Wyndham Hotels & Resorts(WH) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited). This section presents the unaudited condensed consolidated financial statements for Wyndham Hotels & Resorts Report of Independent Registered Public Accounting Firm The independent auditor's review found no material modifications needed for the interim financial statements[9] Condensed Consolidated Statements of Income The statements detail revenues, expenses, and net income for the three and six-month periods Condensed Consolidated Statements of Income (Unaudited) | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net revenues | $397 | $367 | $713 | $671 | | Total expenses | $247 | $222 | $451 | $476 | | Operating income | $150 | $145 | $262 | $195 | | Income before income taxes | $116 | $112 | $194 | $133 | | Net income | $87 | $86 | $149 | $102 | | Basic EPS | $1.13 | $1.07 | $1.92 | $1.27 | | Diluted EPS | $1.13 | $1.07 | $1.90 | $1.26 | - For the three months ended June 30, 2025, net revenues increased by $30 million (8%) and net income increased by $1 million (1%) compared to the prior-year period[15] - For the six months ended June 30, 2025, net revenues increased by $42 million (6%) and net income increased by $47 million (46%) compared to the prior-year period[15] Condensed Consolidated Statements of Comprehensive Income The statements show net income adjusted for other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (Unaudited) | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $87 | $86 | $149 | $102 | | Other comprehensive income/(loss), net of tax | $(2) | $(2) | $(14) | $6 | | Comprehensive income | $85 | $84 | $135 | $108 | - Comprehensive income for the three months ended June 30, 2025, was $85 million, a slight increase from $84 million in the prior-year period[18] - For the six months ended June 30, 2025, comprehensive income was $135 million, up from $108 million in the prior-year period[18] Condensed Consolidated Balance Sheets The balance sheets present the company's assets, liabilities, and equity at period end Condensed Consolidated Balance Sheets (Unaudited) | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Total assets | $4,298 | $4,223 | | Total liabilities | $3,728 | $3,573 | | Total stockholders' equity | $570 | $650 | | Cash and cash equivalents | $50 | $103 | | Long-term debt | $2,532 | $2,420 | - Total assets increased by $75 million and total liabilities increased by $155 million from December 31, 2024, to June 30, 2025[143] - Total stockholders' equity decreased by $80 million due to stock repurchases and dividends, partially offset by net income[143] Condensed Consolidated Statements of Cash Flows The statements detail cash movements from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $129 | $77 | | Net cash used in investing activities | $(71) | $(31) | | Net cash used in financing activities | $(122) | $(32) | | Net (decrease)/increase in cash, cash equivalents and restricted cash | $(63) | $13 | | Cash, cash equivalents and restricted cash, end of period | $50 | $79 | - Net cash from operating activities increased by $52 million, primarily due to the absence of hostile takeover defense payments made in 2024[150] - Net cash used in investing and financing activities increased by $40 million and $90 million, respectively[150][151] Condensed Consolidated Statements of Equity The statements reconcile the changes in stockholders' equity over the period Condensed Consolidated Statements of Equity (Unaudited) | Metric (in millions) | Balance as of Dec 31, 2024 | Net Income (Q1 2025) | Other Comp. Loss (Q1 2025) | Dividends (Q1 2025) | Repurchase of Common Stock (Q1 2025) | Balance as of Mar 31, 2025 | Net Income (Q2 2025) | Other Comp. Loss (Q2 2025) | Dividends (Q2 2025) | Repurchase of Common Stock (Q2 2025) | Balance as of Jun 30, 2025 | | :------------------- | :------------------------- | :------------------- | :------------------------- | :------------------ | :----------------------------------- | :------------------------- | :------------------- | :------------------------- | :------------------ | :----------------------------------- | :------------------------- | | Total Equity | $650 | $61 | $(13) | $(32) | $(76) | $579 | $87 | $(2) | $(32) | $(77) | $570 | - Total equity decreased from $650 million to $570 million due to $153 million in stock repurchases and $64 million in dividends, partially offset by net income[26][143] Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures supporting the condensed consolidated financial statements 1. BASIS OF PRESENTATION The company operates as a global hotel franchisor with financial statements prepared under U.S. GAAP[27][28][29][30] 2. NEW ACCOUNTING PRONOUNCEMENTS The company details the adoption and future impact of new FASB accounting standards - The Company adopted the FASB's "Improvements to Income Tax Disclosures" on January 1, 2025, prospectively[31] - The Company will adopt the FASB's "Disaggregation of Income Statement Expenses" on January 1, 2027, expecting only additional disclosures[32] 3. REVENUE RECOGNITION This note provides a breakdown of revenue streams and related contract costs and liabilities Deferred Revenues (in millions) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Deferred initial franchise fee revenues | $146 | $145 | | Deferred loyalty program revenues | $87 | $97 | | Deferred co-branded credit card program revenues | $70 | $22 | | Deferred other revenues | $16 | $26 | | Total | $319 | $290 | Disaggregation of Net Revenues (in millions) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Royalties and franchise fees | $147 | $144 | $272 | $260 | | Marketing and reservation fees | $140 | $123 | $238 | $220 | | Loyalty revenue | $25 | $27 | $43 | $47 | | Management and other fees | $2 | $2 | $5 | $5 | | License and other fees | $33 | $31 | $60 | $57 | | Other revenue | $50 | $39 | $95 | $80 | | Net revenues | $397 | $367 | $713 | $671 | - Capitalized contract costs increased from $76 million as of December 31, 2024, to $79 million as of June 30, 2025[37] 4. EARNINGS PER SHARE This note details the calculation of earnings per share and summarizes capital return activities Earnings Per Share and Dividends (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income | $87 | $86 | $149 | $102 | | Basic EPS | $1.13 | $1.07 | $1.92 | $1.27 | | Diluted EPS | $1.13 | $1.07 | $1.90 | $1.26 | | Cash dividends declared per share | $0.41 | $0.38 | $0.82 | $0.76 | | Aggregate dividends paid to stockholders | $32 | $31 | $65 | $63 | Stock Repurchase Activity (in millions, except per share data) | Period | Shares Repurchased | Cost | Average Price Per Share | Remaining Availability | | :----- | :----------------- | :--- | :---------------------- | :--------------------- | | Six months ended June 30, 2025 | 1.7 | $153 | $88.73 | $386 (as of June 30, 2025) | 5. RECEIVABLES This note outlines the composition of trade and loan receivables and related allowances Allowance for Doubtful Accounts on Trade Accounts Receivable (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | | Balance as of January 1 | $61 | $60 | | Provision for doubtful accounts | $6 | $3 | | Bad debt write-offs | $(2) | $(1) | | Balance as of June 30 | $65 | $62 | Loan Receivables, Net (in millions) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Other current assets | $20 | $1 | | Other non-current assets | $63 | $31 | | Total loan receivables, net | $83 | $32 | - Loan receivables had a weighted average interest rate of 7.1% and a remaining term of 2.5 years as of June 30, 2025[43] 6. FRANCHISING, MARKETING AND RESERVATION ACTIVITIES This note details fees, development advances, and related expenses for core business activities Initial Franchise Fees (in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Initial franchise fees | $6 | $5 | $11 | $14 | Development Advance Notes (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Other non-current assets | $356 | $308 | - The Company recorded an impairment charge of $10 million related to development advance notes during the first quarter of 2024[49] Development Advance Notes Forgiveness and Impairment (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Forgiveness of notes | $8 | $6 | $14 | $11 | | Impairment | $0 | $0 | $0 | $10 | | Bad debt expense related to notes | $0 | $0 | $1 | $0 | - Net payments of development advance notes were $51 million for the six months ended June 30, 2025, down from $64 million in the prior-year period[52] 7. INCOME TAXES This note provides information on the company's income tax payments and effective tax rates Cash Income Tax Payments and Effective Tax Rates | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Cash income tax payments, net of refunds | $44 million | $37 million | N/A | N/A | | Effective tax rate (3 months) | N/A | N/A | 25.0% | 23.2% | | Effective tax rate (6 months) | 23.2% | 23.3% | N/A | N/A | - The effective tax rate for Q2 2024 was lower due to the non-taxable reversal of a separation-related reserve[55] - The Company does not expect the Pillar II directive or the OBBBA to have a material impact on its 2025 financial results[57][59] 8. LONG-TERM DEBT AND BORROWING ARRANGEMENTS This note details the company's debt structure, interest rates, maturities, and hedging activities Company Indebtedness (in millions) | Debt Type | June 30, 2025 Amount | June 30, 2025 Weighted Average Rate | December 31, 2024 Amount | December 31, 2024 Weighted Average Rate | | :-------- | :------------------- | :---------------------------------- | :----------------------- | :-------------------------------------- | | $750M revolving credit facility | $221 | 6.28% | $88 | 7.17% | | $400M term loan A | $352 | 6.18% | $364 | 7.02% | | $1.5B term loan B | $1,507 | 5.33% | $1,515 | 4.20% | | $500M 4.375% senior unsecured notes | $497 | 4.38% | $496 | 4.38% | | Total long-term debt | $2,577 | 5.32% | $2,463 | 4.84% | Debt Maturities and Revolving Credit Facility Capacity (in millions) | Maturity Period | Long-Term Debt (June 30, 2025) | | :-------------- | :----------------------------- | | Within 1 year | $45 | | Between 1 and 2 years | $558 | | Between 2 and 3 years | $15 | | Between 3 and 4 years | $512 | | Between 4 and 5 years | $1,447 | | Thereafter | $0 | | Total | $2,577 | | Revolving Credit Facility (June 30, 2025) | Amount | | :-------------------------------------- | :----- | | Total capacity | $750 | | Less: Borrowings | $221 | | Available capacity | $529 | - The Company uses interest rate swaps to hedge $1.4 billion of its variable-rate debt, covering nearly 95% of term loan B[65] Net Interest Expense (in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net interest expense | $34 | $30 | $68 | $59 | 9. FAIR VALUE This note describes the methodologies used for fair value measurements and derivative instruments - The Company measures financial assets and liabilities at fair value using a three-level hierarchy based on input observability[69][70][71][72] - The Company uses cash flow hedges and foreign currency forward contracts to manage risk, not for speculative purposes[73][74][75] - For the six months ended June 30, 2025, the Company recognized $6 million in losses from freestanding foreign currency exchange contracts[75] 10. COMMITMENTS AND CONTINGENCIES This note discloses information on legal proceedings and potential financial exposures - The Company is involved in approximately 60 pending litigation matters, including claims related to sex trafficking at franchised/managed hotels[78] Legal Contingency Accruals (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Reserves for legal matters | $2 | $3 | - The potential exposure from adverse litigation outcomes could aggregate up to approximately $8 million in excess of recorded accruals[80] 11. STOCK-BASED COMPENSATION This note details the company's equity incentive plan and related compensation expenses - As of June 30, 2025, 4.2 million shares remained available under the 2018 Equity and Incentive Plan[82] - During 2025, the Company granted $32 million in RSUs and approved PSUs with a maximum grant value of $20 million[83][84] Stock-Based Compensation Expense (in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Stock-based compensation expense | $9 | $12 | $19 | $22 | 12. SEGMENT INFORMATION This note provides financial information for the company's reportable operating segments - Wyndham Hotels' primary reportable segment is Hotel Franchising, which involves licensing lodging brands and providing related services[89] - The Company changed its primary measure of segment profit from adjusted EBITDA to net income following a 2023 accounting update[91] Segment Profitability (Net Income) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Consolidated net income | $87 | $86 | $149 | $102 | Adjusted EBITDA by Segment (in millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Hotel Franchising Adjusted EBITDA | $214 | $195 | $375 | $353 | | Corporate Adjusted EBITDA | $(19) | $(17) | $(35) | $(35) | | Total Company Adjusted EBITDA | $195 | $178 | $340 | $318 | 13. OTHER EXPENSES AND CHARGES This note details transaction-related, separation-related, restructuring, and impairment charges Transaction-Related Expenses (in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Transaction-related expenses | $1 | $5 | $1 | $46 | - Transaction-related expenses in 2024 were primarily due to costs from a failed hostile takeover defense and loan repricing[95] Separation-Related Income (in millions) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Separation-related income | $0 | $12 | $0 | $11 | - In Q2 2025, the Company incurred $13 million in restructuring expenses, expected to yield $15 million in annualized savings[99][139] Restructuring Activity (in millions) | Plan | Liability as of Dec 31, 2024 | Costs Recognized (6M 2025) | Cash Payments (6M 2025) | Liability as of Jun 30, 2025 | | :--- | :--------------------------- | :------------------------- | :---------------------- | :--------------------------- | | 2024 Plan (Personnel-related) | $5 | $0 | $(3) | $2 | | 2025 Plan (Personnel-related) | $0 | $8 | $(2) | $6 | | 2025 Plan (Facility-related) | $0 | $5 | $0 | $5 | | Total accrued restructuring | $5 | $13 | $(5) | $13 | - An impairment charge of $12 million was recorded in the first quarter of 2024, primarily related to development advance notes[102] 14. ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS) This note reconciles the changes in each component of accumulated other comprehensive income Components of Accumulated Other Comprehensive Income/(Loss) (in millions) | Component | Balance as of Dec 31, 2024 | Period Change (Q1 2025) | Balance as of Mar 31, 2025 | Period Change (Q2 2025) | Balance as of Jun 30, 2025 | | :-------- | :------------------------- | :---------------------- | :------------------------- | :---------------------- | :------------------------- | | Foreign Currency Translation Adjustments | $3 | $2 | $5 | $5 | $10 | | Cash Flow Hedges | $14 | $(15) | $(1) | $(7) | $(8) | | Total Accumulated Other Comprehensive Income/(Loss) | $17 | $(13) | $4 | $(2) | $2 | - AOCI decreased from $17 million to $2 million primarily due to unrealized losses on cash flow hedges[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the company's financial condition and results of operations Forward-Looking Statements The report contains forward-looking statements subject to various risks and uncertainties - Factors that could cause actual results to differ materially include economic conditions, industry environment, and geopolitical conflicts[106] BUSINESS AND OVERVIEW Wyndham Hotels & Resorts is a leading global hotel franchisor operating in approximately 100 countries[109] RESULTS OF OPERATIONS This section analyzes the company's operating statistics and financial results for the reporting periods OPERATING STATISTICS This subsection presents key performance indicators for the company's hotel system - The Company revised its reporting to exclude approximately 67,300 rooms in China due to operational challenges[113] Key Operating Statistics | Metric | As of June 30, 2025 | As of June 30, 2024 (Recasted) | % Change YoY | | :----- | :------------------ | :----------------------------- | :----------- | | Total rooms | 846,700 | 816,300 | 4% | | US rooms | 503,300 | 499,400 | 1% | | International rooms | 343,400 | 316,900 | 8% | | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 (Recasted) | % Change YoY | | :----- | :------------------------------- | :------------------------------------------ | :----------- | | Global RevPAR | $47.55 | $49.08 | (3%) | | US RevPAR | $53.32 | $55.44 | (4%) | | International RevPAR | $39.45 | $39.40 | 0% | | Global average royalty rate | 4.0% | 4.0% | 2 bps | | US average royalty rate | 4.7% | 4.7% | 6 bps | | International average royalty rate | 2.6% | 2.5% | 13 bps | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 (Recasted) | % Change YoY | | :----- | :----------------------------- | :---------------------------------------- | :----------- | | Global RevPAR | $43.03 | $43.78 | (2%) | | US RevPAR | $47.86 | $48.54 | (1%) | | International RevPAR | $36.18 | $36.48 | (1%) | | Global average royalty rate | 4.0% | 4.0% | 8 bps | | US average royalty rate | 4.7% | 4.6% | 12 bps | | International average royalty rate | 2.6% | 2.5% | 12 bps | - Rooms grew 4% year-over-year, driven by 1% growth in the U.S. and 8% internationally[119] - Excluding currency effects, global RevPAR for Q2 2025 decreased 3% YoY, with a 4% decline in the U.S. and 1% growth internationally[120] THREE MONTHS ENDED JUNE 30, 2025 VS. THREE MONTHS ENDED JUNE 30, 2024 This subsection compares financial results for the second quarter of 2025 and 2024 Three Months Ended June 30, 2025 vs. 2024 Financial Highlights (in millions) | Metric | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | Net revenues | $397 | $367 | $30 | 8% | | Total expenses | $247 | $222 | $25 | 11% | | Operating income | $150 | $145 | $5 | 3% | | Net income | $87 | $86 | $1 | 1% | - Net revenues increased by $30 million (8%) driven by higher marketing, reservation, loyalty, and ancillary revenues[122][123] - Total expenses increased by $25 million (11%) due to higher operating, marketing, and restructuring costs[122][123][124] - Hotel Franchising adjusted EBITDA increased by $19 million (10%) to $214 million[126][127] SIX MONTHS ENDED JUNE 30, 2025 VS. SIX MONTHS ENDED JUNE 30, 2024 This subsection compares financial results for the first half of 2025 and 2024 Six Months Ended June 30, 2025 vs. 2024 Financial Highlights (in millions) | Metric | 2025 | 2024 | Change | % Change | | :----- | :--- | :--- | :----- | :------- | | Net revenues | $713 | $671 | $42 | 6% | | Total expenses | $451 | $476 | $(25) | (5%) | | Operating income | $262 | $195 | $67 | 34% | | Net income | $149 | $102 | $47 | 46% | - Net revenues increased by $42 million (6%) driven by higher ancillary, marketing, and royalty revenues[129][132] - Total expenses decreased by $25 million (5%) due to lower transaction-related expenses and the absence of a prior-year impairment charge[129][132] - Hotel Franchising adjusted EBITDA increased by $22 million (6%) to $375 million[135][136] DEVELOPMENT This section discusses the company's hotel development pipeline and contract activity - The global development pipeline reached a record high of approximately 2,150 hotels and 255,000 rooms, a 5% year-over-year increase[138] - Approximately 70% of the pipeline is in midscale and above segments, and 76% is new construction[138] - The Company awarded 229 new contracts in Q2 2025, a 40% increase year-over-year[138] RESTRUCTURING This section details the company's recent restructuring initiatives and associated costs - In Q2 2025, the Company approved a restructuring plan, incurring $13 million in expenses and impacting 156 employees[139] - The 2025 plan is expected to generate annualized savings of approximately $15 million[139] Restructuring Activity for Six Months Ended June 30, 2025 (in millions) | Plan | Liability as of Dec 31, 2024 | Costs Recognized | Cash Payments | Liability as of Jun 30, 2025 | | :--- | :--------------------------- | :--------------- | :------------ | :--------------------------- | | 2024 Plan (Personnel-related) | $5 | $0 | $(3) | $2 | | 2025 Plan (Personnel-related) | $0 | $8 | $(2) | $6 | | 2025 Plan (Facility-related) | $0 | $5 | $0 | $5 | | Total accrued restructuring | $5 | $13 | $(5) | $13 | FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES This section analyzes the company's balance sheet, liquidity position, cash flows, and capital deployment Financial Condition This subsection provides a summary of changes in the company's financial position Financial Condition Summary (in millions) | Metric | June 30, 2025 | December 31, 2024 | Change | | :----- | :------------ | :---------------- | :----- | | Total assets | $4,298 | $4,223 | $75 | | Total liabilities | $3,728 | $3,573 | $155 | | Total stockholders' equity | $570 | $650 | $(80) | - Total assets increased by $75 million, total liabilities increased by $155 million, and total equity decreased by $80 million[143] Liquidity and Capital Resources This subsection discusses the company's available liquidity and compliance with debt covenants - As of June 30, 2025, the Company's liquidity was approximately $580 million, including $529 million available under its revolving credit facility[145][146] - The Company was in compliance with all financial covenants, with a first-lien leverage ratio of 2.9 times (maximum allowed 5.0 times)[146][162][164] - The Company has $1.4 billion in interest rate swaps hedging approximately 95% of its term loan B[148] CASH FLOW This subsection analyzes the major sources and uses of cash during the period Changes in Cash, Cash Equivalents and Restricted Cash (in millions) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :------- | :------------------------------- | :------------------------------- | :----- | | Operating activities | $129 | $77 | $52 | | Investing activities | $(71) | $(31) | $(40) | | Financing activities | $(122) | $(32) | $(90) | | Net change in cash | $(63) | $13 | $(76) | - Net cash from operating activities increased by $52 million, primarily due to the absence of payments for a hostile takeover defense in 2024[150] - Net cash used in investing increased by $40 million due to higher development loans, while financing use increased by $90 million[151] Capital Deployment This subsection outlines the company's strategy for allocating capital to growth and shareholder returns - Capital expenditures for the first half of 2025 were $19 million, with a full-year forecast of $40-45 million[153] - The Company deployed $51 million in net development advance notes and expects to invest approximately $110 million for the full year 2025[154] - $52 million was spent on loans to franchisees during the first half of 2025 to support hotel development[155] Stock Repurchase Program This subsection provides details on the company's share repurchase activities - The Board authorized a $400 million increase to the share repurchase plan in 2024, which has no termination date[158] Common Stock Repurchases for Q2 2025 (excluding excise taxes and fees) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan | | :----- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------- | | April | 527,144 | $83.28 | $418,473,345 | | May | 41,210 | $84.92 | $414,973,623 | | June | 354,484 | $80.74 | $386,354,100 | | Total | 922,838 | $82.38 | $386,354,100 (as of June 30, 2025) | - During the first half of 2025, the Company repurchased 1.7 million shares for $153 million, with $386 million remaining available under the program[159] Dividend Policy This subsection describes the company's policy and recent history of dividend payments - The Company declared cash dividends of $0.41 per share in Q1 and Q2 2025, totaling $64 million[160] - Future dividend declarations are at the Board's discretion and depend on various factors[161] LONG-TERM DEBT COVENANTS This section confirms the company's compliance with its debt covenants - The Company was in compliance with all debt covenants as of June 30, 2025, with a first-lien leverage ratio of 2.9 times[162][164] SEASONALITY This section discusses the seasonal nature of the company's business - Revenues are generally higher in the second and third quarters due to increased leisure travel[165] COMMITMENTS AND CONTINGENCIES This section provides an update on potential liabilities from legal and regulatory proceedings - Potential exposure from adverse legal outcomes could range up to $8 million in excess of recorded accruals[166] CRITICAL ACCOUNTING POLICIES This section highlights the significant estimates and judgments used in preparing financial statements - The preparation of financial statements requires management to make estimates and assumptions that are inherently uncertain[167] Item 3. Quantitative and Qualitative Disclosures About Market Risk. This section details the company's exposure to interest rate and foreign currency exchange rate risks - The Company uses derivative instruments to manage interest rate and foreign currency risk, not for speculative purposes[168][169] - A hypothetical 10% change in the effective interest rate on variable-rate debt would impact annual interest expense by $3 million[170] - A hypothetical 10% change in foreign currency exchange rates would impact the fair value of forward contracts by approximately $10 million[172][173] - The Company incurred $1 million in foreign currency exchange losses related to highly inflationary countries for the six months ended June 30, 2025[174] Item 4. Controls and Procedures. This section confirms the effectiveness of the company's disclosure controls and internal controls - Management concluded that disclosure controls and procedures were effective as of June 30, 2025[179] - There have been no material changes in the Company's internal control over financial reporting during the period[179] PART II OTHER INFORMATION Item 1. Legal Proceedings. This section states no current proceedings are expected to have a material adverse effect on the company[181] Item 1A. Risk Factors. This section directs readers to the risk factors detailed in the company's most recent Annual Report[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section summarizes common stock repurchases for the quarter ended June 30, 2025 - The Board has continuously increased the capacity of the share repurchase plan, which has no termination date[183] Common Stock Repurchases for Q2 2025 (excluding excise taxes and fees) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan | | :----- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------- | | April | 527,144 | $83.28 | $418,473,345 | | May | 41,210 | $84.92 | $414,973,623 | | June | 354,484 | $80.74 | $386,354,100 | | Total | 922,838 | $82.38 | $386,354,100 (as of June 30, 2025) | Item 3. Defaults Upon Senior Securities. This section states that there were no defaults upon senior securities during the reporting period[184] Item 4. Mine Safety Disclosures. This section indicates that mine safety disclosures are not applicable to the company[185] Item 5. Other Information. This section reports no new or modified Rule 10b5-1 trading arrangements for directors or officers[186] Item 6. Exhibits. This section lists all exhibits filed with the Form 10-Q report, including certifications and XBRL documents[193] Signatures This section contains the required signatures from the Chief Financial Officer and Chief Accounting Officer[191]