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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-20 · 145 added, 161 removed, 289 unchanged (51% of the section changed)

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We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 46 countries and territories.

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

Our brand names include Comfort Inn®, Comfort Suites®, Quality®, Clarion®, Clarion Pointe™, Ascend Hotel Collection®, Sleep Inn®, Econo Lodge®, Rodeway Inn®, MainStay Suites®, Suburban Studios™, WoodSpring Suites®, Everhome Suites®, and Cambria® Hotels (collectively, the "legacy Choice brands").

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

As of December 31, 2024, we had 7,586 hotels with 653,810 rooms open and operating, and 964 hotels with 97,325 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®.

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

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

The Company's domestic operations are conducted through direct franchising relationships, the ownership of 12 open and operating hotels, and the management of 13 hotels (inclusive of four owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

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

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

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

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

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

We are required by our franchise agreements to use the marketing and reservation system fees we collect for system-wide marketing and reservation system activities.

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

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

Greater awareness and preference promote long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases the franchise fees earned by the Company.

Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer.

Additionally, the Company's management agreements include cost reimbursements, which is primarily related to payroll costs at the managed hotels where the Company is the employer.

Our Company articulates its mission as a commitment to our franchisees’ profitability by providing our franchisees with hotel franchises that strive to generate the highest return on investment of any hotel franchise.

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Improving the performance of the hotels in our system, strategically growing the system through additional franchise sales, and improving franchise agreement pricing while maintaining a disciplined cost structure are the keys to profitable growth.

The addition of the legacy Radisson brands in the Americas increased Choice's footprint in the upper midscale and upscale chain scales and established Choice's presence in the upper upscale chain scale.

We believe the Radisson Hotels Americas acquisition has enabled us to strengthen our presence in the upper midscale chain scale, expand our market presence in certain geographies in the United States, and further build on our momentum in the upscale chain scale which will facilitate the continued growth of our Cambria Hotels and Ascend Hotel Collection brands and the further expansion of the Radisson portfolio.

Maximizing Financial Returns and Creating Value for Shareholders - Our capital allocation decisions, including capital structure and uses of capital, are intended to maximize our return on invested capital and create value for our shareholders.

Maximizing Financial Returns and Creating Value for Shareholders - Our capital allocation decisions, including our capital structure and the uses of capital, are intended to maximize our return on invested capital and create value for our shareholders.

Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provides the greatest returns to our shareholders, which include acquisitions, share repurchases, and dividends.

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

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

In addition to our hotel franchising business, we have also developed or acquired 12 open and operating hotels.

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

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

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

The Company's franchise

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

The Company is obligated to expend the marketing and reservation system fees it collects from its franchisees in accordance with the franchise agreements.

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Over time, the Company expects the cumulative revenues and expenses of reimbursable components to break even and, therefore, no income or loss will be generated from the reimbursable marketing and reservation system activities.

Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer.

Additionally, the Company's management agreements include cost reimbursements, which is primarily related to payroll costs at the managed hotels where the Company is the employer.

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

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

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 surpluses or deficits may be generated.

During the years ended December 31, 2024, 2023, and 2022, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $36.1 million, $1.8 million, and $49.7 million, respectively.

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

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

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

Since our business has not historically required significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders, which include acquisitions, share repurchases, and dividends.

Since our business has not historically required a significant reinvestment of capital, we typically utilize cash in ways that management believes provide the greatest returns to our shareholders, which include acquisitions, share repurchases, and dividends.

We believe the Company’s cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets is sufficient to meet the expected future operating, investing, and financing needs of the business.

Refer to the Liquidity and Capital Resources section of MD&A for additional analysis.

Refer to the Liquidity and Capital Resources section in MD&A for additional analysis.

Inflation - We believe that moderate increases in the rate of inflation will generally result in comparable or greater increases in hotel room rates.

We continue to monitor future inflation trends along with the corresponding impacts to our business.

Wyndham Proposal

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

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

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

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

Operations Review

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

A summary of the financial results for the years ended December 31, 2024 and 2023 was as follows:

(in thousands) 2024 2023

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Impairment of long-lived assets — (3,736)

Gain on sale of business and assets, net — 16,249

Operating income 463,773 375,028

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Interest income (8,646) (7,764)

Gain on extinguishment of debt (4,416) —

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

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

Loss (gain) on extinguishment of debt 331 (4,416)

Other loss (gain) 1,641 (10,649)

Equity in net gain of affiliates (12,329) (2,879)

Total other expenses and income, net 68,128 38,072

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Results of Operations

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

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

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

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

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

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

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

For the year ended December 31, 2024, the Company recognized income before income taxes of $395.6 million, which is a $58.7 million increase from the year ended December 31, 2023.

The increase in income before income taxes was primarily due to an $88.7 million increase in operating income and a $9.5 million increase in the equity in net gain of affiliates, both of which were partially offset by a $23.4 million increase in interest expense, a $12.3 million decrease in other loss (gain), and a $4.7 million decrease in loss (gain) on extinguishment of debt.

Operating income increased $88.7 million primarily due to a $34.4 million increase in the net surplus generated from other revenues and other expenses from franchised and managed properties, a $15.8 million increase in other revenues, and a $38.5 million decrease in business combination, diligence and transition costs.

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

Royalty, Licensing and Management Fees

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

The increase in domestic royalty fees is attributable to higher royalty fees in the comparative period for the legacy Radisson brands and a system-wide 6 basis point increase in the effective royalty rate from 4.93% for the year ended December 31, 2022 to 4.99% for the year ended December 31, 2023, and a 0.1% domestic system-wide RevPAR increase due to a 1.9% increase in average daily rates, partially offset by a 100 basis point decrease in occupancy.

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

Domestic royalty fees decreased $3.4 million to $454.7 million for the year ended December 31, 2024 from $458.1 million for the year ended December 31, 2023.

The decrease in domestic royalty fees was primarily due to a 1.2% domestic system-wide RevPAR decrease as a result of a 0.3% decrease in average daily rates and a 50 basis points decrease in occupancy, all of which were partially offset by a 3.0% increase in open and operating domestic hotel rooms and a system-wide 7 basis points increase in the effective royalty rate from 4.99% for the year ended December 31, 2023 to 5.06% for the year ended December 31, 2024.

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

2024 2023 Change

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72.18 47.1 % 34.00 71.66 47.9 % 34.36 0.7 % (80) bps (1.0) %

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

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

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

Total $ 96.67 56.4 % $ 54.54 $ 96.92 56.9 % $ 55.19 (0.3) % (50) bps (1.2) %

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

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

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

(4) Includes Econo Lodge and Rodeway brands.

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

To enhance comparability for the year ended December 31, 2022, ADR, Occupancy, and RevPAR reflect the operating performance as if the legacy Radisson brands were acquired on January 1, 2022.

A summary of the domestic hotels and rooms by brand in our franchise system as of December 31, 2024 and 2023 was as follows:

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Rodeway 447 24,948 470 26,309 (23) (4.9) % (1,361) (5.2) %

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

Country 422 33,771 428 34,122 (6) (1.4) % (351) (1.0) %

Sleep Inn 415 29,118 432 30,411 (17) (3.9) % (1,293) (4.3) %

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

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

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

(3) Includes the Radisson, Radisson Blu, Radisson Individuals, and Radisson RED brands.

International royalty fees increased to $28.9 million for the year ended December 31, 2023 from $20.0 million for the year ended December 31, 2022.

The increase in international royalty fees is attributable to higher royalty fees for the legacy Radisson brands, improvements in RevPAR performance, and an increase in the international franchise system size by 31 hotels (from 1,191 hotels as of December 31, 2022 to 1,222 hotels as of December 31, 2023), and an increase of 2,626 rooms (from 133,395 rooms as of December 31, 2022 to 136,021 rooms as of December 31, 2023).

International royalty fees increased $0.9 million to $29.8 million for the year ended December 31, 2024 from $28.9 million for the year ended December 31, 2023.

The increase in international royalty fees was primarily due to an increase in the international franchise system size by 36 hotels (from 1,222 hotels as of December 31, 2023 to 1,258 hotels as of December 31, 2024) and 6,050 rooms (from 136,021 rooms as of December 31, 2023 to 142,071 rooms as of December 31, 2024), and an increase in international RevPAR.

Initial Franchise Fees

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

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

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

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

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

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

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

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 $2.2 million to $25.6 million for the year ended December 31, 2024 from $27.8 million for the year ended December 31, 2023.

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

As of December 31, 2024, the Company had 964 hotels with 97,325 rooms in its pipeline.

Approximately 88% of our pipeline is located in the United States and approximately 71% of the domestic pipeline is new construction.

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

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

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

Platform and Procurement Services Fees

Platform and procurement services fees revenue increased $11.3 million from $63.8 million for the year ended December 31, 2022 to $75.1 million for the year ended December 31, 2023.

The increase is primarily attributable to an increase in the fees generated from travel-related partnerships and qualified vendors, and an increase in the fees generated from the Company's annual convention, which includes activity from the newly acquired Radisson hotel brands.

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

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

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

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.

The Company's revenues, net of operating expenses, from the owned hotels increased $4.1 million to $30.3 million for the year ended December 31, 2024 from $26.1 million for the year ended December 31, 2023.

The increase was primarily due to the improved operating performance at our owned hotels and the addition of two owned hotels during the year ended December 31, 2024 as compared to the prior year.

Other Revenues

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

Other revenues increased $15.8 million to $61.8 million for the year ended December 31, 2024 from $46.1 million for the year ended December 31, 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 cost to operate the business, increased $48.4 million from $167.7 million for the year ended December 31, 2022 to $216.1 million for the year ended December 31, 2023.

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

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

related to restructuring certain areas of the business.

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

Selling, general and administrative expenses, which includes the cost to operate the business, increased $3.8 million to $219.9 million for the year ended December 31, 2024 from $216.1 million for the year ended December 31, 2023.

The increase in selling, general and administrative expenses reflects general increases to operate the franchising business.

Business Combination, Diligence and Transition Costs

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

Depreciation and Amortization

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

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

Business combination, diligence and transition costs decreased $38.5 million to $17.2 million for the year ended December 31, 2024 from $55.8 million for the year ended December 31, 2023.

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

Impairment of Long-Lived Assets

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

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

Gain on Sale of Business and Assets, Net

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

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

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

Impairment of long-lived assets decreased $3.7 million to zero for the year ended December 31, 2024 from $3.7 million for the year ended December 31, 2023.

The decrease was primarily related to a sublease agreement that was signed for the legacy Radisson corporate office space in Minneapolis, Minnesota.

The Company did not recognize any impairments of long-lived assets during the year ended December 31, 2024.

Interest Expense

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

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

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

Gain on Extinguishment of Debt

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

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

Other (Gain) Loss

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

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

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

Interest expense increased $23.4 million to $87.1 million for the year ended December 31, 2024 from $63.8 million for the year ended December 31, 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.

Loss (Gain) on Extinguishment of Debt

Loss (gain) on extinguishment of debt decreased $4.7 million to a loss on extinguishment of debt of $0.3 million for the year ended December 31, 2024 from a gain on extinguishment of debt of $4.4 million for the year ended December 31, 2023.

In 2024, the Company recognized a loss on extinguishment of debt due to the repayment of the 2023 Term Loan.

In 2023, the Company derecognized certain economic development loans from the consolidated balance sheets due to satisfying the relevant performance conditions in the loan agreement, resulting in a gain on extinguishment of debt.

Other Loss (Gain)

Other loss (gain) decreased $12.3 million to other losses of $1.6 million for the year ended December 31, 2024 from other gains of $10.6 million for the year ended December 31, 2023.

The decrease was primarily due to a net loss of $8.3 million on the sales of equity securities related to the pursuit of the Wyndham acquisition in 2024 and a $4.0 million unrealized gain on investments in equity securities in 2023, both of which were partially offset by dividend income of $1.5 million and a $0.6 million increase in the Company's deferred compensation and employee benefit plans 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 $9.5 million to $12.3 million for the year ended December 31, 2024 from $2.9 million for the year ended December 31, 2023.

The increase was primarily due to a distribution from an unconsolidated affiliate, which sold its underlying assets, resulting in the recognition of a $7.2 million gain in 2024.

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

Income Tax Expense

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The effective income tax rates for the years ended December 31, 2024 and 2023 were higher than the U.S.

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

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

Refer to Choice Hotels International, Inc.'s 2023 10-K Annual Report, specifically the section "Comparison of 2023 and 2022 Operating Results" of Item 7.

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

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

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

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

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 $605.4 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of December 31, 2024.

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

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

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 December 31, 2024, the

Company had 3.8 million shares remaining under the current share repurchase authorization.

The 2024 annual dividend rate was $1.15 per share or approximately $55.5 million in aggregate dividend payments.

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During the years ended December 31, 2024, 2023, and 2022, the net cash provided by operating activities was $319.4 million, $296.6 million, and $367.1 million, respectively.

Our operating cash flows decreased $70.5 million primarily due to a decrease in the net surplus generated from our other franchised and managed properties activities, an increase in franchise agreement acquisition cost payments, an increase in business combination, diligence and transition costs associated with the integration of the Radisson Hotels Americas business and acquisition pursuits, an increase in selling, general and administrative expenses, and an increase in borrowing costs, all of which were partially offset by the timing of working capital items.

Our operating cash flows increased $22.8 million primarily due to 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, all of which were partially offset by an increase in franchise agreement acquisition cost payments, an increase in borrowing costs, and an increase in deferred income taxes.

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

If the franchisee remains in the franchise system in good standing over the term specified in the incentive agreement, the Company forgives the incentive ratably.

If the franchisee remains in the franchise system in good standing over the term specified in the incentive agreement, then the Company forgives the incentive ratably.

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

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Additionally, the legacy Radisson Hotels Americas management agreements include cost reimbursements, primarily related to payroll costs at managed hotels where the Company is the employer.

Additionally, the Company's management agreements include cost reimbursements, primarily related to the payroll costs at the managed hotels where the Company is the employer.

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

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

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

During the years ended December 31, 2024, 2023, and 2022, the activity from other revenues from franchised and managed properties exceeded the activity of other expenses from franchised and managed properties by $36.1 million, $1.8 million, and $49.7 million, respectively.

Cash Flows from Investing Activities

The net cash used in investing activities was $84.6 million, $265.6 million, and $442.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.

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

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

During the years ended December 31, 2024, 2023, and 2022, investments in owned hotel properties totaled $106.8 million, $68.6 million, and $65.8 million, respectively.

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

During the years ended December 31, 2024, 2023, and 2022, investments in other property and equipment totaled $39.1 million, $47.7 million, and $24.1 million, respectively.

These investments 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 to develop and operate Cambria Hotels and Everhome Suites branded-hotels in strategic markets.

During the years ended December 31, 2024, 2023, and 2022, the Company invested $52.8 million, $38.9 million, and $3.1 million, respectively, to support these efforts.

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

In addition, during the years ended December 31, 2024 and 2023, the Company received distributions from these affiliates totaling $15.9 million and $0.9 million, respectively.

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

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

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

During the year ended December 31, 2024, the Company received proceeds of $108.1 million from the sales of equity securities.

There were no purchases of equity securities during the year ended December 31, 2024.

During the year ended December 31, 2023, the Company purchased $112.4 million of equity securities in conjunction with the Wyndham acquisition pursuit and there were no sales of equity securities.

There were no purchases or sales of equity securities during the year ended December 31, 2022.

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

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During the years ended December 31, 2024, 2023, and 2022, the Company issued a total of $38.0 million, $4.3 million, and $5.6 million of notes receivable loans, respectively, and received repayments totaling $32.1 million, $10.9 million, and $1.0 million on the notes receivable loans, respectively.

The Company did not sell any businesses or assets during the years ended December 31, 2024 and 2023.

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

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

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

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

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

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

During the year ended December 31, 2022, the Company recognized contract termination fee revenue of $22.7 million resulting from the exit of 110 WoodSpring units in September 2022.

During the year ended December 31, 2022, the Company recognized contract termination fee revenue of $22.7 million that resulted from the exit of 110 WoodSpring units in September 2022.

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

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Cash flows from financing activities primarily relate to the proceeds or payments on the Company’s borrowings, treasury stock repurchases, acquisition of shares in connection with the exercise or vesting of equity awards, the payment of dividends, and the payment of debt issuance costs.

Restated Senior Unsecured Credit Facility

On August 20, 2018, the Company entered into the Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"), which amended and restated the Company’s existing senior unsecured revolving credit agreement dated July 21, 2015.

The Restated Credit Agreement provided for a $600 million unsecured credit facility with an original maturity date of August 20, 2023, subject to one-year extension options that could be requested by the Company prior to each of the first, second and third anniversaries of the closing date of the Restated Credit Agreement in exchange for the payment fees.

The Company has exercised the one year extension option on multiple occasions, which has resulted in a new maturity date of August 20, 2026.

The Restated Credit Agreement allows for up to $35 million of borrowings that may be used for alternative

currency loans and up to $25 million of borrowings that may be used for swingline loans.

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

There are no subsidiary guarantors under the Restated Credit Agreement .

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

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

This amendment provides, among other things, for (i) an increase in the aggregate amount of commitments under the Company's existing $600 million unsecured credit facility (the "Revolver") by $250 million (the “Increased Commitments”) to an aggregate amount of $850 million, and (ii) the replacement of the interest reference rate for U.S.

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

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

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

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

The Restated Credit Agreement imposes financial covenants that require the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 and a total leverage ratio of not more than 4.5 to 1.0.

In addition, on up to two nonconsecutive occasions, the Company will be required to maintain a total leverage ratio of not more than 5.5 to 1.0 for up to three consecutive quarters following a material acquisition commencing with the fiscal quarter in which the material acquisition occurred.

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

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

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.

The Restated Credit Agreement allows the Company to elect to have the Revolver bear interest at a rate equal to (i) the secured overnight financing rate (subject to a credit spread adjustment of 0.10% and a 0.00% floor) plus a margin ranging from 0.90% to 1.50% or (ii) a base rate plus a margin ranging from 0.00% to 0.50%.

In each case, the margin is determined according to the Company’s senior unsecured long-term debt rating or under circumstances as set forth in the Restated Credit Agreement if the Company’s total leverage ratio is less than 2.5 to 1.0.

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

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

The Restated Credit Agreement imposes financial maintenance covenants requiring the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 and a total leverage ratio of not more than 4.5 to 1.0, which may be increased up to two nonconsecutive occasions to 5.5 to 1.0 for up to four consecutive fiscal quarters commencing with the fiscal quarter in which certain material acquisitions are consummated.

So long as the

Company maintains an Investment Grade Rating, as defined in the Restated Credit Agreement, then the Company will not need to comply with the consolidated fixed charge coverage ratio covenant.

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

As of December 31, 2024, the Company maintained a total leverage ratio of 2.76x, including outstanding debt of approximately $336 million on the senior unsecured revolving credit facility.

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

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

The amortization of the debt issuance costs is included in interest expense in the consolidated statements of income.

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

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 issued unsecured senior notes with a principal amount of $600 million (the "2024 Senior Notes”) at a discount of $6.4 million, bearing a coupon of 5.85%, with an effective rate of 6.11%, 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.

2023 Term Loan Due 2024

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

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

On December 18, 2023, the Company entered into a $500 million unsecured term loan with an effective interest rate of 6.83% and a maturity date of December 16, 2024 (the "2023 Term Loan").

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

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

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

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

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

The term loan agreement has financial covenants which require the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0, and a total leverage ratio of not more than 4.5 to 1.0 which may be increased to 5.5 to 1.0 for up to three consecutive fiscal quarters commencing with the fiscal quarter in which certain material acquisitions are consummated.

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

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

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

The term loan agreement had financial covenants which required the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0, and a total leverage ratio of not more than 4.5 to 1.0 which may have been increased to 5.5 to 1.0 for up to three consecutive fiscal quarters commencing with the fiscal quarter in which certain material acquisitions are consummated.

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

The Company was in compliance with all covenants upon the repayment in full of the 2023 Term Loan.

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

On July 23, 2020, the Company issued unsecured senior notes with a principal amount of $450 million (the "2020 Senior Notes") bearing a coupon of 3.70%.

The 2020 Senior Notes will mature on January 15, 2031, with interest to be paid semi-annually on January 15th and July 15th.

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

The 2020 Senior Notes will mature on January 15, 2031, with interest to be paid semi-annually on January 15 th and July 15 th of each year.

The Company used the net proceeds of the 2020 Senior Notes, after deducting underwriting discounts, commissions, and offering expenses, to repay in full the $250 million term loan entered in April 2020 and to fund the purchase price of the 2012 Senior Notes.

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

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

If the Company redeems the 2020 Senior Notes prior to October 15, 2030 (three months prior to the maturity date) (the “2020 Notes Par Call Date”), the redemption price will be equal to the greater of (a) 100% of the principal amount of the notes to be redeemed, or (b) the sum of the present values of the remaining scheduled principal and interest payments that would have been payable had the 2020 Senior Notes matured on the 2020 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 50 basis points, plus accrued and unpaid interest.

payable had the 2020 Senior Notes matured on the 2020 Notes Par Call Date, discounted to the redemption date on a semi-annual basis at the applicable Treasury Rate plus 50 basis points, plus accrued and unpaid interest.

If the Company redeems the 2020 Senior Notes on or after the 2020 Notes Par Call Date, the redemption price will equal 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest.

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On November 27, 2019, the Company issued unsecured senior notes with a principal amount of $400 million (the "2019 Senior Notes") at a discount of $2.4 million, bearing a coupon of 3.70% with an effective rate of 3.88%.

The 2019 Senior Notes will mature on December 1, 2029, with interest to be paid semi-annually on December 1 st and June 1 st .

The 2019 Senior Notes will mature on December 1, 2029, with interest to be paid semi-annually on December 1 st and June 1 st of each year.

The Company used the net proceeds of this offering, after deducting underwriting discounts, commissions, and offering expenses, to repay the previously outstanding senior notes with a principal amount of $250 million due August 28, 2020, and for working capital and other general corporate purposes.

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In accordance with these agreements, the governmental entities agreed to advance approximately $4.4 million to the Company to offset a portion of the corporate headquarters relocation and tenant improvement costs in consideration of the employment of permanent, full-time employees within the jurisdictions.

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

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

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

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

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

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

The Company has been advanced the full amounts that were due pursuant to these agreements, and these advances bore interest at a rate of 3% per annum.

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

The performance conditions were measured annually on December 31st and primarily related to maintaining certain levels of employment within the various jurisdictions.

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

Upon the expiration of the Company's previous ten-year corporate headquarters lease agreement in 2023, any outstanding advances would be forgiven in full.

The $4.4 million of advances were previously recognized as in debt in the consolidated balance sheets.

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

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

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

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 per share dividend amount that was utilized in each of the dividends that were declared in 2023 and 2024.

During the year ended December 31, 2024, the Company declared aggregate annual cash dividends of $1.15 per share or approximately $55.5 million in aggregate dividend payments.

We expect that cash dividends will continue to be paid in the future, subject to the declaration by our board of directors, future business performance, economic conditions, changes in tax regulations, and other matters.

In accordance with the Restated Credit Agreement and the 2023 Term Loan, the Company may not declare or make any dividend payments if there is an existing event of default or if the dividend payment would create an event of default.

In accordance with the Restated Credit Agreement, the Company may not declare or make any dividend payments if there is an existing event of default or if the dividend payment would create an event of default.

Share Repurchases & Redemptions

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

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 purchased under its share repurchase program.

During the year ended December 31, 2024, the Company repurchased 3.0 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $369.7 million.

In total through December 31, 2023, the Company repurchased 58.3 million shares of its common stock (including 33.0 million prior to the two-for-one stock split effected in October 2005) under the program at a total cost of $2.3 billion.

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

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

In total, the Company has repurchased 61.3 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 94.3 million shares at an average price of $27.98 per share.

As of December 31, 2024, the Company had 3.8 million shares remaining under the current share repurchase authorization.

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

During the year ended December 31, 2024, the Company redeemed 0.1 million shares of common stock at a total cost of $12.4 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 performance vested restricted stock units ("PVRSUs") and restricted stock grants.

These redemptions were outside the share repurchase program.

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The following table summarizes the material contractual obligations (excluding the previously addressed debt obligations, the financing, investment, guaranty, and franchise agreement acquisition cost commitments to franchisees, and the deferred compensation plan liabilities) as of December 31, 2024:

Payment due by period

Payments due by period

(in thousands) Total Less than

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Total contractual obligations $ 112,222 $ 66,542 $ 45,680

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

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

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

Critical Accounting Estimates

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

Guest Loyalty Programs

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

Guest Loyalty Program

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

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

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

The anticipated redemption pattern of the

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

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

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

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

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

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

carrying value of the asset group.

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

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

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

The Company did not identify any indicators of impairment of long-lived assets in the Hotel Franchising reporting unit during the years ended December 31, 2024, 2023, and 2022, other than impairments on franchise sales commission assets and franchise agreement acquisition cost intangible assets primarily resulting from the termination of franchise agreements from the Choice system or significant delinquencies in construction or invoice payments.

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

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

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

Due to the changes resulting from the 2017 Tax Cuts and Jobs Act, the Company modified its foreign dividend policy to limit any future foreign distributions to income which has been previously subject to US taxation.

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

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

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

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

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

The Tax Cuts and Jobs Act subjects a U.S.

shareholder to a minimum tax on "global intangible low-taxed income" ("GILTI") earned by certain foreign subsidiaries.

The Company's policy is to recognize the tax expense on GILTI as an expense in the period that the tax is incurred.

The Company has incurred tax on GILTI for the year ended December 31, 2024.

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-K

Item 7. Management’s Discussion and Analysis