Extended Stay America Announces Third Quarter 2019 Results


- Net Income of $53.2 million in the Third Quarter
- Adjusted EBITDA1 of $156.3 million in the Third Quarter
- Franchise pipeline expands 12% to 58 hotels in the Third Quarter
- Repurchased 4.0 million Paired Shares in the Third Quarter

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

Third Quarter 2019 Highlights

  • Net Income of $53.2 million
  • Total revenues of $332.7 million
  • Comparable system-wide Revenue Per Available Room (“RevPAR”) declined 1.3%   
  • Adjusted EBITDA of $156.3 million
  • Adjusted Funds from Operations (“Adjusted FFO”)1 of $0.54 per diluted Paired Share
  • Adjusted Paired Share Income1 of $0.33 per diluted Paired Share
  • $186 million in capital returns to shareholders for the first nine months of 2019  

Extended Stay America’s President and Chief Executive Officer, Jonathan Halkyard, commented, “Our focus on core extended stay guests enabled us to outperform our competitive set yet again this quarter, a quarter which was characterized by slowing growth in the Economy and Mid-priced chain scales.”

Mr. Halkyard continued, “We have increased the pace of capital returns to shareholders in recent months and are on track to return more than 10% of our recent market capitalization to shareholders in 2019 through dividends and Paired Share repurchases. Capital returns remain a top priority for the Company with a strong balance sheet, a dividend yield in excess of 6% and more than $200 million remaining in repurchase authorization at the end of the third quarter.”

Financial and Operating Results

Total revenues for the three months ended September 30, 2019 were $332.7 million, a decrease of 5.2% over the same period in the prior year due to asset dispositions in 2018 and a decline in Comparable Company-owned RevPAR. Adjusting for asset dispositions in 2018, total revenues declined 0.6% during the third quarter. For the nine months ended September 30, 2019, total revenues declined 5.2% to $934.0 million, driven by asset dispositions. Adjusting for asset dispositions in 2018, total revenues were approximately flat for the nine months ended September 30, 2019.

Comparable system-wide RevPAR for the three months ended September 30, 2019 decreased 1.3% over the same period in 2018 to $54.81, driven by a 2.0% decline in Average Daily Rate (“ADR”), partially offset by a 70 basis point increase in occupancy. The decline in Comparable system-wide RevPAR was primarily driven by a decline in business transient and medium length stays, particularly in the month of September. Total Company-owned RevPAR increased 1.1% during the quarter, reflecting the sale of non-core hotels throughout 2018. Comparable system-wide RevPAR for the nine months ended September 30, 2019 declined 0.9% over the same period in 2018 driven by a 2.5% decline in ADR, partially offset by a 120 basis point increase in occupancy. Total Company-owned RevPAR for the nine months ended September 30, 2019 increased 1.7% over the same period in 2018, reflecting the sale of non-core hotels throughout 2018.

Hotel Operating Margin1 for the three months ended September 30, 2019 was 53.8% compared to 55.5% in the same period in 2018.  While we continued our strategy to maximize targeted marketing efforts to our longest staying customers and other cost saving initiatives, these were offset by an increase in certain operating expenses, including hotel payroll expense, property insurance expense and property taxes, as well as a decline in Comparable Company-owned RevPAR. Hotel Operating Margin for the nine months ended September 30, 2019 was 52.9% compared to 54.8% in the same period of 2018.  Property-level margins remain at industry leading levels.

Net income for the three months ended September 30, 2019 was $53.2 million compared to $75.7 million in the same period in 2018, a decrease of 29.7%. Net income this quarter was adversely impacted by a $6.7 million debt extinguishment charge related to the Company’s Term Loan modifications and Unsecured Notes offering in September 2019, a non-recurring gain on dispositions of $3.5 million in 2018, as well an impairment charge of $2.7 million, partially offset by a decrease in income tax expense. Net income for the nine months ended September 30, 2019 was $141.3 million compared to $172.4 million in the same period in 2018, a decrease of 18.0%. The decline in net income for both the three and nine months ended September 30, 2019 was primarily due to a decline in Hotel Operating Margin, partially offset by lower depreciation expense. 

Adjusted EBITDA for the three months ended September 30, 2019 was $156.3 million, a decline of 10.0% compared to the same period in 2018. The decline in Adjusted EBITDA was due to asset dispositions in 2018 resulting in lost contribution of $6.8 million, a decline in Comparable Company-owned RevPAR and an increase in Comparable Company-owned hotel operating expenses. Adjusted EBITDA excludes non-cash equity-based compensation expense of $1.9 million, $2.7 million in impairment expense and $1.8 million in other expenses. Adjusted EBITDA for the nine months ended September 30, 2019 was $426.3 million, a decline of 9.9%, due to asset dispositions in 2018 resulting in lost contribution of $20.5 million and an increase in comparable hotel operating expenses.

Adjusted FFO for the three months ended September 30, 2019 was $101.5 million compared to $115.1 million in the same period in 2018. The decline in Adjusted FFO was due to an increase in Comparable Company-owned hotel operating expenses and a decline in Comparable Company-owned RevPAR. Adjusted FFO per diluted Paired Share was $0.54 compared to $0.61 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 nine months ended September 30, 2019 was $269.8 million, or $1.43 per diluted Paired Share, compared to $305.0 million, or $1.60 per diluted Paired Share, in the same period in 2018.

Adjusted Paired Share Income for the three months ended September 30, 2019 was $62.6 million, or $0.33 per diluted Paired Share, compared to $74.0 million, or $0.39 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 and Comparable Company-owned RevPAR, partially offset by lower depreciation 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 nine months ended September 30, 2019 was $0.81 compared to $0.94 in the same period in 2018.

Capital Expenditures

The Company invested $65.1 million in capital expenditures during the third quarter of 2019. This includes $10.2 million in renovation capital, $10.9 million in IT capital and $20.2 million in capital for ESA 2.0 hotel development and land acquisitions. The Company invested $178.0 million in capital expenditures during the first nine months of 2019.

Hotel and Development Pipeline

As of September 30, 2019, the Company had a pipeline of 77 hotels representing approximately 9,400 rooms.

       
  Company Owned Pipeline & Recently Opened Hotels as of September 30, 2019 
  Under Option Pre-Development Under Construction Total Pipeline  Opened YTD 
  # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms  # Hotels# Rooms 
  4496 6752 91,140 192,388  00 
                  
                  
  Third Party Pipeline & Recently Opened Hotels as of September 30, 2019 
  Commitments Applications Executed Total Pipeline  Opened YTD 
  # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms # Hotels# Rooms  # Hotels# Rooms 
  404,928 7868 111,261 587,057  1115 
                  
                  
  Definitions               
  Under Option Locations with a signed purchase and sale agreement         
  Pre-DevelopmentLand purchased, permitting and/or site work          
  Under ConstructionHotel is under construction            
  Commitments Signed commitment to build a certain number of hotels by a third party        
  Applications Third party filed franchise application with deposit          
  Executed Franchise application approved, various stages of pre-development and/or under construction       
                  

 

Distributions and Share Repurchases

On November 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 third quarter of 2019. The distributions are payable on December 4, 2019 to shareholders of record as of November 20, 2019.  The Company repurchased 4.0 million Paired Shares during the third quarter for an aggregate purchase of $57.5 million. Since the end of the third quarter, the Company has repurchased an additional 2.0 million Paired Shares for an aggregate purchase price of $28.8 million. The Company’s total remaining repurchase authorization was approximately $177 million as of close of the market today.

2019 Outlook
The Company’s 2019 Outlook is updated as follows:

in millions, except % and # of hotelsLowHigh  
     
# of hotels owned on 12/31/19 556   
Total Revenues$1,205 $1,215   
Comparable system-wide RevPAR % Δ1 -1.75% -1.25%  
Net income$162 $176   
Adjusted Paired Share Income/Paired Share$0.93 $1.01   
Adjusted EBITDA2$535 $545   
Depreciation and amortization$190 $195   
Net interest expense$129 $129   
Effective tax rate 15.75% 16.75%  
Capital expenditures$235 $275   
Expected capital returns$285 $315   
     
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 Thursday, November 7, 2019 at 8:00 a.m. Eastern Time.  The conference call will be webcast simultaneously in the Investor Relations section of the Company’s website at www.aboutstay.com.  A replay of the call will be available for 90 days following the webcast on the Company’s website.  Alternatively, the conference call can be accessed by dialing 1-855-327-6837 for domestic callers or 1-631-891-4304 for international callers.  A telephone replay will be available from shortly after the call until November 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 10007887.

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
Extended Stay America® is the leading brand in the mid-priced extended stay segment in the U.S. with 626 hotels.  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 72 Extended Stay America® hotels. Visit www.esa.com for more information.

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

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).                  

  
 EXTENDED STAY AMERICA, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
 (In thousands, except per share data)
 (Unaudited)
            
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2019   2018  % Variance  2019   2018  % Variance
      REVENUES:     
 $320,669  $340,917  (5.9)%  Room revenues$899,329  $958,075  (6.1)%
  6,475   5,943  9.0%  Other hotel revenues 17,848   16,710  6.8%
  1,351   864  56.4%  Franchise and management fees 4,023   2,140  88.0%
  328,495   347,724  (5.5)%  921,200   976,925  (5.7)%
            
  4,200   3,352  25.3%Other revenues from franchised and managed properties 12,821   8,419  52.3%
            
  332,695   351,076  (5.2)%Total revenues 934,021   985,344  (5.2)%
            
      OPERATING EXPENSES:     
  152,913   156,341  (2.2)%  Hotel operating expenses 437,111   443,025  (1.3)%
  22,292   21,242  4.9%  General and administrative expenses 67,606   69,710  (3.0)%
  49,748   52,138  (4.6)%  Depreciation and amortization 147,543   159,652  (7.6)%
  2,679   -  n/aImpairment of long-lived assets 2,679   43,600  (93.9)%
  227,632   229,721  (0.9)%  654,939   715,987  (8.5)%
            
  4,699   3,449  36.2%Other expenses from franchised and managed properties 14,342   8,762  63.7%
            
  232,331   233,170  (0.4)%Total operating expenses 669,281   724,749  (7.7)%
            
  -   3,517  n/aGAIN ON SALE OF HOTEL PROPERTIES -   41,599  n/a
            
  3   39  (92.3)%OTHER INCOME 31   501  (93.8)%
            
  100,367   121,462  (17.4)%INCOME FROM OPERATIONS 264,771   302,695  (12.5)%
            
  101   (251) (140.2)%OTHER NON-OPERATING EXPENSE (INCOME) (248)  48  (616.7)%
            
  36,535   31,007  17.8%INTEREST EXPENSE, NET 95,905   95,072  0.9%
            
  63,731   90,706  (29.7)%INCOME BEFORE INCOME TAX EXPENSE 169,114   207,575  (18.5)%
            
  10,501   15,014  (30.1)%INCOME TAX EXPENSE 27,822   35,218  (21.0)%
            
  53,230   75,692  (29.7)%NET INCOME 141,292   172,357  (18.0)%
            
  (12,159)  (3,790) 220.8%NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (24,790)  (20,547) 20.7%
            
 $41,071  $71,902  (42.9)%NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC. COMMON SHAREHOLDERS$116,502  $151,810  (23.3)%
            
            
 $0.22  $0.38  (42.2)%NET INCOME PER EXTENDED STAY AMERICA, INC. COMMON SHARE - DILUTED$0.62  $0.80  (22.5)%
            
  187,015   189,253   WEIGHTED-AVERAGE EXTENDED STAY AMERICA, INC. COMMON SHARES OUTSTANDING - DILUTED 188,317   190,111   
            
  
 
      CONSOLIDATED BALANCE SHEET DATA   
      AS OF SEPTEMBER 30, 2019 AND DECEMBER 31, 2018   
      (In thousands)   
      (Unaudited)   
       September 30, December 31,  
        2019   2018   
      Cash and cash equivalents$489,767  $287,458   
      Restricted cash$13,572  $15,878   
      Total assets$4,155,377  $3,924,210   
      Total debt, net of unamortized deferred financing costs and debt discounts (1)$2,639,498  $2,402,637   
      Total equity$1,266,471  $1,310,639   
            
      (1) Unamortized deferred financing costs and debt discounts totaled $48.5 million and $41.1 million as of September 30, 2019 and December 31, 2018, respectively.  
        
            


 EXTENDED STAY AMERICA, INC.  
 OPERATING METRICS 
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 
 (Unaudited) 
             
             
 COMPARABLE SYSTEM-WIDE OPERATING METRICS (1) 
             
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
  2019   2018  Variance  2019   2018  Variance 
  624   624  - Number of hotels (as of September 30) 623   623  -  
  68,749   68,749  - Number of rooms (as of September 30) 68,634   68,634  -  
  80.8%  80.1% 70 bps Comparable System-Wide Occupancy(1) 77.3%  76.1% 120 bps  
 $67.87  $69.27  (2.0)%Comparable System-Wide ADR(1)$67.02  $68.77  (2.5)% 
 $54.81  $55.51  (1.3)%Comparable System-Wide RevPAR(1)$51.83  $52.31  (0.9)% 
             
             
             
 COMPARABLE COMPANY-OWNED OPERATING METRICS (2) 
             
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
  2019   2018  Variance  2019   2018  Variance 
  553   553  - Number of hotels (as of September 30) 552   552  -  
  61,379   61,379  - Number of rooms (as of September 30) 61,264   61,264  -  
  80.8%  80.7% 10 bps Comparable Company-Owned Occupancy(2) 77.4%  76.7% 70 bps  
 $70.09  $71.23  (1.6)%Comparable Company-Owned ADR(2)$69.15  $70.62  (2.1)% 
 $56.66  $57.46  (1.4)%Comparable Company-Owned RevPAR(2)$53.55  $54.20  (1.2)% 
             
             
      Renovation Displacement Data (in thousands, except percentages):      
  5,647   5,647  -   Total available room nights 16,725   16,725  -  
  10   -  10   Room nights displaced from renovation 45   -  45  
  0.2%  0.0% 20 bps   % of available room nights displaced 0.3%  0.0% 30 bps  
             
             
   
 COMPANY-OWNED OPERATING METRICS (3) 
             
 Three Months Ended Nine Months Ended 
 September 30, September 30, 
  2019   2018  Variance  2019   2018  Variance 
  554   567  (13)Number of hotels (as of September 30) 554   567  (13) 
  61,486   62,748  (1,262)Number of rooms (as of September 30) 61,486   62,748  (1,262) 
  80.8%  80.2% 60 bps Company-Owned Occupancy(3) 77.4%  76.0% 140 bps  
 $70.10  $69.85  0.4%Company-Owned ADR(3)$69.15  $69.24  (0.1)% 
 $56.66  $56.02  1.1%Company-Owned RevPAR(3)$53.53  $52.65  1.7% 
             
             
(1) Includes hotels owned, franchised or managed for the full three and nine months ended September 30, 2019 and 2018, respectively.   
             
(2) Includes hotels owned and operated by the Company for the full three and nine months ended September 30, 2019 and 2018, respectively.   
         
(3) Include results of operations of the Company's owned and operated hotels during the periods presented, which is summarized below:   
             


DateNumber of Hotels
(Sold) Acquired
Number of
Rooms
Number of
Owned Hotels
Number of
Owned Rooms
 
 
January 1, 201862468,620 
February 2018(25)(2,430)59966,190 
March 2018(1)(101)59866,089 
May 2018115 59966,204 
September 2018(32)(3,456)56762,748 
November 2018107 56862,855 
November 2018(14)(1,369)55461,486 
September 30, 201955461,486 
      


 EXTENDED STAY AMERICA, INC.
 NON-GAAP RECONCILIATION OF NET INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGIN 
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
 (In thousands)
 (Unaudited)
            
 Three Months Ended  Nine Months Ended
 September 30, September 30,
 2019 2018 Variance 2019 2018 Variance
 $ 53,230 $ 75,692 (29.7)%Net income$ 141,292 $ 172,357 (18.0)%
 10,501 15,014 (30.1)%Income tax expense27,822 35,218 (21.0)%
 36,535 31,007 17.8%Interest expense, net95,905 95,072 0.9%
 101 (251) (140.2)%Other non-operating expense (income)(248) 48 (616.7)%
 (3) (39) (92.3)%Other income(31) (501) (93.8)%
 - (3,517) n/aGain on sale of hotel properties- (41,599) n/a
 2,679 - n/aImpairment of long-lived assets2,679 43,600 (93.9)%
 49,748 52,138 (4.6)%Depreciation and amortization147,543 159,652 (7.6)%
 22,292 21,242 4.9%General and administrative expenses67,606 69,710 (3.0)%
 1,660 1,949 (14.8)%Loss on disposal of assets(1)5,037 2,617 92.5%
 (1,351) (864) 56.4%  Franchise and management fees(4,023) (2,140) 88.0%
 499 97 414.4%Other expenses from franchised and managed properties, net of other revenues1,521 343 343.4%
 $ 175,891 $ 192,468 (8.6)%Hotel Operating Profit$ 485,103 $ 534,377 (9.2)%
            
 $ 320,669 $ 340,917 (5.9)%Room revenues$ 899,329 $ 958,075 (6.1)%
 6,475 5,943 9.0%Other hotel revenues17,848 16,710 6.8%
 $ 327,144 $ 346,860 (5.7)%Total room and other hotel revenues$ 917,177 $ 974,785 (5.9)%
            
 53.8% 55.5% (170) bpsHotel Operating Margin52.9% 54.8% (190) bps
            
            
       


     
NON-GAAP RECONCILIATION OF NET INCOME TO COMPARABLE HOTEL(2)
OPERATING PROFIT AND COMPARABLE HOTEL OPERATING MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(In thousands)
(Unaudited)
            
 Three Months Ended  Nine Months Ended
 September 30, September 30,
 2019 2018 Variance 2019 2018 Variance
 $ 53,230 $ 75,692 (29.7)%Net income$ 141,292 $ 172,357 (18.0)%
 10,501 15,014 (30.1)%Income tax expense27,822 35,218 (21.0)%
 36,535 31,007 17.8%Interest expense, net95,905 95,072 0.9%
 101 (251) (140.2)%Other non-operating expense (income)(248) 48 (616.7)%
 (3) (39) (92.3)%Other income(31) (501) (93.8)%
 - 0 (3,517) n/aGain on sale of hotel properties- 0 (41,599) n/a
 2,679 - 0 n/aImpairment of long-lived assets2,679 43,600 (93.9)%
 49,748 52,138 (4.6)%Depreciation and amortization147,543 159,652 (7.6)%
 22,292 21,242 4.9%General and administrative expenses67,606 69,710 (3.0)%
 1,660 1,949 (14.8)%Loss on disposal of assets(1)5,037 2,617 92.5%
 (1,351) (864) 56.4%Franchise and management fees(4,023) (2,140) 88.0%
 499 97 414.4%Other expenses from franchised and managed properties, net of other revenues1,521 343 343.4%
 (289) (6,751) (95.7)%Hotel operating profit of hotels not owned for entirety of periods presented(1,235) (20,518) (94.0)%
 $ 175,602 $ 185,717 (5.4)%Comparable Hotel Operating Profit(2)$ 483,868 $ 513,859 (5.8)%
            
 $ 320,669 $ 340,917 (5.9)%Room revenues$ 899,329 $ 958,075 (6.1)%
 6,475 5,943 9.0%Other hotel revenues17,848 16,710 6.8%
 (571) (16,363) (96.5)%Total revenues of hotels not owned for entirety of periods presented(2,877) (51,788) (94.4)%
 $ 326,573 $ 330,497 (1.2)%Comparable total room and other hotel revenues$ 914,300 $ 922,997 (0.9)%
            
 53.8% 56.2% (240) bpsComparable Hotel Operating Margin(2)52.9% 55.7% (280) bps
            
            
(1) Included in hotel operating expenses in the unaudited condensed consolidated statements of operations.    
            
(2) Includes results of 553 and 552 hotels owned and operated during the full three and nine months ended September 30, 2019 and 2018, respectively.
            



 EXTENDED STAY AMERICA, INC.  
 NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA  
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 
 (In thousands) 
 (Unaudited) 
           
 Three Months Ended  Nine Months Ended  
 September 30,  September 30,  
  2019   2018    2019   2018   
 $53,230  $75,692  Net income$141,292  $172,357   
  36,535   31,007  Interest expense, net 95,905   95,072   
  10,501   15,014  Income tax expense 27,822   35,218   
  49,748   52,138  Depreciation and amortization 147,543   159,652   
  150,014   173,851  EBITDA 412,562   462,299   
  1,876   1,811  Equity-based compensation 6,131   5,999   
  2,679   -  Impairment of long-lived assets 2,679   43,600   
  -   (3,517) Gain on sale of hotel properties -   (41,599)  
  1,756   1,532  Other expense(1) 4,907   2,879   
 $156,325  $173,677  Adjusted EBITDA$426,279  $473,178   
           
           
NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND COMPARABLE ADJUSTED EBITDA(2) 
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 
(In thousands) 
(Unaudited) 
           
 Three Months Ended  Nine Months Ended  
 September 30,  September 30,  
  2019   2018    2019   2018   
 $53,230  $75,692  Net income$141,292  $172,357   
  36,535   31,007  Interest expense, net 95,905   95,072   
  10,501   15,014  Income tax expense 27,822   35,218   
  49,748   52,138  Depreciation and amortization 147,543   159,652   
  150,014   173,851  EBITDA 412,562   462,299   
  (289)  (6,751) Adjusted Property EBITDA of hotels not owned for entirety of periods presented (1,235)  (20,518)  
  1,876   1,811  Equity-based compensation 6,131   5,999   
  2,679   -  Impairment of long-lived assets 2,679   43,600   
  -   (3,517) Gain on sale of hotel properties -   (41,599)  
  1,756   1,532  Other expense(1) 4,907   2,879   
 $156,036  $166,926  Comparable Adjusted EBITDA(2)$425,044  $452,660   
           
           
(1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. Loss on disposal of assets totaled $1.7 million, $1.9 million, $5.0 million and $2.6 million, respectively.  
   
(2) Includes results of 553 and 552 hotels owned and operated during the full three and nine months ended September 30, 2019 and 2018, respectively.  
   


EXTENDED STAY AMERICA, INC.    
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.    
    COMMON SHAREHOLDERS TO FUNDS FROM OPERATIONS, ADJUSTED FUNDS FROM OPERATIONS  
  AND ADJUSTED FUNDS FROM OPERATIONS PER DILUTED PAIRED SHARE    
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018   
(In thousands, except per share and per Paired Share data)   
(Unaudited)   
            
Three Months Ended  Nine Months Ended    
September 30,  September 30,    
 2019   2018    2019   2018     
            
$0.22  $0.38  Net income per Extended Stay America, Inc. common share - diluted$0.62  $0.80     
            
$41,071  $71,902  Net income attributable to Extended Stay America, Inc. common shareholders$116,502  $151,810     
 12,155   3,786  Noncontrolling interests attributable to Class B common shares of ESH REIT 24,778   20,535     
 48,247   50,807  Real estate depreciation and amortization 143,335   155,788     
 2,679   -  Impairment of long-lived assets 2,679   43,600     
 -   (3,517) Gain on sale of hotel properties -   (41,599)    
 (8,250)  (7,897) Tax effect of adjustments to net income attributable to Extended Stay America, Inc. common shareholders (23,132)  (26,502)    
 95,902   115,081  Funds from Operations 264,162   303,632     
 6,716   -  Debt modification and extinguishment costs 6,716   1,621     
 (1,088)  -  Tax effect of adjustments to Funds from Operations (1,088)  (274)    
            
$101,530  $115,081  Adjusted Funds from Operations$269,790  $304,979     
            
$0.54  $0.61  Adjusted Funds from Operations per Paired Share – diluted$1.43  $1.60     
            
 187,015   189,253  Weighted average Paired Shares outstanding – diluted 188,317   190,111     
            



EXTENDED STAY AMERICA, INC.  
NON-GAAP RECONCILIATION OF NET INCOME ATTRIBUTABLE TO EXTENDED STAY AMERICA, INC.  
    COMMON SHAREHOLDERS TO PAIRED SHARE INCOME, ADJUSTED PAIRED SHARE INCOME 
 AND ADJUSTED PAIRED SHARE INCOME PER DILUTED PAIRED SHARE  
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018  
(In thousands, except per share and per Paired Share data)  
(Unaudited)  
           
Three Months Ended  Nine Months Ended   
September 30,  September 30,   
 2019   2018    2019   2018    
           
$0.22  $0.38  Net income per Extended Stay America, Inc. common share - diluted$0.62  $0.80    
           
$41,071  $71,902  Net income attributable to Extended Stay America, Inc. common shareholders$116,502  $151,810    
 12,155   3,786  Noncontrolling interests attributable to Class B common shares of ESH REIT 24,778   20,535    
 53,226   75,688  Paired Share Income 141,280   172,345    
 6,716   -  Debt modification and extinguishment costs 6,716   1,621    
 2,679   -  Impairment of long-lived assets 2,679   43,600    
 -   (3,517) Gain on sale of hotel properties -   (41,599)   
 1,756   1,532  Other expense(1) 4,907   2,879    
 (1,806)  331  Tax effect of adjustments to Paired Share Income (2,299)  (1,088)   
$62,571  $74,034  Adjusted Paired Share Income$153,283  $177,758    
           
$0.33  $0.39  Adjusted Paired Share Income per Paired Share – diluted$0.81  $0.94    
           
 187,015   189,253  Weighted average Paired Shares outstanding – diluted 188,317   190,111    
           
(1) Includes loss on disposal of assets, non-operating expense (income), including foreign currency transaction costs, and certain costs associated with acquisitions and dispositions. Loss on disposal of assets totaled $1.7 million, $1.9 million, $5.0 million and $2.6 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$1,205,000 $1,215,000 
        
 $211,756  Net income$161,772 $176,353 
  124,870  Interest expense, net 129,000  129,000 
  42,076  Income tax expense 32,549  32,968 
  209,329  Depreciation and amortization 195,000  190,000 
  588,031  EBITDA 518,321  528,321 
  (21,422) Adjusted Property EBITDA of hotels not owned for entirety of period presented -  - 
  7,724  Equity-based compensation 8,000  8,000 
  43,600  Impairment of long-lived assets 2,679  2,679 
  (42,478) Gain on sale of hotel properties -  - 0 
  2,860  Other expense(2) 6,000  6,000 
 $578,315  Comparable Adjusted EBITDA$535,000 $545,000 
        
        
        
 (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$0.38  $0.43   
        
$112,864  Net income attributable to Extended Stay America, Inc. common shareholders$71,234  $79,893   
 98,876  Noncontrolling interests attributable to Class B common shares of ESH REIT 90,522   96,444   
 211,740  Paired Share Income 161,756   176,337   
 1,621  Debt modification and extinguishment costs 6,716   6,716   
 43,600  Impairment of long-lived assets 2,679   2,679   
 (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 (2,579)  (2,425)  
$216,406  Adjusted Paired Share Income$174,572  $189,307   
        
$1.14  Adjusted Paired Share Income per Paired Share – diluted$0.93  $1.01   
        
 189,821  Weighted average Paired Shares outstanding – diluted 187,000   187,000   
        
(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.