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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 _____________________________________________ 

_____________________________________________ 

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Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common Stock, Par Value $0.01 per share

CHH

New York Stock Exchange

_____________________________________________  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐ No  ☒

As of July 31, 2024, the number of shares outstanding of Choice Hotels International, Inc.'s common stock was 47,214,338.

 

 

ITEM 1.FINANCIAL STATEMENTS

        

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2024						2023						2024						2023
REVENUES
Royalty, licensing and management fees			$	141,813					$	140,499					$	247,280					$	247,991
Initial franchise fees			6,562						7,164						13,267						15,046
Platform and procurement services fees			28,126						28,801						41,882						42,644
Owned hotels			28,418						25,504						53,409						47,836
Other			15,037						11,148						31,394						21,775
Other revenues from franchised and managed properties			215,200						214,304						379,873						384,920
Total revenues			435,156						427,420						767,105						760,212
OPERATING EXPENSES
Selling, general and administrative			64,995						58,424						113,620						107,345
Business combination, diligence and transition costs			895						9,380						16,739						19,742
Depreciation and amortization			10,827						9,812						21,762						19,835
Owned hotels			20,704						18,150						40,027						35,296
Other expenses from franchised and managed properties			205,113						207,265						382,186						375,754
Total operating expenses			302,534						303,031						574,334						557,972
Operating income			132,622						124,389						192,771						202,240
OTHER EXPENSES AND INCOME, NET
Interest expense			23,845						16,270						44,026						30,354
Interest income			(2,415)						(2,056)						(4,146)						(3,939)
Other loss (gain)			2,544						(2,187)						3,880						(4,095)
Equity in net gain of affiliates			(7,933)						(185)						(7,778)						(122)
Total other expenses and income, net			16,041						11,842						35,982						22,198
Income before income taxes			116,581						112,547						156,789						180,042
Income tax expense			29,445						27,837						38,644						42,512
Net income			$	87,136					$	84,710					$	118,145					$	137,530
Basic earnings per share			$	1.82					$	1.66					$	2.42					$	2.68
Diluted earnings per share			$	1.80					$	1.65					$	2.41					$	2.66
Cash dividends declared per share			$	0.2875					$	0.2875					$	0.5750					$	0.5750

        

			Three Months Ended												Six Months Ended
			June 30,												June 30,
			2024						2023						2024						2023
Net income			$	87,136					$	84,710					$	118,145					$	137,530
Other comprehensive income, net of tax:
Foreign currency translation adjustment			(694)						295						(240)						689
Other comprehensive (loss) income, net of tax			(694)						295						(240)						689
Comprehensive income			$	86,442					$	85,005					$	117,905					$	138,219

(1) During certain periods presented, accumulated dividends were paid to certain shareholders upon vesting of their performance vested restricted stock units ("PVRSU"), which are presented in Share-based payment activity.

(2) Beginning January 1, 2023, Treasury purchases include a 1% excise tax as imposed by the Inflation Reduction Act of 2022.

The accompanying unaudited consolidated financial statements of Choice Hotels International, Inc. and subsidiaries (collectively, "Choice" or the "Company") have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments that are necessary to fairly present the Company's financial position and results of operations. Except as otherwise disclosed, all adjustments are of a normal recurring nature.

Certain prior year amounts in our consolidated financial statements have been reclassified in order to maintain comparability with the current year presentation. Business combination, diligence and transition costs, which were previously presented in selling, general and administrative expenses, are now presented within a standalone financial statement line item in the consolidated statements of income. The reclassification had no effect on the Company’s previously reported operating income or net income.

Certain information and footnote disclosures normally included in the consolidated financial statements presented in accordance with GAAP have been omitted. Although the Company believes the disclosures made are adequate to prevent the information presented from being misleading, these consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023 and the notes thereto included in the Company’s Annual Report on Form 10-K, which was filed with the SEC on February 20, 2024. The interim results are not necessarily indicative of the entire year's results.

The Company’s significant accounting policies are included in the “Significant Accounting Policies” section of Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2023.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Improvements to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 requires public entities to disclose significant segment expenses by reportable segment if they are regularly provided to the chief operating decision maker and included in each reported measure of segment profit or loss on both an annual and an interim basis. ASU 2023-07 is effective for the annual reporting period beginning after December 15, 2023 and the interim periods within the annual reporting period beginning after December 15, 2024. Based on the Company's assessment, the adoption of this standard is not expected to have an impact on the Company's consolidated financial statements, but it will require enhanced segment disclosures in the notes to the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 is designed to provide additional information to financial statement users in regard to how an entity's operations, risks, and planning affect its tax rate, opportunities, and future cash flows. ASU 2023-09 is effective for the annual reporting period beginning after December 15, 2024. Based on the Company's assessment, the adoption of this standard is not expected to have an impact on the Company's consolidated financial statements, but it will require enhanced income tax disclosures in the notes to the consolidated financial statements.

Contract liabilities relate to (i) advance consideration received related to services considered to be a part of the brand intellectual property performance obligation, such as initial franchise fees that are paid when a franchise agreement is executed and system implementation fees that are paid at the time of installation, and (ii) amounts received when loyalty points are issued but the associated revenue has not yet been recognized because the related loyalty points have not been redeemed.

Deferred revenues from initial franchise fees and system implementation fees are typically recognized over a ten-year period, unless the franchise agreement is terminated and the hotel exits the franchise system whereby the remaining deferred revenue amounts are recognized to revenue in the period of termination. Loyalty points are typically redeemed within three years of issuance.

The following table summarizes the significant changes in the contract liabilities balances during the period from December 31, 2023 to June 30, 2024:

The aggregate amount of the transaction price that is allocated to unsatisfied, or partially unsatisfied, performance obligations was $211.5 million as of June 30, 2024. This amount represents the fixed transaction price that will be recognized as revenue in future periods, which is presented as current and non-current deferred revenue in the consolidated balance sheets.

Based on the practical expedient elections permitted by ASU 2014-09, Revenue From Contracts with Customers (Topic 606) and subsequent amendments ("Topic 606"), the Company does not disclose the value of unsatisfied performance obligations for (i) variable consideration subject to the sales or usage-based royalty constraint or comprising a component of a series (including franchise, partnership, qualified vendor, and software as a service ("SaaS") agreements), (ii) variable consideration for which the Company recognizes revenue at the amount to which it has the right to invoice for the services performed, or (iii) contracts with an expected original duration of one year or less.

The following table presents the Company's revenues by over time and point in time recognition:

The owned hotels revenues that are recognized at a point in time represent the goods and services that are purchased independently of the hotel stay, such as food and beverage, incidentals, and parking fees. The remaining revenues that are recognized at a point in time represent the loyalty points that are redeemed by members for benefits (with both franchisees and third-party partners), net of the cost of redemptions. The loyalty net revenues, inclusive of adjustments to the estimated redemption rates, were $36.3 million and $29.1 million for the three months ended June 30, 2024 and 2023, respectively, and $55.8 million and $44.9 million for the six months ended June 30, 2024 and 2023, respectively.

As presented in Note 11, the Corporate & Other segment revenue amounts were $24.2 million and $26.6 million for the three months ended June 30, 2024 and 2023, respectively, and $59.3 million and $52.6 million for the six months ended June 30, 2024 and 2023, respectively, which are presented in other revenues and owned hotels revenues in the consolidated statements of income. The remaining revenues relate to the Hotel Franchising & Management reportable segment.

Royalty, licensing and management fees and other revenues from franchised and managed properties are presented net of intersegment revenues of $3.1 million and $1.0 million for the three months ended June 30, 2024 and 2023, respectively, and $5.6 million and $3.3 million for the six months ended June 30, 2024 and 2023, respectively.

The Company has provided financing in the form of notes receivable loans to franchisees in order to support the development of hotel properties in strategic markets. The Company's credit quality indicator is the level of security in the note receivable.

The following table summarizes the composition of the notes receivable balances by credit quality indicator and the allowance for credit losses:

(in thousands)			June 30, 2024						December 31, 2023
Senior			$	87,199					$	85,919
Subordinated			15,792						17,004
Unsecured			4,567						5,359
Total notes receivable			$	107,558					$	108,282
Less: allowance for credit losses			8,001						8,616
Total notes receivable, net of allowance for credit losses			$	99,557					$	99,666
Current portion, net of allowance for credit losses			$	21,686					$	20,766
Long-term portion, net of allowance for credit losses			$	77,871					$	78,900

The following table summarizes the amortized cost basis of the notes receivable by the year of origination and credit quality indicator:

(in thousands)			2024						2023						2022						2021						2020						Prior						Total
Senior			$	1,417					$	—					$	—					$	—					$	—					$	85,782					$	87,199
Subordinated			—						3,498						—						—						—						12,294						15,792
Unsecured			—						—						152						1,288						832						2,295						4,567
Total notes receivable			$	1,417					$	3,498					$	152					$	1,288					$	832					$	100,371					$	107,558

The following table summarizes the activity related to the Company’s notes receivable allowance for credit losses:

(in thousands)			June 30, 2024						December 31, 2023
Beginning balance			$	8,616					$	10,172
Provision for credit losses			61						763
Recoveries			(676)						(2,319)
Ending balance			$	8,001					$	8,616

As of June 30, 2024 and December 31, 2023, one note receivable loan with a senior credit quality indicator met the definition of collateral-dependent and is collateralized by the membership interests in the borrowing entities and the associated land parcel. The Company used a market approach that uses quoted market prices to value the underlying collateral. The Company reviewed the borrower's financial statements, economic trends, industry projections for the market, and comparable sales capitalization rates, which represent significant inputs to the cash flow projections. These nonrecurring fair value measurements are classified as Level 3 in the fair value measurement hierarchy because they are unobservable inputs which are significant to the overall fair value. Based on the Company's analysis, the fair value of the collateral secures substantially all of the carrying value of the respective note receivable loan. The allowance for credit losses attributable to the collateral-dependent note receivable loan was $2.2 million as of June 30, 2024 and December 31, 2023.

During the six months ended June 30, 2024 and during the year ended December 31, 2023, the recoveries were primarily associated with cash collections pursuant to a settlement agreement with a borrower.

The following table summarizes the past due balances by credit quality indicator of the notes receivable:

(in thousands)			1- 30 days Past Due						31-89 days Past Due						> 90 days Past Due						Total Past Due						Current						Total  Notes Receivable
As of June 30, 2024
Senior			$	—					$	—					$	15,200					$	15,200					$	71,999					$	87,199
Subordinated			—						—						—						—						15,792						15,792
Unsecured			—						—						400						400						4,167						4,567
			$	—					$	—					$	15,600					$	15,600					$	91,958					$	107,558
As of December 31, 2023
Senior			$	—					$	—					$	15,200					$	15,200					$	70,719					$	85,919
Subordinated			—						2,936						—						2,936						14,068						17,004
Unsecured			—						—						400						400						4,959						5,359
			$	—					$	2,936					$	15,600					$	18,536					$	89,746					$	108,282

The amortized cost basis of the notes receivable in a non-accrual status was $15.2 million and $15.9 million as of June 30, 2024 and December 31, 2023, respectively.

The Company has issued notes receivable loans to certain entities that have created variable interests in the associated borrowers totaling $95.1 million as of June 30, 2024 and December 31, 2023. The Company has determined that it is not the primary beneficiary of these variable interest entities ("VIEs"). For collateral-dependent loans, the Company has no exposure to the borrowing VIE beyond the respective note receivable and the limited commitments which are addressed in Note 12.

Accounts receivable consists primarily of franchise and related fees due from the hotel franchisees and are recorded at the invoiced amount.

During the six months ended June 30, 2024, the Company recognized provisions for credit losses on accounts receivable of $6.9 million in selling, general and administrative expenses, and $6.4 million in other expenses from franchised and managed properties, in the consolidated statements of income. During the six months ended June 30, 2023, the Company recognized provisions for credit losses on accounts receivable of $2.9 million in selling, general and administrative expenses, and $3.4 million in other expenses from franchised and managed properties, in the consolidated statements of income. During the six months ended June 30, 2024 and 2023, the Company recorded write-offs, net of recoveries, through the accounts receivable allowance for credit losses of $7.2 million and $5.3 million, respectively.

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

As of June 30, 2024 and December 31, 2023, the Company had total investments in affiliates in the consolidated balance sheets of $80.6 million and $70.6 million, respectively, which included investments in affiliates that represent VIEs of $69.1 million and $59.4 million, respectively. The Company has determined that it is not the primary beneficiary of any of these VIEs, however the Company does exercise significant influence through its equity ownership and as a result, the investments in these affiliates are accounted for under the equity method of accounting. During the three months ended June 30, 2024 and 2023, the Company recognized gains totaling $6.8 million and losses totaling $0.9 million, respectively, from these investments that represent VIEs. During the six months ended June 30, 2024 and 2023, the Company recognized gains totaling $5.6 million and losses totaling $2.3 million, respectively, from these investments that represent VIEs. The Company's maximum exposure to losses related to its investments in the VIEs is limited to the total of its respective equity investment as well as certain limited payment guaranties, which are described in Note 12 to these consolidated financial statements.

On May 24, 2024, one of the Company's unconsolidated affiliates sold its underlying assets. The Company received a distribution from the unconsolidated affiliate and recognized a gain of $7.2 million, which was recognized in equity in net gain of affiliates in the consolidated statements of income for the period.

During the three and six months ended June 30, 2024 and 2023, the Company recognized no impairment charges related to its equity method investments.

Debt consisted of the following:

			June 30, 2024						December 31, 2023
			(in thousands)
$500 million unsecured term loan due 2024 ("2023 Term Loan") with an effective interest rate of 6.82%, less a discount and deferred issuance costs of $0.3 million and $0.7 million at June 30, 2024 and December 31, 2023, respectively (1)			$	499,669					$	499,268
$450 million senior unsecured notes due 2031 ("2020 Senior Notes") with an effective interest rate of 3.86%, less a discount and deferred issuance costs of $4.0 million and $4.3 million at June 30, 2024 and December 31, 2023, respectively			445,995						445,690
$400 million senior unsecured notes due 2029 ("2019 Senior Notes") with an effective interest rate of 3.88%, less a discount and deferred issuance costs of $3.3 million and $3.6 million at June 30, 2024 and December 31, 2023, respectively			396,741						396,440
$1 billion senior unsecured revolving credit facility with an effective interest rate of 6.71%, less deferred issuance costs of $4.0 million and $1.9 million at June 30, 2024 and December 31, 2023, respectively			526,020						226,621
Total debt			$	1,868,425					$	1,568,019
Less: current portion (1)			—						499,268
Long-term debt			$	1,868,425					$	1,068,751

(1) The 2023 Term Loan had a maturity date of December 16, 2024. As discussed in Note 14, the Company used the proceeds from the issuance of the 2024 Senior Notes (as defined below) to repay the 2023 Term Loan on July 2, 2024. Based on the 2023 Term Loan being repaid from the proceeds of the 2024 Senior Notes shortly after the end of the period, the 2023 Term Loan has been classified as a long-term liability at June 30, 2024.

On June 28, 2024, the Company entered into a Second Amended and Restated Senior Unsecured Credit Agreement (the "Restated Credit Agreement"), which amended and restated the Company's existing amended and restated senior unsecured credit agreement dated August 20, 2018 (the "Former Credit Agreement"). The Former Credit Agreement provided for an $850 million unsecured revolving credit facility (the "Revolver") with a final maturity date of August 20, 2026. 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 effectiveness of such extension is subject to the consent of the lenders under the Restated Credit Agreement and certain customary conditions. The Restated Credit Agreement also provides that up to $50 million of borrowings under the Revolver may be used for alternative currency loans, up to $10 million of capacity under the Revolver may be used for the issuance of letters of credit, and up to $25 million of borrowings under the Revolver may be used for swingline loans. The Company may from time to time designate one or more wholly-owned subsidiaries of the Company as additional borrowers under the Restated Credit Agreement, subject to the consent of the lenders and certain customary conditions. At any time prior to the final maturity date, the Company may increase the amount of the Revolver or add one or more term loan facilities under the Restated Credit Agreement by up to an additional $500 million in the aggregate to the extent that any one or more lenders commit to being a lender for the additional amount of such increase or the term loan facility and certain other customary conditions are met.

Refer to Note 12 and the Liquidity and Capital Resources section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.

The changes in accumulated other comprehensive loss, net of tax, for the six months ended June 30, 2024 and 2023 were as follows:

Other comprehensive income, net of tax, for both the six months ended June 30, 2024 and 2023 relates entirely to foreign currency items, and there were no amounts reclassified from accumulated other comprehensive loss during either period.

The Company estimates the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The following summarizes the three levels of inputs, as well as the assets that the Company values using those levels of inputs on a recurring basis.

Level 1 - Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist of equity securities and mutual funds held in the Company's Deferred Compensation Plan.

Level 2 - Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable. The Company’s Level 2 assets consist of money market funds held in the Company's Deferred Compensation Plan.

Level 3 - Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument. The Company does not currently have any assets recorded at fair value on a recurring basis whose fair value was determined using Level 3 inputs and there were no transfers of Level 3 assets during the six months ended June 30, 2024 and during the year ended December 31, 2023.

The Company recognized the following assets at fair value on a recurring basis in the consolidated balance sheets:

			Fair Value Measurements at Reporting Date Using
(in thousands)			Total						Level 1						Level 2						Level 3
As of June 30, 2024
Equity securities			$	90,446					$	90,446					$	—					$	—
Mutual funds(1)			41,493						41,493						—						—
Money market funds(1)			4,440						—						4,440						—
Total			$	136,379					$	131,939					$	4,440					$	—
As of December 31, 2023
Equity securities			$	116,374					$	116,374					$	—					$	—
Mutual funds(1)			36,810						36,810						—						—
Money market funds(1)			4,767						—						4,767						—
Total			$	157,951					$	153,184					$	4,767					$	—

(1) The current assets at fair value noted above are presented in prepaid expenses and other current assets in the consolidated balance sheets. The long-term assets at fair value noted above are presented in investments for employee benefit plans, at fair value in the consolidated balance sheets.

The following table is a summary of the unrealized gains and losses of the investments in equity securities:

The Company believes that the fair values of its current assets and current liabilities approximate their reported carrying amounts due to the short-term nature of these items. In addition, the interest rate on the senior unsecured revolving credit facility and the 2023 Term Loan adjusts frequently based on current market interest rates; therefore, the Company believes the carrying amount approximates the fair value.

The fair values of the Company's senior unsecured notes are classified as Level 2 because the significant inputs are observable in an active market. Refer to Note 5 for additional information on debt. As of June 30, 2024 and December 31, 2023, the carrying amounts and the fair values were as follows:

			June 30, 2024												December 31, 2023
(in thousands)			Carrying Amount						Fair Value						Carrying Amount						Fair Value
2020 Senior Notes			$	445,995					$	397,323					$	445,690					$	389,241
2019 Senior Notes			$	396,741					$	359,560					$	396,440					$	355,068

The fair value estimates are determined at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. The settlement of such fair value amounts may not be possible or a prudent management decision.

The Company's effective income tax rates were 25.3% and 24.7% for the three months ended June 30, 2024 and 2023, respectively. The Company's effective income tax rates were 24.6% and 23.6% for the six months ended June 30, 2024 and 2023, respectively. The effective income tax rates for the three and six months ended June 30, 2024 and 2023 were higher than the U.S. federal income tax rate of 21% primarily due to the impact of state income taxes.

The components of the Company’s share-based compensation expense were as follows:

			Three Months Ended June 30,												Six Months Ended June 30,
(in thousands)			2024						2023						2024						2023
Stock options			$	1,292					$	1,752					$	2,638					$	3,140
Restricted stock			3,236						3,358						6,713						7,057
Performance vested restricted stock units			4,749						7,096						9,020						11,780
Total share-based compensation expense			$	9,277					$	12,206					$	18,371					$	21,977

A summary of the share-based award activity during the six months ended June 30, 2024 is presented below:

			Stock Options																		Restricted Stock												Performance Vested Restricted Stock Units
			Options						Weighted Average Exercise Price						Weighted Average Remaining Contractual Life						Shares						Weighted Average Grant Date Fair Value						Shares						Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2024			943,641						$	102.90											361,668						$	136.05					458,495						$	136.14
Granted			78,988						111.94												61,974						113.74						145,228						112.15
Performance-based leveraging (1)			—						—												—						—						(3,772)						129.01
Exercised/vested			(88,483)						71.87												(52,538)						108.91						(146,675)						107.54
Expired			—						—												—						—						(8,028)						108.79
Forfeited			(440)						123.71												(5,494)						120.32						(6,721)						130.04
Outstanding as of June 30, 2024			933,706						$	106.60					6.0 years						365,610						$	136.37					438,527						$	138.42
Options exercisable as of June 30, 2024			637,932						$	99.51					4.9 years

(1) Any revisions to the outstanding PVRSUs during the six months ended June 30, 2024 is based on the Company's performance relative to the targeted performance conditions in the respective PVRSUs.

The fair value of the restricted stock and the PVRSUs with performance conditions that were granted during the six months ended June 30, 2024 was equal to the market price of the Company’s common stock on the date of the grant. The fair value of the PVRSUs with market conditions that are based on the Company’s total shareholder return relative to a predetermined peer group was estimated using a Monte Carlo simulation method as of the date of the grant. The requisite service periods for the restricted stock and the PVRSUs was between 9 months and 48 months. The PVRSUs have vesting ranges generally between 0% and 230% of the initial units granted.

The stock options granted by the Company had an exercise price that was equal to the market price of the Company's common stock on the date of grant. The fair value of the stock options granted during the six months ended June 30, 2024 was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

The Company’s shares of restricted stock contain rights to receive nonforfeitable dividends and thus are participating securities that require the computation of basic earnings per share using the two-class method. The shares of restricted stock are both potential shares of common stock and participating securities so the Company calculates diluted earnings per share by using the more dilutive of the treasury stock method or the two-class method. The calculation of earnings per share for the net income available to common shareholders excludes the distribution of dividends and the undistributed earnings attributable to the participating securities from the numerator. The diluted earnings per share includes stock options, PVRSUs, and RSUs in the calculation of the weighted average shares of common stock outstanding.

The computation of basic and diluted earnings per share was as follows:

			Three Months Ended												Six Months Ended
			June 30,												June 30,
(in thousands, except per share amounts)			2024						2023						2024						2023
Numerator:
Net income			$	87,136					$	84,710					$	118,145					$	137,530
Income allocated to participating securities			(437)						(437)						(597)						(750)
Net income available to common shareholders			$	86,699					$	84,273					$	117,548					$	136,780
Denominator:
Weighted average shares of common stock outstanding – basic			47,741						50,626						48,522						50,946
Basic earnings per share			$	1.82					$	1.66					$	2.42					$	2.68
Numerator:
Net income			$	87,136					$	84,710					$	118,145					$	137,530
Income allocated to participating securities			(437)						(437)						(597)						(750)
Net income available to common shareholders			$	86,699					$	84,273					$	117,548					$	136,780
Denominator:
Weighted average shares of common stock outstanding – basic			47,741						50,626						48,522						50,946
Dilutive effect of stock options, PVRSUs, and RSUs			297						365						317						405
Weighted average shares of common stock outstanding – diluted			48,038						50,991						48,839						51,351
Diluted earnings per share			$	1.80					$	1.65					$	2.41					$	2.66

The following securities have been excluded from the calculation of the diluted weighted average shares of common stock outstanding because the inclusion of these securities would have an anti-dilutive effect:

The Hotel Franchising & Management reportable segment includes the Company's hotel franchising operations, which consists of its 22 brands and brand extensions and the hotel management operations of 13 hotels (inclusive of four owned hotels). The 22 brands and brand extensions and hotel management operations are aggregated together within this reportable segment because they have similar economic characteristics, types of customers, distribution channels, and regulatory business environments. The revenues from the hotel franchising and management business include royalty fees, initial franchise fees and relicensing fees, cost reimbursement revenues, platform and procurement services fees revenue, base and incentive management fees, and other hotel franchising and management-related revenue. The Company provides certain services under its franchise and management agreements which result in direct and indirect reimbursements. The cost reimbursement revenues received from the franchisees are included in Hotel Franchising & Management revenues and are offset by the related expenses in order to calculate Hotel Franchising & Management operating income. The equity in the earnings or losses from the hotel franchising-related investment in affiliates is allocated to the Hotel Franchising & Management reportable segment.

The Company evaluates its Hotel Franchising & Management reportable segment based primarily on the results of the segment without allocating corporate expenses, indirect general and administrative expenses, interest expense, interest income, and other gains and losses, all of which are included in the Corporate & Other column in the tables presented below. The Corporate & Other column also reflects the operations of the Company's owned hotels.

Intersegment Eliminations to revenues is the elimination of Hotel Franchising & Management revenue which includes royalty fees, management and cost reimbursement fees charged to our owned hotels against the franchise and management fee expense that is recognized by our owned hotels in Corporate & Other operating income (loss).

Our President and Chief Executive Officer, who is our chief operating decision maker, does not use assets by operating segment when assessing the performance or when making operating segment resource allocation decisions and therefore, assets by segment are not disclosed below.

The following tables present the financial information for the Company's segments:

			Three Months Ended June 30, 2024																								Three Months Ended June 30, 2023
(in thousands)			Hotel Franchising & Management						Corporate & Other						Intersegment Eliminations						Consolidated						Hotel Franchising & Management						Corporate & Other						Intersegment Eliminations						Consolidated
Revenues			$	414,019					$	24,198					$	(3,061)					$	435,156					$	401,854					$	26,568					$	(1,002)					$	427,420
Operating income (loss)			$	165,243					$	(32,621)					$	—					$	132,622					$	149,931					$	(25,542)					$	—					$	124,389
Income (loss) before income taxes			$	173,177					$	(56,596)					$	—					$	116,581					$	150,116					$	(37,569)					$	—					$	112,547
			Six Months Ended June 30, 2024																								Six Months Ended June 30, 2023
(in thousands)			Hotel Franchising & Management						Corporate & Other						Intersegment Eliminations						Consolidated						Hotel Franchising & Management						Corporate & Other						Intersegment Eliminations						Consolidated
Revenues			$	713,378					$	59,335					$	(5,608)					$	767,105					$	710,901					$	52,632					$	(3,321)					$	760,212
Operating income (loss)			$	260,091					$	(67,320)					$	—					$	192,771					$	255,422					$	(53,182)					$	—					$	202,240
Income (loss) before income taxes			$	267,870					$	(111,081)					$	—					$	156,789					$	255,544					$	(75,502)					$	—					$	180,042