Braemar Hotels & Resorts Inc. quarterly report, Q1 FY2016

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Business context and reporting period

The supplied filing is Ashford Hospitality Prime, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2016—not a filing for Braemar Hotels & Resorts Inc. Confirm the issuer before relying on this summary. Ashford Prime is a hotel REIT with interests in 12 hotels (3,952 rooms; 3,717 net rooms), focused on luxury and upscale properties in gateway and resort markets. The portfolio included acquisitions of Bardessono in July 2015 and the Ritz-Carlton St. Thomas in December 2015, affecting year-over-year comparability.

Financial performance and position

  • Revenue: $99.8 million, up 28.3% from $77.8 million. Hotel revenue was $99.8 million. Rooms revenue rose 27.1%; food and beverage revenue rose 22.9%.
  • Hotel operating indicators: Occupancy was 77.77%, down from 78.54%; ADR was $247.62, up from $207.97; RevPAR was $192.56, up from $163.35. For the ten hotels owned in both periods, RevPAR increased to $169.20 from $163.35.
  • Profitability: Operating income was $11.5 million versus $8.3 million; operating margin was approximately 11.5% versus 10.6%. Net loss was $0.1 million versus $0.4 million, while net loss attributable to common stockholders was $1.0 million versus $0.2 million, including $0.9 million of preferred dividends. Loss per share was $0.04 versus $0.01.
  • Cash flow: Operating cash flow was $10.6 million, compared with cash used of $39.4 million in Q1 2015; the prior-year period included substantial net purchases of marketable securities. Investing activities used $4.4 million, including $3.4 million of hotel improvements. Financing activities used $9.4 million. Cash and cash equivalents were $101.9 million at quarter-end, plus $36.4 million of restricted cash.
  • Non-GAAP measures: Adjusted EBITDA was $24.4 million versus $18.5 million; Adjusted FFO was $13.9 million versus $8.9 million. These company-defined measures include adjustments for items such as strategic alternatives and deal costs, investment and derivative fair-value changes, and equity-based compensation; they are not GAAP cash-flow measures.
  • Debt and liquidity: Indebtedness, net of deferred loan costs, was $834.1 million; gross debt was $838.1 million, down from $840.2 million at year-end. The $150 million revolver had no borrowings outstanding. The company reported compliance with covenants; leverage ratio was 5.82x against a temporarily relaxed 6.25x limit, and fixed-charge coverage was 1.84x against a 1.35x minimum. Gross debt included $426.7 million of variable-rate debt.
  • Margins and costs: Hotel expenses grew 30.6%, slightly faster than hotel revenue growth of 28.3%. Corporate G&A increased $2.8 million to $3.9 million, primarily due to higher professional and miscellaneous expenses. Interest expense and loan-cost amortization rose 11.0% to $10.6 million.

Material changes, outlook, and risks

  • Most of the reported revenue increase reflected the Bardessono and Ritz-Carlton St. Thomas acquisitions. At comparable hotels, occupancy declined while room rates and RevPAR improved.
  • Q1 results included a $2.7 million equity-method loss from the AQUA U.S. Fund, a $1.5 million unrealized loss on Ashford Inc. shares, and a $3.5 million unrealized derivative gain. These items materially affected reported results but are subject to fair-value changes.
  • On April 8, 2016, the company announced plans to use up to $50 million for share repurchases, increase its expected quarterly common dividend from $0.10 to $0.12 beginning in Q2, liquidate its AQUA U.S. Fund investment to help finance repurchases, and seek sales of up to four hotels. It reaffirmed a target net debt/EBITDA ratio of 5.0x or less. These are announced plans, not guaranteed outcomes.
  • After quarter-end, the company completed a Series B preferred-stock offering with approximately $4.9 million of net proceeds. It also signed a non-binding letter of intent to sell the Courtyard Seattle Downtown; definitive agreements and closing conditions remained outstanding.
  • The proposed Series C preferred transaction and related partnership agreement changes were to be unwound unless and until stockholder approval was obtained. The company was involved in ongoing litigation and a proxy dispute with Sessa Capital; outcomes were pending. The board also announced it was seeking a new CEO and additional independent directors, subject to the annual meeting outcome.
  • Debt maturities and extension conditions warrant attention: the revolver was due in November 2016, and several mortgage loans matured in 2017, subject to extension options. The filing cites refinancing access, interest rates, hotel performance, cash-trap provisions, REIT requirements, related-party conflicts, and legal proceedings as risks. Management reported no loan cash-trap provisions were then triggered.
  • Management stated that quarterly results are affected by hotel seasonality and are not necessarily indicative of full-year performance. No specific full-year revenue or earnings guidance was provided.

Important facts for investors to verify

  1. Verify the filing issuer: the source identifies Ashford Hospitality Prime, Inc., whereas the request identifies Braemar Hotels & Resorts Inc.
  2. Separate acquisition-driven growth from comparable-hotel performance, especially occupancy, ADR, RevPAR, and expenses.
  3. Review the definitions and adjustments behind Adjusted EBITDA and Adjusted FFO, including strategic alternatives and deal costs.
  4. Assess the 2016–2017 debt maturities, extension terms, variable-rate exposure, and covenant headroom.
  5. Confirm the status and financial impact of the announced repurchases, dividend increase, fund liquidation, hotel dispositions, preferred offering, and pending litigation and governance changes.