Summit Hotel Properties, Inc.: Form 10-Q for the period ended Jun 30, 2025

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2024, and our unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Unless stated otherwise or the context otherwise requires, references in this report to “we,” “our,” “us,” “our company” or “the company” mean Summit Hotel Properties, Inc. and its consolidated subsidiaries.

Cautionary Statement about Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “forecast,” “project,” “potential,” “continue,” “likely,” “will,” “would” or similar expressions. Forward-looking statements in this report include, among others, statements about our business strategy, including acquisition and development strategies, industry trends, estimated revenues and expenses, ability to realize deferred tax assets and expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital). You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control and which could materially affect actual results, performance or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

• global, national, regional and local economic and geopolitical conditions and events, including wars or potential hostilities, such as future terrorist attacks, that may negatively affect business transient, group and other travel or consumer behavior;
• changes in federal or state regulations or policies, such as the effect of significantly increased tariffs or retaliatory responses to increased tariffs, that could affect our business;
• macroeconomic conditions related to, and our ability to manage, inflationary pressures for commodities, labor and other costs of our business;
• consumer purchasing power and overall behavior, or a potential recessionary environment, which could adversely affect our costs, liquidity, consumer confidence, and demand for travel and lodging;
• levels of spending for business and leisure travel;
• adverse changes in occupancy, average daily rate (“ADR”) and revenue per available room (“RevPAR”) and other lodging property operating metrics;
• potential changes in operations, including as a result of new regulations or changes in brand standards;
• financing risks, including the risk of leverage and the corresponding risk of default on our existing indebtedness and potential inability to refinance or extend the maturities of our existing indebtedness;
• effects of infectious disease outbreaks or pandemics;
• default by borrowers to which we lend or provide seller financing;
• supply and demand factors in our markets or sub-markets;
• the effect of alternative accommodations on our business;
• financial condition of, and our relationships with, third-party property managers and franchisors;
• the degree and nature of our competition;
• increased interest rates or continued high rates of interest;
• increased renovation costs, which may cause actual renovation costs to exceed our current estimates;
• supply-chain disruption, which may reduce access to operating supplies or construction materials and increase related costs;
• changes in zoning laws;
• significant increases in the cost of real property taxes;
• significant increases in insurance costs or availability;
• risks associated with lodging property acquisitions, including the ability to ramp up and stabilize newly acquired lodging properties with limited or no operating history or that require substantial amounts of capital improvements for us to earn economic returns consistent with our expectations at the time of acquisition;
• risks associated with dispositions of lodging properties, including our ability to successfully complete the sale of lodging properties under contract to be sold, including the risk that the purchaser may not have access to the capital needed to complete the purchase;
• the nature of our structure and transactions such that our federal and state taxes are complex and there is risk of successful challenges to our tax positions by the Internal Revenue Service (“IRS”) or other federal and state taxing authorities;
• availability of and the abilities of our property managers and us to retain qualified personnel at our lodging property and corporate offices;
• our failure to maintain our qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “IRC”);
• changes in our business or investment strategy;
• availability, terms and deployment of capital;
• general volatility of the capital markets and the market price of our common stock;
• environmental uncertainties and risks related to natural disasters;
• our ability to recover fully under third-party indemnities or our existing insurance policies for insurable losses and our ability to maintain adequate or full replacement cost “all-risk” property insurance policies on our properties on commercially reasonable terms;
• the effect of a data breach or significant disruption of property operator information technology networks as a result of cyber-attacks that are greater than insurance coverages or indemnities from service providers;
• our ability to manage rapidly advancing artificial intelligence technology related to our business;
• our ability to effectively manage our joint ventures with our joint venture partners;
• current and future changes to the IRC;
• our ability to continue to maintain an effective corporate responsibility program;
• our ability to successfully execute our share repurchase program or implement future share repurchase programs;
• the announced share repurchase program may not result in the full authorized amount being expended to repurchase shares of our common stock and could affect our share price and volatility; and
• the other factors discussed under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Overview

Summit Hotel Properties, Inc. is a self-managed lodging property investment company that was organized in June 2010 and completed its initial public offering in February 2011. We focus on owning lodging properties with efficient operating models that generate strong margins and investment returns. Our lodging properties are typically located in markets with multiple demand generators such as corporate offices and headquarters, retail centers, airports, state capitols, convention centers, and leisure attractions. Substantially all of our assets are held by, and all of our operations are conducted through, our operating partnership, Summit Hotel OP, LP (the “Operating Partnership”). Through a wholly-owned subsidiary, we are the sole general partner of the Operating Partnership. At June 30, 2025, we owned, directly and indirectly, approximately 89% of the Operating Partnership’s issued and outstanding common units of limited partnership interest (“Common Units”), and all of the Operating Partnership’s issued and outstanding 6.25% Series E and 5.875% Series F preferred units of limited partnership interest. NewcrestImage Holdings, LLC and NewcrestImage Holdings II, LLC own all of the issued and outstanding 5.25% Series Z Cumulative Perpetual Preferred Units of the Operating Partnership (“Series Z Preferred Units”), which was issued as part of the NCI Transaction (as defined in “Note 5 -Debt” to the accompanying Condensed Consolidated Financial Statements). We collectively refer to preferred units of limited partnership interests of our Operating Partnership as “Preferred Units.”

At June 30, 2025, our portfolio consisted of 97 lodging properties with a total of 14,577 guestrooms located in 25 states of the United States of America. We own our lodging properties in fee simple, except for seven lodging properties which are subject to ground leases or subleases. As of June 30, 2025, we own 100% of the outstanding equity interests in 53 of the 97 lodging properties. We own a 51% controlling interest in 41 lodging properties through a joint venture that was formed in July 2019 with USFI G-Peak, Ltd. (“GIC”), a private limited company incorporated in the Republic of Singapore (the “GIC Joint Venture”). We also own 90% equity interests in two separate joint ventures (the “Brickell Joint Venture” and the “Onera Joint Venture”). The Brickell Joint Venture owns two lodging properties, and the Onera Joint Venture owns one lodging property.

Our hotel properties primarily operate under premium franchise brands owned by Marriott® International, Inc. (“Marriott”), Hilton® Worldwide (“Hilton”), Hyatt® Hotels Corporation (“Hyatt”) and InterContinental® Hotels Group (“IHG”). We also own two independent lodging properties.

We have elected to be taxed as a REIT for federal income tax purposes commencing with our short taxable year ended December 31, 2011. To qualify as a REIT, we cannot operate or manage our lodging properties. Accordingly, all of our lodging properties are leased to our taxable REIT subsidiaries (“TRS Lessees” or “TRSs”). All of our lodging properties are operated pursuant to lodging property management agreements between our TRS Lessees and professional, third-party lodging property management companies that are not affiliated with us as follows:

(1) Effective July 1, 2025, Concord Hospitality Enterprises Company, LLC was replaced with MIA Hospitality Management, LLC.

Our typical lodging property management agreement requires us to pay a base fee to our lodging property manager calculated as a percentage of lodging property revenues. In addition, our typical lodging property management agreements generally provide that the lodging property manager can earn an incentive fee for hotel-level Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) over certain thresholds of a required investment return to us. Our TRS Lessees may employ other lodging property managers in the future. We currently do not have any ownership or economic interest in any of the lodging property management companies engaged by our TRS Lessees. However, we have a purchase option to acquire a 10% to 15% equity interest in the entity that owns the Onera brand, which is an affiliate of Blink Data Services, LLC, if we reach certain investment thresholds in Onera-branded properties.

Our revenues are derived from lodging property operations and consist of room revenue, food and beverage revenue and other lodging property operations revenue. Revenues from our other lodging property operations consist of ancillary revenues related to parking, cancellation fees, meeting rooms and other guest services provided at certain of our lodging properties.

Recent Developments

On April 29, 2025, our Board of Directors authorized the repurchase of up to $50 million of our common stock (the “2025 Share Repurchase Program”). Repurchases may be made from time to time at management’s discretion, at prices management considers to be attractive, through open market purchases, subject to availability. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Exchange Act, and other applicable legal requirements. We have no obligation to repurchase any shares under the program, and the timing, actual number and value of the shares that are repurchased, if any, are at the discretion of management. The 2025 Share Repurchase Program does not have an expiration date.

During the six months ended June 30, 2025, the Company repurchased 3,585,179 shares of our Common Stock under the 2025 Share Repurchase Program for an aggregate purchase price and commissions of $15.4 million, or an average of approximately $4.30 per share. As of June 30, 2025, approximately $34.6 million remained available for repurchase under the 2025 Stock Repurchase Program.

Industry Trends and Outlook

Room-night demand in the U.S. lodging industry is generally correlated to certain macroeconomic trends. Key drivers of demand, and therefore lodging revenues, include changes in gross domestic product, corporate profits, capital investments, employment, and consumer and corporate sentiment. From a cost perspective, elevated inflation increased the cost of salaries, wages, supplies, material, freight, insurance and energy in recent years. A portion of these costs were partially offset by increases in average rates for lodging properties. Expense growth has moderated to a pace consistent with historical long-term inflation rates; however, certain costs remain above historical levels and could be further affected by changes in tariff policies and agreements.

During the six months ended June 30, 2025, we experienced a modest same-store revenue decline resulting primarily from a reduction in government-related and inbound international travel. Recent policy changes, including tariff policies, as well as continued concerns related to inflationary pressures, have created macroeconomic uncertainty which has had a negative effect on consumer and corporate sentiment and spending. This has resulted in modest near-term pricing pressure in certain demand segments. The medium- and long-term outlook for the industry remains favorable as forecasted room night demand growth and increases in average daily rate, coupled with minimal supply growth, are expected to drive industry RevPAR growth over the next several years.

Our Lodging Property Portfolio

According to current chain scales as defined by STR Global (“STR”), as of June 30, 2025, six of our lodging properties with a total of 953 guestrooms are categorized as Upper-upscale hotels, 74 of our lodging properties with a total of 11,296 guestrooms are categorized as Upscale hotels and 15 of our lodging properties with a total of 2,248 guestrooms are categorized as Upper-midscale hotels. We have two independent lodging properties that are not categorized by STR. Lodging property information at June 30, 2025 is as follows:

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Lodging Property Portfolio Activity

We continually evaluate alternatives to refine our portfolio to drive growth and create value. In the normal course of business, we evaluate opportunities to acquire additional properties that meet our investment criteria and opportunities to recycle capital through the disposition of properties. As such, the composition and size of our portfolio of properties may change materially over time. Significant changes to our portfolio of properties could have a material effect on our Condensed Consolidated Financial Statements.

See “Note 3 - Investments in Lodging Property, net” to the Condensed Consolidated Financial Statements for further information related to lodging property acquisitions and dispositions.

Results of Operations

The comparisons that follow should be reviewed in conjunction with the unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

Comparison of the Three Months Ended June 30, 2025 with the Three Months Ended June 30, 2024

The following table contains key operating metrics for our portfolio for the three months ended June 30, 2025 compared with the three months ended June 30, 2024 (dollars in thousands, except ADR and RevPAR).

(1) Same-store information includes operating results for 95 hotels owned by the Company as of January 1, 2024, and at all times during the three months ended June 30, 2025, and 2024.

The portfolio information above for the three months ended June 30, 2025 and 2024 reflects operating results for various portions of each period for certain lodging properties as a result of the acquisition and sales of lodging properties. The following table details how the acquisition and disposition transactions affect each reporting period:

Changes from the three months ended June 30, 2025 compared with the three months ended June 30, 2024 were due to the following:

• Revenues and RevPAR. Room revenues for our total portfolio during the second quarter of 2025 compared with the second quarter of 2024 decreased by $2.4 million as a result of a $6.2 million decrease in same-store revenues driven by reduced government-related and inbound international travel, partially offset by a $3.8 million increase in room revenues due to the net effect of the acquisition of two lodging properties (the "2024 Acquired Properties") and the sale of four lodging properties (the "2024 Partial Year Sold Properties").

Occupancy was flat and ADR decreased by 2.8% for the total portfolio during the second quarter of 2025, which resulted in a 2.7% decrease in RevPAR. On a same-store basis, we experienced a decrease of 0.4% in occupancy and a 3.3% decrease in ADR during the second quarter of 2025. This resulted in a decrease in same-store RevPAR of 3.6% for the second quarter of 2025. The declines in ADR were driven by a modest shift in mix towards lower rated demand segments.

• Room Expenses. Room expenses for our total portfolio for the second quarter of 2025 compared with the second quarter of 2024 increased $1.1 million as a result of a $0.7 million increase in same-store room expenses primarily driven by an increase in labor and benefits expenses, and a $0.4 million increase in room expenses due to the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Partial Year Sold Properties.
• Food and Beverage Revenues and Expenses. Total portfolio food and beverage revenues increased $1.1 million for the second quarter of 2025 compared with the second quarter of 2024 primarily due to a $1.0 million increase in same-store food and beverage revenues driven by the modification of certain breakfast programs and special events. Total portfolio food and beverage expenses increased by $0.7 million as a result of a $0.6 million increase in same-store food and beverage expenses primarily to support the increase in food and beverage revenues.
• Other Lodging Property Operating Revenues and Expenses. Other lodging property operating revenues for our total portfolio during the second quarter of 2025 compared with the second quarter of 2024 increased $0.3 million primarily due to an increase in same-store parking and resort fees.

The $1.5 million increase in other lodging property operating expenses for the total portfolio for the three months ended June 30, 2025 in comparison with the three months ended June 30, 2024 was attributable to a $0.8 million increase in same-store other lodging property operating expenses combined with a $0.7 million increase due to the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Partial Year Sold Properties. The same-store increase was driven by increased labor costs, maintenance costs, and utilities.

The following table includes other consolidated income and expenses for the three months ended June 30, 2025 compared with the three months ended June 30, 2024 (dollars in thousands):

¹ Not meaningful.

Changes for the three months ended June 30, 2025 compared with the three months ended June 30, 2024 were due to the following:

• Property Taxes, Insurance and Other. The increase in Property taxes, insurance and other during the three months ended June 30, 2025 is primarily due to a $0.6 million increase in property taxes, partially offset by a $0.3 million decrease in insurance premiums, combined with a $0.1 million increase from the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Partial Year Sold Properties.
• Management Fees. Management fees decreased slightly during the three months ended June 30, 2025 primarily due to lower same-store revenues for the period.
• Depreciation and Amortization. Depreciation and amortization increased by $0.8 million during the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to an increase of $1.1 million in depreciation and amortization as a result of the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Partial Year Sold Properties, partially offset by a $0.3 million decrease in same-store depreciation and amortization, as the reduction from fully depreciated assets exceeded the depreciation of assets placed in service as a result of completed renovations.
• Corporate General and Administrative. Corporate general and administrative expenses decreased by $0.4 million during the three months ended June 30, 2025 primarily due to a decrease in corporate employee-related costs.
• (Loss) Gain on Disposal of Assets, net. (Loss) Gain on disposal of assets, net of $28.3 million for the three months ended June 30, 2024 was primarily the result of a $28.3 million gain recorded on the sale of a portfolio of two lodging properties in New Orleans, LA during the three months ended June 30, 2024.
• Interest Expense. Interest expense decreased by $0.2 million during the three months ended June 30, 2025 primarily due to lower average interest rates during the period, partially offset by an increase in the average debt outstanding during the three months ended June 30, 2025 compared to the same period of the prior year.
• Interest Income. Interest income decreased by $0.3 million during the three months ended June 30, 2025 due to non-cash interest income related to the amortization of the Onera Purchase Option recorded during the three months ended June 30, 2024, which was fully amortized in September 2024, combined with a decrease related to interest earned on money market accounts during the comparable three-month periods.
• Gain on Extinguishment of Debt. The gain on extinguishment of debt for the three months ended June 30, 2024 was the result of the repayment of the MetaBank Loan (as defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements) in June 2024 prior to its scheduled maturity date, which resulted in a net gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date.
• Other Income, net. Other income, net for the three months ended June 30, 2025 consists primarily of $0.9 million of third-party tenant income, the realization of approximately $0.3 million of tax rebates related to the NCI Transaction during the period, partially offset by a net casualty loss of $0.4 million.

Other income, net for the three months ended June 30, 2024 consists primarily of $0.7 million of third-party tenant income, the realization of approximately $0.4 million of tax rebates related to the NCI Transaction during the period, $0.4 million in state grants awarded during the period, and net casualty income of $0.6 million.

• Income Tax Expense. The Company recorded a $1.2 million income tax expense during the three months ended June 30, 2025, which represents a decrease of $1.2 million from the same period in the previous year. Income tax expense varies based on changes in our forecasted effective tax rate over the course of the year and variability in quarterly net income (loss).

Comparison of the Six Months Ended June 30, 2025 with the Six Months Ended June 30, 2024

The following table contains key operating metrics for our portfolio for the six months ended June 30, 2025 compared with the six months ended June 30, 2024 (dollars in thousands, except ADR and RevPAR):

(1) Same-store information includes operating results for 95 hotels owned by the Company as of January 1, 2024, and at all times during the six months ended June 30, 2025, and 2024.

The total portfolio information above for the six months ended June 30, 2025 and 2024 reflects operating results for various portions of each period for certain lodging properties as a result of the sales and acquisitions of lodging properties. The following table details how the acquisition and disposition transactions affect each reporting period:

Changes from the six months ended June 30, 2025 compared with the six months ended June 30, 2024 were due to the following:

• Revenues and RevPAR. Room revenues for our total portfolio for the six months ended June 30, 2025 compared with the six months ended June 30, 2024 decreased by $6.1 million as a result of a $5.6 million decrease in same-store room revenues driven by reduced government-related and inbound international travel, and a $0.5 million decrease in room revenues due to the net effect of the acquisition of the 2024 Acquired Properties and the sale of five lodging properties (the "2024 Sold Properties").

Occupancy increased by 0.4% and ADR decreased by 1.4% for the total portfolio during the six months ended June 30, 2025, which resulted in a 0.9% decrease in RevPAR. On a same store basis, we experienced an increase of 0.2% in occupancy and a 1.3% decrease in ADR during the six months ended June 30, 2025. This resulted in a decrease in same-store RevPAR of 1.2% for the six months ended June 30, 2025. The declines in ADR were primarily driven by a modest shift in mix towards lower rated demand channels.

• Room Expenses. Room expenses for our total portfolio for the six months ended June 30, 2025 compared with the six months ended June 30, 2024 increased by $1.3 million primarily due to an increase in same-store room expenses driven by an increase in labor costs.
• Food and Beverage Revenues and Expenses. Total portfolio food and beverage revenues for the six months ended June 30, 2025 when compared with the six months ended June 30, 2024 increased by $1.3 million due to a $1.2 million increase in same-store food and beverage revenues as a result of a 0.2% increase in occupancy combined with the modification of certain breakfast offerings. Total portfolio food and beverage expenses increased by $0.5 million primarily as a result of an increase in same-store food and beverage revenues.
• Other Revenues and Other Lodging Property Operating Expenses. Other lodging property operating revenues for our total portfolio during the six months ended June 30, 2025 compared with the six months ended June 30, 2024 increased by $0.2 million as a result of a $0.4 million increase in same-store other lodging property and operating revenues related to an increase in parking and resort/amenities fees, partially offset by a $0.2 million decrease in other lodging property operating revenues driven by the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Sold Properties.

The $2.1 million increase in other lodging property operating expenses for the total portfolio for the six months ended June 30, 2025 in comparison with the six months ended June 30, 2024 was driven by increased labor costs, sales and marketing costs, and utilities. These increases were partially offset by a $0.3 million decrease in other lodging property operating expenses due to the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Sold Properties.

The following table includes other consolidated income and expenses for the six months ended June 30, 2025 compared with the six months ended June 30, 2024 (dollars in thousands):

¹ Not meaningful.

Changes from the six months ended June 30, 2025 compared with the six months ended June 30, 2024 were due to the following:

• Property Taxes, Insurance and Other. The $0.6 million decrease in Property taxes, insurance and other during the six months ended June 30, 2025 is primarily due to a $0.7 million decrease in insurance premiums and the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Sold Properties, partially offset by a $0.3 million increase in property taxes.
• Management Fees. Management fees decreased during the six months ended June 30, 2025 by $0.4 million as a result of a $4.0 million decrease in same-store revenues and the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Sold Properties.
• Depreciation and Amortization. Depreciation and amortization increased by $1.2 million during the six months ended June 30, 2025 compared with the six months ended June 30, 2024 primarily due to an increase of $2.4 million in depreciation and amortization expense as a result of the net effect of the acquisition of the 2024 Acquired Properties and the sale of the 2024 Sold Properties, partially offset by a $1.1 million decrease in same-store depreciation and amortization as the reduction from fully depreciated assets exceeded the depreciation of assets placed in service as a result of completed renovations.
• Corporate General and Administrative. Corporate general and administrative expenses decreased by $0.2 million during the six months ended June 30, 2025 compared with the six months ended June 30, 2024 primarily due to a decrease in corporate employee-related costs.
• Loss (Gain) on Disposal of Assets, net. Loss (gain) on disposal of assets, net of $28.5 million for the six months ended June 30, 2024 was primarily the result of a $28.3 million gain recorded on the sale of a portfolio of two lodging properties in New Orleans, LA during the six months ended June 30, 2024.
• Interest Expense. Interest expense decreased by $1.8 million during the six months ended June 30, 2025 primarily due to lower average interest rates during the current period.
• Interest Income. Interest income decreased by $0.4 million during the six months ended June 30, 2025 due to non-cash interest income related to the amortization of the Onera Purchase Option recorded during the six months ended June 30, 2024, which was fully amortized in September 2024, combined with a decrease related to interest earned on money market accounts for the current period.
• Gain on Extinguishment of Debt. The gain on extinguishment of debt for the six months ended June 30, 2024 was the result of the repayment of a mortgage loan in June 2024 prior to its scheduled maturity date, which resulted in a net gain on extinguishment of debt of $3.0 million after legal fees and unamortized debt issuance costs that were written-off on the closing date.
• Other Income, net. Other income, net for the six months ended June 30, 2025 consists primarily of third-party tenant income of $1.6 million, the realization of $0.9 million of tax rebates related to the NCI Transaction (as defined in "Note 5 - Debt" to the accompanying Condensed Consolidated Financial Statements), partially offset by a net casualty loss of $0.7 million.

Other income, net for the six months ended June 30, 2024 consists primarily of third-party tenant income of $1.3 million, net casualty income of $0.9 million, the realization of $0.8 million of tax rebates related to the NCI Transaction, and $0.7 million in state grants awarded during the period, partially offset by other miscellaneous expense items totaling $0.7 million.

• Income Tax Expense. Income taxes in interim quarters are based on an estimated annual effective tax rate. The Company recorded $1.9 million in income tax expense for the six months ended June 30, 2025, which represents a decrease of $0.7 million from the six months ended June 30, 2024. Seasonality in quarterly net income (loss), and changes in the forecasted earnings causes variability in income taxes recorded in each quarter.

Non-GAAP Financial Measures

We disclose certain “non-GAAP financial measures,” which are measures of our historical financial performance. Non-GAAP financial measures are financial measures not prescribed by Generally Accepted Accounting Principles (“GAAP”). These measures are as follows: (i) Funds From Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”), (ii) Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Earnings before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”) and Adjusted EBITDAre (as described below). We caution investors that amounts presented in accordance with our definitions of non-GAAP financial measures may not be comparable to similar measures disclosed by other companies, since not all companies calculate these non-GAAP financial measures in the same manner. Our non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of our operating performance. Our non-GAAP financial measures may include funds that may not be available for our discretionary use due to functional requirements to conserve funds for capital expenditures, property acquisitions, debt service obligations and other commitments and uncertainties. Although we believe that our non-GAAP financial measures can enhance the understanding of our financial condition and results of operations, these non-GAAP financial measures are not necessarily better indicators of any trend as compared to a comparable measure prescribed by GAAP such as net income (loss).

FFO and AFFO

As defined by the National Association of Real Estate Investment Trusts (“Nareit”), FFO represents net income or loss (computed in accordance with GAAP), excluding preferred dividends, gains (or losses) from sales of real property, impairment losses on real estate assets, items classified by GAAP as extraordinary, the cumulative effect of changes in accounting principles, plus depreciation and amortization related to real estate assets, and adjustments for unconsolidated partnerships, and joint ventures. AFFO represents FFO excluding amortization of deferred financing costs, franchise fees, equity-based compensation expense, debt transaction costs, premiums on redemption of preferred shares, losses from net casualties, non-cash lease expense, non-cash interest income and non-cash income tax related adjustments to our deferred tax assets. Unless otherwise indicated, we present FFO and AFFO applicable to our Common Stock and Common Units. We present FFO and AFFO because we consider FFO and AFFO important supplemental measures of our operational performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO and AFFO exclude depreciation and amortization related to real estate assets, gains and losses from real property dispositions and impairment losses on real estate assets, FFO and AFFO provide performance measures that, when compared year over year, reflect the effect to operations from trends in occupancy, guestroom rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from net income. Our computation of FFO differs slightly from the computation of Nareit-defined FFO related to the reporting of corporate depreciation and amortization expense, which is de minimis. Our computation of FFO may also differ from the methodology for calculating FFO used by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO and AFFO should not be considered as alternatives to net income (loss) (computed in accordance with GAAP), as an indicator of our liquidity, nor are they indicative of funds available to meet our cash needs, including our ability to pay dividends or make distributions. Where indicated in this Quarterly Report on Form 10-Q, FFO is based on our computation of FFO and not the computation of Nareit-defined FFO unless otherwise noted.

The following is an unaudited reconciliation of our Net income, determined in accordance with GAAP, to FFO and AFFO (in thousands, except per share/unit amounts):

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The following is an unaudited reconciliation of weighted-average diluted shares of Common Stock to non-GAAP weighted-average diluted shares of Common Shares and Common Units for FFO and AFFO (in thousands):

(1) The weighted-average diluted shares of Common Stock and Common Units used to calculate FFO and AFFO per share of Common Stock and Common Units for the three and six months ended June 30, 2025 are added to the weighted average diluted common shares outstanding since the weighted average diluted common shares outstanding exclude the dilutive effect of our outstanding restricted stock awards because they would have been antidilutive.

The weighted-average diluted shares of Common Stock and Common Units used to calculate FFO and AFFO per share of Common Stock and Common Units for the three and six months ended June 30, 2024 includes the dilutive effect of our outstanding restricted stock awards.

(2) The Company includes the outstanding OP units issued by Summit Hotel OP, LP, the Company’s operating partnership, held by limited partners other than the Company because the OP units are redeemable for cash or, at the Company’s option, shares of the Company’s common stock on a one-for-one basis. The weighted average common shares outstanding - diluted included the OP units for the three and six months ended June 30, 2024 since those units were included in our calculation of our fully diluted earnings per share calculation.

(3) The weighted-average shares of Common Stock and Common Units used to calculate FFO and AFFO per share of Common Stock and Common Unit for the three and six months ended June 30, 2025 and 2024 exclude the potential dilution related to our Convertible Notes as we intend to settle the Convertible Notes at maturity in cash.

AFFO applicable to shares of common stock and Common Units decreased by $3.7 million for the three months ended June 30, 2025 compared with the three months ended June 30, 2024 and decreased by $6.3 million for the six months ended June 30, 2025 compared with the six months ended June 30, 2024 primarily as a result of a decrease in Hotel EBITDA due to a decline in same-store RevPAR combined with a decrease in Hotel EBITDA from the net effect of the acquisition of the 2024 Acquired Properties during the three and six months ended June 30, 2024, and the sale of the 2024 Partial Year Sold Properties during the three months ended June 30, 2024, and the sale of the 2024 Sold Properties during the six months ended June 30, 2024.

EBITDA, EBITDAre and Adjusted EBITDAre

EBITDA

EBITDA represents net income or loss, excluding: (i) interest, (ii) income tax expense and (iii) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results. Our management team also uses EBITDA as one measure in determining the value of acquisitions and dispositions.

EBITDAre and Adjusted EBITDAre

EBITDAre is based on EBITDA and is expected to provide additional relevant information about REITs as real estate companies in support of growing interest among generalist investors. EBITDAre is intended to be a supplemental non-GAAP performance measure that is independent of a company’s capital structure and will provide a uniform basis to measure the enterprise value of a company compared to other REITs.

EBITDAre, as defined by Nareit, is calculated as EBITDA, excluding: (i) loss and gains on disposition of property and (ii) asset impairments, if any. We believe EBITDAre is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

We make additional adjustments to EBITDAre when evaluating our performance, such as adjustments related to the provision for credit losses, because we believe that the exclusion of certain additional non-recurring or certain non-cash items described below provides useful supplemental information to investors regarding our on-going operating performance. We believe that the presentation of Adjusted EBITDAre, when combined with the primary GAAP presentation of net income, is useful to an investor in evaluating our operating performance because it provides investors with an indication of our ability to incur and service debt, to satisfy general operating expenses, to make capital expenditures and to fund other cash needs or reinvest cash into our business. We also believe it helps investors meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our asset base (primarily depreciation and amortization) from our operating results.

The following is an unaudited reconciliation of our Net income, determined in accordance with GAAP, to EBITDA, EBITDAre and Adjusted EBITDAre, (in thousands):

Adjusted EBITDAre decreased $5.0 million for the three months ended June 30, 2025 in comparison with the three months ended June 30, 2024 and decreased $8.8 million for the six months ended June 30, 2025 in comparison with the six months ended June 30, 2024 primarily as a result of a decrease in Hotel EBITDA due to a decline in same-store RevPAR combined with a decrease in Hotel EBITDA from the net effect of the acquisition of the 2024 Acquired Properties during the three and six months ended June 30, 2024, and the sale of the 2024 Partial Year Sold Properties during the three months ended June 30, 2024. and the sale of the 2024 Sold Properties during the six months ended June 30, 2025.

Liquidity and Capital Resources

Our short-term cash obligations consist primarily of operating expenses and other expenditures directly associated with our lodging properties, recurring maintenance and capital expenditures necessary to maintain our lodging properties in accordance with internal and brand standards, capital expenditures to improve our lodging properties, interest payments, settlement of interest rate swaps, scheduled principal payments on outstanding indebtedness, restricted cash funding obligations, our joint venture acquisitions and capital requirements, contractual lease payments, corporate overhead, and dividends and distributions to our stockholders and unitholders when declared and paid. Our corporate overhead primarily consists of employee compensation expenses, professional fees, corporate insurance and rent expenses. Cash requirements for our corporate overhead expenses (excluding non-cash equity-based compensation), which are generally paid from operating cash flows, were $12.1 million and $12.5 million, for the six months ended June 30, 2025 and 2024, respectively. We generally expect our corporate overhead expenses to remain consistent with the level of our operating activities and market conditions for goods and services.

Our long-term cash obligations consist primarily of dividends and distributions, scheduled debt payments, including maturing loans, capital required for renovations and other non-recurring capital expenditures that periodically are made with respect to our lodging properties, and lease obligations.

Our sources of cash are primarily from operating cash flows, sales of lodging properties, principal and interest payments from borrowers on notes receivable, and debt financing including available balances on our revolving loans.

The Operating Partnership has $125 million of interest rate swaps and the GIC Joint Venture has $300 million of interest rate swaps that expire within the next 12 months. If we are unable to replace these expiring interest rate swaps with other financial instruments that will hedge our variable interest rate risk to the same extent, or at all, our interest expense may increase upon expiration of these interest rate swaps.

At June 30, 2025, we have scheduled debt principal payments in the next 12 months totaling $0.5 million in addition to our convertible notes totaling $287.5 million which mature in February 2026. In March 2025, we closed a $275 million delayed draw term loan (the "$275 Million 2025 Delayed Draw Term Loan") that will be used to refinance a significant portion of our convertible notes upon maturity. The $275 Million 2025 Delayed Draw Term Loan has a delayed draw feature through March 1, 2026 to ensure the funds are available through the maturity date of the convertible notes. In addition, in May 2025, we closed on a $58 million mortgage loan (the "Brickell Mortgage Loan") with Wells Fargo Bank, N.A., as administrative agent, to refinance the loan with City National Bank of Florida that matured in June 2025.

We have obtained financing through debt instruments having staggered maturities and intend to continue to do so in the future. Our debt includes, and may include in the future, debt secured by equity pledges, debt secured by first priority mortgage liens on certain lodging properties and unsecured debt. Our outstanding indebtedness requires us to comply with various financial and other covenants. We are in compliance with such financial and other covenants and expect to continue to be in compliance over the next four quarters. We believe that we will have adequate liquidity to meet the requirements for scheduled maturities and principal repayments. However, we can provide no assurance that we will be able to refinance our indebtedness as it becomes due and, if refinanced, whether such refinancing will be available on favorable terms.

In June 2025, the Operating Partnership entered into a $58 million interest rate swap related to the Brickell Mortgage Loan to fix one-month term SOFR until May 2028. The interest rate swap has an effective date of June 2, 2025 and a termination date of May 15, 2028. Pursuant to the interest rate swap, we will pay a fixed rate of 3.57% and receive the one-month term SOFR floating rate index.

To satisfy the requirements for qualification as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually at least 90% of our REIT taxable income to our stockholders, determined without regard to the deduction for dividends paid and excluding any net capital gains. We intend to distribute a sufficient amount of our taxable income to maintain our status as a REIT and to avoid tax on undistributed income. Because we anticipate distributing a substantial amount of our available cash from operations, if sufficient funds are not available to us from lodging property dispositions, our senior revolving credit and term loan facilities and other loans, we may need to raise additional capital to grow our business.

From time to time, we may repurchase shares of our common stock pursuant to our 2025 Share Repurchase Program. Currently, approximately $34.6 million is authorized for the repurchase of our common stock under the program.

Outstanding Indebtedness

At June 30, 2025, we had $25 million in borrowings under our $400 Million Revolver, $200 million outstanding on our $200 Million Term Loan, and $200 million outstanding on our 2024 Term Loan (each of such credit facilities are defined in “Note 5 - Debt” to the accompanying Condensed Consolidated Financial Statements). Each of the credit facilities was supported by the 53 lodging properties included in the credit facility borrowing base. We also had $287.5 million of Convertible Notes (as defined in “Note 5 - Debt” to the accompanying Condensed Consolidated Financial Statements) outstanding.

At June 30, 2025, the GIC Joint Venture had $250 million outstanding under the GIC Joint Venture Credit Facility (as defined in “Note 5 - Debt” to the accompanying Condensed Consolidated Financial Statements), which included borrowings of $125 million on its $125 Million Term Loan and $125 million on its $125 Million Revolver. The GIC Joint Venture Credit Facility is secured primarily by a first priority pledge of the equity interests in the subsidiaries that own the 15 lodging property borrowing base assets, and the related TRS entities, which wholly own the TRS Lessees. See “Note 5 - Debt” to the accompanying Condensed Consolidated Financial Statements for additional information.

To complete the NCI Transaction during the first quarter of 2022, the GIC Joint Venture entered into the GIC Joint Venture Term Loan (as defined in “Note 5 - Debt” to the accompanying Condensed Consolidated Financial Statements) that was originally secured by the 27 lodging properties (25 lodging properties at June 30, 2025) and two parking garages acquired in the transaction, and assumed a Property Assessed Clean Energy (“PACE”) loan totaling $6.5 million. The outstanding balances of the GIC Joint Venture Term Loan and the PACE loan at June 30, 2025 were $396 million and $5.8 million, respectively.

On May 15, 2025, the Company closed on a $58 million mortgage loan (the “Brickell Mortgage Loan”) for our dual-branded 264-guestroom AC Hotel by Marriott and Element Hotel in Miami, FL, with Wells Fargo Bank, N.A., as administrative agent, the proceeds of which were primarily used to repay the remaining $45.4 million balance of the mortgage loan with City National Bank of Florida that was scheduled to mature in June of 2025. The outstanding balance of the Brickell Mortgage Loan was $58 million at June 30, 2025.

The GIC Joint Venture has a mortgage loan outstanding totaling $12.4 million related to the acquisition of the Embassy Suites in Tucson, AZ in December 2021.

In July 2025, the Company closed a new $400 million senior unsecured term loan (the "2025 GIC Joint Venture Term Loan") that refinanced and replaced the GIC Joint Venture Term Loan (as defined in Note 5 - Debt to the Condensed Consolidated Financial Statements). The 2025 GIC Joint Venture Term Loan has an initial maturity date of July 2028 and can be extended for two 12-month periods at the Company’s option, subject to certain conditions, for a fully extended maturity date of July 2030.

As a result of the 2025 GIC Joint Venture Term Loan financing and the $275 Million 2025 Delayed Draw Term Loan financing that will be used to repay our $287.5 million Convertible Debt when it becomes due in February 2026, the Company has virtually no debt maturities until 2028 and has an average length to maturity of approximately 4.0 years.

For more information concerning our indebtedness, see “Note 5 - Debt” to the accompanying Condensed Consolidated Financial Statements.

A summary of our debt at June 30, 2025 is as follows (dollars in thousands):

(1) The 2023 Senior Credit Facility and the Regions Bank 2024 Term Loan are supported by a borrowing base of 53 unencumbered hotel properties.

(2) The $125 Million Revolver and the $125 Million Term Loan are secured by pledges of the equity in the entities that own 15 lodging properties and affiliated entities.

(3) The GIC Joint Venture Term Loan is secured by pledges of the equity in the entities that own 25 lodging properties and two parking garages and affiliated entities.

Capital Expenditures

During the six months ended June 30, 2025, we funded $34.6 million in capital expenditures on a consolidated basis. When taking into consideration only our pro rata portion related to our joint ventures, capital expenditures for the six months ended June 30, 2025 were $29.8 million. We anticipate spending approximately $60 million to $65 million on capital expenditures on a pro rata basis during 2025. We expect to fund these expenditures through a combination of cash flows from operations and borrowings on our $400 Million Revolver, or other potential sources of capital, to the extent available to us.

Cash Flows

Unaudited cash flow information is as follows (in thousands):

Changes from the six months ended June 30, 2025 compared with the six months ended June 30, 2024 were due to the following:

• Net cash provided by operating activities. Cash provided by operating activities for the six months ended June 30, 2025 was the result of net income of $86.9 million, after adjusting for non-cash items such as depreciation and amortization and equity-based compensation, partially offset by changes in working capital of $12.2 million. Cash provided by operating activities for the six months ended June 30, 2024 was the result of net income of $91.4 million, after adjusting for non-cash items such as depreciation and amortization and equity-based compensation, partially offset by a net change in working capital of $12.9 million.
• Net cash (used in) provided by investing activities. Cash used in investing activities for the six months ended June 30, 2025 was primarily due to $40.2 million of renovation and development expenditures, partially offset by the net cash proceeds of $1.2 million related to the sale of an undeveloped land parcel in San Antonio, TX in February 2025.

Cash provided by investing activities for the six months ended June 30, 2024 was due to the net cash proceeds of $92.2 million from the sale of the Hyatt Place - Dallas (Plano), TX in February 2024, the sale of the Hilton Garden Inn - College Station, TX in April 2024, and the sale of the Courtyard by Marriott and SpringHill Suites - New Orleans, LA in April 2024, partially offset by $41.5 million of renovation and development expenditures.

• Net cash used in financing activities. Cash used in financing activities for the six months ended June 30, 2025 was primarily related to the payment of dividends and distributions of approximately $40.7 million, repurchases of our common stock of approximately $15.4 million, financing costs of approximately $5.4 million primarily related to the $275 Million 2025 Delayed Draw Term Loan, and $1.6 million related to employee withholding requirements on vested restricted stock, partially offset by net proceeds from the Brickell Mortgage Loan totaling $12.6 million, net borrowings on our line of credit of $15 million, and joint venture contributions of $0.8 million.

Cash used in financing activities for the six months ended June 30, 2024 was primarily related to the repayment of our MetaBank and Bank of the Cascades term loans of $93.5 million, the payment of dividends and distributions of approximately $37.5 million, financing costs of approximately $2.5 million related to the 2024 Term Loan and our $200 Million GIC Joint Venture Credit Facility, and $0.9 million related to employee withholding requirements on vested restricted stock, partially offset by net borrowings on our $400 Million Revolver of $10 million.

Critical Accounting Policies

For critical accounting policies, see “Note 2 - Basis of Presentation and Significant Accounting Policies” to the accompanying Condensed Consolidated Financial Statements and our Annual Report on Form 10-K for the year ended December 31, 2024.

Cybersecurity

The hospitality industry and certain of the major brand and franchise companies have in the past experienced cybersecurity breaches. We are not aware of any material cybersecurity losses at any of our properties. Cybersecurity risks at our lodging properties are managed through our franchisors and property management companies. An important part of our cybersecurity risk mitigation efforts includes maintaining cybersecurity insurance and indemnifications in certain of our property management agreements. Our Board of Directors, primarily through the Audit Committee, oversees management's approach to managing cybersecurity risks.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market-sensitive instruments. In pursuing our business strategies, the primary market risk to which we are exposed is interest rate risk. All of our outstanding loans are now indexed to the Secured Overnight Funding Rate (“SOFR”), and therefore, our primary interest rate exposure is to SOFR. We primarily use derivative financial instruments to manage interest rate risk.

At June 30, 2025, we were party to seven interest rate derivative agreements, pursuant to which we received variable-rate payments in exchange for making fixed-rate payments (dollars in thousands):

(1) Represents the weighted-average effective interest rate of our current interest rate swaps at June 30, 2025.

At June 30, 2025, after giving effect to our interest rate derivative agreements, $988.7 million, or 69%, of our consolidated debt had fixed interest rates and $446 million, or 31%, had variable interest rates. At June 30, 2025, debt related to our wholly-owned properties and our pro rata share of joint venture debt has a fixed-rate debt ratio of approximately 75% of our total pro rata indebtedness when taking into consideration interest rate swaps that are currently in effect.

Taking into consideration our existing interest rate swaps, an increase or decrease in interest rates of 1.0% would decrease or increase, respectively, our cash flows by approximately $4.5 million per year. See “Note 7 - Derivative Financial Instruments and Hedging” to the accompanying Condensed Consolidated Financial Statements for additional information.

As our fixed-rate debts mature, they will become subject to interest rate risk. In addition, as our variable-rate debts mature, lenders may impose interest rate floors on new financing arrangements because of the low interest rates experienced a few years ago.

In June 2025, the Operating Partnership entered into a $58 million interest rate swap related to the Brickell Mortgage Loan to fix one-month term SOFR until May 2028. The interest rate swap has an effective date of June 2, 2025 and a termination date of May 15, 2028.

Controls and Procedures

Disclosure Controls and Procedures

Our management team evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2025. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2025, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Security Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three-month period covered by this Quarterly Report on Form 10-Q, which were identified in connection with management’s evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are updating the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2024 as follows:

The share repurchase program could affect our share price and volatility.

In April 2025, our Board of Directors authorized a share repurchase program that allows us to repurchase up to $50 million of our outstanding common stock. Our share repurchase program may change from time to time, and we may not repurchase shares in any particular amounts, in amounts consistent with historical practice, or at all. Our repurchase program does not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares and the timing and amount of repurchases, if any, will depend on several factors, including market and business conditions, applicable debt covenants, the timing and amount of cash proceeds from asset dispositions, the timing and amount of any like-kind exchange transactions and other tax-planning matters, the trading price of our common stock, the nature of other investment opportunities, and other factors as our Board of Directors may deem relevant from time to time. Repurchase activity could have a negative effect on our stock price, increase volatility, or fail to enhance stockholder value. Our share repurchase program may be amended, suspended or terminated at any time.