– Net Income of $30.1 million and $163.4 million in the Fourth Quarter and Full Year, Respectively
– Comparable Hotel1 Adjusted EBITDA2 grows 16.5% to $142.5 million in the Fourth Quarter
– Comparable Hotel Adjusted EBITDA grows 7.2% to $615.7 million for the Full Year
– Comparable Hotel RevPAR grows 4.1% and 3.9% in the Fourth Quarter and Full Year, Respectively
CHARLOTTE, N.C-Extended Stay America, Inc. and ESH Hospitality, Inc. (NYSE:STAY) (together, the “Company”) today announced consolidated results for the quarter and year ended December 31, 2016.
Fourth Quarter 2016 Highlights
- Comparable Hotel total revenues grew 4.2% to $295.7 million
- Comparable Hotel Revenue Per Available Room (“RevPAR”) grew 4.1% to $45.52
- Comparable Hotel Adjusted EBITDA increased 16.5% to $142.5 million
- Adjusted Funds From Operations (“Adjusted FFO”)2 grew 20.5% to $80.5 million, or $0.41 per diluted Paired Share
- Adjusted Paired Share Income2 grew 25.4% to $38.8 million, or $0.20 per diluted Paired Share
Full Year 2016 Highlights
- Comparable Hotel total revenues grew 4.4% to $1,270.6 million
- Comparable Hotel RevPAR grew 3.9% to $49.23
- Comparable Hotel Adjusted EBITDA increased 7.2% to $615.7 million
- Adjusted FFO grew 6.0% to $359.3 million, or $1.79 per diluted Paired Share
- Adjusted Paired Share Income grew 2.2% to $199.0 million, or $0.99 per diluted Paired Share
- Capital Expenditures of $225.3 million
Extended Stay America’s Chief Executive Officer, Gerry Lopez, commented, “We are very pleased with our performance in the fourth quarter and for the full year of 2016. Our RevPAR growth rates exceeded the lodging industry which, when added to solid expense controls and great work by our field based teams of operators, resulted in outstanding performance over the quarter and year. The strong numbers allowed us to invest in our assets and future growth plans, to the tune of $225 million in capital expenditures, reduce our debt by $171 million and return $340 million to paired shareholders in the form of dividends and share repurchases. Investments in the estate, debt reduction and capital returned to shareholders are exactly the priorities we set forth in our Investor Day last June.”
Mr. Lopez continued, “Looking to 2017, we are encouraged by the improved sense of consumer and business optimism we have seen across the country. These positive views, the completion of our last set of hotel renovations, as well as limited new supply in our chain-scale will allow us to stretch the current phase of the cycle. This year we will maintain our focus on operational excellence and shareholder returns, while at the same time setting the stage for maximizing value well into the future.”
Financial and Operating Results
Total revenues for the three months ended December 31, 2016 were $295.7 million while Comparable Hotel total revenues increased by 4.2% over the same period in 2015. Total revenues for the year ended December 31, 2016 were $1,270.6 million while Comparable Hotel total revenues increased by 4.4% over the same period in 2015.
RevPAR for the three months ended December 31, 2016 grew 6.7% over the same period in 2015, driven by an improvement in average daily rate (“ADR”) of 4.2%. Occupancy increased to 70.7% compared to 69.1% in the same period in 2015. Comparable Hotel RevPAR grew 4.1% during the quarter to $45.52 driven by a 1.7% increase in ADR and a 160 basis point increase in occupancy. RevPAR for the year ended December 31, 2016 increased 7.3% over the same period in 2015, driven by a 6.8% increase in ADR. Occupancy increased to 74.1% compared to 73.7% in the same period in 2015. Comparable Hotel RevPAR grew 3.9% during the year to $49.23 driven by a 3.4% increase in ADR and a 40 basis point increase in occupancy.
Hotel Operating Margin2 for the three months ended December 31, 2016 was 55.1% compared to 50.2% in the same period in 2015. Comparable Hotel Operating Margin increased 430 basis points over the same period in 2015. Comparable Hotel operating margin flow-through, defined as the change in Comparable Hotel Operating Profit2 divided by the change in Comparable Hotel total revenues, was 157.2%. Comparable Hotel Operating Margin for the year ended December 31, 2016 was 55.1% compared to 54.3% in the same period in 2015 and Comparable Hotel operating margin flow-through was 74.3%.
Net income for the three months ended December 31, 2016 was $30.1 million compared to $132.1 million in the same period in 2015. Net income decreased primarily due to a gain on asset sales in the same period in 2015. Income tax expense for the three months ended December 31, 2016 was $8.1 million compared to $28.4 million in the same period in 2015. Net income for the year ended December 31, 2016 was $163.4 million compared to $283.0 million in the same period in 2015. Income tax expense for the year ended December 31, 2016 was $34.4 million compared to $76.5 million in the same period in 2015.
Adjusted EBITDA for the three months ended December 31, 2016 was $142.5 million. Adjusted EBITDA for the three months excludes non-cash equity-based compensation of $3.4 million, impairment charges of $7.1 million, and loss on disposal of assets and other net expenses of $3.6 million. Comparable Hotel Adjusted EBITDA increased $20.1 million or 16.5% during the quarter over the same period in 2015. Adjusted EBITDA, a non-GAAP measure, for the year ended December 31, 2016 was $615.7 million. Adjusted EBITDA for the year excludes non-cash equity based compensation of $12.0 million, impairment charges of $9.8 million and loss on disposal of assets and other net expenses of $10.3 million. Comparable Hotel Adjusted EBITDA increased $41.5 million or 7.2% during the year ended December 31, 2016 over the same period in 2015.
Adjusted FFO for the three months ended December 31, 2016 was $80.5 million, an increase of 20.5% from the same period in 2015. Adjusted FFO per diluted Paired Share was $0.41 compared to $0.33 in the same period in 2015. Adjusted FFO for the year ended December 31, 2016 was $359.3 million, an increase of 6.0% over the same period in 2015. Adjusted FFO per diluted Paired Share was $1.79 compared to $1.66 for the same period in 2015. 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 December 31, 2016 was $38.8 million, or $0.20 per diluted Paired Share, compared to $30.9 million, or $0.15 per diluted Paired Share, in the same period in 2015. Adjusted Paired Share Income for the year ended December 31, 2016 was $199.0 million, or $0.99 per diluted Paired Share, compared to $194.7 million, or $0.95 per diluted Paired Share, in the same period in 2015. 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. 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 Expenditures
The Company invested $58.9 million in capital expenditures during the fourth quarter of 2016 including $25.7 million in renovation capital and $31.1 million in maintenance capital. The Company completed 37 hotel renovations during the fourth quarter of 2016, bringing the total number of renovated hotels to 584. For the year ended December 31, 2016, the Company invested $225.3 million in capital expenditures including $107.7 million in renovation capital and $108.1 million in maintenance capital.
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