CHH 10-K & 10-Q changes, risk factors and insider trading

•changes in exchange rates or economic weakness in the UnitedU.S. States (affecting domestic travel) and internationally.international travel.

Legal or governmental proceedings brought by or on behalf of franchisees, third-party owners of managed properties, employees or customers may adversely affect our financial results. We cannot predict with certainty the cost of defense, the cost of prosecution or the ultimate outcome of litigation filed by or against us, including, remedies or damage awards. ThisSuch litigation may involve, but is not limited to, actions or negligence by franchisees outside of our control. Our business along with the hospitality industry generally, faces risks that could cause damage to our reputation and to the value of our hotel brands, along with litigation-related fees and costs, in connection with claims related to purported incidents of human trafficking at hotel facilities. Our franchise agreements provide that we are not liable for the actions of our franchisees; however, there is no guarantee that we would be insulated from liability in all cases. Moreover, we may be involved in matters such as class actions, administrative proceedings, employment and personal injury claims, and litigation with or involving our relationship with franchisees and the legal distinction between our franchisees and us for employment law or general liability purposes, for which the cost and other effects of defense, settlements or judgments may require us to make disclosures or take other actions that may affect perceptions of our brand and products and adversely affect our business results.

We have franchised hotels open and operating in 4650 countries and territories outside of the United States.U.S. We also have,have made, and may in the future make, investments in foreign hotel franchisors. International operations generally are subject to greater economic, politicalpolitical, and other risks than those affecting Unitedthe StatesU.S. operations. In certain countries, these risks include the risk of war, conflict or civil unrest, political instability, disruptions caused by terrorist activities or otherwise, expropriation and nationalization.

Moreover, our international operations are subject to compliance with anti-corruption and anti-bribery laws and other foreign laws and regulations. While we have policies in place to enforce and monitor internal and external compliance with these laws, we cannot guarantee that our policies will always protect us from reckless or criminal acts committed by our employees, franchisees or third-parties with whom we work. The United StatesU.S. also imposes sanctions that restrict U.S. companies from engaging in business activities with certain persons or entities, foreign countries, or foreign governments that it determines are adverse to U.S. foreign policy interests. From time to time, we may face audits or investigations by one or more domesticU.S. or foreign governmental agencies relating to our international business activities, compliance with which could be costly and time-consuming, and could divert our management and key personnel from our business operations. Further, investigations by regulatory agencies have been increasing and, therefore, it may become increasingly costly and time-consuming to maintain proper internal controls. If we are found liable for violations of anti-corruption or sanctions laws, we could incur criminal or civil liabilities which could have a material adverse effect on our results of operations, our financial condition and our reputation. Furthermore, the creation of new restrictions in these areas could increase our cost of operations, reduce our profits, or cause us to forgo development opportunities that would otherwise contribute to our profitability.

Many factors influence our reputation and the value of our hotel brands including the perception held by guests, our franchisees, our other key stakeholders and the communities in which we do business. Our business faces increasing scrutiny related to environmental, socialsocial, and governance activitiesmatters, and as a result we also face the risk of liability, boycotts, and damage to our reputation and the value of our hotel brands for any of our initiatives related to these matters or if we (or our franchisees) fail to act responsibly or comply with regulatory requirements in a number of areas, such as safety and security, responsible tourism, environmental stewardship, supply chain management, climate change, human trafficking, diversity, human rights, philanthropy and support for local communities.

•our ability to attract and retain qualified domesticU.S. and international franchisees.

We franchise hotels to independent third parties pursuant to franchise agreements. These agreements may be terminated, renegotiated or expire but typically have an initial term of between ten10 and thirty30 years. These agreements also typically contain provisions permitting either party to terminate the franchise agreement upon designated anniversaries of the agreement under certain circumstances and depending on the particular hotel brand that is licensed to the franchisee. While our franchise agreements provide for liquidated damages to be paid to us by franchisees whose agreements have been terminated as the result of a violation of the provisions of the agreement, these damage amounts are typically less than the fees we would have received if the terminated franchisee fulfilled its contractual obligations. In addition, there can be no assurance that we will be able to replace expired or terminated franchise agreements, or that the provisions of renegotiated or new agreements will be as favorable as the provisions that existed before such expiration, replacement or renegotiation. Further, ownership of a significant number of franchise contracts by one or a small group of franchisees, particularly if concentrated within a particular brand, may compound risks of termination since a large number of properties could be terminated at once, decreasing the scope and representation of an impacted brand. As a result, our revenues could be negatively impacted by any of these events.

The Company is obligated to use the marketing and reservation system fees it collects from the current franchisees comprising its various hotel brands to provide system services, such as marketing and reservations services, that are appropriate to fulfill our obligations under the Company’s franchise agreements. In discharging our obligation to provide sufficient and appropriate system services, the Company has the right to expend funds in an amount reasonably necessary to ensure the provision of such services, regardless of whether or not such amount is currently available to the Company for reimbursement.

We are subject to the risks relating to the acquisition of new brands or lines of business.brands.

While our business model is primarily an asset-light, franchising focused business, there are instances where, typically to support the growth of new hotel brands, we may acquire existing operating hotels and acquire real estate for the purpose of developing new hotels. Of the open hotels in our system, we currently own eight10 Cambria hotels, onefour Everhome Suites hotel, one Radisson RED hotel, one Radisson Blu hotel, and one Country Inn & Suites hotel. We are also developing Cambria hotels and Everhome Suites hotels on a standalone basis and with joint venture partners. As a result, fluctuations in fair market values could require us to record a significant non-cash impairment charge in our financial statements in a particular period which may negatively impact our results of operations and shareholders' equity.

We believe that our trademarks and other intellectual property are fundamental to our brands and our franchising business. We generate, maintain, license and enforce a substantial portfolio of trademarks and other intellectual property rights. We enforce our intellectual property rights to protect the value of our trademarks, our development activities, to protect our good name, to promote our brand name recognition, to enhance our competitiveness and to otherwise support our business goals and objectives. We rely on trademark laws to protect our proprietary rights. Monitoring the unauthorized use of our intellectual property is difficult. Litigation has been and may continue to be necessary to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Litigation of this type could result in substantial costs and diversion of resources, may result in counterclaims or other claims against us and could significantly harm our results of operations. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States.U.S. From time to time, we apply to have certain trademarks registered. There is no guarantee that such trademark registrations will be granted. We cannot assure you that all of the steps we have taken to protect our trademarks in the United StatesU.S. and foreign countries will be adequate to prevent imitation of our trademarks by others. The unauthorized reproduction of our trademarks could diminish the value of our brand and its market acceptance, competitive advantages, or goodwill, which could adversely affect our business.

The hospitality industry is under increasing attack by cyber-criminals. Because of the scope and complexity of our information technology systems and those of our franchisees, our reliance on third-party vendors, and the nature of the cyber threat landscape, our systems may be vulnerable to intrusions, disruptions, and other significant malicious cyber-enabled incidents, including through viruses, malware, ransomware, denial of service attacks, phishing, hacking, deepfake or malicious social engineering schemes, and similar attacks by criminal actors, foreign governments, activists, and terrorists. Cybercriminals have increasingly demonstrated advanced capabilities, such as use of zero-day vulnerabilities, and rapid integration of new technology such as generative artificial intelligenceAI and machine learning technologies. Our systems may also be vulnerable to human error, negligence, fraud, or other misuse. These attacks can be deliberate attacks or unintentional events that could result in theft, unauthorized access, unauthorized alteration, loss, fraudulent or unlawful use of sensitive information or cause interruptions, outages, or delays in our business, loss of data, or render us unable to operate our business. Accordingly, an extended interruption in any of our systems or the systems of our franchisees could significantly curtail, directly and indirectly, our ability to conduct our business and generate revenue. Like most large multinational companies, we have experienced, and expect to continue to be subject to, cybersecurity threats and attempts to disrupt or gain access to our systems and those operated by our franchisees, and attempts to affect the confidentiality, availability, and integrity of our data, none of which are known to be material to the Company to date.

Our business requires the collection and retention of large volumes of sensitive data, including credit card numbers and other personal information of our employees, franchisees and guests as such information is entered into, processed, summarized, and reported by the various information systems we use. The integrity and protection of that franchisee, guest, employee, and company data is critical to us and our reputation. Our customers have a high expectation that we will adequately protect their personal information, and the failure to do so could result in a material adverse impact to our reputation, operations, and financial condition. Further, the regulatory environment surrounding information security and privacy is increasingly demanding, both in the United StatesU.S. and in the international jurisdictions in which we operate. If the Company fails to maintain compliance with the various United StatesU.S. and international laws and regulations applicable to the protection of such data or with the Payment Card Industry Data Security Standards, the Company’s ability to process such data could be adversely impacted and expose the Company to fines, litigation or other expenses or sanctions.

We also rely on a variety of direct marketing techniques, including telemarketing, SMS, email, and postal mailings. Any future restrictions in laws such as Telemarketing Sales Rule, Controlling the Assault of Non-Solicited Pornography & Marketing Act (CAN-SPAM Act), and various United StatesU.S. state laws, or new federal laws regarding marketing and solicitation or international data protection laws that govern these activities could adversely affect the continuing effectiveness of telemarketing, SMS, email, and postal mailing techniques and could force changes in our marketing strategies. If this occurs, we may not be able to develop adequate alternative marketing strategies, which could impact the amount and timing of our revenues. We also obtain access to potential customers from travel service providers and other companies with whom we have substantial relationships and market to some individuals on these lists directly or by including our marketing message in the other company’s marketing materials. If access to these lists was prohibited or otherwise restricted, our ability to develop new customers and introduce them to our products could be impaired.

The determination of our worldwide provision for income taxes and other tax liabilities requires estimation and significant judgment and there are many transactions and calculations where the ultimate tax determination is uncertain. Like many other multinational corporations, we are subject to tax in multiple United StatesU.S. and foreign tax jurisdictions and have structured our operations to reduce our effective tax rate. Our determination of our tax liability is always subject to audit and review by applicable domesticU.S. and foreign tax authorities. Any adverse outcome of any such audit or review could have a negative effect on our business, operating results and financial condition. The ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

The concentration of share ownership by our directors and affiliates allows them to substantially influence the outcome of matters requiring shareholder approval. As a result, acting together, they may be able to control or substantially influence the outcome of matters requiring approval by our shareholders, including the elections of directors and the approval of significant corporate transactions, such as mergers, acquisitions, and equity compensation plans. In addition, if directors and affiliates are acquiring and holding more shares, our share repurchase program may further concentrate our share ownership in our directors and affiliates.affiliates and increase their influence on such matters.

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 4650 countries and territories. As of December 31, 2024,2025, we had 7,5867,575 hotels with 653,810656,825 rooms open and operating, and 964825 hotels with 97,32577,862 rooms under construction, awaiting conversion or approved for development, or committed to future franchise development on outstanding master development agreements (collectively, "pipeline") in our global system. Our brand names include Radisson Blu®, Park Plaza®, Cambria® Hotels, Ascend Hotel Collection®, Radisson RED®, Radisson Individuals®, Radisson®, Radisson Collection®, Clarion®, Clarion Pointe™, Comfort Inn®, Comfort Suites®, Country Inn & Suites® by Radisson, Radisson Inn & SuitesSM, 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 & SuitesSM, Econo Lodge®, and Rodeway Inn®.

The hotel franchising business represents the Company's primary operations. The Company's domesticU.S. operations are conducted through direct franchising relationships, the ownership of 1217 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.U.S. Therefore, our description of our business is primarily focused on the domesticU.S. operations, which encompasses the United States.operations.

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.contracts. 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 franchisees and guests.

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 effectiveaverage royalty raterates 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.

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.

Profitable Growth - Our success is dependent on improving the performance of our hotels, increasing the size of our system by selling additional hotel franchises with a focus on revenue-intense chain scales and markets, improving our effective royalty rate,rates, expanding our qualified vendor and partnership platform programs and maintaining a disciplined cost structure. We attempt to improve our revenues and overall profitability by providing a variety of products and services designed to increase business delivery and/or reduce operating and development costs. These products and services include national marketing campaigns, a guest loyalty program, a central reservation system, property and yield management programs and systems, revenue management services, quality assurance standards, and qualified vendor relationships and partnerships with companies that provide products and services to our franchisees and guests. We believe that healthy brands, which deliver a compelling return on investment, will enable us to sell additional hotel franchises and raise royalty rates. We have multiple brands that meet the needs of many different types of guests, and can be developed at various price points and applied to both new and existing hotels. This ensures that we have brands suitable for creating growth in a variety of market conditions. Improving the performance of the hotels in our system, strategically growing the system through additional franchise sales, and improving franchise agreement pricing while maintaining a disciplined cost structure are the keys to profitable growth.

In addition to our hotel franchising business, we have also developed or acquired 1217 open and operating hotels. We intend to continue tohave strategically developdeveloped hotels to increase the presence of our newly introduced brands in the United States,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.

A key component of our strategy for owned hotels is to maximize revenues and manage costs. We strive to optimize revenues by focusing on revenue management, increasing guest loyalty, expanding brand awareness with targeted customer groupings, and providing superior guest service. Other than four owned hotels, we currently do not manage our owned hotels but utilize the services of third-party hotel management companies that provide their own employees. We manage costs by setting performance goals for our hotel management companies and optimizing distribution channels.

The Company also allocates capital to financing, investmentinvestment, and guaranty support to incentivize franchise development for certain brands in strategic markets. The timing and amount of these investments are subject to market and other conditions.

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

Our discussion of our results of operations excludes reimbursable franchise marketing and reservation system revenues and expenses and the management agreement cost reimbursements and expenses included in the Company's otherrevenue revenuesfor reimbursable costs from franchised and managed properties and otherreimbursable 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 otherrevenue revenuesfor reimbursable costs from franchised and othermanaged properties and reimbursable expenses from franchised and managed properties from the analysis of its results of operations.

Due to the seasonal nature of the Company’s hotel franchising and management business and the multi-year investments required to support the franchise operations, quarterly and/or annual surpluses or deficits may be generated. During the years ended December 31, 2025, 2024, and 2023, andreimbursable 2022, other revenuesexpenses from franchised and managed properties exceeded otherrevenue expensesfor reimbursable costs from franchised and managed properties by $36.1$47.1 million, $1.8$18.2 million, and $49.7$32.8 million, respectively.

For the year ended December 31, 2024,2025, the Company recognized income before income taxes of $395.6$456.9 million, which is a $58.7$61.2 million increase from the year ended December 31, 2023.2024. The increase in income before income taxes was primarily due to a $100.0 million gain from an $88.7acquisition of a joint venture in 2025 and an $8.6 million increase in operatingother income(gains) andlosses, anet, $9.5 million increase in the equity in net gain of affiliates, bothall of which were partially offset by a $23.4 million increase in interest expense, a $12.3$26.7 million decrease in otherthe equity in net loss (gain), of affiliates and a $4.7$15.4 million decrease in lossoperating (gain) on extinguishment of debt.income.

Operating income increaseddecreased $88.7$15.4 million primarily due to a $34.4$29.0 million increase in the net surplusreimbursable generated from other revenues and other expensesdeficit from franchised and managed properties, a $15.8$16.6 million increase in selling, general and administrative expenses, and a $7.8 million increase in depreciation and amortization expense, all of which were partially offset by a $14.3 million increase in partnership services and fees, an $8.2 million increase in other revenues, and a $38.5$12.5 million decrease in business combination, diligence and transition costs.

Royalty, LicensingFranchise and Management Fees

DomesticU.S. royalty fees decreased $3.4$14.9 million to $439.8 million for the year ended December 31, 2025 from $454.7 million for the year ended December 31, 2024 from $458.1 million for the year ended December 31, 2023.2024. The decrease in domesticU.S. royalty fees was primarily due to a 1.2%3.0% domesticdecrease in U.S. system-wide RevPAR decrease as a result of a 0.3%1.6% decrease in average daily rates and aan 5080 basis points decrease in occupancy, and a 2.9% decrease in open and operating U.S. hotel rooms, all of which were partially offset by a 3.0% increase in open and operating domestic hotel rooms and a system-wide 78 basis points increase in the effectiveaverage royalty rate from 4.99% for the year ended December 31, 2023 to 5.06% for the year ended December 31, 2024.2024 to 5.14% for the year ended December 31, 2025.

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

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

A summary of the domesticU.S. hotels and rooms by brand in our franchise system as of December 31, 20242025 and 20232024 was as follows:

International royalty fees increased $0.9$11.5 million to $41.3 million for the year ended December 31, 2025 from $29.8 million for the year ended December 31, 2024 from $28.9 million for the year ended December 31, 2023.2024. The increase in international royalty fees was primarily due to an increase in the size of the international franchise system size by 36130 hotels (from 1,222 hotels as of December 31, 2023 to 1,258 hotels as of December 31, 2024) andto 6,0501,388 rooms (from 136,021 roomshotels as of December 31, 20232025) toand 17,775 rooms (from 142,071 rooms as of December 31, 2024 to 159,846 rooms as of December 31, 2025), an increase in royalty fees as a result of the acquisition of the remaining 50% equity interest in Choice Hotels Canada, and an increase in international RevPAR.

Initial Franchise and Management Fees

InitialU.S. franchiseroyalty fees revenue decreased $2.2$3.4 million to $25.6$454.7 million for the year ended December 31, 2024 from $27.8$458.1 million for the year ended December 31, 2023. The decrease in U.S. royalty fees was primarily due to a lower1.2% numberdecrease in U.S. system-wide RevPAR as a result of domestica franchise0.3% agreementdecrease terminationsin average daily rates and a 50 basis points decrease in occupancy, all of which were partially offset by a 3.0% increase in open and operating U.S. hotel rooms and a system-wide 7 basis points increase in the currentaverage royalty rate from 4.99% for the year asended comparedDecember 31, 2023 to 5.06% for the prioryear year.ended December 31, 2024.

We are primarily a hotel franchisor operating in 49 states, the District of Columbia, and 5149 countries and territories. As of MarchJune 31,30, 2026, we had 7,5887,608 hotels with 658,348661,089 rooms open and operating, and 830841 hotels with 77,77377,275 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 Inn®, Comfort Suites®, Country Inn & Suites® by Radisson, Sleep Inn®, Quality®, Park Inn® by Radisson®, Everhome Suites®, WoodSpring Suites®, MainStay Suites®, Suburban Studios™®, Radisson Blu®, Park Plaza®, Cambria® Hotels, Ascend Collection®, Radisson RED®, Radisson Individuals®, Radisson®, Radisson Collection®, Radisson Inn & SuitesSM,Suites™, Econo Lodge®, and Rodeway Inn®.

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 MarchJune 31,30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $37.9$34.3 million and $20.4$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.

Comparison of the Operating Results for the Three Months Ended MarchJune 31,30, 2026 and 2025

For the three months ended MarchJune 31,30, 2026, the Company recognized income before income taxes of $30.3$85.9 million, which is a $29.5$22.7 million decrease from the same period in the prior year. The decrease in income before income taxes was primarily due to a $19.9$20.5 million decrease in operating income, a $6.2 million increase in equity in net loss of affiliates, and a $2.7 million increase in interest expense.income.

Franchise and management fees increased $4.6$10.5 million primarily due to a $5.2$6.4 million increase in international royalty fees andfees, a $4.5$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 $4.0 million decrease in U.S. royalty fees and a $1.5$1.4 million decrease in initial franchise fees.

U.S. royalty fees decreasedincreased $4.0$1.2 million to $90.6$122.5 million for the three months ended MarchJune 31,30, 2026 from $94.6$121.3 million for the three months ended MarchJune 31,30, 2025. The decreaseincrease in U.S. royalty fees was primarily due to a 2.3%1.3% decreaseincrease in U.S. system-wide RevPAR as a result of a 2.1%0.7% decreaseincrease in average daily rates and a 1040 basis points decreaseincrease in occupancy during the current period, which was partially offset byand a system-wide 11 basis points increase in the average royalty rate from 5.11%5.12% for the three months ended MarchJune 31,30, 2025 to 5.22%5.23% for the three months ended MarchJune 31,30, 2026.2026, 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 MarchJune 31,30, 20252026 includes a hurricane-relatedFIFA World Cup-related impact of 41060 basis points.

A summary of the U.S. hotels and rooms by brand in our franchise system as of MarchJune 31,30, 2026 and 2025 was as follows:

International royalty fees increased $5.2$6.4 million to $11.8$14.2 million for the three months ended MarchJune 31,30, 2026 from $6.6$7.8 million for the three months ended MarchJune 31,30, 2025. The increase in international royalty fees was primarily due to an increase in the international franchise system size by 152155 hotels (from 1,2481,258 hotels as of MarchJune 31,30, 2025 to 1,4001,413 hotels as of MarchJune 31,30, 2026) and 18,48118,025 rooms (from 141,986143,838 rooms as of MarchJune 31,30, 2025 to 160,467161,863 rooms as of MarchJune 31,30, 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.

Depreciation and amortization expense increased $3.1$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 $1.0$1.1 million increase in depreciation expense related to the opening of fourfive owned hotels during the third and fourth quarters of 2025.hotels.

Equity in net loss of affiliates increased $6.2$7.3 million primarily due to a $5.8$5.4 million net decrease in the equity earnings from our unconsolidated affiliates and a $0.9$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.

The Company’sCompany's effective income tax rates were 33.0%27.2% and 25.5%25.0% for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The effective income tax rate for the threesix months ended MarchJune 31,30, 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 threesix months ended MarchJune 31,30, 2025 was higher than the U.S. federal income tax rate of 21.0% primarily due to the impact of state income taxes.

As of MarchJune 31,30, 2026, the Company's primary sources of liquidity consisted of $474.0$475.0 million in cash and cash equivalents and available borrowing capacity under the senior unsecured revolving credit facility. As of MarchJune 31,30, 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.

Our board of directors authorized a program which permits us to offer investment and guaranty support to qualified franchisees, and to acquire or develop and then resell hotels to incentivize franchise development of our brands in strategic markets. We primarily engage in these investment and guaranty support activities to encourage acceleration of the growth of our Cambria Hotels and Everhome Suites brands. With respect to these activities, the Company had approximately $642.5$653.6 million of investments in the Cambria Hotels and Everhome Suites brands reflected in the consolidated balance sheet as of MarchJune 31,30, 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.

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 MarchJune 31,30, 2026, the Company had 2.31.8 million shares remaining under the current share repurchase authorization. The projected 2026 annual dividend rate is $1.15 per share or approximately $52.6$52.3 million in aggregate dividend payments. Future dividends are subject to declarations by our board of directors.

During the threesix months ended MarchJune 31,30, 2026,2026 the net cash used in operating activities was $23.2 million. During the three months ended March 31,and 2025, the net cash provided by operating activities was $20.5$67.4 million.million and $116.1 million, respectively. Our operating cash flows decreased $43.6$48.7 million primarily due to the timing of working capital items, an increase in the franchise agreement acquisition cost payments,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.taxes and the timing of working capital items.

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 threesix months ended MarchJune 31,30, 2026 and 2025, the Company's net franchise agreement acquisition costs were $42.8$72.2 million and $26.3$41.5 million, respectively.

The Company’s franchise agreements require the payment of marketing and reservation fees to be used by the Company for the expenses associated with providing franchise services such as national marketing, media advertising, and central reservation systems. Additionally, the Company's management agreements include cost reimbursements, primarily related to the payroll costs at the managed hotels where the Company is the employer. These activities are reflected in revenue for reimbursable costs from franchised and managed properties and reimbursable expenses from franchised and managed properties. During the threesix months ended MarchJune 31,30, 2026 and 2025, reimbursable expenses from franchised and managed properties exceeded revenue for reimbursable costs from franchised and managed properties by $37.9$72.2 million and $20.4$29.4 million, respectively.

The net cash used in investing activities was $6.2$34.0 million and $53.0$95.1 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

During the threesix months ended MarchJune 31,30, 2026 and 2025, investments in owned hotel properties totaled $16.8$27.3 million and $35.5$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 threesix months ended MarchJune 31,30, 2026 and 2025, investments in other property and equipment totaled $10.1$17.9 million and $10.5$18.3 million, respectively. These investments primarily related to leasehold improvements, office equipment, and capitalized software.

The Company has equity method investments in affiliates related to the Company's program to offer equity support to qualified franchisees to develop and operate Cambria Hotels and Everhome Suites branded-hotels in strategic markets. During the threesix months ended MarchJune 31,30, 2026 and 2025, the Company invested $3.9$10.6 million and $5.4$9.4 million, respectively, to support these efforts.

The Company provides financing to franchisees for hotel development efforts and other purposes in the form of notes receivable loans. The loans bear interest and are expected to be repaid in accordance with the terms of the loan agreements. During the threesix months ended MarchJune 31,30, 2026, the Company issued $0.2$1.9 million in notes receivable loans and received $24.6 million in notes receivable loan repayments. During the threesix months ended MarchJune 31,30, 2025, the Company issued $2.0$3.4 million in notes receivable loans and received $1.5$2.8 million in notes receivable loan repayments.

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

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 MarchJune 31,30, 2026, the Company maintained a total leverage ratio of 3.04x,3.02x, including outstanding debt of approximately $566.3$564.8 million on the senior unsecured revolving credit facility. The Company was in compliance with all financial covenants under the Restated Credit Agreement.

The Company entered into certain economic development agreements with various governmental entities in conjunction with the relocation of its corporate headquarters in November 2023. In accordance with these agreements, as of MarchJune 31,30, 2026, the governmental entities advanced $1.9 million to the Company to offset a portion of the corporate headquarters relocation and tenant improvement costs in consideration of the employment of permanent, full-time employees within the jurisdictions. The Company has been advanced the full amounts that were due pursuant to these agreements, and these advances bear interest at a rate of 3% per annum.

Repayment of the advances is contingent upon the Company achieving certain performance conditions, which are measured annually on December 31st and primarily relate to maintaining certain levels of employment within the various jurisdictions. If the Company fails to meet an annual performance condition, then the Company may be required to repay a portion or all of the advances including accrued interest by April 1st following the measurement date. Any outstanding advances at the expiration of the Company's corporate headquarters lease in 2035 will be forgiven in full. The advances are presented in debt in the Company's consolidated balance sheets until the Company determines that the future performance conditions have been met over the entire term of the agreement and the Company will not be required to repay the advances. The Company accrues interest on the portion of the advances that it expects to repay. The Company is in compliance with all applicable current performance conditions as of MarchJune 31,30, 2026.

During the threesix months ended MarchJune 31,30, 2026, the Company paid $13.1$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 $52.6$52.3 million in aggregate dividend payments.

The Company has a share repurchase program. Treasury stock activity is recorded at cost in the consolidated balance sheets. During the threesix months ended MarchJune 31,30, 2026, the Company repurchased 0.50.9 million shares of its common stock under the share repurchase program at a total cost, including accrued excise tax, of $47.8$98.2 million. As of MarchJune 31,30, 2026, the Company had 2.31.8 million shares remaining under the current share repurchase authorization.

During the threesix months ended MarchJune 31,30, 2026, the Company redeemed 0.1 million shares of common stock at a total cost of $14.3$14.4 million from employees to satisfy the stock 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 threesix months ended MarchJune 31,30, 2026, the Company received proceeds of $0.9$2.3 million from stock options exercised by employees.

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, 2025. During the threesix months ended MarchJune 31,30, 2026, there were no material changes to the critical accounting estimates that were previously disclosed.

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, U.S. and foreign economic conditions, including access to liquidity and capital; changes in consumer demand and confidence, including consumer discretionary spending and the demand for travel, transient and group business; the timing and amount of future dividends and share repurchases; future U.S. or global outbreaks of epidemics, pandemics or contagious diseases or fear of such outbreaks, and the related impact on the global hospitality industry, particularly but not exclusively the U.S. travel market; changes in law and regulation applicable to the travel, lodging or franchising industries, including with respect to the status of our relationship with employees of our franchisees; the potential impact of newchanges in laws and regulations generally, or the interpretation thereof, including, without limitation, those relating to taxes, wages, labor and immigration; foreign currency fluctuations; changes in global interest rates and rate differentials; variability and unpredictability in trade relations, sanctions, tariffs or other trade controls; governmental action or inaction relating to the federal governmentbudget, including funding lapselapses and related government shutdowns; impairments or declines in the value of our assets; our assumptions underlying our critical accounting estimates; operating risks common in the travel, lodging or franchising industries; 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; information technology, cyber security and data breach risks; introduction and integration of artificial intelligence technologies; climate change; our sustainability strategy; ownership and financing activities; hotel closures or financial difficulties of our franchisees; operating risks associated with our international operations; political instability, geopolitical conflicts and terrorism; 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, 2025, filed with the SEC on February 19, 2026. 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.