CHOICE HOTELS INTERNATIONAL INC /DE

Previous wording

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 49 countries and territories. As of June 30, 2026, we had 7,608 hotels with 661,089 rooms open and operating, and 841 hotels with 77,275 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system. Our brand names include Clarion®, Clarion Pointe®, Comfort®, Country Inn & Suites® by Radisson, Sleep Inn®, Quality®, Park Inn® by Radisson®, Everhome Suites®, WoodSpring Suites®, MainStay Suites®, Suburban Studios®, Radisson Blu®, Park Plaza®, Cambria® Hotels, Ascend Collection®, Radisson RED®, Radisson Individuals®, Radisson®, Radisson Collection®, Radisson Inn & Suites™, Econo Lodge®, and Rodeway Inn®.

Current wording

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 50 countries and territories. As of September 30, 2026, we had 7,604 hotels with 660,614 rooms open and operating, and 847 hotels with 78,229 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system. Our brand names include Clarion®, Clarion Pointe®, Comfort®, Country Inn & Suites® by Radisson, Sleep Inn®, Quality®, Park Inn® by Radisson®, Everhome Suites®, WoodSpring Suites®, MainStay Suites®, Suburban Studios®, Radisson Blu®, Park Plaza®, Cambria® Hotels, Ascend Collection®, Radisson RED®, Radisson Individuals®, Radisson®, Radisson Collection®, Radisson Inn & Suites™, Econo Lodge®, and Rodeway Inn®.

Previous wording

The hotel franchising business represents the Company's primary operations. The Company's U.S. operations are conducted through direct franchising relationships, the ownership of 18 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 U.S. Therefore, our description of our business is primarily focused on the U.S. operations.

Current wording

The hotel franchising business represents the Company's primary operations. The Company's U.S. operations are conducted through direct franchising relationships, the ownership of 19 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 U.S. Therefore, our description of our business is primarily focused on the U.S. operations.

Previous wording

The primary factors that affect the Company’s results are: the number and relative mix of hotel rooms in the various hotel lodging price categories, growth in the number of hotel rooms owned and under franchise, occupancy and room rates achieved by the hotels in our system, the average royalty rates achieved in our franchise agreements, the level of franchise sales and relicensing activity, the number of qualified vendor arrangements and partnerships and the level of engagement with these partners by our franchisees and guests, and our ability to manage costs. The number of rooms in our hotel system and the occupancy and room rates at those hotel properties significantly affect the Company’s results because our fees are based upon room revenues or the number of rooms at owned and franchised hotels. The key industry standard for measuring hotel-operating performance is revenue per available room ("RevPAR"), which is calculated by multiplying the percentage of occupied rooms by the average daily room rate ("ADR") realized. Our variable overhead costs associated with the franchise system growth of our established brands have historically been less than the incremental royalty fees generated from new franchises. Accordingly, over the long-term, the continued growth of our franchise business should enable us to realize the benefits from the operating leverage in place and improve our operating results.

Current wording

The primary factors that affect the Company’s results are: the number and relative mix of hotel rooms in the various hotel lodging price categories, growth in the number of hotel rooms owned and under franchise, occupancy and room rates achieved by the hotels in our system, the average royalty rates achieved in our franchise agreements, the level of franchise sales and relicensing activity, the number of qualified vendor arrangements and partnerships and the level of engagement with these partners by our franchisees and guests, and our ability to manage costs. The number of rooms in our hotel system and the occupancy and room rates at those hotel properties significantly affect the Company’s results because our fees are based upon room revenues or the number of rooms at owned and franchised hotels. The key industry standard for measuring hotel-operating performance is revenue per available room ("RevPAR"), which is calculated by multiplying the percentage of occupied rooms by the average daily room rate realized. Our variable overhead costs associated with the franchise system growth of our established brands have historically been less than the incremental royalty fees generated from new franchises. Accordingly, over the long-term, the continued growth of our franchise business should enable us to realize the benefits from the operating leverage in place and improve our operating results.

Previous wording

We are required by our franchise agreements to use the marketing and reservation fees we collect for system-wide marketing and reservation activities. These expenditures, which include advertising costs and the costs to maintain our central reservations systems, enhance awareness and consumer preference for our brands and deliver guests to our franchisees. Greater awareness and preference promote long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases the franchise fees earned by the Company. Additionally, the

Current wording

We are required by our franchise agreements to use the marketing and reservation fees we collect for system-wide marketing and reservation activities. These expenditures, which include advertising costs and the costs to maintain our central reservations systems, enhance awareness and consumer preference for our brands and deliver guests to our franchisees. Greater awareness and preference promote long-term growth in business delivery to our franchisees and increases the desirability of our brands to hotel owners and developers, which ultimately increases the franchise fees earned by the Company. Additionally, the Company's management agreements include cost reimbursements, which is primarily related to payroll costs at the managed hotels where the Company is the employer.

Previous wording

In addition to our hotel franchising business, we have also developed or acquired 18 open and operating hotels. We have strategically developed hotels to increase the presence of our newly introduced brands in the U.S., drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded. When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands. 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.

Current wording

In addition to our hotel franchising business, we have also developed or acquired 19 open and operating hotels. We have strategically developed hotels to increase the presence of our newly introduced brands in the U.S., drive greater guest satisfaction and brand preference, and ultimately increase the number of franchise agreements awarded. When developing hotels, we seek key markets with strong growth potential that will deliver strong operating performance and improve the recognition of our brands. 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

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 June 30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $34.3 million and $9.0 million, respectively. During the six months ended June 30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $72.2 million and $29.4 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 September 30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $19.9 million and $14.8 million, respectively. During the nine months ended September 30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $92.1 million and $44.2 million, respectively.

Previous wording

For the three months ended June 30, 2026, the Company recognized income before income taxes of $85.9 million, which is a $22.7 million decrease from the same period in the prior year. The decrease in income before income taxes was primarily due to a $20.5 million decrease in operating income.

Current wording

For the three months ended September 30, 2026, the Company recognized income before income taxes of $75.0 million, which is a $135.9 million decrease from the same period in the prior year. The decrease in income before income taxes was primarily due to a $35.9 million decrease in operating income and a $100.0 million decrease in gain from an acquisition of a joint venture, both of which were partially offset by a $4.0 million decrease in equity in net loss of affiliates.

Previous wording

Franchise and management fees increased $10.5 million primarily due to a $6.4 million increase in international royalty fees, a $2.8 million increase in revenues generated from programs, platforms, and services associated with the Company's franchise operations, and a $1.2 million increase in U.S. royalty fees, all of which were partially offset by a $1.4 million decrease in initial franchise fees.

Current wording

Franchise and management fees increased $9.9 million primarily due to a $5.4 million increase in U.S. royalty fees, a $5.2 million increase in revenues generated from programs, platforms, and services associated with the Company's franchise operations, and a $2.7 million increase in international royalty fees, all of which were partially offset by a $2.8 million decrease in initial franchise fees.

Previous wording

U.S. royalty fees increased $1.2 million to $122.5 million for the three months ended June 30, 2026 from $121.3 million for the three months ended June 30, 2025. The increase in U.S. royalty fees was primarily due to a 1.3% increase in U.S. system-wide RevPAR as a result of a 0.7% increase in average daily rates and a 40 basis points increase in occupancy during the current period, and a system-wide 11 basis points increase in the average royalty rate from 5.12% for the three months ended June 30, 2025 to 5.23% for the three months ended June 30, 2026, all of which were partially offset by a 0.3% decrease in open and operating U.S. hotel rooms. The U.S. system-wide RevPAR during the three months ended June 30, 2026 includes a FIFA World Cup-related impact of 60 basis points.

Current wording

U.S. royalty fees increased $5.4 million to $132.1 million for the three months ended September 30, 2026 from $126.7 million for the three months ended September 30, 2025. The increase in U.S. royalty fees was primarily due to a 3.8% increase in U.S. system-wide RevPAR as a result of a 1.0% increase in average daily rates and a 160 basis points increase in occupancy during the current period, and a system-wide 8 basis points increase in the average royalty rate from 5.15% for the three months ended September 30, 2025 to 5.23% for the three months ended September 30, 2026. The U.S. system-wide RevPAR during the three months ended September 30, 2026 includes a FIFA World Cup-related impact of 40 basis points.

Previous wording

(4)Includes Econo Lodge and Rodeway brands.

Current wording

(4)Includes Econo Lodge and Rodeway Inn brands.

Previous wording

International royalty fees increased $6.4 million to $14.2 million for the three months ended June 30, 2026 from $7.8 million for the three months ended June 30, 2025. The increase in international royalty fees was primarily due to an increase in the international franchise system size by 155 hotels (from 1,258 hotels as of June 30, 2025 to 1,413 hotels as of June 30, 2026) and 18,025 rooms (from 143,838 rooms as of June 30, 2025 to 161,863 rooms as of June 30, 2026), an increase in royalty fees as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada, and an increase in international RevPAR.

Current wording

International royalty fees increased $2.7 million to $17.3 million for the three months ended September 30, 2026 from $14.6 million for the three months ended September 30, 2025. The increase in international royalty fees was primarily due to an increase in the international franchise system size by 109 hotels (from 1,314 hotels as of September 30, 2025 to 1,423 hotels as of September 30, 2026) and 11,029 rooms (from 151,370 rooms as of September 30, 2025 to 162,399 rooms as of September 30, 2026) and an increase in international RevPAR.

Previous wording

Selling, general and administrative expenses increased $6.9 million primarily due to a $4.5 million increase in the provision for credit losses in accounts receivable, a $1.7 million increase in non-recurring operational restructuring and executive severance expense, a $1.4 million increase in expenses to operate Choice Hotels Canada during the three months ended June 30, 2026, and increases in other general costs to operate the franchising business, all of which were partially offset by a $2.0 million decrease in operating guarantee payments for a portfolio of managed hotels which was acquired in connection with the Company's purchase of Radisson Hotels Americas, and a $1.0 million decrease in costs related to the global enterprise resource planning ("ERP") system implementation.

Current wording

Selling, general and administrative expenses increased $1.7 million primarily due to a $4.7 million increase in the provision for credit losses in accounts receivable, a $4.5 million increase in non-recurring operational restructuring and executive severance expense, both of which were partially offset by a $2.4 million decrease in share-based compensation expense, a $1.5 million decrease in costs related to the global enterprise resource planning ("ERP") system implementation, and decreases in other general costs to operate the franchising business.

Previous wording

The Company’s effective income tax rates were 25.1% and 24.7% for the three months ended June 30, 2026 and 2025, respectively. The effective income tax rate for the three months ended June 30, 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 June 30, 2025 was 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 22.8% and 14.7% for the three months ended September 30, 2026 and 2025, respectively. The effective income tax rate for the three months ended September 30, 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, which were partially offset by the impact of federal income tax credits. The effective income tax rate for the three months ended September 30, 2025 was lower than the U.S. federal income tax rate of 21.0% primarily due to the impact of a $100.0 million non-taxable gain from an acquisition of a joint venture and federal income tax credits, which were partially offset by the impact of state income taxes.

Previous wording

Comparison of the Operating Results for the Six Months Ended June 30, 2026 and 2025

Current wording

Comparison of the Operating Results for the Nine Months Ended September 30, 2026 and 2025

Previous wording

For the six months ended June 30, 2026, the Company recognized income before income taxes of $116.2 million, which is a $52.2 million decrease from the same period in the prior year. The decrease in income before income taxes was primarily due to a $40.4 million decrease in operating income, a $7.3 million increase in equity in net loss of affiliates, and a $4.2 million increase in interest expense.

Current wording

For the nine months ended September 30, 2026, the Company recognized income before income taxes of $191.2 million, which is a $188.1 million decrease from the same period in the prior year. The decrease in income before income taxes was primarily due to a $76.3 million decrease in operating income, a $100.0 million decrease in gain from an acquisition of a joint venture, a $6.3 million increase in interest expense, and a $3.3 million increase in equity in net loss of affiliates.

Previous wording

Operating income decreased $20.5 million primarily due to a $25.3 million increase in the net reimbursable deficit from franchised and managed properties, a $6.9 million increase in selling, general and administrative expenses, and a $3.4 million increase in depreciation and amortization, all of which were partially offset by a $10.5 million increase in franchise and management fees.

Current wording

Operating income decreased $76.3 million primarily due to a $47.9 million increase in the net reimbursable deficit from franchised and managed properties, a $24.3 million increase in contract termination costs, a $12.4 million increase in selling, general and administrative expenses, a $7.6 million increase in depreciation and amortization, and a $6.0 million increase in impairment of long-lived assets, all of which were partially offset by a $24.9 million increase in franchise and management fees.

Previous wording

Franchise and management fees increased $15.0 million primarily due to an $11.6 million increase in international royalty fees and a $7.3 million increase in revenues generated from programs, platforms, and services associated with the Company's franchise operations, all of which were partially offset by a $2.9 million decrease in initial franchise fees and a $2.7 million decrease in U.S. royalty fees.

Current wording

Franchise and management fees increased $24.9 million primarily due to a $14.3 million increase in international royalty fees, a $12.3 million increase in revenues generated from programs, platforms, and services associated with the Company's franchise operations, and a $2.8 million increase in U.S. royalty fees, all of which were partially offset by a $5.8 million decrease in initial franchise fees.

Previous wording

U.S. royalty fees decreased $2.7 million to $213.1 million for the six months ended June 30, 2026 from $215.8 million for the six months ended June 30, 2025. The decrease in U.S. royalty fees was primarily due to a 0.2% decrease in U.S. system-wide RevPAR as a result of a 0.5% decrease in average daily rates and a 20 basis points increase in occupancy, and a 0.3% decrease in open and operating U.S. hotel rooms, all of which were partially offset by a system-wide 11 basis points increase in the average royalty rate from 5.11% for the six months ended June 30, 2025 to 5.22% for the six months ended June 30, 2026. The U.S. system-wide RevPAR during the six months ended June 30, 2025 includes a hurricane-related impact of 212 basis points.

Current wording

U.S. royalty fees increased $2.8 million to $345.3 million for the nine months ended September 30, 2026 from $342.5 million for the nine months ended September 30, 2025. The increase in U.S. royalty fees was primarily due to a 1.3% increase in U.S. system-wide RevPAR as a result of a 0.1% increase in average daily rates and a 60 basis points increase in occupancy during the current period, and a system-wide 10 basis points increase in the average royalty rate from 5.12% for the nine months ended September 30, 2025 to 5.22% for the nine months ended September 30, 2026.

Previous wording

(2)Includes Clarion, Comfort Inn, Country Inn & Suites, Park Inn, 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

(4)Includes Econo Lodge and Rodeway brands.

Current wording

(4)Includes Econo Lodge and Rodeway Inn brands.

Previous wording

International royalty fees increased $11.6 million to $26.0 million for the six months ended June 30, 2026 from $14.4 million for the six months ended June 30, 2025. The increase in international royalty fees was primarily due to an increase in the size of the international franchise system, an increase in royalty fees as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada, and an increase in international RevPAR.

Current wording

International royalty fees increased $14.3 million to $43.3 million for the nine months ended September 30, 2026 from $29.0 million for the nine months ended September 30, 2025. The increase in international royalty fees was primarily due to an increase in the size of the international franchise system, an increase in royalty fees as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada, and an increase in international RevPAR.

Previous wording

Selling, general and administrative expenses increased $10.7 million primarily due to an $8.9 million increase in the provision for credit losses in accounts receivable, a $2.5 million increase in expenses to operate Choice Hotels Canada during the six months ended June 30, 2026, and increases in other general costs to operate the franchising business, all of which were partially offset by a $2.0 million decrease in operating guarantee payments for a portfolio of managed hotels which was acquired in connection with the Company's purchase of Radisson Hotels Americas, a $1.8 million decrease in non-recurring operational restructuring and executive severance expense, and a $1.7 million decrease in costs related to the global ERP system implementation.

Current wording

Selling, general and administrative expenses increased $12.4 million primarily due to a $13.6 million increase in the provision for credit losses in accounts receivable, a $2.5 million increase in expenses to operate Choice Hotels Canada during the nine months ended September 30, 2026, a $2.8 million increase in non-recurring operational restructuring and executive severance expense, and increases in other general costs to operate the franchising business, all of which were partially offset by a $5.3 million decrease in share-based compensation expense, a $3.2 million decrease in costs related to the global ERP system implementation, and a $2.0 million decrease in operating guarantee payments for a portfolio of managed hotels which was acquired in connection with the Company's purchase of Radisson Hotels Americas.

Previous wording

Depreciation and amortization expense increased $3.4 million primarily due to a $2.0 million increase in amortization expense for intangible assets as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada in July 2025 and a $1.1 million increase in depreciation expense related to the opening of five owned hotels.

Current wording

Depreciation and amortization expense increased $7.6 million primarily due to a $4.1 million increase in amortization expense for intangible assets as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada in July 2025 and a $3.4 million increase in depreciation expense related to the opening of seven owned hotels.

Previous wording

Equity in net loss of affiliates increased $7.3 million primarily due to a $5.4 million net decrease in the equity earnings from our unconsolidated affiliates and a $1.8 million decrease in the equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada in July 2025.

Current wording

Equity in net loss of affiliates increased $3.3 million primarily due to a loss on sale of $3.8 million as a result of the Company selling its 50% equity interest in CS Hotel West Orange, LLC to the remaining member during the nine months ended September 30, 2026, a $4.2 million net decrease in the equity earnings from our unconsolidated affiliates, and a $1.8 million decrease in the equity earnings as a result of acquiring the remaining 50% equity interest in Choice Hotels Canada in July 2025, all of which were partially offset by the recognition of $6.5 million of non-recurring joint venture formation transaction costs associated with the Company entering into a new joint venture agreement, and a new loan facility, to develop and operate Everhome Suites in certain strategic markets during the nine months ended September 30, 2025.

Previous wording

Interest expense increased $4.2 million primarily due to increased borrowings. Refer to the discussion in the Liquidity and Capital Resources section in MD&A for more information.

Current wording

Interest expense increased $6.3 million primarily due to increased borrowings. Refer to the discussion in the Liquidity and Capital Resources section in MD&A for more information.

Previous wording

The Company's effective income tax rates were 27.2% and 25.0% for the six months ended June 30, 2026 and 2025, respectively. The effective income tax rate for the six months ended June 30, 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 six months ended June 30, 2025 was 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 19.3% for the nine months ended September 30, 2026 and 2025, respectively. The effective income tax rate for the nine months ended September 30, 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, which were partially offset by the impact of federal income tax credits. The effective income tax rate for the nine months ended September 30, 2025 was lower than the U.S. federal income tax rate of 21.0% primarily due to the impact of a $100.0 million non-taxable gain from an acquisition of a joint venture and federal income tax credits, which were partially offset by the impact of state income taxes.

Previous wording

As of June 30, 2026, the Company's primary sources of liquidity consisted of $475.0 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility. As of June 30, 2026, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance. The Company believes that its cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets will provide sufficient liquidity to meet the expected future operating, investing, and financing needs of the business.

Current wording

As of September 30, 2026, the Company's primary sources of liquidity consisted of $927.5 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility. As of September 30, 2026, the Company was in compliance with all of its financial covenants under its credit agreements and the Company expects to remain in such compliance. The Company believes that its cash on hand, available borrowing capacity under the senior unsecured revolving credit facility, cash flows from operations, and access to additional capital in the debt markets will provide sufficient liquidity to meet the expected future operating, investing, and financing needs of the business.

Previous wording

Our board of directors authorized a program which permits us to offer investment and guaranty support to qualified franchisees, and to acquire or develop and then resell hotels to incentivize franchise development of our brands in strategic markets. We primarily engage in these investment and guaranty support activities to encourage acceleration of the growth of our Cambria Hotels and Everhome Suites brands. With respect to these activities, the Company had approximately $653.6 million of investments in the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of June 30, 2026. The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $1.2 billion at any point in time based on the current board of directors' authorization. The deployment and annual pace of future investment and guaranty support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development, and the hotel lending environment. The Company expects the Cambria Hotels and Everhome Suites brands development investments to continue to decline in future periods, as both brands approach scale milestones.

Current wording

Our board of directors authorized a program which permits us to offer investment and guaranty support to qualified franchisees, and to acquire or develop and then resell hotels to incentivize franchise development of our brands in strategic markets. We primarily engage in these investment and guaranty support activities to encourage acceleration of the growth of our Cambria Hotels and Everhome Suites brands. With respect to these activities, the Company had approximately $652.0 million of investments in the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of September 30, 2026. The Company is generally targeting to recycle these investments within a five year period, and expects our outstanding investments to not exceed $1.2 billion at any point in time based on the current board of directors' authorization. The deployment and annual pace of future investment and guaranty support activities will depend upon market and other conditions, including among others, our franchise sales results, the environment for new construction hotel development, and the hotel lending environment. The Company expects the Cambria Hotels and Everhome Suites brands development investments to continue to decline in future periods, as both brands approach scale milestones.

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. As of June 30, 2026, the Company had 1.8 million shares remaining under the current share repurchase authorization. The projected 2026 annual dividend rate is $1.15 per share or approximately $52.3 million in aggregate dividend payments. Future dividends are subject to 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. As of September 30, 2026, the Company had 1.3 million shares remaining under the current share repurchase authorization. The projected 2026 annual dividend rate is $1.15 per share or approximately $52.3 million in aggregate dividend payments. Future dividends are subject to declarations by our board of directors.

Previous wording

During the six months ended June 30, 2026 and 2025, the net cash provided by operating activities was $67.4 million and $116.1 million, respectively. Our operating cash flows decreased $48.7 million primarily due to an increase in franchise agreement acquisition cost payments and an increase in the net reimbursable deficit from franchised and managed properties, all of which were partially offset by a decrease in deferred income taxes and the timing of working capital items.

Current wording

During the nine months ended September 30, 2026 and 2025, the net cash provided by operating activities was $121.9 million and $184.8 million, respectively. Our operating cash flows decreased $62.8 million primarily due to an increase in contract termination costs, an increase in franchise agreement acquisition cost payments, and an increase in the net reimbursable deficit from franchised and managed properties, all of which were partially offset by a decrease in deferred income taxes and the timing of working capital items.

Previous 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 six months ended June 30, 2026 and 2025, the Company's net franchise agreement acquisition costs were $72.2 million and $41.5 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 nine months ended September 30, 2026 and 2025, the Company's net franchise agreement acquisition costs were $104.0 million and $62.4 million, respectively.

Previous wording

The Company’s franchise agreements require the payment of marketing and reservation fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. Additionally, the Company's management agreements include cost reimbursements, primarily related to the payroll costs at the managed hotels where the Company is the employer. These activities are reflected in revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties. During the six months ended June 30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $72.2 million and $29.4 million, respectively.

Current wording

The Company’s franchise agreements require the payment of marketing and reservation fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. Additionally, the Company's management agreements include cost reimbursements, primarily related to the payroll costs at the managed hotels where the Company is the employer. These activities are reflected in revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties. During the nine months ended September 30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $92.1 million and $44.2 million, respectively.

Previous wording

The net cash used in investing activities was $34.0 million and $95.1 million for the six months ended June 30, 2026 and 2025, respectively.

Current wording

The net cash used in investing activities was $63.1 million and $177.9 million for the nine months ended September 30, 2026 and 2025, respectively.

Previous wording

During the six months ended June 30, 2026 and 2025, investments in owned hotel properties totaled $27.3 million and $65.7 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 six months ended June 30, 2026 and 2025, investments in other property and equipment totaled $17.9 million and $18.3 million, respectively. These investments primarily related to leasehold improvements, office equipment, and capitalized software.

Current wording

During the nine months ended September 30, 2026 and 2025, investments in owned hotel properties totaled $37.5 million and $85.3 million, respectively. These investments related to the ongoing hotel development efforts to support the continued growth of the Cambria Hotels and Everhome Suites brands. During the nine months ended September 30, 2026 and 2025, investments in other property and equipment totaled $25.6 million and $26.9 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 to develop and operate Cambria Hotels and Everhome Suites branded-hotels in strategic markets. During the six months ended June 30, 2026 and 2025, the Company invested $10.6 million and $9.4 million, respectively, to support these efforts.

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 nine months ended September 30, 2026 and 2025, the Company invested $20.0 million and $90.0 million, respectively, to support these efforts. During the nine months ended September 30, 2025, the Company received distributions from these affiliates totaling $44.6 million. During the nine months ended September 30, 2025, the Company received net cash proceeds of $52.0 million from the sale of four wholly-owned Everhome Suites under construction to a joint venture. Refer to Note 4 for more information.

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 six months ended June 30, 2026, the Company issued $1.9 million in notes receivable loans and received $24.6 million in notes receivable loan repayments. During the six months ended June 30, 2025, the Company issued $3.4 million in notes receivable loans and received $2.8 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 nine months ended September 30, 2026, the Company issued $3.3 million in notes receivable loans and received $24.6 million in notes receivable loan repayments. During the nine months ended September 30, 2025, the Company issued $6.4 million in notes receivable loans and received $3.0 million in notes receivable loan repayments.

Previous wording

On June 28, 2024, the Company entered into a Second Amended and Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"). The Restated Credit Agreement increased the commitments under the Revolver to $1 billion and extended the maturity date of the Revolver to June 28, 2029, subject to optional one-year extensions that can be requested by the Company prior to each of the third, fourth, and fifth anniversaries of the closing date of the Restated Credit Agreement.

Current wording

On June 28, 2024, the Company entered into a Second Amended and Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"). The Restated Credit Agreement increased the commitments under the senior unsecured revolving credit facility (the "Revolver") to $1 billion and extended the maturity date of the Revolver to June 28, 2029, subject to optional one-year extensions that can be requested by the Company prior to each of the third, fourth, and fifth anniversaries of the closing date of the Restated Credit Agreement.

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 June 30, 2026, the Company maintained a total leverage ratio of 3.02x, including outstanding debt of approximately $564.8 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 September 30, 2026, the Company maintained a total leverage ratio of 3.26x, including outstanding debt of approximately $239.9 million on the senior unsecured revolving credit facility. The Company was in compliance with all financial covenants under the Restated Credit Agreement.

Previous wording

During the six months ended June 30, 2026, the Company paid $26.3 million in cash dividends. Based on the current per share dividend amount and our outstanding share count, the aggregate annual cash dividends for the year ended December 31, 2026 is projected to be $1.15 per share or approximately $52.3 million in aggregate dividend payments.

Current wording

During the nine months ended September 30, 2026, the Company paid $39.3 million in cash dividends. Based on the current per share dividend amount and our outstanding share count, the aggregate annual cash dividends for the year ended December 31, 2026 is projected to be $1.15 per share or approximately $52.3 million in aggregate dividend payments.

Previous wording

The Company has a share repurchase program. Treasury stock activity is recorded at cost in the consolidated balance sheets. During the six months ended June 30, 2026, the Company repurchased 0.9 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $98.2 million. As of June 30, 2026, the Company had 1.8 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 nine months ended September 30, 2026, the Company repurchased 1.4 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $151.1 million. As of September 30, 2026, the Company had 1.3 million shares remaining under the current share repurchase authorization.