Ryman Hospitality Properties, Inc. quarterly report, Q1 FY2023

Ryman Hospitality Properties, Inc. — Q1 2023 Form 10-Q Summary

Business context and reporting period

Ryman is a hospitality-focused REIT specializing in group-oriented destination hotels and owns a controlling 70% interest in Opry Entertainment Group. Its Hospitality segment includes five Gaylord Hotels properties, the Inn at Opryland and the AC Hotel; its Entertainment segment includes the Grand Ole Opry, Ryman Auditorium, Ole Red, Block 21 and related assets. The filing covers the three months ended March 31, 2023, with comparisons to March 31, 2022. The interim financial statements are unaudited.

Financial results and key metrics

Metric	Q1 2023	Q1 2022	Change
Total revenue	$491.7 million	$299.1 million	64.4%
Operating income	$105.7 million	$7.9 million	1,241.8%
Net income	$61.0 million	$(24.8) million	Improved by $85.8 million
Net income available to common stockholders	$61.3 million	$(24.6) million	Improved by $85.9 million
Diluted EPS	$1.02	$(0.45)	Improved by $1.47
Net cash from operating activities	$31.7 million	$(4.2) million	Improved by $35.9 million
Adjusted EBITDA_re, excluding noncontrolling interest	$153.4 million	$69.0 million	122.3%
Adjusted FFO available to common stockholders and unit holders	$113.6 million	$34.8 million	226.3%

Operating margin was approximately 21.5%, compared with 2.6% in the prior-year quarter. Net margin was approximately 12.4%, compared with negative 8.3% in Q1 2022. Hospitality revenue increased 62.6% to $424.4 million, while Entertainment revenue increased 76.9% to $67.3 million. Hospitality operating income increased to $106.1 million from $15.7 million; Entertainment operating income increased to $10.6 million from $2.7 million.

Hotel occupancy was 72.3%, up 25.0 percentage points.
ADR was $237.95, up 3.8%; RevPAR was $172.08, up 58.7%.
Total RevPAR was $452.94, up 62.6%.
Outside-the-room hotel spending increased 65.0%, with group catering particularly strong.
Net definite group room nights booked increased 51.1% to 250,318; future group-booking ADR was 4.5% above 2022 and 12.4% above 2019 levels.

Liquidity, capital allocation and debt

At March 31, 2023, unrestricted cash was $318.5 million and restricted cash was $95.1 million.
Total debt and finance lease obligations were $2.87 billion, compared with $2.86 billion at December 31, 2022.
Debt included $800.0 million of Gaylord Rockies debt, $700.0 million of senior notes due 2027, $600.0 million of senior notes due 2029, $370.0 million of Term Loan B, $298.5 million of OEG Term Loan debt, $133.9 million of Block 21 CMBS debt and $7.0 million drawn on the OEG revolver.
The Company reported $743.4 million of aggregate borrowing availability under its revolving facilities, including $685.4 million under the principal Revolver and availability under the OEG Revolver.
No debt covenant defaults existed at March 31, 2023. The Company had fulfilled requirements to exercise the first one-year extension option for the Gaylord Rockies loan, which was otherwise scheduled to mature in July 2023.
Cash used in investing activities was $48.5 million, including $36.8 million of capital expenditures. Financing cash outflows were $13.9 million, including $14.0 million of dividends.
The board declared a $0.75-per-share first-quarter dividend, approximately $41.7 million in aggregate, paid on April 17, 2023.

Material changes versus the prior comparable period

Results benefited from recovery from the Omicron-affected Q1 2022 period, stronger group travel, higher occupancy, improved ADR and increased ancillary spending.
Cancelled group room nights declined 66.8%, and group attrition declined from 32.1% to 15.5%.
Block 21, acquired in May 2022, contributed to the increase in Entertainment revenue, expenses and depreciation.
Interest expense increased 33.2% to $42.5 million, primarily because of the OEG Term Loan and Block 21 CMBS loan. The weighted-average borrowing rate increased to 5.9% from 4.3%.
Capital expenditures increased to $36.8 million from $9.7 million, reflecting Block 21 enhancements, Ole Red Las Vegas construction, Gaylord Rockies enhancements and maintenance capital.
Depreciation and amortization declined 13.7% to $48.4 million, primarily because a Gaylord Rockies advanced-bookings intangible became fully amortized during 2022.

Guidance, outlook, commentary and risks

Management stated that current demand trends support continued strong performance for the remainder of 2023, but did not provide specific revenue, earnings or EBITDA guidance in the filing. Planned 2023 capital expenditures are approximately $175 million to $215 million, and the Company expects to contribute up to $8.2 million to the Circle joint venture for working capital needs.

Management expects cash on hand, operating cash flow and revolver availability to fund operating expenses, interest, lease obligations, declared dividends and planned capital expenditures.
Key risks include economic slowdown or recession, inflation, labor and supply costs, rising interest rates, refinancing requirements, LIBOR transition, group-demand volatility, geographic concentration, Marriott’s management of the hotels, REIT qualification and the Company’s ability to generate cash sufficient to support dividends.
The $800 million Gaylord Rockies loan, Term Loan B and certain other variable-rate obligations expose the Company to refinancing and interest-rate risk, although interest-rate swaps partially hedge this exposure.
The Company provided limited guarantees related to Gaylord Rockies and Block 21 financing and maintains other contractual commitments, including potential Circle contributions and executive severance obligations.
Block 21 exited its lender-defined Trigger Period during the first quarter of 2023; the filing states that the Trigger Period did not constitute a default.
Ordinary-course litigation was not expected by management to have a material effect on the financial statements. No material changes were reported to previously disclosed risk factors.

Most important facts for investors to verify

Verify the refinancing or extension of the Gaylord Rockies loan and the Company’s ability to manage debt maturities beginning in 2023 and 2024.
Assess whether strong group demand, occupancy, ADR and outside-the-room spending persist after the Omicron comparison benefit fades.
Monitor the $175 million to $215 million capital expenditure plan, Ole Red Las Vegas construction and Gaylord Rockies and Block 21 enhancement spending.
Evaluate interest-rate exposure, the scheduled LIBOR transition and the effect of higher borrowing costs on cash flow and dividend capacity.
Reconcile non-GAAP Adjusted EBITDA_re and Adjusted FFO to GAAP results and consider the effects of noncontrolling interests in OEG.
Confirm that the Company maintains required debt covenants, revolver availability and REIT qualification while continuing its dividend policy.