Ryman Hospitality Properties, Inc. — 2023 Q3 Form 10-Q Summary
Business context and reporting period
Ryman operates as a real estate investment trust focused on group-oriented destination hotels and entertainment assets. Its principal segments are Hospitality, Entertainment and Corporate and Other. The filing covers the three and nine months ended September 30, 2023, compared with the corresponding 2022 periods.
The Hospitality portfolio includes five Gaylord resorts, the Inn at Opryland, the AC Hotel and, beginning June 30, 2023, the 1,002-room JW Marriott San Antonio Hill Country Resort & Spa. The Entertainment segment includes the Grand Ole Opry, Ryman Auditorium, Ole Red, WSM-AM, Block 21 and related assets. Marriott manages the Company’s hotel properties.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Change | Nine months 2023 | Nine months 2022 | Change |
|---|---|---|---|---|---|---|
| Total revenue | $528.5 million | $467.8 million | 13.0% | $1,525.1 million | $1,237.1 million | 23.3% |
| Operating income | $101.9 million | $97.0 million | 5.1% | $329.8 million | $210.8 million | 56.4% |
| Net income | $40.8 million | $47.5 million | (14.0%) | $171.9 million | $73.6 million | 133.7% |
| Net income available to common stockholders | $41.2 million | $45.2 million | (8.9%) | $169.1 million | $70.9 million | 138.5% |
| Diluted earnings per share | $0.64 | $0.79 | (19.0%) | $2.78 | $1.28 | 117.2% |
| Operating cash flow | Not separately reported | Not separately reported | — | $369.9 million | $246.0 million | 50.4% |
| Adjusted EBITDAre, excluding noncontrolling interest | $163.2 million | $144.8 million | 12.7% | $482.5 million | $380.3 million | 26.9% |
| Adjusted FFO available to common stockholders and unit holders | $111.3 million | $100.8 million | 10.4% | $347.3 million | $250.5 million | 38.7% |
Q3 operating margin was approximately 19.3%, compared with 20.7% in the prior-year quarter. Nine-month operating margin was approximately 21.6%, compared with 17.0%. Q3 net margin was approximately 7.7%, compared with 10.1%; nine-month net margin was approximately 11.3%, compared with 5.9%.
- Hospitality revenue increased 14.2% in Q3 and 22.3% for the nine months. Hospitality operating income increased 3.2% in Q3 and 48.9% for the nine months.
- Entertainment revenue increased 6.7% in Q3 and 29.0% for the nine months, while Entertainment operating income increased 16.5% and 44.4%, respectively.
- Same-store nine-month hotel occupancy was 72.3%, up 8.4 percentage points; same-store ADR was $237.74, up 3.3%; same-store RevPAR was $171.80, up 16.8%.
- Q3 same-store occupancy was 71.8%, up 0.3 percentage points; same-store ADR was $230.50, up 1.9%; and same-store RevPAR was $165.58, up 2.4%.
Balance sheet, debt and liquidity
| Balance sheet item | September 30, 2023 | December 31, 2022 |
|---|---|---|
| Total assets | $5.064 billion | $4.041 billion |
| Unrestricted cash | $543.1 million | $334.2 million |
| Restricted cash | $112.9 million | $110.1 million |
| Total debt and finance lease obligations | $3.375 billion | $2.863 billion |
| Total stockholders’ equity | $470.9 million | $95.3 million |
- Total debt included $497.5 million under the Term Loan B, $400 million of 7.25% senior notes due 2028, $600 million of 4.50% senior notes due 2029, $700 million of 4.75% senior notes due 2027, the $800 million Gaylord Rockies term loan, $297.0 million under the OEG term loan and $132.6 million under the Block 21 CMBS loan.
- The $700 million revolving credit facility was undrawn, with $685.4 million available after letters of credit. The OEG revolver was also undrawn. Aggregate availability under the revolving facilities was reported at $750.4 million.
- The Company completed a May 2023 refinancing, establishing a $700 million revolver and a $500 million Term Loan B maturing in 2030. The Company also issued $400 million of 7.25% senior notes due 2028.
- Estimated interest obligations through 2027 were $724.3 million based on rates and principal balances in effect at September 30, 2023; variable rates and balances may change.
- Management reported no debt covenant defaults at September 30, 2023. The Gaylord Rockies term loan matures in July 2024 and has one remaining one-year extension option after the first extension was completed.
Material changes versus the prior comparable period
- The Company acquired JW Marriott Hill Country for approximately $800 million on June 30, 2023. The property contributed $50.0 million of Q3 revenue and $50.7 million for the nine-month period.
- The acquisition was funded primarily with approximately $395 million of common equity proceeds, approximately $393 million of net senior-note proceeds and cash on hand.
- Capital expenditures increased to $122.2 million for the first nine months, compared with $48.2 million in the prior-year period, while investing cash outflows increased to $928.2 million, primarily because of the acquisition.
- Interest expense increased 46.0% in Q3 and 41.7% for the nine months, primarily because of higher interest rates and increased debt.
- Circle, the Company’s 50%-owned joint venture, is being wound down after management pivoted from television network ownership to a distribution approach. The Company recorded approximately $10.6 million of related loss in Q3 and committed to fund approximately $3.5 million of remaining joint-venture obligations.
- Q3 net income declined despite revenue growth because of higher interest expense and the Circle loss. The nine-month improvement benefited from stronger operations and a lower tax provision.
- The Company paid $0.75 per share for the first quarter and $1.00 per share for each of the second and third quarters. The reported dividend policy targets minimum annual dividends equal to 100% of REIT taxable income, subject to board approval and debt agreement limitations.
Guidance, outlook, commentary and risks
- Management expects to spend approximately $55 million to $75 million in capital expenditures during the remainder of 2023, primarily for Gaylord Rockies, Block 21, Ole Red Las Vegas and maintenance capital.
- Management stated that group room nights on the books for future periods were slightly ahead of the prior-year level at September 30, 2023, with booked ADR 5.3% higher.
- Management attributed performance improvements to stronger group demand, higher occupancy and ADR, increased outside-the-room spending, lower cancellations and attrition, and higher Entertainment attendance. It also noted that declining cancellation and attrition fee collections reduced margins.
- Inflation, wage and food costs, energy costs and higher interest rates remain pressures. Management stated that favorable operating performance has mitigated these pressures but warned that prolonged inflation could adversely affect costs, customer spending, bookings and results.
- Key risks include hospitality cyclicality, geographic concentration, reliance on Marriott-managed and Marriott-branded properties, interest-rate exposure, refinancing and covenant compliance, the July 2024 Gaylord Rockies maturity, REIT qualification, dividend funding, and integration of JW Marriott Hill Country into a new market.
- Other unusual items include $2.3 million of debt extinguishment loss for the nine months, $10.6 million related to the Circle wind-down and $4.9 million of deferred income-tax provision. The filing does not provide formal full-year revenue or earnings guidance.
Most important facts for investors to verify
- Confirm the operating performance and integration costs of JW Marriott Hill Country, including whether expected synergies and returns justify the approximately $800 million acquisition.
- Evaluate leverage, interest-rate exposure and refinancing plans, particularly the $800 million Gaylord Rockies term loan maturity in July 2024 and the higher-cost 7.25% senior notes.
- Assess whether operating cash flow can support planned capital expenditures, dividends, debt service and future refinancing needs.
- Monitor group bookings, occupancy, ADR, RevPAR, cancellation and attrition trends, as well as the effect of declining fee collections on margins.
- Track the wind-down of Circle, the remaining funding obligation and whether additional losses or contingencies arise.
- Review covenant headroom, revolver availability, letters of credit and restrictions on dividends or additional borrowing.
- Consider the impact of Marriott brand and management concentration, inflation, labor costs, consumer demand and potential changes in interest rates.