[PART I: Financial Information](index=3&type=section&id=PART%20I%20Financial%20Information%20%28unaudited%29) This section presents the unaudited financial statements and related disclosures for the company [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Unaudited Q1 2021 financial statements show significant net loss and revenue decline due to the pandemic, impacting assets and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$9,514,515** | **$8,687,319** | | Cash and cash equivalents | $874,455 | $73,332 | | Total real estate properties, net | $7,812,780 | $7,882,162 | | **Total Liabilities** | **$7,607,983** | **$6,584,529** | | Revolving credit facility | $1,000,000 | $78,424 | | Senior unsecured notes, net | $6,133,376 | $6,130,166 | | **Total Shareholders' Equity** | **$1,906,532** | **$2,102,790** | Condensed Consolidated Statements of Income (Loss) (in thousands, except per share data) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total revenues | $261,170 | $483,776 | | Hotel operating revenues | $168,953 | $383,503 | | Rental income | $92,217 | $100,273 | | Total expenses | $356,640 | $433,597 | | **Net loss** | **$(194,990)** | **$(33,650)** | | **Net loss per common share (basic and diluted)** | **$(1.19)** | **$(0.20)** | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(62,724) | $97,016 | | Net cash used in investing activities | $(68,806) | $(69,614) | | Net cash provided by (used in) financing activities | $919,625 | $(8,906) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail pandemic impact, hotel management transitions, rent deferrals, credit facility drawdown, and debt covenant non-compliance - The **COVID-19 pandemic** significantly impacted the company's results, financial position, and cash flow, with a full recovery potentially taking several years[20](index=20&type=chunk) - The company transferred **88 hotels** from Marriott to Sonesta management in Q1 2021, with Sonesta managing **256 of SVC's 310 hotels** by March 31, 2021[40](index=40&type=chunk) - Hyatt issued a termination notice for **22 hotel management agreements**, effective May 22, 2021, with SVC expecting to transition them to Sonesta[41](index=41&type=chunk)[50](index=50&type=chunk) - The net lease portfolio collected **93.1% of Q1 2021 rents**, with **$10.6 million** in deferred rents outstanding from **45 tenants** as of March 31, 2021[59](index=59&type=chunk)[60](index=60&type=chunk) - The company fully drew its **$1 billion revolving credit facility** in January 2021 but was not in compliance with a debt covenant for incurring additional debt[20](index=20&type=chunk)[72](index=72&type=chunk) - The company holds a **34% equity interest in Sonesta**, recognizing a **$2.8 million loss** for Q1 2021, with significant related-party transactions[47](index=47&type=chunk)[83](index=83&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 attributes Q1 2021's poor performance to the pandemic, with significant RevPAR decline and negative FFO Hotel Portfolio Performance (All Hotels, Q1 2021 vs Q1 2020) | Metric | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | ADR | $88.02 | $125.06 | -29.6% | | Occupancy | 40.1% | 56.6% | -16.5 p.p. | | RevPAR | $35.30 | $70.78 | -50.1% | - Hotel operating revenues decreased primarily due to **$202.9 million** lower occupancies from the COVID-19 pandemic, leading to a significant net loss[114](index=114&type=chunk)[117](index=117&type=chunk) - The company is in arbitration with Marriott concerning the termination of management agreements and a **$19.1 million** dispute over minimum return advances[128](index=128&type=chunk) - The consolidated income available for debt service to debt service ratio was **1.12x** as of March 31, 2021, below the **1.50x** minimum, restricting additional debt incurrence[153](index=153&type=chunk) FFO and Normalized FFO Reconciliation (in thousands, except per share) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net loss | $(194,990) | $(33,650) | | FFO | $(62,456) | $123,084 | | Normalized FFO | $(41,996) | $123,084 | | FFO per share | $(0.38) | $0.75 | | Normalized FFO per share | $(0.26) | $0.75 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on fixed and floating-rate debt, monitoring LIBOR phase-out - As of March 31, 2021, the company held **$6.2 billion** in fixed-rate senior notes, with a **1% interest rate change** impacting fair value by approximately **$240.2 million**[194](index=194&type=chunk) - A **1% increase** in interest rates on the **$1.0 billion** floating-rate revolving credit facility would raise annual interest expense by **$10.0 million**, or **$0.01 per share**[196](index=196&type=chunk)[197](index=197&type=chunk) - The company is monitoring the **LIBOR phase-out**, expected by June 30, 2023, anticipating an amendment to its credit agreement for an alternative benchmark rate[200](index=200&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2021, with no material changes to internal controls - The President and CEO and the CFO and Treasurer concluded that the company's disclosure controls and procedures were **effective** as of Q1 2021[202](index=202&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2021[203](index=203&type=chunk) [PART II: Other Information](index=47&type=section&id=PART%20II%20Other%20Information) This section provides additional disclosures, including risk factor updates and a list of filed exhibits [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from those disclosed in the 2020 Annual Report - No material changes to risk factors were reported from those previously disclosed in the company's **2020 Annual Report**[218](index=218&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including debt indentures and CEO/CFO certifications - Exhibits include supplemental indentures for senior notes, **CEO and CFO certifications**, and XBRL data files[220](index=220&type=chunk)[221](index=221&type=chunk)

Part I [Item 1. Business](index=9&type=section&id=Item%201.%20Business) SVC, a REIT owning 310 hotels and 799 retail properties, faced severe COVID-19 impacts, leading to hotel portfolio transitions to Sonesta and liquidity preservation measures - As of December 31, 2020, SVC owned **310 hotels** with **49,014 rooms** and **799 service-oriented retail properties** with over **13.4 million square feet**[26](index=26&type=chunk) - The COVID-19 pandemic severely impacted SVC's lodging and service retail properties, causing significant declines in hotel occupancy, revenues, and profitability[31](index=31&type=chunk) - Due to payment failures from operators amidst the pandemic, SVC terminated its agreements with IHG and Marriott, transitioning a large number of hotels to be managed by Sonesta[34](index=34&type=chunk) Hotel Performance Impact from COVID-19 | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Average Occupancy (310 hotels) | 42.0% | 73.0% | [Hotel and Net Lease Portfolios](index=11&type=section&id=Hotel%20and%20Net%20Lease%20Portfolios) As of year-end 2020, SVC's portfolio included 310 hotels with a $7.0 billion investment and 799 net lease properties valued at $5.2 billion, with TA as a major tenant Portfolio Summary (as of Dec 31, 2020) | Portfolio | Number of Properties | Investment (in billions) | | :--- | :--- | :--- | | Hotels | 310 | $7.0 | | Net Lease | 799 | $5.2 | - The hotel portfolio is geographically diverse, located in 39 states, Washington D.C., Canada, and Puerto Rico, with brands ranging from Luxury (Royal Sonesta) to Midscale (Simply Suites)[43](index=43&type=chunk)[46](index=46&type=chunk) - The net lease portfolio was **98.7% occupied** with a weighted average lease term of **10.9 years**. TravelCenters of America and Petro Stopping Centers are the top two brands by investment, totaling over **$3.3 billion**[48](index=48&type=chunk)[50](index=50&type=chunk) [Investment, Operating, and Financing Policies](index=15&type=section&id=Investment,%20Operating,%20and%20Financing%20Policies) SVC's strategy to increase cash flows through acquisitions and leverage is restricted by COVID-19 impacts and credit agreement covenants, necessitating asset sales and dividend reductions while maintaining REIT status - SVC's growth strategy involves acquiring additional properties, but this is currently restricted under its credit agreement[62](index=62&type=chunk) - In 2020, the company sold **18 hotels** for **$85.8 million** and **21 net lease properties** for **$88.4 million** as part of its capital recycling and leverage management strategy[72](index=72&type=chunk) - The company secured a waiver of all existing financial covenants under its credit agreement through July 15, 2022, but pledged equity interests and first mortgage liens on **74 properties** as security[77](index=77&type=chunk) - SVC expects its ratio of income available for debt service to debt service could fall below the **1.5x requirement** under its public debt covenants as of Q1 2021, which would prevent it from incurring additional debt[77](index=77&type=chunk) [Material United States Federal Income Tax Considerations](index=21&type=section&id=Material%20United%20States%20Federal%20Income%20Tax%20Considerations) This section details the complex U.S. federal income tax rules for SVC as a REIT, covering requirements for maintaining REIT status, distribution rules, and tax implications for shareholders - SVC has elected to be taxed as a REIT and believes it has operated in a manner to maintain this qualification, which generally exempts it from federal income tax on distributed income[104](index=104&type=chunk)[105](index=105&type=chunk) - To maintain REIT status, SVC must annually satisfy two gross income tests (**75%** and **95%** from real estate-related sources) and several asset tests at the end of each quarter[129](index=129&type=chunk)[140](index=140&type=chunk) - SVC must distribute at least **90%** of its annual REIT taxable income to shareholders to maintain its tax status[155](index=155&type=chunk) - The company's ownership of approximately **34% of Sonesta** and its leasing of hotels to its Taxable REIT Subsidiaries (TRSs) are structured to comply with complex REIT rules, particularly regarding 'eligible independent contractors' and 'rents from real property'[148](index=148&type=chunk)[151](index=151&type=chunk)[153](index=153&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) SVC faces significant risks from the COVID-19 pandemic, high operator concentration, depleted security deposits, substantial debt with restrictive covenants, and potential conflicts of interest with related parties - The COVID-19 pandemic is the primary risk, having materially and adversely impacted business, financial results, and liquidity, with continued negative effects expected[214](index=214&type=chunk)[217](index=217&type=chunk) - There is a high concentration of properties operated by Sonesta (**256 of 310 hotels expected**) and TA (**179 of 182 travel centers**), making SVC's results highly dependent on their performance[230](index=230&type=chunk)[233](index=233&type=chunk) - Most security deposits and guarantees from former hotel operators (IHG, Marriott, Hyatt) have been exhausted due to the pandemic, increasing the volatility of future earnings[236](index=236&type=chunk) - The company has substantial debt (**$6.3 billion** at year-end) and is subject to restrictive covenants. It may need additional waivers to avoid default and is limited in its ability to pay distributions, make investments, and incur new debt[238](index=238&type=chunk)[243](index=243&type=chunk) - Potential conflicts of interest exist due to the company's relationship with its external manager, RMR LLC, and other related parties like Sonesta and TA, which share common management and ownership[293](index=293&type=chunk)[304](index=304&type=chunk) [Item 2. Properties](index=70&type=section&id=Item%202.%20Properties) As of December 31, 2020, SVC owned 1,109 geographically diverse properties (310 hotels, 799 net lease) with a total undepreciated carrying value of approximately $11.2 billion Property Portfolio Summary (as of Dec 31, 2020) | Property Type | Number of Properties | Undepreciated Carrying Value (in billions) | Depreciated Carrying Value (in billions) | | :--- | :--- | :--- | :--- | | Hotels | 310 | $6.6 | $4.6 | | Net Lease | 799 | $5.2 | $3.3 | | **Total** | **1,109** | **$11.2** | **$7.9** | - The property portfolio is geographically diverse, with assets in **47 states**, Washington D.C., Canada, and Puerto Rico[353](index=353&type=chunk) - A total of **31 properties** (**14 hotels** and **17 net lease**) are on land partially or entirely leased from third parties under ground leases[355](index=355&type=chunk)[356](index=356&type=chunk) [Item 3. Legal Proceedings](index=72&type=section&id=Item%203.%20Legal%20Proceedings) SVC initiated arbitration against Marriott International Inc. regarding the termination of their management agreement, disputing the termination's efficacy, payment classifications, and seeking repayment of advances - SVC initiated arbitration against Marriott and its subsidiaries following the termination of their management agreement for **122 hotels**[359](index=359&type=chunk) - The dispute involves Marriott challenging the termination's efficacy and asserting that SVC must refund approximately **$19.1 million** in minimum return advances[359](index=359&type=chunk) - SVC is also seeking repayment from Marriott for certain working capital advances made under the former agreement[359](index=359&type=chunk) Part II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=73&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) SVC common shares trade on Nasdaq, with a reduced quarterly cash distribution rate of $0.01 per share, subject to Board discretion and credit agreement limitations - The company's common shares trade on Nasdaq under the symbol **SVC**[362](index=362&type=chunk) - The current quarterly cash distribution rate is **$0.01 per common share**, significantly reduced in response to the pandemic's impact[363](index=363&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=74&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The MD&A highlights the severe COVID-19 impact on SVC's financials, with revenues falling to $1.27 billion and a net loss of $311.4 million in 2020, leading to operational changes and liquidity management efforts Financial Performance Summary (2020 vs. 2019) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total Revenues | $1,265.3M | $2,316.1M | | Net Income (Loss) | ($311.4M) | $259.8M | | Net Income (Loss) per Share | ($1.89) | $1.58 | | Normalized FFO | $202.0M | $620.7M | | Normalized FFO per Share | $1.23 | $3.78 | - The decrease in revenue was primarily driven by a **$1.11 billion (56.0%) drop** in hotel operating revenues due to lower occupancy and ADR from the COVID-19 pandemic[383](index=383&type=chunk)[384](index=384&type=chunk) - The company took significant steps to preserve liquidity, including reducing its quarterly dividend to **$0.01/share**, raising **$1.2 billion** in new senior notes, and borrowing the remaining capacity under its revolving credit facility in January 2021[368](index=368&type=chunk)[415](index=415&type=chunk) - As of December 31, 2020, the net lease portfolio generated rent coverage of **2.14x** and was **98.7% occupied**[413](index=413&type=chunk)[472](index=472&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=102&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) SVC's primary market risk is interest rate exposure, with $6.2 billion in fixed-rate debt and $78.4 million in floating-rate debt, the latter sensitive to LIBOR changes and its upcoming phase-out Debt Structure (as of Dec 31, 2020) | Debt Type | Principal Balance | | :--- | :--- | | Fixed Rate Senior Notes | $6,200,000,000 | | Floating Rate Revolving Credit Facility | $78,424,000 | - A hypothetical **1% increase** in interest rates would increase annual interest expense on the outstanding floating rate debt by approximately **$0.8 million**[511](index=511&type=chunk) - The company is monitoring the planned phase-out of LIBOR, which is the basis for its floating rate debt, and expects its credit agreement to be amended to use an alternative reference rate[514](index=514&type=chunk) [Item 9A. Controls and Procedures](index=104&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, a finding affirmed by the independent auditor - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period[518](index=518&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective as of December 31, 2020[521](index=521&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Accounting Fees](index=105&type=section&id=Directors,%20Executive%20Officers,%20Corporate%20Governance,%20Compensation,%20and%20Accounting%20Fees) Information for Items 10 through 14, covering governance, compensation, ownership, related transactions, and accounting fees, is incorporated by reference from the 2021 Proxy Statement - The information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive Proxy Statement to be filed within **120 days** of the fiscal year-end[527](index=527&type=chunk)[528](index=528&type=chunk)[531](index=531&type=chunk)[532](index=532&type=chunk)[533](index=533&type=chunk) - As of December 31, 2020, there were **2,029,893 common shares** available for issuance under the company's 2012 Equity Compensation Plan[530](index=530&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=106&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section provides the index to consolidated financial statements, schedules, and a comprehensive list of exhibits, including auditor reports and detailed notes - This section includes the audited consolidated financial statements for the three years ended December 31, 2020, and the accompanying notes[535](index=535&type=chunk) - The independent registered public accounting firm for the 2020 audit was Deloitte & Touche LLP, who also audited the company's internal control over financial reporting[550](index=550&type=chunk)[551](index=551&type=chunk) - A comprehensive list of exhibits is provided, including governing documents, debt indentures, management agreements, and certifications[540](index=540&type=chunk)

| --- | --- | --- | --- | --- | |------------------------------------------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | Service Properties Trust (Nasdaq: SVC) Investor Presentation November 2020 | | | | | | | | | | | | | | | | | Warning Concerning Forward-Looking Statements. This presentation contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Al ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-11527 SERVICE PROPERTIES TRUST (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation or Organization) Mary ...

Financial Data and Key Metrics Changes - Normalized FFO for Q3 2020 was $23.2 million, a decrease from $155.6 million in the prior year quarter, reflecting a decline of $0.81 per share due to lower returns from IHG and Marriott agreements [25][26] - Adjusted EBITDAre was $103.6 million in Q3 2020, representing a 50.5% decline from the same period in 2019 [26] - RevPAR decreased by 56.6%, and gross operating profit margin percentage decreased by 18.2 percentage points to 21.2% [27] Business Line Data and Key Metrics Changes - Comparable hotels reported an average occupancy of 46% in Q3 2020, up from 30.1% in Q2 2020, with average daily rate increasing to $89.50 from $84.15 [11] - Extended stay hotels reported occupancy of 62.1%, significantly higher than 32.6% for limited service and 26% for full service hotels [12] - Operating losses for Sonesta and Wyndham portfolios were $22 million and $10.7 million respectively, with a $19 million decline in FF&E reserve income [25][26] Market Data and Key Metrics Changes - Rent collections from net lease retail tenants improved to 87.4% in October from a low of 45% in April [14] - TravelCenters of America, representing 25.6% of minimum returns, continued to operate and was current on rent obligations, with property level coverage at 2 times [14][18] - The hotel performance has shown improvement, with overall occupancy increasing to 46.7% by late October from a low of 21% in April [12] Company Strategy and Development Direction - The company is transitioning management and branding of hotels to Sonesta, aiming for greater flexibility and improved performance in challenging market conditions [10] - The focus is on suburban extended stay and select-service hotels, which are expected to outperform urban full-service hotels through at least 2021 [13] - The company has amended its $1 billion revolving credit facility to ensure liquidity and has secured waivers for financial covenants through mid-July 2022 [9][32] Management's Comments on Operating Environment and Future Outlook - Management believes the worst effects of the COVID-19 pandemic are behind, with gradual improvements observed since April [7] - The company anticipates that business travel may not recover as quickly as expected, impacting major brands' guest rewards programs [10] - Management expressed confidence in the recovery of the hotel sector by 2022, contingent on vaccine distribution [37] Other Important Information - The company has deferred $13.4 million of rent for certain retail tenants, with repayment expected over 12 to 24 months [19] - The company has sold 5 net lease properties for $5.9 million and has agreements to sell 39 hotels with a net carrying value of $204 million [21][22] - The company expects to fund approximately $50 million of capital improvements in Q4 2020, primarily for maintenance and ongoing renovations [31] Q&A Session Summary Question: Has the company received calls from Marriott regarding reversing decisions? - Management has not received any calls from IHG or Marriott and believes the vaccine news is favorable for the industry, potentially accelerating recovery in 2022 [37] Question: What is the status of the transition to Sonesta? - The transition is on schedule, with Sonesta enhancing its management team and preparing to take over hotels as planned [39] Question: What is the expected CapEx for the transition to Sonesta? - Approximately $50 million of CapEx is expected for Q4, with $30 million related to rebranding costs [46] Question: What is the current status of security deposits and guarantees? - The total amount for security deposits and guarantees at the end of Q3 is approximately $22 million, with $3 million from Hyatt and $19.5 million from Radisson [49] Question: Is the company considering selling TravelCenters assets? - Currently, the company is not contemplating selling more TravelCenters assets but is keeping options open [64]

[PART I Financial Information](index=3&type=section&id=PART%20I%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Service Properties Trust as of June 30, 2020, detail balance sheets, income, equity, and cash flows, with notes on accounting policies and significant events [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Items | Balance Sheet Items | June 30, 2020 ($ in thousands) | December 31, 2019 ($ in thousands) | Change | | :--- | :--- | :--- | :--- | | Total real estate properties, net | 7,999,090 | 8,264,275 | (3.2%) | | Cash and cash equivalents | 20,206 | 27,633 | (26.9%) | | Total assets | 8,879,545 | 9,033,967 | (1.7%) | | Revolving credit facility | 33,127 | 377,000 | (91.2%) | | Senior unsecured notes, net | 5,732,018 | 5,287,658 | +8.4% | | Total liabilities | 6,533,824 | 6,528,089 | +0.1% | | Total shareholders' equity | 2,345,721 | 2,505,878 | (6.4%) | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Metric | Metric | Three Months Ended June 30, 2020 ($ in thousands) | Three Months Ended June 30, 2019 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2019 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | 214,940 | 610,562 | 698,716 | 1,135,470 | | Hotel operating revenues | 117,356 | 541,215 | 500,859 | 996,078 | | Net income (loss) | (37,349) | 8,782 | (70,999) | 234,569 | | Net income (loss) per share | $(0.23) | $0.05 | $(0.43) | $1.43 | - The company experienced a significant decline in revenues, particularly from hotel operations, leading to a net loss in the second quarter and first half of 2020, a sharp reversal from the net income reported in the same periods of 2019, primarily driven by the COVID-19 pandemic's impact on the lodging industry[11](index=11&type=chunk) - A gain on an insurance settlement of **$62.4 million** was recognized in Q2 2020, partially offsetting operating losses, while the company also recorded a **$28.5 million** loss on asset impairment in the same quarter[11](index=11&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) - Total shareholders' equity decreased from **$2.51 billion** at year-end 2019 to **$2.35 billion** at June 30, 2020, primarily driven by a net loss of **$71.0 million** and common distributions of **$90.5 million** during the first six months of 2020[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Activity (Six Months Ended June 30) | Cash Flow Activity (Six Months Ended June 30) | 2020 ($ in thousands) | 2019 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 48,797 | 239,898 | | Net cash (used in) provided by investing activities | (74,760) | 531 | | Net cash used in financing activities | (5,438) | (262,952) | | **Decrease in cash and cash equivalents** | **(31,401)** | **(22,523)** | - Net cash from operating activities decreased significantly year-over-year, primarily due to the net loss and the application of **$100.2 million** in security deposits, which is a non-cash adjustment to reconcile net income[18](index=18&type=chunk) - Financing activities in H1 2020 included issuing **$800 million** in senior notes, repurchasing **$356 million** of senior notes, and paying significantly lower distributions to shareholders (**$90.5 million** vs. **$176.0 million** in H1 2019)[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - As of June 30, 2020, the company owned 329 hotels and 809 service-oriented retail properties, acquiring three net lease properties for **$7.1 million** and selling ten net lease properties for **$64.0 million** during the first six months[34](index=34&type=chunk)[38](index=38&type=chunk)[42](index=42&type=chunk) - The company's hotel agreements with major operators like IHG and Marriott faced significant stress, with the IHG security deposit depleted leading to a default and termination notice in July 2020, and the Marriott security deposit and limited guaranty fully exhausted[51](index=51&type=chunk)[52](index=52&type=chunk)[57](index=57&type=chunk) - In response to the COVID-19 pandemic, the company entered into rent deferral agreements with 80 net lease retail tenants, deferring an aggregate of **$11.3 million** of rent as of August 6, 2020[92](index=92&type=chunk) - To maintain liquidity, the company amended its credit agreement to waive certain financial covenants through March 31, 2021, issued **$800 million** of 7.50% senior notes due 2025, and repurchased **$350 million** of 4.25% senior notes due 2021[105](index=105&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - The quarterly common share distribution was drastically reduced from **$0.54 per share** in Q1 2020 to **$0.01 per share** in Q2 2020 to preserve cash[110](index=110&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the severe COVID-19 impact on lodging and retail properties, detailing operational and financial responses, including revenue declines, cost reductions, credit waivers, capital raising, and distribution cuts, alongside liquidity and portfolio performance [Impact of COVID-19](index=29&type=section&id=Impact%20of%20COVID-19) - The COVID-19 pandemic has had, and is expected to continue to have, a substantial and materially adverse impact on the company's business, operations, financial results, and liquidity due to its severe effect on the travel, entertainment, and retail industries[148](index=148&type=chunk) - Hotel occupancy plummeted to lows in Q2 2020 (**21.0%** in April, **26.8%** in May, **35.5%** in June), though it showed gradual improvement to **42.4%** for the 28 days ended July 25, 2020, with 19 hotels suspending operations and 9 having resumed by August 6, 2020[149](index=149&type=chunk) - Rent collection from non-TA net lease tenants was **58.7%** in Q2 2020, and the company entered into rent deferral agreements for **$11.3 million** with 80 tenants[154](index=154&type=chunk) - To preserve liquidity, the company reduced its quarterly dividend to **$0.01/share**, raised **$788 million** from a notes offering, repurchased **$350 million** of notes due 2021, and secured a waiver on certain financial covenants for its credit facility[159](index=159&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Metric (Q2 2020 vs Q2 2019) | Metric (Q2 2020 vs Q2 2019) | Q2 2020 ($ in thousands) | Q2 2019 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Hotel operating revenues | 117,356 | 541,215 | (78.3)% | | Total rental income | 97,584 | 68,217 | +43.0% | | Hotel operating expenses | 46,957 | 380,431 | (87.7)% | | Net income (loss) | (37,349) | 8,782 | (525.3)% | - The decrease in hotel operating revenues for Q2 2020 was primarily due to lower occupancies caused by the COVID-19 pandemic[173](index=173&type=chunk) - The increase in rental income from the net lease portfolio was primarily due to properties acquired in the SMTA Transaction in late 2019[176](index=176&type=chunk) - Hotel operating expenses decreased sharply in Q2 2020 due to lower occupancy and a **$121.2 million** reduction from the utilization of security deposits and guarantees from hotel operators[97](index=97&type=chunk)[178](index=178&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) - As of August 6, 2020, the company had **$967.9 million** available under its revolving credit facility, with a limited waiver of compliance with certain financial covenants secured to ensure access to this facility[159](index=159&type=chunk)[234](index=234&type=chunk) - In July 2020, the company sent a notice of default and termination to IHG for non-payment of minimum returns after exhausting its security deposit, with plans to transition these 103 hotels to Sonesta if the default is not cured[210](index=210&type=chunk) - During Q2 2020, the company advanced **$80.5 million** in working capital to its hotel operators (IHG, Marriott, Sonesta, Wyndham, Hyatt) to cover projected operating losses[212](index=212&type=chunk) - The company issued **$800 million** of 7.50% senior notes due 2025 in June 2020 and used proceeds to repay borrowings under its revolving credit facility, also repurchasing **$350 million** of its 4.25% senior notes due 2021[229](index=229&type=chunk)[230](index=230&type=chunk) [Portfolio Performance](index=50&type=section&id=Portfolio%20Performance) Hotel Portfolio Key Metrics | Hotel Portfolio Key Metrics | Q2 2020 | Q2 2019 | Change | | :--- | :--- | :--- | :--- | | ADR | $84.34 | $132.55 | (36.4%) | | Occupancy | 27.8% | 77.2% | (49.4) Pts | | RevPAR | $23.45 | $102.33 | (77.1%) | - For the twelve months ended June 30, 2020, all six of the company's hotel operating agreements generated rent/return coverage of less than **1.0x**, with a range from **0.04x** to **0.52x**, indicating severe cash flow shortfalls at the property level[214](index=214&type=chunk)[259](index=259&type=chunk) - The net lease portfolio was **99%** occupied as of June 30, 2020, with a weighted average remaining lease term of **11.1 years**, and generated an aggregate coverage of **2.16x**[169](index=169&type=chunk)[215](index=215&type=chunk)[277](index=277&type=chunk) - TravelCenters of America (TA) is the largest tenant, accounting for **66.6%** of annualized minimum rent from the net lease portfolio[281](index=281&type=chunk) [Non-GAAP Financial Measures](index=56&type=section&id=Non-GAAP%20Financial%20Measures) Metric (per share) | Metric (per share) | Q2 2020 | Q2 2019 | H1 2020 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $(0.23) | $0.05 | $(0.43) | $1.43 | | FFO | $0.72 | $1.03 | $1.47 | $1.91 | | Normalized FFO | $0.48 | $1.03 | $1.22 | $1.91 | - Normalized FFO for Q2 2020 was **$78.2 million**, or **$0.48 per share**, a significant decrease from **$168.8 million**, or **$1.03 per share**, in Q2 2019, reflecting the severe impact of the pandemic on operations[298](index=298&type=chunk) - Adjustments to calculate Normalized FFO from FFO in Q2 2020 included adding back a **$7.0 million** loss on early extinguishment of debt and subtracting a **$46.7 million** net gain on an insurance settlement[298](index=298&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure, with **$5.8 billion** in fixed-rate senior notes and **$433.1 million** in floating-rate debt, where a 1% rate increase would raise annual interest expense by **$4.3 million** - As of June 30, 2020, the company had **$5.8 billion** in fixed-rate senior notes, which mitigates the impact of rising interest rates on interest expense for this portion of its debt[305](index=305&type=chunk) - The company had **$433.1 million** in floating-rate debt outstanding, consisting of **$33.1 million** on its revolving credit facility and a **$400.0 million** term loan, where a hypothetical **1%** increase in interest rates would increase annual interest expense by approximately **$4.3 million**[308](index=308&type=chunk)[309](index=309&type=chunk) - The company acknowledges the expected phase-out of LIBOR in 2021 and anticipates its credit agreements will be amended to provide for an alternative interest rate benchmark[313](index=313&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2020, the President and Chief Executive Officer and the Chief Financial Officer and Treasurer concluded that the company's disclosure controls and procedures are effective[314](index=314&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[315](index=315&type=chunk) [PART II Other Information](index=64&type=section&id=PART%20II%20Other%20Information) [Risk Factors](index=64&type=page&id=Item%201A.%20Risk%20Factors) Significant risks include the material adverse impact of COVID-19 on operations, financial results, and liquidity, exhaustion of hotel operator security deposits, potential for low share prices, tenant defaults, and restrictions on distributions and asset sales - The COVID-19 pandemic has had, and is expected to continue to have, a substantial and materially adverse impact on the company's business, operations, financial results, and liquidity due to its severe effect on the travel, entertainment, and retail industries[330](index=330&type=chunk)[331](index=331&type=chunk) - A significant risk is the exhaustion of security deposits and guarantees from the company's two largest hotel operators, IHG and Marriott, which reduces the security of minimum returns, increases the variability of operating results, and has led to a payment default and termination notice for IHG[343](index=343&type=chunk) - The company's ability to pay distributions is restricted by its credit agreement waiver and may remain at the reduced rate of **$0.01 per share** for an indefinite period or be eliminated entirely[341](index=341&type=chunk)[344](index=344&type=chunk) - Plans to sell hotels and reduce debt leverage are expected to be delayed due to market conditions, and there is no assurance that sales will be completed or at expected prices[346](index=346&type=chunk)[350](index=350&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2020, the company purchased 3,808 common shares at **$7.09 per share** to satisfy tax obligations related to vested share awards for a former officer and employee Calendar Month | Calendar Month | Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2020 | — | $— | | May 2020 | — | $— | | June 2020 | 3,808 | $7.09 | | **Total** | **3,808** | **$7.09** | [Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, senior note indentures, credit agreement amendments, IHG default correspondence, and required SEC certifications - Key exhibits filed include the Notice of Event of Default and Termination sent to InterContinental Hotels Group (IHG) on July 23, 2020, and a subsequent Notice of Additional Event of Default sent on August 4, 2020[355](index=355&type=chunk) - The filing includes certifications by the CEO and CFO as required by Rule 13a-14(a) and Section 1350 of the Sarbanes-Oxley Act[355](index=355&type=chunk)[357](index=357&type=chunk)

Service Properties Trust (NASDAQ:SVC) Q2 2020 Results Conference Call August 7, 2020 10:00 AM ET Company Participants Kristin Brown - Director, IR John Murray - President and CEO Brian Donley - CFO Todd Hargreaves - Chief Investment Officer Conference Call Participants Bryan Maher - B. Riley FBR Dori Kesten - Wells Fargo Operator Good morning. And welcome to Service Properties Trust’s Second Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-11527 SERVICE PROPERTIES TRUST (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation or Organization) Maryland 0 ...

Service Properties Trust (NASDAQ:SVC) Q1 2020 Earnings Conference Call May 11, 2020 10:00 AM ET Company Participants Kristin Brown - Director-IR John Murray - President Todd Hargreaves - Vice President Brian Donley - CFO Conference Call Participants Bryan Maher - B. Riley FBR Operator Good day and welcome to Service Properties Trust First Quarter 2020 Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the ...

SVC Nasdaq Listed Service Properties Trust First Quarter 2020 Supplemental Operating and Financial Data Courtyard by Marriott Phoenix, S. Chandler, AZ Operator: Marriott International, Inc. Guest Rooms: 156 All amounts in this report are unaudited. Table of Contents (1) | --- | --- | --- | |-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...