Q4 2021 Ashford Inc Earnings Call
Greetings and welcome to the Ashford, Inc. Fourth quarter 2021 results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded I would now like to turn the conference over to your host Jordan Jennings manager of Investor Relations for Ashford Inc. Thank you you may begin.
Good day, everyone and welcome to today's conference call to review results for Ashford for the fourth quarter and full year 2021 and to update you on recent developments.
On the call today will be Jeremy Walter President and Chief Operating Officer, Derek Eubanks, Chief Financial Officer, and Erik <unk>, Managing director and senior Vice President of portfolio management your results as well as notice of accessibility of this conference call on a listen only basis over the Internet were distributed yesterday in a press release.
At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions of the federal Securities regulations.
Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated.
Factors are more fully discussed in the company's filings with the Securities and Exchange Commission.
Forward looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them.
In addition, certain times used on this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on form 8-K with the SEC on February 24th 2022, and May also be accessed through the company's website at Www Dot Ashford, Inc. Dot com.
Yes.
Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.
Also unless otherwise stated all reported results discussed on this call compare the fourth quarter of 2021 with the fourth quarter of 2020, I will now turn the call over to Jeremy.
Good morning, and welcome to our call to discuss our financial results for the fourth quarter of 2021.
I'll begin by discussing Ashford to operations and strategy.
Derek will then review our financial results for the quarter, and then Ara, who will provide an update regarding our products and services businesses. After that we will open it up for Q&A.
We had a great fourth quarter highlighted by the highest quarterly adjusted EBITDA in our company's history.
Our strong growth in adjusted EBITDA for the quarter was driven by our REIT advisory business and the ability to recognize the fee deferral from Ashford Trust as well as continued recovery and improved financial performance and inspire Remington and premier.
As a reminder, during the quarter, we rebranded our audio visual and event technology business, formerly known as J D to inspire.
We're particularly excited to report.
$3 million of adjusted EBITDA for inspire in the fourth quarter, our business that was hit the hardest by the pandemic.
As we look forward.
I'm extremely optimistic about the future of our company.
And we have a lot of exciting developments to discuss on today's call.
The key themes, we are going to highlight today are first.
Both of our advisory platforms are on solid footing Ashford Trust has significant liquidity recently reinstated its preferred dividends and plans to be S. Three eligible very soon.
Braemar is back on offense and growing with its recent announcement of its proposed acquisition of the Dorado Beach.
Rich Carlton reserve in Puerto Rico.
Second we continue to see strong results in our third party growth initiative at Remington and Premier.
Third we have been successful in raising substantial amount of capital and we're ramping up our capital raising efforts at Ashford Securities.
Through its first three quarters Ashford Securities capital raising efforts has outpaced peer sponsors that subsequently raised billions of dollars.
And fourth we are built.
Revert robust acquisition pipeline, and we hope to announce new attractive and accretive transaction soon.
Fifth we have a comprehensive asset light business does is unique and hostile the industry and well positioned for growth going forward.
Ashford advisers, two publicly traded REIT platforms, Ashford Trust, and Braemar, which together own 114 hotels with approximately 26000 rooms and had approximately $7.8 billion of gross assets as of December 31, 2021, Braemar is currently benefiting from its focus.
On the luxury segment and specifically its luxury resorts, which has been the first van segment to recover and had a solid fourth quarter operationally.
<unk> also recently announced its second acquisition of this cycle with the 96 room Dorado Beach, a rich Carlton reserved and Dorado, Puerto Rico.
Ashford Trust has significantly deleverage its balance sheet.
Is now paying interest current on a strategic financing and reinstated and caught up on its accrued preferred dividends, which was one of the key requirement for being Austria eligible.
Ashford Trust also continued to maintain a significant cash balance which ended the quarter at $593 million.
Looking ahead, both platforms now have significant liquidity.
Both reached stabilized and performing well we believe both are well positioned for the continued recovery of the hotel industry and we remain focused on their future strategic objectives.
Remington and premier containing to execute on their long term growth strategies. Both companies are benefiting from the improved demand trends, we are seeing at our hotels and we continue to believe that these two businesses are well positioned to achieve growth with their third party business initiatives, both Remington at Premier have solid ROI.
Mutations.
And the industry, while we are still in the early stages of the growth of our third party business. We have already seen strong momentum with Remington signing 20, New Hotel management contracts with third party hotel owners and Premier signing 35, New third party contracts totaling over $11 million in fees.
What's even more exciting is it seven of the 12 customers at Remington, our repeat customers signing more than one contract with Remington looking.
Looking ahead, we are extremely excited about the long term opportunity for third party growth both Remington Premier.
During 2021, we raised approximately $930 million of capital at our advised Reits only approximately 4% of this capital was through Ashford Securities. We formed Ashford securities to be a dedicated platform to raise retail capital through financial intermediaries and the broker dealer channel in order to grow our existing.
<unk> and future platforms, our goal for Ashford Securities is to provide the market with highly differentiated alternative investment products types of capital raised may include but are not limited to non traded preferred equity non traded convertible preferred equity and non traded REIT common equity for future platforms Ashford Securities.
It's ramping up nicely and has recently began raising capital for Braemar.
Afterwards Securities has raised $62 million in net proceeds during the first eight months of capital raising through the sale of <unk> non traded preferred stop comparing this performance against its peers Ashford Securities has raised 129% more capital than the next closest peer product during its first three quarters of capital raising highlighting the <unk>.
Wrong appetite for <unk> non traded securities.
We have signed up 29 dealer agreements represent over 4500 brokers and we continue to have conversations with more dealers about signing onto this capital raise.
We're excited to pursue a fresh source of capital that will help us grow all of our platforms over the long term all with the goal of increasing shareholder value.
Throughout 2021, we have continued to search for and analyze acquisition opportunities across the industry, which can be accretive to our businesses from both a bolt on a new platform perspective, our teams are actively engaging with potential targets to identify opportunities to rapidly expand our operating footprint and increase market share.
We're excited about the robust pipeline our team has created and look forward to sharing more details in future quarters.
One of our portfolio of companies, where we're seeing strong growth as red hospitality and leisure Red is a leading provider of water sports activities and other travel and transportation services in the U S. Virgin Islands key West, Florida, and most recently in Turks and Caicos in Puerto Rico.
<unk> has had a very strong quarter driven by strong leisure demand in its markets and red anticipates that these markets will continue their strong performance in the coming months. Additionally, the products offered by helping key and pure wellness continue to thrive in this environment as the hotel industry strives to implement measures to provide a clean and safe environment.
Many hotels and guests are seeking automatic check ins, allowing them to bypass the front desk with keyless entry and secure digital key capabilities.
The industry is also seeking enhanced sanitation and air purification standards within the Guestrooms, we believe the benefits. It open key in pure wellness offer will position them well to achieve accelerated adoption and growth hotels nationwide.
As previously discussed during the quarter <unk> completed a strategic rebranding as Dow named inspire.
Throughout his 35 year history of the full service event Technology Company has developed created an individualized event production solutions and the new name inspire reflects the energy and momentum the company brings to each of its clients.
And the aspiration to create events that move people.
The upward trend in hospitality revenue for the year is a bright spot and inspire and looking forward were optimistic for a continued uptick in sales opportunities.
On the Investor Relations front, we believe having an active investor outreach effort and broadening our investor base are important areas of focus.
In recent months, we attended several investor conferences and during the fourth quarter held an Investor day in New York. It was very well attended and gave US the opportunity to share the Ashford story and strategy with existing and potential investors looking ahead to 2022 in the months ahead, we plan to attend several conferences targeting a wide range of inverse.
<unk> for small and mid cap focused funds to industry dedicated investors as well as family offices and retail holders. We believe exposure at these conferences will provide further opportunity to tell our story and provide a meaningful dialogue with potential investors, which should in turn continue to have a positive impact on expanding our investor base.
We believe we have a superior strategy and structure that is unique within the hospitality space, we're starting to see the recovery in our industry and are also seeing investment opportunities are very attractive unlevered returns that we did not see pre pandemic.
We believe there are four key areas of growth for Ashford.
Recovery of the hospitality industry and higher hotel revenues and increase in our assets under management growth of our third party business and the acquisition or incubation of additional businesses.
We are excited about each of these potential path to growth and feel very confident in the future of our business I will now turn the call over to Derek Thanks, Jeremy.
Loss attributable to common stockholders for the fourth quarter was $5 million and net loss attributable to common stockholders for the full year was $46 million adjusted.
Adjusted EBITDA for the fourth quarter was $19 $5 million, which reflected growth of 174% over the prior year quarter and was the highest quarterly adjusted EBITDA in company history.
The growth in adjusted EBITDA over the prior year quarter was led by aspire with an increase of $5 1 million Remington with an increase of $1 $9 million premier with an increase of $1 $5 million and red with an increase of 0.9 billion adjusted.
Adjusted EBITDA for the full year of 2021 was $48 4 million.
For the first time in our company's history, we provided long term earnings guidance to the market last year.
Given the significant growth potential we believe is possible for a company. We felt that it was important for us to share that with the investment community.
Our adjusted EBITDA of $48 $4 million for 2021, there's only about 14% below the guidance we provided for adjusted EBITDA for 2023.
As a result, our 2023 adjusted EBITDA guidance is currently under review and we hope to provide revised guidance soon.
Adjusted net income for the fourth quarter was $17 $1 million and adjusted net income per share was $2.24.
These results reflect growth rates over the prior year of 470% at 421% respectively.
Adjusted net income and adjusted net income per share for the full year 2021 was $39 million and $5 20, respectively.
As it relates to our advisory Ashford Trust raised approximately $564 million from the sale of shares of its common stock during 2021, while braemar raised equity capital of approximately $104 $4 million from the sale of shares of its common stock during the year.
Since launching its non traded preferred capital raise in July Braemar has raised $62 million in net proceeds. These capital raises have helped shore up those routes liquidity and lower the leverage.
In terms of financial results for our portfolio of companies I'll provide some highlights and Eric will discuss more details.
This more recorded revenue of $2 $6 million in the quarter related to the debt placement services and its agreement with Ashford Trust to seek modifications and forbearance for the REIT debt.
The forbearance effort is mostly completed but let's more will continue to record. This revenue over the remaining term of the agreement, which expires in April of 2022.
Remington realized hotel management fee revenue of $7 $5 million in the quarter net income attributable to the company of $129000 and adjusted EBITDA of $3 $5 million.
For the full year Remington reported adjusted EBITDA of $12 $5 million.
For the fourth quarter Premier had design and construction fee revenue of $3 9 million net loss attributable to the company of $1 4 million and adjusted EBITDA of $1 $3 million.
<unk> finished the quarter with 288 hotels under contract, which compares to 267 hotels under contract at the end of the third quarter.
This growth was driven by a significant shift in guest preferences as evidenced by utilization of digital keys, increasing by 33% in the fourth quarter over the prior year quarter.
<unk> also reported revenue growth of 63% over the prior year quarter.
Financial results for inspire for the fourth quarter included revenue of $21 $7 million net income attributable to the company of $135000 and adjusted EBITDA of $3 million.
The revenue for inspire reflected a growth rate of 427% over the prior year quarter and it's the third consecutive quarter of positive adjusted EBITDA for inspire.
For the full year inspire reported adjusted EBITDA of $4 $5 million.
Red hospitality and leisure are boating, and Watersports company had a great 2021 reporting total revenue of $23 $9 million.
Net income attributable to the company of $2 $9 million and adjusted EBITDA of $6 $3 million.
2021, with a record year for Red.
As of December 31, 2021, we had $7 6 million fully diluted shares of common stock in units, which included $4 3 million common shares associated with our series D convertible preferred stock.
We had $2 8 million common shares issued and outstanding and 0.2 million common shares earmarked for issuance under our deferred compensation plan and the balance primarily comprised of restricted stock.
I'll now turn the call over to Eric.
Thank you Derek.
We are excited to provide updates on our products and services businesses.
Looking forward, we have two major initiatives for 2022.
Rapid growth in third party sales and executing strategic acquisitions for our products and services platform.
We believe that our platforms are poised to capitalize on the incredible momentum we established during 2021 and carry that into 2022 and beyond.
Cost control measures are in the final stages of being phased out as we see most of our businesses approaching pre COVID-19 levels of demand in 2022 and shift our attitude toward an aggressive growth stance.
We continue to.
To deliver results that are exceeding internal projections and believe that that is a testament to the best in class leadership teams, we have in place within our portfolio companies.
The first business I'd like to discuss is red hospitality and leisure a leading provider of watersports activities and other travel services in the U S. Virgin Islands, Puerto Rico key west in Turks and Caicos.
In the fourth quarter Red generated $5 $7 million of revenue and $1 million of adjusted EBITDA, representing 95% and 1004% growth respectively over the prior year quarter.
2021 it was a year for the record books for Red Breaking company Records for annual revenue as well as EBITDA.
During the year read assumed operations at the Ritz, Carlton Turks, and Caicos and began providing activities and services to guests.
Performance at the property exceeded our expectations by generating $1 $2 million of revenue in just six months of operations and read will be looking to expand its offerings within Turks and Caicos.
During the fourth quarter Red hospitality entered into an agreement to provide various services and Puerto Rico and expect future growth opportunities in this market.
Lastly, red continues to explore inorganic M&A opportunities to rapidly scale the platform expanding our market share within our existing markets as well as diversifying and expanding to new geographic areas.
Remington is a dynamic hotel management company, providing best in class service and expertise to hotels across the country.
Remington was awarded eight third party management agreements since the third quarter, representing $2 $1 billion first at full year base fees.
Seven of the contracts were for operating hotels, and one was for a development.
Since the fourth quarter of 2019, Remington has executed 23rd party management agreements, representing $4 $6 million, a first full year base fees.
Remingtons third party hotels under management currently stand at 19 and represent approximately 20% of hotels under management.
To date Remington has contracts with 12 ownership groups seven of which have more than one contract with Remington highlighting the best in class service and expertise we are able to offer our owners.
We are optimistic about the future prospects of executing more third party management contracts to bolster our roster of 92 hotels across 21 brands in 23 States and Washington D C.
Lastly, in addition to our business development team organically sourcing new contracts Remington is aggressively pursuing M&A opportunities to bolster its standing in the marketplace as a best in class Hotel operator.
We look forward to providing updates on this initiative in future quarters.
Premier provides comprehensive and cost effective design development architecture procurement and project management services.
And he continues to add staff in order to support its growth objectives.
During the quarter Premier was awarded four additional hospitality design procurement and project management contracts, along with one project management multifamily contract.
To date Premier has signed 35 contracts across 20 ownership groups totaling over $11 million of third party fees.
The majority of Premier's third party customers have come back to contract additional work for Premier.
By delivering excellent service and exceptional projects. We are confident premier will continue to capitalize on the owners and investors uptick in capital investments.
Inspire our leading single source solution for meeting and event needs with.
With an integrated suite of audiovisual services, including show and event services hospitality.
Services Creative services and design and integration delivered a fourth quarter that we were excited to share with you.
Continuing the upward trend since the second quarter of 2021 inspired generated $3 million of adjusted EBITDA in the fourth quarter.
Fourth quarter, adjusted EBITDA was 138% above that of 2019, even with 20% lower revenue.
While we were still ramping up cost we have taken significant measures to rebuild the company in a more efficient manner that will allow us to deliver superior margins in the long term once inspire fully recovers.
Hospitality revenues, which includes events at hotels continued to rebound quicker than expected in the fourth quarter hospitality revenue was up 732% from the first quarter highlighting the ramp we saw through the year.
We remain extremely confident in the team's ability to win third party contracts as hotels begin to shift back to business as usual as the recovery continues.
<unk>, a leading provider of digital key solutions, allowing guests to unlock their rooms with mobile devices posted another impressive quarter, which included both app download growth of 65%.
And key delivery growth of 33% over the prior year period.
While <unk> operating metrics continue to gain traction as brands go live on the platform. The fourth quarter was headlined by strong revenue growth.
Fourth quarter revenue was up 63% compared to the prior year quarter.
We now have 17 four seasons properties under contract and added several other key properties in the fourth quarter. Finally, the Wyndham rollout is starting to gain significant traction with 12 properties under contract and six properties live.
Lastly, I'd like to update you on the progress of Ashford Securities our retail capital raising platform.
The Ashford Securities leadership team continues to build out a world class fundraising platform by hiring exceptional people and growing our relationships in the broker dealer community.
We believe our long term commitment to this platform distinguishes us from many of our competitors in the lodging industry because it provides another source of capital retail capital.
The alternative investment industry in which Ashford securities sits raised over $86 billion last year.
$86 billion was an all time high as investors continue to adopt low correlation real assets generally provide additional diversification and income.
And just eight months Ashford Securities is raised $62 million in net proceeds from both retail and institutional investors for Braemar has not traded preferred stock.
Ashford Securities continues to elevate excuse me evaluate its next product offerings by consulting with our underwriting investment banking and executive management teams.
We continue to see a strong retail appetite for differentiated investment strategies designed to provide current income and growth that is not dependent on the traded capital markets.
Ashford Securities is uniquely positioned to capitalize on this market opportunity for.
For 2022 we plan on launching several new products to our fund raising platform and believe we are at the very early stages of tapping this attractive capital source.
In summary, we are very pleased with our decision to enter the retail space and are excited to see the first fruits of our investments start to pay off.
We're excited to access a fresh source of retail capital that will help us grow our platforms over the long term with the goal of growing our assets under management and increasing shareholder values.
That concludes our prepared remarks, and we'll now open up the call for Q&A.
Thank you at this time, we'll be conducting question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Bryan Maher with B Riley Securities. Please proceed with your question.
Good afternoon, guys on inspire I know you talked about it a little bit in your prepared comments, but based upon what youre seeing now you know here in the first quarter of 2022 relative to bookings.
Yeah, both within inspired directly in with your hotel bookings, how do you see the 2022 ramp going.
Going versus what you might've thought just three months ago now.
Yeah, Brian It's Jeremy I'd say, it's probably very similar I think that we were pleasantly surprise in Q3 and Q4.
In terms of the ramp coming back so quickly.
I don't think that we're gonna be out surprised here in the first quarter, just because I do think that the the omicron took some wind out of the sales, but we do think that that's going to you know the disc.
This space and we do think that.
The ramp will come back here pretty quickly one of the things that we have which.
Which is a little bit surprising.
The bread and butter is actually some of the smaller groups and meetings and that makes up a huge portion of the revenue mix and so it's not that we need.
These big events or or or.
Our bias at the hotels or.
Our city wise or anything like that for inspired to do well, it's actually some of the smaller groups of me so.
So I guess I, just still think that it's probably going to be the last of our business segments to come back up of our portfolio companies, but.
But I do remain incredibly incredibly bullish on that platform. As you can see we were just really shocked if you look at Q3 and Q4 in terms of the profitability that we had with that platform.
Right, Yeah, we noticed that for sure.
Premier Project management, you know given that most of your client companies have already established and given out to most of us analysts.
You know kind of Capex guidance for 2022 how is that business likely to unfold relative to your expectations.
You know just about a quarter or two ago.
Definitely definitely a more optimistic than just a quarter or two.
We're ramping back our efforts at both rates are there's a pretty nice sized capital plan that we have in place we had a lot of backlog of projects that.
We basically put on hold during the pandemic. So we've released those projects and then we have a good amount of capex that we need to do that actually in many cases contractually obligated that we have already extended as far past as possible. So I think from a from a rebounding and in terms of where we are from the.
Trust and Braemar I think that were.
Definitely higher than we would've thought a few quarters ago, but we're not to where we were in 20 I came for sure but the biggest surprise has been the third party business I would never thought we'd have had $11 million of contracted fees. As we just started that effort and the amount of repeat business that we're getting and the.
The size of each one of our contracts are becoming larger as well.
The good thing about some of this third party business is that it is very long lead time.
And so as we continue to contract that business is going to come over over the course of really the next eight quarters and a lot of cases not really the next one to two quarters and so as we continue to sign up more and more business, you'll kind of see that stair step effect of.
You know continued revenues that are really help stabilize them you know that platform as well.
Got it and just last for me on Red, which is you know really I think surprised quite a few people with its growth.
To continue to grow that business, you know what kind of capital requirements will that take and does that impact how you allocate money you know across the other portfolio companies that you're trying to grow out.
Yeah, Great question.
I think that did just taking a high level view is if we have more opportunities than we have access capital right. Now now there are some things that we're working on that could help with that not anything that would we'd issue any common equity at these levels because we're very bullish on.
Outlet.
Of Ashford Inc.
Hopefully they you know the potential equity returns when do you expect as are the rest of our businesses a continued ramp and we expand our businesses.
But when we look at capital allocation, we really want to see a minimum of a 20% Unlevered IRR.
And that's pretty much what we're seeing across all our businesses. So even when we put capital at inspire if we were to put any capital at Remington, 20% is a minimum threshold and in many cases, 30% or higher.
With Red It does take capital to grow I mean, we've been able to grow by pushing rate by filling out the boat.
We've expanded the fleet, but we're at a point now that in order for us to continue to grow there's there's some capital that needs to be put in place and in most cases.
That capital outlay is actually the most attractive across our business as it's usually in many cases, 30% or more unlevered IRR.
And we have plenty of opportunities not only to and that's and expand within the markets. But then also vertically integrate where we are referring different.
Customers that we have two sub vendors, where we will get a 20%.
<unk> bookings, which is great business, but we also.
Steer them to.
Our own <unk>.
<unk> charters, if we had more more boats in our fleet and so that's another opportunity that we continue to look at so we've got plenty of opportunities.
To vertically integrate to expanding into new markets, but generally speaking, it's about a 30% unlevered IRR when we invest in rat.
Great. Thanks, that's all for me.
Thank you, ladies and gentlemen, as a reminder, its star one to join the question queue.
Our next question comes from the line of Tyler Batori with Janney Montgomery Scott. Please proceed with your question.
Good afternoon. This is Jonathan on for Tyler Thanks for taking our questions and congrats on the results first one for me is on Remingtons Third party business can you talk about the notable third party contract gains that you saw there this quarter, how that efforts ramping versus your expectations and any changes to the way you're thinking about that opportunity long term.
Strong traction you've seen so far.
Yeah, well, Eric why don't you take that question.
Sure you know as we as.
As we mentioned in some of our prepared remarks, they're growing.
Much faster than we had originally expected and in addition to the growth that we're looking at from adding management turnover and new contracts with our development team.
We really see an opportunity with M&A opportunities for the Remington So.
The one thing about remingtons growth is that the growth from Remington can and will lead to growth with our other platforms as we add hotels that Remington manages where we can add project management services and add audio visual services and a digital key services and water sports services. So.
I'm not sure if that fully answers your question or if theres. Other clarification do you like but we were very excited about that the growth of roughly 10 minutes ahead of schedule.
No. That's very helpful. I appreciate all the detail and then a follow up on road you bought out the remaining 2% in the quarter any color you can provide on why that made sense that the changes to the operations at all or is it just a reaffirmation of the growth potential that we see there.
Well, yes, it wasn't there, but I'll I'll take that Eric It basically we had a we had some incentives that we had with two key employees and we did a buyout of their their participation within red and basically restructured the incentive plan.
<unk> aligns our interest a lot more in terms of long term.
Productivity and so it was really not not find out or any other third party, but just really within our own team, but restructuring their long term incentive plan, which we put in place and details we're not.
I don't think that we're going to disclose but we do think we have a great team in place and they're more aligned not only to grow the existing business, but to also help with acquisitions. The way we did this.
Okay, great. Thank you that's all for me.
Thank you, ladies and gentlemen that concludes our question and answer session and this concludes our call today. We thank you for your participation you may now disconnect your lines.
Yeah.
Yeah.