Ryman Hospitality Properties, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022; filed August 2, 2022. Ryman is a REIT focused on group-oriented destination hotels and entertainment assets. Its principal segments are Hospitality, Entertainment, and Corporate and Other. The financial statements are unaudited.
Financial performance and key metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $470.2 million | $170.9 million | $769.3 million | $255.0 million |
| Operating income (loss) | $106.0 million | $(30.9) million | $113.8 million | $(110.5) million |
| Net income (loss) | $50.9 million | $(63.0) million | $26.1 million | $(180.2) million |
| Net income (loss) available to common stockholders | $50.3 million | $(57.9) million | $25.7 million | $(162.4) million |
| Diluted EPS | $0.91 | $(1.05) | $0.46 | $(2.95) |
| Operating margin | 22.5% | (18.1)% | 14.8% | (43.3)% |
| Adjusted EBITDAre, excluding consolidated JV noncontrolling interest | $166.5 million | $28.4 million | $235.5 million | $6.7 million |
Hospitality: Revenue was $401.8 million in Q2 and $662.9 million for the six-month period, increases of 196.1% and 222.6%, respectively. Six-month occupancy improved to 60.1% from 24.7%, ADR increased 17.4% to $232.41, RevPAR increased 185.0% to $139.61, and Total RevPAR increased 215.3% to $351.76. Hospitality operating income was $100.6 million in Q2 and $116.2 million year to date, compared with losses in the prior-year periods.
Entertainment: Revenue increased 94.5% to $68.4 million in Q2 and 114.8% to $106.4 million year to date. Segment operating income was $18.2 million in Q2 and $21.0 million for the six months, compared with $5.9 million and a $2.0 million loss, respectively, in 2021.
Cash flow and capital spending: Operating cash flow was $127.6 million for the six months, compared with $(27.9) million in 2021. Investing cash flow was $(121.6) million, including $94.0 million for Block 21 and $24.7 million of property and equipment purchases. Financing cash flow was $62.8 million. Cash, cash equivalents, and restricted cash ended at $231.8 million, including $179.2 million of unrestricted cash.
Balance sheet, debt, and liquidity
- Total assets were $3.86 billion at June 30, 2022, compared with $3.58 billion at December 31, 2021.
- Total debt and finance lease obligations were $2.86 billion, compared with $2.94 billion at year-end 2021. Principal debt included $800 million of Gaylord Rockies debt, $700 million of senior notes due 2027, $600 million of senior notes due 2029, $373.8 million of Term Loan B, $300 million of OEG Term Loan debt, and $136.0 million of Block 21 mortgage debt, before unamortized financing costs and discounts.
- No amounts were outstanding under the $700 million corporate revolving facility; $689.6 million was available after letters of credit. The OEG revolving facility provided an additional $65.0 million of capacity, with no advances at closing. Total reported revolver availability was $754.6 million.
- Management stated that no debt covenant defaults existed at June 30, 2022 and that liquidity was adequate for expected short-term commitments and planned capital expenditures.
- The regular quarterly dividend remains suspended. Any future dividend is subject to credit agreement restrictions and board approval.
- Estimated capital expenditures for the remainder of 2022 were approximately $60 million to $90 million, plus a potential additional $6 million contribution to the Circle joint venture.
Material changes and unusual items
- On June 16, 2022, Atairos acquired 30% of OEG for approximately $296 million. Ryman retained a controlling 70% interest and continues to consolidate OEG. The consideration may increase by up to $30 million if specified 2023 or 2024 financial objectives are achieved.
- OEG issued $300 million of term debt, maturing in 2029, and obtained a $65 million revolving facility. Proceeds from the transaction and OEG debt were used primarily to repay the $300 million Term Loan A and reduce corporate revolver borrowings.
- On May 31, 2022, Ryman acquired Block 21 in Austin for an adjusted purchase price of $255 million, including assumed mortgage debt of approximately $136 million. The preliminary purchase price allocation recognized $114.9 million of net assets acquired and no goodwill; valuation remains subject to the measurement period.
- Q2 2022 included a $1.5 million loss on extinguishment of debt and $1.2 million of Block 21 acquisition-related expenses. Six-month results included $1.3 million of acquisition expenses, a $0.5 million loss on sale of assets, and a $0.9 million pension settlement charge.
- Gaylord National was closed during the first half of 2021 and reopened July 1, 2021, making certain year-over-year comparisons unusually favorable. Management also noted that 2021 operating levels were materially affected by COVID-19 restrictions.
Outlook, management commentary, and risks
Management reported that all assets were open and operating without capacity restrictions during 2022 and that group demand continued to recover. Group room nights on the books at June 30, 2022 for the subsequent five years were approximately 98% of the comparable 2019 level, while associated group ADR was nearly 8% higher. Cancelled room nights decreased 49% year over year, and outside-the-room spending increased 246.8%.
Key risks include renewed or prolonged COVID-19 effects, economic weakness, inflation and labor or supply cost increases, interest-rate increases, refinancing requirements, REIT qualification, geographic concentration, reliance on Marriott to manage the hotels, and restrictions under financing agreements. The Gaylord Rockies loan matures in July 2023, subject to extension options, and management stated that it expects to refinance debt before maturity.
Atairos holds consent rights over certain major OEG decisions and may have put rights beginning in 2026 or 2029 if specified IPO, sale, or spinoff events do not occur. Block 21 was in a loan “Trigger Period” at acquisition, restricting excess cash distributions from the property, although the filing states that this condition was not a default.
A 100-basis-point increase in SOFR would increase annual interest expense on the $300 million OEG Term Loan by approximately $3.0 million. The filing text does not provide company-issued full-year revenue, earnings, or EBITDA guidance.
Investor verification checklist
- Verify the sustainability of the sharp recovery in occupancy, group demand, ADR, and outside-the-room spending after unusually weak 2021 comparisons.
- Review the July 2023 Gaylord Rockies maturity, cash-sweep restrictions, extension conditions, and refinancing plan.
- Assess OEG’s high-cost variable-rate debt, Atairos consent and put rights, and the potential additional $30 million purchase consideration.
- Monitor Block 21 operating performance, completion of the preliminary purchase price allocation, and the conditions for exiting its Trigger Period.
- Reconcile reported liquidity with borrowing-base, covenant, letter-of-credit, and restricted-cash limitations.
- Track the timing and amount of any reinstated dividend, which remained suspended at the filing date.
- Evaluate exposure to COVID-19 resurgence, inflation, labor availability, interest-rate changes, and the ability to maintain REIT status.