RLJ Lodging Trust (NYSE:RLJ) Q1 2022 Results Conference Call May 5, 2022 10:00 AM ET Company Participants Nikhil Bhalla - Vice President of Investor Relations Leslie Hale - President and Chief Executive Officer Sean Mahoney - Executive Vice President and Chief Financial Officer Tom Bardenett - Executive Vice President of Asset Management Conference Call Participants Anthony Powell - Barclays Austin Wurschmidt - KeyBanc Michael Bellisario - Baird Tyler Batory - Oppenheimer Gregory Miller - Truist Securities ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) This section provides a comprehensive overview of the company's financial performance and position [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited consolidated financial statements for Q1 2022, detailing balance sheets, operations, equity, cash flows, and accounting notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position at March 31, 2022, and December 31, 2021, detailing assets, liabilities, and equity Consolidated Balance Sheets (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $4,921,657 | $5,148,976 | | Total liabilities | $2,500,865 | $2,735,109 | | Total equity | $2,420,792 | $2,413,867 | | Cash and cash equivalents | $479,047 | $665,341 | | Debt, net | $2,210,725 | $2,409,438 | - Total assets decreased from **$5.15 billion** at December 31, 2021, to **$4.92 billion** at March 31, 2022. Total liabilities also decreased from **$2.74 billion** to **$2.50 billion**, primarily driven by a reduction in net debt. Cash and cash equivalents saw a significant decrease from **$665.34 million** to **$479.05 million**[10](index=10&type=chunk) [Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) Details the company's financial performance for Q1 2022 and 2021, including revenues, expenses, and net income/loss Statements of Operations and Comprehensive Income (Loss) (in thousands) | Metric | Three months ended March 31, 2022 (in thousands) | Three months ended March 31, 2021 (in thousands) | | :------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total revenues | $242,899 | $119,552 | | Total operating expenses | $242,613 | $172,294 | | Net loss | $(15,469) | $(79,117) | | Net loss attributable to common shareholders | $(21,526) | $(84,264) | | Basic and diluted net loss per common share | $(0.13) | $(0.51) | | Comprehensive income (loss) | $12,858 | $(62,397) | - Total revenues significantly increased by **103.1%** from **$119.55 million** in Q1 2021 to **$242.90 million** in Q1 2022. Net loss attributable to common shareholders improved substantially from **$(84.26 million)** in Q1 2021 to **$(21.53 million)** in Q1 2022, leading to a reduced basic and diluted net loss per common share from **$(0.51)** to **$(0.13)**[12](index=12&type=chunk) [Statements of Changes in Equity](index=7&type=section&id=Statements%20of%20Changes%20in%20Equity) Outlines changes in the company's equity, including total equity, accumulated other comprehensive income, and common shares outstanding Statements of Changes in Equity (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------------- | :----------------------------- | :----------------------------- |\n| Total Equity | $2,420,792 | $2,413,867 | | Accumulated Other Comprehensive Income (Loss) | $11,214 | $(17,113) | | Common Shares Outstanding | 166,843,586 | 166,503,062 | - Total equity increased slightly from **$2.41 billion** at December 31, 2021, to **$2.42 billion** at March 31, 2022. A notable change was the shift from an accumulated other comprehensive loss of **$(17.11 million)** to an income of **$11.21 million**, primarily due to unrealized gains on interest rate derivatives[17](index=17&type=chunk) [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) Presents the company's cash flows from operating, investing, and financing activities for Q1 2022 and 2021 Statements of Cash Flows (in thousands) | Metric | Three months ended March 31, 2022 (in thousands) | Three months ended March 31, 2021 (in thousands) | | :--------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash flow provided by (used in) operating activities | $10,291 | $(29,008) | | Net cash flow provided by (used in) investing activities | $9,791 | $(6,076) | | Net cash flow used in financing activities | $(211,650) | $(218,471) | | Net change in cash, cash equivalents, and restricted cash reserves | $(191,568) | $(253,555) | | Cash, cash equivalents, and restricted cash reserves, end of period | $522,301 | $681,235 | - Operating activities generated **$10.29 million** in cash in Q1 2022, a significant improvement from a **$(29.01 million)** usage in Q1 2021. Investing activities also turned positive, providing **$9.79 million**, primarily from hotel property sales. Financing activities continued to be a net use of cash, totaling **$(211.65 million)**, mainly due to Revolver repayment[23](index=23&type=chunk) [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Details significant accounting policies, investments, debt, equity, and other financial activities supporting the consolidated financial statements [1. General](index=10&type=section&id=1.%20General) Outlines RLJ Lodging Trust's business as a Maryland REIT, its hotel portfolio, and the material impact of the COVID-19 pandemic - RLJ Lodging Trust is a Maryland REIT owning primarily premium-branded, high-margin, focused-service and compact full-service hotels. As of March 31, 2022, the Company owned **97 hotel properties** with approximately **21,400 rooms** across 22 states and D.C., with **99.5% ownership** in its Operating Partnership[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) - The COVID-19 pandemic has had, and is expected to continue to have, a material impact on the Company's financial results and liquidity, with the full extent of the impact remaining uncertain[29](index=29&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Summarizes the key accounting principles and estimates used in preparing the unaudited consolidated financial statements, noting no material changes - The unaudited consolidated financial statements are prepared in accordance with GAAP and SEC rules, including all necessary management adjustments. The Company's significant accounting policies remain largely unchanged from December 31, 2021, with no material impact from ASU 2020-04 (Reference Rate Reform)[30](index=30&type=chunk)[31](index=31&type=chunk)[36](index=36&type=chunk) - The preparation of financial statements involves estimates and assumptions, which have become more challenging due to the COVID-19 pandemic[35](index=35&type=chunk) [3. Investment in Hotel Properties](index=11&type=section&id=3.%20Investment%20in%20Hotel%20Properties) Details the net investment in hotel properties, accumulated depreciation, and depreciation expense for the period, noting no impairment losses Investment in Hotel Properties (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Investment in hotel properties, net | $4,155,048 | $4,219,116 | | Accumulated depreciation | $(1,471,994) | $(1,449,500) | | Depreciation expense (Q1) | $46,700 | $46,800 | - Net investment in hotel properties decreased from **$4.22 billion** at December 31, 2021, to **$4.16 billion** at March 31, 2022. The Company recognized approximately **$46.70 million** in depreciation expense for Q1 2022, consistent with **$46.80 million** in Q1 2021. No impairment losses were recorded in Q1 2022, compared to **$5.90 million** in Q1 2021[37](index=37&type=chunk)[38](index=38&type=chunk) [4. Sale of Hotel Properties](index=11&type=section&id=4.%20Sale%20of%20Hotel%20Properties) Reports the net gain and sales prices from hotel property dispositions for the three months ended March 31, 2022 and 2021 Sale of Hotel Properties (in thousands) | Metric | Three months ended March 31, 2022 (in thousands) | Three months ended March 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net gain on sale of hotel properties | $1,417 | $1,083 | | Sales price (Q1 2022) | $35,500 | N/A | | Sales price (Q1 2021) | N/A | $4,400 | - The Company recorded a net gain of **$1.42 million** from the sale of hotel properties in Q1 2022, up from **$1.08 million** in Q1 2021. In Q1 2022, one hotel (Marriott Denver Airport @ Gateway Park) was sold for approximately **$35.50 million**, while in Q1 2021, one hotel (Courtyard Houston Sugarland) was sold for approximately **$4.40 million**[39](index=39&type=chunk)[40](index=40&type=chunk) [5. Revenue](index=12&type=section&id=5.%20Revenue) Analyzes the company's total revenues by category, highlighting significant increases in room, food and beverage, and other revenues Revenue by Type (in thousands) | Revenue Type | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change (in thousands) | | :------------- | :--------------------- | :--------------------- | :-------------------- | | Room revenue | $205,779 | $102,772 | $103,007 | | Food and beverage revenue | $20,901 | $6,242 | $14,659 | | Other revenue | $16,219 | $10,538 | $5,681 | | Total Revenue | $242,899 | $119,552 | $123,347 | - Total revenues increased by **$123.35 million**, or **103.1%**, from **$119.55 million** in Q1 2021 to **$242.90 million** in Q1 2022, driven by significant increases across all revenue categories, particularly room revenue[41](index=41&type=chunk) [6. Debt](index=13&type=section&id=6.%20Debt) Details the company's debt structure, including Senior Notes, Revolver, Term Loans, and Mortgage loans, and discusses compliance with covenants Debt Breakdown (in thousands) | Debt Type | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------- | :----------------------------- | :----------------------------- | | Senior Notes, net | $987,534 | $986,942 | | Revolver | $0 | $200,000 | | Term Loans, net | $815,439 | $815,004 | | Mortgage loans, net | $407,752 | $407,492 | | Total Debt, net | $2,210,725 | $2,409,438 | - Total net debt decreased by **$198.71 million** from **$2.41 billion** at December 31, 2021, to **$2.21 billion** at March 31, 2022, primarily due to the repayment of the **$200.00 million** Revolver balance. The Company was in compliance with all Senior Notes covenants as of March 31, 2022[42](index=42&type=chunk)[44](index=44&type=chunk) - Financial maintenance covenants under Revolver and Term Loan agreements were waived through March 31, 2022, with modified thresholds for subsequent periods. The Company maintains a minimum liquidity level of **$150.00 million**, which it met[47](index=47&type=chunk)[48](index=48&type=chunk) - Interest expense decreased by **$3.33 million** to **$24.56 million** in Q1 2022 from **$27.90 million** in Q1 2021, driven by lower average debt balances and effective interest rates[54](index=54&type=chunk) [7. Derivatives and Hedging Activities](index=16&type=section&id=7.%20Derivatives%20and%20Hedging%20Activities) Examines the company's interest rate swap positions, fair values, and their impact on accumulated other comprehensive income (loss) and interest expense Derivatives and Hedging Activities (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :---------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Aggregate fair value of interest rate swap liabilities | $4,494 | $21,465 | | Aggregate fair value of interest rate swap assets | $20,529 | $1,548 | | Unrealized gains in accumulated other comprehensive income (loss) | $11,200 | $(17,100) | | Reclassified to interest expense (Q1) | $4,900 | $7,300 | - The Company's interest rate swap positions shifted from a net liability of **$(19.92 million)** at December 31, 2021, to a net asset of **$16.04 million** at March 31, 2022. This change is reflected in the accumulated other comprehensive income (loss), which moved from an unrealized loss of **$(17.10 million)** to an unrealized gain of **$11.20 million**[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) - Approximately **$3.30 million** of unrealized losses from interest rate swaps are expected to be reclassified into earnings within the next 12 months[58](index=58&type=chunk) [8. Fair Value](index=17&type=section&id=8.%20Fair%20Value) Provides the fair value measurements for the company's debt and derivative financial instruments, detailing valuation methodologies Fair Value of Debt (in thousands) | Debt Type | Carrying Value (March 31, 2022, in thousands) | Fair Value (March 31, 2022, in thousands) | | :------------------------ | :------------------------------------------ | :---------------------------------------- | | Senior Notes, net | $987,534 | $939,100 | | Revolver and Term Loans, net | $815,439 | $806,218 | | Mortgage loans, net | $407,752 | $403,211 | | Total Debt, net | $2,210,725 | $2,148,529 | - The fair value of the Company's total net debt was **$2.15 billion** at March 31, 2022, which was lower than its carrying value of **$2.21 billion**. Fair values for Senior Notes are based on Level 1 inputs, while Revolver, Term Loans, and Mortgage Loans use Level 2 and Level 3 inputs via discounted cash flow models[60](index=60&type=chunk)[62](index=62&type=chunk) Fair Value of Derivatives (in thousands) | Derivative Type | Fair Value (March 31, 2022, in thousands) | Fair Value (December 31, 2021, in thousands) | | :-------------------- | :---------------------------------------- | :----------------------------------------- | | Interest rate swap asset | $20,529 | $1,548 | | Interest rate swap liability | $(4,494) | $(21,465) | | Total | $16,035 | $(19,917) | - Derivative financial instruments are valued using Level 2 inputs (interest yield curves, discount rates), with credit valuation adjustments considered insignificant to the overall valuation[63](index=63&type=chunk) [9. Income Taxes](index=18&type=section&id=9.%20Income%20Taxes) Explains the company's accounting for income taxes, including deferred tax assets and liabilities, and the maintenance of a full valuation allowance - The Company accounts for income taxes using the asset and liability method, recognizing deferred tax assets and liabilities. A full valuation allowance is maintained against deferred tax assets, and there were no accruals for tax uncertainties as of March 31, 2022, or December 31, 2021[64](index=64&type=chunk)[65](index=65&type=chunk) [10. Commitments and Contingencies](index=18&type=section&id=10.%20Commitments%20and%20Contingencies) Details restricted cash reserves, cash trap events, and changes in management and franchise fee expenses for the period Commitments and Contingencies (in thousands) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Restricted cash reserves | $43,254 | $48,528 | | Restricted cash due to cash trap events | $15,700 | $22,400 | | Management fee expense (Q1) | $7,900 | $3,200 | | Franchise fee expense (Q1) | $13,600 | $6,700 | - Restricted cash reserves for future capital expenditures and other obligations totaled **$43.25 million** at March 31, 2022. One mortgage loan was in a cash trap event at March 31, 2022, holding **$15.70 million** in restricted cash[66](index=66&type=chunk)[67](index=67&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Management fee expense increased to **$7.90 million** in Q1 2022 from **$3.20 million** in Q1 2021, and franchise fee expense increased to **$13.60 million** from **$6.70 million**, reflecting increased hotel operations. The amortization of Wyndham termination payments reduced management and franchise fee expense by **$1.00 million** in Q1 2022, down from **$4.60 million** in Q1 2021[70](index=70&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [11. Equity](index=19&type=section&id=11.%20Equity) Reports on declared cash dividends, the approval of a new share repurchase program, and the company's ownership in its Operating Partnership - The Company declared a cash dividend of **$0.01 per common share** and **$0.4875 per Series A Preferred Share** for Q1 2022. A new share repurchase program of up to **$250.00 million** was approved on April 29, 2022, effective from May 9, 2022, to May 8, 2023[74](index=74&type=chunk)[75](index=75&type=chunk) - As of March 31, 2022, the Company owned **99.5%** of the Operating Partnership's OP units, with **771,831 OP units** held by limited partners[27](index=27&type=chunk)[77](index=77&type=chunk) [12. Equity Incentive Plan](index=20&type=section&id=12.%20Equity%20Incentive%20Plan) Details share-based compensation expense, unrecognized costs, and vesting schedules for restricted shares and performance unit awards Equity Incentive Plan Metrics | Metric | March 31, 2022 | | :------------------------------------ | :------------- | | Unvested restricted shares | 2,573,536 | | Weighted-average grant date fair value | $15.38 | | Share-based compensation expense (Q1) | $3,500 | | Unrecognized compensation costs | $29,800 | | Weighted-average recognition period | 2.2 years | - The Company recognized **$3.50 million** in share-based compensation expense for restricted share awards in Q1 2022, up from **$1.90 million** in Q1 2021. Total unrecognized compensation costs for unvested restricted share awards were **$29.80 million**, expected to be recognized over **2.2 years**[81](index=81&type=chunk) - Performance unit awards granted in 2021 and 2022 vest over a **three-year period**, contingent on absolute and relative total shareholder return. In Q1 2022, **$1.70 million** in share-based compensation expense was recognized for performance units, with **$16.50 million** in unrecognized costs remaining[83](index=83&type=chunk)[85](index=85&type=chunk) [13. Earnings per Common Share](index=21&type=section&id=13.%20Earnings%20per%20Common%20Share) Presents the basic and diluted net loss per common share, reflecting the net loss attributable to common shareholders Earnings per Common Share | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to common shareholders excluding amounts attributable to unvested restricted shares | $(21,552) | $(84,274) | | Weighted-average number of common shares - basic and diluted | 164,179,661 | 163,826,009 | | Net loss per share attributable to common shareholders - basic and diluted | $(0.13) | $(0.51) | - Basic and diluted net loss per common share improved to **$(0.13)** in Q1 2022 from **$(0.51)** in Q1 2021, reflecting a reduced net loss attributable to common shareholders[90](index=90&type=chunk) [14. Supplemental Information to Statements of Cash Flows](index=23&type=section&id=14.%20Supplemental%20Information%20to%20Statements%20of%20Cash%20Flows) Provides additional details on cash, cash equivalents, restricted cash, interest paid, income taxes paid, and proceeds from hotel sales Supplemental Cash Flow Information (in thousands) | Metric | Three months ended March 31, 2022 (in thousands) | Three months ended March 31, 2021 (in thousands) | | :------------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Cash, cash equivalents, and restricted cash reserves (end of period) | $522,301 | $681,235 | | Interest paid | $33,911 | $20,886 | | Income taxes paid | $6 | $134 | | Proceeds from the sale of hotel properties, net | $34,125 | $3,990 | | Accrued capital expenditures | $1,454 | $9,485 | - Interest paid increased to **$33.91 million** in Q1 2022 from **$20.89 million** in Q1 2021. Net proceeds from hotel sales significantly increased to **$34.12 million** in Q1 2022 from **$3.99 million** in Q1 2021[91](index=91&type=chunk) [15. Subsequent Events](index=23&type=section&id=15.%20Subsequent%20Events) Reports on significant events occurring after the reporting period, including hotel sales, loan extensions, and credit facility amendments - In April 2022, the Company sold the SpringHill Suites Denver North Westminster and exercised the first extension option on a mortgage loan, extending its maturity to April 2023. The 2022 Share Repurchase Program was approved, and credit facility amendments were made to allow for share repurchases[92](index=92&type=chunk)[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, covering COVID-19 impact, key activities, revenue/expense drivers, and non-GAAP measures [Statement Regarding Forward-Looking Information](index=23&type=section&id=Statement%20Regarding%20Forward-Looking%20Information) Highlights forward-looking statements, subject to risks and uncertainties from the COVID-19 pandemic, competition, regulations, and interest rates - The report contains forward-looking statements, which are subject to risks and uncertainties, particularly the ongoing impact of the COVID-19 pandemic on financial condition, operations, and the global economy. Other factors include competition, regulations, real estate conditions, natural disasters, and interest rates[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) [Overview](index=24&type=section&id=Overview) Provides a general description of RLJ Lodging Trust as a Maryland REIT, its focus on premium-branded hotels, and its portfolio size - RLJ Lodging Trust is a self-advised and self-administered Maryland REIT focused on premium-branded, high-margin, focused-service and compact full-service hotels in high-growth urban markets. As of March 31, 2022, the Company owned **97 hotel properties** with approximately **21,400 rooms**[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) [COVID-19](index=25&type=section&id=COVID-19) Discusses the continued material impact of the COVID-19 pandemic on the company's financial results and liquidity, with uncertain long-term effects - The COVID-19 pandemic continues to materially impact the Company's financial results and liquidity, with potential lasting changes in consumer behavior. The full operational and financial impact remains uncertain[104](index=104&type=chunk)[105](index=105&type=chunk) [2022 Significant Activities](index=25&type=section&id=2022%20Significant%20Activities) Summarizes key corporate actions in 2022, including debt repayment, hotel sales, loan extensions, and approval of a share repurchase program - Key activities in 2022 include: - Repayment of **$200.00 million** outstanding balance on the Revolver using cash on hand - Sale of two hotel properties for a combined sales price of approximately **$50.00 million** - Exercise of a one-year extension option on a mortgage loan, extending maturity to April 2023 - Approval of a new share repurchase program and amendment of credit facilities to allow for share repurchases[110](index=110&type=chunk) [Our Customers](index=25&type=section&id=Our%20Customers) Describes the company's primary customer base, consisting mainly of transient business or leisure travelers in major metropolitan areas - The majority of the Company's customers are transient business or leisure travelers, primarily in business districts of major metropolitan areas. Group business and extended-stay customers (five nights or longer) represent smaller components of the customer base[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [Our Revenues and Expenses](index=25&type=section&id=Our%20Revenues%20and%20Expenses) Outlines the primary sources of revenue and categories of operating expenses, including third-party management fees - Revenues are primarily from room rentals, food and beverage, and other ancillary services (parking, resort fees, gift shop sales). Operating costs include room expense, food and beverage expense, management and franchise fees, and other operating expenses. Hotels are managed by third-party companies, with fees based on revenues and profitability[109](index=109&type=chunk)[110](index=110&type=chunk) [Key Indicators of Financial Performance](index=26&type=section&id=Key%20Indicators%20of%20Financial%20Performance) Identifies key lodging industry metrics (ADR, Occupancy, RevPAR) and non-GAAP measures (FFO, EBITDA) used to evaluate operating performance - The Company uses ADR (Average Daily Rate), Occupancy, and RevPAR (Revenue per Available Room) as key lodging industry measures. Non-GAAP measures like FFO, Adjusted FFO, EBITDA, EBITDAre, and Adjusted EBITDA are also used to evaluate operating performance and facilitate comparisons[112](index=112&type=chunk)[113](index=113&type=chunk) [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) States that financial statement preparation involves management estimates and assumptions, with no significant changes since December 31, 2021 - The preparation of financial statements requires management estimates and assumptions, which are continuously evaluated. No significant changes to critical accounting policies and estimates have occurred since December 31, 2021[114](index=114&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, comparing Q1 2022 to Q1 2021, and detailing revenue and expense drivers [Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021](index=27&type=section&id=Comparison%20of%20the%20three%20months%20ended%20March%2031%2C%202022%20to%20the%20three%20months%20ended%20March%2031%2C%202021) Compares the company's financial results for Q1 2022 and Q1 2021, highlighting significant improvements due to increased demand Q1 2022 vs Q1 2021 Financial Comparison (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :------------------------------------- | :--------------------- | :--------------------- | :------- | | Total revenues | $242,899 | $119,552 | $123,347 | | Total operating expenses | $242,613 | $172,294 | $70,319 | | Net loss attributable to common shareholders | $(21,526) | $(84,264) | $62,738 | - The Company experienced significant growth in demand in Q1 2022 due to easing government restrictions, leading to a substantial improvement in results of operations compared to Q1 2021. Total revenues increased by **$123.35 million**, while net loss attributable to common shareholders improved by **$62.74 million**[116](index=116&type=chunk)[117](index=117&type=chunk) [Revenues](index=28&type=section&id=Revenues) Analyzes the increase in total revenues for Q1 2022, primarily driven by higher room, food and beverage, and other revenues Revenue Breakdown (in thousands) | Revenue Type | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :------------- | :--------------------- | :--------------------- | :------- | | Room revenue | $205,779 | $102,772 | $103,007 | | Food and beverage revenue | $20,901 | $6,242 | $14,659 | | Other revenue | $16,219 | $10,538 | $5,681 | | Total revenues | $242,899 | $119,552 | $123,347 | - Total revenues increased by **$123.35 million**, or **103.1%**, in Q1 2022 compared to Q1 2021, primarily driven by a **$103.01 million** increase in room revenue due to higher demand and ADR. Comparable properties saw RevPAR increase to **$107.39** from **$53.54**, though still below 2019 levels[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - Food and beverage revenue increased by **$14.66 million**, and other revenue (including parking, resort fees, gift shop sales, and cancellation fees) increased by **$5.68 million**, both due to increased demand and higher occupancy[122](index=122&type=chunk)[123](index=123&type=chunk) [Property Operating Expenses](index=28&type=section&id=Property%20Operating%20Expenses) Examines the increase in property operating expenses, driven by higher demand and management/franchise fees, partially offset by reduced amortization Property Operating Expenses (in thousands) | Expense Type | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :-------------------------- | :--------------------- | :--------------------- | :------- | | Total property operating expenses | $159,039 | $88,464 | $70,575 | | Room expense (comparable properties) | $52,279 | $27,944 | $24,335 | | Management and franchise fee expense (comparable properties) | $19,770 | $4,940 | $14,830 | - Property operating expenses increased by **$70.58 million** to **$159.04 million** in Q1 2022, primarily due to increased demand. Management and franchise fee expense for comparable properties rose by **$14.83 million**, partially offset by a reduced benefit from Wyndham termination payment amortization (**$1.00 million** in Q1 2022 vs. **$4.60 million** in Q1 2021)[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Depreciation and Amortization](index=29&type=section&id=Depreciation%20and%20Amortization) Reports that depreciation and amortization expense remained relatively stable in Q1 2022 compared to Q1 2021 Depreciation and Amortization (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :-------------------------- | :--------------------- | :--------------------- | :------- | | Depreciation and amortization | $46,865 | $46,943 | $(78) | - Depreciation and amortization expense remained relatively stable at **$46.86 million** in Q1 2022, a slight decrease of **$0.08 million** from Q1 2021[127](index=127&type=chunk) [Impairment Losses](index=29&type=section&id=Impairment%20Losses) Notes no impairment losses recorded in Q1 2022, a significant improvement from the prior year Impairment Losses (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :--------------- | :--------------------- | :--------------------- | :------- | | Impairment losses | $0 | $5,946 | $(5,946) | - No impairment losses were recorded in Q1 2022, a significant improvement from **$5.95 million** in Q1 2021 related to two hotel properties sold in May 2021[128](index=128&type=chunk) [Property Tax, Insurance and Other](index=29&type=section&id=Property%20Tax%2C%20Insurance%20and%20Other) Details the increase in property tax, insurance, and other expenses, primarily due to non-recurring items and higher premiums Property Tax, Insurance and Other (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :-------------------------------- | :--------------------- | :--------------------- | :------- | | Property tax, insurance and other | $22,513 | $20,081 | $2,432 | - Property tax, insurance and other expenses increased by **$2.43 million** to **$22.51 million** in Q1 2022, primarily due to the non-recurrence of a **$5.20 million** real estate tax liability reversal in Q1 2021, and higher insurance premiums and ground lease rent[129](index=129&type=chunk) [General and Administrative](index=29&type=section&id=General%20and%20Administrative) Reports an increase in general and administrative expenses, mainly driven by higher compensation and non-cash share-based compensation General and Administrative Expenses (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :-------------------------- | :--------------------- | :--------------------- | :------- | | General and administrative | $14,134 | $10,800 | $3,334 | - General and administrative expenses increased by **$3.33 million** to **$14.13 million** in Q1 2022, mainly due to higher compensation expense, including non-cash share-based compensation[130](index=130&type=chunk) [Other Income, net](index=29&type=section&id=Other%20Income%2C%20net) Highlights a significant increase in other income, net, primarily due to reclassification of unrealized gains from discontinued cash flow hedges Other Income, net (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :---------------- | :--------------------- | :--------------------- | :------- | | Other income, net | $7,285 | $465 | $6,820 | - Other income, net, significantly increased by **$6.82 million** to **$7.28 million** in Q1 2022, primarily due to the reclassification of unrealized gains from accumulated other comprehensive income (loss) from discontinued cash flow hedges[131](index=131&type=chunk) [Interest Expense](index=29&type=section&id=Interest%20Expense) Details the decrease in total interest expense, driven by lower average debt balances and effective interest rates, despite increased Senior Notes interest Interest Expense Breakdown (in thousands) | Expense Type | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :------------------------------------------ | :--------------------- | :--------------------- | :------- | | Senior Notes | $9,743 | $5,942 | $3,801 | | Revolver and Term Loans | $9,968 | $17,178 | $(7,210) | | Mortgage loans | $3,210 | $3,454 | $(244) | | Amortization of deferred financing costs | $1,684 | $1,321 | $363 | | Non-cash interest expense related to interest rate hedges | $(44) | $0 | $(44) | | Total interest expense | $24,561 | $27,895 | $(3,334) | - Total interest expense decreased by **$3.33 million** to **$24.56 million** in Q1 2022, driven by lower average debt balances and effective interest rates, despite an increase in Senior Notes interest[132](index=132&type=chunk) [Gain on Sale of Hotel Properties, net](index=30&type=section&id=Gain%20on%20Sale%20of%20Hotel%20Properties%2C%20net) Reports the net gain from hotel property sales, noting an increase in Q1 2022 compared to Q1 2021 Gain on Sale of Hotel Properties, net (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | $ Change | | :-------------------------------- | :--------------------- | :--------------------- | :------- | | Gain on sale of hotel properties, net | $1,417 | $1,083 | $334 | - The Company recorded a net gain of **$1.42 million** from the sale of one hotel property for **$35.50 million** in Q1 2022, an increase from a **$1.08 million** gain on a **$4.40 million** sale in Q1 2021[133](index=133&type=chunk) [Non-GAAP Financial Measures](index=30&type=section&id=Non-GAAP%20Financial%20Measures) Explains the use of non-GAAP measures like FFO, Adjusted FFO, EBITDA, and Adjusted EBITDA to evaluate operating performance and facilitate comparisons - The Company uses FFO, Adjusted FFO, EBITDA, EBITDAre, and Adjusted EBITDA as key supplemental non-GAAP measures to evaluate operating performance and facilitate comparisons, as they remove the impact of capital structure and asset base from operating results[134](index=134&type=chunk)[135](index=135&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) Non-GAAP Financial Measures (in thousands) | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :-------------------------------------------------------------------------------- | :--------------------- | :--------------------- | | FFO attributable to common shareholders and unitholders | $24,064 | $(32,635) | | Adjusted FFO attributable to common shareholders and unitholders | $23,894 | $(29,767) | | EBITDA | $56,382 | $(4,139) | | EBITDAre | $54,965 | $724 | | Adjusted EBITDA | $54,594 | $3,592 | - All non-GAAP measures showed significant improvement in Q1 2022 compared to Q1 2021, with FFO, Adjusted FFO, EBITDA, EBITDAre, and Adjusted EBITDA all turning positive or increasing substantially, reflecting improved operating performance[138](index=138&type=chunk)[144](index=144&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's liquidity position, including cash reserves, and outlines cash flow activities and capital expenditure funding - As of March 31, 2022, the Company had **$522.30 million** in cash, cash equivalents, and restricted cash reserves. Liquidity requirements include operating expenses, capital expenditures, debt payments, and distributions[145](index=145&type=chunk)[146](index=146&type=chunk) Cash Flow Activities (in thousands) | Cash Flow Activity | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :--------------------------------------------- | :--------------------- | :--------------------- | | Net cash flow provided by (used in) operating activities | $10,291 | $(29,008) | | Net cash flow provided by (used in) investing activities | $9,791 | $(6,076) | | Net cash flow used in financing activities | $(211,650) | $(218,471) | - Operating cash flow turned positive to **$10.29 million** in Q1 2022 from a **$29.01 million** usage in Q1 2021. Investing activities provided **$9.79 million**, mainly from hotel sales, while financing activities used **$211.65 million**, primarily for Revolver repayment[147](index=147&type=chunk)[148](index=148&type=chunk)[150](index=150&type=chunk) - The Company maintains FF&E reserve accounts, typically funded by **3.0% to 5.0%** of gross revenues, for future capital expenditures. As of March 31, 2022, approximately **$30.70 million** was held in these reserves[152](index=152&type=chunk)[154](index=154&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's exposure to interest rate risk and its mitigation strategies through fixed-rate debt and derivative instruments - As of March 31, 2022, **53.9%** of the Company's total indebtedness (**$1.20 billion**) was variable rate debt, with a weighted-average interest rate of **3.88%**. However, after accounting for interest rate swaps, **100.0%** of total indebtedness was effectively fixed[155](index=155&type=chunk) - The Company uses fixed-rate debt instruments and interest rate swaps to limit the impact of interest rate fluctuations on earnings and cash flows, and to lower overall borrowing costs, avoiding speculative derivative transactions[156](index=156&type=chunk) Debt Maturity and Interest Rate Profile (in thousands) | Debt Type | 2022 (in thousands) | 2023 (in thousands) | 2024 (in thousands) | 2025 (in thousands) | 2026 (in thousands) | Thereafter (in thousands) | Total (in thousands) | | :-------------------- | :------------------ | :------------------ | :------------------ | :------------------ | :------------------ | :------------------------ | :------------------- | | Fixed rate debt | $0 | $0 | $0 | $0 | $500,000 | $525,000 | $1,025,000 | | Weighted average interest rate (Fixed) | — % | — % | — % | — % | 3.75 % | 4.05 % | 3.90 % | | Variable rate debt | $200,000 | $418,662 | $181,000 | $400,000 | $0 | $0 | $1,199,662 | | Weighted average interest rate (Variable) | 3.30 % | 4.45 % | 2.95 % | 4.00 % | — % | — % | 3.88 % | | Total | $200,000 | $418,662 | $181,000 | $400,000 | $500,000 | $525,000 | $2,224,662 | - A **1.00%** increase in market interest rates on variable rate debt not subject to swaps would have no impact on future earnings and cash flows due to existing hedging arrangements. However, a **1.00%** rise in interest rates would decrease the fair value of fixed rate debt by approximately **$47.20 million**[155](index=155&type=chunk)[159](index=159&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2022[160](index=160&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the period ended March 31, 2022[161](index=161&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) Presents additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, and shareholder meeting results [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) States that the company is not involved in any material legal or regulatory proceedings beyond routine business matters - The Company is not currently subject to any material litigation, nor is any material litigation threatened against it, beyond routine matters arising in the ordinary course of business[162](index=162&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) Refers to the Annual Report for a discussion of risk factors, noting no material changes since the previous filing - There have been no material changes to the risk factors previously disclosed in the Company's Annual Report[163](index=163&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities and details share repurchases solely for employee tax withholding obligations - The Company did not sell any unregistered securities during Q1 2022[164](index=164&type=chunk) Share Repurchases for Employee Tax Withholding | Period | Total number of shares purchased (1) | Average price paid per share | | :--------------------------------------- | :--------------------------------- | :--------------------------- | | February 1, 2022 through February 28, 2022 | 87,626 | $14.48 | | Total (Q1 2022) | 87,626 | N/A | - The **87,626** shares repurchased in February 2022 were solely to satisfy employee tax withholding obligations related to the vesting of restricted common shares[165](index=165&type=chunk) [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[166](index=166&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Indicates that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the Company[167](index=167&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) Provides final voting results from the 2022 Annual Meeting of Shareholders, covering trustee elections, auditor ratification, and executive compensation - At the 2022 Annual Meeting of Shareholders on April 29, 2022, trustees were elected, PricewaterhouseCoopers LLP was ratified as the independent registered public accounting firm, and the compensation paid to named executive officers was approved in an advisory vote[169](index=169&type=chunk) Election of Trustees Voting Results | Nominee | Votes For | Votes Against | Abstentions | Broker Non-Votes | | :------------------ | :---------- | :------------ | :---------- | :--------------- | | Robert L. Johnson | 137,771,141 | 2,430,741 | 675,310 | 10,181,077 | | Leslie D. Hale | 140,540,676 | 325,577 | 10,939 | 10,181,077 | | Evan Bayh | 136,686,135 | 4,179,037 | 12,020 | 10,181,077 | | Arthur R. Collins | 138,079,441 | 2,788,361 | 9,390 | 10,181,077 | | Nathaniel A. Davis | 127,627,868 | 13,236,803 | 12,521 | 10,181,077 | | Patricia L. Gibson | 139,664,243 | 1,197,774 | 15,175 | 10,181,077 | | Robert M. La Forgia | 139,266,448 | 1,597,851 | 12,893 | 10,181,077 | | Robert J. McCarthy | 139,547,817 | 1,316,483 | 12,892 | 10,181,077 | | Robin Zeigler | 132,577,496 | 8,287,267 | 12,429 | 10,181,077 | Ratification of PWC as independent registered public accounting firm | Votes For | Votes Against | Abstentions | Broker Non-Votes | | :---------- | :------------ | :---------- | :--------------- | | 147,832,763 | 3,209,356 | 16,150 | — | Advisory Vote to Approve Named Executive Officer Compensation | Votes For | Votes Against | Abstentions | Broker Non-Votes | | :---------- | :------------ | :---------- | :--------------- | | 36,852,166 | 104,002,223 | 22,803 | 10,181,077 | [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) Lists all exhibits required to be filed by Regulation S-K, including various corporate documents and certifications - The exhibit index includes Articles of Amendment and Restatement of Declaration of Trust, Articles Supplementary, Third Amended and Restated Bylaws, CEO and CFO certifications (302 and 906), and Inline XBRL documents[173](index=173&type=chunk) [Signatures](index=38&type=section&id=Signatures) Contains the signatures of the company's authorized officers, certifying the report on May 5, 2022 - The report is signed by Leslie D. Hale (President and CEO), Sean M. Mahoney (EVP and CFO), and Christopher A. Gormsen (SVP and Chief Accounting Officer) on May 5, 2022[175](index=175&type=chunk)[176](index=176&type=chunk)

Overview of Key Statistics - As of March 31, 2022, the company had 95 properties with 21,097 hotel rooms and a share price of $14.08[2] - The total shares and units outstanding were 1676 million[2] - The market capitalization stood at $24 billion, with preferred equity at $03 billion and net debt outstanding at $18 billion[2] - The total enterprise value (TEV) was $44 billion, and the total capitalization was $49 billion[2] Debt Maturity Schedule - The company had a secured debt of $325 million due in 2022, representing 24% of the total debt[2] - Unsecured debt included $600 million, with $400 million due in 2025 (18% of debt) and $200 million due in subsequent years[2] - High yield bonds accounted for $500 million, representing 24% of the debt, with $500 million in undrawn LOC and $500 million in LOC (30% of debt)[2] Historical Pro Forma Statistics (Q1 2022) - For the 95 properties, Rooms Available were 1,899,000, Rooms Sold were 1,161,000, and Total Room Revenue was $203904000[4] - Total Revenue reached $240664000, with an Occupancy rate of 612%[4] - The Average Daily Rate (ADR) was $17557, and the Room Revenue per Available Room (RevPAR) was $10739[4] - Pro forma Hotel EBITDA was $63186000, with a Pro forma Hotel EBITDA Margin of 263%[4] Q1 2022 Pro Forma Portfolio Operating Statistics - The total portfolio occupancy was 612%, ADR was $17557, and RevPAR was $10739[15] - Hotel EBITDA was $632 million[7] - Northern California showed an occupancy of 530%, ADR of $15193, and RevPAR of $8046[15] - South Florida had an occupancy of 814%, ADR of $26593, and RevPAR of $21650[15]

PRO FORMA SUPPLEMENTAL Q4 2021 FEBRUARY 23, 2022 OVERVIEW Key Statistics (1) (2) Properties 97 Hotel Rooms 21,499 Share Price $14.55 Total Shares and Units Outstanding 167.3M Market Capitalization $2.4B Preferred Equity $0.3B Net Debt Outstanding $1.8B Total Enterprise Value (TEV) $4.5B MOXY DENVER CHERRY CREEK Total Capitalization $5.2B AC HOTEL BOSTON DOWNTOWN Debt Maturity Schedule (3) Secured Unsecured LOC Undrawn LOC HY Bonds Amount Due ($ in millions) $600 $325 $500 | --- | --- | --- | --- | --- | --- ...

PART I [Business](index=6&type=section&id=Item%201.%20Business) RLJ Lodging Trust is a REIT specializing in premium-branded, focused-service and compact full-service hotels - As of December 31, 2021, the company owned **98 hotel properties** with approximately **21,700 rooms**, located in 22 states and the District of Columbia[20](index=20&type=chunk) - The business has been, and will likely continue to be, materially adversely impacted by the **COVID-19 pandemic**, which has affected travel demand, booking patterns, and overall financial results[22](index=22&type=chunk)[23](index=23&type=chunk) - The company's business strategy focuses on owning premium-branded hotels in high-growth markets, proactive asset management, disciplined acquisitions, opportunistic capital recycling, and maintaining a flexible balance sheet[27](index=27&type=chunk) - The company emphasizes its commitment to ESG initiatives, highlighting a **diverse board** (four women, six ethnically diverse, eight independent trustees) and adherence to frameworks like the Global Reporting Initiative (GRI)[54](index=54&type=chunk) Hotel Brand Affiliations as of December 31, 2021 | Brand Family | Number of Hotels | Percentage of Total Hotels | Number of Rooms | Percentage of Total Rooms | | :--- | :--- | :--- | :--- | :--- | | **Marriott** | 39 | 39.9% | 7,992 | 36.8% | | **Hilton** | 35 | 35.7% | 8,659 | 40.0% | | **Hyatt** | 12 | 12.2% | 1,920 | 8.9% | | **Wyndham** | 7 | 7.1% | 2,241 | 10.3% | | **Other** | 5 | 5.1% | 858 | 4.0% | | **Total** | **98** | **100.0%** | **21,670** | **100.0%** | [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from the COVID-19 pandemic, substantial debt, operational dependencies, and its REIT status [Risks Related to Our Business and Hotel Properties](index=12&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Hotel%20Properties) Operational risks include COVID-19 disruption, significant debt, market concentration, and reliance on third-party managers - The **COVID-19 pandemic** is expected to continue to significantly impact and disrupt the business, financial performance, operating results, and cash flows[61](index=61&type=chunk) - As of December 31, 2021, the company had approximately **$2.4 billion of debt outstanding**, which could adversely affect operating performance and requires significant cash to service[83](index=83&type=chunk) - The company is highly dependent on third-party management companies, with **Aimbridge Hospitality managing 30** of its hotels as of December 31, 2021[68](index=68&type=chunk) - A substantial portion of the hotel portfolio (**86 of 98 properties**) operates under Marriott, Hilton, or Hyatt brands, creating a concentration risk tied to the success of these three brand families[76](index=76&type=chunk) - **Labor shortages** are a significant risk, potentially slowing growth and harming the business by impacting hotel operations, guest satisfaction, and increasing wage costs[73](index=73&type=chunk) [Risks Related to the Lodging Industry](index=19&type=section&id=Risks%20Related%20to%20the%20Lodging%20Industry) The lodging sector presents risks from economic cyclicality, intense competition, ground leases, and climate change - The lodging industry is historically **highly cyclical**, with performance fluctuations driven by general economic conditions, which affect business and leisure travel[101](index=101&type=chunk) - As of December 31, 2021, **14 of the company's hotel properties were on land subject to ground leases**, which exposes the company to risks of non-renewal, financing difficulties, or loss of the property upon breach[102](index=102&type=chunk) - The company faces risks associated with natural disasters and the physical effects of **climate change**, which could damage properties, increase insurance and operating costs, and are particularly relevant for its coastal hotels[107](index=107&type=chunk) [Risks Related to Our Status as a REIT](index=23&type=section&id=Risks%20Related%20to%20Our%20Status%20as%20a%20REIT) Maintaining REIT status requires significant dividend distributions and imposes operational constraints that could impact financial flexibility - **Failure to qualify as a REIT** would subject the company to U.S. federal income tax at corporate rates, significantly reducing earnings and cash available for shareholder distributions[129](index=129&type=chunk) - The requirement to **distribute at least 90% of REIT taxable income annually** could adversely affect the company's ability to fund capital expenditures, acquisitions, or other business needs from operating cash flow[131](index=131&type=chunk) - To qualify as a REIT, rental income must be from true leases; the company leases its hotels to its TRSs, and if these leases are not respected as true leases for tax purposes, the company would **likely fail to qualify as a REIT**[132](index=132&type=chunk) [Unresolved Staff Comments](index=26&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[146](index=146&type=chunk) [Properties](index=26&type=section&id=Item%202.%20Properties) The company's 98 hotels are operated by third-party managers and leased to its TRSs to comply with REIT regulations - A comprehensive list of the company's **98 hotel properties** as of December 31, 2021 is provided, detailing names, locations, and room counts[147](index=147&type=chunk)[149](index=149&type=chunk) - All hotel properties are operated by one of 15 independent management companies; **Aimbridge was the management company for 30 properties** as of year-end 2021[152](index=152&type=chunk)[153](index=153&type=chunk) - **68 hotels operate under franchise agreements**, which require royalty fees typically between 3.0% and 6.0% of room revenue, plus other marketing and system fees[158](index=158&type=chunk)[159](index=159&type=chunk) - To qualify as a REIT, the company **leases its hotels to its TRS lessees**, which in turn engage third-party management companies[162](index=162&type=chunk) [Legal Proceedings](index=30&type=section&id=Item%203.%20Legal%20Proceedings) The company is not presently subject to any material litigation outside of the ordinary course of business - Other than routine litigation arising out of the ordinary course of business, the company is **not presently subject to any material litigation**[171](index=171&type=chunk) [Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[172](index=172&type=chunk) PART II [Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE, and its shareholder return has underperformed key market indices - The company's common shares are traded on the NYSE under the symbol 'RLJ'; a cash dividend of **$0.01 per common share** was paid for each quarter during 2021 and 2020[175](index=175&type=chunk) - During the quarter ended December 31, 2021, **6,612 shares were repurchased** at an average price of $13.88 per share to satisfy employee tax obligations, not as part of a publicly announced repurchase plan[185](index=185&type=chunk)[186](index=186&type=chunk) Share Return Performance (Value of $100 Investment) | Name | Dec 31, 2016 | Dec 31, 2019 | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | RLJ Lodging Trust | $100.00 | $88.56 | $71.01 | $70.10 | | S&P 500 Index | $100.00 | $153.18 | $181.36 | $233.43 | | Dow Jones US REIT Hotels Index | $100.00 | $126.18 | $116.63 | $166.85 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company experienced a significant operational recovery in 2021, with strong revenue growth and improved profitability metrics [Results of Operations](index=36&type=section&id=Results%20of%20Operations) In 2021, revenues increased significantly due to higher occupancy, leading to an improved net loss and positive Adjusted FFO Comparison of Operations (2021 vs. 2020) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | **Total Revenues** | $785,664 | $473,087 | $312,577 | | **Total Operating Expenses** | $980,618 | $730,177 | $250,441 | | **Impairment Losses** | $144,845 | $0 | $144,845 | | **Net Loss** | $(311,088) | $(408,802) | $97,714 | | **Net Loss Attributable to Common Shareholders** | $(330,283) | $(429,556) | $99,273 | Key Hotel Operating Statistics (Comparable Properties) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Occupancy** | 57.6% | 34.2% | 78.7% | | **ADR** | $148.48 | $144.20 | $183.71 | | **RevPAR** | $85.52 | $49.35 | $144.64 | Non-GAAP Financial Measures Reconciliation (2021 vs. 2020) | Metric (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | **Net Loss** | $(311,088) | $(408,802) | | **FFO** | $1,570 | $(232,124) | | **Adjusted FFO** | $31,433 | $(161,444) | | **EBITDAre** | $132,104 | $(60,652) | | **Adjusted EBITDA** | $162,007 | $(41,082) | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position and actively managed its capital structure through debt refinancing and asset sales - As of December 31, 2021, the company had **$713.9 million of cash**, cash equivalents, and restricted cash reserves, and **$400.0 million available** on its $600.0 million Revolver[241](index=241&type=chunk) - Total outstanding debt as of December 31, 2021, was approximately **$2.4 billion** with a weighted average interest rate of 3.94%[245](index=245&type=chunk) - In 2021, the company amended its Revolver and Term Loans to **suspend the testing of all existing financial maintenance covenants** through March 31, 2022 (the 'Covenant Relief Period')[248](index=248&type=chunk)[250](index=250&type=chunk) Cash Flow Summary (2021 vs. 2020) | Cash Flow Activity (in millions) | 2021 | 2020 | | :--- | :--- | :--- | | **Operating Activities** | $43.0 | $(168.7) | | **Investing Activities** | $(24.6) | $(66.7) | | **Financing Activities** | $(239.3) | $243.0 | [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company mitigates interest rate risk on its variable rate debt through derivative instruments, rendering its debt effectively fixed - The company's primary market risk is exposure to changes in interest rates on its variable rate debt, which was approximately **$1.4 billion** (57.7% of total) as of December 31, 2021[263](index=263&type=chunk) - Through the use of interest rate swaps, **100% of the company's total indebtedness was fixed or effectively fixed** as of December 31, 2021, mitigating the impact of interest rate fluctuations[265](index=265&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers the reader to the Index to Financial Statements located on page F-1 of the report - This section directs to the Index to Financial Statements on page F-1[269](index=269&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=46&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[270](index=270&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective - The company's management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of December 31, 2021[271](index=271&type=chunk) - Management concluded that **internal control over financial reporting was effective** as of December 31, 2021, based on the criteria set forth by COSO[275](index=275&type=chunk) - There were **no changes in the company's internal control over financial reporting** during the fourth quarter of 2021 that materially affected, or are reasonably likely to materially affect, these controls[277](index=277&type=chunk) [Other Information](index=47&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[278](index=278&type=chunk) PART III This part incorporates information by reference from the company's 2022 definitive Proxy Statement [Directors, Executive Officers and Corporate Governance](index=48&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting - The information required by this item is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[281](index=281&type=chunk) [Executive Compensation](index=48&type=section&id=Item%2011.%20Executive%20Compensation) Information is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting - The information required by this item is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[282](index=282&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=48&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting - The information required by this item is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[283](index=283&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=48&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting - The information required by this item is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[284](index=284&type=chunk) [Principal Accountant Fees and Services](index=48&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting - The information required by this item is incorporated by reference from the definitive Proxy Statement for the 2022 Annual Meeting of Shareholders[285](index=285&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=49&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K - This section lists all documents filed as part of the report, including financial statements, Schedule III (Real Estate and Accumulated Depreciation), and an index of exhibits[288](index=288&type=chunk) [Form 10-K Summary](index=52&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[294](index=294&type=chunk)

RLJ Lodging Trust (NYSE:RLJ) Q4 2021 Results Conference Call February 24, 2022 10:00 AM ET Company Participants Nikhil Bhalla - Vice President of Investor Relations Leslie Hale - President and Chief Executive Officer Sean Mahoney - Executive Vice President and Chief Financial Officer Thomas Bardenett - Executive Vice President of Asset Management Conference Call Participants Austin Wurschmidt - KeyBanc Capital Markets Michael Bellisario - Robert W. Baird Neil Malkin - Capital One Securities Anthony Powell - ...

CAPITAL ONE CONFERENCE PORTFOLIO UPDATE JANUARY 2022 INVESTMENT HIGHLIGHTS JANUARY 2022 2 | --- | --- | |---------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

Financial Data and Key Metrics Changes - The company reported a third quarter portfolio occupancy of 63.8%, a 310 basis point increase from the second quarter, achieving 79% of 2019 levels [9][28] - Average Daily Rate (ADR) reached $160, representing nearly 90% of 2019 levels, with over 25% of the portfolio exceeding 2019 ADR [10][29] - Adjusted EBITDA for the third quarter was $60.1 million, an increase of approximately 38% from the second quarter [33] Business Line Data and Key Metrics Changes - Leisure demand drove weekend occupancy to 76.8%, a 280 basis point increase over the prior quarter, with weekend ADR improving by nearly 12% [11] - Business transient revenues improved by 44% since the last quarter, with weekday occupancy growing to 58.5% [12] - Group revenues increased by 54% since the second quarter, with room nights improving by 34% [13] Market Data and Key Metrics Changes - The company achieved a market share gain of 340 basis points in the third quarter, indicating competitive strength [14] - Urban hotels achieved 76% of 2019 occupancy, resulting in a 400 basis point improvement over the second quarter [12] - The company noted strong performance in urban markets, with ADR growth of nearly 70% since the beginning of the year [97] Company Strategy and Development Direction - The company is focused on recycling capital from noncore asset sales into high-quality acquisitions, with plans to accretively recycle over $200 million into three acquisitions [15][19] - The company aims to unlock $23 million to $28 million in incremental EBITDA from internal growth catalysts [20][25] - The strategy includes maintaining a lean operating model and enhancing the balance sheet to support growth initiatives [21][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of lodging fundamentals, despite challenges from the Delta variant [6] - The company anticipates continued improvement in leisure and group bookings, with expectations for a meaningful step forward in 2022 [22][24] - Concerns around inflation were acknowledged, but management remains positive about the overall economic backdrop [22] Other Important Information - The company raised $1 billion through high-yield bond offerings to enhance liquidity and reduce the cost of capital [36] - The company ended the quarter with approximately $625 million of unrestricted cash and no debt maturities until 2023 [38] - The company is on track to generate positive operating cash flow for the full year 2021 [39] Q&A Session Summary Question: What are the conditions to closing and getting that deal done? - The deal is subject to normal customary closing conditions, with a sizable deposit from the buyer [44] Question: Can you provide details on customer mix across the portfolio in October? - Leisure demand remained strong, with improvements in group and business transient segments noted [46] Question: Can you compare October ADR and RevPAR versus 2019? - October ADR was down about 14% and occupancy was down roughly 25% compared to 2019 [51] Question: What is the company's exposure to international demand? - Historically, international demand was sub 3% across the portfolio, higher in specific markets like San Francisco and New York [68] Question: How close is the company to normalized staffing levels? - Overall staffing is at about 55% of 2019 levels, with leisure-focused hotels at approximately 75% [89] Question: What are the expectations for holiday bookings in cold weather markets? - There is a surge in bookings for Thanksgiving and December holidays, with strong demand noted in urban markets [92][96]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the period ended September 30, 2021 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets decreased to $5.12 billion, driven by a reduction in hotel property investments and net debt Balance Sheet Highlights | Balance Sheet Highlights | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$5,124,244** | **$5,617,172** | | Cash and cash equivalents | $624,551 | $899,813 | | Investment in hotel properties, net | $4,258,703 | $4,486,416 | | **Total Liabilities** | **$2,694,080** | **$2,929,784** | | Debt, net | $2,381,274 | $2,587,731 | | **Total Equity** | **$2,430,164** | **$2,687,388** | [Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q3 2021 revenues grew significantly to $233.8 million, but a $138.9 million impairment loss resulted in a net loss of $151.8 million Income Statement Highlights (in thousands) | Income Statement Highlights (in thousands) | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$233,769** | **$83,932** | **$547,575** | **$382,005** | | Total Operating Expenses | $368,081 | $160,450 | $744,787 | $574,974 | | Impairment Losses | $138,899 | $— | $144,845 | $— | | **Net Loss** | **($151,818)** | **($173,919)** | **($283,157)** | **($320,914)** | | Net Loss per Share (Basic & Diluted) | ($0.94) | ($1.10) | ($1.81) | ($2.04) | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first nine months of 2021, operating activities provided $20.2 million in cash, a significant improvement from the prior year's cash use Cash Flow Highlights (in thousands) | Cash Flow Highlights (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $20,247 | ($86,791) | | Net cash used in investing activities | ($63,886) | ($55,684) | | Net cash (used in) provided by financing activities | ($230,837) | $253,964 | | **Net change in cash, cash equivalents, and restricted cash** | **($274,476)** | **$111,489** | [Notes to the Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Key disclosures include the COVID-19 impact, property transactions, a significant impairment loss, and extensive debt refinancing activities - As of September 30, 2021, the company owned **98 hotel properties** with approximately 22,300 rooms, with **96 of the 98 hotels open**[38](index=38&type=chunk)[39](index=39&type=chunk) - During the nine months ended September 30, 2021, the company acquired the Hampton Inn and Suites Atlanta Midtown for **$58.0 million** and sold six hotel properties for a combined price of approximately **$39.5 million**[54](index=54&type=chunk)[55](index=55&type=chunk) - An impairment loss of **$138.9 million** was recorded to write down the DoubleTree Metropolitan Hotel New York City to its estimated fair value of **$153.0 million**[53](index=53&type=chunk) - The company undertook significant debt restructuring, including issuing **$500.0 million of 4.00% senior secured notes due 2029** and **$500.0 million of 3.75% senior secured notes due 2026**[64](index=64&type=chunk)[69](index=69&type=chunk)[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial recovery from the COVID-19 pandemic, key strategic activities, operating results, and liquidity position [Overview and COVID-19 Impact](index=32&type=section&id=Overview%20and%20COVID-19%20Impact) The company, a REIT specializing in premium-branded hotels, continues to see financial results materially impacted by the COVID-19 pandemic despite a recovery in demand - The company's strategy is to own primarily premium-branded, focused-service and compact full-service hotels, which are believed to generate **high RevPAR and strong margins**[140](index=140&type=chunk) - As of September 30, 2021, the company owned **98 hotels**, of which **96 were open**, representing 98% of the portfolio[141](index=141&type=chunk)[142](index=142&type=chunk) - The ongoing effects of the COVID-19 pandemic are expected to continue to have a **material impact** on the company's financial results and liquidity[145](index=145&type=chunk) [2021 Significant Activities](index=33&type=section&id=2021%20Significant%20Activities) Key activities in 2021 included debt refinancing, credit facility amendments, and capital recycling through hotel sales and acquisitions - Issued **2029 and 2026 Senior Notes at 4.00% and 3.75%** respectively, using proceeds to redeem 2025 Senior Notes and repay other loans[146](index=146&type=chunk) - Amended its Revolver and Term Loans to **waive financial covenants through Q1 2022** and extend maturities[146](index=146&type=chunk) - Sold six hotels for a combined price of **$39.5 million** and acquired two hotels in Atlanta and Boston for a combined price of **$147.0 million**[146](index=146&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Operating results show a strong rebound driven by increased travel demand, though a significant impairment loss impacted net income Comparable Hotel Operating Statistics | Comparable Hotel Operating Statistics | Q3 2021 | Q3 2020 | Change | | :--- | :--- | :--- | :--- | | Occupancy | 61.4% | 28.8% | +32.6 ppts | | ADR | $159.68 | $120.15 | +32.9% | | RevPAR | $98.11 | $34.59 | +183.6% | Comparable Hotel Operating Statistics | Comparable Hotel Operating Statistics | Nine Months 2021 | Nine Months 2020 | Change | | :--- | :--- | :--- | :--- | | Occupancy | 53.9% | 33.5% | +20.4 ppts | | ADR | $143.07 | $154.71 | -7.5% | | RevPAR | $77.15 | $51.90 | +48.6% | - A significant impairment loss of **$138.9 million** was recorded in Q3 2021 related to the DoubleTree Metropolitan New York City[166](index=166&type=chunk) - Property tax, insurance and other expenses decreased by **$13.9 million** for the nine-month period, primarily due to a decrease in real estate tax assessments[187](index=187&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with $660.3 million in cash reserves, enhanced by positive operating cash flow and covenant relief - The company had **$660.3 million of cash and cash equivalents** and restricted cash reserves as of September 30, 2021[215](index=215&type=chunk) - An amendment to the Revolver and Term Loans **suspends the testing of financial maintenance covenants** through the fiscal quarter ending March 31, 2022[214](index=214&type=chunk) - Net cash flow provided by operating activities was **$20.2 million** for the nine months ended September 30, 2021, compared to a use of $86.8 million in the prior-year period[216](index=216&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk from variable-rate debt is fully mitigated through the use of interest rate swaps - As of September 30, 2021, the company had approximately **$1.4 billion of total variable rate debt**, representing 58.3% of total indebtedness[225](index=225&type=chunk) - After accounting for interest rate swaps, **100.0% of the company's total indebtedness was fixed or effectively fixed**, insulating future earnings from interest rate increases[225](index=225&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the Company's **disclosure controls and procedures were effective** as of September 30, 2021[230](index=230&type=chunk) - **No material changes** were made to the company's internal control over financial reporting during the period ended September 30, 2021[231](index=231&type=chunk) [PART II. OTHER INFORMATION](index=48&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not subject to any material litigation outside of routine claims from ordinary business operations - Other than routine litigation arising out of the ordinary course of business, the Company is **not presently subject to any material litigation**[232](index=232&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been made to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - **No material changes** to the risk factors previously disclosed in the Annual Report have occurred[233](index=233&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered securities were sold; share repurchases were limited to shares surrendered by employees for tax obligations - During the three months ended September 30, 2021, **26,543 shares were repurchased** at an average price of $14.23 per share for employee tax obligations[235](index=235&type=chunk)

PRO FORMA SUPPLEMENTAL Q3 2021 NOVEMBER 4, 2021 OVERVIEW | --- | --- | --- | --- | |------------------------------------|-------------|-------|--------------------------| | Key Statistics \nProperties | (1)(2) \n97 | | | | Hotel Rooms | 22,093 | | | | Share Price | $15.91 | | | | Total Shares and Units Outstanding | 167.4M | | | | Market Capitalization | $2.7B | | | | Preferred Equity | $0.3B | | | | Net Debt Outstanding | $1.8B | | | | Total Enterprise Value (TEV) | $4.8B | | | | Total Capitalization | $5. ...