Company Overview - Apple Hospitality owns 220 upscale, rooms-focused hotels[8] with 29,767 guest rooms[8] across 37 states[8] - The company's net debt to total capitalization is 33%[8] with 72% of outstanding debt effectively fixed[8] - The company's equity market capitalization was $3.1 billion as of March 31, 2025[11] and net debt was $1.5 billion[11] - The company paid $243.7 million in distributions in 2024[11] Financial Performance - Full year 2024 revenue was $1.4 billion[11] with MFFO per share of $1.61[11] - Comparable Hotels RevPAR for the first quarter of 2025 was $111[26], with occupancy at 71%[26] and ADR at $157[26] - Comparable Hotels Total Revenue for Q1 2025 was $324.262 million[30], a decrease of 0.4% compared to Q1 2024[30] - Comparable Hotels Adjusted Hotel EBITDA for Q1 2025 was $104.866 million[30], a decrease of 5.4% compared to Q1 2024[30] Portfolio Management - The company has an average effective hotel age of 5 years[8] and an average TripAdvisor rating of 4.3[8] - The company repurchased approximately 2.4 million common shares for $32.3 million through April 2025[26] - The company has available liquidity of approximately $500 million under its revolving credit facility as of Q1 2025[26]

Group 1 - Apple Hospitality REIT, Inc. (APLE) has been added to the Zacks Rank 5 (Strong Sell) List due to a 4.4% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Assertio Holdings, Inc. (ASRT) is also on the Zacks Rank 5 (Strong Sell) List, with a significant 50% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days [1] - Boot Barn Holdings, Inc. (BOOT) has seen a 9.3% downward revision in the Zacks Consensus Estimate for its current year earnings over the last 60 days, leading to its inclusion in the Zacks Rank 5 List [2]

Core Insights - Apple Hospitality REIT, Inc. (APLE) has acquired Homewood Suites by Hilton Tampa-Brandon for $18.8 million, aiming to leverage the economic growth in Tampa, FL [1][9] - The acquisition aligns with the company's strategy to invest in properties with strong growth potential, enhancing shareholder value [5][9] Acquisition Details - The hotel features 126 rooms and is strategically located to benefit from various demand generators including conventions, sporting events, and healthcare [2][3] - The purchase price of $18.8 million translates to approximately $149,000 per key, reflecting an attractive valuation below replacement cost and a 12% cap rate based on trailing 12-month results [5] Market Positioning - The hotel's location near major attractions and corporate offices positions it well for both leisure and business tourism [4][6] - The Tampa East submarket has shown a 15% increase in revenue per available room (RevPAR) over the past year, indicating a recovery in the hospitality sector [6] Portfolio Expansion - Following the acquisition, Apple Hospitality's portfolio now includes 221 hotels with 29,893 guest rooms across 37 states and the District of Columbia [8] - The company has plans for further expansion with an additional hotel under contract for purchase in Nashville and one for sale in Houston [7] Strategic Outlook - The acquisition reflects Apple Hospitality's commitment to geographic diversification and investment in high-demand markets [9] - Despite the positive developments, macroeconomic uncertainties and competitive pressures may impact future demand for the company's properties [10]

Core Insights - Share buyback activity by US equity real estate investment trusts (REITs) more than doubled in the first quarter of the year [2] - The total amount spent on buybacks reached approximately $993.2 million in common stock [2] Industry Summary - The analysis conducted by S&P Global Market Intelligence indicates a significant increase in buyback activities among US REITs [2] - This trend reflects a growing confidence in the market and a strategic move by REITs to enhance shareholder value [2]

Group 1 - Real estate investment trusts (REITs) have shown increased volatility since the onset of COVID-19, initially experiencing a significant decline alongside other asset classes [1] - Following the initial downturn, the REIT sector has seen a notable recovery [1] Group 2 - Roberts Berzins has over ten years of experience in financial management, focusing on helping top-tier corporates with financial strategies and large-scale financings [1] - Berzins has contributed to institutionalizing the REIT framework in Latvia to enhance liquidity in pan-Baltic capital markets [1] - His policy-level work includes developing national state-owned enterprise (SOE) financing guidelines and frameworks for channeling private capital into affordable housing [1]

Financial Data and Key Metrics Changes - In the first quarter, comparable hotels total revenue was $324 million, down 0.4% year-over-year, while adjusted hotel EBITDA was $105 million, down approximately 5% [8][16] - Comparable hotels RevPAR was $111, down 0.5%, with ADR at $157, up 1%, and occupancy at 71%, down 1.5% compared to the same period last year [8][9] Business Line Data and Key Metrics Changes - The company completed the sale of two hotels for approximately $21 million and entered into an agreement for the sale of the Houston Marriott for $16 million [2] - The company has repurchased approximately $32 million of common shares and paid distributions of nearly $89 million while maintaining a strong balance sheet [2][3] Market Data and Key Metrics Changes - The company noted that demand remained healthy across its portfolio despite challenges, with specific markets like Houston and Los Angeles showing RevPAR growth of nearly 8% and over 20%, respectively [11][12] - Government demand represented about 5% of the occupancy mix, with a decline in government room nights in March but an improvement in April [36][39] Company Strategy and Development Direction - The company is focused on capital allocation to refine its portfolio, drive earnings per share, and maximize long-term shareholder value [2][5] - The company plans to reinvest between $80 million and $90 million in its hotels during 2025, with major renovations at approximately 20 hotels [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating market shifts and highlighted the importance of a diversified portfolio to mitigate risks [7][20] - The company anticipates net income for the full year to be between $167 million and $195 million, with a decrease in RevPAR guidance reflecting macroeconomic uncertainties [19][20] Other Important Information - The company has approximately $1.5 billion in total outstanding debt, with a weighted average interest rate of 4.8% and cash on hand of approximately $15 million [18] - The company has completed approximately $338 million in hotel sales since the onset of the pandemic, allowing it to forego over $100 million in capital investments [4] Q&A Session Summary Question: Can you provide more color on the RevPAR guide? - Management indicated that the booking position has declined, leading to a 200 basis point drop in RevPAR expectations for the second half of the year, with Q2 expected to be the worst quarter [24][25] Question: How is the transaction market looking moving forward? - Management noted that the transaction market remains unchanged, with opportunities primarily in smaller asset sales, and they are optimistic about redeploying proceeds into share repurchases [27][28] Question: What are the trends in group bookings? - Management reported strong group bookings, particularly in smaller corporate and leisure groups, with no significant hesitancy observed [61][62] Question: How does the company view its CapEx philosophy? - Management stated that they plan to spend between $80 million and $90 million on CapEx this year, focusing on renovations and maintaining a competitive edge [40][42] Question: How is the company positioned for potential economic downturns? - Management expressed confidence that the lack of new supply in their markets positions them well to weather economic downturns, limiting downside risk and enhancing upside potential [75][76]

Financial Data and Key Metrics Changes - In the first quarter, total revenue for comparable hotels was $324 million, down 0.4% year-over-year, while adjusted hotel EBITDA was $105 million, down approximately 5% [9][16] - Comparable hotels RevPAR was $111, down 0.5%, with ADR at $157, up 1%, and occupancy at 71%, down 1.5% compared to the same period last year [9][10] - MFFO for the quarter was approximately $76 million, or $0.32 per share, down approximately 6% on a per share basis compared to the first quarter of the previous year [17] Business Line Data and Key Metrics Changes - Comparable hotels total hotel expenses increased by 2.2% year-over-year, with total payroll per occupied room at $42, up 4% [15][16] - Comparable hotels adjusted hotel EBITDA margin was 32.3%, down 180 basis points year-over-year, indicating effective cost management despite revenue challenges [16] Market Data and Key Metrics Changes - Government demand represented approximately 5% of the occupancy mix, down from 7% earlier in the year, with a decline in government room nights of about 15% in March [11][34] - Houston properties saw RevPAR growth of almost 8% due to a strong convention calendar, while Los Angeles hotels experienced over 20% RevPAR growth [12][13] Company Strategy and Development Direction - The company plans to reinvest between $80 million and $90 million in hotel renovations in 2025, focusing on maintaining competitiveness in the market [6][7] - The company has completed approximately $338 million in hotel sales since the pandemic began, optimizing its portfolio and reducing capital investment needs [4][5] Management's Comments on Operating Environment and Future Outlook - Management anticipates a challenging transaction market but remains confident in executing selective asset sales to optimize portfolio concentration [2][5] - The company expects net income for the full year to be between $167 million and $195 million, with a comparable hotels RevPAR change projected to be between negative 11% [18][19] Other Important Information - The company has approximately $1.5 billion in total outstanding debt, with a weighted average interest rate of 4.8% and a significant portion of debt fixed or hedged [17] - The company is closely monitoring potential impacts from tariffs on project costs and timelines, although no known delays are currently affecting planned projects [7] Q&A Session Summary Question: Can you provide more color on the RevPAR guidance? - Management indicated that the booking position has declined by 200 basis points since late February, with Q2 expected to be the worst quarter, implying about 1% RevPAR growth for the second half of the year [22][23] Question: How is the transaction market looking moving forward? - The transaction market remains largely unchanged, with uncertainty keeping larger transactions on the sidelines, but opportunities for smaller asset sales continue to exist [25][26] Question: What is the company's philosophy on CapEx spending? - Historically, the company has spent between 5% to 6% of revenues on CapEx, with plans to spend $80 million to $90 million this year on renovations and other needs [39][40] Question: How is the company managing cost mitigation? - The company is focused on productivity and reducing contract labor, achieving a reduction to 7% of total wages, while maintaining strong occupancy levels [65][66] Question: How does the company view its position in a potential recession? - Management believes the lack of new supply in their markets positions the company favorably, limiting downside risk and enhancing upside potential [68][69]

Hotel Portfolio - As of March 31, 2025, the Company owned 219 hotels with a total of 29,558 guest rooms, a decrease from 224 hotels and 29,886 guest rooms as of March 31, 2024[84][90]. - As of March 31, 2025, the company owns 219 hotels and one non-hotel property, with a total of 30,000 guest rooms[120]. - The average number of guest rooms per hotel in the portfolio is approximately 137[120]. - The largest hotel in the portfolio is located in San Diego, CA, with 245 guest rooms[121]. - The company has expanded its portfolio with various brands including Embassy Suites, Hilton Garden Inn, and Residence Inn across multiple states[121][122][123]. - The company continues to focus on market expansion, particularly in states like California and Florida, with multiple new hotel openings planned[121][122]. Financial Performance - Total revenue for the three months ended March 31, 2025, was $327.7 million, a decrease of 0.5% compared to $329.5 million for the same period in 2024[93][99]. - Net income for the three months ended March 31, 2025, was $31.2 million, down 42.2% from $54.1 million in the same period of 2024[93]. - Average Daily Rate (ADR) increased by 2.0% to $156.24 for the three months ended March 31, 2025, compared to $153.18 in 2024[93][100]. - Revenue per Available Room (RevPAR) increased by 0.7% to $111.04 for the three months ended March 31, 2025, compared to $110.25 in 2024[93][100]. - EBITDA for Q1 2025 was $98.9 million, compared to $118.5 million in Q1 2024, reflecting a decrease in operational performance[117]. Operating Expenses - The Company’s hotel operating expenses increased by 1.3% to $199.9 million for the three months ended March 31, 2025, compared to $197.3 million in 2024[93]. - Hotel operating expenses for Q1 2025 totaled $199.9 million, representing 61.0% of total revenue, compared to $197.3 million or 59.9% in Q1 2024[101]. - Property taxes, insurance, and other expenses increased to $23.4 million in Q1 2025, accounting for 7.1% of total revenue, up from $21.0 million or 6.4% in Q1 2024[102]. - General and administrative expenses decreased to $9.2 million in Q1 2025, representing 2.8% of total revenue, down from $10.6 million or 3.2% in Q1 2024[103]. - Depreciation and amortization expense rose to $47.9 million in Q1 2025, compared to $46.8 million in Q1 2024, primarily due to acquisitions and renovations[104][105]. - Interest and other expenses, net, increased to $19.4 million in Q1 2025 from $17.3 million in Q1 2024, influenced by higher average borrowings and interest rates[106][107]. Cash Flow and Distributions - For the three months ended March 31, 2025, the company paid distributions of $0.29 per common share, totaling $69.6 million[138]. - The current annual distribution rate is $0.96 per common share, with monthly distributions of $0.08 expected to continue[139]. - The company declared a monthly cash distribution of $0.08 per common share on March 20, 2025, payable on April 15, 2025[138]. - The company anticipates that cash flow from operations and availability under its Revolving Credit Facility will meet its liquidity requirements, including required distributions to shareholders[136]. - The company may utilize additional financing sources to maintain its distribution rate if cash flows from operations are insufficient[139]. Debt and Financing - As of March 31, 2025, the company had total outstanding debt of $1.5 billion, consisting of $252.3 million in mortgage debt and $1.3 billion under unsecured credit facilities[131]. - The Company had approximately $361.1 million in principal and interest payments due on its debt over the next 12 months, including a $25.9 million mortgage maturing in Q2 2025[142]. - As of March 31, 2025, approximately $428.0 million, or 28% of the Company's total debt, was subject to variable interest rates, with every 100 basis points change impacting annual net income by approximately $4.3 million[155]. - The Company had 12 interest rate swap agreements fixing interest payments on approximately $735.0 million of variable-rate debt, with maturity dates ranging from May 2025 to December 2029[156]. - The company has a universal shelf registration statement that allows for the offering of an indeterminate number of common shares and other securities[134]. Capital Expenditures and Investments - The Company invested approximately $19.6 million in capital expenditures during the three months ended March 31, 2025, and anticipates spending $80 million to $90 million in 2025 for renovations across approximately 20 properties[141]. - The Company approved a one-year extension of its Share Repurchase Program, authorizing repurchases up to $335.4 million, with approximately $274.5 million remaining available as of March 31, 2025[140]. - During the three months ended March 31, 2025, the Company repurchased approximately 1.9 million common shares at an average price of $13.61 per share, totaling approximately $26.3 million[140]. - The company plans to use future net proceeds from share sales for acquisitions, debt repayment, capital expenditures, and working capital[135]. Future Outlook - The Company expects RevPAR for its Comparable Hotels to seasonally improve and to be in line with 2024 for the full year of 2025, assuming current macroeconomic conditions persist[98]. - The company anticipates a more favorable operating expense environment for the remainder of 2025, despite ongoing inflationary pressures and labor market challenges[101]. - The Company expects inflationary pressures and supply chain issues to potentially increase costs and delays for anticipated renovation projects[141]. - Future outlook includes a focus on enhancing customer experience through new technology and service offerings[120]. - The company is exploring new strategies for growth, including potential mergers and acquisitions to enhance its market presence[120].

Financial Performance - For Q1 2025, Apple Hospitality reported a net income of $31.2 million, down 42.2% from $54.1 million in Q1 2024[2] - Adjusted EBITDAre for Q1 2025 was approximately $95.4 million, a decrease of 5.4% compared to $100.8 million in Q1 2024[12] - Comparable Hotels Adjusted Hotel EBITDA was approximately $104.9 million for Q1 2025, down 5.4% from $110.9 million in Q1 2024[12] - Total revenue for Q1 2025 was $327.7 million, a decrease of 0.5% from $329.5 million in Q1 2024[35] - Operating income decreased by 29.0% to $50.9 million in Q1 2025 from $71.6 million in Q1 2024[38] - Comparable Hotels total revenue was $324.3 million, down 0.4% from $325.4 million in the same period last year[38] - Funds from operations (FFO) for Q1 2025 were $74,845, compared to $82,343 in Q1 2024, indicating a decrease of approximately 9%[61] - Comprehensive income for Q1 2025 was $24.2 million, down from $57.8 million in Q1 2024[35] Operational Metrics - The average daily rate (ADR) for Comparable Hotels increased by 1.0% to $156.56 in Q1 2025, while occupancy decreased by 1.5% to 71.1%[9] - The operating margin for Q1 2025 was 15.5%, down 620 basis points from 21.7% in Q1 2024[38] - Average Daily Rate (ADR) for Comparable Hotels increased by 1.0% to $156.56 in Q1 2025 from $155.05 in Q1 2024[38] - Occupancy rate for Comparable Hotels was 71.1%, a decrease of 1.5% from 72.2% in Q1 2024[38] - Revenue per Available Room (RevPAR) decreased slightly by 0.5% to $111.36 in Q1 2025 from $111.97 in Q1 2024[73] - In the top 30 markets, occupancy was 76.2% in Q1 2025, a decrease of 1.2% from 77.1% in Q1 2024[73] - The suburban location category had the highest occupancy at 71.7%, with a 0.4% increase from the previous year[76] Debt and Capital Management - The company maintained a total debt to total capitalization ratio of approximately 33% as of March 31, 2025[12] - As of March 31, 2025, the Company had approximately $1.5 billion of total outstanding debt with a weighted-average interest rate of approximately 4.8%[19] - The Company repaid a secured mortgage loan of approximately $7 million in April 2025, increasing the number of unencumbered hotels to 207[19] - Total debt as of March 31, 2025, is $1,540.26 million, with maturities of $293.001 million in 2025 and $352.649 million in 2026[67] - Average interest rates for total debt are 4.8% for 2025, 4.9% for 2026, and decreasing to 3.6% by 2029[67] Investments and Acquisitions - The company sold two hotels for a combined gross sales price of approximately $21 million during Q1 2025, with a gain of approximately $3.6 million[12] - Apple Hospitality has two hotels under contract for purchase with a total anticipated purchase price of approximately $117 million[13] - The Company anticipates acquiring the 126-room Homewood Suites by Hilton Tampa Brandon for approximately $18.8 million in June 2025[17] - The Company expects to acquire a Motto by Hilton in downtown Nashville, Tennessee, for approximately $98.2 million, with an expected 260 rooms, in late 2025[17] - The company invested approximately $20 million in capital expenditures during Q1 2025 and anticipates investing $80 million to $90 million in capital improvements throughout 2025[16] Shareholder Returns - Monthly distributions paid were $0.29 per common share, including a special cash distribution of $0.05 per share[12] - The Company paid distributions totaling $0.29 per common share during the three months ended March 31, 2025, representing an annual yield of approximately 8.1%[22] - The Company purchased approximately 1.9 million common shares at a weighted-average price of approximately $13.61 per share for a total of approximately $26.3 million during the three months ended March 31, 2025[20] Future Outlook - The Company updated its 2025 outlook, decreasing Net Income by $6.5 million and Adjusted EBITDAre by $14 million compared to previous guidance[23] - The anticipated range for 2025 Net Income is between $167 million and $195 million, with Comparable Hotels RevPAR Change guidance of -1.0% to 1.0%[23] - The Adjusted Hotel EBITDA guidance for 2025 is projected to be between $471,301 and $496,001[63] - For the year ending December 31, 2025, the net income guidance ranges from $166,534 to $194,834, with an EBITDA forecast between $440,742 and $464,442[63] Strategic Focus - The company emphasizes the importance of Adjusted Hotel EBITDA as a key performance measure for evaluating hotel operations and management effectiveness[55] - The company plans to focus on market and location metrics for more effective portfolio performance analysis moving forward[71] - The company operates a total of 218 hotels, with 123 in the top 30 markets contributing 79.4% of Adjusted Hotel EBITDA[73] - Los Angeles, CA, showed a significant occupancy increase of 7.8% to 86.1% in Q1 2025 compared to 79.9% in Q1 2024[73]

Group 1 - The recent market selloff has created new opportunities for capital deployment at higher yields [1] Group 2 - Roberts Berzins has over a decade of experience in financial management, focusing on corporate financial strategies and large-scale financings [2] - He has contributed to the institutionalization of the REIT framework in Latvia to enhance liquidity in pan-Baltic capital markets [2] - His work includes developing national SOE financing guidelines and frameworks for channeling private capital into affordable housing [2]