Q4 2022 Ashford Inc Earnings Call
Speaker 2: Greetings and welcome to the Ashford Inc. 4th Quarter 2022 Results Conference call. At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded.
Speaker 2: It is now my pleasure to introduce your host, Jordan Jennings, Investor Relations. Thank you. Please go ahead. Good day, everyone, and welcome to today's conference call to review results for Ashford for the fourth quarter and full year 2022 and to update you on recent developments. On the call today will be Derek Eubanks, Chief Financial Officer, and Eric Betas, Executive Vice President of Operations.
Speaker 2: The results, as well as notice of the accessibility of this conference call on a list and 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 State Harbor provisions of the federal securities regulations.
Speaker 2: Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risk which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements, including 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, the company is not obligated to publicly update or revise them.
Speaker 2: Certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in a company's earnings release and accompanying tables or schedules which have been filed on Form 8K with the SEC on February 22, 2023 and may also be accessed through the company's website at www.ashfordinc.com. 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 in this call compare the fourth quarter and full year ended December 31, 2022 with the fourth quarter and full year ended December 31, 2021. I will now turn the call over to Derek.
Speaker 3: Good morning and welcome to our call to discuss our financial results for the fourth quarter of 2022. I'll start by giving you an overview of our operations, strategy, and financial results for the quarter, and then Eric will provide an update regarding our operating businesses. After that, we'll open it up for Q&A. The key themes we are going to highlight today are, first, the recovery in the lodging industry continues to gain momentum..
Speaker 3: and both of our advised REAP platforms are well positioned. Second, we continue to see strong results in our third-party growth initiative for operating businesses. And third, through our focus on growing assets under management, the pace of our capital raising efforts at Aschord Security continues to accelerate. We recently completed the offering for Braymar's non-traded first stock, placing approximately $460 million. As of December 31, 2022, our two publicly traded REAP platforms, Aschord Opportunity Trust and Braymar Hotel and Resorts had ownership interests in 116 hotels with approximately 26,000 rooms and had approximately $8.2 billion of growth assets as of December 31, 2022. While Braymar's exposure to the Resorts segment has fueled its strong performance.
Speaker 3: and we anticipate capital raising to accelerate with Breimar's offering now completed.
Speaker 3: Looking ahead we believe both advisory 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. 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 and fee payers for the major hotel brands.
Speaker 3: 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. Over the past few years, we have completed numerous bolt-on acquisitions for our operating businesses, and we continue to look for attractive opportunities to strategically and accretively grow our business. I will now turn to our financial results for the quarter. Net loss attributable to common stockholders for the fourth quarter was $10.8 million, and net loss attributable to common stockholders for the full year was $32.8 million. Adjusted EBITDA was $19.4 million for the fourth quarter, and $75.7 million for the full year. This full year result reflected a growth rate of 56% over 2021.
Speaker 3: Our strong growth in adjusted EBITDA for the year was driven primarily by Inspire, Remington, and Premier. Adjusted net income for the fourth quarter was $13.2 million, and adjusted net income per diluted share was $1.65. Adjusted net income and adjusted net income per share for the full year 2022 were $53.6 million and $6.88 respectively, reflecting strong growth over the prior year. I wanna remind analysts and investors that in the fourth quarter of 2021, we recognized $5.5 million of base advisory fees from Ashford Trust that had been deferred in previous quarters. So as you think about the year over year comparison, it's important to keep that in mind. Total advisory fee revenue from Braemar in the fourth quarter.
Speaker 3: increased 27% over the prior year quarter. Our share count currently stands at eight million fully diluted shares outstanding, which is comprised of three million common shares outstanding, 0.2 million common shares earmarked for issuance under our deferred compensation plan, 4.2 million common shares associated with our Series D convertible preferred stock, and the remaining 0.6 million shares are for acquisition related shares and restricted stock. I will now turn the call over to Eric to discuss our operating businesses in more detail. Thank you, Derek. We're excited to provide updates on our products and services businesses, which posted another excellent quarter to round out a record year. Several of our portfolio companies broke company records in 2022. Inspire and Remington reached all time highs for revenue in EBITDA. Red Hospitality and Leisure set a company record for revenue, and Ashford Securities set a company record for capital raised within the year.
Speaker 3: We believe that our platform is poised to maintain the incredible momentum we established in 2022 and carry the success forward 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 advise REITs, ensuring that their hotels receive exceptional service while optimizing financial performance. The first business I'd like to discuss is Inspire, our leading single source solution for meeting and event needs with an integrated suite of audio visual services including event, hospitality and creative services. Inspire generated $34.2 million of audio visual revenue in the fourth quarter, a 57.3% increase over the prior year quarter.
Speaker 3: and $4.6 million of adjusted EBITDA, representing a 13.5% adjusted EBITDA margin. Inspire realized significant growth in its show and event services segment, generating $3.3 million of revenue in the fourth quarter, a 45.8% increase over the prior year quarter. Inspire also executed six new hospitality contracts during the fourth quarter, which are expected to contribute $9 million of annual revenue. Inspire's record 2022 culminated with $121.3 million of audio visual revenue and $19.6 million of adjusted EBITDA for the year, representing a 16.1% adjusted EBITDA margin, compared to 9% in 2021. The company also signed 18 new contracts to its hospitality segment in 2022.
Speaker 3: representing $15.2 million of expected annual revenue. Internationally, Inspire drove significant growth in Mexico and the Dominican Republic, generating $29 million of revenue, compared to $10.7 million in 2021. We are thrilled with Inspire's record-setting 2022 and the efforts the company has made to capture market share. Remington is a dynamic hotel management company providing best-in-class management and expertise to hotels across the country. Remington generated fourth quarter hotel management fee revenue and adjusted EBITDA of $13.1 million and $6.8 million, respectively. This reflects an impressive 52.1% margin. Hotel management fee revenue and adjusted EBITDA grew 73.8% and 93.4%, respectively, over the prior year quarter. Remington continues to focus on growing its third-party business and was awarded $10 million.
Speaker 3: hotel management contracts for five hotels in the fourth quarter, totaling $1.6 million of expected first full year base fees. At the end of the fourth quarter, Remington managed 118 properties that were open and operating, 45 under third-party management agreements and 73 for Ashford Trust in Braemar, located in 27 states and Washington, D.C., across 23 brands, including 19 independent and boutique properties. The next business I'd like to discuss is Premier, which provides comprehensive and cost-effective design, development, architecture, procurement and project management services. Premier generated $6.6 million of fee revenue in the fourth quarter, representing 68.0% growth over the prior year quarter. Premier also generated $2.7 million of adjusted EBITDA, resulting in a 41.4% adjusted EBITDA margin.
Speaker 3: In addition, Premier executed nine new third-party contracts during the quarter representing $6.5 million of expected fee revenue, a record quarter on the sales front for the company. Six of the new contracts were for multi-family projects, which brings the company's total to 25 contracts for that property type, and three contracts were in hospitality, which raises the total to 27 contracts for that property type. Across the multi-family, hospitality, and student housing segments, Premier has signed a total of 53 third-party contracts spanning 26 ownership groups, representing $18.8 million of expected fee revenue. Repeat Business is a significant portion of Premier's third-party revenues, and by delivering excellent service from design to completion, Premier continues to gain the trust of its customers. RED Hospitality and Leisure is the leading provider of water sports activities and other travel services in the U.S. Virgin Islands, Puerto Rico, Key West, and Turks and Caicos. In the fourth quarter, RED generated $6 billion of revenue and $0.5 million of
Speaker 3: and investment offerings, an income-focused, non-traded preferred stock offering for Ashford Hospitality Trust, and a growth-oriented private offering that targets core commercial real estate investments in the state of Texas. The growth-oriented offering is Ashford Security's first investment offering focused outside of the hospitality industry. We are very bullish on Texas' commercial real estate market because of the continued migration of people, companies, and wealth into the Lone Star State.
Speaker 3: We are very excited about Ashford Security's prospects as we head into 2023 and view this platform to be an integral part of our strategy to significantly grow our assets under management. As we look ahead, 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.
Speaker 4: 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. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Once again, that is star 1 to register a question at this time. The first question is coming from Brian Maher of B. Riley Securities. Please go ahead. Good afternoon, Eric and Eric. I appreciate the comments. Just a few. When it comes to...
Speaker 3: I mean, clearly that's been one of your most important acquisitions to date and it's been touted nicely post COVID. How are you sourcing new business there? I was a little surprised to hear about the strength in Mexico and Dominican Republic. Who's driving that growth and how big of an opportunity do you see that part of your business? Yeah, specifically in Mexico and the Dominican Republic, we have two very focused leaders there that have been in those markets for 20 plus years that are just consistently building relationships. We have a good base of business that we're building on and it just continues to grow. It's Chuck Bowman also who joined the company as CEO from one of our largest competitors. He used to manage international property sales for the hospitality industry and so he has relationships that we've been able to leverage as well and some of these hospitality contracts that we're talking about are in Mexico and the Dominican Republic. We just continue to grow there with new hospitality clients and that creates a lot of opportunities.
Speaker 3: markets. Okay, thanks. And moving on to Red, it seemed like Red might have slowed a little bit in the back half of 2022, likely due to Hurricane Fiona and I forget what the other name was.
Speaker 3: Do you think that that was just an aberration or might there be something else going on there? I wouldn't want to necessarily dovetail it with some of the you know weakness we've seen at some of the you know kind of luxury your resort part, but maybe you get a little bit of color there and more along the lines of the M&A activity. Yeah, I mean red responded
Speaker 3: from the pandemic quicker than any of our other businesses, right? Inspire took the longest to recover and Red recovered very quickly with its presence in Florida and folks' ability to travel to the U.S. Virgin Islands versus some of the other Caribbean markets. That being said, Q3 and Q4 are historically slower quarters for us, so it's more of a timing thing where you're seeing a quote-unquote slowdown. But I expect Red to grow, and we think they're going to grow materially as we still have a lot of contracts that we can add. We expect significant growth in the U.S. Virgin Islands coming up this year with some new contracts. And so I don't think that there's an indication, like you're mentioning, I don't think you need to attribute it to a slowdown of the markets. It's a seasonal thing, and certainly there is the weather activity that hits us in.
Speaker 3: in Q3 and Q4. So I don't see it as of any particular concern, and I expect RED to grow significantly. In terms of acquisitions, we are hot on the trail of a couple, and we would love to grow into other geographies and believe that we will do that, so that we can kind of mitigate some of the impact when we do have weather events in the Caribbean and South Florida. So I think RED will be on track to make some acquisitions that are exciting in the near term here. And just last, maybe a two-part question. On the ASTR-Trust non-preferred raise, is there a traded amount there? How big might that raise be? And then secondarily, I think some of us are fairly surprised by the success in the size of the Braemar non-preferred traded, with non-traded base.
Speaker 3: might ask security to raise money for other entities that aren't ASHRAE related? Hey Brian , it's Derek, I'll take that. So to answer your question on the ASHRAE trust raise, it's a $500 million offering, so that's the amount of the offering. It will be open for three years, or if we hit the size prior to that, then we could close it early. The Braemar offering was the same, except it got kind of sidetracked because we initially filed the perspectives for that right before COVID. And then, as you know, what happened to the hotel industry during COVID, we kind of shelved it.
Speaker 3: and now we'll sort of transition them over to the Ashford Trust raise. In terms of your second question about raising capital for other groups, that's clearly something we could do. I think from our perspective, we would just wanna make sure it's something that would be smart to do, it's something that would be profitable for us. So I'm not sure, I wouldn't say that you should expect us to do something like that anytime soon, but it is something that is always a potential for us. And as we said in the prepared remarks, we're very pleased with the...
Speaker 4: Thank you. This brings us to the end of the question and answer session. We'd like to thank you for your interest in Ashford Hospitality. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Speaker 1: I.