Ashford (US:AINC)2019-08-08 19:04Financial Performance - Total revenue for the three months ended June 30, 2019, increased by $8.7 million, or 15.8%, to $63.5 million compared to the same period in 2018 [245]. - Advisory services revenue decreased by $3.35 million, or 13.6%, to $21.22 million for the 2019 quarter compared to the 2018 quarter [242]. - Audio visual revenue increased by $6.75 million, or 28.9%, to $30.13 million for the 2019 quarter compared to the 2018 quarter [242]. - Net income attributable to common stockholders decreased by $12.12 million, or 135.3%, resulting in a loss of $3.16 million for the 2019 quarter [242]. - Total revenue increased by $23.8 million, or 23.1%, to $126.8 million for the six months ended June 30, 2019, compared to the same period in 2018 [263]. - Advisory services revenue decreased by $6.7 million, or 14.2%, to $40.4 million, primarily due to lower base and incentive advisory fees [264]. - Audio visual revenue increased by $14.4 million, or 30.9%, to $61.1 million, contributing significantly to overall revenue growth [264]. - Project management revenue was $15.5 million for the six months ended June 30, 2019, with no revenue recorded in the prior year [264]. - Operating income decreased by $2.3 million, or 40.3%, to $3.5 million for the six months ended June 30, 2019 [262]. - Net income attributable to common stockholders decreased by $9.0 million, or 277.2%, to a loss of $5.7 million for the 2019 period [262]. Expenses and Costs - Total expenses for the three months ended June 30, 2019, increased by $18.58 million, or 42.3%, to $62.52 million compared to the same period in 2018 [242]. - Salaries and benefits expense rose by $2.4 million, or 15.6%, to $18.16 million for the quarter [249]. - General and administrative expenses increased by $2.2 million, or 24.6%, to $11.37 million, primarily due to legal fees and transaction costs related to acquisitions [254]. - Depreciation and amortization expense surged by $3.7 million, or 313.6%, to $4.9 million, mainly due to amortization from the acquisition of Premier [252]. - Total expenses increased by $26.2 million, or 26.9%, to $123.3 million, driven by higher costs in various segments [262]. - General and administrative expenses rose by $3.9 million, or 25.5%, to $19.4 million, driven by increased professional fees and office expenses [273]. - Depreciation and amortization expense surged by $7.2 million, or 323.7%, to $9.5 million, mainly due to amortization related to the acquisition of Premier [271]. Acquisitions and Investments - The company acquired a 30% noncontrolling interest in Real Estate Advisory Holdings LLC for approximately $3.0 million, with an option to acquire an additional 50% for $12.5 million starting January 1, 2022 [227]. - Under the Braemar ERFP Agreement, Ashford Inc. committed $50 million to Braemar for hotel acquisitions, with the option to increase this commitment to $100 million [228]. - Braemar acquired The Ritz-Carlton Lake Tahoe for $103.0 million, requiring Ashford Inc. to provide approximately $10.3 million for FF&E [229]. - Ashford Trust acquired the Embassy Suites New York Manhattan Times Square for $195.0 million, necessitating a $19.5 million commitment from Ashford Inc. for FF&E [230]. - Ashford Trust acquired the Hilton Santa Cruz/Scotts Valley for $50.0 million, requiring Ashford Inc. to provide approximately $5.0 million for FF&E [231]. - JSAV acquired BAV Services for a total purchase price of $10.4 million, increasing Ashford Inc.'s ownership interest in JSAV from 85% to approximately 88% [233]. - Ashford Inc. completed the acquisition of Sebago for a total purchase price of approximately $7 million, consisting of $2.5 million in cash and $4.5 million in common stock [237]. - Ashford Inc. signed a Combination Agreement to acquire Remington's Hotel Management business for $275 million, payable via Series D Convertible Preferred Stock [234]. - The Company completed the acquisition of BAV Services for a total purchase price of $10.4 million, including $5 million in cash and $4 million in common stock [291]. Financing and Liquidity - The company has a revolving credit facility providing up to $250,000, maturing on February 5, 2020 [232]. - The Company has a $35 million senior revolving credit facility with Bank of America, with an option to expand borrowing capacity to $75 million [290]. - The company expects to meet short-term liquidity requirements through net cash from operations and existing cash balances [282]. - As of June 30, 2019, the Company had $40 million in cash and cash equivalents, down from $51.5 million as of December 31, 2018 [297]. - The Company reported net cash flows from operating activities of $14.5 million for the six months ended June 30, 2019, an increase from $12.3 million in the same period of 2018 [297]. - Net cash flows used in investing activities for the six months ended June 30, 2019, were $25.5 million, primarily due to the acquisition of BAV Services for $4.3 million and capital expenditures related to ERFP agreements [299]. - The Company reported net cash flows provided by financing activities of $4.9 million for the six months ended June 30, 2019, compared to $3.7 million in the same period of 2018 [300][301]. Debt and Interest - Aggregate subsidiary notes payable increased to $24.9 million as of June 30, 2019, from $17.8 million as of December 31, 2018 [296]. - Total indebtedness as of June 30, 2019, was $25.1 million, with $24.6 million in variable-rate debt [305]. - Interest expense increased to $742,000 from $304,000, reflecting higher costs associated with notes payable and lines of credit [276]. - A 100 basis point change in interest rates would impact annual results by approximately $246,000 for the variable-rate debt [305]. Stock and Dividends - Dividends on the Series D Convertible Preferred Stock will be payable at an annual rate of 6.59% in the first year, 6.99% in the second year, and 7.28% in the third year [234]. - Preferred dividends increased by $2.8 million due to the issuance of Series B Convertible Preferred Stock in the acquisition of Premier [260]. - Preferred dividends increased by $5.6 million due to the issuance of Series B Convertible Preferred Stock in the acquisition of Premier [280]. Other Financial Information - Ashford Inc. holds approximately 22.9% of its common stock owned by Ashford Trust and 7.5% by Braemar as of August 6, 2019 [221]. - The company aims to grow by expanding existing REIT platforms, starting new REIT platforms, and acquiring strategic businesses in the hospitality sector [222]. - Noncontrolling interests in consolidated entities were allocated a loss of $131,000 in the 2019 quarter, compared to a loss of $118,000 in the 2018 quarter [259]. - Income from reimbursable expenses related to software implementation costs increased to $1.1 million from $586,000 year-over-year [265]. - Non-cash stock/unit-based compensation revenue decreased by $8.7 million to $16.6 million, primarily due to lower revenue from Ashford Trust and Braemar [268]. - The majority of revenues, expenses, and capital purchases are transacted in U.S. dollars, with exposure to exchange rate fluctuations due to operations in Mexico and the Dominican Republic [307]. - There have been no material changes to contractual obligations and commitments since December 31, 2018, except for the Braemar ERFP Agreement [303]. - Critical accounting policies have not materially changed, except for updates related to leases [304].