What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-05-08 · 155 added, 88 removed, 429 unchanged (36% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2024 2023 2024 2023

Royalty, licensing and management fees $ 141,813 $ 140,499 $ 247,280 $ 247,991

18 unchanged sentences

Other loss (gain) 2,544 ( 2,187 ) 3,880 ( 4,095 )

Equity in net loss of affiliates 155 63

Equity in net gain of affiliates ( 7,933 ) ( 185 ) ( 7,778 ) ( 122 )

Total other expenses and income, net 16,041 11,842 35,982 22,198

9 unchanged sentences

(IN THOUSANDS)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2024 2023 2024 2023

Net income $ 87,136 $ 84,710 $ 118,145 $ 137,530

1 unchanged sentence

Foreign currency translation adjustment ( 694 ) 295 ( 240 ) 689

Other comprehensive income, net of tax 454 394

Other comprehensive (loss) income, net of tax ( 694 ) 295 ( 240 ) 689

Comprehensive income $ 86,442 $ 85,005 $ 117,905 $ 138,219

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Current assets

2 unchanged sentences

235,384 195,896

Investments in equity securities, at fair value 90,446 —

Income taxes receivable 9,695 14,283

17 unchanged sentences

Total assets $ 2,518,907 $ 2,394,799

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY

Current liabilities

3 unchanged sentences

Current portion of long-term debt — 499,268

Liability for guest loyalty programs 98,577 94,574

Liability for guest loyalty program 98,493 94,574

Total current liabilities 452,090 942,690

4 unchanged sentences

Operating lease liabilities 110,266 109,483

Liability for guest loyalty programs 45,292 43,266

Liability for guest loyalty program 44,394 43,266

Other liabilities 7,665 7,252

3 unchanged sentences

160,000,000 shares authorized;

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

95,065,638 shares issued at June 30, 2024 and December 31, 2023;

47,350,867 and 49,526,245 shares outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in-capital 344,173 330,750

1 unchanged sentence

Treasury stock, at cost;

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

47,714,771 and 45,539,393 shares at June 30, 2024 and December 31, 2023, respectively

( 2,332,736 ) ( 2,046,791 )

Retained earnings 1,846,744 1,756,359

Total shareholders’ equity 6,727 35,598

Total liabilities and shareholders’ equity $ 2,475,078 $ 2,394,799

Total shareholders’ (deficit) equity ( 146,779 ) 35,598

Total liabilities and shareholders’ (deficit) equity $ 2,518,907 $ 2,394,799

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

2 unchanged sentences

(IN THOUSANDS)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

5 unchanged sentences

Non-cash share-based compensation and other charges 19,253 23,689

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

Non-cash interest, investments, and affiliate income, net ( 1,791 ) ( 3,098 )

Deferred income taxes ( 2,689 ) 2,157

7 unchanged sentences

Contributions to investments in affiliates ( 19,486 ) ( 15,328 )

Proceeds from the sale of affiliates — 868

Distributions from sales of affiliates 15,850 868

Purchases of investments for employee benefit plans ( 2,110 ) ( 3,206 )

11 unchanged sentences

Proceeds from the exercise of stock options 4,261 5,616

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

Net cash used in financing activities ( 18,564 ) ( 72,128 )

Net change in cash and cash equivalents 32,999 ( 5,539 )

30 unchanged sentences

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

Net income — — — — — 84,710 84,710

Other comprehensive income, 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

Outstanding Common

15 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 — — — — — 87,136 87,136

Other comprehensive income, net of tax — — — ( 694 ) — — ( 694 )

Share-based payment activity (1)

17,095 — 8,561 — 685 — 9,246

Dividends declared ($ 0.2875 per share)

— — — — — ( 13,613 ) ( 13,613 )

Treasury purchases (2)

( 1,950,432 ) — — — ( 235,581 ) — ( 235,581 )

Balance as of June 30, 2024 47,350,867 $ 951 $ 344,173 $ ( 5,911 ) $ ( 2,332,736 ) $ 1,846,744 $ ( 146,779 )

(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.

22 unchanged sentences

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 requires public entities to disclose significant segment expenses by reportable segment if they are regularly provided to the chief operating decision maker 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.

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 segment disclosures in the notes to the 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 designed to provide additional information to financial statement users in regard 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.

4 unchanged sentences

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, 2023 to March 31, 2024:

The following table summarizes the significant changes in the contract liabilities balances during the period from December 31, 2023 to June 30, 2024:

(in thousands)

2 unchanged sentences

Revenue recognized in the period ( 58,624 )

Balance as of March 31, 2024 $ 209,805

Balance as of June 30, 2024 $ 211,494

Remaining Performance Obligations

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.

The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $ 211.5 million as of June 30, 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.

3 unchanged sentences

Three Months Ended Three Months Ended

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

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

6 unchanged sentences

Total revenues $ 391,610 $ 43,546 $ 435,156 $ 391,971 $ 35,449 $ 427,420

Six Months Ended Six Months Ended

June 30, 2024 June 30, 2023

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

Royalty, licensing and management fees $ 241,566 $ 5,714 $ 247,280 $ 243,502 $ 4,489 $ 247,991

Initial franchise fees 13,267 — 13,267 15,046 — 15,046

Platform and procurement services fees 40,558 1,324 41,882 41,237 1,407 42,644

Owned hotels 39,251 14,158 53,409 36,047 11,789 47,836

Other 31,394 — 31,394 21,775 — 21,775

Other revenues from franchised and managed properties 331,083 48,790 379,873 345,934 38,986 384,920

Total revenues $ 697,119 $ 69,986 $ 767,105 $ 703,541 $ 56,671 $ 760,212

The owned hotels revenues that are recognized at a point in time represent the goods and services that are purchased independently of the hotel stay, such as food and beverage, incidentals, and parking fees.

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.

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 loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $ 36.3 million and $ 29.1 million for the three months ended June 30, 2024 and 2023, respectively, and $ 55.8 million and $ 44.9 million for the six months ended June 30, 2024 and 2023, respectively.

As presented in Note 11, the Corporate & Other segment revenue amounts were $ 24.2 million and $ 26.6 million for the three months ended June 30, 2024 and 2023, respectively, and $ 59.3 million and $ 52.6 million for the six months ended June 30, 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 $ 2.5 million and $ 2.3 million for the three months ended March 31, 2024 and 2023, respectively.

Royalty, licensing and management fees and other revenues from franchised and managed properties are presented net of intersegment revenues of $ 3.1 million and $ 1.0 million for the three months ended June 30, 2024 and 2023, respectively, and $ 5.6 million and $ 3.3 million for the six months ended June 30, 2024 and 2023, respectively .

Receivables and Allowance for Credit Losses

3 unchanged sentences

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

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

(in thousands) June 30, 2024 December 31, 2023

Senior $ 87,199 $ 85,919

13 unchanged sentences

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

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

(in thousands) June 30, 2024 December 31, 2023

Beginning balance $ 8,616 $ 10,172

2 unchanged sentences

Ending balance $ 8,001 $ 8,616

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.

As of June 30, 2024 and December 31, 2023, one note receivable loan with a senior credit quality indicator met the definition of collateral-dependent and is collateralized by the membership interests in the borrowing entities and the associated land parcel.

The Company used a market approach that uses 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.

1 unchanged sentence

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 allowance for credit losses attributable to the collateral-dependent note receivable loan was $ 2.2 million as of June 30, 2024 and December 31, 2023.

During the six months ended June 30, 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 March 31, 2024

As of June 30, 2024

Senior $ — $ — $ 15,200 $ 15,200 $ 71,999 $ 87,199

7 unchanged sentences

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

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.

The amortized cost basis of the notes receivable in a non-accrual status was $ 15.2 million and $ 15.9 million as of June 30, 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 issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $ 95.1 million as of June 30, 2024 and December 31, 2023.

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

2 unchanged sentences

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

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.

During the six months ended June 30, 2024, the Company recognized provisions for credit losses on accounts receivable of $ 6.9 million in selling, general and administrative expenses, and $ 6.4 million in other expenses from franchised and managed properties, in the consolidated statements of income.

During the six months ended June 30, 2023, the Company recognized provisions for credit losses on accounts receivable of $ 2.9 million in selling, general and administrative expenses, and $ 3.4 million in other expenses from franchised and managed properties, in the consolidated statements of income.

During the six months ended June 30, 2024 and 2023, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 7.2 million and $ 5.3 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 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.

As of June 30, 2024 and December 31, 2023, the Company had total investments in affiliates in the consolidated balance sheets of $ 80.6 million and $ 70.6 million, respectively, which included investments in affiliates that represent VIEs of $ 69.1 million and $ 59.4 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 of accounting.

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 June 30, 2024 and 2023, the Company recognized gains totaling $ 6.8 million and losses totaling $ 0.9 million, respectively, from these investments that represent VIEs.

During the six months ended June 30, 2024 and 2023, the Company recognized gains totaling $ 5.6 million and losses totaling $ 2.3 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 to these consolidated financial statements.

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

On May 24, 2024, one of the Company's unconsolidated affiliates sold its underlying assets.

The Company received a distribution from the unconsolidated affiliate and recognized a gain of $ 7.2 million, which was recognized in equity in net gain of affiliates in the consolidated statements of income for the period.

During the three and six months ended June 30, 2024 and 2023, the Company recognized no impairment charges related to its equity method investments.

Debt consisted of the following:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

$ 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)

$ 500 million unsecured term loan due 2024 ("2023 Term Loan") with an effective interest rate of 6.82 %, less a discount and deferred issuance costs of $ 0.3 million and $ 0.7 million at June 30, 2024 and December 31, 2023, respectively (1)

$ 499,669 $ 499,268

$ 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

$ 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 $ 4.0 million and $ 4.3 million at June 30, 2024 and December 31, 2023, respectively

445,995 445,690

$ 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

$ 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 $ 3.3 million and $ 3.6 million at June 30, 2024 and December 31, 2023, respectively

396,741 396,440

$ 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

$ 1 billion senior unsecured revolving credit facility with an effective interest rate of 6.71 %, less deferred issuance costs of $ 4.0 million and $ 1.9 million at June 30, 2024 and December 31, 2023, respectively

526,020 226,621

1 unchanged sentence

current portion (1)

499,471 499,268

Long-term debt $ 1,868,425 $ 1,068,751

(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.

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

As discussed in Note 14, the Company used the proceeds from the issuance of the 2024 Senior Notes (as defined below) to repay the 2023 Term Loan on July 2, 2024.

Based on the 2023 Term Loan being repaid from the proceeds of the 2024 Senior Notes shortly after the end of the period, the 2023 Term Loan has been classified as a long-term liability at June 30, 2024.

Senior Unsecured Revolving Credit Facility

On June 28, 2024, the Company entered into a Second Amended and Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"), which amended and restated the Company's existing amended and restated senior unsecured credit agreement dated August 20, 2018 (the "Former Credit Agreement").

The Former Credit Agreement provided for an $ 850 million unsecured revolving credit facility (the "Revolver") with a final maturity date of August 20, 2026.

The Restated Credit Agreement increased the commitments under the Revolver to $ 1 billion and extended the final maturity date of the Revolver to June 28, 2029, subject to optional one-year extensions that can be requested by the Company prior to each of the third, fourth, and fifth anniversaries of the closing date of the Restated Credit Agreement.

The effectiveness of such extension is 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 $ 50 million of borrowings under the Revolver may be used for alternative currency loans, up to $ 10 million of capacity under the Revolver may be used for the issuance of letters of credit, and up to $ 25 million of borrowings under the Revolver 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.

At any time prior to the final maturity date, the Company may increase the amount of the Revolver or add one or more term loan facilities under the Restated Credit Agreement by up to an additional $ 500 million in the aggregate to the extent that any one or more lenders commit to being a lender for the additional amount of such increase or the term loan facility and certain other customary conditions are met.

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 three months ended March 31, 2024 and 2023 were as follows:

The changes in accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2024 and 2023 were as follows:

(in thousands)

1 unchanged sentence

Other comprehensive income before reclassification ( 240 )

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

Balance as of June 30, 2024 $ ( 5,911 )

(in thousands)

1 unchanged sentence

Other comprehensive income before reclassification 689

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.

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

Other comprehensive income, net of tax, for both the six months ended June 30, 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

6 unchanged sentences

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:

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 six months ended June 30, 2024 and during the year ended December 31, 2023.

The 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 March 31, 2024

As of June 30, 2024

Equity securities $ 90,446 $ 90,446 $ — $ —

15 unchanged sentences

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

As of June 30, 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

6 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, the carrying amounts and the fair values were as follows:

June 30, 2024 December 31, 2023

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

1 unchanged sentence

2019 Senior Notes $ 396,741 $ 359,560 $ 396,440 $ 355,068

The fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment.

The fair value estimates are determined at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment.

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

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.

The Company's effective income tax rates were 25.3 % and 24.7 % for the three months ended June 30, 2024 and 2023, respectively.

The Company's effective income tax rates were 24.6 % and 23.6 % for the six months ended June 30, 2024 and 2023, respectively.

The effective income tax rates for the three and six months ended June 30, 2024 and 2023 were higher than the U.S.

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

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands) 2024 2023 2024

3 unchanged sentences

Total share-based compensation expense $ 9,277 $ 12,206 $ 18,371 $ 21,977

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

A summary of the share-based award activity during the six months ended June 30, 2024 is presented below:

Stock Options Restricted Stock Performance Vested

7 unchanged sentences

Performance-based leveraging (1)

— — — — ( 3,772 ) 129.01

Exercised/vested ( 88,483 ) 71.87 ( 52,538 ) 108.91 ( 146,675 ) 107.54

1 unchanged sentence

Forfeited ( 440 ) 123.71 ( 5,494 ) 120.32 ( 6,721 ) 130.04

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.

Outstanding as of June 30, 2024 933,706 $ 106.60 6.0 years 365,610 $ 136.37 438,527 $ 138.42

Options exercisable as of June 30, 2024 637,932 $ 99.51 4.9 years

(1) Any revisions to the outstanding PVRSUs during the six months ended June 30, 2024 is based on the Company's performance relative to the targeted performance conditions in the respective PVRSUs.

The fair value of the restricted stock and the PVRSUs with performance conditions that were granted during the six months ended June 30, 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.

1 unchanged sentence

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:

The stock options granted by the Company had an exercise price that was 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 six months ended June 30, 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 %

11 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(in thousands, except per share amounts) 2024 2023 2024 2023

11 unchanged sentences

Diluted earnings per share $ 1.80 $ 1.65 $ 2.41 $ 2.66

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

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

Three Months Ended Six Months Ended

June 30, June 30,

(in thousands) 2024 2023 2024 2023

Stock options 248 235 231 235

PVRSUs 49 — 49 —

Reportable Segments

9 unchanged sentences

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 March 31, 2024 Three Months Ended March 31, 2023

The following tables present the financial information for the Company's segments:

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

(in thousands) Hotel

6 unchanged sentences

Income (loss) before income taxes $ 173,177 $ ( 56,596 ) $ — $ 116,581 $ 150,116 $ ( 37,569 ) $ — $ 112,547

Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

(in thousands) Hotel

Franchising & Management Corporate &

Other Intersegment Eliminations Consolidated Hotel

Franchising & Management Corporate &

Other Intersegment Eliminations Consolidated

Revenues $ 713,378 $ 59,335 $ ( 5,608 ) $ 767,105 $ 710,901 $ 52,632 $ ( 3,321 ) $ 760,212

Operating income (loss) $ 260,091 $ ( 67,320 ) $ — $ 192,771 $ 255,422 $ ( 53,182 ) $ — $ 202,240

Income (loss) before income taxes $ 267,870 $ ( 111,081 ) $ — $ 156,789 $ 255,544 $ ( 75,502 ) $ — $ 180,042

Commitments and Contingencies

4 unchanged sentences

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

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.

As of June 30, 2024, the maximum unrecorded exposure of the principal associated with these limited payment guaranties is $ 12.3 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 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.

The Company has the following outstanding commitments as of June 30, 2024:

As of June 30, 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 March 31, 2024 in the consolidated balance sheets.

Accordingly, no liability was recognized as of June 30, 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.

1 unchanged sentence

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

As of June 30, 2024, the Company had remaining commitments of up to $ 8.5 million, if certain conditions are met.

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

11 unchanged sentences

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 a total principal balance on these loans of $ 66.8 million and $ 64.5 million as of June 30, 2024 and December 31, 2023, respectively.

These loans mature at various dates and bear interest at fixed or 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 fees earned and the payroll costs reimbursed under these arrangements totaled $ 2.1 million and $ 1.9 million for the three months ended June 30, 2024 and 2023, respectively, and $ 3.8 million and $ 3.7 million for the six months ended June 30, 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.

Pursuant to these franchise agreements, the Company recognized royalty fees and marketing and reservation system fees of approximately $ 10.0 million and $ 7.8 million for the three months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024 and 2023, the Company recognized royalty fees and marketing and reservation system fees of approximately $ 16.3 million and $ 13.6 million, respectively.

The Company has recognized $ 7.5 million and $ 4.9 million of gross accounts receivables in the consolidated balance sheets from these unconsolidated affiliates as of June 30, 2024 and December 31, 2023, respectively.

Subsequent Events

On July 2, 2024, the Company closed its sale of an aggregate principal amount of $ 600 million of senior notes (the "2024 Senior Notes").

The 2024 Senior Notes bear interest at a fixed rate of 5.850 % per year and mature on August 1, 2034.

Interest on the 2024 Senior Notes is payable semi-annually on February 1 st and August 1 st of each year, commencing February 1, 2025.

The Company used the net proceeds from the 2024 Senior Notes, after deducting underwriting discounts, commissions, and

offering expenses, to repay in full the $ 500 million unsecured term loan and to repay $ 88.2 million of the outstanding borrowings under the senior unsecured revolving credit facility.

Subsequent to June 30, 2024, the Company sold 1,222,227 shares of equity securities of another issuer for $ 91.3 million and recognized a realized loss on sale of $ 3.6 million.

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