GlobeNewswire Inc | Aug 5, 2020 04:06PM EDT

August 05, 2020

During the First Half of the Year Reduced Terminations by 22% from the Prior Year and Signed 92 Franchise Agreements Including 19 New

DENVER, Aug. 05, 2020 (GLOBE NEWSWIRE) -- Red Lion Hotels Corporation (RLHC, Red Lion) (NYSE: RLH), a hospitality company doing business as RLH Corporation which franchises midscale and economy hotels, today reported second quarter 2020 results and provided an update regarding financial and operational activities.

Second Quarter Financial Results

Red Lion reported a net loss of ($4.0) million, or ($0.16) per share compared to a net loss of ($3.0) million or ($0.12) per share in the prior year period. Adjusted EBITDA was $0.3 million compared to $3.7 million for the same period in 2019.

In the core franchise hotel segment, which excludes company operated hotels, second quarter revenues were $8.8 million compared to $14.7 million in the prior year period and Core Adjusted EBITDA was $0.8 million, compared to $1.1 million in the prior year period.

Year-over-year results continue to reflect the loss of income from the sale of four company owned and operated hotels, franchise agreement terminations, as well as reduced travel due to COVID-19.

Cash and equivalents at quarter end were $33.8 million, up $2.0 million from year end.

Red Lion CEO John Russell stated, We continue to make positive strides with respect to franchisee retention as we focus on our ROAR initiatives. Our franchised hotels remain ideally positioned to benefit from a resurgence in drive-to travel as economies re-open, however due to ongoing uncertainty caused by the pandemic, we are also continuing with our cost savings and cash preservation initiatives. We were encouraged by having 98% of our franchisees hotels open and we remain confident that we are well positioned to benefit as travel, especially drive-to, picks up.

Operating Summary

As a result of the renewed focus on its ROAR initiatives, RLHC signed 92 franchise agreements in the first half of 2020, including adding 19 new franchised locations. This pace of signings reflects the value franchisees find in the Red Lion brands and is even more impressive considering the uncertain environment COVID has created. Additionally, by reestablishing the important relationship with franchisees Promises Made, Promises Kept RLHC improved retention trends, seeing 22% fewer franchisees leaving the brand year over year.

Royalty fees for the second quarter were $3.6 million compared to $5.9 million in the prior year quarter primarily due to terminated franchise agreements and the impact of COVID-19 on midscale brands, which generally pay royalties and marketing fees as a percentage of gross rooms revenue. Royalty revenue mix for the second quarter of 2020 was 83% from economy hotels and 17% from midscale hotels.

Selling, general, administrative, and other expenses, which include franchise sales; operations and corporate costs; and bad debt expense were $4.8 million, a 28% improvement from $6.7 million in the year-ago period. The improvement was driven by cost containment efforts initiated earlier in 2020.

Transaction costs for the quarter were $1.0 million comprised of fees paid to advisors engaged to review and respond to bona fide inquiries received from parties considering an investment in or acquisition of the Company. The Board remains committed to evaluating strategic alternatives that are in the best interest of shareholders, particularly as RLHC has attracted attention from those who recognize that its portfolio of franchised hotels are located in areas that are less impacted by a reduction in leisure travel, and are well positioned to respond quickly to upticks in travel, especially drive-to travel.

Balance Sheet and Liquidity

As of June 30, 2020, cash and cash equivalents totaled $33.8 million, a $4.1 million decrease from March 31, 2020. The decrease included a portion of the $1.1 million in fee deferrals offered to assist franchisees through this difficult period; $0.3 million in severance and other costs to implement the cost-savings measures established at the onset of COVID; and $0.2 million of advisor fees as previously described.

Adjusted free cash flow for the six months ended June 30, 2020, was $2.0 million as compared to $5.4 million for the six months ended June 30, 2019. Cash flow from operations was ($5.8) million and $3.1 million for the same periods, respectively. RLHC has $5.6 million of debt on its balance sheet related to a non-recourse mortgage on the Hotel RL Olympia held in a joint venture in which RLHC holds a 55% equity interest.

Webcast and Conference Call

Red Lions senior management team plans to host a webcast and conference call to review its financial results at 9:00 a.m. ET, Thursday, August 6, 2020.

The live webcast can be accessed through the Investor Relations section of RLHCs website http://ir.redlion.com/events-and-presentations/events.

For those unable to access the webcast, the conference call will be accessible domestically or internationally, by dialing 877-407-8289 or 201-689-8341, respectively, and requesting the Red Lion Hotel Corporation Second Quarter 2020 Earnings Conference Call.

A replay of the conference call will be available after 11:30 a.m. ET on Thursday, August 6, 2020 through 11:59 p.m. ET on Thursday, August 20, 2020. To access the replay, listeners may use 877-660-6853 (domestic) or 201-612-7415 (international). The passcode for the replay is 13698294. The recorded replay will be available on the Companys website for one year after the call date.

About RLH Corporation

Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation, which focuses on the franchising of midscale and economy hotels. The Company strives to maximize return on invested capital for hotel owners across North America through relevant brands, industry-leading technology and forward-thinking services. For more information, please visit the companys website at www.rlhco.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning operational and financial impacts of the COVID-19 pandemic, plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, risks associated with our asset light model; relationships with our franchisees and properties; competitive conditions in the lodging industry; economic cycles; changes in future demand and supply for hotel rooms; international conflicts and conditions; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; the extent and duration of the COVID-19 pandemic; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other risks and uncertainties discussed in the Company's annual report on Form 10-K for the year endedDecember 31, 2019, and in other documents filed by the Company with theSecurities and Exchange Commission. The forward-looking statements contained herein speak only to the date of this press release. The Company undertakes no obligation to update or revise any forward-looking statements except as required by law.

Social Media:

www.Facebook.com/myhellorewardswww.Twitter.com/myhellorewardswww.Instagram.com/myhellorewardswww.Linkedin.com/company/rlhco

Investor Relations Contact:

Nikki SacksInvestor Relations 203-682-8263investorrelations@rlhco.com



RED LION HOTELS CORPORATIONCondensed Consolidated Statements of Comprehensive Loss(unaudited)(In thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019Revenue: Royalty $ 3,584 $ 5,867 $ 7,941 $ 11,607 Marketing, reservations 4,473 7,603 10,278 14,332 and reimbursablesOther franchise 701 1,214 1,475 1,756 Company operated hotels 1,471 14,236 7,800 27,206 Other ? 5 ? 8 Total revenues 10,229 28,925 27,494 54,909 Operating expenses: Selling, general,administrative and other 4,770 6,660 21,035 14,051 expensesCompany operated hotels 2,139 12,532 8,817 24,077 Marketing, reservations 3,791 7,847 9,549 15,008 and reimbursablesDepreciation and 2,410 4,109 4,947 7,556 amortizationAsset impairment ? ? 1,760 ? Loss (gain) on asset 331 38 (7,561 ) 44 dispositions, netTransaction and 1,002 173 1,400 235 integration costsTotal operating expenses 14,443 31,359 39,947 60,971 Operating loss (4,214 ) (2,434 ) (12,453 ) (6,062 )Other income (expense): Interest expense (49 ) (1,109 ) (555 ) (1,991 )Loss on early retirement ? (164 ) (1,309 ) (164 )of debtOther income, net 199 44 247 77 Total other income 150 (1,229 ) (1,617 ) (2,078 )(expense)Loss before taxes (4,064 ) (3,663 ) (14,070 ) (8,140 )Income tax expense 148 108 (604 ) 190 (benefit)Net loss (4,212 ) (3,771 ) (13,466 ) (8,330 )Net loss attributable to 250 774 1,405 1,060 noncontrolling interestNet loss and comprehensiveloss attributable to RLH $ (3,962 ) $ (2,997 ) $ (12,061 ) $ (7,270 )Corporation Loss per share - basic $ (0.16 ) $ (0.12 ) $ (0.48 ) $ (0.29 )Loss per share - diluted $ (0.16 ) $ (0.12 ) $ (0.48 ) $ (0.29 ) Weighted average shares - 25,335 24,856 25,267 24,730 basicWeighted average shares - 25,335 24,856 25,267 24,730 diluted Non-GAAP Financial Measures ^(1)EBITDA $ (1,605 ) $ 1,555 $ (8,568 ) $ 1,407 Adjusted EBITDA $ 260 $ 3,726 $ (10,055 ) $ 4,725 ^(1) The definitions of "EBITDA" and "Adjusted EBITDA" and how those measuresrelate to net income (loss) are discussed further in this release underReconciliation of Non-GAAP Financial Measures.

RED LION HOTELS CORPORATIONCondensed Consolidated Balance Sheets(unaudited)(In thousands, except share data) June 30, December 2020 31, 2019ASSETS Current assets: Cash and cash equivalents ($972 and $1,819 $ 33,702 $ 29,497 attributable to VIEs)Restricted cash ($100 and $2,311 attributable to 100 2,311 VIEs)Accounts receivable ($398 and $1,033 attributableto VIEs), net of an allowance for doubtful accounts 11,463 15,143 of $8,611 and $4,589, respectivelyNotes receivable, net 286 5,709 Other current assets ($130 and $311 attributable to 4,255 5,849 VIEs)Total current assets 49,806 58,509 Property and equipment, net ($11,296 and $29,848 34,492 68,668 attributable to VIEs)Operating lease right-of-use assets ($0 and $10,810 5,337 48,283 attributable to VIEs)Goodwill 18,595 18,595 Intangible assets, net 47,081 48,612 Other assets, net ($0 and $703 attributable to 2,635 3,851 VIEs)Total assets $ 157,946 $ 246,518 LIABILITIES Current liabilities: Accounts payable ($134 and $589 attributable to $ 4,093 $ 5,510 VIEs)Accrued payroll and related benefits ($90 and $349 1,031 2,709 attributable to VIEs)Other accrued liabilities ($182 and $455 4,900 5,469 attributable to VIEs)Long-term debt, due within one year ($5,582 and 5,582 16,984 $16,984 attributable to VIEs)Operating lease liabilities, due within one year 1,520 4,809 ($0 and $966 attributable to VIEs)Total current liabilities 17,126 35,481 Long-term debt, due after one year, net of debt ? 5,576 issuance costs ($0 and $5,576 attributable to VIEs)Line of credit, due after one year ? 10,000 Operating lease liabilities, due after one year ($0 5,059 46,592 and $11,938 attributable to VIEs)Deferred income and other long-term liabilities ($0 842 1,105 and $28 attributable to VIEs)Deferred income taxes 823 743 Total liabilities 23,850 99,497 Commitments and contingencies STOCKHOLDERS? EQUITY RLH Corporation stockholders' equity Preferred stock - 5,000,000 shares authorized; ? ? $0.01 par value; no shares issued or outstandingCommon stock - 50,000,000 shares authorized; $0.01par value; 25,342,104 and 25,148,005 254 251 shares issued and outstandingAdditional paid-in capital, common stock 179,770 181,608 Accumulated deficit (48,936 ) (36,875 )Total RLH Corporation stockholders' equity 131,088 144,984 Noncontrolling interest 3,008 2,037 Total stockholders? equity 134,096 147,021 Total liabilities and stockholders? equity $ 157,946 $ 246,518

RED LION HOTELS CORPORATIONCondensed Consolidated Statements of Cash Flows(unaudited)(In thousands)

Six Months Ended June30, 2020 2019Operating activities: Net loss $ (13,466 ) $ (8,330 )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization 4,947 7,556 Noncash PIK interest and amortization of debt 187 249 issuance costsAmortization of key money and contract costs 514 459 Amortization of contract liabilities (301 ) (534 )Loss (gain) on asset dispositions, net (7,561 ) 44 Noncash loss on early retirement of debt 750 67 Asset impairment 1,760 ? Deferred income taxes 80 98 Stock-based compensation expense 575 1,562 Provision for doubtful accounts 10,328 472 Change in operating assets and liabilities: Accounts receivable (1,085 ) (820 ) Key money disbursements (329 ) (535 ) Other current assets 1,299 839 Accounts payable (1,483 ) 2,827 Other accrued liabilities (1,984 ) (899 )Net cash provided by (used in) operating activities (5,769 ) 3,055 Investing activities: Capital expenditures (1,374 ) (2,843 )Net proceeds from disposition of property and 36,896 ? equipmentCollection of notes receivable ? 242 Advances on notes receivable ? (90 )Net cash provided by (used in) investing activities 35,522 (2,691 )Financing activities: Borrowings on long-term debt, net of discounts 4,234 32,935 Repayment of long-term debt and finance leases (21,958 ) (20,283 )Repayment of line of credit borrowing (10,000 ) ? Debt issuance costs ? (542 )Distributions to noncontrolling interest ? (7,431 )Stock-based compensation awards canceled to settle (81 ) (2,131 )employee tax withholdingStock option and stock purchase plan issuances, net 46 105 and otherNet cash provided by (used in) financing activities (27,759 ) 2,653 Change in cash, cash equivalents and restricted cash:Net increase (decrease) in cash, cash equivalents 1,994 3,017 and restricted cashCash, cash equivalents and restricted cash at 31,808 19,789 beginning of periodCash, cash equivalents and restricted cash at end of $ 33,802 $ 22,806 period

RED LION HOTELS CORPORATIONAdditional Hotel Statistics(unaudited)

A summary of activity relating to our open franchise and company operatedhotels by type from January 1, 2020 through June 30, 2020, including theapproximate number of available rooms, is provided below:

Midscale Brand Economy Brand Total Total Total Total Hotels Available Hotels Available Hotels Available Rooms Rooms RoomsBeginningquantity, January 96 13,500 966 54,200 1,062 67,700 1, 2020Newly opened 1 100 12 700 13 800 Change in brand 1 100 (1 ) (100 ) ? ? Terminated (10 ) (1,900 ) (80 ) (4,500 ) (90 ) (6,400 )propertiesEnding quantity, 88 11,800 897 50,300 985 62,100 June 30, 2020

A summary of activity relating to our open midscale franchise and company operated hotels by brand from January 1, 2020 through June30, 2020 is provided below:

Red RedMidscale Brand Hotel Lion Lion Signature Other TotalHotels RL Hotels Inn and SuitesBeginningquantity, January 9 39 40 4 4 96 1, 2020Newly opened ? ? 1 ? ? 1 Change in brand ? ? 1 ? ? 1 Terminated (1 ) (5 ) (2 ) ? (2 ) (10 )propertiesEnding quantity, 8 34 40 4 2 88 June 30, 2020 Ending rooms, June 1,400 6,700 3,200 300 200 11,800 30, 2020

A summary of activity relating to our open economy franchise hotels by brand from January 1, 2020 through June30, 2020 is provided below:

Economy Brand ABVI and Knights Country Guest Other TotalHotels CBVI Inn Hearth HouseBeginningquantity, 657 232 47 19 11 966 January 1, 2020Newly opened 8 4 ? ? ? 12 Change in brand ? ? ? (1 ) ? (1 )Terminated (49 ) (23 ) (4 ) (2 ) (2 ) (80 )propertiesEnding quantity, 616 213 43 16 9 897 June 30, 2020 Ending rooms, 32,800 13,000 2,100 1,200 1,200 50,300 June 30, 2020

A summary of our executed agreements for the six months ended June 30, 2020 is provided below:

Midscale Economy Total Brand BrandExecuted franchise license agreements, six months ended June 30, 2020:New locations 3 16 19 New contracts for existing locations 4 69 73 Total executed franchise license agreements, 7 85 92 six months ended June 30, 2020

RED LION HOTELS CORPORATIONReconciliation of Non-GAAP Financial Measures(unaudited)

Free Cash Flow is a non-GAAP measured defined as net cash provided by or usedin operating activities less capital expenditures. The Company believes it isan important liquidity measure that provides useful information to managementand investors about the amount of cash generated by the business.

Adjusted Free Cash Flow is a non-GAAP measure defined as Free Cash Flowadjusted to reflect the impact of certain investing or financing cash flowssuch as acquisitions, proceeds from dispositions of properties, borrowings andrepayments of long-term debt, and distributions to non-controlling interests.We believe this information is necessary as reflecting significant cash flowsfrom strategic investing and financing decisions provides the most accurateoverall measure of cash generated or used by the business.

Free Cash Flow and Adjusted Free Cash Flow are commonly used measures ofperformance. We utilize these measures because management finds them a usefultool to calculate more meaningful comparisons of past, present and future cashgeneration and as a means to evaluate the results of core, ongoing operations.We believe they are a complement to reported net cash provided by (used in)operating activities, investing activities, and financing activities. Free CashFlow and Adjusted Free Cash Flow are not intended to represent net cashprovided by (used in) operating activities, investing activities, or financingactivities defined by generally accepted accounting principles in the UnitedStates of America ("GAAP"), and such information should not be considered as analternative to reported information or any other measure of performanceprescribed by GAAP. In addition, other companies may calculate Free Cash Flowand, in particular, Adjusted Free Cash Flow differently than we do or may notcalculate them at all, limiting the usefulness of Free Cash Flow and AdjustedFree Cash Flow as comparative measures.

The following is a reconciliation of GAAP net cash provided by (used in)operating activities to non-GAAP Free Cash Flow and Adjusted Free Cash Flow forthe six months ended June 30, 2020 and 2019 (in thousands): Six Months Ended June 30, 2020 2019Net cash provided by (used in) operating $ (5,769 ) $ 3,055 activitiesLess: Capital expenditures (1,374 ) (2,843 )Free Cash Flow (7,143 ) 212 Net proceeds from disposition of property and 36,896 ? equipmentBorrowings on long-term debt, net of 4,234 32,935 discountsRepayment of line of credit borrowing (10,000 ) ? Repayment of long-term debt and finance (21,958 ) (20,283 )leasesDistributions to noncontrolling interest ? (7,431 )Adjusted Free Cash Flow $ 2,029 $ 5,433

RED LION HOTELS CORPORATIONReconciliation of Non-GAAP Financial Measures(unaudited)

EBITDA is defined as net income (loss), before interest, taxes, depreciationand amortization. The Company believes it is a useful financial performancemeasure due to the significance of our long-lived assets and level ofindebtedness.

Adjusted EBITDA is an additional measure of financial performance. The Companybelieves that the inclusion or exclusion of certain special items, such asstock-based compensation, gains and losses on asset dispositions andimpairments, is necessary to provide the most accurate measure of coreoperating results and as a means to evaluate comparative results.

During the fourth quarter of 2018, we modified the definition of AdjustedEBITDA as used in prior periods to exclude the effect of non-cash stockcompensation expense. We believe that the exclusion of this item is consistentwith the purposes of the measure described below and we have applied thismodification to all prior periods presented.

EBITDA and Adjusted EBITDA are commonly used measures of performance in theindustry. RLH Corporation utilizes these measures because management finds thema useful tool to calculate more meaningful comparisons of past, present andfuture operating results and as a means to evaluate the results of core,ongoing operations. Our board of directors and executive management teamconsider Adjusted EBITDA to be a key performance metric and compensationmeasure. The Company believes the measures are a complement to reportedoperating results. EBITDA and Adjusted EBITDA are not intended to represent netincome (loss) defined by generally accepted accounting principles in the UnitedStates of America ("GAAP"), and such information should not be considered as analternative to reported information or any other measure of performanceprescribed by GAAP. In addition, other companies in the industry may calculateEBITDA and, in particular, Adjusted EBITDA differently than the Company does ormay not calculate them at all, limiting the usefulness of EBITDA and AdjustedEBITDA as comparative measures.

Non-Core Adjusted EBITDA includes the results of our Company Operated Hotels.Core Adjusted EBITDA is comprised of franchise and all other results, includingall Selling, general, administrative and other expenses. Management believesthis presentation provides a meaningful comparison of our financial results asCore Adjusted EBITDA represents the results of our Company as a franchise onlybusiness.

RED LION HOTELS CORPORATIONReconciliation of Non-GAAP Financial Measures(unaudited)

The following is a reconciliation of Core and Non-Core GAAP net income (loss)to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the three monthsended June 30, 2020 (in thousands): Core Non-Core TotalNet loss $ (3,108 ) $ (1,104 ) $ (4,212 )Depreciation and amortization 1,987 423 2,410 Interest expense 2 47 49 Income tax expense 148 ? 148 EBITDA (971 ) (634 ) (1,605 )Stock-based compensation ^(1) 202 ? 202 Transaction and integration costs ^(2) 981 21 1,002 Employee separation and transition costs ^ 268 ? 268 (3)Loss on asset dispositions ^(4) 220 111 331 Non-income tax expense assessment ^(5) 62 ? 62 Adjusted EBITDA 762 (502 ) 260 Adjusted EBITDA attributable to ? 122 122 noncontrolling interestsAdjusted EBITDA attributable to RLH $ 762 $ (380 ) $ 382 Corporation

^(1) Costs represent total stock-based compensation for the period. These costsare included within Selling, general, administrative and other expenses andMarketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).^(2) Transaction and integration costs relate primarily to fees paid toadvisors engaged to review and respond to bona fide inquiries received fromparties considering an investment in or acquisition of the Company.^(3) The costs relate to a reduction in force that was implemented in thesecond quarter of 2020. These costs are included within Selling, general,administrative and other expenses and Marketing, reservations and reimbursableson the Condensed Consolidated Statements of Comprehensive Income (Loss).^(4) The losses relate primarily to the disposal of various fixed assets duringthe three months ended June 30, 2020.^(5) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. We accrued these estimated taxes in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).

RED LION HOTELS CORPORATIONReconciliation of Non-GAAP Financial Measures(unaudited)

The following is a reconciliation of Core and Non-Core GAAP net income (loss)to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the three monthsended June 30, 2019 (in thousands): Core Non-Core TotalNet loss $ (2,479 ) $ (1,292 ) $ (3,771 )Depreciation and amortization 2,192 1,917 4,109 Interest expense 226 883 1,109 Income tax expense 108 ? 108 EBITDA 47 1,508 1,555 Stock-based compensation ^(1) 646 ? 646 Transaction and integration costs ^(2) 173 ? 173 Employee separation and transition costs ^ 35 ? 35 (3)Loss on early retirement of debt^ (4) ? 164 164 Loss on asset dispositions 1 37 38 Legal settlement expense^ (5) ? 952 952 Non-income tax expense assessment ^(6) 163 ? 163 Adjusted EBITDA 1,065 2,661 3,726 Adjusted EBITDA attributable to ? (458 ) (458 )noncontrolling interestsAdjusted EBITDA attributable to RLH $ 1,065 $ 2,203 $ 3,268 Corporation

^(1) Costs represent total stock-based compensation for the period. These costsare included within Selling, general, administrative and other expenses andMarketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).^(2) Transaction and integration costs include incremental expenses incurredfor potential and executed acquisitions and dispositions of assets.^(3) The costs relate to a reduction in force that was implemented in thesecond quarter of 2019. These costs are included within Selling, general,administrative and other expenses on the Condensed Consolidated Statements ofComprehensive Income (Loss).^(4) The loss on early retirement of debt relates to unamortized deferred debtissuance costs and prepayment fees incurred related to the payoff of a mortgageloan at RLS DC Venture, which was replaced through a new mortgage loan with adifferent lender.^(5) Legal settlement expense relates to a settlement agreement with currentand former hotel workers regarding a wage dispute in California. This expenseis included in Company operated hotels expense on the Condensed ConsolidatedStatement of Comprehensive Income (Loss).^(6) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. These estimated taxes have been accrued in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).

RED LION HOTELS CORPORATIONReconciliation of Non-GAAP Financial Measures(unaudited)

The following is a reconciliation of Core and Non-Core GAAP net income (loss)to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the six monthsended June 30, 2020 (in thousands): Core Non-Core TotalNet income (loss) $ (15,828 ) $ 2,362 $ (13,466 )Depreciation and amortization 3,658 1,289 4,947 Interest expense 174 381 555 Income tax benefit (604 ) ? (604 )EBITDA (12,600 ) 4,032 (8,568 )Stock-based compensation ^(1) 575 ? 575 Asset impairment ^(2) ? 1,760 1,760 Transaction and integration costs ^(3) 1,347 53 1,400 Employee separation and transition 796 ? 796 costs ^(4)Loss on early retirement of debt ^(5) 223 1,086 1,309 Loss (gain) on asset dispositions ^(6) 220 (7,781 ) (7,561 )Non-income tax expense assessment ^(7) 234 ? 234 Adjusted EBITDA (9,205 ) (850 ) (10,055 )Adjusted EBITDA attributable to ? 44 44 noncontrolling interestsAdjusted EBITDA attributable to RLH $ (9,205 ) $ (806 ) $ (10,011 )Corporation

^(1) Costs represent total stock-based compensation for the period. Thesecosts are included within Selling, general, administrative and other expenses and Marketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).^(2) In the first quarter of 2020, we recognized an impairment on our Red LionHotel Seattle Airport leased property.^(3) Transaction and integration costs relate primarily to fees paid toadvisors engaged to review and respond to bona fide inquiries received fromparties considering an investment in or acquisition of the Company.^(4) The costs relate to severance payments due to our Chief Financial Officerupon her departure in March 2020, along with two reductions in force that wereimplemented in the first six months of 2020. These costs are included withinSelling, general, administrative and other expenses and Marketing,reservations and reimbursables on the Condensed Consolidated Statements ofComprehensive Income (Loss).^(5) The loss on early retirement of debt relates to unamortized deferred debtissuance costs and prepayment fees incurred related to the payoff of a secureddebt agreement at RL Venture - Olympia and the outstanding balance on our Lineof Credit.^(6) The gain primarily relates to the sale of two properties during the firstquarter of 2020.^(7) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. We accrued these estimated taxes in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).

RED LION HOTELS CORPORATIONReconciliation of Non-GAAP Financial Measures(unaudited)

The following is a reconciliation of Core and Non-Core GAAP net income (loss)to Core and Non-Core non-GAAP EBITDA and Adjusted EBITDA for the six monthsended June 30, 2019 (in thousands): Core Non-Core TotalNet loss $ (5,924 ) $ (2,406 ) $ (8,330 )Depreciation and amortization 3,683 3,873 7,556 Interest expense 529 1,462 1,991 Income tax expense 190 ? 190 EBITDA (1,522 ) 2,929 1,407 Stock-based compensation ^(1) 1,562 ? 1,562 Transaction and integration costs ^(2) 235 ? 235 Employee separation and transition costs ^ 35 ? 35 (3)Loss on early retirement of debt ^(4) ? 164 164 Loss on asset dispositions 1 43 44 Legal settlement expense^ (5) ? 952 952 Non-income tax expense assessment ^(6) 326 ? 326 Adjusted EBITDA 637 4,088 4,725 Adjusted EBITDA attributable to ? (1,005 ) (1,005 )noncontrolling interestsAdjusted EBITDA attributable to RLH $ 637 $ 3,083 $ 3,720 Corporation

^(1) Costs represent total stock-based compensation for the period. These costsare included within Selling, general, administrative and other expenses andMarketing, reservations and reimbursables on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).^(2) Transaction and integration costs include incremental expenses incurredfor potential and executed acquisitions and dispositions of assets.^(3) The costs relate to a reduction in force that was implemented in thesecond quarter of 2019. These costs are included within Selling, general,administrative and other expenses on the Condensed Consolidated Statements ofComprehensive Income (Loss).^(4) The loss on early retirement of debt relates to unamortized deferred debtissuance costs and prepayment fees incurred related to the payoff of a mortgageloan at RLS DC Venture, which was replaced through a new mortgage loan with adifferent lender.^(5) Legal settlement expense relates to a settlement agreement with currentand former hotel workers regarding a wage dispute in California. This expenseis included in Company operated hotels expense on the Condensed ConsolidatedStatement of Comprehensive Income (Loss).^(6) Costs relate to estimated non-income taxes we have concluded we areprobable of being assessed. These estimated taxes have been accrued in Selling,general, administrative and other expenses on the Condensed ConsolidatedStatements of Comprehensive Income (Loss).