stay-20201109
00015811640001507563false00015811642020-11-092020-11-090001581164stay:ESHHospitalityInc.Member2020-11-092020-11-09


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) – November 9, 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 November 9, 2020, Extended Stay America, Inc. and ESH Hospitality, Inc. issued an earnings release announcing their results of operations for the three and nine months ended September 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 November 10, 2020, Extended Stay America, Inc. and ESH Hospitality, Inc. will hold a conference call announcing their results of operations for the three and nine months ended September 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 November 9, 2020, announcing results for the three and nine months ended September 30, 2020.
Management’s presentation materials, dated November 9, 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: November 9, 2020By:/s/ Christopher N. Dekle
Name: Christopher N. Dekle
Title: General Counsel and Corporate Secretary

ESH HOSPITALITY, INC.
Date: November 9, 2020By:/s/ Christopher N. Dekle
Name: Christopher N. Dekle
Title: General Counsel and Corporate Secretary




Document
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EXTENDED STAY AMERICA ANNOUNCES THIRD QUARTER 2020 RESULTS
-Net income of $31.5 million
-Adjusted EBITDA1 of $112.7 million
-Comparable system-wide RevPAR decrease of 14.7%
-Hotel Operating Margin1 of 47.3%

CHARLOTTE, N.C. - November 9, 2020 (GlobeNewswire) — Extended Stay America, Inc. and ESH Hospitality, Inc. (NASDAQ:STAY) (together, the "Company") today announced consolidated results for the three and nine months ended September 30, 2020.
Third Quarter 2020 Highlights
Net income of $31.5 million
Total revenues of $285.9 million
Comparable system-wide Revenue Per Available Room ("RevPAR") declined 14.7% to $46.75
Comparable system-wide occupancy of 79.8%
Adjusted EBITDA of $112.7 million
Adjusted Funds From Operations ("Adjusted FFO")1 of $0.40 per diluted Paired Share
Adjusted Paired Share Income1 of $0.19 per diluted Paired Share
Comparable system-wide RevPAR index of 129, a 3,230 basis point increase

Extended Stay America’s President and Chief Executive Officer Bruce Haase, commented, "We are pleased with another strong quarter easily outperforming every industry benchmark and improving our RevPAR index by more than 30% against our closest competition. Our performance illustrates the strength of our unique operating model, our singular focus on the extended stay segment, and the successful implementation of a wide variety of operational, marketing, and distribution channel initiatives."

"We generated strong free cash flow and fully repaid our REIT’s outstanding revolver during the quarter. While others in the industry are forced to make difficult short-term decisions, we continue to invest in our properties, our people, and our longer term strategies which will enable further long-term success as the lodging markets recover."
Financial and Operating Results
Total revenues for the three months ended September 30, 2020 were $285.9 million, a decrease of 14.1% over the same period in 2019 due to the impact of the COVID-19 pandemic. Total revenues for the first nine months of 2020 were $783.0 million, a decrease of 16.2% 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 Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share).


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Comparable system-wide RevPAR for the three months ended September 30, 2020 declined 14.7% over the same period in 2019 to $46.75, driven by a 13.7% decline in Average Daily Rate ("ADR") and a 100 basis point decrease in occupancy to 79.8%. Comparable system-wide RevPAR year over year percentage change improved each month during the third quarter. Comparable system-wide RevPAR for the first nine months of 2020 declined 16.9% to $43.06.

Hotel Operating Margin for the three months ended September 30, 2020 was 47.3% compared to 53.8% in the same period in 2019 due a decrease in RevPAR caused by the COVID-19 pandemic. Hotel operating expenses during the third quarter of 2020 declined by 2.5% from the same period in 2019, or approximately 3.5% on a comparable basis. Hotel Operating Margin for the first nine months of 2020 was 45.1% compared to 52.9% in the same period of 2019, driven by a decrease in RevPAR due to the COVID-19 pandemic.

Net income for the three months ended September 30, 2020 was $31.5 million compared to net income of $53.2 million for the same period in 2019. The decrease in net income was due to a decline in Comparable system-wide RevPAR, partially offset by an income tax benefit, lower net interest expense, and lower hotel operating expenses. Net income for the first nine months of 2020 was $30.6 million, compared to net income of $141.3 million for the same period in 2019.

Adjusted EBITDA for the three months ended September 30, 2020 was $112.7 million, a decline of 27.9% 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 $1.7 million, $1.3 million in loss on disposal of assets and $0.8 million in other expenses. Adjusted EBITDA for the first nine months of 2020 was $284.8 million compared to $426.3 million in the same period of 2019.

Adjusted FFO for the three months ended September 30, 2020 was $70.7 million, or $0.40 per diluted Paired Share, compared to $101.5 million, or $0.54 per diluted Paired Share in the same period in 2019. The decrease in Adjusted FFO per diluted Paired Share was due to a decline in Comparable system-wide RevPAR, partially offset by an income tax benefit, lower net interest expense and a reduction in Paired Shares outstanding. Adjusted FFO for the first nine months of 2020 was $156.4 million, or $0.88 per diluted Paired Share, compared to $269.8 million, or $1.43 per diluted Paired Share, for the same period in 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 Income for the three months ended September 30, 2020 was $33.1 million, or $0.19 per diluted Paired Share, compared to $62.6 million in Adjusted Paired Share Income, or $0.33 per diluted Paired Share, for the same period in 2019. The decrease in Adjusted Paired Share Income per diluted Paired Share was due to the decline in Comparable System-wide RevPAR, partially offset an income tax benefit, lower net interest expense and a reduction in Paired Shares outstanding. Adjusted Paired Share Income for the first nine months of 2020 was $38.6 million, or $0.22 per diluted Paired Share, compared to $153.3 million, or $0.81 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.

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Capital Expenditures and Balance Sheet
The Company invested $39.6 million in capital expenditures during the third quarter of 2020. This included $2.9 million in renovation capital and $16.7 million in capital for hotel development. For the first nine months of 2020, the Company invested $144.9 million in capital expenditures.

As of September 30, 2020, the Company had $396.4 million in cash and equivalents, including $14.9 million in restricted cash, and total debt outstanding was $2.73 billion. The Company repaid its $350.0 million revolver at ESH Hospitality, Inc. in full during the third quarter due to the strong increases in RevPAR compared to earlier in the pandemic and the improvement in free cash flow in recent months. Excluding the $350 million revolver repayment made in the third quarter, the Company increased its cash position by $63.9 million despite its investments in renovations and hotel development.

Hotel and Development Pipeline
As of September 30, 2020, the Company had a pipeline of 65 hotels representing approximately 7,900 rooms. One Company-owned hotel and one franchised hotel opened during the third quarter, resulting in a total of 8 system-wide hotels opened in the first nine months of 2020.
Company Owned Pipeline & Recently Opened Hotels as of September 30, 2020
Under OptionPre-DevelopmentUnder ConstructionTotal PipelineOpened YTD
# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms
0045046764101,2685612
Third Party Pipeline & Recently Opened Hotels as of September 30, 2020
CommitmentsApplicationsExecutedTotal PipelineOpened YTD
# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms# Hotels# Rooms
283,472273,184556,6563280

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 November 9, 2020, the Board of Directors of Extended Stay America, Inc. declared a $0.01 distribution to common shareholders payable on December 8, 2020 to shareholders of record on November 24, 2020. Management and the Boards of 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

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maintain its REIT status and expects to make a catch-up dividend in the first quarter of 2021 in order to meet its 2020 REIT distribution requirements.

The Company did not repurchase any Paired Shares during the third quarter and has $101.1 million in authorization outstanding.

Q4 and Full Year 2020 Outlook Update
The Company's Q4 2020 Outlook is as follows:
In millions, except %LowHigh
Comparable system-wide RevPAR% Δ-15%-11%
Adjusted EBITDA$78$88

The Company's 2020 Outlook is as follows:
In millions, except %LowHigh
Comparable system-wide RevPAR% Δ-16.5%-15.5%
Net Income$31$45
Adjusted EBITDA$363$373
Depreciation and amortization$203$206
Net interest expense$130$130
Capital expenditures$170$190

Performance for the fourth 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 fourth quarter and full year 2020 results.
Webcast and Conference Call Details
The Company will host a conference call on Tuesday, November 10, 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 November 17, 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 13712117.
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,

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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, Q4 2020 and full year 2020 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 November 9, 2020. 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

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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 638 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 562 hotels and over 62,000 rooms in the U.S. ESA also manages or franchises an additional 76 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 NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In thousands, except per share data)
(Unaudited)
Three Months EndedNine Months Ended
September 30, September 30,
20202019% Variance20202019% Variance
REVENUES:
$273,056 $320,669 (14.8)%  Room revenues$747,371 $899,329 (16.9)%
7,552 6,475 16.6%  Other hotel revenues20,640 17,848 15.6%
1,443 1,351 6.8%  Franchise and management fees3,940 4,023 (2.1)%
282,051 328,495 (14.1)%771,951 921,200 (16.2)%
3,837 4,200 (8.6)%Other revenues from franchised and managed properties11,072 12,821 (13.6)%
285,888 332,695 (14.1)%Total revenues783,023 934,021 (16.2)%
OPERATING EXPENSES:
149,156 152,913 (2.5)%  Hotel operating expenses427,886 437,111 (2.1)%
23,193 22,292 4.0%  General and administrative expenses70,234 67,606 3.9%
52,286 49,748 5.1%  Depreciation and amortization153,848 147,543 4.3%
420 2,679 (84.3)%  Impairment of long-lived assets1,095 2,679 (59.1)%
225,055 227,632 (1.1)%653,063 654,939 (0.3)%
4,353 4,699 (7.4)%Other expenses from franchised and managed properties12,643 14,342 (11.8)%
229,408 232,331 (1.3)%Total operating expenses665,706 669,281 (0.5)%
(66.7)%OTHER INCOME31 (87.1)%
56,481 100,367 (43.7)%INCOME FROM OPERATIONS117,321 264,771 (55.7)%
(155)101 (253.5)%OTHER NON-OPERATING (INCOME) EXPENSE246 (248)(199.2)%
32,276 36,535 (11.7)%INTEREST EXPENSE, NET98,582 95,905 2.8%
24,360 63,731 (61.8)%INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE18,493 169,114 (89.1)%
(7,132)10,501 (167.9)%INCOME TAX (BENEFIT) EXPENSE(12,074)27,822 (143.4)%
31,492 53,230 (40.8)%NET INCOME30,567 141,292 (78.4)%
(7,272)(12,159)(40.2)%NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS(14,156)(24,790)(42.9)%
$24,220 $41,071 (41.0)%NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS$16,411 $116,502 (85.9)%
$0.14 $0.22 (38.1)%NET INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED$0.09 $0.62 (85.1)%
178,198 187,015 WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED178,071 188,317 
CONSOLIDATED BALANCE SHEET DATA
AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019
(In thousands)
(Unaudited)
September 30,December 31,
20202019
Cash and cash equivalents$381,486 $346,812 
Restricted cash$14,894 $14,858 
Total assets$4,069,933 $4,030,596 
Total debt, net of unamortized deferred financing costs and debt discounts (1)
$2,684,024 $2,639,766 
Total equity$1,134,141 $1,176,270 
(1) Unamortized deferred financing costs and debt discounts totaled $41.0 million and $46.7 million as of September 30, 2020 and December 31, 2019, respectively.

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EXTENDED STAY AMERICA, INC.
OPERATING METRICS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Unaudited)
COMPARABLE SYSTEM-WIDE OPERATING METRICS (1)
Three Months EndedNine Months Ended
September 30, September 30,
20202019Variance20202019Variance
626626Number of hotels (as of September 30)624624
68,92268,922Number of rooms (as of September 30)68,70068,700
79.8%80.8%(100) bps
Comparable System-Wide Occupancy(1)
73.8%77.3%(350) bps
$58.56$67.83(13.7)%
Comparable System-Wide ADR(1)
$58.35$67.02(12.9)%
$46.75$54.78(14.7)%
Comparable System-Wide RevPAR(1)
$43.06$51.81(16.9)%

COMPARABLE COMPANY-OWNED OPERATING METRICS (2)
Three Months EndedNine Months Ended
September 30,September 30,
20202019Variance20202019Variance
554554Number of hotels (as of September 30)553553
61,55261,552Number of rooms (as of September 30)61,44561,445
79.5%80.8%(130) bps
Comparable Company-Owned Occupancy(2)
73.3%77.4%(410) bps
$60.04$70.10(14.4)%
Comparable Company-Owned ADR(2)
$59.97$69.15(13.3)%
$47.76$56.66(15.7)%
Comparable Company-Owned RevPAR(2)
$43.96$53.53(17.9)%

COMPANY-OWNED OPERATING METRICS(3)
Three Months EndedNine Months Ended
September 30,September 30,
20202019Variance20202019Variance
5625548Number of hotels (as of September 30)5625548
62,54561,552993Number of rooms (as of September 30)62,54561,552993
79.2%80.8%(160) bps
Company-Owned Occupancy(3)
73.2%77.4%(420) bps
$60.09$70.10(14.3)%
Company-Owned ADR(3)
$60.08$69.15(13.1)%
$47.60$56.66(16.0)%
Company-Owned RevPAR(3)
$43.95$53.53(17.9)%
(1) Includes hotels owned, franchised or managed for the full three and nine months ended September 30, 2020 and 2019, respectively.
(2) Includes hotels owned and operated by the Company for the full three and nine months ended September 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
August 2020112456262,545
September 202056262,545
(1) As of end of period.


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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, 2020 AND 2019
(In thousands)
(Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
20202019Variance20202019Variance
$31,492 $53,230 (40.8)%Net income$30,567 $141,292 (78.4)%
(7,132)10,501 (167.9)%Income tax (benefit) expense(12,074)27,822 (143.4)%
32,276 36,535 (11.7)%Interest expense, net98,582 95,905 2.8%
(155)101 (253.5)%Other non-operating (income) expense246 (248)(199.2)%
(1)(3)(66.7)%Other income(4)(31)(87.1)%
420 2,679 (84.3)%Impairment of long-lived assets1,095 2,679 (59.1)%
52,286 49,748 5.1%Depreciation and amortization153,848 147,543 4.3%
23,193 22,292 4.0%General and administrative expenses70,234 67,606 3.9%
1,330 1,660 (19.9)%
Loss on disposal of assets(1)
6,309 5,037 25.3%
(1,443)(1,351)6.8%Franchise and management fees(3,940)(4,023)(2.1)%
516 499 3.4%System services loss, net1,571 1,521 3.3%
$132,782 $175,891 (24.5)%Hotel Operating Profit$346,434 $485,103 (28.6)%
$273,056 $320,669 (14.8)%Room revenues$747,371 $899,329 (16.9)%
7,552 6,475 16.6%Other hotel revenues20,640 17,848 15.6%
$280,608 $327,144 (14.2)%Total room and other hotel revenues$768,011 $917,177 (16.3)%
47.3 %53.8 %(650) bpsHotel Operating Margin45.1 %52.9 %(780) bps
(1) Included in hotel operating expenses in the consolidated statements of operations.

NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(In thousands)
(Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
$31,492 $53,230 Net income$30,567 $141,292 
32,276 36,535 Interest expense, net98,582 95,905 
(7,132)10,501 Income tax (benefit) expense(12,074)27,822 
52,286 49,748 Depreciation and amortization153,848 147,543 
108,922 150,014 EBITDA270,923 412,562 
1,656 1,876 Equity-based compensation4,646 6,131 
420 2,679 Impairment of long-lived assets1,095 2,679 
516 — 
System services loss, net(1)
1,571 — 
1,175 1,756 
Other expense(2)
6,555 4,907 
$112,689 $156,325 Adjusted EBITDA$284,790 $426,279 
(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 nine months ended September 30, 2019, was $0.5 million and $1.5 million, respectively.
(2) Includes loss on disposal of assets and non-operating (income) expense, including foreign currency transaction costs. Loss on disposal of assets totaled $1.3 million, $1.7 million, $6.3 million and $5.0 million, respectively.


9


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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, 2020 AND 2019
(In thousands, except per share and per Paired Share data)
(Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
$0.14 $0.22 Net income per Extended Stay America, Inc. common
share - diluted
$0.09 $0.62 
$24,220 $41,071 Net income attributable to Extended Stay America, Inc. common shareholders$16,411 $116,502 
7,268 12,155 Noncontrolling interests attributable to Class B common shares of ESH REIT14,144 24,778 
50,667 48,247 Real estate depreciation and amortization148,977 143,335 
420 2,679 Impairment of long-lived assets1,095 2,679 
(11,835)(8,250)
Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders(1)
(24,265)(23,132)
70,740 95,902 Funds From Operations156,362 264,162 
— 6,716 Debt modification and extinguishment costs— 6,716 
— (1,088)Tax effect of adjustments to Funds From Operations— (1,088)
$70,740 $101,530 Adjusted Funds From Operations$156,362 $269,790 
$0.40 $0.54 Adjusted Funds From Operations per Paired Share - diluted$0.88 $1.43 
178,198 187,015 Weighted average Paired Shares outstanding - diluted178,071 188,317 
(1) The tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders for the three months ended September 30, 2020, is computed using a statutory rate due to the fact that the consolidated effective tax rate for the period is negative.


10


https://cdn.kscope.io/e70e26d2a996185b4ca5969677d77d19-staylogoa071a.jpg
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, 2020 AND 2019
(In thousands, except per share and per Paired Share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
$0.14 $0.22 Net income per Extended Stay America, Inc. common
share - diluted
$0.09 $0.62 
$24,220 $41,071 Net income attributable to Extended Stay America, Inc. common shareholders$16,411 $116,502 
7,268 12,155 Noncontrolling interests attributable to Class B common shares of ESH REIT14,144 24,778 
31,488 53,226 Paired Share Income30,555 141,280 
— 6,716 Debt modification and extinguishment costs— 6,716 
420 2,679 Impairment of long-lived assets1,095 2,679 
516 — 
System services loss, net(1)
1,571 — 
1,175 1,756 
Other expense(2)
6,555 4,907 
(489)(1,806)
Tax effect of adjustments to Paired Share Income(3)
(1,209)(2,299)
$33,110 $62,571 Adjusted Paired Share Income$38,567 $153,283 
$0.19 $0.33 Adjusted Paired Share Income per Paired Share - diluted$0.22 $0.81 
178,198 187,015 Weighted average Paired Shares outstanding - diluted178,071 188,317 
(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 Income; no adjustments have been made to prior period results. System services loss, net for the three and nine months ended September 30, 2019, was $0.5 million and $1.5 million, respectively.
(2) Includes loss on disposal of assets and non-operating (income) expense, including foreign currency transaction costs. Loss on disposal of assets totaled $1.3 million, $1.7 million, $6.3 million and $5.0 million, respectively.
(3) The tax effect of adjustments to Paired Share Income for the three months ended September 30, 2020, is computed using a statutory rate due to the fact that the consolidated effective tax rate for the period is negative.









11


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EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
FOR THE YEARS ENDED DECEMBER 31, 2019 (ACTUAL) AND 2020 (OUTLOOK)
(In thousands)
(Unaudited)
Year EndedYear Ended December 31, 2020
December 31, 2019(Outlook)
(Actual)LowHigh
$165,138 Net income$30,605 $44,605 
127,764 Interest expense, net130,000 130,000 
29,315 
Income tax expense (benefit)(1)
(19,000)(26,000)
197,400 Depreciation and amortization203,000 206,000 
519,617 EBITDA344,605 354,605 
6,913 Equity-based compensation6,200 6,200 
2,679 Impairment of long-lived assets1,095 1,095 
— 
System services loss, net (2)
2,100 2,100 
5,829 
Other expense(3)
9,000 9,000 
$535,038 Adjusted EBITDA$363,000 $373,000 
(1) The 2020 Outlook with respect to income tax applies to absolute income tax benefit only. Due to (1) certain provisions of the CARES Act related to income tax relief, (2) greater variability in 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 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 the year ended December 31, 2020.
(2) 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 year ended December 31, 2019, was $2.2 million.
(3) Includes loss on disposal of assets and non-operating (income) expense, including foreign currency transaction costs.


12

earningscallq32020vfinal
Q3 2020 Earnings Summary November 9, 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, Q4 2020 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 reports on Form 10-Q filed with the SEC on November 9, 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 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 each of the full three and nine months ended September 30, 2020 and 2019. For franchised or managed hotels, ESA earns certain fees based on a percentage of hotel revenues. 2


 
Q3 2020 Operating Results and Financial Highlights comparable system-wide revenue per available net income (in millions) room (“RevPAR”) $54.78 $53.2 $46.75 $31.5 Q3 2019 Q3 2020 Q3 2019 Q3 2020 1 hotel operating margin1 adjusted FFO per diluted Paired Share 53.8% 47.3% $0.54 $0.40 Q3 2019 Q3 2020 Q3 2019 Q3 2020 adjusted EBITDA (in millions)1 adjusted Paired Share income per diluted Paired Share1 $156.3 $112.7 $0.33 $0.19 Q3 2019 Q3 2020 Q3 2019 Q3 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 have 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, which began to improve before COVID-19, has continued at very high levels months into the industry recovery 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 July, August and September 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 close to FY 2019 levels in recent months ✓ 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 ✓ RevPAR levels since June generate positive cash flow, even with significant capital investments ✓ Full kitchen and refrigerator in room attract guests concerned 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 5


 
Strong free cash flow, despite capital investments into new hotels and renovations 1 1 maturity amount/ interest debt capitalization date millions2 rate Term Loan B 2026 $625 L + 2003 ESH REIT revolver 2024 $0 L + 200 ($350m) ESA revolver ($50m) 2024 $50 L + 225 total secured debt $675 senior unsecured notes 2025 $1,300 5.25% senior unsecured notes 2027 $750 4.63% preferred stock4 2020 $1 8.00% total unsecured debt $2,051 total company debt $2,726 1 Includes restricted and unrestricted cash. 2 Gross debt outstanding (excludes discounts and deferred financing costs). 3 $100m swapped to fixed LIBOR of 1.175% as of 9/30/20. 6 4 Expected to be redeemed on November 15, 2020.


 
Pipeline Update Company Owned Pipeline & Recently Opened Hotels as of September 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 6 764 10 1,268 5 612 Third Party Pipeline & Recently Opened Hotels as of September 30, 2020 Commitments Applications Executed Total Pipeline Opened YTD # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms # Hotels # Rooms 28 3,472 0 0 27 3,184 55 6,656 3 280 • 1 owned hotel and 1 franchised hotel opened during 3Q 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 Q4 2020 Comparable system-wide RevPAR % D: -11% to -15% Company owned RevPAR % D: -12% to -16% Adjusted EBITDA: $78 to $88 million FY 2020 Comparable system-wide RevPAR % D: -15.5% to -16.5% Company owned RevPAR % D: -16.5% to -17.5% Net Income: $31 to $45 million Adjusted EBITDA: $363 to $373 million Capital expenditures: $170 to $190 million Depreciation expense: $203 to $206 million Net interest expense: $130 million 1Outlook for Q4 2020 and Full Year 2020 is as of November 9, 2020. Performance for the fourth 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 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 fourth quarter or full year 2020 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 INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (In thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 Variance 2020 2019 Variance $ 31,492 $ 53,230 (40.8)% Net income $ 30,567 $ 141,292 (78.4)% (7,132) 10,501 (167.9)% Income tax (benefit) expense (12,074) 27,822 (143.4)% 32,276 36,535 (11.7)% Interest expense, net 98,582 95,905 2.8% (155) 101 (253.5)% Other non-operating (income) expense 246 (248) (199.2)% (1) (3) (66.7)% Other income (4) (31) (87.1)% 420 2,679 (84.3)% Impairment of long-lived assets 1,095 2,679 (59.1)% 52,286 49,748 5.1% Depreciation and amortization 153,848 147,543 4.3% 23,193 22,292 4.0% General and administrative expenses 70,234 67,606 3.9% 1,330 1,660 (19.9)% Loss on disposal of assets (1) 6,309 5,037 25.3% (1,443) (1,351) 6.8% Franchise and management fees (3,940) (4,023) (2.1)% 516 499 3.4% System services loss, net 1,571 1,521 3.3% $ 132,782 $ 175,891 (24.5)% Hotel Operating Profit $ 346,434 $ 485,103 (28.6)% $ 273,056 $ 320,669 (14.8)% Room revenues $ 747,371 $ 899,329 (16.9)% 7,552 6,475 16.6% Other hotel revenues 20,640 17,848 15.6% $ 280,608 $ 327,144 (14.2)% Total room and other hotel revenues $ 768,011 $ 917,177 (16.3)% 47.3% 53.8% (650) bps Hotel Operating Margin 45.1% 52.9% (780) bps (1) Included in hotel operating expenses in the consolidated statements of operations. 11


 
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (In thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 $ 31,492 $ 53,230 Net income $ 30,567 $ 141,292 32,276 36,535 Interest expense, net 98,582 95,905 (7,132) 10,501 Income tax (benefit) expense (12,074) 27,822 52,286 49,748 Depreciation and amortization 153,848 147,543 108,922 150,014 EBITDA 270,923 412,562 1,656 1,876 Equity-based compensation 4,646 6,131 420 2,679 Impairment of long-lived assets 1,095 2,679 516 - System services loss, net(1) 1,571 - 1,175 1,756 Other expense(2) 6,555 4,907 $ 112,689 $ 156,325 Adjusted EBITDA $ 284,790 $ 426,279 (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 nine months ended September 30, 2019, was $0.5 million and $1.5 million, respectively. (2) Includes loss on disposal of assets and non-operating (income) expense, including foreign currency transaction costs. Loss on disposal of assets totaled $1.3 million, $1.7 million, $6.3 million and $5.0 million, respectively. 12


 
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, 2020 AND 2019 (In thousands, except per share and per Paired Share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net income per Extended Stay America, Inc. common share - $ 0.14 $ 0.22 $ 0.09 $ 0.62 diluted Net income attributable to Extended Stay America, Inc. common $ 24,220 $ 41,071 $ 16,411 $ 116,502 shareholders Noncontrolling interests attributable to Class B 7,268 12,155 14,144 24,778 common shares of ESH REIT 50,667 48,247 Real estate depreciation and amortization 148,977 143,335 420 2,679 Impairment of long-lived assets 1,095 2,679 Tax effect of adjustments to net income attributable to Extended (11,835) (8,250) (24,265) (23,132) Stay America, Inc. common shareholders(1) 70,740 95,902 Funds from Operations 156,362 264,162 - 6,716 Debt modification and extinguishment costs - 6,716 - (1,088) Tax effect of adjustments to Funds from Operations - (1,088) $ 70,740 $ 101,530 Adjusted Funds from Operations $ 156,362 $ 269,790 Adjusted Funds from Operations $ 0.40 $ 0.54 per Paired Share – diluted $ 0.88 $ 1.43 Weighted average Paired Shares 178,198 187,015 outstanding – diluted 178,071 188,317 (1) The tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders for the three months ended September 30, 2020, is computed using a statutory rate due to the fact that the consolidated effective tax rate for the period is negative. 13


 
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, 2020 AND 2019 (In thousands, except per share and per Paired Share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net income per Extended Stay America, Inc. common share - $ 0.14 $ 0.22 $ 0.09 $ 0.62 diluted Net income attributable to Extended Stay America, Inc. $ 24,220 $ 41,071 common shareholders $ 16,411 $ 116,502 Noncontrolling interests attributable to Class B 7,268 12,155 common shares of ESH REIT 14,144 24,778 31,488 53,226 Paired Share Income 30,555 141,280 - 6,716 Debt modification and extinguishment costs - 6,716 420 2,679 Impairment of long-lived assets 1,095 2,679 516 - System services loss, net(1) 1,571 - 1,175 1,756 Other expense(2) 6,555 4,907 (489) (1,806) Tax effect of adjustments to Paired Share Income(3) (1,209) (2,299) $ 33,110 $ 62,571 Adjusted Paired Share Income $ 38,567 $ 153,283 Adjusted Paired Share Income per $ 0.19 $ 0.33 Paired Share – diluted $ 0.22 $ 0.81 178,198 187,015 Weighted average Paired Shares outstanding – diluted 178,071 188,317 (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 Income; no adjustments have been made to prior period results. System services loss, net for the three and nine months ended September 30, 2019, was $0.5 million and $1.5 million, respectively. (2) Includes loss on disposal of assets and non-operating (income) expense, including foreign currency transaction costs. Loss on disposal of assets totaled $1.3 million, $1.7 million, $6.3 million and $5.0 million, respectively. (3) The tax effect of adjustments to Paired Share Income for the three months ended September 30, 2020, is computed using a statutory rate due to the fact that the consolidated effective tax rate for the period is negative. 14


 
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA FOR THE YEARS ENDED DECEMBER 31, 2019 (ACTUAL) AND 2020 (OUTLOOK) (In thousands) (Unaudited) Year Ended Year Ended December 31, 2020 December 31, 2019 (Outlook) (Actual) Low High $ 165,138 Net income $ 30,605 $ 44,605 127,764 Interest expense, net 130,000 130,000 29,315 Income tax expense (benefit)(1) (19,000) (26,000) 197,400 Depreciation and amortization 203,000 206,000 519,617 EBITDA 344,605 354,605 6,913 Equity-based compensation 6,200 6,200 2,679 Impairment of long-lived assets 1,095 1,095 - System services loss, net(2) 2,100 2,100 5,829 Other expense(3) 9,000 9,000 $ 535,038 Adjusted EBITDA $ 363,000 $ 373,000 (1) The 2020 Outlook with respect to income tax applies to absolute income tax benefit only. Due to (1) certain provisions of the CARES Act related to income tax relief, (2) greater variability in 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 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 the year ended December 31, 2020. (2) 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 year ended December 31, 2019, was $2.2 million. (3) Includes loss on disposal of assets and non-operating (income) expense, including foreign currency transaction costs. 15