What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-19 compared with 2025-02-20 · 211 added, 161 removed, 273 unchanged (58% of the section changed)

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As of December 31, 2025, we had 7,575 hotels with 656,825 rooms open and operating, and 825 hotels with 77,862 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system.

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

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

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

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

The Company's U.S.

operations are conducted through direct franchising relationships, the ownership of 17 open and operating hotels, and the management of 13 hotels (inclusive of four owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships.

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

As a result of our master franchise relationships and international market conditions, our revenues are primarily concentrated in the United States.

Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States.

As a result of our master franchise relationships and international market conditions, our revenues are primarily concentrated in the U.S.

Therefore, our description of our business is primarily focused on the U.S.

Our Company generates revenues, income, and cash flows primarily from our hotel franchising operations.

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Because our primary focus is hotel franchising, we benefit from the economies of scale inherent in the franchising business.

The fee and cost structure of our franchising business provides opportunities to improve our operating results by increasing the number of franchised hotel rooms and the effective royalty rates in our franchise contracts resulting in increased initial franchise fees, ongoing royalty and licensing fees, and platform and procurement services fees.

In addition, our operating results can also be improved through our company-wide efforts related to improving property-level performance and expanding the number of partnerships with travel-related and other companies with products and services that appeal to our guests.

The fee and cost structure of our franchising business provides opportunities to improve our operating results by increasing the number of franchised hotel rooms and the royalty rates in our franchise contracts.

The primary factors that affect the Company’s results are:

the number and relative mix of hotel rooms in the various hotel lodging price categories, growth in the number of hotel rooms owned and under franchise, occupancy and room rates achieved by the hotels in our system, the effective royalty rate achieved in our franchise agreements, the level of franchise sales and relicensing activity, the number of qualified vendor arrangements and partnerships and the level of engagement with these partners by our franchisees and guests, and our ability to manage costs.

the number and relative mix of hotel rooms in the various hotel lodging price categories, growth in the number of hotel rooms owned and under franchise, occupancy and room rates achieved by the hotels in our system, the average royalty rates achieved in our franchise agreements, the level of franchise sales and relicensing activity, the number of qualified vendor arrangements and partnerships and the level of engagement with these partners by our franchisees and guests, and our ability to manage costs.

The number of rooms in our hotel system and the occupancy and room rates at those hotel properties significantly affect the Company’s results because our fees are based upon room revenues or the number of rooms at owned and franchised hotels.

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

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

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

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

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

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

Additionally, the

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

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

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Our Company focuses on the following strategic priorities:

Profitable Growth - Our success is dependent on improving the performance of our hotels, increasing the size of our system by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate, expanding our qualified vendor and partnership platform programs and maintaining a disciplined cost structure.

Profitable Growth - Our success is dependent on improving the performance of our hotels, increasing the size of our system by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our royalty rates, expanding our qualified vendor and partnership programs and maintaining a disciplined cost structure.

We attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs.

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In addition to our hotel franchising business, we have also developed or acquired 17 open and operating hotels.

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

We have strategically developed hotels to increase the presence of our newly introduced brands in the U.S., drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded.

When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands.

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We strive to optimize revenues by focusing on revenue management, increasing guest loyalty, expanding brand awareness with targeted customer groupings, and providing superior guest service.

Other than four owned hotels, we currently do not manage our owned hotels but utilize the services of third-party management companies that provide their own employees.

Other than four owned hotels, we currently do not manage our owned hotels but utilize the services of third-party hotel management companies that provide their own employees.

We manage costs by setting performance goals for our hotel management companies and optimizing distribution channels.

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The ultimate measure of our success will be reflected in the items below.

Results of Operations - Royalty, licensing and management fees, operating income, net income, and diluted earnings per share ("EPS") represent the key measures of our financial performance.

These measures are primarily driven by the operations of our hotel franchise system and therefore, our analysis of the Company's operations is primarily focused on the size, performance, and the potential growth of the hotel franchise system as well as our variable overhead costs.

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

The Company's franchise

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

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

Results of Operations - Franchise and management fees, operating income, net income, and diluted earnings per share ("EPS") represent the key measures of our financial performance.

These measures are primarily driven by the operations of our hotel franchise system and therefore, our analysis of the Company's results of operations is primarily focused on the size, performance, and the potential growth of the hotel franchise system as well as our variable overhead costs.

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

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

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

Furthermore, the franchisees are required to reimburse the Company for any deficits generated by these marketing and reservation system activities.

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

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

As a result, the Company generally excludes the revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties from the analysis of its results of operations.

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

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

During the years ended December 31, 2025, 2024, and 2023, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $47.1 million, $18.2 million, and $32.8 million, respectively.

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

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(in thousands) 2025 2024

Royalty, licensing and management fees $ 514,569 $ 513,412

Initial franchise fees 25,606 27,787

Platform and procurement services fees 75,752 75,114

Franchise and management fees $ 673,197 $ 669,637

Partnership services and fees 113,789 99,491

Owned hotels 121,373 113,459

Other 72,230 64,060

Other revenues from franchised and managed properties 793,650 784,160

Revenue for reimbursable costs from franchised and managed properties 616,204 638,192

Total revenues 1,596,793 1,584,839

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Owned hotels 91,684 83,148

Other expenses from franchised and managed properties 757,525 782,409

Reimbursable expenses from franchised and managed properties 663,336 656,344

Total operating expenses 1,148,394 1,121,066

Operating income 448,399 463,773

OTHER EXPENSES AND (INCOME), NET

Interest expense 91,148 87,131

Interest income (6,237) (8,646)

Gain from an acquisition of a joint venture (100,025) —

Gain on sale of assets (713) —

Loss on extinguishment of debt — 331

Other (gains) losses, net (6,989) 1,641

Equity in net loss (gain) of affiliates 14,324 (12,329)

Total other expenses and (income), net (8,492) 68,128

Income before income taxes 456,891 395,645

Income tax expense 86,945 95,980

Net income $ 369,946 $ 299,665

Results of Operations

For the year ended December 31, 2025, the Company recognized income before income taxes of $456.9 million, which is a $61.2 million increase from the year ended December 31, 2024.

The increase in income before income taxes was primarily due to a $100.0 million gain from an acquisition of a joint venture in 2025 and an $8.6 million increase in other (gains) losses, net, all of which were partially offset by a $26.7 million decrease in the equity in net loss (gain) of affiliates and a $15.4 million decrease in operating income.

Operating income decreased $15.4 million primarily due to a $29.0 million increase in the net reimbursable deficit from franchised and managed properties, a $16.6 million increase in selling, general and administrative expenses, and a $7.8 million increase in depreciation and amortization expense, all of which were partially offset by a $14.3 million increase in partnership services and fees, an $8.2 million increase in other revenues, and a $12.5 million decrease in business combination, diligence and transition costs.

Franchise and Management Fees

Franchise and management fees increased $3.6 million primarily due to an $11.5 million increase in international royalty fees and an $8.2 million increase in revenues generated from programs, platforms, and services associated with the Company's franchise operations, all of which were partially offset by a $14.9 million decrease in U.S.

royalty fees.

royalty fees decreased $14.9 million to $439.8 million for the year ended December 31, 2025 from $454.7 million for the year ended December 31, 2024.

The decrease in U.S.

royalty fees was primarily due to a 3.0% decrease in U.S.

RevPAR as a result of a 1.6% decrease in average daily rates and an 80 basis points decrease in occupancy, and a 2.9% decrease in open and operating U.S.

hotel rooms, all of which were partially offset by a system-wide 8 basis points increase in the average royalty rate from 5.06% for the year ended December 31, 2024 to 5.14% for the year ended December 31, 2025.

A summary of the operating performance for the Company's U.S.

franchised hotels, organized by chain scale, was as follows:

2025 2024 Change

Average Daily Rate Occupancy RevPAR Average

Daily Rate Occupancy RevPAR Average

Daily Rate Occupancy RevPAR

Upscale & Above (1)

$ 149.75 56.3 % $ 84.35 $ 151.91 57.7 % $ 87.67 (1.4) % (140) bps (3.8) %

Midscale & Upper Midscale (2)

99.21 54.9 % 54.50 100.91 55.9 % 56.41 (1.7) % (100) bps (3.4) %

Extended Stay (3)

66.10 69.1 % 45.67 64.12 71.2 % 45.66 3.1 % (210) bps — %

70.73 46.7 % 33.02 72.15 47.1 % 33.97 (2.0) % (40) bps (2.8) %

Total $ 95.05 55.6 % $ 52.85 $ 96.64 56.4 % $ 54.51 (1.6) % (80) bps (3.0) %

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

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

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

(4) Includes Econo Lodge and Rodeway brands.

A summary of the U.S.

hotels and rooms by brand in our franchise system as of December 31, 2025 and 2024 was as follows:

December 31, 2025 December 31, 2024 Variance

Hotels Rooms Hotels Rooms Hotels % Rooms %

1,652 128,836 1,674 131,495 (22) (1.3) % (2,659) (2.0) %

Quality Inn 1,571 113,613 1,627 118,725 (56) (3.4) % (5,112) (4.3) %

Econo Lodge 599 34,658 642 37,528 (43) (6.7) % (2,870) (7.6) %

Rodeway 432 23,838 447 24,948 (15) (3.4) % (1,110) (4.4) %

Country 402 32,333 422 33,771 (20) (4.7) % (1,438) (4.3) %

Sleep Inn 404 28,199 415 29,118 (11) (2.7) % (919) (3.2) %

Ascend Collection 236 38,426 233 38,589 3 1.3 % (163) (0.4) %

WoodSpring Suites 284 34,176 256 30,846 28 10.9 % 3,330 10.8 %

181 18,562 193 19,944 (12) (6.2) % (1,382) (6.9) %

MainStay Suites 143 10,337 141 10,157 2 1.4 % 180 1.8 %

Suburban Studios 115 9,558 111 9,159 4 3.6 % 399 4.4 %

Cambria Hotels 76 10,189 76 10,344 — — % (155) (1.5) %

52 10,090 57 13,390 (5) (8.8) % (3,300) (24.6) %

Park Inn 15 1,294 27 2,926 (12) (44.4) % (1,632) (55.8) %

Everhome Suites 25 2,870 7 799 18 257.1 % 2,071 259.2 %

Franchises 6,187 496,979 6,328 511,739 (141) (2.2) % (14,760) (2.9) %

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

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

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

International royalty fees increased $11.5 million to $41.3 million for the year ended December 31, 2025 from $29.8 million for the year ended December 31, 2024.

The increase in international royalty fees was primarily due to an increase in the size of the international franchise system by 130 hotels (from 1,258 hotels as of December 31, 2024 to 1,388 hotels as of December 31, 2025) and 17,775 rooms (from 142,071 rooms as of December 31, 2024 to 159,846 rooms as of December 31, 2025), an increase in royalty fees as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada, and an increase in international RevPAR.

Partnership Services and Fees

Partnership services and fees increased $14.3 million primarily due to an increase in the fees generated from the Company's co-branded credit card agreement and qualified vendors.

Other Revenues

Other revenues increased $8.2 million primarily due to an increase in liquidated damages resulting from the early termination of franchise agreements and other franchising revenues.

Selling, General and Administrative

Selling, general and administrative expenses increased $16.6 million primarily due to a $9.2 million increase in the provisions for credit losses on accounts receivable balances, a $4.5 million increase in costs related to the global enterprise resource planning ("ERP") system implementation, a $3.8 million increase in operating guarantee payments for a portfolio of managed hotels which was acquired in connection with the Company's purchase of Radisson Hotels Americas, and a $2.2 million increase in expenses to operate Choice Hotels Canada during the year ended December 31, 2025, all of which were partially offset by a $2.4 million litigation settlement that was recognized during the year ended December 31, 2024.

Business Combination, Diligence and Transition Costs

Business combination, diligence and transition costs decreased $12.5 million primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024, which was partially offset by the transaction costs associated with the acquisition of Choice Hotels Canada that were recognized during the year ended December 31, 2025.

Depreciation and Amortization

Depreciation and amortization expense increased $7.8 million primarily due to a $4.0 million increase in amortization expense for intangible assets as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada in July 2025 and a $1.7 million increase in depreciation expense related to the opening of five owned hotels during the year ended December 31, 2025.

Gain from an Acquisition of a Joint Venture

During the year ended December 31, 2025, the Company recognized a $100.0 million gain on the fair value remeasurement of its previously held 50% equity investment in Choice Hotels Canada as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada in July 2025.

Other (Gains) Losses, net

Other (gains) losses, net increased $8.6 million primarily due to a net loss of $8.3 million on the sales of equity securities during the year ended December 31, 2024, which was partially offset by dividend income of $1.5 million that was recognized during the year ended December 31, 2024.

Equity in Net Loss (Gain) of Affiliates

Equity in net loss (gain) of affiliates decreased $26.7 million primarily due to $6.5 million of non-recurring joint venture formation transaction costs that were associated with the Company entering into a new joint venture agreement, and a new loan facility, to develop and operate Everhome Suites in certain strategic markets during the year ended December 31, 2025, a $10.0 million decrease in the equity earnings from our unconsolidated affiliates, a $3.6 million decrease in equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada during the year ended December 31, 2025, and a distribution from an unconsolidated affiliate, which sold its underlying assets, resulting in the recognition of a $7.2 million gain during the year ended December 31, 2024.

Income Tax Expense

The Company's effective income tax rates were 19.0% and 24.3% for the years ended December 31, 2025 and 2024, respectively.

The effective income tax rate for the year ended December 31, 2025 was 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 federal income tax credits, which were partially offset by the impact of state income taxes and tax expense related to compensation.

The effective income tax rate for the year ended December 31, 2024 was 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, which were partially offset by federal income tax credits.

Operations Review

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

(in thousands) 2024 2023

Franchise and management fees $ 669,637 $ 652,060

Partnership services and fees 99,491 91,790

Owned hotels 113,459 97,641

Other 64,060 55,097

Revenue for reimbursable costs from franchised and managed properties 638,192 647,577

Total revenues 1,584,839 1,544,165

OPERATING EXPENSES

Selling, general and administrative 312,388 312,701

Business combination, diligence and transition costs 17,233 55,778

Depreciation and amortization 51,953 45,038

Owned hotels 83,148 71,474

Reimbursable expenses from franchised and managed properties 656,344 680,410

Total operating expenses 1,121,066 1,165,401

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

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

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

Other losses (gains), net 1,641 (10,649)

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

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

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

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

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

Operating income increased $88.7 million primarily due to a $17.6 million increase in franchise and management fees, a $7.7 million increase in partnership services and fees, a $9.0 million increase in other revenues, a $14.7 million decrease in the net reimbursable deficit from franchised and managed properties, and a $38.5 million decrease in business combination, diligence and transition costs.

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

Royalty, Licensing and Management Fees

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

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

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

Franchise and Management Fees

Franchise and management fees increased $17.6 million primarily due to a $14.7 million increase in revenues generated from programs, platforms, and services associated with the Company's franchise operations and a $0.9 million increase in international royalty fees, all of which were partially offset by a $3.4 million decrease in U.S.

royalty fees.

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

The decrease in U.S.

royalty fees was primarily due to a 1.2% decrease in U.S.

system-wide RevPAR as a result of a 0.3% decrease in average daily rates and a 50 basis points decrease in occupancy, all of which were

partially offset by a 3.0% increase in open and operating U.S.

hotel rooms and a system-wide 7 basis points increase in the average royalty rate from 4.99% for the year ended December 31, 2023 to 5.06% for the year ended December 31, 2024.

A summary of the operating performance for the Company's U.S.

franchised hotels, organized by chain scale, was as follows:

2024 2023 Change

10 unchanged sentences

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

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

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

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

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(4) Includes Econo Lodge and Rodeway brands.

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

A summary of the U.S.

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

December 31, 2024 December 31, 2023 Variance

6 unchanged sentences

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

Ascend Hotel Collection 233 38,589 209 23,484 24 11.5 % 15,105 64.3 %

Ascend Collection 233 38,589 209 23,484 24 11.5 % 15,105 64.3 %

WoodSpring Suites 256 30,846 235 28,350 21 8.9 % 2,496 8.8 %

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Everhome Suites 7 799 1 98 6 600.0 % 701 715.3 %

Total Domestic Franchises 6,328 511,739 6,305 496,965 23 0.4 % 14,774 3.0 %

Franchises 6,328 511,739 6,305 496,965 23 0.4 % 14,774 3.0 %

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

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

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

Initial Franchise Fees

Initial franchise fees are generally paid to the Company when a franchisee executes a franchise agreement for a new property entering the franchise system, or an existing franchised property at the time of an ownership change (referred to as a relicensing), or a franchise agreement renewal;

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

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

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

Initial franchise fees revenue decreased $2.2 million to $25.6 million for the year ended December 31, 2024 from $27.8 million for the year ended December 31, 2023.

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

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

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

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

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

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

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

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

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

Partnership Services and Fees

Partnership services and fees increased $7.7 million primarily due to an increase in the fees generated from the Company's co-branded credit card agreement and qualified vendors.

The Company's revenues, net of operating expenses, from the owned hotels increased $4.1 million primarily due to the improved operating performance at our owned hotels and the addition of two owned hotels during the year ended December 31, 2024 as compared to the prior year.

Other Revenues

Other revenues increased $15.8 million to $61.8 million for the year ended December 31, 2024 from $46.1 million for the year ended December 31, 2023.

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

Selling, General and Administrative

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

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

Other revenues increased $9.0 million primarily due to an increase in liquidated damages that resulted from the early termination of franchise agreements and other franchising revenues.

Business Combination, Diligence and Transition Costs

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

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

Business combination, diligence and transition costs decreased $38.5 million primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024 and substantial completion of the integration of the Radisson Hotels Americas business in the fourth quarter of 2023.

Impairment of Long-Lived Assets

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

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

Impairment of long-lived assets decreased $3.7 million primarily due to a sublease agreement that was signed for the legacy Radisson corporate office space in Minneapolis, Minnesota.

The long-lived asset group associated with the office space was determined to be impaired due to the carrying value exceeding its fair value, which resulted in the recognition of a $3.4 million impairment loss in 2023.

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Interest Expense

Interest expense increased $23.4 million to $87.1 million for the year ended December 31, 2024 from $63.8 million for the year ended December 31, 2023.

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

Interest expense increased $23.4 million primarily due to increased borrowings and higher interest rates on the Company's outstanding borrowings.

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

Loss (Gain) on Extinguishment of Debt

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

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

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

Other Loss (Gain)

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

The decrease was primarily due to a net loss of $8.3 million on the sales of equity securities related to the pursuit of the Wyndham acquisition in 2024 and a $4.0 million unrealized gain on investments in equity securities in 2023, both of which were partially offset by dividend income of $1.5 million and a $0.6 million increase in the Company's deferred compensation and employee benefit plans assets based on increases in the fair value of the underlying investments.

Loss (gain) on extinguishment of debt decreased $4.7 million.

During the year ended December 31, 2024, the Company recognized a loss on extinguishment of debt due to the repayment of the 2023 Term Loan.

During the year ended December 31, 2023, the Company derecognized certain economic development loans from the consolidated balance sheets due to satisfying the relevant performance conditions in the loan agreement, resulting in a gain on extinguishment of debt.

Other Losses (Gains), net

Other losses (gains), net decreased $12.3 million primarily due to a net loss of $8.3 million on the sales of equity securities related to the pursuit of the Wyndham acquisition during the year ended December 31, 2024 and a $4.0 million unrealized gain on investments in equity securities during the year ended December 31, 2023, all of which were partially offset by dividend income of $1.5 million that was recognized during the year ended December 31, 2024 and a $0.6 million increase in the Company's deferred compensation and employee benefit plans assets based on increases in the fair value of the underlying investments.

Equity in Net Gain of Affiliates

Equity in net gain of affiliates increased $9.5 million to $12.3 million for the year ended December 31, 2024 from $2.9 million for the year ended December 31, 2023.

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

Equity in net gain of affiliates increased $9.5 million primarily due to a distribution from an unconsolidated affiliate, which sold its underlying assets, resulting in the recognition of a $7.2 million gain during the year ended December 31, 2024.

Refer to Note 7 to our consolidated financial statements for additional information.

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

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

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

Management's Discussion and Analysis of Financial Condition and Results of Operations for the details regarding the changes between 2023 and 2022.

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

Liquidity and Capital Resources

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As of December 31, 2025, the Company's primary sources of liquidity consisted of $571.4 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of December 31, 2024, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance.

As of December 31, 2025, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such

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

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

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

With respect to these activities, the Company had approximately $605.4 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of December 31, 2024.

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

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

With respect to these activities, the Company had approximately $667.2 million of investments in the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of December 31, 2025.

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

The deployment and annual pace of future financial support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development, and the hotel lending environment.

The deployment and annual pace of future investment and guaranty support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development, and the hotel lending environment.

The Company also strategically deploys capital in the form of franchise agreement acquisition costs across our brands to incentivize franchise development.

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

As of December 31, 2024, the

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

As of December 31, 2025, the Company had 2.8 million shares remaining under the current share repurchase authorization.

The 2025 annual dividend rate was $1.15 per share or approximately $53.5 million in aggregate dividend payments.

Future dividends are subject to declarations by our board of directors.

Cash Flows from Operating Activities

During the years ended December 31, 2025, 2024, and 2023, the net cash provided by operating activities was $270.4 million, $319.4 million, and $296.6 million, respectively.

Our operating cash flows increased $22.8 million primarily due to the timing of working capital items and a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024 and the due diligence and transition costs related to the integration of the Radisson Hotels Americas business in 2023, all of which were partially offset by an increase in franchise agreement acquisition cost payments, an increase in borrowing costs, and an increase in deferred income taxes.

Our operating cash flows decreased $49.0 million during the year ended December 31, 2025 primarily due to the timing of working capital items, the final installment payment made in 2025 for the one-time transition tax on earnings of foreign subsidiaries that was imposed by 2017 tax legislation, and the cash paid for the purchase of transferrable tax credits in 2025 of which a portion will be utilized in 2026, all of which were partially offset by a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024, a decrease in deferred income taxes primarily attributable to the enactment of a tax act, and a decrease in the franchise agreement acquisition cost payments.

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

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During the years ended December 31, 2025, 2024, and 2023, the Company's net franchise agreement acquisition costs were $83.4 million, $112.2 million, and $98.3 million, respectively.

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

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

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

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

These activities are reflected in revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties.

Cash Flows from Investing Activities

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During the years ended December 31, 2025, 2024, and 2023, the Company invested $93.7 million, $52.8 million, and $38.9 million, respectively, to support these efforts.

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

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

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

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

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

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

During the years ended December 31, 2025, 2024, and 2023, the Company received distributions from these affiliates totaling $44.6 million, $15.9 million, and $0.9 million, respectively.

For the year ended December 31, 2025, the Company received net cash proceeds of $52.0 million from the sale of four wholly-owned Everhome Suites under construction to a joint venture.

Refer to Note 7 for more information.

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

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During the years ended December 31, 2025, 2024, and 2023, the Company issued a total of $6.9 million, $38.0 million, and $4.3 million of notes receivable loans, respectively, and received repayments totaling $7.4 million, $32.1 million, and $10.9 million on the notes receivable loans, respectively.

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

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

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

The purchase price, net of the cash acquired, was $550.4 million.

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

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

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

On July 2, 2025, the Company acquired the remaining 50% of the outstanding shares of Choice Hotels Canada for a purchase price, net of the cash acquired, of $73.4 million.

The acquisition was funded with available cash and borrowings under the Company's senior unsecured revolving credit facility.

During the year ended December 31, 2025, there were no purchases or sales of equity securities.

During the year ended December 31, 2024, the Company purchased no equity securities and received $108.1 million in proceeds from the sales of equity securities.

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

Cash Flows from Financing Activities

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

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

In each case, the margin is determined according to the

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

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

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

So long as the

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

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

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

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

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

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

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

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Additionally, at the option of the holders of the 2019 Senior Notes, the Company may be required to repurchase all or a portion of the 2019 Senior Notes upon the occurrence of a change of control event at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

2012 Senior Unsecured Notes Due 2022

On June 27, 2012, the Company issued unsecured senior notes with a principal amount of $400 million (the "2012 Senior Notes") at par, bearing a coupon of 5.75% with an effective rate of 6.00%.

The Company utilized the net proceeds from this offering, after deducting underwriting discounts, commissions, and other offering expenses, together with borrowings under the Company's senior unsecured senior credit facility, to pay a special cash dividend to shareholders that totaled approximately $600.7 million on August 23, 2012.

On July 9, 2020, the Company commenced a tender offer (the "Tender Offer") to purchase an aggregate principal amount of up to $160.0 million of the 2012 Senior Notes, subject to increase or decrease.

The Tender Offer was subsequently upsized to an aggregate principal amount of up to $180.0 million of the 2012 Senior Notes.

On July 23, 2020, the Company amended the Tender Offer by increasing the aggregate principal amount from $180.0 million to $183.4 million.

The Tender Offer settled on July 24, 2020 for $197.8 million, which included an early tender premium, settlement fees, and accrued interest paid.

The 2012 Senior Notes matured on July 1, 2022.

The outstanding principal amount of $216.6 million was re-paid on the maturity date.

2025 Economic Development Loans

The Company entered into certain economic development agreements with various governmental entities in conjunction with the relocation of its corporate headquarters in November 2023.

In accordance with these agreements, as December 31, 2025, the governmental entities advanced $1.9 million to the Company to offset a portion of the corporate headquarters relocation and tenant improvement costs in consideration of the employment of permanent, full-time employees within the jurisdictions.

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

Repayment of the advances is contingent upon the Company achieving certain performance conditions, which are measured annually on December 31st and primarily relate to maintaining certain levels of employment within the various jurisdictions.

If the Company fails to meet an annual performance condition, then the Company may be required to repay a portion or all of the advances including accrued interest by April 1st following the measurement date.

Any outstanding advances at the expiration of the Company's corporate headquarters lease in 2035 will be forgiven in full.

The advances are presented in debt in the Company's consolidated balance sheets until the Company determines that the future performance conditions have been met over the entire term of the agreement and the Company will not be required to repay the advances.

The Company accrues

interest on the portion of the advances that it expects to repay.

The Company is in compliance with all applicable current performance conditions as of December 31, 2025.

2013 Economic Development Loans

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

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

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

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

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

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

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

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

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

Acquired Debt and Swap Derivative Asset

On August 11, 2022, in connection with the Radisson Hotels Americas acquisition, the Company acquired three owned hotel properties, one of which had an encumbered mortgage loan with a mortgage principal in the amount of $53.5 million with an original maturity date of August 7, 2024.

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

On August 12, 2022, the Company paid off the outstanding mortgage loan principal, outstanding interest, and certain prepayment, exit and related fees in the amount of $56.0 million.

At the same time, several of the loan-related escrows were released in the amount of $10.4 million.

On August 16, 2022, the interest rate cap agreement was terminated, which resulted in a $1.9 million payment to the Company.

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

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

During the year ended December 31, 2025, the Company declared aggregate annual cash dividends of $1.15 per share or approximately $53.5 million in aggregate dividend payments.

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Share Repurchases & Redemptions

In 1998, we instituted a share repurchase program.

The Company has a share repurchase program.

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

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

During the year ended December 31, 2025, the Company repurchased 1.0 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $125.9 million.

In total, the Company has repurchased 61.3 million shares of its common stock (including 33.0 million shares prior to the two-for-one stock split effected in October 2005) under the share repurchase program at a total cost of $2.6 billion.

Considering the effect of the two-for-one stock split, the Company has repurchased 94.3 million shares at an average price of $27.98 per share.

As of December 31, 2025, the Company had 2.8 million shares remaining under the current share repurchase authorization.

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During the year ended December 31, 2025, the Company received proceeds of $6.8 million from stock options exercised by employees.

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

Payments due by period

(in thousands) Total Less than

1 year Greater than 1 year

Purchase obligations $ 112,222 $ 66,542 $ 45,680

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

The Company has material future contractual obligations of $104.2 million (excluding the previously addressed debt obligations, the financing, investment, guaranty, and franchise agreement acquisition cost commitments to franchisees, and the deferred compensation plan liabilities) as of December 31, 2025.

Critical Accounting Estimates

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

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

The loyalty program point redemption revenues are presented within revenue for reimbursable costs from franchised and managed properties in the consolidated statements of income.

Any changes in the estimates used in developing the breakage rate or other future guest loyalty program operations could result in a material change to the liability for the guest loyalty program and the deferred revenues.

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The allocation of 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 time elapsed, and are presented within royalty, licensing and management fees and platform and procurement services fees in the consolidated statements of income.

The amounts allocated to 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 breakage, primarily within other revenues from franchised and managed properties.

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 in the Hotel Franchising reporting unit during the years ended December 31, 2024, 2023, and 2022, other than impairments on franchise sales commission assets and franchise agreement acquisition cost intangible assets primarily resulting from the termination of franchise agreements from the Choice system or significant delinquencies in construction or invoice payments.

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.

The amounts allocated to the brand intellectual property are recognized on a gross basis over time using the output measure of time elapsed, and are presented within partnership services and fees in the consolidated statements of income.

The amounts allocated to 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 breakage, within revenue for reimbursable costs from franchised and managed properties.

Goodwill and Intangible Assets

The Company evaluates the impairment of goodwill and intangible assets with indefinite lives annually as of October 1st 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.

During the year ended December 31, 2025, the Company changed its annual impairment assessment date from December

31st to October 1st.

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.

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As such, no impairment was recognized and a quantitative test was not required.

Income taxes are recorded using the asset and liability method of accounting for income taxes.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

A valuation allowance is provided for deferred tax assets if it is more likely than not that such assets will be unrealized.

Historically, deferred United States income taxes have not been recorded for temporary differences related to investments in certain foreign subsidiaries and corporate affiliates.

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

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

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

Consequently, the Company did not record any additional deferred taxes for this item in 2024.

With respect to uncertain income tax positions, a tax liability is recorded in full when management determines that the position does not meet the more likely than not threshold of being sustained on examination.

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

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

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

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

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

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

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

New Accounting Standards

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

What changed 10-K

Item 7. Management’s Discussion and Analysis