– Comparable Hotel1 RevPAR grows 6.0% and 6.1% in the Fourth Quarter and Full Year, Respectively –

– Comparable Hotel Adjusted EBITDA2 grows 4.2% and 8.5% in the Fourth Quarter and Full Year, Respectively –

– Completed sale of 53 economy extended stay hotels for $285.0 million –

– Provides 2016 Guidance –

– Increases Paired Share Repurchase Authorization to $200 million –

CHARLOTTE, N.C.–Extended Stay America, Inc. (NYSE:STAY) (the “Company”) today announced consolidated results for the fourth quarter and year ended December 31, 2015.

Fourth Quarter 2015 Highlights

  • Revenue Per Available Room (“RevPAR”) grew 7.1% to $42.66
  • Comparable Hotel RevPAR grew 6.0% to $43.71
  • Total revenues increased 4.8% to $296.3 million
  • Adjusted EBITDA increased 3.0% to $127.1 million
  • Comparable Hotel Adjusted EBITDA increased 4.2% to $122.3 million
  • Net income increased 371.8% to $132.1 million
  • Adjusted Paired Share Income2 of $30.9 million, or $0.15 per diluted Paired Share

Full Year 2015 Highlights

  • RevPAR grew 6.7% to $45.89
  • Comparable Hotel RevPAR grew 6.1% to $47.36
  • Total revenues increased 5.9% to $1,284.8 million
  • Hotel Operating Margin2 expanded 200 basis points to 53.7%
  • Adjusted EBITDA increased 8.3% to $603.1 million
  • Comparable Hotel Adjusted EBITDA increased 8.5% to $574.1 million
  • Net income increased 88.0% to $283.0 million
  • Adjusted Paired Share Income increased 14.7% to $194.7 million, or $0.95 per diluted Paired Share

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1 Comparable Hotels include 629 Extended Stay America and Extended Stay Canada-branded hotels owned and operated as of December 31, 2015.

2 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).

Extended Stay America’s Chief Executive Officer, Gerry Lopez, commented, “Our results demonstrate that our initiatives are working, as illustrated by our strong performance for the quarter and year. In the fourth quarter we continued our high rate of RevPAR growth, completed 50 hotel renovations, sold 53 economy extended stay hotels at an attractive price, authorized a share repurchase program and declared capital return to shareholders beyond our regular dividend. In 2015, we improved our hotel assets by completing 128 hotel renovations, completed a system-wide rollout of an automated revenue management system and expanded our corporate sales force, while also significantly deleveraging our balance sheet.”

Mr. Lopez continued, “As we look to 2016, we remain confident in our ability to grow. Given our geographic diversification, our limited exposure to gateway cities and international travel, low supply growth in our segment, and the demonstrated success of our initiatives, we believe that we will continue to outperform. Our unique value proposition, ongoing renovation program, robust revenue management system and strong sales force position us to deliver enhanced results this year and beyond.”

Financial and Operating Results

Total revenues for the three months ended December 31, 2015 increased 4.8% over the comparable period in 2014 to $296.3 million. Comparable Hotel total revenues for the fourth quarter increased 6.2% to $283.7 million. Total revenues for the year ended December 31, 2015 increased 5.9% over the comparable period in 2014 to $1,284.8 million. Comparable Hotel total revenues for the year increased 6.2% to $1,217.4 million.

RevPAR for the three months ended December 31, 2015 grew 7.1% over the comparable period in 2014, driven by an improvement in average daily rate (“ADR”) of 6.7% while occupancy increased to 69.1% compared to 68.8% in the comparable period in 2014. Comparable Hotel RevPAR for the fourth quarter increased 6.0% to $43.71. RevPAR for the year ended December 31, 2015 grew 6.7% over the comparable period in 2014, driven by an improvement in ADR of 7.4% while occupancy decreased to 73.7% compared to 74.3% in the comparable period in 2014. Comparable Hotel RevPAR for the year increased 6.1% to $47.36.

Hotel Operating Margin for the three months ended December 31, 2015 and 2014 was 50.2%. Hotel operating margin flow-through, defined as the change in Hotel Operating Profit2 divided by the change in total room and other hotel revenues, was 49.9% for the three months ended December 31, 2015. Hotel Operating Margin for the year ended December 31, 2015 was 53.7% compared to 51.7% in the comparable period in 2014. Hotel operating margin flow-through for the year ended December 31, 2015 was 88.4%.

Adjusted EBITDA for the three months ended December 31, 2015 increased $3.7 million to $127.1 million, representing 3.0% growth over the comparable period in 2014. The Company’s previously issued guidance included $3.0 million additional Adjusted EBITDA from the 53 economy extended stay hotels sold in the fourth quarter. Adjusted EBITDA excludes a gain of $130.9 million from the fourth quarter disposition, non-cash equity-based compensation of $2.6 million, loss on disposal of assets of $6.0 million and other non-operating expense of $0.7 million during the fourth quarter. Comparable Hotel Adjusted EBITDA for the fourth quarter increased $4.9 million to $122.3 million, representing 4.2% growth over the comparable period in 2014. Adjusted EBITDA for the year ended December 31, 2015 increased $46.4 million to $603.1 million, representing 8.3% growth over the comparable period in 2014. Comparable Hotel Adjusted EBITDA for the year ended December 31, 2015 increased $45.0 million to $574.1 million, representing 8.5% growth over the comparable period in 2014.

Net income for the three months ended December 31, 2015 was $132.1 million compared to $28.0 million in the comparable period in 2014, an increase of 371.8%. The increase in net income was driven by a pre-tax gain of $130.9 million from the sale of 53 economy extended stay hotels during the fourth quarter. Income tax expense for the three months ended December 31, 2015 was $28.4 million compared to $6.9 million in the comparable period in 2014. The increase in income tax expense was primarily due to the gain on the disposition. Net income for the year ended December 31, 2015 was $283.0 million compared to $150.6 million in the comparable period in 2014, an increase of 88.0%. Income tax expense for the year was $76.5 million compared to $45.1 million in the comparable period in 2014.

Adjusted Paired Share Income for the three months ended December 31, 2015 was $30.9 million, or $0.15 per diluted Paired Share, compared to $32.7 million, or $0.16 per diluted Paired Share, in the comparable period in 2014. Adjusted Paired Share Income decreased during the quarter due to increased depreciation and interest expense. Adjusted Paired Share Income for the year ended December 31, 2015 was $194.7 million, or $0.95 per diluted Paired Share, compared to $169.7 million, or $0.83 per diluted Paired Share, in the comparable period in 2014. Adjusted Paired Share Income, a non-GAAP measure, represents net income, as adjusted, attributable to our 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

The Company invested $63.6 million in capital expenditures during the three months ended December 31, 2015, which includes hotel renovations, ordinary maintenance capital and information technology projects. The Company invested $204.7 million during the year ended December 31, 2015 in capital expenditures, including $108.1 million on hotel renovations.

Distribution

This morning, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. declared cash distributions totaling $0.17 per Paired Share for the fourth quarter of 2015. These distributions include $0.15 per ESH Hospitality, Inc. Class A and Class B common share and $0.02 per Extended Stay America, Inc. common share. The distributions are payable on March 22, 2016 to shareholders of record as of March 8, 2016.

Share Repurchase

This morning, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc. authorized an increase to the Company’s combined Paired Share repurchase program for up to an additional $100 million of Paired Shares. The Company’s current repurchase program authorization is now for up to$200 million of Paired Shares. Repurchases may be made at management’s discretion from time to time in the open market, in privately negotiated transactions or by other means (including through Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended without prior notice.

2016 Outlook

The Company’s outlook for 2016 is as follows:

  • Total revenues are expected to range from $1.266 billion to $1.290 billion
  • Comparable Hotel total revenues are expected to increase by approximately 4% to 6%
  • Adjusted EBITDA is expected to range from $600 million to $620 million, representing approximately 4.5 % to 8.0% growth over 2015 Comparable Hotel Adjusted EBITDA
  • Depreciation and amortization of $215 million to $220 million
  • Net interest expense of $135 million to $140 million
  • Effective tax rate is expected to range between 23.0% and 24.0%
  • Net income is anticipated to range from $163 million to $192 million
  • Capital expenditures are expected to range from $240 million to $260 million, including $120 to $135 million in hotel renovation capital and approximately $100 million in maintenance capital

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