Xenia Hotels & Resorts, Inc. — Q3 2023 Form 10-Q
Business and reporting period. Xenia is a U.S. hotel REIT focused on luxury and upper-upscale properties. At September 30, 2023, it owned 32 hotels with 9,511 rooms across 14 states. This filing covers the quarter and nine months ended September 30, 2023; financial amounts below are in millions unless noted.
Key financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $232.0 | $240.7 | $772.1 | $734.5 |
| Operating income | $8.0 | $16.1 | $76.7 | $84.5 |
| Net income (loss) | $(8.9) | $(1.7) | $12.1 | $21.3 |
| Net income (loss) attributable to common stockholders | $(8.5) | $(1.7) | $11.5 | $20.7 |
| Basic and diluted EPS | $(0.08) | $(0.01) | $0.10 | $0.18 |
| Adjusted EBITDAre attributable to common stock and unit holders | $46.3 | $53.8 | $192.3 | $192.4 |
| Adjusted FFO attributable to common stock and unit holders | $28.7 | $35.6 | $126.2 | $130.7 |
Operating margin was approximately 3.4% in Q3 2023 versus 6.7% a year earlier, and 9.9% for the nine-month period versus 11.5%. These are calculated as operating income divided by revenue.
- Hotel performance: Total-portfolio RevPAR increased 0.4% to $158.48 in Q3 and 6.6% to $173.43 for nine months. Q3 occupancy was 63.8% and ADR was $248.58; nine-month occupancy was 66.1% and ADR was $262.24.
- Cash flow: Nine-month operating cash flow was $137.9, down from $157.9. Investing used $67.6, including $69.5 of capital expenditures; financing used $160.2. Cash and restricted cash declined $89.8 to $276.1, including $219.2 of unrestricted cash.
- Debt and liquidity: Total debt outstanding was $1,408.2 (balance-sheet debt, net of financing items, was $1,394.7), with a 5.46% weighted-average rate. The company had no revolver borrowings and $450 of availability under its revolving line; the new credit facility also includes $225 of term loans. Debt maturities are concentrated in 2025, when $469.2 is scheduled.
- Other balance-sheet and capital items: Total assets were $2,962.7 and total equity $1,370.9. Xenia repurchased 6.52 million shares for $83.7 during the nine months and declared dividends of $0.10 per share/unit each quarter. Approximately $82.7 remained under the repurchase authorization at quarter-end.
Changes and management commentary
- Q3 revenue declined 3.6% year over year, while nine-month revenue rose 5.1%. Management attributed Q3 weakness mainly to normalizing leisure demand and renovation disruption, partly offset by stronger group demand. Nine-month growth reflected business-transient and group demand, leisure strength early in the year, and easier comparisons with Omicron-affected early 2022.
- Q3 net loss widened, and nine-month net income fell 43.3%. Management cited lower hotel operating income, reduced business-interruption proceeds, higher general and administrative costs, increased interest expense and property taxes/insurance. Higher interest income and W Nashville’s contribution partly offset these items.
- Adjusted EBITDAre was down 13.9% for Q3 and essentially flat for nine months; Adjusted FFO declined 19.3% and 3.5%, respectively. These are non-GAAP measures and should be considered alongside GAAP results and cash flows.
- In January 2023, Xenia refinanced its corporate credit facilities with a $675 senior unsecured facility, repaid a $99.5 mortgage loan, and amended the Andaz Napa loan. It repurchased and retired $35.3 principal of 2025 senior notes during the first nine months.
Outlook, risks, and contingencies
- The filing provides no quantified earnings or operating guidance. Management said it continues to monitor inflation, rising interest rates, possible recession, global conflicts, staffing and wage pressures, and supply-chain constraints; these may weigh on demand, costs, financing and transactions.
- One mortgage covenant was not met because of disruption from a significant renovation. The company reported no event of default, and the lender waived the covenant through March 31, 2024; absent continued compliance or waiver, the loan terms permit a cash sweep.
- Six interest-rate swaps with $280 of aggregate notional value hedge variable-rate debt. The company stated all variable-rate debt was fixed by swaps at quarter-end. It expects approximately $4.4 of accumulated swap gains to reduce interest expense over the next 12 months.
- Hotel renovation contract commitments totaled $37.7 at quarter-end. Legal proceedings arise in the ordinary course; management does not expect their outcome to materially affect financial condition, results or liquidity. No new risk factors were reported.
- In October, Xenia repurchased an additional 849,762 shares for approximately $10.0. The filing notes that future dividends remain subject to board discretion, financial condition, contractual limits and other factors.
Important facts for investors to verify
- Whether RevPAR and demand trends improve as leisure demand normalizes and renovation disruption recedes, and whether rising operating costs continue to pressure margins.
- The status of the mortgage covenant after the March 31, 2024 waiver expiration, and the company’s capacity to address the substantial 2025 debt maturities.
- Expected renovation spending against the $37.7 of remaining commitments, and the impact on operating cash flow and available liquidity.
- The pace and funding of share repurchases and dividends relative to cash generation, debt obligations and capital needs.
- How non-GAAP Adjusted EBITDAre and Adjusted FFO reconcile to GAAP earnings and actual cash available after capital expenditures and debt service.