CHOICE HOTELS INTERNATIONAL INC /DE 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 53 Consolidated Statements of Income 55 Consolidated Statements of Comprehensive Income 56 Consolidated Balance Sheets 57 Consolidated Statements of Cash Flows 58 Consolidated Statements of Shareholders' (Deficit) Equity 60 Notes to Consolidated Financial Statements 61 52 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Choice Hotels International, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Choice Hotels International, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 20, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 53 Table of Contents Accounting for Choice Privileges Loyalty Program Description of the Matter The Company recognized $123.2 million in revenues from loyalty points redeemed, net of the cost of redemptions, and had a point liability and deferred revenue of $129.6 million and $110.4 million, respectively, as of December 31, 2024, associated with the Choice Privileges Loyalty Program. 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 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 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. For example, we tested controls over management’s review of the assumptions and data inputs used in the accounting model and the actuarial methods used to estimate the ultimate redemption rate of Choice Privileges Loyalty Program points. 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 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. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2014. Tysons, Virginia February 20, 2025 54 Table of Contents CONSOLIDATED FINANCIAL STATEMENTS CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Years Ended December 31, 2024 2023 2022 REVENUES Royalty, licensing and management fees $ 514,569 $ 513,412 $ 471,759 Initial franchise fees 25,606 27,787 28,074 Platform and procurement services fees 75,752 75,114 63,800 Owned hotels 113,459 97,641 70,826 Other 61,803 46,051 64,740 Other revenues from franchised and managed properties 793,650 784,160 702,750 Total revenues 1,584,839 1,544,165 1,401,949 OPERATING EXPENSES Selling, general and administrative 219,878 216,081 167,697 Business combination, diligence and transition costs 17,233 55,778 39,578 Depreciation and amortization 43,282 39,659 30,425 Owned hotels 83,148 71,474 48,837 Other expenses from franchised and managed properties 757,525 782,409 653,060 Total operating expenses 1,121,066 1,165,401 939,597 Impairment of long-lived assets — ( 3,736 ) — Gain on sale of business and assets, net — — 16,249 Operating income 463,773 375,028 478,601 OTHER EXPENSES AND INCOME, NET Interest expense 87,131 63,780 43,797 Interest income ( 8,646 ) ( 7,764 ) ( 7,288 ) 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 Income before income taxes 395,645 336,956 436,806 Income tax expense 95,980 78,449 104,654 Net income $ 299,665 $ 258,507 $ 332,152 Basic earnings per share $ 6.26 $ 5.11 $ 6.05 Diluted earnings per share $ 6.20 $ 5.07 $ 5.99 The accompanying notes are an integral part of these consolidated financial statements. 55 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) Years Ended December 31, 2024 2023 2022 Net income $ 299,665 $ 258,507 $ 332,152 Other comprehensive loss, net of tax: Foreign currency translation adjustment ( 522 ) ( 460 ) ( 637 ) Other comprehensive loss, net of tax: ( 522 ) ( 460 ) ( 637 ) Comprehensive income $ 299,143 $ 258,047 $ 331,515 The accompanying notes are an integral part of these consolidated financial statements. 56 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) December 31, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 40,177 $ 26,754 Accounts receivables (net of allowance for credit losses of $ 45,610 and $ 39,265 , respectively) 176,672 195,896 Income taxes receivable 5,419 14,283 Notes receivable (net of allowance for credit losses of $ 5,805 and $ 3,035 , respectively) 75,501 20,766 Prepaid expenses and other current assets 41,317 38,831 Total current assets 339,086 296,530 Property and equipment, net 604,345 493,478 Operating lease right-of-use assets 83,451 85,101 Goodwill 220,187 220,187 Intangible assets, net 884,013 811,075 Notes receivable (net of allowance for credit losses of $ 1,526 and $ 5,581 , respectively) 32,682 78,900 Investments in equity securities, at fair value — 116,374 Investments for employee benefit plans, at fair value 47,603 39,751 Investments in affiliates 117,016 70,579 Deferred income taxes 108,308 89,535 Other assets 93,836 93,289 Total assets $ 2,530,527 $ 2,394,799 LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY Current liabilities Accounts payable $ 134,865 $ 131,284 Accrued expenses and other current liabilities 136,729 109,248 Deferred revenue 102,114 108,316 Liability for guest loyalty program 89,013 94,574 Current portion of long-term debt — 499,268 Total current liabilities 462,721 942,690 Long-term debt 1,768,526 1,068,751 Long-term deferred revenue 132,259 133,501 Deferred compensation and retirement plan obligations 53,316 45,657 Income taxes payable — 8,601 Operating lease liabilities 113,255 109,483 Liability for guest loyalty program 40,607 43,266 Other liabilities 5,114 7,252 Total liabilities 2,575,798 2,359,201 Commitments and contingencies (Note 23) Common stock, $ 0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at December 31, 2024 and December 31, 2023; 46,856,567 and 49,526,245 shares outstanding at December 31, 2024 and December 31, 2023, respectively 951 951 Additional paid-in-capital 370,201 330,750 Accumulated other comprehensive loss ( 6,193 ) ( 5,671 ) Treasury stock, at cost; 48,209,071 and 45,539,393 shares at December 31, 2024 and December 31, 2023, respectively ( 2,411,527 ) ( 2,046,791 ) Retained earnings 2,001,297 1,756,359 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. 57 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Years Ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 299,665 $ 258,507 $ 332,152 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 43,282 39,659 30,425 Depreciation and amortization - other expenses from franchised and managed properties 27,578 36,076 33,488 Franchise agreement acquisition cost amortization 28,702 20,024 15,666 Loss (gain) on extinguishment of debt 331 ( 4,416 ) — Impairment of long-lived assets — 3,736 — 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, investments, and affiliate (income) loss, net ( 7,282 ) ( 8,747 ) 7,365 Deferred income taxes ( 19,028 ) ( 1,336 ) ( 19,642 ) Equity in net (gain) loss of affiliates, less distributions received ( 2,327 ) ( 1,570 ) 489 Franchise agreement acquisition costs, net of reimbursements ( 112,164 ) ( 98,316 ) ( 54,527 ) Change in working capital and other 17,396 6,128 ( 5,078 ) Net cash provided by operating activities 319,403 296,554 367,061 CASH FLOWS FROM INVESTING ACTIVITIES 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 ) 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 ) Net cash used in investing activities ( 84,571 ) ( 265,626 ) ( 442,430 ) CASH FLOWS FROM FINANCING ACTIVITIES 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 ) Proceeds from acquired derivative — — 1,943 Debt issuance costs ( 8,069 ) ( 1,553 ) ( 44 ) Purchases of treasury stock ( 380,743 ) ( 362,772 ) ( 434,767 ) Dividends paid ( 55,497 ) ( 56,457 ) ( 52,545 ) Proceeds from the exercise of stock options 17,525 6,345 3,809 Net cash used in financing activities ( 221,710 ) ( 45,937 ) ( 394,150 ) Net change in cash and cash equivalents 13,122 ( 15,009 ) ( 469,519 ) Effect of foreign exchange rate changes on cash and cash equivalents 301 197 ( 520 ) Cash and cash equivalents, beginning of period 26,754 41,566 511,605 Cash and cash equivalents, end of period $ 40,177 $ 26,754 $ 41,566 58 Table of Contents Years Ended December 31, 2024 2023 2022 Supplemental disclosure of cash flow information: Cash payments during the year for Income taxes, net of refunds $ 108,173 $ 94,342 $ 115,972 Interest, net of capitalized interest $ 67,176 $ 60,773 $ 46,908 Non-cash investing and financing activities 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 The accompanying notes are an integral part of these consolidated financial statements. 59 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) Common Stock - Shares Outstanding Common Stock - Par Value Additional Paid-in- Capital Accumulated Other Comprehensive Income (Loss) Treasury Stock Retained Earnings Total Balance as of December 31, 2021 55,609,226 $ 951 $ 259,317 $ ( 4,574 ) $ ( 1,265,032 ) $ 1,275,220 $ 265,882 Net income — — — — — 332,152 332,152 Other comprehensive loss, net of tax — — — ( 637 ) — — ( 637 ) Share-based payment activity (1) 294,095 — 38,736 — 4,941 — 43,677 Dividends declared ($ 0.95 per share) — — — — — ( 51,648 ) ( 51,648 ) Treasury purchases ( 3,702,418 ) — — — ( 434,766 ) — ( 434,766 ) Balance as of December 31, 2022 52,200,903 $ 951 $ 298,053 $ ( 5,211 ) $ ( 1,694,857 ) $ 1,555,724 $ 154,660 Net income — — — — — 258,507 258,507 Other comprehensive loss, net of tax — — — ( 460 ) — — ( 460 ) Share-based payment activity (1) 366,121 — 32,697 — 13,889 — 46,586 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 loss, net of tax — — — ( 522 ) — — ( 522 ) Share-based payment activity (1) 437,268 — 39,451 — 13,659 — 53,110 Dividends declared ($ 1.15 per share) — — — — — ( 54,727 ) ( 54,727 ) 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) 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. 60 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation and Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements of Choice Hotels International, Inc. and subsidiaries (collectively, "Choice" or the "Company") have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, the accompanying consolidated financial statements include all adjustments that are necessary to fairly present the Company's financial position and results of operations. Except as otherwise disclosed, all adjustments are of a normal recurring nature. Certain prior year amounts in our consolidated financial statements have been reclassified in order to maintain comparability with the current year presentation. Business combination, diligence and transition costs, which were previously presented in selling, general and administrative expenses, are now presented within a standalone financial statement line item in the consolidated statements of income. 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 On August 11, 2022, the Company completed the acquisition (the "Transaction") of (1) all of the issued and outstanding shares of Radisson Hospitality, Inc., and (2) certain trademarks held by Radisson Hospitality Belgium BV/SRL (collectively referred to as "Radisson Hotels Americas"). The Company determined that it was the accounting acquirer of Radisson Hotels Americas and accounted for the Transaction as a business combination using the acquisition method of accounting. Accordingly, the assets acquired and the liabilities assumed were recorded at their fair values as of the August 11, 2022 acquisition date, with the exception of certain assets and liabilities which were accounted for in accordance with the provisions of ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). The Company finalized the purchase price allocation for the Transaction during the third quarter of 2023. Revenue Recognition Franchise Agreements The Company's revenues are primarily derived from franchise agreements with third-party hotel owners. The majority of the Company’s performance obligations are a series of distinct services, which are described in more detail below, for which the Company receives variable consideration through franchise fees. The Company enters into franchise agreements to provide franchisees with a limited non-exclusive license to utilize the Company’s registered brand tradenames and trademarks, marketing and reservation services, and other miscellaneous franchise services. These agreements typically have an initial term of 10 to 30 years with provisions permitting the franchisees or the Company to terminate the franchise agreement upon designated anniversaries of the hotel opening before the end of the initial term. An up-front initial franchise fee is assessed to the third-party hotel owners to affiliate with our brands, which is typically paid prior to the execution of the franchise agreement and is non-refundable. After hotel opening, franchise fees are typically generated based on a percentage of gross room revenues or as designated transactions and events occur (such as when a reservation is delivered to the hotel through a specified channel) and are invoiced by the Company in the following month. 61 Table of Contents The franchise agreements are comprised of multiple performance obligations, which may require significant judgment in identifying. The primary performance obligations are as follows: • License of brand intellectual property and related services (“brand intellectual property”) - Grants the right to access the Company’s intellectual property associated with the brand tradenames, trademarks, reservation systems, property management systems, and related services. • Material rights for free or discounted goods or services to hotel guests - Primarily consists of the points issued under the Company’s guest loyalty program, Choice Privileges. License of Brand Intellectual Property and Related Services The fees generated from brand intellectual property are recognized to revenue over time as the hotel owners pay for access to these services for the duration of the franchise agreement. The franchise fees are typically based on the sales or usage of the underlying hotel (i.e., after the completion of a hotel stay), with the exception of fixed up-front fees that usually represent an insignificant portion of the transaction price. The variable transaction price is determined for the period when the underlying gross room revenues and the transactions or events which generate fees are known. Franchise fees include the following: • Royalty fees - Royalty fees are earned in exchange for a license to brand intellectual property typically based on a percentage of gross room revenues. The royalty fees are billed and collected monthly and the revenues are recognized in the same period that the underlying gross room revenues are earned by the Company’s franchisees. The royalty fees are recognized within royalty, licensing and management fees revenue in the consolidated statements of income. • Initial franchise fees - Initial franchise fees are charged when (i) new hotels enter the franchise system, (ii) there is a change of ownership, or (iii) the existing franchise agreements are extended. The initial franchise fees are recognized as revenue ratably as the services are provided over the enforceable period of the franchise agreement, 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. The enforceable period is the period from the hotel's opening to the first point the franchisee or the Company can terminate the franchise agreement without incurring a significant penalty. • Other revenue - Other revenue is a combination of miscellaneous non-marketing and reservation system fees, which includes quality assurance, non-compliance, and franchisee training fees. Other revenue is recognized in the period that the designated transaction or event has occurred. The Company’s franchise agreements require the payment of marketing and reservation system fees. The Company is obligated to use these marketing and reservation system fees to provide marketing and reservation services, such as marketing, media, advertising, access to centralized reservation systems, and certain franchise services to support the operation of the overall franchise system. The marketing and reservation system fees are recognized within other revenues from franchised and managed properties in the consolidated statements of income. These services are comprised of multiple fees including the following: • Fees based on a percentage of gross room revenues are recognized in the period the gross room revenue was earned, based on the underlying hotel’s sales or usage. • Fees based on the occurrence of a designated transaction or event are recognized in the period the transaction or event occurred. • System implementation fees charged to the franchisees are deferred and recognized as revenue over the enforceable period of the franchise agreement. • Marketing and reservation system activities also include revenues generated from the Company’s guest loyalty programs. The revenue recognition of these programs is discussed in the Material rights for free or discounted goods or services to hotel guests section below . Marketing and reservation system expenses are the expenses that are incurred to facilitate the delivery of the marketing and reservation system services, including direct expenses and an allocation of costs for certain administrative activities that are required to carry out marketing and reservation system services. Marketing and reservation system expenses are recognized when the services are incurred or the goods are received within other expenses from franchised and managed properties in the consolidated statements of income. 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 62 Table of Contents 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. Material Rights for Free or Discounted Goods or Services to Hotel Guests 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. gift cards to participating retailers). The Company collects from the franchisees a percentage of the loyalty program members’ gross room revenue from completed stays to operate the programs. 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 (with both franchisees and third-party partners), net of the cost of redemptions. 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. No loyalty program revenues are recognized at the time the loyalty points are issued. The Company is an agent in coordinating the delivery of the services between the loyalty program member and the franchisee or third party, and as a result, the revenues are recognized net of the cost of redemptions. The estimated value of the future redemptions is reflected in the current and non-current liability for guest loyalty program in the consolidated balance sheets. The liability for the guest loyalty program is developed based on an estimate of the eventual redemption rates and point values using various actuarial methods. These significant judgments determine the required point liability attributable to the outstanding points, which is relieved as the redemption costs are processed. The amount of the loyalty program fees in excess of the guest loyalty program point liability represents current and non-current deferred revenue, which is recognized to revenue as the points are redeemed including an estimate of the future forfeitures (“breakage”). The anticipated redemption pattern of the points is the basis for the current and non-current designation of each liability. As of December 31, 2024, the current and non-current deferred revenue balances were $ 75.8 million and $ 34.6 million, respectively. The loyalty points are typically redeemed within three years of issuance. The loyalty program point redemption revenues are recognized within other revenues from franchised and managed properties in the consolidated statements of income. The Company also recognizes revenues from various contracts that are incidental to the support of the operations for the franchised hotels, including the purchasing operations. Partnership Agreements The Company is a party to various agreements with third-party partners, including the co-branding of the Choice Privileges credit card. The agreements typically provide for use of the Company’s marks, limited access to the Company’s distribution channels, and the sale of Choice Privileges loyalty points, in exchange for fees primarily comprising variable consideration that is paid each month. Loyalty members can earn points through participation in the partner’s program. The partnership agreements include multiple performance obligations. The primary performance obligations are for the brand intellectual property and material rights for free or discounted goods or services to hotel guests. The allocation of the fixed and variable consideration to the performance obligations is based on the standalone selling price, which is estimated based on the market and income methods, which contain significant judgments. The amounts allocated to the brand intellectual property are recognized on a gross basis over time using the output measure of the time elapsed, primarily within royalty, licensing and management fees and platform and procurement services fees in the consolidated statements of income. The amounts allocated to the material rights for free or discounted goods or services to hotel guests are recognized to revenue as the points are redeemed including an estimate of the breakage, primarily within other revenues from franchised and managed properties in the consolidated statements of income. Qualified Vendors The Company generates procurement services revenue from qualified vendors. The qualified vendor revenue is generally based on the marketing services provided by the Company on behalf of, and the access provided to, the qualified vendors to the hotel owners and guests. The Company provides these services in exchange for either fixed consideration or a percentage of the revenues earned by the qualified vendor pertaining to purchases by the Company’s franchisees or guests. The fixed consideration is paid in installments based on a contractual schedule, with an initial payment typically due at contract execution. The variable consideration is typically paid quarterly after the sales to the franchisees or guests have occurred. 63 Table of Contents The qualified vendor agreements comprise a single performance obligation, which is satisfied over time based on the access afforded, and the services provided, to the qualified vendor for the stated duration of the agreement. The fixed consideration is allocated and recognized ratably to each period over the term of the agreement. The variable consideration is determined and recognized in the period when the vendors' sales to the franchisees or guests are known or the cash payment has been remitted. The qualified vendor revenues are recognized within platform and procurement services fees revenue in the consolidated statements of income. Other 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. SaaS agreements comprise a single performance obligation, which is satisfied over time based on the access to the software for the stated duration of the agreement. The fixed consideration is allocated and recognized ratably to each period over the term of the agreement. The variable consideration is determined at the conclusion of each period, and allocated to and recognized in the current period. Managed Hotels 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, 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 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 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 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 income. 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. Owned Hotels 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. The Company typically satisfies the performance obligations over the length of the stay and recognizes the revenue on a daily basis, as the hotel rooms are occupied and the services are rendered. Other ancillary goods and services at the owned hotels are purchased independently of the hotel stay at the standalone selling prices and are considered separate performance obligations, which are satisfied at the point in time when the related good or service is provided to the guest. These primarily consist of food and beverage, incidentals, and parking fees. The hotel room night and other ancillary good and services revenues are recognized within owned hotels revenue in the consolidated statements of income. Sales Taxes 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. 64 Table of Contents Business Combination, Diligence and Transition Costs The Company incurs costs during the review of potential business combinations, including legal fees, financial advisory, and other professional service fees. If the Company is successful in completing a business combination, then the Company may incur transition and integration costs, including professional service fees, technology costs, and employee-related costs such as bonuses, retention, and severance. The business combination, diligence and transition costs are expensed as incurred in the consolidated statements of income. Notes & Accounts Receivable and Allowances for Credit Losses The Company provides financing in the form of notes receivable loans to franchisees to support the development or conversion of properties in strategic markets. The Company accrues interest for notes receivable loans in accordance with loan provisions. The Company considers notes receivable loans past due and in default when payments are not made when due in accordance with the then-current loan provisions or the terms extended to the borrowers, including loans with concessions or interest deferral. The Company suspends the accrual of interest when payments on loans are more than 30 days past due or upon a loan being classified as collateral-dependent. The Company applies the payments received for loans on a non-accrual status first to interest and then to principal. The Company does not resume an interest accrual until all delinquent payments are received based on the then-current loan provisions. The Company has developed a systematic methodology to determine its allowance for credit losses across our portfolio of notes receivable loans. The Company monitors the risk and performance of our portfolio by the level of security in the collateral (i.e., senior, subordinated, or unsecured), which is the Company's credit quality indicator. As each of the Company’s notes receivable loans has unique risk characteristics, the Company deploys its methodology to calculate allowances for credit losses at the individual notes receivable loan level. The Company primarily utilizes a discounted cash flow ("DCF") technique to measure the credit allowance, influenced by the key economic variables of each note receivable loan. The Company identified the key economic variables for these loans to be the loan-to-cost ("LTC") or loan-to-value ("LTV") ratios and a debt service coverage ratio ("DSCR"). The LTC or LTV ratio represents the loan principal relative to the project cost or value and is an indication of the loan principal's ability to be re-paid at loan maturity. The DSCR represents property-specific net operating income as a percentage of the interest and principal payments incurred (i.e., debt service) on all debt of the borrower for the property and is an indication of the borrower's ability to make timely payments during the term of the loan. The LTC or LTV ratios and DSCR are considered during the loan underwriting process as indications of risk and, accordingly, we believe these factors are the most representative risk indicators for calculating the allowance for credit loss. Loans with higher LTC or LTV ratios and lower DSCR ratios generally are representative of loans with greater risk and, accordingly, have higher credit allowances as a percentage of loan principal. Conversely, loans with lower LTC or LTV ratios and higher DSCR ratios generally are representative of loans with lesser risk and, accordingly, have lower credit allowances as a percentage of loan principal. In preparing or updating a DCF model to measure the credit allowance, the Company develops various recovery scenarios and, based on the key economic variables, the present status of the loan, and the underlying collateral, applies a probability-weighting to the outputs of the scenarios. Collateral-dependent financial assets are financial assets for which repayment is expected to be derived substantially through the operation or sale of the collateral and when the borrower is experiencing financial difficulty. For collateral-dependent loans, the expected credit losses are based on the fair value of the collateral, less the selling costs if repayment will be from the sale of the collateral. The Company calculates the fair value of the collateral using a DCF technique to project the cash flows or a market approach via quoted market prices. In developing the cash flow projections, the Company will review the borrower's financial statements for the property, economic trends, industry projections for the market where the property is located, and comparable sales capitalization rates. Management assesses the credit quality of the notes receivable portfolio and the adequacy of the credit loss allowances on a quarterly basis and recognizes the provisions for credit losses in selling, general and administrative expenses in the consolidated statements of income. Significant judgment is required in this analysis. Accounts receivable consists primarily of the franchise and related fees due from the hotel franchisees and are recorded at the invoiced amount. The allowance for credit losses is the Company’s best estimate of the amount of expected credit losses inherent in the accounts receivable balance. The Company determines the allowance considering its historical write-off experience, a review of the aged receivable balances and customer payment trends, the economic environment, and other available evidence. The Company recognizes the provisions for credit losses on accounts receivable in selling, general and administrative expenses and other expenses from franchised and managed properties in the consolidated statements of income. When the Company determines that a trade or note receivable is not collectible, then the account is written-off to the associated allowance for credit losses. 65 Table of Contents Refer to Note 4 for more information on the receivables and the allowances for credit losses. Advertising Costs 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. The Company presents advertising costs primarily in other expenses from franchised and managed properties in the consolidated statements of income. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. The Company maintains cash balances at domestic banks, which at times may exceed the limits of the amounts insured by the Federal Deposit Insurance Corporation. In addition, the Company also maintains cash balances at international banks which do not provide deposit insurance. Capitalization Policies Property and equipment are generally recorded at cost and depreciated for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Major renovations and replacements incurred during construction are capitalized. The costs for computer software developed for internal use are capitalized during the application development stage and amortized using the straight-line method over the estimated useful lives of the software. The capitalized software licenses pertaining to cloud computing arrangements are amortized using the straight-line method over the shorter of the cloud computing arrangement term or the estimated useful lives of the software. The Company capitalizes the interest incurred during the construction and development of property and equipment, including software. The total interest capitalized as a cost of property and equipment was $ 9.4 million and $ 5.8 million during the years ended December 31, 2024 and 2023, respectively. As construction in progress and software development are completed and then placed in service, the assets are transferred to the appropriate property and equipment categories and depreciation and amortization begins. Upon the sale or the retirement of the property, the cost and the related accumulated depreciation are eliminated from the accounts and any related gain or loss is recognized in the consolidated statements of income. Repairs and maintenance, and minor replacements, are charged to expense as incurred. The Company has made certain acquisitions of hotel assets, which are recognized at the fair value of the consideration exchanged. 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. If the Company determines that it will not progress to active construction and development of a land parcel, then the land parcel is reclassified to other assets in the consolidated balance sheets. The table below summarizes the estimated useful lives for the respective assets for depreciation and amortization purposes: Computer equipment and software 2 - 7 years Buildings and leasehold improvements 10 - 40 years Furniture, fixtures, vehicles and equipment 3 - 10 years Assets Held for Sale The Company considers assets to be held for sale when all of the following criteria are met: • Management commits to a plan to sell an asset; • It is unlikely that the disposal plan will be significantly modified or discontinued; • The asset is available for immediate sale in its present condition; • Actions required to complete the sale of the asset have been initiated; • The sale of the asset is probable and the Company expects the completed sale will occur within one year; and • The asset is actively being marketed for sale at a price that is reasonable given its current market value. Upon designation as an asset held for sale, the Company recognizes the carrying value of each asset as a component of other current assets at the lower of its carrying value or its estimated fair value, less the estimated costs to sell, and immediately ceases the recognition of depreciation or amortization expense on the asset. If, at any time, these criteria are no longer met, subject to certain exceptions, then the assets previously classified as held for sale are reclassified as held and used and measured individually at the lower of (a) the carrying amount before the asset was 66 Table of Contents classified as held for sale, adjusted for any depreciation or amortization expense that would have been recognized had the asset been continuously classified as held and used, or (b) the fair value at the date of the subsequent decision not to sell. Long-Lived Assets, Intangible Assets, and Goodwill The Company groups its long-lived assets, including property and equipment and definite-lived intangible assets (e.g., franchise rights and franchise agreement acquisition costs), at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company evaluates the potential impairment of its long-lived asset groups annually as of December 31 or earlier when other circumstances indicate that the Company may not be able to recover the carrying value of the asset group. When indicators of impairment are present, then the recoverability is assessed based on undiscounted expected cash flows. If the undiscounted expected cash flows are less than the carrying amount of the asset group, then an impairment charge is measured and recognized, as applicable, for the excess of the carrying value over the fair value of the asset group. The fair value of the long-lived asset groups are estimated primarily using discounted cash flow analyses representing the highest and best use by an independent market participant. 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. 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. Refer to Note 2 for additional information. During the year ended December 31, 2023, the Company recognized an impairment loss on the long-lived assets associated with the legacy Radisson corporate office lease. Refer to Note 6 for additional information. The Company evaluates the impairment of goodwill and intangible assets with indefinite lives annually as of December 31 or earlier upon the occurrence of substantive unfavorable changes in economic conditions, industry trends, costs, cash flows, or ongoing declines in market capitalization that indicate that the Company may not be able to recover the carrying amount of the asset. In evaluating these assets for impairment, the Company may elect to first assess qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit or the indefinite lived intangible asset is less than its carrying amount. If the conclusion is that it is not more likely than not that the fair value of the asset is less than its carrying value, then no further testing is required. If the conclusion is that it is more likely than not that the fair value of the asset is less than its carrying value, then a quantitative impairment test is performed whereby the carrying value is compared to the fair value of the asset and an impairment charge is recognized, as applicable, for the excess of the carrying value over the fair value. The Company may elect to forgo the qualitative assessment and move directly to the quantitative impairment tests for goodwill and indefinite-lived intangible assets. The Company determines the fair value of its reporting units and indefinite-lived intangible assets using the income and market methods. Goodwill is allocated to the Company's reporting units. The Company's reporting units are determined primarily by the availability of discrete financial information relied upon by the chief operating decision maker ("CODM") to assess performance and make operating segment resource allocation decisions. As of December 31, 2024, the Company's goodwill is allocated solely to the Hotel Franchising reporting unit. The Company performed the qualitative impairment analysis for the Hotel Franchising reporting unit, concluding that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount. As such, a quantitative test was not required and no impairment was recorded. Variable Interest Entities In accordance with the guidance for the consolidation of variable interest entities ("VIE"), the Company identifies its variable interests and analyzes to determine if the entity in which the Company has a variable interest is a VIE. The Company's variable interests include equity investments, loans, and guaranties. The determination of whether a variable interest is a VIE includes both quantitative and qualitative considerations. For those entities determined to be VIEs, a further quantitative and qualitative analysis is performed to determine if the Company is deemed to be the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impacts the entity's economic performance and who has an obligation to absorb the losses of the entity or a right to receive the benefits from the entity that could potentially be significant. The Company consolidates those entities in which it is determined to be the primary beneficiary. As of December 31, 2024, the Company is not the primary beneficiary of any VIE. The Company's qualitative analysis is based on its review of the design of the entity, the organizational structure including its decision-making ability, and the relevant development, operating management, and financial agreements. 67 Table of Contents The investments in unconsolidated affiliates where the Company is not deemed to be the primary beneficiary but where the Company exercises significant influence over the operating and financial policies of the investee are accounted for using the equity method of accounting. Investments in Affiliates The Company evaluates an investment in an affiliate for impairment when circumstances indicate that the carrying value may not be recoverable, such as a loan default, significant under-performance relative to historical or projected operating performance, and/or significant negative industry, market, or economic trends. When there is an indication that a loss in value has occurred, the Company evaluates the carrying value compared to the estimated fair value of the investment. The fair value is based upon internally-developed discounted cash flow models, third-party appraisals, or current estimated net sales proceeds from pending offers. 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 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. In determining this, the Company considers factors including, but not limited to, the length of time and extent of the decline, loss of value as a percentage of the cost, financial condition, near-term financial projections, the Company's intent and ability to recover the lost value, and current economic conditions. 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 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 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 loss (gain) in the consolidated statements of income. Foreign Operations The United States dollar is the functional currency of the consolidated entities operating in the United States. The functional currency for the consolidated entities operating outside of the United States is generally the currency of the primary economic environment in which the entity primarily generates and expends cash. 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 statement 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’ (deficit) equity. 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 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. 68 Table of Contents 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. 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. Leases The Company determines if an arrangement is a lease, and the classification as either an operating lease or a financing lease, at lease inception. Operating leases are included in operating lease right-of-use assets, accrued expenses and other current liabilities, and operating lease liabilities in our consolidated balance sheets. As of December 31, 2024 and 2023, the Company did not have any leases classified as a financing lease. 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. 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. Lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments include certain index-based changes in rent, certain non-lease components (such as maintenance and other services provided by the lessor), and other charges included in the lease. Variable lease payments are excluded from the future minimum lease payments and expensed as incurred. 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 sheets. These short-term leases are expensed on a straight-line basis over the lease term. 69 Table of Contents Recently Adopted & Issued Accounting Standards 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 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"). ASU 2023-09 is designed to provide additional information to financial statement users in regards to how an entity's operations, risks, and planning affect its tax rate, opportunities, and future cash flows. ASU 2023-09 is effective for the annual reporting period beginning after December 15, 2024. 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. 2. Revenue 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 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. The following table summarizes the significant changes in the contract liabilities balances during the year ended December 31, 2024: (in thousands) Balance as of December 31, 2023 $ 209,895 Increases to the contract liability balance due to cash received 126,055 Revenue recognized in the period ( 119,253 ) Balance as of December 31, 2024 $ 216,697 Remaining Performance Obligations The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $ 216.7 million as of December 31, 2024. This amount represents the fixed transaction price that will be recognized as revenue in future periods, which is presented as current and non-current deferred revenue in the consolidated balance sheets. 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. 70 Table of Contents Capitalized Franchise Agreement Costs Sales commissions earned by Company personnel upon execution of a franchise agreement (“franchise sales commissions”) meet the requirement to be capitalized as an incremental cost of obtaining a contract with a customer. The capitalized franchise sales commissions are amortized on a straight-line basis over the estimated benefit period of the arrangement, unless the franchise agreement is terminated and the hotel exits the system whereby the remaining capitalized amounts will be expensed in the period of termination. The estimated benefit period is the Company's estimate of the duration a hotel will remain in the Choice system. As of December 31, 2024 and 2023, the capitalized franchise sales commissions were $ 59.5 million and $ 58.6 million, respectively, which are recognized within other assets in the consolidated balance sheets. For the years ended December 31, 2024, 2023, and 2022, amortization expense and impairment charges were $ 10.2 million, $ 13.1 million, and $ 13.0 million, respectively, which are recognized in selling, general and administrative expenses in the consolidated statements of income. The Company makes certain payments to customers as an incentive to enter into new franchise agreements (“franchise agreement acquisition costs”). These payments are recognized as an adjustment to the transaction price and capitalized as an intangible asset in the consolidated balance sheets. 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 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. 3 . Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: December 31, (in thousands) 2024 2023 Prepaid expenses $ 36,591 $ 34,669 Other current assets 4,726 4,162 Total prepaid expenses and other current assets $ 41,317 $ 38,831 71 Table of Contents 4. Receivables and Allowance for Credit Losses Notes Receivable 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. The following table summarizes the composition of the notes receivable balances by credit quality indicator and the allowance for credit losses: December 31, (in thousands) 2024 2023 Senior $ 94,963 $ 85,919 Subordinated 15,433 17,004 Unsecured 5,118 5,359 Total notes receivable 115,514 108,282 Less: allowance for credit losses 7,331 8,616 Total notes receivable, net of allowance for credit losses $ 108,183 $ 99,666 Current portion, net of allowance for credit losses $ 75,501 $ 20,766 Long-term portion, net of allowance for credit losses $ 32,682 $ 78,900 The following table summarizes the amortized cost basis of the notes receivable by the year of origination and credit quality indicator: (in thousands) 2024 2023 2022 2021 2020 Prior Total Senior $ 38,205 $ — $ — $ — $ — $ 56,758 $ 94,963 Subordinated — 3,499 — — — 11,934 15,433 Unsecured 113 — 69 1,145 761 3,030 5,118 Total notes receivable $ 38,318 $ 3,499 $ 69 $ 1,145 $ 761 $ 71,722 $ 115,514 The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses: December 31, (in thousands) 2024 2023 Beginning balance $ 8,616 $ 10,172 (Reversal) provision for credit losses ( 609 ) 763 Recoveries ( 676 ) ( 2,319 ) Ending balance $ 7,331 $ 8,616 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 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. 72 Table of Contents The following table summarizes the past due balances by credit quality indicator of the notes receivable: (in thousands) 1-30 days Past Due 31-89 days Past Due > 90 days Past Due Total Past Due Current Total Notes Receivable As of December 31, 2024 Senior $ — $ — $ 15,200 $ 15,200 $ 79,763 $ 94,963 Subordinated — — 2,264 2,264 13,169 15,433 Unsecured — — 784 784 4,334 5,118 $ — $ — $ 18,248 $ 18,248 $ 97,266 $ 115,514 As of December 31, 2023 Senior $ — $ — $ 15,200 $ 15,200 $ 70,719 $ 85,919 Subordinated — 2,936 — 2,936 14,068 17,004 Unsecured — — 400 400 4,959 5,359 $ — $ 2,936 $ 15,600 $ 18,536 $ 89,746 $ 108,282 The amortized cost basis of the notes receivable in a non-accrual status was $ 17.5 million and $ 15.9 million as of December 31, 2024 and 2023, respectively. Variable Interest through Notes Receivable The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $ 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 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 Accounts receivable consists primarily of franchise and related fees due from the hotel franchisees and are recorded at the invoiced amount. 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, 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. 5. Property and Equipment The components of property and equipment were the following: December 31, (in thousands) 2024 2023 Land and land improvements $ 51,045 $ 44,978 Construction in progress and software under development 151,756 98,310 Computer equipment and software 105,196 261,287 Buildings and leasehold improvements 354,689 305,485 Furniture, fixtures, vehicles and equipment 67,562 63,917 Property and equipment 730,248 773,977 Less: Accumulated depreciation and amortization ( 125,903 ) ( 280,499 ) Property and equipment, net $ 604,345 $ 493,478 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 73 Table of Contents 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. 6. Goodwill, Impairment of Assets, and Sale of Business and Assets Goodwill The following table summarizes the carrying amount of the Company's goodwill: December 31, (in thousands) 2024 2023 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 carrying amount $ 220,187 $ 220,187 As of December 31, 2024 and 2023, goodwill is entirely attributable to the Hotel Franchising reporting unit. The Company assessed the qualitative factors attributable to the Hotel Franchising reporting unit and determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount. The Hotel Franchising reporting unit is included in the Hotel Franchising & Management reportable segment in Note 20. Long-lived Asset Group Impairments Legacy Radisson Corporate Office Lease On October 12, 2023, the Company executed an agreement to sublease the legacy Radisson corporate office space in Minneapolis, Minnesota. As a result of the intended change of use, the Company determined the assets associated with the legacy Radisson corporate office space represent their own long-lived asset group, inclusive of the head lease right-of-use asset and leasehold improvements, with a carrying value of $ 9.5 million. The legacy Radisson corporate office space long-lived asset group was determined to be impaired due to the carrying value exceeding its fair value, which resulted in the recognition of a $ 3.4 million impairment loss, which is presented in impairments of long-lived assets in the consolidated statements of income and the Corporate & Other segment in Note 20. This nonrecurring fair value measurement, which is based on a discounted cash flows analysis, is classified as Level 3 in the fair value measurement hierarchy because there are unobservable inputs which are significant to the overall fair value. 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. 74 Table of Contents 7. Intangible Assets The components of the Company's intangible assets were the following: As of December 31, 2024 As of December 31, 2023 (in thousands) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Franchise Rights (1) $ 278,956 $ 67,620 $ 211,336 $ 354,735 $ 123,845 $ 230,890 Franchise Agreement Acquisition Costs (2) 548,544 128,932 419,612 424,695 98,103 326,592 Trademarks & Other (3) 12,444 6,414 6,030 19,876 13,721 6,155 Capitalized SaaS Licenses (4) 6,392 6,071 321 17,397 16,673 724 Total amortizing intangible assets 846,336 209,037 637,299 816,703 252,342 564,361 Trademarks (non-amortizing) (5) 246,714 — 246,714 246,714 — 246,714 Total intangible assets $ 1,093,050 $ 209,037 $ 884,013 $ 1,063,417 $ 252,342 $ 811,075 (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 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. (2) Represents certain payments to customers as an incentive to enter into new franchise agreements, which are amortized as a reduction to royalty, licensing and management fees and other revenues from franchised and managed properties in the consolidated statements of income over useful lives generally ranging from 10 to 30 years on a straight-line basis commencing at hotel opening. The gross and accumulated amortization amounts are written off upon full amortization recognition, including the termination of an associated franchise agreement. (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, 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) 2025 $ 48,894 2026 $ 47,947 2027 $ 47,012 2028 $ 45,328 2029 $ 44,127 8. Investments in Affiliates The Company has equity method investments in affiliates primarily related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels and Everhome Suites in strategic markets. As of 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, 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. 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 to these consolidated financial statements. 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. 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 75 Table of Contents 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. 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. Based on these analyses, in each case, the Company determined that the fair value declined below the carrying value and the decline is other-than-temporary. 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 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: Ownership Interest December 31, 2024 December 31, 2023 Choice Hotels Canada, Inc. (1) 50 % 50 % Main Street WP Hotel Associates, LLC 50 % 50 % CS Hotel West Orange, LLC 50 % 50 % City Market Hotel Development, LLC (2) — % 43 % 926 James M. Wood Boulevard, LLC 75 % 75 % EH Glendale JV, LLC 80 % 80 % CS Lakeside Santa Clara LLC 50 % 50 % BL 219 Holdco, LP 50 % 50 % Integrated 32 West Randolph, LLC 20 % 20 % EH Nampa JV LLC 80 % 80 % Radisson Hotel La Crosse (1) 14 % 14 % EH Cheyenne JV, LLC 80 % 80 % EH Waco JV, LLC 80 % 80 % EH Amarillo JV, LLC 80 % 80 % EH Yuma JV, LLC 80 % 80 % EH El Paso JV, LLC 80 % 80 % 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, 2024, the Company received a liquidating distribution as a result of the affiliate selling its underlying assets. 76 Table of Contents 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: Year Ended December 31, (in thousands) 2024 2023 2022 Revenues $ 65,732 $ 65,634 $ 58,821 Operating income $ 14,199 $ 12,504 $ 7,977 (Loss) income before income taxes $ ( 1,203 ) $ 314 $ 1,837 Net loss $ ( 3,488 ) $ ( 1,255 ) $ ( 1,058 ) As of December 31, (in thousands) 2024 2023 Current assets $ 71,737 $ 63,397 Non-current assets 412,269 269,693 Total assets $ 484,006 $ 333,090 Current liabilities $ 84,966 $ 63,526 Non-current liabilities 257,130 177,451 Total liabilities $ 342,096 $ 240,977 9. Other Assets Other assets consisted of the following: December 31, (in thousands) 2024 2023 Land and buildings $ 20,303 $ 20,303 Capitalized franchise sales commissions 59,450 58,611 Other assets 14,083 14,375 Total other assets $ 93,836 $ 93,289 The land and buildings presented as other assets in the consolidated balance sheets represent real estate that the Company does not intend to progress to active construction and development. 10. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: December 31, (in thousands) 2024 2023 Accrued compensation and benefits $ 55,806 $ 51,385 Accrued interest 27,333 10,606 Dividends payable 13,888 14,902 Termination benefits 5,944 5,252 Income taxes payable 10,405 6,954 Current operating lease liabilities 5,367 4,238 Other liabilities 17,986 15,911 Total accrued expenses and other current liabilities $ 136,729 $ 109,248 77 Table of Contents 11. Deferred Revenue Deferred revenue consisted of the following: December 31, (in thousands) 2024 2023 Initial franchise fees $ 111,240 $ 128,935 Loyalty program 110,371 98,225 System implementation fees 3,601 3,912 Procurement services fees 3,882 7,963 Other 5,279 2,782 Total deferred revenue $ 234,373 $ 241,817 Current portion $ 102,114 $ 108,316 Long-term portion $ 132,259 $ 133,501 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. 12. Debt Debt consisted of the following: December 31, 2024 2023 (in thousands) $ 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 $ 397,042 $ 396,440 $ 450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 3.7 million and $ 4.3 million at December 31, 2024 and December 31, 2023, respectively 446,300 445,690 $ 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 588,764 — $ 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 $ 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 Total debt $ 1,768,526 $ 1,568,019 Less: current portion — 499,268 Total long-term debt $ 1,768,526 $ 1,068,751 As of December 31, 2024, the scheduled principal maturities of debt, net of unamortized discounts, premiums, and deferred issuance costs, were as follows: (in thousands) Senior Notes Revolving Credit Facility Total 2025 $ — $ — $ — 2026 — — — 2027 — — — 2028 — — — 2029 397,042 336,420 733,462 Thereafter 1,035,064 — 1,035,064 Total payments $ 1,432,106 $ 336,420 $ 1,768,526 78 Table of Contents 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. 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. 13. Non-Qualified Retirement, Savings, and Investment Plans The Company sponsors two non-qualified retirement savings and investment plans for certain employees and senior executives. Employee and Company contributions are maintained in separate irrevocable trusts. Legally, the assets of the trusts remain those of the Company; however, access to the trusts’ assets is severely restricted. The trusts cannot be revoked by the Company or an acquirer, but the assets are subject to the claims of the Company’s general creditors. The participants do not have the right to assign or transfer contractual rights in the trusts. In 2002, the Company adopted the Choice Hotels International, Inc. 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. In 1997, the Company adopted the Choice Hotels International, Inc. Non-Qualified Retirement Savings and Investment Plan ("Non-Qualified Plan"). 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 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. 79 Table of Contents 14. Fair Value Measurements The Company estimates the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs on a recurring basis. Level 1 - Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist of equity securities and mutual funds held in the Company's Deferred Compensation Plan. Level 2 - Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable. The Company’s Level 2 assets consist of money market funds held in the Company's Deferred Compensation Plan. Level 3 - Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument. The Company does not currently have any assets recorded at fair value on a recurring basis whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the years ended December 31, 2024 and 2023. The Company recognized the following assets at fair value on a recurring basis in the consolidated balance sheets: Fair Value Measurements at Reporting Date Using (in thousands) Total Level 1 Level 2 Level 3 As of December 31, 2024 Equity securities $ — $ — $ — $ — Mutual funds (1) 43,887 43,887 — — Money market funds (1) 5,439 — 5,439 — Total $ 49,326 $ 43,887 $ 5,439 $ — As of December 31, 2023 Equity securities $ 116,374 $ 116,374 $ — $ — Mutual funds (1) 36,810 36,810 — — Money market funds (1) 4,767 — 4,767 — Total $ 157,951 $ 153,184 $ 4,767 $ — (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 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 Equity Securities $ — $ — $ — $ — $ 112,420 $ 3,954 $ — $ 116,374 Other Financial Instruments Disclosure 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 adjusts frequently based on current market interest rates; therefore, the Company believes the carrying amount approximates the fair value. 80 Table of Contents 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. Refer to Note 12 for additional information on debt. As of December 31, 2024 and 2023, the carrying amounts and the fair values were as follows: December 31, 2024 December 31, 2023 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value 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. 15. Income Taxes The Company's income before income taxes, classified by source of income, was as follows: Year Ended December 31, (in thousands) 2024 2023 2022 U.S. $ 370,395 $ 303,337 $ 409,666 Outside the U.S. 25,250 33,619 27,140 Income before income taxes $ 395,645 $ 336,956 $ 436,806 The provision for income taxes, classified by the timing and the location of payment, was as follows: Year Ended December 31, (in thousands) 2024 2023 2022 Current tax expense Federal $ 89,716 $ 60,493 $ 103,275 State 21,518 16,890 20,068 Foreign 2,609 1,593 2,331 Deferred tax (benefit) expense Federal ( 18,378 ) ( 2,022 ) ( 18,974 ) State ( 2,908 ) ( 1,874 ) ( 4,163 ) Foreign 3,423 3,369 2,117 Income tax expense $ 95,980 $ 78,449 $ 104,654 81 Table of Contents The net deferred tax assets were as follows: December 31, (in thousands) 2024 2023 Deferred tax assets: Accrued compensation $ 20,958 $ 18,325 Deferred revenue 40,946 30,007 Receivable, net 12,345 12,460 Tax credits 24,663 19,194 Operating lease liabilities 28,455 28,673 Partnership interests 5,130 5,516 Capitalized research and experimental expenditures 44,946 30,781 Foreign net operating losses 7,870 7,564 Non-U.S. intellectual property 11,333 15,149 Other 7,235 6,588 Total gross deferred tax assets 203,881 174,257 Less: Valuation allowance ( 29,660 ) ( 24,228 ) Deferred tax assets $ 174,221 $ 150,029 Deferred tax liabilities: Property, equipment and intangible assets $ ( 42,895 ) $ ( 36,386 ) Operating lease ROU assets ( 20,016 ) ( 21,379 ) Other ( 3,002 ) ( 2,729 ) Deferred tax liabilities ( 65,913 ) ( 60,494 ) Net deferred tax assets $ 108,308 $ 89,535 The Company assesses all positive and negative evidence to estimate whether sufficient future taxable income will be generated to use its deferred tax assets. Based on this evaluation, the Company recorded a net change to its valuation allowance of $ 5.4 million due to state tax credits. The Company has $ 24.7 million of state income tax credit carryforwards. It is unlikely that the Company will realize these benefits. Accordingly, the Company has provided a full valuation allowance against these carryforwards. 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. The Company has recorded a tax-effected valuation allowance of $ 1.8 million for these NOLs, primarily related to France and India. In addition, the Company has a Dutch deferred tax asset of $ 11.3 million, for which it has recorded a valuation allowance of $ 3.0 million. The Dutch valuation allowance did not change during the year ended December 31, 2024. The following table presents a reconciliation of the statutory United States federal income tax rate to the effective income tax rate for continuing operations: Year Ended December 31, 2024 2023 2022 Statutory U.S. federal income tax rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal tax benefit 3.5 % 3.2 % 3.0 % 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 % Tax credits ( 2.4 ) % ( 2.4 ) % ( 1.5 ) % Valuation allowance 0.6 % 0.6 % 0.5 % Other 0.4 % ( 0.9 ) % ( 0.3 ) % Effective income tax rate 24.3 % 23.3 % 24.0 % The Company's effective income tax rates from continuing operations were 24.3 %, 23.3 %, and 24.0 % for the years ended December 31, 2024, 2023, and 2022, respectively. 82 Table of Contents 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 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. After considering the deferred income tax accounting impact, it is expected that approximately $ 4.6 million of the total as of December 31, 2024 would reduce the effective income tax rate if resolved in the Company’s favor. The following table presents a reconciliation of the beginning and ending amounts of the unrecognized tax benefits: (in thousands) 2024 2023 2022 Balance, January 1 $ 13,434 $ 11,876 $ 11,147 Changes for tax positions of prior years ( 776 ) 2,338 ( 31 ) Increases for tax positions related to the current year 1,516 1,670 1,650 Settlements and lapsing of statutes of limitations ( 7,260 ) ( 2,450 ) ( 890 ) Balance, December 31 $ 6,914 $ 13,434 $ 11,876 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 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. The Company did not incur any material interest or penalties during the years ended December 31, 2024, 2023, and 2022. The Company had $ 0.3 million and $ 0.1 million of accrued interest and penalties as of December 31, 2024 and 2023, respectively. 16. Share-Based Compensation and Capital Stock Share-Based Compensation 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. Approximately 1.1 million shares of the Company's common stock remain available for grant as of December 31, 2024. The Company’s policy allows the issuance of new common stock shares or treasury shares to satisfy the share-based awards. 83 Table of Contents For the year ended December 31, 2024, the following table presents a summary of the share-based award activity: 2024 Stock Options Restricted Stock Performance Vested Restricted Stock Units Options Weighted Average Exercise Price Weighted Average 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 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. 84 Table of Contents 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: 2024 2023 2022 Risk-free interest rate 4.27 % 4.10 % 2.01 % Expected volatility 31.34 % 30.90 % 29.46 % Expected life of stock option 6.0 years 6.0 years 5.9 years Dividend yield 1.03 % 0.90 % 0.66 % Requisite service period 4 years 4 years 4 years Contractual life 10 years 10 years 10 years Weighted average fair value of the stock options granted (per stock option) $ 38.85 $ 42.59 $ 42.66 The expected life of the stock options and the expected volatility are based on historical data which is believed to be indicative of future exercise patterns and volatility. The historical volatility is calculated based on a period that corresponds to the expected life of the stock option. 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. Restricted Stock The following table is a summary of the activity related to the restricted stock grants: For the Year Ended December 31, 2024 2023 2022 Restricted shares granted 69,249 65,991 273,777 Weighted average grant date fair value per share $ 115.57 $ 123.65 $ 143.76 Aggregate grant date fair value (in thousands) $ 8,003 $ 8,160 $ 39,357 Restricted shares forfeited 16,246 13,202 14,443 Vesting service period for the restricted shares granted 9 - 48 months 9 - 48 months 9 - 60 months Fair value of the restricted shares vested (in thousands) $ 6,804 $ 11,134 $ 13,784 Performance Vested Restricted Stock Units The following table is a summary of the activity related to the PVRSU grants: For the Years Ended December 31, 2024 2023 2022 PVRSUs granted at target 147,943 110,636 111,585 Weighted average grant date fair value per share $ 115.04 $ 128.71 $ 181.91 Aggregate grant date fair value (in thousands) $ 17,019 $ 14,240 $ 20,298 PVRSUs forfeited & expired 23,710 16,504 83,563 Requisite service period 9 - 48 months 9 - 48 months 9 - 60 months 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 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 of the share repurchase program. 85 Table of Contents 17. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss were as follows: December 31, (in thousands) 2024 2023 2022 Foreign currency translation adjustments $ ( 6,193 ) $ ( 5,671 ) $ ( 5,211 ) Total accumulated other comprehensive loss $ ( 6,193 ) $ ( 5,671 ) $ ( 5,211 ) The changes in accumulated other comprehensive loss, net of tax, were as follows: Year Ended December 31, (in thousands) 2024 2023 Beginning Balance $ ( 5,671 ) $ ( 5,211 ) Foreign currency translation adjustments ( 522 ) ( 460 ) Ending Balance $ ( 6,193 ) $ ( 5,671 ) 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. 18. 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 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 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, (in thousands, except per share amounts) 2024 2023 2022 Numerator: Net income $ 299,665 $ 258,507 $ 332,152 Income allocated to participating securities ( 1,521 ) ( 1,379 ) ( 1,881 ) Net income available to common shareholders $ 298,144 $ 257,128 $ 330,271 Denominator: Weighted average shares of common stock outstanding - basic 47,653 50,341 54,595 Basic earnings per share $ 6.26 $ 5.11 $ 6.05 Numerator: Net income $ 299,665 $ 258,507 $ 332,152 Income allocated to participating securities ( 1,521 ) ( 1,379 ) ( 1,881 ) Net income available to common shareholders $ 298,144 $ 257,128 $ 330,271 Denominator: Weighted average shares of common stock outstanding - basic 47,653 50,341 54,595 Dilutive effect of stock options, PVRSUs, and RSUs 425 359 526 Weighted average shares of common stock outstanding - diluted 48,078 50,700 55,121 Diluted earnings per share $ 6.20 $ 5.07 $ 5.99 86 Table of Contents 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, (in thousands) 2024 2023 2022 Stock options 147 232 153 PVRSUs 7 71 — 19. Leases Lessee 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 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. The Company's lease costs were as follows: Year Ended December 31, (in thousands) 2024 2023 Operating lease cost $ 11,979 $ 13,786 Sublease income ( 789 ) ( 234 ) Total lease cost $ 11,190 $ 13,552 Other information related to the Company's lease arrangements were as follows: Year Ended December 31, (in thousands) 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 6,637 $ 12,714 ROU assets obtained in exchange for lease liabilities in non-cash transactions: Operating lease assets obtained in exchange for operating lease liabilities $ 4,585 $ 28,605 Weighted-average remaining lease term 31.7 years 33.1 years Weighted-average discount rate 5.07 % 5.04 % As of December 31, 2024, the future minimum lease payments were as follows: (in thousands) 2025 $ 8,500 2026 12,863 2027 13,545 2028 13,572 2029 13,577 Thereafter 311,586 Total minimum lease payments $ 373,643 Less: imputed interest 255,021 Present value of the minimum lease payments $ 118,622 Office Lease On September 26, 2023, the Company's principal executive office lease agreement commenced with an unrelated third-party for a lease term of approximately twelve years . The Company accounted for this lease as an operating lease and established a lease liability and a right-of-use asset of approximately $ 41.9 million and $ 28.6 million, respectively. Sublease 87 Table of Contents 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 commenced 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 in 2023. Refer to Note 6 for additional information. Related Party Lease The Company and the family members of the Company's largest shareholder entered into an agreement that allows those family members to lease the Company's aircraft from time to time for their personal use. 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 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. 20. Reportable Segment Information The Hotel Franchising & Management reportable segment includes the Company's hotel franchising operations which consists of its 22 brands and brand extensions and the hotel management operations of 13 hotels (inclusive of four owned hotels). The 22 brands and brand extensions and hotel management operations are aggregated together within this reportable segment because they have similar economic characteristics, types of customers, distribution channels, and regulatory business environments. The revenues from the hotel franchising and management business include royalty fees, initial franchise fees and relicensing fees, cost reimbursement revenues, platform and procurement services fees revenue, base and incentive management fees, and other hotel franchising and management-related revenue. The Company provides certain services under its franchise and management agreements which result in direct and indirect reimbursements. The cost reimbursement revenues received from the franchisees are included in Hotel Franchising & Management revenues and are offset by the related expenses in order to calculate Hotel Franchising & Management operating income. 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 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 (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. 88 Table of Contents The following tables presents the financial information for the Company's segments: For the Year Ended December 31, 2024 (in thousands) Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Revenues $ 1,470,592 $ 126,450 $ ( 12,203 ) $ 1,584,839 Other Segment Items (1) 866,514 223,473 ( 12,203 ) 1,077,784 Depreciation and amortization 19,779 23,503 — 43,282 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 (in thousands) Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Revenues $ 1,444,394 $ 110,854 $ ( 11,083 ) $ 1,544,165 Other Segment Items (1) 916,680 223,881 ( 11,083 ) 1,129,478 Depreciation and amortization 19,183 20,476 — 39,659 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 (in thousands) Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Revenues $ 1,298,521 $ 108,879 $ ( 5,451 ) $ 1,401,949 Other Segment Items (1) 732,681 165,693 ( 5,451 ) 892,923 Depreciation and amortization 12,935 17,490 — 30,425 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. 89 Table of Contents The results of the Company's international operations are included in the Hotel Franchising & Management reportable segment and Corporate & Other. For the years ended December 31, 2024, 2023, and 2022, the revenues generated by the international operations, including royalty fees, cost reimbursable revenues, and other revenues, were $ 102.7 million, $ 103.2 million, and $ 70.2 million, respectively. 21. Related Party Transactions Transactions with the Company's Largest Shareholder Effective October 15, 1997, Choice Hotels International, Inc., which included both a franchising business and an owned hotel business, separated the businesses via a spin-off into two companies: Sunburst Hospitality Corporation (referred to hereafter as “Sunburst”) and the Company. Subsequent to the spin-off, the Company’s largest shareholder retained significant ownership percentages in both Sunburst and the Company. As part of the spin-off, Sunburst and the Company entered into a strategic alliance agreement (as amended, the "Strategic Alliance Agreement"). Among other things, the Strategic Alliance Agreement provided for revised royalty and system fees and the determination of liquidated damages related to the termination of Choice-branded Sunburst properties. The liquidated damage provisions extend through the life of the existing Sunburst franchise agreements. On June 5, 2019, the Strategic Alliance Agreement was terminated and replaced with addenda to each of the five hotels under a franchise at that time. The addenda preserve certain terms from the Strategic Alliance Agreement with respect to the five hotels, including the revised royalty and system fees and liquidated damage provisions, which would also apply to new franchise agreements signed for the five hotels (as either a renewal or a change to another Choice brand not contemplated at the time of the original agreement execution). No terms were substantially modified with respect to the five hotels under franchise. 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, 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 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, 2024, the Company had $ 102 thousand of remaining payments under this arrangement. 22. Transactions with Unconsolidated Affiliates The Company has extended loans to various unconsolidated affiliates or members of our unconsolidated affiliates. 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 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 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. 90 Table of Contents 23. 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 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 The Company entered into various limited payment guaranties with regards to the Company’s VIEs in order to support their efforts to develop and own hotels that are franchised under the Company’s brands. 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, 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. Commitments 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. The maximum guarantee under the agreement is $ 22 million. The Company believes the future performance of the hotels is expected to be sufficient on both an annual basis and over the duration of the agreement. Accordingly, no liability was recognized as of December 31, 2024 in the consolidated balance sheets. • The Company strategically deploys capital in the form of franchise agreement acquisition cost payments across our brands to incentivize franchise development. 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 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. Conversely, to the extent the expenditures incurred exceed the revenues collected, the Company has the contractual enforceable right to assess and collect such amounts from the franchisees. In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies another party for breaches of representations and warranties. Such indemnifications are granted under various agreements, including those governing (i) purchases or sales of assets or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities, (v) issuances of debt or equity securities, and (vi) certain operating agreements. The indemnifications issued are for the benefit of the (i) buyers in sale agreements and sellers in purchase agreements, (ii) landlords in lease contracts, (iii) franchisees in licensing agreements, (iv) financial institutions in credit facility arrangements, (v) underwriters in debt or equity security issuances, and (vi) parties under certain operating agreements. In addition, these parties are also generally indemnified against any third-party claim resulting from the transaction that is contemplated in the underlying agreement. 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 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 91 Table of Contents 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 any potential liability. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.