Xenia Hotels & Resorts(XHR) - 2024 Q1 - Quarterly Results

First Quarter 2024 Performance Overview Xenia Hotels & Resorts reported strong Q1 2024 results, with increased net income and FFO, despite renovation impacts Key Financial and Operating Highlights In Q1 2024, Xenia Hotels & Resorts reported a net income of $8.5 million and an Adjusted FFO per share of $0.44, a 10% increase year-over-year. However, Same-Property RevPAR decreased by 1.5% to $176.86, and Adjusted EBITDAre fell by 8.5% to $65.3 million, primarily due to the transformative renovation at the Hyatt Regency Scottsdale. Excluding this property, Same-Property RevPAR showed healthy growth of 3.7% Q1 2024 Key Performance Indicators (vs. Q1 2023) | Metric | Q1 2024 | Change vs. Q1 2023 | | :--- | :--- | :--- | | Net Income | $8.5 million | +35.9% | | Adjusted EBITDAre | $65.3 million | -8.5% | | Adjusted FFO per Diluted Share | $0.44 | +$0.04 (+10.0%) | | Same-Property Occupancy | 67.4% | +130 bps | | Same-Property ADR | $262.39 | -3.5% | | Same-Property RevPAR | $176.86 | -1.5% | | Same-Property Hotel EBITDA Margin | 26.4% | -228 bps | - Excluding the Hyatt Regency Scottsdale, which is undergoing a major renovation, Same-Property RevPAR increased by 3.7% and Same-Property Hotel EBITDA increased by 4.7% year-over-year, indicating positive underlying portfolio performance[5] - The company repurchased 468,107 shares of common stock for approximately $6.3 million and declared a quarterly dividend of $0.12 per share[5] Management Commentary CEO Marcel Verbaas expressed satisfaction with Q1 results, which surpassed expectations despite the Easter timing shift. He highlighted strong growth in larger group-oriented hotels and recently renovated properties. While the ongoing renovation of Hyatt Regency Scottsdale will impact near-term results, management is optimistic about its future contribution as the Grand Hyatt Scottsdale and maintains its full-year Adjusted EBITDAre guidance - Portfolio RevPAR and Adjusted EBITDAre exceeded internal expectations for the quarter[4] - Strong growth was observed at larger group-oriented hotels in Santa Clara, Houston, Portland, San Francisco, and San Diego[4] - Early Q2 results are encouraging, with an estimated Same-Property RevPAR growth (excluding Hyatt Regency Scottsdale) of approximately 6.2% in April[6] - The transformative renovation of Hyatt Regency Scottsdale is on track for completion by year-end and is expected to drive significant earnings growth in 2025 and beyond[6] Financial Position and Capital Allocation The company maintains a strong financial position with substantial liquidity and no near-term debt maturities, actively managing capital Liquidity and Balance Sheet As of March 31, 2024, the company maintained a solid financial position with approximately $590 million in total liquidity, including $140 million in cash and full availability on its revolving credit facility. Total outstanding debt was approximately $1.4 billion with a weighted-average interest rate of 5.47%, and the company has no debt maturities until August 2025 Liquidity and Debt Summary (as of March 31, 2024) | Metric | Value | | :--- | :--- | | Total Outstanding Debt | ~$1.4 billion | | Weighted-Average Interest Rate | 5.47% | | Cash and Cash Equivalents | ~$140 million | | Total Liquidity | ~$590 million | | Next Debt Maturity | August 2025 | Capital Markets Activities During the first quarter, Xenia repurchased 468,107 shares for $6.3 million at a weighted-average price of $13.51 per share. The company has $127.4 million remaining under its repurchase authorization and did not issue any shares through its At-The-Market (ATM) program, which has $200 million of availability - Repurchased 468,107 shares for a total of $6.3 million in Q1 2024[12] - Remaining capacity under the share repurchase authorization is $127.4 million[12] Capital Expenditures and Renovation Projects The company invested $33.4 million in portfolio improvements during Q1 2024. The primary focus is the transformative renovation and upbranding of the Hyatt Regency Scottsdale to a Grand Hyatt, with significant progress on the pool complex, guest rooms, and ballroom expansion. Other completed projects include renovations at Waldorf Astoria Atlanta Buckhead, Bohemian Hotel Savannah Riverfront, and The Ritz-Carlton, Denver - Total capital expenditures for Q1 2024 amounted to $33.4 million[13] - The Hyatt Regency Scottsdale renovation is progressing with the pool complex completed in early April, approximately 230 guest rooms finished, and the ballroom expansion and F&B outlets expected to be completed by late 2024[14] - Other significant projects completed in Q1 include meeting room renovations at Waldorf Astoria Atlanta Buckhead and restaurant renovations at Bohemian Hotel Savannah and The Ritz-Carlton, Denver[14][18] Full Year 2024 Outlook Xenia updated its full-year 2024 guidance, maintaining key financial targets and adjusting for increased renovation disruptions Updated Guidance Xenia has updated its full-year 2024 guidance, maintaining the midpoint for key metrics like Adjusted EBITDAre and Adjusted FFO. The company projects Net Income between $17 million and $33 million, and Adjusted FFO per diluted share between $1.61 and $1.76. Same-Property RevPAR growth is expected to be between 2.25% and 4.75% Current Full Year 2024 Guidance | Metric | Low End | High End | | :--- | :--- | :--- | | Net Income | $17 million | $33 million | | Same-Property (32 Hotel) RevPAR Change | 2.25% | 4.75% | | Adjusted EBITDAre | $246 million | $262 million | | Adjusted FFO per Diluted Share | $1.61 | $1.76 | | Capital Expenditures | $120 million | $130 million | Key Assumptions The 2024 guidance is based on several key assumptions, most notably an expected negative impact of approximately $16 million to Adjusted EBITDAre and Adjusted FFO from renovation disruptions, an increase of $2 million from prior guidance. Capital expenditures for the Hyatt Regency Scottsdale project are projected to be between $65 million and $70 million - Renovation disruption is now expected to negatively impact Adjusted EBITDAre and Adjusted FFO by approximately $16 million, up $2 million from previous guidance[19] - Assumes general and administrative expenses of ~$25 million and interest expense of ~$77 million[19] - Capital expenditures for the Hyatt Regency Scottsdale renovation are expected to be in the range of $65 - $70 million[19] Financial Statements The company's financial statements show a stable balance sheet with total assets around $2.9 billion and increased Q1 2024 net income Condensed Consolidated Balance Sheets As of March 31, 2024, Xenia's total assets were approximately $2.90 billion, nearly flat compared to year-end 2023. Total liabilities stood at $1.59 billion, a slight increase, while total equity decreased slightly to $1.31 billion. Key assets include $2.60 billion in net investment properties and $140 million in cash Balance Sheet Summary (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net Investment Properties | $2,595,831 | $2,594,966 | | Cash and cash equivalents | $140,109 | $164,725 | | Total Assets | $2,901,866 | $2,902,227 | | Total Debt, net | $1,395,096 | $1,394,906 | | Total Liabilities | $1,589,827 | $1,584,730 | | Total Equity | $1,312,039 | $1,317,497 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2024, total revenues were $267.5 million, a slight decrease from $269.0 million in the prior year. Despite higher operating expenses, net income attributable to common stockholders increased by 35.9% to $8.5 million, or $0.08 per share, up from $6.3 million, or $0.06 per share, in Q1 2023, aided by lower interest and income tax expenses Q1 Statement of Operations Summary (in thousands) | Account | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $267,488 | $268,973 | | Total Hotel Operating Expenses | $183,026 | $179,276 | | Operating Income | $27,626 | $33,761 | | Interest Expense | $20,358 | $22,134 | | Net Income Attributable to Common Stockholders | $8,534 | $6,280 | | Diluted EPS | $0.08 | $0.06 | Supplemental Financial Information Supplemental information provides non-GAAP reconciliations, a comprehensive debt overview, and granular insights into same-property performance Non-GAAP Reconciliations The company provides reconciliations from GAAP Net Income to key non-GAAP metrics. For Q1 2024, Net Income of $9.0 million was reconciled to Adjusted EBITDAre of $65.3 million and Adjusted FFO of $45.5 million. These adjustments primarily account for depreciation, amortization, interest, and taxes, along with other non-recurring items Q1 2024 Reconciliation Summary (in thousands) | Metric | Value | | :--- | :--- | | Net Income | $8,967 | | EBITDA and EBITDAre | $62,017 | | Adjusted EBITDAre | $65,251 | | FFO | $40,851 | | Adjusted FFO | $45,498 | Debt Summary As of March 31, 2024, the company's total debt of approximately $1.4 billion consists of mortgage loans, corporate credit facilities, and senior notes. The majority of the debt is fixed-rate, contributing to a weighted-average interest rate of 5.47%. The revolving line of credit with a capacity of $450 million remains fully undrawn - Total debt outstanding is composed of $216.8 million in mortgage loans, $225.0 million in corporate credit facilities, and $964.7 million in senior notes[64] - The company maintains an undrawn revolving line of credit of $450 million[66] Same-Property Portfolio Performance The Same-Property portfolio of 32 hotels experienced a 1.5% RevPAR decline in Q1 2024, driven by a 3.5% drop in ADR, while occupancy increased by 130 basis points. Hotel EBITDA decreased by 8.5%. However, when excluding the Hyatt Regency Scottsdale, the remaining 31 properties showed a RevPAR increase of 3.7%, demonstrating the underlying strength of the core portfolio Overall Same-Property Performance (32 Hotels) For the total 32-hotel Same-Property portfolio, Q1 2024 RevPAR was $176.86, a 1.5% decrease from Q1 2023. This was a result of a 3.5% decrease in ADR to $262.39, partially offset by a 130 basis point increase in occupancy to 67.4%. Total revenues decreased by 0.6%, while operating expenses rose 2.6%, leading to an 8.5% decline in Same-Property Hotel EBITDA Q1 2024 Same-Property Performance (32 Hotels vs. Q1 2023) | Metric | Q1 2024 | Change | | :--- | :--- | :--- | | Occupancy | 67.4% | +130 bps | | ADR | $262.39 | -3.5% | | RevPAR | $176.86 | -1.5% | | Hotel EBITDA | $70,669k | -8.5% | | Hotel EBITDA Margin | 26.4% | -228 bps | Performance Excluding Hyatt Regency Scottsdale (31 Hotels) When excluding the Hyatt Regency Scottsdale, the portfolio's performance was notably stronger. Q1 2024 RevPAR for the 31-hotel portfolio increased by 3.7% to $178.07, driven by a 310 basis point increase in occupancy to 68.9%. Same-Property Hotel EBITDA for this subset grew by 4.7% to $67.2 million, with the margin remaining stable at 26.4% Q1 2024 Same-Property Performance (31 Hotels vs. Q1 2023) | Metric | Q1 2024 | Change | | :--- | :--- | :--- | | Occupancy | 68.9% | +310 bps | | ADR | $258.38 | -1.0% | | RevPAR | $178.07 | +3.7% | | Hotel EBITDA | $67,157k | +4.7% | | Hotel EBITDA Margin | 26.4% | -10 bps | Performance by Market In Q1 2024, market performance varied significantly. Strong RevPAR growth was seen in California Central Coast (+70.7%), San Jose/Santa Cruz (+26.3%), and Portland (+9.7%). Conversely, the Phoenix market saw a sharp RevPAR decline of 40.1%, heavily impacted by the Scottsdale renovation. Orlando and Houston, two of the largest markets by EBITDA contribution, posted healthy RevPAR growth of 6.5% and 8.8%, respectively - Top contributing markets by 2023 Hotel EBITDA are Orlando (15%), Houston (14%), and Phoenix (10%)[81] - Markets with notable Q1 2024 RevPAR growth include California Central Coast (+70.7%), San Jose/Santa Cruz (+26.3%), Pittsburgh (+9.8%), and Houston (+8.8%)[87] - The Phoenix market experienced a significant RevPAR decline of 40.1% due to the ongoing renovation at Hyatt Regency Scottsdale[87]