Playa Hotels & Resorts N.V. (NASDAQ:PLYA) Q1 2019 Earnings Conference Call April 8, 2019 9:00 AM ET Company Participants Ryan Hymel - Executive Vice President and Chief Financial Officer Bruce Wardinski - Chairman and Chief Executive Officer Conference Call Participants Chris Woronka - Deutsche Bank Tyler Batory - Janney Capital Markets Brian Dobson - Instinet Nomura Patrick Scholes - SunTrust Smedes Rose - Citi Greg Gibas - Northland Securities Operator Good morning, my name is Shenica and I will be your c ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________ FORM 10-Q _______________________________________________ ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended March 31, 2019 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. COMMISSION FILE NO. 1-38012 Playa Hotels & Resorts N.V. (Exact name of registrant as specified in its c ...

Playa Hotels & Resorts NV (NASDAQ:PLYA) Q4 2018 Earnings Conference Call March 1, 2019 9:00 AM ET Company Participants Ryan Hymel - Executive Vice President & Chief Financial Officer Bruce Wardinski - Chairman & Chief Executive Officer Conference Call Participants Chris Woronka - Deutsche Bank Gregory Miller - SunTrust Robinson Smedes Rose - Citi Tyler Batory - Jenney Capital Markets Paul Penney - Northland Capital Operator Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter Ea ...

Financial Performance - Q4 2018 - Total net revenue for the total portfolio was $123.5 million[11], while adjusted EBITDA reached $37.1 million, a 19.5% increase compared to 2017[11, 12] - For the comparable portfolio, net revenue increased by 0.7% to $124.4 million, and adjusted EBITDA increased by 9.6% to $34.1 million[26] - Net Package RevPAR for the total portfolio decreased by 1.1% while Net Package ADR decreased by 0.8%[8] - Net Package RevPAR for the comparable portfolio increased by 1.3%[23] Financial Performance - Year Ended 2018 - Total net revenue for the total portfolio was $598.6 million, a 9.6% increase compared to 2017[42], and adjusted EBITDA increased by 4.8% to $179.0 million[42, 43] - For the comparable portfolio, net revenue increased slightly by 0.3% to $547.8 million, but adjusted EBITDA decreased by 1.3% to $168.6 million[55, 56] - Net Package RevPAR for the total portfolio decreased by 1.6%[38] - Net Package RevPAR for the comparable portfolio increased by 0.6%[52] Regional Performance - Q4 2018 - Resort EBITDA in Mexico increased 14.8% to $31.8 million[12, 28] - Resort EBITDA in the Dominican Republic decreased 3.0% to $6.1 million[12, 28] - Resort EBITDA in Jamaica increased significantly by 70.8% to $7.5 million[12] Debt Overview - Total debt stood at $996.5 million as of December 31, 2018[64] - Net debt was $880.1 million, which adjusted for Cap Cana spend is $738.2 million[64] - The company's revolving credit facility had a total borrowing capacity of $100.0 million[65]

PART I [Business](index=6&type=section&id=Item%201.%20Business) Playa Hotels & Resorts N.V. operates 21 all-inclusive resorts in Mexico and the Caribbean, focusing on strategic brand partnerships and technology to drive growth - As of December 31, 2018, Playa owned or managed **21 resorts** with **7,908 rooms** across Mexico, Jamaica, and the Dominican Republic[23](index=23&type=chunk) - Strategic relationships with Hyatt and Hilton provide access to approximately **100 million** and **85 million** loyalty program members, driving revenue and reducing acquisition costs[26](index=26&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - In June 2018, Playa acquired **five all-inclusive resorts** and **two developable land sites** in Jamaica through a business combination with Sagicor[20](index=20&type=chunk) - Utilization of new technologies increased direct bookings from **18.2%** in 2017 to **21.6%** in 2018[31](index=31&type=chunk) - Exclusive agreements allow operation of Hyatt Ziva and Hyatt Zilara brands through 2021 and potential development of up to **eight additional Hilton resorts** by 2025[36](index=36&type=chunk)[37](index=37&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including geographic concentration, reliance on brand partnerships, financial volatility, and an identified material weakness in IT controls - Significant geographic concentration in Mexico, accounting for **57.8%** of 2018 Total Net Revenue, exposes the company to regional risks[56](index=56&type=chunk) - Business highly dependent on Hyatt and Hilton relationships; failure to maintain standards could lead to franchise agreement termination, harming resort value and performance[60](index=60&type=chunk)[71](index=71&type=chunk) - Exposure to currency exchange rate fluctuations as most operating expenses are in local currencies while revenues are primarily in U.S. dollars[82](index=82&type=chunk) - Substantial debt of **$996.5 million** as of December 31, 2018, could restrict operations, limit investment, and increase vulnerability to rising interest rates[104](index=104&type=chunk) - A material weakness in internal IT controls (system access, change management, segregation of duties) was identified as of December 31, 2018, with ongoing remediation efforts[125](index=125&type=chunk)[126](index=126&type=chunk) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - No unresolved staff comments to report[184](index=184&type=chunk) [Properties](index=37&type=section&id=Item%202.%20Properties) Overview of the company's 21 resorts across four geographic segments, detailing owned and managed rooms, and a significant Cap Cana development project Portfolio Overview as of December 31, 2018 | Category | Number of Rooms | | :--- | :--- | | Total Rooms Owned | 7,456 | | Total Rooms Operated (Managed) | 452 | | **Total Rooms Owned and Operated** | **7,908** | - The portfolio is organized into **four geographic business segments**: Yucatán Peninsula, Pacific Coast, Dominican Republic, and Jamaica[185](index=185&type=chunk) - Development of Hyatt Ziva and Hyatt Zilara Cap Cana in the Dominican Republic is underway, expected to add **750 rooms** by Q4 2019 with an estimated budget of **$202.0 million**[214](index=214&type=chunk) [Legal Proceedings](index=42&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to ordinary course legal claims and proceedings, none expected to materially affect financial condition or operations - Ordinary course claims and proceedings are not expected to materially affect the company's financial condition[215](index=215&type=chunk) [Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[216](index=216&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=42&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Overview of the company's NASDAQ-listed ordinary shares, dividend policy, and the initiation of a **$100.0 million** share repurchase program in December 2018 - The company's ordinary shares trade on NASDAQ under the ticker symbol **PLYA**[218](index=218&type=chunk) - Playa has never paid cash dividends and does not anticipate future payments, partly due to credit facility restrictions[220](index=220&type=chunk) - In December 2018, the Board authorized a share repurchase program of up to **$100.0 million** of outstanding ordinary shares[227](index=227&type=chunk) Q4 2018 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | Total Value (approx.) | | :--- | :--- | :--- | :--- | | Dec 1 - Dec 31, 2018 | 47,241 | $6.65 | $314,000 | [Selected Financial Data](index=44&type=section&id=Item%206.%20Selected%20Financial%20Data) A five-year summary of historical financial data, highlighting consistent revenue growth, fluctuating net income, and increasing assets and debt Selected Consolidated Statement of Operations Data (in thousands) | Year Ended Dec 31, | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total revenue | $617,013 | $559,545 | $521,491 | $408,345 | $367,237 | | Operating income (loss) | $90,597 | $88,669 | $84,631 | $58,692 | $(13,457) | | Net income (loss) | $18,977 | $(241) | $20,216 | $9,711 | $(38,216) | Selected Consolidated Balance Sheet Data (in thousands) | As of Dec 31, | 2018 | 2017 | | :--- | :--- | | Total assets | $2,135,158 | $1,737,823 | | Total debt | $989,387 | $898,215 | | Total equity | $839,841 | $599,549 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analysis of 2018 financial performance, highlighting revenue growth driven by acquisitions, improved net income, liquidity, and debt utilization for development Financial Performance Summary (2018 vs. 2017, in thousands) | Metric | 2018 | 2017 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $617,013 | $559,545 | 10.3% | | Operating Income | $90,597 | $88,669 | 2.2% | | Net Income (Loss) | $18,977 | $(241) | N/A | | Adjusted EBITDA | $179,031 | $170,865 | 4.8% | - The **$50.8 million** increase in 2018 revenue was primarily driven by the acquisition of Sagicor Assets[245](index=245&type=chunk) - On a comparable portfolio basis, Total Net Revenue increased by only **0.3%** and Adjusted EBITDA decreased by **1.3%** year-over-year[244](index=244&type=chunk) - As of December 31, 2018, the company held **$116.4 million** in cash and cash equivalents with full availability under its **$100.0 million** Revolving Credit Facility[328](index=328&type=chunk) - Total debt outstanding was **$996.5 million** as of year-end 2018, primarily a term loan facility maturing in 2024[329](index=329&type=chunk) [Results of Operations](index=49&type=section&id=Results%20of%20Operations) Detailed comparison of 2018, 2017, and 2016 operating results, highlighting revenue growth driven by acquisitions, net income fluctuations, and segment-specific performance Year-over-Year Performance Comparison (in thousands) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Total Revenue | $617,013 | $559,545 | $521,491 | | Net Income (Loss) | $18,977 | $(241) | $20,216 | | Adjusted EBITDA | $179,031 | $170,865 | $154,669 | - The Jamaica segment's Owned Net Revenue increased by **93.8%** in 2018, driven by the Sagicor acquisition and strong performance at Hyatt Ziva/Zilara Rose Hall[290](index=290&type=chunk)[302](index=302&type=chunk) - The Yucatán Peninsula segment's Owned Net Revenue decreased by **3.6%** in 2018 due to lower Net Package ADR and Occupancy, partially offset by Hyatt Ziva Cancun's strong performance[290](index=290&type=chunk)[292](index=292&type=chunk) - The 2017 net loss was primarily caused by a **$25.1 million** loss on extinguishment of debt from refinancing activities[270](index=270&type=chunk) [Liquidity and Capital Resources](index=69&type=section&id=Liquidity%20and%20Capital%20Resources) Analysis of liquidity sources, including cash from operations and credit facilities, and uses of capital for debt service, development projects, and acquisitions Cash Flow Summary (in thousands) | Year Ended Dec 31, | 2018 | 2017 | | :--- | :--- | :--- | | Net cash from operating activities | $114,430 | $64,191 | | Net cash used in investing activities | $(204,586) | $(109,829) | | Net cash from financing activities | $89,280 | $119,704 | - Major 2018 investing activities included **$93.1 million** for the Sagicor acquisition and **$110.9 million** in capital expenditures, with **$82.3 million** for Cap Cana development[337](index=337&type=chunk) - Total capital expenditures in 2018 were **$110.9 million**, a significant increase from **$60.6 million** in 2017, primarily due to the Cap Cana project[340](index=340&type=chunk) Contractual Obligations as of Dec 31, 2018 (in thousands) | Obligation | Total Amount | | :--- | :--- | | Term Loan principal payments | $996,548 | | Term Loan interest payments | $288,821 | | **Total Contractual Obligations** | **$1,313,485** | [Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discussion of primary market risks, including interest rate risk on variable-rate debt and foreign currency risk from local currency operating expenses - A **1%** increase in market interest rates on floating rate debt would increase annual interest expense by approximately **$2.0 million**[387](index=387&type=chunk) - The company faces foreign currency risk as **80.2%** of 2018 operating expenses were in local currencies, while most revenue is in U.S. dollars[389](index=389&type=chunk) - A hypothetical **5%** adverse change in foreign exchange rates would have impacted 2018 pre-tax net income by approximately **$8.7 million** (Mexican Peso), **$3.4 million** (Dominican Peso), and **$4.1 million** (Jamaican Dollar)[390](index=390&type=chunk) [Financial Statements and Supplementary Data](index=75&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Presents audited consolidated financial statements for 2018, 2017, and 2016, including balance sheets, statements of operations, and cash flows, with detailed notes Consolidated Balance Sheet Highlights (in thousands) | As of December 31, | 2018 | 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $116,353 | $117,229 | | Property and equipment, net | $1,808,412 | $1,466,326 | | Total assets | $2,135,158 | $1,737,823 | | Debt | $989,387 | $898,215 | | Total liabilities | $1,295,317 | $1,138,274 | | Total shareholders' equity | $839,841 | $599,549 | Consolidated Statement of Operations Highlights (in thousands) | Year Ended December 31, | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Total revenue | $617,013 | $559,545 | $521,491 | | Operating income | $90,597 | $88,669 | $84,631 | | Net income (loss) | $18,977 | $(241) | $20,216 | - The Sagicor Assets acquisition on June 1, 2018, totaled **$308.5 million**, comprising **$93.1 million** in cash and **20 million** ordinary shares valued at **$215.4 million**[465](index=465&type=chunk)[466](index=466&type=chunk) - The company's debt as of December 31, 2018, primarily consists of a **$996.5 million** term loan facility maturing in 2024[553](index=553&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=122&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - No changes in or disagreements with accountants to report[616](index=616&type=chunk) [Controls and Procedures](index=122&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of December 31, 2018, due to an unremediated material weakness in IT general controls - Management concluded that disclosure controls and procedures were **not effective** as of December 31, 2018[618](index=618&type=chunk) - Ineffectiveness stems from an unremediated material weakness in IT controls regarding system access, change management, and segregation of duties[620](index=620&type=chunk) - Remediation efforts are underway, including phased implementation of a new SAP system throughout 2019[620](index=620&type=chunk) - The internal controls assessment as of December 31, 2018, excluded recently acquired Sagicor Assets, as permitted by SEC guidelines[622](index=622&type=chunk) [Other Information](index=123&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - No other information to report[624](index=624&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=124&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[627](index=627&type=chunk) [Executive Compensation](index=124&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[628](index=628&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=124&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[629](index=629&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=124&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[630](index=630&type=chunk) [Principal Accountant Fees and Services](index=124&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the company's 2019 Proxy Statement[631](index=631&type=chunk) PART IV [Exhibits and Financial Statement Schedule](index=125&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule) Lists all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - This section contains the list of all financial statements, schedules, and exhibits filed with the 10-K report[634](index=634&type=chunk)[637](index=637&type=chunk) [Form 10-K Summary](index=128&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[644](index=644&type=chunk)