Extended Stay America Announces Third Quarter 2018 Results


  • Net Income of $75.7 million for the third quarter
  • Adjusted EBITDA1 of $173.7 million for the third quarter
  • Comparable system-wide RevPAR grows 1.9% for the third quarter
  • Announces hotel asset dispositions and increased hotel pipeline

CHARLOTTE, N.C., Oct. 31, 2018 (GLOBE NEWSWIRE) -- 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, 2018.

Third quarter 2018 Highlights

  • Total revenues of $351.1 million
  • Comparable system-wide Revenue Per Available Room (“RevPAR”) grew 1.9% to $55.57
  • Adjusted EBITDA of $173.7 million
  • Adjusted Funds From Operations (“Adjusted FFO”)1 of $0.61 per diluted Paired Share, an increase of 7.5%
  • Adjusted Paired Share Income1 of $0.39 per diluted Paired Share, an increase of 11.5%

Nine months 2018 Highlights

  • Total revenues of $985.3 million
  • Comparable system-wide RevPAR grew 2.3% to $52.35
  • Adjusted EBITDA of $473.2 million
  • Adjusted FFO of $1.60 per diluted Paired Share, an increase of 11.2%
  • Adjusted Paired Share Income of $0.94 per diluted Paired Share, an increase of 15.7%

Extended Stay America’s President and Chief Executive Officer, Jonathan Halkyard, commented, “We made strong progress on our growth strategy during the third quarter. In the last few months, we completed the sale of two portfolios totaling 32 hotels, each of which is now a franchise hotel.”

Mr. Halkyard continued, “Each of these transactions come with agreements to develop additional Extended Stay America hotels. Those commitments, combined with our on-balance sheet development progress and new franchise applications, grew our pipeline to 52 hotels, an increase of more than 50% during the quarter.”

___________________________________________
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).

Financial and Operating Results

Total revenues for the three months ended September 30, 2018 were $351.1 million, an increase of 0.1% over the same period in 2017. Revenue growth was driven by an increase in RevPAR and franchise and management fees, largely offset by hotel dispositions in 2017 and in 2018. Total room and other hotel revenues on a comparable Company-owned basis increased 2.3% for the quarter. Total revenues for the first nine months of 2018 were $985.3 million, an increase of 0.5% over the same period in 2017. Total room and other hotel revenues on a comparable Company-owned basis increased 2.5% for the first nine months of 2018 compared to the same period in 2017.

Comparable system-wide RevPAR for the three months ended September 30, 2018 grew 1.9% over the same period in 2017 to $55.57, driven by an improvement in average daily rate (“ADR”) of 0.5% and a 110 basis point increase in occupancy. Comparable Company-owned RevPAR increased 2.0% during the quarter to $57.15. Total Company-owned RevPAR increased 2.7% during the quarter, reflecting the sales of non-core hotels and the increase in comparable Company-owned RevPAR. Comparable system-wide RevPAR for the first nine months of 2018 grew 2.3% over the same period in 2017.

Hotel Operating Margin1 for the three months ended September 30, 2018 was 55.5% compared to 57.2% in the same period in 2017.  The decline in Hotel Operating Margin was driven primarily by an increase in payroll, reservation, marketing and maintenance expenses. Hotel Operating Margin for the first nine months of 2018 was 54.8% compared to 55.7% in the same period in 2017.

Net income for the three months ended September 30, 2018 was $75.7 million compared to $66.3 million in the same period in 2017, an increase of 14.3%. Net income in the third quarter was favorably impacted by decreases in our effective tax rate, depreciation, general and administrative expenses and a gain on asset dispositions. Income tax expense for the three months ended September 30, 2018 was $15.0 million compared to $20.3 million in the same period in 2017. Net income for the first nine months of 2018 was $172.4 million compared to $132.0 million in the same period in 2017, an increase of 30.5%.

Adjusted EBITDA for the three months ended September 30, 2018 was $173.7 million, a decline of 3.7% compared to the same period in 2017. The decline in Adjusted EBITDA was due primarily to asset dispositions in 2017 and 2018 resulting in lost contribution of approximately $5.7 million. Adjusted EBITDA excludes non-cash equity-based compensation expense of $1.8 million, a $3.5 million gain on asset dispositions and net expense of $1.5 million in other items. Adjusted EBITDA for the first nine months of 2018 was $473.2 million, a decline of 2.0% compared to the same period in 2017, due to asset dispositions in 2017 and 2018 resulting in lost contribution of approximately $13.9 million.  

Adjusted FFO for the three months ended September 30, 2018 was $115.1 million compared to $109.3 million in the same period in 2017. The increase in Adjusted FFO was primarily due to a lower effective tax rate. Adjusted FFO per diluted Paired Share was $0.61 compared to $0.57 in the same period in 2017, an increase of 7.5%. Adjusted FFO for the first nine months of 2018 was $305.0 million compared to $279.9 million in the same period in 2017. Adjusted FFO per diluted Paired Share for the first nine months of 2018 was $1.60 compared to $1.44 in the same period in 2017, an increase of 11.2%. 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, 2018 was $74.0 million, or $0.39 per diluted Paired Share, compared to $67.8 million, or $0.35 per diluted Paired Share, in the same period in 2017, an increase of 11.5% per diluted Paired Share. The increase in Adjusted Paired Share Income per diluted Paired Share was due to a lower effective tax rate, lower depreciation expense and a reduction in share count as a result of Paired Share repurchases. Adjusted Paired Share Income for the first nine months of 2018 was $177.8 million, or $0.94 per diluted Paired Share, compared to $156.8 million, or $0.81 per diluted Paired Share, in the same period in 2017, an increase of 15.7% per diluted Paired Share. Adjusted Paired Share Income, a non-GAAP measure, represents net income, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share. 

Capital Expenditures

The Company invested $57.8 million in capital expenditures during the third quarter of 2018. This included approximately $22.4 million in capital expenditures for new hotel development and conversions. For the first nine months of 2018, the Company invested $147.5 million in capital expenditures.

Asset Dispositions and Acquisitions

The Company completed the sale of two portfolios totaling 32 hotels during the third quarter for gross proceeds of $124.6 million, including pre-paid franchise application and development fees. The Company expects to complete the sale of an additional portfolio of 14 hotels in November 2018, subject to customary due diligence. Each of these sold portfolios come with franchise agreements on all of the hotels sold and with agreements from the buyers to develop or convert at an additional five or more Extended Stay America hotels each, which we expect to be completed over the next several years.

In the third quarter of 2018, the Company purchased a new hotel under construction for approximately $12.3 million. That hotel is expected to open in early November 2018.

Hotel and Development Pipeline

As of September 30, 2018, the Company had a pipeline of 52 hotels representing approximately 6,500 rooms.

      
 Company Owned Pipeline & Recently Opened Hotels as of September 30, 2018 
 Under Option Pre-Development Under Construction Total Pipeline  Opened YTD 
 # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms  # Hotels# Rooms 
 8992 81,016 2231 182,239  1115 
                 
                 
 Third Party Pipeline & Recently Opened Hotels as of September 30, 2018 
 Commitments Applications Executed Total Pipeline  Opened YTD 
 # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms  # Hotels# Rooms 
 273,348 6744 1124 344,216  00 
                 
                 
                 
 Definitions               
 Under Option Locations with a signed purchase and sale agreement        
 Pre-DevelopmentLand purchased, permitting and/or site work         
 Under ConstructionHotel is under construction           
 Commitments Signed commitment to build a certain number of hotels by a third party      
 Applications Third party filed franchise application with deposit        
 Executed Franchise application approved, various stages of pre-development and/or under construction   
                 

Distributions and Share Repurchases

On October 31, 2018, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. declared cash distributions totaling $0.22 per Paired Share for the third quarter of 2018. The distributions are payable on November 29, 2018 to shareholders of record as of November 15, 2018. 

During the third quarter of 2018, the Company repurchased 0.6 million Paired Shares for an aggregate purchase price of $11.7 million. For the first nine months of 2018, the Company repurchased 4.0 million Paired Shares for an aggregate purchase price of $79.7 million. As of market close on October 31, 2018, the Company had approximately $113.5 million in share repurchase authorization remaining.

2018 Outlook

The Company’s outlook for 2018 is updated as follows:

Full Year 2018     Updated Outlook
   Previous Outlook 
in millions, except % and # of hotels    Low High   Low High 
               
# of hotels owned on 12/31/18    554   600 
Total Revenues    $1,271  $1,277    $1,257  $1,279 
Comparable system-wide RevPAR % Δ     1.75%   2.25%    1.0%  2.75%
Net income    $202  $209    $194  $208 
Adjusted Paired Share Income/Paired Share    $1.10  $1.14    1.07  $1.15 
Adjusted EBITDA    $596  $603    $595  $610 
Depreciation and amortization    $209  $209    $213  $213 
Net interest expense    $128  $128    $130  $130 
Effective tax rate     16.5%  17%    16.5%  17%
Capital expenditures    $215  $235    $205  $235 
Expected capital returns    $260  $300    $260  $300 

Our updated guidance reflects the sale of 32 hotels in the third quarter of 2018 as well as expected disposition of 14 hotels in the fourth quarter of 2018, which reflects lost contribution of approximately $4.5 million in the fourth quarter of 2018 for those 46 hotels. Our prior revenue guidance was for Company owned hotel revenue, while our updated revenue guidance for 2018 includes franchise and management revenues and 46 additional asset dispositions.

Webcast and Conference Call Details

The Company will host a conference call on Thursday, November 1, 2018 at 8:00 a.m. Eastern Time.  The conference call will be webcast simultaneously in the Investor Relations section of the Company’s website at www.aboutstay.com.  A replay of the call will be available for 90 days following the webcast on the Company’s website.

Alternatively, the conference call can be accessed by dialing 1-877-705-6003 for domestic callers or 1-201-493-6725 for international callers.  A telephone replay will be available from shortly after the call until November 8, 2018, 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 13683749.

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. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results or performance to differ from those projected in the forward-looking statements, possibly materially. For a description of factors that may cause the Company’s actual results or performance to differ from projected results or performance implied by forward-looking statements, please review the information under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in the Company’s combined annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2018 and other documents of the Company on file with or furnished to the SEC. Any forward-looking statements made in this release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, will have the expected consequences to, or effects on, the Company, its business or operations.  Except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. We caution you that actual results may differ materially from what is expressed, implied or forecasted by the Company’s forward-looking statements.

About Extended Stay America
Extended Stay America, Inc. (“ESA”) and its brand Extended Stay America® is the leading brand in the mid-priced extended stay segment in the U.S with 626 hotels, with approximately twice as many rooms as its nearest competitor.  ESA’s subsidiary, ESH Hospitality, Inc. (“ESH”), is the largest lodging REIT in North America by unit and room count, with 567 hotels and approximately 62,700 rooms in the U.S. ESA also manages or franchises an additional 59 Extended Stay America® hotels. Visit www.esa.com for more information.

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

 EXTENDED STAY AMERICA, INC. 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
 (In thousands, except per share data)
 (Unaudited)
            
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2018
 2017 % Variance 2018 2017 % Variance
      REVENUES:     
 $  340,917  $  345,089  (1.2)%  Room revenues$  958,075  $  963,505  (0.6)%
    5,943     5,777  2.9%  Other hotel revenues   16,710     16,715  (0.0)%
    1,446   -  n/a   Franchise and management fees   3,493   -  n/a 
    348,306     350,866  (0.7)%    978,278     980,220  (0.2)%
            
    2,770   -  n/a Other revenues from franchised and managed properties   7,066   -  n/a 
                    
    351,076     350,866  0.1%Total revenues   985,344     980,220  0.5%
            
      OPERATING EXPENSES:     
    156,341     152,155  2.8%  Hotel operating expenses   443,025     442,726  0.1%
    21,921     23,823  (8.0)%  General and administrative expenses   71,406     75,560  (5.5)%
    52,138     57,314  (9.0)%  Depreciation and amortization   159,652     172,789  (7.6)%
    -    -  n/a Impairment of long-lived assets   43,600     20,357  114.2%
    230,400     233,292  (1.2)%    717,683     711,432  0.9%
            
    2,770   -  n/a Other expenses from franchised and managed properties   7,066   -  n/a 
                    
    233,170     233,292  (0.1)%Total operating expenses   724,749     711,432  1.9%
            
    3,517   -  n/a GAIN (LOSS) ON SALE OF HOTEL PROPERTIES   41,599     (1,897) 2,292.9%
            
    39     344  (88.7)%OTHER INCOME   501     2,400  (79.1)%
                    
    121,462     117,918  3.0%INCOME FROM OPERATIONS   302,695     269,291  12.4%
            
    (251)    (278) (9.7)%OTHER NON-OPERATING (INCOME) EXPENSE   48     (426) 111.3%
            
    31,007     31,651  (2.0)%INTEREST EXPENSE, NET   95,072     96,958  (1.9)%
                    
    90,706     86,545  4.8%INCOME BEFORE INCOME TAX EXPENSE   207,575     172,759  20.2%
            
    15,014     20,295  (26.0)%INCOME TAX EXPENSE   35,218     40,721  (13.5)%
                    
    75,692     66,250  14.3%NET INCOME    172,357     132,038  30.5%
            
    (3,790)    (12,374) (69.4)%NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (1)   (20,547)    (3,286) 525.3%
                    
 $  71,902  $  53,876  33.5%NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS$  151,810  $  128,752  17.9%
                    
            
 $  0.38  $  0.28   NET INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED$  0.80  $  0.66   
                    
    189,253     193,331   WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED   190,111     194,001   
                    
 (1) Noncontrolling interests in Extended Stay America, Inc. include approximately 43% of ESH REIT's common equity as of September 30, 2018 and 2017.
 
            
            
      CONSOLIDATED BALANCE SHEET DATA     
      AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017     
      (In thousands)     
      (Unaudited)     
       September 30, December 31,  
       2018 2017  
      Cash and cash equivalents$  370,355  $  113,343   
      Restricted cash$  16,286  $  37,631   
      Total assets$  4,032,572  $  4,076,005   
      Total debt, net of unamortized deferred financing costs and debt discounts (2)$  2,478,861  $  2,541,901   
      Total equity$  1,318,499  $  1,345,847   
            
      (2)  Unamortized deferred financing costs and debt discounts totaled approximately $42.9 million and $49.0 million as of September 30, 2018 and December 31, 2017, respectively.  
        
            

 

 EXTENDED STAY AMERICA, INC.  
 KEY OPERATING METRICS 
             
             
  COMPARABLE SYSTEM-WIDE OPERATING METRICS 
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 
 (Unaudited) 
             
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
  2018   2017  Variance  2018   2017  Variance 
  625 (1) 625 (1)  - Number of hotels (as of September 30) 625 (1) 625 (1)  -  
  68,780 (1) 68,780 (1)  - Number of rooms (as of September 30) 68,780 (1) 68,780 (1)  -  
  80.1% (1) 79.0% (1)110 bpsComparable System-Wide occupancy 76.0% (1) 76.2% (1)(20) bps 
  $69.35 (1) $69.01 (1)0.5%Comparable System-Wide ADR $68.85 (1) $67.15 (1)2.5% 
  $55.57 (1) $54.55 (1)1.9%Comparable System-Wide RevPAR $52.35 (1) $51.16 (1)2.3% 
             
             
             
 COMPARABLE COMPANY-OWNED OPERATING METRICS 
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 
 (Unaudited) 
             
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
  2018   2017  Variance  2018   2017  Variance 
  80.7% (2) 79.6% (2)110 bpsComparable Company-Owned occupancy 76.2% (3) 76.4% (3)(20) bps 
  $70.84 (2) $70.41 (2)0.6%Comparable Company-Owned ADR $69.64 (3) $67.83 (3)2.7% 
  $57.15 (2) $56.03 (2)2.0%Comparable Company-Owned RevPAR $53.08 (3) $51.82 (3)2.4% 
             
             
   
 COMPANY-OWNED HOTEL OPERATING METRICS 
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017 
 (Unaudited) 
             
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
  2018   2017  Variance  2018   2017  Variance 
  80.2% (4) 79.0% (4)120 bpsCompany-Owned Occupancy 76.0% (4) 76.1% (4)(10) bps 
  $69.85 (4) $69.01 (4)1.2%Company-Owned ADR $69.24 (4) $67.15 (4)3.1% 
  $56.02 (4) $54.55 (4)2.7%Company-Owned RevPAR $52.65 (4) $51.13 (4)3.0% 
             
             
             
 (1) Includes hotels owned, franchised and/or managed for the full three and nine month periods ended September 30, 2018 and 2017.     
             
 (2) Includes 566 hotels owned and operated by the Company for the full three month periods ended September 30, 2018 and 2017.     
    
 (3) Includes 598 hotels owned and operated by the Company for the six month periods ended June 30, 2018 and 2017, and 566 hotels owned and operated by the Company for the three month periods ended September 30, 2018 and 2017. 
  
             
 (4) Operating metrics for the three and nine months ended September 30, 2018 and 2017 include the results of operations based on the Company's ownership and operation of hotels during the periods presented, which is summarized below: 
  


DateNumber of Hotels
(Sold) Acquired
Number of Rooms
(Sold) Acquired
Number of Hotels
Owned After
Transaction
Number of Rooms
After Transaction
 
 
Beginning of 201762969,383   
May 2017(3)(500)62668,883 
May 2017(1)(103)62568,780 
December 2017(1)(160)62468,620 
February 2018(25)(2,430)59966,190 
March 2018(1)(101)59866,089 
May 2018111559966,204 
September 2018(16)(1,680)58364,524 
September 2018(16)(1,776)56762,748 

 

   
 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, 2018 AND 2017 
 (In thousands) 
 (Unaudited) 
             
 Three Months Ended  Nine Months Ended 
 September 30, September 30, 
  2018   2017  Variance  2018   2017  Variance 
 $  75,692  $  66,250  14.3%Net income$  172,357  $  132,038  30.5% 
    15,014     20,295  (26.0)%Income tax expense   35,218     40,721  (13.5)% 
    31,007     31,651  (2.0)%Interest expense, net   95,072     96,958  (1.9)% 
    (251)    (278) (9.7)%Other non-operating (income) expense   48     (426) 111.3% 
    (39)    (344) (88.7)%Other income   (501)    (2,400) (79.1)% 
    (3,517)  -  n/a(Gain) loss on sale of hotel properties   (41,599)    1,897  2,292.9% 
  -   -  n/aImpairment of long-lived assets   43,600     20,357  114.2% 
    52,138     57,314  (9.0)%Depreciation and amortization   159,652     172,789  (7.6)% 
    21,921     23,823  (8.0)%General and administrative expenses   71,406     75,560  (5.5)% 
    1,949     2,047  4.8% Loss on disposal of assets (1)   2,617     8,065  (67.6)% 
    (1,446)  -  n/a  Franchise and management fees   (3,493)  -  n/a 
 $  192,468  $  200,758  (4.1)%Hotel Operating Profit$  534,377  $  545,559  (2.0)% 
             
 $  340,917  $  345,089  (1.2)%Room revenues$  958,075  $  963,505  (0.6)% 
    5,943     5,777  2.9%Other hotel revenues   16,710     16,715  (0.0)% 
 $  346,860  $  350,866  (1.1)%Total room and other hotel revenues$  974,785  $  980,220  (0.6)% 
             
  55.5%  57.2% (170) bpsHotel Operating Margin 54.8%  55.7% (90) bps 
             
             
 (1)  Included in hotel operating expenses in the unaudited condensed consolidated statements of operations. 
             

 

 EXTENDED STAY AMERICA, INC. 
 NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA 
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017
 (In thousands)
 (Unaudited)
          
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
 2018 2017  2018 2017 
 $  75,692  $  66,250  Net income$  172,357  $  132,038  
    31,007     31,651  Interest expense, net   95,072     96,958  
    15,014     20,295  Income tax expense    35,218     40,721  
    52,138     57,314  Depreciation and amortization    159,652     172,789  
    173,851     175,510  EBITDA    462,299     442,506  
    1,811     2,720  Equity-based compensation   5,999     9,049  
    (251) (1 )   (278) (1 )Other non-operating (income) expense    48  (1 )   (426) (1 )
  -   -  Impairment of long-lived assets   43,600     20,357  
    (3,517)  -  (Gain) loss on sale of hotel properties   (41,599)    1,897  
    1,783  (2 )   2,314  (3 )Other expenses   2,831  (4 )   9,333  (5 )
 $  173,677  $  180,266  Adjusted EBITDA $  473,178  $  482,716  
          
          
 (1) Includes impact of foreign currency transaction gain/loss and gain/loss related to interest rate swap.
 
 (2) Includes loss on disposal of assets of approximately $1.9 million and costs related to hotel acquisitions and dispositions.
 
 (3) Includes loss on disposal of assets of approximately $2.1 million and costs related to hotel acquisitions, dispositions and secondary offerings.
 
 (4) Includes loss on disposal of assets of approximately $2.6 million and costs related to hotel acquisitions and dispositions.
 
 (5) Includes loss on disposal of assets of approximately $8.1 million and costs related to hotel acquisitions, dispositions and secondary offerings.
 
  

 

 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, 2018 AND 2017
 (In thousands, except per share and per Paired Share data)
 (Unaudited)
          
 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
 2018 2017  2018 2017 
          
 $  0.38  $  0.28  Net income per Extended Stay America, Inc. common share - diluted$  0.80  $  0.66  
          
 $  71,902  $  53,876  Net income attributable to Extended Stay America, Inc. common shareholders$  151,810  $  128,752  
    3,786     12,370  Noncontrolling interests attributable to Class B
common shares of ESH REIT
   20,535     3,274  
    50,807     56,145  Real estate depreciation and amortization   155,788     169,327  
  -   -  Impairment of long-lived assets   43,600     20,357  
    (3,517)  -  (Gain) loss on sale of hotel properties   (41,599)    1,897  
    (7,897)    (13,138) Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders   (26,502)    (44,835) 
    115,081     109,253  Funds from Operations   303,632     278,772  
  -   -  Debt modification and extinguishment costs   1,621     1,168  
  -   103  Loss on interest rate swap -     356  
  -   (24) Tax effect of adjustments to Funds from Operations   (274)    (354) 
 $  115,081  $  109,332  Adjusted Funds from Operations$  304,979  $  279,942  
          
 $  0.61  $  0.57  Adjusted Funds from Operations
per Paired Share – diluted 
$  1.60  $  1.44  
          
    189,253     193,331  Weighted average Paired Shares
 outstanding – diluted 
   190,111     194,001  
          

 

 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, 2018 AND 2017 
 (In thousands, except per share and per Paired Share data) 
 (Unaudited) 
           
 Three Months Ended  Nine Months Ended  
 September 30,  September 30,  
  2018   2017    2018   2017   
           
 $  0.38  $  0.28  Net income per Extended Stay America, Inc. common share - diluted$  0.80  $  0.66   
           
 $  71,902  $  53,876  Net income attributable to Extended Stay America, Inc. common shareholders$  151,810  $  128,752   
    3,786     12,370  Noncontrolling interests attributable to Class B
common shares of ESH REIT
   20,535     3,274   
    75,688     66,246  Paired Share Income    172,345     132,026   
  -   -  Debt modification and extinguishment costs   1,621     1,168   
    (251) (1 )   (278) (1 )Other non-operating (income) expense    48  (1 )   (426) (1 ) 
  -   -  Impairment of long-lived assets   43,600     20,357   
    (3,517)  -  (Gain) loss on sale of hotel properties   (41,599)    1,897   
    1,783  (2 )   2,314  (3 )Other expenses   2,831  (4 )   9,333  (5 ) 
    331     (477) Tax effect of adjustments to Paired Share Income   (1,088)    (7,570)  
 $  74,034  $  67,805  Adjusted Paired Share Income$  177,758  $  156,785   
           
 $  0.39  $  0.35  Adjusted Paired Share Income per Paired Share – diluted $  0.94  $  0.81   
           
    189,253     193,331  Weighted average Paired Shares outstanding – diluted    190,111     194,001   
           
           
 (1) Includes impact of foreign currency transaction gain/loss and gain/loss related to interest rate swap. 
  
 (2) Includes loss on disposal of assets of approximately $1.9 million and costs related to hotel acquisitions and dispositions. 
  
 (3) Includes loss on disposal of assets of approximately $2.1 million and costs related to hotel acquisitions, dispositions and secondary offerings. 
  
 (4) Includes loss on disposal of assets of approximately $2.6 million and costs related to hotel acquisitions and dispositions. 
  
 (5) Includes loss on disposal of assets of approximately $8.1 million and costs related to hotel acquisitions, dispositions and secondary offerings. 
  
           

 

 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 YEAR ENDING DECEMBER 31, 2018 (OUTLOOK) 
 (In thousands, except per share and per Paired Share data) 
 (Unaudited) 
       
  Year Ending December 31, 2018  
  (Outlook)  
  Low High  
       
 Net income per Extended Stay America, Inc. common share - diluted$  0.57  $  0.59   
       
 Net income attributable to Extended Stay America, Inc. common shareholders$  107,654  $  112,570   
           
 Noncontrolling interests attributable to Class B common shares of ESH REIT   94,187     96,332   
 Paired Share Income    201,841     208,902   
 Debt modification and extinguishment costs   1,621     1,621   
 Other non-operating expense   48  (1 )   48  (1 ) 
 Impairment of long-lived assets   43,600     43,600   
 Gain on sale of hotel properties   (41,599)    (41,599)  
 Other expense   6,000  (2 )   6,000  (2 ) 
 Tax effect of adjustments to Paired Share Income   (1,644)    (1,547)  
 Adjusted Paired Share Income$  209,867  $  217,025   
       
 Adjusted Paired Share Income per Paired Share – diluted $  1.10  $  1.14   
       
 Weighted average Paired Shares outstanding – diluted    190,111     190,111   
       
 (1) Includes impact of foreign currency transaction gain/loss. 
  
 (2) Includes loss on disposal of assets and other non-operating expenses, including costs related to hotel acquisitions and dispositions.  
   
       

 

EXTENDED STAY AMERICA, INC.   
TOTAL REVENUES AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA   
FOR THE YEAR ENDING DECEMBER 31, 2018 (OUTLOOK)  
(In thousands)  
(Unaudited)  
       
  Year Ending December 31, 2018  
  (Outlook)   
  Low High  
Total revenues $  1,271,000  $  1,277,000   
       
Net income  $  201,857  $  208,918   
Interest expense, net    128,000     128,000   
Income tax expense    41,344     41,283   
Depreciation and amortization     209,000     209,000   
EBITDA     580,201     587,201   
Equity-based compensation    7,750     7,750   
Other non-operating expense    48  (1 )   48  (1 ) 
Impairment of long-lived assets     43,600     43,600   
Gain on sale of hotel properties    (41,599)    (41,599)  
Other expense    6,000  (2 )   6,000  (2 ) 
Adjusted EBITDA  $  596,000  $  603,000   
       
       
(1) Includes foreign currency transaction loss. 
 
(2) Includes loss on disposal of assets and other non-operating expenses, including costs related to hotel acquisitions and dispositions.