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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-20 · 314 added, 540 removed, 964 unchanged (47% of the section changed)

6 unchanged sentences

Consolidated Statements of Cash Flows

Consolidated Statements of Shareholders' Equity (Deficit)

Consolidated Statements of Shareholders' (Deficit) Equity

Notes to Consolidated Financial Statements

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As discussed in Note 1 to the consolidated financial statements, loyalty points earned represent a performance obligation attributable to usage of the points, and thus revenues are recognized at the point in time when the loyalty points are redeemed by members for benefits.

The liability for the Choice Privileges Loyalty Program is developed based on an estimate of the eventual redemption rates on future redemption behavior and point values using various actuarial methods.

The liability for the Choice Privileges Loyalty Program is developed based on an estimate of the eventual redemption rates on future redemption behavior using various actuarial methods and point values.

The amount of the Choice Privileges Loyalty Program fees in excess of the point liability represents deferred revenue, which is recognized to revenue as points are redeemed including an estimate of future forfeitures.

Auditing the Choice Privileges Loyalty Program results is complex due to:

(1) the complexity of the models used to account for Choice Privileges Loyalty Program results;

and (2) the complexity of estimating the future redemption rate and Choice Privileges Loyalty Program point values.

Such estimates are highly judgmental given the significant estimation uncertainty associated with expected redemption activity.

(1) the complexity of the models used and the high volume of data to monitor and account for Choice Privileges Loyalty Program results;

and (2) the complexity of estimating the future redemption rate.

Performing audit procedures to evaluate the reasonableness of these estimates requires a high degree of auditor judgment and an increased extent of effort, which includes the use of actuarial specialists.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process of accounting for the Choice Privileges Loyalty Program during the year.

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To test the recognition of revenues and liabilities associated with the Choice Privileges Loyalty Program, we performed audit procedures that included, among others, testing the completeness and accuracy of the data and significant assumptions used in the models and assessing the accounting models developed by the Company to recognize the related revenue and the liabilities.

For example, we tested significant inputs into the accounting models, including the Choice Privileges Loyalty Program point values and the recognition of points earned and redeemed during the period.

For example, we tested significant inputs into the accounting models, including the amounts received and paid by the Choice Privileges Loyalty Program as well as the recognition of points earned and redeemed during the period.

With the assistance of our actuarial specialists, we evaluated management’s methodologies as well as the actuarial assumptions used in estimating the Choice Privileges Loyalty Program expected redemption rates.

29 unchanged sentences

Interest income ( 8,646 ) ( 7,764 ) ( 7,288 )

Gain on extinguishment of debt ( 4,416 ) — —

Other (gain) loss ( 10,649 ) 7,018 ( 5,134 )

Equity in net (gain) loss of affiliates ( 2,879 ) ( 1,732 ) 15,876

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

Other loss (gain) 1,641 ( 10,649 ) 7,018

Equity in net gain of affiliates ( 12,329 ) ( 2,879 ) ( 1,732 )

Total other expenses and income, net 68,128 38,072 41,795

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Net income $ 299,665 $ 258,507 $ 332,152

Other comprehensive (loss) income, net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation adjustment ( 522 ) ( 460 ) ( 637 )

Other comprehensive (loss) income, net of tax:

Other comprehensive loss, net of tax:

( 522 ) ( 460 ) ( 637 )

26 unchanged sentences

Total assets $ 2,530,527 $ 2,394,799

LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY

Current liabilities

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Deferred revenue 102,114 108,316

Liability for guest loyalty programs 94,574 89,954

Liability for guest loyalty program 89,013 94,574

Current portion of long-term debt — 499,268

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Operating lease liabilities 113,255 109,483

Liability for guest loyalty programs 43,266 47,381

Liability for guest loyalty program 40,607 43,266

Other liabilities 5,114 7,252

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Retained earnings 2,001,297 1,756,359

Total shareholders’ equity 35,598 154,660

Total liabilities and shareholders’ equity $ 2,394,799 $ 2,102,175

Total shareholders’ (deficit) equity ( 45,271 ) 35,598

Total liabilities and shareholders’ (deficit) equity $ 2,530,527 $ 2,394,799

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

10 unchanged sentences

Franchise agreement acquisition cost amortization 28,702 20,024 15,666

Gain on extinguishment of debt ( 4,416 ) — —

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

Impairment of long-lived assets — 3,736 —

(Gain) loss on sale of business and assets, net — ( 16,251 ) 530

Gain on sale of business and assets, net — — ( 16,251 )

Non-cash share-based compensation and other charges 43,250 46,809 42,974

Non-cash interest, investment, and affiliate (income) loss, net ( 8,747 ) 7,365 ( 13,509 )

Non-cash interest, investments, and affiliate (income) loss, net ( 7,282 ) ( 8,747 ) 7,365

Deferred income taxes ( 19,028 ) ( 1,336 ) ( 19,642 )

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CASH FLOWS FROM INVESTING ACTIVITIES

Investments in property and equipment ( 116,277 ) ( 89,954 ) ( 74,294 )

Investments in intangible assets ( 2,014 ) ( 3,631 ) ( 3,573 )

Proceeds from the sale of assets and business — 166,568 6,119

Asset acquisitions, net of cash paid — ( 856 ) —

Cash received from extinguishment of notes receivable — — 301

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

Proceeds from the termination of intangible assets — 44,711 —

Investments in other property and equipment ( 39,102 ) ( 47,717 ) ( 24,140 )

Investments in owned hotel properties ( 106,750 ) ( 68,560 ) ( 65,814 )

Contributions to investments in affiliates ( 52,768 ) ( 38,930 ) ( 3,148 )

Proceeds from the sale of affiliates 868 — 15,554

Purchases of investments for employee benefit plans ( 4,194 ) ( 4,185 ) ( 1,705 )

Proceeds from sales of investments for employee benefit plans 1,609 1,908 2,609

Purchases of equity securities ( 112,420 ) — —

Issuances of notes receivable ( 37,994 ) ( 4,323 ) ( 5,647 )

Purchases of equity securities — ( 112,420 ) —

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

Distributions from sales of affiliates 15,850 868 —

Collections of notes receivable 32,100 10,852 975

Proceeds from sales of equity securities 108,149 — —

Proceeds from the sale of assets and business — — 166,568

Proceeds from the termination of intangible assets — — 44,711

Other items, net ( 4,056 ) ( 5,396 ) ( 5,504 )

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CASH FLOWS FROM FINANCING ACTIVITIES

Net (repayments) borrowings pursuant to revolving credit facilities ( 131,500 ) 360,000 —

Proceeds from issuance of Term Loan 500,000 — —

Principal payments on long-term debt — ( 216,571 ) —

Net borrowings (repayments) pursuant to revolving credit facilities 111,500 ( 131,500 ) 360,000

Proceeds from the issuance of long-term debt 593,574 500,000 —

Repayment of long-term debt ( 500,000 ) — ( 216,571 )

Payments to extinguish acquired debt — — ( 55,975 )

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Dividends declared but not paid $ 13,471 $ 14,902 $ 13,136

Investments in property, equipment, and intangible assets recognized in accounts payable and accrued expense liabilities $ 23,284 $ 10,291 $ 5,383

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

Investment in property, equipment and intangible assets acquired in accounts payable and accrued liabilities $ 10,291 $ 5,383 $ 3,518

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

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Value Additional

Capital Accumulated Other Comprehensive Loss Treasury

Capital Accumulated Other Comprehensive Income (Loss) Treasury

Stock Retained

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Net income — — — — — 332,152 332,152

Other comprehensive income (loss), net of tax — — — 72 — — 72

Other comprehensive loss, net of tax — — — ( 637 ) — — ( 637 )

Share-based payment activity (1)

294,095 — 38,736 — 4,941 — 43,677

Dividends declared (1)

Dividends declared ($ 0.95 per share)

— — — — — ( 51,648 ) ( 51,648 )

2 unchanged sentences

Net income — — — — — 258,507 258,507

Other comprehensive income (loss), net of tax — — — ( 637 ) — — ( 637 )

Other comprehensive loss, net of tax — — — ( 460 ) — — ( 460 )

Share-based payment activity (1)

366,121 — 32,697 — 13,889 — 46,586

Dividends declared (1)

Dividends declared ($ 1.15 per share)

— — — — — ( 57,872 ) ( 57,872 )

Treasury purchases (2)

( 3,040,779 ) — — — ( 365,823 ) — ( 365,823 )

Balance as of December 31, 2023 49,526,245 $ 951 $ 330,750 $ ( 5,671 ) $ ( 2,046,791 ) $ 1,756,359 $ 35,598

Net income — — — — — 299,665 299,665

Other comprehensive income (loss), net of tax — — — ( 460 ) — — ( 460 )

Other comprehensive loss, net of tax — — — ( 522 ) — — ( 522 )

Share-based payment activity (1)

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Treasury purchases (2)

( 3,106,946 ) — — — ( 378,395 ) — ( 378,395 )

Balance as of December 31, 2024 46,856,567 $ 951 $ 370,201 $ ( 6,193 ) $ ( 2,411,527 ) $ 2,001,297 $ ( 45,271 )

(1) In May 2021, the Company resumed the payment of quarterly dividends, subject to future declarations by the Company's Board of Directors, and declared a quarterly cash dividend of $ 0.225 per share of common stock.

On December 6, 2021, the Company's Board of Directors approved a 6 % increase in the quarterly cash dividend and declared a quarterly cash dividend of $ 0.2375 per share of common stock.

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.

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

(1) During certain periods presented, accumulated dividends were paid to certain shareholders upon vesting of their PVRSUs, which are presented in Share-based payment activity.

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

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

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

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

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

Purchases of investments for employee benefit plans, investments in intangible assets, asset acquisitions, net of cash paid, and proceeds from sales of investments for employee benefit plans, which were previously presented in standalone financial statement line items, are now presented within other items, net in the consolidated statements of cash flows.

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

Acquisition of Radisson Hotels Americas

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

Refer to Note 24 for more information.

Revenue Recognition

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As a result, the marketing and reservation system expenses may not equal the marketing and reservation system revenues in a specific period but are expected to equal the revenues earned from the franchisees over time.

The Company’s franchise agreements provide the Company the right to advance monies to the franchise system when the needs of the franchisor system surpass the balances currently available.

The Company’s franchise agreements provide the Company the right to advance monies to the franchise system when the needs

of the franchisor system surpass the balances currently available.

The Company has the right to recover such advances in future periods through additional fee assessments or reduced spending.

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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 or certain vendors (refer to the Partnership Agreements section below).

The points, which the

Company accumulates and tracks on the members’ behalf, may be redeemed for free accommodations or other benefits (e.g.

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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At such time the points are redeemed for free accommodations or other benefits, the Company reimburses the franchisees or third parties based on a rate derived in accordance with the franchise or vendor agreement.

The loyalty points represent a performance obligation attributable to the usage of the points, and thus the revenues are recognized at the point in time when the loyalty points are redeemed by the members for benefits.

For the years ended December 31, 2024, 2023, and 2022, the loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $ 123.2 million, $ 93.1 million, and $ 109.3 million, respectively.

The transaction price is variable and determined in the period when the loyalty points are earned and the underlying gross room revenues are known.

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The qualified vendor revenues are recognized within platform and procurement services fees revenue in the consolidated statements of income.

The Company is a party to other non-franchising agreements that generate revenue, which are primarily SaaS arrangements for non-franchised hoteliers, and is presented as other revenue in the consolidated statements of income.

The Company is a party to other non-franchising agreements that generate revenue, which are primarily software as a service ("SaaS") arrangements for non-franchised hoteliers, and is presented as other revenue in the consolidated statements of income.

SaaS agreements typically include fixed consideration for installment and other initiation fees that are paid at the beginning of the contract, and variable consideration for recurring subscription revenue that is typically paid on a monthly basis.

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The Company manages 13 hotels (inclusive of four owned hotels).

The management agreements provide for the use of the Company's marks and hotel management services, include providing day-to-day management services in the operation of the hotels for the hotel owners.

The management agreements provide for the use of the Company's marks and hotel management services, which include providing day-to-day management services in the operation of the hotels for the hotel owners.

The fees generated from the management agreements are recognized to revenue over time as the hotel owners pay for access to these services for the duration of the management agreement, and include base and incentive management fees.

Base management fees are generally based on a percentage of the hotel's monthly gross revenue and invoiced and collected monthly.

Incentive management fees are generally based on a percentage of the hotel's operating profits as measured and invoiced on an annual basis.

Base management fees are generally based on a percentage of the hotel's monthly gross revenue and are invoiced and collected monthly.

Incentive management fees are generally based on a percentage of the hotel's operating profits and are invoiced on an annual basis.

Base and incentive management fee revenues are recognized within royalty, licensing and management fees in the consolidated statements of income.

Refer to Note 23 for more information on the management agreement guarantees.

The Company's management agreements include amounts that are contractually reimbursed to us by the hotel owners, either directly or indirectly, relating to certain costs and expenses that are paid by us in support of the operations of these hotel properties.

The reimbursements include payroll and related costs and certain other operating costs of the managed properties' operations, which are reimbursed to us by the hotel owners as the expenses are incurred.

The revenue related to these direct reimbursements is recognized based on the amount of the expenses incurred by the Company, which are recognized as other expenses from franchised and managed properties in the consolidated statements of operations.

The hotel owner typically reimburses us on a monthly basis, which results in no net effect to operating income or net income.

The revenues related to marketing and reservations are recognized over time and are intended to reimburse us, indirectly, for the expenses incurred in performing the marketing and reservation services.

These managed revenues are presented within other revenues from franchised and managed properties in the consolidated statements of operations.

The Company owned ten hotels and nine hotels as of December 31, 2023 and 2022, respectively, from which the Company generates revenues.

The Company's management agreements include amounts that are contractually reimbursed to the Company by the hotel owners, either directly or indirectly, relating to certain costs and expenses that are paid by the Company in support of the operations of these hotel properties.

The reimbursements include payroll costs and certain other operating costs of the managed properties' operations, which are reimbursed to the Company by the hotel owners as the expenses are incurred.

The hotel owner typically reimburses the Company on a monthly basis, which results in no net effect to operating income or net income.

The revenues related to marketing and reservations are recognized over time and are intended to reimburse the Company, indirectly, for the expenses incurred in performing the marketing and reservation services.

These managed revenues are presented within other revenues from franchised and managed properties in the consolidated statements of income.

The Company owned 12 hotels and 10 hotels as of December 31, 2024 and 2023, respectively, from which the Company generates revenues.

As a hotel owner, the Company has performance obligations to provide accommodations to hotel guests and in return, the Company earns a nightly fee for an agreed upon period that is generally payable at the time the hotel guest checks out of the hotel.

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These primarily consist of food and beverage, incidentals, and parking fees.

The hotel room night and other ancillary hotel ownership revenues are recognized within owned hotels revenue in the consolidated statements of income.

The hotel room night and other ancillary good and services revenues are recognized within owned hotels revenue in the consolidated statements of income.

The Company presents the taxes collected from customers and then remitted to governmental authorities on a net basis and, therefore, the taxes are excluded from revenues in the consolidated financial statements.

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Advertising Costs

The Company expenses advertising costs as the advertising occurs.

The Company expenses advertising costs as incurred.

Advertising expense was $ 194.6 million, $ 195.2 million, and $ 170.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.

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The Company has made certain acquisitions of hotel assets, which are recognized at the fair value of the consideration exchanged.

Refer to Note 24 for more information.

The Company acquires land parcels with the intention to develop hotels, which are recognized at cost within property and equipment, net in the consolidated balance sheets.

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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 from 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, which are recognized within selling, general and administrative expenses and other expenses from franchised and managed properties in the consolidated statements of income.

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There are judgments and assumptions in each of these fair value determinations, including our selection of comparable market transactions, the amount and timing of expected future cash flows, long-term growth rates, and sales capitalization rates.

These nonrecurring fair value measurements are classified as level three in the fair value measurement hierarchy, as the Company utilized unobservable inputs which are significant to the overall fair value.

These nonrecurring fair value measurements are classified as level three in the fair value measurement hierarchy, as the Company utilizes unobservable inputs which are significant to the overall fair value.

If the estimated fair value is less than the carrying value, then management uses its judgment to determine if the decline in value is other-than-temporary.

1 unchanged sentence

For declines in value that are deemed to be other-than-temporary, then the impairment charge is recognized to earnings.

The Company did not recognize any impairment charges on its investments in affiliates during the year ended December 31, 2023.

During the years ended December 31, 2022 and 2021, the Company recognized impairment charges of $ 0.2 million and $ 19.3 million, respectively, related to multiple investments in affiliates that are accounted for under the equity method of accounting.

The impairment charges were recognized within equity in net (gain) loss of affiliates in the consolidated statements of income.

The Company did not recognize any impairment charges on its investments in affiliates during the years ended December 31, 2024 and 2023.

During the year ended December 31, 2022, the Company recognized impairment charges of $ 0.2 million related to multiple investments in affiliates that are accounted for under the equity method of accounting.

The impairment charges were recognized within equity in net gain of affiliates in the consolidated statements of income.

Refer to Note 8 for additional information.

Investments in Equity Securities

The Company's investments in equity securities are recognized at fair value in the consolidated balance sheets, and the unrealized gains and losses on the investments in equity securities are recognized as other (gain) loss in the consolidated statements of income.

The Company's investments in equity securities are recognized at fair value in the consolidated balance sheets, and the unrealized gains and losses on the investments in equity securities are recognized as other loss (gain) in the consolidated statements of income.

Refer to Note 14 for additional information on the fair value measurements of the equity securities.

The realized gains and losses on the investments in equity securities are recognized upon the disposition of the equity securities using the specific identification method as other (gain) loss in the consolidated statements of income.

The realized gains and losses on the investments in equity securities are recognized upon the disposition of the equity securities using the specific identification method as other loss (gain) in the consolidated statements of income.

Foreign Operations

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The Company translates the financial statements of the consolidated entities whose functional currency is not the United States dollar into United States dollars.

The Company translates the assets and liabilities at the exchange rate in effect as of the financial statements date, and translates income statement accounts using the approximate weighted average exchange rate for the period.

The Company includes translation adjustments from foreign exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature as a separate component of shareholders’ equity (deficit).

The Company presents foreign currency transaction gains and losses, and the effect of inter-company transactions of a short-term or trading nature, within other (gain) loss in the consolidated statements of income.

For the years ended December 31, 2023, 2022, and 2021, the foreign currency transaction (gains) losses were $( 0.5 ) million, $ 1.0 million, and $ 0.4 million, respectively.

The Company translates the assets and liabilities at the exchange rate in effect as of the financial statement date, and translates income statement accounts using the approximate weighted average exchange rate for the period.

The Company presents foreign currency transaction gains and losses, and the effect of inter-company transactions of a short-term or trading nature, within other loss (gain) in the consolidated statements of income.

For the years ended December 31, 2024 and 2023, the foreign currency transaction gains were $ 2.1 million and $ 0.5 million, respectively.

For the year ended December 31, 2022, the foreign currency transaction losses were $ 1.0 million.

Share-Based Compensation

The Company recognizes compensation expense for share-based awards based on the fair value of the equity or liability instruments issued.

The compensation expense is recognized on a straight-line basis over the requisite service period.

The Company has stock compensation plans pursuant to which it is authorized to grant share-based awards, including restricted stock, stock options, stock appreciation rights, and performance-based share awards, to officers, key employees, and non-employee directors with contractual terms that are set by the Compensation and Management Development Committee of the Board of Directors.

Stock Options - The Company recognizes compensation expense related to the fair value of these awards on a straight-line basis over the requisite service period for the share-based awards that ultimately vest.

The fair value of the stock options is estimated on the grant date using the Black-Scholes options-pricing model.

Restricted Stock Units ("RSUs") - The Company recognizes compensation expense related to the fair value of the restricted stock awards on a straight-line basis over the requisite service period for the restricted stock awards that ultimately vest.

The fair value of the grants is measured by the market price of the Company’s common stock on the date of grant.

The restricted stock awards generally vest ratably over the service period beginning on the first anniversary of the grant date.

The restricted stock awards granted to retirement eligible non-employee directors are recognized over the shorter of the requisite service period or the length of time until retirement since the terms of the grant provide that awards will vest upon retirement.

Performance Vested Restricted Stock Units ("PVRSUs") - The Company has granted PVRSUs to certain employees.

The Company grants three types of PVRSU awards:

i) PVRSUs with performance conditions based on internal performance metrics, ii) PVRSUs with market conditions based on the Company's total shareholder return ("TSR") relative to a predetermined peer group, and iii) PVRSUs with both performance and market conditions.

The vesting of the PVRSU awards is contingent upon the Company achieving the internal performance and/or TSR targets over a specified period and the employees' continued employment over the service period.

The performance and market conditions affect the number of shares that will ultimately vest.

The fair value of the PVRSUs with performance conditions based on internal performance metrics is measured by the market price of the Company's common stock on the date of the award grant.

The Company recognizes compensation expense ratably over the requisite service period based on the Company's estimate of achieving the performance conditions.

The fair value of the PVRSUs with market conditions is estimated using a Monte Carlo simulation method as of the date of the award grant.

The Company recognizes compensation expense ratably over the requisite service period regardless of whether the market conditions are achieved and the awards ultimately vest.

The fair value of the PVRSUs with both performance and market conditions is estimated using a Monte Carlo simulation as of the date of the award grant.

The Company recognizes compensation expense ratably over the requisite service period based on the Company's estimate of achieving the performance conditions, with subsequent adjustments being made for the performance-based leveraging of any unvested PVRSUs, as necessary.

Over the life of the share-based award grant, the Company's estimate of the share-based compensation expense for the share-based awards with performance and/or service requirements will be adjusted so that compensation expense is recognized only for the share-based awards that will ultimately vest.

For the share-based award grants with market conditions, the fair value of the award is determined on the grant date and compensation expense is recognized on a straight-line basis over the life of the grant.

The expected forfeiture rate is calculated based on the number of shares that have historically been forfeited due to termination within one year of the grant date.

The Company determines if an arrangement is a lease, and the classification as either an operating lease or a financing lease, at lease inception.

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On the commencement date, operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term.

Operating lease right-of-use assets are further offset by any prepaid rent, lease incentives, and any initial direct costs incurred.

The operating lease right-of-use assets are further offset by prepaid rent, lease incentives, and initial direct costs incurred.

When a lease agreement does not provide an implicit rate, the Company utilizes its incremental borrowing rate based on the information available at the commencement date in determining the present value of the future minimum lease payments.

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The Company has made an election to not separate the lease and the non-lease components for all classes of underlying assets in which it is the lessee.

In addition, the Company has made an election to not recognize short-term leases with an initial term of 12 months or less in the consolidated balance sheet.

In addition, the Company has made an election to not recognize short-term leases with an initial term of 12 months or less in the consolidated balance sheets.

These short-term leases are expensed on a straight-line basis over the lease term.

Recently Adopted & Issued Accounting Standards

In October 2021, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") 2021-08 which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Revenue from Contracts with Customers (Topic 606) , as if the acquirer had originated the contracts at the date of the business combination.

ASU 2021-08 is effective for the annual reporting period beginning after December 15, 2022 and the interim periods within that fiscal years.

Early adoption is permitted.

The Company elected to early adopt ASU 2021-08 in the second quarter of 2022.

There was no retrospective impact to our consolidated financial statement as a result of the adoption.

ASU 2021-08 was applied in the accounting for the acquisition of Radisson Hotels Americas, and accordingly, the Company utilized the carrying values of contract assets and contract liabilities of Radisson Hotels Americas in application of acquisition accounting (refer to Note 24).

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

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

ASU 2022-02 is effective for the annual reporting period beginning after December 15, 2022 and the interim periods within that fiscal year.

Early adoption is permitted.

The Company adopted ASU 2022-02 on a prospective basis effective January 1, 2023, and applied in the accounting for loan modifications made for borrowers experiencing financial difficulty in the fourth quarter of 2023.

Refer to Note 4 for more information.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures ("ASU 2023-07").

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

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

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

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

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

The Company adopted ASU 2023-07 on a retrospective basis effective December 31, 2024.

The adoption of this standard did not have an impact on the Company's consolidated financial statements, but it did require enhanced segment disclosures in the notes to the consolidated financial statements.

Refer to Note 20 for more information.

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

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

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses ("ASU 2024-03").

ASU 2024-03 requires public entities to provide detailed disclosure of the income statement expenses in the footnotes to the consolidated financial statements.

ASU 2024-03 does not require any changes to the expense captions on the face of the consolidated income statement.

ASU 2024-03 is effective for the annual reporting period beginning after December 15, 2026 and for the interim periods within the annual reporting period beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the potential impact that ASU 2024-03 will have on the Company's consolidated financial statements.

Contract Liabilities

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

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

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

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

Loyalty points are typically redeemed within three years of issuance.

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

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

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

Capitalized Franchise Agreement Costs

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The franchise agreement acquisition cost intangible assets are amortized on a straight-line basis over the estimated benefit period of the arrangement as a reduction to royalty, licensing and management fees and other revenues from franchised and managed properties in the consolidated statements of income.

For the years ended December 31, 2023, 2022, and 2021, impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, were $ 7.3 million, $ 2.5 million, and $ 11.1 million, respectively, which are recognized in selling, general and administrative expenses and other expenses from franchised and managed properties in the consolidated statements of income.

Disaggregation of Revenue

The following table presents our revenues by over time and point in time recognition:

Year Ended December 31, 2023

(in thousands) Over time Point in time Total

Royalty, licensing and management fees $ 502,164 $ 11,248 $ 513,412

Initial franchise fees 27,787 — 27,787

Platform and procurement services fees 72,275 2,839 75,114

Owned hotels 72,132 25,509 97,641

Other 46,051 — 46,051

Other revenues from franchised and managed properties 705,114 79,046 784,160

Total revenues $ 1,425,523 $ 118,642 $ 1,544,165

Year Ended December 31, 2022

(in thousands) Over time Point in time Total

Royalty, licensing and management fees $ 471,601 $ 158 $ 471,759

Initial franchise fees 28,074 — 28,074

Platform and procurement services fees 60,768 3,032 63,800

Owned hotels 55,428 15,398 70,826

Other 64,740 — 64,740

Other revenues from franchised and managed properties 596,668 106,082 702,750

Total revenues $ 1,277,279 $ 124,670 $ 1,401,949

Year Ended December 31, 2021

(in thousands) Over time Point in time Total

Royalty, licensing and management fees $ 397,218 $ — $ 397,218

Initial franchise fees 26,342 — 26,342

Platform and procurement services fees 47,878 2,515 50,393

Owned hotels 32,191 5,642 37,833

Other 28,669 — 28,669

Other revenues from franchised and managed properties 465,184 63,659 528,843

Total revenues $ 997,482 $ 71,816 $ 1,069,298

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

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

For the years ended December 31, 2023, 2022, and 2021, the loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $ 93.1 million, $ 109.3 million, and $ 66.2 million, respectively.

For the year ended December 31, 2024, the net recoveries from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, was $ 0.4 million which is recognized in selling, general and administrative expenses and other expenses from franchised and managed properties in the consolidated statements of income.

For the years ended December 31, 2023 and 2022, the net impairments from adverse franchise agreement activity, including terminations and significant delinquencies in construction or invoice payments, were $ 7.3 million and $ 2.5 million, respectively, which are recognized in selling, general and administrative expenses and other expenses from franchised and managed properties in the consolidated statements of income.

Other Revenues

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

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

As presented in Note 20, the Corporate & Other segment revenue amounts were $ 110.9 million, $ 108.9 million, and $ 45.7 million for the years ended December 31, 2023, 2022, and 2021, respectively, which are presented in other revenues and owned hotels revenues in the consolidated statements of income.

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

Royalty, licensing and management fees and other revenues from franchised and managed properties are presented net of intersegment revenues of $ 11.1 million, $ 5.5 million, and $ 2.9 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Prepaid Expenses and Other Current Assets

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Notes Receivable

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

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

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

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Beginning balance $ 8,616 $ 10,172

Provision for credit losses 763 ( 938 )

(Reversal) provision for credit losses ( 609 ) 763

Recoveries ( 676 ) ( 2,319 )

Ending balance $ 7,331 $ 8,616

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

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

During the years ended December 31, 2024 and 2023, the recoveries were primarily associated with cash collections pursuant to a settlement agreement with a borrower.

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

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

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

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

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

value of the note receivable loan.

The allowances for credit losses attributable to the collateral-dependent note receivable loan increased by $ 1.3 million from $ 0.9 million as of December 31, 2022 to $ 2.2 million as of December 31, 2023.

During the year ended December 31, 2023, the recoveries were primarily associated with cash collections pursuant to a settlement agreement with a borrower.

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

Refer to Note 24 regarding the 2022 asset acquisition accounting.

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

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

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

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The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $ 103.1 million and $ 95.1 million as of December 31, 2024 and 2023, respectively.

The Company has determined that it is not the primary beneficiary of these VIEs.

For collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the respective note receivable and the limited commitments which are addressed in Note 23.

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

For the collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the respective note receivable and the limited commitments which are addressed in Note 23.

Accounts Receivable

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During the year ended December 31, 2024, the Company recognized provisions for credit losses on accounts receivable of $ 11.0 million in selling, general and administrative expenses, and $ 9.7 million in other expenses from franchised and managed properties, in the consolidated statements of income.

During the year ended December 31, 2022, the Company recognized reversals of provisions for credit losses on accounts receivable of $ 0.4 million in selling, general and administrative expenses, and provisions for credit losses on accounts receivable of $ 1.4 million in other expenses from franchised and managed properties, in the consolidated statements of income.

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

For the years ended December 31, 2024 and 2023, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 14.4 million and $ 0.6 million, respectively.

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Property and equipment, net $ 604,345 $ 493,478

For the years ended December 31, 2023, 2022, and 2021, depreciation expense, excluding the activity attributable to other expenses from franchised and managed properties, was $ 20.9 million, $ 14.5 million, and $ 16.5 million, respectively.

For the years ended December 31, 2024, 2023, and 2022, the Company recognized depreciation and amortization expense of $ 23.0 million, $ 20.9 million, and $ 14.5 million, respectively, in depreciation and amortization in the consolidated statements of income.

Additionally, for the years ended December 31, 2024, 2023, and 2022, the Company recognized depreciation and

amortization expense of $ 25.6 million, $ 32.2 million, and $ 29.4 million, respectively, in other expenses from franchised and managed properties in the consolidated statements of income.

For the years ended December 31, 2024, 2023, and 2022, the Company recognized amortization of capitalized software development costs of $ 22.8 million, $ 30.3 million, and $ 26.6 million, respectively, which are included in the total depreciation and amortization expense amounts that are disclosed in the paragraph above.

As of December 31, 2024 and 2023, unamortized capitalized software development costs were $ 65.3 million and $ 50.3 million, respectively.

For the years ended December 31, 2023, 2022, and 2021, the amortization of capitalized software development costs was $ 30.3 million, $ 26.6 million, and $ 14.1 million, respectively, which is included in the other expenses from franchised and managed properties and depreciation and amortization line items in the consolidated statements of income.

Goodwill, Impairment of Assets, and Sale of Business and Assets

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Goodwill $ 227,765 $ 226,231

Goodwill arising from the Radisson Hotels Americas acquisition — 1,534

Total goodwill, gross carrying amount 227,765 227,765

Accumulated impairment losses ( 7,578 ) ( 7,578 )

Goodwill, net of accumulated impairment losses 218,653 159,196

Goodwill arising from the Radisson Hotels Americas acquisition (refer to Note 24)

Goodwill, net carrying amount $ 220,187 $ 220,187

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Real Estate Asset Sales

During the year ended December 31, 2022, four separately owned Cambria hotel assets or land parcels met the held for sale classification and the Company completed the sale transactions to third-party franchisees, which resulted in the derecognition of

the assets from the consolidated balance sheets.

During the year ended December 31, 2022, the Company recognized a gain on sale of business and assets, net for the four sale transactions of $ 16.2 million in the Corporate & Other segment.

Commercial Office Building

On December 30, 2014, a court awarded the Company title to a commercial office building as settlement of a portion of an outstanding loan receivable for which the building was pledged as collateral.

In 2021, the Company committed to a plan to sell the commercial office building, which met the held for sale classification in the third quarter of 2021.

The commercial office building was sold in November 2021 for $ 6.1 million, which resulted in a gain of $ 13 thousand which is presented in gain on sale of business and assets, net in the consolidated statements of income.

The financial results of the commercial office building are included in the Corporate & Other segment in Note 20.

Intangible Assets

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(1) Represents the purchase price assigned to long-term franchise contracts.

The unamortized balance relates primarily to the franchise rights established from the Radisson Hotels Americas Transaction, as well as WoodSpring franchise rights active since acquisition.

The unamortized balance relates primarily to the franchise rights established from the Radisson Hotels Americas Transaction, as well as the active WoodSpring franchise rights since the acquisition.

The franchise rights are being amortized over useful lives ranging from 12 to 15 years on a straight-line basis.

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The gross and accumulated amortization amounts are written off upon full amortization recognition, including the termination of an associated franchise agreement.

Refer to Note 2 for a discussion of the impairments recognized.

(3) Represents definite-lived trademarks and other various amortizing assets, including management agreements, which are generally amortized on a straight-line basis over a period of 10 years to 30 years.

(4) Represents software licenses capitalized under a SaaS agreement, which are generally amortized on a straight-line basis over an average period of 3 years.

(5) Represents the purchase price assigned to the Radisson, WoodSpring, and Suburban trademarks established at the time of their respective acquisitions.

(3) Represents definite-lived trademarks and other amortizing assets, including management agreements, which are generally amortized on a straight-line basis over a period of 10 years to 30 years.

(4) Represents software licenses that have been capitalized under a SaaS agreement, which are generally amortized on a straight-line basis over an average period of 3 years.

(5) Represents the purchase price assigned to the Radisson, WoodSpring, and Suburban trademarks that were recognized at the time of their respective acquisitions.

The trademarks are non-amortizing assets because they are expected to generate future cash flows for an indefinite period of time.

For the years ended December 31, 2023, 2022, and 2021, amortization expense on the amortizing intangible assets was $ 42.5 million, $ 35.1 million, and $ 25.2 million, respectively.

The estimated annual amortization expense on the amortizing intangible assets for each of the next five years is as follows:

For the years ended December 31, 2024, 2023, and 2022, amortization on the amortizing intangible assets was $ 50.9 million, $ 42.5 million, and $ 35.1 million, respectively.

The estimated annual amortization on the amortizing intangible assets for each of the next five years is as follows:

(in thousands)

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Investments in Affiliates

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

As of December 31, 2024 and 2023, the Company had total investments in affiliates in the consolidated balance sheets of $ 117.0 million and $ 70.6 million, respectively, which included investments in affiliates that represent VIEs of $ 104.2 million and $ 59.4 million, respectively.

The Company has determined that it is not the primary beneficiary of any of these VIEs, however the

Company does exercise significant influence through its equity ownership and as a result, the investments in these affiliates are accounted for under the equity method of accounting.

During the years ended December 31, 2023, 2022, and 2021, the Company recognized losses totaling $ 3.4 million, $ 3.7 million, and $ 18.9 million, respectively, from these investment that represent VIEs.

The Company's maximum exposure to losses related to its investments in the VIEs is limited to the total of its respective equity investment as well as certain limited payment guaranties, which are described in Note 23 of these consolidated financial statements.

The Company recognized no impairment charges during the year ended December 31, 2023.

During the years ended December 31, 2022 and 2021, the Company recognized impairment charges of $ 0.2 million and $ 19.3 million, respectively, related to certain equity method investments.

The Company estimated the fair value of each investment on an individual basis and derived the fair value from a combination of observable prices from offers received for either the underlying collateral or the ownership interest of the unconsolidated affiliate, comparable market transactions, and DCF techniques to project the cash flows for the investment based upon the underlying property.

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

During the years ended December 31, 2024, 2023, and 2022, the Company recognized gains of $ 6.9 million, and losses of $ 3.4 million and $ 3.7 million, respectively, from these investments that represent VIEs.

During the years ended December 31, 2024 and 2023, the Company recognized no impairment charges related to its equity method investments.

During the year ended December 31, 2022, the Company recognized impairment charges of $ 0.2 million related to certain equity method investments.

flows for the investment based upon the underlying property.

There are judgments and assumptions in each of these fair value determinations, including our selection of comparable market transactions, the amount and timing of the expected future cash flows, long-term growth rates, and sales capitalization rates.

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As a result, the Company recognized an impairment charge equal to the difference between the carrying value and the estimated fair value for each investment.

During the years ended December 31, 2023 and 2021, the Company received distributions of $ 0.9 million and $ 15.6 million, respectively, from the sales of ownership interests or from the distributions from the sales of the underlying assets of the affiliates, which resulted in no net gains (losses) and a $ 6.9 million net gain, respectively.

The Company received no distributions and therefore recognized no net gains (losses) during the year ended December 31, 2022.

During the year ended December 31, 2024, the Company received distributions from the sale of affiliates of $ 15.9 million and recognized net gains of $ 7.2 million, which was recognized in equity in net gain of affiliates in the consolidated statements of income.

During the year ended December 31, 2023, the Company received distributions of $ 0.9 million which resulted in no net gains (losses).

During the year ended December 31, 2022, the Company received no distributions and therefore recognized no net gains (losses).

The Company's ownership interests in its affiliates were as follows:

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City Market Hotel Development, LLC (2)

CS Woodlands, LLC (2)

Wood Boulevard, LLC 75 % 75 %

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EH Brownsville JV, LLC 80 % 80 %

EH Wichita JV, LLC 80 % — %

CH East Avenue, LLC 65 % — %

EH Salem JV, LLC 80 % — %

EH Clarksville JV, LLC 80 % — %

(1) Non-VIE investments.

(2) During the year ended December 31, 2023, the Company received distributions resulting from the sale of the underlying assets of the affiliate.

(2) During the year ended December 31, 2024, the Company received a liquidating distribution as a result of the affiliate selling its underlying assets.

The following tables present summarized financial information for all of the unconsolidated joint ventures in which the Company holds an investment in affiliate that is accounted for under the equity method of accounting:

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Operating income $ 14,199 $ 12,504 $ 7,977

Income (loss) from continuing operations $ 314 $ 1,837 $ ( 5,227 )

(Loss) income before income taxes $ ( 1,203 ) $ 314 $ 1,837

Net loss $ ( 3,488 ) $ ( 1,255 ) $ ( 1,058 )

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Initial franchise fees $ 111,240 $ 128,935

Loyalty programs 98,225 93,419

Loyalty program 110,371 98,225

System implementation fees 3,601 3,912

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Long-term portion $ 132,259 $ 133,501

Refer to Note 2 for the revenue recognition policies resulting in the deferral of revenue, including loyalty programs and the relationship between the loyalty programs deferred revenue and the liability for the guest loyalty programs.

Refer to Note 2 for the revenue recognition policies resulting in the deferral of revenue, including the relationship between the loyalty program deferred revenue and the liability for the guest loyalty program.

Debt consisted of the following:

(in thousands)

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

$ 499,268 $ —

$ 400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 3.0 million and $ 3.6 million at December 31, 2024 and December 31, 2023, respectively

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446,300 445,690

$ 850 million senior unsecured revolving credit facility with an effective interest rate of 6.54 %, less deferred issuance costs of $ 1.9 million and $ 1.8 million at December 31, 2023 and December 31, 2022, respectively

$ 600 million senior unsecured notes due 2034 ("2024 Senior Notes") with an effective interest rate of 6.11 %, less a discount and deferred issuance costs of $ 11.2 million at December 31, 2024

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

$ 1 billion senior unsecured revolving credit facility with an effective interest rate of 6.10 %, less deferred issuance costs of $ 3.6 million and $ 1.9 million at December 31, 2024 and December 31, 2023, respectively

336,420 226,621

Economic development loans with an effective interest rate of 3 % at December 31, 2022

Total debt $ 1,768,526 $ 1,568,019

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(in thousands) Senior Notes Revolving Credit

Facility Term Loan Total

Facility Total

2025 $ — $ — $ —

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Total payments $ 1,432,106 $ 336,420 $ 1,768,526

Senior Unsecured Credit Facility

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

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

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

The pricing and other terms applicable to the Increased Commitments are the same as those applicable to the existing revolving loan commitments that were in effect prior to the Amendment.

Except as amended by the Amendment, the remaining terms of the unsecured credit facility remain in full force and effect.

2023 Term Loan

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.

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.

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.

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").

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.

Economic Development Loans

The Company entered into economic development agreements with various governmental entities in conjunction with the relocation of its corporate headquarters in April 2013.

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 were included 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.

As a result, during the year ended December 31, 2023, the Company derecognized the $ 4.4 million economic development loans debt from the consolidated balance sheets and recognized a gain on extinguishment of debt in the consolidated statements of income.

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.

Non-Qualified Retirement, Savings, and Investment Plans

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In 2002, the Company adopted the Choice Hotels International, Inc.

Executive Deferred Compensation Plan ("EDCP") which became effective January 1, 2003.

Executive Deferred Compensation Plan ("EDCP") which became effective on January 1, 2003.

Under the EDCP, certain executive officers may defer a portion of their salary into an irrevocable trust and invest these amounts in a selection of available diversified investment options.

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The Non-Qualified Plan allows certain employees who do not participate in the EDCP to defer a portion of their salary and invest these amounts in a selection of available diversified investment options.

Under the EDCP and Non-Qualified Plan, (together, the "Deferred Compensation Plan"), the Company recognized current and long-term deferred compensation and retirement plan liabilities of $ 47.5 million and $ 37.4 million as of December 31, 2023 and 2022, respectively, related to these deferrals and credited investment returns under these two deferred compensation plans.

Compensation expense is recognized in selling, general and administrative expenses in the consolidated statements of income based on the change in the deferred compensation obligations related to the earnings credited to the participants as well as the changes in the fair value of the diversified investments.

For the years ended December 31, 2023 and 2021, the increase in compensation expense recognized in selling, general and administrative expenses was $ 7.0 million and $ 6.1 million, respectively.

For the year ended December 31, 2022, the decrease in compensation expense recognized in selling, general and administrative expenses was $ 5.3 million.

Under the Deferred Compensation Plan, the Company has invested the employee salary deferrals in diversified long-term investments which are intended to provide investment returns that offset the earnings credited to the participants.

As of December 31, 2023 and 2022, the employee benefit plans investments held in the trusts totaled $ 41.6 million and $ 32.4 million, respectively, and are recognized at fair value, which is based on quoted market prices.

As of December 31, 2023, the Company expects $ 1.8 million of the assets held in the trusts to be distributed during the year ended December 30, 2024 to plan participants.

These investments are considered trading securities and therefore, the changes in the fair value of the diversified assets is included in other (gain) loss in the consolidated statements of income.

During the years ended December 31, 2023 and 2021, the Company recognized investment gains of $ 6.6 million and $ 5.6 million, respectively.

During the year ended December 31, 2022, the Company recognized investment losses of $ 6.0 million.

The Deferred Compensation Plan held no shares of the Company's common stock as of December 31, 2023 and 2022.

Under the EDCP and the Non-Qualified Plan (together, the "Deferred Compensation Plan"), the Company recognized current and long-term deferred compensation and retirement plan liabilities of $ 55.0 million and $ 47.5 million as of December 31, 2024 and 2023, respectively, related to the deferrals and the credited investment returns under these two deferred compensation plans.

Compensation expense or benefit is recognized in selling, general and administrative expenses in the consolidated statements of income based on the change in the deferred compensation and retirement plan obligations related to the earnings credited to the participants as well as the changes in the fair value of the diversified investments.

For the years ended December 31, 2024 and 2023, the Company recognized compensation expense of $ 8.2 million and $ 7.0 million, respectively, in selling, general and administrative expenses in the consolidated statements of income.

For the year ended December 31, 2022, the Company recognized compensation benefit of $ 5.3 million in selling, general and administrative expenses in the consolidated statements of income.

Fair Value Measurements

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

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

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

Fair Value Measurements at Reporting Date Using

(in thousands) Total Level 1 Level 2 Level 3

December 31, 2023

As of December 31, 2024

Equity securities $ — $ — $ — $ —

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Total $ 49,326 $ 43,887 $ 5,439 $ —

December 31, 2022

As of December 31, 2023

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

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Total $ 157,951 $ 153,184 $ 4,767 $ —

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

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

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

Investments in Equity Securities

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

There have been no dispositions and therefore no realized gains or losses in equity securities during the year ended December 31, 2023.

For the year ended December 31, 2024, the Company sold approximately 1.4 million shares of equity securities of another issuer for $ 108.1 million and recognized a net loss of $ 8.3 million on the sales of equity securities.

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

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

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

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

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

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

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

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

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

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

2020 Senior Notes $ 445,690 $ 389,241 $ 445,080 $ 384,647

2019 Senior Notes $ 396,440 $ 355,068 $ 395,838 $ 349,368

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

2019 Senior Notes Due 2029 $ 397,042 $ 371,600 $ 396,440 $ 355,068

2020 Senior Notes Due 2031 $ 446,300 $ 405,351 $ 445,690 $ 389,241

2024 Senior Notes Due 2034 $ 588,764 $ 601,836 $ — $ —

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

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

The total income before income taxes, classified by source of income, was as follows:

The Company's income before income taxes, classified by source of income, was as follows:

Year Ended December 31,

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Partnership interests 5,130 5,516

Capitalized research and experimental expenditures 44,946 30,781

Foreign net operating losses 7,870 7,564

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The Company has $ 24.7 million of state income tax credit carryforwards.

It is unlikely that we will realize these benefits.

It is unlikely that the Company will realize these benefits.

Accordingly, the Company has provided a full valuation allowance against these carryforwards.

The Company has also provided a tax-effected valuation allowance of $ 5.0 million on its foreign deferred tax assets because the Company believes that it is unlikely that we will realize some of these benefits.

As of December 31, 2024, the Company had gross foreign net operating losses ("NOLs") of $ 29.3 million, all of which have indefinite carryforward lives.

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State income taxes, net of federal tax benefit 3.5 % 3.2 % 3.0 %

Benefits related to foreign operations 0.3 % 0.1 % ( 0.2 ) %

Expenses (benefits) related to compensation, net 1.0 % 1.0 % 0.5 %

Expenses related to foreign operations 0.7 % 0.3 % 0.1 %

Expenses related to compensation, net 1.3 % 1.0 % 1.0 %

Unrecognized tax positions ( 0.8 ) % 0.5 % 0.2 %

International Reorganization — % — % 1.1 %

Tax credits ( 2.4 ) % ( 2.4 ) % ( 1.5 ) %

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The effective income tax rates for the years ended December 31, 2024, 2023, and 2022 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.

The effective income tax rate for the year ended December 31, 2021 was also higher due to a reduction in the net carrying value of its Dutch deferred tax asset as a result of an international reorganization.

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.

For the years ended December 31, 2024, 2023, and 2022, the Company’s gross unrecognized tax benefits totaled $ 6.9 million, $ 13.4 million, and $ 11.9 million, respectively.

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It is reasonably possible that the Company’s unrecognized tax benefits could decrease within the next 12 months by as much as $ 2.6 million due to settlements and the expiration of applicable statutes of limitations.

The Company's federal income tax returns for tax years 2015 and 2016 are currently under examination by the Internal Revenue Service for a tax credit refund claim.

The Company's federal income tax returns for the 2017 and 2018 tax years are also under examination by the Internal Revenue Service.

Further, the Company's federal income tax returns for the 2020, 2021, 2022 and 2023 tax years are subject to examination by the Internal Revenue Service.

The Company's federal income tax returns for the 2021, 2022, 2023, and 2024 tax years are subject to examination by the Internal Revenue Service.

The Company's policy is to recognize interest and penalties related to income tax matters in the provision for income taxes.

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The Company had $ 0.3 million and $ 0.1 million of accrued interest and penalties as of December 31, 2024 and 2023, respectively.

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, 2023.

Share-Based Compensation and Capital Stock

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The Company’s policy allows the issuance of new common stock shares or treasury shares to satisfy the share-based awards.

For the year ended December 31, 2024, the following table presents a summary of the share-based award activity:

Stock Options Restricted Stock Performance Vested

Restricted Stock Units

Options Weighted Average Exercise Price Weighted

Remaining Contractual

Life Shares Weighted

Average Grant

Date Fair Value Shares Weighted

Average Grant

Date Fair Value

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

Granted 78,988 111.94 69,249 115.57 147,943 115.04

Performance-based leveraging* — — — — 31,468 116.43

Exercised/vested ( 249,059 ) 80.03 ( 59,266 ) 111.50 ( 146,675 ) 107.54

Expired — — — — ( 8,028 ) 108.79

Forfeited ( 1,929 ) 126.23 ( 16,246 ) 124.09 ( 15,682 ) 131.59

Outstanding as of December 31, 2024 771,641 $ 111.15 6.2 years 355,405 $ 136.67 467,521 $ 137.74

Options exercisable as of December 31, 2024 481,522 $ 104.67 5.3 years

* The outstanding PVRSUs have been adjusted by 31,468 net units during the year ended December 31, 2024, due to an increase in the outstanding PVRSUs as a result of the Company exceeding the targeted performance conditions.

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

For the Year Ended December 31,

(in thousands) 2024 2023 2022

Stock options $ 5,265 $ 5,816 $ 4,674

During the years ended December 31, 2023, 2022, and 2021, the Company granted approximately 0.1 million, 0.2 million, and 0.3 million stock options to certain employees of the Company at a fair value of approximately $ 3.8 million, $ 7.4 million, and $ 7.9 million, respectively.

Restricted stock 12,728 13,774 14,349

Performance vested restricted stock units 20,447 20,924 21,436

Total share-based compensation expense $ 38,440 $ 40,514 $ 40,459

The following table as of December 31, 2024 is a summary of the total unrecognized compensation expense related to the share-based awards that have not yet vested and the related weighted average remaining amortization periods over which the compensation expense will be recognized:

(in thousands) Unrecognized Compensation Expense on Unvested Awards Weighted Average Remaining Amortization Period

Stock options $ 5,708 1.8 years

Restricted stock 23,601 2.2 years

Performance vested restricted stock units 24,661 1.9 years

Total $ 53,970

Stock Options

The following table is a summary of the activity related to the stock option grants:

For the Year Ended December 31,

2024 2023 2022

Number of options granted 78,988 88,733 172,441

Fair value of options granted (in thousands) $ 3,069 $ 3,779 $ 7,356

Weighted average exercise price per share $ 111.94 $ 102.90 $ 94.97

Total intrinsic value of stock options exercised (in thousands) $ 12,185 $ 9,170 $ 5,390

Total fair value of stock options vested (in thousands) $ 5,032 $ 4,857 $ 3,591

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

As of December 31, 2024, the aggregate intrinsic value of the stock options outstanding and exercisable was $ 24.5 million and $ 18.3 million, respectively.

The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

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The dividend yield and the risk-free interest rate are calculated on the grant date based on the then-current dividend rate and the risk-free interest rate for the period corresponding to the expected life of the stock option.

The Company recognizes compensation expense related to the fair value of these awards on a straight-line basis over the requisite service period for the share-based awards that ultimately vest.

As of December 31, 2023, the aggregate intrinsic value of the stock options outstanding and exercisable was $ 15.7 million and $ 13.7 million, respectively.

For the years ended December 31, 2023, 2022, and 2021, the total intrinsic value of the stock options exercised was $ 9.2 million, $ 5.4 million, and $ 10.6 million, respectively.

During the years ended December 31, 2023, 2022, and 2021, the Company received $ 6.3 million, $ 3.8 million, and $ 11.1 million in proceeds from the exercise of approximately 0.1 million, 0.1 million, and 0.2 million employee stock options, respectively.

The following table summarizes information about the stock options outstanding as of December 31, 2023:

Options Outstanding Options Exercisable

Range of Exercise Prices Number Outstanding at December 31, 2023 Weighted Average

Contractual Life

(in Years) Weighted

Exercise Price Number Exercisable at December 31, 2023 Weighted

Exercise Price

$ 55.01 to $ 65.00

62,946 0.2 $ 60.74 62,946 $ 60.74

$ 65.01 to $ 85.00

211,358 1.8 81.30 211,358 81.30

$ 85.01 to $ 91.28

153,692 6.2 91.28 115,257 91.28

$ 91.29 to $ 104.87

267,361 7.2 104.87 133,206 104.87

$ 104.88 to $ 117.98

16,667 8.6 117.98 4,166 117.98

$ 117.99 to $ 146.68

231,617 8.5 138.42 37,071 146.68

943,641 5.7 $ 102.90 564,004 $ 91.18

Restricted Stock

The following table is a summary of the activity related to restricted stock grants:

The following table is a summary of the activity related to the restricted stock grants:

For the Year Ended December 31,

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Fair value of the restricted shares vested (in thousands) $ 6,804 $ 11,134 $ 13,784

The Company recognizes compensation expense related to the fair value of the restricted stock awards on a straight-line basis over the requisite service period for the restricted stock awards that ultimately vest.

The fair value of the grants is measured by the market price of the Company’s common stock on the date of grant.

The restricted stock awards generally vest ratably over the service period beginning on the first anniversary of the grant date.

Performance Vested Restricted Stock Units

The Company has granted performance vested restricted stock units (“PVRSU”) to certain employees.

The Company grants three types of PVRSU awards:

The performance and market conditions affect the number of shares that will ultimately vest.

During the year ended December 31, 2023, the Company granted PVRSUs with performance conditions, PVRSUs with market conditions, and PVRSUs with performance and market conditions, with requisite service periods between 9 months and 48 months and with award vesting ranges generally between 0 % and 230 % of the initial units granted.

The fair value of the PVRSUs with performance conditions based on internal performance metrics is measured by the market price of the Company's common stock on the date of the award grant.

The Company recognizes compensation expense ratably over the requisite service period based on the Company's estimate of achieving the performance conditions.

The Company monitors its current results and forecasts of the relevant internal performance metrics and, as necessary, adjusts the performance-based leveraging of any unvested PVRSUs.

The fair value of the PVRSUs with market conditions is estimated using a Monte Carlo simulation method as of the date of the award grant.

The Company recognizes compensation expense ratably over the requisite service period regardless of whether the market conditions are achieved and the awards ultimately vest.

The fair value of the PVRSUs with both performance and market conditions is estimated using a Monte Carlo simulation as of the date of the award grant.

The Company has currently estimated that between 0 % and 267 % of the various award targets will be achieved.

The following table is a summary of the activity related to the PVRSU grants:

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9 - 60 months

During the year ended December 31, 2023, 119,751 PVRSUs vested at a fair value of $ 17.4 million.

During the year ended December 31, 2022, there were no PVRSUs vested.

During the year ended December 31, 2021, 3,986 PVRSUs vested at a fair value of $ 0.3 million and an additional 920 units were awarded because the Company's performance exceeded the conditions provided in the PVRSU awards.

During the years ended December 31, 2023, 2022, and 2021, the number of PVRSUs that expired was 0 shares, 78,370 shares, and 72,944 shares, respectively, as a result of the Company's operating results not achieving the performance conditions contained in the PVRSU awards.

For the years ended December 31, 2023, 2022, and 2021, the following tables present a summary of the share-based award activity during those respective years:

Stock Options Restricted Stock Performance Vested

Restricted Stock Units

Options Weighted Average Exercise Price Weighted

Remaining Contractual

Life Shares Weighted

Average Grant

Date Fair Value Shares Weighted

Average Grant

Date Fair Value

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

Granted 88,733 123.62 65,991 123.65 110,636 128.71

Performance-based leveraging* — — — — 46,934 139.47

Exercised/vested ( 143,357 ) 57.72 ( 90,220 ) 96.14 ( 119,751 ) 145.41

Expired ( 1,054 ) 146.68 — — — —

Forfeited ( 11,328 ) 124.94 ( 13,202 ) ( 118.56 ) ( 16,504 ) 131.91

Outstanding as of December 31, 2023 943,641 $ 102.90 5.6 years 361,668 $ 136.05 458,495 $ 136.14

Options exercisable as of December 31, 2023 564,004 $ 91.18 4.3 years

* The outstanding PVRSUs have been adjusted by 46,934 net units during the year ended December 31, 2023, due to an increase in the outstanding PVRSUs as a result of the Company exceeding the targeted performance conditions.

Stock Options Restricted Stock Performance Vested

Restricted Stock Units

Options Weighted Average Exercise Price Weighted

Remaining Contractual

Life Shares Weighted

Average Grant

Date Fair Value Shares Weighted

Average Grant

Date Fair Value

Outstanding as of January 1, 2022 910,944 $ 83.14 236,599 $ 92.60 412,642 $ 114.70

Granted 172,441 143.91 273,777 143.76 111,585 181.91

Performance-based leveraging* — — — — ( 3,484 ) 121.34

Exercised/vested ( 66,192 ) 57.55 ( 96,834 ) 87.34 — —

Expired ( 986 ) 51.49 — — ( 78,370 ) 81.15

Forfeited ( 5,560 ) 128.86 ( 14,443 ) 106.35 ( 5,193 ) 132.06

Outstanding as of December 31, 2022 1,010,647 $ 94.97 5.6 years 399,099 $ 128.47 437,180 $ 140.05

Options exercisable as of December 31, 2022 523,856 $ 76.77 3.3 years

* The outstanding PVRSUs have been adjusted by 3,484 net units during the year ended December 31, 2022, due to a decrease in the outstanding PVRSUs as a result of the Company partially meeting the targeted performance conditions, partially offset by an increase in the outstanding PVRSUs due to the Company exceeding the targeted performance conditions for the PVRSUs that were granted in prior periods.

Stock Options Restricted Stock Performance Vested

Restricted Stock Units

Options Weighted Average Exercise Price Weighted

Remaining Contractual

Life Shares Weighted

Average Grant

Date Fair Value Shares Weighted

Average Grant

Date Fair Value

Outstanding as of January 1, 2021 819,610 $ 70.48 304,439 $ 84.48 321,752 $ 109.25

Granted 280,811 104.87 61,009 111.25 98,544 108.75

Performance-based leveraging* — — — — 74,832 107.51

Exercised/vested ( 185,437 ) 59.61 ( 109,640 ) 80.83 ( 3,986 ) 81.55

Expired — — — — ( 72,944 ) 81.55

Forfeited ( 4,040 ) 104.87 ( 19,209 ) 90.23 ( 5,556 ) 55.76

Outstanding as of December 31, 2021 910,944 $ 83.14 5.5 years 236,599 $ 92.60 412,642 $ 114.70

Options exercisable as of December 31, 2021 421,592 $ 67.09 2.8 years

* The outstanding PVRSUs were increased by 74,832 units during the year ended December 31, 2021, due to the Company exceeding the targeted performance conditions contained in the PVRSUs that were granted in prior periods.

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

For the Year Ended December 31,

(in thousands) 2023 2022 2021

Stock options $ 5,816 $ 4,674 $ 3,396

Restricted stock awards 13,774 14,349 9,281

Performance vested restricted stock units 20,924 21,436 10,703

Total share-based compensation expense $ 40,514 $ 40,459 $ 23,380

The following table as of December 31, 2023 is a summary of the total unrecognized compensation expense related to the share-based awards that have not yet vested and the related weighted average amortization periods over which the compensation expense will be recognized:

(in thousands) Unrecognized Compensation Expense on Unvested Awards Weighted Average Remaining Amortization Period

Stock options $ 7,952 2.1 years

Restricted stock awards 30,350 2.9 years

Performance vested restricted stock units 25,634 2.1 years

Total $ 63,936

The annual dividends declared during the year ended December 31, 2023 was $ 1.15 per share or $ 57.9 million.

During the year ended December 31, 2022, the Company's quarterly dividend rate was $ 0.2375 per share.

The annual dividends declared during the year ended December 31, 2022 was $ 0.95 per share or $ 51.7 million.

During the year ended December 31, 2021, the Company's quarterly dividend rate was $ 0.225 per share for the second and third quarters and $ 0.2375 per share for the fourth quarter.

The annual dividends declared during the year ended December 31, 2021 was $ 0.688 per share or $ 38.2 million.

The Company may not declare or make any payment under the Restated Credit agreement and the 2023 Term Loan if there is an existing event of default or if the payment would create an event of default.

Fair value of PVRSUs vested (in thousands) $ 15,773 $ 17,413 $ —

During the year ended December 31, 2024, the Company granted PVRSUs with performance conditions, PVRSUs with market conditions, and PVRSUs with performance and market conditions, with requisite service periods between 9 months and 48 months and with award vesting ranges generally between 0 % and 230 % of the initial units granted.

Share Repurchases and Redemptions

In 1998, we instituted a share repurchase program.

The Company may purchase stock under the share repurchase program to return excess capital to its shareholders.

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

On May 7, 2021, the Company's Board of Directors approved a motion to resume the share repurchase program.

During the year ended December 31, 2021, the Company repurchased less than 0.1 million shares of its common stock under the share repurchase program at a total cost of $ 7.3 million.

During the year ended December 31, 2022, the Company repurchased 3.7 million shares of its common stock under the share repurchase program at a total cost of $ 429.4 million.

During the year ended December 31, 2023, the Company repurchased 2.9 million shares of its common stock under the share repurchase program at a total cost of $ 351.7 million.

On a cumulative basis through December 31, 2023, the Company has repurchased 91.3 million shares of its common stock (including 33.0 million prior to the two -for-one stock split effected in October 2005) under the share repurchase program at a total cost of $ 2.3 billion.

During the years ended December 31, 2024, 2023, and 2022, the Company redeemed 120,601 , 114,242 , and 36,120 , respectively, shares of common stock at a total cost of approximately $ 12.4 million, $ 14.2 million, and $ 5.4 million, respectively, from employees to satisfy the stock option exercise price and the statutory minimum tax-withholding requirements related to exercising stock options and the vesting of performance vested restricted stock units and restricted stock grants.

These redemptions were outside the share repurchase program.

These redemptions were outside of the share repurchase program.

Accumulated Other Comprehensive Loss

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Ending Balance $ ( 6,193 ) $ ( 5,671 )

Other comprehensive income (loss), net of tax, for the years ended December 31, 2023 and 2022 relates entirely to foreign currency items.

Other comprehensive loss, net of tax, for the years ended December 31, 2024 and 2023 relates entirely to foreign currency items.

There were no amounts reclassified from accumulated other comprehensive loss during the years ended December 31, 2024 and 2023.

Earnings Per Share

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

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

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

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

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

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

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

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

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

Year Ended December 31,

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Diluted earnings per share $ 6.20 $ 5.07 $ 5.99

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

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

Year Ended December 31,

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The Company has operating leases for office spaces, buildings, and equipment.

The Company's leases, excluding the assumed ground lease discussed below, have remaining lease terms of two months to eleven years , some of which include options to extend the lease for up to ten years .

The Company's leases, excluding the assumed ground lease discussed below, have remaining lease terms of four months to ten years , some of which include options to extend the lease for up to ten years .

Additionally, the Company has a ground lease on an owned hotel with a remaining lease term of 87.3 years.

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Operating lease cost $ 11,979 $ 13,786

Short-term lease cost — 40

Sublease income ( 789 ) ( 234 )

Total lease cost $ 11,190 $ 13,552

Leases recognized in the consolidated balance sheets consisted of the following:

(in thousands) 2023 2022

Operating lease right-of-use assets $ 85,101 $ 68,985

Current operating lease liabilities $ 4,238 $ 10,663

Long-term operating lease liabilities 109,483 70,994

Total lease liabilities $ 113,721 $ 81,657

Other information related to the Company's lease arrangements were as follows:

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Weighted-average discount rate 5.07 % 5.04 %

As of December 31, 2023, the maturities of the lease liabilities were as follows:

As of December 31, 2024, the future minimum lease payments were as follows:

(in thousands)

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In October 2023, the Company entered into a lease agreement with an unrelated third-party to sublease the legacy Radisson corporate office space in Minneapolis, Minnesota.

The sublease term is approximately eight years and is expected to commence during the first quarter of 2024.

The Company re-evaluated the head lease upon the effectiveness of this sublease, which resulted in the Company recognizing a $ 3.4 million impairment loss on certain long-lived assets associated with the leased office space.

The sublease term is approximately eight years and commenced during the first quarter of 2024.

Refer to Note 6 for additional information.

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The agreement provides for lease payments that contribute towards the fixed costs associated with the aircraft as well as a reimbursement of the Company’s variable costs associated with operating the aircraft, in compliance with and to the extent authorized by applicable regulatory requirements.

The terms of this lease agreement is consistent with the terms of other lease agreements that the Company has entered into with unrelated third parties for use of the aircraft.

The terms of this lease agreement are consistent with the terms of other lease agreements that the Company has entered into with unrelated third parties for use of the aircraft.

During both of the years ended December 31, 2024 and 2023, the Company received less than $ 0.1 million pursuant to this related party lease arrangement.

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

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

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

The Company evaluates its Hotel Franchising & Management reportable segment based primarily on the operating income of the segment without allocating corporate expenses or indirect general and administrative expenses.

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

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

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

Our President and Chief Executive Officer, who is our chief operating decision maker (CODM), utilizes budgeted and forecasted financial information as well as industry metrics, such as RevPar, Occupancy, and ADR, to assess the performance and to make resource allocation decisions.

The CODM does not use assets by operating segment when assessing the performance or when making operating segment resource allocation decisions and therefore, assets by segment are not disclosed below.

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

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Revenues $ 1,470,592 $ 126,450 $ ( 12,203 ) $ 1,584,839

Operating income (loss) 508,531 ( 133,503 ) — 375,028

Other Segment Items (1)

866,514 223,473 ( 12,203 ) 1,077,784

Depreciation and amortization 19,779 23,503 — 43,282

Income (loss) before income taxes 511,410 ( 174,454 ) — 336,956

Operating income (loss) 584,299 ( 120,526 ) — 463,773

Reconciliation of segment profit or loss:

Interest expense 87,131

Interest income ( 8,646 )

Loss on extinguishment of debt 331

Other loss 1,641

Equity in net gain of affiliates ( 12,329 )

Income before income taxes $ 395,645

For the Year Ended December 31, 2023

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Revenues $ 1,444,394 $ 110,854 $ ( 11,083 ) $ 1,544,165

Operating income (loss) 552,905 ( 74,304 ) — 478,601

Other Segment Items (1)

916,680 223,881 ( 11,083 ) 1,129,478

Depreciation and amortization 19,183 20,476 — 39,659

Income (loss) before income taxes 554,637 ( 117,831 ) — 436,806

Operating income (loss) 508,531 ( 133,503 ) — 375,028

Reconciliation of segment profit or loss:

Interest expense 63,780

Interest income ( 7,764 )

Gain on extinguishment of debt ( 4,416 )

Other gain ( 10,649 )

Equity in net gain of affiliates ( 2,879 )

Income before income taxes $ 336,956

For the Year Ended December 31, 2022

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Revenues $ 1,298,521 $ 108,879 $ ( 5,451 ) $ 1,401,949

Operating income (loss) 485,199 ( 56,266 ) — 428,933

Other Segment Items (1)

732,681 165,693 ( 5,451 ) 892,923

Depreciation and amortization 12,935 17,490 — 30,425

Income (loss) before income taxes 468,894 ( 92,402 ) — 376,492

Operating income (loss) 552,905 ( 74,304 ) — 478,601

Reconciliation of segment profit or loss:

Interest expense 43,797

Interest income ( 7,288 )

Loss (gain) on extinguishment of debt —

Other loss 7,018

Equity in net gain of affiliates ( 1,732 )

Income before income taxes $ 436,806

(1) Other segment items for the reportable segment include selling, general and administrative expenses and other expenses from franchised and managed properties.

The results of the Company's international operations are included in the Hotel Franchising & Management reportable segment and Corporate & Other.

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In June 2019, the Company and Sunburst entered into master development agreements, which provide Sunburst the geographic exclusivity in two specified regions for the development of five WoodSpring branded hotels.

For the years ended December 31, 2023 and 2022, there were three and four new franchise agreements signed between the Company and Sunburst and its affiliates, respectively.

As of December 31, 2023, Sunburst and its affiliates operated six hotels under franchise with the Company.

For the years ended December 31, 2024 and 2023, there were nine and three new franchise agreements signed between the Company and Sunburst and its affiliates, respectively.

As of December 31, 2024, Sunburst and its affiliates operated seven hotels under franchise with the Company.

For the years ended December 31, 2024, 2023, and 2022, the total franchise fees revenues, including royalty fees and marketing and reservation system fees, paid by Sunburst and its affiliates to the Company included in the consolidated financial statements was $ 1.8 million, $ 0.9 million, and $ 0.8 million, respectively.

As of both December 31, 2023 and 2022, accounts receivable due from Sunburst and its affiliates was approximately $ 0.1 million.

As of December 31, 2024, there was no outstanding accounts receivable due from Sunburst and its affiliates.

As of December 31, 2023, accounts receivable due from Sunburst and its affiliates was approximately $ 0.1 million.

In November 2023, the Company executed a 13-month office work space agreement, beginning December 1, 2023, for family members of the Company’s largest shareholder.

Pursuant to this arrangement, the Company made payments of $ 96 thousand and $ 18 thousand during the years ended December 31, 2024 and 2023, respectively, for full repayment under the arrangement.

During 2024, the Company executed a 12-month extension of the agreement, beginning January 1, 2025.

Pursuant to this arrangement, the Company made payments of $ 10 thousand during the year ended December 31, 2024.

As of December 31, 2023, the Company has $ 96 thousand of remaining payments under this arrangement.

As of December 31, 2024, the Company had $ 102 thousand of remaining payments under this arrangement.

Transactions with Unconsolidated Affiliates

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

The Company has a total principal balance on these loans of $ 64.5 million and $ 65.2 million as of December 31, 2023 and December 31, 2022, respectively.

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

The Company has management fee arrangements with certain of its unconsolidated affiliates that are discussed in Note 8.

The Company had a total principal balance on these loans of $ 66.2 million and $ 64.5 million as of December 31, 2024 and December 31, 2023, respectively.

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

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

The fees earned and the payroll costs reimbursed under these arrangements totaled $ 8.5 million, $ 7.9 million, and $ 2.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.

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

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

Pursuant to these franchise agreements, the Company recognized royalty fees and marketing and reservation system fees of approximately $ 34.5 million, $ 30.9 million, and $ 27.2 million for the years ended December 31, 2024, 2023, and 2022, respectively.

The Company has $ 4.9 million and $ 3.9 million of gross accounts receivables in the consolidated balance sheets from these unconsolidated affiliates as of December 31, 2023 and 2022, respectively.

The Company recognized $ 9.5 million and $ 4.9 million of gross accounts receivables in the consolidated balance sheets from these unconsolidated affiliates as of December 31, 2024 and 2023, respectively.

Commitments and Contingencies

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

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

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

Contingencies

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

As of December 31, 2023, the maximum unrecorded exposure of principal incidental to these limited payment guaranties is $ 5.4 million, plus unpaid expenses and accrued unpaid interest.

As of December 31, 2024, the maximum unrecorded exposure of the principal associated with these limited payment guaranties was $ 30.1 million, plus unpaid expenses and accrued but unpaid interest.

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

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

The Company has the following outstanding commitments as of December 31, 2023:

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

The Company had the following outstanding commitments as of December 31, 2024:

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

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

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

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

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

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

The timing and the amount of the franchise agreement acquisition cost payments are dependent on various factors, including the implementation of various development and brand incentive programs, the level of franchise sales, and the ability of our franchisees to complete construction or convert their hotels to one of the Company’s brands.

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

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

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

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

As of December 31, 2024, the Company had remaining commitments of up to $ 6.2 million, if certain conditions are met.

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

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

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

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

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

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

Radisson Hotels Americas Acquisition

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

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

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

In connection with the acquisition, we recognized $ 40.9 million and $ 39.6 million during the years ended December 31, 2023 and 2022, respectively, of Radisson Hotels Americas related transaction, transition, and severance expenses which are included within business combination, diligence and transition costs and impairment of long-lived assets in the consolidated statements of income.

Fair Values of the Assets Acquired and the Liabilities Assumed

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

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

The Company made these measurement period adjustments to reflect the facts and circumstances that existed as of the acquisition date and did not result from any intervening events subsequent to the acquisition date.

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

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

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

Assets acquired August 11, 2022 - original Measurement period adj - 4th quarter 2022 Measurement period adj - 1st quarter 2023 August 11, 2022 -

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

Restricted cash 10,403 — — 10,403

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

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

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

Property and equipment 125,441 — — 125,441

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

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

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

Investment in affiliates 471 — — 471

Other assets 2,129 — — 2,129

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

Liabilities assumed

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

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

Deferred revenue - current (1)

5,745 1,566 — 7,311

Liability for guest loyalty program - current (1)

3,542 3,792 — 7,334

Long-term debt 55,975 — — 55,975

Long-term deferred revenue (1)

26,499 ( 3,915 ) — 22,584

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

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

Liability for guest loyalty program - noncurrent (1)

10,180 ( 1,443 ) — 8,737

Other liabilities 3,052 543 — 3,595

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

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

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

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

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

Refer to Note 1 for more information.

Property and Equipment

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

Estimated Useful Life Estimated Fair Value

(in years) (in thousands)

Land N/A $ 7,159

Construction in progress N/A 3,190

Building and leasehold improvements 24.4 93,934

Site improvements 23.1 586

Furniture, fixtures and equipment 3.9 8,334

Computer equipment and software 2.0 12,238

Total property and equipment $ 125,441

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

Identified Intangible Assets

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

Estimated Useful Life Estimated Fair Value

(in years) (in thousands)

Trade names N/A $ 223,700

Franchise agreements 15.5 220,100

Management agreements 15.5 3,300

Total intangible assets $ 447,100

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

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

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

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

These valuation methodologies utilize Level 3 assumptions.

As part of the Transaction, we assumed a mortgage loan with a principal balance of $ 53.5 million with a maturity date of August 7, 2024 related to an acquired hotel property.

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

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

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

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

Operating Leases

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

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

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

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

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

As a result of this election, the tax basis of the assets acquired and the liabilities assumed by Choice were reset to fair value on the date of the acquisition, which results in the elimination of any previously established deferred income tax balances and the establishment of new balances that reflect the new tax basis, including tax deductible goodwill.

Pro Forma Results of Operations

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

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

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

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

Year Ended December 31,

(in thousands) 2022 2021

Revenues $ 1,551,775 $ 1,263,988

Net income 368,449 207,023

Radisson Hotels Americas Results of Operations

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

Radisson Hotels Americas contributed $ 104.2 million and $ 1.2 million in total revenues and net income, respectively, for the year ended December 31, 2022.

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

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

Refer to Note 6 for a reconciliation of the Company's goodwill balance.

2021 & 2022 asset acquisitions

In September 2021 and April 2022, the Company reached settlements with independent borrowers holding senior and mezzanine loans that were classified as collateral-dependent and collateralized by operating hotels.

The key terms of the settlements resulted in a deed in lieu of foreclosure on each operating hotel in exchange for releasing the obligations pursuant to the senior and mezzanine loans and the associated franchise agreements, as exchanged on October 1, 2021 and April 14, 2022, respectively.

As collateral-dependent financial assets, the expected credit losses as captured in notes receivable, net of allowance for credit losses, on the consolidated balance sheets immediately prior to exchange were determined based on the fair value of the operating hotels.

The acquisition accounting was also based on the fair value of the operating hotels.

The fair values were estimated using an income approach valuation method based on the discounted cash flows of the collateralized operating hotel utilizing historical operating performance, industry projections for the market, and comparable sales capitalization rates.

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

The acquisition dates for these hotels were October 1, 2021 and April 14, 2022 and had fair values at the time of acquisition of approximately $ 21.1 million and $ 20.4 million, respectively.

In accordance with the provisions of ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business ("ASU 2017-01") , each purchase represented an asset acquisition based on the concentration of value in the acquired land and building.

The notes receivable, net of allowance for credit losses, balances were re-characterized and attributed to each asset class based on a relative fair value allocation to the qualifying assets.

The relative fair values for each asset class were estimated using a combination of income and market approach valuations methods.

For the October 1, 2021 acquisition, the $ 21.1 million balance was re-characterized as $ 4.8 million to land, $ 14.2 million to building and improvements, $ 1.8 million to furniture, fixtures, and equipment, and $ 0.3 million to the net assets assumed.

For the April 14, 2022 acquisition, the $ 20.4 million balance was re-characterized as $ 3.3 million to land, $ 16.6 million to building and improvements, $ 1.3 million to furniture, fixtures, and equipment, and $( 0.8 ) million to the net liabilities assumed.

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

predictability.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data