DiamondRock Hospitality pany(DRH) - 2025 Q1 - Quarterly Results

First Quarter 2025 Financial & Operational Highlights Performance Summary DiamondRock's first-quarter 2025 results were in line with expectations, showing a 2.0% increase in Comparable RevPAR and a 2.2% rise in Comparable Hotel Adjusted EBITDA, with net income attributable to common stockholders increasing 59.3% year-over-year Q1 2025 Key Performance Indicators (vs. Q1 2024) | Metric | Q1 2025 | Change vs. Q1 2024 | | :--- | :--- | :--- | | Net Income (attributable to common stockholders) | $9.4 million | +59.3% | | Comparable RevPAR | $186.20 | +2.0% | | Comparable Hotel Adjusted EBITDA | $61.3 million | +2.2% | | Comparable Hotel Adjusted EBITDA Margin | 24.36% | +39 bps | | Adjusted FFO per Share | $0.19 | +5.6% | - Strong revenue growth was driven by a more than 10% increase in group revenues and a over 9% increase in business transient revenues compared to the prior year[4] - The company is executing a capital recycling strategy, exemplified by the sale of the Westin Washington, D.C. and subsequent repurchase of $15.9 million of its common shares[5] Operating and Financial Results Operating Results Summary For Q1 2025, comparable RevPAR increased by 2.0% to $186.20, driven by a 2.7% rise in ADR to $277.36, which offset a slight 0.5% decline in occupancy, while net income attributable to common stockholders surged 59.3% to $9.4 million Q1 2025 Comparable Operating Results (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | ADR | $277.36 | $269.95 | +2.7% | | Occupancy | 67.1% | 67.6% | (0.5)% | | RevPAR | $186.20 | $182.50 | +2.0% | | Total Revenues | $251.8 million | $250.5 million | +0.5% | | Hotel Adjusted EBITDA | $61.3 million | $60.0 million | +2.2% | | Hotel Adjusted EBITDA Margin | 24.36% | 23.97% | +39 bps | Q1 2025 Actual & Adjusted Financial Results (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $254.9 million | $256.4 million | (0.6)% | | Net income attributable to common stockholders | $9.4 million | $5.9 million | +59.3% | | Earnings per diluted share | $0.04 | $0.03 | +33.3% | | Adjusted EBITDA | $56.1 million | $56.2 million | (0.2)% | | Adjusted FFO per diluted share | $0.19 | $0.18 | +5.6% | Consolidated Financial Statements The company's consolidated financial statements reflect a stable but slightly smaller balance sheet compared to year-end 2024, with total assets at $3.10 billion, and a significant improvement in Q1 2025 profitability despite a slight dip in total revenues Consolidated Balance Sheets As of March 31, 2025, total assets were $3.10 billion, a decrease from $3.17 billion at December 31, 2024, primarily due to a hotel sale, with total liabilities and equity also slightly declining Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $3,101,597 | $3,172,251 | | Total liabilities | $1,527,945 | $1,573,319 | | Total equity | $1,573,652 | $1,598,932 | Consolidated Statements of Operations For the first quarter of 2025, total revenues were $254.9 million, a slight decrease from $256.4 million in Q1 2024, yet net income attributable to common stockholders increased substantially to $9.4 million from $5.9 million, benefiting from lower total operating and interest expenses Q1 Statement of Operations Highlights (in thousands) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenues | $254,853 | $256,423 | | Total operating expenses | $230,086 | $233,978 | | Interest expense | $15,158 | $16,246 | | Net income attributable to common stockholders | $9,403 | $5,874 | | Earnings per share - diluted | $0.04 | $0.03 | Corporate Activities and Capital Allocation Hotel Disposition On February 19, 2025, the company finalized the sale of the 410-room Westin Washington D.C. City Center for $92.0 million, representing an 11.2x multiple on 2024 Hotel EBITDA and a 7.5% capitalization rate on 2024 net operating income - The Company completed the sale of the Westin Washington D.C. City Center for a contract price of $92.0 million on February 19, 2025[9] - The sale price represented an 11.2x multiple on 2024 Hotel EBITDA and a 7.5% capitalization rate on 2024 hotel net operating income[9] Capital Expenditures The company invested approximately $25.6 million in hotel improvements during Q1 2025, with a full-year 2025 capital expenditure forecast of $85 million to $95 million, focusing on key repositioning and renovation projects - The company invested approximately $25.6 million in capital improvements in Q1 2025 and expects to invest $85 million to $95 million for the full year[10] - Significant 2025 projects include repositioning Orchards Inn Sedona as the Cliffs at L'Auberge, and guestroom renovations at Hilton Garden Inn New York / Times Square Central, Kimpton Hotel Palomar Phoenix, and Courtyard New York Manhattan/Midtown East[15] Share Repurchase Program During the first quarter, the company repurchased 1.4 million common shares for $11.1 million, with an additional 0.7 million shares bought back for $4.8 million subsequent to quarter-end, leaving $158.1 million available under the existing $200.0 million repurchase authorization - Year-to-date, the Company has repurchased 2.1 million shares of its common stock for a total of approximately $15.9 million[6][12] - The company has $158.1 million of remaining capacity under its $200.0 million share repurchase program[12] Dividends The Board of Directors declared a quarterly cash dividend of $0.08 per common share, payable in July 2025, and a quarterly dividend of $0.515625 per share for the 8.250% Series A Cumulative Redeemable Preferred Stock, payable in June 2025 - A quarterly cash dividend of $0.08 per share on common stock was declared, payable on July 11, 2025, to shareholders of record as of June 30, 2025[13] - A quarterly dividend of $0.515625 per share on its 8.250% Series A Cumulative Redeemable Preferred Stock was declared, payable on June 30, 2025[13] Balance Sheet, Liquidity, and Debt Liquidity and Debt Summary As of March 31, 2025, DiamondRock maintained a strong liquidity position of $624.6 million, including $224.6 million in unrestricted cash and full availability of its revolving credit facility, with total debt outstanding at $1.1 billion at a weighted average interest rate of 5.08% - The Company ended Q1 2025 with $624.6 million of total liquidity, comprising $100.6 million of unrestricted corporate cash, $124.0 million of unrestricted hotel cash, and full availability of its revolving credit facility[11] Debt Summary as of March 31, 2025 | Category | Amount | | :--- | :--- | | Total Debt Outstanding | $1.1 billion | | Unsecured Term Loans | $800.0 million | | Property-Specific Mortgage Loans | $293.7 million | | Weighted Average Interest Rate | 5.08% | - The company has three mortgage loans maturing in the next 12 months and is actively pursuing a financing transaction to repay them[10] Full Year 2025 Guidance Updated 2025 Outlook In response to macroeconomic uncertainty and moderating group revenue pickup, the company has updated its full-year 2025 guidance, lowering the Comparable RevPAR growth forecast by 200 basis points to a range of -1.0% to +1.0%, while maintaining Adjusted FFO per share guidance Full Year 2025 Guidance Update | Metric | Current Guidance | Previous Guidance | Change at Midpoint | | :--- | :--- | :--- | :--- | | Comparable RevPAR Growth | (1.0)% to 1.0% | 1.0% to 3.0% | (2.0)% | | Adjusted EBITDA | $270 million to $295 million | $275 million to $300 million | ($5.0 million) | | Adjusted FFO | $198 million to $223 million | $199 million to $224 million | ($1.0 million) | | Adjusted FFO per share | $0.94 to $1.06 | $0.94 to $1.06 | - | - The updated outlook is based on current economic trends, including a tempered pace of group revenue pickup for the rest of the year[14] - Key full-year 2025 assumptions include corporate expenses of $24 million-$25 million, cash interest expense of $60.5 million-$61.5 million, and 210.3 million fully diluted weighted average shares[20] Non-GAAP Financial Measures and Reconciliations Explanation of Non-GAAP Measures The company utilizes several non-GAAP financial measures, including EBITDA, EBITDAre, FFO, and their adjusted versions, to assess operating performance and facilitate peer comparison, with key adjustments for non-cash lease expenses, hotel acquisition costs, and, effective January 1, 2025, share-based compensation - The company uses non-GAAP measures such as EBITDA, EBITDAre, Adjusted EBITDA, Hotel Adjusted EBITDA, FFO, and Adjusted FFO as key indicators of operating performance[25] - Adjustments are made for items like non-cash lease expense, hotel acquisition costs, severance, and other non-recurring items to provide a clearer view of ongoing performance[33] - Effective January 1, 2025, the company excludes share-based compensation from its calculations of Adjusted EBITDA and Adjusted FFO, with prior periods adjusted for comparability[8][33] Reconciliations This section provides detailed reconciliations of GAAP net income to the company's key non-GAAP performance metrics, showing Q1 2025 net income of $11.9 million reconciled to an Adjusted EBITDA of $56.1 million and an Adjusted FFO of $39.5 million, along with reconciliations for the full-year 2025 guidance Q1 2025 Reconciliation: Net Income to Adjusted EBITDA (in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $11,915 | | Interest expense | $15,158 | | Income tax benefit | $(842) | | Real estate related depreciation and amortization | $27,892 | | EBITDA/EBITDAre | $54,123 | | Adjustments (Non-cash lease, Share-based comp, etc.) | $1,987 | | Adjusted EBITDA | $56,110 | Q1 2025 Reconciliation: Net Income to Adjusted FFO (in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $11,915 | | Real estate related depreciation and amortization | $27,892 | | FFO | $39,807 | | Adjustments (Non-cash lease, Share-based comp, etc.) | $2,163 | | Adjusted FFO available to common stock and unit holders | $39,516 | Supplemental Information Comparable Operating Results and Quarterly Data This section adjusts historical results to create a comparable portfolio view, excluding the sold Westin Washington D.C. and including pre-acquisition results for the AC Hotel Minneapolis, showing Q1 2025 Comparable Revenues of $251.8 million and Comparable Hotel Adjusted EBITDA of $61.3 million, alongside detailed quarterly operating metrics for 2024 Q1 2025 Reconciliation to Comparable Results (in thousands) | Metric | Reported | Adjustments | Comparable | | :--- | :--- | :--- | :--- | | Revenues | $254,853 | $(3,077) | $251,776 | | Hotel Adjusted EBITDA | $61,664 | $(331) | $61,333 | - The report provides selected quarterly comparable operating information for the full year 2024, including ADR, Occupancy, RevPAR, and Hotel Adjusted EBITDA for the current portfolio of 36 hotels[38][39] Market Capitalization and Debt Details As of March 31, 2025, the company's total enterprise value was calculated at approximately $2.73 billion, composed of $1.62 billion in common equity, $119 million in preferred equity, and $1.09 billion in debt, offset by $100.6 million in cash, with a detailed debt summary provided Enterprise Value as of March 31, 2025 (in thousands) | Component | Value | | :--- | :--- | | Common equity capitalization | $1,616,966 | | Preferred equity capitalization | $119,000 | | Consolidated debt (face amount) | $1,093,694 | | Cash and cash equivalents | $(100,621) | | Total enterprise value | $2,729,039 | - A detailed debt summary table provides specifics on interest rates, principal amounts, and maturity dates for the company's mortgage loans and unsecured term loans[43] Hotel-Level Operating Statistics The report includes detailed property-level operating statistics for the first quarter, comparing 2025 to 2024, covering ADR, Occupancy, and RevPAR for each of the 36 hotels in the comparable portfolio, along with detailed reconciliations from property-level net income (or loss) to Hotel Adjusted EBITDA - Provides a detailed table of Q1 2025 vs. Q1 2024 operating statistics (ADR, Occupancy, RevPAR) for each individual hotel in the portfolio[44] - Includes detailed hotel-by-hotel reconciliations of Net Income/(Loss) to Hotel Adjusted EBITDA for Q1 2025 and Q1 2024[45][46]