CHARLOTTE, N.C.–(BUSINESS WIRE)–Extended Stay America, Inc. (NYSE:STAY) (the “Company”) today announced consolidated results for the quarter ended March 31, 2017.
First Quarter 2017 Highlights
- Revenue Per Available Room (“RevPAR”) grew 2.1% to $45.76
- Net Income increased 8.9% to $16.1 million
- Adjusted EBITDA increased 5.5% to $129.6 million
- Adjusted Funds from Operations (“Adjusted FFO”)1 per diluted Paired Share increased 11.7% to $0.35
- Adjusted Paired Share Income1 per diluted Paired Share increased 15.7% to $0.15
The Company’s Chief Executive Officer, Gerry Lopez, commented, “We were pleased with our strong topline finish and our solid expense discipline throughout the first quarter. This led to results finishing above our guidance for both RevPAR as well as Adjusted EBITDA. Additionally, both Adjusted Paired Share Income and Adjusted FFO per diluted Paired Share grew more than 10% in the first quarter.”
Mr. Lopez continued, “With our strong free cash flow and outlook for 2017 and beyond, we continue to focus on returning capital to shareholders. This morning, our Boards approved raising our quarterly dividend by 10.5% to $0.21 per Paired Share, marking the third year in a row since becoming a public company that we have increased our dividend by over 10%. This represents a roughly 5% annual yield at recent trading prices. In addition to our strong dividend, in the last 14 months the Company has repurchased and retired over 5% of our Paired Shares outstanding. We remain firmly committed to strong capital returns to shareholders as our free cash flow continues to increase and as we recycle capital.”
Financial and Operating Results
Total revenues for the three months ended March 31, 2017 increased 1.2% over the comparable period in 2016 to $291.0 million. Total revenue growth was affected by one fewer day in the quarter compared to the comparable period in 2016 due to leap year.
RevPAR for the three months ended March 31, 2017 grew 2.1% over the comparable period in 2016, driven by an improvement in average daily rate (“ADR”) of 0.8% while occupancy increased to 70.4% compared to 69.5% in the comparable period in 2016.
Hotel Operating Margin1 for the three months ended March 31, 2017 was 52.5% compared to 50.4% in the comparable period in 2016. Hotel operating margin flow-through, defined as the change in Hotel Operating Profit1 divided by the change in total hotel revenues, was 230.3%.
Net income for the three months ended March 31, 2017 was $16.1 million compared to $14.8 million in the comparable period in 2016. Net income during the quarter was impacted by a non-cash impairment charge of $12.4 million related to assets held for sale. Income tax expense for the three months ended March 31, 2017 was $4.5 million compared to $2.9 million in the comparable period in 2016.
Adjusted EBITDA for the three months ended March 31, 2017 increased $6.8 million to $129.6 million over the comparable period in 2016. Adjusted EBITDA, a non-GAAP measure, excludes non-cash equity-based compensation of $2.7 million, non-cash impairment loss of $12.4 million related to assets held for sale, and other net expenses of $2.7 million.
Adjusted FFO for the three months ended March 31, 2017 was $68.7 million, an increase of 6.8% from the comparable period in 2016. Adjusted FFO per diluted Paired Share was $0.35 compared to $0.31 in the comparable period in 2016. Adjusted FFO, a non-GAAP measure, represents Funds From Operations1, 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, 2017 was $28.5 million, or $0.15 per diluted Paired Share, compared to $25.8 million, or $0.13 per diluted Paired Share, in the comparable period in 2016. 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
The Company invested $48.4 million in capital expenditures during the first quarter of 2017 which includes $21.0 million in renovation capital and $25.1 million in maintenance capital. The Company completed 24 hotel renovations in the first quarter of 2017, bringing the total number of renovated hotels to 608. We expect to complete the renovation program in the second quarter of 2017.
Distribution and Share Repurchases
On April 27, 2017, the Boards of Directors of Extended Stay America, Inc. and ESH Hospitality, Inc., declared cash distributions totaling $0.21 per Paired Share for the first quarter of 2017. This represents a $0.02, or 10.5%, increase in the combined quarterly distribution. The distribution is comprised of $0.07 per Extended Stay America, Inc. common share and $0.14 per ESH Hospitality, Inc. Class A and B common share. The distributions are payable on May 25, 2017 to shareholders of record as of May 11, 2017.
During the quarter, the Company paid approximately $23.1 million to repurchase and retire approximately 1.4 million Paired Shares. The Company had approximately $137.1 million remaining for repurchases under the combined Paired Share repurchase program as of March 31, 2017.
To view full financial release and corresponding tables please click the PDF icon or visit: http://www.aboutstay.com/CorporateProfile.aspx?iid=4409177
