Xenia Hotels & Resorts, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. The unaudited quarter ended March 31, 2024. Xenia is a REIT focused on luxury and upper-upscale U.S. hotels and resorts. It owned 32 properties with 9,515 rooms at quarter-end; hotels are operated by third-party managers.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $267.5 million | $269.0 million | Down 0.6% |
| Operating income | $27.6 million | $33.8 million | Down 18.2% |
| Net income | $9.0 million | $6.6 million | Up 36.8% |
| Net income attributable to common stockholders | $8.5 million; $0.08 per share | $6.3 million; $0.06 per share | — |
| Cash provided by operating activities | $24.7 million | $30.3 million | Down $5.6 million |
| Capital expenditures | $33.4 million | $11.6 million | Up $21.8 million |
| Adjusted EBITDAre | $65.3 million | $71.3 million | Down 8.5% |
| Adjusted FFO | $45.5 million | $45.2 million | Up 0.6% |
Operating margin was approximately 10.3%, versus 12.6% a year earlier. Portfolio occupancy increased to 67.4% from 66.1%, while ADR fell 3.5% to $262.39 and RevPAR fell 1.5% to $176.86. Excluding the Hyatt Regency Scottsdale, which is undergoing a transformative renovation, RevPAR increased 3.7%.
At March 31, cash and cash equivalents were $140.1 million and restricted cash was $56.8 million. Debt outstanding was approximately $1.407 billion, with a 5.47% weighted-average interest rate; the balance-sheet carrying value, net of financing costs and other adjustments, was $1.395 billion. The $450 million revolving facility was undrawn and fully available. Total liabilities were $1.590 billion and total equity was $1.312 billion.
Material changes and notable items
- Revenue declined slightly, while hotel operating expenses rose 2.1% to $183.0 million, mainly reflecting higher labor costs. Food and beverage revenue fell 3.5%; other revenue rose 12.4%.
- Net income increased largely because income tax expense fell by $4.5 million, interest expense fell by $1.8 million, and insurance-related income increased. The effective tax estimate was 9.90%, compared with 31.04% in Q1 2023.
- Adjusted EBITDAre declined despite higher reported net income, reflecting weaker hotel operating results and the effects of renovation disruption and normalizing leisure demand.
- Cash from operations decreased, which management attributed primarily to working-capital timing. Investing outflows increased with higher hotel capital spending.
- The company repurchased 468,107 shares for $6.3 million at a weighted-average $13.51 per share; approximately $127.4 million remained under the repurchase authorization. The quarterly dividend was $0.12 per share/unit.
Outlook, risks, and contingencies
No quantified full-year earnings or operating guidance is provided in the supplied filing text. Management expects short- and long-term funding needs to be met through cash, hotel operating cash flow, available revolving credit, capital markets, and potentially asset sales, and states that liquidity is expected to be adequate. These expectations are subject to market and financing conditions.
Management cited inflation, rising interest rates, possible recession, labor and wage pressures, conflicts, and lodging demand and supply trends as risks. The Scottsdale renovation is disrupting results. The company also reported $64.9 million of remaining renovation and construction contract commitments.
A mortgage covenant was affected by renovation disruption; the lender waived it through March 31, 2024. The filing states this did not constitute a default, notes the lender could impose a cash sweep if the covenant is not met, and also reports the company was in compliance with its debt covenants at quarter-end. The company reported $469.2 million of scheduled debt principal payments in 2025, including $464.7 million of 2020 Senior Notes due in August 2025. Six interest-rate swaps covered $280 million of notional debt; the earliest hedge maturity is February 2025. The company recorded $0.3 million of storm-related repair and cleanup costs at The Ritz-Carlton, Denver and recognized insurance recoveries related to a prior restaurant fire. Management does not expect ordinary-course legal matters to have a material adverse effect.
Important facts for investors to verify
- Progress, expected disruption, costs, and remaining funding needs for the Hyatt Regency Scottsdale renovation and other committed projects.
- Plans and available sources to address the 2025 debt maturities, refinancing terms, and related interest costs.
- Status of the mortgage covenant after the waiver period and whether any cash sweep or other lender restrictions apply.
- Whether operating cash flow, occupancy, ADR, and RevPAR trends improve, and how labor, insurance, and property-tax costs affect margins.
- Cash available after restricted reserves, capital spending, dividends, and share repurchases; non-GAAP measures such as Adjusted EBITDAre and Adjusted FFO are not substitutes for cash flow.