What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-08 compared with 2023-11-07 · 169 added, 341 removed, 348 unchanged (59% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Royalty, licensing and management fees $ 105,467 $ 107,492

7 unchanged sentences

Selling, general and administrative 48,625 48,921

Business combination, diligence and transition costs 15,844 10,362

Depreciation and amortization 10,935 10,023

3 unchanged sentences

271,800 254,941

Gain on sale of business and assets, net — 13,379 — 16,688

Operating income 60,149 77,851

OTHER INCOME AND EXPENSES, NET

OTHER EXPENSES AND INCOME, NET

Interest expense 20,181 14,084

1 unchanged sentence

Other loss (gain) 1,336 ( 1,908 )

Equity in net gain of affiliates ( 1,801 ) ( 1,075 ) ( 1,923 ) ( 1,279 )

Total other income and expenses, net 13,813 8,242 36,011 35,127

Equity in net loss of affiliates 155 63

Total other expenses and income, net 19,941 10,356

Income before income taxes 40,208 67,495

8 unchanged sentences

(IN THOUSANDS)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Net income $ 31,009 $ 52,820

Other comprehensive income (loss), net of tax:

Other comprehensive income, net of tax:

Foreign currency translation adjustment 454 394

Other comprehensive income (loss), net of tax ( 191 ) ( 902 ) 498 ( 1,139 )

Other comprehensive income, net of tax 454 394

Comprehensive income $ 31,463 $ 53,214

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current assets

15 unchanged sentences

77,336 78,900

Investments in equity securities, at fair value 109,861 116,374

Investments for employee benefit plans, at fair value 43,747 39,751

22 unchanged sentences

160,000,000 shares authorized;

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

50,026,433 and 52,200,903 shares outstanding at September 30, 2023 and December 31, 2022, respectively

95,065,638 shares issued at March 31, 2024 and December 31, 2023;

49,284,204 and 49,526,245 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in-capital 335,612 330,750

1 unchanged sentence

Treasury stock, at cost;

45,039,205 and 42,864,735 shares at September 30, 2023 and December 31, 2022, respectively

45,781,434 and 45,539,393 shares at March 31, 2024 and December 31, 2023, respectively

( 2,097,840 ) ( 2,046,791 )

6 unchanged sentences

(IN THOUSANDS)

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization 10,935 10,023

Depreciation and amortization – marketing and reservation system 27,544 23,237

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

Depreciation and amortization – other expenses from franchised and managed properties 7,028 9,276

Franchise agreement acquisition cost amortization 6,185 4,637

Non-cash share-based compensation and other charges 10,597 10,630

Non-cash interest, investment, and affiliate (income) loss, net ( 1,709 ) 9,135

Non-cash interest, investments, and affiliate loss (income), net 2,510 ( 1,442 )

Deferred income taxes ( 736 ) 7,566

Equity in net (gain) loss of affiliates, less distributions received ( 621 ) 2,451

Equity in net loss of affiliates, less distributions received 1,200 421

Franchise agreement acquisition costs, net of reimbursements ( 33,486 ) ( 28,092 )

4 unchanged sentences

Investments in intangible assets ( 1,439 ) ( 1,097 )

Asset acquisitions, net of cash paid — ( 856 )

Proceeds from the sale of assets and business — 140,554

Proceeds from the termination of intangible assets — 5,698

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

Contributions to investments in affiliates ( 9,317 ) ( 3,620 )

2 unchanged sentences

Proceeds from sales of investments for employee benefit plans 1,591 716

Proceeds from sales of equity securities 1,230 —

Issuances of notes receivable ( 1,042 ) ( 3,660 )

3 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Payments to extinguish acquired debt — ( 55,975 )

Proceeds from acquired derivative — 1,943

Net borrowings pursuant to revolving credit facilities 126,500 176,000

Principal payments on 2012 senior notes — ( 216,571 )

Debt issuance costs — ( 755 )

Purchases of treasury stock ( 59,459 ) ( 160,488 )

Proceeds from the exercise of stock options 6,719 2,361

Dividends paid ( 14,728 ) ( 12,821 )

Net cash used in financing activities ( 149,009 ) ( 239,493 )

Proceeds from the exercise of stock options 4,160 5,504

Net cash provided by financing activities 56,473 7,440

Net change in cash and cash equivalents 15,478 ( 9,990 )

8 unchanged sentences

Dividends declared but not paid $ 14,147 $ 14,985

Investment in property, equipment and intangible assets acquired in accounts payable and accrued liabilities $ 8,064 $ 5,352

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

Investments in property, equipment, and intangible assets recognized in accounts payable and accrued expense liabilities $ 14,020 $ 6,704

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

11 unchanged sentences

Net income — — — — — 52,820 52,820

Other comprehensive income (loss), net of tax — — — ( 134 ) — — ( 134 )

Share-based payment activity (1)

262,008 — 6,068 — 3,486 4 9,558

Dividends declared ($ 0.2375 per share)

— — — — — ( 13,250 ) ( 13,250 )

Treasury purchases ( 100,912 ) — — — ( 14,802 ) — ( 14,802 )

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

Net income — — — — — 106,168 106,168

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

Other comprehensive income, net of tax — — — 394 — — 394

Share-based payment activity (1)

3 unchanged sentences

Treasury purchases (2)

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

Net income — — — — — 103,080 103,080

Other comprehensive income (loss), net of tax — — — ( 902 ) — — ( 902 )

Share-based payment activity (1)

( 1,341,520 ) — — — ( 161,553 ) — ( 161,553 )

Dividends declared ($ 0.2375 per share)

— — — — — ( 12,767 ) ( 12,767 )

Treasury purchases ( 2,005,000 ) — — — ( 231,388 ) — ( 231,388 )

Balance as of September 30, 2022 53,773,667 $ 951 $ 284,092 $ ( 5,713 ) $ ( 1,507,423 ) $ 1,512,604 $ 284,511

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

Outstanding Common

7 unchanged sentences

Net income — — — — — 31,009 31,009

Other comprehensive income (loss), net of tax — — — 394 — — 394

Other comprehensive income, net of tax — — — 454 — — 454

Share-based payment activity (1)

5 unchanged sentences

Balance as of March 31, 2024 49,284,204 $ 951 $ 335,612 $ ( 5,217 ) $ ( 2,097,840 ) $ 1,773,221 $ 6,727

Net income — — — — — 84,710 84,710

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

Share-based payment activity (1)

10,508 — 11,336 — 579 — 11,915

Dividends declared ($ 0.2875 per share)

— — — — — ( 14,540 ) ( 14,540 )

Treasury purchases (2)

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

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

Net income — — — — — 92,024 92,024

Other comprehensive income (loss), net of tax — — — ( 191 ) — — ( 191 )

Share-based payment activity (1)

22,372 — 10,502 — 403 — 10,905

Dividends declared ($ 0.2875 per share)

— — — — — ( 14,382 ) ( 14,382 )

Treasury purchases (2)

( 561,820 ) — — — ( 70,634 ) — ( 70,634 )

Balance as of September 30, 2023 50,026,433 $ 951 $ 321,790 $ ( 4,713 ) $ ( 1,987,262 ) $ 1,741,647 $ 72,413

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

(2) Beginning January 1, 2023, Treasury purchases include an excise tax as imposed by the Inflation Reduction Act of 2022.

(2) Beginning January 1, 2023, Treasury purchases include a 1% excise tax as imposed by the Inflation Reduction Act of 2022.

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

6 unchanged sentences

All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

1 unchanged sentence

Except as otherwise disclosed, all adjustments are of a normal recurring nature.

Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted.

Although we believe the disclosures made are adequate to prevent the information presented from being misleading, these financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2022 and the notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on March 1, 2023.

Interim results are not necessarily indicative of the entire year's results.

Acquisition of Radisson Hotels Americas

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

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

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

Accordingly, the assets acquired and the liabilities assumed were recorded at their fair values as of the August 11, 2022 acquisition date, with the exception of certain assets and liabilities which were accounted for in accordance with the provisions of ASU 2021-08, Business Combinations (Topic 805):

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

The Company finalized the purchase price allocation for the Transaction in the third quarter of 2023.

Refer to Note 14.

The Company's consolidated statements of income include Radisson Hotels Americas' results of operations in the three and nine months ended September 30, 2023, but our consolidated statements of income only partially include Radisson Hotels Americas' results of operations in the three and nine months ended September 30, 2022 because the Company did not acquire Radisson Hotels Americas until August 11, 2022.

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

Business combination, diligence and transition costs, which were previously presented in selling, general and administrative expenses, are now presented within a standalone financial statement line item in the consolidated statements of income.

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

Certain information and footnote disclosures normally included in the consolidated financial statements presented in accordance with GAAP have been omitted.

Although the Company believes the disclosures made are adequate to prevent the information presented from being misleading, these consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023 and the notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 20, 2024.

The interim results are not necessarily indicative of the entire year's results.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are detailed in the “Summary of Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2022.

Recently Adopted Accounting Standards

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

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

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

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

The Company’s significant accounting policies are included in the “Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Improvements to Reportable Segment Disclosures ("ASU 2023-07").

ASU 2023-07 requires public entities to disclose significant segment expenses by reportable segment if they are regularly provided to the CODM and included in each reported measure of segment profit or loss on both an annual and an interim basis.

ASU 2023-07 is effective for the annual reporting period beginning after December 15, 2023 and the interim periods within the annual reporting period beginning after December 15, 2024.

The Company is currently evaluating the potential impact that ASU 2023-07 will have on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures ("ASU 2023-09").

ASU 2023-09 is designed to provide additional information to financial statement users in regards to how an entity's operations, risks, and planning affect its tax rate, opportunities, and future cash flows.

ASU 2023-09 is effective for the annual reporting period beginning after December 15, 2024.

Based on the Company's assessment, the adoption of this standard is not expected to have an impact on the Company's consolidated financial statements, but it will require enhanced income tax disclosures in the notes to the consolidated financial statements.

Contract Liabilities

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

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

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

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

Loyalty points are typically redeemed within three years of issuance.

The following table summarizes the significant changes in the contract liabilities balances during the period from December 31, 2022 to September 30, 2023:

The following table summarizes the significant changes in the contract liabilities balances during the period from December 31, 2023 to March 31, 2024:

(in thousands)

2 unchanged sentences

Revenue recognized in the period ( 26,273 )

Balance as of September 30, 2023 $ 215,189

Balance as of March 31, 2024 $ 209,805

Remaining Performance Obligations

The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $ 215.2 million as of September 30, 2023.

The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $ 209.8 million as of March 31, 2024.

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

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

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

Disaggregation of Revenue

The following table presents the Company's revenues by over time and point in time recognition:

Three Months Ended Three Months Ended

September 30, 2023 September 30, 2022

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

Royalty, licensing and management fees $ 145,830 $ 2,682 $ 148,512 $ 143,987 $ 33 $ 144,020

Initial franchise fees 6,194 — 6,194 7,011 — 7,011

Platform and procurement services fees 14,874 668 15,542 13,628 773 14,401

Owned hotels 19,497 6,742 26,239 14,877 5,115 19,992

Other 11,436 — 11,436 31,432 — 31,432

Other revenues from franchised and managed properties 200,399 17,235 217,634 178,349 19,061 197,410

Total revenues $ 398,230 $ 27,327 $ 425,557 $ 389,284 $ 24,982 $ 414,266

Nine Months Ended Nine Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

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

8 unchanged sentences

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

During the three and nine months ended September 30, 2022, Other revenues included contract termination fee revenue of $ 22.7 million from the exit of 110 WoodSpring units in September 2022.

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

As presented in Note 11, the Corporate & Other segment revenue amounts are $ 33.8 million and $ 29.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 86.5 million and $ 63.4 million for the nine months ended September 30, 2023 and 2022, respectively, and are primarily included in Other revenue and Owned hotels revenue in the consolidated statements of income.

For the three months ended March 31, 2024 and 2023, the loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $ 19.5 million and $ 15.8 million, respectively.

As presented in Note 11, the Corporate & Other segment revenue amounts were $ 35.1 million and $ 26.1 million for the three months ended March 31, 2024 and 2023, respectively, which are presented in other revenues and owned hotels revenues in the consolidated statements of income.

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

Royalty, licensing and management fees and Other revenues from franchised and managed properties are presented net of intersegment revenues of $ 4.0 million and $ 1.6 million for the three months ended September 30, 2023 and 2022, respectively, and $ 7.3 million and $ 3.7 million for the nine months ended September 30, 2023 and 2022, respectively.

Royalty, licensing and management fees and other revenues from franchised and managed properties are presented net of intersegment revenues of $ 2.5 million and $ 2.3 million for the three months ended March 31, 2024 and 2023, respectively.

Receivables and Allowance for Credit Losses

Notes Receivable

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

The Company has provided financing in the form of notes receivable loans to franchisees in order to support the development of hotel properties in strategic markets.

The Company's credit quality indicator is the level of security in the note receivable.

The following table summarizes the composition of the notes receivable balances by credit quality indicator and the allowance for credit losses:

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

(in thousands) March 31, 2024 December 31, 2023

Senior $ 87,055 $ 85,919

13 unchanged sentences

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

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

(in thousands) March 31, 2024 December 31, 2023

Beginning balance $ 8,616 $ 10,172

2 unchanged sentences

Ending balance $ 8,656 $ 8,616

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

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

As of March 31, 2024 and December 31, 2023, two and one note receivable loans, respectively, with senior credit quality indicators met the definition of collateral-dependent and are collateralized by the membership interests in the borrowing entities and either the associated land parcel or the operating hotel.

The Company used a discounted cash flow income approach or a market approach using quoted market prices to value the underlying collateral.

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

These nonrecurring fair value measurements are classified as Level 3 in the fair value measurement hierarchy because they are unobservable inputs which are significant to the overall fair value.

Based on the Company's analysis, the fair value of the collateral secures substantially all of the carrying value of the loan.

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

Recoveries during the nine months ended September 30, 2023 were primarily associated with cash collections pursuant to a settlement agreement with a borrower.

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

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

The Company suspends the accrual of interest when payments on loans are more than 30 days past due or upon a loan being classified as collateral-dependent.

The Company applies the payments received for loans on a non-accrual status first to interest and then to principal.

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

The amortized cost basis of the notes receivable in a non-accrual status was $ 16.5 million and $ 18.7 million as of September 30, 2023 and December 31, 2022, respectively.

The Company has notes receivable loans totaling approximately $ 4.4 million and $ 4.8 million as of September 30, 2023 and December 31, 2022, respectively, with stated interest rates that are lower than market interest rates, representing a total unamortized discount of less than $ 0.1 million as of both September 30, 2023 and December 31, 2022.

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

Based on the Company's analysis, the fair value of the collateral secures substantially all of the carrying value of the respective note receivable loan.

The allowance for credit losses attributable to the collateral-dependent note receivable loans was $ 3.2 million and $ 2.2 million as of March 31, 2024 and December 31, 2023, respectively.

During the three months ended March 31, 2024 and during the year ended December 31, 2023, the recoveries were primarily associated with cash collections pursuant to a settlement agreement with a borrower.

The following table summarizes the past due balances by credit quality indicator of the notes receivable:

5 unchanged sentences

Notes Receivable

As of September 30, 2023

As of March 31, 2024

Senior $ — $ — $ 15,200 $ 15,200 $ 71,855 $ 87,055

7 unchanged sentences

$ — $ 2,936 $ 15,600 $ 18,536 $ 89,746 $ 108,282

Variable Interest through Notes Issued

The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $ 98.4 million and $ 103.2 million as of September 30, 2023 and December 31, 2022, respectively.

The amortized cost basis of the notes receivable in a non-accrual status was $ 31.1 million and $ 15.9 million as of March 31, 2024 and December 31, 2023, respectively.

Variable Interest through Notes Receivable

The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $ 94.8 million and $ 95.1 million as of March 31, 2024 and December 31, 2023, respectively.

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

For collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the respective note receivable and the limited commitments which are addressed in Note 12.

Accounts Receivable

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

During the nine months ended September 30, 2023, the Company recognized provisions for credit losses on accounts receivable of $ 4.2 million in selling, general and administrative ("SG&A") expenses and $ 4.0 million in other expenses from franchised and managed properties.

During the nine months ended September 30, 2022, the Company recognized a reversal of provisions for credit losses on accounts receivable of $ 0.4 million in SG&A expenses and provisions for credit losses on accounts receivable of $ 0.5 million in other expenses from franchised and managed properties.

During the nine months ended September 30, 2023 and 2022, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 2.8 million and $ 12.9 million, respectively.

During the three months ended March 31, 2024, the Company recognized provisions for credit losses on accounts receivable of $ 1.1 million in selling, general and administrative expenses, and $ 1.6 million in other expenses from franchised and managed properties, in the consolidated statements of income.

During the three months ended March 31, 2023, the Company recognized provisions for credit losses on accounts receivable of $ 1.8 million in selling, general and administrative expenses, and $ 2.1 million in other expenses from franchised and managed properties, in the consolidated statements of income.

During the three months ended March 31, 2024 and 2023, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 1.5 million and $ 2.8 million, respectively.

Investments in Affiliates

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

As of September 30, 2023 and December 31, 2022, the Company had total investments in affiliates in the consolidated balance sheets of $ 55.1 million and $ 30.6 million, respectively, which included investments in affiliates that represent VIEs of $ 45.3 million and $ 24.4 million, respectively.

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

During the three months ended September 30, 2023 and 2022, the Company recognized losses totaling $ 0.9 million and $ 1.1 million, respectively, from these investments that represent VIEs.

During the nine months ended September 30, 2023 and 2022, the Company recognized losses totaling $ 3.2 million and $ 2.7 million, respectively, from these investments that represent VIEs.

The Company's maximum exposure to losses related to its investments in the VIEs is limited to the total of its respective equity investment as well as certain limited payment guaranties, which are described in Note 12 of these consolidated financial statements.

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

Debt consists of the following:

September 30, 2023 December 31, 2022

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

As of March 31, 2024 and December 31, 2023, the Company had total investments in affiliates in the consolidated balance sheets of $ 78.8 million and $ 70.6 million, respectively, which included investments in affiliates that represent VIEs of $ 67.8 million and $ 59.4 million, respectively.

During the three months ended March 31, 2024 and 2023, the Company recognized losses totaling $ 1.2 million and $ 1.4 million, respectively, from these investments that represent VIEs.

During the three months ended March 31, 2024 and 2023, t he Company recognized no impairment charges related to its equity method investments.

Debt consisted of the following:

March 31, 2024 December 31, 2023

(in thousands)

$ 450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 4.5 million and $ 4.9 million at September 30, 2023 and December 31, 2022, respectively

$ 500 million unsecured term loan due 2024 ("2023 Term Loan") with an effective interest rate of 6.79 %, less a discount and deferred issuance costs of $ 0.5 million and $ 0.7 million at March 31, 2024 and December 31, 2023, respectively (1)

$ 499,471 $ 499,268

$ 400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 3.7 million and $ 4.2 million at September 30, 2023 and December 31, 2022, respectively

$ 450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 4.2 million and $ 4.3 million at March 31, 2024 and December 31, 2023, respectively

445,842 445,690

$ 850 million senior unsecured revolving credit facility with an effective interest rate of 6.40 % less deferred issuance costs of $ 2.1 million and $ 1.8 million at September 30, 2023 and December 31, 2022, respectively (1)

$ 400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 3.4 million and $ 3.6 million at March 31, 2024 and December 31, 2023, respectively

396,590 396,440

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

$ 850 million senior unsecured revolving credit facility with an effective interest rate of 6.48 %, less deferred issuance costs of $ 1.7 million and $ 1.9 million at March 31, 2024 and December 31, 2023, respectively

353,298 226,621

Less current portion

$ 1,695,201 $ 1,568,019

current portion (1)

499,471 499,268

Long-term debt $ 1,195,730 $ 1,068,751

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

The 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 ("LIBOR") to an adjusted Secured Overnight Financing Rate ("SOFR").

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.

(1) The 2023 Term Loan has a maturity date of December 16, 2024.

The maturity date may be extended for a one-year term at the Company's option, subject to the consent of the lenders and certain customary conditions.

Refer to Note 12 and the Liquidity and Capital Resources section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2023 and 2022 were as follows:

The changes in accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2024 and 2023 were as follows:

(in thousands)

Balance as of December 31, 2023 $ ( 5,671 )

Other comprehensive income (loss) before reclassification 498

Balance as of September 30, 2023 $ ( 4,713 )

Other comprehensive income before reclassification 454

Balance as of March 31, 2024 $ ( 5,217 )

(in thousands)

Balance as of December 31, 2022 $ ( 5,211 )

Other comprehensive income (loss) before reclassification ( 1,139 )

Balance as of September 30, 2022 $ ( 5,713 )

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

Other comprehensive income before reclassification 394

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

Other comprehensive income, net of tax, for both the three months ended March 31, 2024 and 2023 relates entirely to foreign currency items, and there were no amounts reclassified from accumulated other comprehensive loss during either period.

Fair Value Measurements

1 unchanged sentence

The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs on a recurring basis.

Quoted prices in active markets for identical assets and liabilities.

The Company’s Level 1 assets consist of marketable securities (primarily mutual funds) held in the Company's Deferred Compensation Plan.

Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable.

Level 1 - Quoted prices in active markets for identical assets and liabilities.

The Company’s Level 1 assets consist of equity securities and mutual funds held in the Company's Deferred Compensation Plan.

Level 2 - Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable.

The Company’s Level 2 assets consist of money market funds held in the Company's Deferred Compensation Plan.

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

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

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

Level 3 - Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument.

The Company does not currently have any assets recorded at fair value on a recurring basis whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the three months ended March 31, 2024 and during the year ended December 31, 2023.

T he Company recognized the following assets at fair value on a recurring basis in the consolidated balance sheets:

Fair Value Measurements at Reporting Date Using

(in thousands) Total Level 1 Level 2 Level 3

As of September 30, 2023

As of March 31, 2024

Equity securities $ 109,861 $ 109,861 $ — $ —

Mutual funds (1)

4 unchanged sentences

As of December 31, 2023

Equity securities $ 116,374 $ 116,374 $ — $ —

Mutual funds (1)

3 unchanged sentences

Total $ 157,951 $ 153,184 $ 4,767 $ —

(1) The current assets at fair value noted above are presented in Prepaid expenses and other assets, and the long-term assets at fair value noted above are presented in Investments for employee benefit plans, at fair value, in the consolidated balance sheets.

(1) The current assets at fair value noted above are presented in prepaid expenses and other current assets in the consolidated balance sheets.

The long-term assets at fair value noted above are presented in investments for employee benefit plans, at fair value in the consolidated balance sheets.

Investments in Equity Securities

The following table is a summary of the unrealized gains and losses of the investments in equity securities:

As of March 31, 2024 As of December 31, 2023

(in thousands) Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

Equity securities $ 111,190 $ — $ ( 1,329 ) $ 109,861 $ 112,420 $ 3,954 $ — $ 116,374

Other Financial Instruments Disclosure

The Company believes that the fair values of its current assets and current liabilities approximate their reported carrying amounts due to the short-term nature of these items.

In addition, the interest rate on the senior unsecured revolving credit facility adjusts frequently based on current market interest rates;

accordingly, the Company believes the carrying amount approximates fair value.

In addition, the interest rate on the senior unsecured revolving credit facility and the 2023 Term Loan adjusts frequently based on current market interest rates;

therefore, the Company believes the carrying amount approximates the fair value.

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

Refer to Note 5 for further information on debt.

As of September 30, 2023 and December 31, 2022, the carrying amounts and the fair values were as follows:

September 30, 2023 December 31, 2022

Refer to Note 5 for additional information on debt.

As of March 31, 2024 and December 31, 2023, the carrying amounts and the fair values were as follows:

March 31, 2024 December 31, 2023

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

3 unchanged sentences

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

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

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

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

The Company's effective income tax rates were 22.9 % and 21.7 % for the three months ended March 31, 2024 and 2023, respectively.

The effective income tax rates were higher than the U.S.

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

Share-Based Compensation and Capital Stock

The components of the Company’s share-based compensation expense for the three and nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Share-Based Compensation

The components of the Company’s share-based compensation expense were as follows:

Three Months Ended March 31,

(in thousands) 2024 2023

Stock options $ 1,346 $ 1,388

Restricted stock awards 3,305 3,763 10,362 10,364

Restricted stock 3,477 3,699

Performance vested restricted stock units 4,271 4,684

Total share-based compensation expense $ 9,094 $ 9,771

A summary of the share-based award activity during the nine months ended September 30, 2023 is presented below:

A summary of the share-based award activity during the three months ended March 31, 2024 is presented below:

Stock Options Restricted Stock Performance Vested

2 unchanged sentences

Price Weighted

Term Shares Weighted

Life Shares Weighted

Fair Value Shares Weighted

Outstanding at January 1, 2023 1,010,647 $ 94.97 399,099 $ 128.47 437,180 $ 140.05

Outstanding as of January 1, 2024 943,641 $ 102.90 361,668 $ 136.05 458,495 $ 136.14

Granted 78,988 111.94 49,333 111.94 143,312 111.94

Performance-based leveraging (1)

— — — — 64,717 138.51

Exercised/vested ( 87,240 ) 71.74 ( 37,307 ) 105.52 ( 146,675 ) 107.54

1 unchanged sentence

Forfeited ( 440 ) 123.71 ( 2,433 ) 119.50 ( 10,940 ) 115.62

Outstanding at September 30, 2023 964,164 $ 102.30 5.9 367,394 $ 135.87 479,567 $ 136.11

Stock options exercisable at September 30, 2023 581,426 $ 90.42 4.4

(1) Any revisions to the outstanding PVRSUs during the nine months ended September 30, 2023 is based on the Company's performance relative to the targeted performance conditions in the respective PVRSUs.

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

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

The requisite service periods for the restricted stock and PVRSUs was between 9 months and 48 months.

PVRSU awards have vesting ranges between 0 % and 230 % of the initial units granted.

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

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

Outstanding as of March 31, 2024 934,949 $ 106.56 6.2 years 371,261 $ 135.99 444,192 $ 138.29

Options exercisable as of March 31, 2024 639,175 $ 99.47 5.2 years

(1) During the three months ended March 31, 2024, there were no revisions to the outstanding PVRSUs as a result of a change in the Company's targeted performance conditions.

The fair value of the restricted stock and the PVRSUs with performance conditions that were granted during the three months ended March 31, 2024 was equal to the market price of the Company’s common stock on the date of the grant.

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

The requisite service periods for the restricted stock and the PVRSUs was between 9 months and 48 months.

The PVRSUs have vesting ranges generally between 0 % and 230 % of the initial units granted.

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

The fair value of the stock options granted during the three months ended March 31, 2024 was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate 4.27 %

6 unchanged sentences

Earnings Per Share

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

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

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

The calculation of EPS for the net income available to common shareholders excludes the distribution of dividends and the undistributed earnings attributable to the participating securities from the numerator.

The diluted earnings weighted average shares of common stock outstanding includes stock options, PVRSUs and RSUs.

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

Three Months Ended Nine Months Ended

September 30, September 30,

The calculation of earnings per share for the net income available to common shareholders excludes the distribution of dividends and the undistributed earnings attributable to the participating securities from the numerator.

The diluted earnings per share includes stock options, PVRSUs, and RSUs in the calculation of the weighted average shares of common stock outstanding.

The computation of basic and diluted earnings per share was as follows:

Three Months Ended

(in thousands, except per share amounts) 2024 2023

12 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(in thousands) 2024 2023

Stock options 231 240

PVRSUs — 75 — 75

Reportable Segment Information

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

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

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

Reportable Segments

The Hotel Franchising & Management reportable segment includes the Company's hotel franchising operations, which consists of its 22 brands and brand extensions and the hotel management operations of 13 hotels (inclusive of four owned hotels).

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

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

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

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

The cost reimbursement revenues received from the franchisees are included in Hotel Franchising & Management revenues and are offset by the related expenses in order to calculate Hotel Franchising & Management operating income.

The equity in the earnings or losses from the hotel franchising-related investment in affiliates is allocated to the Hotel Franchising & Management reportable segment.

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

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

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

The Corporate & Other column also reflects the operations of the Company's owned hotels.

Intersegment Eliminations to revenues is the elimination of Hotel Franchising & Management revenue which includes royalty fees, management and cost reimbursement fees charged to our owned hotels against the franchise and management fee expense that is recognized by our owned hotels in Corporate & Other operating income (loss).

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

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

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

Three Months Ended September 30, 2023 Three Months Ended September 30, 2022

(in thousands) Hotel

Franchising & Management Corporate &

Other Intersegment Eliminations Consolidated Hotel

Franchising & Management Corporate &

Other Intersegment Eliminations Consolidated

Revenues $ 395,742 $ 33,832 $ ( 4,017 ) $ 425,557 $ 386,124 $ 29,692 $ ( 1,550 ) $ 414,266

Operating income (loss) $ 167,459 $ ( 32,417 ) $ — $ 135,042 $ 161,084 $ ( 16,066 ) $ — $ 145,018

Income (loss) before income taxes $ 169,260 $ ( 48,031 ) $ — $ 121,229 $ 162,162 $ ( 25,386 ) $ — $ 136,776

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

(in thousands) Hotel

8 unchanged sentences

The Company is not a party to any litigation other than litigation in the ordinary course of business.

The Company's management and legal counsel do not expect that the ultimate outcome of any of its currently ongoing legal proceedings, individually or collectively, will have a material adverse effect on the Company's financial position, results of operations or cash flows.

The Company's management and legal counsel do not expect that the ultimate outcome of any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company's financial position, results of operations, or cash flows.

Contingencies

1 unchanged sentence

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

As of September 30, 2023, the maximum unrecorded exposure of principal incidental to these limited payment guaranties is $ 4.5 million, plus unpaid expenses and accrued unpaid interest.

As of March 31, 2024, the maximum unrecorded exposure of the principal associated with these limited payment guaranties is $ 8.8 million, plus unpaid expenses and accrued but unpaid interest.

The Company believes the likelihood of having to perform under these guaranties is remote.

In the event of performance, the Company has recourse for certain of the guaranties in the form of partial guaranties from third parties.

The Company has the following outstanding commitments as of September 30, 2023:

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

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

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

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

The Company has the following outstanding commitments as of March 31, 2024:

• As part of the acquisition of Radisson Hotels Americas in August 2022, the Company entered into a long-term management arrangement, with an expiration date of July 31, 2031, to manage eight hotels owned by a third-party.

As of March 31, 2024, the Company managed seven hotels pursuant to the long-term management arrangement.

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

1 unchanged sentence

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

Accordingly, no liability was recognized as of September 30, 2023 in the consolidated balance sheets.

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

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

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

Accordingly, no liability was recognized as of March 31, 2024 in the consolidated balance sheets.

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

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

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

As of March 31, 2024, the Company had remaining commitments of up to $ 9.0 million, if certain conditions are met.

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

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

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

5 unchanged sentences

While some of these indemnities extend only for the duration of the underlying agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal statute of limitations).

There are no specific limitations on the maximum potential amount of future payments that the Company could be required to make under these indemnities, nor is the Company able to develop an estimate of the maximum potential amount of the future payments that could be made under these indemnifications as the triggering events are not subject to predictability.

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

There are no specific limitations on the maximum potential amount of the future payments that the Company could be required to make under these indemnities, nor is the Company able to develop an estimate of the maximum potential amount of the future payments that could be made under these indemnifications as the triggering events are not subject to predictability.

Transactions with Unconsolidated Affiliates

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

The fees earned and the payroll costs reimbursed under these arrangements totaled $ 2.4 million and $ 0.8 million for the three months ended September 30, 2023 and 2022, respectively, and $ 6.1 million and $ 1.7 million for the nine months ended September 30, 2023 and 2022, respectively.

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

Pursuant to these franchise agreements, for the three months ended September 30, 2023 and 2022, the Company recognized royalty and marketing reservation system fees of approximately $ 9.4 million and $ 8.9 million, respectively.

For the nine months ended September 30, 2023 and 2022, the Company recognized royalty and marketing reservation fees of approximately $ 23.1 million and $ 19.5 million, respectively.

The Company recognized $ 5.2 million and $ 3.9 million as a receivable from these affiliates as of September 30, 2023 and December 31, 2022, respectively.

Radisson Hotels Americas Acquisition

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

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

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

In connection with the acquisition, we recognized $ 10.9 million and $ 30.6 million during the three and nine months ended September 30, 2023, respectively, and $ 24.9 million and $ 29.0 million during the three and nine months ended September 30, 2022, respectively, of transaction, transition, and severance expenses which are included within Selling, general and administrative in the consolidated statements of income.

Fair Values of the Assets Acquired and the Liabilities Assumed

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

During the fourth quarter of 2022 and the first quarter of 2023, the Company recorded certain net measurement period adjustments that reduced goodwill by $ 9.1 million and increased goodwill by $ 1.5 million, respectively, which is presented in the table below.

The Company made these measurement period adjustments to reflect the

facts and circumstances that existed as of the acquisition date and did not result from any intervening events subsequent to the acquisition date.

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

The final valuation and related allocation of the purchase price was completed in the third quarter of 2023.

The final allocation of the purchase price, including all measurement period adjustments, as presented in our consolidated balance sheets is as follows:

(in thousands) August 11, 2022 - original Measurement Period Adj - 4th quarter 2022 Measurement Period Adj - 1st quarter 2023 August 11, 2022 - as adjusted

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

Restricted cash 10,403 — — 10,403

Accounts receivable 32,972 8,752 ( 1,941 ) 39,783

Notes receivable - current 1,709 — ( 860 ) 849

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

Property and equipment 125,441 — — 125,441

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

Intangible assets 447,400 ( 300 ) — 447,100

Notes receivable - noncurrent 2,592 — — 2,592

Investment in affiliates 471 — — 471

Other assets 2,129 — — 2,129

Total assets acquired $ 786,594 $ 6,436 $ ( 2,801 ) $ 790,229

Accounts payable $ 8,295 $ ( 1,566 ) $ ( 1,941 ) $ 4,788

Accrued expenses and other current liabilities 15,987 425 674 17,086

Deferred revenue - current (1)

5,745 1,566 — 7,311

Liability for guest loyalty program - current (1)

3,542 3,792 — 7,334

Long-term debt 55,975 — — 55,975

Long-term deferred revenue (1)

26,499 ( 3,915 ) — 22,584

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

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

Liability for guest loyalty program - noncurrent (1)

10,180 ( 1,443 ) — 8,737

Other liabilities 3,052 543 — 3,595

Total liabilities assumed $ 181,245 $ ( 2,614 ) $ ( 1,267 ) $ 177,364

Fair value of net assets acquired $ 605,349 $ 9,050 $ ( 1,534 ) $ 612,865

Goodwill 68,507 ( 9,050 ) 1,534 60,991

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

(1) The Deferred revenue (including deferred affiliation fees) and Liability for guest loyalty program balances were assumed at their carrying value on the date of the acquisition pursuant to the application of ASU 2021-08.

Refer to Note 1

Property and Equipment

The following table presents the estimated fair value of the acquired property and equipment, which is primarily concentrated at three acquired hotel properties, and their estimated weighted average remaining useful lives.

Estimated Useful Life Estimated Fair Value

(in years) (in thousands)

Land N/A $ 7,159

Construction in progress N/A 3,190

Building and leasehold improvements 24.4 93,934

Site improvements 23.1 586

Furniture, fixtures and equipment 3.9 8,334

Computer equipment and software 2.0 12,238

Total property and equipment $ 125,441

We estimated the value of the property and equipment through a combination of income, cost and market approaches, which are primarily based on significant Level 2 and Level 3 assumptions, such as estimates of future income growth, discount rates, capitalization rates and capital expenditure needs of the hotel properties.

Identified Intangible Assets

The following table presents the estimated fair values of the acquired identified intangible assets and their estimated useful lives:

Estimated Useful Life Estimated Fair Value

(in years) (in thousands)

Trade names N/A $ 223,700

Franchise agreements 15.5 220,100

Management agreements 15.5 3,300

Total intangible assets $ 447,100

The fair value of the trade names was estimated using the relief-from-royalty method.

This method applies an estimated royalty rate to the forecasted future cash flows and discounted to the present value.

The fair value of the franchise and management agreements was estimated using a multi-period excess earnings method, which is a variation of the income approach.

This method uses the present value of the incremental after-tax cash flows attributable to the intangible asset.

These valuation methodologies utilize Level 3 assumptions.

As part of the Transaction, we assumed a mortgage loan related to an acquired hotel property.

The mortgage loan had an associated interest rate cap agreement with an effective date of July 30, 2021 through August 6, 2024.

Subsequent to the acquisition date, the mortgage loan and the outstanding interest and fees, was repaid in full in the amount of $ 56.0 million using cash we acquired in the Transaction.

Additionally, the interest rate cap agreement was terminated, which resulted in a $ 1.9 million payment to Choice.

In conjunction with assuming the mortgage loan, we acquired $ 10.4 million in restricted cash, for which the restrictions were lifted upon repayment of the mortgage loan.

Operating Leases

The Company measured the assumed operating lease liabilities at the present value of the remaining payments as of the acquisition date, which were discounted using Choice's applicable incremental borrowing rate in accordance with Leases (Topic 842) .

The corresponding acquired right-of-use assets were measured at the value of the operating lease liabilities, and then further adjusted for favorable or unfavorable lease terms as compared to market lease terms.

Pursuant to the terms of the Transaction, the parties agree to jointly make a valid, timely election under Section 338(h)(10) of the U.S.

Internal Revenue Code and under any similar provisions of state or local law with respect to the purchase of the shares of Radisson Hotels Americas.

Under this election, the parties agreed to treat the Transaction for federal income tax purposes as if it had been structured as an asset sale and purchase.

As a result of this election, the tax basis of the assets acquired and the liabilities assumed by Choice were reset to fair value on the date of the acquisition, which results in the elimination of any

previously established deferred income tax balances and the establishment of new balances that reflect the new tax basis, including tax deductible goodwill.

Pro Forma Results of Operations

The following unaudited pro forma information presents the combined results of operations of Choice and Radisson Hotels Americas as if the Transaction was completed on January 1, 2021, but using the fair values of the assets acquired and the liabilities assumed as of the acquisition date.

The unaudited pro forma information reflects adjustments relating to (i) the allocation of purchase price and related adjustments, including incremental depreciation and amortization expense based on the fair values of the acquired property and equipment and intangible assets, (ii) the incremental impact of the Revolver draw on interest expense and the amortization of financing costs, (iii) nonrecurring transaction costs, and (iv) the income tax impact of the aforementioned pro forma adjustments.

As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies.

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

Nine Months Ended

(in thousands) September 30, 2022

Revenues $ 1,189,792

Net income $ 304,770

Radisson Hotels Americas Results of Operations

The Company's consolidated statements of income include Radisson Hotels Americas’ results of operations since the August 11, 2022 acquisition date.

Radisson Hotels Americas contributed $ 40.2 million and $ 1.4 million in total revenues and net loss, respectively, for both the three and nine months ended September 30, 2022.

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

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

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

(in thousands)

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

Accumulated impairment losses ( 7,578 )

Goodwill arising from Radisson Hotels Americas acquisition 60,991

Goodwill, net carrying amount $ 220,187

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

The Company has a total principal balance on these loans of $ 66.8 million and $ 64.5 million as of March 31, 2024 and December 31, 2023, respectively.

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

The Company has management fee arrangements with certain of its unconsolidated affiliates.

The fees earned and the payroll costs reimbursed under these arrangements totaled $ 1.6 million and $ 0.7 million for the three months ended March 31, 2024 and 2023, respectively.

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

Pursuant to these franchise agreements, the Company recognized royalty fees and marketing and reservation system fees of approximately $ 6.3 million and $ 5.8 million for the three months ended March 31, 2024 and 2023, respectively.

The Company has $ 6.7 million and $ 4.9 million of gross accounts receivables in the consolidated balance sheets from these unconsolidated affiliates as of March 31, 2024 and December 31, 2023, respectively.

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

What changed 10-Q

Item 1. Financial Statements