Ryman Hospitality Properties, Inc. — Q3 2021 Form 10-Q Summary
Business context and reporting period
Quarterly report for the three and nine months ended September 30, 2021, filed November 2, 2021. Ryman operates as a REIT focused on group-oriented destination hotels and entertainment assets. Its principal segments are Hospitality, Entertainment, and Corporate and Other. The portfolio includes five Gaylord Hotels properties, other Marriott-managed hotels, and Nashville-based entertainment assets.
Results remained materially affected by the COVID-19 pandemic, although all assets had reopened by September 30, 2021. Gaylord National reopened July 1, 2021, and the Wildhorse Saloon reopened in April 2021. The company purchased the remaining 35% of the Gaylord Rockies joint venture and adjacent land in May 2021.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Change | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|---|
| Total revenue | $306.9 million | $70.2 million | 336.9% | $561.9 million | $398.0 million |
| Operating income (loss) | $25.7 million | $(103.2) million | Improved | $(84.8) million | $(239.2) million |
| Net loss | $(8.6) million | $(129.9) million | Improved | $(188.8) million | $(368.3) million |
| Net loss available to common stockholders | $(8.5) million | $(117.7) million | Improved | $(171.0) million | $(337.7) million |
| Diluted loss per share | $(0.16) | $(2.14) | Improved | $(3.11) | $(6.14) |
| Net cash from operating activities | Not separately presented | Not separately presented | $22.7 million | $(112.3) million |
Q3 operating margin was approximately 8.4%, compared with negative 146.9% in Q3 2020. The nine-month operating margin was approximately negative 15.1%, compared with negative 60.1% in the prior-year period. Q3 net margin was approximately negative 2.8%; the nine-month net margin was approximately negative 33.6%.
- Hospitality revenue was $257.9 million in Q3 and $463.3 million for the nine months, up 344.7% and 30.9%, respectively. Hospitality operating income was $24.7 million in Q3 versus a $78.3 million loss in the prior-year quarter; the nine-month operating loss improved to $65.8 million from $154.6 million.
- Entertainment revenue was $49.1 million in Q3 and $98.6 million for the nine months, up 299.7% and 124.1%, respectively. Entertainment operating income was $12.1 million in Q3 and $10.1 million for the nine months, compared with losses in both 2020 periods.
- Hospitality occupancy increased to 54.5% in Q3 from 14.6% in Q3 2020 and 34.9% for the nine months from 24.4%. Q3 ADR was $216.79, up 19.8% year over year; Q3 RevPAR was $118.17.
- Adjusted EBITDAre, excluding noncontrolling interest in the consolidated joint venture, was $86.0 million in Q3 and $92.7 million for the nine months, compared with $(34.8) million and $(38.7) million, respectively. These are non-GAAP measures and should be considered alongside GAAP results.
- At September 30, total debt and finance lease obligations were $2.926 billion, compared with $2.658 billion at December 31, 2020. Debt included $180.0 million drawn on the revolver, $300.0 million Term Loan A, $377.5 million Term Loan B, $800.0 million Gaylord Rockies term debt, and $1.3 billion of senior notes.
- Liquidity included $53.2 million of unrestricted cash, $25.3 million of restricted cash, and $519.7 million of remaining revolver availability. No debt covenant defaults were reported under the amended terms.
- Cash flow from investing activities was $(277.0) million, including $188.0 million for the remaining Gaylord Rockies interest, $22.0 million for adjacent land, and $66.2 million of capital expenditures. Financing activities provided $253.1 million, including $600.0 million of new senior notes and $74.0 million of revolver borrowings.
Material changes versus the prior comparable periods
- Operating performance improved substantially as hotels and entertainment venues reopened and demand recovered from pandemic-related closures. However, results remained below normal pre-pandemic operating levels, particularly in the nine-month period.
- The company refinanced its $400.0 million 5% senior notes due 2023 with $600.0 million of 4.50% senior notes due 2029. The redemption generated a $2.9 million loss on extinguishment of debt.
- Ryman acquired the remaining 35% of Gaylord Rockies for $188.0 million and approximately 130 acres of adjacent undeveloped land for $22.0 million, making Gaylord Rockies wholly owned.
- The Gaylord Palms expansion, including 302 rooms and additional meeting space, was completed in April 2021. The Gaylord National guest-room renovation was completed in June 2021.
- The regular quarterly dividend remained suspended. The credit agreement permits distributions needed to preserve REIT status and permits a $0.01 per share quarterly dividend, subject to board approval.
- The balance sheet moved from $219.8 million of total equity at December 31, 2020 to a $27.1 million total equity deficit at September 30, 2021, primarily reflecting the acquisition of the remaining Gaylord Rockies interest and continuing losses.
Guidance, outlook, management commentary, risks and unusual items
- No formal full-year revenue or earnings guidance is provided in the filing. Management expects $17 million to $24 million of capital expenditures during the remainder of 2021, primarily for maintenance.
- Management stated that contracted 2022 business approaches or exceeds pre-pandemic levels based on booking pace comparisons, and that group ADR on the books for the next five years exceeds comparable 2018 levels. These statements are forward-looking and subject to execution and demand risks.
- Approximately 65% of room nights cancelled because of the pandemic had been rebooked through September 30, 2021. Organic group bookings represented 83% of group room nights booked in Q3.
- The company entered into an agreement in October 2021 to acquire Block 21 in Austin, Texas, for $260 million, including approximately $138 million of assumed mortgage debt and approximately $11 million of existing cash reserves. The company expects to fund approximately $122 million after assumed debt, with closing expected near the end of Q4 2021, subject to conditions.
- The October 2021 credit agreement amendment permits the Block 21 acquisition during the restricted period, subject to conditions including revolver borrowings of no more than $400 million after the transaction.
- Credit agreement financial covenants were waived through March 31, 2022, subject to a minimum unrestricted liquidity covenant of $100 million. The company stated that it expects to amend the agreement or take other mitigating actions if future compliance becomes uncertain.
- Approximately $1.7 billion of variable-rate debt was indexed to LIBOR at September 30, 2021. LIBOR is expected to cease for U.S. dollar tenors after June 30, 2023, creating refinancing, interest expense, and hedge-transition risks.
- Gaylord National bond notes receivable had a $69.8 million carrying value, net of a $38.0 million credit-loss reserve; the Series B bond was fully reserved. Recovery depends on tax revenues generated by the Gaylord National property.
- Other unusual items included the absence of the $32.8 million prior-year credit loss on held-to-maturity securities, the absence of the prior-year $15.0 million forfeited Block 21 earnest deposit, and $3.6 million of additional deferred-tax valuation allowance in 2021.
- Management reported that ordinary-course legal proceedings are not expected to have a material effect on the financial statements. Disclosure controls and procedures were deemed effective.
Important facts investors should verify
- Whether occupancy, group bookings, ADR, and RevPAR continue recovering without renewed pandemic restrictions or elevated cancellations and attrition.
- Whether the company can maintain at least $100 million of unrestricted liquidity while funding debt service, capital expenditures, and the Block 21 acquisition.
- The timing, financing sources, closing conditions, and integration performance of the Block 21 acquisition.
- Compliance with debt covenants after the temporary waiver expires on March 31, 2022, and the company’s ability to refinance or extend debt maturities, particularly the $800 million Gaylord Rockies loan maturing in 2023.
- The effect of LIBOR replacement on variable-rate debt, interest-rate swaps, interest expense, and cash flow.
- When, if ever, the regular dividend will resume and whether future distributions will be constrained by credit agreements, liquidity, or REIT requirements.
- The recoverability of the Gaylord National notes receivable and the adequacy of the related credit-loss reserve.