stay-20200810
00015811640001507563false00015811642020-08-102020-08-100001581164stay:ESHHospitalityInc.Member2020-08-102020-08-10


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported) – August 10, 2020
 
 
EXTENDED STAY AMERICA, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware001-3619046-3140312
(State or other jurisdiction of
incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)
11525 N. Community House Road, Suite 100
Charlotte
North Carolina
28277
(Address of principal executive offices, zip code)
Registrant’s telephone number, including area code (980345-1600
ESH HOSPITALITY, INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware001-3619127-3559821
(State or other jurisdiction of
incorporation or organization)
(Commission
File Number)
(I.R.S. Employer
Identification Number)
11525 N. Community House Road, Suite 100
Charlotte
North Carolina
28277
(Address of principal executive offices, zip code)
Registrant’s telephone number, including area code (980345-1600



 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.01 per share, of
STAYNasdaq Global Select Market
Extended Stay America, Inc. and Class B
Common Stock, par value $0.01 per share, of
ESH Hospitality, Inc., which are attached
and trade together as a Paired Share.
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions:


Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 2.02. Results of Operations and Financial Condition.
On August 10, 2020, Extended Stay America, Inc. and ESH Hospitality, Inc. issued an earnings release announcing their results of operations for the three and six months ended June 30, 2020. A copy of the earnings release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in this Item 2.02.
The information contained under Item 2.02 of this Current Report on Form 8-K (including Exhibit 99.1) is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01. Regulation FD Disclosure.
On August 11, 2020, Extended Stay America, Inc. and ESH Hospitality, Inc. will hold a conference call announcing their results of operations for the three and six months ended June 30, 2020. A copy of management’s presentation materials is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference in this Item 7.01.
The information contained under Item 7.01 of this Current Report on Form 8-K (including Exhibit 99.2) is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.








Item 9.01.Financial Statements and Exhibits.
 
(d)Exhibits.
 
Exhibit NumberExhibit Description
Earnings release of Extended Stay America, Inc. and ESH Hospitality, Inc., dated August 10, 2020, announcing results for the three and six months ended June 30, 2020.
Management’s presentation materials, dated August 10, 2020.
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.























































SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the Registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
EXTENDED STAY AMERICA, INC.
Date: May 6, 2020By:/s/ Christopher N. Dekle
Name: Christopher N. Dekle
Title: General Counsel and Corporate Secretary

ESH HOSPITALITY, INC.
Date: May 6, 2020By:/s/ Christopher N. Dekle
Name: Christopher N. Dekle
Title: General Counsel and Corporate Secretary




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EXTENDED STAY AMERICA ANNOUNCES SECOND QUARTER 2020 RESULTS
-Net loss of $8.8 million
-Adjusted EBITDA1 of $74.4 million
-Comparable system-wide RevPAR decrease of 28.7%

CHARLOTTE, N.C. - August 10, 2020 (GlobeNewswire) — Extended Stay America, Inc. and ESH Hospitality, Inc. (NASDAQ:STAY) (together, the “Company”) today announced consolidated results for the three and six months ended June 30, 2020.
Second Quarter 2020 Highlights
Net loss of $8.8 million
Total revenues of $230.8 million
Comparable system-wide Revenue Per Available Room (“RevPAR”) declined 28.7% to $38.38
Comparable system-wide occupancy of 69.6%
Adjusted EBITDA1 of $74.4 million
Adjusted Funds From Operations ("Adjusted FFO")1 of $0.17 per diluted Paired Share
Adjusted Paired Share Loss1 of $(0.04) per diluted Paired Share
Comparable system-wide RevPAR index of 141, a 4,640 basis point increase

Extended Stay America’s President and Chief Executive Officer Bruce Haase, commented, “I am proud of our Company’s performance during these unprecedented times, with our second quarter comparable system-wide RevPAR decline of 28.7% being significantly better than any public hotel company in the US. System-wide occupancy levels have improved significantly off April lows to over 80% in recent weeks – approaching pre-pandemic 2019 levels – and many markets are now running positive RevPAR growth over last year. This performance illustrates the strength of our unique business model and our singular focus on the extended stay segment, unlike anyone else in the industry.”

“Since June, STAY is generating positive cash flow, and with July results showing continued improvement, we repaid our $350 million ESH REIT revolver last week. While others in the industry have deeply cut management and staff, ESA has continued to invest for the long-term growth of the Company.”
Financial and Operating Results
Total revenues for the three months ended June 30, 2020 were $230.8 million, a decrease of 28.7% over the same period in 2019 due to the impact of the COVID-19 pandemic. Total revenues for the first half of 2020 were $497.1 million, a decrease of 17.3% compared to the same period in 2019.
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 (Loss) Income, Adjusted Paired Share (Loss) Income and Adjusted Paired Share (Loss) Income per diluted Paired Share).

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Comparable system-wide RevPAR for the three months ended June 30, 2020 declined 28.7% over the same period in 2019 to $38.38, driven by a 18.3% decline in Average Daily Rate (“ADR”) and a 1,010 basis point decrease in occupancy to 69.6%. Comparable system-wide RevPAR declined 34.7%, 28.2% and 23.9% in the months of April, May and June 2020, respectively, compared to the same periods in 2019. After bottoming in mid-April, RevPAR increased each week for the remainder of the quarter. Comparable system-wide RevPAR for the first half of 2020 declined 18.1% to $41.18.

Hotel Operating Margin1 for the three months ended June 30, 2020 was 41.7% compared to 54.4% in the same period in 2019 due a decrease in RevPAR caused by the COVID-19 pandemic. Hotel Operating Margin improved from 35.2% in April 2020 to June 2020 to 45.4%. Hotel operating expenses during the second quarter of 2020 declined by 9.2% from the same period in 2019, or approximately 10% on a comparable basis. Hotel Operating Margin for the first half of 2020 was 43.8% compared to 52.4% in the same period of 2019, driven by a decrease in RevPAR due to the COVID-19 pandemic.

Net loss for the three months ended June 30, 2020 was $8.8 million compared to net income of $59.7 million for the same period in 2019. The decline in net income was due to a decline in comparable system-wide RevPAR as a result of the COVID-19 pandemic, an increase in depreciation and amortization expense, and an increase in net interest expense, partially offset by a decrease in income tax expense. Net loss for the first half of 2020 was $0.9 million, compared to net income of $88.1 million for the same period in 2019.

Adjusted EBITDA for the three months ended June 30, 2020 was $74.4 million, a decline of 51.6% compared to the same period in 2019. The decline in Adjusted EBITDA was due to a decline in Comparable system-wide RevPAR. Adjusted EBITDA for the quarter excludes non-cash equity-based compensation expense of $1.9 million, $1.6 million in loss on disposal of assets and $1.0 million in other expenses. Adjusted EBITDA for the first half of 2020 was $172.1 million compared to $270.0 million in the same period of 2019.

Adjusted FFO for the three months ended June 30, 2020 was $30.5 million, or $0.17 per diluted Paired Share, compared to $99.8 million, or $0.53 per diluted Paired Share in the same period in 2019. The decline in Adjusted FFO was due to a decline in comparable system-wide RevPAR due to the impact of the COVID-19 pandemic. Adjusted FFO for the first half of 2020 was $85.6 million, or $0.48 per diluted Paired Share, compared to $168.3 million, or $0.89 per diluted Paired Share, for the first half of 2019. 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 Paired Share Loss for the three months ended June 30, 2020 was $6.7 million, or ($0.04) per diluted Paired Share, compared to $61.2 million in Adjusted Paired Share Income, or $0.32 per diluted Paired Share, for the same period in 2019. The decline in Adjusted Paired Share (Loss) Income per diluted Paired Share was due to a decline in comparable system-wide RevPAR, an increase in depreciation and amortization expense and an increase in net interest expense, partially offset by a decline in income tax expense. Adjusted Paired Share Income for the first half of 2020 was $5.5 million, or $0.03 per diluted Paired

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Share, compared to $90.7 million, or $0.48 per diluted Paired Share, in the same period of 2019. 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.

Capital Expenditures and Balance Sheet
The Company invested $50.7 million in capital expenditures during the second quarter of 2020. This included $1.8 million in renovation capital and $21.8 million in capital for hotel development. For the first half of 2020, the Company invested $105.3 million in capital expenditures.

As of June 30, 2020, the company had $682.4 million in cash and equivalents, including $14.9 million in restricted cash, and total debt outstanding was $3.08 billion. Since the end of the second quarter, the Company has repaid its $350.0 million revolver at ESH Hospitality, Inc. in full using unrestricted cash on hand due to the strong increases in RevPAR and the improvement in the Company’s cash flow profile in recent months.

Hotel and Development Pipeline
As of June 30, 2020, the Company had a pipeline of 69 hotels representing approximately 8,400 rooms. Three Company-owned hotels and one franchised hotel opened during the second quarter.
Company Owned Pipeline & Recently Opened Hotels as of June 30, 2020
Under OptionPre-DevelopmentUnder ConstructionTotal PipelineOpened YTD
# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms
0045047888111,3924488
Third Party Pipeline & Recently Opened Hotels as of June 30, 2020
CommitmentsApplicationsExecutedTotal PipelineOpened YTD
# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms
273,3484464273,184586,9962205

Definitions
Under OptionLocations with a signed purchase and sale agreement
Pre-DevelopmentLand purchased, permitting and/or site work
Under ConstructionHotel is under construction
CommitmentsSigned commitment to build or convert a certain number of hotels by a third party, generally associated with a prior portfolio sale
ApplicationsThird party filed franchise application with deposit
ExecutedFranchise and development application approved, geography identified and deposits paid, various stages of pre-development and/or under construction

Distributions and Share Repurchases
On August 10, 2020, the Board of Directors of ESH Hospitality, Inc. declared a $0.01 distribution to ESH Class A and B shareholders payable on September 8, 2020 to shareholders of record on August 25, 2020. Management and the Boards of

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Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. intend to review future Company distributions as pandemic and business conditions continue to evolve. ESH Hospitality, Inc. will continue to distribute at least 90% of its pre-tax earnings to maintain its REIT status.

The Company did not repurchase any Paired Shares during the second quarter and has $101.1 million in authorization outstanding.
Q3 and Full Year 2020 Outlook Update
Third Quarter of 2020
In millions, except %LowHigh
Comparable system-wide RevPAR-21%-18%
Company owned RevPAR-22%-19%
Adjusted EBITDA$98$105

Full Year 2020
In millionsLowHigh
Net interest expense$133$133
Depreciation and amortization$198$203
Capital expenditures$160$190

Due to the significant uncertainty surrounding the COVID-19 pandemic length, severity and the pace of economic recovery, the Company will not provide a RevPAR outlook or an Adjusted EBITDA outlook for the full year 2020 at this time. Outlook for Q3 2020 and Full Year 2020 is as of August 10, 2020. Performance for the third quarter is subject to risks and uncertainties, in particular the ongoing impact of the COVID-19 pandemic, which could cause actual results to deviate materially and adversely from current trends and expectations. In such event, the Company does not expect to, and undertakes no obligation to, announce changes in expectations prior to the announcement of actual third quarter results.
Webcast and Conference Call Details
The Company will host a conference call on Tuesday, August 11, 2020 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 August 18, 2020, 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 13707704.

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RevPAR Index
RevPAR Index is stated as a percentage and calculated by comparing RevPAR for owned hotels or system-wide hotels to the aggregate RevPAR of a group of competing hotels generally in the same market. As such, the RevPAR Index is only a measure of RevPAR relative to certain competing hotels and not a measure of our absolute RevPAR or profitability. We subscribe to STR, Inc. ("STR"), an independent third-party service, which collects and compiles the data used to calculate RevPAR Index. We select the competing hotels included in the RevPAR Index calculation subject to STR's guidelines. The competing hotels included in STR guidelines will generally include certain hotels that are not considered part of the extended stay lodging segment of the hospitality industry and, instead, fall within the category of short-term stay hotels. STR does not endorse the Company, or any other company, and STR data should not be viewed as investment advice or as a recommendation to take a particular course of action.
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, Q3 2020 and full year outlook, distribution policy, plans, goals, beliefs, business trends and future events, as well as the impact of the COVID-19 pandemic, its effects on the foregoing, government actions taken in response to the pandemic and actions that we have or plan to take in response to the pandemic and other non-historical statements. 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 26, 2020 and other documents of the Company on file with or furnished to the SEC, including the Company’s combined quarterly report on Form 10-Q filed on August 10, 2020. Any forward-looking statements made in this release are qualified by these cautionary statements, and there can be no assurance that the actual

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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 636 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 561 hotels and over 62,000 rooms in the U.S. ESA also manages or franchises an additional 75 Extended Stay America® hotels. Visit www.esa.com for more information.
Contacts
Investors or Media:
Rob Ballew
(980) 345-1546
investorrelations@esa.com 










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EXTENDED STAY AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(In thousands, except per share data)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
20202019% Variance20202019% Variance
REVENUES:
$219,851  $311,614  (29.4)%  Room revenues$474,315  $578,660  (18.0)%
6,320  6,070  4.1%  Other hotel revenues13,088  11,373  15.1%
1,218  1,447  (15.8)%  Franchise and management fees2,497  2,672  (6.5)%
227,389  319,131  (28.7)%489,900  592,705  (17.3)%
3,445  4,526  (23.9)%Other revenues from franchised and managed properties7,235  8,621  (16.1)%
230,834  323,657  (28.7)%Total revenues497,135  601,326  (17.3)%
OPERATING EXPENSES:
133,435  146,907  (9.2)%  Hotel operating expenses278,730  284,198  (1.9)%
23,103  22,287  3.7%  General and administrative expenses47,041  45,314  3.8%
51,042  49,017  4.1%  Depreciation and amortization101,562  97,795  3.9%
675  —  n/a  Impairment of long-lived assets675  —  n/a
208,255  218,211  (4.6)%428,008  427,307  0.2%
4,083  4,996  (18.3)%Other expenses from franchised and managed properties8,290  9,643  (14.0)%
212,338  223,207  (4.9)%Total operating expenses436,298  436,950  (0.1)%
  OTHER INCOME 28  (89.3)%
18,497  100,451  (81.6)%INCOME FROM OPERATIONS60,840  164,404  (63.0)%
(302) (171) 76.6%OTHER NON-OPERATING (INCOME) EXPENSE401  (349) (214.9)%
33,621  29,766  13.0%INTEREST EXPENSE, NET66,306  59,370  11.7%
(14,822) 70,856  (120.9)%(LOSS) INCOME BEFORE INCOME TAX EXPENSE(5,867) 105,383  (105.6)%
(6,052) 11,198  (154.0)%INCOME TAX (BENEFIT) EXPENSE(4,942) 17,321  (128.5)%
(8,770) 59,658  (114.7)%NET (LOSS) INCOME(925) 88,062  (101.1)%
(3,593) (6,161) (41.7)%NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS(6,884) (12,631) (45.5)%
$(12,363) $53,497  (123.1)%NET (LOSS) INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS$(7,809) $75,431  (110.4)%
$(0.07) $0.28  (124.6)%NET (LOSS) INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED$(0.04) $0.40  (111.0)%
177,551  188,813  WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED177,771  188,695  
CONSOLIDATED BALANCE SHEET DATA
AS OF JUNE 30, 2020 AND DECEMBER 31, 2019
(In thousands)
(unaudited)
June 30,December 31,
20202019
Cash and cash equivalents$667,553  $346,812  
Restricted cash$14,893  $14,858  
Total assets$4,348,239  $4,030,596  
Total debt, net of unamortized deferred financing costs and debt discounts (1)
$3,033,718  $2,639,766  
Total equity$1,102,368  $1,176,270  
(1) Unamortized deferred financing costs and debt discounts totaled $42.9 million and $46.7 million as of June 30, 2020 and December 31, 2019, respectively.

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EXTENDED STAY AMERICA, INC.
OPERATING METRICS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Unaudited)
COMPARABLE SYSTEM-WIDE OPERATING METRICS (1)
Three Months EndedSix Months Ended
June 30,June 30,
20202019Variance20202019Variance
625625Number of hotels (as of June 30)624624
68,81568,815Number of rooms (as of June 30)68,70068,700
69.6%79.7%(1010) bps
Comparable System-Wide Occupancy(1)
70.7%75.6%(490) bps
$55.17$67.53(18.3)%
Comparable System-Wide ADR(1)
$58.22$66.56(12.5)%
$38.38$53.84(28.7)%
Comparable System-Wide RevPAR(1)
$41.18$50.29(18.1)%

COMPARABLE COMPANY-OWNED OPERATING METRICS (2)
Three Months EndedSix Months Ended
June 30June 30
20202019Variance20202019Variance
553553Number of hotels (as of June 30)553553
61,44561,445Number of rooms (as of June 30)61,44561,445
68.8%79.9%(1110) bps
Comparable Company-Owned Occupancy(2)
70.1%75.7%(560) bps
$56.61$69.63(18.7)%
Comparable Company-Owned ADR(2)
$59.93$68.63(12.7)%
$38.97$55.62(29.9)%
Comparable Company-Owned RevPAR(2)
$42.04$51.94(19.1)%

COMPANY-OWNED OPERATING METRICS(3)
Three Months EndedSix Months Ended
June 30,June 30,
20202019Variance20202019Variance
5615547Number of hotels (as of June 30)5615547
62.42161.552869Number of rooms (as of June 30)62.42161.552869
68.7%79.9%(1120) bps
Company-Owned Occupancy(3)
70.1%75.7%(560) bps
$56.68$69.65(18.6)%
Company-Owned ADR(3)
$60.07$68.64(12.5)%
$38.96$55.63(30.0)%
Company-Owned RevPAR(3)
$42.09$51.94(19.0)%
(1) Includes hotels owned, franchised or managed for the full three and six months ended June 30, 2020 and 2019, respectively.
(2) Includes hotels owned and operated by the Company for the full three and six months ended June 30, 2020 and 2019, respectively.
(3) Includes results of operations based on the Company's owned and operated hotels during the periods presented, which is summarized below:

DateNumber of Hotels
Acquired or
Opened
Number of
Rooms
Number of
Owned Hotels(1)
Number of
Owned Rooms(1)
January 1, 201955461,552
November 2019112155561,673
December 2019226055761,933
March 2020112055862,053
April 2020112055962,173
June 2020224856162,421
(1) As of end of period.

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EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET (LOSS) INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(In thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
20202019Variance20202019Variance
$(8,770) $59,658  (114.7)%Net (loss) income$(925) $88,062  (101.1)%
(6,052) 11,198  (154.0)%Income tax (benefit) expense(4,942) 17,321  (128.5)%
33,621  29,766  13.0%Interest expense, net66,306  59,370  11.7%
(302) (171) 76.6%Other non-operating (income) expense401  (349) (214.9)%
(1) (1) —%Other income(3) (28) (89.3)%
675  —  n/aImpairment of long-lived assets675  —  n/a
51,042  49,017  4.1%Depreciation and amortization101,562  97,795  3.9%
23,103  22,287  3.7%General and administrative expenses47,041  45,314  3.8%
1,636  2,001  (18.2)%
Loss on disposal of assets(1)
4,979  3,377  47.4%
(1,218) (1,447) (15.8)%Franchise and management fees(2,497) (2,672) (6.5)%
638  470  35.7%System services loss, net1,055  1,022  3.2%
$94,372  $172,778  (45.4)%Hotel Operating Profit$213,652  $309,212  (30.9)%
$219,851  $311,614  (29.4)%Room revenues$474,315  $578,660  (18.0)%
6,320  6,070  4.1%Other hotel revenues13,088  11,373  15.1%
$226,171  $317,684  (28.8)%Total room and other hotel revenues$487,403  $590,033  (17.4)%
41.7 %54.4 %(1270) bpsHotel Operating Margin43.8 %52.4 %(860) bps
(1) Included in hotel operating expenses in the consolidated statements of operations.

EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(In thousands)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
$(8,770) $59,658  Net (loss) income$(925) $88,062  
33,621  29,766  Interest expense, net66,306  59,370  
(6,052) 11,198  Income tax (benefit) expense(4,942) 17,321  
51,042  49,017  Depreciation and amortization101,562  97,795  
69,841  149,639  EBITDA162,001  262,548  
1,864  2,147  Equity-based compensation2,990  4,255  
675  —  Impairment of long-lived assets675  —  
638  —  
System services loss, net(1)
1,055  —  
1,335  1,857  
Other expense(2)
5,381  3,151  
$74,353  $153,643  Adjusted EBITDA$172,102  $269,954  
(1) In light of the growth of our franchise business and in order to enhance comparability, effective January 1, 2020, the Company adopted the practice of other lodging companies with franchise businesses of excluding system services (profit) loss, net from Adjusted EBITDA; no adjustments have been made to prior period results. System services loss, net for the three and six months ended June 30, 2019, was $0.5 million and $1.0 million, respectively.
(2) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with dispositions. Loss on disposal of assets totaled $1.6 million, $2.0 million, $5.0 million and $3.4 million, respectively.

9


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EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET (LOSS) 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 SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(In thousands, except per share and per Paired Share data)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
$(0.07) $0.28  Net (loss) income per Extended Stay America, Inc. common share - diluted$(0.04) $0.40  
$(12,363) $53,497  Net (loss) income attributable to Extended Stay America, Inc. common shareholders$(7,809) $75,431  
3,589  6,157  Noncontrolling interests attributable to Class B common shares of ESH REIT6,876  12,623  
49,429  47,655  Real estate depreciation and amortization98,310  95,088  
675  —  Impairment of long-lived assets675  —  
(10,822) (7,482) Tax effect of adjustments to net (loss) income attributable to Extended Stay America, Inc. common shareholders(12,430) (14,882) 
30,508  99,827  Funds From Operations85,622  168,260  
$30,508  $99,827  Adjusted Funds From Operations$85,622  $168,260  
$0.17  $0.53  Adjusted Funds From Operations per Paired Share - diluted$0.48  $0.89  
177,844  188,813  Weighted average Paired Shares outstanding - diluted178,008  188,695  


10


https://cdn.kscope.io/a7109f45a51301157de2b84cba7d7ed2-staylogoa0711.jpg
EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET (LOSS) INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.
COMMON SHAREHOLDERS TO PAIRED SHARE (LOSS) INCOME, ADJUSTED PAIRED SHARE (LOSS) INCOME
 AND ADJUSTED PAIRED SHARE (LOSS) INCOME PER DILUTED PAIRED SHARE
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(In thousands, except per share and per Paired Share data)
(Unaudited)
Three Months Ended
June,
Six Months Ended
June,
2020201920202019
$(0.07) $0.28  Net (loss) income per Extended Stay America, Inc. common share - diluted$(0.04) $0.40  
$(12,363) $53,497  Net (loss) income attributable to Extended Stay America, Inc. common shareholders$(7,809) $75,431  
3,589  6,157  Noncontrolling interests attributable to Class B common shares of ESH REIT6,876  12,623  
(8,774) 59,654  Paired Share (Loss) Income(933) 88,054  
675  —  Impairment of long-lived assets675  —  
638  —  
System services loss, net(1)
1,055  —  
1,335  1,857  
Other expense(2)
5,381  3,151  
(573) (291) Tax effect of adjustments to Paired Share (Loss) Income(720) (493) 
$(6,699) $61,220  Adjusted Paired Share (Loss) Income$5,458  $90,712  
$(0.04) $0.32  Adjusted Paired Share (Loss) Income per Paired Share - diluted$0.03  $0.48  
177,551  188,813  Weighted average Paired Shares outstanding - diluted178,008  188,695  
(1) In light of the growth of our franchise business and in order to enhance comparability, effective January 1, 2020, the Company adopted the practice of other lodging companies with franchise businesses of excluding system services (profit) loss, net from Adjusted Paired Share (Loss) Income; no adjustments have been made to prior period results. System services loss, net for the three and six months ended June 30, 2019, was $0.5 million and $1.0 million, respectively.
(2) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with dispositions. Loss on disposal of assets totaled $1.6 million, $2.0 million, $5.0 million and $3.4 million, respectively.










11


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EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 (ACTUAL) AND 2020 (OUTLOOK)
(In thousands)
(Unaudited)
Three Months EndedThree Months Ended September 30, 2020
September 30, 2019(Outlook)
(Actual)LowHigh
$53,230  Net income$11,000  $44,000  
36,535  Interest expense, net33,000  33,000  
10,501  
Income tax expense (benefit)(1)
(2,000) (26,000) 
49,748  Depreciation and amortization52,000  50,000  
150,014  EBITDA94,000  101,000  
1,876  Equity-based compensation1,700  1,700  
2,679  Impairment of long-lived assets—  —  
1,756  
Other expense(2)
2,300  2,300  
$156,325  Adjusted EBITDA$98,000  $105,000  
(1) The Q3-2020 Outlook with respect to income tax applies to absolute income tax expense (benefit) only. Due to (1) certain provisions of the CARES Act related to income tax relief, (2) a greater variability in quarterly forecasted results within the current year than in prior years and (3) a wider than usual range between the forecasted financial results of ESA, a taxable C-Corp, and ESH REIT, a non-taxable real estate investment trust (in each case due to the volatility in our performance caused by the COVID-19 pandemic), the Q3-2020 Outlook with respect to income tax does not apply to, or provide an outlook with respect to, the Company's effective tax rate or range of effective tax rates for either the three months ended September 30, 2020, or the year ended December 31, 2020.
(2) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with dispositions.


12

earningscallq22020vfinal
Q2 2020 Earnings Summary August 10, 2020 Extended Stay America, Inc. ESH Hospitality, Inc.


 
important disclosure information This presentation 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, business strategies, financial results, liquidity and capital resources, capital expenditures, capital returns, Q3 2020 Outlook and Full Year 2020 Outlook, distribution policy, plans, goals, beliefs, business trends and future events, as well as the COVID-19 pandemic, its effects on the foregoing, government action taken in response to the pandemic and action that we have or plan to take in response to the pandemic and other non-historical statements, including statements relating to industry RevPAR trends. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause Extended Stay America, Inc.’s (“ESA”) and ESH Hospitality, Inc.’s (“ESH REIT,” and together with ESA, the “Company”) 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 26, 2020 and other documents of the Company on file with or furnished to the SEC, including our combined quarterly report on Form 10-Q filed with the SEC on August 10, 2020. Any forward-looking statements made in this presentation 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 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 and adversely from what is expressed, implied or forecasted by the Company’s forward-looking statements. This presentation includes certain non-GAAP financial measures, including Hotel Operating Profit, Hotel Operating Margin, EBITDA, Adjusted EBITDA, Funds from Operations (“FFO”), Adjusted Funds From Operations (“Adjusted FFO”), Adjusted FFO per diluted Paired Share, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with U.S. GAAP. Please refer to the Appendix of this presentation for a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with U.S. GAAP, and to the Company’s combined annual report on Form 10-K filed with the SEC on February 26, 2020 for definitions of these non-GAAP measures. This presentation includes certain operating metrics presented on a comparable system-wide basis. The term “comparable system-wide” refers to hotels operated under the Extended Stay America brand, including those owned, franchised or managed by the Company, for both the full three and six months ended June 30, 2020 and 2019. For franchised or managed hotels, ESA earns certain fees based on a percentage of hotel revenues. 2


 
Q2 2020 Operating Results and Financial Highlights comparable system-wide revenue per available net income (loss) (in millions) room (“RevPAR”) $53.84 $59.7 $38.38 ($8.8) Q2 2019 Q2 2020 Q2 2019 Q2 2020 hotel operating margin1 adjusted FFO per diluted Paired Share1 54.4% $0.53 41.7% $0.17 Q2 2019 Q2 2020 Q2 2019 Q2 2020 adjusted EBITDA (in millions)1 adjusted Paired Share income (loss) per diluted Paired Share1 $153.6 $0.32 $74.4 Q2 2019 Q2 2020 ($0.04) Q2 2019 Q2 2020 1See Appendix for Hotel Operating Margin, Adjusted FFO per diluted Paired Share, Adjusted EBITDA and Adjusted Paired Share Income per diluted Paired Share reconciliations. 3


 
Significantly outperforming industry, segment and competitive set 1,2 3 • STAY’s 2020 RevPAR and occupancy compared to 2019 has held up significantly better than the industry and other mid-priced extended stay hotels since the pandemic began in the United States in March 20201,2 • STAY’s RevPAR Index3, already improving before COVID-19, has continued at very high levels months into the crisis 1 Total industry RevPAR numbers per STR, Inc. (“STR”), a CoStar Group Company, as reported at Hotel News Now. Mid-priced extended stay RevPAR per The Highland Group, Inc. (“Highland”) for average of reported April, May and June 2020. Neither STR nor Highland endorse the Company, nor any other operator of hotels, and the data provided by each such company should not be viewed as investment advice or as a recommendation to take a particular course of action. 2 Industry RevPAR numbers do not reflect hotel closures; industry revenue decline is steeper than RevPAR. 4 3 See Appendix for RevPAR Index definition and disclosure.


 
Well positioned in a challenging environment ✓ System-wide occupancy running higher than FY 2019 levels in recent weeks ✓ Majority of STAY’s guests are driving to hotels; ~75% of locations are suburban ✓ STAY’s guests average length of stay is ~30 nights vs ~2 nights for overall industry ✓ Current RevPAR levels generate positive cash flow, even with capital investments ✓ Full kitchen and refrigerator in room attract guests worried about COVID-19 exposure while traveling or with limited dining out options ✓ Very limited urban, group and in-bound international exposure; no hotels were closed during pandemic ✓ RevPAR has increased each week since mid-April 5


 
Balance Sheet Update as of June 30, 2020 cash balance (in millions)1 $682 Q2 2020 maturity amount/ interest debt capitalization date millions2 rate Term Loan B 2026 $626 L + 2003 ESH REIT revolver 2024 $350 L + 200 ($350m) ESA revolver ($50m) 2024 $50 L + 225 total secured debt $1,026 senior unsecured notes 2025 $1,300 5.25% senior unsecured notes 2027 $750 4.625% preferred stock4 2020 $1 8.00% total unsecured debt $2,051 total company debt $3,077 • STAY repaid the $350 million ESH REIT Revolver in full since the end of Q2 with available cash on hand • Strong cash position and no significant debt maturities until May 2025 1 Includes restricted and unrestricted cash; does not include the repayment of ESH Revolver of $350 million. 2 Gross debt outstanding (excludes discounts and deferred financing costs). 3 $150m swapped to fixed LIBOR of 1.175% as of 6/30/20. 6 4 Mandatorily redeemable in November 2020.


 
Pipeline Update Company Owned Pipeline & Recently Opened Hotels as of June 30, 2020 Under Option Pre-Development Under Construction Total Pipeline Opened YTD # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms 0 0 4 504 7 888 11 1,392 4 488 Third Party Pipeline & Recently Opened Hotels as of June 30, 2020 Commitments Applications Executed Total Pipeline Opened YTD # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms 27 3,348 4 464 27 3,184 58 6,996 2 205 • 3 ESA owned and 1 franchise owned hotel opened in 2Q 2020 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 or convert a certain number of hotels by a third party, generally associated with a prior portfolio sale Applications Third party filed franchise application with deposit Executed Franchise and development application approved, geography identified and deposits paid, various stages of pre-development and/or under construction 7


 
Outlook Update1 Q3 2020 Comparable system-wide RevPAR % D: -21% to -18% Company owned RevPAR % D: -22% to -19% Adjusted EBITDA: $98 million to $105 million FY 2020 Capital expenditures: $160 to $190 million Depreciation expense: $198 to $203 million Net interest expense: $133 million 1Outlook for Q3 2020 and Full Year 2020 is as of August 10, 2020. Performance for the third quarter is subject to risks and uncertainties, in particular the ongoing impact of the COVID-19 pandemic, which could cause actual results to deviate materially and adversely from current trends and expectations. In such event, the Company does not expect to and undertakes no obligation to announce changes in 8 expectations prior to the announcement of actual third quarter results.


 
appendix


 
REVPAR INDEX RevPAR Index is stated as a percentage and calculated by comparing RevPAR for comparable system-wide hotels to the aggregate RevPAR of a group of competing hotels generally in the same geographic market. As such, the RevPAR Index is only a measure of RevPAR relative to certain competing hotels and not a measure of our absolute RevPAR or profitability. We subscribe to STR, Inc. ("STR"), an independent third-party service, which collects and compiles the data used to calculate RevPAR Index. We select the competing hotels included in the RevPAR Index calculation subject to STR's guidelines. The competing hotels included in STR guidelines will generally include certain hotels that are not considered part of the extended stay lodging segment of the hospitality industry and, instead, fall within the category of short-term stay hotels. STR does not endorse the Company, or any other company or operator of hotels, and STR data should not be viewed as investment advice or as a recommendation to take a particular course of action. 10


 
NON-GAAP RECONCILIATION OF NET (LOSS) INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (In thousands) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 Variance 2020 2019 Variance $ (8,770) $ 59,658 (114.7)% Net (loss) income $ (925) $ 88,062 (101.1)% (6,052) 11,198 (154.0)% Income tax (benefit) expense (4,942) 17,321 (128.5)% 33,621 29,766 13.0% Interest expense, net 66,306 59,370 11.7% (302) (171) 76.6% Other non-operating (income) expense 401 (349) (214.9)% (1) (1) – Other income (3) (28) (89.3)% 675 - n/a Impairment of long-lived assets 675 - n/a 51,042 49,017 4.1% Depreciation and amortization 101,562 97,795 3.9% 23,103 22,287 3.7% General and administrative expenses 47,041 45,314 3.8% 1,636 2,001 (18.2)% Loss on disposal of assets (1) 4,979 3,377 47.4% (1,218) (1,447) (15.8)% Franchise and management fees (2,497) (2,672) (6.5)% 638 470 35.7% System services loss, net 1,055 1,022 3.2% $ 94,372 $ 172,778 (45.4)% Hotel Operating Profit $ 213,652 $ 309,212 (30.9)% $ 219,851 $ 311,614 (29.4)% Room revenues $ 474,315 $ 578,660 (18.0)% 6,320 6,070 4.1% Other hotel revenues 13,088 11,373 15.1% $ 226,171 $ 317,684 (28.8)% Total room and other hotel revenues $ 487,403 $ 590,033 (17.4)% 41.7% 54.4% (1270) bps Hotel Operating Margin 43.8% 52.4% (860) bps (1) Included in hotel operating expenses in the consolidated statements of operations. 11


 
NON-GAAP RECONCILIATION OF NET (LOSS) INCOME TO EBITDA AND ADJUSTED EBITDA FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (In thousands) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 $ (8,770) $ 59,658 Net (loss) income $ (925) $ 88,062 33,621 29,766 Interest expense, net 66,306 59,370 (6,052) 11,198 Income tax (benefit) expense (4,942) 17,321 51,042 49,017 Depreciation and amortization 101,562 97,795 69,841 149,639 EBITDA 162,001 262,548 1,864 2,147 Equity-based compensation 2,990 4,255 675 - Impairment of long-lived assets 675 - 638 - System services loss, net(1) 1,055 - 1,335 1,857 Other expense(2) 5,381 3,151 $ 74,353 $ 153,643 Adjusted EBITDA $ 172,102 $ 269,954 (1) In light of the growth of our franchise business and in order to enhance comparability, effective January 1, 2020, the Company adopted the practice of other lodging companies with franchise businesses of excluding system services (profit) loss, net from Adjusted EBITDA; no adjustments have been made to prior period results. System services loss, net for the three and six months ended June 30, 2019, was $0.5 million and $1.0 million, respectively. (2) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with dispositions. Loss on disposal of assets totaled $1.6 million, $2.0 million, $5.0 million and $3.4 million, respectively. 12


 
NON-GAAP RECONCILIATION OF NET (LOSS) 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 SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (In thousands, except per share and per Paired Share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Net (loss) income per Extended Stay America, Inc. common $ (0.07) $ 0.28 $ (0.04) $ 0.40 share - diluted Net (loss) income attributable to Extended Stay America, Inc. $ (12,363) $ 53,497 $ (7,809) $ 75,431 common shareholders Noncontrolling interests attributable to Class B 3,589 6,157 6,876 12,623 common shares of ESH REIT 49,429 47,655 Real estate depreciation and amortization 98,310 95,088 675 - Impairment of long-lived assets 675 - Tax effect of adjustments to net (loss) income attributable to (10,822) (7,482) (12,430) (14,882) Extended Stay America, Inc. common shareholders 30,508 99,827 Funds from Operations 85,622 168,260 $ 30,508 $ 99,827 Adjusted Funds from Operations $ 85,622 $ 168,260 Adjusted Funds from Operations $ 0.17 $ 0.53 per Paired Share – diluted $ 0.48 $ 0.89 Weighted average Paired Shares 177,844 188,813 outstanding – diluted 178,008 188,695 13


 
NON-GAAP RECONCILIATION OF NET (LOSS) INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS TO PAIRED SHARE (LOSS) INCOME, ADJUSTED PAIRED SHARE (LOSS) INCOME AND ADJUSTED PAIRED SHARE (LOSS) INCOME PER DILUTED PAIRED SHARE FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019 (In thousands, except per share and per Paired Share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Net (loss) income per Extended Stay America, Inc. common $ (0.07) $ 0.28 $ (0.04) $ 0.40 share - diluted Net (loss) income attributable to Extended Stay America, Inc. $ (12,363) $ 53,497 common shareholders $ (7,809) $ 75,431 Noncontrolling interests attributable to Class B 3,589 6,157 common shares of ESH REIT 6,876 12,623 (8,774) 59,654 Paired Share (Loss) Income (933) 88,054 675 - Impairment of long-lived assets 675 - 638 - System services loss, net(1) 1,055 - 1,335 1,857 Other expense(2) 5,381 3,151 (573) (291) Tax effect of adjustments to Paired Share (Loss) Income (720) (493) $ (6,699) $ 61,220 Adjusted Paired Share (Loss) Income $ 5,458 $ 90,712 Adjusted Paired Share (Loss) Income per $ (0.04) $ 0.32 Paired Share – diluted $ 0.03 $ 0.48 177,551 188,813 Weighted average Paired Shares outstanding – diluted 178,008 188,695 (1) In light of the growth of our franchise business and in order to enhance comparability, effective January 1, 2020, the Company adopted the practice of other lodging companies with franchise businesses of excluding system services (profit) loss, net from Adjusted Paired Share (Loss) Income; no adjustments have been made to prior period results. System services loss, net for the three and six months ended June 30, 2019, was $0.5 million and $1.0 million, respectively. (2) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with dispositions. Loss on disposal of assets totaled $1.6 million, $2.0 million, $5.0 million and $3.4 million, respectively. 14


 
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 (ACTUAL) AND 2020 (OUTLOOK) (In thousands) (Unaudited) Three Months Ended Three Months Ended September 30, 2020 September 30, 2019 (Outlook) (Actual) Low High $ 53,230 Net income $ 11,000 $ 44,000 36,535 Interest expense, net 33,000 33,000 10,501 Income tax expense (benefit)(1) (2,000) (26,000) 49,748 Depreciation and amortization 52,000 50,000 150,014 EBITDA 94,000 101,000 1,876 Equity-based compensation 1,700 1,700 2,679 Impairment of long-lived assets - - 1,756 Other expense(2) 2,300 2,300 $ 156,325 Adjusted EBITDA $ 98,000 $ 105,000 (1) The Q3-2020 Outlook with respect to income tax applies to absolute income tax expense (benefit) only. Due to (1) certain provisions of the CARES Act related to income tax relief, (2) a greater variability in quarterly forecasted results within the current year than in prior years and (3) a wider than usual range between the forecasted financial results of ESA, a taxable C-Corp, and ESH REIT, a non-taxable real estate investment trust (in each case due to the volatility in our performance caused by the COVID-19 pandemic), the Q3-2020 Outlook with respect to income tax does not apply to, or provide an outlook with respect to, the Company's effective tax rate or range of effective tax rates for either the three months ended September 30, 2020, or the year ended December 31, 2020. (2) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with dispositions. 15