Extended Stay America Announces Second Quarter 2019 Results

|GlobeNewswire|About: STAY

- Net Income of $59.7 million for the second quarter
- Adjusted EBITDA1 of $153.6 million for the second quarter
- Franchise pipeline expands 21% to 52 hotels in the second quarter
- Increased Share Repurchase authorization by $150 million
- Update to Corporate Structure Review

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

Second Quarter 2019 Highlights

  • Net Income of $59.7 million
  • Total revenues of $323.7 million
  • Comparable system-wide Revenue Per Available Room (“RevPAR”) increased 0.1%   
  • RevPAR Index gain of 1.5% excluding hurricane-related markets and renovation disruption
  • Adjusted EBITDA of $153.6 million
  • Adjusted Funds from Operations (“Adjusted FFO”)1 of $0.53 per diluted Paired Share
  • Adjusted Paired Share Income1 of $0.32 per diluted Paired Share  

Extended Stay America’s President and Chief Executive Officer, Jonathan Halkyard, commented, “We are pleased with the significant progress in our growth plans during the quarter with our total hotel pipeline increasing by 18% in the second quarter to 8,700 rooms, or approximately 13% of existing supply, and successfully opening our first franchise conversion hotel.”

Mr. Halkyard continued, “After extensive exploration of a variety of possible transformative transactions to which our Boards of Directors have been, and remain, open, our Boards have concluded that the terms currently available for such transactions do not presently provide a superior alternative to the opportunity presented by the aggressive pursuit of our ESA 2.0 strategy, including steps to accelerate the franchising portion of that strategy.”

Lastly, Mr. Halkyard noted, “We believe our shares are significantly undervalued at recent trading prices and have asked our Boards to increase the Company’s remaining authorization to more than $260 million, which they have approved. With the review concluded, we expect to return a significant amount of capital to shareholders in the second half of 2019 and in 2020.”

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 June 30, 2019 were $323.7 million, a decrease of 3.8% over the same period in the prior year due to asset dispositions in 2018. Adjusting for asset dispositions in 2018, total revenues increased 1.0% during the second quarter. For the six months ended June 30, 2019, total revenues declined 5.2% to $601.3 million, driven by asset dispositions. Adjusting for asset dispositions in 2018, total revenues increased 0.3% in the six months ended June 30, 2019.

Comparable system-wide RevPAR for the three months ended June 30, 2019 increased 0.1% over the same period in 2018 to $53.94, driven by a 220 basis point increase in occupancy to 79.8%, largely offset by a 2.7% decrease in Average Daily Rate (“ADR”). Comparable system-wide RevPAR was impacted this quarter by renovation disruption, a shift in the Easter holiday as well as cycling business related to Hurricanes Harvey and Irma in Houston, TX and several Florida markets, respectively. Excluding the aforementioned items, Comparable system-wide RevPAR grew approximately 2.0% during the second quarter. Comparable Company-owned RevPAR decreased 0.1% during the second quarter to $55.66. Total Company-owned RevPAR increased 2.5% during the quarter, reflecting the sales of non-core hotels in 2018. Comparable system-wide RevPAR for the six months ended June 30, 2019 declined 0.7% driven by a 2.8% decline in ADR, partially offset by a 160 basis point increase in occupancy.

Hotel Operating Margin1 for the three months ended June 30, 2019 was 54.4% compared to 56.4% in the same period in 2018.   While we continued our strategy to maximize targeted marketing efforts to our longest staying customers, and other revenue and cost saving initiatives, these were offset by an increase in operating expenses, including payroll expense, property insurance expense and property taxes. Hotel Operating Margin for the six months ended June 30, 2019 was 52.4% compared to 54.5% in the same period of 2018.  Property level margins remain at industry leading levels.

Net income for the three months ended June 30, 2019 was $59.7 million compared to $65.6 million in the same period in 2018, a decrease of 9.0%. Net income for the six months ended June 30, 2019 was $88.1 compared to $96.7 million in the same period in 2018, a decrease of 8.9%. The decline in net income for both the three and six months ended June 30, 2019 was primarily due to a decline in Hotel Operating Margin, partially offset by lower depreciation expense, decreased net interest expense and a decline in corporate overhead expense.   We have paid down over $490 million in debt in the last five years and reduced our corporate level expense run rate by 8.5% compared to the same period in 2015.

Adjusted EBITDA for the three months ended June 30, 2019 was $153.6 million, a decline of 8.2% compared to the same period in 2018. The decline in Adjusted EBITDA was due in part due to asset dispositions in 2018 resulting in lost contribution of $6.7 million and an increase in comparable hotel operating expenses. Adjusted EBITDA excludes non-cash equity-based compensation expense of $2.1 million and $1.9 million in other expenses. Adjusted EBITDA for the six months ended June 30, 2019 was $270.0 million, a decline of 9.9% due to asset dispositions in 2018 resulting in lost contribution of $13.5 million and an increase in comparable hotel operating expenses

Adjusted FFO for the three months ended June 30, 2019 was $99.8 million compared to $109.9 million in the same period in 2018. The decline in Adjusted FFO was due to an increase in comparable Company-owned hotel operating expenses, partially offset by decreases in net interest expense and corporate overhead expense. Adjusted FFO per diluted Paired Share was $0.53 compared to $0.58 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 six months ended June 30, 2019 was $168.3 million, or $0.89 per diluted Paired Share, compared to $189.9 million, or $1.00 per diluted Paired Share, in the same period in 2018.

Adjusted Paired Share Income for the three months ended June 30, 2019 was $61.2 million, or $0.32 per diluted Paired Share, compared to $66.3 million, or $0.35 per diluted Paired Share, in the same period in 2018. The decline in Adjusted Paired Share Income was due to a decline in Hotel Operating Margin, partially offset by lower depreciation expense, net interest expense and corporate overhead expense. Adjusted Paired Share Income, a non-GAAP measure, represents net income, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share.  Adjusted Paired Share Income per diluted Paired Share for the six months ended June 30, 2019 was $0.48 compared to $0.54 in the same period in 2018.

Capital Expenditures

The Company invested $57.6 million in capital expenditures during the second quarter of 2019. This includes $9.3 million in renovation capital, $9.2 million in IT capital and $13.9 million in capital for ESA 2.0 hotel development and land acquisitions. The Company invested $112.9 million in capital expenditures during the first half of 2019.

Hotel and Development Pipeline

As of June 30, 2019, the Company had a pipeline of 71 hotels representing approximately 8,700 rooms.

  3/31/2019 6/30/2019
STAY Pipeline: # Hotels # Rooms # Hotels # Rooms
Owned 17 2,140 19 2,388
Franchised 43 5,195 52 6,288
Total 60 7,335 71 8,676

Distributions and Share Repurchases

On August 6, 2019, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. declared cash distributions totaling $0.23 per Paired Share for the second quarter of 2019. The distributions are payable on September 4, 2019 to shareholders of record as of August 21, 2019.  The Company did not repurchase Paired Shares during the second quarter of 2019.

On August 6, 2019, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. approved a $150 million increase in the Company’s combined Paired Share repurchase authorization. Including this increase, the Company’s the total remaining outstanding authorization is $263 million as of today.

2019 Outlook

The Company’s 2019 Outlook is updated as follows:

in millions, except % and # of hotels   Low       High
             
# of hotels owned on 12/31/19           554        
Total Revenues   $ 1,215         $ 1,230  
Comparable system-wide RevPAR % D     -1.0 %         0.5 %
Net income   $ 183         $ 202  
Adjusted Paired Share Income/Paired Share   $ 1.00         $ 1.10  
Adjusted EBITDA2   $ 550         $ 565  
Depreciation and amortization   $ 190         $ 195  
Net interest expense   $ 120         $ 120  
Effective tax rate     16.0 %         17.0 %
Capital expenditures   $ 270         $ 320  
Expected capital returns   $ 240         $ 280  

1 Approximately 200 basis point negative impact from hurricane related markets and net renovation displacement
2 Lost contribution of approximately $21 million related to 72 hotel dispositions in 2018

Webcast and Conference Call Details

The Company will host a conference call on Wednesday, August 7, 2019 at 8:30 a.m. Eastern Time.  The conference call will be webcast simultaneously in the Investor Relations section of the Company’s website at www.aboutstay.com.  A replay of the call will be available for 90 days following the webcast on the Company’s website.  Alternatively, the conference call can be accessed by dialing 1-877-705-6003 for domestic callers or 1-201-493-6725 for international callers.  A telephone replay will be available from shortly after the call until August 14, 2019, and can be accessed by dialing 1-844-512-2921 for domestic callers or 1-412-317-6671 for international callers. The passcode for the replay is 13692781.

Disclosure Regarding Non-GAAP Financial Measures

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

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws. These statements include, but are not limited to, statements related to our expectations regarding our business performance, financial results, liquidity and capital resources, capital expenditures, capital returns, distribution policy and other non-historical statements, including the statements in the “2019 Outlook” section of this release. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results or performance to differ from those projected in the forward-looking statements, possibly materially. For a description of factors that may cause the Company’s actual results or performance to differ from projected results or performance implied by forward-looking statements, please review the information under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in the Company’s combined annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2019 and other documents of the Company on file with or furnished to the SEC. Any forward-looking statements made in this release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, will have the expected consequences to, or effects on, the Company, its business or operations.  Except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. We caution you that actual results may differ materially from what is expressed, implied or forecasted by the Company’s forward-looking statements.

About Extended Stay America (ESH)

Extended Stay America® is the leading brand in the mid-priced extended stay segment in the U.S. with 627 hotels and nearly twice as many rooms as its nearest competitor.  ESH Hospitality, Inc. (“ESH”), a subsidiary of Extended Stay America, Inc. (“ESA”), is the largest lodging REIT in North America by unit and room count, with 554 hotels and approximately 61,500 rooms in the U.S. ESA also manages or franchises an additional 73 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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(In thousands, except per share data)
(Unaudited)
                     
Three Months Ended   Six Months Ended
June 30,   June 30,
2019   2018   % Variance   2019   2018   % Variance
          REVENUES:          
$   311,614   $   326,948   (4.7)%   Room revenues $   578,660   $   617,158   (6.2)%
  6,070     5,492   10.5%   Other hotel revenues   11,373     10,767   5.6%
  1,447     861   68.1%   Franchise and management fees   2,672     1,276   109.4%
  319,131     333,301   (4.3)%     592,705     629,201   (5.8)%
                     
  4,526     3,200   41.4% Other revenues from franchised and managed properties   8,621     5,067   70.1%
                     
  323,657     336,501   (3.8)% Total revenues   601,326     634,268   (5.2)%
                     
          OPERATING EXPENSES:          
  146,907     144,054   2.0%   Hotel operating expenses   284,198     286,684   (0.9)%
  22,287     23,507   (5.2)%   General and administrative expenses   45,314     48,468   (6.5)%
  49,017     53,499   (8.4)%   Depreciation and amortization   97,795     107,514   (9.0)%
  -      -    n/a Impairment of long-lived assets   -      43,600   (100.0)%
  218,211     221,060   (1.3)%     427,307     486,266   (12.1)%
                     
  4,996     3,394   47.2% Other expenses from franchised and managed properties   9,643     5,313   81.5%
                     
  223,207     224,454   (0.6)% Total operating expenses   436,950     491,579   (11.1)%
                     
  -      -    n/a GAIN ON SALE OF HOTEL PROPERTIES   -      38,082   (100.0)%
                     
  1     457   (99.8)% OTHER INCOME   28     462   (93.9)%
                     
  100,451     112,504   (10.7)% INCOME FROM OPERATIONS   164,404     181,233   (9.3)%
                     
  (171)     102   (267.6)% OTHER NON-OPERATING (INCOME) EXPENSE   (349)     299   216.7%
                     
  29,766     32,425   (8.2)% INTEREST EXPENSE, NET   59,370     64,065   (7.3)%
                     
  70,856     79,977   (11.4)% INCOME BEFORE INCOME TAX EXPENSE   105,383     116,869   (9.8)%
                     
  11,198     14,407   (22.3)% INCOME TAX EXPENSE   17,321     20,204   (14.3)%
                     
  59,658     65,570   (9.0)% NET INCOME    88,062     96,665   (8.9)%
                     
  (6,161)     (514)   1,098.6% NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS   (12,631)     (16,757)   (24.6)%
                     
$   53,497   $   65,056   (17.8)% NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS $   75,431   $   79,908   (5.6)%
                     
                     
$   0.28   $   0.34   (17.2)% NET INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED $   0.40   $   0.42   (4.6)%
                     
  188,813     190,183     WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED   188,695     190,709    
                     
                       
                     
          CONSOLIDATED BALANCE SHEET DATA          
          AS OF JUNE 30, 2019 AND DECEMBER 31, 2018          
          (In thousands)          
          (Unaudited)          
            June 30,   December 31,    
            2019   2018    
          Cash and cash equivalents $   286,616   $   287,458    
          Restricted cash $   16,024   $   15,878    
          Total assets $   3,939,565   $   3,924,210    
          Total debt, net of unamortized deferred financing costs and debt discounts (1) $   2,400,617   $   2,402,637    
          Total equity $   1,313,023   $   1,310,639    
                     
          (1)  Unamortized deferred financing costs and debt discounts totaled approximately $37.4 million and $41.1 million as of June 30, 2019 and December 31, 2018, respectively.    
             


  EXTENDED STAY AMERICA, INC. 
  OPERATING METRICS
  FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
  (Unaudited)
                       
                       
  COMPARABLE SYSTEM-WIDE OPERATING METRICS (1)
                       
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2019   2018   Variance   2019   2018   Variance
  625   625     - Number of hotels (as of June 30) 625   625     -
  68,780   68,780     - Number of rooms (as of June 30) 68,780   68,780     -
  79.8%   77.6%   220 bps Comparable System-Wide Occupancy(1) 75.6%   74.0%   160 bps
  $67.63   $69.50   (2.7)% Comparable System-Wide ADR(1) $66.63   $68.58   (2.8)%
  $53.94   $53.91   0.1% Comparable System-Wide RevPAR(1) $50.36   $50.72   (0.7)%
                       
                       
                       
  COMPARABLE COMPANY-OWNED OPERATING METRICS (2)
                       
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2019   2018   Variance   2019   2018   Variance
  552   552     - Number of hotels (as of June 30) 552   552     -
  61,264   61,264     - Number of rooms (as of June 30) 61,264   61,264     -
  79.9%   78.2%   170 bps Comparable Company-Owned Occupancy(2) 75.7%   74.7%   100 bps
  $69.64   $71.25   (2.3)% Comparable Company-Owned ADR(2) $68.63   $70.29   (2.5)%
  $55.66   $55.74   (0.1)% Comparable Company-Owned RevPAR(2) $51.96   $52.53   (1.0)%
                       
                       
            Renovation Displacement Data (in thousands, except percentages):          
    5,575     5,575     -   Total available room nights   11,089     11,089     -
    15     -      15   Room nights displaced from renovation   35     -      35
  0.3%   0.0%   30 bps   % of available room nights displaced 0.3%   0.0%   30 bps
                       
   
  COMPANY-OWNED OPERATING METRICS (3)
                       
  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2019   2018   Variance   2019   2018   Variance
  554   599     (45) Number of hotels (as of June 30) 554   599     (45)
  61,486   66,204     (4,718) Number of rooms (as of June 30) 61,486   66,204     (4,718)
  79.9%   77.6%   230 bps Company-Owned Occupancy(3) 75.7%   74.1%   160 bps
  $69.65   $69.91   (0.4)% Company-Owned ADR(3) $68.64   $69.00   (0.5)%
  $55.63   $54.27   2.5% Company-Owned RevPAR(3) $51.94   $51.12   1.6%
                       
                       
(1) Includes hotels owned, franchised or managed for the full three and six months ended June 30, 2019 and 2018.          
                       
(2) Includes hotels owned and operated by the Company for the full three and six months ended June 30, 2019 and 2018.  
               
(3) Include results of operations based on the Company's owned and operated hotels during the periods presented, which is summarized below:    
                       


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


  EXTENDED STAY AMERICA, INC.
  NON-GAAP RECONCILIATION OF NET INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN
  FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
  (In thousands)
  (Unaudited)
                       
  Three Months Ended    Six Months Ended
  June 30,   June 30,
  2019   2018   Variance   2019   2018   Variance
  $   59,658   $   65,570   -9.0% Net income $   88,062   $   96,665   (8.9)%
    11,198     14,407   (22.3)% Income tax expense   17,321     20,204   (14.3)%
    29,766     32,425   (8.2)% Interest expense, net   59,370     64,065   (7.3)%
    (171)     102   (267.6)% Other non-operating (income) expense   (349)     299   216.7%
    (1)     (457)   (99.8)% Other income   (28)     (462)   (93.9)%
    -      -    n/a Gain on sale of hotel properties   -      (38,082)   100.0%
    -      -    n/a Impairment of long-lived assets   -      43,600   (100.0)%
    49,017     53,499   (8.4)% Depreciation and amortization   97,795     107,514   (9.0)%
    22,287     23,507   (5.2)% General and administrative expenses   45,314     48,468   (6.5)%
    2,001     (824)   342.8% Loss (gain) on disposal of assets (1)   3,377     668   405.5%
    (1,447)     (861)   (68.1)%   Franchise and management fees   (2,672)     (1,276)   109.4%
    470     194   (142.3)% Other expenses from franchised and managed properties, net of other revenues   1,022     246   315.4%
  $   172,778   $   187,562   (7.9)% Hotel Operating Profit $   309,212   $   341,909   (9.6)%
                       
  $   311,614   $   326,948   (4.7)% Room revenues $   578,660   $   617,158   (6.2)%
    6,070     5,492   10.5% Other hotel revenues   11,373     10,767   5.6%
  $   317,684   $   332,440   (4.4)% Total room and other hotel revenues $   590,033   $   627,925   (6.0)%
                       
  54.4%   56.4%   (200) bps Hotel Operating Margin 52.4%   54.5%   (210) bps
                       
                       
                       
NON-GAAP RECONCILIATION OF NET INCOME TO COMPARABLE HOTEL(2)
OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(In thousands)
(Unaudited)
                       
  Three Months Ended    Six Months Ended
  June 30,   June 30,
  2019   2018   Variance   2019   2018   Variance
  $   59,658   $   65,570   (9.0)% Net income $   88,062   $   96,665   (8.9)%
    11,198     14,407   (22.3)% Income tax expense   17,321     20,204   (14.3)%
    29,766     32,425   (8.2)% Interest expense, net   59,370     64,065   (7.3)%
    (171)     102   (267.6)% Other non-operating (income) expense   (349)     299   (216.7)%
    (1)     (457)   (99.8)% Other income   (28)     (462)   (93.9)%
    -      -    n/a Gain on sale of hotel properties   -      (38,082)   100.0%
    -      -    n/a Impairment of long-lived assets   -      43,600   (100.0)%
    49,017     53,499   (8.4)% Depreciation and amortization   97,795     107,514   (9.0)%
    22,287     23,507   (5.2)% General and administrative expenses   45,314     48,468   (6.5)%
    2,001     (824)   (342.8)% Loss (gain) on disposal of assets(1)   3,377     668   405.5%
    (1,447)     (861)   68.1% Franchise and management fees   (2,672)     (1,276)   109.4%
    470     194   142.3% Other expenses from franchised and managed properties, net of other revenues   1,022     246   315.4%
    (433)     (6,688)   (93.5)% Hotel operating profit of hotels not owned for entirety of periods presented   (786)     (13,565)   (94.2)%
  $   172,345   $   180,874   (4.7)% Comparable Hotel Operating Profit(2) $   308,426   $   328,344   (6.1)%
                       
  $   311,614   $   326,948   (4.7)% Room revenues $   578,660   $   617,158   (6.2)%
    6,070     5,492   10.5% Other hotel revenues   11,373     10,767   5.6%
    (1,003)     (16,262)   (93.8)% Total revenues of hotels not owned for entirety of periods presented   (1,831)     (34,963)   (94.8)%
  $   316,681   $   316,178   0.2% Comparable total room and other hotel revenues $   588,202   $   592,962   (0.8)%
                       
  54.4%   57.2%   (280) bps Comparable Hotel Operating Margin(2) 52.4%   55.4%   (300) bps
                       
                       
(1)  Included in hotel operating expenses in the unaudited condensed consolidated statements of operations.        
                       
(2) Includes results of 552 hotels owned and operated during the full three and six months ended June 30, 2019 and 2018.      
                       


  EXTENDED STAY AMERICA, INC. 
  NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA 
  FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
  (In thousands)
  (Unaudited)
                   
  Three Months Ended     Six Months Ended  
  June 30,     June 30,  
  2019   2018     2019   2018  
  $   59,658   $   65,570   Net income $   88,062   $   96,665  
    29,766     32,425   Interest expense, net   59,370     64,065  
    11,198     14,407   Income tax expense    17,321     20,204  
    49,017     53,499   Depreciation and amortization    97,795     107,514  
    149,639     165,901   EBITDA    262,548     288,448  
    2,147     1,785   Equity-based compensation   4,255     4,188  
    -      -    Impairment of long-lived assets   -      43,600  
    -      -    Gain on sale of hotel properties   -      (38,082)  
    1,857     (349)   Other expense (income)(1)   3,151     1,347  
  $   153,643   $   167,337   Adjusted EBITDA  $   269,954   $   299,501  
                   
                   
                   
                   
                   
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE ADJUSTED EBITDA(2)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(In thousands)
(Unaudited)
                   
  Three Months Ended     Six Months Ended  
  June 30,     June 30,  
  2019   2018     2019   2018  
  $   59,658   $   65,570   Net income $   88,062   $   96,665  
    29,766     32,425   Interest expense, net   59,370     64,065  
    11,198     14,407   Income tax expense    17,321     20,204  
    49,017     53,499   Depreciation and amortization    97,795     107,514  
    149,639     165,901   EBITDA    262,548     288,448  
    (433)     (6,688)   Adjusted Property EBITDA of hotels
not owned for entirety of periods presented
  (786)     (13,565)  
    2,147     1,785   Equity-based compensation   4,255     4,188  
    -      -    Impairment of long-lived assets   -      43,600  
    -      -    Gain on sale of hotel properties   -      (38,082)  
    1,857     (349)   Other expense (income)(1)   3,151     1,347  
  $   153,210   $   160,649   Comparable Adjusted EBITDA(2) $   269,168   $   285,936  
                   
                   
                   
(1) Includes loss (gain) on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with dispositions. Loss (gain) on disposal of assets totaled $2.0 million, $(0.8) million, $3.4 million and $0.7 million, respectively.
 
 
                   
(2) Includes results of 552 hotels owned and operated during the full three and six months ended June 30, 2019 and 2018.  
                   
                   


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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(In thousands, except per share and per Paired Share data)
(Unaudited)
                 
Three Months Ended     Six Months Ended  
June 30,      June 30,  
2019   2018     2019   2018  
                 
$   0.28   $   0.34   Net income per Extended Stay America, Inc. common share - diluted $   0.40   $   0.42  
                 
$   53,497   $   65,056   Net income attributable to Extended Stay America, Inc. common shareholders $   75,431   $   79,908  
  6,157     510   Noncontrolling interests attributable to Class B
common shares of ESH REIT
  12,623     16,749  
  47,655     52,233   Real estate depreciation and amortization   95,088     104,981  
  -      -    Impairment of long-lived assets   -      43,600  
  -      -    Gain on sale of hotel properties   -      (38,082)  
  (7,482)     (8,880)   Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders   (14,882)     (18,605)  
  99,827     108,919   Funds from Operations   168,260     188,551  
  -      1,184   Debt modification and extinguishment costs   -      1,621  
  -      (201)   Tax effect of adjustments to Funds from Operations   -      (274)  
                 
$   99,827   $   109,902   Adjusted Funds from Operations $   168,260   $   189,898  
                 
$   0.53   $   0.58   Adjusted Funds from Operations
per Paired Share – diluted 
$   0.89   $   1.00  
                 
  188,813     190,183   Weighted average Paired Shares
 outstanding – diluted 
  188,695     190,709  
                 


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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018
(In thousands, except per share and per Paired Share data)
(Unaudited)
                 
Three Months Ended     Six Months Ended  
June 30,      June 30,  
2019   2018     2019   2018  
                 
$   0.28   $   0.34   Net income per Extended Stay America, Inc. common share - diluted $   0.40   $   0.42  
                 
$   53,497   $   65,056   Net income attributable to Extended Stay America, Inc. common shareholders $   75,431   $   79,908  
  6,157     510   Noncontrolling interests attributable to Class B
common shares of ESH REIT
  12,623     16,749  
  59,654     65,566   Paired Share Income    88,054     96,657  
  -     1,184   Debt modification and extinguishment costs   -     1,621  
  -     -   Impairment of long-lived assets   -     43,600  
  -     -   Gain on sale of hotel properties   -     (38,082)  
  1,857     (349)   Other expense (income) (1)   3,151     1,347  
  (291)     (142)   Tax effect of adjustments to Paired Share Income   (493)     (1,419)  
$   61,220   $   66,259   Adjusted Paired Share Income $   90,712   $   103,724  
                 
$   0.32   $   0.35   Adjusted Paired Share Income per Paired Share – diluted  $   0.48   $   0.54  
                 
  188,813     190,183   Weighted average Paired Shares outstanding – diluted    188,695     190,709  
                 
                 
(1) Includes loss (gain) on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with dispositions. Loss (gain) on disposal of assets totaled $2.0 million, $(0.8) million, $3.4 million and $0.7 million, respectively.

 
 


EXTENDED STAY AMERICA, INC. 
TOTAL REVENUES AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE ADJUSTED EBITDA 
FOR THE YEARS ENDED DECEMBER 31, 2018 (ADJUSTED) AND 2019 (OUTLOOK)
(In thousands)
(Unaudited)
             
  Year Ended     Year Ending December 31, 2019
  December 31, 2018     (Outlook)
  (Adjusted) (1)     Low   High
  $   1,204,429   Total revenues $   1,215,000   $   1,230,000
             
  $   211,756   Net income  $   183,015   $   202,020
    124,870   Interest expense, net   120,000     120,000
    42,076   Income tax expense   37,485     38,480
    209,329   Depreciation and amortization    195,000     190,000
    588,031   EBITDA    535,500     550,500
    (21,422)   Adjusted Property EBITDA of hotels not owned
 for entirety of period presented
  -      - 
    7,724   Equity-based compensation   8,500     8,500
    43,600   Impairment of long-lived assets    -      - 
    (42,478)   Gain on sale of hotel properties   -      - 
    2,860   Other expense(2)   6,000     6,000
  $   578,315   Comparable Adjusted EBITDA $   550,000   $   565,000
             
             
             
  (1) 2018 results adjusted to reflect results of 552 hotels owned and operated for the full year ended December 31, 2018.
             
  (2) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with acquisitions, dispositions and capital transactions.
 
             


EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. 
COMMON SHAREHOLDERS TO PAIRED SHARE INCOME, ADJUSTED PAIRED SHARE INCOME 
 AND ADJUSTED PAIRED SHARE INCOME PER DILUTED PAIRED SHARE
FOR THE YEARS ENDED DECEMBER 31, 2018 (ACTUAL) AND 2019 (OUTLOOK)
(In thousands, except per share and per Paired Share data)
(Unaudited)
Year Ended     Year Ending December 31, 2019  
December 31, 2018     (Outlook)  
(Actual)     Low   High  
             
$   0.59   Net income per Extended Stay America, Inc. common share - diluted $   0.43   $   0.48  
             
$   112,864   Net income attributable to Extended Stay America, Inc. common shareholders $   81,318   $   90,888  
  98,876   Noncontrolling interests attributable to Class B common shares of ESH REIT   101,681     111,116  
  211,740   Paired Share Income    182,999     202,004  
  1,621   Debt modification and extinguishment costs   -      -   
  43,600   Impairment of long-lived assets   -      -   
  (42,478)   Gain on sale of hotel properties   -      -   
  2,860   Other expense (1)   6,000     6,000  
  (937)   Tax effect of adjustments to Paired Share Income   (1,020)     (960)  
$   216,406   Adjusted Paired Share Income $   187,979   $   207,044  
             
$   1.14   Adjusted Paired Share Income per Paired Share – diluted  $   1.00   $   1.10  
             
  189,821   Weighted average Paired Shares outstanding – diluted    188,695     188,695  
             
(1) Includes loss on disposal of assets, non-operating (income) expense, including foreign currency transaction costs, and certain costs associated with acquisitions, dispositions and capital transactions.  


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Source: Extended Stay America, Inc. 2019 GlobeNewswire, Inc.