Q1 2025 Summit Hotel Properties Inc Earnings Call

Operator: Good day and thank you for standing by.

Good day, and thank you for standing by and welcome to the Summit Hotel properties, Inc. First quarter 2025 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Operator: Welcome to the Summit Hotel Properties, Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again.

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Operator: Please be advised that today's conference is being recorded.

Kevin Malata: I would now like to hand the conference over to your speaker today, Kevin Malata. Please go ahead. Thank you, Operator, and good morning.

Speaker Change: I would now like to hand, the conference over to your Speaker today, Kevin Miller. Please go ahead.

Speaker Change: Thank you operator, and good morning, I'm joined by Summit Hotel properties, President and Chief Executive Officer, John Scanner, and Executive Vice President and Chief Financial Officer Trade Chocolate. Please note that many of our comments today are considered forward looking statements as defined by federal Securities laws. These statements are subject to risks and uncertainties both.

Kevin Malata: I'm joined by Summit Hotel Properties President and Chief Executive Officer John Stanner, and Executive Vice President and Chief Financial Officer Trey Conkling. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC file.

Speaker Change: Known and unknown as described in our SEC filings.

Kevin Malata: Board looking statements that we make today are effective only as of today, May 1, 2025. And we undertake no duty to update them later.

Speaker Change: Forward looking statements that we make today are effective only as of today may one 2025, and we undertake no duty to update them. Later, you can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at Www dot.

Kevin Malata: You can find copies of our SEC filings and earnings release which contain reconciliations to non gap financial measures reference on this call on our website at www.shbreit.com.

John Stanner: Please welcome Summit Hotel Properties President and Chief Executive Officer John Thanks, Kevin. And thank you all for joining us today for our first quarter 2025 earnings conference call. We are pleased with our first quarter results, which were in line with expectations, despite the more challenging operating backdrop we began to experience in early. Revpar in our same store portfolio increased one and a half percent compared to the first quarter of last year. driven by a relatively equal mix of rate and option. Continued strong cost controls resulted in EBITDA margin contraction of less than 50%. compared to the first quarter of last year.

John Scanner: S. H B R E T Dot Com. Please welcome Summit Hotel properties, President and Chief Executive Officer, John Scanner.

Speaker Change: Thanks, Kevin and thank you all for joining us today for our first quarter 2025 earnings conference call.

Speaker Change: We are pleased with our first quarter results, which were in line with expectations. Despite the more challenging operating backdrop, we began to experience in early March.

Speaker Change: Revpar at our same store portfolio increased one 5% compared to the first quarter of last year.

Speaker Change: Driven by a relatively equal mix of rate and occupancy growth.

Speaker Change: Continued strong cost controls resulted in EBITDA margin contraction of less than 50 basis points compared to the first quarter of last year, that's pro forma operating expenses increased a mere one 5% year over year.

John Stanner: as pro forma operating expenses increased a mere 1.5% year over year. Our REVPAR growth was primarily concentrated in urban and suburban markets, where growth continues to be driven by strength and group demand and the ongoing recovery of corporate transient traffic. January REV PAR declined 1.5% in our same store portfolio, primarily due to weather-related disruptions. which created some pent-up demand for February when RevPAR increased a robust 8.1% year-over-year. For the first two months of the year, same-store REVPAR increased over 3%, driven by positive growth in all demand segments when adjusting for assets under REVPAR. We began to experience demand softening in early March, driven predominantly by weakness in government and government-related travel, as well as a meaningful reduction of outbound international travel, particularly from Canada.

Speaker Change: Our revpar growth was primarily concentrated in urban and suburban markets, where growth continues to be driven by strength in group demand and the ongoing recovery of corporate transient travel.

Speaker Change: January Revpar declined one 5% and our same store portfolio, primarily due to weather related disruption, which.

Speaker Change: Which created some pent up demand for February when Revpar increased a robust eight 1% year over year.

Speaker Change: For the first two months of the year same store revpar increased over 3% driven by positive growth in all demand segments when adjusting for assets under renovation.

Speaker Change: We began to experience demand softening in early March driven predominantly by weakness in government and government related travel as well as a meaningful reduction of outbound international travel, particularly from Canada.

John Stanner: March REF PAR declined 1.6% in our same store portfolio and approximately 10% in our qualified segment. which is a reasonable proxy for government-related demand. For the first quarter, Qualified Revenue, which represents approximately 5% of total room-night demand for our portfolio, declined 7% year-over-year. In certain markets, softening demand has resulted in the need to shift our room-night mix to lower rates. which puts downward pressure on year-over-year ADR growth. This was particularly evident in March, as modest occupancy growth in our same store portfolio was offset by a 2% decline in average daily Despite absolute ADRs increasing year-over-year across most of our demand.

Speaker Change: March Revpar declined one, 6% and our same store portfolio and approximately 10% and our qualified segment specifically.

Speaker Change: As a reasonable proxy for government related demand.

Speaker Change: For the first quarter qualified revenue, which represents approximately 5% of total room night demand for our portfolio declined 7% year over year.

Speaker Change: In certain markets softening demand has resulted in the need to shift our room night mix to lower rated segments, which puts downward pressure on year over year ADR growth rates.

Speaker Change: This was particularly evident in March as modest occupancy growth in our same store portfolio was offset by a 2% decline in average daily rate.

Speaker Change: Despite absolute ADR is increasing year over year across most of our demand segments.

John Stanner: Encouragingly, this suggests outright rate cutting is not yet occurring across These demand trends mostly persisted into April. However, the company faced particularly challenging calendar comparisons. related to the solar eclipse from last year and the shift of Easter from March of 2024 to April. which adds a layer of complication to evaluating year-over-year demand patterns. Driven primarily by these difficult comparisons, we expect April REVTAR to decline between 4% and 5% compared to last year. When isolating the first two weeks of April preceding the Easter holiday, demand in our portfolio remained consistent with January and February trends, as REVPAR increased approximately 3% when excluding markets that were direct beneficiaries of the solar eclipse last year.

Speaker Change: Encouragingly this suggest outright rate cutting is not yet occurring across the industry.

Speaker Change: These demand trends, mostly persisted into April however, the company faced particularly challenging calendar comparisons related to the solar eclipse from last year and the shift of Easter from March of 2024 to April of this year.

Speaker Change: Which adds a layer of complication to evaluating year over year demand patterns.

Speaker Change: Driven primarily by these difficult comparisons, we expect April revpar to decline between 4% and 5% compared to last year.

Speaker Change: When isolating the first two weeks of April preceding the Easter holiday demand in our portfolio remain consistent with January and February trends as Revpar increased approximately 3% when excluding markets that were direct beneficiaries of the solar eclipse last year.

John Stanner: It's worth noting that approximately 20% of our portfolio benefited from primarily in four markets, Austin, Dallas, Cleveland, and Indianapolis.

Speaker Change: It's worth noting that approximately 20% of our portfolio benefited from the eclipse primarily in four markets Austin, Dallas, Cleveland and Indianapolis.

John Stanner: In our press release yesterday, we announced the completion of the transformational renovation of our courtyard on the beach of Fort Lauderdale. which has been formally renamed the Courtyard by Marriott Oceanside, Fort Lauderdale. A comprehensive repositioning of the hotel includes the complete redesign of the guest rooms and corridors. as well as the re-imaging of all of the public spaces and the exterior of the building. Our poolside bar and sun deck provide unobstructed views of the Atlantic Ocean and have been significantly upgraded to drive incremental revenue. Finally, we unveiled a new lobby, restaurant, fitness center, and retail space to further amenitize the hotel.

Speaker Change: In our press release press release yesterday, we announced the completion of the transformational renovation of our courtyard on the beach and Fort Lauderdale, which has been formally renamed the courtyard by Marriott Oceanside Fort Lauderdale Beach.

Speaker Change: The comprehensive repositioning of the hotel, including the complete redesign of the Guestrooms and corridors as well as the re imaging of all of the public spaces and the exterior of the building.

Speaker Change: Our poolside bar and Sunday provide.

Speaker Change: <unk> views of the Atlantic Ocean and had been significantly upgraded to drive incremental revenue.

Speaker Change: Finally, we unveiled a new lobby restaurants, and fitness center and retail space to further monetize the hotel.

John Stanner: Directly competitive oceanfront properties have historically achieved a meaningful rate premium to our hotel, and we believe this capital investment will allow us to significantly increase our average rates and close. We have also underwritten cash on cash yields of over 20% related to our investments enhancing the hotel's public Boogie Beveries Out. partially driven by our ability to capture outside guest spend due to the high foot traffic associated with our beachfront location.

Speaker Change: Directly competitive oceanfront properties have historically achieved a meaningful rate premium to our hotel and we believe this capital investment will allow us to significantly increase our average rates and close this rate gap.

Speaker Change: We are also underwritten cash on cash yields of over 20% related to our investments enhancing the hotel's public spaces, and food and beverage outlets, partially driven by our ability to capture outside guest spending due to the high foot traffic associated with our beachfront location.

John Stanner: We believe there is tremendous upside in the operating performance of this hotel, given its irreplaceable location in a market with incredibly high barriers.

Speaker Change: We believe there is tremendous upside in the operating performance of this hotel given its irreplaceable location in a market with incredibly high barriers to entry.

John Stanner: Let me take a minute to provide some perspective on the current outlook for the industry in our portfolio. Clearly, recent policy changes have created macroeconomic uncertainty and capital markets volatility that complicate the near-term outlook for our Our booking window is short term under normal operating typically book approximately 60% of our room nights within two weeks of stay. As uncertainty persists, we expect our booking window to continue to compress in the near Particularly as corporations await further clarity on trade policy and what effect the recent volatility has on the broader economy.

Speaker Change: Let me take a minute to provide some perspective on the current outlook for the industry and our portfolio more specifically.

Speaker Change: Clearly recent policy changes have created macroeconomic uncertainty and capital markets volatility that complicate the near term outlook for our business our.

Speaker Change: Our booking window, a short term under normal operating conditions as we typically book approximately 60% of our room nights within two weeks of stay.

Speaker Change: As uncertainty persist, we expect our booking window to continue to compress in the near term, particularly as corporations await further clarity on trade policy and what effect. The recent volatility has on the broader economy.

John Stanner: We've experienced a modest pullback in demand in March. generally concentrated in government and international travel, which are two of our smaller. but have not yet seen the sort of broad-based reduction in demand or acceleration and cancellations experienced in the more severe downturns of prior sectors. History would suggest leisure demand will remain the most resilient segment during times of uncertainty. And our current expectation is for group demand to remain strong over the medium-term.

Speaker Change: We've experienced a modest pullback in demand in March and April generally concentrated in government and international travel, which are two of our smaller demand segments, but have not yet seen the sort of broad based reduction in demands or acceleration in cancellations experienced in the more severe downturns of prior cycles.

Speaker Change: History would suggest leisure demand will remain the most resilient segment during times of uncertainty.

Speaker Change: And our current expectation is for group demand to remain strong over the medium term, while near term uncertainty at the prevailing market sentiment we remain constructive on the long term prospects for our portfolio and are confident in our ability to manage through a period of softening demand.

John Stanner: While near-term uncertainty is the prevailing market sentiment, we remain constructive on the long-term prospects for our portfolio, and are confident in our ability to manage through a period of softening. In prior down cycles, select service assets have outperformed on a relative scale. benefiting from an already lean operating model and, in certain times, a shift from price-sensitive customers away from full-service hotels. We've already been effectively managing expenses in a lower revenue growth environment. as EBITDA margins in our pro-forma portfolio have contracted only 15 base... on 1.6% rep par growth over the past five. This is particularly impressive as the industry has absorbed above inflationary costs.

Speaker Change: In prior down cycles select service assets have outperformed on a relative basis.

Speaker Change: I think from an already lean operating model and in certain times, a shift from price sensitive customers away from full service hotels.

Speaker Change: We have already been effectively managing expenses and a lower revenue growth environment as EBITDA margins in our pro forma portfolio have contracted only 15 basis points on a one 6% revpar growth over the past five quarters.

Speaker Change: This is particularly impressive as the industry has absorbed above inflationary cost increases.

John Stanner: With the uncertainty of the current macroeconomic backdrop, we believe it's appropriate to provide a framework to assess potential outcomes for our full-year financial results, given the wider range of possible demand patterns for the remaining year. Based on first quarter actual results and recent portfolio trends, our performance is currently tracking toward the lower end of our guidance. provided as part of our year-end 2024 earnings. for full year adjusted EBITDA, adjusted FFO, and adjusted FFO per share. We currently expect second quarter REV PAR to decline between 2% and 4% compared to the second quarter of last year.

Speaker Change: With the uncertainty of the current macroeconomic backdrop, we believe it's appropriate to provide a framework to assess potential outcomes for our full year financial results given the wider range of possible demand patterns for the remainder of the year.

Speaker Change: Based on first quarter actual results and recent portfolio trends. Our performance is currently tracking toward the lower end of our guidance ranges provided as part of our year end 2024 earnings report for full year adjusted EBITDA, adjusted <unk> and adjusted <unk> per share.

Speaker Change: We currently expect second quarter Revpar to decline between 2% and 4% compared to the second quarter of last year.

John Stanner: It's important to note that we face particularly difficult special event comparisons in the second quarter, as our results last year benefited from demand related to the solar eclipse across several markets. 150th running of the Kentucky Derby and PGA Championship. and Olympic Trials in both Indianapolis and Achieving the midpoint of our second quarter REV PAR expectation. would result in a rev par decline of approximately 1% for the first half of the year in our pro forma portfolio. Finishing the full year at the low end of our guidance range for adjusted EBITDA, FFO, and FFO per share implies positive rep part growth of approximately 1% in the second half or essentially flat rep art growth for the full.

Speaker Change: It is important to note that we faced particularly difficult special event comparisons in the second quarter as our results last year benefited from demand related to the solar eclipse across several markets. The final four in Phoenix, The 150, <unk> running of the Kentucky Derby and PGA Championship in Louisville.

Speaker Change: And the Olympic trials in both Indianapolis and Minneapolis.

Speaker Change: Achieving the midpoint of our second quarter Revpar expectations would result in a revpar decline of approximately 1% for the first half of the year and our pro forma portfolio.

Speaker Change: Finishing the full year at the low end of our guidance range for adjusted EBITDA, <unk> and <unk> per share implies positive revpar growth of approximately 1% in the second half of the year or essentially flat revpar growth for the full year based on a reasonable flow through assumptions. It is worth highlighting that our full year assumption.

John Stanner: based on a reasonable flow through assumption. It is worth highlighting that our full year assumptions now assume the lower end of our guidance range is achievable with flat REF PAR growth in 2025. compared to our previous expectations, which reflected 1% REV PAR growth at the low level. As a general framework, every 1% of full-year REVPAR growth equates to approximately $5 million in pro rata EBITDA, or 4 cents of adjusted FFO per share, again assuming reasonable profitability flow.

Speaker Change: Now at the lower end of our guidance range is achievable with flat revpar growth in 2025.

Speaker Change: Compared to our previous expectations, which reflected 1% revpar growth at the low end.

As a general framework every 1% of full year revpar growth equates to approximately $5 million and pro rata EBITDA or <unk> of adjusted <unk> per share again, assuming reasonable profitability flow throughs.

John Stanner: It is worth emphasizing that it remains relatively early in the year. And changes in government policy can have meaningful effects on lodging demand over the short term.

Speaker Change: It is worth emphasizing that it remains relatively early in the year and changes in government policy can have meaningful effects on lodging demand over the short term.

John Stanner: Finally, given the significant dislocation we've experienced in our stock price.

Speaker Change: Finally, given the significant dislocation we've experienced that our stock price recently, our board of directors has approved a $50 million share repurchase program that we intend to utilize opportunistically to return capital to shareholders and drive value creation.

John Stanner: Our Board of Directors has approved a $50 million share repurchase program. that we intend to utilize opportunistically to return capital to shareholders and drive value creation. Before I turn the call over to Trey, let me reiterate that we remain confident in the long-term outlook. and our portfolio. Despite the recent market volatility, we expect travel to remain a secular winner through cycle. And our high-quality portfolio of well-located hotels remains poised to benefit from these trends. With the recently announced closing of our delayed draw term loan, we have no significant debt maturities until 2021. ample liquidity under a revolving credit and a track record of successfully navigating through uncertainty.

Speaker Change: Before I turn the call over to Trey, Let me reiterate that we remain confident in the long term outlook for the industry and our portfolio specifically.

Speaker Change: Despite the recent market volatility, we expect travel to remain a secular winter through cycles, and our high quality portfolio of well located hotels remains poised to benefit from these trends.

Speaker Change: With the recently announced closing of our delayed draw term loan we have no significant debt maturities until 2027.

Speaker Change: Ample liquidity under our revolving credit facility and a track record of successfully navigating through uncertain periods.

John Stanner: While we look forward to more stable operating We also continue to seek opportunities. value can be followed.

Speaker Change: While we look forward to more stable operating conditions. We also continue to seek opportunities to create value in these volatile times.

Kevin Malata: With that, I'll hand the call over. Thanks, Sean.

Track: With that I'll hand, the call over to track.

Trey Conkling: And good morning, everyone. For the first quarter 2025, REVPAR growth was driven by the company's urban portfolio, for which REVPAR increased nearly 3%. outpacing the total industry by approximately 80 basis. The strength of the company's urban portfolio is better highlighted by the 6.8% REVPAR growth realized in January and February, before broad macro uncertainty disrupted March demand. Urban markets delivering outsized growth include New Orleans, Tampa, San Francisco, Chicago and downtown Houston. All of which experienced first quarter red par growth of 7% or higher. San Francisco, in particular, outperformed in the first quarter, with RevPAR growth of 13.5 percent, driven by a successful J.P.

Speaker Change: Thanks, Sean and good morning, everyone.

Speaker Change: For the first quarter 2025, Revpar growth was driven by the Companys urban portfolio for which Revpar increased nearly 3%.

Speaker Change: Outpacing the total industry by approximately 80 basis points.

Speaker Change: The strength of the company's urban portfolio is better highlighted by the six 8% Revpar growth realized in January and February before broad macro uncertainty disrupted march to that.

Speaker Change: Urban markets delivering outsized growth include New Orleans, Tampa, San Francisco, Chicago Downtown Houston.

Speaker Change: All of which experienced first quarter revpar growth of 7% or higher.

Speaker Change: San Francisco in particular outperformed in the first quarter with Revpar growth of 13, 5% driven by a successful J P. Morgan Healthcare conference. In addition to multiple other citywide events.

Trey Conkling: Morgan Health Care Conference, in addition to multiple other citywide events. This enabled our hotels to maximize compression opportunities, driving a 550 basis point outperformance to first quarter San Francisco MSA REVPAR growth of approximately 8%. Looking ahead, San Francisco is positioned for another strong quarter as convention pace is up over 30% in the second quarter. Strength in Group also applied to our urban hotel portfolio broadly, for which group REVFAR increased 17% versus the first quarter of 2024, and over 30% relative to January and February 2024.

Speaker Change: This enabled our hotels to maximize compression opportunities driving a 550 basis point outperformance to first quarter, San Francisco MSA revpar growth of approximately 8%.

Speaker Change: Looking ahead, San Francisco is positioned for another strong quarter as convention pace is up over 30% in the second quarter.

Speaker Change: Strengthened group also apply to our urban hotel portfolio broadly for which group Revpar increased 17% versus the first quarter of 2024.

Speaker Change: And over 30% relative to January and February 2024.

Trey Conkling: The performance of our urban portfolio in the first quarter gives us strong conviction that Summit is well positioned to outperform as the macro environment normalizes. Today, urban hotels comprise approximately 48% of our total guest room count. The company's suburban and small-town metro portfolios generated average red-card growth of 1.2 percent in the first quarter, driven by our hotels in Portland-Hillsborough, Greenville, North Dallas-Frisco, and Southern California. We have invested significant capital into renovating many of our suburban and small town metro assets over the past 24 months, and expect strong relative future performance, assuming normalized conditions. Today, suburban and small town metro hotels comprise approximately 29% of our total guest room count.

Speaker Change: The performance of our urban portfolio in the first quarter gives us strong conviction that summit is well positioned to outperform as the macro environment normalizes.

Speaker Change: Today urban hotels comprised approximately 48% of our total Guestroom count.

Speaker Change: The company is suburban and small town metro portfolios generated average revpar growth of one 2% in the first quarter driven by our hotels in Portland, Hillsboro, Greenville, North Dallas fresco and southern California.

Speaker Change: We have invested significant capital into renovating many of our suburban and small town metro assets over the past 24 months and expect strong relative future performance assuming normalized conditions.

Speaker Change: Today suburban and small town Metro hotels comprised approximately 29% of our total Guestroom count.

Trey Conkling: Summit's exposure to the resort location type accounts for only 11% of total guest One of our largest resort assets, the Courtyard Oceanside Fort Lauderdale Beach, just completed a significant reposition. And we expect this capital investment will provide a tailwind to our resort portfolio red part growth for the remainder of 2025 and into 2026. Moderating expense growth continued in the first quarter, with pro forma operating expenses increasing approximately 1.5% year over year, as the company realized incremental progress across multiple aspects of our cost structure. Given modest revenue growth, our asset management team and hotel managers have successfully focused on managing wages, reducing hotel reliance on contract labor, and improving employee retention.

Speaker Change: Some of this exposure to the resort location type accounts for only 11% of total guestrooms.

Speaker Change: One of our largest resort assets the courtyard Ocean side Fort Lauderdale Beach, just completed a significant repositioning.

Speaker Change: And we expect this capital investment will provide a tailwind to our resort portfolio Revpar growth for the remainder of 2025, and then 2026.

Speaker Change: Moderating expense growth continued in the first quarter with pro forma operating expenses, increasing approximately one 5% year over year as the company realized incremental progress across multiple aspects of our cost structure.

Speaker Change: Given modest revenue growth our asset management team at hotel managers has successfully focused on managing wages, reducing hotel reliance on contract labor and improving employee retention.

Trey Conkling: hourly wages excluding contract labor increased just 1.2% compared to the first quarter of 2024. The company continues to benefit from reductions in contract labor, which declined by 9% on a nominal basis and by 10% on a nominal basis and by 9% on a per occupied room basis versus first quarter 2024. Contract labor now represents 10% of our total labor costs, which is 750 basis points below peak COVID era levels, but 250 basis points above 2019 levels. suggesting the opportunity for further improvement. We also continue to see improvement in employee retention, which results in improved productivity in the hotels and reduced training costs.

Speaker Change: Hourly wages, excluding contract labor increased just one 2% compared to the first quarter of 2024.

Speaker Change: The company continues to benefit from reductions in contract labor, which declined by 9% on a nominal basis.

Speaker Change: By 10% on a nominal basis and by 9% on a per occupied room basis versus first quarter 2024.

Speaker Change: Contract Labor now represents 10% of our total labor costs, which is 750 basis points below peak COVID-19 era levels, but 250 basis points above 2019 levels, suggesting the opportunity for further improvement.

Speaker Change: We also continue to see improvement in employee retention, which results in improved productivity and the hotels and reduced training costs.

Trey Conkling: Finally, we continue to be encouraged by expense trends in our portfolio and how the current baseline cost structure positions the company for future bottom line growth. Same-store REVFAR growth for the first quarter was 1.5%, driven by gains in both occupancy and average rate. Due to the company's strong retention efforts, hotels even a margin contraction of 49 bases. finished better than the tight end of annual margin guidance provided in February 2025, despite modest red part growth. First quarter adjusted EBITDA was $45 million, a modest decline versus prior year, driven primarily by the net effective asset sales completed in 2024.

Speaker Change: Finally, we continue to be encouraged by expense trends in our portfolio and how the current baseline cost structure positions the company for future bottom line growth.

Speaker Change: Same store Revpar growth for the first quarter was one 5% driven by gains in both occupancy and average rate.

Speaker Change: Due to the company's strong retention efforts hotel EBITDA margin contraction of 49 basis points finished better than the tight end of annual margin guidance provided in February 2025, despite modest revpar growth.

Speaker Change: First quarter, adjusted EBITDA was $45 million in modest decline versus prior year, driven primarily by the net effect of asset sales completed in 2024.

Trey Conkling: First quarter adjusted FFO was $27.4 million, or $0.22 per share, as the company continues to benefit from lower interest expense resulting from deleveraging efforts related to our strategic asset sales completed in 2023 and 2024. From a capital expenditure standpoint, in the first quarter, we invested $16 million in our portfolio on a consolidated and $14 million on a pro rata bill. Recently completed and ongoing renovations include the Courtyard Oceanside Fort Lauderdale Beach. Courtyard Grapevine, Spring Hill Suites Dallas Downtown, Courtyard Charlotte, Residence in Atlanta Midtown, and the Hampton Inn & Suites Silver Thames. The company's continued investment in our portfolio resulted in a REVPAR index of 114 for the first quarter of 2025, and a REVPAR index of 116 when excluding the displacement from renovation.

Speaker Change: First quarter, adjusted <unk> was $27 4 million or <unk> 22 cents per share.

Speaker Change: The company continues to benefit from lower interest expense, resulting from the deleveraging efforts related to our strategic asset sales completed in 2023 and 2024.

Speaker Change: From a capital expenditure standpoint in the first quarter, we invested $16 million in our portfolio on a consolidated basis and $14 million on a pro rata basis.

Recently completed and ongoing renovations include the courtyard Ocean side Fort Lauderdale Beach.

Speaker Change: Great time, Springhill suites Dallas downtown.

Speaker Change: Courtyard, Charlotte residence Inn, Atlanta, Midtown and the Hampton Inn and suites Silverthorne.

The company's continued investment in our portfolio resulted in a Revpar index of 114 for the first quarter of 2025, and a Revpar index of 116, when excluding the displacement from renovations.

Trey Conkling: During the first quarter, our portfolio incurred approximately $2 million of revenue displacement related to ongoing renovations. of which 75% was related to the Courtyard Oceanside, Fort Lauderdale Beach. Adjusted for net renovation displacement in the first quarter, same-store REVPAR increased 2.4%. Our continued investment ensures the quality of our portfolio, positions the company to drive profitability in the future.

Speaker Change: During the first quarter, our portfolio incurred approximately $2 million of revenue displacement related to ongoing renovations of which 75% was related to the courtyard Ocean side Fort Lauderdale Beach.

Speaker Change: Adjusted for net renovation displacement in the first quarter same store Revpar increased two 4%.

Speaker Change: Our continued investment ensures the quality of our portfolio positions the company to drive profitability in the future.

Trey Conkling: Turning to the balance sheet, in March we closed on a $275 million delay draw term. The proceeds of which will go to refinance the $287.5 million 1.5% convertible notes maturing in February 2026.

Speaker Change: Turning to the balance sheet in March we closed on a $275 million delayed draw term loan.

Speaker Change: The proceeds of which will go to refinance the $287 $5 million, one 5% convertible notes maturing in February 2026.

Trey Conkling: The delay draw option is open until March 2020. which will allow the company to benefit from the lower coupon convertible notes through the balance of 2025, thus preserving meaningful cash. In addition, the balance sheet continues to be well positioned with total liquidity of over $300 million, an average interest rate of approximately 4.6%. and an average length of maturity of nearly four years when adjusting for the new delay draw terminal. As a result of our interest rate management efforts, our interest rate exposure continues to be effectively managed with a swap portfolio that has an average fixed SOFR rate of approximately 3%, and 71% of our prorouted share of debt is fixed after consideration of interest rates.

Speaker Change: The delayed draw option is open until March 2026, which will allow the company to benefit from the lower coupon convertible notes through the balance of 2025, thus preserving meaningful cash flow.

Speaker Change: In addition, the balance sheet continues to be well positioned with total liquidity of over $300 million.

Speaker Change: The average interest rate of approximately four 6%.

At an average length to maturity of nearly four years when adjusting for the new delayed draw term loan.

Speaker Change: As a result of our interest rate management efforts, our interest rate exposure continues to be effectively managed with a swap portfolio that has an average fixed sofa rate of approximately 3% and 71% of our pro rata share of that is fixed after consideration of interest rate swaps when accounting for the company's series E.

Trey Conkling: When accounting for the company series E, F, and Z preferred equity within our capital structure, we were 77% fixed at quarter end.

Speaker Change: <unk> Z preferred equity within our capital structure, we were 77% fixed at quarter end.

Trey Conkling: With no significant maturities until 2027, a staggered maturity schedule, and a strong liquidity profile, we believe the company is well positioned to navigate any near term volatility in operating fundamentals, as well as to take advantage of potential value creation opportunities.

Speaker Change: With no significant maturities until 2027, our staggered maturity schedule and a strong liquidity profile. We believe the company is well positioned to navigate any near term volatility in operating fundamentals as well as to take advantage of potential value creation opportunities.

Trey Conkling: On April 24, 2025, our Board of Directors declared a quarterly common dividend of eight cents per share. which represents a dividend yield of approximately 8% based on the annualized dividend of $0.32 per share. The current dividend rate continues to represent a modest payout ratio of nearly 35% based on the company's trailing 12-month AFFO.

On April 24, 2025, our board of directors declared a quarterly common dividend of <unk> <unk> per share.

Speaker Change: Which represents a dividend yield of approximately 8% based on the annualized dividend of 32 per share.

Speaker Change: The current dividend rate continues to represent a modest payout ratio of nearly 35% based on the company's trailing 12 month <unk>.

Trey Conkling: In addition, our Board of Directors approves a $50 million share repurchase program. given the recent significant dislocation in the company's share price. We will provide updates on the utilization of that program as part of future quarterly earnings. The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage, and maintaining liquidity for future growth opportunities. As John previously highlighted, while we remain confident in the long-term outlook for both the industry and our portfolio, near-term fundamentals are being negatively impacted by broader macroeconomic uncertainty. Based on first quarter results and our outlook for the second quarter.

Speaker Change: In addition, our board of directors approved a $50 million share repurchase program.

Given the recent significant dislocation in the company share price.

Speaker Change: We will provide updates on the utilization of that program as part of future quarterly earnings.

Speaker Change: The company continues to prioritize striking an appropriate balance between returning capital to shareholders investing in our portfolio, reducing corporate leverage and maintaining liquidity for future growth opportunities.

John Scanner: As John previously highlighted.

John Scanner: While we remain confident in the long term outlook for both the industry and our portfolio.

John Scanner: Near term fundamentals are being negatively impacted by broader macroeconomic uncertainty.

John Scanner: Based on first quarter results and our outlook for the second quarter our.

Trey Conkling: Our full year performance is currently tracking toward the lower end of our guidance ranges provided in February 2025 for adjusted EBITDA, adjusted FFO, and adjusted FFO per share. From a non-operational perspective, we expect pro rata interest expense, excluding the amortization of deferred financing costs, to be $50 to $55 million. Series E and Series F preferred dividends to be approximately $16 million, and Series E preferred distributions to be $2.6 million. From a capital expenditure perspective, we are reducing our full year 2025 spend to $60 million to $70 million on a pro rata basis.

John Scanner: Our full year performance is currently tracking towards the lower end of our guidance ranges provided in February 2025.

John Scanner: For adjusted EBITDA, adjusted <unk>, and adjusted <unk> per share.

John Scanner: From a non operational perspective, we expect pro rata interest expense, excluding the amortization of deferred financing costs to be 50% to $55 million series.

John Scanner: The series E and series F preferred dividends to be approximately $16 million and series D preferred distributions to be $2 6 billion.

John Scanner: Sure.

John Scanner: From a capital expenditure perspective, we are reducing our full year 2025 spin to 60 million to $70 million on a pro rata basis, which represents a $10 million or an approximate 15% reduction at the midpoint.

Trey Conkling: which represents a $10 million or an approximate 15% reduction at the mid This will allow us additional time to gain clarity on trade policy and better understand the potential impact of tariffs on both renovation costs as well as the broader macroeconomic outlook. It is worth noting that over the past three years, we have invested over $250 million in capital expenditures on a consolidated basis, resulting in a portfolio that is generally in excellent physical condition. This capital investment affords us the flexibility to preserve optionality on certain renovations without risking meaningful downward pressure on overall operating results.

John Scanner: This will allow us additional time to gain clarity on trade policy and better understand the potential impact of tariffs on both renovation costs as well as the broader macroeconomic outlook.

John Scanner: It is worth noting that over the past three years, we've invested over $250 million in capital expenditures on a consolidated basis, resulting in a portfolio that is generally in excellent physical condition.

John Scanner: This capital investment affords us the flexibility to preserve optionality uncertain renovations without risking meaningful downward pressure on overall operating results.

Trey Conkling: The previously referenced non-operational estimates do not include any additional acquisition, disposition, or capital markets refinancing activity beyond what we have discussed today. Finally, the increased size of the GIC joint venture results in fee income payable to Summit covering approximately 15% of annual cash corporate G&A. excluding any promote distributions summit they earned during the year.

John Scanner: The previously referenced non operational estimates do not include any additional acquisition disposition or capital markets refinancing activity.

John Scanner: <unk> discussed today.

John Scanner: Finally, the increased size of the GIC joint venture results in fee income payable to summit covering approximately 15%.

John Scanner: Cash corporate G&A expense, excluding any promote distributions southern they earned during the year.

Operator: And with that, we will open the call to your questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment as we take our first question.

John Scanner: And with that we will open the call to your questions.

John Scanner: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one woman as we take our first question.

Austin Wurschmidt: Our first question is going to come from the line of Austin Wurschmidt with KeyBank Capital Markets. Your line is open. Please go ahead. Hey, good morning.

Speaker Change: Our first question is going to come from the line of Austin <unk> with Keybanc capital markets. Your line is open. Please go ahead.

John Stanner: It's Josh Friedlander for Austin. Can you give us a sense of how trends have evolved within government and international since the initial impact earlier this year? And does it appear that these segments have stabilized? Or are you continuing to see pressure in the booking window? Yeah, hey, good morning, Josh. This is John. Look, I think that we've we felt the most acute impact from both segments in the month of March, you know, particularly from a government perspective, I do think that they have stabilized, albeit at lower levels. And I think we have, you know, some optimism that we'll see some recovery.

Speaker Change: Hey, good morning, it's Jefferies one on for Austin.

Speaker Change: Can you give us a sense of how trends have evolved within the government and international since the initial impact earlier this year.

Speaker Change: And does it appear that these segments have stabilized or are you continuing to see pressure in the booking window.

John Scanner: Yeah, Hey, good morning, Josh. This is John look I think that we felt the most acute impact from both segments in the month of March.

John Scanner: Particularly from a government perspective, I do think that they have stabilized, albeit at lower levels and I think we have some optimism that we'll see some recovery as we progress through the year I think the sense that we get is that.

John Stanner: As we progress through the year, I think the sense that we get is that, you know, as part of kind of the government efficiency efforts, there was there were really broad based and deep cuts. We lost, you know, significant portions of that business in certain markets. I think there's some uncertainty of how some level of that travel comes back, but we would expect some of it to come back as we progress through the year. So it certainly hasn't gotten any worse from a government perspective. And again, we think that there's the potential to start to recoup some of those losses as we progress through the year.

John Scanner: As part of kind of the government efficiency efforts. There was there were really broad based and deep cuts.

John Scanner: We lost significant portions of that business in certain markets.

John Scanner: I think theres some uncertainty of how some level of that travel comes back, but we would expect some of it to come back as we progress through the year. So.

John Scanner: Certainly hasn't gotten any worse from a government perspective, and again, we think that there is the potential to start to recoup some of those losses as we progress through the year.

John Stanner: Okay, all right, that's helpful. And as it relates to the BT customer, how have those trends evolved at this point relative to your initial expectations? And where do you see those going in the short term? Yeah, our midweek negotiated business, you know, again, which we use as kind of a proxy, you know, broadly for business transient travel has held up reasonably well. I do think it's obviously one segment that you watch very closely, as it tends to be a more reactionary to weakness in the broader economy. But the trends to date there have have not trended down in a meaningful manner.

John Scanner: Okay, Alright, that's helpful and as it relates to the BT customer.

John Scanner: How have those trends evolved at this point relative to your initial expectations and where do you see those going in the short term.

John Scanner: Yes, our mid week negotiated business.

Again, which we use as kind of a proxy broadly for business transient travel has held up reasonably well I do think it's obviously one segment that.

John Scanner: That you watch very closely as it tends to be.

John Scanner: More reactionary to weakness in the broader economy, but the trends to date, there have not trended down in a meaningful manner. We've been fairly pleased with how resilient that demand segment has in its held in relatively well as we said in the prepared remarks most of the softness in demand. We have seen has been concentrated in.

Austin Wurschmidt: We've been, you know, fairly pleased with how resilient that demand segment has. And it's held in relatively well, as we said, in the prepared remarks, you know, most of the softness and demand we have seen has been concentrated in those two demand segments we referenced. got it. Thank you very, thank you very much. Thanks, guys. Thank you. One moment for our next question.

John Scanner: Two demand segments, we referenced.

Speaker Change: Got it. Thank you Barry Thank you very much thanks.

Josh: Thanks, Josh.

Josh: One moment for our next question.

Chris Woronka: Our next question comes from the line of Chris Woronka with Deutsche Bank. Your line is open. Please go ahead. Hey, good morning, guys. Thanks for all the color so far. So kind of following up on the last question.

Speaker Change: Our next question comes from the line of Chris <unk> with Deutsche Bank. Your line is open. Please go ahead.

Josh: Okay.

Chris <unk>: Good morning, guys and thanks for all the color so far.

Josh: So kind of following up on last question.

John Stanner: Is it fair to say that in addition to maybe government and maybe set aside a little bit of international inbound that you might have, is it fair to say that what's really being hit the most is kind of the shorter booked weekend leisure kind of these, you know, what we like to call extra trips? Is that the bucket that you guys would say has been was kind of impacted the most thus far? Yeah, well, I think definitely secondarily to the other demand segments that we've seen, I would say, you know, broadly, we would expect leisure to be one of the more resilient demand segments.

Josh: Is it fair to say that in addition to maybe government and maybe set aside a little bit of internationally.

You might have is it fair to say that what's what's really being hit the most is kind of a shorter book weekend Weezer kind of these.

Josh: We like to call extra trips is that is that the bucket that you guys would say, it's been kind of impacted the most thus far.

Josh: Well I think it's definitely secondarily to the other demand segments that we've seen I would say broadly we would expect leisure to be one of the more resilient demand segments.

John Stanner: You know, our first quarter trends, which again, you know, 60 of the days were under much more normal operating conditions, you know, we continue to see growth driven midweek. And that's, you know, the group that we have in the recovery of BT, there's, there was a shift in that beginning in the first part of March that largely carried through to April. You know, our expectation is there's, you know, potentially a little softness on the leisure side. But I do think historically, that's been a demand segment that's been more resilient in periods of economic uncertainty. And we would expect that to happen.

Josh: Our first quarter trends, which again.

Josh: 60 of the days were under much more normal operating conditions.

Josh: Continue to see growth driven midweek.

Josh: The group that we have in the recovery of BT.

Josh: There was a shift in that beginning in the first part of March that largely carried through to April.

Josh: Our expectation is there is potentially a little softness on the leisure side, but I do think historically thats been a demand segment that has been more resilient in periods of economic uncertainty, we would expect that to happen again, we don't think that there is going to be large scale canceling of summer vacations.

John Stanner: Again, we don't think that there's going to be, you know, large scale canceling of summer vacations. You know, that feels, you know, almost like non discretionary spend for for the majority of household budgets. It may mean a little bit more domestic travel this year, it may mean a little bit more drive to travel than we've seen in the past, which potentially creates a little bit of a benefit for us. But we do expect that demand segment to hold up reasonably well this year.

Josh: That feels.

Josh: Almost like non discretionary spend for the majority of household budgets. It may mean, a little bit more domestic travel. This year. It may mean, a little bit more drive to travel than we've seen in the past, which potentially creates a little bit of a benefit for us, but we do expect that demand segment to hold up reasonably well this year.

Chris Woronka: Great. Thanks, John. And then, yeah, obviously Q2 is, you know, you're kind of guiding to negative rent of power. I think, you know, a lot of your peers may get there as well. And maybe things will turn around and turn positive again with Q3, but at what point kind of on the, when you think about working with the brands on, you know, is it too early to kind of break the glass or on, you know, maybe an opportunity to go back to the brands on some of the, you know, I don't want to say COVID things, but, but COVID things that, that you, you, you did in kind of an effort, because you guys have obviously had a lot of, a lot of pressure coming out of COVID.

Josh: Great. Thanks, Sean and then yes.

Josh: Yes.

Speaker Change: Obviously Q2 is you're kind of guiding to negative Revpar I think.

Josh: Yeah, a lot of your peers, maybe get there as well.

Josh: And then maybe things will turn positive again for Q3.

Josh: What point kind of on that when you think about working with the brands.

Josh: Is it too early to kind of break the glass or.

Josh: Maybe an opportunity to go back to the brands.

Josh: Yes, I don't want to say COVID-19 things, but COVID-19 things that debt.

Josh: Data and kind of an effort because you guys have obviously you have a lot of a.

Josh: A lot of pressure coming out of Covid, you've recovered pretty well from that now but at what point do you do you think you can go back to the brands.

John Stanner: You've recovered pretty well from that now. But at what point do you, you know, do you think to go back to the brands and kind of, you know, ask for some relief on, on expenses that might be, you know, somewhat discretionary? Yeah, well, I mean, look, I think, you know, I point out a couple things. I've described, you know, what we've seen from a demand perspective is a modest pullback in demand. And I think, you know, you know, obviously, we kind of pointed to RevPAR for the second quarter being down between two and 4%. A lot of that is exacerbated by the special events comparisons we referenced in the prepared remarks.

Josh: Ask for some relief on.

Josh: On expenses that might be.

Josh: Somewhat discretionary.

Josh: Yes, well I mean look I think I pointed out a couple of things I've described what we've seen from a demand perspective as a modest pullback in demand and I think.

Josh: Obviously, we kind of pointed to revpar for the second quarter being down between 2% and 4%.

Josh: A lot of that is exacerbated by the special events comparisons we referenced.

John Stanner: And so, you know, this obviously is a very, very different set of dynamics than we had during the pandemic. It really feels nothing like the great financial crisis either, you know, demand, while we wish it was better, is far more stable than in either of those circumstances. I will say this, we are being proactive in terms of how we manage expenses and how we think about managing our capital needs. So we've, you saw that in our first quarter numbers, where, you know, we've, margins have contracted less than 50 basis points on one and a half percent RevPAR growth.

Josh: In the prepared remarks and so.

Josh: This obviously is a very very different set of dynamics that we had during the pandemic. It really feels nothing like the great financial crisis, either demand, while we wish it was better is far more stable than in either of those circumstances.

Josh: I'll say this we are being proactive in terms of how we manage expenses and how we think about managing our capital needs. So you saw that in our first quarter numbers, where we've margins have contracted less than 50 basis points on one 5% revpar growth.

Josh: Even we even saw it last year. If you go back to the beginning of last year over the last five quarters, essentially one 5% revpar growth and we're pretty close to breaking even from a margin perspective. So I do think without going back to the brands and trying to put a kind of Covid era.

Josh: Controls in place like we've done a really good job managing expenses and then the other thing is look we've we pulled out $10 million in Capex spend from our initial guide as our expectation. It's about a 50, 15% reduction at the midpoint of that range to the extent that we see demand deteriorate further.

Josh: There's probably incremental room for us to pull that lever I would say those are the starting points for us and.

Josh: And again unless things get significantly worse, I think we'll be able to kind of manage through given the strength of the balance sheet and our ability to pull those levers.

John Stanner: Okay, fair enough. Thanks, Sean.

Speaker Change: Okay fair enough. Thanks, sorry, if I could just sneak a clarification question.

John Stanner: If I can just sneak a clarification question in, talking about the mix shift, is that more about kind of going to a little bit more, you know, OTA, opaque, or is that more about contract stuff with with crews and the like? Yeah, it's a little bit more reliance on discount channels. And that could be, you know, advanced purchase or any type of discount, it could be reliance on the OTAs, you know, which is offsetting kind of declines in the qualified segment, which is government driven in some declines in retail. Again, I'll point out, and we'll continue to emphasize this, part of what we're seeing in the retail segment is driven by calendar shifts.

Speaker Change: Talking about the mix shift.

Speaker Change: Is that more about kind of go into a little bit more opaque or is that more about contract.

Speaker Change: Stuff with crews and alike.

Yes, it's a little bit more reliance on discount channels.

Speaker Change: And that can be advanced purchase or any type of discount it could be reliance on the otas.

Speaker Change: Which is offsetting kind of declines in the qualified segment, which is government driven and some declines in retail.

Speaker Change: Again, I'll point out and we will continue to emphasize this part of what we're seeing in the retail segments driven by calendar shifts.

John Stanner: And whether that's the Easter shift, or in April, in particular, where we had, you know, this really significant demand from the solar eclipse last year, which, which helped a significant portion of our portfolio. And so, April became a very difficult month for us to discern what kind of underlying trends are because of those calendar shifts. And so when we look at the first couple of weeks prior to the Easter holiday, you know, we're up a couple percent, excluding, excluding the markets that were affected by the solar eclipse. That's even with knowing we were going to have to shift segments, when I look at the rates, the absolute rates by segment, the majority of our segments are still seeing rate increases, it's this shifting of mix, given some of it, again, is driven by calendar comparisons, which is putting the downward pressure on rates, you know, we're going to finish the month of April running, you know, high 70% occupancies, close to 80% occupancies, I expect it to be close to in line with where we finished last year, the increment of pressure has been on rate.

Speaker Change: And whether that's the Easter shift or in April in particular, where we had this really significant demand from the solar eclipse last year, which.

Speaker Change: Helps a significant portion of our portfolio and so.

Speaker Change: April became a very difficult month for us to discern what kind of underlying trends are because of those calendar shifts and so when we look at the first couple of weeks prior to the Easter holiday were up a couple percent excluding.

Speaker Change: Excluding the markets that were affected by the solar eclipse, that's even with knowing we were going to have to shift segments. When I look at the rate the absolute rates by segment. The majority of our segments are still seeing rate increases. It's this shifting of mix given some of it again is driven by calendar comparisons which is putting the downward pressure.

Speaker Change: On rate, we're going to finish the month of April running high 70% occupancy is close to 80% Occupancies I expect it to be close to in line with where we finished last year on the incremental pressure has been on rate and again as you alluded to it's really driven by the shifting and mix.

John Stanner: And again, as you alluded to, it's really driven by the shift.

Operator: Okay, very good. Thanks for all the details, John. Yep. Thanks, Chris. Thank you. And again, if you would like to ask a question, please press star 11 on your telephone.

Speaker Change: Okay very good thanks for all the details Sean yes, thanks, Chris.

Speaker Change: Thank you and again, if you would like to ask a question. Please press star one on your telephone.

Michael Bellisario: And our next question comes from the line of Michael Bellisario with Baird. Your line is open. Please go ahead. Thanks, good morning guys. Good morning Mike. John, I just want to go back to margins.

Michael Bellisario: And our next question comes from the line of Michael Bellisario with Baird. Your line is open. Please go ahead.

Speaker Change: Okay.

Michael Bellisario: Thanks, Good morning, guys.

Speaker Change: Good morning, Mike.

Speaker Change: And can you just want to go back to margins I know, you mentioned sort of contract labor and lower turnover, but anything else sort of more proactive that youre doing in terms of maybe.

John Stanner: I know you mentioned sort of contract labor and lower turnover, but anything else sort of more proactive that you're doing in terms of maybe headcount reductions, reduced hours, changing F&B menus, pricing, things like that, or is it more sort of more of the same just sort of on the the contract labor and turnover side of things? Look, I think that's been the major driver of what's held margins in check. You know, we're still running, you know, really high occupancies and so, you know, we haven't gone to, as we kind of alluded to in the last question, we haven't gone to, you know, COVID era levels of cutting expenses, whether that's related to cleaning rooms or how we're managing shifts.

Speaker Change: Headcount reductions reduced hours.

Speaker Change: Changing F&B menus pricing things like that.

Speaker Change: Or is it more sort of more of the same just sort of on the contract labor and turnover side of things.

Speaker Change: I think thats been the major driver of what's held margins in check.

Speaker Change: Still running really high Occupancies and so we haven't gone too as we kind of alluded to in the last question, we Havent gone to.

Speaker Change: Covid era levels of cutting expenses, whether thats related to cleaning rooms are how are managing shifts. We're just not there yet the demand is still there.

John Stanner: We're just not there yet. The demand is still there. As Trey kind of alluded to, there's still some room for us to go, particularly on the contract labor side, and as we've seen some softening broadly in the labor markets, that's really helped us to keep margins in check. So there haven't been kind of these deeper cuts that we've had to utilize in prior downturns that were more severe from a demand perspective, because again, our occupancies are still high and the demand is still there.

Speaker Change: As Trey alluded to Theres still some room for us to go, particularly on the contract labor side and as we've seen some softening broadly in the labor markets. That's really helped us to keep margins in check so.

Speaker Change: There haven't been kind of these deeper cuts that we've had to utilize in prior downturns that were more severe from a demand perspective, because again, our occupancies are still high and the demand is still there.

John Stanner: Those levers are there and available to pull to the extent that we need to if we see a more significant downturn. Understood.

Speaker Change: Levers are there and available to pull to the extent that we need to if we see a more significant downturn in demand.

John Stanner: And then second question just sort of on the buyback announcement and then capital allocation more broadly. Maybe if this is the first time as a public company you guys have had an authorization in place. Maybe how do you fund it? How do you balance leverage? I mean, do you accelerate asset sales from here? Just maybe some more thoughts on sort of triangulating everything and the thought process behind when and how you use that buyback. Thanks. Yeah. No, you're correct. I mean, this is the first time we've done it. And we've actually talked about this in the past on these calls about this hasn't been necessarily historically the preferred way to allocate capital.

Speaker Change: Okay understood and then second question just sort of on the.

Speaker Change: The buyback announcement, and then capital allocation more broadly maybe if this is the first time as a public company you guys have had an authorization in place.

Speaker Change: Maybe how do you fund it how do you balance leverage I mean, do you accelerate asset sales from here just maybe some more thoughts on sort of triangulating everything in that thought process behind why.

Speaker Change: And how you use that buyback thanks, yes.

Speaker Change: No.

Speaker Change: You are correct I mean this is the first time we've done it.

Speaker Change: We've actually talked about this in the past on these calls about this hasnt been necessarily historically the preferred way to allocate capital our belief today is that the dislocation in the equity prices, particularly our stock price has gotten so extreme.

John Stanner: Our belief today is that the dislocation in the equity prices, particularly our stock price, has gotten so extreme that this really kind of skews the risk reward of this investment asymmetrically to the positive. We recognize that there's always some risk to the operating outlook. But we think what's being priced into the stocks today infers something that's really dramatic to the downside. Our balance sheet is in good shape. As we said, we've taken care of all of our maturities through the end of next year. We have a lot of how we think about funding it. It's going to be a combination of a couple things.

Speaker Change: This really kind of skews the risk reward of this investment asymmetrically to the positive will would recognize that there's always some risk to the operating outlook.

Speaker Change: But we think what's being priced into the stock today.

Speaker Change: For something Thats really dramatic to the downside.

Speaker Change: Our balance sheet is in good shape as we said we've taken care of all of our maturities through the end of next year, we have a lot of liquidity.

Speaker Change: Have the ability to do this in terms of how we think about funding it.

Speaker Change: Going to be a combination of a couple of things one we've scaled back on our capex expectations for the year, we probably will continue to look to opportunistically sell assets to fund a portion of this and while we don't really want to lever the balance sheet up in any meaningful way, even if we cut nothing else out.

John Stanner: One, we've scaled back on our CapEx expectations for the year. We probably will continue to look to opportunistically sell assets to fund a portion of this. And while we don't really want to lever the balance sheet up in any meaningful way, even if we cut nothing else out from a CapEx perspective or a sale of a business up about a quarter of a return or less than 5 percent. And again, given the health of the balance sheet, we feel like we have the ability to do that in the short term. So again, we think this is a really compelling and timely opportunity to buy some stock back at what we believe is a really attractive price.

Speaker Change: From a from a capex perspective, or a sale perspective utilizing the full program takes the leverage profile of the business up about a quarter of return or less than 5% and again given the health of the balance sheet. We feel like we have the ability to do that in the short term.

Speaker Change: Again, we think this is.

Really compelling and timely opportunity to buy some stock back at what we believe is a really attractive basis.

John Stanner: Got it. That's very helpful.

Michael Bellisario: And then just one more follow-up. Maybe can you give us the the latest thoughts and conversations with your joint venture partner and sort of how they are thinking about the world and how their capital deployment Deployment view may or may not have changed recently and that's all for me. Thanks Yeah, thanks Mike. Well, I'd say that look we do stay in very regular contact with them I think you know like everybody else They're this is an uncertain environment And so the first thing I would say is there's we expect transaction activity to slow off of what has already been fairly low Levels, you know I don't think we're at a period where you're going to see at least in the near term a lot of distressed selling And underwriting in this environment is difficult That being said, you know as we always reiterate they are very well capitalized and in many ways they're built to take advantage of Environments where you see dislocation and values we haven't seen that yet It's certainly possible that we will see it and look we're very fortunate to have them as a partner because it allows us To participate in those opportunities to a greater extent.

Speaker Change: Got it Thats very helpful. And then just one more follow up maybe can you give us the latest thoughts and conversations.

Speaker Change: With your joint venture partner and sort of how they are thinking about the world and other capital deployment deployment view may or may not have changed recently and Thats all for me. Thanks, Yes.

Michael Bellisario: Yes, Thanks, Mike.

Michael Bellisario: I'd say that look we do stay in very regular contact with them I think like everybody else.

Michael Bellisario: This is an uncertain environment and so the first thing I would say is that we expect transaction activity to slow off of what has already been fairly low levels.

Michael Bellisario: I don't think we're at a period, where youre going to see at least in the near term a lot of distress selling.

Michael Bellisario: And underwriting in this environment is difficult.

Speaker Change: <unk> said.

Speaker Change: As we always reiterate they are very well capitalized and in many ways. They are built to take advantage of environments, where you see dislocation and values, we haven't seen that yet.

Speaker Change: Certainly possible that we will see it and look we're very fortunate to have them as a partner because it allows us.

Speaker Change: To participate in those opportunities to a greater extent so.

John Stanner: So again, I think that they are Very much kind of watching the markets evolve But certainly will be you know willing and able to participate to the extent there's meaningful valuation Understood. Thank you.

Speaker Change: Again, I think that they are very much kind of watching the markets evolve, but certainly we'll be willing and able to participate to the extent there is meaningful valuation dislocations.

Speaker Change: Understood. Thank you.

John Stanner: Thank you and I'm showing no further questions at this time and I would like to turn the conference back over to John Stanner for closing remarks. Well, thank you all for joining us today. We look forward to seeing many of you over the next couple of months at the various conference. Hope you all have a nice day. Thank you.

Speaker Change: Thanks, Mike Thank you and I'm showing no further questions at this time I would like to turn the conference back over to John <unk> for closing remarks.

John Scanner: Well. Thank you all for joining US today, we look forward to seeing many of you over the next couple of months at the various conference Hope you all have a nice day. Thank you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.

John Scanner: Okay.

John Scanner: Okay.

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John Scanner: Okay.

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John Scanner: Yes.

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John Scanner: Okay.