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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-08 · 264 added, 261 removed, 245 unchanged (68% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the consolidated financial condition and results of operations of Choice Hotels International, Inc.

and its subsidiaries (together "Choice" or the "Company", "we", "us", or "our") contained in this report.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the consolidated financial condition and the results of operations of Choice Hotels International, Inc.

and its subsidiaries (collectively "Choice" or the "Company", "we", "us", or "our") contained in this report.

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

We are primarily a hotel franchisor operating in 50 states, the District of Columbia and over 45 countries and territories.

At June 30, 2023, we had 7,472 hotels with 628,901 rooms open and operating, and 960 hotels with 93,646 rooms under construction, awaiting conversion, approved for development or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in its global system.

At September 30, 2023, we had 7,463 hotels with 627,694 rooms open and operating, and 980 hotels with 99,076 rooms under construction, awaiting conversion, approved for development or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in its global system.

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").

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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.

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

As a result of our 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.

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.

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

hotel ownership;

and other ancillary sources.

Historically, the hotel industry has been seasonal in nature.

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

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, procurement services and licensing 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 and other companies with product and services that appeal to our guests.

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

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

Our principal source of revenue is franchise fees, which is based on the gross room revenues or the number of rooms at 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 of the year.

The Company's primary focus is hotel franchising, so 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 our operating results by increasing the number of franchised hotel rooms and the effective royalty rates in our franchise contracts resulting in increased initial fee revenue, ongoing royalty fees, procurement services and licensing revenues.

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

the number and relative mix of hotel rooms in the various hotel lodging price categories;

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occupancy and room rates achieved by the hotels in our system;

the effective royalty rate achieved on our franchise agreements;

the effective royalty rate achieved in our franchise agreements;

the level of franchise sales and relicensing activity;

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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.

The number of rooms in our hotel system and the occupancy and room rates at those hotel 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.

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, 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.

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

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

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

These expenditures, which include advertising costs and costs to maintain our central reservations systems, enhance awareness and consumer preference for our brands and deliver guests to our franchisees.

Greater awareness and preference promotes long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases franchise fees earned by the Company.

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

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

Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer.

Our Company articulates its mission as a commitment to our franchisees’ profitability by providing our franchisees with hotel franchises that strive to generate the highest return on investment of any hotel franchise.

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

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

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

We believe that executing on 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 and partnership platform programs and maintaining a disciplined cost structure.

Profitable Growth - Our success is dependent on improving the performance of our hotels, increasing the size of our system 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 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, and qualified vendor relationships and partnerships with companies that provide products and 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.

We have multiple brands that meet the needs of many types of guests, and can be developed at various price points and applied to both new and existing hotels.

We have multiple brands that meet the needs of many different types of guests, and can be developed at various price points and applied to both new and existing hotels.

This ensures that we have brands suitable for creating growth in a variety of market conditions.

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.

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.

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

We believe the Radisson Hotels Americas acquisition has enabled 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 which will facilitate the continued growth of our Cambria Hotels and Ascend Hotel Collection brands and the further expansion of 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.

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.

Refer to the Liquidity and Capital Resources section of MD&A for more information regarding our 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.

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Our hotel development and ownership efforts currently focus on the Cambria Hotels and Everhome Suites brands.

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

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.

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

We do not anticipate owning hotels on a permanent basis and we 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.

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

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The ultimate measure of our success will be reflected in the items below.

Results of Operations:

Royalty fees, licensing and management fees, operating income, net income and diluted Earnings per Share ("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.

Our discussion of results generally excludes the Company’s other revenues and expenses from franchised and managed properties, which reflect franchise marketing and reservation system revenues and expenses and management agreement cost reimbursements.

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.

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

Over time, the Company expects cumulative revenues and expenses to break even and, therefore, no income or loss will be generated from marketing and reservation system activities.

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.

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

Results of Operations - Royalty fees, licensing and management fees, operating income, net income and diluted earnings per share ("EPS") represent the key measures of our financial performance.

These measures 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.

Our discussion of our results of operations generally excludes the Company’s other revenues and other expenses from franchised and managed properties, which reflect franchise marketing and reservation system revenues and expenses and management agreement cost reimbursements and expenses.

The Company's legacy Choice franchise agreements require the payment of marketing and reservation system fees to be used exclusively by the Company for the 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 its franchisees in accordance with the franchise agreements.

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

Over time, the Company expects the cumulative revenues and expenses to break even and, therefore, no income or loss will be generated from the marketing and reservation system activities.

The franchise and management contracts acquired in the Radisson Hotels Americas acquisition have similar terms as those described above with the exception of certain contractual elements concerning reservation fees, which are not required to break-even over time and are insignificant to the Company's operating income and net income.

As a result, the Company generally excludes the other revenues and other 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, quarterly and/or annual deficits may be generated.

During the three months ended June 30, 2023 and 2022, other franchised and managed revenues exceeded expenses by $7.0 million and $35.5 million, respectively.

During the six months ended June 30, 2023 and 2022, other franchised and managed revenues exceeded expenses by $9.1 million and $48.5 million, respectively.

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

Liquidity and Capital Resources:

Historically, the Company has generated significant cash flows from operations .

During the three months ended September 30, 2023 and 2022, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $10.3 million and $6.9 million, respectively.

During the nine months ended September 30, 2023 and 2022, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $19.5 million and $55.4 million, respectively.

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

Liquidity and Capital Resources - Historically, the Company has generated significant cash flows from operations .

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.

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 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.

We are monitoring future inflation trends and any resulting impacts on our business.

Non-GAAP Financial Statement Measurements

We believe the Company’s cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets is sufficient to meet the expected future operating, investing and financing needs of the business.

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

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

We continue to monitor future inflation trends along with the corresponding impacts to our business.

Wyndham Proposal

As previously disclosed, the Company publicly announced a proposal to acquire all of the outstanding shares of Wyndham Hotels & Resorts, Inc.

("Wyndham") at a price of $90.00 per share, payable in a mix of cash and stock.

Although Wyndham has publicly rejected the proposal, the Company continues to believe the proposal will benefit shareholders of both companies and has encouraged Wyndham to engage in further discussions.

There can be no assurance that any transaction will result from our proposal.

Non-GAAP Financial Statement Measures

The Company utilizes certain measures which do not conform to generally accepted accounting principles accepted in the United States ("GAAP") when analyzing and discussing its results with the investment community.

This information should not be considered as an alternative to any measure of performance as promulgated under GAAP.

The Company’s calculation of these measurements may be different from the calculations used by other companies and therefore, comparability may be limited.

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.

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 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.

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

The Company’s calculation of these measures may be different from the calculations used by other companies and therefore, comparability may be limited.

We have included a reconciliation of these measures to the comparable GAAP measure 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.

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

The legacy Choice franchise marketing and reservation activities and the 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 other

revenues from franchised and managed properties, does not break-even, based on the legacy Radisson Hotels Americas franchise contracts.

Additionally, the Company recognized $22.7 million in termination fees in the other revenues financial statement line item as a result of the exit of 110 WoodSpring units in the third quarter of 2022.

The Company excludes reimbursable revenue from franchised and managed properties and the extraordinary termination fees from franchisee 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

Three Months Ended June 30, Six Months Ended June 30,

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,

(in thousands) 2023 2022 2023 2022

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Reimbursable revenue from franchised and managed properties (205,965) (190,627) (563,391) (506,646)

Revenues excluding reimbursable revenue from franchised and managed properties

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

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

$ 219,592 $ 200,992 $ 622,378 $ 510,674

Operations Review

Comparison of financial results for the three and six months ended June 30, 2023 and 2022 are set forth in the sections below.

In accordance with GAAP, our income statements include Radisson Hotels Americas’ results of operations in the three and six months ended June 30, 2023, but do not include Radisson Hotels Americas' results of operations in the three and six months ended June 30, 2022, as we did not acquire Radisson Hotels America until August 11, 2022.

Comparison of Operating Results for the Three-Month Periods Ended June 30, 2023 and 2022

A comparison of the financial results for the three and nine months ended September 30, 2023 and 2022 is set forth in the sections below.

In accordance with GAAP, our consolidated statements of income include Radisson Hotels Americas’ results of operations in the three and nine months ended September 30, 2023, but our income statements only partially include Radisson Hotels Americas' results of operations in the three and nine months ended September 30, 2022 because we did not acquire Radisson Hotels America until August 11, 2022.

Comparison of Operating Results for the Three Month Periods Ended September 30, 2023 and 2022

Three Months Ended

September 30,

(in thousands) 2023 2022

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Interest income (1,897) (2,348)

Other (gain) loss (2,187) 5,559

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

Other loss (gain) 1,343 2,303

Equity in net gain of affiliates (1,801) (1,075)

Total other income and expenses, net 13,813 8,242

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Results of Operations

The Company recorded income before income taxes of $112.5 million for the three-month period ended June 30, 2023, a $29.6 million decrease from the same period of the prior year.

The decrease in income before income taxes primarily reflects a $33.0 million decrease in operating income.

Operating income decreased $33.0 million primarily due to a $28.6 million decrease in the net surplus generated from other franchised and managed properties activities, a $3.1 million increase in selling, general and administrative ("SG&A") expense related to operational restructuring charges, consisting primarily of salary and benefit continuation payments, and $4.3 million of transition costs in SG&A expenses related to integration of the Radisson Hotels Americas business acquired in August 2022.

In addition, SG&A expenses increased $6.9 million related to increases in the Company's deferred compensation assets based on increases in the underlying investments.

This increase as well as a $4.3 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 acquired on August 11, 2022, are described in more detail below.

The Company recognized income before income taxes of $121.2 million for the three month period ended September 30, 2023, which is a $15.6 million decrease from the same period in the prior year.

The decrease in income before income taxes is primarily due to a $10.0 million decrease in operating income and a $6.8 million increase in interest expense.

Operating income decreased $10.0 million primarily due to $22.7 million of termination fees in other revenues from the exit of 110 WoodSpring units in September 2022 and a $13.4 million net gain on sale of business and assets that were recognized during the third quarter of 2022.

The decreases to operating income were partially offset by a $9.8 million reduction in transition costs in selling, general and administrative ("SG&A") expenses related to the integration of the Radisson Hotels Americas business, a $4.0 million decrease in SG&A expenses related to operational restructuring charges consisting primarily of salary and benefit continuation payments, a $3.4 million increase in the net surplus generated from the other franchised and managed properties activity, and the growth of the legacy Choice business and the operations of the acquired Radisson Hotels Americas business.

The primary reasons for these fluctuations, inclusive of the impact from the legacy Radisson brands, are described in more detail below.

Royalty, licensing and management fees

Domestic royalty fees increased $8.4 million to $125.1 million for the three months ended June 30, 2023 from $116.7 million for the three months ended June 30, 2022.

The increase in domestic royalties is attributable to an 8.8% increase in the number of domestic franchised hotel rooms as compared to the corresponding period in 2022 and a system-wide 6 basis point increase in the effective royalty rate from 4.93% for the three months ended June 30, 2022 to 4.99% for the three months ended June 30, 2023, with $11.7 million of fees attributed to legacy Radisson brands in the three months ended June 30, 2023.

The domestic system experienced a RevPAR increase of 0.5% due to a 2.8% increase in average daily rates, partially offset by a 130 basis point decrease in occupancy.

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

Domestic royalty fees decreased $1.2 million to $132.2 million for the three months ended September 30, 2023 from $133.4 million for the three months ended September 30, 2022 which was primarily due to the exit of 110 WoodSpring units in September 2022 and a domestic system-wide RevPAR decrease of 0.8% due to a 130 basis point decrease in occupancy, partially offset by a 1.3% increase in average daily rates.

The decrease in domestic royalty fees was partially offset by higher royalty fees in the comparative period for the legacy Radisson brands and a system-wide 6 basis point increase in the effective royalty rate from 4.93% for the three months ended September 30, 2022 to 4.99% for the three months ended September 30, 2023.

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

Three Months Ended Three Months Ended Change

June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022

Rate Occupancy RevPAR Average

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(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 June 30, 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 June 30, 2023 and 2022 by brand is as follows:

June 30, 2023 June 30, 2022 Variance

To enhance comparability, ADR, Occupancy, and RevPAR reflect the operating performance for the three months ended September 30, 2022 as if the legacy Radisson brands were acquired on January 1, 2022.

A summary of the domestic hotels and rooms by brand in our franchise system at September 30, 2023 and 2022 is as follows:

September 30, 2023 September 30, 2022 Variance

Hotels Rooms Hotels Rooms Hotels Rooms % %

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Cambria Hotels 69 9,398 61 8,433 8 965 13.1 % 11.4 %

68 15,887 — — 68 15,887 NM NM

66 15,499 77 17,643 (11) (2,144) (14.3) % (12.2) %

430 34,326 — — 430 34,326 NM NM

1,660 130,380 1,668 131,140 (8) (760) (0.5) % (0.6) %

426 33,928 439 35,179 (13) (1,251) (3.0) % (3.6) %

177 19,327 185 20,642 (8) (1,315) (4.3) % (6.4) %

Quality 1,611 118,874 1,625 120,708 (14) (1,834) (0.9) % (1.5) %

Sleep 425 30,005 423 29,770 2 235 0.5 % 0.8 %

Park 4 363 — — 4 363 NM NM

Everhome 1 98 — — 1 98 NM NM

Park 4 363 4 363 0 0 — % — %

Everhome 1 98 1 98 0 0 — % — %

MainStay 123 8,471 113 7,843 10 628 8.8 % 8.0 %

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Total Domestic Franchises 6,256 493,034 6,262 493,235 (6) (201) (0.1) % — %

6,267 494,135 5,864 454,314 403 39,821 6.9 % 8.8 %

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

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

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

(3) Includes Country Inn & Suites, Park Plaza, and Radisson Inn brands.

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

(5) The Company reclassified six properties located in the Caribbean from Domestic Franchises to International Franchises as of June 30, 2022 to conform to current year presentation.

(5) In July 2022, the Company received notice from an ownership group of its intent to exit 110 WoodSpring properties from the Choice system, which occurred in September 2022.

International royalty fees increased $2.7 million to $7.5 million for the three months ended June 30, 2023 from $4.8 million three months ended June 30, 2022.

The increase in international royalty fees is attributable to $2.0 million of fees from the newly acquired Radisson brands in the three months ended June 30, 2023 and as a result of improvements in RevPAR performance and an increase of international franchise system size.

Inclusive of the Radisson brands, the international hotel system increased by 99 hotels (from 1,106 as of June 30, 2022 to 1,205 as of June 30, 2023) and 14,192 rooms (from 120,574 as of June 30, 2022 to 134,766 as of June 30, 2023).

International royalty fees increased $1.7 million to $7.9 million for the three months ended September 30, 2023 from $6.2 million three months ended September 30, 2022.

The increase in international royalty fees is attributable to higher royalty fees for the legacy Radisson brands, improvements in RevPAR performance, and an increase in the international franchise system size by 11 hotels (from 1,196 as of September 30, 2022 to 1,207 as of September 30, 2023) and 713 rooms (from 133,947 as of September 30, 2022 to 134,660 as of September 30, 2023).

Initial franchise fees

Initial franchise fee revenue increased $1.0 million from $6.2 million to $7.2 million for the three months ended June 30, 2022 and June 30, 2023, respectively.

The increase is primarily attributable to the quantity of domestic franchise agreements awards, openings, and terminations compared to the prior year.

Initial franchise fee revenue decreased $0.8 million from $7.0 million to $6.2 million for the three months ended September 30, 2022 and September 30, 2023, respectively.

The decrease is primarily attributable to the quantity of domestic franchise agreement terminations as 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.

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

At June 30, 2023, the Company had 960 hotels with 93,646 rooms in its global pipeline, as compared to 930 hotels and 85,314 rooms at June 30, 2022.

At September 30, 2023, the Company had 980 hotels with 99,076 rooms in its global pipeline.

Approximately 90% of our pipeline is located in the United States and approximately 73% of the domestic pipeline is new construction.

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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 $7.0 million from $21.8 million for the three months ended June 30, 2022 to $28.8 million the three months ended June 30, 2023.

These results reflect an increase in fees generated from travel-related partnerships and qualified vendors, and fees generated from the Company's convention, 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 increased $23.9 million from $43.9 million for the three months ended June 30, 2022 to $67.8 million for the three months ended June 30, 2023.

SG&A expenses increased $3.1 million related to operational restructuring charges, consisting primarily of salary and benefit continuation payments, and $4.3 million of transition costs related to integration of the Radisson Hotels Americas business acquired in August 2022;

$1.6 million accrued for costs related to potential performance under a financial guaranty;

and for general corporate purposes, including compensation, benefits, professional fees, travel, and conventions and meeting related expenses.

SG&A expenses also reflect a $6.9 million increase in the Company's deferred compensation liabilities based on increases in the underlying investments, compared to declines in the comparable period of the prior year.

While the Company's 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, including access to liquidity, availability of construction labor and materials, and local governmental approvals and entitlements.

Selling, general and administrative

SG&A expenses, which includes the cost to operate the business, decreased $15.3 million from $70.2 million for the three months ended September 30, 2022 to $54.9 million for the three months ended September 30, 2023.

SG&A expenses decreased $4.0 million related to operational restructuring charges that consisted primarily of salary and benefit continuation payments and $9.8 million related to transition costs associated with the integration of the Radisson Hotels Americas business.

SG&A expenses also includes a contra expense attributable to a decrease in the Company's deferred compensation liabilities based on decreases in the fair value of the underlying investments.

The current period activity represents a $0.5 million increase in SG&A expense relative to the comparable period of the prior year.

Depreciation and amortization

Depreciation and amortization expense was $9.8 million and $5.5 million for the three months ended June 30, 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.

Depreciation and amortization expense was $9.6 million and $8.7 million for the three months ended September 30, 2023 and 2022, respectively.

Depreciation and amortization expense increased primarily due to the acquisition of Radisson Hotels Americas and the associated amortization from the portion of the purchase price that was allocated to contract asset acquisition costs as well as the three hotel properties acquired in the transaction.

Interest expense

The Company recorded interest expense of $16.3 million for the three months ended June 30, 2023, an increase of $5.0 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 $2.2 million for the three months ended June 30, 2023, compared to other net loss of $5.6 million for the three months ended June 30, 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.

The Company recognized $16.2 million of interest expense for the three months ended September 30, 2023, which was an increase of $6.8 million from the comparable period in 2022.

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

Refer to the discussion under the Liquidity and Capital Resources section of MD&A.

Other loss (gain)

The Company recognized other net loss of $1.3 million and $2.3 million for the three months ended September 30, 2023 and 2022, respectively.

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

Income tax expense

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 for the three months ended June 30, 2023 and 2022 were higher than the U.S.

The effective income tax rates were 24.1% and 24.6% for the three months ended September 30, 2023 and 2022, respectively.

The effective income tax rates for the three months ended September 30, 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.

Comparison of Operating Results for the Six-Month Periods Ended June 30, 2023 and 2022

Six Months Ended

Comparison of Operating Results for the Nine Month Periods Ended September 30, 2023 and 2022

Nine Months Ended

September 30,

(in thousands) 2023 2022

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Interest income (5,836) (5,256)

Other (gain) loss (4,095) 7,275

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

Other loss (gain) (2,752) 9,578

Equity in net gain of affiliates (1,923) (1,279)

Total other income and expenses, net 36,011 35,127

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Results of Operations

The Company recorded income before income taxes of $180.0 million for the six-month period ended June 30, 2023, a $49.9 million decrease from the same period of the prior year.

The decrease in income before income taxes primarily reflects a $54.5 million decrease in operating income.

Operating income decreased $54.5 million primarily due to a $39.4 million decrease in the net surplus generated from other franchised and managed activities, and a $5.3 million increase in SG&A expenses related to operational restructuring charges, consisting primarily of salary and benefit continuation payments, and $12.0 million of transition costs in SG&A expenses related to integration of the Radisson Hotels Americas business acquired in August 2022.

In addition SG&A expenses increased $10.4 million related to increases in the Company's deferred compensation assets based on increases in underlying investments.

This increase as well as a $8.1 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 acquired on August 11, 2022, are described in more detail below.

The Company recognized income before income taxes of $301.3 million for the nine month period ended September 30, 2023, which is a $65.3 million decrease from the same period in the prior year.

The decrease in income before income taxes is primarily due to a $64.5 million decrease in operating income.

Operating income decreased $64.5 million primarily due to a $35.9 million decrease in the net surplus generated from the other franchised and managed properties activity, $22.7 million of termination fees in other revenues from the exit of 110 WoodSpring units in September 2022, and $16.7 million of net gains on sale of business and assets that were recognized during the nine month period September 30, 2022.

In addition, SG&A expenses increased $10.9 million related to increases in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments.

Depreciation and amortization expense also increased $9.1 million due to the acquisition of three hotel properties and identifiable intangible assets as part of the Radisson Hotels Americas transaction.

The decreases to operating income were partially offset by the growth of the legacy Choice business and the operations of the acquired Radisson Hotels Americas business.

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

Royalty fees, licensing and management fees

Domestic royalty fees increased $19.6 million to $223.2 million for the six months ended June 30, 2023 from $203.6 million for the six months ended June 30, 2022.

The increase in domestic royalties is attributable to an 8.8% increase in the number of domestic franchised hotel rooms as compared to the corresponding period in 2022 and a system-wide 6 basis point increase in the effective royalty rate from 4.93% for the six months ended June 30, 2022 to 4.99% for the six months ended June 30, 2023, with $21.1 million of fees attributed to legacy Radisson brands in the six months ended June 30, 2023.

The Choice system experienced a domestic RevPAR increase of 2.8% due to a 4.0% increase in average daily rates, partially offset by a 60 basis point decrease in occupancy.

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

Six Months Ended Six Months Ended Change

June 30, 2023 June 30, 2022

Domestic royalty fees increased $18.4 million to $355.4 million for the nine months ended September 30, 2023 from $337.1 million for the nine months ended September 30, 2022.

The increase in domestic royalty fees is attributable to higher royalty fees from the legacy Radisson brands, a system-wide 6 basis point increase in the effective royalty rate from 4.93% during the nine months ended September 30, 2022 to 4.99% during the nine months ended September 30, 2023, and a domestic system-wide RevPAR increase of 1.4% due to a 3.0% increase in average daily rates, partially offset by a 100 basis point decrease in occupancy.

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

Nine Months Ended Nine Months Ended Change

September 30, 2023 September 30, 2022

Rate Occupancy RevPAR Average

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

To enhance comparability, ADR, Occupancy, and RevPAR reflect operating performance for the six months ended June 30, 2022 as if the legacy Radisson brands were acquired on January 1, 2022.

International royalty fees for the six months ended June 30, 2023 increased $5.3 million to $13.9 million compared to the six months ended June 30, 2022.

The increase in international royalty fees is attributable to $3.8 million of fees from the newly acquired Radisson brands in the six months ended June 30, 2023 and as a result of increases in RevPAR performance and an increase of international franchise system size.

To enhance comparability, ADR, Occupancy, and RevPAR reflect the operating performance for the nine months ended September 30, 2022 as if the legacy Radisson brands were acquired on January 1, 2022.

International royalty fees increased $7.0 million to $21.8 million during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

The increase in international royalty fees is attributable to higher royalty fees from the legacy Radisson brands, improvements in RevPAR performance, and an increase in the size of the international franchise system.

Initial franchise fees

Initial franchise fee revenue increased $0.4 million from $14.6 million during the six months ended June 30, 2022 to $15.0 million during six months ended June 30, 2023.

The increase is primarily attributable to the quantity of domestic franchise agreements awards, openings, and terminations compared to the prior year.

Initial franchise fee revenue decreased $0.4 million from $21.6 million during the nine months ended September 30, 2022 to $21.2 million during nine months ended September 30, 2023.

The decrease is primarily attributable to the quantity of domestic franchise agreement terminations as compared to the prior year.

Platform and procurement services fees

Revenues increased $9.1 million from $33.5 million for the six months ended June 30, 2022 to $42.6 million for the six months ended June 30, 2023.

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 increased $52.9 million from $74.2 million for the six months ended June 30, 2022 to $127.1 million for the six months ended June 30, 2023.

SG&A expenses increased $5.3 million related to operational restructuring charges, consisting primarily of salary and benefit continuation payments, and a $12.0 million increase in transition costs related to integration of the Radisson Hotels Americas business acquired in August 2022;

$1.6 million accrued for costs related to the performance under a financial guaranty;

and for general corporate purposes, including compensation, benefits, professional fees, travel, and conventions and meeting related expenses.

SG&A expenses reflect a $10.4 million increase in the Company's deferred compensation liabilities based on increase in the underlying investments compared, to a decline in the comparable period of the prior year.

Revenues increased $10.3 million from $47.9 million for the nine months ended September 30, 2022 to $58.2 million for the nine months ended September 30, 2023.

The increase is primarily attributable to an increase in the fees generated from travel-related partnerships and qualified vendors, and an increase in the fees generated from the Company's convention, inclusive of the activity from the newly acquired Radisson brand hotels.

Selling, general and administrative

SG&A expenses, which includes the cost to operate the business, increased $37.6 million from $144.4 million for the nine months ended September 30, 2022 to $182.0 million for the nine months ended September 30, 2023.

SG&A expenses increased $1.4 million related to operational restructuring charges that consisted primarily of salary and benefit continuation payments, $2.1 million related to transition costs associated with the integration of the Radisson Hotels Americas business, $1.6 million related to the expected performance under a financial guaranty, and an increase in general corporate costs including compensation, benefits, professional fees, travel, and conventions and meeting related expenses.

SG&A expenses also includes the expense attributable to increases in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments.

The current period activity represents a $10.9 million increase in SG&A expense relative to the comparable period of the prior year.

Depreciation and amortization

Depreciation and amortization expense was $19.8 million and $11.7 million for the six months ended June 30, 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.

Depreciation and amortization expense was $29.5 million and $20.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Depreciation and amortization expense increased primarily due to the acquisition of Radisson Hotels

Americas and the associated amortization from the portion of the purchase price that was allocated to contract asset acquisition costs as well as the three hotel properties that were acquired in the transaction.

Interest expense

The Company recorded interest expense of $30.4 million for the six months ended June 30, 2023, an increase of $7.7 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 gains of $4.1 million for the six months ended June 30, 2023, compared to other net losses of $7.3 million, a decrease of $11.4 million for the six months ended June 30, 2022.

The gains relate to increases in the Company's deferred compensation assets based on increases in the underlying investments.

The Company recognized $46.5 million of interest expense for the nine months ended September 30, 2023, which was an increase of $14.4 million from the comparable period in 2022.

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

Refer to the discussion under the Liquidity and Capital Resources section of MD&A.

Other loss (gain)

The Company recognized other net gains of $2.8 million for the nine months ended September 30, 2023, as compared to other net losses of $9.6 million for the nine months ended September 30, 2022.

The gains relate to increases in the Company's deferred compensation assets based on increases in the fair value of the underlying investments.

Income tax expense

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 six months ended June 30, 2023 and 2022 were higher than the U.S.

The effective income tax rates were 23.8% and 24.5% for the nine months ended September 30, 2023 and 2022, respectively.

The effective income tax rates for the nine months ended September 30, 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.

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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.

Our capital allocation decisions, including capital structure and our 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 primary sources of liquidity as of June 30, 2023 consisted of $341.2 million in cash and available borrowing capacity through its senior unsecured revolving credit facility.

As of June 30, 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.

With respect to these activities, the Company had approximately $414.0 million in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of June 30, 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.

As of September 30, 2023, the Company's primary sources of liquidity consisted of $334.9 million in cash and available borrowing capacity under the senior unsecured revolving credit facility.

As of September 30, 2023, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance.

The Company believes that its cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets will 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 to acquire or develop and then resell hotels, to incentivize franchise development of our brands in strategic markets.

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

With respect to these activities, the Company had approximately $436.7 million in support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheets as of September 30, 2023.

The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $975 million at any point in time based on the 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.

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

As of 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.

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 June 30, 2023, the Company had 2.8 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.

The Company's quarterly dividend rate remained unchanged for the second quarter 2023, with the dividend payable on July 19, 2023 to shareholders of record on July 5, 2023.

This increase will result in a projected 2023 annual dividend rate of $1.15 per share or approximately $56.6 million in aggregate dividend payments, subject to future declarations by our board of directors.

Operating Activities

During the six months ended June 30, 2023 and 2022, net cash provided by operating activities totaled $125.7 million and $159.3 million, respectively.

Operating cash flows decreased $33.6 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.

As of September 30, 2023, the Company had commitments for an additional $350.3 million in franchise agreement acquisition payments, provided the conditions of the payments are met by the franchisees.

The timing and amount of the franchise agreement acquisition costs 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.

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

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

As of September 30, 2023, the Company had 2.3 million shares remaining under the current share repurchase authorization.

The projected 2023 annual dividend rate is $1.15 per share or approximately $56.5 million in aggregate dividend payments, subject to future declarations by our board of directors.

Cash Flows from Operating Activities

During the nine months ended September 30, 2023 and 2022, the net cash provided by operating activities was $247.2 million and $265.2 million, respectively.

Our operating cash flows decreased $18.0 million primarily due to a decrease in the net surplus generated from our other franchised and managed properties activities, an increase in franchise agreement acquisition cost payments, 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, and an increase in borrowing costs, all of which were partially offset by the 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").

If the franchisee remains in the franchise system in good standing over the term specified in the incentive agreement, the Company forgives the incentive ratably.

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 six months ended June 30, 2023 and 2022, the Company's net advances for these purposes totaled $46.2 million and $27.0 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

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.

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

During the nine months ended September 30, 2023 and 2022, the Company's net franchise agreement acquisition costs were $72.9 million and $32.9 million, respectively.

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 six months ended June 30, 2023 and 2022, net surplus generated from other franchised and managed properties activities was $9.1 million and $48.5 million, respectively.

Investing Activities

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 $414.0 million outstanding in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of June 30, 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.

Cash utilized for investing activities totaled $59.2 million and $24.0 million for the six months ended June 30, 2023 and 2022, respectively.

The change in cash utilized for investing activities for the six months ended June 30, 2023 primarily reflects the following:

During the six months ended June 30, 2023 and 2022, capital expenditures in property and equipment totaled $45.7 million and $49.9 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 six months ended June 30, 2022, the Company realized net proceeds of $32.9 million from the sale of one Cambria hotel, one parcel of land, and a sale and conversion of an international direct franchising market to a master franchising market.

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 and Everhome Suites in strategic markets.

During the six months ended June 30, 2023 and 2022, the Company invested $15.3 million and $0.7 million, respectively, to support these efforts.

In addition, during the six months ended June 30, 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 six months ended June 30, 2022.

To the extent that existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make additional capital contributions totaling $15.7 million to support these efforts.

The Company provides financing to franchisees for hotel development efforts and other purposes in the form of notes receivable.

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

During the six months ended June 30, 2023, the Company advanced $4.3 million and received repayments totaling $9.3 million for these purposes.

For the six months ended June 30, 2022, the Company advanced $2.0 million amounts and received repayments totaling $0.1 million for these purposes.

At June 30, 2023, the Company had commitments to extend less than $0.1 million for these purposes provided certain conditions are met by its franchisees.

Financing Activities

Financing cash flows relate primarily to the Company's borrowings, open market treasury stock repurchases, acquisition of shares in connection with the exercise or vesting of equity awards, and dividends.

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

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

Conversely, to the extent the expenditures incurred exceed the revenues collected, the Company has the contractual enforceable right to assess and collect such amounts from the franchisees, or to reduce its spending.

During the nine months ended September 30, 2023 and 2022, the net surplus generated from our other franchised and managed properties activities was $19.5 million and $55.4 million, respectively.

Cash Flows from Investing Activities

The net cash used in investing activities was $103.3 million and $483.7 million for the nine months ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023 and 2022, capital expenditures in property and equipment totaled $81.4 million and $66.1 million, respectively.

These capital expenditures primarily reflect the costs incurred to support the continued growth of the Cambria Hotels and Everhome Suites brands, including ongoing hotel development efforts, as well as leasehold improvements in the Company's new headquarters office space.

During the nine months ended September 30, 2022, the Company recognized 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, 2023 and 2022, the Company invested $24.6 million and $4.3 million, respectively, to support these efforts.

In addition, during the nine months ended September 30, 2023, the Company received proceeds from the sale of certain affiliates totaling $0.9 million.

The Company received no distributions or sale proceeds from these affiliates during the nine months ended September 30, 2022.

The Company provides financing to franchisees for hotel development efforts and other purposes in the form of notes receivable loans.

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

During the nine months ended September 30, 2023, the Company issued a total of $4.3 million in notes receivable loans and received a total of $9.9 million in notes receivable loan repayments.

During the nine months ended September 30, 2022, the Company issued a total of $5.6 million in notes receivable loans and received a total of $0.7 million in notes receivable loan repayments.

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

The purchase price, net of the cash acquired, was $550.4

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

Refer to Note 14 to our consolidated financial statements for further discussion.

During the nine months ended September 30, 2022, the Company recognized contract termination fee revenue of $22.7 million resulting from the exit of 110 WoodSpring units in September 2022.

The contract termination fee revenue consists of $67.4 million in consideration, less the $44.7 million in carrying basis of intangible assets that were initially recognized on the date of the WoodSpring acquisition.

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

Cash Flows from Financing Activities

Cash flows from financing activities primarily relate to the proceeds or payments on the Company's borrowings, treasury stock repurchases, acquisition of shares in connection with the exercise or vesting of equity awards, the payment of dividends, and the payment of debt issuance costs.

Restated Senior Unsecured Credit Facility

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

The Restated Credit Agreement 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.

The Restated Credit Agreement provided for a $600 million unsecured credit facility with an original maturity date of August 20, 2023, subject to one-year extension options 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 the payment fees.

The Company has exercised the one-year extension option on multiple occasions, which has resulted in a new maturity date of August 20, 2026.

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

From time to time, the Company may 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.

There are no subsidiary guarantors under the Restated Credit Agreement.

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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).

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

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

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

dollar-denominated borrowings under the Revolver from LIBOR to an adjusted SOFR.

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%, which is dependent on the Company’s senior unsecured long-term debt rating or other circumstances as set forth in the Restated Credit Agreement if the Company’s total leverage ratio is less than 2.5 to 1.0.

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

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

The Restated Credit Agreement imposes financial covenants that require the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 and a total leverage ratio of not more than 4.5 to 1.0.

In addition, on up to two nonconsecutive occasions, the Company will be required to maintain a total leverage ratio of not more than 5.5 to 1.0 for up to three consecutive quarters following a material acquisition commencing with the fiscal quarter in which the material acquisition occurred.

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

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

At June 30, 2023, the Company maintained a total leverage ratio of 2.36x, including outstanding debt of approximately $542.8 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.

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

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

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 under the Restated Credit Agreement to be immediately due and payable.

As of September 30, 2023, the Company maintained a total

leverage ratio of 2.34x, including outstanding debt of approximately $549.4 million on the senior unsecured revolving credit facility.

The Company 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 from the effective interest method, and through the loan's maturity date.

The amortization of the debt issuance costs is included in interest expense in the consolidated statements of income.

Senior Unsecured Notes Due 2031

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

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

The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions and other offering expenses, to repay 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").

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

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

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

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

The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions and offering expenses, to repay in full the $250 million Term Loan entered in April 2020 and to fund the purchase price of the 2012 Senior Notes tendered and accepted by the Company for the purchase pursuant to the tender offer (discussed further below under "Senior Unsecured Notes Due 2022").

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

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

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

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

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

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

Senior Unsecured Notes Due 2029

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

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

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

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

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

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

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

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

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

Senior Unsecured Notes Due 2022

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

The 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.

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

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

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

The Company utilized the net proceeds from 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 that totaled approximately $600.7 million on August 23, 2012.

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

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

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

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

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

The 2012 Senior Notes matured on July 1, 2022.

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

The outstanding principal amount of $216.6 million was re-paid on the maturity date.

Economic Development Loans

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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 June 30, 2023, the Company had been fully advanced the amounts due pursuant to these agreements.

As of September 30, 2023, the Company had been advanced the full amounts that were due pursuant to these agreements.

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

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

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

If the Company fails to meet an annual performance condition, the Company may be required to repay a portion or all of the advances including accrued interest by April 30 th following the measurement date.

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

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

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

If the Company fails to meet an annual performance condition, then the Company may be required to repay a portion, or all, of the advances including accrued interest by April 30 th following the measurement date.

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

The advances are presented within debt in the Company's consolidated balance sheets.

The Company will continue to evaluate whether the future performance conditions will be met over the entire term of the agreement and whether the Company will, or will not, be required to repay the advances.

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

The Company was in material compliance with all applicable current performance conditions as of June 30, 2023.

The Company was in material compliance with all applicable performance conditions as of September 30, 2023.

Acquired Debt and Swap Derivative Asset

On August 11, 2022, in connection with the Radisson Hotels Americas acquisition, the Company 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 loan had an associated interest rate cap agreement with an effective date of July 30, 2021 through August 6, 2024.

On August 12, 2022, the Company paid off the outstanding mortgage 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 rate cap agreement was terminated, which resulted in a $1.9 million payment to the Company.

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, with the dividend payable on April 18, 2023 to shareholders of record on April 3, 2023.

The Company's quarterly dividend rate remained unchanged for the second quarter 2023, with the dividend payable on July 19, 2023 to shareholders of record on July 5, 2023.

During the six months ended June 30, 2023, the Company paid $27.5 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 2023 are projected to be $1.15 per share or approximately $56.6 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.

In March 2023, the Company's board of directors approved a 21% increase in the quarterly cash dividend to $0.2875 per share, which is the current per share dividend amount that was utilized in each of the dividends that were declared in 2023.

During the nine months ended September 30, 2023, the Company paid $42.1 million in cash dividends.

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

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

In accordance with the Restated Credit Agreement, the Company may not declare or make any dividend payments if there is an existing event of default or if the dividend payment would create an event of default.

Share Repurchases and Redemptions

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

During the six months ended June 30, 2023, the Company repurchased 1.8 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $222.4 million.

In total through June 30, 2023, the Company repurchased 57.2 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.

During the nine months ended September 30, 2023, the Company repurchased 2.4 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $292.9 million.

In total through September 30, 2023, the Company repurchased 57.8 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 $2.2 billion.

Considering the effect of the two-for-one stock split, the Company has repurchased 90.8 million shares at an average price of $24.38 per share.

As of June 30, 2023, the Company had 2.8 million shares remaining under the current share repurchase authorization.

During the six months ended June 30, 2023, the Company redeemed 0.1 million shares of common stock at a total cost of $14.0 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of PVRSUs and restricted stock grants.

As of September 30, 2023, the Company had 2.3 million shares remaining under the current share repurchase authorization.

During the nine months ended September 30, 2023, the Company redeemed 0.1 million shares of common stock at a total cost of $14.1 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 six months ended June 30, 2023, the Company received proceeds of $5.6 million from stock options exercised by employees.

During the nine months ended September 30, 2023, the Company received proceeds of $6.7 million from stock options exercised by employees.

Critical Accounting Policies

Our accounting policies comply with principles generally accepted in the United States.

Discussion of these policies is included in Note 1 to our consolidated financial statements as of and for the year ended December 31, 2022 included in our Annual Report on Form 10-K, which incorporates description of our critical accounting policies that involve subjective and complex judgments that could potentially affect reported results.

A discussion of our accounting policies is included in Note 1 to our consolidated financial statements as of and for the year ended December 31, 2022 included in our Annual Report on Form 10-K, which incorporates a description of our critical accounting policies that involve subjective and complex judgments that could potentially affect our reported results.

New Accounting Standards

Refer to Note 1 for information related to our evaluation of new accounting standards.

Refer to Note 1 to these consolidated financial statements for information related to our evaluation of new accounting standards.

FORWARD-LOOKING STATEMENTS

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

the resurgence 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;

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;

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

future domestic or global outbreaks of epidemics, pandemics or contagious diseases or fear of such outbreaks, including any resurgence of the COVID-19 pandemic, and the related impact on the global hospitality industry, particularly but not exclusively the U.S.

travel market;

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;

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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 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.

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;

and developments with respect to our proposal to acquire Wyndham.

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