Sotherly Hotels Inc. (NASDAQ:SOHO) Q3 2023 Earnings Conference Call November 9, 2023 10:00 AM ET Company Participants Mack Sims - Vice President-Operations & IR Scott Kucinski - Executive Vice President & Chief Operating Officer Tony Domalski - VP, Secretary & Chief Financial Officer Dave Folsom - President, Chief Executive Officer & Director Conference Call Participants Alexander Goldfarb - Piper Sandler Jeff Hassannia - HD Enterprise Operator Hello, and welcome to Sotherly Hotels Third Quarter 2023 Earnin ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . SOTHERLY HOTELS INC. (Exact name of registrant as specified in its charter) MARYLAND 001-32379 20-1531029 (State or Other Jurisdiction of Incorporation or Organizati ...

Financial Data and Key Metrics Changes - For the second quarter, RevPAR was $131.16, driven by an occupancy of 70.6% and an ADR of $185.82, representing a 5% increase over the same period in 2022 [4][16] - Adjusted FFO for the quarter was approximately $7 million, a 12.9% increase year-over-year, while year-to-date adjusted FFO was approximately $11.7 million, reflecting a 56.5% improvement [9] - Total revenue for the second quarter was approximately $49 million, up 3.9% from the same quarter in 2022, and year-to-date total revenue was approximately $92.5 million, an 8.2% increase [20] Business Line Data and Key Metrics Changes - The portfolio's RevPAR for the same-store portfolio increased by 11.9% year-to-date, driven by a 5.8% increase in both occupancy and rate [16] - The Hyatt Centric Arlington outperformed last year's RevPAR by nearly 25%, fueled by a recovery in group and business demand [18] - The DeSoto Savannah improved RevPAR by nearly 25% compared to 2019, with significant rate growth of nearly 19% [34] Market Data and Key Metrics Changes - Demand softened in South Florida markets due to increased competition from international destinations and cruise lines, impacting group bookings in Atlanta due to the Hollywood writers and actors strike [13] - The Washington, D.C. market hotels are nearing full recovery, while Houston, Philadelphia, and Atlanta have significant upside potential as corporate travel remains below pre-pandemic levels [6] - Forward bookings continue to trend positively despite recession concerns, with group revenue pacing 24% ahead of last year and business transient segment pacing 18% ahead [26][42] Company Strategy and Development Direction - The company aims to unlock potential in urban locations that are more dependent on corporate transient and group demand, with a focus on stabilizing margins as staffing and amenity levels normalize [14][19] - The company announced a catch-up payment for preferred shareholders, reducing unpaid cumulative preferred dividends by approximately $1.9 million, indicating a priority on managing dividend obligations [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the portfolio's performance, noting that RevPAR is expected to range between 103% and 109% of Q3 2022's RevPAR [42] - The company anticipates capital expenditures to align with historical norms, estimating approximately $7.4 million for 2023 [22] - Management highlighted the importance of strong rates in driving RevPAR growth and overall profitability, with occupancy showing sequential improvement [25] Other Important Information - The company had total cash of approximately $32.2 million as of June 30, 2023, with outstanding debt of approximately $322.7 million [21] - Insurance premiums increased by over $2 million year-over-year, representing about a 50% change, primarily due to property coverage for coastal properties [29][30] Q&A Session Summary Question: Is the portfolio back to a normalized level? - Management indicated that there is still growth potential in certain markets, particularly in Philadelphia, Houston, and Atlanta, which have not yet fully normalized [43] Question: What is the outlook for insurance premiums? - Management noted that while there was a significant increase this year, they expect to have a clearer picture after hurricane season regarding future premium changes [46] Question: What is the current unpaid balance for preferred dividends? - The current unpaid balance is $20 million, with management expressing a cautious approach to future payments [49]

[Part I - Financial Information](index=5&type=section&id=PART%20I) [Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Sotherly Hotels Inc. and Sotherly Hotels LP for the three months ended March 31, 2023, and 2022, including balance sheets, statements of operations, and cash flows, with detailed notes on accounting policies, debt, and equity [Sotherly Hotels Inc. Financial Statements](index=5&type=section&id=Sotherly%20Hotels%20Inc.%20Financial%20Statements) For Q1 2023, Sotherly Hotels Inc. reported total revenues of **$43.5 million**, shifting from a **net loss of $0.8 million** in Q1 2022 to a **net income of $1.4 million**, with total assets at **$407.2 million** and net cash from operations at **$10.0 million** Sotherly Hotels Inc. Consolidated Balance Sheet Summary (As of March 31, 2023) | Metric | Amount (USD) | | :--- | :--- | | Total Assets | $407,218,526 | | Total Liabilities | $354,049,825 | | Total Equity | $53,168,701 | Sotherly Hotels Inc. Consolidated Statement of Operations Summary (Three Months Ended March 31) | Metric | 2023 (USD) | 2022 (USD) | | :--- | :--- | :--- | | Total Revenue | $43,491,277 | $38,352,603 | | Net Operating Income | $5,520,122 | $3,925,204 | | Net Income (Loss) | $1,387,514 | $(810,944) | | Net Loss Attributable to Common Stockholders | $(581,838) | $(2,507,765) | | Basic Net Loss Per Share | $(0.03) | $(0.15) | - Net cash provided by operating activities increased to approximately **$10.0 million** for the three months ended March 31, 2023, up from **$7.5 million** in the same period of 2022[28](index=28&type=chunk) [Notes to Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's portfolio of ten hotels, significant transactions, **$318.6 million** in mortgage debt, and **$23.9 million** in undeclared cumulative preferred dividends as of March 31, 2023, with subsequent events including a mortgage refinancing - As of March 31, 2023, the company's portfolio consisted of **ten hotel properties** with **2,786 rooms**, two hotel commercial condominium units, and their associated rental programs[45](index=45&type=chunk) - As of March 31, 2023, the company had approximately **$318.6 million** of outstanding mortgage debt[99](index=99&type=chunk) - As of March 31, 2023, total undeclared and unpaid cumulative cash dividends on Series B, C, and D preferred stock were approximately **$23.9 million**[126](index=126&type=chunk)[128](index=128&type=chunk) - Subsequent to the quarter end, on May 4, 2023, the company refinanced the mortgage on the DoubleTree by Hilton Laurel hotel with a new **$10.0 million** loan maturing in 2028 at a fixed rate of **7.35%**[171](index=171&type=chunk)[102](index=102&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a **13.4% increase in total revenue** for Q1 2023, a shift to **$1.4 million net income**, adequate liquidity with **$32.0 million cash**, and a persistent **$23.9 million preferred dividend arrearage** [Results of Operations](index=35&type=section&id=Results%20of%20Operations) For Q1 2023, total revenue increased by **13.4% to $43.5 million** year-over-year, driven by a recovery in leisure, small group, and corporate travel, leading to a **14.3% growth in room revenue** and improved operational efficiency Key Portfolio Operating Metrics (Composite) | Metric | Q1 2023 | Q1 2022 | Q1 2019 | | :--- | :--- | :--- | :--- | | Occupancy % | 60.4% | 53.9% | 69.9% | | ADR | $197.07 | $187.23 | $174.24 | | RevPAR | $119.06 | $100.89 | $121.86 | - Total revenue for Q1 2023 increased by approximately **$5.1 million**, or **13.4%**, to **$43.5 million** compared to Q1 2022, primarily due to increased demand from leisure, small group, and corporate business travel[186](index=186&type=chunk) - Food and beverage revenues saw a substantial increase of **55.7%** to **$8.7 million** in Q1 2023 from **$5.6 million** in Q1 2022[188](index=188&type=chunk) - Interest expense decreased by **28.0%** to **$4.1 million** in Q1 2023, down from **$5.7 million** in Q1 2022, mainly due to debt reduction following asset sales and the extinguishment of Secured Notes[197](index=197&type=chunk) [Non-GAAP Financial Measures](index=38&type=section&id=Non-GAAP%20Financial%20Measures) The company's key non-GAAP performance metrics showed significant improvement in Q1 2023, with FFO attributable to common stockholders and unitholders more than doubling to **$3.9 million**, and Hotel EBITDA growing to **$12.1 million** FFO and Adjusted FFO Reconciliation (Three Months Ended March 31) | Metric (in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net income (loss) | $1.4 | $(0.8) | | FFO attributable to common stockholders and unitholders | $3.9 | $1.8 | | Adjusted FFO attributable to common stockholders and unitholders | $4.7 | $1.2 | | FFO per common share and unit | $0.20 | $0.10 | | Adjusted FFO per common share and unit | $0.24 | $0.07 | Hotel EBITDA Reconciliation (Three Months Ended March 31) | Metric (in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net income (loss) | $1.4 | $(0.8) | | EBITDA | $9.9 | $9.5 | | Hotel EBITDA | $12.1 | $10.0 | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, the company had approximately **$32.0 million** in total cash, with **$7.3 million** in planned capital expenditures for 2023, and is seeking a waiver for non-compliance with a DSCR covenant on a mortgage maturing in October 2023 - As of March 31, 2023, the company had approximately **$23.4 million** of unrestricted cash and **$8.6 million** of restricted cash[208](index=208&type=chunk) - Total capital expenditures for 2023 are expected to be approximately **$7.3 million**[214](index=214&type=chunk) - The company was not in compliance with the Debt Service Coverage Requirement (DSCR) covenant for the mortgage on the DoubleTree by Hilton Philadelphia Airport and anticipates receiving a waiver, with this mortgage maturing in October 2023[219](index=219&type=chunk)[220](index=220&type=chunk)[224](index=224&type=chunk) [Dividend Policy](index=41&type=section&id=Dividend%20Policy) The company resumed quarterly distributions to preferred stockholders in January 2023, but a significant arrearage of approximately **$23.9 million** in cumulative unpaid dividends on outstanding preferred shares remains as of March 31, 2023 - The company resumed quarterly distributions to preferred stockholders in January 2023 after deferring them since March 2020 due to the COVID-19 pandemic[226](index=226&type=chunk)[227](index=227&type=chunk) - As of March 31, 2023, the cumulative unpaid dividends on the company's outstanding preferred shares amounted to approximately **$23.9 million**[228](index=228&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk associated with its variable-rate debt, where a one percent increase in the Prime Rate would result in an approximate **$0.1 million** increase in annual interest expense Debt Structure as of March 31, 2023 | Debt Type | Amount (USD) | | :--- | :--- | | Fixed-Rate Debt | ~$307.9 million | | Variable-Rate Debt | ~$14.2 million | - A one percent increase in the Prime Rate would increase annual interest incurred and cash flows by approximately **$0.1 million**, based on the variable-rate debt balance at March 31, 2023[238](index=238&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting identified during the last fiscal quarter - The CEO and CFO concluded that as of March 31, 2023, the disclosure controls and procedures for both Sotherly Hotels Inc. and Sotherly Hotels LP were effective[240](index=240&type=chunk)[243](index=243&type=chunk) - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[242](index=242&type=chunk)[245](index=245&type=chunk) [Part II - Other Information](index=45&type=section&id=PART%20II) [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings and expects routine litigation arising from ordinary business to be covered by insurance without material impact - The company is not involved in any material legal proceedings and does not expect routine litigation to have a material impact on its financial condition or results of operations[247](index=247&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes in risk factors have occurred since the filing of the 2022 Form 10-K[248](index=248&type=chunk) [Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company is in arrears on its preferred stock dividends for nine quarterly periods, totaling approximately **$23.9 million** as of May 12, 2023, which entitles preferred stockholders to elect two additional directors and prohibits common stock dividends - The company's distributions on Series B, C, and D Preferred Stock are in arrears for nine quarterly periods[250](index=250&type=chunk) - Due to the dividend arrears, preferred stockholders are entitled to vote for the election of two additional company directors[250](index=250&type=chunk) - As of May 12, 2023, the total undeclared and unpaid cash dividends were **$8,784,600** for Series B, **$7,950,470** for Series C, and **$7,196,681** for Series D Preferred Stock[251](index=251&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including amendments to employment agreements and various certifications by the CEO and CFO as required by the Sarbanes-Oxley Act of 2002

Sotherly Hotels, Inc. (NASDAQ:SOHO) Q1 2023 Earnings Conference Call May 11, 2023 10:00 AM ET Company Participants Andrew Sims - VP, Operations & IR Scott Kucinski - EVP & COO Anthony Domalski - VP, Secretary & CFO David Folsom - President, CEO & Director Conference Call Participants Operator Hello, and welcome to the Sotherly Hotels First Quarter 2023 Earnings Call and Webcast. My name is Alex. I'll be coordinating the call today. [Operator Instructions]. I'll now hand over to your host, Mack Sims, Vice Pr ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to SOTHERLY HOTELS INC. (Exact name of registrant as specif ...

Sotherly Hotels Inc. (NASDAQ:SOHO) Q4 2022 Earnings Conference Call March 2, 2023 10:00 AM ET Company Representatives Dave Folsom - President, Chief Executive Officer Scott Kucinski - Executive Vice President, Chief Operating Officer Tony Domalski - Vice President, Chief Financial Officer Mack Sims - Vice President of Operations Conference Call Participants Alexander Goldfarb - Piper Sandler Operator Hello! And welcome to today's Sotherly Hotels, 4Q 2022 Earnings Call and Webcast. My name is Bailey and I'll ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . SOTHERLY HOTELS INC. (Exact name of registrant as specified in its charter) WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR MARYLAND 001-32379 20-1531029 (State or Other Jurisdiction of Incorporation or Organ ...

Sotherly Hotels Inc. (NASDAQ:SOHO) Q3 2022 Results Conference Call November 10, 2022 10:00 AM ET Company Participants Mack Sims - Head of IR Scott Kucinski - Executive Vice President and Chief Operating Officer Tony Domalski - Vice President and Chief Financial Officer Dave Folsom - President and Chief Executive Officer Conference Call Participants Alexander Goldfarb - Piper Sandler Operator Hello, and welcome to today's Sotherly Hotels Third Quarter 2022 Earnings Call and Webcast. My name is Bailey, and I' ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . SOTHERLY HOTELS INC. (Exact name of registrant as specified in its charter) MARYLAND 001-32379 20-1531029 (State or Other Jurisdiction of Incorporation or Organizati ...