- Net Income of $23.8 million in the Fourth Quarter, $165.1 million for the Full Year 2019
- Adjusted EBITDA1 of $108.8 million in the Fourth Quarter, $535.0 million for the Full Year 2019
- Comparable system-wide RevPAR of -0.8% in the Fourth Quarter, -0.9% for the Full Year 2019
- Over $300 million in capital returns to Paired Shareholders for the Full Year 2019
- Issues 2020 Guidance
CHARLOTTE, N.C., Feb. 26, 2020 (GLOBE NEWSWIRE) -- Extended Stay America, Inc. and ESH Hospitality, Inc. (together, the “Company”) (NASDAQ:STAY) today announced consolidated results for the three and twelve months ended December 31, 2019.
Fourth Quarter 2019 Highlights
- Net income of $23.8 million
- Total revenues of $284.2 million
- Comparable system-wide Revenue Per Available Room (“RevPAR”) declined 0.8%, a RevPAR Index gain of 2.1% compared to our competitive set
- Adjusted EBITDA of $108.8 million
- Adjusted Funds from Operations (“Adjusted FFO”)1 of $0.37 per diluted Paired Share
- Adjusted Paired Share Income1 of $0.14 per diluted Paired Share
- $115 million in capital returns to Paired Shareholders
Extended Stay America’s President and Chief Executive Officer, Bruce Haase, commented, “We were pleased to finish the year on a strong December performance, where we gained more than 400 basis points of RevPAR index on our competitive set and 210 basis points for the full fourth quarter of 2019.”
Mr. Haase continued, “In 2020, we will focus on a return to the basics and fully exploiting the value inherent in our high margin extended stay business model. We believe there is opportunity to improve the guest experience and property performance, more aggressively curate our asset portfolio, and grow the Extended Stay America brand through an asset-light franchising strategy. We will also continue to focus on returning significant capital to our shareholders while maintaining strong financial discipline.”
Financial and Operating Results
Total revenues for the three months ended December 31, 2019 were $284.2 million, a decrease of 1.9% over the same period in the prior year due to asset dispositions in 2018 and a decline in Comparable Company-owned RevPAR. Adjusting for asset dispositions in 2018, total revenues declined 1.1% during the fourth quarter. For the full year 2019, total revenues declined 4.5% to $1,218.2 million, driven by asset dispositions and a decrease in Comparable system-wide RevPAR. Adjusting for asset dispositions in 2018, total revenues decreased 0.3%.
Comparable system-wide RevPAR for the three months ended December 31, 2019 decreased 0.8% over the same period in 2018 to $46.94, driven by a 4.0% decline in Average Daily Rate (“ADR”), partially offset by a 240 basis point increase in occupancy. The decline in Comparable system-wide RevPAR was driven by industry softness in October, a -0.8% impact from renovation disruption, and a -0.8% impact from cycling the Boston gas explosion in 2018. Despite the impact from renovation disruption, the Company’s RevPAR outperformed its competitive set by 2.1% during the quarter on a Comparable system-wide basis. Comparable system-wide RevPAR was approximately flat in November and increased 1.8% in December. Company-owned RevPAR decreased 1.7% during the quarter. Comparable system-wide RevPAR for the full year 2019 declined 0.9% over 2018 driven by a 2.9% decline in ADR, partially offset by a 150 basis point increase in occupancy. Excluding renovation disruption and cycling hurricane market benefits in 2018, Comparable system-wide RevPAR for the full year 2019 would have increased 1.0%. The Company’s RevPAR outperformed its competitive set by 0.6% during the full year on a Comparable system-wide basis.
Hotel Operating Margin1 for the three months ended December 31, 2019 was 48.3% compared to 51.1% in the same period in 2018. While we continued our strategy to maximize targeted marketing efforts to our longest staying customers and other cost saving initiatives, these were offset by an increase in certain operating expenses, including hotel payroll expense, property insurance expense, maintenance expense and property taxes, as well as a decline in Comparable Company-owned RevPAR. Hotel Operating Margin for the full year 2019 was 51.8% compared to 54.0% in 2018. Property-level margins remain at industry leading levels.
Net income for the three months ended December 31, 2019 was $23.8 million compared to $39.4 million in the same period in 2018, a decrease of 39.5%. Net income this quarter was adversely impacted by CEO and related transition costs, legal settlement expense and an increase in hotel operating expenses. Net income for the full year 2019 was $165.1 million compared to $211.8 million in the same period in 2018, a decrease of 22.0%. The decline in net income for both the three and twelve months ended December 31, 2019 was primarily due to a decline in Hotel Operating Margin driven by increased hotel operating expense, partially offset by lower income tax expense.
Adjusted EBITDA for the three months ended December 31, 2019 was $108.8 million, a decline of 14.1% compared to the same period in 2018. Adjusted EBITDA was impacted by CEO and related transition costs, legal settlement expense and other unanticipated net expense items arising after our November 2019 guidance totaling approximately $10.0 million. Adjusted EBITDA excludes non-cash equity-based compensation expense of $0.8 million and $0.9 million in other expenses. Adjusted EBITDA for the full year 2019 was $535.0 million, a decline of 10.8%, due primarily to asset dispositions in 2018 resulting in lost contribution of $21.4 million and an increase in Comparable Company-owned hotel operating expenses.
Adjusted FFO for the three months ended December 31, 2019 was $67.8 million compared to $77.8 million in the same period in 2018. The decline in Adjusted FFO was due to an increase in Comparable Company-owned hotel operating expenses, CEO and related transition costs, legal settlements and a decline in Comparable Company-owned RevPAR. Adjusted FFO per diluted Paired Share was $0.37 compared to $0.41 in the same period in 2018. Adjusted FFO, a non-GAAP measure, represents funds from operations, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share. A Paired Share entitles its holder to participate in 100% of the common equity and earnings of both Extended Stay America, Inc. and ESH Hospitality, Inc. Adjusted FFO for the full year 2019 was $337.6 million, or $1.81 per diluted Paired Share, compared to $382.8 million, or $2.02 per diluted Paired Share, in 2018.
Adjusted Paired Share Income for the three months ended December 31, 2019 was $24.9 million, or $0.14 per diluted Paired Share, compared to $38.6 million, or $0.21 per diluted Paired Share, in the same period in 2018. The decline in Adjusted Paired Share Income was driven by an increase in Comparable Company-owned hotel operating expenses, CEO and related transition costs, legal settlements and a decline in Comparable Company-owned RevPAR, partially offset by a decrease in effective tax rate. Adjusted Paired Share Income, a non-GAAP measure, represents net income, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share. Adjusted Paired Share Income per diluted Paired Share for the full year 2019 was $0.95 compared to $1.14 in 2018.
Capital Expenditures
The Company invested $83.3 million in capital expenditures during the fourth quarter of 2019. This includes $13.4 million in renovation capital, $8.4 million in IT capital and $35.3 million in capital for hotel development and land acquisitions. The Company invested $261.3 million in capital expenditures for the full year 2019.
Hotel and Development Pipeline
As of December 31, 2019, the Company had a pipeline of 75 hotels representing approximately 9,100 rooms after opening 4 hotels in 2019.
| Company Owned Pipeline & Recently Opened Hotels as of December 31, 2019 | |||||||||||||||
| Under Option | Pre-Development | Under Construction | Total Pipeline | Opened in 2019 | |||||||||||
| # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | ||||||
| 1 | 124 | 6 | 752 | 9 | 1,128 | 16 | 2,004 | 2 | 260 | ||||||
| Third Party Pipeline & Recently Opened Hotels as of December 31, 2019 | |||||||||||||||
| Commitments | Applications | Executed | Total Pipeline | Opened in 2019 | |||||||||||
| # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | ||||||
| 39 | 4,804 | 5 | 588 | 15 | 1,665 | 59 | 7,057 | 2 | 217 | ||||||
| Definitions | |||||||||||||||
| Under Option | Locations with a signed purchase and sale agreement | ||||||||||||||
| Pre-Development | Land purchased, permitting and/or site work | ||||||||||||||
| Under Construction | Hotel is under construction | ||||||||||||||
| Commitments | Signed commitment to build a certain number of hotels by a third party | ||||||||||||||
| Applications | Third party filed franchise application with deposit | ||||||||||||||
| Executed | Franchise application approved, various stages of pre-development or under construction | ||||||||||||||
Distributions and Share Repurchases
On February 26, 2020, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. declared cash distributions totaling $0.23 per Paired Share for the fourth quarter of 2019. The distributions are payable on March 26, 2020 to shareholders of record as of March 12, 2020. The Company repurchased 5.0 million Paired Shares during the fourth quarter for an aggregate purchase of $73.1 million. For the full year 2019, the Company repurchased 9.0 million Paired Shares for an aggregate purchase of $130.5 million.
Since the end of the fourth quarter of 2019, the Company has repurchased an additional 2.2 million Paired Shares for an aggregate purchase of $31.0 million. The Company’s total remaining repurchase authorization was $101.1 million as of close of the market today.
2020 Outlook
The Company’s 2020 Outlook is as follows:
| in millions, except % and # of hotels | Low | High | ||||||||
| # of hotels owned on 12/31/20 | 564 | |||||||||
| Total revenues | $ | 1,226 | $ | 1,246 | ||||||
| Comparable system-wide RevPAR % D | -0.5 | % | +1.5 | % | ||||||
| Net income | $ | 133 | $ | 154 | ||||||
| Adjusted Paired Share Income/Paired Share | $ | 0.78 | $ | 0.90 | ||||||
| Adjusted FFO/Paired Share | $ | 1.68 | $ | 1.77 | ||||||
| Adjusted EBITDA | $ | 505 | $ | 525 | ||||||
| Depreciation and amortization | $ | 195 | $ | 200 | ||||||
| Net interest expense | $ | 135 | $ | 135 | ||||||
| Effective tax rate | 15 | % | 15 | % | ||||||
| Capital expenditures | $ | 210 | $ | 240 | ||||||
| Expected capital returns** | $ | 215 | $ | 235 | ||||||
Our guidance does not include any potential impact from the COVID-19 virus.
**Expected capital returns assumes no asset dispositions in 2020. We are currently marketing hotel assets and if such asset dispositions occur, a portion of disposition proceeds is expected to be used for incremental Paired Share repurchases.
Webcast and Conference Call Details
The Company will host a conference call on Thursday, February 27, 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 March 5, 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 13699082.
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, business strategies, financial results, liquidity and capital resources, capital expenditures, capital returns, distribution policy and other non-historical statements, including the statements in the “2020 Outlook” section of this release. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results or performance to differ from those projected in the forward-looking statements, possibly materially. For a description of factors that may cause the Company’s actual results or performance to differ from projected results or performance implied by forward-looking statements, please review the information under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in the Company’s combined annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 26, 2020 and other documents of the Company on file with or furnished to the SEC. Any forward-looking statements made in this release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, will have the expected consequences to, or effects on, the Company, its business or operations. Except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. We caution you that actual results may differ materially from what is expressed, implied or forecasted by the Company’s forward-looking statements.
About Extended Stay America
Extended Stay America® is the leading brand in the mid-priced extended stay segment in the U.S. with 631 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 557 hotels and approximately 61,900 rooms in the U.S. ESA also manages or franchises an additional 74 Extended Stay America® hotels. Visit www.esa.com for more information.
Contacts
Investors or Media:
Rob Ballew
(980) 345-1546
investorrelations@esa.com
_______________________________
1 See “Disclosure Regarding Non-GAAP Financial Measures” for an explanation of non-GAAP measures included in this release (i.e., Hotel Operating Profit, Hotel Operating Margin, EBITDA, Adjusted EBITDA, Funds from Operations (“FFO”), Adjusted FFO, Adjusted FFO per diluted Paired Share, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share)
| EXTENDED STAY AMERICA, INC. | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | ||||||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2019 | 2018 | % Variance | 2019 | 2018 | % Variance | |||||||||||||||
| (Unaudited) | REVENUES: | (Audited) | ||||||||||||||||||
| $ | 272,397 | $ | 279,236 | (2.4 | )% | Room revenues | $ | 1,171,726 | $ | 1,237,311 | (5.3 | )% | ||||||||
| 6,517 | 5,161 | 26.3 | % | Other hotel revenues | 24,365 | 21,871 | 11.4 | % | ||||||||||||
| 1,389 | 1,171 | 18.6 | % | Franchise and management fees | 5,412 | 3,310 | 63.5 | % | ||||||||||||
| 280,303 | 285,568 | (1.8 | )% | 1,201,503 | 1,262,492 | (4.8 | )% | |||||||||||||
| 3,895 | 4,148 | (6.1 | )% | Other revenues from franchised and managed properties | 16,716 | 12,567 | 33.0 | % | ||||||||||||
| 284,198 | 289,716 | (1.9 | )% | Total revenues | 1,218,219 | 1,275,059 | (4.5 | )% | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||
| 145,210 | 140,004 | 3.7 | % | Hotel operating expenses | 582,321 | 583,029 | (0.1 | )% | ||||||||||||
| 27,549 | 21,384 | 28.8 | % | General and administrative expenses | 95,155 | 91,094 | 4.5 | % | ||||||||||||
| 49,857 | 49,677 | 0.4 | % | Depreciation and amortization | 197,400 | 209,329 | (5.7 | )% | ||||||||||||
| - | - | n/a | Impairment of long-lived assets | 2,679 | 43,600 | (93.9 | )% | |||||||||||||
| 222,616 | 211,065 | 5.5 | % | 877,555 | 927,052 | (5.3 | )% | |||||||||||||
| 4,528 | 4,456 | 1.6 | % | Other expenses from franchised and managed properties | 18,870 | 13,217 | 42.8 | % | ||||||||||||
| 227,144 | 215,521 | 5.4 | % | Total operating expenses | 896,425 | 940,269 | (4.7 | )% | ||||||||||||
| - | 879 | (100.0 | )% | GAIN ON SALE OF HOTEL PROPERTIES, NET | - | 42,478 | (100.0 | )% | ||||||||||||
| 1 | 168 | (99.4 | )% | OTHER INCOME | 32 | 669 | (95.2 | )% | ||||||||||||
| 57,055 | 75,242 | (24.2 | )% | INCOME FROM OPERATIONS | 321,826 | 377,937 | (14.8 | )% | ||||||||||||
| (143 | ) | (813 | ) | (82.4 | )% | OTHER NON-OPERATING INCOME | (391 | ) | (765 | ) | (48.9 | )% | ||||||||
| 31,859 | 29,798 | 6.9 | % | INTEREST EXPENSE, NET | 127,764 | 124,870 | 2.3 | % | ||||||||||||
| 25,339 | 46,257 | (45.2 | )% | INCOME BEFORE INCOME TAX EXPENSE | 194,453 | 253,832 | (23.4 | )% | ||||||||||||
| 1,493 | 6,858 | (78.2 | )% | INCOME TAX EXPENSE | 29,315 | 42,076 | (30.3 | )% | ||||||||||||
| 23,846 | 39,399 | (39.5 | )% | NET INCOME | 165,138 | 211,756 | (22.0 | )% | ||||||||||||
| (70,680 | ) | (78,345 | ) | (9.8 | )% | NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (95,470 | ) | (98,892 | ) | (3.5 | )% | ||||||||
| $ | (46,834 | ) | $ | (38,946 | ) | 20.3 | % | NET (LOSS) INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS | $ | 69,668 | $ | 112,864 | (38.3 | )% | ||||||
| $ | (0.26 | ) | $ | (0.21 | ) | 24.4 | % | NET (LOSS) INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED | $ | 0.37 | $ | 0.59 | (37.3 | )% | ||||||
| 182,046 | 188,272 | WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED | 186,822 | 189,821 | ||||||||||||||||
| CONSOLIDATED BALANCE SHEET DATA | ||||||||||||||||||||
| AS OF DECEMBER 31, 2019 and 2018 | ||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| (Audited) | ||||||||||||||||||||
| December 31, | ||||||||||||||||||||
| 2019 | 2018 | |||||||||||||||||||
| Cash and cash equivalents | $ | 346,812 | $ | 287,458 | ||||||||||||||||
| Restricted cash | $ | 14,858 | $ | 15,878 | ||||||||||||||||
| Total assets | $ | 4,030,596 | $ | 3,924,210 | ||||||||||||||||
| Total debt, net of unamortized deferred financing costs and debt discounts (1) | $ | 2,639,766 | $ | 2,402,637 | ||||||||||||||||
| Total equity | $ | 1,176,270 | $ | 1,310,639 | ||||||||||||||||
| (1) Unamortized deferred financing costs and debt discounts totaled $46.7 million and $41.1 million as of December 31, 2019 and 2018, respectively. | ||||||||||||||||||||
| EXTENDED STAY AMERICA, INC. | |||||||||||||||||||||
| OPERATING METRICS | |||||||||||||||||||||
| FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| COMPARABLE SYSTEM-WIDE OPERATING METRICS (1) | |||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||
| 2019 | 2018 | Variance | 2019 | 2018 | Variance | ||||||||||||||||
| 624 | 624 | - | Number of hotels (as of December 31) | 623 | 623 | - | |||||||||||||||
| 68,700 | 68,700 | - | Number of rooms (as of December 31) | 68,585 | 68,585 | - | |||||||||||||||
| 75.3 | % | 72.9 | % | 240 | bps | Comparable System-Wide Occupancy(1) | 76.8 | % | 75.3 | % | 150 | bps | |||||||||
| $ | 62.31 | $ | 64.94 | (4.0 | )% | Comparable System-Wide ADR(1) | $ | 65.86 | $ | 67.84 | (2.9 | )% | |||||||||
| $ | 46.94 | $ | 47.34 | (0.8 | )% | Comparable System-Wide RevPAR(1) | $ | 50.60 | $ | 51.06 | (0.9 | )% | |||||||||
| COMPARABLE COMPANY-OWNED OPERATING METRICS (2) | |||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||
| 2019 | 2018 | Variance | 2019 | 2018 | Variance | ||||||||||||||||
| 553 | 553 | - | Number of hotels (as of December 31) | 552 | 552 | - | |||||||||||||||
| 61,445 | 61,445 | - | Number of rooms (as of December 31) | 61,330 | 61,330 | - | |||||||||||||||
| 74.8 | % | 73.4 | % | 140 | bps | Comparable Company-Owned Occupancy(2) | 76.8 | % | 75.9 | % | 90 | bps | |||||||||
| $ | 64.32 | $ | 66.74 | (3.6 | )% | Comparable Company-Owned ADR(2) | $ | 67.96 | $ | 69.67 | (2.5 | )% | |||||||||
| $ | 48.13 | $ | 48.96 | (1.7 | )% | Comparable Company-Owned RevPAR(2) | $ | 52.19 | $ | 52.88 | (1.3 | )% | |||||||||
| Renovation Displacement Data (in thousands, except percentages): | |||||||||||||||||||||
| 5,653 | 5,653 | - | Total available room nights | 22,385 | 22,385 | - | |||||||||||||||
| 34 | - | 34 | Room nights displaced from renovation | 79 | - | 79 | |||||||||||||||
| 0.6 | % | 0.0 | % | 60 | bps | % of available room nights displaced | 0.4 | % | 0.0 | % | 40 | bps | |||||||||
| COMPANY-OWNED OPERATING METRICS (3) | |||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||
| 2019 | 2018 | Variance | 2019 | 2018 | Variance | ||||||||||||||||
| 557 | 554 | 3 | Number of hotels (as of December 31) | 557 | 554 | 3 | |||||||||||||||
| 61,933 | 61,552 | 381 | Number of rooms (as of December 31) | 61,933 | 61,552 | 381 | |||||||||||||||
| 74.8 | % | 73.3 | % | 150 | bps | Company-Owned Occupancy(3) | 76.7 | % | 75.9 | % | 80 | bps | |||||||||
| $ | 64.34 | $ | 66.74 | (3.6 | )% | Company-Owned ADR(3) | $ | 67.97 | $ | 69.67 | (2.4 | )% | |||||||||
| $ | 48.11 | $ | 48.93 | (1.7 | )% | Company-Owned RevPAR(3) | $ | 52.16 | $ | 52.86 | (1.3 | )% | |||||||||
| (1) Includes hotels owned, franchised or managed for the full three and twelve months ended December 31, 2019 and 2018, respectively. | |||||||||||||||||||||
| (2) Includes hotels owned and operated by the Company for the full three and twelve months ended December 31, 2019 and 2018, respectively. | |||||||||||||||||||||
| (3) Includes results of operations of the Company's owned and operated hotels during the periods presented, which is summarized below: | |||||||||||||||||||||
| Date | Number of Hotels (Sold), Acquired or Opened | Number of Rooms | Number of Owned Hotels(1) | Number of Owned Rooms(1) | ||||
| December 31, 2017 | - | - | 624 | 68,686 | ||||
| February 2018 | (25 | ) | (2,420 | ) | 599 | 66,266 | ||
| March 2018 | (1 | ) | (101 | ) | 598 | 66,165 | ||
| May 2018 | 1 | 115 | 599 | 66,280 | ||||
| September 2018 | (32 | ) | (3,449 | ) | 567 | 62,831 | ||
| November 2018 | 1 | 107 | 568 | 62,938 | ||||
| November 2018 | (14 | ) | (1,386 | ) | 554 | 61,552 | ||
| November 2019 | 1 | 121 | 555 | 61,673 | ||||
| December 31, 2019 | 2 | 260 | 557 | 61,933 | ||||
| (1) As of end of period. | ||||||||
| EXTENDED STAY AMERICA, INC. | |||||||||||||||
| NON-GAAP RECONCILIATION OF NET INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN | |||||||||||||||
| FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | |||||||||||||||
| (In thousands) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2019 | 2018 | Variance | 2019 | 2018 | Variance | ||||||||||
| $ | 23,846 | $ | 39,399 | (39.5)% | Net income | $ | 165,138 | $ | 211,756 | (22.0)% | |||||
| 1,493 | 6,858 | (78.2)% | Income tax expense | 29,315 | 42,076 | (30.3)% | |||||||||
| 31,859 | 29,798 | 6.9% | Interest expense, net | 127,764 | 124,870 | 2.3% | |||||||||
| (143) | (813) | (82.4)% | Other non-operating income | (391) | (765) | (48.9)% | |||||||||
| (1) | (168) | (99.4)% | Other income | (32) | (669) | (95.2)% | |||||||||
| - | (879) | (100.0)% | Gain on sale of hotel properties, net | - | (42,478) | (100.0)% | |||||||||
| - | - | n/a | Impairment of long-lived assets | 2,679 | 43,600 | (93.9)% | |||||||||
| 49,857 | 49,677 | 0.4% | Depreciation and amortization | 197,400 | 209,329 | (5.7)% | |||||||||
| 27,549 | 21,384 | 28.8% | General and administrative expenses | 95,155 | 91,094 | 4.5% | |||||||||
| 1,035 | 796 | 30.0% | Loss on disposal of assets(1) | 6,072 | 3,413 | 77.9% | |||||||||
| (1,389) | (1,171) | 18.6% | Franchise and management fees | (5,412) | (3,310) | 63.5% | |||||||||
| 633 | 308 | 105.5% | Other expenses from franchised and managed properties, net of other revenues | 2,154 | 650 | 231.4% | |||||||||
| $ | 134,739 | $ | 145,189 | (7.2)% | Hotel Operating Profit | $ | 619,842 | $ | 679,566 | (8.8)% | |||||
| $ | 272,397 | $ | 279,236 | (2.4)% | Room revenues | $ | 1,171,726 | $ | 1,237,311 | (5.3)% | |||||
| 6,517 | 5,161 | 26.3% | Other hotel revenues | 24,365 | 21,871 | 11.4% | |||||||||
| $ 278,914 | $ 284,397 | (1.9)% | Total room and other hotel revenues | $ | 1,196,091 | $ | 1,259,182 | (5.0)% | |||||||
| 48.3% | 51.1% | (280) bps | Hotel Operating Margin | 51.8% | 54.0% | (220) bps | |||||||||
| NON-GAAP RECONCILIATION OF NET INCOME TO COMPARABLE HOTEL(2) | |||||||||||||||
| OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN | |||||||||||||||
| FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | |||||||||||||||
| (In thousands) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2019 | 2018 | Variance | 2019 | 2018 | Variance | ||||||||||
| $ | 23,846 | $ | 39,399 | (39.5)% | Net income | $ | 165,138 | $ | 211,756 | (22.0)% | |||||
| 1,493 | 6,858 | (78.2)% | Income tax expense | 29,315 | 42,076 | (30.3)% | |||||||||
| 31,859 | 29,798 | 6.9% | Interest expense, net | 127,764 | 124,870 | 2.3% | |||||||||
| (143) | (813) | (82.4)% | Other non-operating income | (391) | (765) | (48.9)% | |||||||||
| (1) | (168) | (99.4)% | Other income | (32) | (669) | (95.2)% | |||||||||
| - | (879) | (100.0)% | Gain on sale of hotel properties, net | - | (42,478) | (100.0)% | |||||||||
| - | - | n/a | Impairment of long-lived assets | 2,679 | 43,600 | (93.9)% | |||||||||
| 49,857 | 49,677 | 0.4% | Depreciation and amortization | 197,400 | 209,329 | (5.7)% | |||||||||
| 27,549 | 21,384 | 28.8% | General and administrative expenses | 95,155 | 91,094 | 4.5% | |||||||||
| 1,035 | 796 | 30.0% | Loss on disposal of assets(1) | 6,072 | 3,413 | 77.9% | |||||||||
| (1,389) | (1,171) | 18.6% | Franchise and management fees | (5,412) | (3,310) | 63.5% | |||||||||
| 633 | 308 | 105.5% | Other expenses from franchised and managed properties, net of other revenues | 2,154 | 650 | 231.4% | |||||||||
| (283) | (770) | (63.2)% | Hotel operating profit of hotels not owned for entirety of periods presented | (1,641) | (21,423) | (92.3)% | |||||||||
| $ | 134,456 | $ | 144,419 | (6.9)% | Comparable Hotel Operating Profit(2) | $ | 618,201 | $ | 658,143 | (6.1)% | |||||
| $ | 272,397 | $ | 279,236 | (2.4)% | Room revenues | $ | 1,171,726 | $ | 1,237,311 | (5.3)% | |||||
| 6,517 | 5,161 | 26.3% | Other hotel revenues | 24,365 | 21,871 | 11.4% | |||||||||
| (900) | (2,476) | (63.7)% | Total revenues of hotels not owned for entirety of periods presented | (4,202) | (54,753) | (92.3)% | |||||||||
| $ | 278,014 | $ | 281,921 | (1.4)% | Comparable total room and other hotel revenues | $ | 1,191,889 | $ | 1,204,429 | (1.0)% | |||||
| 48.4% | 51.2% | (280) bps | Comparable Hotel Operating Margin(2) | 51.9% | 54.6% | (270) bps | |||||||||
| (1) Included in hotel operating expenses in the consolidated statements of operations. | |||||||||||||||
| (2) Includes results of 553 and 552 hotels owned and operated during the full three and twelve months ended December 31, 2019 and 2018, respectively. | |||||||||||||||
| EXTENDED STAY AMERICA, INC. | |||||||||||||||||
| NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA | |||||||||||||||||
| FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| $ | 23,846 | $ | 39,399 | Net income | $ | 165,138 | $ | 211,756 | |||||||||
| 31,859 | 29,798 | Interest expense, net | 127,764 | 124,870 | |||||||||||||
| 1,493 | 6,858 | Income tax expense | 29,315 | 42,076 | |||||||||||||
| 49,857 | 49,677 | Depreciation and amortization | 197,400 | 209,329 | |||||||||||||
| 107,055 | 125,732 | EBITDA | 519,617 | 588,031 | |||||||||||||
| 782 | 1,725 | Equity-based compensation | 6,913 | 7,724 | |||||||||||||
| - | - | Impairment of long-lived assets | 2,679 | 43,600 | |||||||||||||
| - | (879 | ) | Gain on sale of hotel properties, net | - | (42,478 | ) | |||||||||||
| 922 | (19 | ) | Other non-operating expense (income)(1) | 5,829 | 2,860 | ||||||||||||
| $ | 108,759 | $ | 126,559 | Adjusted EBITDA | $ | 535,038 | $ | 599,737 | |||||||||
| NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE ADJUSTED EBITDA(2) | |||||||||||||||||
| FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||
| December 31, | December 31, | ||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| $ | 23,846 | $ | 39,399 | Net income | $ | 165,138 | $ | 211,756 | |||||||||
| 31,859 | 29,798 | Interest expense, net | 127,764 | 124,870 | |||||||||||||
| 1,493 | 6,858 | Income tax expense | 29,315 | 42,076 | |||||||||||||
| 49,857 | 49,677 | Depreciation and amortization | 197,400 | 209,329 | |||||||||||||
| 107,055 | 125,732 | EBITDA | 519,617 | 588,031 | |||||||||||||
| (283 | ) | (770 | ) | Adjusted Property EBITDA of hotels not owned for entirety of periods presented | (1,641 | ) | (21,423 | ) | |||||||||
| 782 | 1,725 | Equity-based compensation | 6,913 | 7,724 | |||||||||||||
| - | - | Impairment of long-lived assets | 2,679 | 43,600 | |||||||||||||
| - | (879 | ) | Gain on sale of hotel properties, net | - | (42,478 | ) | |||||||||||
| 922 | (19 | ) | Other non-operating expense (income)(1) | 5,829 | 2,860 | ||||||||||||
| $ | 108,476 | $ | 125,789 | Comparable Adjusted EBITDA(2) | $ | 533,397 | $ | 578,314 | |||||||||
| (1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. Loss on disposal of assets totaled $1.0 million, $0.8 million, $6.1 million and $3.4 million, respectively. | |||||||||||||||||
| (2) Includes results of 553 and 552 hotels owned and operated during the full three and twelve months ended December 31, 2019 and 2018, respectively. | |||||||||||||||||
| 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 TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | ||||||||||||||||
| (In thousands, except per share and per Paired Share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| $ | (0.26 | ) | $ | (0.21 | ) | Net (loss) income per Extended Stay America, Inc. common share - diluted | $ | 0.37 | $ | 0.59 | ||||||
| $ | (46,834 | ) | $ | (38,946 | ) | Net (loss) income attributable to Extended Stay America, Inc. common shareholders | $ | 69,668 | $ | 112,864 | ||||||
| 70,676 | 78,341 | Noncontrolling interests attributable to Class B common shares of ESH REIT | 95,454 | 98,876 | ||||||||||||
| 48,225 | 48,307 | Real estate depreciation and amortization | 191,560 | 204,095 | ||||||||||||
| - | - | Impairment of long-lived assets | 2,679 | 43,600 | ||||||||||||
| - | (879 | ) | Gain on sale of hotel properties, net | - | (42,478 | ) | ||||||||||
| (4,451 | ) | (8,015 | ) | Tax effect of adjustments to net (loss) income attributable to Extended Stay America, Inc. common shareholders | (27,582 | ) | (34,517 | ) | ||||||||
| 67,616 | 78,808 | Funds from Operations | 331,779 | 382,440 | ||||||||||||
| 17 | - | Debt modification and extinguishment costs | 6,733 | 1,621 | ||||||||||||
| - | (1,208 | ) | Other non-operating income | - | (1,208 | ) | ||||||||||
| 132 | 204 | Tax effect of adjustments to Funds from Operations | (956 | ) | (70 | ) | ||||||||||
| $ | 67,765 | $ | 77,804 | Adjusted Funds from Operations | $ | 337,556 | $ | 382,783 | ||||||||
| $ | 0.37 | $ | 0.41 | Adjusted Funds from Operations per Paired Share – diluted | $ | 1.81 | $ | 2.02 | ||||||||
| 182,046 | 188,272 | Weighted average Paired Shares outstanding – diluted | 186,822 | 189,821 | ||||||||||||
| EXTENDED STAY AMERICA, INC. | ||||||||||||||||
| NON-GAAP RECONCILIATION OF NET (LOSS) 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 TWELVE MONTHS ENDED DECEMBER 31, 2019 AND 2018 | ||||||||||||||||
| (In thousands, except per share and per Paired Share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| $ | (0.26 | ) | $ | (0.21 | ) | Net (loss) income per Extended Stay America, Inc. common share - diluted | $ | 0.37 | $ | 0.59 | ||||||
| $ | (46,834 | ) | $ | (38,946 | ) | Net (loss) income attributable to Extended Stay America, Inc. common shareholders | $ | 69,668 | $ | 112,864 | ||||||
| 70,676 | 78,341 | Noncontrolling interests attributable to Class B common shares of ESH REIT | 95,454 | 98,876 | ||||||||||||
| 23,842 | 39,395 | Paired Share Income | 165,122 | 211,740 | ||||||||||||
| 17 | - | Debt modification and extinguishment costs | 6,733 | 1,621 | ||||||||||||
| - | - | Impairment of long-lived assets | 2,679 | 43,600 | ||||||||||||
| - | (879 | ) | Gain on sale of hotel properties, net | - | (42,478 | ) | ||||||||||
| 922 | (19 | ) | Other non-operating expense (income)(1) | 5,829 | 2,860 | |||||||||||
| 136 | 152 | Tax effect of adjustments to Paired Share Income | (2,163 | ) | (937 | ) | ||||||||||
| $ | 24,917 | $ | 38,649 | Adjusted Paired Share Income | $ | 178,200 | $ | 216,406 | ||||||||
| $ | 0.14 | $ | 0.21 | Adjusted Paired Share Income per Paired Share – diluted | $ | 0.95 | $ | 1.14 | ||||||||
| 182,046 | 188,272 | Weighted average Paired Shares outstanding – diluted | 186,822 | 189,821 | ||||||||||||
| (1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. Loss on disposal of assets totaled $1.0 million, $0.8 million, $6.1 million and $3.4 million, respectively. | ||||||||||||||||
| EXTENDED STAY AMERICA, INC. | ||||||||||
| TOTAL REVENUES AND 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 Ending December 31, 2020 | |||||||||
| December 31, 2019 | (Outlook) | |||||||||
| (Actual) | Low | High | ||||||||
| $ | 1,218,219 | Total revenues | $ | 1,226,000 | $ | 1,246,000 | ||||
| $ | 165,138 | Net income | $ | 132,600 | $ | 153,850 | ||||
| 127,764 | Interest expense, net | 135,000 | 135,000 | |||||||
| 29,315 | Income tax expense | 23,400 | 27,150 | |||||||
| 197,400 | Depreciation and amortization | 200,000 | 195,000 | |||||||
| 519,617 | EBITDA | 491,000 | 511,000 | |||||||
| 6,913 | Equity-based compensation | 8,000 | 8,000 | |||||||
| 2,679 | Impairment of long-lived assets | - | - | |||||||
| 5,829 | Other expense(1) | 6,000 | 6,000 | |||||||
| $ | 535,038 | Adjusted EBITDA | $ | 505,000 | $ | 525,000 | ||||
| (1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. | ||||||||||
| 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 YEARS ENDED DECEMBER 31, 2019 (ACTUAL) AND 2020 (OUTLOOK) | |||||||||||
| (In thousands, except per share and per Paired Share data) | |||||||||||
| (Unaudited) | |||||||||||
| Year Ended | Year Ending December 31, 2020 | ||||||||||
| December 31, 2019 | (Outlook) | ||||||||||
| (Actual) | Low | High | |||||||||
| $ | 0.37 | Net income per Extended Stay America, Inc. common share - diluted | $ | 0.28 | $ | 0.36 | |||||
| $ | 69,668 | Net income attributable to Extended Stay America, Inc. common shareholders | $ | 50,424 | $ | 63,354 | |||||
| 95,454 | Noncontrolling interests attributable to Class B common shares of ESH REIT | 82,160 | 90,480 | ||||||||
| 191,560 | Real estate depreciation and amortization | 194,000 | 189,000 | ||||||||
| 2,679 | Impairment of long-lived assets | - | - | ||||||||
| (27,582 | ) | Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders | (29,100 | ) | (28,350 | ) | |||||
| 331,779 | Funds from Operations | 297,484 | 314,484 | ||||||||
| 6,733 | Debt modification and extinguishment costs | - | - | ||||||||
| (956 | ) | Tax effect of adjustments to Funds from Operations | - | - | |||||||
| $ | 337,556 | Adjusted Funds from Operations | $ | 297,484 | $ | 314,484 | |||||
| $ | 1.81 | Adjusted Funds from Operations per Paired Share – diluted | $ | 1.68 | $ | 1.77 | |||||
| 186,822 | Weighted average Paired Shares outstanding – diluted | 177,500 | 177,500 | ||||||||
| EXTENDED STAY AMERICA, INC. | |||||||||||
| NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. | |||||||||||
| COMMON SHAREHOLDERS TO PAIRED SHARE INCOME, ADJUSTED PAIRED SHARE INCOME | |||||||||||
| AND ADJUSTED PAIRED SHARE INCOME PER DILUTED PAIRED SHARE | |||||||||||
| FOR THE YEARS ENDED DECEMBER 31, 2019 (ACTUAL) AND 2020 (OUTLOOK) | |||||||||||
| (In thousands, except per share and per Paired Share data) | |||||||||||
| (Unaudited) | |||||||||||
| Year Ended | Year Ending December 31, 2020 | ||||||||||
| December 31, 2019 | (Outlook) | ||||||||||
| (Actual) | Low | High | |||||||||
| $ | 0.37 | Net income per Extended Stay America, Inc. common share - diluted | $ | 0.28 | $ | 0.36 | |||||
| $ | 69,668 | Net income attributable to Extended Stay America, Inc. common shareholders | $ | 50,424 | $ | 63,354 | |||||
| 95,454 | Noncontrolling interests attributable to Class B common shares of ESH REIT | 82,160 | 90,480 | ||||||||
| 165,122 | Paired Share Income | 132,584 | 153,834 | ||||||||
| 6,733 | Debt modification and extinguishment costs | - | - | ||||||||
| 2,679 | Impairment of long-lived assets | - | - | ||||||||
| 5,829 | Other expense(1) | 6,000 | 6,000 | ||||||||
| (2,163 | ) | Tax effect of adjustments to Paired Share Income | (900 | ) | (900 | ) | |||||
| $ | 178,200 | Adjusted Paired Share Income | $ | 137,684 | $ | 158,934 | |||||
| $ | 0.95 | Adjusted Paired Share Income per Paired Share – diluted | $ | 0.78 | $ | 0.90 | |||||
| 186,822 | Weighted average Paired Shares outstanding – diluted | 177,500 | 177,500 | ||||||||
| (1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. | |||||||||||