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Extended Stay America Announces Third Quarter 2019 Results

November 6, 2019 at 5:01 PM EST

- Net Income of $53.2 million in the Third Quarter
- Adjusted EBITDA1 of $156.3 million in the Third Quarter
- Franchise pipeline expands 12% to 58 hotels in the Third Quarter
- Repurchased 4.0 million Paired Shares in the Third Quarter

CHARLOTTE, N.C., Nov. 06, 2019 (GLOBE NEWSWIRE) -- Extended Stay America, Inc. and ESH Hospitality, Inc. (together, the “Company”) (NASDAQ:STAY) today announced consolidated results for the three and nine months ended September 30, 2019.

Third Quarter 2019 Highlights

  • Net Income of $53.2 million
  • Total revenues of $332.7 million
  • Comparable system-wide Revenue Per Available Room (“RevPAR”) declined 1.3%   
  • Adjusted EBITDA of $156.3 million
  • Adjusted Funds from Operations (“Adjusted FFO”)1 of $0.54 per diluted Paired Share
  • Adjusted Paired Share Income1 of $0.33 per diluted Paired Share
  • $186 million in capital returns to shareholders for the first nine months of 2019  

Extended Stay America’s President and Chief Executive Officer, Jonathan Halkyard, commented, “Our focus on core extended stay guests enabled us to outperform our competitive set yet again this quarter, a quarter which was characterized by slowing growth in the Economy and Mid-priced chain scales.”

Mr. Halkyard continued, “We have increased the pace of capital returns to shareholders in recent months and are on track to return more than 10% of our recent market capitalization to shareholders in 2019 through dividends and Paired Share repurchases. Capital returns remain a top priority for the Company with a strong balance sheet, a dividend yield in excess of 6% and more than $200 million remaining in repurchase authorization at the end of the third quarter.”

Financial and Operating Results

Total revenues for the three months ended September 30, 2019 were $332.7 million, a decrease of 5.2% over the same period in the prior year due to asset dispositions in 2018 and a decline in Comparable Company-owned RevPAR. Adjusting for asset dispositions in 2018, total revenues declined 0.6% during the third quarter. For the nine months ended September 30, 2019, total revenues declined 5.2% to $934.0 million, driven by asset dispositions. Adjusting for asset dispositions in 2018, total revenues were approximately flat for the nine months ended September 30, 2019.

Comparable system-wide RevPAR for the three months ended September 30, 2019 decreased 1.3% over the same period in 2018 to $54.81, driven by a 2.0% decline in Average Daily Rate (“ADR”), partially offset by a 70 basis point increase in occupancy. The decline in Comparable system-wide RevPAR was primarily driven by a decline in business transient and medium length stays, particularly in the month of September. Total Company-owned RevPAR increased 1.1% during the quarter, reflecting the sale of non-core hotels throughout 2018. Comparable system-wide RevPAR for the nine months ended September 30, 2019 declined 0.9% over the same period in 2018 driven by a 2.5% decline in ADR, partially offset by a 120 basis point increase in occupancy. Total Company-owned RevPAR for the nine months ended September 30, 2019 increased 1.7% over the same period in 2018, reflecting the sale of non-core hotels throughout 2018.

Hotel Operating Margin1for the three months ended September 30, 2019 was 53.8% compared to 55.5% in the same period in 2018.  While we continued our strategy to maximize targeted marketing efforts to our longest staying customers and other cost saving initiatives, these were offset by an increase in certain operating expenses, including hotel payroll expense, property insurance expense and property taxes, as well as a decline in Comparable Company-owned RevPAR. Hotel Operating Margin for the nine months ended September 30, 2019 was 52.9% compared to 54.8% in the same period of 2018.  Property-level margins remain at industry leading levels.

Net income for the three months ended September 30, 2019 was $53.2 million compared to $75.7 million in the same period in 2018, a decrease of 29.7%. Net income this quarter was adversely impacted by a $6.7 million debt extinguishment charge related to the Company’s Term Loan modifications and Unsecured Notes offering in September 2019, a non-recurring gain on dispositions of $3.5 million in 2018, as well an impairment charge of $2.7 million, partially offset by a decrease in income tax expense. Net income for the nine months ended September 30, 2019 was $141.3 million compared to $172.4 million in the same period in 2018, a decrease of 18.0%. The decline in net income for both the three and nine months ended September 30, 2019 was primarily due to a decline in Hotel Operating Margin, partially offset by lower depreciation expense. 

Adjusted EBITDA for the three months ended September 30, 2019 was $156.3 million, a decline of 10.0% compared to the same period in 2018. The decline in Adjusted EBITDA was due to asset dispositions in 2018 resulting in lost contribution of $6.8 million, a decline in Comparable Company-owned RevPAR and an increase in Comparable Company-owned hotel operating expenses. Adjusted EBITDA excludes non-cash equity-based compensation expense of $1.9 million, $2.7 million in impairment expense and $1.8 million in other expenses. Adjusted EBITDA for the nine months ended September 30, 2019 was $426.3 million, a decline of 9.9%, due to asset dispositions in 2018 resulting in lost contribution of $20.5 million and an increase in comparable hotel operating expenses.

Adjusted FFO for the three months ended September 30, 2019 was $101.5 million compared to $115.1 million in the same period in 2018. The decline in Adjusted FFO was due to an increase in Comparable Company-owned hotel operating expenses and a decline in Comparable Company-owned RevPAR. Adjusted FFO per diluted Paired Share was $0.54 compared to $0.61 in the same period in 2018. Adjusted FFO, a non-GAAP measure, represents funds from operations, 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.  Adjusted FFO for the nine months ended September 30, 2019 was $269.8 million, or $1.43 per diluted Paired Share, compared to $305.0 million, or $1.60 per diluted Paired Share, in the same period in 2018.

Adjusted Paired Share Income for the three months ended September 30, 2019 was $62.6 million, or $0.33 per diluted Paired Share, compared to $74.0 million, or $0.39 per diluted Paired Share, in the same period in 2018. The decline in Adjusted Paired Share Income was due to a decline in Hotel Operating Margin and Comparable Company-owned RevPAR, partially offset by lower depreciation expense. 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.  Adjusted Paired Share Income per diluted Paired Share for the nine months ended September 30, 2019 was $0.81 compared to $0.94 in the same period in 2018.

Capital Expenditures

The Company invested $65.1 million in capital expenditures during the third quarter of 2019. This includes $10.2 million in renovation capital, $10.9 million in IT capital and $20.2 million in capital for ESA 2.0 hotel development and land acquisitions. The Company invested $178.0 million in capital expenditures during the first nine months of 2019.

Hotel and Development Pipeline

As of September 30, 2019, the Company had a pipeline of 77 hotels representing approximately 9,400 rooms.

             
    Company Owned Pipeline & Recently Opened Hotels as of September 30, 2019  
    Under Option   Pre-Development   Under Construction   Total Pipeline     Opened YTD  
    # Hotels # Rooms   # Hotels # Rooms   # Hotels # Rooms   # Hotels # Rooms     # Hotels # Rooms  
    4 496   6 752   9 1,140   19 2,388     0 0  
                                   
                                   
    Third Party Pipeline & Recently Opened Hotels as of September 30, 2019  
    Commitments   Applications   Executed   Total Pipeline     Opened YTD  
    # Hotels # Rooms   # Hotels # Rooms   # Hotels # Rooms   # Hotels # Rooms     # Hotels # Rooms  
    40 4,928   7 868   11 1,261   58 7,057     1 115  
                                   
                                   
    Definitions                              
    Under Option   Locations with a signed purchase and sale agreement                  
    Pre-Development Land purchased, permitting and/or site work                    
    Under Construction Hotel is under construction                        
    Commitments   Signed commitment to build a certain number of hotels by a third party                
    Applications   Third party filed franchise application with deposit                    
    Executed   Franchise application approved, various stages of pre-development and/or under construction              
                                   

 

Distributions and Share Repurchases

On November 6, 2019, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. declared cash distributions totaling $0.23 per Paired Share for the third quarter of 2019. The distributions are payable on December 4, 2019 to shareholders of record as of November 20, 2019.  The Company repurchased 4.0 million Paired Shares during the third quarter for an aggregate purchase of $57.5 million. Since the end of the third quarter, the Company has repurchased an additional 2.0 million Paired Shares for an aggregate purchase price of $28.8 million. The Company’s total remaining repurchase authorization was approximately $177 million as of close of the market today.

2019 Outlook
The Company’s 2019 Outlook is updated as follows:

in millions, except % and # of hotels Low High    
         
# of hotels owned on 12/31/19   556      
Total Revenues $ 1,205   $ 1,215      
Comparable system-wide RevPAR % Δ1   -1.75 %   -1.25 %    
Net income $ 162   $ 176      
Adjusted Paired Share Income/Paired Share $ 0.93   $ 1.01      
Adjusted EBITDA2 $ 535   $ 545      
Depreciation and amortization $ 190   $ 195      
Net interest expense $ 129   $ 129      
Effective tax rate   15.75 %   16.75 %    
Capital expenditures $ 235   $ 275      
Expected capital returns $ 285   $ 315      
         
1 Approximately 200 basis point negative impact from hurricane related markets and net renovation displacement
2 Lost contribution of approximately $21 million related to 72 hotel dispositions in 2018    

 

Webcast and Conference Call Details

The Company will host a conference call on Thursday, November 7, 2019 at 8:00 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 1-855-327-6837 for domestic callers or 1-631-891-4304 for international callers.  A telephone replay will be available from shortly after the call until November 14, 2019, and can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for the replay is 10007887.

Disclosure Regarding Non-GAAP Financial Measures

Hotel Operating Profit, Hotel Operating Margin, EBITDA, Adjusted EBITDA, FFO, Adjusted FFO, Adjusted FFO per diluted Paired Share, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share (collectively, the “Non-GAAP Financial Measures”), which are detailed in the reconciliation tables that accompany this release, are used by the Company as supplemental performance measures. The Company believes these measures 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, including those which include a REIT as part of their legal entity structure. The Non-GAAP Financial Measures are not recognized terms under U.S. GAAP.  These measures as presented may not be comparable to measures calculated by other companies. These measures should not be considered as alternative measures of, or superior to, operating profit, net income, net income per share or any other measure of the Company, Extended Stay America, Inc. or ESH Hospitality, Inc. calculated in accordance with U.S. GAAP.  The Company’s presentation of the Non-GAAP Financial Measures does not replace the presentation of the Company’s consolidated financial statements and other disclosures prepared in accordance with U.S. GAAP.  

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws. These statements include, but are not limited to, statements related to our expectations regarding our business performance, financial results, liquidity and capital resources, capital expenditures, capital returns, distribution policy and other non-historical statements, including the statements in the “2019 Outlook” section of this release. Forward looking statements 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 projected 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 27, 2019 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® is the leading brand in the mid-priced extended stay segment in the U.S. with 626 hotels.  ESH Hospitality, Inc. (“ESH”), a subsidiary of Extended Stay America, Inc. (“ESA”), is the largest lodging REIT in North America by unit and room count, with 554 hotels and approximately 61,500 rooms in the U.S. ESA also manages or franchises an additional 72 Extended Stay America® hotels. Visit www.esa.com for more information.

Contacts
Investors or Media:                                                                       
Rob Ballew                                                                                         
(980) 345-1546                                                                  
investorrelations@esa.com     

1 See “Disclosure Regarding Non-GAAP Financial Measures” for an explanation of  non-GAAP measures included in this release (i.e., Hotel Operating Profit, Hotel Operating Margin, EBITDA, Adjusted EBITDA, Funds from Operations (“FFO”), Adjusted FFO, Adjusted FFO per diluted Paired Share, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share).                  

   
  EXTENDED STAY AMERICA, INC.
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
  (In thousands, except per share data)
  (Unaudited)
                       
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
    2019       2018     % Variance     2019       2018     % Variance
            REVENUES:          
  $ 320,669     $ 340,917     (5.9 )%   Room revenues $ 899,329     $ 958,075     (6.1 )%
    6,475       5,943     9.0 %   Other hotel revenues   17,848       16,710     6.8 %
    1,351       864     56.4 %   Franchise and management fees   4,023       2,140     88.0 %
    328,495       347,724     (5.5 )%     921,200       976,925     (5.7 )%
                       
    4,200       3,352     25.3 % Other revenues from franchised and managed properties   12,821       8,419     52.3 %
                       
    332,695       351,076     (5.2 )% Total revenues   934,021       985,344     (5.2 )%
                       
            OPERATING EXPENSES:          
    152,913       156,341     (2.2 )%   Hotel operating expenses   437,111       443,025     (1.3 )%
    22,292       21,242     4.9 %   General and administrative expenses   67,606       69,710     (3.0 )%
    49,748       52,138     (4.6 )%   Depreciation and amortization   147,543       159,652     (7.6 )%
    2,679       -     n/a Impairment of long-lived assets   2,679       43,600     (93.9 )%
    227,632       229,721     (0.9 )%     654,939       715,987     (8.5 )%
                       
    4,699       3,449     36.2 % Other expenses from franchised and managed properties   14,342       8,762     63.7 %
                       
    232,331       233,170     (0.4 )% Total operating expenses   669,281       724,749     (7.7 )%
                       
    -       3,517     n/a GAIN ON SALE OF HOTEL PROPERTIES   -       41,599     n/a
                       
    3       39     (92.3 )% OTHER INCOME   31       501     (93.8 )%
                       
    100,367       121,462     (17.4 )% INCOME FROM OPERATIONS   264,771       302,695     (12.5 )%
                       
    101       (251 )   (140.2 )% OTHER NON-OPERATING EXPENSE (INCOME)   (248 )     48     (616.7 )%
                       
    36,535       31,007     17.8 % INTEREST EXPENSE, NET   95,905       95,072     0.9 %
                       
    63,731       90,706     (29.7 )% INCOME BEFORE INCOME TAX EXPENSE   169,114       207,575     (18.5 )%
                       
    10,501       15,014     (30.1 )% INCOME TAX EXPENSE   27,822       35,218     (21.0 )%
                       
    53,230       75,692     (29.7 )% NET INCOME   141,292       172,357     (18.0 )%
                       
    (12,159 )     (3,790 )   220.8 % NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (24,790 )     (20,547 )   20.7 %
                       
  $ 41,071     $ 71,902     (42.9 )% NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS $ 116,502     $ 151,810     (23.3 )%
                       
                       
  $ 0.22     $ 0.38     (42.2 )% NET INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED $ 0.62     $ 0.80     (22.5 )%
                       
    187,015       189,253       WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED   188,317       190,111      
                       
   
 
            CONSOLIDATED BALANCE SHEET DATA     
            AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018     
            (In thousands)     
            (Unaudited)     
              September 30,   December 31,    
                2019       2018      
            Cash and cash equivalents $ 489,767     $ 287,458      
            Restricted cash $ 13,572     $ 15,878      
            Total assets $ 4,155,377     $ 3,924,210      
            Total debt, net of unamortized deferred financing costs and debt discounts (1) $ 2,639,498     $ 2,402,637      
            Total equity $ 1,266,471     $ 1,310,639      
                       
            (1) Unamortized deferred financing costs and debt discounts totaled $48.5 million and $41.1 million as of September 30, 2019 and December 31, 2018, respectively.    
               
                       


  EXTENDED STAY AMERICA, INC.  
  OPERATING METRICS  
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018  
  (Unaudited)  
                         
                         
  COMPARABLE SYSTEM-WIDE OPERATING METRICS (1)  
                         
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
    2019       2018     Variance     2019       2018     Variance  
    624       624     -   Number of hotels (as of September 30)   623       623     -    
    68,749       68,749     -   Number of rooms (as of September 30)   68,634       68,634     -    
    80.8 %     80.1 %   70 bps   Comparable System-Wide Occupancy(1)   77.3 %     76.1 %   120 bps    
  $ 67.87     $ 69.27     (2.0 )% Comparable System-Wide ADR(1) $ 67.02     $ 68.77     (2.5 )%  
  $ 54.81     $ 55.51     (1.3 )% Comparable System-Wide RevPAR(1) $ 51.83     $ 52.31     (0.9 )%  
                         
                         
                         
  COMPARABLE COMPANY-OWNED OPERATING METRICS (2)  
                         
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
    2019       2018     Variance     2019       2018     Variance  
    553       553     -   Number of hotels (as of September 30)   552       552     -    
    61,379       61,379     -   Number of rooms (as of September 30)   61,264       61,264     -    
    80.8 %     80.7 %   10 bps   Comparable Company-Owned Occupancy(2)   77.4 %     76.7 %   70 bps    
  $ 70.09     $ 71.23     (1.6 )% Comparable Company-Owned ADR(2) $ 69.15     $ 70.62     (2.1 )%  
  $ 56.66     $ 57.46     (1.4 )% Comparable Company-Owned RevPAR(2) $ 53.55     $ 54.20     (1.2 )%  
                         
                         
            Renovation Displacement Data (in thousands, except percentages):            
    5,647       5,647     -     Total available room nights   16,725       16,725     -    
    10       -     10     Room nights displaced from renovation   45       -     45    
    0.2 %     0.0 %   20 bps     % of available room nights displaced   0.3 %     0.0 %   30 bps    
                         
                         
     
  COMPANY-OWNED OPERATING METRICS (3)  
                         
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
    2019       2018     Variance     2019       2018     Variance  
    554       567     (13 ) Number of hotels (as of September 30)   554       567     (13 )  
    61,486       62,748     (1,262 ) Number of rooms (as of September 30)   61,486       62,748     (1,262 )  
    80.8 %     80.2 %   60 bps   Company-Owned Occupancy(3)   77.4 %     76.0 %   140 bps    
  $ 70.10     $ 69.85     0.4 % Company-Owned ADR(3) $ 69.15     $ 69.24     (0.1 )%  
  $ 56.66     $ 56.02     1.1 % Company-Owned RevPAR(3) $ 53.53     $ 52.65     1.7 %  
                         
                         
(1) Includes hotels owned, franchised or managed for the full three and nine months ended September 30, 2019 and 2018, respectively.      
                         
(2) Includes hotels owned and operated by the Company for the full three and nine months ended September 30, 2019 and 2018, respectively.      
                 
(3) Include results of operations of the Company's owned and operated hotels during the periods presented, which is summarized below:      
                         


Date Number of Hotels
(Sold) Acquired
Number of
Rooms
Number of
Owned Hotels
Number of
Owned Rooms
 
 
January 1, 2018 624 68,620  
February 2018 (25) (2,430) 599 66,190  
March 2018 (1) (101) 598 66,089  
May 2018 115  599 66,204  
September 2018 (32) (3,456) 567 62,748  
November 2018 107  568 62,855  
November 2018 (14) (1,369) 554 61,486  
September 30, 2019 554 61,486  
           


  EXTENDED STAY AMERICA, INC.
  NON-GAAP RECONCILIATION OF NET INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN  
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
  (In thousands)
  (Unaudited)
                       
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   Variance   2019   2018   Variance
  $ 53,230   $ 75,692   (29.7)% Net income $ 141,292   $ 172,357   (18.0)%
  10,501   15,014   (30.1)% Income tax expense 27,822   35,218   (21.0)%
  36,535   31,007   17.8% Interest expense, net 95,905   95,072   0.9%
  101   (251)   (140.2)% Other non-operating expense (income) (248)   48   (616.7)%
  (3)   (39)   (92.3)% Other income (31)   (501)   (93.8)%
  -   (3,517)   n/a Gain on sale of hotel properties -   (41,599)   n/a
  2,679   -   n/a Impairment of long-lived assets 2,679   43,600   (93.9)%
  49,748   52,138   (4.6)% Depreciation and amortization 147,543   159,652   (7.6)%
  22,292   21,242   4.9% General and administrative expenses 67,606   69,710   (3.0)%
  1,660   1,949   (14.8)% Loss on disposal of assets(1) 5,037   2,617   92.5%
  (1,351)   (864)   56.4%   Franchise and management fees (4,023)   (2,140)   88.0%
  499   97   414.4% Other expenses from franchised and managed properties, net of other revenues 1,521   343   343.4%
  $ 175,891   $ 192,468   (8.6)% Hotel Operating Profit $ 485,103   $ 534,377   (9.2)%
                       
  $ 320,669   $ 340,917   (5.9)% Room revenues $ 899,329   $ 958,075   (6.1)%
  6,475   5,943   9.0% Other hotel revenues 17,848   16,710   6.8%
  $ 327,144   $ 346,860   (5.7)% Total room and other hotel revenues $ 917,177   $ 974,785   (5.9)%
                       
  53.8%   55.5%   (170) bps Hotel Operating Margin 52.9%   54.8%   (190) bps
                       
                       
             


         
NON-GAAP RECONCILIATION OF NET INCOME TO COMPARABLE HOTEL(2)
OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(In thousands)
(Unaudited)
                       
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   Variance   2019   2018   Variance
  $ 53,230   $ 75,692   (29.7)% Net income $ 141,292   $ 172,357   (18.0)%
  10,501   15,014   (30.1)% Income tax expense 27,822   35,218   (21.0)%
  36,535   31,007   17.8% Interest expense, net 95,905   95,072   0.9%
  101   (251)   (140.2)% Other non-operating expense (income) (248)   48   (616.7)%
  (3)   (39)   (92.3)% Other income (31)   (501)   (93.8)%
  - 0   (3,517)   n/a Gain on sale of hotel properties - 0   (41,599)   n/a
  2,679   - 0   n/a Impairment of long-lived assets 2,679   43,600   (93.9)%
  49,748   52,138   (4.6)% Depreciation and amortization 147,543   159,652   (7.6)%
  22,292   21,242   4.9% General and administrative expenses 67,606   69,710   (3.0)%
  1,660   1,949   (14.8)% Loss on disposal of assets(1) 5,037   2,617   92.5%
  (1,351)   (864)   56.4% Franchise and management fees (4,023)   (2,140)   88.0%
  499   97   414.4% Other expenses from franchised and managed properties, net of other revenues 1,521   343   343.4%
  (289)   (6,751)   (95.7)% Hotel operating profit of hotels not owned for entirety of periods presented (1,235)   (20,518)   (94.0)%
  $ 175,602   $ 185,717   (5.4)% Comparable Hotel Operating Profit(2) $ 483,868   $ 513,859   (5.8)%
                       
  $ 320,669   $ 340,917   (5.9)% Room revenues $ 899,329   $ 958,075   (6.1)%
  6,475   5,943   9.0% Other hotel revenues 17,848   16,710   6.8%
  (571)   (16,363)   (96.5)% Total revenues of hotels not owned for entirety of periods presented (2,877)   (51,788)   (94.4)%
  $ 326,573   $ 330,497   (1.2)% Comparable total room and other hotel revenues $ 914,300   $ 922,997   (0.9)%
                       
  53.8%   56.2%   (240) bps Comparable Hotel Operating Margin(2) 52.9%   55.7%   (280) bps
                       
                       
(1) Included in hotel operating expenses in the unaudited condensed consolidated statements of operations.        
                       
(2) Includes results of 553 and 552 hotels owned and operated during the full three and nine months ended September 30, 2019 and 2018, respectively.
                       



  EXTENDED STAY AMERICA, INC.  
  NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA  
  FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018  
  (In thousands)  
  (Unaudited)  
                     
  Three Months Ended     Nine Months Ended    
  September 30,     September 30,    
    2019       2018         2019       2018      
  $ 53,230     $ 75,692     Net income $ 141,292     $ 172,357      
    36,535       31,007     Interest expense, net   95,905       95,072      
    10,501       15,014     Income tax expense   27,822       35,218      
    49,748       52,138     Depreciation and amortization   147,543       159,652      
    150,014       173,851     EBITDA   412,562       462,299      
    1,876       1,811     Equity-based compensation   6,131       5,999      
    2,679       -     Impairment of long-lived assets   2,679       43,600      
    -       (3,517 )   Gain on sale of hotel properties   -       (41,599 )    
    1,756       1,532     Other expense(1)   4,907       2,879      
  $ 156,325     $ 173,677     Adjusted EBITDA $ 426,279     $ 473,178      
                     
                     
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE ADJUSTED EBITDA(2)  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018  
(In thousands)  
(Unaudited)  
                     
  Three Months Ended     Nine Months Ended    
  September 30,     September 30,    
    2019       2018         2019       2018      
  $ 53,230     $ 75,692     Net income $ 141,292     $ 172,357      
    36,535       31,007     Interest expense, net   95,905       95,072      
    10,501       15,014     Income tax expense   27,822       35,218      
    49,748       52,138     Depreciation and amortization   147,543       159,652      
    150,014       173,851     EBITDA   412,562       462,299      
    (289 )     (6,751 )   Adjusted Property EBITDA of hotels not owned for entirety of periods presented   (1,235 )     (20,518 )    
    1,876       1,811     Equity-based compensation   6,131       5,999      
    2,679       -     Impairment of long-lived assets   2,679       43,600      
    -       (3,517 )   Gain on sale of hotel properties   -       (41,599 )    
    1,756       1,532     Other expense(1)   4,907       2,879      
  $ 156,036     $ 166,926     Comparable Adjusted EBITDA(2) $ 425,044     $ 452,660      
                     
                     
(1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. Loss on disposal of assets totaled $1.7 million, $1.9 million, $5.0 million and $2.6 million, respectively.    
     
(2) Includes results of 553 and 552 hotels owned and operated during the full three and nine months ended September 30, 2019 and 2018, respectively.    
     


EXTENDED STAY AMERICA, INC.      
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.      
        COMMON SHAREHOLDERS TO FUNDS FROM OPERATIONS, ADJUSTED FUNDS FROM OPERATIONS  
  AND ADJUSTED FUNDS FROM OPERATIONS PER DILUTED PAIRED SHARE      
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018      
(In thousands, except per share and per Paired Share data)      
(Unaudited)      
                       
Three Months Ended     Nine Months Ended        
September 30,     September 30,        
  2019       2018         2019       2018          
                       
$ 0.22     $ 0.38     Net income per Extended Stay America, Inc. common share - diluted $ 0.62     $ 0.80          
                       
$ 41,071     $ 71,902     Net income attributable to Extended Stay America, Inc. common shareholders $ 116,502     $ 151,810          
  12,155       3,786     Noncontrolling interests attributable to Class B common shares of ESH REIT   24,778       20,535          
  48,247       50,807     Real estate depreciation and amortization   143,335       155,788          
  2,679       -     Impairment of long-lived assets   2,679       43,600          
  -       (3,517 )   Gain on sale of hotel properties   -       (41,599 )        
  (8,250 )     (7,897 )   Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders   (23,132 )     (26,502 )        
  95,902       115,081     Funds from Operations   264,162       303,632          
  6,716       -     Debt modification and extinguishment costs   6,716       1,621          
  (1,088 )     -     Tax effect of adjustments to Funds from Operations   (1,088 )     (274 )        
                       
$ 101,530     $ 115,081     Adjusted Funds from Operations $ 269,790     $ 304,979          
                       
$ 0.54     $ 0.61     Adjusted Funds from Operations per Paired Share – diluted $ 1.43     $ 1.60          
                       
  187,015       189,253     Weighted average Paired Shares outstanding – diluted   188,317       190,111          
                       



EXTENDED STAY AMERICA, INC.    
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.    
        COMMON SHAREHOLDERS TO PAIRED SHARE INCOME, ADJUSTED PAIRED SHARE INCOME  
 AND ADJUSTED PAIRED SHARE INCOME PER DILUTED PAIRED SHARE    
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018    
(In thousands, except per share and per Paired Share data)    
(Unaudited)    
                     
Three Months Ended     Nine Months Ended      
September 30,     September 30,      
  2019       2018         2019       2018        
                     
$ 0.22     $ 0.38     Net income per Extended Stay America, Inc. common share - diluted $ 0.62     $ 0.80        
                     
$ 41,071     $ 71,902     Net income attributable to Extended Stay America, Inc. common shareholders $ 116,502     $ 151,810        
  12,155       3,786     Noncontrolling interests attributable to Class B common shares of ESH REIT   24,778       20,535        
  53,226       75,688     Paired Share Income   141,280       172,345        
  6,716       -     Debt modification and extinguishment costs   6,716       1,621        
  2,679       -     Impairment of long-lived assets   2,679       43,600        
  -       (3,517 )   Gain on sale of hotel properties   -       (41,599 )      
  1,756       1,532     Other expense(1)   4,907       2,879        
  (1,806 )     331     Tax effect of adjustments to Paired Share Income   (2,299 )     (1,088 )      
$ 62,571     $ 74,034     Adjusted Paired Share Income $ 153,283     $ 177,758        
                     
$ 0.33     $ 0.39     Adjusted Paired Share Income per Paired Share – diluted $ 0.81     $ 0.94        
                     
  187,015       189,253     Weighted average Paired Shares outstanding – diluted   188,317       190,111        
                     
(1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. Loss on disposal of assets totaled $1.7 million, $1.9 million, $5.0 million and $2.6 million, respectively.       
                     


EXTENDED STAY AMERICA, INC.  
TOTAL REVENUES AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE ADJUSTED EBITDA  
FOR THE YEARS ENDED DECEMBER 31, 2018 (ADJUSTED) AND 2019 (OUTLOOK)  
(In thousands)  
(Unaudited)  
               
  Year Ended     Year Ending December 31, 2019  
  December 31, 2018     (Outlook)  
  (Adjusted)(1)     Low   High  
  $ 1,204,429     Total revenues $ 1,205,000   $ 1,215,000  
               
  $ 211,756     Net income $ 161,772   $ 176,353  
    124,870     Interest expense, net   129,000     129,000  
    42,076     Income tax expense   32,549     32,968  
    209,329     Depreciation and amortization   195,000     190,000  
    588,031     EBITDA   518,321     528,321  
    (21,422 )   Adjusted Property EBITDA of hotels not owned for entirety of period presented   -     -  
    7,724     Equity-based compensation   8,000     8,000  
    43,600     Impairment of long-lived assets   2,679     2,679  
    (42,478 )   Gain on sale of hotel properties   -     - 0  
    2,860     Other expense(2)   6,000     6,000  
  $ 578,315     Comparable Adjusted EBITDA $ 535,000   $ 545,000  
               
               
               
  (1) 2018 results adjusted to reflect results of 552 hotels owned and operated for the full year ended December 31, 2018.  
               
  (2) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with acquisitions, dispositions and capital transactions.  
                       



EXTENDED STAY AMERICA, INC.  
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.  
COMMON SHAREHOLDERS TO PAIRED SHARE INCOME, ADJUSTED PAIRED SHARE INCOME  
 AND ADJUSTED PAIRED SHARE INCOME PER DILUTED PAIRED SHARE  
FOR THE YEARS ENDED DECEMBER 31, 2018 (ACTUAL) AND 2019 (OUTLOOK)  
(In thousands, except per share and per Paired Share data)  
(Unaudited)  
Year Ended     Year Ending December 31, 2019    
December 31, 2018   (Outlook)    
(Actual)     Low   High    
               
$ 0.59     Net income per Extended Stay America, Inc. common share - diluted $ 0.38     $ 0.43      
               
$ 112,864     Net income attributable to Extended Stay America, Inc. common shareholders $ 71,234     $ 79,893      
  98,876     Noncontrolling interests attributable to Class B common shares of ESH REIT   90,522       96,444      
  211,740     Paired Share Income   161,756       176,337      
  1,621     Debt modification and extinguishment costs   6,716       6,716      
  43,600     Impairment of long-lived assets   2,679       2,679      
  (42,478 )   Gain on sale of hotel properties   -       -      
  2,860     Other expense(1)   6,000       6,000      
  (937 )   Tax effect of adjustments to Paired Share Income   (2,579 )     (2,425 )    
$ 216,406     Adjusted Paired Share Income $ 174,572     $ 189,307      
               
$ 1.14     Adjusted Paired Share Income per Paired Share – diluted $ 0.93     $ 1.01      
               
  189,821     Weighted average Paired Shares outstanding – diluted   187,000       187,000      
               
(1) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with acquisitions, dispositions and capital transactions.    
               


Extended Stay America.jpg

Source: Extended Stay America, Inc.