Xenia Hotels & Resorts, Inc. — Q1 2023 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2023, compared with Q1 2022. Xenia is a U.S. hotel REIT focused on luxury and upper-upscale properties. At quarter-end it owned 32 hotels with 9,508 rooms across 14 states, versus 34 hotels and 9,814 rooms a year earlier.
Financial and operating performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Total revenue | $269.0 million | $210.3 million |
| Operating income | $33.8 million | $17.7 million |
| Net income (loss) | $6.6 million | $(5.5) million |
| Net income (loss) attributable to common stockholders | $6.3 million; $0.06 per diluted share | $(5.3) million; $(0.05) per diluted share |
| Operating cash flow | $30.3 million | $32.6 million |
| Capital expenditures | $11.6 million | $7.5 million |
| Adjusted EBITDAre attributable to common stock and unit holders | $71.3 million | $49.9 million |
| Adjusted FFO attributable to common stock and unit holders | $45.2 million | $29.1 million |
Revenue rose 27.9%; operating income improved as hotel demand and revenue growth outpaced expense growth. Approximate operating margin increased to 12.6% from 8.4%; net margin was 2.4%, compared with a net loss margin of 2.6% in Q1 2022. These margins are calculated from reported GAAP figures.
Total-portfolio RevPAR increased 24.7% to $179.55, with occupancy up to 66.1% from 56.6% and ADR up 6.8% to $271.79. Rooms revenue rose 24.7% and food-and-beverage revenue rose 41.9%; other revenue declined 1.1%. Management cited stronger business-transient and corporate-group demand, robust leisure demand, and easier comparisons with early 2022, when Omicron affected travel.
Balance sheet, debt, and liquidity
- March 31 cash and cash equivalents were $283.2 million; restricted cash and escrows were $58.2 million. Cash, cash equivalents, and restricted cash totaled $341.4 million.
- Total debt principal was $1.445 billion, at a weighted-average rate of 5.72%. The balance-sheet carrying value, net of financing items, was $1.430 billion. Debt fair value was estimated at $1.364 billion.
- The January 2023 unsecured credit facility provides $450 million of revolving capacity, plus $125 million initial and $100 million delayed-draw term loans. No revolver balance was outstanding; the full $450 million was available at quarter-end. Term loans mature in 2026; the revolver matures in 2027, with extension options.
- Management reported compliance with all debt covenants and no defaults. The senior notes became unsecured in January 2023 after collateral was released in connection with refinancing.
- Scheduled principal maturities include $504.3 million in 2025, primarily the $500 million senior notes due that year, and $280.1 million in 2026. Management estimates a 1% sustained rate change on quarter-end variable-rate debt would change annual earnings and cash flows by approximately $2.8 million.
Material changes, outlook, and risks
- Q1 2023 revenue and profitability improved materially year over year. Adjusted EBITDAre rose 42.8% and Adjusted FFO rose 55.5%. Q1 2022 included $1.3 million of Hurricane Ida repair costs and a $1.0 million insurance recovery; those items did not recur in Q1 2023.
- January refinancing replaced prior corporate facilities, raised $225 million in term loans, repaid the $125 million prior term loan and a $99.5 million property mortgage, and amended the Andaz Napa loan. Interest expense increased 7.8%, partly due to higher rates on variable-rate debt. The quarter included a $1.1 million debt-extinguishment loss.
- Operating cash flow declined to $30.3 million, primarily reflecting working-capital movements, including higher receivables and other assets and lower accounts payable. Financing cash outflows included $26.7 million of share repurchases and $11.5 million of dividends.
- The company repurchased 1.91 million shares during the quarter for $26.7 million at a weighted-average $14.03 per share; approximately $139.7 million remained under the authorization. A $0.10-per-share/unit dividend was declared. In April and May, it repurchased a further 1.18 million shares for approximately $15.0 million.
- No quantified full-year financial guidance is provided in the supplied filing text. Management said it was monitoring inflation, higher interest rates, recession concerns, labor and supply-chain issues, and the uneven recovery in travel. These factors, along with demand shifts, natural disasters, insurance costs, and reliance on third-party hotel managers, could affect results and liquidity.
- Renovation contract commitments were $11.0 million at quarter-end. Management said ordinary-course legal matters were not expected to have a material adverse effect; the filing reports no new risk factors for this quarter.
Important facts for investors to verify
- Whether RevPAR growth and the shift in demand toward business-transient and group travel continue, and how hotel expenses and margins respond.
- Debt refinancing and upcoming maturities, particularly the $500 million notes due in 2025; variable-rate exposure and available revolver capacity.
- Cash conversion, required hotel capital spending, restricted FF&E reserves, and the $11.0 million renovation commitments.
- Share repurchases and dividends relative to operating cash generation, liquidity needs, and contractual restrictions.
- How inflation, interest rates, recession risk, insurance costs, staffing, and geographic concentration affect hotel performance. Adjusted EBITDAre and Adjusted FFO are non-GAAP measures and are not substitutes for GAAP earnings or operating cash flow.