Attached files
| file | filename |
|---|---|
| EX-99.3 - EXHIBIT 99.3 - Extended Stay America, Inc. | exhibit993-distributionann.htm |
| EX-99.1 - EXHIBIT 99.1 - Extended Stay America, Inc. | exhibit991-earningsrelease.htm |
| 8-K - 8-K - Extended Stay America, Inc. | stay-8xkannouncingq42017fo.htm |
February 27, 2018
Extended Stay America, Inc.
ESH Hospitality, Inc.
Q4 2017
Earnings Summary
2
important disclosure information
This presentation contains forward-looking statements within the meaning of the federal securities laws. Statements related to,
among other things, future financial performance, including our 2018 outlook, the expected timing, completion and effects of any
proposed asset disposals, expected performance, free cash flow, debt reduction, distribution growth, franchised new builds,
owned new builds and other growth opportunities, as such, involve known and unknown risks, uncertainties and other factors
that may cause Extended Stay America, Inc.’s (the “Corporation”) and ESH Hospitality, Inc.’s (“ESH REIT,” and together with the
Corporation, the “Company”) actual results or performance to differ from those projected in the forward-looking statements,
possibly materially. For a description of factors that may cause the Company’s actual results or performance to differ from
projected results or performance implied by forward-looking statements, please review the information under the headings
“Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included in the Company’s combined annual report
on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2018 and other documents of the
Company on file with or furnished to the SEC. Any forward-looking statements made in this presentation are qualified by these
cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be
realized or, even if substantially realized, will have the expected consequences to, or effects on, the Company, its business or
operations. Except as required by law, the Company undertakes no obligation to update 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.
This presentation includes certain non-GAAP financial measures, including Hotel Operating Profit, Hotel Operating Margin,
EBITDA, Adjusted EBITDA, Funds From Operations (“FFO”), Adjusted Funds From Operations (“Adjusted FFO”), Adjusted FFO per
diluted Paired Share, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired
Share. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial
measures prepared in accordance with U.S. GAAP. Please refer to the Appendix of this presentation for a reconciliation of these
non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with U.S. GAAP, and to
the Company’s combined annual report on Form 10-K filed with the SEC on February 27, 2018 for definitions of these non-GAAP
measures.
3
1Comparable Hotels include the 624 Extended Stay America hotels owned and operated during the full three and twelve month periods ended December 31, 2017 and 2016.
2Net Income, Adjusted EBITDA, Adjusted FFO per diluted Paired Share and Adjusted Paired Shared Income per diluted Paired Share were affected by lost contribution from 4 hotels sold in May 2017 and 1 hotel sold
in December 2017. Net Income, Adjusted FFO per diluted Paired Share and Adjusted Paired Share Income per diluted Paired Share were all negatively impacted by income taxes.
3See Appendix for Hotel Operating Margin, Adjusted FFO per diluted Paired Share, Adjusted EBITDA and Adjusted Paired Share Income per diluted Paired Share reconciliations.
Q4 2017 Operating Results & Financial Highlights
$45.52
$47.01
Q4 2016 Q4 2017
Comparable Hotel1 Revenue Per Available Room
(“RevPAR”)
$0.41
$0.40
Q4 2016 Q4 2017
Adjusted FFO per Diluted Paired Share2,3
-2.2%
$30.1
$40.2
Q4 2016 Q4 2017
Net Income (in millions)2
$142.5
$140.2
Q4 2016 Q4 2017
Hotel Operating Margin3
55.1%
53.0%
Q4 2016 Q4 2017
Adjusted EBITDA (in millions) 2,3
$0.20
$0.19
Q4 2016 Q4 2017
Adjusted Paired Share Income
per Diluted Paired Share2,3
4
1Comparable Hotels include the 624 Extended Stay America hotels owned and operated during the full three and twelve month periods ended December 31, 2017 and 2016.
2Net Income, Adjusted EBITDA, Adjusted FFO per diluted Paired Share and Adjusted Paired Shared Income per diluted Paired Share were affected by lost contribution from 4 hotels sold in May 2017 and 1 hotel sold
in December 2017. Net Income, Adjusted FFO per diluted Paired Share and Adjusted Paired Share Income per diluted Paired Share were all negatively impacted by income taxes.
3See Appendix for Hotel Operating Margin, Adjusted FFO per diluted Paired Share, Adjusted EBITDA and Adjusted Paired Share Income per diluted Paired Share reconciliations.
Full Year 2017 Operating Results & Financial Highlights
$49.20
$50.13
2016 2017
Comparable Hotel1 RevPAR
$1.79
$1.84
2016 2017
Adjusted FFO per Diluted Paired Share2,3
+3.0%
$163.4
$172.2
2016 2017
Net Income (in millions)2
$615.7 $622.9
2016 2017
Hotel Operating Margin3
55.1% 55.0%
2016 2017
Adjusted EBITDA (in millions) 2,3
5.4%
-10bps
$0.99 $1.00
2016 2017
Adjusted Paired Share Income
per Diluted Paired Share2,3
5
Quarterly Distribution and Select Balance Sheet Amounts
Quarterly Distribution
per Paired Share1
$0.19
$0.21
Q4 2016 Q4 2017
+10.5%
Adjusted Net Debt / TTM Adjusted
EBITDA Ratio3
3.9X 3.9X
Q3 2017 Q4 2017
¹ Distribution dates of March 28, 2017 and March 27, 2018, respectively.
2 Includes restricted and unrestricted cash.
3 Net debt calculation is (gross debt – total restricted and unrestricted cash).
4 Gross debt outstanding (excludes discounts and deferred financing costs).
Cash Balance (in millions)2
$138.0
$151.0
Q3 2017 Q4 2017
Debt Outstanding (in millions)4
$2,594 $2,591
Q3 2017 Q4 2017
6
Q4 2017 Results, Q1 2018 Guidance and Full Year 2018 Guidance1
1 Guidance for Q1 2018 and full year 2018 is as of February 27, 2018.
2 Guidance as of Q3 2017 earnings call on November 7, 2017. RevPAR growth shown on a 624 hotel basis.
3 On a 599 comparable basis. Q1 2018 Adjusted EBITDA includes approximately $1.4 million in contribution from the 25 hotel assets sold
in February 2018.
4 RevPAR growth on a 599 hotel basis.
5 Estimated lost contribution of approximately $16 million related to 5 hotel asset sold in 2017 and 25 hotel assets sold in early 2018 for
the full year 2018. See Appendix for hotel operating metrics of these 30 hotels by quarter of 2017.
(in millions, except %)
RevPAR % D4 1.0% to 3.0%
Net Income $197 $220
Adjusted EBITDA5 $600 $620
Depreciation and Amortization $220 $220
Net Interest Expense $130 $130
Effective Tax Rate 16.0% 17.0%
Capital Expenditures $180 $210
2018 Guidance
(in millions, except %) Q4 2017 Guidance2 Q4 2017 Actual
RevPAR % D2 0.0% to 2.0% 3.3%
Adjusted EBITDA $127 to $132 $140.2
(in millions, except %) Q1 2017
RevP D3 2.3% 1.0% 3.0%
Adjusted EBITDA3 $126.1 $124 $130
Q1 2018 Guidance
appendix
8
NON-GAAP RECONCILIATION OF ROOM REVENUES, OTHER HOTEL REVENUES AND HOTEL OPERATING
EXPENSES TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN FOR THE FOUR QUARTERS OF 2017
FOR THE 30 HOTELS SOLD IN 2017 (5) AND THROUGH FEBRUARY 27, 2018 (25)
Q1 2017 Q2 2017
1
Q3 2017 Q4 2017
2 2017
Number of hotels 30 29 26 26
Room revenues 9,832$ 10,651$ 10,225$ 8,359$ 39,067$
Other hotel revenues 260 219 185 157 821
Total hotel revenues 10,092 10,870 10,410 8,516 39,888
Hotel operating expenses
3
6,619 5,643 5,190 5,064 22,516
Hotel Operating Profit 3,473$ 5,227$ 5,220$ 3,452$ 17,372$
Hotel Operating Margin 34.4% 48.1% 50.1% 40.5% 43.6%
1
Includes results of four hotels sold in May 2017 prior to sale.
2
Includes results of one hotel sold in December 2017 prior to sale.
3
Excludes loss on disposal of assets of $118, $134, $71, $92 and $414, respectively
(unaudited)
(in thousands)
9
HOTEL OPERATING METRICS FOR THE FOUR QUARTERS OF 2017 FOR THE 30 HOTELS SOLD IN 2017 (5) AND
THROUGH FEBRUARY 27, 2018 (25)
Q1 2017 Q2 2017
1
Q3 2017 Q4 2017
2
2017
Number of hotels 30 29 26 26
Number of rooms 3,193 3,090 2,590 2,590 3,193
Occupancy 65.1% 74.9% 77.6% 66.1% 70.7%
ADR 53.35$ 56.27$ 55.33$ 53.68$ 54.71$
RevPAR 34.74$ 42.17$ 42.91$ 35.49$ 38.70$
1 Includes results of four hotels sold in May 2017 prior to sale.
2 Includes results of one hotel sold in December prior to sale.
(unaudited)
10
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA FOR THE THREE AND TWELVE
MONTHS ENDED DECEMBER 31, 2017 AND 2016
2017 2016 2017 2016
$ 40,150 $ 30,148 Net income $ 172,188 $ 163,352
32,814 33,075 Interest expense, net 129,772 164,537
18,793 8,140 Income tax expense 59,514 34,351
56,427 57,035 Depreciation and amortization 229,216 221,309
148,184 128,398 EBITDA 590,690 583,549
(1,497) 3,365 Equity-based compensation 7,552 12,000
27 (1) (507) (2) Other non-operating expense (income) (399) (3) (1,576) (4)
4,812 7,072 Impairment of long-lived assets 25,169 9,828
(11,870) - Gain on sale of hotel properties, net (9,973) -
533 (5) 4,139 (6) Other expenses 9,866 (7) 11,857 (8)
$ 140,189 $ 142,467 Adjusted EBITDA $ 622,905 $ 615,658
(1.6)% % growth 1.2%
Twelve Months Ended
(7)
Includes loss on disposal of assets of approximately $8.6 million, costs incurred in connection with 2017 secondary offerings
of approximately $1.1 million and transaction costs of approximately $0.2 million due to the revision of an estimate related to the
sale of three hotel properties in 2017.
December 31,
(8)
Includes loss on disposal of assets of approximately $10.7 million, costs incurred in connection with 2016 secondary
offerings of approximately $1.1 million and transaction costs of approximately $0.1 million due to the revision of an estimate
related to the sale of a portfolio of 53 hotel properties in 2015.
Three Months Ended
December 31,
(1)
Includes foreign currency transaction loss of approximately $0.1 million and gain related to interest rate swap of approximately
$0.1 million.
(2)
Includes foreign currency transaction gain of approximately $0.5 million.
(3)
Includes foreign currency transaction gain of approximately $0.7 million and loss related to interest rate swap of approximately
$0.3 million.
(4)
Includes foreign currency transaction gain of approximately $1.6 million.
(5)
Includes loss on disposal of assets of approximately $0.5 million and transaction costs of approximately $0.1 million due to
the revision of an estimate related to the sale of three hotel properties in 2017.
(6)
Includes loss on disposal of assets of approximately $3.5 million and costs incurred in connection with 2016 secondary
offerings of approximately $0.7 million.
(In thousands)
(Unaudited)
11
NON-GAAP RECONCILIATION OF ROOM REVENUES, OTHER HOTEL REVENUES AND HOTEL OPERATING
EXPENSES TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN FOR THE THREE AND TWELVE
MONTHS ENDED DECEMBER 31, 2017 AND 2016
2 17 2016 Variance 2017 2016 Variance
297,363$ 290,819$ 2.3% Room revenues 1,260,868$ 1,250,865$ 0.8%
5,142 4,906 4.8% Other hotel revenues 21,857 19,728 10.8%
302,505 295,725 2.3% Total hotel revenues 1,282,725 1,270,593 1.0%
142,277 132,790 7.1% Hotel operating expenses
(1)
576,938 570,032 1.2%
160,228$ 162,935$ (1.7)% Hotel Operating Profit 705,787$ 700,561$ 0.7%
53.0% 55.1% (210) bps Hotel Operating Margin 55.0% 55.1% (10) bps
Three Months Ended
December 31,
(In thousands)
(Unaudited)
(1)
Excludes loss on disposal of assets of approximately $0.5 million, $3.5 million, $8.6 million and $10.7 million, respectively.
December 31,
Twelve Months Ended
12
NON-GAAP RECONCILIATION OF NET (LOSS) INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON
SHAREHOLDERS TO FUNDS FROM OPERATIONS, ADJUSTED FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM
OPERATIONS PER DILUTED PAIRED SHARE FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016
2017 2016 2017 2016
$ (0.26) $ (0.28)
Net (loss) income per Extended Stay America, Inc.
common share - diluted $ 0.41 $ 0.35
$ (49,905) $ (54,399)
Net (loss) income attributable to Extended Stay America,
Inc. common shareholders
$ 78,847 $ 69,932
90,051 84,543
Noncontrolling interests attributable to Class B
common shares of ESH REIT
93,325 93,404
55,232 55,938 Real estate depreciation and amortization 224,559 216,950
4,812 7,072 Impairment of long-lived assets 25,169 9,828
(11,870) - Gain on sale of hotel properties, net (9,973) -
(12,048) (12,665)
Tax effect of adjustments to net (loss) income attributable
to Extended Stay America, Inc. common shareholders
(56,883) (50,728)
76,272 80,489 Funds from Operations 355,044 339,386
1,183 72 Debt modification and extinguishment costs 2,351 26,233
(42) - (Gain) loss on interest rate swap 314 -
(285) (14) Tax effect of adjustments to Funds from Operations (639) (6,286)
$ 77,128 $ 80,547 Adjusted Funds from Operations $ 357,070 $ 359,333
$ 0.40 $ 0.41
Adjusted Funds from Operations
per Paired Share – diluted $ 1.84 $ 1.79
192,301 196,973
Weighted average Paired Shares
outstanding – diluted 193,670 200,736
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands, except per share and per Paired Share data)
(Unaudited)
13
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, 2017 AND 2016
2017 2016 2017 2016
$ (0.26) $ (0.28)
Net (loss) income per Extended Stay America, Inc.
common share - diluted $ 0.41 $ 0.35
(49,905)$ (54,399)$
Net (loss) income attributable to Extended Stay America,
Inc. common shareholders 78,847$ 69,932$
90,051 84,543
Noncontrolling interests attributable to Class B
common shares of ESH REIT 93,325 93,404
40,146 30,144 Paired Share Income 172,172 163,336
1,183 72 Debt modification and extinguishment costs 2,351 26,233
27 (1) (507) (2) Other non-operating expense (income) (399) (3) (1,576) (4)
4,812 7,072 Impairment of long-lived assets 25,169 9,828
(11,870) - Gain on sale of hotel properties, net (9,973) -
533 (5) 4,139 (6) Other expenses 9,866 (7) 11,857 (8)
1,329 (2,166) Tax effect of adjustments to Paired Share Income (6,241) (10,671)
36,160$ 38,754$ Adjusted Paired Share Income 192,945$ 199,007$
0.19$ 0.20$ Adjusted Paired Share Income per Paired Share – diluted 1.00$ 0.99$
192,301 196,973 Weighted average Paired Shares outstanding – diluted 193,670 200,736
(1)
Includes foreign currency transaction loss of approximately $0.1 million and gain related to interest rate swap of
approximately $0.1 million.
(2)
Includes foreign currency transaction gain of approximately $0.5 million.
(3)
Includes foreign currency transaction gain of approximately $0.7 million and loss related to interest rate swap of
approximately $0.3 million.
(Unaudited)
December 31,
Twelve Months EndedThree Months Ended
December 31,
(In thousands, except per share and per Paired Share data)
(4)
Includes foreign currency transaction gain of approximately $1.6 million.
(5)
Includes loss on disposal of assets of approximately $0.5 million and transaction costs of approximately $0.1 million due to
the revision of an estimate related to the sale of three hotel properties in 2017.
(6)
Includes loss on disposal of assets of approximately $3.5 million and costs incurred in connection with 2016 secondary
offerings of approximately $0.7 million.
(7)
Includes loss on disposal of assets of approximately $8.6 million, costs incurred in connection with 2017 secondary
offerings of approximately $1.1 million and transaction costs of approximately $0.2 million due to the revision of an estimate
related to the sale of three hotel properties in 2017.
(8)
Includes loss on disposal of assets of approximately $10.7 million, costs incurred in connection with 2016 secondary
offerings of approximately $1.1 million and transaction costs of approximately $0.1 million due to the revision of an estimate
related to the sale of a portfolio of 53 hotel properties in 2015.
14
TOTAL REVENUES AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA FOR THE YEARS ENDED
DECEMBER 31, 2017 (ADJUSTED) AND 2018 (OUTLOOK)
Year Ended
December 31, 2017
(Adjusted)
(1)
Low High
$ 1,242,837 Total revenues 1,257,000$ 1,282,000$
$ 172,188 Net income 196,710$ 220,080$
129,772 Interest expense, net 130,000 130,000
59,514 Income tax expense 40,290 41,920
229,216 Depreciation and amortization 220,000 220,000
590,690 EBITDA 587,000 612,000
(17,372) Adjusted Property EBITDA of hotels not owned for entirety of periods presented - -
7,552 Equity-based compensation 8,000 8,000
(399)
(3)
Other non-operating income - -
25,169 Impairment of long-lived assets - -
(9,973) Gain on sale of hotel properties, net (5,000) (10,000)
9,866 (4) Other expenses 10,000
(5)
10,000
(5)
$ 605,533 Comparable Adjusted EBITDA
(2) $ 600,000 $ 620,000
% growth -0.9% 2.4%
(1) 2017 results adjusted to reflect only those 599 hotels owned and operated as of February 27, 2018.
(2) 2018 outlook includes revenues of approximately $4.0 million and Adjusted EBITDA of approximately $1.4 million for the 25 hotels sold in February 2018.
(3)
(4)
(5)
Includes loss on disposal of assets and other non-operating costs.
(In thousands)
(Unaudited)
(Outlook)
(2)
Includes foreign currency transaction gain of approximately $0.7 million and loss related to interest rate swap of approximately $0.3 million.
Includes loss on disposal of assets of approximately $8.6 million, costs incurred in connection with the 2017 secondary offerings of approximately $1.1 million
and transaction costs of approximately $0.2 million due to the revision of an estimate related to the sale of the three hotel properties in 2017.
Year Ending December 31, 2018