Ryman Hospitality Properties, Inc. quarterly report, Q2 FY2023

Ryman Hospitality Properties, Inc. — Q2 2023 Form 10-Q Summary

Business context and reporting period

Ryman is a REIT focused on group-oriented destination hotels and entertainment assets. Its Hospitality segment includes five Gaylord Hotels resorts and other Marriott-managed properties; its Entertainment segment includes Opry Entertainment Group, Block 21 and related assets. The filing covers the three and six months ended June 30, 2023, compared with the corresponding 2022 periods. Results are unaudited.

On June 30, 2023, Ryman acquired the 1,002-room JW Marriott San Antonio Hill Country Resort & Spa for approximately $800 million. The property is included in the Hospitality segment beginning on the acquisition date.

Key financial metrics

Metric	Three months ended June 30, 2023	Three months ended June 30, 2022	Six months ended June 30, 2023	Six months ended June 30, 2022
Total revenue	$504.8 million	$470.2 million	$996.6 million	$769.3 million
Operating income	$122.2 million	$106.0 million	$227.9 million	$113.8 million
Net income	$70.1 million	$50.9 million	$131.1 million	$26.1 million
Net income available to common stockholders	$66.5 million	$50.3 million	$127.9 million	$25.7 million
Diluted earnings per share	$1.15	$0.91	$2.17	$0.46
Adjusted EBITDA_re, excluding noncontrolling interest	$165.9 million	$166.5 million	$319.3 million	$235.5 million
Operating cash flow	Not separately provided	Not separately provided	$215.5 million	$127.6 million

Revenue increased 7.4% in the second quarter and 29.5% for the six-month period. Operating margins were approximately 24.2% and 22.9%, respectively, compared with 22.5% and 14.8% in the prior-year periods. Net margins were approximately 13.9% and 13.2%, compared with 10.8% and 3.4%.

Hospitality revenue was $417.7 million in the quarter and $842.1 million year to date, up 4.0% and 27.0%, respectively.
Entertainment revenue was $87.2 million in the quarter and $154.4 million year to date, up 27.4% and 45.1%, respectively. Block 21 contributed materially to the increase.
Hospitality occupancy was 72.7% in the quarter and 72.5% year to date. Year-to-date occupancy increased 12.4 percentage points from the prior year; second-quarter occupancy was unchanged.
Hospitality ADR was $244.77 in the quarter and $241.38 year to date, up 4.4% and 3.9%, respectively.
Adjusted FFO available to common stockholders and unit holders was $122.4 million in the quarter and $236.0 million year to date, compared with $114.9 million and $149.7 million, respectively.

Debt, liquidity and capital allocation

Total debt and finance lease obligations were $3.38 billion at June 30, 2023, compared with $2.86 billion at December 31, 2022.
Unrestricted cash was $508.3 million; restricted cash was $105.6 million.
Ryman had $743.4 million of aggregate borrowing availability under its revolving facilities. The principal $700 million revolver was undrawn, although $14.6 million of letters of credit had been issued, leaving $685.4 million of availability under that facility.
In May 2023, Ryman refinanced its credit facility with a $700 million revolver and a $500 million Term Loan B maturing in 2030. The Term Loan B balance was $498.8 million at quarter-end.
In June 2023, Ryman issued $400 million of 7.25% senior notes due 2028 and received approximately $393 million of net proceeds. It also issued approximately 4.4 million common shares for approximately $395 million of net proceeds. These proceeds funded the Hill Country acquisition.
The $800 million Gaylord Rockies term loan matures in July 2024 and has two one-year extension options remaining; the first extension was completed in May 2023. Management stated that there were no debt covenant defaults at June 30, 2023.
Capital expenditures were $78.2 million in the first six months. Management expects approximately $145 million to $175 million of capital expenditures during the remainder of 2023 and may contribute up to $4.2 million to the Circle joint venture.
Cash dividends paid during the first six months were $55.7 million. The company declared a second-quarter dividend of $1.00 per share, paid July 17, 2023. Future dividends remain subject to board approval and financing restrictions.

Material changes versus the prior comparable period

Six-month revenue growth reflected recovery from the prior-year Omicron-affected period, stronger group demand, higher outside-the-room spending and the addition of Block 21.
Group room nights traveled increased 3.6% in the second quarter; year-to-date occupancy increased to 72.5% from 60.1%.
Net definite group room nights booked increased 9.0% in the quarter and 21.1% year to date.
Attrition and cancellation fee revenue declined by $5.1 million in the quarter and $15.0 million year to date as cancellations and related collections decreased.
Interest expense increased 44.8% in the quarter and 39.2% year to date, driven by higher interest rates and increased debt. The weighted-average borrowing rate, including swaps, rose to 6.3% in the quarter and 6.2% year to date, from 4.5% and 4.4%.
Income tax expense declined to $3.5 million in the quarter and $5.2 million year to date, primarily because of lower taxable income at taxable REIT subsidiaries.
Operating equity increased to $498.7 million from $95.9 million at year-end, primarily reflecting the common stock issuance and earnings, partially offset by dividends and other comprehensive losses.

Outlook, management commentary, risks and unusual items

Management expects cash on hand, operating cash flow and available revolver capacity to fund operating expenses, interest, lease obligations, declared dividends and planned capital expenditures. Management also stated that it expects to refinance debt before maturity, but this remains dependent on market conditions, lender availability and covenant compliance. The filing does not provide formal earnings or revenue guidance.

Future group room nights on the books at June 30, 2023 were described as in line with the prior year, while booked ADR was 5.2% higher.
Inflation, labor and food costs, higher interest rates, customer spending and booking levels remain significant operating variables.
Ryman is exposed to concentration in group meetings, geographic markets and Marriott-managed brands. All hotel properties, including Hill Country, are managed under Marriott-owned brands.
Integration of JW Marriott Hill Country may be more difficult, costly or time-consuming than expected. San Antonio is a new market for Ryman, and anticipated synergies may not be realized.
The acquisition increased leverage and added $400 million of 7.25% senior notes. Variable-rate debt remains exposed to changes in SOFR, although the company uses interest-rate swaps.
Ryman holds notes receivable tied to tax revenues supporting Gaylord National bonds. The Series B bond is fully reserved, and the notes have long-dated maturities extending to 2034 and 2037.
Unusual or nonrecurring items included the Hill Country acquisition, refinancing-related loss on extinguishment of debt of $2.3 million, and $78.2 million of year-to-date capital expenditures.
Management reported that ordinary-course litigation and other contingencies were not expected to have a material financial statement effect. Disclosure controls were deemed effective.

Investor verification checklist

Verify the post-acquisition operating contribution, integration costs and forward performance of JW Marriott Hill Country.
Monitor leverage, interest expense, SOFR exposure and refinancing plans for the July 2024 Gaylord Rockies maturity and other debt obligations.
Compare actual 2023 capital expenditures and Circle contributions with the stated $145 million to $175 million capital expenditure outlook.
Assess whether group booking levels, ADR growth and reduced cancellations offset inflationary labor, food and financing costs.
Review dividend coverage, REIT taxable income and any restrictions under the credit agreement and senior note indentures.
Reconcile GAAP earnings with Adjusted EBITDA_re, FFO and Adjusted FFO, including the effects of noncontrolling interests and management-defined adjustments.