RLJ Lodging Trust Reports First Quarter 2019 Results

- Pro forma RevPAR increased 1.3%

- Repurchased 0.6 million common shares year-to-date for $10.8 million

- Refinanced approximately $381 million of debt (post quarter-end)

RLJ Lodging Trust (the "Company") RLJ today reported results for the three months ended March 31, 2019.

Highlights

• Pro forma RevPAR increased 1.3%, driven by a Pro forma ADR increase of 2.0%
• Net income of $28.3 million
• Pro forma Consolidated Hotel EBITDA of $120.5 million, an increase of 0.6% over the prior year
• Pro forma Hotel EBITDA Margin of 30.2%
• Adjusted FFO of $82.6 million, an increase of 1.4% over the prior year
• Repurchased 0.6 million common shares since the beginning of the year for $10.8 million at an average price of $17.53
• Refinanced approximately $381 million of debt subsequent to quarter-end, reducing interest rates, extending maturities, and adding flexibility

"We are pleased with our solid performance this quarter, which underscores the targeted capital investments we made last year in markets and assets that are positioned for outsized growth in 2019 and beyond. Our asset management team successfully implemented cost containment initiatives to mitigate the significant cost pressures that we are seeing, which aided in our ability to outperform our bottom line expectations," commented Leslie D. Hale, President and Chief Executive Officer. "In addition to achieving solid results, we prudently allocated capital through highly accretive share repurchases, further strengthened our balance sheet, and made progress on our strategic initiative to sell our non-core hotels. All of these initiatives have positioned RLJ to achieve our key 2019 strategic priorities."

The prefix "Pro forma", as defined by the Company, denotes operating results which include results for periods prior to its ownership and excludes sold hotels. Pro forma RevPAR and Pro forma Hotel EBITDA Margin are reported on a comparable basis and therefore exclude any hotels sold during the period and non-comparable hotels that were not open for operation or were closed for renovation for comparable periods. Explanations of EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, Hotel EBITDA Margin, FFO, and Adjusted FFO, as well as reconciliations of those measures to net income or loss, if applicable, are included within this release.

Pro forma RevPAR growth for the first quarter was 1.3%. The Company's top performing markets were Atlanta, Northern California, and Louisville with Pro forma RevPAR growth of 20.9%, 15.5%, and 13.5%, respectively. The Company's RevPAR growth was impacted by approximately 25 basis points from the government shutdown and 60 basis points from current year renovation disruption. Additionally, excluding Denver, which experienced softness in the quarter, Pro forma RevPAR growth was 1.8%.

Adjusted EBITDA for the first quarter was $111.5 million, a decrease of $4.2 million from the comparable period in 2018. Adjusted EBITDA for the comparable period in the prior year included $4.8 million from seven sold hotels. Normalizing for the impact of asset sales, Adjusted EBITDA would have increased by $0.6 million from the comparable period in 2018.

Interest expense for the first quarter was $20.1 million, a decrease of $8.6 million from the comparable period in 2018, primarily due to the prior year redemption of the senior secured notes and the repayment of the Knickerbocker mortgage. First quarter interest expense includes a unrealized gain of $2.3 million related to interest rate hedges that were specifically assigned to debt that was repaid in 2019. Please refer to the financial tables for a reconciliation of net interest expense.

Financial and Operating Highlights

Share Repurchases

Year-to-date, the Company has repurchased 0.6 million shares of its common stock for $10.8 million at an average price per share of $17.53. The Company's share buyback program has remaining capacity of $249.6 million.

Balance Sheet

As of March 31, 2019, the Company had $241.5 million of unrestricted cash on its balance sheet, $460.0 million available on its revolving credit facility, and $2.2 billion of debt outstanding.

The Company's ratio of net debt to Adjusted EBITDA for the trailing twelve-month period ended March 31, 2019, was 3.8x.

Dividends

The Company's Board of Trustees declared a cash dividend of $0.33 per common share of beneficial interest in the first quarter. The dividend was paid on April 15, 2019, to shareholders of record as of March 29, 2019.

The Company's Board of Trustees declared a preferred dividend of $0.4875 on its Series A cumulative convertible preferred shares. The dividend was paid on April 30, 2019, to shareholders of record as of March 29, 2019.

Subsequent Events

In April 2019, the Company refinanced approximately $381 million of secured debt, which reduced borrowing costs, extended maturities (including extensions), and improved non-financial terms. These included the following:

• New $200.0 million five-year floating rate mortgage loan maturing April 2024
• New $96.0 million seven-year floating rate mortgage loan maturing April 2026
• Amended and restated $85.0 million seven-year floating rate mortgage loan maturing April 2026

The Company utilized proceeds from the two new loans to repay its $150.0 million secured loan maturing in October 2021 and approximately $140 million secured loan maturing in March 2022.

Outlook

The Company's full-year outlook includes all hotels owned as of May 8, 2019. Potential future acquisitions, dispositions, financing, or share repurchases are not incorporated into the Company's outlook below and could result in a material change to the Company's outlook. For the full year 2019, the Company is updating its outlook to incorporate first quarter results.

Additionally, key assumptions underlying the Company's full year 2019 outlook include:

• Net interest expense of $88 million to $90 million, which excludes the impact of unrealized gains or losses related to interest rate hedges
• Capital expenditures related to renovations in the range of $90 million to $110 million and approximately 40 bps to 50 bps of renovation related RevPAR disruption
• Cash income tax expense of $3 million to $4 million
• Diluted weighted-average common shares and units of 173.7 million, assuming no additional share repurchases

For the second quarter 2019, the Company anticipates Pro forma Consolidated Hotel EBITDA and Adjusted EBITDA to be between 28.75% and 29.75% of the Company's full year 2019 outlook, calculated at the midpoint of the respective outlook range.

Earnings Call

The Company will conduct its quarterly analyst and investor conference call on May 9, 2019, at 10:00 a.m. (Eastern Time). The conference call can be accessed by dialing (877) 407-3982 or (201) 493-6780 for international participants and requesting RLJ Lodging Trust's first quarter earnings conference call. Additionally, a live webcast of the conference call will be available through the Company's website at http://www.rljlodgingtrust.com. A replay of the conference call webcast will be archived and available online through the Investor Relations page of the Company's website.

About Us

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. The Company's portfolio consists of 150 hotels with approximately 28,600 rooms located in 25 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.

Forward Looking Statements

The following information contains certain statements, other than purely historical information, including estimates, projections, statements relating to the Company's business plans, objectives and expected operating results, and the assumptions upon which those statements are based, that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally are identified by the use of the words "believe," "project," "expect," "anticipate," "estimate," "plan," "may," "will," "will continue," "intend," "should," or similar expressions. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs, and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and the Company's actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the current global economic uncertainty, increased direct competition, changes in government regulations or accounting rules, changes in local, national, and global real estate conditions, declines in the lodging industry, seasonality of the lodging industry, risks related to natural disasters, such as earthquakes and hurricanes, hostilities, including future terrorist attacks or fear of hostilities that affect travel, the Company's ability to obtain lines of credit or permanent financing on satisfactory terms, changes in interest rates, access to capital through offerings of the Company's common and preferred shares of beneficial interest, or debt, the Company's ability to identify suitable acquisitions, the Company's ability to close on identified acquisitions and integrate those businesses, and inaccuracies of the Company's accounting estimates. Given these uncertainties, undue reliance should not be placed on such statements. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. The Company cautions investors not to place undue reliance on these forward-looking statements and urges investors to carefully review the disclosures the Company makes concerning risks and uncertainties in the sections entitled "Risk Factors," "Forward-Looking Statements," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report, as well as risks, uncertainties, and other factors discussed in other documents filed by the Company with the Securities and Exchange Commission.

RLJ Lodging Trust
Non-GAAP and Accounting Commentary

Non-Generally Accepted Accounting Principles ("Non-GAAP") Financial Measures

The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its performance: (1) FFO, (2) Adjusted FFO, (3) EBITDA, (4) EBITDAre, (5) Adjusted EBITDA, (6) Hotel EBITDA, and (7) Hotel EBITDA Margin. These Non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of its operating performance. FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA, and Hotel EBITDA Margin as calculated by the Company, may not be comparable to other companies that do not define such terms exactly as the Company.

Funds From Operations ("FFO")

The Company calculates Funds from Operations ("FFO") in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which defines FFO as net income or loss (calculated in accordance with GAAP), excluding gains or losses from sales of real estate, impairment, the cumulative effect of changes in accounting principles, plus depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company's operations. The Company believes that the presentation of FFO provides useful information to investors regarding the Company's operating performance and can facilitate comparisons of operating performance between periods and between real estate investment trusts ("REITs"), even though FFO does not represent an amount that accrues directly to common shareholders.

The Company's calculation of FFO may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or do not calculate FFO per diluted share in accordance with NAREIT guidance. Additionally, FFO may not be helpful when comparing the Company to non-REITs. The Company presents FFO attributable to common shareholders, which includes unitholders of limited partnership interest ("OP units") in RLJ Lodging Trust, L.P., the Company's operating partnership, because the OP units are redeemable for common shares of the Company. The Company believes it is meaningful for the investor to understand FFO attributable to all common shares and OP units.

EBITDA and EBITDAre

Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA") is defined as net income or loss excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sales of assets; and (3) depreciation and amortization. The Company considers EBITDA useful to an investor in evaluating and facilitating comparisons of its operating performance between periods and between REITs by removing the impact of its capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from its operating results. In addition, EBITDA is used as one measure in determining the value of hotel acquisitions and dispositions.

In addition to EBITDA, the Company presents EBITDAre in accordance with NAREIT guidelines, which defines EBITDAre as net income or loss (calculated in accordance with GAAP) excluding interest expense, income tax expense, depreciation and amortization expense, gains or losses from sales of real estate, impairment, and adjustments for unconsolidated partnerships and joint ventures. The Company believes that the presentation of EBITDAre provides useful information to investors regarding the Company's operating performance and can facilitate comparisons of operating performance between periods and between REITs.

Adjustments to FFO and EBITDAre

The Company adjusts FFO, EBITDA, and EBITDAre for certain items that the Company considers either outside the normal course of operations or extraordinary. The Company believes that Adjusted FFO, Adjusted EBITDA, and Adjusted EBITDAre provide useful supplemental information to investors regarding its ongoing operating performance that, when considered with net income or loss, FFO, EBITDA, and EBITDAre, are beneficial to an investor's understanding of its operating performance. The Company adjusts FFO, EBITDA, and EBITDAre for the following items:

• Transaction Costs: The Company excludes transaction costs expensed during the period.
• Non-Cash Expenses: The Company excludes the effect of certain non-cash items such as the amortization of share-based compensation and non-cash income taxes.
• Other Non-Operational Expenses: The Company excludes the effect of certain non-operational expenses representing income and expenses outside of the normal course of operations

The Company previously presented Adjusted EBITDA with adjustments for noncontrolling interests in consolidated joint ventures. The rationale for including 100% of Adjusted EBITDA for consolidated joint ventures with noncontrolling interests is that the full amount of any debt of these consolidated joint ventures is reported in our consolidated balance sheet and metrics using debt to EBITDA provide a better understanding of the Company's leverage. This is also consistent with NAREIT's definition of EBITDAre.

Hotel EBITDA and Hotel EBITDA Margin

With respect to Consolidated Hotel EBITDA, the Company believes that excluding the effect of corporate-level expenses and certain non-cash items provides a more complete understanding of the operating results over which individual hotels and operators have direct control. The Company believes property-level results provide investors with supplemental information about the ongoing operational performance of the Company's hotels and the effectiveness of its third-party management companies.

Pro forma Consolidated Hotel EBITDA includes prior ownership information provided by the sellers of the hotels for periods prior to our acquisition of the hotels, which has not been audited and excludes results from sold hotels as applicable. Pro forma Hotel EBITDA and Pro forma Hotel EBITDA Margin exclude the results of any non-comparable hotels that were under renovation or not open for the entirety of the comparable periods. The following is a summary of pro forma hotel adjustments:

Pro forma adjustments: Acquired hotels

For the three months ended March 31, 2019 and 2018, respectively, no hotels were acquired.

Pro forma adjustments: Sold hotels

For the three months ended March 31, 2019, no hotels were sold. For the three months ended March 31, 2018, pro forma adjustments included the following hotels:

• Embassy Suites Boston - Marlborough sold in February 2018
• Sheraton Philadelphia Society Hill Hotel sold in March 2018
• Embassy Suites Napa Valley sold in July 2018
• DoubleTree Columbia sold in August 2018
• The Vinoy Renaissance St. Petersburg Resort & Golf Club sold in August 2018
• DoubleTree by Hilton Burlington Vermont sold in September 2018
• Holiday Inn San Francisco - Fisherman's Wharf sold in October 2018

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