Chatham Lodging Trust(CLDT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's comprehensive financial statements and management's analysis of its financial condition and operational results Item 1. Financial Statements. This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, statements of equity, and statements of cash flows, along with detailed notes explaining the company's organization, accounting policies, property transactions, debt, equity, and other financial commitments for the periods ended June 30, 2025 and 2024 Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (in thousands): | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Investment in hotel properties, net | $1,137,185 | $1,197,518 | | Cash and cash equivalents | $17,168 | $20,195 | | Total assets | $1,194,329 | $1,254,681 | | Mortgage debt, net | $141,363 | $157,211 | | Revolving credit facility | $70,000 | $110,000 | | Total liabilities | $405,360 | $462,684 | | Total equity | $788,969 | $791,997 | Consolidated Statements of Operations This section details the company's revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations Highlights (in thousands, except per share data): For the three months ended June 30, | Metric | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Total revenue | $80,294 | $86,479 | (7.2)% | | Total operating expenses | $68,790 | $72,401 | (5.0)% | | Operating income | $11,854 | $14,090 | (15.8)% | | Net income | $5,499 | $7,034 | (21.8)% | | Net income (loss) attributable to common shareholders | $3,389 | $4,861 | (30.3)% | | Diluted EPS | $0.07 | $0.10 | (30.0)% | | Distributions declared per common share | $0.09 | $0.07 | 28.6% | For the six months ended June 30, | Metric | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Total revenue | $148,929 | $154,920 | (3.9)% | | Total operating expenses | $136,235 | $139,714 | (2.5)% | | Operating income | $20,162 | $15,066 | 33.8% | | Net income | $7,017 | $1,548 | 353.3% | | Net income (loss) attributable to common shareholders | $6,911 | $1,621 | 326.3% | | Diluted EPS | $0.06 | $(0.05) | N/A | | Distributions declared per common share | $0.18 | $0.14 | 28.6% | Consolidated Statements of Equity This section outlines changes in the company's equity, including common and preferred shares, and distributions for the periods presented Consolidated Statements of Equity Highlights (in thousands, except share data): | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total shareholders' equity | $754,090 | $758,219 | | Total equity | $788,969 | $791,997 | | Common shares outstanding | 48,997,996 | 48,912,293 | | Preferred shares outstanding | 4,800,000 | 4,800,000 | - Repurchased 20,480 common shares for approximately $0.1 million during the three months ended June 30, 2025[16][59] - Dividends declared on common shares increased to $0.09 per share for the three months ended June 30, 2025, from $0.07 per share in the prior year[16][54] Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Highlights (in thousands): For the six months ended June 30, | Metric | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Net cash provided by operating activities | $26,252 | $32,069 | $(5,817) | | Net cash provided by (used in) investing activities | $36,519 | $(46,008) | $82,527 | | Net cash used in financing activities | $(68,406) | $(46,114) | $(22,292) | | Net change in cash, cash equivalents and restricted cash | $(5,635) | $(60,053) | $54,418 | | Cash, cash equivalents and restricted cash, end of period | $24,209 | $25,696 | $(1,487) | Notes to the Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies, significant transactions, and financial commitments Note 1. Organization This note provides details on organization - Chatham Lodging Trust is a Maryland real estate investment trust (REIT) focused on upscale extended-stay and premium-branded select-service hotels[27] - As of June 30, 2025, the Company owned 34 hotels with 5,166 rooms across 15 states and the District of Columbia[29] - All hotels are managed by Island Hospitality Management, LLC (IHM), which is 100% owned by the Company's Chairman, President, and CEO[31] Note 2. Summary of Significant Accounting Policies This note provides details on summary of significant accounting policies - The unaudited interim consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, involving management estimates and assumptions[32][34] - The Company adopted ASU 2023-07 (Segment Reporting) in FY2024 and ASU 2023-09 (Income Tax Disclosures) on January 1, 2025[35][36] - The Company is currently evaluating the potential impact of ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 2026[37] Note 3. Acquisition of Hotel Properties This note provides details on acquisition of hotel properties - On May 30, 2024, the Company acquired the Home2 Suites Phoenix Downtown hotel property for $43.3 million[38] - The acquired hotel property is classified as a finance lease, with right-of-use (ROU) assets and a lease liability recorded[38] Note 4. Disposition of Hotel Properties This note provides details on disposition of hotel properties Hotel Dispositions (2025): | Hotel Property | Sale Date | Sale Price (millions) | Gain on Sale (millions) | | :----------------------------------- | :---------- | :-------------------- | :-------------------- | | Courtyard Houston-Medical Center | April 22, 2025 | $23.5 | $0.1 | | Hampton Inn & Suites Houston-Medical Center | March 17, 2025 | $15.5 | $1.8 | | Homewood Suites by Hilton Nashville-Brentwood | January 30, 2025 | $15.0 | $5.5 | Hotel Dispositions (2024): | Hotel Property | Sale Date | Sale Price (millions) | Gain (Loss) on Sale (millions) | | :----------------------------------- | :---------- | :-------------------- | :----------------------------- | | Homewood Suites by Hilton Minneapolis-Mall of America | December 16, 2024 | $13.8 | $(0.8) | | Homewood Suites by Hilton Orlando-Maitland | December 6, 2024 | $15.5 | $6.7 | | Hilton Garden Inn Denver Tech Center | January 9, 2024 | $18.0 | $(0.2) | - The sales did not represent a strategic shift or qualify to be reported as discontinued operations[42] Note 5. Investment in Hotel Properties This note provides details on investment in hotel properties Investment in Hotel Properties, Net (in thousands): | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Land and improvements | $270,046 | $280,415 | | Building and improvements | $1,185,836 | $1,232,438 | | Furniture, fixtures and equipment | $87,561 | $107,947 | | Finance lease assets | $43,798 | $43,760 | | Renovations in progress | $8,624 | $17,232 | | Less accumulated depreciation and amortization | $(458,680) | $(484,274) | | Investment in hotel properties, net | $1,137,185 | $1,197,518 | Note 6. Debt This note provides details on debt Debt Outstanding (in thousands): | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Revolving Credit Facility | $70,000 | $110,000 | | Unsecured Term Loan | $140,000 | $140,000 | | Total debt before unamortized debt issue costs | $353,225 | $409,182 | | Unamortized term loan and mortgage debt issue costs | $(2,006) | $(2,332) | | Total debt outstanding | $351,219 | $406,850 | - During the six months ended June 30, 2025, the Company repaid a $16.0 million mortgage loan on the Hampton Inn Houston hotel property[47] - New mortgage loans obtained in 2024 include a $23.3 million loan for Hyatt Place Pittsburgh (7.29% fixed) and two loans totaling $37.0 million for SpringHill Suites Savannah and Hampton Inn & Suites Exeter (6.70% fixed)[50] Future Scheduled Principal Payments of Debt Obligations (in thousands): | Year | Amount | | :-------------------------------- | :----- | | 2025 (remaining six months) | $140,000 | | 2026 | $70,000 | | 2027 | $— | | 2028 | $24,590 | | 2029 | $23,681 | | Thereafter | $94,954 | | Total debt before unamortized debt issue costs | $353,225 | Note 7. Income Taxes This note provides details on income taxes - Income tax expense was zero for the three and six months ended June 30, 2025 and 2024[52] - The Company's Taxable REIT Subsidiary (TRS) continues to recognize a full valuation allowance (100%) on net deferred tax assets due to cumulative three-year taxable losses[53] Note 8. Dividends Declared and Paid This note provides details on dividends declared and paid Common Share and LTIP Unit Distributions Declared: For the six months ended June 30, | Year | Common Share Distribution Amount | LTIP Unit Distribution Amount | | :--- | :----------------------------- | :-------------------------- | | 2025 | $0.18 | $0.18 | | 2024 | $0.14 | $0.14 | Preferred Share Dividends Declared: For the six months ended June 30, | Year | Dividend per Preferred Share | | :--- | :------------------------- | | 2025 | $0.82812 | | 2024 | $0.82812 | Note 9. Shareholders' Equity This note provides details on shareholders' equity - As of June 30, 2025, 48,997,996 common shares were outstanding[56] - Approximately $77.5 million in common shares remained available for issuance under the At-The-Market (ATM) Program as of June 30, 2025, with no shares issued during Q2 2025[57] - A $25.0 million Share Repurchase Program was authorized in May 2025; 20,480 common shares were repurchased for approximately $0.1 million during Q2 2025, with $24.9 million remaining available[59] - As of June 30, 2025, there were 2,191,510 vested Long-Term Incentive Plan (LTIP) units held by current and former employees[62] Note 10. Earnings Per Share This note provides details on earnings per share - The Company uses the two-class method for earnings per share (EPS) calculation, treating unvested restricted shares and LTIP units as participating shares[63] Diluted Net Income (Loss) Per Common Share: For the three months ended June 30, | Year | Diluted EPS | | :--- | :---------- | | 2025 | $0.07 | | 2024 | $0.10 | For the six months ended June 30, | Year | Diluted EPS | | :--- | :---------- | | 2025 | $0.06 | | 2024 | $(0.05) | Note 11. Equity Incentive Plan This note provides details on equity incentive plan - The Equity Incentive Plan was amended on May 6, 2025, to increase the maximum number of shares available by 2,150,000 and to increase individual grant limits for performance units[65] - As of June 30, 2025, there were 2,271,462 common shares available for issuance under the Equity Incentive Plan[65] Unrecognized Compensation Costs Related to Equity Awards (in thousands): | Award Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Restricted share awards | $81 | $33 | | LTIP units | $9,300 | $6,800 | Weighted-average recognition period for restricted share awards: ~2.3 years (June 30, 2025). Weighted-average remaining vesting period for LTIP units: ~2.1 years (June 30, 2025). - On March 1, 2025, 380,571 performance-based LTIP unit awards were granted, with vesting contingent on the Company's relative Total Shareholder Return (TSR) performance over a three-year period[72][73] Note 12. Leases This note provides details on leases ROU Assets and Lease Liabilities (in thousands): | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total ROU asset, net | $59,054 | $60,297 | | Total lease liability | $20,349 | $20,634 | Weighted-average remaining lease term: 41.74 years (June 30, 2025). Weighted-average discount rate: 6.86% (June 30, 2025). - The Home2 Phoenix hotel property is subject to a finance lease under a Government Property Lease Excise Tax (GPLET) agreement with the City of Phoenix[86] - A new 10-year corporate office lease was entered into in May 2024, commencing by September 1, 2026, with annual base rent ranging from $0.6 million to $0.7 million[84] Note 13. Commitments and Contingencies This note provides details on commitments and contingencies - The Company is subject to various claims and lawsuits, but the aggregate identifiable liabilities are not expected to have a material adverse impact on its financial condition or results of operations[89] - Management agreements with IHM provide for base management fees (percentage of gross room revenue) and incentive management fees (capped at 1% of gross hotel revenues)[90] Management Fees Paid to Related Parties (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $2,685 | $2,850 | | Six months ended June 30 | $4,975 | $5,159 | Franchise and Marketing Fees (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $6,435 | $6,936 | | Six months ended June 30 | $11,866 | $12,425 | Note 14. Related Party Transactions This note provides details on related party transactions - Island Hospitality Management, LLC (IHM), 100% owned by the Company's CEO, manages all 34 of the Company's hotels[93] Hotel Management Fees Accrued or Paid to IHM (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $2,700 | $2,900 | | Six months ended June 30 | $5,000 | $5,200 | - Cost reimbursements from related parties, primarily for shared office expenses, are recorded without markup and have no impact on operating or net income[94] Note 15. Segment Information This note provides details on segment information - The Company evaluates its hotels as a single reportable segment due to similar economic characteristics and services[95] - Operating performance is assessed based on Adjusted Hotel EBITDA[95] Adjusted Hotel EBITDA (in thousands): | Period | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Three months ended June 30 | $30,891 | $33,652 | (8.2)% | | Six months ended June 30 | $51,726 | $54,679 | (5.4)% | Note 16. Subsequent Events This note provides details on subsequent events - In July 2025, the Company repurchased 20,559 common shares for approximately $0.1 million under its Share Repurchase Program[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides an overview of the Company's business, key performance indicators, and a detailed comparison of financial results for the three and six months ended June 30, 2025, against the prior year, highlighting the impact of hotel dispositions, acquisitions, and market conditions. It also discusses liquidity, capital resources, and non-GAAP financial measures Statement Regarding Forward-Looking Information This statement highlights that the report contains forward-looking information subject to various known and unknown risks and uncertainties - The report contains forward-looking statements about future results, financial condition, liquidity, and plans, which are subject to known and unknown risks[99] - Important risk factors include economic conditions, competition, government regulations, lodging industry fundamentals, operating costs, financing ability, and asset dispositions[99] Overview This section provides a high-level description of Chatham Lodging Trust as a REIT focused on upscale hotels, including its leverage and debt profile - Chatham Lodging Trust is a self-advised hotel investment company, organized as a REIT, focused on upscale extended-stay and premium-branded select-service hotels[100][103] - As of June 30, 2025, the Company's leverage ratio was 21.1% (net debt to hotel investments at cost)[102] - Total debt as of June 30, 2025, was $353.2 million at a weighted-average interest rate of approximately 6.46%[102] Key Indicators of Operating Performance and Financial Condition This section identifies the non-financial and financial metrics used by the company to evaluate its operating performance and financial health - The Company evaluates performance using non-financial metrics such as Average Daily Rate (ADR), Occupancy, and Revenue Per Available Room (RevPAR)[106] - Financial metrics used include Funds From Operations (FFO), Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, and Adjusted Hotel EBITDA[106] Results of Operations This section analyzes the company's operational performance, including industry outlook and detailed comparisons of financial results for the periods presented Industry Outlook This section discusses the U.S. lodging industry's RevPAR trends, noting a decrease and slowed growth in 2025 - U.S. lodging industry RevPAR decreased 0.5% for the three months ended June 30, 2025[107] - RevPAR growth slowed starting in March 2025, with limited visibility for the remainder of 2025[107] Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024 This section provides a detailed comparative analysis of the company's financial performance for the three months ended June 30, 2025, versus the prior year Revenues (Three Months) This section analyzes the total revenue and same-property room revenue metrics for the three months ended June 30, highlighting the impact of hotel sales and acquisitions Total Revenue (in thousands): | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three months ended June 30 | $80,294 | $86,479 | (7.2)% | Same Property Room Revenue Metrics (34 hotels): | Metric | June 30, 2025 | June 30, 2024 | % Change | | :-------------------------------- | :------------ | :------------ | :------- | | Occupancy | 81.5% | 81.8% | (0.4)% | | ADR | $190.63 | $190.68 | (0.0)% | | RevPAR | $155.37 | $155.96 | (0.4)% | - The decrease in total revenue was primarily due to a (0.4)% decrease in same property RevPAR and the sales of five hotels, partially offset by the acquisition of one hotel[109] Hotel Operating Expenses (Three Months) This section details the changes in total hotel operating expenses, primarily influenced by hotel dispositions and acquisitions Total Hotel Operating Expenses (in thousands): | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three months ended June 30 | $43,020 | $46,571 | (7.6)% | - The decrease was driven by the sales of five hotels, partially offset by the acquisition of one hotel and inflationary cost pressures[114] - Room expenses, the most significant component, decreased by $(2.0) million to $15.0 million[115] Depreciation and Amortization (Three Months) This section presents the depreciation and amortization expense for the three months ended June 30 Depreciation and Amortization Expense (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $15,395 | $14,914 | Property Taxes, Ground Rent and Insurance (Three Months) This section outlines the property taxes, ground rent, and insurance expenses, noting increases due to higher assessments Property Taxes, Ground Rent and Insurance Expenses (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $6,134 | $5,981 | - The increase was primarily due to higher property tax assessments, partially offset by hotel sales[118] General and Administrative (Three Months) This section reports the general and administrative expenses, excluding share-based compensation, for the three months ended June 30 General and Administrative Expenses (excluding share-based compensation, in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $2,400 | $3,000 | Reimbursable Costs from Related Parties (Three Months) This section details reimbursable costs from related parties, which offset operating expenses without impacting net income Reimbursable Costs from Related Parties (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $249 | $275 | - These costs offset related operating expenses and had no impact on operating or net income[120] Interest and Other Income (Three Months) This section presents interest and other income, noting a decrease primarily due to lower cash balances Interest and Other Income (in thousands): | Period | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Three months ended June 30 | $59 | $684 | $(625) | - The decrease was due to lower cash balances[121] Interest Expense, Including Amortization of Deferred Fees (Three Months) This section analyzes interest expense, including amortization of deferred fees, highlighting the impact of lower debt balances Interest Expense (in thousands): | Component | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Mortgage debt interest | $2,619 | $4,946 | (47.0)% | | Credit facility and term loan interest and unused fees | $3,455 | $2,421 | 42.7% | | Total Interest Expense | $6,414 | $7,723 | (16.9)% | - The overall decrease in interest expense was due to lower debt balances[122] Income Tax Expense (Three Months) This section reports the income tax expense, which remained zero due to a full valuation allowance on deferred tax assets - Income tax expense remained zero for both periods due to a full valuation allowance on deferred tax assets of the TRS[123] Net Income (Loss) (Three Months) This section presents the net income for the three months ended June 30 Net Income (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three months ended June 30 | $5,499 | $7,034 | Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024 This section provides a detailed comparative analysis of the company's financial performance for the six months ended June 30, 2025, versus the prior year Revenues (Six Months) This section analyzes the total revenue and same-property room revenue metrics for the six months ended June 30, highlighting the impact of hotel sales and acquisitions Total Revenue (in thousands): | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Six months ended June 30 | $148,929 | $154,920 | (3.9)% | Same Property Room Revenue Metrics (34 hotels): | Metric | June 30, 2025 | June 30, 2024 | % Change | | :-------------------------------- | :------------ | :------------ | :------- | | Occupancy | 76.9% | 75.5% | 1.9% | | ADR | $184.45 | $184.62 | (0.1)% | | RevPAR | $141.80 | $139.37 | 1.7% | - The decrease in total revenue was primarily due to the sales of six hotels, partially offset by a 1.7% increase in same property RevPAR and the acquisition of one hotel[126] Hotel Operating Expenses (Six Months) This section details the changes in total hotel operating expenses, primarily influenced by hotel dispositions and acquisitions Total Hotel Operating Expenses (in thousands): | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Six months ended June 30 | $84,800 | $88,413 | (4.1)% | - The decrease was driven by the sales of six hotels, partially offset by the acquisition of one hotel and increased staffing/wage costs[131] - Room expenses decreased by $(2.3) million to $29.8 million[132] Depreciation and Amortization (Six Months) This section presents the depreciation and amortization expense for the six months ended June 30 Depreciation and Amortization Expense (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Six months ended June 30 | $30,426 | $30,169 | Property Taxes, Ground Rent and Insurance (Six Months) This section outlines the property taxes, ground rent, and insurance expenses, noting increases due to higher assessments Property Taxes, Ground Rent and Insurance Expenses (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Six months ended June 30 | $11,877 | $11,275 | - The increase was primarily due to higher property tax assessments, partially offset by hotel sales[135] General and Administrative (Six Months) This section reports the general and administrative expenses, excluding share-based compensation, for the six months ended June 30 General and Administrative Expenses (excluding share-based compensation, in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Six months ended June 30 | $5,400 | $6,000 | Reimbursable Costs from Related Parties (Six Months) This section details reimbursable costs from related parties, which offset operating expenses without impacting net income Reimbursable Costs from Related Parties (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Six months ended June 30 | $526 | $553 | - These costs offset related operating expenses and had no impact on operating or net income[137] Interest and Other Income (Six Months) This section presents interest and other income, noting a decrease primarily due to lower cash balances Interest and Other Income (in thousands): | Period | 2025 | 2024 | Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | | Six months ended June 30 | $121 | $1,529 | $(1,408) | - The decrease was due to lower cash balances[138] Interest Expense, Including Amortization of Deferred Fees (Six Months) This section analyzes interest expense, including amortization of deferred fees, highlighting the impact of lower debt balances Interest Expense (in thousands): | Component | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Mortgage debt interest | $5,220 | $10,154 | (48.6)% | | Credit facility and term loan interest and unused fees | $7,361 | $4,209 | 74.9% | | Total Interest Expense | $13,266 | $15,030 | (11.7)% | - The overall decrease in interest expense was due to lower debt balances[139] Income Tax Expense (Six Months) This section reports the income tax expense, which remained zero due to a full valuation allowance on deferred tax assets - Income tax expense remained zero for both periods due to a full valuation allowance on deferred tax assets of the TRS[140] Net Income (Loss) (Six Months) This section presents the net income for the six months ended June 30 Net Income (in thousands): | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Six months ended June 30 | $7,017 | $1,548 | Non-GAAP Financial Measures This section discusses the company's use of non-GAAP financial measures like FFO, EBITDA, and Adjusted Hotel EBITDA as supplemental performance indicators - The Company uses non-GAAP financial measures including FFO, Adjusted FFO, EBITDA, EBITDAre, Adjusted EBITDA, and Adjusted Hotel EBITDA as supplemental indicators of operating performance[142] - These measures are not GAAP alternatives for net income or cash flows from operations and have limitations, such as not reflecting cash expenditures for capital or working capital needs[143][154][155] Reconciliation of Net Income (Loss) to FFO and Adjusted FFO (in thousands): For the six months ended June 30, | Metric | 2025 | 2024 | | :--------------------------------------- | :----- | :----- | | Net income | $7,017 | $1,548 | | FFO attributable to common share and unit holders | $24,929 | $27,621 | | Adjusted FFO attributable to common share and unit holders | $25,906 | $27,865 | Reconciliation of Net Income (Loss) to EBITDA, EBITDAre, and Adjusted EBITDA (in thousands): For the six months ended June 30, | Metric | 2025 | 2024 | | :--------------------------------------- | :----- | :----- | | Net income | $7,017 | $1,548 | | EBITDA | $50,709 | $46,747 | | EBITDAre | $43,241 | $46,887 | | Adjusted EBITDA | $46,412 | $50,241 | Reconciliation of Net Income (Loss) to Adjusted Hotel EBITDA (in thousands): For the six months ended June 30, | Metric | 2025 | 2024 | | :--------------------------------------- | :----- | :----- | | Net income | $7,017 | $1,548 | | Adjusted Hotel EBITDA | $51,726 | $54,679 | Sources and Uses of Cash This section summarizes the company's cash flow activities from operations, investing, and financing, and projected capital expenditures - Cash, cash equivalents, and restricted cash decreased by $(5.6) million to $24.2 million as of June 30, 2025[157] Cash Flow Activities (in thousands, six months ended June 30): | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash provided by operating activities | $26,252 | $32,069 | | Net cash provided by (used in) investing activities | $36,519 | $(46,008) | | Net cash used in financing activities | $(68,406) | $(46,114) | - The Company expects to invest approximately $9.3 million in renovations and capital expenditures on existing hotels during the remainder of 2025[160] Liquidity and Capital Resources This section details the company's leverage ratio, total debt, borrowing availability, and compliance with financial covenants - As of June 30, 2025, the Company's leverage ratio was 21.1%, with total debt of $353.2 million at an average interest rate of 6.46%[165] - The Company had $180.0 million in aggregate maximum remaining borrowing availability under its revolving credit facility and unsecured term loan as of June 30, 2025[46] - The Company was in compliance with all financial covenants of its credit facilities at June 30, 2025[167] - Available capital for issuance/repurchase includes approximately $49.9 million under the DRSPP, $77.5 million under the ATM Program, and $24.9 million under the Share Repurchase Program[168][169][170] Dividend Policy This section outlines the company's common share dividend policy and declared distributions for common and preferred shares - The common share dividend policy is to distribute approximately 100% of annual taxable income[174] - For the six months ended June 30, 2025, total dividends of $0.18 per common share/LTIP unit and $0.82812 per Series A preferred share were declared[174][175] Inflation This section discusses the potential impact of inflation on room rates, operating costs, and capital investment costs - Operators can adjust room rates daily to reflect inflation, but competitive pressures may limit this ability[176] - Inflation may increase operating costs (e.g., labor, food, utilities) and capital investment costs[176] Seasonality This section explains the seasonal patterns in the company's hotel operations, affecting revenue, operating income, and cash flow - The Company's hotels experience seasonal patterns, with lower revenue, operating income, and cash flow in the first and fourth quarters, and higher in the second and third quarters[177] - Cash on hand or credit facility borrowings are used to manage cash flow fluctuations during seasonal downturns[177] Critical Accounting Estimates This section emphasizes that financial statement preparation involves management estimates and assumptions, which may differ from actual results - The preparation of financial statements requires management to make estimates and assumptions, which are evaluated on an ongoing basis[178] - Actual results could differ from these estimates, and all significant accounting policies are disclosed in the Annual Report on Form 10-K[178] Item 3. Quantitative and Qualitative Disclosures about Market Risk. The Company is exposed to interest rate risk primarily from its floating rate debt. It manages this risk by seeking fixed rates or variable rates with low margins and evaluating hedging opportunities. A hypothetical 100 basis point increase in SOFR would result in approximately $2.1 million in additional annual interest - The Company is exposed to interest rate changes primarily due to floating rate borrowings under its revolving credit facility and term loan[179] - Interest rate risk management objectives include limiting the impact of interest rate changes and lowering borrowing costs, achieved by borrowing at fixed or lowest variable rates and evaluating hedging opportunities[179] Debt Sensitive to Interest Rate Changes (in thousands, as of June 30, 2025): | Debt Type | Total | Average Interest Rate | | :-------------------------------- | :------ | :-------------------- | | Floating rate debt | $210,000 | 5.93% | | Fixed rate debt | $143,225 | 7.23% | - A hypothetical 100 basis points increase in SOFR would result in approximately $2.1 million in additional annual interest[181] Item 4. Controls and Procedures. The Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective as of June 30, 2025. There have been no material changes in internal control over financial reporting during the last fiscal quarter Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by senior management - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures[182] - They concluded that these controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[182] Changes in Internal Control over Financial Reporting This section states that there were no material changes in internal control over financial reporting during the last fiscal quarter - There have been no material changes in the Company's internal control over financial reporting during the last fiscal quarter[183] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity transactions, and other relevant disclosures Item 1. Legal Proceedings. The Company is involved in various routine legal proceedings arising in the ordinary course of business, but the aggregate identifiable liabilities from these matters are not expected to have a material adverse impact on its financial condition or results of operations - The Company is subject to various claims, lawsuits, and legal proceedings in the ordinary course of business[185] - The aggregate identifiable amount of such liabilities is not expected to have a material adverse impact on the Company's financial condition or results of operations[185] Item 1A. Risk Factors. There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the Risk Factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[186] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the second quarter of 2025, the Company repurchased 20,480 common shares for approximately $0.1 million under its $25.0 million Share Repurchase Program, with $24.9 million remaining available for repurchase Issuer Purchases of Equity Securities (Q2 2025): | Period | Total Number of Shares Purchased | Average Price Paid per Share | Dollar Value of Shares that May Yet Be Purchased (in thousands) | | :-------------------------------- | :----------------------------- | :--------------------------- | :------------------------------------------------------------ | | June 1, 2025 - June 30, 2025 | 20,480 | $7.02 | $24,856 | | Total | 20,480 | $7.02 | $24,856 | - The repurchases were made under a $25.0 million Share Repurchase Program authorized in May 2025, which has no time limit[187] Item 3. Defaults Upon Senior Securities. The Company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[188] Item 4. Mine Safety Disclosures. This item is not applicable to the Company - This item is not applicable to the Company[189] Item 5. Other Information. During the three months ended June 30, 2025, none of the Company's trustees or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by the Company's trustees or officers during the three months ended June 30, 2025[190] Item 6. Exhibits. This section lists all exhibits filed as part of the report, including corporate governance documents, equity incentive plan amendments, and required certifications - Exhibits include Articles of Amendment and Restatement, Articles Supplementary for Preferred Shares, and the Fourth Amended and Restated Bylaws[191][193] - The Chatham Lodging Trust Equity Incentive Plan, Amended and Restated as of May 22, 2022, was further amended on May 6, 2025[191] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed/furnished[191] SIGNATURE The report is officially signed on behalf of Chatham Lodging Trust by Jeremy B. Wegner, Senior Vice President and Chief Financial Officer, on August 6, 2025 - The report was signed by Jeremy B. Wegner, Senior Vice President and Chief Financial Officer[197] - The signing date was August 6, 2025[197]