What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-04 compared with 2024-08-08 · 95 added, 97 removed, 354 unchanged (35% of the section changed)

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We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 45 countries and territories.

As of June 30, 2024, we had 7,486 hotels with 631,063 rooms open and operating, and 1,007 hotels with 114,653 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system.

As of September 30, 2024, we had 7,515 hotels with 634,952 rooms open and operating, and 970 hotels with 110,380 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system.

Our brand names include Radisson Blu®, Park Plaza®, Cambria® Hotels, Ascend Hotel Collection®, Radisson RED®, Radisson Individuals®, Radisson®, Radisson Collection®, Clarion®, Clarion Pointe™, Comfort Inn®, Comfort Suites®, Country Inn & Suites® by Radisson, Radisson Inn & Suites SM , Sleep Inn®, Quality®, Park Inn by Radisson®, Everhome Suites®, WoodSpring Suites®, MainStay Suites®, Suburban Studios™, Econo Lodge®, and Rodeway Inn®.

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Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support the franchise operations, quarterly and/or annual deficits may be generated.

During the three months ended June 30, 2024 and 2023, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $10.1 million and $7.0 million, respectively.

During the six months ended June 30, 2024, other expenses from franchised and managed properties exceeded other revenues from franchised and managed properties by $2.3 million.

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

During the three months ended September 30, 2024 and 2023, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $20.1 million and $10.3 million, respectively.

During the nine months ended September 30, 2024 and 2023, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $17.7 million and $19.5 million, respectively.

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

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Operations Review

Comparison of the Operating Results for the Three Months Ended June 30, 2024 and 2023

Comparison of the Operating Results for the Three Months Ended September 30, 2024 and 2023

Three Months Ended

September 30,

(in thousands) 2024 2023

13 unchanged sentences

Total operating expenses 276,181 290,515

302,534 303,031

Operating income 151,783 135,042

2 unchanged sentences

Interest income (2,411) (1,897)

Other loss (gain) 2,544 (2,187)

Loss on extinguishment of debt 331 —

Other (gain) loss (4,013) 1,343

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

4 unchanged sentences

Results of Operations

For the three months ended June 30, 2024, the Company recognized income before income taxes of $116.6 million, which is a $4.1 million increase from the same period in the prior year.

The increase in income before income taxes is primarily due to an $8.2 million increase in operating income and a $7.7 million increase in equity in net gain of affiliates, partially offset by a $7.5 million increase in interest expense and a $4.7 million decrease in other loss (gain).

Operating income increased $8.2 million primarily due to a $3.9 million increase in other revenues, a $3.1 million increase in the net activity generated from other revenues from franchised and managed properties and other expenses from franchised and managed properties, and an $8.5 million decrease in business combination, diligence and transition costs, all of which were partially offset by a $6.6 million increase in selling, general and administrative expenses.

For the three months ended September 30, 2024, the Company recognized income before income taxes of $137.1 million, which is a $15.9 million increase from the same period in the prior year.

The increase in income before income taxes was primarily due to a $16.7 million increase in operating income and a $5.3 million increase in other gains, all of which were partially offset by a $5.8 million increase in interest expense.

Operating income increased $16.7 million primarily due to a $9.8 million increase in the net activity generated from other revenues from franchised and managed properties and other expenses from franchised and managed properties, a $2.5 million increase in other revenues, and a $9.9 million decrease in business combination, diligence and transition costs, all of which were partially offset by a $5.1 million increase in selling, general and administrative expenses.

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

Royalty, Licensing and Management Fees

Domestic royalty fees decreased $0.1 million to $125.0 million for the three months ended June 30, 2024 from $125.1 million for the three months ended June 30, 2023.

The decrease in domestic royalty fees is primarily due to a 0.5% domestic system-wide RevPAR decrease as a result of a 0.6% decrease in average daily rates during the current period, which was partially offset by a 10 basis points increase in occupancy and a system-wide 5 basis points increase in the effective royalty rate from 4.99% for the three months ended June 30, 2023 to 5.04% for the three months ended June 30, 2024.

Domestic royalty fees decreased $1.9 million to $131.6 million for the three months ended September 30, 2024 from $133.5 million for the three months ended September 30, 2023.

The decrease in domestic royalty fees is primarily due to a 2.5% domestic system-wide RevPAR decrease as a result of a 1.2% decrease in average daily rates and an 80 basis points decrease in occupancy during the current period, which was partially offset by a system-wide 6 basis points increase in the effective royalty rate from 4.99% for the three months ended September 30, 2023 to 5.05% for the three months ended September 30, 2024.

A summary of the operating performance for the Company's domestic franchised hotels, organized by chain scale, was as follows:

Three Months Ended Three Months Ended Change

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

Rate Occupancy RevPAR Average

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(4) Includes Econo Lodge and Rodeway brands.

A summary of the domestic hotels and rooms by brand in our franchise system as of June 30, 2024 and 2023 was as follows:

June 30, 2024 June 30, 2023 Variance

A summary of the domestic hotels and rooms by brand in our franchise system as of September 30, 2024 and 2023 was as follows:

September 30, 2024 September 30, 2023 Variance

Hotels Rooms Hotels Rooms Hotels % Rooms %

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

International royalty fees decreased $0.2 million to $7.3 million for the three months ended June 30, 2024 from $7.5 million for the three months ended June 30, 2023.

The decrease in international royalty fees is primarily due to the expiration of a licensing fee arrangement in 2023, partially offset by an increase in international RevPAR and an increase in the international franchise system size by 5 hotels (from 1,205 as of June 30, 2023 to 1,210 as of June 30, 2024) and 2,214 rooms (from 134,766 as of June 30, 2023 to 136,980 as of June 30, 2024).

International royalty fees increased $0.5 million to $8.4 million for the three months ended September 30, 2024 from $7.9 million for the three months ended September 30, 2023.

The increase in international royalty fees is primarily due to an increase in the international franchise system size by 30 hotels (from 1,207 hotels as of September 30, 2023 to 1,237 hotels as of September 30, 2024) and 5,098 rooms (from 134,660 rooms as of September 30, 2023 to 139,758 rooms as of September 30, 2024), which was partially offset by a decrease in international RevPAR.

Initial Franchise Fees

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If a franchise agreement is terminated, then the previously deferred initial franchise fees are recognized as revenue immediately in the period the franchise agreement is terminated.

Initial franchise fees revenue decreased $0.6 million to $6.6 million for the three months ended June 30, 2024 from $7.2 million for the three months ended June 30, 2023.

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

As of June 30, 2024, the Company had 1,007 hotels with 114,653 rooms in its pipeline.

Initial franchise fees revenue decreased $0.3 million to $5.9 million for the three months ended September 30, 2024 from $6.2 million for the three months ended September 30, 2023.

The decrease is primarily due to a lower number of domestic franchise agreement terminations as compared to the prior year.

As of September 30, 2024, the Company had 970 hotels with 110,380 rooms in its pipeline.

Approximately 86% of our pipeline is located in the United States and approximately 71% of the domestic portion of the pipeline is new construction.

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While the pipeline provides a strong platform for growth, a hotel in the pipeline does not always result in an open and operating hotel due to various macroeconomic factors, including access to liquidity, availability of construction labor and materials, and local governmental approvals and entitlements.

Other Revenues

Other revenues increased $3.9 million to $15.0 million for the three months ended June 30, 2024 from $11.1 million for the three months ended June 30, 2023.

The increase was primarily due to an increase in liquidated damages that resulted from the early termination of franchise agreements and other franchising revenues.

Selling, General and Administrative

Selling, general and administrative expenses, which includes the costs to operate the business, increased $6.6 million to $65.0 million for the three months ended June 30, 2024 from $58.4 million for the three months ended June 30, 2023.

The increase in selling, general and administrative expenses was primarily due to a $2.4 million litigation settlement and an increase in the provisions for credit losses on accounts receivable balances.

The overall increase in selling, general and administrative expenses was partially offset by a $1.1 million decrease in the Company's deferred compensation liabilities based on decreases in the fair value of the underlying investments.

Selling, general and administrative expenses, which includes the costs to operate the business, increased $5.1 million to $49.1 million for the three months ended September 30, 2024 from $44.0 million for the three months ended September 30, 2023.

The increase in selling, general and administrative expenses was primarily due to a $3.4 million increase in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments and a $1.0 million increase in the provisions for credit losses related to the issuance of new notes receivable.

Business Combination, Diligence and Transition Costs

Business combination, diligence and transition costs decreased $8.5 million to $0.9 million for the three months ended June 30, 2024 from $9.4 million for the three months ended June 30, 2023.

Business combination, diligence and transition costs decreased $9.9 million to $1.0 million for the three months ended September 30, 2024 from $10.9 million for the three months ended September 30, 2023.

The decrease was primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024.

Interest Expense

Interest expense increased $7.5 million to $23.8 million for the three months ended June 30, 2024 from $16.3 million for the three months ended June 30, 2023.

Interest expense increased $5.8 million to $22.0 million for the three months ended September 30, 2024 from $16.2 million for the three months ended September 30, 2023.

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

Refer to the discussion in the Liquidity and Capital Resources section in MD&A for more information.

Other Loss (Gain)

Other loss (gain) decreased $4.7 million to other losses of $2.5 million for the three months ended June 30, 2024 from other gains of $2.2 million for the three months ended June 30, 2023.

The decrease was primarily due to a $3.2 million unrealized loss on investments in equity securities, a $0.7 million realized loss on the sale of equity securities, and a $1.1 million decrease in the Company's deferred compensation assets based on decreases in the fair value of the underlying investments, all of which were partially offset by dividend income of $0.5 million.

Equity in Net Gain of Affiliates

Equity in net gain of affiliates increased $7.7 million to $7.9 million for the three months ended June 30, 2024 from $0.2 million for the three months ended June 30, 2023.

The increase was primarily due to a distribution from an unconsolidated affiliate, which sold its underlying assets, so the Company recognized a gain of $7.2 million.

Refer to Note 4 to our consolidated financial statements for additional information.

Other (Gain) Loss

Other (gain) loss increased $5.3 million to other gains of $4.0 million for the three months ended September 30, 2024 from other losses of $1.3 million for the three months ended September 30, 2023.

The increase in other gains was primarily due to a $3.5 million increase in the Company's deferred compensation assets based on increases in the fair value of the underlying investments and a net gain of $0.9 million on the sales of equity securities.

Income Tax Expense

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 22.9% and 24.1% for the three months ended September 30, 2024 and 2023, respectively.

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

federal income tax rate of 21.0% primarily due to the impact of state income taxes.

Comparison of the Operating Results for the Six Months Ended June 30, 2024 and 2023

Six Months Ended

Comparison of the Operating Results for the Nine Months Ended September 30, 2024 and 2023

Nine Months Ended

September 30,

(in thousands) 2024 2023

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Total operating expenses 850,515 848,487

574,334 557,972

Operating income 344,554 337,282

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Interest income (6,557) (5,836)

Other loss (gain) 3,880 (4,095)

Loss on extinguishment of debt 331 —

Other (gain) loss (133) (2,752)

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

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Results of Operations

For the six months ended June 30, 2024, the Company recognized income before income taxes of $156.8 million, which is a $23.2 million decrease from the same period in the prior year.

The decrease in income before income taxes is primarily due to a $9.5 million decrease in operating income, an $8.0 million decrease in other loss (gain), and an increase of $13.6 million in interest expense, all of which were partially offset by a $7.7 million increase in equity in net gain of affiliates.

Operating income decreased $9.5 million primarily due to an $11.5 million decrease in the net activity generated from other revenues from franchised and managed properties and other expenses from franchised and managed properties, a $1.7 million decrease in initial franchise fees revenue, and a $6.3 million increase in selling, general and administrative expenses, all of which were partially offset by a $9.6 million increase in other revenues and a $3.0 million decrease in business combination, diligence and transition costs.

For the nine months ended September 30, 2024, the Company recognized income before income taxes of $293.9 million, which is a $7.4 million decrease from the same period in the prior year.

The decrease in income before income taxes is primarily due to a $2.7 million decrease in other (gain) loss and an increase of $19.6 million in interest expense, all of which were partially offset by a $7.3 million increase in operating income and a $7.2 million increase in equity in net gain of affiliates.

Operating income increased $7.3 million primarily due to a $12.1 million increase in other revenues and a $12.9 million decrease in business combination, diligence and transition costs, all of which were partially offset by a $2.1 million decrease in royalty, licensing and management fees revenue, a $2.1 million decrease in initial franchise fees revenue, a $1.8 million decrease in the net activity generated from other revenues from franchised and managed properties and other expenses from franchised and managed properties, and an $11.3 million increase in selling, general and administrative expenses.

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

Royalty Fees, Licensing and Management Fees

Domestic royalty fees decreased $5.3 million to $217.9 million for the six months ended June 30, 2024 from $223.2 million for the six months ended June 30, 2023.

The decrease in domestic royalty fees was primarily due to a 2.9% domestic system-wide RevPAR decrease as a result of a 1.2% decrease in average daily rates and a 100 basis points decrease in occupancy, all of which were partially offset by a system-wide 5 basis points increase in the effective royalty rate from 4.99% for the six months ended June 30, 2023 to 5.04% for the six months ended June 30, 2024.

Royalty, Licensing and Management Fees

Domestic royalty fees decreased $7.3 million to $349.4 million for the nine months ended September 30, 2024 from $356.7 million for the nine months ended September 30, 2023.

The decrease in domestic royalty fees was primarily due to a 2.7% domestic system-wide RevPAR decrease as a result of a 1.2% decrease in average daily rates and a 90 basis points decrease in occupancy, all of which were partially offset by a 0.4% increase in open and operating domestic hotel rooms and a system-wide 6 basis points increase in the effective royalty rate from 4.99% for the nine months ended September 30, 2023 to 5.05% for the nine months ended September 30, 2024.

A summary of the operating performance for the Company's domestic franchised hotels, organized by chain scale, was as follows:

Six Months Ended Six Months Ended Change

June 30, 2024 June 30, 2023

Nine Months Ended Nine Months Ended Change

September 30, 2024 September 30, 2023

Rate Occupancy RevPAR Average

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(4) Includes Econo Lodge and Rodeway brands.

International royalty fees increased $0.3 million to $14.2 million for the six months ended June 30, 2024 from $13.9 million for the six months ended June 30, 2023.

The increase in international royalty fees was primarily due to an increase in international RevPAR and an increase in the size of the international franchise system.

International royalty fees increased $0.8 million to $22.6 million for the nine months ended September 30, 2024 from $21.8 million for the nine months ended September 30, 2023.

The increase in international royalty fees was primarily due to an increase in the size of the international franchise system, which was partially offset by a decrease in international RevPAR.

Initial Franchise Fees

Initial franchise fees revenue decreased $1.7 million to $13.3 million for the six months ended June 30, 2024 from $15.0 million for the six months ended June 30, 2023.

The decrease was primarily due to the lower number of domestic franchise agreement terminations as compared to the prior year.

Initial franchise fees revenue decreased $2.1 million to $19.1 million for the nine months ended September 30, 2024 from $21.2 million for the nine months ended September 30, 2023.

The decrease was primarily due to a lower number of domestic franchise agreement terminations as compared to the prior year.

Other Revenues

Other revenues increased $9.6 million to $31.4 million for the six months ended June 30, 2024 from $21.8 million for the six months ended June 30, 2023.

Other revenues increased $12.1 million to $45.3 million for the nine months ended September 30, 2024 from $33.2 million for the nine months ended September 30, 2023.

The increase was primarily due to an increase in liquidated damages that resulted from the early termination of franchise agreements and other franchising revenues.

Selling, General and Administrative

Selling, general and administrative expenses, which includes the costs to operate the business, increased $6.3 million to $113.6 million for the six months ended June 30, 2024 from $107.3 million for the six months ended June 30, 2023.

Selling, general and administrative expenses, which includes the costs to operate the business, increased $11.3 million to $162.7 million for the nine months ended September 30, 2024 from $151.4 million for the nine months ended September 30, 2023.

The increase in selling, general and administrative expenses was primarily due to a $2.4 million litigation settlement, an increase in the provisions for credit losses on accounts receivable balances, and a $4.2 million increase in the Company's deferred compensation liabilities based on increases in the fair value of the underlying investments.

Business Combination, Diligence and Transition Costs

Business combination, diligence and transition costs decreased $3.0 million to $16.7 million for the six months ended June 30, 2024 from $19.7 million for the six months ended June 30, 2023.

Business combination, diligence and transition costs decreased $12.9 million to $17.7 million for the nine months ended September 30, 2024 from $30.6 million for the nine months ended September 30, 2023.

The decrease was primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024 and substantially completing the integration of the Radisson Hotels Americas business in the fourth quarter of 2023.

Interest Expense

Interest expense increased $13.6 million to $44.0 million for the six months ended June 30, 2024 from $30.4 million for the six months ended June 30, 2023.

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

Interest expense increased $19.6 million to $66.1 million for the nine months ended September 30, 2024 from $46.5 million for the nine months ended September 30, 2023.

The increase in interest expense was due to increased borrowings and higher interest rates on the Company's outstanding borrowings.

Refer to the discussion in the Liquidity and Capital Resources section in MD&A for more information.

Other Loss (Gain)

Other loss (gain) decreased $8.0 million to other losses of $3.9 million for the six months ended June 30, 2024 from other gains of $4.1 million for the six months ended June 30, 2023.

The decrease was primarily due to a $8.4 million unrealized loss on investments in equity securities, $0.8 million increase in foreign currency transaction losses, and a $0.7 million realized loss on the sale of equity securities, all of which were partially offset by dividend income of $1.5 million and a $0.5 million increase in the Company's deferred compensation assets based on increases in the fair value of the underlying investments.

Other (Gain) Loss

Other (gain) loss decreased $2.7 million to other gains of $0.1 million for the nine months ended September 30, 2024 from other gains of $2.8 million for the nine months ended September 30, 2023.

The decrease was primarily due to a net loss of $8.3 million on the sales of equity securities, which was partially offset by dividend income of $1.5 million and a $4.0 million increase in the Company's deferred compensation assets based on increases in the fair value of the underlying investments.

Equity in Net Gain of Affiliates

Equity in net gain of affiliates increased $7.7 million to $7.8 million for the six months ended June 30, 2024 from $0.1 million for the six months ended June 30, 2023.

The increase was primarily due to a distribution from an unconsolidated affiliate, which sold its underlying assets, so the Company recognized a gain of $7.2 million.

Equity in net gain of affiliates increased $7.2 million to $9.1 million for the nine months ended September 30, 2024 from $1.9 million for the nine months ended September 30, 2023.

The increase was due to a distribution from an unconsolidated affiliate, which sold its underlying assets, so the Company recognized a gain of $7.2 million.

Refer to Note 4 to our consolidated financial statements for additional information.

Income Tax Expense

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

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

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The Company's short-term and long-term liquidity requirements primarily arise from working capital needs, debt obligations, income tax payments, dividend payments, share repurchases, capital expenditures, and investments in growth opportunities.

As of June 30, 2024, the Company's primary sources of liquidity consisted of $530.4 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of June 30, 2024, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance.

As of September 30, 2024, the Company's primary sources of liquidity consisted of $675.6 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of September 30, 2024, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance.

The Company believes that its cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets will provide sufficient liquidity to meet the expected future operating, investing, and financing needs of the business.

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

With respect to these activities, the Company had approximately $526.3 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of June 30, 2024.

With respect to these activities, the Company had approximately $595.4 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of September 30, 2024.

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

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

As a result, the Company maintains a share repurchase program and

typically pays a quarterly dividend.

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

On March 11, 2024, the Company's board of directors approved an increase of 5 million shares in the number of shares authorized to be repurchased under its share repurchase program.

As of June 30, 2024, the Company had 4.4 million shares remaining under the current share repurchase authorization.

As of September 30, 2024, the Company had 4.0 million shares remaining under the current share repurchase authorization.

The projected 2024 annual dividend rate is $1.15 per share or approximately $56.0 million in aggregate dividend payments, which is subject to future declarations by our board of directors.

Cash Flows from Operating Activities

During the six months ended June 30, 2024 and 2023, the net cash provided by operating activities was $113.6 million and $125.7 million, respectively.

Our operating cash flows decreased $12.1 million primarily due to a decrease in the net reimbursable amounts from the franchised and managed properties activities, an increase in the franchise agreement acquisition cost payments, and an increase in borrowing costs, all of which were partially offset by the timing of working capital items and a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024 and the due diligence and transition costs related to the integration of the Radisson Hotels Americas business in 2023.

During the nine months ended September 30, 2024 and 2023, the net cash provided by operating activities was $236.5 million and $247.2 million, respectively.

Our operating cash flows decreased $10.7 million primarily due to an increase in the franchise agreement acquisition cost payments, an increase in deferred income taxes, and an increase in borrowing costs, all of which were partially offset by the timing of working capital items and a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024 and the due diligence and transition costs related to the integration of the Radisson Hotels Americas business in 2023.

In conjunction with brand and development programs, we strategically make certain franchise acquisition cost payments to franchisees as an incentive to enter into new franchise agreements or perform-designated improvements to properties under existing franchise agreements.

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

During the six months ended June 30, 2024 and 2023, the Company's net franchise agreement acquisition costs were $52.0 million and $46.2 million, respectively.

During the nine months ended September 30, 2024 and 2023, the Company's net franchise agreement acquisition costs were $84.1 million and $72.9 million, respectively.

The Company’s franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems.

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

During the six months ended June 30, 2024, the activity from other expenses from franchised and managed properties exceeded the activity of other revenues from franchised and managed properties by $2.3 million.

During the six months ended June 30, 2023, the activity from other revenues from franchised and managed properties exceeded the activity of other expenses from franchised and managed properties by $9.1 million.

During the nine months ended September 30, 2024 and 2023, the activity from other revenues from franchised and managed properties exceeded the activity of other expenses from franchised and managed properties by $17.7 million and $19.5 million, respectively.

Cash Flows from Investing Activities

The net cash used in investing activities was $62.0 million and $59.2 million for the six months ended June 30, 2024 and 2023, respectively.

The net cash used in investing activities was $63.4 million and $103.3 million for the nine months ended September 30, 2024 and 2023, respectively.

The net cash used in investing activities was primarily due to the following:

During the six months ended June 30, 2024 and 2023, capital expenditures in property and equipment totaled $73.5 million and $45.7 million, respectively.

These capital expenditures primarily reflect the costs incurred to support the continued growth of the Cambria Hotels and Everhome Suites brands and the ongoing hotel development efforts.

During the nine months ended September 30, 2024 and 2023, investments in owned hotel properties totaled $81.2 million and $45.5 million, respectively.

These investments related to the continued growth of the Cambria Hotels and Everhome Suites brands and the ongoing hotel development efforts.

During the nine months ended September 30, 2024 and 2023, capital expenditures in other property and equipment totaled $33.6 million and $35.9 million, respectively.

These capital expenditures primarily related to leasehold improvements, office equipment, and capitalized software.

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

During the six months ended June 30, 2024 and 2023, the Company invested $19.5 million and $15.3 million, respectively, to support these efforts.

In addition, during the six months ended June 30, 2024 and 2023, the Company received distributions from these affiliates totaling $15.9 million and $0.9 million, respectively.

During the six months ended June 30, 2024, the Company received proceeds of $16.8 million from the sale of equity securities.

There were no purchases of equity securities during the six months ended June 30, 2024.

The Company did not purchase or sell any equity securities during the six months ended June 30, 2023.

During the nine months ended September 30, 2024 and 2023, the Company invested $47.7 million and $24.6 million, respectively, to support these efforts.

In addition, during the nine months ended September 30, 2024 and 2023, the Company received distributions from these affiliates totaling $15.9 million and $0.9 million, respectively.

During the nine months ended September 30, 2024, the Company received proceeds of $108.1 million from the sale of equity securities.

There were no purchases of equity securities during the nine months ended September 30, 2024.

The Company did not purchase or sell any equity securities during the nine months ended September 30, 2023.

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

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

During the six months ended June 30, 2024, the Company issued $1.5 million in notes receivable loans and received $1.7 million in notes receivable loan repayments.

During the six months ended June 30, 2023, the Company issued $4.3 million in notes receivable loans and received $9.3 million in notes receivable loan repayments.

During the nine months ended September 30, 2024, the Company issued $24.4 million in notes receivable loans and received $2.3 million in notes receivable loan repayments.

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

Cash Flows from Financing Activities

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

As of June 30, 2024, the Company maintained a total leverage ratio of 3.02x, including outstanding debt of approximately $526.0 million on the senior unsecured revolving credit facility.

As of September 30, 2024, the Company maintained a total leverage ratio of 2.85x, including outstanding debt of approximately $379.2 million on the senior unsecured revolving credit facility.

The Company was in compliance with all financial covenants under the Restated Credit Agreement.

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

2024 Senior Unsecured Notes Due 2034

On July 2, 2024, the Company closed its sale of an aggregate principal 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.

The Company may redeem the 2024 Senior Notes, in whole or in part, at any time prior to their maturity at the redemption price, which includes a make-whole premium.

If the 2024 Senior Notes are redeemed on or after May 1, 2034 (three months prior to the applicable maturity date), then the redemption price will be equal to 100% of the principal amount of the 2024 Senior Notes being redeemed plus accrued and unpaid interest thereon to the redemption date.

Additionally, at the option of the holders of the 2024 Senior Notes, the Company may be required to repurchase all or a portion of the holder's 2024 Senior Notes upon the occurrence of a change of control event, at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

Term Loan Due 2024

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

On July 2, 2024, the Company repaid the 2023 Term Loan in full using the net proceeds from the issuance of the $600 million unsecured senior notes.

Refer to Note 14 to the consolidated financial statements for more information.

On July 2, 2024, the Company used a portion of the net proceeds from the sale of the 2024 Senior Notes, after deducting underwriting discounts and commissions and other offering expenses, to repay in full the 2023 Term Loan.

2020 Senior Unsecured Notes Due 2031

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

If the Company redeems the 2019 Senior Notes prior to September 1, 2029 (three months prior to the maturity date)

(the “2019 Notes Par Call Date”), the redemption price will be equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, or (b) the sum of the present values of the remaining scheduled principal and interest payments that would have been payable had the 2019 Senior Notes matured on the 2019 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 30 basis points, plus accrued and unpaid interest.

If the Company redeems the 2019 Senior Notes prior to September 1, 2029 (three months prior to the maturity date) (the “2019 Notes Par Call Date”), the redemption price will be equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, or (b) the sum of the present values of the remaining scheduled principal and interest payments that would have been payable had the 2019 Senior Notes matured on the 2019 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 30 basis points, plus accrued and unpaid interest.

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

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In March 2023, the Company's board of directors approved a 21% increase in the quarterly cash dividend to $0.2875 per share, which is the current per share dividend amount that was utilized in each of the dividends that were declared in 2023 and 2024.

During the six months ended June 30, 2024, the Company paid $28.9 million in cash dividends.

During the nine months ended September 30, 2024, the Company paid $42.5 million in cash dividends.

Based on the current per share dividend amount and our outstanding share count, the aggregate annual dividends for the year ended December 31, 2024 is projected to be $1.15 per share or approximately $56.0 million in aggregate dividend payments.

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On March 11, 2024, the Company's board of directors approved an increase of 5.0 million shares in the number of shares authorized to be repurchased under its share repurchase program.

During the six months ended June 30, 2024, the Company repurchased 2.3 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $284.6 million.

During the nine months ended September 30, 2024, the Company repurchased 2.8 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $341.2 million.

In total, the Company has repurchased 61.1 million shares of its common stock (including 33.0 million shares prior to the two-for-one stock split effected in October 2005) under the share repurchase program at a total cost of $2.6 billion.

Considering the effect of the two-for-one stock split, the Company has repurchased 94.1 million shares at an average price of $27.74 per share.

As of June 30, 2024, the Company had 4.4 million shares remaining under the current share repurchase authorization.

During the six months ended June 30, 2024, the Company redeemed 0.1 million shares of common stock at a total cost of $11.6 million from employees to satisfy the option exercise price and the statutory minimum tax-withholding requirements related to the exercising of stock options and the vesting of PVRSUs and restricted stock grants.

These redemptions were outside the

share repurchase program.

During the six months ended June 30, 2024, the Company received proceeds of $4.3 million from stock options exercised by employees.

As of September 30, 2024, the Company had 4.0 million shares remaining under the current share repurchase authorization.

During the nine months ended September 30, 2024, the Company redeemed 0.1 million shares of common stock at a total cost of $11.7 million from employees to satisfy the option exercise price and the statutory minimum tax-withholding requirements related to the exercising of stock options and the vesting of PVRSUs and restricted stock grants.

These redemptions were outside the share repurchase program.

During the nine months ended September 30, 2024, the Company received proceeds of $9.3 million from stock options exercised by employees.

Critical Accounting Estimates

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We have discussed the estimates that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

During the six months ended June 30, 2024, there were no material changes to the critical accounting estimates that were previously disclosed.

During the nine months ended September 30, 2024, there were no material changes to the critical accounting estimates that were previously disclosed.

New Accounting Standards

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis