Attached files
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| EX-99.2 - EXHIBIT 99.2 - Extended Stay America, Inc. | earningscallq22018vfinal.htm |
| 8-K - 8-K - Extended Stay America, Inc. | stay-8xkannouncingq22018fo.htm |
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EXTENDED STAY AMERICA ANNOUNCES SECOND QUARTER 2018 RESULTS
-Net Income of $65.6 million for the second quarter
-Adjusted EBITDA1 of $167.3 million for the second quarter
-Comparable system-wide RevPAR grows 1.6% for the second quarter
-Announces hotels under contract to be sold and updates new hotel pipeline
CHARLOTTE, N.C. - July 25, 2018 (GlobeNewswire) - Extended Stay America, Inc. and ESH Hospitality, Inc. (Nasdaq:STAY) (together, the “Company”) today announced consolidated results for the three and six months ended June 30, 2018.
Second Quarter 2018 Highlights
• | Total revenues of $336.5 million |
• | Comparable system-wide Revenue Per Available Room (“RevPAR”) grew 1.6% to $53.91 |
• | Adjusted EBITDA of $167.3 million |
• | Adjusted Funds From Operations ("Adjusted FFO")1 of $0.58 per diluted Paired Share, an increase of 10.0% |
• | Adjusted Paired Share Income1 of $0.35 per diluted Paired Share, an increase of 11.7% |
First Half 2018 Highlights
• | Total revenues of $634.3 million |
• | Comparable system-wide RevPAR grew 2.6% to $50.72 |
• | Adjusted EBITDA of $299.5 million |
• | Adjusted FFO of $1.00 per diluted Paired Share, an increase of 13.4% |
• | Adjusted Paired Share Income of $0.54 per diluted Paired Share, an increase of 18.8% |
Extended Stay America’s President and Chief Executive Officer, Jonathan Halkyard, commented, “The second quarter marked another quarter of progress on our growth strategy. In the last few months, we grew our total pipeline to 34 hotels, including 19 franchise hotels, we purchased a hotel for conversion, purchased an additional site for a new hotel and we expect to purchase several more sites in the second half of 2018.”
Mr. Halkyard continued, “Our operating model, combined with strong capital returns, allowed us to grow Adjusted FFO and Adjusted Paired Share Income per Paired Share by double digit increases for the second quarter in a row.”
Financial and Operating Results
Total revenues for the three months ended June 30, 2018 were $336.5 million, a decrease of 0.6% over the same period in 2017. The decrease in revenue was driven by hotel dispositions in 2017 and in 2018, partially offset by an increase in RevPAR and
franchise and management fee revenue. Total revenues on a comparable basis increased 1.8% for the quarter. Total revenues for
1 See “Disclosure Regarding Non-GAAP Financial Measures” for an explanation of non-GAAP measures included in this release (i.e., Hotel Operating Profit, Hotel Operating Margin, EBITDA, Adjusted EBITDA, Funds from Operations ("FFO"), Adjusted FFO, Adjusted FFO per diluted Paired Share, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per diluted Paired Share).
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the first six months of 2018 were $634.3 million, an increase of 0.8% over the same period in 2017. Total revenues on a comparable basis increased 2.7% for the first six months of 2018 compared to the same period in 2017.
Comparable system-wide RevPAR for the three months ended June 30, 2018 grew 1.6% over the same period in 2017 to $53.91, driven by an improvement in average daily rate (“ADR”) of 3.4%, partially offset by a 130 basis point decline in occupancy. Comparable company-owned RevPAR increased 1.7% during the quarter to $54.28. Company-owned RevPAR increased 2.4% 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 half of 2018 grew 2.6% over the same period in 2017.
Hotel Operating Margin1 for the three months ended June 30, 2018 was 56.4% compared to 56.7% in the same period in 2017. The decline in Hotel Operating Margin was driven by an increase in payroll and reservation expenses. Hotel Operating Margin for the first half of 2018 was 54.5% compared to 54.8% in the same period in 2017.
Net income for the three months ended June 30, 2018 was $65.6 million compared to $49.7 million in the same period in 2017, an increase of 31.9%. Net income in the second quarter was favorably impacted by a decrease in effective tax rate, lower depreciation and amortization, a reduction in hotel operating expenses and reduced impairment charges. Income tax expense for the three months ended June 30, 2018 was $14.4 million compared to $15.9 million in the same period in 2017. Net income for the first half of 2018 was $96.7 million compared to $65.8 million in the same period in 2017, an increase of 46.9%.
Adjusted EBITDA for the three months ended June 30, 2018 was $167.3 million, a decline of 3.2% compared to the same period in 2017. The decline in Adjusted EBITDA was due to asset dispositions in 2017 and 2018 resulting in lost contributions of approximately $6.0 million. Adjusted EBITDA excludes non-cash equity-based compensation expense of $1.8 million and net gain of $0.3 million on other items. Adjusted EBITDA for the first six months of 2018 was $299.5 million, a decline of 1.0% compared to the same period in 2017 due to asset dispositions in 2017 and 2018.
Adjusted FFO for the three months ended June 30, 2018 was $109.9 million, an increase of 7.8% compared to the same period in 2017. The increase in Adjusted FFO was primarily due to a lower effective tax rate and a reduction in hotel operating expenses. Adjusted FFO per diluted Paired Share was $0.58 compared to $0.53 in the same period in 2017. Adjusted FFO for the first six months of 2018 was $189.9 million, an increase of 11.3% compared to the same period in 2017. Adjusted FFO per Paired Share for the first six months of 2018 was $1.00 compared to $0.88 in the same period in 2017. 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 June 30, 2018 was $66.3 million, or $0.35 per diluted Paired Share, compared to $60.5 million, or $0.31 per diluted Paired Share, in the same period in 2017. The increase in Adjusted Paired Share Income was due to a decrease in effective tax rate and lower depreciation expense. Adjusted Paired Share Income for the first half of 2018 was $103.7 million, or $0.54 per diluted Paired Share, compared to $89.0 million, or $0.46 per diluted Paired Share, in the same period in 2017. Adjusted Paired Share Income, a non-GAAP measure, represents net income, as adjusted, attributable to the
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consolidated enterprise, whose representative equity security is a Paired Share.
Capital Expenditures
The Company invested $56.2 million in capital expenditures during the second quarter of 2018. This included approximately $14.6 million in capital expenditures for new hotel development and conversions and $14.9 million in capital expenditures for IT projects. For the first half of 2018, the Company invested $89.7 million in capital expenditures.
Asset Dispositions and Acquisitions
The Company has signed purchase and sale agreements with three portfolio buyers for a total of 46 hotels. Under the terms of these agreements, the hotels will remain branded as Extended Stay America, the buyers will pay franchise fees to the Company and the buyers will agree to build or convert additional Extended Stay America hotels in the future. These transactions, subject to customary due diligence, are expected to close in 2018 or early 2019.
In the second quarter of 2018, the Company purchased and converted one hotel for approximately $13.0 million. The Company expects to purchase another hotel for conversion in the second half of 2018.
Hotel Pipeline, as of June 30, 2018
As of June 30, 2018, the Company had a pipeline of 34 hotels representing approximately 4,200 rooms.
Company Owned Pipeline & Recently Opened as of June 30, 2018 | |||||||||
Under Option | Pre-Development | Under Construction | Total Pipeline | Opened YTD | |||||
# Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms |
11 | 1,367 | 4 | 504 | 0 | 0 | 15 | 1,871 | 1 | 115 |
Third Party Pipeline as of June 30, 2018 | |||||||||
Commitments | Applications | Executed | Total Pipeline | Opened YTD | |||||
# Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms | # Hotels | # Rooms |
15 | 1,860 | 4 | 496 | 0 | 0 | 19 | 2,356 | 0 | 0 |
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 | |
Applications | Submitted a franchise application with deposit | |
Executed | Application approved, various stages of pre-development and under construction | |
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Distribution and Share Repurchases
On July 25, 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 second quarter of 2018. The distributions are payable on August 23, 2018 to shareholders of record as of August 9, 2018.
During the second quarter of 2018, the Company repurchased 1.6 million Paired Shares for an aggregate purchase price of $32.8 million. For the first six months of 2018, the Company repurchased 3.4 million Paired Shares for an aggregate purchase price of $68.0 million. As of market close on July 25, 2018, the Company had approximately $128.2 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 | 600 | 600 | ||||||||||||
Room and other hotel revenues | $ | 1,257 | $ | 1,279 | $ | 1,257 | $ | 1,282 | ||||||
Comparable system-wide RevPAR % Δ | 1.0% | 2.75% | 1.0% | 3.0% | ||||||||||
Net income | $ | 194 | $ | 208 | $ | 188 | $ | 207 | ||||||
Adjusted Paired Share Income/Paired Share | $ | 1.07 | $ | 1.15 | $ | 1.04 | $ | 1.14 | ||||||
Adjusted EBITDA | $ | 595 | $ | 610 | $ | 600 | $ | 620 | ||||||
Comparable Adjusted EBITDA % Δ | -1.3% | +1.2% | -0.5% | +2.8% | ||||||||||
Depreciation and amortization | $ | 213 | $ | 213 | $ | 220 | $ | 220 | ||||||
Net interest expense | $ | 130 | $ | 130 | $ | 130 | $ | 130 | ||||||
Effective tax rate | 16.5% | 17% | 16% | 17% | ||||||||||
Capital expenditures | $ | 205 | $ | 235 | $ | 205 | $ | 235 | ||||||
Expected capital returns | $ | 260 | $ | 300 | $ | 260 | $ | 300 | ||||||
Our updated comparable system-wide RevPAR and adjusted EBITDA guidance now includes renovation room disruption in the fourth quarter of 2018. While unchanged in total from prior guidance, our 2018 capital expenditure outlook now reflects capital expenditures for our next cycle of hotel renovations beginning in the fourth quarter of 2018, offset by a reduction in expected maintenance and ESA 2.0 related capital expenditures. The above guidance assumes no further asset dispositions in 2018 but does assume the purchase of one additional hotel for conversion.
Webcast and Conference Call Details
The Company will host a conference call on Thursday, July 26, 2018 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.
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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 2, 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 13681523.
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”) is the largest integrated hotel owner/operator in North America. Its subsidiary, ESH Hospitality, Inc. (“ESH”), is the largest lodging REIT in North America by unit and room count, with 599 hotels and approximately 66,000 rooms in the U.S. ESA manages all of ESH’s hotel properties in addition to 27 Extended Stay America branded hotels for third parties, providing over 8,000 jobs at Extended Stay America hotels and corporate headquarters. Extended
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Stay America® is the leading brand in the mid-priced extended stay segment, with approximately twice as many rooms as its nearest competitor. Visit www.esa.com for more information.
Contacts | ||||
Investors: | Media: | |||
Rob Ballew | Terry Atkins | |||
(980) 345-1546 | (980) 345-1648 | |||
investorrelations@esa.com | tatkins@esa.com | |||
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EXTENDED STAY AMERICA, INC. | ||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 | ||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2018 | 2017 | % Variance | 2018 | 2017 | % Variance | |||||||||||||||
REVENUES: | ||||||||||||||||||||
$ | 326,948 | $ | 332,608 | (1.7)% | Room revenues | $ | 617,158 | $ | 618,416 | (0.2)% | ||||||||||
5,492 | 5,755 | (4.6)% | Other hotel revenues | 10,767 | 10,938 | (1.6)% | ||||||||||||||
1,424 | — | n/a | Franchise and management fees | 2,047 | — | n/a | ||||||||||||||
333,864 | 338,363 | (1.3)% | 629,972 | 629,354 | 0.1% | |||||||||||||||
2,637 | — | n/a | Other revenues from franchised and managed properties | 4,296 | — | n/a | ||||||||||||||
336,501 | 338,363 | (0.6)% | Total revenues | 634,268 | 629,354 | 0.8% | ||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||
144,054 | 148,911 | (3.3)% | Hotel operating expenses | 286,684 | 290,571 | (1.3)% | ||||||||||||||
24,264 | 25,430 | (4.6)% | General and administrative expenses | 49,485 | 51,737 | (4.4)% | ||||||||||||||
53,499 | 57,804 | (7.4)% | Depreciation and amortization | 107,514 | 115,475 | (6.9)% | ||||||||||||||
— | 7,934 | n/a | Impairment of long-lived assets | 43,600 | 20,357 | 114.2% | ||||||||||||||
221,817 | 240,079 | (7.6)% | 487,283 | 478,140 | 1.9% | |||||||||||||||
2,637 | — | n/a | Other expenses from franchised and managed properties | 4,296 | — | n/a | ||||||||||||||
224,454 | 240,079 | (6.5)% | Total operating expenses | 491,579 | 478,140 | 2.8% | ||||||||||||||
— | (1,897 | ) | n/a | GAIN (LOSS) ON SALE OF HOTEL PROPERTIES | 38,082 | (1,897 | ) | 2,107.5% | ||||||||||||
457 | 2,055 | (77.8)% | OTHER INCOME | 462 | 2,056 | (77.5)% | ||||||||||||||
112,504 | 98,442 | 14.3% | INCOME FROM OPERATIONS | 181,233 | 151,373 | 19.7% | ||||||||||||||
102 | 1,073 | (90.5)% | OTHER NON-OPERATING EXPENSE (INCOME) | 299 | (148 | ) | 302.0% | |||||||||||||
32,425 | 31,701 | 2.3% | INTEREST EXPENSE, NET | 64,065 | 65,307 | (1.9)% | ||||||||||||||
79,977 | 65,668 | 21.8% | INCOME BEFORE INCOME TAX EXPENSE | 116,869 | 86,214 | 35.6% | ||||||||||||||
14,407 | 15,943 | (9.6)% | INCOME TAX EXPENSE | 20,204 | 20,426 | (1.1)% | ||||||||||||||
65,570 | 49,725 | 31.9% | NET INCOME | 96,665 | 65,788 | 46.9% | ||||||||||||||
(514 | ) | 2,050 | (125.1)% | NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS (1) | (16,757 | ) | 9,088 | (284.4)% | ||||||||||||
$ | 65,056 | $ | 51,775 | 25.7% | NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC COMMON SHAREHOLDERS | $ | 79,908 | $ | 74,876 | 6.7% | ||||||||||
$ | 0.34 | $ | 0.27 | NET INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED | $ | 0.42 | $ | 0.39 | ||||||||||||
190,183 | 193,944 | WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED | 190,709 | 194,372 | ||||||||||||||||
(1) Noncontrolling interests in Extended Stay America, Inc. include approximately 43% of ESH REIT's common equity as of June 30, 2018 and 2017. | ||||||||||||||||||||
CONSOLIDATED BALANCE SHEET DATA | ||||||||||||||||||||
AS OF JUNE 30, 2018 AND DECEMBER 31, 2017 | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
June 30, | December 31, | |||||||||||||||||||
2018 | 2017 | |||||||||||||||||||
Cash and cash equivalents | $ | 183,193 | $ | 113,343 | ||||||||||||||||
Restricted cash | $ | 44,245 | $ | 37,631 | ||||||||||||||||
Total assets | $ | 3,984,586 | $ | 4,076,005 | ||||||||||||||||
Total debt, net of unamortized deferred financing costs and debt discounts (2) | $ | 2,480,080 | $ | 2,541,901 | ||||||||||||||||
Total equity | $ | 1,294,601 | $ | 1,345,847 | ||||||||||||||||
(2) Unamortized deferred financing costs and debt discounts totaled approximately $44.7 million and $49.0 million as of June 30, 2018 and December 31, 2017, respectively. | ||||||||||||||||||||
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EXTENDED STAY AMERICA, INC. | ||||||||||||||
COMPARABLE SYSTEM-WIDE OPERATING METRICS (1) | ||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2018 | 2017 | Variance | 2018 | 2017 | 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 | — | ||||||||
77.6% | 78.9% | (130) bps | Comparable System-Wide occupancy | 74.0% | 74.7% | (70) bps | ||||||||
$69.50 | $67.21 | 3.4 | % | Comparable System-Wide ADR | $68.58 | $66.15 | 3.7 | % | ||||||
$53.91 | $53.04 | 1.6 | % | Comparable System-Wide RevPAR | $50.72 | $49.44 | 2.6 | % | ||||||
COMPARABLE COMPANY-OWNED OPERATING METRICS (2) | ||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2018 | 2017 | Variance | 2018 | 2017 | Variance | |||||||||
598 | 598 | — | Number of hotels (as of June 30) | 598 | 598 | — | ||||||||
66,089 | 66,089 | — | Number of rooms (as of June 30) | 66,089 | 66,089 | — | ||||||||
77.6% | 79.1% | (150) bps | Comparable Company-Owned occupancy | 74.1% | 74.9% | (80) bps | ||||||||
$69.91 | $67.52 | 3.5 | % | Comparable Company-Owned ADR | $69.00 | $66.51 | 3.7 | % | ||||||
$54.28 | $53.38 | 1.7 | % | Comparable Company-Owned RevPAR | $51.12 | $49.80 | 2.7 | % | ||||||
COMPANY-OWNED HOTEL OPERATING METRICS (3) | ||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2018 | 2017 | Variance | 2018 | 2017 | Variance | |||||||||
599 | 625 | (26 | ) | Number of hotels (as of June 30) | 599 | 625 | (26 | ) | ||||||
66,204 | 68,780 | (2,576 | ) | Number of rooms (as of June 30) | 66,204 | 68,780 | (2,576 | ) | ||||||
77.6% | 78.9% | (130) bps | Occupancy | 74.1% | 74.7% | (60) bps | ||||||||
$69.91 | $67.20 | 4.0 | % | ADR | $69.00 | $66.16 | 4.3 | % | ||||||
$54.27 | $53.02 | 2.4 | % | RevPAR | $51.12 | $49.40 | 3.5 | % | ||||||
(1) Includes hotels that were owned, franchised and/or managed for the full three and six month periods ended June 30, 2018 and 2017. | ||||||||||||||
(2) Includes hotels owned and operated by the Company for the full three and six month periods ended June 30, 2018 and 2017. | ||||||||||||||
(3) Includes hotels owned and operated during the periods presented. | ||||||||||||||
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EXTENDED STAY AMERICA, INC. | ||||||||||||||||||||||
NON-GAAP RECONCILIATION OF NET INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN | ||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||
2018 | 2017 | Variance | 2018 | 2017 | Variance | |||||||||||||||||
$ | 65,570 | $ | 49,725 | 31.9 | % | Net income | $ | 96,665 | $ | 65,788 | 46.9 | % | ||||||||||
14,407 | 15,943 | (9.6)% | Income tax expense | 20,204 | 20,426 | (1.1 | )% | |||||||||||||||
32,425 | 31,701 | 2.3 | % | Interest expense, net | 64,065 | 65,307 | (1.9 | )% | ||||||||||||||
102 | 1,073 | (90.5)% | Other non-operating expense (income) | 299 | (148 | ) | 302.0 | % | ||||||||||||||
(457 | ) | (2,055 | ) | (77.8)% | Other income | (462 | ) | (2,056 | ) | (77.5 | )% | |||||||||||
— | 1,897 | n/a | (Gain) loss on sale of hotel properties | (38,082 | ) | 1,897 | (2,107.5 | )% | ||||||||||||||
— | 7,934 | n/a | Impairment of long-lived assets | 43,600 | 20,357 | 114.2 | % | |||||||||||||||
53,499 | 57,804 | (7.4)% | Depreciation and amortization | 107,514 | 115,475 | (6.9 | )% | |||||||||||||||
24,264 | 25,430 | (4.6)% | General and administrative expenses | 49,485 | 51,737 | (4.4 | )% | |||||||||||||||
(824 | ) | 2,548 | (132.3)% | (Gain) loss on disposal of assets (1) | 668 | 6,018 | (88.9 | )% | ||||||||||||||
(1,424 | ) | — | n/a | Franchise and management fees | (2,047 | ) | — | n/a | ||||||||||||||
$ | 187,562 | $ | 192,000 | (2.3)% | Hotel Operating Profit | $ | 341,909 | $ | 344,801 | (0.8 | )% | |||||||||||
$ | 326,948 | $ | 332,608 | (1.7)% | Room revenues | $ | 617,158 | $ | 618,416 | (0.2 | )% | |||||||||||
5,492 | 5,755 | (4.6)% | Other hotel revenues | 10,767 | 10,938 | (1.6 | )% | |||||||||||||||
$ | 332,440 | $ | 338,363 | (1.8)% | Total room and other hotel revenues | $ | 627,925 | $ | 629,354 | (0.2 | )% | |||||||||||
56.4 | % | 56.7 | % | (30) bps | Hotel Operating Margin | 54.5 | % | 54.8 | % | (30) bps | ||||||||||||
(1) Included in hotel operating expenses in the unaudited condensed consolidated statements of operations. | ||||||||||||||||||||||
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EXTENDED STAY AMERICA, INC. | ||||||||||||||||||
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 | ||||||||||||||||||
(In thousands) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
$ | 65,570 | $ | 49,725 | Net income | $ | 96,665 | $ | 65,788 | ||||||||||
32,425 | 31,701 | Interest expense, net | 64,065 | 65,307 | ||||||||||||||
14,407 | 15,943 | Income tax expense | 20,204 | 20,426 | ||||||||||||||
53,499 | 57,804 | Depreciation and amortization | 107,514 | 115,475 | ||||||||||||||
165,901 | 155,173 | EBITDA | 288,448 | 266,996 | ||||||||||||||
1,785 | 3,646 | Non-cash equity-based compensation | 4,188 | 6,329 | ||||||||||||||
102 | (1) | 1,073 | (2) | Other non-operating expense (income) | 299 | (3) | (148 | ) | (4) | |||||||||
— | 7,934 | Impairment of long-lived assets | 43,600 | 20,357 | ||||||||||||||
— | 1,897 | (Gain) on sale of hotel properties | (38,082 | ) | 1,897 | |||||||||||||
(451 | ) | (5) | 3,125 | (6) | Other (income) expenses | 1,048 | (7) | 7,019 | (8) | |||||||||
$ | 167,337 | $ | 172,848 | Adjusted EBITDA | $ | 299,501 | $ | 302,450 | ||||||||||
(1) Includes foreign currency transaction loss of approximately $0.1 million. | ||||||||||||||||||
(2) Includes loss related to interest rate swap of approximately $1.5 million and foreign currency transaction gain of approximately $0.4 million. | ||||||||||||||||||
(3) Includes foreign currency transaction loss of approximately $0.3 million. | ||||||||||||||||||
(4) Includes foreign currency transaction gain of approximately $0.4 million and loss related to interest rate swap of approximately $0.3 million. | ||||||||||||||||||
(5) Includes gain on disposal of assets of approximately $0.8 million and acquisition costs of approximately $0.3 million incurred in connection with the purchase of one hotel. | ||||||||||||||||||
(6) Includes loss on disposal of assets of approximately $2.5 million and costs incurred in connection with secondary offerings of approximately $0.6 million. | ||||||||||||||||||
(7) Includes loss on disposal of assets of approximately $0.7 million and acquisition costs of approximately $0.3 million incurred in connection with the purchase of one hotel. | ||||||||||||||||||
(8) Includes loss on disposal of assets of approximately $6.0 million and costs incurred in connection with secondary offerings of approximately $1.0 million. | ||||||||||||||||||
10
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EXTENDED STAY AMERICA, INC. | |||||||||||||||||
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. | |||||||||||||||||
COMMON SHAREHOLDERS TO FUNDS FROM OPERATIONS, ADJUSTED FUNDS FROM OPERATIONS | |||||||||||||||||
AND ADJUSTED FUNDS FROM OPERATIONS PER DILUTED PAIRED SHARE | |||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 | |||||||||||||||||
(In thousands, except per share and per Paired Share data) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||
$ | 0.34 | $ | 0.27 | Net income per Extended Stay America, Inc. common share - diluted | $ | 0.42 | $ | 0.39 | |||||||||
$ | 65,056 | $ | 51,775 | Net income attributable to Extended Stay America, Inc. common shareholders | $ | 79,908 | $ | 74,876 | |||||||||
510 | (2,054 | ) | Noncontrolling interests attributable to Class B common shares of ESH REIT | 16,749 | (9,096 | ) | |||||||||||
52,233 | 56,649 | Real estate depreciation and amortization | 104,981 | 113,182 | |||||||||||||
— | 7,934 | Impairment of long-lived assets | 43,600 | 20,357 | |||||||||||||
— | 1,897 | (Gain) loss on sale of hotel properties | (38,082 | ) | 1,897 | ||||||||||||
(8,880 | ) | (15,423 | ) | Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders | (18,605 | ) | (31,697 | ) | |||||||||
108,919 | 100,778 | Funds From Operations | 188,551 | 169,519 | |||||||||||||
1,184 | — | Debt modification and extinguishment costs | 1,621 | 1,168 | |||||||||||||
— | 1,495 | Loss on interest rate swap | — | 253 | |||||||||||||
(201 | ) | (347 | ) | Tax effect of adjustments to Funds From Operations | (274 | ) | (330 | ) | |||||||||
$ | 109,902 | $ | 101,926 | Adjusted Funds From Operations | $ | 189,898 | $ | 170,610 | |||||||||
$ | 0.58 | $ | 0.53 | Adjusted Funds From Operations per Paired Share- diluted | $ | 1.00 | $ | 0.88 | |||||||||
190,183 | 193,944 | Weighted average Paired Shares outstanding – diluted | 190,709 | 194,372 | |||||||||||||
11
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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, 2018 AND 2017 | ||||||||||||||||||
(In thousands, except per share and per Paired Share data) | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
$ | 0.34 | $ | 0.27 | Net income per Extended Stay America, Inc. common share - diluted | $ | 0.42 | $ | 0.39 | ||||||||||
$ | 65,056 | $ | 51,775 | Net income attributable to Extended Stay America, Inc. common shareholders | $ | 79,908 | $ | 74,876 | ||||||||||
510 | (2,054 | ) | Noncontrolling interests attributable to Class B common shares of ESH REIT | 16,749 | (9,096 | ) | ||||||||||||
65,566 | 49,721 | Paired Share Income | 96,657 | 65,780 | ||||||||||||||
1,184 | — | Debt modification and extinguishment costs | 1,621 | 1,168 | ||||||||||||||
102 | (1) | 1,073 | (2) | Other non-operating expense (income) | 299 | (3) | (148 | ) | (4) | |||||||||
— | 7,934 | Impairment of long-lived assets | 43,600 | 20,357 | ||||||||||||||
— | 1,897 | (Gain) loss on sale of hotel properties | (38,082 | ) | 1,897 | |||||||||||||
(451 | ) | (5) | 3,125 | (6) | Other (income) expense | 1,048 | (7) | 7,019 | (8) | |||||||||
(142 | ) | (3,255 | ) | Tax effect of adjustments to Paired Share Income | (1,419 | ) | (7,093 | ) | ||||||||||
$ | 66,259 | $ | 60,495 | Adjusted Paired Share Income | $ | 103,724 | $ | 88,980 | ||||||||||
$ | 0.35 | $ | 0.31 | Adjusted Paired Share Income per Paired Share – diluted | $ | 0.54 | $ | 0.46 | ||||||||||
190,183 | 193,944 | Weighted average Paired Shares outstanding – diluted | 190,709 | 194,372 | ||||||||||||||
(1) Includes foreign currency transaction loss of approximately $0.1 million. | ||||||||||||||||||
(2) Includes loss related to interest rate swap of approximately $1.5 million and foreign currency transaction gain of approximately $0.4 million. | ||||||||||||||||||
(3) Includes foreign currency transaction loss of approximately $0.3 million. | ||||||||||||||||||
(4) Includes foreign currency transaction gain of approximately $0.4 million and loss related to interest rate swap of approximately $0.3 million. | ||||||||||||||||||
(5) Includes gain on disposal of assets of approximately $0.8 million and acquisition costs of approximately $0.3 million incurred in connection with the purchase of one hotel. | ||||||||||||||||||
(6) Includes loss on disposal of assets of approximately $2.5 million and costs incurred in connection with secondary offerings of approximately $0.6 million. | ||||||||||||||||||
(7) Includes loss on disposal of assets of approximately $0.7 million and acquisition costs of approximately $0.3 million incurred in connection with the purchase of one hotel. | ||||||||||||||||||
(8) Includes loss on disposal of assets of approximately $6.0 million and costs incurred in connection with secondary offerings of approximately $1.0 million. | ||||||||||||||||||
12
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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, 2017 (ACTUAL) AND 2018 (OUTLOOK) | |||||||||||||
(In thousands, except per share and per Paired Share data) | |||||||||||||
(Unaudited) | |||||||||||||
Year Ended | Year Ending December 31, 2018 | ||||||||||||
December 31, 2017 | (Outlook) | ||||||||||||
(Actual) | Low | High | |||||||||||
$ | 0.41 | Net income per Extended Stay America, Inc. common share - diluted | $ | 0.45 | $ | 0.48 | |||||||
$ | 78,847 | Net income attributable to Extended Stay America, Inc. common shareholders | $ | 86,268 | $ | 91,740 | |||||||
93,325 | Noncontrolling interests attributable to Class B common shares of ESH REIT | 108,088 | 116,312 | ||||||||||
172,172 | Paired Share Income | 194,356 | 208,052 | ||||||||||
2,351 | Debt modification and extinguishment costs | 1,621 | 1,621 | ||||||||||
(399 | ) | (1) | Other non-operating (income) expense | 299 | (2) | 299 | (2) | ||||||
25,169 | Impairment of long-lived assets | 43,600 | 43,600 | ||||||||||
(9,973 | ) | Gain on sale of hotel properties | (38,082 | ) | (38,082 | ) | |||||||
9,866 | (3) | Other expenses | 5,000 | (4) | 5,000 | (4) | |||||||
(6,241 | ) | Tax effect of adjustments to Paired Share Income | (2,114 | ) | (1,990 | ) | |||||||
$ | 192,945 | Adjusted Paired Share Income | $ | 204,680 | $ | 218,500 | |||||||
$ | 1.00 | Adjusted Paired Share Income per Paired Share – diluted | $ | 1.07 | $ | 1.15 | |||||||
% growth | 7.7 | % | 15.0 | % | |||||||||
193,670 | Weighted average Paired Shares outstanding – diluted | 190,709 | 190,709 | ||||||||||
(1) | Includes foreign currency transaction gain of approximately $0.7 million and loss related to interest rate swap of approximately $0.3 million. | ||||||||||||
(2) | Includes foreign currency transaction loss of approximately $0.3 million. | ||||||||||||
(3) | Includes loss on disposal of assets of approximately $8.6 million, costs incurred in connection with 2017 secondary offering 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. | ||||||||||||
(4) | Includes loss on disposal of assets and other non-operating expenses. | ||||||||||||
13
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EXTENDED STAY AMERICA, INC. | |||||||||||||
TOTAL REVENUES AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA | |||||||||||||
FOR YEARS ENDED DECEMBER 31, 2017 (ADJUSTED)(1) AND 2018 (OUTLOOK)(2) | |||||||||||||
(In thousands) | |||||||||||||
(Unaudited) | |||||||||||||
Year Ended | Year Ending December 31, 2018 | ||||||||||||
December 31, 2017 | (Outlook)(2) | ||||||||||||
(Adjusted) (1) | Low | High | |||||||||||
$ | 1,238,825 | Total revenues | $ | 1,257,000 | $ | 1,279,000 | |||||||
$ | 172,188 | Net income | $ | 194,372 | $ | 208,068 | |||||||
129,772 | Interest expense, net | 130,000 | 130,000 | ||||||||||
59,514 | Income tax expense | 39,811 | 41,115 | ||||||||||
229,216 | Depreciation and amortization | 212,500 | 212,500 | ||||||||||
590,690 | EBITDA | 576,683 | 591,683 | ||||||||||
(19,906 | ) | Adjusted Property EBITDA of hotels not owned for entirety of periods presented (2) | — | — | |||||||||
7,552 | Equity-based compensation | 7,500 | 7,500 | ||||||||||
(399 | ) | (3) | Other non-operating (income) expense | 299 | (4) | 299 | (4) | ||||||
25,169 | Impairment of long-lived assets | 43,600 | 43,600 | ||||||||||
(9,973 | ) | Gain on sale of hotel properties | (38,082 | ) | (38,082 | ) | |||||||
9,866 | (5) | Other expenses | 5,000 | (6) | 5,000 | (6) | |||||||
$ | 602,999 | Comparable Company-Owned Adjusted EBITDA(2) | $ | 595,000 | $ | 610,000 | |||||||
% growth | -1.3 | % | 1.2 | % | |||||||||
(1) | 2017 results adjusted to reflect only those 598 hotels owned and operated by the Company for the full six months ended June 30, 2018. | ||||||||||||
(2) | 2018 outlook includes revenues of approximately $5.0 million and Adjusted EBITDA of approximately $2.0 million for the 26 hotels sold in the first quarter. | ||||||||||||
(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 loss of approximately $0.2 million. | ||||||||||||
(5) | 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 hotel properties. | ||||||||||||
(6) | Includes loss on disposal of assets and other non-operating expenses. | ||||||||||||
14