Extended Stay America Announces Third Quarter 2016 Results

-Third Quarter Net Income of $57.1 million

-Third Quarter Adjusted EBITDA1 of $185.7 million

-Third Quarter Total Revenues of $354.5 million

-Third Quarter Comparable Hotel2 Total Revenues Increase 3.9%

-Third Quarter Comparable Hotel Operating Margin1 Expands 150 basis points

-Updates 2016 Guidance

CHARLOTTE, N.C.--()--Extended Stay America, Inc. and ESH Hospitality, Inc. (NYSE:STAY) (together, the “Company”) today announced consolidated results for the quarter ended September 30, 2016.

Third Quarter 2016 Highlights

  • Comparable Hotel total revenues grew 3.9% to $354.5 million
  • Comparable Hotel Revenue Per Available Room (“RevPAR”) grew 3.7% to $54.65
  • Comparable Hotel Adjusted EBITDA increased 7.4% to $185.7 million
  • Adjusted Paired Share Income1 of $71.5 million, or $0.36 per diluted Paired Share1

Nine Months 2016 Highlights

  • Comparable Hotel total revenues grew 4.4% to $974.9 million
  • Comparable Hotel RevPAR grew 3.9% to $50.47
  • Comparable Hotel Adjusted EBITDA increased 4.7% to $473.2 million
  • Adjusted Paired Share Income of $160.3 million, or $0.79 per diluted Paired Share

Extended Stay America’s Chief Executive Officer, Gerry Lopez, commented, “We were pleased with our performance in the third quarter, as our RevPAR growth ran ahead of our closest competitive chain-scales – Economy and Midscale – as well as above the industry. We were able to show property level flow through over 90%, driving strong EBITDA growth and expanding Comparable Hotel Operating Margin by 150 basis points.”

Mr. Lopez continued, “In addition to our strong financial and operating performance during the quarter, we were pleased to make progress on other initiatives. These included refinancing the balance sheet with flexible, long dated, low cost debt, and providing strong capital returns through both dividends and share repurchases. We also began to execute on our real estate monetization strategy we discussed at our Investor Day earlier this year. Lastly, we were very gratified that corporate travel managers voted us the #1 mid-priced extended stay hotel brand this year with Business Travel News, showing the strong progress we have made with corporate guests.”

Financial and Operating Results

Total revenues for the three months ended September 30, 2016 were $354.5 million while Comparable Hotel total revenues increased by 3.9% over the same period in 2015. Total revenues for the nine months ended September 30, 2016 were $974.9 million while Comparable Hotel total revenues increased by 4.4% over the same period in 2015.

RevPAR for the three months ended September 30, 2016 grew 7.5% over the same period in 2015, driven by an improvement in average daily rate (“ADR”) of 6.0%. Occupancy increased to 79.4% compared to 78.3% in the same period in 2015. Comparable Hotel RevPAR grew 3.7% during the quarter to $54.65 driven by a 2.4% increase in ADR and a 100 basis point increase in occupancy. RevPAR for the nine months ended September 30, 2016 increased 7.5% over the same period in 2015, driven by a 7.6% increase in ADR. Occupancy declined to 75.2% compared to 75.3% in the same period in 2015. Comparable Hotel RevPAR grew 3.9% during the first nine months of the year to $50.47 driven by a 4.0% increase in ADR, partially offset by a 10 basis point decrease in occupancy.

Hotel Operating Margin for the three months ended September 30, 2016 was 58.4% compared to 56.2% in the same period in 2015. Comparable Hotel Operating Margin increased 150 basis points over the same period in 2015. Comparable Hotel operating margin flow-through, defined as the change in Comparable Hotel Operating Profit1 divided by the change in Comparable Hotel total revenues, was 94.7%. Comparable Hotel Operating Margin for the nine months ended September 30, 2016 was 55.1% compared to 55.4% in the same period in 2015.

Net income for the three months ended September 30, 2016 was $57.1 million compared to $58.2 million in the same period in 2015. Net income decreased due to the 53 hotel portfolio sale in December 2015, an increase in depreciation expense due to renovations, and higher interest expense due to debt extinguishment costs related to our refinancing activity during the quarter, partially offset by a decrease in income tax expense. Income tax expense for the three months ended September 30, 2016 was $15.9 million compared to $21.3 million in the same period in 2015. Net income for the nine months ended September 30, 2016 was $133.2 million compared to $150.9 million in the same period in 2015. Income tax expense for the nine months ended September 30, 2016 was $26.2 million compared to $48.1 million in the same period in 2015.

Adjusted EBITDA for the three months ended September 30, 2016 was $185.7 million. Adjusted EBITDA excludes non-cash equity-based compensation of $3.0 million, an impairment charge of $2.8 million, and loss on disposal of assets and other net expenses of $2.4 million. Comparable Hotel Adjusted EBITDA increased $12.8 million or 7.4% during the quarter over the same period in 2015. Adjusted EBITDA for the nine months ended September 30, 2016 was $473.2 million. Adjusted EBITDA excludes non-cash equity based compensation of $8.6 million, an impairment charge of $2.8 million, loss on disposal of assets and other net expenses of $6.6 million. Comparable Hotel Adjusted EBITDA increased $21.4 million or 4.7% during the nine months ended September 30, 2016 over the same period in 2015.

Adjusted Paired Share Income for the three months ended September 30, 2016 was $71.5 million, or $0.36 per diluted Paired Share, compared to $66.6 million, or $0.33 per diluted Paired Share, in the same period in 2015. Adjusted Paired Share Income for the nine months ended September 30, 2016 was $160.3 million, or $0.79 per diluted Paired Share, compared to $163.8 million, or $0.80 per diluted Paired Share, in the same period in 2015. 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. 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.

Capital and Asset Sales

The Company invested $56.5 million in capital expenditures during the third quarter of 2016 which includes $23.9 million in renovation capital and $28.9 million in maintenance capital. The Company completed 17 hotel renovations in the third quarter of 2016, bringing the total number of renovated hotels to 547. For the nine months ended September 30, 2016, the Company invested $166.5 million in capital expenditures.

In October, the Company executed a purchase and sale agreement to divest one property for $44.8 million. The Company expects to lease back the property at nominal rent for approximately 18 to 24 months and expects to receive all operating income from this hotel in 2017. This transaction is currently in due diligence and the Company expects it to close in December 2016. Separately, the Company has executed a purchase and sale agreement to divest its three Extended Stay Canada hotels for CAD $76.0 million. This transaction is also in due diligence and the Company expects it to close in the first quarter of 2017.

Distribution and Share Repurchases

On October 25, 2016, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc., declared cash distributions totaling $0.19 per Paired Share for the third quarter of 2016. The distributions are payable on November 22, 2016 to shareholders of record as of November 8, 2016.

During the third quarter of 2016, the Company repurchased approximately 0.6 million Paired Shares for an aggregate purchase price of approximately $9.2 million. The Company also announced the purchase of 1.95 million Paired Shares for $27.6 million on September 29, 2016 that closed on October 4, 2016. As of October 24, 2016 the Company had $102.8 million in repurchase authorization remaining.

2016 Outlook

The Company’s outlook for 2016 is updated as follows:

             
Full Year 2016 Updated Outlook Previous Outlook
in millions, except % Low         High Low         High
 
Total Revenues $ 1,261 $ 1,267 $ 1,257 $ 1,272
Comparable Hotel Revenue % Δ         3.6%             4.1%             3.25%             4.5%
Net Income $ 153 $ 166 $ 162 $ 188
Adjusted EBITDA $ 601 $ 606 $ 595 $ 610

Comparable Hotel Adjusted EBITDA % Δ

       

4.7 %

           

5.6%

           

3.6%

           

6.2%

Depreciation and Amortization $ 218 $ 223 $ 215 $ 220
Net Interest Expense $ 164 $ 166 $ 153 $ 158
Effective Tax Rate 17.5% 18.5% 15.0% 16.0%
Capital Expenditures $ 220 $ 235 $ 240 $ 260
Renovation Capital $ 100 $ 110 $ 120 $ 135
 

Webcast and Conference Call Details

The Company will host a conference call on Tuesday, October 25, 2016 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 November 8, 2016, and can be accessed by dialing 1-877-870-5176 for domestic callers or 1-858-384-5517 for international callers. The passcode for the replay is 13647092.

Disclosure Regarding Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share, which are detailed in the reconciliation tables that accompany this release, are used by the Company as supplemental performance measures. The Company believes these financial measures, including those provided on a Comparable Hotel basis, 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. EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share are not recognized terms under U.S. GAAP. EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share as presented may not be comparable to measures calculated by other companies. These measures should not be considered as alternative measures of operating profit, net income, net income per share or cash flow provided by operating activities calculated in accordance with U.S. GAAP. The Company’s presentation of EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share does not replace the presentation of the Company’s consolidated financial results prepared in accordance with U.S. GAAP.

Forward Looking Statements

This release contains forward-looking statements within the meaning of the federal securities laws. Statements related to, among other things, future financial performance, including our 2016 outlook, expected performance, free cash flow, debt reduction, distribution growth and other growth opportunities, as such, 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 future 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 23, 2016 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., the largest owner/operator of company-branded hotels in North America, owns and operates 629 hotels in the U.S. and Canada comprising approximately 69,400 rooms and employs over 8,400 employees at its hotel properties and headquarters. The Company’s core brand, Extended Stay America®, serves the mid-priced extended stay segment. Visit www.esa.com for more information about the Company and its services.

_______________________

 

1

  See “Disclosure Regarding Non-GAAP Financial Measures” for an explanation of non-GAAP measures included herein (i.e., EBITDA, Adjusted EBITDA, Hotel Operating Profit, Hotel Operating Margin, Paired Share Income, Adjusted Paired Share Income and Adjusted Paired Share Income per Paired Share).

2

Comparable Hotels include 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
 
           
EXTENDED STAY AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015   % Variance   2016     2015   % Variance
REVENUES:
$ 349,076 $ 355,445 (1.8 )% Room revenues $ 960,046 $ 974,127 (1.4 )%
  5,445     5,071   7.4 % Other hotel revenues   14,822     14,291   3.7 %
 
354,521 360,516 (1.7 )% Total revenues 974,868 988,418 (1.4 )%
 
OPERATING EXPENSES:
149,860 159,049 (5.8 )% Hotel operating expenses 444,498 450,543 (1.3 )%
24,612 24,373 1.0 % General and administrative expenses 73,552 73,909 (0.5 )%
55,955 52,268 7.1 % Depreciation and amortization 164,274 151,980 8.1 %
  2,756     9,011   (69.4 )% Impairment of long-lived assets   2,756     9,011   (69.4 )%
 
233,183 244,701 (4.7 )% Total operating expenses 685,080 685,443 (0.1 )%
 
  2     3   (33.3 )% OTHER INCOME   20     44   (54.5 )%
 
121,340 115,818 4.8 % INCOME FROM OPERATIONS 289,808 303,019 (4.4 )%
 
(305 ) 1,143 (126.7 )% OTHER NON-OPERATING (INCOME) EXPENSE (1,069 ) 2,035 (152.5 )%
 
  48,713     35,157   38.6 % INTEREST EXPENSE, NET   131,462     101,975   28.9 %
 
72,932 79,518 (8.3 )% INCOME BEFORE INCOME TAX EXPENSE 159,415 199,009 (19.9 )%
 
  15,867     21,293   (25.5 )% INCOME TAX EXPENSE   26,211     48,119   (45.5 )%
 
57,065 58,225 (2.0 )% NET INCOME 133,204 150,890 (11.7 )%
 
  (10,509 )   (20,569 ) (48.9 )%

NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS (1)

  (8,873 )   (33,703 ) (73.7 )%
 
$ 46,556   $ 37,656   23.6 %

NET INCOME ATTRIBUTABLE TO COMMON
SHAREHOLDERS

$ 124,331   $ 117,187   6.1 %
 
 
$ 0.23   $ 0.18   NET INCOME PER COMMON SHARE - DILUTED $ 0.61   $ 0.57  
 
  200,696     204,685  

WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING - DILUTED

  202,252     204,538  
 

(1)

 

Noncontrolling interests in Extended Stay America, Inc. include approximately 45% of ESH REIT's common equity.

 
           
CONSOLIDATED BALANCE SHEET DATA

AS OF SEPTEMBER 30, 2016 AND DECEMBER 31, 2015

(In thousands)
(Unaudited)
September 30, December 31,
  2016   2015
Cash and cash equivalents $ 149,835 $ 373,239
Restricted cash $ 21,576 $ 84,416
Total assets $ 4,256,936 $ 4,528,900

Total debt, net of unamortized deferred financing
costs and debt discounts (1)

$ 2,587,901 $ 2,783,590
Total equity $ 1,447,693 $ 1,488,357
 

(1) Unamortized deferred financing costs and debt discounts totaled approximately $58.3
million and $35.2 million as of September 30, 2016 and December 31, 2015, respectively.

 
       
EXTENDED STAY AMERICA, INC.
OPERATING METRICS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(Unaudited)
   
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015   Variance   2016     2015   Variance
629 682 (53 ) Number of hotels (as of September 30)(1) 629 682 (53 )
69,383 76,000 (6,617 ) Number of rooms (as of September 30)(1) 69,383 76,000 (6,617 )
79.4 % 78.3 % 110 bps Occupancy 75.2 % 75.3 % (10) bps
$ 68.84 $ 64.95 6.0 % ADR $ 67.09 $ 62.38 7.6 %
$ 54.65 $ 50.83 7.5 % RevPAR $ 50.47 $ 46.95 7.5 %
 
Hotel Inventory (as of September 30):
547 413 134 Renovated Extended Stay America (2) 547 413 134
82 222 (140 ) Unrenovated Extended Stay America and other (1) 82 222 (140 )
  -     47   (47 ) Crossland Economy Studios (1)   -     47   (47 )
629 682 (53 ) Total number of hotels 629 682 (53 )
 

Renovation Displacement Data (in thousands, except percentages):

6,383 6,993 (610 ) Total available room nights 19,015 20,747 (1,732 )
64 128 (64 ) Room nights displaced from renovation 243 231 12
1.0 % 1.8 % (80) bps % of available room nights displaced 1.3 % 1.1 % 20 bps
 
 
 
COMPARABLE HOTEL OPERATING METRICS (3)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015   Variance   2016     2015   Variance
629 629 - Number of hotels 629 629 -
69,383 69,383 - Number of rooms 69,383 69,383 -
79.4 % 78.4 % 100 bps Comparable Hotel Occupancy 75.2 % 75.3 % (10) bps
$ 68.84 $ 67.22 2.4 % Comparable Hotel ADR $ 67.09 $ 64.54 4.0 %
$ 54.65 $ 52.70 3.7 % Comparable Hotel RevPAR $ 50.47 $ 48.59 3.9 %
 
Comparable Hotel Inventory:
547 413 134 Renovated Extended Stay America (2) 547 413 134
  82     216   (134 ) Unrenovated Extended Stay America and other   82     216   (134 )
629 629 - Comparable Hotel number of hotels 629 629 -
 

Comparable Hotel Renovation Displacement Data (in thousands,
except percentages):

6,383 6,383 - Comparable Hotel available room nights 19,015 18,944 71
64 128 (64 ) Comparable Hotel room nights displaced from renovation 243 231 12
1.0 % 2.0 % (100) bps % of Comparable Hotel available room nights displaced 1.3 % 1.2 % 10 bps
 
 

(1) In December 2015, the Company sold a portfolio of 53 hotel properties, six of which were included in "Unrenovated Extended Stay America and other" and 47 of which were included in "Crossland Economy Studios" as of September 30, 2015.

(2) Includes three Extended Stay Canada-branded hotels.

(3) Comparable Hotel operating metrics include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.

 
   
EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
     
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015     2016     2015  
$ 57,065 $ 58,225 Net income $ 133,204 $ 150,890
48,713 35,157 Interest expense, net 131,462 101,975
15,867 21,293 Income tax expense 26,211 48,119
  55,955     52,268   Depreciation and amortization   164,274     151,980  
177,600 166,943

 

EBITDA 455,151 452,964
3,016 3,021 Non-cash equity-based compensation 8,635 7,940
(305 ) 1,143 Other non-operating (income) expense (1,069 ) 2,035
2,756 9,011 Impairment of long-lived assets 2,756 9,011
  2,666  

(1)

 

  1,290  

(2)

 

Other expenses

  7,718  

(3)

 

  4,034  

(4)

 

$ 185,733   $ 181,408   Adjusted EBITDA $ 473,191   $ 475,984  
2.4 % % growth (0.6 )%
 
 
 
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE HOTEL ADJUSTED EBITDA(5)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015     2016     2015  
$ 57,065 $ 58,225 Net income $ 133,204 $ 150,890
48,713 35,157 Interest expense, net 131,462 101,975
15,867 21,293 Income tax expense 26,211 48,119
  55,955     52,268   Depreciation and amortization   164,274     151,980  
177,600 166,943 EBITDA 455,151 452,964
- (8,511 )

Adjusted Property EBITDA of hotels not owned for entirety of
periods presented

- (24,191 )
3,016 3,021 Non-cash equity-based compensation 8,635 7,940
(305 ) 1,143 Other non-operating (income) expense (1,069 ) 2,035
2,756 9,011 Impairment of long-lived assets 2,756 9,011
  2,666  

(1)

 

  1,290  

(2)

 

Other expenses   7,718  

(3)

 

  4,034  

(6)

 

$ 185,733   $ 172,897   Comparable Hotel Adjusted EBITDA $ 473,191   $ 451,793  
7.4 % % growth 4.7 %
 
 
(1) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.
(2) Includes loss on disposal of assets of approximately $1.3 million.
(3) Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties.
(4) Includes loss on disposal of assets of approximately $3.3 million and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
(5) Comparable Hotel Adjusted EBITDA includes the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(6) Includes loss on disposal of assets of approximately $3.3 million, $0.2 million of which relates to hotels not owned for entirety of periods presented, and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
 
     
EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO PAIRED SHARE
INCOME, ADJUSTED PAIRED SHARE INCOME AND ADJUSTED PAIRED SHARE INCOME PER PAIRED SHARE
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands, expect per Paired Share data)
(Unaudited)
     
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015     2016     2015  
$ 46,556 $ 37,656 Net income attributable to common shareholders $ 124,331 $ 117,187
  10,505     20,565  

Noncontrolling interests attributable to Class B common
shares of ESH REIT

  8,861     33,691  
57,061 58,221 Paired Share Income 133,192 150,878
14,058 - Debt extinguishment costs 26,161 2,283
(305 ) 1,143 Other non-operating (income) expense (1,069 ) 2,035
2,756 9,011 Impairment of long-lived assets 2,756 9,011
2,666

(1)

 

1,290

(2)

 

Other expenses 7,718

(3)

 

4,034

(4)

 

  (4,775 )   (3,065 ) Tax effect of adjustments to Paired Share Income   (8,505 )   (4,438 )
$ 71,461   $ 66,600   Adjusted Paired Share Income $ 160,253   $ 163,803  
 
$ 0.36   $ 0.33   Adjusted Paired Share Income per Paired Share – diluted $ 0.79   $ 0.80  
 
  200,696     204,685   Weighted average Paired Shares outstanding – diluted   202,252     204,538  
 
 
(1) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.
(2) Includes loss on disposal of assets of approximately $1.3 million.
(3) Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties.
(4) Includes loss on disposal of assets of approximately $3.3 million and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
 
         
EXTENDED STAY AMERICA, INC.
NON-GAAP RECONCILIATION OF HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015   % Variance   2016     2015   % Variance
$ 349,076 $ 355,445 (1.8 )% Room revenues $ 960,046 $ 974,127 (1.4 )%
  5,445     5,071   7.4 % Other hotel revenues   14,822     14,291   3.7 %
354,521 360,516 (1.7 )% Total hotel revenues 974,868 988,418 (1.4 )%
  147,605     157,761   (6.4 )% Hotel operating expenses(1)   437,242     447,217   (2.2 )%
$ 206,916   $ 202,755   2.1 % Hotel Operating Profit $ 537,626   $ 541,201   (0.7 )%
  58.4 %   56.2 % 220 bps Hotel Operating Margin   55.1 %   54.8 % 30 bps
 
 
 

NON-GAAP RECONCILIATION OF COMPARABLE HOTEL OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN(2)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015   % Variance   2016     2015   % Variance
$ 349,076 $ 355,445 (1.8 )% Room revenues $ 960,046 $ 974,127 (1.4 )%
5,445 5,071 7.4 % Other hotel revenues 14,822 14,291 3.7 %
  -     (19,371 ) (100.0 )%

Total revenues of hotels not owned for
entirety of periods presented

  -     (54,748 ) (100.0 )%
354,521 341,145 3.9 % Comparable Hotel total revenues 974,868 933,670 4.4 %
147,605 157,761 (6.4 )% Hotel operating expenses(1) 437,242 447,217 (2.2 )%
  -     (10,860 )

(3)

 

(100.0

)%

Hotel operating expenses of hotels not
owned for entirety of periods presented

  -     (30,557 )

(3)

 

(100.0 )%
  147,605     146,901   0.5 % Comparable Hotel operating expenses   437,242     416,660   4.9 %
$ 206,916   $ 194,244   6.5 % Comparable Hotel Operating Profit $ 537,626   $ 517,010   4.0 %
 
  58.4 %   56.9 % 150 bps Comparable Hotel Operating Margin   55.1 %   55.4 % (30) bps
 
 
(1) Excludes loss on disposal of assets of approximately $2.2 million, $1.3 million, $7.2 million and $3.3 million, respectively.
(2) Comparable Hotel Operating Profit and Comparable Hotel Operating Margin include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(3) Excludes loss on disposal of assets of approximately $0 and $0.2 million, respectively.
 
 

EXTENDED STAY AMERICA, INC.

COMPARABLE HOTEL TOTAL REVENUES (1) AND NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE HOTEL ADJUSTED EBITDA(1)
TWELVE MONTHS ENDED DECEMBER 31, 2015 (ACTUAL) AND 2016 (OUTLOOK)
(In thousands)
(Unaudited)
         

Twelve Months Ended

Twelve Months Ending December 31, 2016

December 31, 2015 (Outlook)
(Actual) Low High
$ 1,217,354 Comparable Hotel total revenues $ 1,261,000 $ 1,267,000
 
$ 283,022 Net income $ 152,660 $ 166,083
137,782 Interest expense, net 166,000 164,000
76,536 Income tax expense 34,653 35,230
  203,897   Depreciation and amortization   223,000     218,000  
701,237 EBITDA 576,313 583,313
(28,948 ) Adjusted Property EBITDA of hotels not owned for entirety of periods presented - -
10,500 Non-cash equity-based compensation 12,000 11,000
2,732 Other non-operating expense (income) (1,069 ) (1,069 )
9,011 Impairment of long-lived assets 2,756 2,756
(130,894 ) Gain on sale of hotel properties - -
  10,495  

(2)

 

Other expenses   11,000  

(3)

 

  10,000  
$ 574,133   Comparable Hotel Adjusted EBITDA $ 601,000   $ 606,000  
% growth 4.7 % 5.6 %
 
 

(1) Comparable Hotel total revenues and Comparable Hotel Adjusted EBITDA include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated as of December 31, 2015.

(2) Includes costs incurred in connection with the preparation of the registration statement filed in June 2015 and the November 2015 secondary offering of approximately $0.9 million, transaction costs of approximately $0.3 million associated with the sale of hotel properties, and loss on disposal of assets of approximately $9.3 million, $0.3 million of which relates to hotels not owned for entirety of the periods presented.

(3) Includes loss on disposal of assets and other non-operating transaction costs.

 
 
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE HOTEL ADJUSTED EBITDA(1)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
         
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015     2016     2015  
$ 57,065 $ 58,225 Net income $ 133,204 $ 150,890
48,713 35,157 Interest expense, net 131,462 101,975
15,867 21,293 Income tax expense 26,211 48,119
  55,955     52,268   Depreciation and amortization   164,274     151,980  
177,600 166,943 EBITDA 455,151 452,964
- (8,511 )

Adjusted Property EBITDA of hotels not owned for entirety
of periods presented

- (24,191 )
3,016 3,021 Non-cash equity-based compensation 8,635 7,940
(305 ) 1,143 Other non-operating (income) expense (1,069 ) 2,035
2,756 9,011 Impairment of long-lived assets 2,756 9,011
  2,666  

(2)

 

  1,290  

(3)

 

Other expenses   7,718  

(4)

 

  4,034  

(5)

 

$ 185,733   $ 172,897   Comparable Hotel Adjusted EBITDA $ 473,191   $ 451,793  
7.4 % % growth 4.7 %
 
 
(1) Comparable Hotel Adjusted EBITDA includes the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(2) Includes loss on disposal of assets of approximately $2.2 million and costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million.
(3) Includes loss on disposal of assets of approximately $1.3 million.
(4) Includes loss on disposal of assets of approximately $7.2 million, costs incurred in connection with the October 2016 secondary offering of approximately $0.4 million and transaction costs of approximately $0.1 million due to the revision of an estimate related to the sale of 53 hotel properties.
(5) Includes loss on disposal of assets of approximately $3.3 million, $0.2 million of which relates to hotels not owned for entirety of periods presented, and costs incurred in connection with the preparation of the registration statement filed in June 2015 of approximately $0.7 million.
 
 
NON-GAAP RECONCILIATION OF COMPARABLE HOTEL OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN(1)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(In thousands)
(Unaudited)
           
Three Months Ended Nine Months Ended
September 30, September 30,
  2016     2015   % Variance   2016     2015   % Variance
$ 349,076 $ 355,445 (1.8 )% Room revenues $ 960,046 $ 974,127 (1.4 )%
5,445 5,071 7.4 % Other hotel revenues 14,822 14,291 3.7 %
  -     (19,371 ) (100.0 )%

Total revenues of hotels not owned for
entirety of periods presented

  -     (54,748 ) (100.0 )%
354,521 341,145 3.9 % Comparable Hotel total revenues 974,868 933,670 4.4 %
147,605 157,761 (6.4 )% Hotel operating expenses(2) 437,242 447,217 (2.2 )%
  -     (10,860 )

(3)

 

(100.0 )%

Hotel operating expenses of hotels not
owned for entirety of periods presented

  -     (30,557 )

(3)

 

(100.0 )%
  147,605     146,901   0.5 % Comparable Hotel operating expenses   437,242     416,660   4.9 %
$ 206,916   $ 194,244   6.5 % Comparable Hotel Operating Profit $ 537,626   $ 517,010   4.0 %
 
  58.4 %   56.9 % 150 bps Comparable Hotel Operating Margin   55.1 %   55.4 % (30) bps
 
 
(1) Comparable Hotel Operating Profit and Comparable Hotel Operating Margin include the results of 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated for the three and nine months ended September 30, 2016 and 2015.
(2) Excludes loss on disposal of assets of approximately $2.2 million, $1.3 million, $7.2 million and $3.3 million, respectively.
(3) Excludes loss on disposal of assets of approximately $0 and $0.2 million, respectively.

Contacts

Extended Stay America, Inc.
Investors:
Rob Ballew, 980-345-1546
investorrelations@esa.com
or
Media:
Terry Atkins, 980-345-1648
tatkins@esa.com

Contacts

Extended Stay America, Inc.
Investors:
Rob Ballew, 980-345-1546
investorrelations@esa.com
or
Media:
Terry Atkins, 980-345-1648
tatkins@esa.com