What changed in this filing

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Item 1. Financial Statements

2024-11-04 compared with 2024-08-08 · 124 added, 102 removed, 482 unchanged (32% of the section changed)

3 unchanged sentences

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

13 unchanged sentences

Total operating expenses 276,181 290,515 850,515 848,487

302,534 303,031 574,334 557,972

Operating income 151,783 135,042 344,554 337,282

2 unchanged sentences

Interest income ( 2,411 ) ( 1,897 ) ( 6,557 ) ( 5,836 )

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

Loss on extinguishment of debt 331 — 331 —

Other (gain) loss ( 4,013 ) 1,343 ( 133 ) ( 2,752 )

Equity in net gain of affiliates ( 1,310 ) ( 1,801 ) ( 9,088 ) ( 1,923 )

10 unchanged sentences

(IN THOUSANDS)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

Net income $ 105,716 $ 92,024 $ 223,861 $ 229,554

Other comprehensive income, net of tax:

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment 532 ( 191 ) 292 498

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

Other comprehensive income (loss), net of tax 532 ( 191 ) 292 498

Comprehensive income $ 106,248 $ 91,833 $ 224,153 $ 230,052

3 unchanged sentences

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets

2 unchanged sentences

210,925 195,896

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

Income taxes receivable 4,205 14,283

36 unchanged sentences

160,000,000 shares authorized;

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

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

46,959,039 and 49,526,245 shares outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in-capital 356,208 330,750

1 unchanged sentence

Treasury stock, at cost;

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

48,106,599 and 45,539,393 shares at September 30, 2024 and December 31, 2023, respectively

( 2,386,893 ) ( 2,046,791 )

6 unchanged sentences

(IN THOUSANDS)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Deferred income taxes ( 21,086 ) ( 4,315 )

Equity in net loss of affiliates, less distributions received 1,160 637

Equity in net loss (gain) of affiliates, less distributions received 56 ( 621 )

Franchise agreement acquisition costs, net of reimbursements ( 84,085 ) ( 72,867 )

2 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Investments in property and equipment ( 73,539 ) ( 45,684 )

Investments in intangible assets ( 1,702 ) ( 1,385 )

Investments in other property and equipment ( 33,620 ) ( 35,933 )

Investments in owned hotel properties ( 81,239 ) ( 45,470 )

Contributions to investments in affiliates ( 47,695 ) ( 24,573 )

Distributions from sales of affiliates 15,850 868

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

Proceeds from sales of investments for employee benefit plans 2,142 1,099

Proceeds from sales of equity securities 16,815 —

Issuances of notes receivable ( 24,405 ) ( 4,319 )

Purchases of investments for employee benefit plans ( 2,504 ) ( 3,678 )

Investments in intangible assets ( 2,133 ) ( 1,893 )

Distributions from sales of affiliates 15,850 868

Collections of notes receivable 2,277 9,923

Proceeds from sales of equity securities 108,149 —

Proceeds from sales of investments for employee benefit plans 2,182 1,263

Other items, net ( 225 ) 547

2 unchanged sentences

Net borrowings pursuant to revolving credit facilities 154,500 191,500

Proceeds from the issuance of long-term debt 593,574 —

Repayment of long-term debt ( 500,000 ) —

Debt issuance costs ( 8,069 ) ( 755 )

16 unchanged sentences

CHOICE HOTELS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

25 unchanged sentences

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 (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 ( 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

Outstanding Common

16 unchanged sentences

Net income — — — — — 87,136 87,136

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

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

Share-based payment activity (1)

5 unchanged sentences

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

Net income — — — — — 105,716 105,716

Other comprehensive income, net of tax — — — 532 — — 532

Share-based payment activity (1)

63,559 — 12,035 — 2,534 — 14,569

Dividends declared ($ 0.2875 per share)

— — — — — ( 13,499 ) ( 13,499 )

Treasury purchases (2)

( 455,387 ) — — — ( 56,691 ) — ( 56,691 )

Balance as of September 30, 2024 46,959,039 $ 951 $ 356,208 $ ( 5,379 ) $ ( 2,386,893 ) $ 1,938,961 $ ( 96,152 )

(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.

15 unchanged sentences

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

Investments in owned hotel properties and investments in other property and equipment, which were previously presented in investments in property and equipment, are now presented within standalone financial statement line items in the consolidated statements of cash flows.

The reclassification had no effect on the Company's previously reported net cash used in investing activities or the net change in cash and cash equivalents.

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

16 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 June 30, 2024:

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

(in thousands)

2 unchanged sentences

Revenue recognized in the period ( 87,924 )

Balance as of June 30, 2024 $ 211,494

Balance as of September 30, 2024 $ 214,439

Remaining Performance Obligations

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.

The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $ 214.4 million as of September 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

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

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

6 unchanged sentences

Total revenues $ 396,866 $ 31,098 $ 427,964 $ 398,230 $ 27,327 $ 425,557

Six Months Ended Six Months Ended

June 30, 2024 June 30, 2023

Nine Months Ended Nine Months Ended

September 30, 2024 September 30, 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.

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 loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $ 23.7 million and $ 20.6 million for the three months ended September 30, 2024 and 2023, respectively, and $ 79.5 million and $ 65.5 million for the nine months ended September 30, 2024 and 2023, respectively.

As presented in Note 11, the Corporate & Other segment revenue amounts were $ 35.4 million and $ 33.8 million for the three months ended September 30, 2024 and 2023, respectively, and $ 94.7 million and $ 86.5 million for the nine months ended September 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 $ 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 .

Royalty, licensing and management fees and other revenues from franchised and managed properties are presented net of intersegment revenues of $ 3.2 million and $ 4.0 million for the three months ended September 30, 2024 and 2023, respectively, and $ 8.8 million and $ 7.3 million for the nine months ended September 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) June 30, 2024 December 31, 2023

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

Senior $ 110,196 $ 85,919

13 unchanged sentences

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

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

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

Beginning balance $ 8,616 $ 10,172

2 unchanged sentences

Ending balance $ 9,007 $ 8,616

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.

As of September 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.

2 unchanged sentences

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

During the nine months ended September 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 June 30, 2024

As of September 30, 2024

Senior $ — $ — $ 15,200 $ 15,200 $ 94,996 $ 110,196

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 $ 15.2 million and $ 15.9 million as of June 30, 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 September 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 $ 95.1 million as of June 30, 2024 and December 31, 2023.

The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $ 116.8 million and $ 95.1 million as of September 30, 2024 and December 31, 2023, respectively.

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 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.

During the nine months ended September 30, 2024, the Company recognized provisions for credit losses on accounts receivable of $ 8.2 million in selling, general and administrative expenses, and $ 7.5 million in other expenses from franchised and managed properties, in the consolidated statements of income.

During the year ended December 31, 2023, the Company recognized provisions for credit losses on accounts receivable of $ 7.5 million in selling, general and administrative expenses, and $ 9.0 million in other expenses from franchised and managed properties, in the consolidated statements of income.

During the nine months ended September 30, 2024, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 10.7 million.

During the year ended December 31, 2023, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 0.6 million.

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 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.

As of September 30, 2024 and December 31, 2023, the Company had total investments in affiliates in the consolidated balance sheets of $ 109.7 million and $ 70.6 million, respectively, which included investments in affiliates that represent VIEs of $ 96.8 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 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.

During the three months ended September 30, 2024 and 2023, the Company recognized losses totaling $ 0.6 million and $ 0.9 million, respectively, from these investments that represent VIEs.

During the nine months ended September 30, 2024 and 2023, the Company recognized gains totaling $ 5.0 million and losses totaling $ 3.2 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.

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.

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

Debt consisted of the following:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in thousands)

$ 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 $ 4.0 million and $ 4.3 million at June 30, 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 $ 3.1 million and $ 3.6 million at September 30, 2024 and December 31, 2023, respectively

$ 396,891 $ 396,440

$ 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

$ 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 $ 3.9 million and $ 4.3 million at September 30, 2024 and December 31, 2023, respectively

446,147 445,690

$ 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

$ 600 million senior unsecured notes due 2034 ("2024 Senior Notes") with an effective interest rate of 6.11 %, less a discount and deferred issuance costs of $ 11.5 million at September 30, 2024

$ 500 million unsecured term loan due 2024 ("2023 Term Loan") with an effective interest rate of 6.83 %, less a discount and deferred issuance costs of $ 0.7 million at December 31, 2023 (1)

$ 1 billion senior unsecured revolving credit facility with an effective interest rate of 6.68 %, less deferred issuance costs of $ 3.8 million and $ 1.9 million at September 30, 2024 and December 31, 2023, respectively

379,222 226,621

3 unchanged sentences

(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.

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.

Senior Unsecured Revolving Credit Facility

6 unchanged sentences

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.

2024 Senior Unsecured Notes Due 2034

On July 2, 2024, the Company closed its sale of an aggregate principle amount of $ 600 million of 5.850 % senior notes due 2034 (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 on February 1, 2025.

The interest rate payable on the 2024 Senior Notes will be subject to adjustment based on certain rating events.

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 six months ended June 30, 2024 and 2023 were as follows:

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

(in thousands)

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

Other comprehensive income before reclassification ( 240 )

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

Other comprehensive income (loss) before reclassification 292

Balance as of September 30, 2024 $ ( 5,379 )

(in thousands)

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

Other comprehensive income before reclassification 689

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.

Other comprehensive income (loss) before reclassification 498

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

Other comprehensive income (loss), net of tax, for both the nine months ended September 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 six months ended June 30, 2024 and during the year ended December 31, 2023.

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, 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:

1 unchanged sentence

(in thousands) Total Level 1 Level 2 Level 3

As of June 30, 2024

As of September 30, 2024

Equity securities $ — $ — $ — $ —

14 unchanged sentences

Investments in Equity Securities

For the nine months ended September 30, 2024, the Company sold approximately 1.4 million shares of equity securities of another issuer for $ 108.1 million and recognized a net loss of $ 8.3 million on the sales of equity securities.

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

As of June 30, 2024 As of December 31, 2023

As of September 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

2 unchanged sentences

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 and the 2023 Term Loan adjusts frequently based on current market interest rates;

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

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

1 unchanged sentence

Refer to Note 5 for additional information on debt.

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

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

September 30, 2024 December 31, 2023

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

1 unchanged sentence

2020 Senior Notes $ 446,147 $ 416,219 $ 445,690 $ 389,241

2019 Senior Notes $ 396,891 $ 379,868 $ 396,440 $ 355,068

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 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.

The Company's effective income tax rates were 22.9 % and 24.1 % for the three months ended September 30, 2024 and 2023, respectively.

The Company's effective income tax rates were 23.8 % and 23.8 % for the nine months ended September 30, 2024 and 2023, respectively.

The effective income tax rates for the three and nine months ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands) 2024 2023 2024

3 unchanged sentences

Total share-based compensation expense $ 9,749 $ 9,988 $ 28,120 $ 31,965

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

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

Stock Options Restricted Stock Performance Vested

11 unchanged sentences

Forfeited ( 440 ) 123.71 ( 8,654 ) 121.05 ( 9,877 ) 130.82

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.

Outstanding as of September 30, 2024 872,619 $ 108.19 5.9 years 363,946 $ 136.46 442,973 $ 138.30

Options exercisable as of September 30, 2024 581,011 $ 101.29 4.9 years

(1) Any revisions to the outstanding PVRSUs during the nine months ended September 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 nine months ended September 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.

2 unchanged sentences

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:

The fair value of the stock options granted during the nine months ended September 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

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

12 unchanged sentences

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,

Three Months Ended Nine Months Ended

September 30, September 30,

(in thousands) 2024 2023 2024 2023

13 unchanged sentences

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

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

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023

(in thousands) Hotel

6 unchanged sentences

Income (loss) before income taxes $ 174,911 $ ( 37,763 ) $ — $ 137,148 $ 169,260 $ ( 48,031 ) $ — $ 121,229

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

Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

(in thousands) Hotel

12 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 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.

As of September 30, 2024, the maximum unrecorded exposure of the principal associated with these limited payment guaranties was $ 17.6 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 June 30, 2024:

The Company had the following outstanding commitments as of September 30, 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 hotels owned by a third-party.

As of June 30, 2024, the Company managed seven hotels pursuant to the long-term management arrangement.

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

Accordingly, no liability was recognized as of September 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.

2 unchanged sentences

• 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.

As of September 30, 2024, the Company had remaining commitments of up to $ 7.3 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 June 30, 2024 and December 31, 2023, respectively.

The Company had a total principal balance on these loans of $ 66.4 million and $ 64.5 million as of September 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 $ 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 fees earned and the payroll costs reimbursed under these arrangements totaled $ 2.5 million and $ 2.4 million for the three months ended September 30, 2024 and 2023, respectively, and $ 6.2 million and $ 6.1 million for the nine months ended September 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 $ 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.

Pursuant to these franchise agreements, the Company recognized royalty fees and marketing and reservation system fees of approximately $ 10.0 million and $ 9.4 million for the three months ended September 30, 2024 and 2023, respectively.

For the nine months ended September 30, 2024 and 2023, the Company recognized royalty fees and marketing and reservation system fees of approximately $ 26.3 million and $ 23.1 million, respectively.

The Company recognized $ 8.6 million and $ 4.9 million of gross accounts receivables in the consolidated balance sheets from these unconsolidated affiliates as of September 30, 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