CHOICE HOTELS INTERNATIONAL INC /DE

Previous wording

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 45 countries and territories. As of September 30, 2024, we had 7,515 hotels with 634,952 rooms open and operating, and 970 hotels with 110,380 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®.

Current wording

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 46 countries and territories. As of March 31, 2025, we had 7,527 hotels with 647,587 rooms open and operating, and 947 hotels with 95,089 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®.

Previous wording

The hotel franchising business represents the Company's primary operations. The Company's domestic operations are conducted through direct franchising relationships, the ownership of 12 open and operating hotels, and the management of 13 hotels (inclusive of four owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships. Master franchising relationships are governed by master franchising agreements which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region, usually for a fee. As a result of our master franchise relationships and international market conditions, our revenues are primarily concentrated in the United States. Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States.

Current wording

The hotel franchising business represents the Company's primary operations. The Company's domestic operations are conducted through direct franchising relationships, the ownership of 13 open and operating hotels, and the management of 13 hotels (inclusive of four owned hotels), while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships. Master franchising relationships are governed by master franchising agreements which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region, usually for a fee. As a result of our master franchise relationships and international market conditions, our revenues are primarily concentrated in the United States. Therefore, our description of our business is primarily focused on the domestic operations, which encompasses the United States.

Previous wording

Our Company generates revenues, income, and cash flows primarily from our hotel franchising operations. Revenues are also generated from partnerships with qualified vendors and travel partners that provide value-added solutions to our platform of guests and hotels, hotel ownership, and other ancillary sources. Historically, the hotel industry has been seasonal in nature. 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 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.

Current wording

Our Company generates revenues, income, and cash flows primarily from our hotel franchising operations. Revenues are also generated from partnerships with qualified vendors and travel partners that provide value-added solutions to our platform of guests and hotels, hotel ownership, and other ancillary sources. Historically, the hotel industry has been seasonal in nature. 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. 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.

Previous wording

Because our primary focus is hotel franchising, we benefit from the economies of scale inherent in the franchising business. The fee and cost structure of our franchising business provides opportunities to improve our operating results by increasing the number of franchised hotel rooms and the effective royalty rates in our franchise contracts resulting in increased initial franchise fees, ongoing royalty and licensing fees, and platform and procurement services fees. In addition, our operating results can also be improved through our company-wide efforts related to improving property-level performance and expanding the number of partnerships with travel-related and other companies with products and services that appeal to our guests.

Current wording

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.

Previous wording

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. 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.

Current wording

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.

Previous wording

In addition to our hotel franchising business, we have also developed or acquired 12 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. When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands. Our hotel development and ownership efforts primarily focus on the Cambria Hotels and Everhome Suites brands. We believe our owned hotels provide us the opportunity to support and accelerate the growth of these brands. We do not anticipate owning hotels on a permanent basis and we expect to target dispositions to a franchisee encumbered with a long-term Choice franchise agreement in the future.

Current wording

In addition to our hotel franchising business, we have also developed or acquired 13 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. When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands. Our hotel development and ownership efforts currently focus on the Cambria Hotels and Everhome Suites brands. We believe our owned hotels provide us the opportunity to support and accelerate the growth of these brands. We do not anticipate owning hotels on a permanent basis and we expect to target dispositions to a franchisee encumbered with a long-term Choice franchise agreement in the future.

Previous wording

Results of Operations -Royalty, licensing and management fees, operating income, net income, and diluted earnings per share represent the key measures of our financial performance. These measures are primarily driven by the operations of our hotel franchise system and therefore, our analysis of the Company's results of operations is primarily focused on the size, performance, and the potential growth of the hotel franchise system as well as our variable overhead costs.

Current wording

Results of Operations -Franchise and management fees, operating income, net income, and diluted earnings per share represent the key measures of our financial performance. These measures are primarily driven by the operations of our hotel franchise system and therefore, our analysis of the Company's results of operations is primarily focused on the size, performance, and the potential growth of the hotel franchise system as well as our variable overhead costs.

Previous wording

Our discussion of our results of operations excludes reimbursable franchise marketing and reservation system revenues and expenses and the management agreement cost reimbursements and expenses included in the Company's other revenues from franchised and managed properties and other expenses from franchised and managed properties. The Company's franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. The Company is obligated to expend the marketing and reservation system fees it collects from its franchisees in accordance with the franchise agreements. Furthermore, the franchisees are required to reimburse the Company for any deficits generated by these marketing and reservation system activities. Over time, the Company expects the cumulative revenues and expenses of reimbursable components to break even and, therefore, no income or loss will be generated from the reimbursable marketing and reservation system activities. Additionally, the Company's management agreements include cost reimbursements, which is primarily related to payroll costs at the managed hotels where the Company is the employer. As a result, the Company generally excludes the other revenues and other expenses from franchised and managed properties from the analysis of its operations.

Current wording

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. Furthermore, the franchisees are required to reimburse the Company for any deficits generated by these marketing and reservation system activities. Over time, the Company expects the cumulative revenues and expenses of reimbursable components to break even and, therefore, no income or loss will be generated from the reimbursable marketing and reservation system activities. 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.

Previous wording

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 deficits may be generated. During the three months ended September 30, 2024 and 2023, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $20.1 million and $10.3 million, respectively. During the nine months ended September 30, 2024 and 2023, other revenues from franchised and managed properties exceeded other expenses from franchised and managed properties by $17.7 million and $19.5 million, respectively.

Current wording

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 March 31, 2025 and 2024, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $20.4 million and $22.6 million, respectively.

Previous wording

For the three months ended September 30, 2024, the Company recognized income before income taxes of $137.1 million, which is a $15.9 million increase from the same period in the prior year. The increase in income before income taxes was primarily due to a $16.7 million increase in operating income and a $5.3 million increase in other gains, all of which were partially offset by a $5.8 million increase in interest expense.

Current wording

For the three months ended March 31, 2025, the Company recognized income before income taxes of $59.8 million, which is a $19.6 million increase from the same period in the prior year. The increase in income before income taxes was primarily due to a $19.8 million increase in operating income.

Previous wording

Business Combination, Diligence and Transition Costs

Current wording

Operating income increased $19.8 million primarily due to a $5.5 million increase in partnership services and fees, a $15.7 million decrease in business combination, diligence and transition costs, and a $1.7 million increase in franchise and management fees, all of which were partially offset by a $3.6 million decrease in other revenues.

Previous wording

Domestic royalty fees decreased $1.9 million to $131.6 million for the three months ended September 30, 2024 from $133.5 million for the three months ended September 30, 2023. The decrease in domestic royalty fees is primarily due to a 2.5% domestic system-wide RevPAR decrease as a result of a 1.2% 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 6 basis points increase in the effective royalty rate from 4.99% for the three months ended September 30, 2023 to 5.05% for the three months ended September 30, 2024.

Current wording

Domestic royalty fees increased $1.7 million to $94.6 million for the three months ended March 31, 2025 from $92.9 million for the three months ended March 31, 2024. The increase in domestic royalty fees was primarily due to a 2.3% domestic system-wide RevPAR increase as a result of a 1.7% increase in average daily rates and a 30 basis points increase in occupancy during the current period, and a system-wide 8 basis points increase in the effective royalty rate from 5.03% for the three months ended March 31, 2024 to 5.11% for the three months ended March 31, 2025.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

International royalty fees increased $0.5 million to $8.4 million for the three months ended September 30, 2024 from $7.9 million for the three months ended September 30, 2023. The increase in international royalty fees is primarily due to an increase in the international franchise system size by 30 hotels (from 1,207 hotels as of September 30, 2023 to 1,237 hotels as of September 30, 2024) and 5,098 rooms (from 134,660 rooms as of September 30, 2023 to 139,758 rooms as of September 30, 2024), which was partially offset by a decrease in international RevPAR.

Current wording

International royalty fees decreased $0.3 million to $6.6 million for the three months ended March 31, 2025 from $6.9 million for the three months ended March 31, 2024. The decrease in international royalty fees was primarily due to a decrease in international RevPAR, which was partially offset by an increase in the international franchise system size by 33 hotels (from 1,215 hotels as of March 31, 2024 to 1,248 hotels as of March 31, 2025) and 5,954 rooms (from 136,032 rooms as of March 31, 2024 to 141,986 rooms as of March 31, 2025).

Previous wording

Other revenues increased $12.1 million to $45.3 million for the nine months ended September 30, 2024 from $33.2 million for the nine months ended September 30, 2023. The increase was primarily due to an increase in liquidated damages that resulted from the early termination of franchise agreements and other franchising revenues.

Current wording

Other revenues decreased $3.6 million primarily due to a decrease in liquidated damages resulting from the early termination of franchise agreements.

Previous wording

Business combination, diligence and transition costs decreased $9.9 million to $1.0 million for the three months ended September 30, 2024 from $10.9 million for the three months ended September 30, 2023. The decrease was primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024.

Current wording

Business combination, diligence and transition costs decreased $15.7 million primarily due to the termination of the Wyndham acquisition pursuit on March 8, 2024.

Previous wording

The Company's effective income tax rates were 22.9% and 24.1% for the three months ended September 30, 2024 and 2023, respectively. The effective income tax rates were higher than the U.S. federal income tax rate of 21.0% primarily due to the impact of state income taxes.

Current wording

The Company's effective income tax rates were 25.5% and 22.9% for the three months ended March 31, 2025 and 2024, respectively. The effective income tax rates were higher than the U.S. federal income tax rate of 21.0% primarily due to the impact of state income taxes.

Previous wording

As of September 30, 2024, the Company's primary sources of liquidity consisted of $675.6 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility. As of September 30, 2024, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance. 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.

Current wording

As of March 31, 2025, the Company's primary sources of liquidity consisted of $593.8 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility. As of March 31, 2025, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such 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.

Previous wording

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 $595.4 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of September 30, 2024. 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.

Current wording

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 $636.6 million in financial support of the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of March 31, 2025. The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $1.2 billion at any point in time based on the current board of directors' authorization. The deployment and annual pace of future financial support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development, and the hotel lending environment.

Previous wording

The Company has historically generated cash flows from operating activities that are in excess of the capital needed to invest in growth opportunities and to service debt obligations. 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, 2024, the Company had 4.0 million shares remaining under the current share repurchase authorization. The projected 2024 annual dividend rate is $1.15 per share or approximately $56.0 million in aggregate dividend payments, which is subject to future declarations by our board of directors.

Current wording

The Company has historically generated cash flows from operating activities that are in excess of the capital needed to invest in growth opportunities and to service debt obligations. 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 March 31, 2025, the Company had 3.4 million shares remaining under the current share repurchase authorization. The projected 2025 annual dividend rate is $1.15 per share or approximately $53.6 million in aggregate dividend payments, which is subject to future declarations by our board of directors.

Previous wording

During the nine months ended September 30, 2024 and 2023, the net cash provided by operating activities was $236.5 million and $247.2 million, respectively. Our operating cash flows decreased $10.7 million primarily due to an increase in the franchise agreement acquisition cost payments, an increase in deferred income taxes, and an increase in borrowing costs, all of which were partially offset by the timing of working capital items and a decrease in business combination, diligence and transition costs associated with the timing of the termination of the Wyndham acquisition pursuit during the first quarter of 2024 and the due diligence and transition costs related to the integration of the Radisson Hotels Americas business in 2023.

Current wording

During the three months ended March 31, 2025 and 2024, the net cash provided by operating activities was $20.5 million and $1.7 million, respectively. Our operating cash flows increased $18.8 million primarily due to 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, all of which were partially offset by the timing of working capital items.

Previous wording

In conjunction with brand and development programs, we strategically make certain franchise acquisition cost payments to franchisees as an incentive to enter into new franchise agreements or perform-designated improvements to properties under existing franchise agreements. If the franchisee remains in the franchise system in good standing over the term specified in the incentive agreement, then the Company forgives the incentive ratably. 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, 2024 and 2023, the Company's net franchise agreement acquisition costs were $84.1 million and $72.9 million, respectively.

Current wording

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. If the franchisee remains in the franchise system in good standing over the term specified in the incentive agreement, then the Company forgives the incentive ratably. 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 three months ended March 31, 2025 and 2024, the Company's net franchise agreement acquisition costs were $26.3 million and $33.5 million, respectively.

Previous wording

The Company’s franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. Additionally, the Company's management agreements include cost reimbursements, primarily related to the payroll costs at the managed hotels where the Company is the employer. These activities are reflected in other revenues from franchised and managed properties and other expenses from franchised and managed properties. During the nine months ended September 30, 2024 and 2023, the activity from other revenues from franchised and managed properties exceeded the activity of other expenses from franchised and managed properties by $17.7 million and $19.5 million, respectively.

Current wording

The Company’s franchise agreements require the payment of marketing and reservation system fees to be used by the Company for the expenses associated with providing franchise services, such as national marketing, media advertising, and central reservation systems. Additionally, the Company's management agreements include cost reimbursements, primarily related to the payroll costs at the managed hotels where the Company is the employer. These activities are reflected in revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties. During the three months ended March 31, 2025 and 2024, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $20.4 million and $22.6 million, respectively.

Previous wording

The net cash used in investing activities was $63.4 million and $103.3 million for the nine months ended September 30, 2024 and 2023, respectively. The net cash used in investing activities was primarily due to the following:

Current wording

The net cash used in investing activities was $53.0 million and $42.7 million for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

During the nine months ended September 30, 2024 and 2023, investments in owned hotel properties totaled $81.2 million and $45.5 million, respectively. These investments related to the continued growth of the Cambria Hotels and Everhome Suites brands and the ongoing hotel development efforts. During the nine months ended September 30, 2024 and 2023, capital expenditures in other property and equipment totaled $33.6 million and $35.9 million, respectively. These capital expenditures primarily related to leasehold improvements, office equipment, and capitalized software.

Current wording

During the three months ended March 31, 2025 and 2024, investments in owned hotel properties totaled $35.5 million and $25.6 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 three months ended March 31, 2025 and 2024, investments in other property and equipment totaled $10.5 million and $7.2 million, respectively. These investments primarily related to leasehold improvements, office equipment, and capitalized software.

Previous wording

The Company has equity method investments in affiliates related to the Company's program to offer equity support to qualified franchisees in order to develop and operate Cambria Hotels and Everhome Suites branded-hotels in strategic markets. During the nine months ended September 30, 2024 and 2023, the Company invested $47.7 million and $24.6 million, respectively, to support these efforts. In addition, during the nine months ended September 30, 2024 and 2023, the Company received distributions from these affiliates totaling $15.9 million and $0.9 million, respectively.

Current wording

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 three months ended March 31, 2025 and 2024, the Company invested $5.4 million and $9.3 million, respectively, to support these efforts.

Previous wording

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, 2024, the Company issued $24.4 million in notes receivable loans and received $2.3 million in notes receivable loan repayments. During the nine months ended September 30, 2023, the Company issued $4.3 million in notes receivable loans and received $9.9 million in notes receivable loan repayments.

Current wording

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 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. During the three months ended March 31, 2024, the Company issued $1.0 million in notes receivable loans and received $0.9 million in notes receivable loan repayments.

Previous wording

Cash flows from financing activities primarily relate to the proceeds or payments on the Company's borrowings, treasury stock repurchases, acquisition of shares in connection with the exercise or vesting of equity awards, the payment of dividends, and the payment of debt issuance costs.

Current wording

Cash flows from financing activities primarily relate to the proceeds or payments on the Company's borrowings, treasury stock repurchases, acquisition of shares in connection with the exercise or vesting of equity awards, and the payment of dividends.

Previous wording

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, 2024, the Company maintained a total leverage ratio of 2.85x, including outstanding debt of approximately $379.2 million on the senior unsecured revolving credit facility. The Company was in compliance with all financial covenants under the Restated Credit Agreement.

Current wording

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 March 31, 2025, the Company maintained a total leverage ratio of 2.89x, including outstanding debt of approximately $442.1 million on the senior unsecured revolving credit facility. The Company was in compliance with all financial covenants under the Restated Credit Agreement.

Previous wording

On July 2, 2024, the Company closed its sale of an aggregate principal amount of $600 million of 5.850% senior notes due 2034 (the "2024 Senior Notes”). The 2024 Senior Notes bear interest at a fixed rate of 5.850% per year and mature on August 1, 2034. Interest on the 2024 Senior Notes is payable semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2025. The interest rate payable on the 2024 Senior Notes will be subject to adjustment based on certain rating events.

Current wording

On July 2, 2024, the Company issued unsecured senior notes with a principal amount of $600 million (the "2024 Senior Notes”) at a discount of $6.4 million, bearing a coupon of 5.85%, with an effective rate of 6.11%, and mature on August 1, 2034. Interest on the 2024 Senior Notes is payable semi-annually on February 1 st and August 1 st of each year, commencing on February 1, 2025. The interest rate payable on the 2024 Senior Notes will be subject to adjustment based on certain rating events.

Previous wording

On December 18, 2023, the Company entered into a $500 million unsecured term loan with a maturity date of December 16, 2024 (the "2023 Term Loan"), which has an optional one-year extension that can be requested by the Company prior to the initial maturity date. The extension option is subject to the consent of the lenders and certain customary conditions.

Current wording

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").

Previous wording

The term loan agreement requires 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 has financial covenants which require the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0, and a total leverage ratio of not more than 4.5 to 1.0 which may be increased 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 maintains an Investment Grade Rating, as defined in the term loan agreement, then the Company will not need to comply with the consolidated fixed charge coverage ratio covenant.

Current wording

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.

Previous wording

During the nine months ended September 30, 2024, the Company paid $42.5 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, 2024 is projected to be $1.15 per share or approximately $56.0 million in aggregate dividend payments.

Current wording

During the three months ended March 31, 2025, the Company paid $13.5 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, 2024 is projected to be $1.15 per share or approximately $53.6 million in aggregate dividend payments.

Previous wording

During the nine months ended September 30, 2024, the Company repurchased 2.8 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $341.2 million. In total, the Company has repurchased 61.1 million shares of its common stock (including 33.0 million shares prior to the two-for-one stock split effected in October 2005) under the share repurchase program at a total cost of $2.6 billion. Considering the effect of the two-for-one stock split, the Company has repurchased 94.1 million shares at an average price of $27.74 per share. As of September 30, 2024, the Company had 4.0 million shares remaining under the current share repurchase authorization.

Current wording

The Company has a share repurchase program. Treasury stock activity is recorded at cost in the consolidated balance sheets. During the three months ended March 31, 2025, the Company repurchased 0.4 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $55.3 million. In total, the Company has repurchased 61.6 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 94.6 million shares at an average price of $28.45 per share. As of March 31, 2025, the Company had 3.4 million shares remaining under the current share repurchase authorization.

Previous wording

During the nine months ended September 30, 2024, the Company redeemed 0.1 million shares of common stock at a total cost of $11.7 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, 2024, the Company received proceeds of $9.3 million from stock options exercised by employees.

Current wording

During the three months ended March 31, 2025, the Company redeemed 0.1 million shares of common stock at a total cost of $9.3 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 three months ended March 31, 2025, the Company received proceeds of $4.8 million from stock options exercised by employees.

Previous wording

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, and the related disclosures in the consolidated financial statements and the accompanying footnotes. 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, 2023. During the nine months ended September 30, 2024, there were no material changes to the critical accounting estimates that were previously disclosed.

Current wording

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, and the related disclosures in the consolidated financial statements and the accompanying footnotes. 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, 2024. During the three months ended March 31, 2025, there were no material changes to the critical accounting estimates that were previously disclosed.

Previous wording

Certain matters discussed in this quarterly report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "expect," "estimate," "believe," "anticipate," "should," "will," "forecast," "plan," "project," "assume," or similar words of futurity. All statements other than historical facts are forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which, in turn, are based on information currently available to management. Such statements may relate to projections of our revenue, expenses, adjusted EBITDA, earnings, debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock, and other financial and operational measures, including occupancy and open hotels, revenue per available room, and our liquidity, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Current wording

Certain matters discussed in this quarterly report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "expect," "estimate," "believe," "anticipate," "should," "will," "forecast," "plan," "project," "assume," or similar words of futurity. All statements other than historical facts are forward-looking statements. These forward-looking statements are based on management's current beliefs, assumptions and expectations regarding future events, which, in turn, are based on information currently available to management. Such statements may relate to projections of our revenue, expenses, earnings, debt levels, ability to repay outstanding indebtedness, payment of dividends, repurchases of common stock, and other financial and operational measures, including occupancy and open hotels, revenue per available room, and our liquidity, among other matters. We caution you not to place undue reliance on any such forward-looking statements. Forward-looking statements do not guarantee future performance and involve known and unknown risks, uncertainties and other factors.

Previous wording

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; 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. 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; foreign currency fluctuations; impairments or declines in the value of our assets; operating risks common in the travel, lodging or franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees and our relationships with our franchisees; our ability to keep pace with improvements in technology utilized for marketing and reservations systems and other operating systems; our ability to grow our franchise system; exposure to risks related to our hotel development, financing, and ownership activities; exposures to risks associated with our investments in new businesses; fluctuations in the supply and demand for hotel rooms; our ability to realize anticipated benefits from acquired businesses; impairments or losses relating to acquired businesses; the level of acceptance of alternative growth strategies we may implement; the impact of inflation; cyber security and data breach risks; climate change and sustainability related concerns; ownership and financing activities; hotel closures or financial difficulties of our franchisees; operating risks associated with our international operations; labor shortages; the outcome of litigation; and our ability to effectively manage our indebtedness and secure our indebtedness. These and other risk factors are discussed in detail in the Risk Factors section of this Quarterly Report on Form 10-Q and of the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Current wording

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; 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. 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; foreign currency fluctuations; impairments or declines in the value of our assets; operating risks common in the travel, lodging or franchising industries; changes to the desirability of our brands as viewed by hotel operators and customers; changes to the terms or termination of our contracts with franchisees and our relationships with our franchisees; our ability to keep pace with improvements in technology utilized for our marketing and reservation systems and other operating systems; our ability to grow our franchise system; exposure to risks related to our hotel development, financing, franchise agreement acquisition costs and ownership activities; exposures to risks associated with our investments in new businesses; fluctuations in the supply and demand for hotel rooms; our ability to realize anticipated benefits from acquired businesses; impairments or losses relating to acquired businesses; the level of acceptance of alternative growth strategies we may implement; the impact of inflation; cyber security and data breach risks; climate change and sustainability related concerns; ownership and financing activities; hotel closures or financial difficulties of our franchisees; operating risks associated with our international operations; labor shortages; the outcome of litigation; and our ability to effectively manage our indebtedness and secure our indebtedness. These and other risk factors are discussed in detail in Item 1A. Risk Factors of this Quarterly Report on Form 10-Q and of the Company's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.