What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2025-11-05 · 101 added, 182 removed, 246 unchanged (53% of the section changed)

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We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 51 countries and territories.

As of September 30, 2025, we had 7,515 hotels with 649,677 rooms open and operating, and 897 hotels with 86,441 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®.

As of March 31, 2026, we had 7,588 hotels with 658,348 rooms open and operating, and 830 hotels with 77,773 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 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 15 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 franchising 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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For most hotels, demand is typically lower in November through February than during the remainder of the year.

Our principal source of revenue is franchise fees, which is primarily based on the gross room revenues or the number of rooms at our franchised properties.

Our principal source of revenue is franchise fees, which is based on the gross room revenues or the number of rooms at our franchised properties.

The Company’s franchise and managed fees, as well as its owned hotels' revenues, normally reflect the industry’s seasonality and historically have been lower in the first and fourth quarters than in the second and third quarters of the year.

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 royalty, licensing and other franchise related 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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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 system 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 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.

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.

The 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 revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties from the analysis of our 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 three months ended September 30, 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $14.8 million.

During the three months ended September 30, 2024, revenue for reimbursable costs from franchised and managed properties exceeded reimbursable expenses from franchised and managed properties by $0.9 million.

During the nine months ended September 30, 2025 and 2024, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $44.2 million and $24.8 million, respectively.

During the three months ended March 31, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $37.9 million and $20.4 million, respectively.

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

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Operations Review

Comparison of the Operating Results for the Three Months Ended September 30, 2025 and 2024

Comparison of the Operating Results for the Three Months Ended March 31, 2026 and 2025

Three Months Ended

September 30,

(in thousands) 2026 2025

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Interest income (1,211) (1,559)

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)

Other losses, net 721 436

Equity in net loss of affiliates 6,252 51

Total other expenses and (income), net 29,724 20,170

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Results of Operations

For the three months ended September 30, 2025, the Company recognized income before income taxes of $210.9 million, which is a $73.8 million increase from the same period in the prior year.

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, which was partially offset by a $12.2 million decrease in the equity in net loss (gain) of affiliates and a $9.4 million decrease in operating income.

Operating income decreased $9.4 million primarily due to a $15.7 million increase in the net reimbursable deficit from franchised and managed properties and a $10.6 million increase in selling, general and administrative expenses, all of which were partially offset by a $10.4 million increase in other revenues, a $5.5 million increase in franchise and management fees, and a $4.5 million increase in partnership services and fees.

For the three months ended March 31, 2026, the Company recognized income before income taxes of $30.3 million, which is a $29.5 million decrease from the same period in the prior year.

The decrease in income before income taxes was primarily due to a $19.9 million decrease in operating income, a $6.2 million increase in equity in net loss of affiliates, and a $2.7 million increase in interest expense.

Operating income decreased $19.9 million primarily due to a $17.5 million increase in the net reimbursable deficit from franchised and managed properties, a $3.8 million increase in selling, general and administrative expenses, and a $3.1 million increase in depreciation and amortization, all of which were partially offset by a $4.6 million increase in franchise and management fees.

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

Franchise and Management Fees

Domestic royalty fees decreased $4.9 million to $126.7 million for the three months ended September 30, 2025 from $131.6 million for the three months ended September 30, 2024.

The decrease in domestic royalty fees was primarily due to a 3.2% decrease in domestic system-wide RevPAR as a result of a 2.0% decrease in average daily rates and an 80 basis points decrease in occupancy during the current period, which was partially offset by a system-wide 10 basis points increase in the effective

royalty rate from 5.05% for the three months ended September 30, 2024 to 5.15% for the three months ended September 30, 2025.

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

Franchise and management fees increased $4.6 million primarily due to a $5.2 million increase in international royalty fees and a $4.5 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 $4.0 million decrease in U.S.

royalty fees and a $1.5 million decrease in initial franchise fees.

royalty fees decreased $4.0 million to $90.6 million for the three months ended March 31, 2026 from $94.6 million for the three months ended March 31, 2025.

The decrease in U.S.

royalty fees was primarily due to a 2.3% decrease in U.S.

system-wide RevPAR as a result of a 2.1% decrease in average daily rates and a 10 basis points decrease in occupancy during the current period, which was partially offset by a system-wide 11 basis points increase in the average royalty rate from 5.11% for

the three months ended March 31, 2025 to 5.22% for the three months ended March 31, 2026.

system-wide RevPAR during the three months ended March 31, 2025 includes a hurricane-related impact of 410 basis points.

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

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

Three Months Ended Three Months Ended Change

September 30, 2025 September 30, 2024

March 31, 2026 March 31, 2025

Rate Occupancy RevPAR Average

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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 September 30, 2025 and 2024 was as follows:

September 30, 2025 September 30, 2024 Variance

A summary of the U.S.

hotels and rooms by brand in our franchise system as of March 31, 2026 and 2025 was as follows:

March 31, 2026 March 31, 2025 Variance

Hotels Rooms Hotels Rooms Hotels % Rooms %

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Rodeway 425 23,389 443 24,792 (18) (4.1) % (1,403) (5.7) %

Total Domestic Franchises 6,201 498,307 6,278 495,194 (77) (1.2) % 3,113 0.6 %

Franchises 6,188 497,881 6,279 505,601 (91) (1.4) % (7,720) (1.5) %

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

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

International royalty fees increased $6.2 million to $14.6 million for the three months ended September 30, 2025 from $8.4 million for the three months ended September 30, 2024.

The increase in international royalty fees was primarily due to an increase in the international franchise system size by 77 hotels (from 1,237 hotels as of September 30, 2024 to 1,314 hotels as of September 30, 2025) and 11,612 rooms (from 139,758 rooms as of September 30, 2024 to 151,370 rooms as of September 30, 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 $4.5 million 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 $10.4 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 $10.6 million primarily due to $1.1 million of expenses to operate Choice Hotels Canada during the three months ended September 30, 2025, a $1.0 million increase in costs related to the global ERP system implementation, and increases in other general costs to operate the franchising business.

Gain from an Acquisition of a Joint Venture

During the three months ended September 30, 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.

Equity in Net Loss (Gain) of Affiliates

Equity in net loss (gain) of affiliates decreased $12.2 million primarily due to $6.5 million of non-recurring joint venture formation transaction costs 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 three months ended September 30, 2025 and a $1.9 million decrease in equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada during the three months ended September 30, 2025.

Income Tax Expense

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 effective income tax rate for the three months ended September 30, 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 the purchase of transferable tax credits, all of which were partially offset by the impact of state income taxes.

The effective income tax rate for the three months ended September 30, 2024 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes.

Comparison of the Operating Results for the Nine Months Ended September 30, 2025 and 2024

Nine Months Ended

September 30,

(in thousands) 2025 2024

Franchise and management fees $ 515,931 $ 511,450

Partnership services and fees 81,313 71,527

Owned hotels 91,255 85,345

Other 57,937 49,671

Revenue for reimbursable costs from franchised and managed properties 460,207 477,076

Total revenues 1,206,643 1,195,069

OPERATING EXPENSES

International royalty fees increased $5.2 million to $11.8 million for the three months ended March 31, 2026 from $6.6 million for the three months ended March 31, 2025.

The increase in international royalty fees was primarily due to an increase in the international franchise system size by 152 hotels (from 1,248 hotels as of March 31, 2025 to 1,400 hotels as of March 31, 2026) and 18,481 rooms (from 141,986 rooms as of March 31, 2025 to 160,467 rooms as of March 31, 2026), 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.

Selling, General and Administrative

Business combination, diligence and transition costs 1,940 17,723

Selling, general and administrative expenses increased $3.8 million primarily due to a $4.3 million increase in bad debt expense and a $1.1 million increase in expenses to operate Choice Hotels Canada during the three months ended March 31, 2026, all of which were partially offset by a $0.7 million decrease in costs related to the global ERP system implementation and decreases in other general costs to operate the franchising business.

Depreciation and Amortization

Owned hotels 67,271 62,370

Reimbursable expenses from franchised and managed properties 504,437 501,857

Total operating expenses 859,698 850,515

Operating income 346,945 344,554

OTHER EXPENSES AND (INCOME), NET

Depreciation and amortization expense increased $3.1 million primarily due to a $2.0 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 $1.0 million increase in depreciation expense related to the opening of four owned hotels during the third and fourth quarters of 2025.

Equity in Net Loss of Affiliates

Equity in net loss of affiliates increased $6.2 million primarily due to a $5.8 million decrease in the equity earnings from our unconsolidated affiliates and a $0.9 million decrease in the equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada in July 2025.

Interest Expense

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)

Total other expenses and (income), net (32,344) 50,617

Income before income taxes 379,289 293,937

Income tax expense 73,025 70,076

Net income $ 306,264 $ 223,861

Results of Operations

For the nine months ended September 30, 2025, the Company recognized income before income taxes of $379.3 million, which is an $85.4 million increase from the same period in the prior year.

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 a $5.5 million increase in other gains, net, which was partially offset by a $20.1 million decrease in equity in net loss (gain) of affiliates.

Operating income increased $2.4 million primarily due to a $9.8 million increase in partnership services and fees, an $8.3 million increase in other revenues, and a $15.8 million decrease in business combination, diligence and transition costs, all of which were partially offset by a $19.4 million increase in the net reimbursable deficit from franchised and managed properties and a $13.1 million increase in selling, general and administrative expenses.

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

Franchise and Management Fees

Domestic royalty fees decreased $6.9 million to $342.5 million for the nine months ended September 30, 2025 from $349.4 million for the nine months ended September 30, 2024.

The decrease in domestic royalty fees was primarily due to a 1.7% decrease in domestic system-wide RevPAR as a result of a 1.0% decrease in average daily rates and a 40 basis points decrease in occupancy, which was partially offset by a system-wide 7 basis points increase in the effective royalty rate from 5.05% for the nine months ended September 30, 2024 to 5.12% for the nine months ended September 30, 2025.

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

Nine Months Ended Nine Months Ended Change

September 30, 2025 September 30, 2024

Rate Occupancy RevPAR Average

Rate Occupancy RevPAR

Upscale & Above (1)

$ 150.69 57.7 % $ 87.01 $ 153.61 59.2 % $ 90.87 (1.9) % (150) bps (4.2) %

Midscale & Upper Midscale (2)

100.67 56.4 % 56.81 101.81 57.0 % 57.98 (1.1) % (60) bps (2.0) %

Extended Stay (3)

66.66 70.0 % 46.68 63.83 72.1 % 46.03 4.4 % (210) bps 1.4 %

71.71 48.0 % 34.42 71.77 47.6 % 34.16 (0.1) % 40 bps 0.8 %

Total $ 96.41 57.0 % $ 54.94 $ 97.38 57.4 % $ 55.87 (1.0) % (40) bps (1.7) %

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

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

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

(4) Includes Econo Lodge and Rodeway brands.

International royalty fees increased $6.4 million to $29.0 million for the nine months ended September 30, 2025 from $22.6 million for the nine months ended September 30, 2024.

The increase in international royalty fees was primarily due to an increase in the size of the international franchise system, 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 $9.8 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 $8.3 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 $13.1 million primarily due to $1.1 million of expenses to operate Choice Hotels Canada during the nine months ended September 30, 2025, a $3.1 million increase in costs related to the global ERP system implementation, a $2.0 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 increases in other general costs to operate the franchising business, all of which were partially offset by a $2.4 million litigation settlement that was recognized during the nine months ended September 30, 2024.

Business Combination, Diligence and Transition Costs

Business combination, diligence and transition costs decreased $15.8 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 nine months ended September 30, 2025.

Gain from an Acquisition of a Joint Venture

During the nine months ended September 30, 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, net

Other gains, net increased $5.5 million primarily due to a net loss of $8.3 million on the sales of equity securities during the nine months ended September 30, 2024, which was partially offset by dividend income of $1.5 million that was recognized during the nine months ended September 30, 2024.

Equity in Net Loss (Gain) of Affiliates

Equity in net loss (gain) of affiliates decreased $20.1 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 nine months ended September 30, 2025, a $2.3 million decrease in equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada during the nine months ended September 30, 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 nine months ended September 30, 2024.

Interest expense increased $2.7 million primarily due to increased borrowings.

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

Income Tax Expense

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 rate for the nine months ended September 30, 2025 was lower than the U.S.

The effective income tax rate for the nine months ended September 30, 2024 was higher than the U.S.

The Company’s effective income tax rates were 33.0% and 25.5% for the three months ended March 31, 2026 and 2025, respectively.

The effective income tax rate for the three months ended March 31, 2026 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.

The effective income tax rate for the three months ended March 31, 2025 was higher than the U.S.

federal income tax rate of 21.0% primarily due to the impact of state income taxes.

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The Company's short-term and long-term liquidity requirements primarily arise from working capital needs, debt obligations, income tax payments, dividend payments, share repurchases, capital expenditures, and investments in growth opportunities.

As of September 30, 2025, the Company's primary sources of liquidity consisted of $564.2 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of September 30, 2025, 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 March 31, 2026, the Company's primary sources of liquidity consisted of $474.0 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility.

As of March 31, 2026, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance.

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 $662.8 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of September 30, 2025.

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 $642.5 million of investments in the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of March 31, 2026.

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 expects the Cambria Hotels and Everhome Suites brands development investments to continue to decline in future periods, as both brands approach scale milestones.

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

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 September 30, 2025, the Company had 3.0 million shares remaining under the current share repurchase authorization.

The projected 2025 annual dividend rate is $1.15 per share or approximately $53.5 million in aggregate dividend payments, which is subject to future declarations by our board of directors.

As of March 31, 2026, the Company had 2.3 million shares remaining under the current

share repurchase authorization.

The projected 2026 annual dividend rate is $1.15 per share or approximately $52.6 million in aggregate dividend payments.

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

Cash Flows from Operating Activities

During the nine months ended September 30, 2025 and 2024, the net cash provided by operating activities was $184.8 million and $236.5 million, respectively.

Our operating cash flows decreased $51.8 million primarily due to the timing of working capital items, timing of cash paid for income taxes as a result of the purchase of transferrable production tax credits, 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 and a decrease in the franchise agreement acquisition cost payments.

During the three months ended March 31, 2026, the net cash used in operating activities was $23.2 million.

During the three months ended March 31, 2025, the net cash provided by operating activities was $20.5 million.

Our operating cash flows decreased $43.6 million primarily due to the timing of working capital items, an increase in the franchise agreement acquisition cost payments, and an increase in the net reimbursable deficit from franchised and managed properties, all of which were partially offset by a decrease in deferred income taxes.

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

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

During the nine months ended September 30, 2025 and 2024, the Company's net franchise agreement acquisition costs were $62.4 million and $84.1 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.

During the three months ended March 31, 2026 and 2025, the Company's net franchise agreement acquisition costs were $42.8 million and $26.3 million, respectively.

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.

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 revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties.

Cash Flows from Investing Activities

The net cash used in investing activities was $177.9 million and $63.4 million for the nine months ended September 30, 2025 and 2024, respectively.

During the nine months ended September 30, 2025 and 2024, investments in owned hotel properties totaled $85.3 million and $81.2 million, respectively.

The net cash used in investing activities was $6.2 million and $53.0 million for the three months ended March 31, 2026 and 2025, respectively.

During the three months ended March 31, 2026 and 2025, investments in owned hotel properties totaled $16.8 million and $35.5 million, respectively.

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

During the nine months ended September 30, 2025 and 2024, investments in other property and equipment totaled $26.9 million and $33.6 million, respectively.

During the three months ended March 31, 2026 and 2025, investments in other property and equipment totaled $10.1 million and $10.5 million, respectively.

These investments primarily related to leasehold improvements, office equipment, and capitalized software.

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

During the nine months ended September 30, 2025 and 2024, the Company invested $90.0 million and $47.7 million, respectively, to support these efforts.

During the nine months ended September 30, 2025 and 2024, the Company received distributions from these affiliates totaling $44.6 million and $15.9 million, respectively.

During the nine months ended September 30, 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 4 for more information.

During the three months ended March 31, 2026 and 2025, the Company invested $3.9 million and $5.4 million, respectively, to support these efforts.

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

The loans bear interest and are expected to be repaid in accordance with the terms of the loan agreements.

During the nine months ended September 30, 2025, the Company issued $6.4 million in notes receivable loans and received $3.0 million in notes receivable loan repayments.

During the nine months ended September 30, 2024, the Company issued $24.4 million in notes receivable loans and received $2.3 million in notes receivable loan repayments.

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 nine months ended September 30, 2024, the Company received cash proceeds of $108.1 million from the sale of equity securities.

During the three months ended March 31, 2026, the Company issued $0.2 million in notes receivable loans and received $24.6 million in notes receivable loan repayments.

During the three months ended March 31, 2025, the Company issued $2.0 million in notes receivable loans and received $1.5 million in notes receivable loan repayments.

Cash Flows from Financing Activities

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Senior Unsecured Revolving Credit Facility

On June 28, 2024, the Company entered into a Second Amended and Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"), which amended and restated the Company’s existing amended and restated senior unsecured credit agreement dated August 20, 2018 (the “Former Credit Agreement”).

The Former Credit Agreement provided for an $850 million unsecured revolving credit facility (the “Revolver”) with a final maturity date of August 20, 2026.

On June 28, 2024, the Company entered into a Second Amended and Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement").

The Restated Credit Agreement increased the commitments under the Revolver to $1 billion and extended the final maturity date of the Revolver to June 28, 2029, subject to optional one-year extensions that can be requested by the Company prior to each of the third, fourth, and fifth anniversaries of the closing date of the Restated Credit Agreement.

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

As of September 30, 2025, the Company maintained a total leverage ratio of 2.84x, including outstanding debt of approximately $484.4 million on the senior unsecured revolving credit facility.

As of March 31, 2026, the Company maintained a total leverage ratio of 3.04x, including outstanding debt of approximately $566.3 million on the senior unsecured revolving credit facility.

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

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Additionally, at the option of the holders of the 2024 Senior Notes, the Company may be required to repurchase all or a portion of the holder's 2024 Senior Notes upon the occurrence of a change of control event, at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, to the date of repurchase.

2023 Term Loan Due 2024

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

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

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

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

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

On July 2, 2024, the Company used a portion of the net proceeds from the sale of the 2024 Senior Notes, after deducting underwriting discounts and commissions and other offering expenses, to repay in full the 2023 Term Loan.

2020 Senior Unsecured Notes Due 2031

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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 of September 30, 2025, the governmental entities advanced $0.3 million to the Company to offset a portion of the corporate headquarters relocation and tenant improvement costs in consideration of the employment of permanent, full-time employees within the jurisdictions.

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

In accordance with these agreements, as of March 31, 2026, 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.

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

The advances will be 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 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 September 30, 2025.

During the nine months ended September 30, 2025, the Company paid $40.2 million in cash dividends.

Based on the current per share dividend amount and our outstanding share count, the aggregate annual dividends for the year ended December 31, 2025 is projected to be $1.15 per share or approximately $53.5 million in aggregate dividend payments.

The Company is in compliance with all applicable current performance conditions as of March 31, 2026.

During the three months ended March 31, 2026, the Company paid $13.1 million in cash dividends.

Based on the current per share dividend amount and our outstanding share count, the aggregate annual cash dividends for the year ended December 31, 2026 is projected to be $1.15 per share or approximately $52.6 million in aggregate dividend payments.

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

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

During the nine months ended September 30, 2025, the Company repurchased 0.7 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $100.4 million.

In total, the Company has repurchased 62.0 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 $2.7 billion.

Considering the effect of the two-for-one stock split, the Company has repurchased 95.0 million shares at an average price of $28.81 per share.

As of September 30, 2025, the Company had 3.0 million shares remaining under the current share repurchase authorization.

During the nine months ended September 30, 2025, the Company redeemed 0.1 million shares of common stock at a total cost of $9.8 million from employees to satisfy the option exercise price and the statutory minimum tax-withholding requirements related to the exercising of stock options and the vesting of PVRSUs and restricted stock grants.

During the three months ended March 31, 2026, the Company repurchased 0.5 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $47.8 million.

As of March 31, 2026, the Company had 2.3 million shares remaining under the current share repurchase authorization.

During the three months ended March 31, 2026, the Company redeemed 0.1 million shares of common stock at a total cost of $14.3 million from employees to satisfy the option exercise price and the statutory minimum tax-withholding requirements related to the exercising of stock options and the vesting of PVRSUs and restricted stock grants.

These redemptions were outside the share repurchase program.

During the nine months ended September 30, 2025, the Company received proceeds of $7.5 million from stock options exercised by employees.

During the three months ended March 31, 2026, the Company received proceeds of $0.9 million from stock options exercised by employees.

Critical Accounting Estimates

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We have discussed the estimates that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

During the nine months ended September 30, 2025, there were no material changes to the critical accounting estimates that were previously disclosed.

During the three months ended March 31, 2026, there were no material changes to the critical accounting estimates that were previously disclosed.

New Accounting Standards

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Several factors could cause our actual results, performance or achievements to differ materially from those expressed in or contemplated by the forward-looking statements.

Such risks include, but are not limited to, changes to general, domestic and foreign economic conditions, including access to liquidity and capital;

Such risks include, but are not limited to, changes to general, U.S.

and foreign economic conditions, including access to liquidity and capital;

changes in consumer demand and confidence, including consumer discretionary spending and the demand for travel, transient and group business;

the timing and amount of future dividends and share repurchases;

future domestic or global outbreaks of epidemics, pandemics or contagious diseases or fear of such outbreaks, and the related impact on the global hospitality industry, particularly but not exclusively the U.S.

or global outbreaks of epidemics, pandemics or contagious diseases or fear of such outbreaks, and the related impact on the global hospitality industry, particularly but not exclusively the U.S.

travel market;

changes in law and regulation applicable to the travel, lodging or franchising industries, including with respect to the status of our relationship with employees of our franchisees;

the potential impact of new laws and regulations generally, including,

without limitation, those relating to taxes, wages, labor and immigration;

foreign currency fluctuations;

changes in global interest rates and rate differentials;

variability and unpredictability in trade relations, sanctions, tariffs or other trade controls;

the United States federal government funding lapse and related government shutdown;

the federal government funding lapse and related government shutdowns;

impairments or declines in the value of our assets;

our assumptions underlying our critical accounting estimates;

operating risks common in the travel, lodging or franchising industries;

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cyber security and data breach risks;

climate change and sustainability related concerns;

introduction and integration of artificial intelligence technologies;

climate change;

our sustainability strategy;

ownership and financing activities;

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operating risks associated with our international operations;

political instability, conflicts and terrorism;

labor shortages;

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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-Q

Item 2. Management’s Discussion and Analysis