Q3 2022 Ashford Inc Earnings Call
Greetings and welcome to the Ashford, Inc. Third quarter 2022 results conference 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.
Please note this conference is being recorded.
I will now turn the call over to our host Jordan Jennings Investor Relations. Thank you you may begin.
Good day, everyone and welcome to today's conference call to review results for Ashford for the third quarter of 2022 and to update you on recent developments.
On the call today will be Derrick Eubanks, Chief Financial Officer, and Eric Fader Executive Vice President of operations.
Results as well as notice of the possibility 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 of assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provision.
Federal Securities regulation.
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. These thought theres more latest thoughts and the company's filings with the Securities and Exchange Commission.
The 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, you say, let's call our 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 November five 2022 and May also be accessed through the company's website at Www Dot Ashford Inc. Dot.
Tom.
Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release.
Also unless otherwise stated all reported results discussed in this call compare the third quarter of 2022 with the third quarter of 2021, I will now turn the call over to Derek.
Good afternoon, and welcome to our call to discuss our financial results for the third quarter of 2022.
I'll start by giving you an overview of our operations strategy and financial results for the quarter and then Eric who will provide an update regarding our operating businesses. After that we'll open it up for Q&A and we have a lot of exciting developments to discuss on today's call. The key for US we are going to highlight today are first the recovery in the lodging industry continues to gain momentum.
Both of our advised REIT platforms are well positioned Ashford trust continues to have significant liquidity and it has been it is benefiting from increased demand associated with the corporate and group segments framework continues to benefit from strong leisure demand and so on urban hotels bounce back strongly in the third quarter as corporate and group demand accelerated.
Second we continue to see strong results in our third party growth initiative highlighted with Remingtons recent acquisition of Chesapeake hospitality, which added significant later remingtons mix of third party business.
At the end of the third quarter Remingtons mix of third party hotels under management stood at approximately 38% Eric will discuss more details around Remington later in the call and third through our focus on growing assets under management the pace of our capital raising efforts at Ashford Securities continues to accelerate.
Today's braemar as issued approximately $289 million of its non traded preferred stock with a $126 million of this capital coming in the third quarter.
Ashford Trust offering of its non traded preferred stock is also effective and we've launched a growth oriented private offering that will target investments in all types of commercial real estate in the state of Texas.
Our two publicly traded REIT platforms, Ashford Trust and Braemar, one to 114 hotels with approximately 26000 rooms and had approximately $8 $1 billion of gross assets as of September 32022.
While <unk> exposure to the resorts segment is fueled a strong performance for several quarters now in the third quarter, it's urban hotels ramped up significantly.
<unk> continues to report industry, leading results in our third quarter results significantly exceeded its 2019 results.
<unk> has been active on the acquisition front, having completed two acquisitions this cycle, including the iconic 96 room Ritz Carlton Reserve Dorado Beach, and Dorado, Puerto Rico, and this week announced an agreement to acquire the 210 room four seasons resort Scottsdale at true North.
We anticipate that framework will continue to actively look to deploy capital into accretive hotel investment opportunities.
Ashford Trust has significantly deleveraged the balance sheet from a couple of years ago and the registration statement is now effective for its offering of our series J M series K redeemable non traded preferred stock, which is being issued through Ashford Securities. Ashford Trust also continues to maintain a substantial cash balance which ended the quarter at $506 million.
Looking ahead, we believe both advised REIT platforms have ample liquidity and we remain focused on their future strategic objectives.
Our strategy and structure are designed for growth, we have a powerful ecosystem of businesses that all benefit as we grow our assets under management or.
Our size and scale in the lodging industry also brings benefits to third party owners and other capital providers. As we are one of the largest owners of the payors for the major hotel brands.
We believe we have a superior strategy and structure that is unique within the hospitality space and we are excited about the potential growth of our platform I will now turn to our financial results for the quarter.
Net loss attributable to common stockholders for the third quarter was $10 million.
Adjusted EBITDA was $16 4 million, an increase of 31% over the prior year quarter, our strong growth in adjusted EBITDA for the quarter was driven by Premier Remington and inspire.
Adjusted net income for the quarter was $11 $8 million and adjusted net income per diluted share was $1 48.
These results reflect growth rates over the prior year, a 41% and 33% respectively.
Looking ahead to the fourth quarter I want to remind analysts and investors that in the fourth quarter of 2021, we recognized $5 $5 million.
Based advisory fees from Ashford Trust, which had been deferred in previous quarters as.
As you think about year over year comparisons, it's important to keep that in mind.
Our share count currently stands at $7 6 million fully diluted shares outstanding which is comprised of $3 1 million common shares outstanding 0.2 million common shares earmarked for issuance under our deferred compensation plan $4 1 million common shares associated with our series D convertible preferred stock.
0.1 million common shares associated with the Chesapeake acquisition and the balance is primarily restricted stock.
Now I'd like to turn the call over to Eric to discuss our operating businesses in more detail.
Thank you Derrick we are excited to provide updates on our products and services businesses, which posted another excellent quarter as we continue to focus on growth in third party sales and expansion into new verticals.
We believe that our platform is poised to continue the incredible momentum we have established throughout 2022 and carry this success into 2023 and beyond.
As a reminder, our products and services Division is a unique investment strategy in the hospitality industry, where we aim to accelerate growth and create shareholder value through the implementation of best operating practices investment in infrastructure and the execution of accretive acquisitions.
We are also able to utilize our extensive relationships and refer these businesses to our advised Reits ensuring their hotels receive exceptional service, while optimizing financial performance.
The first business I'd like to discuss is premier which provides comprehensive and cost effective design development architecture procurement and project management services.
Premier generated third quarter fee revenue of $6 $3 million, representing 185% growth over the prior year quarter.
Premier also generated $3 3 million of adjusted EBITDA, resulting in a 52% adjusted EBITDA margin.
In addition, during the quarter Premier executed five new contracts, representing $444000 a piece.
Two contracts were in multifamily, which brings the total to 18 contracts in this segment and three contracts were in hospitality, which raises the total to 24 contracts in that segment so from here.
Across the multifamily hospitality and student housing segments Premier assigned a total of 44 third party contracts spanning 22 ownership groups, representing $12 $2 million of fees.
Lastly, repeat business is a significant portion of Premier's third party revenues by delivering excellent service and exceptional projects Premier has grown the trust of its customers who come back to contract additional work from Premier.
We're confident premier will continue to capitalize on the uptick in capital investments by owners and investors.
The next business I'd like to discuss is inspire our leading single source solution for meeting and event needs with an integrated suite of audiovisual services, including show and event services hospitality services creative services and design and integration.
Inspire reflects the energy and momentum that the company has delivered to its clients for the past 30 years.
Inspire generated $26 $2 million of revenue and $2 million of adjusted EBITDA in the third quarter, representing a seven 8% adjusted EBITDA margin.
Inspires third quarter revenue was 73, 1% above the prior year quarter driven by growth in its show and event services segment, which generated $4 million of revenue in the third quarter, a 74% increase over the prior year quarter.
Inspire also executed four new.
New hospitality contracts during the third quarter, which are expected to contribute $1 $6 million of annual revenue.
We are thrilled with inspires huge 2022 and continue to see material upside for the business.
Red hospitality and leisure a leading provider of watersports activities and other travel services in the U S. Virgin Islands, Puerto Rico U S in Turks and Caicos Red.
<unk> was impacted by hurricane season, and Fiona in the third quarter.
And despite the combined 20 days of inoperable conditions across its markets red generated $6 $6 million of revenue and $1 4 million of adjusted EBITDA, representing a 22% EBITDA margin.
Despite the adverse weather conditions Red served nearly 49000 passengers in the quarter compared to 35000 in the third quarter of 2019.
We are happy to report there were no there was no material damage to read the assets in the company has returned to normal business operations for the fourth quarter.
<unk> enters the fourth quarter with $1 $3 million of advanced bookings for the remainder of 2022.
A 30% increase over the prior year quarter.
Strong demand for water sports and excursion services, coupled with the Companys continued push into new verticals, such as transportation signals and exciting growth trajectory as the company seeks to gain revenue from the entire customer experience.
Lastly, Greg continues to explore M&A opportunities in new and existing markets to continue to grow market share and gain scale.
Remington is a dynamic hotel management company, providing best in class service and expertise to hotels across the country.
Remington generated third quarter Hotel management fee revenue and adjusted EBITDA of $12 9 million and $6 8 million, respectively, which represents a 53% adjusted EBITDA margin.
Revenue and adjusted EBITDA grew 66% and 64% respectively over the prior year quarter.
Remington continues to focus on growing its third party business and was awarded three contracts in the third quarter at.
At the end of the third quarter Remington managed 117 properties that were open and operating 44 under third party management agreements and 73 for Ashford Ashford Trust and Braemar.
Located in 27 States and Washington D C across 23 brands, including 18 independent and boutique properties.
Ashford Securities as our dedicated fundraising platform. We are extremely pleased with the progress Ashford Securities has made during the past year. We have built out a talented team of 24 professionals, who are great at what they do.
Since the commencement of <unk> non traded preferred offering Ashford securities is placed approximately $289 million through a syndicate of 73 firms with over 13300 financial advisors.
Ashford Securities has launched two new investment offerings and income focused non traded preferred stock offering for Ashford Trust and a growth oriented private offerings that targets investments in all types of commercial real estate and the state of Texas.
The growth oriented private offering is Ashford securities first investment offering focused on an area outside of hospitality and we believe this is a big area of growth for them in the future.
As we look ahead to the remainder of 2022, we will continue to focus on growing our businesses through the recovery in the hospitality industry and our two major initiatives third party sales and executing strategic acquisitions for our products and services platform.
We continue to see significant runway in all of our businesses and see the opportunity to meaningfully scale across all our portfolio companies.
That concludes our prepared remarks, and we will now open up the call for Q&A.
Thank you and at this time, we will conduct a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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Our first question comes from Tyler Battery with Oppenheimer. Please state your question.
Thank you good afternoon couple of questions for me.
The first one on Ashford Securities and got a couple of offerings out there in the marketplace have you seen any impact to <unk>.
That's your interest or demand broadly just given the move higher in interest rates and perhaps some other opportunities in the market as well that are extra or additional competition for what you're offering.
Hey, Tyler, it's Eric I'll take that.
It's a good question and actually we haven't because we've continued to grow our syndicate.
Dealers that are out there selling our product.
Really talking about.
Braemar here specifically.
As you can see the capital raising for <unk> non traded preferred is actually continue to accelerate.
And that's been a function of growing our syndicate, having more advisors out there selling.
Selling that product I mean look if rates continue to go up or the market continues to go down significantly.
Dissipate at some point you probably start to see.
A bit of a slowdown, but one of the things that really attracted us to this channel is just the resiliency of the source of capital and we've seen us through multiple multiple market cycles, and we've watched it from a distance.
What really.
Let us to want to access this type of capital because it tends to be pretty resilient.
Source of capital really regardless of what's going on.
With the with whether it's the stock market or interest rates et cetera. So.
Anyway, so we.
We haven't really seen it we've continued to grow and accelerate our capital raising and.
We're excited about these two products that we have.
<unk>, just recently and are still sort of the early stages of building the syndicate.
And really kind of getting the word out on these two products.
Okay that makes sense very helpful.
In terms of Premier.
Interested as we're getting closer to year end kind of what youre hearing from some of the hotel owners in terms of Capex next year kind of what their budgets are looking like and what their expectations for spending are versus this year. I'm also interested in that business you made some progress on the multifamily.
Thanks.
Yeah, I'm interested if there are significant.
Significant differences in terms of the.
The margin there or perhaps how much you all multifamily.
Or is willing to spend compared with a hotel owner I mean do you, perhaps do you see even more opportunity to really.
Ramp up growth on the multifamily side of things, Rob above and beyond.
The hotel exposure you have.
Yes. This.
This is Eric I'll take that one so on.
On your first question in terms of capital spend we see it returning back to pre COVID-19 levels folks.
Folks who are using this opportunity of having.
Not spent any money on capex the last.
Two three years to get projects started and get them planned and executed over the next 12 to 24 months. So I think we will see that return and we will see that kind of stabilize going forward.
As far as multifamily in terms of fees.
There is not.
A material difference in terms of.
Mr spend well, what we'd like to do more of these development projects and things that are are larger in scale.
As opposed to refreshes there is obviously some programmatic renovation.
That occurs in hospitality, where youre on a certain cycle and you've got a renovated every.
Certain number of years in multifamily doesn't have as much structure.
But at when projects do occur.
I wouldn't say to your comment about.
Willingness to spend or dollar speed that we can get on any individual project theres not really a difference once that project is identified and moving forward.
But multifamily obviously it does have.
It's a significant market and maybe more significant than hospitality.
Yes.
As a place that we think we can get significant market share. So we do think there'll be a lot of growth in that segment for us.
And Tyler as it relates to the Capex spending at our advised Reits.
We expect capital spending next year to accelerate just a little from where we expect to finish the year this year, but at Braemar.
As we announced today on the on the earlier call for Braemar, We do anticipate.
That increase in capital spending at Braemar, just give us a pretty significant projects there.
But to Eric's point.
We do expect to see hotel owners in general kind of get back to the level of capital spending that we saw really pre COVID-19 after kind of a couple of lean years capital spending.
Okay. Okay and then just last question for me in terms of.
Acquisitions, obviously, including the Chesapeake you're interested.
What the opportunity set looks like out there.
The bolt ons for the product and services business.
Sure if the environment has changed over the last couple of months in terms of what's your what Youre seeing.
So theres still absolutely market out there.
Particularly at at Red and Remington and even inspire.
But we're looking at bolt on opportunities at all of our businesses I wouldn't say anything is necessarily.
Slowdown in particular in our.
Activity deals once we get things signed up they just take a while to get executed.
So haven't seen.
Slowdown necessarily unexpected that will continue to be acquisitive.
And grow well through that organic and inorganic growth.
Okay, Great. That's all for me. Thank you.
Thanks.
Thank you there are no further questions at this time.
This concludes today's conference call you May now disconnect. Your lines at this time. Thank you all for your participation.