Ryman Hospitality Properties, Inc. quarterly report, Q3 FY2021

Ryman Hospitality Properties, Inc. — Q3 2021 Form 10-Q Summary

Business context and reporting period

Quarterly report for the three and nine months ended September 30, 2021, filed November 2, 2021. 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 portfolio includes five Gaylord Hotels properties, other Marriott-managed hotels, and Nashville-based entertainment assets.

Results remained materially affected by the COVID-19 pandemic, although all assets had reopened by September 30, 2021. Gaylord National reopened July 1, 2021, and the Wildhorse Saloon reopened in April 2021. The company purchased the remaining 35% of the Gaylord Rockies joint venture and adjacent land in May 2021.

Financial performance and liquidity

Metric	Q3 2021	Q3 2020	Change	Nine months 2021	Nine months 2020
Total revenue	$306.9 million	$70.2 million	336.9%	$561.9 million	$398.0 million
Operating income (loss)	$25.7 million	$(103.2) million	Improved	$(84.8) million	$(239.2) million
Net loss	$(8.6) million	$(129.9) million	Improved	$(188.8) million	$(368.3) million
Net loss available to common stockholders	$(8.5) million	$(117.7) million	Improved	$(171.0) million	$(337.7) million
Diluted loss per share	$(0.16)	$(2.14)	Improved	$(3.11)	$(6.14)
Net cash from operating activities	Not separately presented	Not separately presented		$22.7 million	$(112.3) million

Q3 operating margin was approximately 8.4%, compared with negative 146.9% in Q3 2020. The nine-month operating margin was approximately negative 15.1%, compared with negative 60.1% in the prior-year period. Q3 net margin was approximately negative 2.8%; the nine-month net margin was approximately negative 33.6%.

Hospitality revenue was $257.9 million in Q3 and $463.3 million for the nine months, up 344.7% and 30.9%, respectively. Hospitality operating income was $24.7 million in Q3 versus a $78.3 million loss in the prior-year quarter; the nine-month operating loss improved to $65.8 million from $154.6 million.
Entertainment revenue was $49.1 million in Q3 and $98.6 million for the nine months, up 299.7% and 124.1%, respectively. Entertainment operating income was $12.1 million in Q3 and $10.1 million for the nine months, compared with losses in both 2020 periods.
Hospitality occupancy increased to 54.5% in Q3 from 14.6% in Q3 2020 and 34.9% for the nine months from 24.4%. Q3 ADR was $216.79, up 19.8% year over year; Q3 RevPAR was $118.17.
Adjusted EBITDA_re, excluding noncontrolling interest in the consolidated joint venture, was $86.0 million in Q3 and $92.7 million for the nine months, compared with $(34.8) million and $(38.7) million, respectively. These are non-GAAP measures and should be considered alongside GAAP results.
At September 30, total debt and finance lease obligations were $2.926 billion, compared with $2.658 billion at December 31, 2020. Debt included $180.0 million drawn on the revolver, $300.0 million Term Loan A, $377.5 million Term Loan B, $800.0 million Gaylord Rockies term debt, and $1.3 billion of senior notes.
Liquidity included $53.2 million of unrestricted cash, $25.3 million of restricted cash, and $519.7 million of remaining revolver availability. No debt covenant defaults were reported under the amended terms.
Cash flow from investing activities was $(277.0) million, including $188.0 million for the remaining Gaylord Rockies interest, $22.0 million for adjacent land, and $66.2 million of capital expenditures. Financing activities provided $253.1 million, including $600.0 million of new senior notes and $74.0 million of revolver borrowings.

Material changes versus the prior comparable periods

Operating performance improved substantially as hotels and entertainment venues reopened and demand recovered from pandemic-related closures. However, results remained below normal pre-pandemic operating levels, particularly in the nine-month period.
The company refinanced its $400.0 million 5% senior notes due 2023 with $600.0 million of 4.50% senior notes due 2029. The redemption generated a $2.9 million loss on extinguishment of debt.
Ryman acquired the remaining 35% of Gaylord Rockies for $188.0 million and approximately 130 acres of adjacent undeveloped land for $22.0 million, making Gaylord Rockies wholly owned.
The Gaylord Palms expansion, including 302 rooms and additional meeting space, was completed in April 2021. The Gaylord National guest-room renovation was completed in June 2021.
The regular quarterly dividend remained suspended. The credit agreement permits distributions needed to preserve REIT status and permits a $0.01 per share quarterly dividend, subject to board approval.
The balance sheet moved from $219.8 million of total equity at December 31, 2020 to a $27.1 million total equity deficit at September 30, 2021, primarily reflecting the acquisition of the remaining Gaylord Rockies interest and continuing losses.

Guidance, outlook, management commentary, risks and unusual items

No formal full-year revenue or earnings guidance is provided in the filing. Management expects $17 million to $24 million of capital expenditures during the remainder of 2021, primarily for maintenance.
Management stated that contracted 2022 business approaches or exceeds pre-pandemic levels based on booking pace comparisons, and that group ADR on the books for the next five years exceeds comparable 2018 levels. These statements are forward-looking and subject to execution and demand risks.
Approximately 65% of room nights cancelled because of the pandemic had been rebooked through September 30, 2021. Organic group bookings represented 83% of group room nights booked in Q3.
The company entered into an agreement in October 2021 to acquire Block 21 in Austin, Texas, for $260 million, including approximately $138 million of assumed mortgage debt and approximately $11 million of existing cash reserves. The company expects to fund approximately $122 million after assumed debt, with closing expected near the end of Q4 2021, subject to conditions.
The October 2021 credit agreement amendment permits the Block 21 acquisition during the restricted period, subject to conditions including revolver borrowings of no more than $400 million after the transaction.
Credit agreement financial covenants were waived through March 31, 2022, subject to a minimum unrestricted liquidity covenant of $100 million. The company stated that it expects to amend the agreement or take other mitigating actions if future compliance becomes uncertain.
Approximately $1.7 billion of variable-rate debt was indexed to LIBOR at September 30, 2021. LIBOR is expected to cease for U.S. dollar tenors after June 30, 2023, creating refinancing, interest expense, and hedge-transition risks.
Gaylord National bond notes receivable had a $69.8 million carrying value, net of a $38.0 million credit-loss reserve; the Series B bond was fully reserved. Recovery depends on tax revenues generated by the Gaylord National property.
Other unusual items included the absence of the $32.8 million prior-year credit loss on held-to-maturity securities, the absence of the prior-year $15.0 million forfeited Block 21 earnest deposit, and $3.6 million of additional deferred-tax valuation allowance in 2021.
Management reported that ordinary-course legal proceedings are not expected to have a material effect on the financial statements. Disclosure controls and procedures were deemed effective.

Important facts investors should verify

Whether occupancy, group bookings, ADR, and RevPAR continue recovering without renewed pandemic restrictions or elevated cancellations and attrition.
Whether the company can maintain at least $100 million of unrestricted liquidity while funding debt service, capital expenditures, and the Block 21 acquisition.
The timing, financing sources, closing conditions, and integration performance of the Block 21 acquisition.
Compliance with debt covenants after the temporary waiver expires on March 31, 2022, and the company’s ability to refinance or extend debt maturities, particularly the $800 million Gaylord Rockies loan maturing in 2023.
The effect of LIBOR replacement on variable-rate debt, interest-rate swaps, interest expense, and cash flow.
When, if ever, the regular dividend will resume and whether future distributions will be constrained by credit agreements, liquidity, or REIT requirements.
The recoverability of the Gaylord National notes receivable and the adequacy of the related credit-loss reserve.