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Item 7. Management’s Discussion and Analysis

2024-02-20 compared with 2023-03-01 · 336 added, 556 removed, 114 unchanged (89% 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 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 (together as "Choice," 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.

Recent Developments

Agreement to acquire Radisson Hotels Americas

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

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

Impact of the COVID-19 Pandemic

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

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

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

Since the impacts of COVID-19 on the Company's business were first experienced in March 2020, trends have improved steadily.

The full year 2022 domestic revenue per available room ("RevPAR") experienced an increase of approximately 12.4% and 14.6% relative to full year 2021 and full year 2019, respectively.

As of both December 31, 2022 and December 31, 2021, less than 1% of the Company's domestic hotel system had temporarily suspended operations.

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

Further, as of December 31, 2022, the Company had approximately $281.6 million in cash and additional borrowing capacity through its senior unsecured revolving credit facility.

Based on our business model and information known at this time, the Company believes that cash flows from operations and available financing capacity provide sufficient liquidity to meet the expected future operating, investing and financing needs of the business, inclusive of those for the recently acquired Radisson Hotels Americas operations.

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

For additional information, refer to Item 1A.

Risk Factors.

We are primarily a hotel franchisor with franchised, managed and owned hotels representing 7,487 hotels open comprising 627,804 rooms and 988 hotels under construction, awaiting conversion or approved for development comprising 94,558 rooms as of December 31, 2022, located in 50 states, the District of Columbia and approximately 50 countries and territories outside the United States.

We are primarily a hotel franchisor operating in 50 states, the District of Columbia, and 46 countries and territories.

At December 31, 2023, we had 7,527 hotels with 632,986 rooms open and operating, and 1,032 hotels with 105,062 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our 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").

Additionally, through the Radisson Hotels Americas acquisition, our brands expanded to include Country Inn & Suites® by Radisson, Radisson Blu®, Radisson RED®, Radisson®, Park Plaza®, Radisson Inn & Suites SM , Park Inn by Radisson®, Radisson Individuals®, and

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Radisson Collection® (collectively, the "legacy Radisson brands"), which are located across the United States, Canada, the Caribbean and Latin America.

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

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

The Company's domestic operations are conducted through direct franchising relationships, the ownership of 6 Cambria and 3 legacy Radisson Hotels Americas hotels, and the management of 13 legacy Radisson Hotels Americas hotels (inclusive of the Radisson Hotels Americas owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

The Company's domestic operations are conducted through direct franchising relationships, the ownership of seven Cambria and three legacy Radisson Hotels Americas open and operating hotels, and the management of 14 hotels (inclusive of four owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

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

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 and the initial, relicensing and continuing royalty fees attributable to our franchise agreements.

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.

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

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

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

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

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

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

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

growth in the number of hotel rooms owned and under franchise;

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

the effective royalty rate achieved on our franchise agreements;

the level of franchise sales and relicensing activity;

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

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

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

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

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.

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

Greater awareness and preference promote 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.

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.

Because our primary focus is 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 our operating results by increasing the number of franchised hotel rooms and the effective royalty rates in our franchise contracts resulting in increased initial franchise fees, ongoing royalty and licensing fees, and platform and procurement services fees.

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, growth in the number of hotel rooms owned and under franchise, occupancy and room rates achieved by the hotels in our system, the effective royalty rate achieved in our franchise agreements, the level of franchise sales and relicensing activity, the number of qualified vendor arrangements and partnerships and the level of engagement with these partners by our franchisees and guests, and our ability to manage costs.

The number of rooms in our hotel system and the occupancy and room rates at those 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 ("ADR") realized.

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

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 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.

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 over the long term.

These key long-term goals are as follows:

Profitable Growth.

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

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

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

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 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, 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.

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 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.

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.

Refer to the heading Liquidity and Capital Resources under Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations for additional analysis.

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

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

On December 6, 2021, the Company's Board of Directors approved a 6% increase in the quarterly cash dividend and declared a quarterly cash dividend of $0.2375 per share of common stock, which was paid in January 2022.

On February 24, 2022, May 24, 2022, September 22, 2022, and December 7, 2022, the Company's Board of Directors declared a quarterly cash dividend of $0.2375 per share of common stock.

In addition to our hotel franchising business, we have also developed or acquired 6 Cambria and 3 legacy Radisson Hotels Americas hotels.

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

When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance.

For legacy Choice brands, 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 the growth and recognition of our brands.

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

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 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 section in Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations for more information regarding our capital returns to shareholders.

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

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

When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands.

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 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.

A key component of our strategy for owned hotels is to maximize revenues and manage costs.

We strive to optimize revenues by focusing on revenue management, increasing guest loyalty, expanding brand awareness with targeted customer groupings, and providing superior guest service.

Other than four owned hotels, we currently do not manage our owned hotels but utilize the services of third-party management companies that provide their own employees.

We manage costs by setting performance goals for our hotel management companies and optimizing distribution channels.

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

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, 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

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

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

During the years ended December 31, 2022 and 2021 other revenues from franchised and managed properties exceeded expenses by $49.7 million and $83.9 million, respectively.

During the year ended December 31, 2020, other expenses from franchised and managed properties exceeded revenues by $44.3 million.

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

Liquidity and Capital Resources:

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

Results of Operations - Royalty, 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 the potential growth of the hotel franchise system as well as our variable overhead costs.

Our discussion of our results of operations excludes reimbursable franchise marketing and reservation system revenues and expenses and the management agreement cost reimbursements and expenses included in the Company's other revenues from franchised and managed properties and other expenses from franchised and managed properties.

The Company's franchise agreements require the payment of marketing and reservation system fees to be used 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 of reimbursable components to break even and, therefore, no income or loss will be generated from the reimbursable marketing and reservation system 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.

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 years ended December 31, 2023, 2022, and 2021, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $1.8 million, $49.7 million, and $83.9 million, respectively.

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

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

The Company's declaration of quarterly dividends and activity under the share repurchase program have resumed, subject to future declarations by our Board of Directors, after being temporarily suspended at the height of the COVID-19 pandemic.

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

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

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

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

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 and extraordinary termination fees from franchisee.

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

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

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

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

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

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

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

Year Ended December 31,

(in thousands) 2022 2021 2020

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

Reimbursable revenue from franchised and managed properties (682,612) (528,843) (402,568)

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

Revenues excluding reimbursable revenue from franchised and managed properties and extraordinary termination fees from franchisee $ 696,690 $ 540,455 $ 371,504

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

On December 12, 2023, the Company disclosed that it had commenced an exchange offer to acquire all of the outstanding shares of Wyndham Hotels & Resorts, Inc.

("Wyndham") at an exchange ratio of $49.50 in cash and 0.324 shares of Choice common stock per Wyndham share.

There can be no assurance that the exchange offer will be successful.

In the event we enter into and consummate an acquisition of Wyndham, the acquisition would have a significant impact on our future financial condition, results of operations, and cash flows.

Operations Review

Summarized financial results for the years ended December 31, 2022 and 2021 are as follows:

The summarized financial results for the years ended December 31, 2023 and 2022 are as follows:

(in thousands) 2023 2022

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Initial franchise fees 27,787 28,074

Procurement services 63,800 50,393

Platform and procurement services fees 75,114 63,800

Owned hotels 97,641 70,826

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Selling, general and administrative 216,081 167,697

Business combination, diligence and transition costs 55,778 39,578

Depreciation and amortization 39,659 30,425

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Interest income (7,764) (7,288)

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

Gain on extinguishment of debt (4,416) —

Other (gain) loss (10,649) 7,018

Equity in net (gain) loss of affiliates (2,879) (1,732)

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

Total other expenses and income, net 38,072 41,795

Income before income taxes 336,956 436,806

Income tax expense (benefit) 104,654 87,535

Income tax expense 78,449 104,654

Net income $ 258,507 $ 332,152

Results of Operations

The Company recorded income before income taxes of $436.8 million for the year ended December 31, 2022, a $60.3 million increase from the same period of the prior year.

The increase in income before income taxes primarily reflects a $49.6 million increase in operating income and a $17.6 million increase in equity in net (gain) loss of affiliates, partially offset by a $12.1 million increase in other loss (gain).

Operating income increased $49.6 million primarily due to a $74.6 million increase in royalty, licensing and management fees, a $36.0 million increase in other revenue, a $16.2 million increase in gain on sale of business assets, net, a $13.4 million increase in procurement services revenues, and a $9.0 million increase in owned hotels revenues in excess of expense, offset by a $61.7 million increase in selling, general and administrative (“SG&A”), a $34.2 million decrease in the net surplus generated from other franchised and managed properties activities, and an increase of $5.6 million in depreciation and amortization expense.

The primary reasons for these fluctuations, including the impact of the Radisson Hotels Americas acquisition, are described in more detail below.

For the year ended December 31, 2023, the Company recognized income before income taxes of $337.0 million, which is a $99.8 million decrease from the year ended December 31, 2022.

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

Operating income decreased $103.4 million primarily due to a $47.9 million decrease in the net surplus generated from other revenues and other expenses from franchised and managed properties, a $22.7 million decrease in termination fees in other revenues from the exit of 110 WoodSpring units in September 2022, and a $16.2 million decrease in net gains on the sale of business and assets that were recognized during 2022.

Selling, general and administrative expenses increased $48.4 million primarily due to the inclusion of the full year's cost of operations of the acquired Radisson Hotels Americas business, an increase in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments, and an increase in employee salary and benefit continuation payments due to certain restructurings.

Business combination, diligence and transition costs increased $16.2 million related to the integration of the Radisson Hotels Americas business and costs associated with acquisition pursuits.

Depreciation and amortization expense also increased $9.3 million due to the acquisition of three hotel properties and identifiable intangible assets in the Radisson Hotels Americas transaction.

The decreases to operating income were partially offset by the growth of the legacy Choice franchising business and the inclusion of the full year's revenues from operations of the acquired Radisson Hotels Americas business.

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

Royalty, Licensing and Management Fees

Domestic royalty fees for legacy Choice brands the year ended December 31, 2022 increased $43.0 million to $425.4 million from $382.4 million for the year ended December 31, 2021, an increase of 11%.

The increase in domestic royalties for legacy Choice brands reflects a 12.4% increase in domestic RevPAR.

System-wide RevPAR increased due to a 10.8% increase in average daily rates, a 80 basis point increase in occupancy, and a 4 basis point increase in the effective royalty rate from 5.01%

for the year ended December 31, 2021 to 5.05% for the year ended December 31, 2022, partially offset by a 3.3% decrease in the number of domestic franchised hotel rooms.

A summary of the Company’s domestic franchised hotels operating information for legacy Choice brands for the years ending December 31, 2022 and 2021 is as follows.

These statistics exclude the acquired legacy Radisson brands.

Additionally, the operating statistics for the Everhome Suites brand are not provided as the operating statistics are not representative of a stabilized brand which the Company defines as having at least 25 units open and operating for a twelve-month period.

Domestic royalty fees increased $14.8 million to $458.1 million for the year ended December 31, 2023 from $443.3 million for the year ended December 31, 2022.

The increase in domestic royalty fees is attributable to 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 year ended December 31, 2022 to 4.99% for the year ended December 31, 2023, and a 0.1% domestic system-wide RevPAR increase due to a 1.9% 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:

2023 2022 Change

Daily Rate Occupancy RevPAR Average

Average Daily Rate Occupancy RevPAR Average

Daily Rate Occupancy RevPAR Average

Daily Rate Occupancy RevPAR

Comfort $ 108.31 61.8 % $ 66.88 $ 98.22 60.1 % $ 59.05 10.3 % 170 bps 13.3 %

Sleep 95.29 59.5 % 56.72 86.55 58.7 % 50.85 10.1 % 80 bps 11.5 %

Quality 90.64 53.5 % 48.53 83.88 53.5 % 44.84 8.1 % — bps 8.2 %

Clarion 94.83 45.5 % 43.13 88.09 43.1 % 37.99 7.7 % 240 bps 13.5 %

Econo Lodge 72.04 49.6 % 35.72 68.08 50.1 % 34.08 5.8 % (50) bps 4.8 %

Rodeway 72.55 50.9 % 36.96 68.01 50.9 % 34.64 6.7 % — bps 6.7 %

WoodSpring 58.02 79.2 % 45.94 51.66 79.6 % 41.10 12.3 % (40) bps 11.8 %

MainStay 87.07 62.3 % 54.24 80.25 62.1 % 49.79 8.5 % 20 bps 8.9 %

Suburban 59.94 67.5 % 40.46 55.36 70.0 % 38.77 8.3 % (250) bps 4.4 %

Cambria Hotels 159.18 64.2 % 102.13 132.48 56.2 % 74.47 20.2 % 800 bps 37.1 %

Ascend Hotel Collection 154.32 56.3 % 86.83 138.01 53.7 % 74.11 11.8 % 260 bps 17.2 %

Total $ 93.17 58.0 % $ 54.06 $ 84.06 57.2 % $ 48.10 10.8 % 80 bps 12.4 %

*The Company calculates RevPAR based on information as reported by franchisees.

To accurately reflect RevPAR, the Company revised its prior years' operating statistics for the most current information provided.

A summary of domestic hotels and rooms for legacy Choice brands in our franchise system at December 31, 2022 and 2021 by brand is as follows:

Upscale & Above (1)

$ 151.14 56.7 % $ 85.73 $ 146.24 55.8 % $ 81.65 3.4 % 90 bps 5.0 %

Midscale & Upper Midscale (2)

101.14 56.8 % 57.46 100.42 57.4 % 57.64 0.7 % (60) bps (0.3) %

Extended Stay (3)

63.50 72.2 % 45.88 61.91 75.6 % 46.81 2.6 % (340) bps (2.0) %

71.71 47.9 % 34.37 71.75 50.1 % 35.94 (0.1) % (220) bps (4.4) %

$ 96.93 57.0 % $ 55.21 $ 95.13 58.0 % $ 55.16 1.9 % (100) bps 0.1 %

(1) Includes Ascend Hotel Collection, Cambria, Radisson, Radisson Blu, Radisson Individuals, and Radisson RED brands.

(2) Includes Clarion, Comfort Inn, Country Inn & Suites, Park Inn, Park Plaza, Quality, and Sleep Inn brands.

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

(4) Includes Econo Lodge and Rodeway brands.

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

To enhance comparability for the year ended December 31, 2022, ADR, Occupancy, and RevPAR reflect the operating performance 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 as of December 31, 2023 and 2022 was as follows:

December 31, 2023 December 31, 2022 Variance

Hotels Rooms Hotels Rooms Hotels % Rooms %

Comfort 1,685 132,523 1,665 130,963 20 1.2 % 1,560 1.2 %

Sleep 423 29,775 414 29,194 9 2.2 % 581 2.0 %

Quality 1,633 121,275 1,652 123,549 (19) (1.2) % (2,274) (1.8) %

Clarion 178 19,630 189 21,837 (11) (5.8) % (2,207) (10.1) %

1,705 133,675 1,685 132,523 20 1.2 % 1,152 0.9 %

Quality Inn 1,617 118,960 1,633 121,275 (16) (1.0) % (2,315) (1.9) %

Econo Lodge 675 39,805 702 42,112 (27) (3.8) % (2,307) (5.5) %

Rodeway 470 26,309 503 28,364 (33) (6.6) % (2,055) (7.2) %

WoodSpring (2)

426 33,976 434 34,657 (8) (1.8) % (681) (2.0) %

Everhome 1 99 — — 1 NM 99 NM

MainStay 115 7,891 101 6,994 14 13.9 % 897 12.8 %

Suburban 75 6,719 71 6,395 4 5.6 % 324 5.1 %

Cambria Hotels 65 8,865 57 7,869 8 14.0 % 996 12.7 %

Sleep Inn 427 30,104 423 29,775 4 0.9 % 329 1.1 %

Ascend Hotel Collection 199 22,818 196 20,091 3 1.5 % 2,727 13.6 %

Total (1), (2)

WoodSpring Suites 235 28,350 212 25,592 23 10.8 % 2,758 10.8 %

178 19,185 178 19,630 — — % (445) (2.3) %

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

Prior year hotel and room data have been reclassified for comparability.

(2) 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.

Refer to Note 2 of our consolidated financial statements.

As of both December 31, 2022 and 2021, less than 1% of the Company's domestic hotel system had temporarily suspended operations due to governmental restriction or a franchisee’s election.

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

International royalty fees for legacy Choice brands for the year ended December 31, 2022 increased $3.6 million to $18.4 million compared to the year ended December 31, 2021 as a result of improvements in RevPAR performance, despite reductions of the international franchise system size by 16 hotels (from 1,117 as of December 31, 2021 to 1,101 as of December

31, 2022), and a decrease by 1,248 rooms (from 121,716 as of December 31, 2021 to 120,468 as of December 31, 2022).

As of December 31, 2022 and December 31, 2021, approximately 1% and 2%, respectively, of the Company's international branded hotels temporarily suspended operations due to governmental restriction or a franchisee’s election.

Royalty fees for the newly acquired Radisson Hotels Americas brands since the acquisition date of August 11, 2022 through December 31, 2022 were $19.5 million.

As of December 31, 2022, Radisson Hotels Americas brands accounted for 508 and 51,473 domestic hotels and rooms, respectively, and 90 and 12,927 international hotels and rooms, respectively.

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

MainStay Suites 126 8,831 115 7,891 11 9.6 % 940 11.9 %

Suburban Studios 104 9,046 75 6,719 29 38.7 % 2,327 34.6 %

Cambria Hotels 74 10,239 65 8,865 9 13.8 % 1,374 15.5 %

64 15,206 70 16,453 (6) (8.6) % (1,247) (7.6) %

Park Inn 4 363 4 363 — — % — — %

Everhome Suites 1 98 1 99 — — % (1) (1.0) %

Total Domestic Franchises 6,305 496,965 6,296 494,409 9 0.1 % 2,556 0.5 %

(1) Includes the Comfort family of brand extensions, including Comfort Inn and Comfort Suites.

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

(3) Includes the Clarion family of brand extensions, including Clarion and Clarion Pointe.

(4) Includes the Radisson, Radisson Blu, Radisson Individuals, and Radisson Red brands.

International royalty fees increased to $28.9 million for the year ended December 31, 2023 from $20.0 million for the year ended December 31, 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 31 hotels (from 1,191 hotels as of December 31, 2022 to 1,222 hotels as of December 31, 2023), and an increase of 2,626 rooms (from 133,395 rooms as of December 31, 2022 to 136,021 rooms as of December 31, 2023).

Initial Franchise Fees

Initial franchise fee revenue increased $1.8 million from $26.3 million to $28.1 million during the years ended December 31, 2021 and 2022, respectively.

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 time of an ownership change (referred to as a relicensing) or agreement renewal, however, the recognition of revenue is deferred until the hotel associated with the franchise agreement is open or the franchise agreement is terminated.

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

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

During the year ended December 31, 2022, the Company awarded 542 franchise agreements to legacy Choice brands representing 50,057 rooms compared to 528 franchise agreements representing 49,784 rooms for the year ended December 31, 2021.

Domestic franchise agreements awarded to legacy Choice brands for new construction hotels totaled 194 representing 20,042 rooms during the year ended December 31, 2022 compared to 175 contracts representing 16,787 rooms for the year ended December 31, 2021.

Conversion hotel awarded franchise agreements to legacy Choice brands totaled 348 representing 30,015 rooms for the year ended December 31, 2022 compared to 353 agreements representing 32,997 rooms for the year ended December 31, 2021.

The Company awarded MDA commitments to legacy Choice brands of 44 franchise agreements representing 5,256 rooms during the year ended December 31, 2022, and 5 franchise agreements representing 610 rooms during the year ended December 31, 2021.

The Company awarded 519 domestic relicensing contracts to legacy Choice brands during the year ended December 31, 2022 compared to 346 executed during the year ended December 31, 2021.

The Company awarded 36 domestic renewal agreements to legacy Choice brands during the year ended December 31, 2022 compared to 24 during the year ended December 31, 2021.

Since the August 11, 2022 acquisition date through December 31, 2022, the Company awarded 4 franchise agreements to Radisson Hotels Americas brands.

As of December 31, 2022, the Company's legacy Choice brands had 882 franchised hotels with 82,148 rooms under construction, awaiting conversion or approved for development in its domestic system as compared to 874 hotels and 75,017 rooms at December 31, 2021.

The number of new construction franchised hotels in the Company’s legacy Choice brands domestic pipeline decreased from 657 at December 31, 2021 to 653 at December 31, 2022.

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

The number of conversion franchised hotels in the Company’s legacy Choice brands domestic pipeline increased from 217 at December 31, 2021 to 229 hotels at December 31, 2022.

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

The Company's domestic legacy Choice brands also had outstanding MDAs committing owners to future franchise development for 102 franchised hotels and 12,332 rooms at December 31, 2022 and 29 franchised hotels and 3,506 rooms December 31, 2021.

Further, the Company had an additional 40 legacy Choice brands franchised hotels with 4,306 rooms under construction, awaiting conversion or approved for development in its international system as of December 31, 2022 compared to 40 hotels and 4,090 rooms at December 31, 2021.

As of December 31, 2022, the Company's Radisson Hotels Americas brands had 66 franchised hotels with 8,104 rooms under construction, awaiting conversion or approved for development in its global system.

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

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

Procurement services:

Procurement services revenues increased $13.4 million from $50.4 million for the year ended December 31, 2021 to $63.8 million for the year ended December 31, 2022.

These results reflect an increase in fees generated from travel-related partnerships and qualified vendors.

Owned hotels:

The Company's revenues, net of expenses, from owned hotels increased $9.0 million from $13.0 million for the year ended December 31, 2021 to $22.0 million for the year ended December 31, 2022.

These results reflect improved operating performance at our owned hotels and the net addition of 3 owned hotel during the comparative period as a result of the Radisson Hotels Americas acquisition (refer to Note 24 to our consolidated financial statements).

Initial franchise fees are generally paid to the Company when a franchisee executes a franchise agreement for a new property entering the franchise system, or an existing franchised property at the time of an ownership change (referred to as a relicensing), or a franchise agreement renewal;

however, the recognition of revenue is deferred until the hotel associated with the franchise agreement is open or the franchise agreement is terminated.

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

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

Initial franchise fees revenue decreased $0.3 million from $28.1 million to $27.8 million for the years ended December 31, 2022 and 2023, respectively.

The decrease is primarily attributable to the lower number of domestic franchise agreement terminations in the current year as compared to the prior year.

At December 31, 2023, the Company had 1,032 hotels with 105,062 rooms in its global pipeline.

Approximately 88% of our pipeline is located in the United States and approximately 72% of the domestic pipeline is new construction.

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

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

While the Company’s 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 local governmental approvals and entitlements.

Platform and Procurement Services Fees

Platform and procurement services fees revenue increased $11.3 million from $63.8 million for the year ended December 31, 2022 to $75.1 million for the year ended December 31, 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 annual convention, which includes activity from the newly acquired Radisson hotel brands.

The Company's revenues, net of operating expenses, from the owned hotels increased $4.1 million from $22.0 million for the year ended December 31, 2022 to $26.1 million for the year ended December 31, 2023.

The increase reflects improved operating performance at our owned hotels and the net addition of one owned hotel during the year ended December 31, 2023 relative to the comparative period.

Other Revenues

Other revenues increased $36.0 million from $28.7 million the year ended December 31, 2021 to $64.7 million for the year ended December 31, 2022 driven by an increase in termination fees, including $22.6 million resulting from the exit of 110 WoodSpring units in the third quarter of 2022, and other franchising revenues.

Selling, general and administrative expenses:

The cost to operate the business is reflected in SG&A expenses on the consolidated statements of income, which were $207.3 million for the year ended December 31, 2022, an increase of $61.7 million from December 31, 2021.

SG&A expenses experienced an increase resulting from the acquisition of Radisson Hotels Americas, inclusive of severance and transaction related-costs incurred of $39.6 million.

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

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

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

These were partially offset by a $11.5 million decrease in the Company's deferred compensation liabilities based on decreases in the underlying investments.

Other revenues decreased $18.6 million from $64.7 million for the year ended December 31, 2022 to $46.1 million for the year ended December 31, 2023, which was primarily due to a decrease in termination fees of $22.7 million resulting from the exit of 110 WoodSpring units in the third quarter of 2022.

Selling, General and Administrative

Selling, general and administrative expenses, which includes the cost to operate the business, increased $48.4 million from $167.7 million for the year ended December 31, 2022 to $216.1 million for the year ended December 31, 2023.

Selling, general and administrative expenses increased $48.4 million primarily due to the acquisition of the Radisson Hotels Americas business in August 2022, with the year ended December 31, 2023 reflecting a full year of combined operations.

In addition, the increase includes a $12.3 million increase in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments, and a $5.5 million increase in employee salary and benefit continuation payments

related to restructuring certain areas of the business.

The remaining increase relates to general corporate purposes, including compensation, benefits, travel, and professional fees, and the provision of credit losses on accounts receivable balances.

Business Combination, Diligence and Transition Costs

Business combination, diligence and transition costs increased $16.2 million due to the integration of the Radisson Hotels Americas business, which was acquired on August 11, 2022 and substantially completed integration in the fourth quarter of 2023, and costs associated with acquisition pursuits.

Depreciation and Amortization

Depreciation and amortization expense was $24.8 million and $30.4 million for the year ended December 31, 2021, and 2022, respectively, increasing primarily due to the acquisition of Radisson Hotels Americas on August 11, 2022 and associated amortization from the portion of the purchase price allocated to contract asset acquisition costs.

Depreciation and amortization expense was $39.7 million and $30.4 million for the years ended December 31, 2023 and 2022, respectively.

Depreciation and amortization expense increased primarily due to the acquisition of Radisson Hotels Americas and the associated depreciation and amortization from the portion of the purchase price allocated to three hotel properties and contract asset acquisition costs.

Impairment of Long-Lived Assets

Impairment of long-lived assets of $3.7 million for the year ended December 31, 2023 was primarily related to a sublease agreement that was signed for the legacy Radisson corporate office space in Minneapolis, Minnesota.

The long-lived asset group associated with the office space was determined to be impaired due to the carrying value exceeding its fair value, which resulted in the recognition of a $3.4 million impairment loss.

Gain on Sale of Business and Assets, Net

The Company recognized gains of $16.2 million for the year ended December 31, 2022, primarily related to the sale of two owned hotel assets in the second and third quarters of 2022.

These gains are partially offset by a reduction to the carrying value of an asset held for sale in the third quarter of 2022 and the sale and conversion of an international direct franchising market to a master franchising market in the second quarter of 2022.

Other loss (gain):

The Company recorded other net loss of $7.0 million for the year ended December 31, 2022, compared to other net gains of $5.1 million for the year ended December 31, 2021.

The losses for the year ended December 31, 2022 relate to decreases in the Company's deferred compensation assets based on decreases in the underlying investments and by foreign currency transaction losses.

Equity in net (gain) loss of affiliates:

The Company recorded net gains of $1.7 million from its unconsolidated affiliates during the year ended December 31, 2022 compared to net losses of $15.9 million for the year ended December 31, 2021.

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

The activity for the year ended December 31, 2021 reflects other-than-temporary impairments of multiple unconsolidated affiliates resulting in losses of $19.3 million, partially offset by sales of ownership interests of and distributions resulting from sales of underlying assets from multiple unconsolidated affiliates resulting in gains of $6.9 million.

Refer to Note 8 to our consolidated financial statements for additional information.

Income tax expense (benefit) :

Gain on sale of business and assets, net, was $16.2 million for the year ended December 31, 2022.

The gain primarily related to the sale of two owned hotels in the second and third quarters of 2022.

The gains were partially offset by a reduction in the carrying value of an asset held for sale in the third quarter of 2022 and the sale and conversion of an international direct franchising market to a master franchising market in the second quarter of 2022.

Interest Expense

The Company recognized $63.8 million of interest expense for the year ended December 31, 2023, which was an increase of $20.0 million from the comparable period in 2022.

The increase in interest expense was due to an increase in borrowings and higher interest rates on the Company's revolving credit facility.

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

Gain on Extinguishment of Debt

Gain on extinguishment of debt was $4.4 million for the year ended December 31, 2023.

The Company derecognized certain economic development loans from the consolidated balance sheets due to satisfying the relevant performance conditions in the loan agreements.

Other (Gain) Loss

The Company recognized other net gains of $10.6 million and other net losses of $7.0 million for the years ended December 31, 2023 and 2022, respectively.

For the year ended December 31, 2023, the net gain was primarily due to a $6.6 million increase in the Company's deferred compensation assets based on increases in the fair value of the underlying investments and a $4.0 million unrealized gain on investments in equity securities.

For the year ended December 31, 2022, the net loss was primarily due to a decrease in the Company's deferred compensation assets based on decreases in the fair value of the underlying investments.

Income Tax Expense

The Company's effective income tax rates were 23.3% and 24.0% for the years ended December 31, 2023 and 2022, respectively.

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

The effective income tax rates for the years ended December 31, 2023 and 2022 were higher than the U.S.

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

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

Refer to Choice Hotels International, Inc.

2021 10-K Annual Report "Comparison of 2021 and 2020 Operating Results" under Item 7.

Management's Discussion and Analysis for details regarding changes between 2021 and 2020.

Refer to Choice Hotels International, Inc.'s 2022 10-K Annual Report, specifically the section "Comparison of 2022 and 2021 Operating Results" of Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations for the details regarding the changes between 2022 and 2021.

Liquidity and Capital Resources

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

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

The Company's short-term and long-term liquidity

requirements primarily arise from working capital needs, debt obligations, income tax payments, dividend payments, share repurchases, capital expenditures and investments in growth opportunities.

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

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

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

The outstanding principal of $216.6 million was repaid at maturity.

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

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

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

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

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.

As of December 31, 2023, the Company's primary sources of liquidity consisted of $648.3 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of December 31, 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 allows us to acquire or develop and resell hotels to incentivize franchise development of our brands in strategic markets.

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

With respect to our hotel development and ownership, affiliate investments, and lending, the Company had approximately $484.8 million in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of December 31, 2022, which it generally targets to recycle within a five year period, and expects our outstanding investment to not exceed $975 million at any point in time based on current Board of Directors' authorization.

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

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

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

The Company's primary sources of liquidity as of December 31, 2022 consisted of $281.6 million in cash and available borrowing capacity through its senior unsecured revolving credit facility.

As of December 31, 2022, the Company was in compliance with the financial covenants of its credit agreements and expects to remain in such compliance.

Operating Activities

During the years ended December 31, 2022, 2021 and 2020, net cash provided by operating activities totaled $367.1 million, $383.7 million, and $110.1 million, respectively.

Operating cash flows decreased $16.6 million from the year ended December 31, 2021 to the year ended December 31, 2022 primarily due to increases in franchise agreement acquisition cost payments and timing of working capital and deferred items, partially offset by an increase in operating income, excluding certain non-cash charges.

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").

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 $467.8 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of December 31, 2023.

The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $1.2 billion at any point in time based on the current board of directors' authorization.

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 costs across our brands to incentivize franchise development.

The timing and the amount of the franchise agreement acquisition cost payments 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 flows from operating activities that are 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 December 31, 2023, the Company had 1.8 million shares remaining under the current share repurchase authorization.

The 2023 annual dividend rate was $1.15 per share or approximately $56.5 million in aggregate dividend payments.

Cash Flows from Operating Activities

During the years ended December 31, 2023, 2022, and 2021, the net cash provided by operating activities was $296.6 million, $367.1 million, and $383.7 million, respectively.

Our operating cash flows decreased $70.5 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 business combination, diligence and transition costs associated with the integration of the Radisson Hotels Americas business and acquisition pursuits, an increase in selling, general and administrative expenses, 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 franchise agreement acquisition cost payments to franchisees as an incentive to enter into new franchise agreements or perform-designated improvements to properties under existing franchise agreements.

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 years ended December 31, 2022, 2021 and 2020, the Company's net advances for these purposes totaled $54.5 million, $38.2 million, and $36.5 million, respectively.

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

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

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.

The franchised and management contracts acquired in the Radisson Hotels Americas acquisition have similar terms as those described above with the exceptions of certain contractual

elements concerning reservation fees, which are not required to breakeven over time and which are insignificant to overall operating net income.

During the years ended 2022 and 2021, other revenues from franchised and managed properties exceeded expenses by $49.7 million and $83.9 million, respectively.

During the year ended 2020, other expenses from franchised and managed properties exceeded revenues by $44.2 million.

Investing Activities

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

We 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 $484.8 million outstanding in support of the Cambria Hotels and Everhome Suites brands currently reflected on the balance sheet as of December 31, 2022, which it generally targets to recycle within a five year period, and expects our outstanding investment to not exceed $975 million at any point of time based on current Board of Directors' authorization.

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

Cash utilized for investing activities totaled $442.4 million, $78.9 million and $24.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The increase in cash utilized for investing activities from 2021 to 2022 primarily reflects the following:

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

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

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

On the transaction date, the Company acquired approximately $10.4 million in restricted cash based on provisions of an assumed mortgage on an acquired hotel property of $56.0 million.

Subsequent to the acquisition closing date, this mortgage was repaid in full using cash we acquired and, as a result, the associated cash restrictions were lifted.

Refer to Note 24 to our consolidated financial statements for further discussion.

During the years ended December 31, 2022, 2021 and 2020, capital expenditures in property and equipment totaled $90.0 million, $74.3 million, and $33.6 million, respectively.

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

During the year ended December 31, 2022, the Company realized net proceeds of $166.6 million from the sale of three Cambria hotels, one parcel of land and a sale and conversion of an international direct franchising market to a master franchising market.

During the year ended December 31, 2021, the Company realized proceeds of $6.1 million from the sale of a commercial office building previously awarded to the Company pursuant to a court settlement.

The Company did not make sales of this nature during the year ended December 31, 2020.

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

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

The Company accounted for the acquisition of each hotel as an asset acquisition in the fourth quarter of 2021 (acquired net cash of $0.3 million) and second quarter of 2022 (paid net cash of $0.9 million), respectively.

During the year ended December 31, 2022, the Company recognized contract termination fee revenue of $22.6 million related to the termination of 110 WoodSpring units.

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

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

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 franchise agreement acquisition cost payment plus interest to the Company.

During the years ended December 31, 2023, 2022, and 2021, the Company's net franchise agreement acquisition costs were $98.3 million, $54.5 million, and $38.2 million, respectively.

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.

These activities are reflected in other revenues from franchised and managed properties and other expenses from franchised and managed properties.

During the years ended December 31, 2023, 2022, and 2021, the activity from other revenues from franchised and managed properties

exceeded the activity of other expenses from franchised and managed properties by $1.8 million, $49.7 million, and $83.9 million, respectively.

Cash Flows from Investing Activities

The net cash used in investing activities was $265.6 million, $442.4 million, and 78.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

During the years ended December 31, 2023, 2022, and 2021, capital expenditures for property and equipment totaled $116.3 million, $90.0 million, and $74.3 million, respectively.

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

The Company has 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 branded-hotels in strategic markets.

During the years ended December 31, 2023, 2022, and 2021, the Company invested $38.9 million, $3.1 million, and $2.8 million, respectively, to support these efforts.

In addition, during the years ended December 31, 2021 and 2020, the Company received distributions and sales proceeds from these affiliates totaling $15.6 million and $10.8 million, respectively.

The Company received no distributions from affiliates for the year ended December 31, 2022.

To the extent existing unconsolidated affiliates proceed to the hotel construction phase, the Company is committed to make additional capital contributions totaling $14.1 million to support these efforts.

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

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

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

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

In addition, during the years ended December 31, 2023 and 2021, the Company received proceeds from the sale of certain affiliates totaling $0.9 million and $15.6 million, respectively.

The Company received no distributions from affiliates during the year ended December 31, 2022.

During the year ended December 31, 2023, the Company purchased $112.4 million of equity securities in Wyndham in conjunction with its proposed acquisition, and made no dispositions.

There were no purchases or dispositions of equity securities during the years ended December 31, 2022 and 2021.

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 years ended December 31, 2023, 2022, and 2021, the Company issued a total of $4.3 million, $5.6 million, and $20.1 million of notes receivable loans, respectively, and received repayments totaling $10.9 million, $1.0 million, and $0.2 million on the notes receivable loans, respectively.

During the year ended December 31, 2022, the Company recognized net proceeds of $166.6 million from the sale of three Cambria hotels, one parcel of land, and a sale and conversion of an international direct franchising market to a master franchising market.

During the year ended December 31, 2021, the Company recognized proceeds of $6.1 million from the sale of a commercial office building that was previously awarded to the Company pursuant to a court settlement.

The Company did not sell any businesses or assets during the year ended December 31, 2023.

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 million.

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

Refer to Note 24 to our consolidated financial statements for further discussion.

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 years ended December 31, 2022, 2021 and 2020, the Company advanced $5.6 million, $20.1 million, and $9.8 million for these purposes, respectively, and received repayments totaling $1.0 million, $0.2 million, and $6.5 million for these purposes, respectively.

At December 31, 2022, the Company had commitments to extend an additional $1.8 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.

During the year ended December 31, 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 consisted of $67.4 million in consideration received, less the $44.7 million in carrying basis of intangible assets that were initially recognized on the date of the WoodSpring acquisition.

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

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

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

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

The Company has exercised multiple one-year extension options on the Restated Credit Agreement in exchange for fees.

As a result of extensions in 2021 and 2022, the full $600 million senior unsecured credit facility matures on August 20, 2026.

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 .

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

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

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

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

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

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

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

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

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

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

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

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

At December 31, 2022, the Company maintained a total leverage ratio of 2.13x and was in compliance with all financial covenants under the Restated Credit Agreement.

In the third quarter of 2020, the Company utilized excess cash on hand to pay down the senior unsecured revolving credit facility balance in full and remained undrawn as of December 31, 2020 and 2021.

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

At December 31, 2022, there is approximately $360 million outstanding on the senior unsecured revolving credit facility.

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

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

The Amendment provides, among other things, for (i) an increase in the aggregate amount of commitments under the Revolver by $250 million (the “Increased Commitments”) to an aggregate amount of $850 million and (ii) the replacement of the interest reference rate for U.S.

dollar-denominated borrowings under the Revolver from LIBOR to an adjusted Secured Overnight Financing Rate.

The pricing and other terms applicable to the Increased Commitments are the same as those applicable to the existing revolving loan commitments that were in effect prior to the Amendment.

Except as amended by the Amendment, the remaining terms of the unsecured credit facility remain in full force and effect.

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

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

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

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

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

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

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

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

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

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 the London Interbank Offered Rate 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%, 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 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 December 31, 2023, the Company maintained a total leverage ratio of 2.57x, including outstanding debt of approximately $227 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.

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 as set forth in the Restated Credit Agreement.

Term Loan Due 2024

On December 18, 2023, the Company entered into a $500 million unsecured term loan with a maturity date of December 16, 2024 (the "2023 Term Loan"), which has an optional one-year extension that can be requested by the Company prior to the initial maturity date.

The extension option is subject to the consent of the lenders and certain customary conditions.

The 2023 Term Loan and all accrued but unpaid interest must be repaid in full on the maturity date.

Upon the occurrence of certain debt issuances and equity issuances, as defined in the term loan agreement, the Company is required to make certain principal prepayments of the 2023 Term Loan in an amount equal to 100% of the net cash proceeds from those debt and equity issuances.

The Company may elect to have the 2023 Term Loan bear interest at a rate equal to (i) SOFR (subject to a credit spread adjustment of 0.10% and a 0.00% floor) plus a margin ranging from 125 to 175 basis points, or (ii) a base rate plus a margin ranging from 25 to 75 basis points.

In each case, the margin is determined according to the Company’s senior unsecured long-term debt rating.

The term loan agreement requires that the Company comply with various covenants, including restrictions on liens, incurring indebtedness, making dividends, stock repurchases, investments, and completing mergers and/or asset sales.

The term loan agreement has financial covenants which 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 which may be increased to 5.5 to 1.0 for up to three consecutive fiscal quarters commencing with the fiscal quarter in which certain material acquisitions are consummated.

As long as the Company maintains an Investment Grade Rating, as defined in the term loan agreement, then the Company will not need to comply with the consolidated fixed charge coverage ratio covenant.

The term loan 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 term loan agreement to be immediately due and payable.

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 15th and July 15th beginning January 15, 2021.

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

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

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

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

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 15th and July 15th.

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 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 stockholders 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.

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

The Company 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.

The 2012 Senior Notes matured on July 1, 2022.

The outstanding principal of $216.6 million was repaid at maturity.

Construction Loan

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

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

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

Fixed Rate Collateralized Mortgage

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

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

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

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

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 December 31, 2022, the Company had been fully advanced the amounts due pursuant to these agreements.

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

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

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

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

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

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

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

The Company was in compliance with all applicable current performance conditions as of December 31, 2022.

The performance conditions are measured annually on December 31st 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 30th following the measurement date.

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

The $4.4 million of advances have been included in debt in the consolidated balance sheets.

Upon the expiration of the Company's previous ten-year corporate headquarters lease agreement in 2023, the Company concluded that it had achieved the performance conditions over the entire term of the agreement and therefore, the Company is not required to repay the advances.

As a result, during the year ended December 31, 2023, the Company derecognized the $4.4 million economic development loans debt from the consolidated balance sheets and recognized a gain on extinguishment of debt in the consolidated statements of income.

Acquired Debt and Swap Derivative Asset

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

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

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

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 Swap derivative was terminated, which resulted in a payment to Choice in the amount of $1.9 million.

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

Given our strong liquidity and credit profile, in May 2021, the Company resumed the payment of quarterly dividends and declared a quarterly cash dividend of $0.225 per share of common stock, subject to future declarations by our Board of Directors.

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

During the year ended December 31, 2022, the Company declared cash dividends at a quarterly rate of $0.2375 per share of common stock, and paid $52.5 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 estimated to be approximately $49.6 million.

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.

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, which is the current per share dividend amount that was utilized in each of the dividends that were declared in 2023.

During the year ended December 31, 2023, the Company declared aggregate annual cash dividends of $1.15 per share or approximately $56.5 million in aggregate dividend payments.

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.

In accordance with the Restated Credit Agreement and the 2023 Term Loan, 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 & Redemptions

In 1998, we instituted a share repurchase program.

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

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

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

In May 2021, the Company's Board of Directors approved resumption of the share repurchase program.

During the year ended December 31, 2022, the Company repurchased 3.7 million shares of its common stock under the share repurchase program at a total cost of $429.4 million.

During the year ended December 31, 2023, the Company repurchased 2.9 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $351.7 million.

In total through December 31, 2023, the Company repurchased 58.3 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 $2.3 billion.

Considering the effect of the two-for-one stock split, the Company has repurchased 88.4 million shares at an average price of $21.76 per share.

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

Considering the effect of the two-for-one stock split,

the Company has repurchased 91.3 million shares at an average price of $24.88 per share.

As of December 31, 2023, the Company had 1.8 million shares remaining under the current share repurchase authorization.

During the year ended December 31, 2022, the Company redeemed 36.1 thousand shares of common stock at a total cost of $5.4 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of PVRSUs and restricted stock grants.

During the year ended December 31, 2023, the Company redeemed 114.2 thousand shares of common stock at a total cost of $14.2 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and the vesting of PVRSUs and restricted stock grants.

These redemptions were outside the share repurchase program.

During the year ended December 31, 2023, the Company received proceeds of $6.3 million from stock options exercised by employees.

The following table summarizes material contractual obligations (excluding previously addressed debt obligations;

financing, investment, guaranty, and franchise agreement acquisition commitments to franchisees;

and deferred compensation plan liabilities) as of December 31, 2022:

The following table summarizes the material contractual obligations (excluding the previously addressed debt obligations, the financing, investment, guaranty, and franchise agreement acquisition cost commitments to franchisees, and the deferred compensation plan liabilities) as of December 31, 2023:

Payment due by period

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Purchase obligations $ 76,497 $ 31,423 $ 45,074

Commitments for leases not yet commenced (1)

60,897 — 60,897

Total contractual obligations $ 76,497 $ 31,423 $ 45,074

(1) Commitments for leases not yet commenced represents future fixed payments, excluding anticipated tenant allowances, under leases that are not included in the consolidated balance sheet.

For future lease payments related to leases that have commenced and are included in the consolidated balance sheet, refer to Note 19 to our consolidated financial statements.

The total amount of unrecognized tax positions and the related interest and penalties totaled $12.2 million at December 31, 2022.

Due to the uncertainty with respect to the timing and amounts of payments in connection with these positions, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Refer to Note 15 to our consolidated financial statements.

Critical Accounting Policies

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

We have described below those policies that we believe are critical and require the use of complex judgment or significant estimates in their application.

Additional discussion of these policies is included in Note 1 to our consolidated financial statements.

Revenue Recognition

Franchise agreements

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

Franchise fees include the following:

• Royalty fees .

Royalty fees are earned in exchange for a license to brand intellectual property typically based on a percentage of gross room revenues.

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

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

• Initial franchise fees .

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

(ii) there is a change of ownership;

or (iii) existing franchise agreements are extended.

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

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

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

• Other revenue.

Other revenue is a combination of miscellaneous non-marketing and reservation system fees, inclusive of quality assurance, non-compliance and franchisee training fees, and is recognized in the period the designated transaction or event has occurred.

• Marketing and reservation system revenues .

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

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

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

These services are comprised of multiple fees including the following:

▪ Fees based on a percentage of gross room revenues are recognized in the period the gross room revenue was earned, based on the underlying hotel’s sales or usage.

▪ Fees based on the occurrence of a designated transaction or event are recognized in the period the transaction or event occurred.

▪ System implementation fees charged to franchisees are deferred and recognized as revenue over the term of the franchise agreement.

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

The revenue recognition of this program is discussed in Choice Privileges Loyalty Program below .

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

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

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

Sales commissions earned by Company personnel upon execution of a franchise agreement (“franchise sales commissions”) meet the requirement to be capitalized as an incremental cost of obtaining a contract with a customer.

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

We make certain payments to customers as an incentive to enter into new franchise agreements (“franchise agreement acquisition cost”).

We capitalize such payments as intangible assets.

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

Impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, are recorded within the SG&A expenses and other expenses from franchised and managed properties.

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

• Procurement services revenues.

The Company generates procurement services revenues from qualified vendors.

Procurement services revenues are generally based on marketing services provided by the Company on behalf of and access provided to our qualified vendors to hotel owners and guests.

The Company provides these services in exchange for either fixed consideration or a percentage of revenues earned by the qualified vendor pertaining to purchases by the Company’s franchisees or guests.

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

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

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

Managed Hotels

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

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

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

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

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

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

Refer to Note 23 regarding discussion of management agreement guarantees.

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

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

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

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

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

The Company owned nine hotels at December 31, 2022 and six hotels at December 31, 2021, from which the Company derives revenues.

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

The Company typically satisfies the performance obligations over the length of the stay and recognizes the revenue on a daily basis, as the hotel rooms are occupied and services are rendered.

Other ancillary goods and services at owned hotels are purchased independently of the hotel stay at standalone selling prices and are considered separate performance obligations, which are satisfied at the point in time when the related good or service is provided to the guest.

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

The total amount of unrecognized tax positions and the interest and penalties thereon was $13.5 million as of December 31, 2023.

Due to the uncertainty with respect to the timing and amounts of the payments in connection with these positions, the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Refer to Note 15 to our consolidated financial statements for more information.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, and the related disclosures in the consolidated financial statements and the accompanying footnotes.

On an ongoing basis, we evaluate these estimates and judgments based on historical experiences and various other factors that we believe reflect the current circumstances.

While we believe our estimates, assumptions, and judgments are reasonable, they are based on information that was available when the estimate or assumption was made.

Actual results may differ significantly from these estimates due to changes in assumptions, judgments, and conditions as a result of unforeseen events or otherwise, which could have a material effect on our financial condition or results of operations.

We believe that the following estimates, which are used in conjunction with our significant accounting policies, are critical because they involve a higher degree of judgment and are based on information that is inherently uncertain.

Refer to Note 1 to our consolidated financial statements for information on our significant accounting policies.

Guest Loyalty Programs

Choice Privileges and Radisson Rewards Americas are the Company’s frequent guest loyalty programs, which enable members to earn points based on their spending levels with the Company’s franchisees.

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

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

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

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

Loyalty points represent a performance obligation attributable to usage of the points, and thus revenues are recognized at the point in time when the loyalty points are redeemed by members for benefits.

The transaction price is variable and determined in the period when the loyalty points are earned and the underlying gross room revenues are known.

No loyalty program revenues are recognized at the time the loyalty points are issued.

The Company is an agent in coordinating delivery of the services between the loyalty program member and franchisee or third party, and as a result, revenues are recognized net of the cost of redemptions.

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

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

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

The amount of the loyalty program fees in excess of the point liability represents current and non-current deferred revenue, which is recognized to revenue as points are redeemed including an estimate of future forfeitures (“breakage”).

The anticipated redemption pattern of the points is the basis for current and non-current designation of each liability.

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

Changes in the estimates used in developing the breakage rate or other expected future program operations could result in material changes to the liability for guest loyalty program and deferred revenues.

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

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

Loyalty program points represent a performance obligation attributable to the usage of the points, and thus the revenues are recognized at a point in time when the loyalty program points are redeemed by the members for benefits.

The transaction price is variable and determined in the period when the loyalty program points are earned and the underlying gross room revenues are known.

No loyalty program revenues are recognized at the time the loyalty program points are issued.

The Company is an agent in coordinating the delivery of the services between the loyalty program member and the franchisee or third party, and as a result, the revenues are recognized net of the cost of redemptions.

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

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

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

The amount of the loyalty program fees in excess of the guest loyalty program point liability represents current and non-current deferred revenue, which is recognized to revenue as the points are redeemed including an estimate of the future forfeitures (“breakage”).

The anticipated redemption pattern of the

points is the basis for the current and non-current designation of each liability.

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

Any changes in the estimates used in developing the breakage rate or other future guest loyalty program operations could result in a material change to the liability for the guest loyalty program and the deferred revenues.

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

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

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

Partner agreements include multiple performance obligations.

The primary performance obligations are brand intellectual property and material rights for free or discounted goods or services to hotel guests.

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

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

The amounts allocated to material rights for free or discounted goods or services to hotel guests are recognized to revenue as points are redeemed including an estimate of breakage, primarily within other revenues from franchised and managed properties.

Valuation of Long-Lived Assets, Intangibles, and Goodwill

The Company groups its long-lived assets, including property and equipment and definite-lived intangible assets (e.g., franchise rights, franchise agreement acquisition costs), at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

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

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

The partner agreements include multiple performance obligations.

The primary performance obligations are brand intellectual property and material rights for free or discounted goods or services to the hotel guests.

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

The amounts allocated to the brand intellectual property are recognized on a gross basis over time using the output measure of time elapsed, and are presented within royalty, licensing and management fees and platform and procurement services fees in the consolidated statements of income.

The amounts allocated to material rights for free or discounted goods or services to hotel guests are recognized to revenue as the points are redeemed including an estimate of breakage, primarily within other revenues from franchised and managed properties.

Long-Lived Assets, Intangible Assets, and Goodwill

The Company groups its long-lived assets, including property and equipment and definite-lived intangible assets (e.g., franchise rights and franchise agreement acquisition costs), at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

The Company evaluates the potential impairment of its long-lived asset groups annually as of December 31 or earlier when other circumstances indicate that the Company may not be able to recover the carrying value of the asset group.

When indicators of impairment are present, recoverability is assessed based on undiscounted expected cash flows.

If the undiscounted expected cash flows are less than the carrying amount of the asset group, an impairment charge is measured and recorded, as applicable, for the excess of the carrying value over the fair value of the asset group.

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

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

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

The Company did not identify any indicators of impairment of long-lived assets from the Hotel Franchising reporting unit during the years ended December 31, 2022, 2021 and 2020, other than impairments on franchise sales commission assets and franchise agreement acquisition cost intangibles primarily resulting from terminations of franchisees from the Choice system or significant delinquencies in construction or invoice payments.

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

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

Prior to initial lease term expiration of the building's single tenant, the tenant provided notice that the lease renewal options would not be exercised.

Management identified this as a triggering event requiring the interim reevaluation of the commercial office building's long-lived assets.

During the third quarter of 2020, recoverability of the long-lived asset group was assessed based on undiscounted expected cash flows of the asset group aligned with management’s present long-term strategy for the building, and management concluded the undiscounted expected cash flows were less than the carrying amount of the asset group.

An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group.

To estimate the fair value of the long-lived asset group, the Company utilized a combination of market and income approach valuation methods.

The Company recognized a non-cash pretax long-lived asset group impairment charge in the amount of $4.3 million during the third quarter of 2020.

In 2021, the Company committed to a plan to sell the commercial office building.

The building was sold in November 2021 for $6.1 million, resulting in a gain of $13 thousand reflected within gain (loss) on sale of business and assets, net on the consolidated statements of income in the fourth quarter of 2021.

• During the third quarter of 2018, the Company purchased the remaining membership interests in a VIE previously accounted for under the equity method of accounting.

The VIE held a real estate parcel and the purchase was accounted for an asset acquisition.

The financial results of the 100% owned entity have been consolidated in the Company's financial statements since August 2018.

The real estate parcel represents a long-lived asset group with a carrying value prior to recoverability evaluation of $29.5 million in other assets as of December 31, 2020.

Based on the impact of the COVID-19 pandemic, the Company’s assessment of the highest and best use of the real estate parcel changed and therefore, the recoverability of the long-lived asset group was re-assessed based on undiscounted expected cash flows of the asset group from a sale, which were less than the carrying value of the asset group.

An impairment charge was recorded for the excess of the carrying value over the fair value of the asset group.

To estimate the fair value of the long-lived asset group, the Company utilized market approach valuation methods.

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

When indicators of impairment are present, then the recoverability is assessed based on undiscounted expected cash flows.

If the undiscounted expected cash flows are less than the carrying amount of the asset group, then an impairment charge is measured and recognized, as applicable, for the excess of the carrying value over the fair value of the asset group.

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

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

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

The Company did not identify any indicators of impairment of long-lived assets in the Hotel Franchising reporting unit during the years ended December 31, 2023, 2022, and 2021, other than impairments on franchise sales commission assets and franchise agreement acquisition cost intangible assets primarily resulting from the termination of franchise agreements from the Choice system or significant delinquencies in construction or invoice payments.

The Company evaluates the impairment of goodwill and intangible assets with indefinite lives annually as of December 31 or earlier upon the occurrence of substantive unfavorable changes in economic conditions, industry trends, costs, cash flows, or ongoing declines in market capitalization that indicate that the Company may not be able to recover the carrying amount of the asset.

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If the conclusion is that it is more likely than not that the fair value of the asset is less than its carrying value, then a quantitative impairment test is performed whereby the carrying value is compared to the fair value of the asset and an impairment charge is recognized, as applicable, for the excess of the carrying value over the fair value.

The Company may elect to forgo the qualitative assessment and move directly to the quantitative impairment tests for goodwill and indefinite-lived intangibles.

The Company determines the fair value of its reporting units and indefinite-lived intangibles using income and market methods.

The Company may elect to forgo the qualitative assessment and move directly to the quantitative impairment tests for goodwill and indefinite-lived intangible assets.

The Company determines the fair value of its reporting units and indefinite-lived intangible assets using the income and market methods.

Goodwill is allocated to the Company's reporting units.

The Company's reporting units are determined primarily by the availability of discrete financial information relied upon by chief operating decision maker ("CODM") to assess performance and make operating segment resource allocation decisions.

The Company's reporting units are determined primarily by the availability of discrete financial information relied upon by the chief operating decision maker ("CODM") to assess performance and make operating segment resource allocation decisions.

As of December 31, 2023, the Company's goodwill is allocated to the Hotel Franchising reporting unit.

The Company performed the qualitative impairment analysis for the Hotel Franchising reporting unit, concluding that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount.

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

Valuation of Investments in Affiliates

The Company evaluates an investment in an affiliate for impairment when circumstances indicate that the carrying value may not be recoverable (for example, due to loan defaults), significant under performance relative to historical or projected operating performance, and significant negative industry, market or economic trends.

When there is indication that a loss in value has occurred, the Company evaluates the carrying value compared to the estimated fair value of the investment.

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

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

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

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

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

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

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

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

The Company recognized no impairment charges during the year ended December 31, 2020.

Notes & Accounts Receivable and Expected Credit Losses

The Company provides financing in the form of notes receivable loans to franchisees to support the development of properties in strategic markets.

The Company has developed a systematic methodology to determine its allowance for credit losses across our portfolio of notes receivable loans.

The Company monitors the risk and performance of our portfolio by the level of security in collateral (i.e., senior, subordinated or unsecured), which is the Company's credit quality indicator.

As each of the Company’s notes receivable loans has unique risk characteristics, the Company deploys its methodology to calculate allowances for credit losses at the individual notes receivable loan level.

The Company primarily utilizes a discounted cash flow ("DCF") technique to measure the credit allowance, influenced by the key economic variables of each note receivable loan.

The Company identified the key economic variables for these loans to be loan-to-cost ("LTC") or loan-to-value ("LTV") ratios and debt service coverage ratio ("DSCR").

The LTC or LTV ratio represents the loan principal relative to the project cost or value and is an indication of the ability to be re-paid principal at loan maturity.

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

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

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

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

In preparing or updating a DCF model as the basis for the credit allowance, the Company develops various recovery scenarios and, based on the key economic variables and present status of the loan and underlying collateral, applies a probability-weighting to the outputs of the scenarios.

Collateral-dependent financial assets are financial assets for which repayment is expected to be derived substantially through the operation or sale of the collateral and where the borrower is experiencing financial difficulty.

For collateral-dependent loans, expected credit losses are based on the fair value of the collateral, less selling costs if repayment will be from the sale of the collateral.

The Company calculates fair value of the collateral using a DCF technique to project cash flows or a market approach via quoted market prices.

In developing cash flow projections, the Company will review the borrower's financial statements for the property, economic trends, industry projections for the market where the property is located, and comparable sales capitalization rates.

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

The allowance for credit losses is the Company’s best estimate of the amount of expected credit losses inherent in the accounts receivable balance.

The Company determines the allowance considering historical write-off experience, review of aged receivable balances and customer payment trends, the economic environment, and other available evidence.

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

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

Historically, the Company has considered its credit risk associated with accounts receivables to be partially mitigated due to the dispersion of these receivables across a large number of geographically diverse franchisees.

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

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

The Company performed a qualitative impairment analysis for the Hotel Franchising reporting unit and concluded that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount.

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

Income taxes are recorded using the asset and liability method of accounting for income taxes.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

A valuation allowance is provided for deferred tax assets if it is more likely than

not such assets will be unrealized.

A valuation allowance is provided for deferred tax assets if it is more likely than not that such assets will be unrealized.

Historically, deferred United States income taxes have not been recorded for temporary differences related to investments in certain foreign subsidiaries and corporate affiliates.

The temporary differences consisted primarily of undistributed earnings that are considered permanently reinvested in operations outside the United States.

Due to the changes resulting from the 2017 Tax Cuts and Jobs Act, the Company has implemented a new foreign dividend policy effective during the quarter ended September 30, 2018.

Due to the changes resulting from the 2017 Tax Cuts and Jobs Act, the Company implemented a new foreign dividend policy effective during the quarter ended September 30, 2018.

As a result of the new policy, the Company intends to limit any future foreign distributions to income which has been previously subject to US taxation, for which relevant taxes have been recorded.

Nonetheless, the Company will continue to assert that any other outside basis difference of the foreign subsidiaries will be permanently (or indefinitely) reinvested outside of the U.S.

Consequently, the Company will not record any additional deferred taxes for this item in 2022.

Consequently, the Company did not record any additional deferred taxes for this item in 2023.

With respect to uncertain income tax positions, a tax liability is recorded in full when management determines that the position does not meet the more likely than not threshold of being sustained on examination.

A tax liability may also be recognized for a position that meets the more likely than not threshold, based upon management’s assessment of the position’s probable settlement value.

The Company records interest and penalties on unrecognized tax benefits in the provision for income taxes.

Additional information regarding the Company’s unrecognized tax benefits is provided in Note 15 to Consolidated Financial Statement s .

The Company records interest and penalties on unrecognized tax benefits in the provision for income taxes in the consolidated statements of income.

Additional information regarding the Company’s unrecognized tax benefits is provided in Note 15 to the consolidated financial Statement s .

New Accounting Standards

Refer to the "Recently Adopted & Issued Accounting Standards" section of Note 1 of our consolidated financial statements for information related to our adoption and assessment of new accounting standards in 2022.

Refer to the "Recently Adopted & Issued Accounting Standards" section of Note 1 to the consolidated financial statements for information related to our adoption and assessment of new accounting standards.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis