GlobeNewswire Inc | May 10, 2021 04:30PM EDT

May 10, 2021

CHARLOTTE, N.C., May 10, 2021 (GLOBE NEWSWIRE) -- Extended Stay America, Inc. (ESA) and ESH Hospitality, Inc. (NASDAQ:STAY) (together, the Company)today announced consolidated results for the three months ended March 31, 2021.

Financial and Operating Results

Total revenues for the three months ended March 31, 2021 were $259.6 million, a decrease of 2.5% over the same period in 2020 and a decrease of 6.5% over the same period in 2019.

Comparable system-wide RevPAR for the three months ended March 31, 2021 declined 1.7% over the same period in 2020 to $43.56, driven by a 5.7% decline in Average Daily Rate (ADR) partially offset by a 310 basis point increase in occupancy to 75.0%. The Comparable system-wide RevPAR index was 130, a 21% increase over the same period in 2020.

Hotel Operating Margin for the three months ended March 31, 2021 declined 230 basis points to 43.4% compared to 45.7% in the same period in 2020 due to the decline in Comparable system-wide RevPAR and a 1% increase in comparable owned hotel operating expenses. The increase in comparable owned hotel operating expenses was driven by increased labor, insurance and indirect expenses partially offset by lower distribution costs, credit card processing fees and breakfast costs.

Net income for the three months ended March 31, 2021 was $12.4 million compared to net income of $7.8 million for the same period in 2020. The increase in net income was due to a gain on a sale of two hotel properties, partially offset by a decline in Comparable system-wide RevPAR and merger transaction expenses.

Adjusted EBITDA for the three months ended March 31, 2021 was $90.9 million, a decline of 7.0% compared to the same period in 2020. As a point of reference, as disclosed in the Companys definitive proxy statement filed April 26, 2021, managements 2021 Adjusted EBITDA forecast was $434 million (a 16% increase over 2020 Adjusted EBITDA). The decline in Adjusted EBITDA was due to a decline in Comparable system-wide RevPAR and a 1% increase in comparable hotel operating expenses. Adjusted EBITDA for the quarter excludes a $12.0 million gain on a sale of hotel properties, merger transaction expenses of $4.8 million, non-cash equity-based compensation expense of $2.3 million, $1.2 million in loss on disposal of assets and $0.6 million in other expenses.

Adjusted FFO for the three months ended March 31, 2021 was $49.4 million, or $0.28 per diluted Paired Share, compared to $55.1 million, or $0.31 per diluted Paired Share in the same period in 2020. The decrease in Adjusted FFO per diluted Paired Share was due primarily to a decline in Comparable system-wide RevPAR and a 1% increase in comparable hotel operating expenses. Adjusted FFO, a non-GAAP measure, represents funds from operations, as adjusted, attributable to the consolidated enterprise, whose representative equity security is a Paired Share. A Paired Share entitles its holder to participate in 100% of the common equity and earnings of both Extended Stay America, Inc. and ESH Hospitality, Inc.

Adjusted Paired Share Income for the three months ended March 31, 2021 was $7.4 million, or $0.04 per diluted Paired Share, compared to $12.2 million in Adjusted Paired Share Income, or $0.07 per diluted Paired Share, for the same period in 2020. The decrease in Adjusted Paired Share Income per diluted Paired Share was due to a decrease in Comparable system-wide RevPAR and a 1% increase in comparable owned hotel expenses. 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.

Capital Expenditures and Balance Sheet

The Company invested $30.4 million in capital expenditures during the first quarter of 2021. This included $3.6 million in renovation capital and $6.2 million in capital for new hotel development.

As of March 31, 2021, the Company had $371.0 million in cash and equivalents, including $13.2 million in restricted cash, and total debt outstanding was $2.68 billion.

Hotel and Development Pipeline

As of March 31, 2021, the Company had a pipeline of 51 hotels representing approximately 6,200 rooms. Two Company-owned hotels and three franchised hotels opened during the first quarter of 2021.

Company Owned Pipeline & Recently Opened Hotels as of March 31, 2021 Under Option Pre-Development Under Total Opened YTD Construction Pipeline 2021 # Hotels # # # Rooms # # # # # # Rooms Hotels Hotels Rooms Hotels Rooms Hotels Rooms 0 0 4 504 2 248 6 752 2 248 Third Party Pipeline & Recently Opened Hotels as of March 31, 2021 Commitments Applications Executed Total Opened YTD Pipeline 2021 # Hotels # # # Rooms # # # # # # Rooms Hotels Hotels Rooms Hotels Rooms Hotels Rooms 21 2,604 0 0 24 2,893 45 5,497 3 291 Definitions Under Option Locations with a signed purchase and sale agreement Pre-Development Land purchased, permitting and/or site work Under Construction Hotel is under construction Commitments Signed commitment to build or convert a certain number of hotels by a third party, generally associated with a prior portfolio sale Applications Third party filed franchise application with deposit Franchise and development application approved, geography identified Executed and deposits paid, various stages of pre-development and/or under construction

Capital Returns, Outlook and Conference Call

Due to the Companys pending acquisition by affiliates of The Blackstone Group Inc. and Starwood Capital Inc., the Company will not declare a quarterly dividend, will not issue Q2 2021 or Full Year 2021 guidance nor host a conference call at this time. Please refer to the Companys definitive proxy filed with the SEC on April 26, 2021, also available on our IR website www.aboutstay.com, for more information.

RevPAR Index

RevPAR Index is stated as a percentage and calculated by comparing RevPAR for owned hotels or system-wide hotels to the aggregate RevPAR of a group of competing hotels generally in the same market. As such, RevPAR Index is only a measure of RevPAR relative to certain competing hotels and not a measure of our absolute RevPAR or profitability. We subscribe to STR, Inc. ("STR"), an independent third-party service, which collects and compiles the data used to calculate RevPAR Index. We select the competing hotels included in the RevPAR Index calculation subject to STR's guidelines. The competing hotels included in STR guidelines will generally include certain hotels that are not considered part of the extended stay lodging segment of the hospitality industry and, instead, fall within the category of short-term stay hotels. STR does not endorse the Company, or any other company, and STR data should not be viewed as investment advice or as a recommendation to take a particular course of action.

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, cash flow from operating activities, 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 Companys presentation of the Non-GAAP Financial Measures does not replace the presentation of the Companys 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, acquisition, distribution policy, plans, goals, beliefs, business trends and future events, as well as the impact of the COVID-19 pandemic, its effects on the foregoing, government actions taken in response to the pandemic and actions that we have taken or plan to take in response to the pandemic and other non-historical statements. Forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Companys 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 Companys 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 Companys combined annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 25, 2021 and our definitive proxy filed with the SEC on April 26, 2021. 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 and adversely from what is expressed, implied or forecasted by the Companys forward-looking statements.

About Extended Stay AmericaExtended Stay America is the leading brand in the mid-priced extended stay segment in the U.S. with 652 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 564 hotels and over 62,800 rooms in the U.S. ESA also franchises an additional 88 Extended Stay America hotels. Visit www.esa.com for more information.

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

EXTENDED STAY AMERICA, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020(In thousands, except per share data)(Unaudited) Three Months Ended March 31, 2021 2020 % Variance REVENUES: Room revenues $ 249,868 $ 254,464 (1.8)%Other hotel revenues 6,680 6,768 (1.3)%Franchise and management 1,218 1,279 (4.8)%fees 257,766 262,511 (1.8)% Other revenues from franchised 1,805 3,790 (52.4)%and managed properties Total revenues 259,571 266,301 (2.5)% OPERATING EXPENSES: Hotel operating expenses 146,338 145,295 0.7%General and administrative 24,124 23,938 0.8%expensesDepreciation and 49,408 50,520 (2.2)%amortizationMerger transaction expenses 4,782 - n/a 224,652 219,753 2.2% Other expenses from franchised 2,444 4,207 (41.9)%and managed properties Total operating expenses 227,096 223,960 1.4% GAIN ON SALE OF HOTEL PROPERTIES 12,018 - n/a OTHER INCOME 1 2 (50.0)% INCOME FROM OPERATIONS 44,494 42,343 5.1% OTHER NON-OPERATING (INCOME) (84 ) 703 (111.9)%EXPENSE INTEREST EXPENSE, NET 31,462 32,685 (3.7)% INCOME BEFORE INCOME TAX EXPENSE 13,116 8,955 46.5% INCOME TAX EXPENSE 750 1,110 (32.4)% NET INCOME 12,366 7,845 57.6% NET INCOME ATTRIBUTABLE TO (10,445 ) (3,291 ) 217.4%NONCONTROLLING INTERESTS^(1) NET INCOME ATTRIBUTABLE TOEXTENDED STAY AMERICA, INC. $ 1,921 $ 4,554 (57.8)%COMMON SHAREHOLDERS NET INCOME PER EXTENDED STAYAMERICA, INC. COMMON SHARE - $ 0.01 $ 0.03 (57.9)%DILUTED WEIGHTED-AVERAGE EXTENDED STAYAMERICA, INC. COMMON SHARES 178,549 178,171 OUTSTANDING - DILUTED ^(1) Excluding interests in Paired Shares, the value of unaffiliated noncontrolling interests in Extended Stay America, Inc. totals $0.1 million. CONSOLIDATED BALANCE SHEET DATAAS OF MARCH 31, 2021 AND DECEMBER 31, 2020(In thousands) March 31, December 31, 2021 2020 (Unaudited) (Audited) Cash and cash equivalents $ 357,857 $ 396,770 Restricted cash $ 13,152 $ 13,151 Total assets $ 4,020,348 $ 4,089,149 Total debt, net of unamortizeddeferred financing costs and $ 2,643,929 $ 2,683,622 debt discounts ^(1)Total equity $ 1,134,655 $ 1,137,443 ^(1) Unamortized deferred financing costs and debt discounts totaled $37.2 million and $39.2 million as of March 31, 2021 andDecember 31, 2020, respectively.



EXTENDED STAY AMERICA, INC.OPERATING METRICSFOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020(Unaudited) COMPARABLE SYSTEM-WIDE OPERATING METRICS ^(1) Three Months Ended March 31, 2021 2020 VarianceNumber of hotels (as of March 31) 627 627 -Number of rooms (as of March 31) 68,999 68,999 -Comparable System-Wide Occupancy^(1) 75.0% 71.9% 310 bpsComparable System-Wide ADR^(1) $58.07 $61.60 (5.7)%Comparable System-Wide RevPAR^(1) $43.56 $44.30 (1.7)% COMPARABLE COMPANY-OWNED OPERATING METRICS ^(2) Three Months Ended March 31, 2021 2020 VarianceNumber of hotels (as of March 31) 552 552 -Number of rooms (as of March 31) 61,286 61,286 -Comparable Company-Owned Occupancy^(2) 74.5% 71.5% 300 bpsComparable Company-Owned ADR^(2) $59.59 $63.15 (5.6)%Comparable Company-Owned RevPAR^(2) $44.42 $45.15 (1.6)% COMPANY-OWNED OPERATING METRICS ^(3) Three Months Ended March 31, 2021 2020 VarianceNumber of hotels (as of March 31) 563 558 5Number of rooms (as of March 31) 62,674 62,053 621Company-Owned Occupancy^(3) 74.5% 71.4% 310 bpsCompany-Owned ADR^(3) $59.86 $63.35 (5.5)%Company-Owned RevPAR^(3) $44.60 $45.23 (1.4)% ^(1) Includes hotels owned and franchised for the full three months endedMarch 31, 2021 and 2020, respectively. ^(2) Includes hotels owned and operated by the Company for the full threemonths ended March 31, 2021 and 2020, respectively. ^(3) Includes results of operations of the Company's owned and operated hotelsduring the periods presented, which is summarized below:

Number of Hotels Date Acquired, Opened Number of Number of Owned Number of Owned or Disposed Rooms Hotels^(1) Rooms^(1)

January - - 557 61,933 1, 2020March 1 120 558 62,053 2020April 1 120 559 62,173 2020June 2 248 561 62,421 2020August 1 124 562 62,545 2020November 1 144 563 62,689 2020November (1 ) (146 ) 562 62,543 2020December 1 124 563 62,667 2020March 2 248 565 62,915 2021March (2 ) (241 ) 563 62,674 2021 ^(1) As of end of period.

EXTENDED STAY AMERICA, INC.NON-GAAP RECONCILIATION OF NET INCOME TO HOTEL OPERATING PROFIT AND HOTEL OPERATING MARGINFOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020(In thousands)(Unaudited) Three Months Ended March 31, 2021 2020 VarianceNet income $ 12,366 $ 7,845 57.6%Income tax expense 750 1,110 (32.4)%Interest expense, net 31,462 32,685 (3.7)%Other non-operating (income) (84 ) 703 (111.9)%expenseOther income (1 ) (2 ) (50.0)%Gain on sale of hotel properties (12,018 ) - n/aDepreciation and amortization 49,408 50,520 (2.2)%Merger transaction expenses 4,782 - n/aGeneral and administrative expenses 24,124 23,938 0.8%Loss on disposal of assets^(1) 1,232 3,343 (63.1)%Franchise and management fees (1,218 ) (1,279 ) (4.8)%System services loss, net 639 417 53.2%Hotel Operating Profit $ 111,442 $ 119,280 (6.6)% Room revenues $ 249,868 $ 254,464 (1.8)%Other hotel revenues 6,680 6,768 (1.3)%Total room and other hotel revenues $ 256,548 $ 261,232 (1.8)% Hotel Operating Margin 43.4% 45.7% (230) bps ^(1) Included in hotel operating expenses in the condensed consolidated statements of operations.

EXTENDED STAY AMERICA, INC.NON-GAAP RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDAFOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020(In thousands)(Unaudited) Three Months Ended March 31, 2021 2020 Net income $ 12,366 $ 7,845 Interest expense, net 31,462 32,685 Income tax expense 750 1,110 Depreciation and amortization 49,408 50,520 EBITDA 93,986 92,160 Equity-based compensation 2,348 1,126 Gain on sale of hotel properties (12,018) - Merger transaction expenses 4,782 - System services loss, net 639 417 Other expense^(1) 1,149 4,046 Adjusted EBITDA $ 90,886 $ 97,749 ^(1) Includes loss on disposal of assets and non-operating (income) expense,including foreign currency transaction costs. Loss on disposal of assetstotaled $1.2 million and $3.3 million, 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 MONTHS ENDED MARCH 31, 2021 AND 2020 (In thousands, except per share and per Paired Share data) (Unaudited) Three Months Ended March 31, 2021 2020 Net income per Extended Stay America, Inc. common $ 0.01 $ 0.03 share - diluted Net income attributable to Extended Stay America, $ 1,921 $ 4,554 Inc. common shareholdersNoncontrolling interests attributable to Class B 10,441 3,287 common shares of ESH REITReal estate depreciation and amortization 47,755 48,881 Gain on sale of hotel properties (12,018 ) - Tax effect of adjustments to net incomeattributable to Extended Stay America, Inc. common (3,038 ) (1,608 ) shareholdersFunds from Operations 45,061 55,114 Merger transaction expenses 4,782 - Tax effect of adjustments to Funds from Operations (406 ) - Adjusted Funds from Operations $ 49,437 $ 55,114 Adjusted Funds from Operations per Paired Share ? $ 0.28 $ 0.31 diluted Weighted average Paired Shares outstanding ? 178,549 178,171 diluted

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 MONTHS ENDED MARCH 31, 2021 AND 2020 (In thousands, except per share and per Paired Share data) (Unaudited) Three Months Ended March 31, 2021 2020 Net income per Extended Stay America, Inc. common $ 0.01 $ 0.03 share - diluted Net income attributable to Extended Stay America, $ 1,921 $ 4,554 Inc. common shareholdersNoncontrolling interests attributable to Class B 10,441 3,287 common shares of ESH REITPaired Share Income 12,362 7,841 Gain on sale of hotel properties (12,018 ) - Merger transaction expenses 4,782 - System services loss, net 639 417 Other expense^(1) 1,149 4,046 Tax effect of adjustments to Paired Share Income 464 (147 ) Adjusted Paired Share Income $ 7,378 $ 12,157 Adjusted Paired Share Income per Paired Share ? $ 0.04 $ 0.07 diluted Weighted average Paired Shares outstanding ? 178,549 178,171 diluted ^(1) Includes loss on disposal of assets and non-operating (income) expense, including foreign currency transaction costs. Loss on disposal of assetstotaled $1.2 million and $3.3 million, respectively.