CHOICE HOTELS INTERNATIONAL INC /DE 10-Q

ITEM 1. FINANCIAL STATEMENTS CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 REVENUES Franchise and management fees $ 193,777 $ 188,237 $ 515,931 $ 511,450 Partnership services and fees 28,868 24,320 81,313 71,527 Owned hotels 33,167 31,936 91,255 85,345 Other 22,094 11,647 57,937 49,671 Revenue for reimbursable costs from franchised and managed properties 169,434 171,824 460,207 477,076 Total revenues 447,340 427,964 1,206,643 1,195,069 OPERATING EXPENSES Selling, general and administrative 79,610 69,022 243,118 230,020 Business combination, diligence and transition costs 1,494 984 1,940 17,723 Depreciation and amortization 15,760 12,893 42,932 38,545 Owned hotels 23,792 22,343 67,271 62,370 Reimbursable expenses from franchised and managed properties 184,268 170,939 504,437 501,857 Total operating expenses 304,924 276,181 859,698 850,515 Operating income 142,416 151,783 346,945 344,554 OTHER EXPENSES AND (INCOME), NET Interest expense 23,490 22,038 67,468 66,064 Interest income ( 1,435 ) ( 2,411 ) ( 4,450 ) ( 6,557 ) Gain from an acquisition of a joint venture ( 100,025 ) — ( 100,025 ) — Gain on sale of assets ( 713 ) — ( 713 ) — Loss on extinguishment of debt — 331 — 331 Other gains, net ( 721 ) ( 4,013 ) ( 5,659 ) ( 133 ) Equity in net loss (gain) of affiliates 10,904 ( 1,310 ) 11,035 ( 9,088 ) Total other expenses and (income), net ( 68,500 ) 14,635 ( 32,344 ) 50,617 Income before income taxes 210,916 137,148 379,289 293,937 Income tax expense 30,920 31,432 73,025 70,076 Net income $ 179,996 $ 105,716 $ 306,264 $ 223,861 Basic earnings per share $ 3.89 $ 2.24 $ 6.59 $ 4.64 Diluted earnings per share $ 3.86 $ 2.22 $ 6.52 $ 4.61 Cash dividends declared per share $ 0.2875 $ 0.2875 $ 0.8625 $ 0.8625 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Net income $ 179,996 $ 105,716 $ 306,264 $ 223,861 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment ( 1,557 ) 532 585 292 Other comprehensive (loss) income, net of tax ( 1,557 ) 532 585 292 Comprehensive income $ 178,439 $ 106,248 $ 306,849 $ 224,153 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED) September 30, 2025 December 31, 2024 ASSETS Current assets Cash and cash equivalents $ 52,583 $ 40,177 Accounts receivable (net of allowance for credit losses of $ 48,284 and $ 45,610 , respectively) 236,499 176,672 Income taxes receivable 20,382 5,419 Notes receivable (net of allowance for credit losses of $ 6,523 and $ 5,805 , respectively) 95,509 75,501 Prepaid expenses and other current assets 45,374 41,317 Total current assets 450,347 339,086 Property and equipment (net of accumulated depreciation and amortization of $ 147,450 and $ 125,903 , respectively) 628,260 604,345 Operating lease right-of-use assets 79,029 83,451 Goodwill 304,511 220,187 Intangible assets (net of accumulated amortization of $ 242,136 and $ 209,037 , respectively) 1,045,510 884,013 Notes receivable (net of allowance for credit losses of $ 960 and $ 1,526 , respectively) 16,268 32,682 Investments for employee benefit plans, at fair value 49,017 47,603 Investments in affiliates 134,424 117,016 Deferred income taxes 87,975 108,308 Other assets 112,193 93,836 Total assets $ 2,907,534 $ 2,530,527 LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) Current liabilities Accounts payable $ 154,224 $ 134,865 Accrued expenses and other current liabilities 114,902 136,729 Deferred revenue 109,451 102,114 Liability for guest loyalty program 89,965 89,013 Total current liabilities 468,542 462,721 Long-term debt 1,918,504 1,768,526 Long-term deferred revenue 134,622 132,259 Deferred compensation and retirement plan obligations 55,014 53,316 Deferred income taxes 22,914 — Operating lease liabilities 109,782 113,255 Liability for guest loyalty program 42,681 40,607 Other liabilities 5,701 5,114 Total liabilities 2,757,760 2,575,798 Commitments and contingencies (Note 12) Common stock, $ 0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at September 30, 2025 and December 31, 2024; 46,271,815 and 46,856,567 shares outstanding at September 30, 2025 and December 31, 2024, respectively 951 951 Additional paid-in-capital 397,775 370,201 Accumulated other comprehensive loss ( 5,608 ) ( 6,193 ) Treasury stock, at cost; 48,793,823 and 48,209,071 shares at September 30, 2025 and December 31, 2024, respectively ( 2,510,911 ) ( 2,411,527 ) Retained earnings 2,267,567 2,001,297 Total shareholders’ equity (deficit) 149,774 ( 45,271 ) Total liabilities and shareholders’ equity (deficit) $ 2,907,534 $ 2,530,527 The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) Nine Months Ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 306,264 $ 223,861 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 42,932 38,545 Depreciation and amortization – reimbursable expenses from franchised and managed properties 14,295 14,314 Franchise agreement acquisition cost amortization 25,020 20,584 Gain from an acquisition of a joint venture ( 100,025 ) — Gain on sale of assets ( 713 ) — Non-cash share-based compensation and other charges 27,439 32,445 Non-cash interest, investments, and affiliate income, net ( 6,131 ) ( 7,529 ) Deferred income taxes ( 17,713 ) ( 21,086 ) Equity in net loss of affiliates, less distributions received 16,424 56 Franchise agreement acquisition costs, net of reimbursements ( 62,359 ) ( 84,085 ) Change in working capital and other ( 60,676 ) 19,435 Net cash provided by operating activities 184,757 236,540 CASH FLOWS FROM INVESTING ACTIVITIES Investments in other property and equipment ( 26,927 ) ( 33,620 ) Investments in owned hotel properties ( 85,307 ) ( 81,239 ) Contributions to investments in affiliates ( 90,005 ) ( 47,695 ) Issuances of notes receivable ( 6,351 ) ( 24,405 ) Collections of notes receivable 3,036 2,277 Business acquisition, net of cash acquired ( 73,395 ) — Proceeds from the sale of assets 52,000 — Proceeds from sales of equity securities — 108,149 Distributions from sales of affiliates 44,617 15,850 Other items, net 4,475 ( 2,680 ) Net cash used in investing activities ( 177,857 ) ( 63,363 ) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings pursuant to revolving credit facilities 148,482 154,500 Proceeds from the issuance of long-term debt — 593,574 Proceeds from economic development loans 250 — Repayment of long-term debt — ( 500,000 ) Debt issuance costs — ( 8,069 ) Purchases of treasury stock ( 112,958 ) ( 348,964 ) Dividends paid ( 40,194 ) ( 42,488 ) Proceeds from the exercise of stock options 7,488 9,279 Net cash provided by (used in) financing activities 3,068 ( 142,168 ) Net change in cash and cash equivalents 9,968 31,009 Effect of foreign exchange rate changes on cash and cash equivalents 2,438 802 Cash and cash equivalents, beginning of period 40,177 26,754 Cash and cash equivalents, end of period $ 52,583 $ 58,565 Supplemental disclosure of cash flow information: Cash payments during the period for Income taxes, net of refunds and transferable tax credits $ 75,992 $ 64,734 Interest, net of capitalized interest $ 76,338 $ 56,202 Non-cash investing and financing activities Dividends declared but not paid $ 13,299 $ 13,499 Investments in property, equipment, and intangible assets recognized in accounts payable and accrued expense liabilities $ 20,441 $ 19,522 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED) 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, 2023 49,526,245 $ 951 $ 330,750 $ ( 5,671 ) $ ( 2,046,791 ) $ 1,756,359 $ 35,598 Net income — — — — — 31,009 31,009 Other comprehensive income, net of tax — — — 454 — — 454 Share-based payment activity (1) 252,869 — 4,862 — 6,323 — 11,185 Dividends declared ($ 0.2875 per share) — — — — — ( 14,147 ) ( 14,147 ) Treasury purchases ( 494,910 ) — — — ( 57,372 ) — ( 57,372 ) Balance as of March 31, 2024 49,284,204 $ 951 $ 335,612 $ ( 5,217 ) $ ( 2,097,840 ) $ 1,773,221 $ 6,727 Net income — — — — — 87,136 87,136 Other comprehensive loss, net of tax — — — ( 694 ) — — ( 694 ) Share-based payment activity (1) 17,095 — 8,561 — 685 — 9,246 Dividends declared ($ 0.2875 per share) — — — — — ( 13,613 ) ( 13,613 ) Treasury purchases ( 1,950,432 ) — — — ( 235,581 ) — ( 235,581 ) Balance as of June 30, 2024 47,350,867 $ 951 $ 344,173 $ ( 5,911 ) $ ( 2,332,736 ) $ 1,846,744 $ ( 146,779 ) Net income — — — — — 105,716 105,716 Other comprehensive (loss), net of tax — — — 532 — — 532 Share-based payment activity (1) 63,559 — 12,035 — 2,534 — 14,569 Dividends declared ($ 0.2875 per share) — — — — — ( 13,499 ) ( 13,499 ) Treasury purchases ( 455,387 ) — — — ( 56,691 ) — ( 56,691 ) Balance as of September 30, 2024 46,959,039 $ 951 $ 356,208 $ ( 5,379 ) $ ( 2,386,893 ) $ 1,938,961 $ ( 96,152 ) 7 Table of Contents 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, 2024 46,856,567 $ 951 $ 370,201 $ ( 6,193 ) $ ( 2,411,527 ) $ 2,001,297 $ ( 45,271 ) Net income — — — — — 44,534 44,534 Other comprehensive income, net of tax — — — 63 — — 63 Share-based payment activity (1) 188,586 — 5,813 — 8,945 — 14,758 Dividends declared ($ 0.2875 per share) — — — — — ( 13,391 ) ( 13,391 ) Treasury purchases ( 456,142 ) — — — ( 64,627 ) — ( 64,627 ) Balance as of March 31, 2025 46,589,011 $ 951 $ 376,014 $ ( 6,130 ) $ ( 2,467,209 ) $ 2,032,440 $ ( 63,934 ) Net income — — — — — 81,734 81,734 Other comprehensive income, net of tax — — — 2,079 — — 2,079 Share-based payment activity (1) 29,639 — 11,147 — 1,181 — 12,328 Dividends declared ($ 0.2875 per share) — — — — — ( 13,304 ) ( 13,304 ) Treasury purchases ( 355,276 ) — — — ( 45,141 ) — ( 45,141 ) Balance as of June 30, 2025 46,263,374 $ 951 $ 387,161 $ ( 4,051 ) $ ( 2,511,169 ) $ 2,100,870 $ ( 26,238 ) Net income — — — — — 179,996 179,996 Other comprehensive income, net of tax — — — ( 1,557 ) — — ( 1,557 ) Share-based payment activity (1) 10,060 — 10,614 — 451 — 11,065 Dividends declared ($ 0.2875 per share) — — — — — ( 13,299 ) ( 13,299 ) Treasury purchases ( 1,619 ) — — — ( 193 ) — ( 193 ) Balance as of September 30, 2025 46,271,815 $ 951 $ 397,775 $ ( 5,608 ) $ ( 2,510,911 ) $ 2,267,567 $ 149,774 (1) During certain periods presented, accumulated dividends were paid to certain shareholders upon vesting of their performance vested restricted stock units ("PVRSU"), which are presented in Share-based payment activity. The accompanying notes are an integral part of these consolidated financial statements. 8 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation and Significant Accounting Policies Basis of Presentation The accompanying unaudited 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 unaudited 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 information and footnote disclosures normally included in the consolidated financial statements presented in accordance with GAAP have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024 and the notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 20, 2025. The interim results are not necessarily indicative of the entire year's results. Certain prior year amounts in our consolidated financial statements have been reclassified in order to maintain comparability with the current year presentation. The reclassifications were not as a result of any error in our consolidated financial statements. The Company reclassified certain prior year amounts in the consolidated statements of income in order to maintain comparability with the current year presentation. • Royalty, licensing and management fees were revised to franchise and management fees in the consolidated statements of income, and now include the revenues previously presented in royalty, licensing and management fees, with the exception of partnership licensing revenues which are now presented in partnership services and fees in the consolidated statements of income, and the addition of the revenues generated from programs, platforms, and services associated with the Company's franchise operations which were previously presented in other revenues from franchised and managed properties in the consolidated statements of income. • Initial franchise fees, which were previously presented as a standalone financial statement line item, are now presented within franchise and management fees in the consolidated statements of income. • Platform and procurement services fees were revised to partnership services and fees in the consolidated statements of income, and now include the revenues previously presented in platform and procurement services fees, with the exception of the revenues from the Company’s annual franchisee convention which are now presented in other revenues, the addition of partnership licensing revenues which were previously presented in royalty, licensing and management fees, and the addition of the revenues generated from other non-franchising agreements which are primarily software as a service (“SaaS”) arrangements for non-franchised hoteliers which were previously presented in other revenues in the consolidated statements of income. • Other revenues from franchised and managed properties were revised to revenue for reimbursable costs from franchised and managed properties in the consolidated statements of income, and now include the revenues previously presented in other revenues from franchised and managed properties, with the exception of the revenues generated from programs, platforms, and services associated with the Company’s franchise operations which are now presented in franchise and management fees in the consolidated statements of income. • Selling, general and administrative expenses were revised to include the expenses incurred related to programs, platforms, and services associated with the Company’s franchise operations, which were previously presented in other expenses from franchised and managed properties in the consolidated statements of income. • Depreciation and amortization was revised to include amortization expense from information technology platforms, which was previously presented in other expenses from franchised and managed properties in the consolidated statements of income. 9 Table of Contents • Other expenses from franchised and managed properties were revised to reimbursable expenses from franchised and managed properties in the consolidated statements of income, and now include the expenses previously presented in other expenses from franchised and managed properties, with the exception of the expenses incurred from programs, platforms, and services associated with the Company’s franchise operations which are now presented in selling, general and administrative expenses, and amortization expense from information technology platforms which is now presented in depreciation and amortization expense in the consolidated statements of income. The reclassifications had no effect on the Company's previously reported total revenues, total operating expenses, operating income, or net income. The following table presents the effect of the reclassifications on the three and nine months ended September 30, 2024 consolidated statements of income. Three Months Ended Nine Months Ended September 30, 2024 September 30, 2024 As previously reported Reclassification As reclassified As previously reported Reclassification As reclassified REVENUES Franchise and management fees $ 147,151 $ 41,086 $ 188,237 $ 394,431 $ 117,019 $ 511,450 Initial franchise fees 5,866 ( 5,866 ) — 19,133 ( 19,133 ) — Partnership services and fees 16,178 8,142 24,320 58,060 13,467 71,527 Owned hotels 31,936 — 31,936 85,345 — 85,345 Other 13,857 ( 2,210 ) 11,647 45,251 4,420 49,671 Revenue for reimbursable costs from franchised and managed properties 212,976 ( 41,152 ) 171,824 592,849 ( 115,773 ) 477,076 Total revenues 427,964 — 427,964 1,195,069 — 1,195,069 OPERATING EXPENSES Selling, general and administrative 49,077 19,945 69,022 162,697 67,323 230,020 Business combination, diligence and transition costs 984 — 984 17,723 — 17,723 Depreciation and amortization 10,861 2,032 12,893 32,623 5,922 38,545 Owned hotels 22,343 — 22,343 62,370 — 62,370 Reimbursable expenses from franchised and managed properties 192,916 ( 21,977 ) 170,939 575,102 ( 73,245 ) 501,857 Total operating expenses 276,181 — 276,181 850,515 — 850,515 Operating income $ 151,783 $ — $ 151,783 $ 344,554 $ — $ 344,554 The Company also reclassified certain prior year amounts in the consolidated statements of cash flows in order to maintain comparability with the current year presentation. Depreciation and amortization was revised to include amortization expense from information technology platforms, which was previously presented in depreciation and amortization - other expenses from franchised and managed properties in the consolidated statements of cash flows. Depreciation and amortization - other expenses from franchised and managed properties was revised to depreciation and amortization - reimbursable expenses from franchised and managed properties in the consolidated statements of cash flows. Investments in intangible assets, purchases of investments for employee benefits plans, and proceeds from sales of investments for employee benefits 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 reclassifications had no effect on the Company's previously reported net cash provided by operating activities, the net cash used in investing activities, or the net change in cash and cash equivalents. Summary of Significant Accounting Policies The Company’s significant accounting policies are included in the “Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2024. 10 Table of Contents Recently Issued Accounting Standards In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 regard 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 period from December 31, 2024 to September 30, 2025: (in thousands) Balance as of December 31, 2024 $ 216,697 Increases to the contract liability balance due to cash received 110,450 Revenue recognized in the period ( 92,947 ) Balance as of September 30, 2025 $ 234,200 Remaining Performance Obligations The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $ 234.2 million as of September 30, 2025. 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. 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. The loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $ 31.8 million and $ 23.7 million for the three months ended September 30, 2025 and 2024, respectively, and $ 88.5 million and $ 79.5 million for the nine months ended September 30, 2025 and 2024, respectively. 11 Table of Contents 3. 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: (in thousands) September 30, 2025 December 31, 2024 Senior $ 99,849 $ 94,963 Subordinated 15,367 15,433 Unsecured 4,044 5,118 Total notes receivable $ 119,260 $ 115,514 Less: allowance for credit losses 7,483 7,331 Total notes receivable, net of allowance for credit losses $ 111,777 $ 108,183 Current portion, net of allowance for credit losses $ 95,509 $ 75,501 Long-term portion, net of allowance for credit losses $ 16,268 $ 32,682 The following table summarizes the amortized cost basis of the notes receivable by the year of origination and credit quality indicator: (in thousands) 2025 2024 2023 2022 2021 Prior Total Senior $ 1,684 $ 42,280 $ — $ — $ — $ 55,885 $ 99,849 Subordinated 1,199 — 3,502 — — 10,666 15,367 Unsecured 236 124 — — 748 2,936 4,044 Total notes receivable $ 3,119 $ 42,404 $ 3,502 $ — $ 748 $ 69,487 $ 119,260 The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses: (in thousands) September 30, 2025 December 31, 2024 Beginning balance $ 7,331 $ 8,616 Provision (reversal) for credit losses 152 ( 609 ) Recoveries — ( 676 ) Ending balance $ 7,483 $ 7,331 During the year ended December 31, 2024, the recoveries were primarily associated with cash collections pursuant to a settlement agreement with a borrower. As of September 30, 2025 and December 31, 2024, three and one note receivable loans, respectively, with senior credit quality indicators met the definition of collateral-dependent and are collateralized by the membership interests in the borrowing entities, the associated land parcel, or the operating hotel. The Company used both a market approach that uses quoted market prices and an income approach that uses discounted cash flows 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 loans was $ 3.2 million and $ 2.2 million as of September 30, 2025 and December 31, 2024, respectively. 12 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 September 30, 2025 Senior $ — $ — $ 42,900 $ 42,900 $ 56,949 $ 99,849 Subordinated — — 2,264 2,264 13,103 15,367 Unsecured — — 384 384 3,660 4,044 $ — $ — $ 45,548 $ 45,548 $ 73,712 $ 119,260 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 The amortized cost basis of the notes receivable in a non-accrual status was $ 45.2 million and $ 17.5 million as of September 30, 2025 and December 31, 2024, 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 $ 107.8 million and $ 103.1 million as of September 30, 2025 and December 31, 2024, respectively. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs"). For collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the respective note receivable and the limited commitments which are addressed in Note 12. 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 $ 65.6 million and $ 66.2 million as of September 30, 2025 and December 31, 2024, respectively. These loans mature at various dates and bear interest at fixed or variable rates. 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 nine months ended September 30, 2025, the Company recognized provisions for credit losses on accounts receivable of $ 12.4 million in selling, general and administrative expenses, and $ 8.7 million in reimbursable expenses from franchised and managed properties, in the consolidated statements of income. 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 reimbursable expenses from franchised and managed properties, in the consolidated statements of income. During the nine months ended September 30, 2025, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 18.4 million. During the year ended December 31, 2024, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 14.4 million. 4. 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 September 30, 2025 and December 31, 2024, the Company had total investments in affiliates in the consolidated balance sheets of $ 134.4 million and $ 117.0 million, respectively, which included investments in affiliates that represent VIEs of $ 134.0 million and $ 104.2 million, respectively. The Company has determined that it is not the primary beneficiary of any of these VIEs, however the Company does exercise significant influence through its equity ownership and as a result, the investments in these affiliates are accounted for under the equity method of accounting. During the three months ended September 30, 2025 and 2024, the Company recognized losses totaling $ 10.9 million and $ 0.6 million, respectively, from these investments that represent VIEs. During the nine months ended September 30, 2025 and 2024, the Company recognized losses totaling $ 12.8 million and gains totaling $ 5.0 million, respectively, from these investments that represent VIEs. The Company's maximum exposure to losses related to its investments in the VIEs is limited to the total of its respective equity investment as well as certain limited payment guaranties, which are described in Note 12 to these consolidated financial statements. On July 10, 2025, the Company entered into a joint venture agreement to develop and operate Everhome Suites in certain strategic markets (the "Joint Venture"). The Company contributed $ 71.6 million in cash to the Joint Venture in exchange for an equity ownership interest. The Company concluded that the Joint Venture represents a VIE. The Company determined that it is not the primary beneficiary of the VIE, however, the Company does exercise significant influence through its equity ownership and as a result, the Company's investment in the Joint Venture is accounted for under the equity method of accounting and reported within investments in affiliates in the consolidated balance sheets. Subsequent to the formation of the Joint Venture, the following transactions were completed: • The Joint Venture entered into a loan facility for up to $ 500 million. In connection with the loan facility, the Company has provided a limited payment guarantee, which applies to all hotel projects funded by the loan facility, with the applicable guaranteed amount being determined on a hotel project by hotel project basis. The Company’s obligation under the limited payment guarantee with respect to any hotel project is effective upon the earlier of (a) the hotel's opening date or (b) 18 months after the date on which construction first started for the hotel. The maximum exposure to losses related to this limited payment guarantee is described in Note 12 to these consolidated financial statements. • The Company sold four wholly-owned Everhome Suites hotels under construction to the Joint Venture for an aggregate sale price of $ 52.0 million, resulting in a gain of $ 0.7 million which is reported within gain on sale of assets in the consolidated statements of income. Prior to the sale, the four wholly-owned Everhome Suites hotels were reported within property and equipment in the consolidated balance sheets. • Seven of the Company's unconsolidated affiliates, which the Company previously accounted for under the equity method of accounting, contributed their underlying assets to the Joint Venture. Prior to the transaction, the seven unconsolidated affiliates had an aggregate investment balance of $ 42.1 million, which was reported within investments in affiliates in the consolidated balance sheets. On May 24, 2024, one of the Company's unconsolidated affiliates sold its underlying assets. The Company received a distribution from the unconsolidated affiliate and recognized a gain of $ 7.2 million, which was reported within equity in net gain of affiliates in the consolidated statements of income for the nine months ended September 30, 2024. During the three and nine months ended September 30, 2025 and 2024, the Company recognized no impairment charges related to its equity method investments. 5. Debt Debt consisted of the following: September 30, 2025 December 31, 2024 (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 $ 2.5 million and $ 3.0 million at September 30, 2025 and December 31, 2024, respectively $ 397,493 $ 397,042 $ 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 $ 3.2 million and $ 3.7 million at September 30, 2025 and December 31, 2024, respectively 446,757 446,300 $ 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 $ 10.4 million and $ 11.2 million at September 30, 2025 and December 31, 2024, respectively 589,643 588,764 $ 1 billion senior unsecured revolving credit facility with an effective interest rate of 5.65 %, less deferred issuance costs of $ 3.0 million and $ 3.6 million at September 30, 2025 and December 31, 2024, respectively 484,361 336,420 Economic development loans with an effective interest rate of 3.00 % at September 30, 2025 250 — Total long-term debt $ 1,918,504 $ 1,768,526 Refer to Note 12 and the Liquidity and Capital Resources section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information. 13 Table of Contents 6. Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive loss, net of tax, for the nine months ended September 30, 2025 and 2024 were as follows: (in thousands) Balance as of December 31, 2024 $ ( 6,193 ) Other comprehensive income before reclassification 585 Balance as of September 30, 2025 $ ( 5,608 ) (in thousands) Balance as of December 31, 2023 $ ( 5,671 ) Other comprehensive income before reclassification 292 Balance as of September 30, 2024 $ ( 5,379 ) Other comprehensive loss, net of tax, for both the nine months ended September 30, 2025 and 2024 relates entirely to foreign currency items, and there were no amounts reclassified from accumulated other comprehensive loss during either period. 7. 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 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 nine months ended September 30, 2025 and during the year ended December 31, 2024. 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 September 30, 2025 Mutual funds (1) $ 46,785 $ 46,785 $ — $ — Money market funds (1) 4,006 — 4,006 — Total $ 50,791 $ 46,785 $ 4,006 $ — As of December 31, 2024 Mutual funds (1) $ 43,887 $ 43,887 $ — $ — Money market funds (1) 5,439 — 5,439 — Total $ 49,326 $ 43,887 $ 5,439 $ — (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. 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. 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 5 for additional information on debt. As of September 30, 2025 and December 31, 2024, the carrying amounts and the fair values were as follows: September 30, 2025 December 31, 2024 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value 2019 Senior Notes due 2029 $ 397,493 $ 382,324 $ 397,042 $ 371,600 2020 Senior Notes due 2031 $ 446,757 $ 421,322 $ 446,300 $ 405,351 2024 Senior Notes due 2034 $ 589,643 $ 614,064 $ 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. 8. Income Taxes The Company's effective income tax rates were 14.7 % and 22.9 % for the three months ended September 30, 2025 and 2024, respectively. The Company's effective income tax rates were 19.3 % and 23.8 % for the nine months ended September 30, 2025 and 2024, respectively. The effective income tax rates for the three and nine months ended September 30, 2025 were lower than the U.S. federal income tax rate of 21.0% primarily due to the impact of a $ 100.0 million non-taxable gain from an acquisition of a joint venture and the purchase of transferable tax credits, which were partially offset by the impact of state income taxes. The effective income tax rates for the three and nine months ended September 30, 2024 were higher than the U.S. federal income tax rate of 21.0% primarily due to the impact of state income taxes. 9. Share-Based Compensation The components of the Company’s share-based compensation expense were as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Stock options $ 814 $ 1,319 $ 3,128 $ 3,957 Restricted stock 3,318 3,246 9,648 9,959 Performance vested restricted stock units 7,076 5,184 19,800 14,204 Total share-based compensation expense $ 11,208 $ 9,749 $ 32,576 $ 28,120 A summary of the share-based award activity during the nine months ended September 30, 2025 is presented below: 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, 2025 771,641 $ 111.15 355,405 $ 136.67 467,521 $ 137.74 Granted — — 61,269 135.24 147,586 150.94 Performance-based leveraging (1) — — — — 14,662 120.48 Exercised/vested ( 62,025 ) 107.71 ( 62,976 ) 129.44 ( 116,107 ) 151.76 Expired ( 12,850 ) 135.92 — — — — Forfeited ( 613 ) 134.58 ( 11,381 ) 125.15 ( 22,904 ) 136.71 Outstanding as of September 30, 2025 696,153 $ 111.02 5.5 years 342,317 $ 138.43 490,758 $ 137.85 Options exercisable as of September 30, 2025 560,584 $ 107.86 5.0 years (1) Any revisions to the outstanding PVRSUs during the nine months ended September 30, 2025 is based on the Company's performance relative to the targeted performance conditions in the respective PVRSUs. The fair value of the restricted stock and the PVRSUs with performance conditions that were granted during the nine months ended September 30, 2025 was equal to the market price of the Company’s common stock on the date of the grant. The fair value of the PVRSUs with market conditions that are based on the Company’s total shareholder return relative to a predetermined peer group was estimated using a Monte Carlo simulation method as of the date of the grant. The requisite service periods for the restricted stock and the PVRSUs was between 9 months and 48 months. 14 Table of Contents 10. Earnings Per Share The Company’s shares of restricted stock contain rights to receive nonforfeitable dividends and thus are participating securities that require 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: Three Months Ended Nine Months Ended September 30, September 30, (in thousands, except per share amounts) 2025 2024 2025 2024 Numerator: Net income $ 179,996 $ 105,716 $ 306,264 $ 223,861 Income allocated to participating securities ( 857 ) ( 540 ) ( 1,478 ) ( 1,135 ) Net income available to common shareholders $ 179,139 $ 105,176 $ 304,786 $ 222,726 Denominator: Weighted average shares of common stock outstanding – basic 46,050 46,904 46,226 47,979 Basic earnings per share $ 3.89 $ 2.24 $ 6.59 $ 4.64 Numerator: Net income $ 179,996 $ 105,716 $ 306,264 $ 223,861 Income allocated to participating securities ( 857 ) ( 540 ) ( 1,478 ) ( 1,135 ) Net income available to common shareholders $ 179,139 $ 105,176 $ 304,786 $ 222,726 Denominator: Weighted average shares of common stock outstanding – basic 46,050 46,904 46,226 47,979 Dilutive effect of stock options, PVRSUs, and RSUs 411 454 496 363 Weighted average shares of common stock outstanding – diluted 46,461 47,358 46,722 48,342 Diluted earnings per share $ 3.86 $ 2.22 $ 6.52 $ 4.61 The following securities have been excluded from the calculation of the diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect: Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2025 2024 2025 2024 Stock options 202 148 128 231 PVRSUs 38 7 38 7 11. Reportable Segments 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, partnership services and fees, 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. 15 Table of Contents 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 revenue per available room ("RevPar"), occupancy, and average daily room rate ("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. 16 Table of Contents The following tables present the financial information for the Company's segments: Three Months Ended September 30, 2025 Three Months Ended September 30, 2024 (in thousands) Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Revenues $ 413,237 $ 37,611 $ ( 3,508 ) $ 447,340 $ 395,795 $ 35,385 $ ( 3,216 ) $ 427,964 Other segment items (1) 211,307 81,365 ( 3,508 ) 289,164 215,523 50,981 ( 3,216 ) 263,288 Depreciation and amortization 8,723 7,037 — 15,760 6,670 6,223 — 12,893 Operating income (loss) 193,207 ( 50,791 ) — 142,416 173,602 ( 21,819 ) — 151,783 Reconciliation of segment profit or loss: Interest expense 23,490 22,038 Interest income ( 1,435 ) ( 2,411 ) Gain from an acquisition of a joint venture ( 100,025 ) — Gain on sale of assets ( 713 ) — Loss on extinguishment of debt — 331 Other gains, net ( 721 ) ( 4,013 ) Equity in net loss (gain) of affiliates 10,904 ( 1,310 ) Income before income taxes $ 210,916 $ 137,148 Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024 (in thousands) Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Revenues $ 1,113,262 $ 103,239 $ ( 9,858 ) $ 1,206,643 $ 1,109,173 $ 94,720 $ ( 8,824 ) $ 1,195,069 Other segment items (1) 635,380 191,244 ( 9,858 ) 816,766 656,325 164,469 ( 8,824 ) 811,970 Depreciation and amortization 23,424 19,508 — 42,932 19,155 19,390 — 38,545 Operating income (loss) 454,458 ( 107,513 ) — 346,945 433,693 ( 89,139 ) — 344,554 Reconciliation of segment profit or loss: Interest expense 67,468 66,064 Interest income ( 4,450 ) ( 6,557 ) Gain from an acquisition of a joint venture ( 100,025 ) — Gain on sale of assets ( 713 ) — Loss on extinguishment of debt — 331 Other gains, net ( 5,659 ) ( 133 ) Equity in net loss (gain) of affiliates 11,035 ( 9,088 ) Income before income taxes $ 379,289 $ 293,937 (1) Other segment items for the reportable segment include selling, general and administrative expenses and reimbursable expenses from franchised and managed properties. 17 Table of Contents 12. 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 it's 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 September 30, 2025, the maximum unrecorded exposure of the principal associated with these limited payment guaranties was $ 36.5 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 September 30, 2025: • 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 September 30, 2025, 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. As of September 30, 2025, no liability was recognized in the consolidated balance sheets. For the nine months ended September 30, 2025, the Company recognized guarantee payments of $ 2.0 million in selling, general and administrative expenses in the consolidated statements of income. As of September 30, 2025, the maximum unrecorded exposure of the guarantee was $ 20.0 million. • 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 September 30, 2025, the Company had remaining commitments of up to $ 2.3 million, if certain conditions are met. • The Company’s franchise agreements require the payment of franchise fees, which include marketing and reservation system fees. 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. • The Company has committed to purchase transferable production tax credits generated by a qualified solar energy facility for an aggregate purchase price of approximately $ 125 million over a ten year period, from 2025 through 2035. The Company’s commitment is contingent upon the satisfaction of certain legal and contractual conditions from the seller, and the continued availability of the credits under federal tax laws. The Company expects to utilize these credits in the same quarter in which they are purchased, offsetting federal income tax estimated payments and reducing income tax expense each year. 18 Table of Contents 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 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. 13. Acquisitions Choice Hotels Canada Acquisition On July 2, 2025, the Company completed the acquisition (the “Transaction”) of the remaining 50 % of the outstanding shares of Choice Hotels Canada, Inc. ("Choice Hotels Canada") and amended the existing master franchise agreement for a purchase price of approximately $ 114.5 million, inclusive of preliminary customary adjustments related to working capital and cash. The acquisition was funded with available cash and borrowings under the Company's senior unsecured revolving credit facility. Choice Hotels Canada franchises more than 26,000 rooms in Canada, which have historically been included in the Company's franchised hotel statistics as a result of the prior master franchise agreement. Following the completion of the Transaction, Choice Hotels Canada will have the ability to offer developers access to all of the Company's 22 hotel brands and brand extensions, including the Company's extended stay brands. Prior to the acquisition date, the Company owned 50 % of the outstanding shares of Choice Hotels Canada, which was accounted for under the equity method of accounting and reported within investments in affiliates in the consolidated balance sheets. As a result of the Transaction, Choice Hotels Canada is now a wholly-owned and consolidated subsidiary of the Company, and the Transaction was accounted for as a business combination using the acquisition method. In connection with the Transaction, the Company remeasured the value of its previously held 50 % equity investment to its acquisition date fair value of $ 114.5 million, which resulted in a gain of approximately $ 100.0 million that is reported within gain from an acquisition of a joint venture in the consolidated statements of income. The fair value of the previously held equity investment was determined using a market approach based on the cash consideration exchanged for the newly acquired 50 % equity interest. The following is a summary of the purchase consideration transferred: Purchase Consideration (in thousands) Cash consideration transferred for the newly acquired interest $ 114,470 Fair value of the previously held interest 114,470 Effective settlement of intercompany payables 3,280 Total consideration, including previously held interest $ 232,220 During both the three and nine months ended September 30, 2025, the Company recognized transaction and transition costs of $ 1.5 million in business combination, diligence and transition costs in the consolidated statements of income. Preliminary Fair Values of the Assets Acquired and the Liabilities Assumed The Company allocated the purchase price based upon a preliminary assessment of the fair value of the assets acquired and the liabilities assumed on July 2, 2025. The preliminary fair values are based on management’s estimates and assumptions, using the best information available at the time of this filing. The final valuation and related allocation of the purchase price will be completed no later than 12 months after the closing date of the acquisition. The final acquisition accounting adjustments could be materially different and may include (1) changes in the allocations to the intangible assets as well as goodwill, and (2) other changes to assets and liabilities, such as working capital. The preliminary allocation of the purchase price is as follows: 19 Table of Contents (in thousands) July 2, 2025 Assets acquired Cash and cash equivalents $ 44,356 Accounts receivable 10,706 Income taxes receivable 149 Prepaid expenses and other current assets 335 Operating lease right-of-use assets 358 Intangible assets 150,665 Total assets acquired $ 206,569 Liabilities assumed Accounts payable $ 5,235 Accrued expenses and other current liabilities 1,926 Deferred revenue - current 333 Liability for guest loyalty program - current 7,194 Deferred income taxes 38,045 Long-term deferred revenue 1,845 Operating lease liabilities 358 Liability for guest loyalty program - noncurrent 5,607 Total liabilities assumed $ 60,543 Fair value of net assets acquired $ 146,026 Goodwill 86,194 Total consideration, including previously held interest $ 232,220 Identified Intangible Assets The following table presents the estimated fair values of the acquired identified intangible assets and their estimated useful lives: Estimated Useful Life Estimated Fair Value (in years) (in thousands) Reacquired territory rights 38 $ 76,523 Franchise agreements 12 74,142 Total intangible assets $ 150,665 The reacquired territory rights represent the reacquired rights for the use of certain Choice brands within Canada. The fair value of the reacquired territory rights and the franchise agreements was estimated using a multi-period excess earnings method, which is a variation of the income approach. This method uses the present value of the incremental after-tax cash flows attributable to the intangible asset in order to estimate the fair value. This valuation methodology utilizes Level 3 inputs, and the Company is continuing to assess the assumptions used in estimating these values as well as the respective useful lives, which could result in changes to the provisional values. Income Taxes As the Transaction is accounted for as a business combination, deferred tax assets and liabilities are generally recognized on the differences between the fair value of the assets acquired and the liabilities assumed and the tax bases of the assets acquired and the liabilities assumed in the business combination. The Transaction consists of a foreign entity, so the Company asserts an indefinite reinvestment and has not recorded a deferred tax liability on the outside basis difference in its investment. Pro Forma Results of Operations The following unaudited pro forma information presents the combined results of operations of Choice and Choice Hotels Canada as if the Company had completed the Transaction on January 1, 2024, but using the preliminary fair values of the assets acquired and the liabilities assumed as of the acquisition date. The unaudited pro forma information reflects adjustments relating to (i) the allocation of the purchase price and related adjustments, including the incremental amortization expense based on the preliminary fair values of the intangible assets acquired, (ii) the incremental impact of the senior unsecured revolving credit facility draw on interest expense, (iii) nonrecurring transaction costs, and (iv) the income tax impact of the aforementioned pro forma adjustments. 20 Table of Contents As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Transaction had occurred at the beginning of the period presented, nor are they indicative of the future results of operations. Nine Months Ended (in thousands) September 30, 2025 September 30, 2024 Revenues $ 1,222,972 $ 1,225,458 Net income (1) $ 204,397 $ 222,300 (1) The gain on the previously held 50 % equity interest in Choice Hotels Canada is excluded from the pro forma results of operations. Choice Hotels Canada Results of Operations The Company's consolidated statements of income include Choice Hotels Canada's results of operations since the July 2, 2025 acquisition date. Choice Hotels Canada contributed $ 13.2 million and $ 5.9 million in total revenues and net income, respectively, for both the three and nine months ended September 30, 2025. Goodwill The $ 86.2 million of goodwill recognized is primarily attributable to the value that the Company expects to realize from the existing customer base, cost synergies, and new agreements signed with new franchisees and developers. The goodwill for the Transaction is fully attributable to the Hotel Franchising & Management reportable segment and is not deductible for tax purposes. The following table summarizes the carrying amount of the Company's goodwill, including the goodwill arising from the acquisition of Choice Hotels Canada, as of September 30, 2025. (in thousands) Goodwill, excluding goodwill arising from the Choice Hotels Canada acquisition $ 227,765 Goodwill arising from the Choice Hotels Canada acquisition 86,194 Effect of foreign currency translation ( 1,870 ) Total goodwill, gross carrying amount 312,089 Accumulated impairment losses ( 7,578 ) Goodwill, net carrying amount $ 304,511 21 Table of Contents