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

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited Q1 2025 financial statements show net income attributable to common stockholders increased to $9.4 million, total assets decreased to $3.10 billion, and $63.5 million net cash provided by investing activities, including a $92.0 million hotel sale Consolidated Balance Sheet Summary (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 Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $254,853 | $256,423 | | Total Operating Expenses | $230,086 | $233,978 | | Net Income | $11,915 | $8,358 | | Net Income Attributable to Common Stockholders | $9,403 | $5,874 | | EPS (Basic) | $0.05 | $0.03 | | EPS (Diluted) | $0.04 | $0.03 | Consolidated Statement of Cash Flows Summary (in thousands) | Cash Flow Category | Three Months Ended March 31, 2025 | | :--- | :--- | | Net cash provided by operating activities | $27,606 | | Net cash provided by (used in) investing activities | $63,457 | | Net cash used in financing activities | $(69,593) | - On February 19, 2025, the company sold the Westin Washington, D.C. City Center for $92.0 million, receiving net proceeds of approximately $89.0 million[30] - During Q1 2025, the company repurchased 1,413,643 shares of common stock at an average price of $7.85 per share, for a total of $11.1 million[50] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, noting a 0.6% revenue decrease to $254.9 million but a 2.0% RevPAR increase, supported by $100.6 million cash and $400 million credit facility capacity, with $85-95 million projected 2025 capital expenditure - As of March 31, 2025, DiamondRock owned a portfolio of 36 premium hotels and resorts with 9,595 guest rooms in 26 U.S. markets[81] Revenue Comparison (in thousands) | Revenue Category | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Rooms | $163,118 | $163,507 | (0.2)% | | Food and beverage | $66,841 | $68,381 | (2.3)% | | Total revenues | $254,853 | $256,423 | (0.6)% | Key Hotel Operating Statistics | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Occupancy % | 66.6% | 67.5% | (0.9)% | | ADR | $277.01 | $268.31 | 3.2% | | RevPAR | $184.60 | $180.98 | 2.0% | - The company maintains significant liquidity with $100.6 million of unrestricted cash and $400 million of borrowing capacity under its senior unsecured revolving credit facility as of March 31, 2025[113][126] - For 2025, the company expects to spend between $85 million and $95 million on capital improvements, with significant projects at Orchards Inn Sedona, Kimpton Hotel Palomar Phoenix, and Courtyard New York Manhattan/Midtown East[134][137] Non-GAAP Financial Measures Reconciliation Summary (in thousands) | Metric | Q1 2025 | Q1 2024 (As Adjusted) | | :--- | :--- | :--- | | Net Income | $11,915 | $8,358 | | EBITDA/EBITDAre | $54,123 | $51,827 | | Adjusted EBITDA | $56,110 | $56,214 | | Hotel Adjusted EBITDA | $61,664 | $61,414 | | FFO available to common stock and unit holders | $37,353 | $34,217 | | Adjusted FFO available to common stock and unit holders | $39,516 | $38,604 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from its $0.8 billion variable-rate debt, mitigated by interest rate swaps fixing $325 million - The primary market risk is interest rate risk. As of March 31, 2025, $0.8 billion of the company's $1.1 billion total debt had a variable interest rate[157] - The company has effectively fixed the interest rate on $325 million of its variable-rate debt through the use of interest rate swaps[157] - A 100 basis point (1%) fluctuation in market interest rates on the unhedged variable rate debt would change annual interest expense by approximately $4.8 million[157] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[158] - There were no changes in the company's internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[159] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings, with management expecting no material adverse effect on financial condition or results - The company is subject to various claims and lawsuits arising in the ordinary course of business but does not expect the aggregate liability to have a material adverse impact on its financial condition[161] Item 1A. Risk Factors Key risk factors include the lodging industry's cyclicality, adverse impacts of inflation on costs, higher interest rates on financing and valuations, and challenges in funding ongoing capital improvements - The performance of the lodging industry is highly cyclical and historically linked to key macroeconomic indicators, making the business sensitive to economic downturns[163] - Heightened inflation could continue to negatively impact operating expenses (e.g., labor, food, utilities) and the cost of renovations. Tariffs on imported goods could further increase costs[165][171] - Higher interest rates could increase future financing costs and negatively affect real estate valuations due to rising capitalization rates[165][167] - The company faces ongoing risks related to necessary hotel renovations, including construction cost overruns, operational disruptions, and the challenge of funding these projects due to REIT distribution requirements limiting retained earnings[168][169] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased over 1.4 million shares for approximately $11.1 million in Q1 2025 under its $200.0 million share repurchase program Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | Jan 1 - Jan 31, 2025 | — | $ — | — | | Feb 1 - Feb 28, 2025 | 218,418 | $8.17 | — | | Mar 1 - Mar 31, 2025 | 1,430,769 | $7.86 | 1,413,643 | - The share repurchases were made under a $200.0 million program approved on May 1, 2024, which expires on May 1, 2026. As of March 31, 2025, approximately $161.2 million remained available under the program[173] Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[175] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[176] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - During the three months ended March 31, 2025, no directors or officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement[177] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, CEO/CFO certifications, and Inline XBRL financial data files - The exhibits filed with the report include amendments to the Sixth Amended and Restated Credit Agreement, CEO and CFO certifications (Rule 13a-14(a) and Section 906), and Inline XBRL documents[178][179]