v3.26.1
Acquisitions
 3 Months Ended
Mar. 31, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Acquisitions Acquisitions
Choice Hotels Canada Acquisition
On July 2, 2025, the Company completed the acquisition (the “Transaction”) of the remaining 50% of the outstanding shares of Choice Hotels Canada, Inc. ("Choice Hotels Canada") and amended the existing master franchise agreement for a purchase price of approximately $114.5 million, inclusive of customary adjustments related to working capital and cash. The acquisition was funded with available cash and borrowings under the Company's senior unsecured revolving credit facility. Choice Hotels Canada franchises more than 26,000 rooms in Canada, which have historically been included in the Company's franchised hotel statistics as a result of the prior master franchise agreement. Choice Hotels Canada now has the ability to offer developers access to all of the Company's 22 hotel brands and brand extensions, including the Company's extended stay brands. Prior to the acquisition date, the Company owned 50% of the outstanding shares of Choice Hotels Canada, which was accounted for under the equity method of accounting and reported within investments in affiliates in the consolidated balance sheets. As a result of the Transaction, Choice Hotels Canada is now a wholly-owned and consolidated subsidiary of the Company, and the Transaction was accounted for as a business combination using the acquisition method.
In connection with the Transaction, the Company remeasured the value of its previously held 50% equity investment to its acquisition date fair value of $114.5 million, which resulted in a gain of approximately $100.0 million that is reported within gain from an acquisition of a joint venture in the consolidated statements of income. The fair value of the previously held equity investment was determined using a market approach based on the cash consideration exchanged for the newly acquired 50% equity interest.
The following is a summary of the purchase consideration transferred:
Purchase Consideration
(in thousands)
Cash consideration transferred for the newly acquired interest$114,470 
Fair value of the previously held interest114,470 
Effective settlement of intercompany payables3,280 
Total consideration, including previously held interest$232,220 
During the three months ended March 31, 2026, the Company recognized transaction and transition costs of $0.2 million in business combination, diligence and transition costs in the consolidated statements of income.
Fair Values of the Assets Acquired and the Liabilities Assumed
The Company allocated the purchase price based upon an assessment of the fair value of the assets acquired and the liabilities assumed on July 2, 2025. The final valuation and related allocation of the purchase price was completed in the first quarter of 2026. There were no measurement period adjustments. The final allocation of the purchase price, as presented in our consolidated balance sheets is as follows:
(in thousands)July 2, 2025
Assets acquired
Cash and cash equivalents$44,356 
Accounts receivable10,706 
Income taxes receivable149 
Prepaid expenses and other current assets335 
Operating lease right-of-use assets358 
Intangible assets150,665 
Total assets acquired$206,569 
Liabilities assumed
Accounts payable$5,235 
Accrued expenses and other current liabilities1,926 
Deferred revenue - current333 
Liability for guest loyalty program - current7,194 
Deferred income taxes38,045 
Long-term deferred revenue1,845 
Operating lease liabilities358 
Liability for guest loyalty program - noncurrent5,607 
Total liabilities assumed$60,543 
Fair value of net assets acquired$146,026 
Goodwill86,194 
Total consideration, including previously held interest$232,220 
Identified Intangible Assets
The following table presents the estimated fair values of the acquired identified intangible assets and their estimated useful lives:
Estimated Useful LifeEstimated Fair Value
(in years)(in thousands)
Reacquired territory rights38$76,523 
Franchise agreements1274,142 
Total intangible assets$150,665 
The reacquired territory rights represent the reacquired rights for the use of certain Choice brands within Canada. The fair value of the reacquired territory rights and the franchise agreements was estimated using a multi-period excess earnings method, which is a variation of the income approach. This method uses the present value of the incremental after-tax cash flows attributable to the intangible asset in order to estimate the fair value. This valuation methodology utilizes Level 3 inputs.
Income Taxes
As the Transaction is accounted for as a business combination, deferred tax assets and liabilities are generally recognized on the differences between the fair value of the assets acquired and the liabilities assumed and the tax bases of the assets acquired and the liabilities assumed in the business combination. The Transaction consists of a foreign entity, so the Company asserts an indefinite reinvestment and has not recorded a deferred tax liability on the outside basis difference in its investment.
Pro Forma Results of Operations
The following unaudited pro forma information presents the combined results of operations of Choice and Choice Hotels Canada as if the Company had completed the Transaction on January 1, 2024, but using the fair values of the assets acquired and the liabilities assumed as of the acquisition date. The unaudited pro forma information reflects adjustments relating to (i) the allocation of the purchase price and related adjustments, including the incremental amortization expense based on the fair values of the intangible assets acquired, (ii) the incremental impact of the senior unsecured revolving credit facility draw on interest expense, (iii) nonrecurring transaction costs, and (iv) the income tax impact of the aforementioned pro forma adjustments.
As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Transaction had occurred at the beginning of the period presented, nor are they indicative of the future results of operations.
Three Months Ended
(in thousands)March 31, 2025
Revenues$339,898 
Net income (1)
$42,770 
(1) The gain on the previously held 50% equity interest in Choice Hotels Canada is excluded from the pro forma results of operations.
Choice Hotels Canada Results of Operations
The Company's consolidated statements of income include Choice Hotels Canada's results of operations since the July 2, 2025 acquisition date. Choice Hotels Canada contributed $8.9 million and $3.2 million in total revenues and net income, respectively, for the three months ended March 31, 2026.
Goodwill
The $86.2 million of goodwill recognized is primarily attributable to the value that the Company expects to realize from the existing customer base, cost synergies, and new agreements signed with new franchisees and developers. The goodwill for the Transaction is fully attributable to the Hotel Franchising & Management reportable segment and is not deductible for tax purposes.
The following table summarizes the carrying amount of the Company's goodwill, including the goodwill arising from the acquisition of Choice Hotels Canada, as of March 31, 2026.
(in thousands)
Goodwill, excluding goodwill arising from the Choice Hotels Canada acquisition$227,765 
Goodwill arising from the Choice Hotels Canada acquisition86,194 
Effect of foreign currency translation(1,798)
Total goodwill, gross carrying amount312,161 
Accumulated impairment losses(7,578)
Goodwill, net carrying amount$304,583