Ryman Hospitality Properties, Inc. quarterly report, Q3 FY2022

Ryman Hospitality Properties, Inc. — Q3 2022 Form 10-Q Summary

Business context and reporting period

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 filing covers the three and nine months ended September 30, 2022, compared with the same periods in 2021. The filing was signed November 1, 2022.

The portfolio includes five Gaylord Hotels resorts managed by Marriott, ancillary hotels, and entertainment assets including the Grand Ole Opry, Ryman Auditorium, Ole Red, WSM-AM, Circle, and Block 21 in Austin, acquired May 31, 2022.

Financial performance and key metrics

Metric	Q3 2022	Q3 2021	9M 2022	9M 2021
Total revenue	$467.8 million	$306.9 million	$1.237 billion	$561.9 million
Operating income (loss)	$97.0 million	$25.7 million	$210.8 million	$(84.8) million
Net income (loss)	$47.5 million	$(8.6) million	$73.6 million	$(188.8) million
Net income available to common stockholders	$45.2 million	$(8.5) million	$70.9 million	$(171.0) million
Diluted EPS	$0.79	$(0.16)	$1.28	$(3.11)
Operating margin	20.7%	8.4%	17.0%	(15.1)%
Adjusted EBITDA_re, excluding consolidated joint-venture NCI	$144.8 million	$86.0 million	$380.3 million	$92.7 million

Hospitality generated $390.6 million of Q3 revenue and $1.054 billion for the nine-month period, increases of 51.5% and 127.4%, respectively. Hospitality operating income was $88.9 million in Q3 and $205.1 million for nine months. Entertainment revenue was $77.2 million in Q3 and $183.6 million for nine months, while operating income was $17.8 million and $38.7 million, respectively.

Q3 hotel occupancy was 71.5%, up 17.0 percentage points; ADR was $226.20, up 4.3%; RevPAR was $161.75, up 36.9%.
For nine months, occupancy was 63.9%, up 29.0 percentage points; ADR was $230.07, up 10.6%; RevPAR was $147.07, up 102.4%.
Net definite group room nights booked increased 208.9% in Q3 and 110.5% for nine months.
Outside-the-room spending increased 144.5% for the nine-month period, while cancelled room nights decreased 50.7%.
Cash flow from operating activities was $246.0 million for the first nine months, compared with $22.7 million in 2021.
Capital expenditures were $48.2 million; investing cash outflows were $147.9 million, including $94.0 million of net cash used for Block 21.

Liquidity, debt, and capital structure

At September 30, 2022, unrestricted cash was $224.7 million and restricted cash was $96.0 million.
Available borrowing capacity was $689.6 million under the company revolver and $65.0 million under the OEG revolver, or $754.6 million in total.
Total debt and finance lease obligations were $2.863 billion, compared with $2.937 billion at December 31, 2021.
Debt included $800.0 million of Gaylord Rockies debt, $700.0 million of 2027 senior notes, $600.0 million of 2029 senior notes, $372.5 million of Term Loan B, $300.0 million of OEG Term Loan debt, and $135.3 million of Block 21 CMBS debt.
The company repaid its $300.0 million Term Loan A and substantially paid down its revolver using proceeds from the OEG transaction and OEG Term Loan.
The company reported no debt covenant defaults at September 30, 2022. The Gaylord Rockies loan matures in July 2023, subject to three one-year extension options.
Block 21 remained in a CMBS “Trigger Period”; excess cash generated by the property is restricted from distribution except for permitted obligations and reserves.

Material changes versus the prior comparable period

Results materially improved as hotels and entertainment venues recovered from pandemic-related closures and capacity restrictions. Gaylord National was closed during the first half of 2021 but operated throughout 2022.
Revenue increased 52.4% in Q3 and 120.1% for nine months, while operating income improved to positive results from the prior-year loss for the nine-month period.
Interest expense increased 23.7% in Q3 and 13.9% for nine months, primarily due to the OEG Term Loan and Block 21 CMBS loan, as well as higher rates.
On June 16, 2022, Atairos acquired 30% of OEG for approximately $296.0 million. Ryman retained a controlling 70% interest and continued consolidating OEG.
On May 31, 2022, Ryman acquired Block 21 for an adjusted purchase price of $255.0 million, including assumed mortgage debt of approximately $136.0 million. The purchase-price allocation remained preliminary.
The company reinstated its cash dividend in September 2022 and declared $0.10 per share, or approximately $5.6 million, paid October 17, 2022.
Stockholders’ equity improved from a deficit of $22.2 million at year-end 2021 to $51.6 million at September 30, 2022, excluding noncontrolling interests.

Outlook, commentary, risks, and unusual items

Management stated that all assets were open without capacity restrictions and that demand continued to recover. Group room nights on the books for the following five years were approximately 96% of the comparable 2019 level, while booked group ADR was nearly 9% higher than the comparable 2019 level.

Management expected approximately $25 million to $45 million of additional capital expenditures during the remainder of 2022, primarily for Gaylord Rockies enhancements, Block 21 improvements, Ole Red Las Vegas, and maintenance capital. The company also expected to contribute up to $2.0 million more to Circle for working capital.

Management believed cash on hand and available revolver capacity would fund short-term operating needs, interest, lease obligations, planned capital expenditures, and other commitments. The filing states that there were no debt maturities until July 2023 and that management expected to refinance debt before maturity, including through available extension options.

COVID-19 recovery remained uncertain, particularly for travel, group meetings, transient demand, and entertainment attendance.
Labor, food, utility, supply, and other inflationary costs continued to pressure margins.
Higher variable interest rates increased financing costs; a 100-basis-point increase in SOFR would increase annual interest expense on the $300 million OEG Term Loan by approximately $3.0 million.
Gaylord Rockies remained subject to a cash sweep and limited repayment and carry guarantees covering 10% of principal debt, interest, and operating expenses until specified coverage conditions are met.
Atairos holds consent rights over certain major OEG decisions and has put and other contractual rights that could require Ryman to purchase its OEG interest or pursue an IPO, sale, or spinoff under specified circumstances.
The Block 21 acquisition accounting remained subject to measurement-period adjustments, and the company had not completed integration of Block 21’s internal control framework.
The company’s $66.3 million carrying value of Gaylord National-related notes receivable was subject to a $38.0 million credit-loss reserve; the Series B bond was fully reserved.
Reported results benefited from pandemic recovery, increased group activity, cancellation and attrition fees, and the addition of Block 21, limiting direct comparability with 2021.

Important facts for investors to verify

Whether the recovery in group demand, occupancy, ADR, and outside-the-room spending persists after the favorable 2021 comparison.
The refinancing plan and extension status for the $800 million Gaylord Rockies loan maturing in July 2023.
Compliance with credit agreement covenants after the temporary covenant modifications expire, including requirements beginning January 1, 2023.
The effect of rising SOFR and other interest rates on the OEG Term Loan and remaining variable-rate debt.
Block 21’s operating performance, Trigger Period status, final purchase-price allocation, and required liquidity or sponsor guarantees.
The economic impact of Atairos’ OEG governance, purchase-option, put, IPO, and sale-payment rights.
Future dividend amounts and the company’s ability to satisfy REIT distribution requirements while funding capital expenditures and debt service.
Management’s non-GAAP measures, including Adjusted EBITDA_re and Adjusted FFO, against GAAP earnings and operating cash flow.