 and December 31, 2022, respectively.

These discounts are reflected as a reduction of the outstanding loan amounts and are amortized over the life of the related loan.

6 unchanged sentences

Notes Receivable

As of March 31, 2023

As of June 30, 2023

Senior $ — $ 15,950 $ 28,099 $ 44,049 $ 42,368 $ 86,417

7 unchanged sentences

$ 20 $ 15,240 $ 2,249 $ 17,508 $ 100,707 $ 118,215

The Company evaluated its off-balance-sheet credit exposure for loan commitments and determined the likelihood of having to perform is remote as of March 31, 2023.

Refer to Note 12.

Variable Interest through Notes Issued

The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $ 105.3 million and $ 103.2 million as of March 31, 2023 and December 31, 2022, respectively.

The Company has issued notes receivables to certain entities that have created variable interests in these borrowers totaling $ 98.7 million and $ 103.2 million as of June 30, 2023 and December 31, 2022, respectively.

The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs").

1 unchanged sentence

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

During the three months ended March 31, 2023, the Company recorded provisions for credit losses on accounts receivable of $ 1.8 million in selling, general and administrative ("SG&A") expenses and $ 2.1 million in marketing and reservation system expenses.

During the three months ended March 31, 2022, the Company recorded reversal of provisions for credit losses on accounts receivable of $ 0.5 million in SG&A expenses and provisions of $ 0.3 million in marketing and reservation system expenses.

During the three months ended March 31, 2023 and 2022, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 2.8 million and $ 0.3 million, respectively.

During the six months ended June 30, 2023, the Company recorded provisions for credit losses on accounts receivable of $ 2.9 million in selling, general and administrative ("SG&A") expenses and $ 3.4 million in marketing and reservation system expenses.

During the six months ended June 30, 2022, the Company recorded reversal of provisions for credit losses on accounts receivable of $ 1.1 million in SG&A expenses and provisions of $ 0.3 million in marketing and reservation system expenses.

During the six months ended June 30, 2023 and 2022, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 5.3 million and $ 11.2 million, respectively.

Investments in Affiliates

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.

The Company has investments in affiliates that represent VIEs totaling $ 26.1 million and $ 24.5 million on the consolidated balance sheets at March 31, 2023 and December 31, 2022, 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 Everhome Suites and Cambria Hotels in strategic markets.

The Company has investments in affiliates that represent VIEs totaling $ 37.0 million and $ 24.5 million on the consolidated balance sheets at June 30, 2023 and December 31, 2022, respectively.

The Company has determined that it is not the primary beneficiary of any of these VIEs, however it does exercise significant influence through its equity ownership and as a result the investment in these affiliates is accounted for under the equity method.

For the three months ended March 31, 2023 and 2022, the Company recognized losses totaling $ 1.4 million and $ 0.8 million, respectively, from these investments that represent VIEs.

For both the three months ended June 30, 2023 and 2022, the Company recognized losses totaling $ 0.9 million from these investments that represent VIEs.

For the six months ended June 30, 2023 and 2022, the Company recognized losses totaling $ 2.3 million and $ 1.7 million, respectively, from these investments that represent VIEs.

The Company's maximum exposure to losses related to its investments in VIEs is limited to its equity investments as well as certain limited payment guaranties described in Note 12 of these financial statements.

The Company recognized no impairment charges related to equity method investments during the three months ended March 31, 2023 and 2022.

The Company recognized no impairment charges related to equity method investments during the six months ended June 30, 2023 and 2022.

Debt consists of the following:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in thousands)

$ 450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 4.8 million and $ 4.9 million at March 31, 2023 and December 31, 2022, respectively

$ 450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 4.6 million and $ 4.9 million at June 30, 2023 and December 31, 2022, respectively

$ 445,385 $ 445,080

$ 400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 4.0 million and $ 4.2 million at March 31, 2023 and December 31, 2022, respectively

$ 400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 3.9 million and $ 4.2 million at June 30, 2023 and December 31, 2022, respectively

396,139 395,838

$ 850 million senior unsecured revolving credit facility with an effective interest rate of 5.87 % less deferred issuance costs of $ 2.4 million and $ 1.8 million at March 31, 2023 and December 31, 2022, respectively (1)

$ 850 million senior unsecured revolving credit facility with an effective interest rate of 6.27 % less deferred issuance costs of $ 2.2 million and $ 1.8 million at June 30, 2023 and December 31, 2022, respectively (1)

542,769 358,189

Economic development loans with an effective interest rate of 3.00 % at March 31, 2023 and December 31, 2022, respectively

Economic development loans with an effective interest rate of 3.00 % at June 30, 2023 and December 31, 2022, respectively

$ 1,388,709 $ 1,203,523

8 unchanged sentences

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2023 and 2022 are as follows:

The changes in accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2023 and 2022 are as follows:

(in thousands)

1 unchanged sentence

Other comprehensive income (loss) before reclassification 689

Balance as of March 31, 2023 $ ( 4,817 )

Balance as of June 30, 2023 $ ( 4,522 )

(in thousands)

1 unchanged sentence

Other comprehensive income (loss) before reclassification ( 237 )

Balance as of March 31, 2022 $ ( 4,708 )

The other comprehensive income (loss) before reclassification for both the three months ended March 31, 2023 and 2022 relate to foreign currency items, and there were no amounts reclassified from accumulated other comprehensive loss during either period.

Balance as of June 30, 2022 $ ( 4,811 )

The other comprehensive income (loss) before reclassification for both the six months ended June 30, 2023 and 2022 relate to foreign currency items, and there were no amounts reclassified from accumulated other comprehensive loss during either period.

Fair Value Measurements

8 unchanged sentences

Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument.

The Company does not currently have any assets recorded at fair value whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the three months ended March 31, 2023 and year ended December 31, 2022.

As of March 31, 2023 and December 31, 2022, the Company had the following assets recorded in the consolidated balance sheets measured at fair value on a recurring basis:

The Company does not currently have any assets recorded at fair value whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the six months ended June 30, 2023 and year ended December 31, 2022.

As of June 30, 2023 and December 31, 2022, the Company had the following assets recorded in the consolidated balance sheets measured at fair value on a recurring basis:

Fair Value Measurements at Reporting Date Using

(in thousands) Total Level 1 Level 2 Level 3

As of March 31, 2023

As of June 30, 2023

Mutual funds (1)

16 unchanged sentences

Refer to Note 5 for further information on debt.

At March 31, 2023 and December 31, 2022, the carrying amounts and fair values are as follows:

March 31, 2023 December 31, 2022

At June 30, 2023 and December 31, 2022, the carrying amounts and fair values are as follows:

June 30, 2023 December 31, 2022

(in thousands) Carrying Amount Fair Value Carrying Amount Fair Value

3 unchanged sentences

Settlement of such fair value amounts may not be possible or a prudent management decision.

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

The effective income tax rates were 24.7 % and 25.3 % for the three months ended June 30, 2023 and 2022, respectively.

The effective income tax rates were 23.6 % and 24.5 % for the six months ended June 30, 2023 and 2022, respectively.

The effective income tax rates for the three and six months ended June 30, 2023 and 2022, were higher than the U.S.

federal income tax rate of 21% primarily due to the impact of state income taxes .

Share-Based Compensation and Capital Stock

The components of the Company’s pretax share-based compensation activity are as follows for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

The components of the Company’s pretax share-based compensation activity are as follows for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands) 2023 2022 2023

3 unchanged sentences

Total share-based compensation expense $ 12,206 $ 9,545 $ 21,977 $ 16,994

A summary of share-based award activity as of and changes during the three months ended March 31, 2023 are presented below:

A summary of share-based award activity as of and changes during the six months ended June 30, 2023 are presented below:

Stock Options Restricted Stock Performance Vested

7 unchanged sentences

Performance-Based Leveraging (1)

— — — — 54,166 141.00

Exercised/Vested ( 108,322 ) 52.77 ( 82,822 ) 94.27 ( 119,751 ) 145.41

1 unchanged sentence

Forfeited ( 6,731 ) 125.15 ( 7,851 ) 113.75 ( 5,986 ) 133.50

Outstanding at March 31, 2023 991,483 $ 102.13 6.3 361,827 $ 134.91 420,040 $ 135.78

Options exercisable at March 31, 2023 596,997 $ 90.05 4.8

(1) There has been no change to PVRSUs outstanding in the three months ended March 31, 2023 based on the Company's performance relative to the targeted performance conditions contained in PVRSUs.

The fair value of the restricted stock awards and the PVRSUs with performance conditions granted during the three months ended March 31, 2023 were equal to the market price of the Company’s common stock on date of grant.

Outstanding at June 30, 2023 984,327 $ 101.99 6.0 356,704 $ 136.05 470,650 $ 136.34

Options exercisable at June 30, 2023 595,927 $ 90.02 4.5

(1) Revision to PVRSUs outstanding in the six months ended June 30, 2023 is based on the Company's performance relative to the targeted performance conditions contained in PVRSUs.

The fair value of the restricted stock awards and the PVRSUs with performance conditions granted during the six months ended June 30, 2023 were equal to the market price of the Company’s common stock on date of grant.

The fair value of the PVRSUs with market conditions based on the Company’s total shareholder return relative to a predetermined peer group was estimated using a Monte Carlo simulation method as of the grant date.

2 unchanged sentences

The stock options granted by the Company had an exercise price equal to the market price of the Company's common stock on the date of grant.

The fair value of the options granted during the three months ended March 31, 2023 was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

The fair value of the options granted during the six months ended June 30, 2023 was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate 4.10 %

6 unchanged sentences

Earnings Per Share

The Company’s shares of restricted stock contain rights to receive nonforfeitable dividends and thus are participating securities requiring the computation of basic EPS using the two-class method.

The Company’s shares of restricted stock contain rights to receive nonforfeitable dividends and thus are participating securities requiring the computation of basic Earnings per Share ("EPS") using the two-class method.

As the shares of restricted stock are both potential shares of common stock and participating securities, the Company calculates diluted earnings per share by the more dilutive of the treasury stock method or the two-class method.

2 unchanged sentences

The computation of basic and diluted earnings per share of common stock is as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(in thousands, except per share amounts) 2023 2022 2023 2022

12 unchanged sentences

The following securities have been excluded from the calculation of diluted weighted average shares of common stock outstanding as the inclusion of these securities would have an anti-dilutive effect:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(in thousands) 2023 2022 2023 2022

Stock options 235 155 235 155

PVRSUs — 76 — 76

Reportable Segment Information

10 unchanged sentences

The following table presents the financial information for the Company's segments:

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Three Months Ended June 30, 2022

(in thousands) Hotel

6 unchanged sentences

Income (loss) before income taxes $ 150,116 $ ( 37,569 ) $ — $ 112,547 $ 165,405 $ ( 23,279 ) $ — $ 142,126

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

(in thousands) Hotel

Franchising & Management Corporate &

Other Intersegment Eliminations Consolidated Hotel

Franchising & Management Corporate &

Other Intersegment Eliminations Consolidated

Revenues $ 710,901 $ 52,632 $ ( 3,321 ) $ 760,212 $ 594,228 $ 33,671 $ ( 2,198 ) $ 625,701

Operating income (loss) $ 255,422 $ ( 53,182 ) $ — $ 202,240 $ 272,768 $ ( 16,022 ) $ — $ 256,746

Income (loss) before income taxes $ 255,544 $ ( 75,502 ) $ — $ 180,042 $ 272,969 $ ( 43,108 ) $ — $ 229,861

Commitments and Contingencies

4 unchanged sentences

Under these limited payment guaranties, the Company has agreed to guarantee a portion of the outstanding debt until certain conditions are met such as (a) the loan matures, (b) certain debt covenants are achieved, (c) the maximum amount guaranteed by the Company is paid in full or (d) the Company, through its affiliates, ceases to be a member of the VIE.

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

As of March 31, 2023 and December 31, 2022, the Company believed the likelihood of having to perform under the aforementioned limited payment guaranties was remote.

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

The Company has the following commitments outstanding at March 31, 2023:

As of June 30, 2023, the maximum unrecorded exposure of principal incidental to these limited payment guaranties is $ 4.1 million, plus unpaid expenses and accrued unpaid interest, and the Company believed the likelihood of having to perform under these guaranties was remote.

The Company has the following commitments outstanding at June 30, 2023:

• The Company provides financing in the form of franchise agreement acquisition payments to franchisees for property improvements, hotel development efforts and other purposes.

These payments are typically made at commencement of construction or hotel opening, in accordance with agreed upon provisions in individual franchise agreements.

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.

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

At June 30, 2023, the Company had commitments to extend an additional $ 336.0 million for these purposes provided the conditions of the payment are met by its franchisees.

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

The maximum guarantee under the agreement is $ 22 million.

The Company believes the future performance is expected to be sufficient on both an annual basis and over the duration of the agreement.

Accordingly, no liability was recorded as of March 31, 2023 in accrued liabilities within the consolidated balance sheets.

• To the extent existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make capital contributions totaling $ 11.6 million to support their efforts to construct Cambria hotels.

The Company believes the future performance of the hotels is expected to be sufficient on both an annual basis and over the duration of the agreement.

Accordingly, no liability was recorded as of June 30, 2023 in accrued liabilities within the consolidated balance sheets.

• To the extent existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make capital contributions totaling $ 15.7 million to support their efforts to construct Everhome Suites and Cambria hotels.

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

At March 31, 2023, the Company has remaining commitments of approximately $ 0.7 million, upon certain conditions being met.

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

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

marketing and reservation services appropriate to support the operation of the overall system.

At June 30, 2023, the Company has remaining commitments of less than $ 0.1 million, upon certain conditions being met.

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

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

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

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

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Transactions with Unconsolidated Affiliates

The Company has a management fee arrangement for marketing services with a partner in an unconsolidated affiliate.

For the three months ended March 31, 2023 and 2022, fees earned and payroll costs reimbursed under this arrangement totaled $ 0.7 million and $ 0.4 million, respectively.

The Company has entered into franchise agreements with certain of the unconsolidated affiliates discussed in Note 4.

Pursuant to these franchise agreements, for the three months ended March 31, 2023 and 2022, the Company recorded royalty and marketing reservation system fees of approximately $ 5.8 million and $ 4.2 million, respectively.

The Company recorded $ 4.1 million and $ 3.9 million as a receivable due from these affiliates as of March 31, 2023 and December 31, 2022, respectively.

As part of the acquisition of Radisson Hotels Americas as discussed in Note 14, the Company has a management fee arrangement with an investment in an unconsolidated affiliate accounted for under the cost method.

For the three months ended March 31, 2023, fees earned and payroll costs reimbursed under this arrangement totaled $ 1.0 million.

The Company has management fee arrangements with certain of the unconsolidated affiliates discussed in Note 4.

The fees earned and payroll costs reimbursed under these arrangements totaled $ 1.9 million and $ 0.6 million for the three months ended June 30, 2023 and 2022, respectively, and $ 3.7 million and $ 0.9 million for the six months ended June 30, 2023 and 2022, respectively.

The Company has entered into franchise agreements with certain unconsolidated affiliates.

Pursuant to these franchise agreements, for the three months ended June 30, 2023 and 2022, the Company recorded royalty and marketing reservation system fees of approximately $ 7.8 million and $ 6.4 million, respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded royalty and marketing reservation fees of approximately $ 13.6 million and $ 10.6 million, respectively.

The Company recorded $ 4.9 million and $ 3.9 million as a receivable due from these affiliates as of June 30, 2023 and December 31, 2022, respectively.

August 2022 Radisson Hotels Americas Acquisition

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

Additionally, in connection with the acquisition, we recorded $ 10.4 million of transaction, transition, and severance expense, included within Selling, general and administrative, during the three months ended March 31, 2023.

Additionally, in connection with the acquisition, we recorded $ 9.4 million and $ 19.7 million of transaction, transition, and severance expense, included within Selling, general and administrative, during the three and six months ended June 30, 2023, respectively.

Preliminary Fair Values of Assets Acquired and Liabilities Assumed

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

The final acquisition accounting adjustments may b e materially different and may include (1) changes in fair value of property and equipment and associated salvage values, (2) changes in allocations to intangible assets, such trade names, acquired

franchise and management agreements, above and below market leases, as well as goodwill;

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

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Total $ 125,441

We provisionally estimated the value of the property and equipment through a combination of income, cost and market approaches, which are primarily based on significant Level 2 and Level 3 assumptions, such as estimates of future income

growth, discount rates, capitalization rates and capital expenditure needs of the hotels.

We are continuing to assess the marketplace assumptions and property conditions, which could result in changes to these provisional values.

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Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the transaction had occurred at the beginning of the period presented, nor are they indicative of future results of operations.

Three Months Ended

(in thousands) March 31, 2022

Six Months Ended

(in thousands) June 30, 2022

Revenues $ 745,238

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Radisson Hotels Americas Results of Operations

The results of Radisson Hotels Americas have been consolidated with the Company since August 11, 2022 and are included in the Company’s Consolidated Statement of Income for the three months ended March 31, 2023.

The following table presents these results.

Three Months Ended

(in thousands) March 31, 2023

Three Months Ended Six Months Ended

(in thousands) June 30, 2023 June 30, 2023

Revenues $ 73,113 $ 135,496

Net income 7,713 10,981

The $ 61.0 million excess value recorded in goodwill is primarily attributable to value we expect to realize from the existing customer base, improvements in RevPAR, cost synergies and new agreements signed with new franchisees and developers.

The $ 61.0 million excess value recorded in goodwill is primarily attributable to value we expect to realize from the existing customer base, improvements in Revenue per Available Room ("RevPAR"), cost synergies and new agreements signed with new franchisees and developers.

Goodwill for the Transaction is fully attributable to the Hotel Franchising & Management reportable segment and is fully deductible for tax purposes.

The following table details the carrying amount of the Company's goodwill, including goodwill arising from the acquisition of Radisson Hotels Americas, as of March 31, 2023.

The following table details the carrying amount of the Company's goodwill, including goodwill arising from the acquisition of Radisson Hotels Americas, as of June 30, 2023.

(in thousands)

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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 1. Financial Statements