CHOICE HOTELS INTERNATIONAL INC /DE 10-Q

ITEM 1. FINANCIAL STATEMENTS CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended March 31, 2026 2025 REVENUES Franchise and management fees $ 149,631 $ 145,068 Partnership services and fees 24,734 25,381 Owned hotels 30,433 27,860 Other 11,873 11,127 Revenue for reimbursable costs from franchised and managed properties 123,904 123,424 Total revenues 340,575 332,860 OPERATING EXPENSES Selling, general and administrative 78,046 74,210 Business combination, diligence and transition costs 236 99 Depreciation and amortization 16,821 13,748 Owned hotels 23,651 21,060 Reimbursable expenses from franchised and managed properties 161,787 143,811 Total operating expenses 280,541 252,928 Operating income 60,034 79,932 OTHER EXPENSES AND (INCOME), NET Interest expense 23,962 21,242 Interest income ( 1,211 ) ( 1,559 ) Other losses, net 721 436 Equity in net loss of affiliates 6,252 51 Total other expenses and (income), net 29,724 20,170 Income before income taxes 30,310 59,762 Income tax expense 10,006 15,228 Net income $ 20,304 $ 44,534 Basic earnings per share $ 0.44 $ 0.95 Diluted earnings per share $ 0.44 $ 0.94 Cash dividends declared per share $ 0.2875 $ 0.2875 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS) (UNAUDITED) Three Months Ended March 31, 2026 2025 Net income $ 20,304 $ 44,534 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment ( 2,869 ) 63 Other comprehensive (loss) income, net of tax ( 2,869 ) 63 Comprehensive income $ 17,435 $ 44,597 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED) March 31, 2026 December 31, 2025 ASSETS Current assets Cash and cash equivalents $ 43,872 $ 44,997 Accounts receivable (net of allowance for credit losses of $ 62,304 and $ 51,189 , respectively) 243,511 207,491 Income taxes receivable 14,491 13,456 Notes receivable (net of allowance for credit losses of $ 5,007 and $ 7,462 , respectively) 54,849 94,686 Prepaid expenses and other current assets 54,052 45,368 Total current assets 410,775 405,998 Property and equipment (net of accumulated depreciation and amortization of $ 176,737 and $ 162,113 , respectively) 649,883 649,291 Operating lease right-of-use assets 76,559 77,670 Goodwill 304,583 305,758 Intangible assets (net of accumulated amortization of $ 273,556 and $ 256,575 , respectively) 1,096,143 1,082,486 Notes receivable (net of allowance for credit losses of $ 3,444 and $ 1,019 , respectively) 27,403 12,490 Investments for employee benefit plans, at fair value 47,899 50,227 Investments in affiliates 132,848 134,975 Deferred income taxes 76,729 75,371 Other assets 121,764 123,937 Total assets $ 2,944,586 $ 2,918,203 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable $ 146,193 $ 156,276 Accrued expenses and other current liabilities 86,707 125,282 Deferred revenue 112,853 100,698 Liability for guest loyalty program 88,236 85,035 Total current liabilities 433,989 467,291 Long-term debt 2,003,236 1,906,122 Long-term deferred revenue 129,946 130,505 Deferred compensation and retirement plan obligations 54,313 56,532 Deferred income taxes 34,081 25,303 Operating lease liabilities 106,384 107,963 Liability for guest loyalty program 41,566 39,771 Other liabilities 3,644 3,487 Total liabilities 2,807,159 2,736,974 Commitments and contingencies (Note 11) Common stock, $ 0.01 par value; 160,000,000 shares authorized; 95,065,638 shares issued at March 31, 2026 and December 31, 2025; 45,617,358 and 45,996,087 shares outstanding at March 31, 2026 and December 31, 2025, respectively 951 951 Additional paid-in-capital 407,781 403,927 Accumulated other comprehensive loss ( 8,176 ) ( 5,307 ) Treasury stock, at cost; 49,448,280 and 49,069,551 shares at March 31, 2026 and December 31, 2025, respectively ( 2,588,349 ) ( 2,536,373 ) Retained earnings 2,325,220 2,318,031 Total shareholders’ equity 137,427 181,229 Total liabilities and shareholders’ equity $ 2,944,586 $ 2,918,203 The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) Three Months Ended March 31, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 20,304 $ 44,534 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 16,821 13,748 Depreciation and amortization – reimbursable expenses from franchised and managed properties 5,115 4,887 Franchise agreement acquisition cost amortization 9,580 9,791 Non-cash share-based compensation and other charges 8,434 9,834 Non-cash interest, investments, and affiliate loss, net 1,800 1,515 Deferred income taxes 7,657 626 Equity in net loss of affiliates, less distributions received 6,252 413 Franchise agreement acquisition costs, net of reimbursements ( 42,842 ) ( 26,287 ) Change in working capital and other ( 56,295 ) ( 38,594 ) Net cash (used in) provided by operating activities ( 23,174 ) 20,467 CASH FLOWS FROM INVESTING ACTIVITIES Investments in other property and equipment ( 10,065 ) ( 10,543 ) Investments in owned hotel properties ( 16,819 ) ( 35,462 ) Contributions to investments in affiliates ( 3,863 ) ( 5,415 ) Issuances of notes receivable ( 236 ) ( 1,952 ) Collections of notes receivable 24,610 1,487 Other items, net 197 ( 1,067 ) Net cash used in investing activities ( 6,176 ) ( 52,952 ) CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings pursuant to revolving credit facilities 97,000 105,500 Purchases of treasury stock ( 56,480 ) ( 64,624 ) Dividends paid ( 13,115 ) ( 13,471 ) Proceeds from the exercise of stock options 880 4,803 Net cash provided by financing activities 28,285 32,208 Net change in cash and cash equivalents ( 1,065 ) ( 277 ) Effect of foreign exchange rate changes on cash and cash equivalents ( 60 ) 154 Cash and cash equivalents, beginning of period 44,997 40,177 Cash and cash equivalents, end of period $ 43,872 $ 40,054 Supplemental disclosure of cash flow information: Cash payments during the period for Income taxes, net of refunds and transferable tax credits $ 3,964 $ 3,029 Interest, net of capitalized interest $ 32,164 $ 32,268 Non-cash investing and financing activities Dividends declared but not paid $ 13,115 $ 13,391 Investments in property, equipment, and intangible assets recognized in accounts payable and accrued expense liabilities $ 12,886 $ 17,337 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED) Common Stock - Shares Outstanding Common Stock - Par Value Additional Paid-in- Capital Accumulated Other Comprehensive Income (Loss) (2) Treasury Stock Retained Earnings Total Balance as of December 31, 2024 46,856,567 $ 951 $ 370,201 $ ( 6,193 ) $ ( 2,411,527 ) $ 2,001,297 $ ( 45,271 ) Net income — — — — — 44,534 44,534 Other comprehensive income, net of tax — — — 63 — — 63 Share-based payment activity (1) 188,586 — 5,813 — 8,945 — 14,758 Dividends declared ($ 0.2875 per share) — — — — — ( 13,391 ) ( 13,391 ) Treasury purchases ( 456,142 ) — — — ( 64,627 ) — ( 64,627 ) Balance as of March 31, 2025 46,589,011 $ 951 $ 376,014 $ ( 6,130 ) $ ( 2,467,209 ) $ 2,032,440 $ ( 63,934 ) Common Stock - Shares Outstanding Common Stock - Par Value Additional Paid-in- Capital Accumulated Other Comprehensive Income (Loss) (2) Treasury Stock Retained Earnings Total Balance as of December 31, 2025 45,996,087 $ 951 $ 403,927 $ ( 5,307 ) $ ( 2,536,373 ) $ 2,318,031 $ 181,229 Net income — — — — — 20,304 20,304 Other comprehensive income, net of tax — — — ( 2,869 ) — — ( 2,869 ) Share-based payment activity (1) 229,675 — 3,854 — 4,757 — 8,611 Dividends declared ($ 0.2875 per share) — — — — — ( 13,115 ) ( 13,115 ) Treasury purchases ( 608,404 ) — — — ( 56,733 ) — ( 56,733 ) Balance as of March 31, 2026 45,617,358 $ 951 $ 407,781 $ ( 8,176 ) $ ( 2,588,349 ) $ 2,325,220 $ 137,427 (1) During certain periods presented, accumulated dividends were paid to certain shareholders upon vesting of their performance vested restricted stock units ("PVRSU"), which are presented in Share-based payment activity. (2) Accumulated other comprehensive income (loss) relates entirely to foreign currency items. There were no amounts reclassified from accumulated other comprehensive income (loss) during the three months ended March 31, 2026 and 2025 . The accompanying notes are an integral part of these consolidated financial statements. 7 Table of Contents CHOICE HOTELS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation and Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements of Choice Hotels International, Inc. and subsidiaries (collectively, "Choice" or the "Company") have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments that are necessary to fairly present the Company's financial position and results of operations. Except as otherwise disclosed, all adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in the consolidated financial statements presented in accordance with GAAP have been condensed or omitted. The Company believes the disclosures made are adequate to prevent the information presented from being misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2025 and the notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 19, 2026. The interim results are not necessarily indicative of the entire year's results. Summary of Significant Accounting Policies The Company’s significant accounting policies are included in the “Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2025. Recently Issued Accounting Standards In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Disaggregation of Income Statement Expenses ("ASU 2024-03"). ASU 2024-03 requires public entities to provide detailed disclosure of the income statement expenses in the footnotes to the consolidated financial statements. ASU 2024-03 does not require any changes to the expense captions on the face of the consolidated income statement. ASU 2024-03 is effective for the annual reporting period beginning after December 15, 2026 and for the interim periods within the annual reporting period beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact that ASU 2024-03 will have on the Company's consolidated financial statements. In December 2025, the FASB issued ASU 2025-11, Interim Reporting ("ASU 2025-11"). ASU 2025-11 provides a comprehensive list of required interim disclosures and requires entities to disclose events that have a material impact on the entity since the end of the last annual reporting period. ASU 2025-11 is effective for the annual reporting period beginning after December 15, 2027, including the interim periods within that annual reporting period. Early adoption is permitted. The Company is currently evaluating the potential impact that ASU 2025-11 will have on the Company's consolidated financial statements. 2. Revenue Contract Liabilities Contract liabilities relate to (i) advance consideration received related to services considered to be a part of the brand intellectual property performance obligation, such as initial franchise fees that are paid when a franchise agreement is executed and system implementation fees that are paid at the time of installation, and (ii) amounts received when loyalty points are issued but the associated revenue has not yet been recognized because the related loyalty points have not been redeemed. Deferred revenues from initial franchise fees and system implementation fees are typically recognized over a ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby the remaining deferred revenue amounts are recognized to revenue in the period of termination. Loyalty points are typically redeemed within three years of issuance. The following table summarizes the significant changes in the contract liabilities balances during the period from December 31, 2025 to March 31, 2026: (in thousands) Balance as of December 31, 2025 $ 220,340 Increases to the contract liability balance due to cash received 29,125 Revenue recognized in the period ( 27,705 ) Balance as of March 31, 2026 $ 221,760 Remaining Performance Obligations The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $ 221.8 million as of March 31, 2026. This amount represents the fixed transaction price that will be recognized as revenue in future periods, which is presented as current and non-current deferred revenue in the consolidated balance sheets. Based on the practical expedient elections permitted by ASU 2014-09, Revenue From Contracts with Customers (Topic 606) and subsequent amendments ("Topic 606"), the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and SaaS agreements), (ii) variable consideration for which the Company recognizes revenue at the amount to which it has the right to invoice for the services performed, or (iii) contracts with an expected original duration of one year or less. The loyalty points represent a performance obligation attributable to the usage of the points, and thus the revenues are recognized at the point in time when the loyalty points are redeemed by the members for benefits (with both franchisees and third-party partners), net of the cost of redemptions. The loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $ 22.9 million and $ 19.5 million for the three months ended March 31, 2026 and 2025, respectively. 3. Receivables and Allowance for Credit Losses Notes Receivable The Company has provided financing in the form of notes receivable loans to franchisees in order to support the development of hotel properties in strategic markets. The Company's credit quality indicator is the level of security in the note receivable. The following table summarizes the composition of the notes receivable balances by credit quality indicator and the allowance for credit losses: (in thousands) March 31, 2026 December 31, 2025 Senior $ 56,546 $ 98,257 Subordinated 30,505 13,356 Unsecured 3,652 4,044 Total notes receivable $ 90,703 $ 115,657 Less: allowance for credit losses 8,451 8,481 Total notes receivable, net of allowance for credit losses $ 82,252 $ 107,176 Current portion, net of allowance for credit losses $ 54,849 $ 94,686 Long-term portion, net of allowance for credit losses $ 27,403 $ 12,490 The following table summarizes the amortized cost basis of the notes receivable by the year of origination and credit quality indicator: (in thousands) 2026 2025 2024 2023 2022 Prior Total Senior $ — $ — $ 41,346 $ — $ — $ 15,200 $ 56,546 Subordinated — 1,501 — 3,503 — 25,501 30,505 Unsecured — 357 129 — — 3,166 3,652 Total notes receivable $ — $ 1,858 $ 41,475 $ 3,503 $ — $ 43,867 $ 90,703 8 Table of Contents The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses: (in thousands) March 31, 2026 December 31, 2025 Beginning balance $ 8,481 $ 7,331 (Reversal) provision for credit losses ( 30 ) 1,150 Ending balance $ 8,451 $ 8,481 As of March 31, 2026 and December 31, 2025, three note receivable loans with senior credit quality indicators met the definition of collateral-dependent and are collateralized by the membership interests in the borrowing entities, the associated land parcel, or the operating hotel. The Company used both a market approach that uses quoted market prices and an income approach that uses discounted cash flows to value the underlying collateral. The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections. These nonrecurring fair value measurements are classified as Level 3 in the fair value measurement hierarchy because they are unobservable inputs which are significant to the overall fair value. Based on the Company's analysis, the fair value of the collateral secures substantially all of the carrying value of the respective note receivable loans. The allowance for credit losses attributable to the collateral-dependent note receivable loans was $ 4.6 million as of both March 31, 2026 and December 31, 2025. The following table summarizes the past due balances by credit quality indicator of the notes receivable: (in thousands) 1- 30 days Past Due 31-89 days Past Due > 90 days Past Due Total Past Due Current Total Notes Receivable As of March 31, 2026 Senior $ — $ — $ 42,900 $ 42,900 $ 13,646 $ 56,546 Subordinated — — — — 30,505 30,505 Unsecured — — 204 204 3,448 3,652 $ — $ — $ 43,104 $ 43,104 $ 47,599 $ 90,703 As of December 31, 2025 Senior $ — $ — $ 42,900 $ 42,900 $ 55,357 $ 98,257 Subordinated — — — — 13,356 13,356 Unsecured — — 404 404 3,640 4,044 $ — $ — $ 43,304 $ 43,304 $ 72,353 $ 115,657 The amortized cost basis of the notes receivable in a non-accrual status was $ 42.9 million as of both March 31, 2026 and December 31, 2025. Variable Interest through Notes Receivable The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $ 78.7 million and $ 103.2 million as of March 31, 2026 and December 31, 2025, respectively. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs"). For collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the respective note receivable and the limited commitments which are addressed in Note 11. Transactions with Unconsolidated Affiliates The Company has extended loans to various unconsolidated affiliates or members of our unconsolidated affiliates. The Company had a total principal balance on these loans of $ 42.5 million and $ 65.3 million as of March 31, 2026 and December 31, 2025, respectively. Accounts Receivable Accounts receivable consists primarily of franchise and related fees due from the hotel franchisees and are recorded at the invoiced amount. During the three months ended March 31, 2026, the Company recognized provisions for credit losses on accounts receivable of $ 9.5 million in selling, general and administrative expenses, and $ 7.4 million in reimbursable expenses from franchised and managed properties, in the consolidated statements of income. During the year ended December 31, 2025, the Company recognized provisions for credit losses on accounts receivable of $ 20.2 million in selling, general and administrative expenses, and $ 15.0 million in reimbursable expenses from franchised and managed properties, in the consolidated statements of income. 9 Table of Contents During the three months ended March 31, 2026, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 5.8 million. During the year ended December 31, 2025, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $ 29.6 million. 4. Investments in Affiliates The Company has equity method investments in affiliates primarily related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels and Everhome Suites branded-hotels in strategic markets. As of March 31, 2026 and December 31, 2025, the Company had total investments in affiliates in the consolidated balance sheets of $ 132.8 million and $ 135.0 million, respectively, which included investments in affiliates that represent VIEs of $ 132.4 million and $ 134.4 million, respectively. The Company has determined that it is not the primary beneficiary of any of these VIEs, however the Company does exercise significant influence through its equity ownership and as a result, the investments in these affiliates are accounted for under the equity method of accounting. During the three months ended March 31, 2026 and 2025, the Company recognized losses totaling $ 6.3 million and $ 0.9 million, respectively, from these investments that represent VIEs. The Company's maximum exposure to losses related to its investments in the VIEs is limited to the total of its respective equity investment as well as certain limited payment guaranties, which are described in Note 11 to these consolidated financial statements. During the three months ended March 31, 2026 and 2025, the Company recognized no impairment charges related to its equity method investments. 5. Debt Debt consisted of the following: March 31, 2026 December 31, 2025 (in thousands) $ 400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88 %, less a discount and deferred issuance costs of $ 2.2 million and $ 2.4 million at March 31, 2026 and December 31, 2025, respectively $ 397,794 $ 397,643 $ 450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86 %, less a discount and deferred issuance costs of $ 2.9 million and $ 3.1 million at March 31, 2026 and December 31, 2025, respectively 447,062 446,910 $ 600 million senior unsecured notes due 2034 ("2024 Senior Notes") with an effective interest rate of 6.11 %, less a discount and deferred issuance costs of $ 9.8 million and $ 10.1 million at March 31, 2026 and December 31, 2025, respectively 590,229 589,936 $ 1 billion senior unsecured revolving credit facility with an effective interest rate of 4.93 %, less deferred issuance costs of $ 2.6 million and $ 2.8 million at March 31, 2026 and December 31, 2025, respectively 566,301 469,783 Economic development loans with an effective interest rate of 3.00 % at March 31, 2026 and December 31, 2025 1,850 1,850 Total long-term debt $ 2,003,236 $ 1,906,122 6. Fair Value Measurements The Company estimates the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs on a recurring basis. Level 1 - Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist of mutual funds held in the Company's Deferred Compensation Plan. Level 2 - Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable. The Company’s Level 2 assets consist of money market funds held in the Company's Deferred Compensation Plan. Level 3 - Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument. The Company does not currently have any assets recorded at fair value on a recurring basis whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the three months ended March 31, 2026 and during the year ended December 31, 2025. The Company recognized the following assets at fair value on a recurring basis in the consolidated balance sheets: Fair Value Measurements at Reporting Date Using (in thousands) Total Level 1 Level 2 Level 3 As of March 31, 2026 Mutual funds (1) $ 46,855 $ 46,855 $ — $ — Money market funds (1) 3,635 — 3,635 — Total $ 50,490 $ 46,855 $ 3,635 $ — As of December 31, 2025 Mutual funds (1) $ 47,713 $ 47,713 $ — $ — Money market funds (1) 4,281 — 4,281 — Total $ 51,994 $ 47,713 $ 4,281 $ — (1) The current assets at fair value noted above are presented in prepaid expenses and other current assets in the consolidated balance sheets. The long-term assets at fair value noted above are presented in investments for employee benefit plans, at fair value in the consolidated balance sheets. Other Financial Instruments Disclosure The Company believes that the fair values of its current assets and current liabilities approximate their reported carrying amounts due to the short-term nature of these items. In addition, the interest rate on the senior unsecured revolving credit facility adjusts frequently based on current market interest rates; therefore, the Company believes the carrying amount approximates the fair value. The fair values of the Company's senior unsecured notes are classified as Level 2 because the significant inputs are observable in an active market. Refer to Note 5 for additional information on debt. As of March 31, 2026 and December 31, 2025, the carrying amounts and the fair values were as follows: March 31, 2026 December 31, 2025 (in thousands) Carrying Amount Fair Value Carrying Amount Fair Value 2019 Senior Notes due 2029 $ 397,794 $ 383,596 $ 397,643 $ 389,612 2020 Senior Notes due 2031 $ 447,062 $ 422,321 $ 446,910 $ 428,963 2024 Senior Notes due 2034 $ 590,229 $ 605,298 $ 589,936 $ 612,612 The fair value estimates are determined at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. The settlement of such fair value amounts may not be possible or a prudent management decision. 7. Income Taxes 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. 8. Share-Based Compensation The components of the Company’s share-based compensation expense were as follows: Three Months Ended March 31, (in thousands) 2026 2025 Stock options $ 557 $ 1,519 Restricted stock 3,422 3,327 Performance vested restricted stock units 4,313 5,569 Total share-based compensation expense $ 8,292 $ 10,415 10 Table of Contents A summary of the share-based award activity during the three months ended March 31, 2026 is presented below: Stock Options Restricted Stock Performance Vested Restricted Stock Units Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Outstanding as of January 1, 2026 695,083 $ 110.98 343,165 $ 138.02 444,811 $ 138.89 Granted — — 129,303 107.01 133,689 151.51 Performance-based leveraging (1) — — — — ( 8,796 ) 131.53 Exercised/vested ( 77,737 ) 81.80 ( 78,106 ) 139.77 ( 115,378 ) 128.93 Expired — — — — — — Forfeited ( 752 ) 136.14 ( 6,235 ) 123.36 ( 22,031 ) 161.60 Outstanding as of March 31, 2026 616,594 $ 114.62 5.6 years 388,127 $ 127.84 432,295 $ 144.29 Options exercisable as of March 31, 2026 553,953 $ 114.48 5.4 years (1) Any revisions to the outstanding PVRSUs during the three months ended March 31, 2026 is based on the Company's performance relative to the targeted performance conditions in the respective PVRSUs. The fair value of the restricted stock and the PVRSUs with performance conditions that were granted during the three months ended March 31, 2026 was equal to the market price of the Company’s common stock on the date of the grant. The fair value of the PVRSUs with market conditions that are based on the Company’s total shareholder return relative to a predetermined peer group was estimated using a Monte Carlo simulation method as of the date of the grant. The requisite service periods for the restricted stock and the PVRSUs was between 9 months and 48 months. 11 Table of Contents 9. Earnings Per Share The Company’s shares of restricted stock contain rights to receive nonforfeitable dividends and thus are participating securities that require the computation of basic earnings per share using the two-class method. The shares of restricted stock are both potential shares of common stock and participating securities so the Company calculates diluted earnings per share by using the more dilutive of the treasury stock method or the two-class method. The calculation of earnings per share for the net income available to common shareholders excludes the distribution of dividends and the undistributed earnings attributable to the participating securities from the numerator. The diluted earnings per share includes stock options, PVRSUs, and RSUs in the calculation of the weighted average shares of common stock outstanding. The computation of basic and diluted earnings per share was as follows: Three Months Ended March 31, (in thousands, except per share amounts) 2026 2025 Numerator: Net income $ 20,304 $ 44,534 Income allocated to participating securities ( 79 ) ( 219 ) Net income available to common shareholders $ 20,225 $ 44,315 Denominator: Weighted average shares of common stock outstanding – basic 45,719 46,494 Basic earnings per share $ 0.44 $ 0.95 Numerator: Net income $ 20,304 $ 44,534 Income allocated to participating securities ( 79 ) ( 219 ) Net income available to common shareholders $ 20,225 $ 44,315 Denominator: Weighted average shares of common stock outstanding – basic 45,719 46,494 Dilutive effect of stock options, PVRSUs, and RSUs 314 629 Weighted average shares of common stock outstanding – diluted 46,033 47,123 Diluted earnings per share $ 0.44 $ 0.94 The following securities have been excluded from the calculation of the diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect: Three Months Ended March 31, (in thousands) 2026 2025 Stock options 509 137 PVRSUs 30 — 10. Reportable Segments The Hotel Franchising & Management reportable segment includes the Company's hotel franchising operations, which consists of its 22 brands and brand extensions and the hotel management operations of 13 hotels (inclusive of four owned hotels). The 22 brands and brand extensions and hotel management operations are aggregated together within this reportable segment because they have similar economic characteristics, types of customers, distribution channels, and regulatory business environments. The revenues from the hotel franchising and management business include royalty fees, initial franchise fees and relicensing fees, cost reimbursement revenues, partnership services and fees, base and incentive management fees, and other hotel franchising and management-related revenue. The Company provides certain services under its franchise and management agreements which result in direct and indirect reimbursements. The cost reimbursement revenues received from the franchisees are included in Hotel Franchising & Management revenues and are offset by the related expenses in order to calculate Hotel Franchising & Management operating income. The equity in the earnings or losses from the hotel franchising-related investment in affiliates is allocated to the Hotel Franchising & Management reportable segment. 12 Table of Contents The Company evaluates its Hotel Franchising & Management reportable segment based primarily on the operating income of the segment without allocating corporate expenses or indirect general and administrative expenses. The Corporate & Other column includes the operations of the Company's owned hotels. Intersegment Eliminations to revenues is the elimination of Hotel Franchising & Management revenue which includes royalty fees, management and cost reimbursement fees charged to our owned hotels against the franchise and management fee expense that is recognized by our owned hotels in Corporate & Other operating income (loss). Our President and Chief Executive Officer, who is our chief operating decision maker ("CODM"), utilizes budgeted and forecasted financial information as well as industry metrics, such as revenue per available room ("RevPar"), occupancy, and average daily room rate ("ADR"), to assess the performance and to make resource allocation decisions. The CODM does not use assets by operating segment when assessing the performance or when making operating segment resource allocation decisions and therefore, assets by segment are not disclosed below. The following tables present the financial information for the Company's segments: Three Months Ended March 31, 2026 (in thousands) Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Revenues $ 309,544 $ 34,541 $ ( 3,510 ) $ 340,575 Other segment items (1) 213,089 54,141 ( 3,510 ) 263,720 Depreciation and amortization 9,640 7,181 — 16,821 Operating income (loss) 86,815 ( 26,781 ) — 60,034 Reconciliation of segment profit or loss: Interest expense 23,962 Interest income ( 1,211 ) Other losses, net 721 Equity in net loss of affiliates 6,252 Income before income taxes $ 30,310 Three Months Ended March 31, 2025 (in thousands) Hotel Franchising & Management Corporate & Other Intersegment Eliminations Consolidated Revenues $ 303,184 $ 32,904 $ ( 3,228 ) $ 332,860 Other segment items (1) 192,425 49,983 ( 3,228 ) 239,180 Depreciation and amortization 7,374 6,374 — 13,748 Operating income (loss) 103,385 ( 23,453 ) — 79,932 Reconciliation of segment profit or loss: Interest expense 21,242 Interest income ( 1,559 ) Other losses, net 436 Equity in net loss of affiliates 51 Income before income taxes $ 59,762 (1) Other segment items for the reportable segment include selling, general and administrative expenses and reimbursable expenses from franchised and managed properties. 13 Table of Contents 11. Commitments and Contingencies The Company is not a party to any litigation other than litigation in the ordinary course of business. The Company's management and legal counsel do not expect that the ultimate outcome of any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company's financial position, results of operations, or cash flows. Contingencies The Company entered into various limited payment guaranties with regards to the Company’s VIEs in order to support it's efforts to develop and own hotels that are franchised under the Company’s brands. Under these limited payment guaranties, the Company has agreed to guarantee a portion of the outstanding debt until certain conditions are met, such as (a) the loan matures, (b) certain debt covenants are achieved, (c) the maximum amount guaranteed by the Company is paid in full, or (d) the Company, through its affiliates, ceases to be a member of the VIE. As of March 31, 2026, the maximum unrecorded exposure of the principal associated with these limited payment guaranties was $ 40.4 million, plus unpaid expenses and accrued but unpaid interest. The Company believes the likelihood of having to perform under these guaranties is remote. In the event of performance, the Company has recourse for certain of the guaranties in the form of partial guaranties from third parties. Commitments The Company had the following outstanding commitments as of March 31, 2026: • As part of the acquisition of Radisson Hotels Americas in August 2022, the Company entered into a long-term management arrangement, with an expiration date of July 31, 2031, to manage hotels owned by a third-party. As of March 31, 2026, the Company managed seven hotels pursuant to the long-term management arrangement. In conjunction with the management arrangement, the Company entered into a guarantee with the third-party to fund any shortfalls in the payment of the third-party owner’s priority that is stipulated in the management agreement. As of March 31, 2026, no liability was recognized in the consolidated balance sheets. For the three months ended March 31, 2026, the Company recognized no guarantee payments in selling, general and administrative expenses in the consolidated statements of income. As of March 31, 2026, the maximum unrecorded exposure of the guarantee was $ 18.2 million. • The Company strategically deploys capital in the form of franchise agreement acquisition cost payments across our brands to incentivize franchise development. These payments are typically made at the commencement of construction or the hotel's opening, in accordance with agreed upon provisions in the individual franchise agreements. The timing and the amount of the franchise agreement acquisition cost payments are dependent on various factors, including the implementation of various development and brand incentive programs, the level of franchise sales, and the ability of our franchisees to complete construction or convert their hotels to one of the Company’s brands. • The Company has committed to provide financing in the form of loans or credit facilities to franchisees for brand development efforts. As of March 31, 2026, the Company had remaining commitments of up to $ 3.1 million, if certain conditions are met. • The Company’s franchise agreements require the payment of franchise fees, which include marketing and reservation fees. In accordance with the terms of our franchise agreements, the Company is obligated to use the marketing and reservation revenues it collects from the current franchisees to provide marketing and reservation services that are appropriate to support the operation of the overall system. To the extent the revenues collected exceed the expenditures incurred, the Company has a commitment to the franchisee system to make expenditures in future years. Conversely, to the extent the expenditures incurred exceed the revenues collected, the Company has the contractual enforceable right to assess and collect such amounts from the franchisees. • The Company has committed to purchase transferable production tax credits generated by qualified solar energy facilities for an aggregate purchase price of approximately $ 193 million over an eleven year period, from 2026 through 2036. The Company’s commitments are contingent upon the satisfaction of certain legal and contractual conditions from the sellers, and the continued availability of the credits under federal tax laws. The Company expects to utilize these credits in the same quarter in which they are purchased, offsetting federal income tax estimated payments and reducing income tax expense each year. In the ordinary course of business, the Company enters into numerous agreements that contain standard indemnities whereby the Company indemnifies another party for breaches of representations and warranties. Such indemnifications are granted under various agreements, including those governing (i) purchases or sales of assets or businesses, (ii) leases of real estate, (iii) licensing of trademarks, (iv) access to credit facilities, (v) issuances of debt or equity securities, and (vi) certain operating agreements. The indemnifications issued are for the benefit of the (i) buyers in sale agreements and sellers in purchase 14 Table of Contents agreements, (ii) landlords in lease contracts, (iii) franchisees in licensing agreements, (iv) financial institutions in credit facility arrangements, (v) underwriters in debt or equity security issuances, and (vi) parties under certain operating agreements. In addition, these parties are also generally indemnified against any third-party claim resulting from the transaction that is contemplated in the underlying agreement. While some of these indemnities extend only for the duration of the underlying agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless subject to a legal statute of limitations). There are no specific limitations on the maximum potential amount of the future payments that the Company could be required to make under these indemnities, nor is the Company able to develop an estimate of the maximum potential amount of the future payments that could be made under these indemnifications as the triggering events are not subject to predictability. With respect to certain of the aforementioned indemnities, such as the indemnifications of the landlords against third-party claims for the use of real estate property leased by the Company, the Company maintains insurance coverage that mitigates any potential liability. 12. Acquisitions Choice Hotels Canada Acquisition On July 2, 2025, the Company completed the acquisition (the “Transaction”) of the remaining 50 % of the outstanding shares of Choice Hotels Canada, Inc. ("Choice Hotels Canada") and amended the existing master franchise agreement for a purchase price of approximately $ 114.5 million, inclusive of customary adjustments related to working capital and cash. The acquisition was funded with available cash and borrowings under the Company's senior unsecured revolving credit facility. Choice Hotels Canada franchises more than 26,000 rooms in Canada, which have historically been included in the Company's franchised hotel statistics as a result of the prior master franchise agreement. Choice Hotels Canada now has the ability to offer developers access to all of the Company's 22 hotel brands and brand extensions, including the Company's extended stay brands. Prior to the acquisition date, the Company owned 50 % of the outstanding shares of Choice Hotels Canada, which was accounted for under the equity method of accounting and reported within investments in affiliates in the consolidated balance sheets. As a result of the Transaction, Choice Hotels Canada is now a wholly-owned and consolidated subsidiary of the Company, and the Transaction was accounted for as a business combination using the acquisition method. In connection with the Transaction, the Company remeasured the value of its previously held 50 % equity investment to its acquisition date fair value of $ 114.5 million, which resulted in a gain of approximately $ 100.0 million that is reported within gain from an acquisition of a joint venture in the consolidated statements of income. The fair value of the previously held equity investment was determined using a market approach based on the cash consideration exchanged for the newly acquired 50 % equity interest. The following is a summary of the purchase consideration transferred: Purchase Consideration (in thousands) Cash consideration transferred for the newly acquired interest $ 114,470 Fair value of the previously held interest 114,470 Effective settlement of intercompany payables 3,280 Total consideration, including previously held interest $ 232,220 During the three months ended March 31, 2026, the Company recognized transaction and transition costs of $ 0.2 million in business combination, diligence and transition costs in the consolidated statements of income. Fair Values of the Assets Acquired and the Liabilities Assumed The Company allocated the purchase price based upon an assessment of the fair value of the assets acquired and the liabilities assumed on July 2, 2025. The final valuation and related allocation of the purchase price was completed in the first quarter of 2026. There were no measurement period adjustments. The final allocation of the purchase price, as presented in our consolidated balance sheets is as follows: 15 Table of Contents (in thousands) July 2, 2025 Assets acquired Cash and cash equivalents $ 44,356 Accounts receivable 10,706 Income taxes receivable 149 Prepaid expenses and other current assets 335 Operating lease right-of-use assets 358 Intangible assets 150,665 Total assets acquired $ 206,569 Liabilities assumed Accounts payable $ 5,235 Accrued expenses and other current liabilities 1,926 Deferred revenue - current 333 Liability for guest loyalty program - current 7,194 Deferred income taxes 38,045 Long-term deferred revenue 1,845 Operating lease liabilities 358 Liability for guest loyalty program - noncurrent 5,607 Total liabilities assumed $ 60,543 Fair value of net assets acquired $ 146,026 Goodwill 86,194 Total consideration, including previously held interest $ 232,220 Identified Intangible Assets The following table presents the estimated fair values of the acquired identified intangible assets and their estimated useful lives: Estimated Useful Life Estimated Fair Value (in years) (in thousands) Reacquired territory rights 38 $ 76,523 Franchise agreements 12 74,142 Total intangible assets $ 150,665 The reacquired territory rights represent the reacquired rights for the use of certain Choice brands within Canada. The fair value of the reacquired territory rights and the franchise agreements was estimated using a multi-period excess earnings method, which is a variation of the income approach. This method uses the present value of the incremental after-tax cash flows attributable to the intangible asset in order to estimate the fair value. This valuation methodology utilizes Level 3 inputs. Income Taxes As the Transaction is accounted for as a business combination, deferred tax assets and liabilities are generally recognized on the differences between the fair value of the assets acquired and the liabilities assumed and the tax bases of the assets acquired and the liabilities assumed in the business combination. The Transaction consists of a foreign entity, so the Company asserts an indefinite reinvestment and has not recorded a deferred tax liability on the outside basis difference in its investment. Pro Forma Results of Operations The following unaudited pro forma information presents the combined results of operations of Choice and Choice Hotels Canada as if the Company had completed the Transaction on January 1, 2024, but using the fair values of the assets acquired and the liabilities assumed as of the acquisition date. The unaudited pro forma information reflects adjustments relating to (i) the allocation of the purchase price and related adjustments, including the incremental amortization expense based on the fair values of the intangible assets acquired, (ii) the incremental impact of the senior unsecured revolving credit facility draw on interest expense, (iii) nonrecurring transaction costs, and (iv) the income tax impact of the aforementioned pro forma adjustments. 16 Table of Contents As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Transaction had occurred at the beginning of the period presented, nor are they indicative of the future results of operations. Three Months Ended (in thousands) March 31, 2025 Revenues $ 339,898 Net income (1) $ 42,770 (1) The gain on the previously held 50 % equity interest in Choice Hotels Canada is excluded from the pro forma results of operations. Choice Hotels Canada Results of Operations The Company's consolidated statements of income include Choice Hotels Canada's results of operations since the July 2, 2025 acquisition date. Choice Hotels Canada contributed $ 8.9 million and $ 3.2 million in total revenues and net income, respectively, for the three months ended March 31, 2026. Goodwill The $ 86.2 million of goodwill recognized is primarily attributable to the value that the Company expects to realize from the existing customer base, cost synergies, and new agreements signed with new franchisees and developers. The goodwill for the Transaction is fully attributable to the Hotel Franchising & Management reportable segment and is not deductible for tax purposes. The following table summarizes the carrying amount of the Company's goodwill, including the goodwill arising from the acquisition of Choice Hotels Canada, as of March 31, 2026. (in thousands) Goodwill, excluding goodwill arising from the Choice Hotels Canada acquisition $ 227,765 Goodwill arising from the Choice Hotels Canada acquisition 86,194 Effect of foreign currency translation ( 1,798 ) Total goodwill, gross carrying amount 312,161 Accumulated impairment losses ( 7,578 ) Goodwill, net carrying amount $ 304,583 17 Table of Contents