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Extended Stay America Announces Third Quarter 2016 Results

October 25, 2016 at 6:30 PM EDT

-Third Quarter Net Income of $57.1 million

-Third Quarter Adjusted EBITDA1 of $185.7 million

-Third Quarter Total Revenues of $354.5 million

-Third Quarter Comparable Hotel2 Total Revenues Increase 3.9%

-Third Quarter Comparable Hotel Operating Margin1 Expands 150 basis points

-Updates 2016 Guidance

CHARLOTTE, N.C.--(BUSINESS WIRE)-- Extended Stay America, Inc. and ESH Hospitality, Inc. (NYSE:STAY) (together, the “Company”) today announced consolidated results for the quarter ended September 30, 2016.

Third Quarter 2016 Highlights

  • Comparable Hotel total revenues grew 3.9% to $354.5 million
  • Comparable Hotel Revenue Per Available Room (“RevPAR”) grew 3.7% to $54.65
  • Comparable Hotel Adjusted EBITDA increased 7.4% to $185.7 million
  • Adjusted Paired Share Income1 of $71.5 million, or $0.36 per diluted Paired Share1

Nine Months 2016 Highlights

  • Comparable Hotel total revenues grew 4.4% to $974.9 million
  • Comparable Hotel RevPAR grew 3.9% to $50.47
  • Comparable Hotel Adjusted EBITDA increased 4.7% to $473.2 million
  • Adjusted Paired Share Income of $160.3 million, or $0.79 per diluted Paired Share

Extended Stay America’s Chief Executive Officer, Gerry Lopez, commented, “We were pleased with our performance in the third quarter, as our RevPAR growth ran ahead of our closest competitive chain-scales – Economy and Midscale – as well as above the industry. We were able to show property level flow through over 90%, driving strong EBITDA growth and expanding Comparable Hotel Operating Margin by 150 basis points.”

Mr. Lopez continued, “In addition to our strong financial and operating performance during the quarter, we were pleased to make progress on other initiatives. These included refinancing the balance sheet with flexible, long dated, low cost debt, and providing strong capital returns through both dividends and share repurchases. We also began to execute on our real estate monetization strategy we discussed at our Investor Day earlier this year. Lastly, we were very gratified that corporate travel managers voted us the #1 mid-priced extended stay hotel brand this year with Business Travel News, showing the strong progress we have made with corporate guests.”

Financial and Operating Results

Total revenues for the three months ended September 30, 2016 were $354.5 million while Comparable Hotel total revenues increased by 3.9% over the same period in 2015. Total revenues for the nine months ended September 30, 2016 were $974.9 million while Comparable Hotel total revenues increased by 4.4% over the same period in 2015.

RevPAR for the three months ended September 30, 2016 grew 7.5% over the same period in 2015, driven by an improvement in average daily rate (“ADR”) of 6.0%. Occupancy increased to 79.4% compared to 78.3% in the same period in 2015. Comparable Hotel RevPAR grew 3.7% during the quarter to $54.65 driven by a 2.4% increase in ADR and a 100 basis point increase in occupancy. RevPAR for the nine months ended September 30, 2016 increased 7.5% over the same period in 2015, driven by a 7.6% increase in ADR. Occupancy declined to 75.2% compared to 75.3% in the same period in 2015. Comparable Hotel RevPAR grew 3.9% during the first nine months of the year to $50.47 driven by a 4.0% increase in ADR, partially offset by a 10 basis point decrease in occupancy.

Hotel Operating Margin for the three months ended September 30, 2016 was 58.4% compared to 56.2% in the same period in 2015. Comparable Hotel Operating Margin increased 150 basis points over the same period in 2015. Comparable Hotel operating margin flow-through, defined as the change in Comparable Hotel Operating Profit1 divided by the change in Comparable Hotel total revenues, was 94.7%. Comparable Hotel Operating Margin for the nine months ended September 30, 2016 was 55.1% compared to 55.4% in the same period in 2015.

Net income for the three months ended September 30, 2016 was $57.1 million compared to $58.2 million in the same period in 2015. Net income decreased due to the 53 hotel portfolio sale in December 2015, an increase in depreciation expense due to renovations, and higher interest expense due to debt extinguishment costs related to our refinancing activity during the quarter, partially offset by a decrease in income tax expense. Income tax expense for the three months ended September 30, 2016 was $15.9 million compared to $21.3 million in the same period in 2015. Net income for the nine months ended September 30, 2016 was $133.2 million compared to $150.9 million in the same period in 2015. Income tax expense for the nine months ended September 30, 2016 was $26.2 million compared to $48.1 million in the same period in 2015.

Adjusted EBITDA for the three months ended September 30, 2016 was $185.7 million. Adjusted EBITDA excludes non-cash equity-based compensation of $3.0 million, an impairment charge of $2.8 million, and loss on disposal of assets and other net expenses of $2.4 million. Comparable Hotel Adjusted EBITDA increased $12.8 million or 7.4% during the quarter over the same period in 2015. Adjusted EBITDA for the nine months ended September 30, 2016 was $473.2 million. Adjusted EBITDA excludes non-cash equity based compensation of $8.6 million, an impairment charge of $2.8 million, loss on disposal of assets and other net expenses of $6.6 million. Comparable Hotel Adjusted EBITDA increased $21.4 million or 4.7% during the nine months ended September 30, 2016 over the same period in 2015.

Adjusted Paired Share Income for the three months ended September 30, 2016 was $71.5 million, or $0.36 per diluted Paired Share, compared to $66.6 million, or $0.33 per diluted Paired Share, in the same period in 2015. Adjusted Paired Share Income for the nine months ended September 30, 2016 was $160.3 million, or $0.79 per diluted Paired Share, compared to $163.8 million, or $0.80 per diluted Paired Share, in the same period in 2015. Adjusted Paired Share Income, a non-GAAP measure, represents net income, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share. A Paired Share entitles its holder to participate in 100% of the common equity and earnings of both Extended Stay America, Inc. and ESH Hospitality, Inc.

Capital and Asset Sales

The Company invested $56.5 million in capital expenditures during the third quarter of 2016 which includes $23.9 million in renovation capital and $28.9 million in maintenance capital. The Company completed 17 hotel renovations in the third quarter of 2016, bringing the total number of renovated hotels to 547. For the nine months ended September 30, 2016, the Company invested $166.5 million in capital expenditures.

In October, the Company executed a purchase and sale agreement to divest one property for $44.8 million. The Company expects to lease back the property at nominal rent for approximately 18 to 24 months and expects to receive all operating income from this hotel in 2017. This transaction is currently in due diligence and the Company expects it to close in December 2016. Separately, the Company has executed a purchase and sale agreement to divest its three Extended Stay Canada hotels for CAD $76.0 million. This transaction is also in due diligence and the Company expects it to close in the first quarter of 2017.

Distribution and Share Repurchases

On October 25, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc., declared cash distributions totaling $0.19 per Paired Share for the third quarter of 2016. The distributions are payable on November 22, 2016 to shareholders of record as of November 8, 2016.

During the third quarter of 2016, the Company repurchased approximately 0.6 million Paired Shares for an aggregate purchase price of approximately $9.2 million. The Company also announced the purchase of 1.95 million Paired Shares for $27.6 million on September 29, 2016 that closed on October 4, 2016. As of October 24, 2016 the Company had $102.8 million in repurchase authorization remaining.

2016 Outlook

The Company’s outlook for 2016 is updated as follows:

                     
Full Year 2016         Updated Outlook         Previous Outlook
in millions, except %       Low         High         Low         High
                                       
Total Revenues       $ 1,261           $ 1,267           $ 1,257           $ 1,272
Comparable Hotel Revenue % Δ         3.6%             4.1%             3.25%             4.5%
Net Income       $ 153           $ 166           $ 162           $ 188
Adjusted EBITDA       $ 601           $ 606           $ 595           $ 610

Comparable Hotel Adjusted EBITDA % Δ

       

4.7 %

           

5.6%

           

3.6%

           

6.2%

Depreciation and Amortization       $ 218           $ 223           $ 215           $ 220
Net Interest Expense       $ 164           $ 166           $ 153           $ 158
Effective Tax Rate         17.5%             18.5%             15.0%             16.0%
Capital Expenditures       $ 220           $ 235           $ 240           $ 260
Renovation Capital       $ 100           $ 110           $ 120           $ 135
                                                     

Webcast and Conference Call Details

The Company will host a conference call on Tuesday, October 25, 2016 at 8:30 a.m. Eastern Time. The conference call will be webcast simultaneously in the Investor Relations section of the Company’s website at www.aboutstay.com. A replay of the call will be available for 90 days following the webcast on the Company’s website.

Alternatively, the conference call can be accessed by dialing 1-877-705-6003 for domestic callers or 1-201-493-6725 for international callers. A telephone replay will be available from shortly after the call until November 8, 2016, and can be accessed by dialing 1-877-870-5176 for domestic callers or 1-858-384-5517 for international callers. The passcode for the replay is 13647092.

Disclosure Regarding Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share, which are detailed in the reconciliation tables that accompany this release, are used by the Company as supplemental performance measures. The Company believes these financial measures, including those provided on a Comparable Hotel basis, provide useful information to investors regarding our results of operations and allow investors to evaluate the ongoing operating performance of our hotels and facilitate comparisons between the Company and other lodging companies, hotel owners and capital-intensive companies. EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share are not recognized terms under U.S. GAAP. EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share as presented may not be comparable to measures calculated by other companies. These measures should not be considered as alternative measures of operating profit, net income, net income per share or cash flow provided by operating activities calculated in accordance with U.S. GAAP. The Company’s presentation of EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share does not replace the presentation of the Company’s consolidated financial results prepared in accordance with U.S. GAAP.

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws. Statements related to, among other things, future financial performance, including our 2016 outlook, expected performance, free cash flow, debt reduction, distribution growth and other growth opportunities, as such, involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results or performance to differ from those projected in the forward-looking statements, possibly materially. For a description of factors that may cause the Company’s actual results or performance to differ from future results or performance implied by forward-looking statements, please review the information under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in the Company’s combined annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 23, 2016 and other documents of the Company on file with or furnished to the SEC. Any forward-looking statements made in this release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, will have the expected consequences to, or effects on, the Company, its business or operations. Except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. We caution you that actual results may differ materially from what is expressed, implied or forecasted by the Company’s forward-looking statements.

About Extended Stay America

Extended Stay America, Inc., the largest owner/operator of company-branded hotels in North America, owns and operates 629 hotels in the U.S. and Canada comprising approximately 69,400 rooms and employs over 8,400 employees at its hotel properties and headquarters. The Company’s core brand, Extended Stay America®, serves the mid-priced extended stay segment. Visit www.esa.com for more information about the Company and its services.

_______________________

 

1

  See “Disclosure Regarding Non-GAAP Financial Measures” for an explanation of non-GAAP measures included herein (i.e., EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share).

2

  Comparable Hotels include 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
     
                       
EXTENDED STAY AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
                           
  Three Months Ended       Nine Months Ended
  September 30,       September 30,
    2016       2015     % Variance         2016       2015     % Variance
              REVENUES:            
  $ 349,076     $ 355,445     (1.8 )%   Room revenues   $ 960,046     $ 974,127     (1.4 )%
    5,445       5,071     7.4 %   Other hotel revenues     14,822       14,291     3.7 %
                           
    354,521       360,516     (1.7 )%   Total revenues     974,868       988,418     (1.4 )%
                           
              OPERATING EXPENSES:            
    149,860       159,049     (5.8 )%   Hotel operating expenses     444,498       450,543     (1.3 )%
    24,612       24,373     1.0 %   General and administrative expenses     73,552       73,909     (0.5 )%
    55,955       52,268     7.1 %   Depreciation and amortization     164,274       151,980     8.1 %
    2,756       9,011     (69.4 )%   Impairment of long-lived assets     2,756       9,011     (69.4 )%
                           
    233,183       244,701     (4.7 )%   Total operating expenses     685,080       685,443     (0.1 )%
                           
    2       3     (33.3 )%   OTHER INCOME     20       44     (54.5 )%
                           
    121,340       115,818     4.8 %   INCOME FROM OPERATIONS     289,808       303,019     (4.4 )%
                           
    (305 )     1,143     (126.7 )%   OTHER NON-OPERATING (INCOME) EXPENSE     (1,069 )     2,035     (152.5 )%
                           
    48,713       35,157     38.6 %   INTEREST EXPENSE, NET     131,462       101,975     28.9 %
                           
    72,932       79,518     (8.3 )%   INCOME BEFORE INCOME TAX EXPENSE     159,415       199,009     (19.9 )%
                           
    15,867       21,293     (25.5 )%   INCOME TAX EXPENSE     26,211       48,119     (45.5 )%
                           
    57,065       58,225     (2.0 )%   NET INCOME     133,204       150,890     (11.7 )%
                           
    (10,509 )     (20,569 )   (48.9 )%  

NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS (1)

    (8,873 )     (33,703 )   (73.7 )%
                           
  $ 46,556     $ 37,656     23.6 %  

NET INCOME ATTRIBUTABLE TO COMMON
SHAREHOLDERS

  $ 124,331     $ 117,187     6.1 %
                           
                           
  $ 0.23     $ 0.18         NET INCOME PER COMMON SHARE - DILUTED   $ 0.61     $ 0.57      
                           
    200,696       204,685        

WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING - DILUTED

    202,252       204,538      
                                           

(1)

 

Noncontrolling interests in Extended Stay America, Inc. include approximately 45% of ESH REIT's common equity.

     
                 
        CONSOLIDATED BALANCE SHEET DATA        
       

AS OF SEPTEMBER 30, 2016 AND DECEMBER 31, 2015

       
        (In thousands)        
        (Unaudited)        
            September 30,   December 31,
              2016     2015
        Cash and cash equivalents   $ 149,835   $ 373,239
        Restricted cash   $ 21,576   $ 84,416
        Total assets   $ 4,256,936   $ 4,528,900
       

Total debt, net of unamortized deferred financing
costs and debt discounts (1)

  $ 2,587,901   $ 2,783,590
        Total equity   $ 1,447,693   $ 1,488,357
                 
       

(1) Unamortized deferred financing costs and debt discounts totaled approximately $58.3
million and $35.2 million as of September 30, 2016 and December 31, 2015, respectively.

         
                 
EXTENDED STAY AMERICA, INC.
OPERATING METRICS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(Unaudited)
                         
Three Months Ended       Nine Months Ended
September 30,       September 30,
  2016       2015     Variance         2016       2015     Variance
  629       682     (53 )   Number of hotels (as of September 30)(1)     629       682     (53 )
  69,383       76,000     (6,617 )   Number of rooms (as of September 30)(1)     69,383       76,000     (6,617 )
  79.4 %     78.3 %   110 bps   Occupancy     75.2 %     75.3 %   (10) bps
$ 68.84     $ 64.95     6.0 %   ADR   $ 67.09     $ 62.38     7.6 %
$ 54.65     $ 50.83     7.5 %   RevPAR   $ 50.47     $ 46.95     7.5 %
                         
            Hotel Inventory (as of September 30):            
  547       413     134     Renovated Extended Stay America (2)     547       413     134  
  82       222     (140 )   Unrenovated Extended Stay America and other (1)     82       222     (140 )
  -       47     (47 )   Crossland Economy Studios (1)     -       47     (47 )
  629       682     (53 )   Total number of hotels     629       682     (53 )
                         
           

Renovation Displacement Data (in thousands, except percentages):

           
  6,383       6,993     (610 )   Total available room nights     19,015       20,747     (1,732 )
  64       128     (64 )   Room nights displaced from renovation     243       231     12  
  1.0 %     1.8 %   (80) bps   % of available room nights displaced     1.3 %     1.1 %   20 bps
                         
                         
                         
COMPARABLE HOTEL OPERATING METRICS (3)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(Unaudited)
                         
Three Months Ended       Nine Months Ended
September 30,       September 30,
  2016       2015     Variance         2016       2015     Variance
  629       629     -     Number of hotels     629       629     -  
  69,383       69,383     -     Number of rooms     69,383       69,383     -  
  79.4 %     78.4 %   100 bps   Comparable Hotel Occupancy     75.2 %     75.3 %   (10) bps
$ 68.84     $ 67.22     2.4 %   Comparable Hotel ADR   $ 67.09     $ 64.54     4.0 %
$ 54.65     $ 52.70     3.7 %   Comparable Hotel RevPAR   $ 50.47     $ 48.59     3.9 %
                         
            Comparable Hotel Inventory:            
  547       413     134     Renovated Extended Stay America (2)     547       413     134  
  82       216     (134 )   Unrenovated Extended Stay America and other     82       216     (134 )
  629       629     -     Comparable Hotel number of hotels     629       629     -  
                         
           

Comparable Hotel Renovation Displacement Data (in thousands,
except percentages):

           
  6,383       6,383     -     Comparable Hotel available room nights     19,015       18,944     71  
  64       128     (64 )   Comparable Hotel room nights displaced from renovation     243       231     12  
  1.0 %     2.0 %   (100) bps   % of Comparable Hotel available room nights displaced     1.3 %     1.2 %   10 bps
                                         
 

(1) In December 2015, the Company sold a portfolio of 53 hotel properties, six of which were included in "Unrenovated Extended Stay America and other" and 47 of which were included in "Crossland Economy Studios" as of September 30, 2015.

 

(2) Includes three Extended Stay Canada-branded hotels.

 

(3) Comparable Hotel operating metrics include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.

   
           
EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
                     
Three Months Ended         Nine Months Ended  
September 30,         September 30,  
  2016       2015             2016       2015    
$ 57,065     $ 58,225       Net income   $ 133,204     $ 150,890    
  48,713       35,157       Interest expense, net     131,462       101,975    
  15,867       21,293       Income tax expense     26,211       48,119    
  55,955       52,268       Depreciation and amortization     164,274       151,980    
  177,600       166,943  

 

  EBITDA     455,151       452,964    
  3,016       3,021       Non-cash equity-based compensation     8,635       7,940    
  (305 )     1,143       Other non-operating (income) expense     (1,069 )     2,035    
  2,756       9,011       Impairment of long-lived assets     2,756       9,011    
  2,666  

(1)

 

  1,290  

(2)

 

 

Other expenses

    7,718  

(3)

 

  4,034  

(4)

 

$ 185,733     $ 181,408       Adjusted EBITDA   $ 473,191     $ 475,984    
  2.4 %         % growth     (0.6 )%      
                     
                     
                     
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE HOTEL ADJUSTED EBITDA(5)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
                     
Three Months Ended         Nine Months Ended  
September 30,         September 30,  
  2016       2015             2016       2015    
$ 57,065     $ 58,225       Net income   $ 133,204     $ 150,890    
  48,713       35,157       Interest expense, net     131,462       101,975    
  15,867       21,293       Income tax expense     26,211       48,119    
  55,955       52,268       Depreciation and amortization     164,274       151,980    
  177,600       166,943       EBITDA     455,151       452,964    
  -       (8,511 )    

Adjusted Property EBITDA of hotels not owned for entirety of
periods presented

    -       (24,191 )  
  3,016       3,021       Non-cash equity-based compensation     8,635       7,940    
  (305 )     1,143       Other non-operating (income) expense     (1,069 )     2,035    
  2,756       9,011       Impairment of long-lived assets     2,756       9,011    
  2,666  

(1)

 

  1,290  

(2)

 

  Other expenses     7,718  

(3)

 

  4,034  

(6)

 

$ 185,733     $ 172,897       Comparable Hotel Adjusted EBITDA   $ 473,191     $ 451,793    
  7.4 %         % growth     4.7 %      
                     
 
(1) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.
(2) Includes loss on disposal of assets of approximately $1.3 million.
(3) Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties.
(4) Includes loss on disposal of assets of approximately $3.3 million and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
(5) Comparable Hotel Adjusted EBITDA includes the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(6) Includes loss on disposal of assets of approximately $3.3 million, $0.2 million of which relates to hotels not owned for entirety of periods presented, and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
 
             
  EXTENDED STAY AMERICA, INC.
  NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO PAIRED SHARE
  INCOME, ADJUSTED PAIRED SHARE INCOME AND ADJUSTED PAIRED SHARE INCOME PER PAIRED SHARE
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
  (In thousands, expect per Paired Share data)
  (Unaudited)
                       
  Three Months Ended         Nine Months Ended  
  September 30,         September 30,  
    2016       2015             2016       2015    
  $ 46,556     $ 37,656       Net income attributable to common shareholders   $ 124,331     $ 117,187    
    10,505       20,565      

Noncontrolling interests attributable to Class B common
shares of ESH REIT

    8,861       33,691    
    57,061       58,221       Paired Share Income     133,192       150,878    
    14,058       -       Debt extinguishment costs     26,161       2,283    
    (305 )     1,143       Other non-operating (income) expense     (1,069 )     2,035    
    2,756       9,011       Impairment of long-lived assets     2,756       9,011    
    2,666  

(1)

 

  1,290  

(2)

 

  Other expenses     7,718  

(3)

 

  4,034  

(4)

 

    (4,775 )     (3,065 )     Tax effect of adjustments to Paired Share Income     (8,505 )     (4,438 )  
  $ 71,461     $ 66,600       Adjusted Paired Share Income   $ 160,253     $ 163,803    
                       
  $ 0.36     $ 0.33       Adjusted Paired Share Income per Paired Share – diluted   $ 0.79     $ 0.80    
                       
    200,696       204,685       Weighted average Paired Shares outstanding – diluted     202,252       204,538    
                                       
 
(1) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.
(2) Includes loss on disposal of assets of approximately $1.3 million.
(3) Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties.
(4) Includes loss on disposal of assets of approximately $3.3 million and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
 
                   
EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
                         
Three Months Ended       Nine Months Ended
September 30,       September 30,
  2016       2015     % Variance         2016       2015     % Variance
$ 349,076     $ 355,445     (1.8 )%   Room revenues   $ 960,046     $ 974,127     (1.4 )%
  5,445       5,071     7.4 %   Other hotel revenues     14,822       14,291     3.7 %
  354,521       360,516     (1.7 )%   Total hotel revenues     974,868       988,418     (1.4 )%
  147,605       157,761     (6.4 )%   Hotel operating expenses(1)     437,242       447,217     (2.2 )%
$ 206,916     $ 202,755     2.1 %   Hotel Operating Profit   $ 537,626     $ 541,201     (0.7 )%
  58.4 %     56.2 %   220 bps   Hotel Operating Margin     55.1 %     54.8 %   30 bps
                         
                         
                         

NON-GAAP RECONCILIATION OF COMPARABLE HOTEL OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN(2)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
                         
Three Months Ended       Nine Months Ended
September 30,       September 30,
  2016       2015     % Variance         2016       2015     % Variance
$ 349,076     $ 355,445     (1.8 )%   Room revenues   $ 960,046     $ 974,127     (1.4 )%
  5,445       5,071     7.4 %   Other hotel revenues     14,822       14,291     3.7 %
  -       (19,371 )   (100.0 )%  

Total revenues of hotels not owned for
entirety of periods presented

    -       (54,748 )   (100.0 )%
  354,521       341,145     3.9 %   Comparable Hotel total revenues     974,868       933,670     4.4 %
  147,605       157,761     (6.4 )%   Hotel operating expenses(1)     437,242       447,217     (2.2 )%
  -       (10,860 )

(3)

 

(100.0

)%  

Hotel operating expenses of hotels not
owned for entirety of periods presented

    -       (30,557 )

(3)

 

(100.0 )%
  147,605       146,901     0.5 %   Comparable Hotel operating expenses     437,242       416,660     4.9 %
$ 206,916     $ 194,244     6.5 %   Comparable Hotel Operating Profit   $ 537,626     $ 517,010     4.0 %
                         
  58.4 %     56.9 %   150 bps   Comparable Hotel Operating Margin     55.1 %     55.4 %   (30) bps
                                         
 
(1) Excludes loss on disposal of assets of approximately $2.2 million, $1.3 million, $7.2 million and $3.3 million, respectively.
(2) Comparable Hotel Operating Profit and Comparable Hotel Operating Margin include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(3) Excludes loss on disposal of assets of approximately $0 and $0.2 million, respectively.
 
 

EXTENDED STAY AMERICA, INC.

COMPARABLE HOTEL TOTAL REVENUES (1) AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE HOTEL ADJUSTED EBITDA(1)
TWELVE MONTHS ENDED DECEMBER 31, 2015 (ACTUAL) AND 2016 (OUTLOOK)
(In thousands)
(Unaudited)
                 
 

Twelve Months Ended

       

Twelve Months Ending December 31, 2016

  December 31, 2015         (Outlook)
  (Actual)         Low   High
  $ 1,217,354       Comparable Hotel total revenues   $ 1,261,000     $ 1,267,000  
                 
  $ 283,022       Net income   $ 152,660     $ 166,083  
    137,782       Interest expense, net     166,000       164,000  
    76,536       Income tax expense     34,653       35,230  
    203,897       Depreciation and amortization     223,000       218,000  
    701,237       EBITDA     576,313       583,313  
    (28,948 )     Adjusted Property EBITDA of hotels not owned for entirety of periods presented     -       -  
    10,500       Non-cash equity-based compensation     12,000       11,000  
    2,732       Other non-operating expense (income)     (1,069 )     (1,069 )
    9,011       Impairment of long-lived assets     2,756       2,756  
    (130,894 )     Gain on sale of hotel properties     -       -  
    10,495  

(2)

 

  Other expenses     11,000  

(3)

 

  10,000  
  $ 574,133       Comparable Hotel Adjusted EBITDA   $ 601,000     $ 606,000  
        % growth     4.7 %     5.6 %
                         
 

(1) Comparable Hotel total revenues and Comparable Hotel Adjusted EBITDA include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated as of December 31, 2015.

(2) Includes costs incurred in connection with the preparation of the registration statement filed in June 2015 and the November 2015 secondary offering of approximately $0.9 million, transaction costs of approximately $0.3 million associated with the sale of hotel properties, and loss on disposal of assets of approximately $9.3 million, $0.3 million of which relates to hotels not owned for entirety of the periods presented.

(3) Includes loss on disposal of assets and other non-operating transaction costs.

 
   
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE HOTEL ADJUSTED EBITDA(1)  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015  
(In thousands)  
(Unaudited)  
                     
Three Months Ended         Nine Months Ended  
September 30,         September 30,  
  2016       2015             2016       2015    
$ 57,065     $ 58,225       Net income   $ 133,204     $ 150,890    
  48,713       35,157       Interest expense, net     131,462       101,975    
  15,867       21,293       Income tax expense     26,211       48,119    
  55,955       52,268       Depreciation and amortization     164,274       151,980    
  177,600       166,943       EBITDA     455,151       452,964    
  -       (8,511 )    

Adjusted Property EBITDA of hotels not owned for entirety
of periods presented

    -       (24,191 )  
  3,016       3,021       Non-cash equity-based compensation     8,635       7,940    
  (305 )     1,143       Other non-operating (income) expense     (1,069 )     2,035    
  2,756       9,011       Impairment of long-lived assets     2,756       9,011    
  2,666  

(2)

 

  1,290  

(3)

 

  Other expenses     7,718  

(4)

 

  4,034  

(5)

 

$ 185,733     $ 172,897       Comparable Hotel Adjusted EBITDA   $ 473,191     $ 451,793    
  7.4 %         % growth     4.7 %      
                     
 
(1) Comparable Hotel Adjusted EBITDA includes the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(2) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.
(3) Includes loss on disposal of assets of approximately $1.3 million.
(4) Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties.
(5) Includes loss on disposal of assets of approximately $3.3 million, $0.2 million of which relates to hotels not owned for entirety of periods presented, and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
 
 
NON-GAAP RECONCILIATION OF COMPARABLE HOTEL OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN(1)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
                         
Three Months Ended       Nine Months Ended
September 30,       September 30,
  2016       2015     % Variance         2016       2015     % Variance
$ 349,076     $ 355,445     (1.8 )%   Room revenues   $ 960,046     $ 974,127     (1.4 )%
  5,445       5,071     7.4 %   Other hotel revenues     14,822       14,291     3.7 %
  -       (19,371 )   (100.0 )%  

Total revenues of hotels not owned for
entirety of periods presented

    -       (54,748 )   (100.0 )%
  354,521       341,145     3.9 %   Comparable Hotel total revenues     974,868       933,670     4.4 %
  147,605       157,761     (6.4 )%   Hotel operating expenses(2)     437,242       447,217     (2.2 )%
  -       (10,860 )

(3)

 

(100.0 )%  

Hotel operating expenses of hotels not
owned for entirety of periods presented

    -       (30,557 )

(3)

 

(100.0 )%
  147,605       146,901     0.5 %   Comparable Hotel operating expenses     437,242       416,660     4.9 %
$ 206,916     $ 194,244     6.5 %   Comparable Hotel Operating Profit   $ 537,626     $ 517,010     4.0 %
                         
  58.4 %     56.9 %   150 bps   Comparable Hotel Operating Margin     55.1 %     55.4 %   (30) bps
                                         
 
(1) Comparable Hotel Operating Profit and Comparable Hotel Operating Margin include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(2) Excludes loss on disposal of assets of approximately $2.2 million, $1.3 million, $7.2 million and $3.3 million, respectively.
(3) Excludes loss on disposal of assets of approximately $0 and $0.2 million, respectively.

 

Extended Stay America, Inc.
Investors:
Rob Ballew, 980-345-1546
investorrelations@esa.com
or
Media:
Terry Atkins, 980-345-1648
tatkins@esa.com

 

Source: Extended Stay America, Inc.