Apple Hospitality REIT(APLE) - 2025 Q2 - Quarterly Results

Q2 2025 Performance Overview This section summarizes the company's financial and operational performance for Q2 2025, highlighting key profitability metrics and management's strategic commentary Financial & Statistical Highlights The company reported a decline in key profitability metrics for Q2 2025 compared to Q2 2024, with Net Income down 13.9% and Adjusted EBITDAre down 5.6%. Hotel operating metrics showed a slight decline, with Comparable Hotels RevPAR decreasing by 1.7% due to lower occupancy, though ADR remained relatively flat Q2 2025 Key Financial and Operating Metrics (YoY, in thousands) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Income | $63,648 | $73,931 | (13.9%) | | Adjusted EBITDAre | $133,006 | $140,916 | (5.6%) | | MFFO per share | $0.47 | $0.50 | (6.0%) | | Comparable Hotels RevPAR | $128.68 | $130.89 | (1.7%) | | Comparable Hotels ADR | $163.62 | $163.80 | (0.1%) | | Comparable Hotels Occupancy | 78.6% | 79.9% | (1.6%) | CEO Commentary The CEO noted that performance improved sequentially through the quarter after a challenging April, with preliminary July results showing positive RevPAR growth. The company is adapting to demand shifts by optimizing its business mix. The capital allocation strategy focuses on opportunistically selling assets to fund share repurchases while the stock trades at a discount, preserving balance sheet flexibility for future acquisitions - Comparable Hotels RevPAR declines moderated each month during Q2, and preliminary results for July show approximately 1% year-over-year growth[6] - The company is actively managing its portfolio by selling assets to redeploy proceeds into share repurchases, taking advantage of the stock trading at an implied discount to private market values[7] - Management expressed confidence in the long-term outlook for the hospitality industry and the company's ability to maximize shareholder returns due to its high-quality, diversified portfolio and strong balance sheet[7] Detailed Quarterly Performance For Q2 2025, Comparable Hotels RevPAR decreased 1.7% YoY to approximately $129, driven by a 1.6% drop in occupancy. Performance trends improved monthly, with the RevPAR decline narrowing from -4.0% in April to -0.2% in June. Bottom-line metrics also saw declines, with Comparable Hotels Adjusted Hotel EBITDA down 5.4% and MFFO down 7.9% Comparable Hotels Monthly Performance (Q2 2025 vs Q2 2024) | Metric | April % Change | May % Change | June % Change | Q2 2025 % Change | | :--- | :--- | :--- | :--- | :--- | | ADR | (1.2%) | 0.5% | 0.3% | (0.1%) | | Occupancy | (2.9%) | (1.3%) | (0.6%) | (1.6%) | | RevPAR | (4.0%) | (0.9%) | (0.2%) | (1.7%) | - Bottom-line performance for Q2 2025 saw declines, with Comparable Hotels Adjusted Hotel EBITDA at $142 million (-5.4% YoY) and MFFO at $112 million (-7.9% YoY)[13] Portfolio & Capital Management This section details the company's strategic activities in portfolio management, capital improvements, balance sheet health, and shareholder returns during the quarter Portfolio Activity The company was active in managing its portfolio, acquiring one hotel in Tampa for $18.8 million and placing three hotels under contract for sale for a combined $36.3 million. It also has a hotel in Nashville under a potential purchase contract. Additionally, the company regained possession of its New York Property from a third-party operator in April 2025 - Acquired the 126-room Homewood Suites by Hilton Tampa-Brandon for $18.8 million in June 2025[14] - Three hotels are currently under contract for sale for a combined gross price of approximately $36.3 million[16] - On April 4, 2025, the company recovered possession of its independent boutique hotel in New York, NY from a third-party operator and reinstated operations[18][20] Capital Improvements The company invested approximately $32 million in capital expenditures in the first half of 2025 and plans to invest a total of $80 million to $90 million for the full year, targeting comprehensive renovations for approximately 20 hotels - Invested approximately $32 million in capital expenditures during the six months ended June 30, 2025[21] - Anticipates investing $80 million to $90 million in capital improvements for the full year 2025[21] Balance Sheet and Liquidity As of June 30, 2025, the company maintained a strong balance sheet with total debt of $1.5 billion, a net debt to total capitalization ratio of approximately 36%, and $475 million available on its revolving credit facility. Subsequent to the quarter's end, the company refinanced a term loan, increasing its size to $385 million and extending the maturity to 2030 Balance Sheet & Liquidity as of June 30, 2025 (in millions/billions) | Metric | Value | | :--- | :--- | | Total Outstanding Debt | ~$1.5 Billion | | Cash on Hand | ~$8 Million | | Revolving Credit Facility Availability | ~$475 Million | | Total Debt to Total Capitalization (net) | ~36% | - In July 2025, the company entered into a new $385 million term loan facility maturing in 2030, using proceeds to repay a $225 million facility and reduce the balance on its revolving credit facility[23] Capital Markets and Shareholder Returns The company repurchased 1.4 million common shares for $16.9 million in Q2 2025 under its Share Repurchase Program. It paid distributions of $0.24 per share during the quarter, representing a current annualized yield of approximately 8.2%. The at-the-market (ATM) offering program remained unused - During Q2 2025, the company repurchased approximately 1.4 million common shares for an aggregate price of $16.9 million[24] - Paid distributions totaling $0.24 per common share in Q2 2025. The current annualized distribution of $0.96 per share represents an annual yield of approximately 8.2% as of August 4, 2025[27] - No shares were sold under the $500 million at-the-market (ATM) offering program during the first six months of 2025[26] 2025 Outlook This section provides the company's updated financial guidance for the full year 2025, reflecting current market conditions and booking trends Updated 2025 Guidance Citing economic uncertainty and slightly weaker booking data for late summer, the company updated its full-year 2025 guidance. The outlook for Net Income, Comparable Hotels RevPAR Change, and Adjusted EBITDAre was revised downwards compared to the midpoint of previous guidance - The company lowered its full-year guidance to reflect current booking trends, which have pulled back slightly year-over-year for August and September, and continued economic uncertainty[28] Updated Full Year 2025 Guidance (in millions) | Metric | Low-End | High-End | | :--- | :--- | :--- | | Net income | $161 Million | $187 Million | | Comparable Hotels RevPAR Change | (1.5%) | 0.5% | | Comparable Hotels Adjusted Hotel EBITDA Margin % | 33.5% | 34.5% | | Adjusted EBITDAre | $428 Million | $450 Million | | Capital expenditures | $80 Million | $90 Million | Financial Statements & Reconciliations This section presents the company's consolidated financial statements, including balance sheet and statement of operations, along with reconciliations of non-GAAP financial measures Consolidated Financial Statements The Consolidated Balance Sheet as of June 30, 2025, shows total assets of $4.93 billion and total shareholders' equity of $3.20 billion. The Consolidated Statement of Operations for Q2 2025 reports total revenues of $384.4 million and net income of $63.6 million, a decrease from $73.9 million in Q2 2024 Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | | :--- | :--- | | Total Assets | $4,929,092 | | Total Liabilities | $1,730,307 | | Total Shareholders' Equity | $3,198,785 | Consolidated Statement of Operations Summary (Q2 2025, in thousands) | Account | Amount | | :--- | :--- | | Total Revenue | $384,370 | | Operating Income | $84,851 | | Net Income | $63,648 | Non-GAAP Reconciliations The report provides detailed reconciliations for non-GAAP measures such as Adjusted EBITDAre and MFFO to the nearest GAAP measure, Net Income. For Q2 2025, Net Income of $63.6 million reconciled to Adjusted EBITDAre of $133.0 million and MFFO of $111.8 million Reconciliation of Net Income to MFFO (Q2 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $63,648 | | Depreciation of real estate owned | $47,262 | | Funds from operations (FFO) | $110,910 | | Adjustments | $893 | | Modified funds from operations (MFFO) | $111,803 | Reconciliation of Net Income to Adjusted EBITDAre (Q2 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $63,648 | | Depreciation and amortization | $48,022 | | Interest and other expense, net | $20,963 | | EBITDAre | $132,975 | | Adjusted EBITDAre | $133,006 | Debt Summary As of June 30, 2025, the company had total debt of $1.53 billion with a weighted-average interest rate of approximately 5.0%. The debt is a mix of variable-rate ($1.19 billion) and fixed-rate ($342 million) instruments with maturities spread through 2029 and beyond. A significant refinancing of a $225 million term loan occurred in July 2025, extending maturity Total Debt Maturities as of June 30, 2025 (in thousands) | Period | Maturities | | :--- | :--- | | Jul 1 - Dec 31, 2025 | $257,983 | | 2026 | $377,649 | | 2027 | $278,602 | | 2028 | $334,066 | | 2029 | $162,294 | | Thereafter | $119,654 | | Total | $1,530,248 | - Subsequent to the quarter end, on July 24, 2025, the company entered a new $385 million term loan facility maturing in 2030, repaying its $225 million facility that was due in the second half of 2025[79] Detailed Operating Metrics This section provides a detailed breakdown of comparable hotel operating metrics, segmented by market and location type, highlighting performance variations Comparable Hotels Metrics by Market Performance varied significantly across the company's top 30 markets in Q2 2025. Markets like Pittsburgh (+19.1%), Alaska (+10.6%), and Salt Lake City (+6.8%) showed strong RevPAR growth. Conversely, markets such as Fort Worth/Arlington (-13.5%), Phoenix (-11.8%), Nashville (-10.8%), and Washington D.C. (-8.9%) experienced notable declines. The top 30 markets collectively saw a RevPAR decrease of 0.8% - Strongest performing markets in Q2 2025 by RevPAR growth included Pittsburgh, PA (+19.1%) and Alaska (+10.6%)[83] - Weakest performing markets in Q2 2025 by RevPAR growth included Fort Worth/Arlington, TX (-13.5%), Phoenix, AZ (-11.8%), and Washington, DC (-8.9%)[83] Comparable Hotels Metrics by Location In Q2 2025, performance by location type was mixed. Suburban and Urban locations, which constitute over 82% of the portfolio's Adjusted Hotel EBITDA, saw RevPAR declines of 2.3% and 1.4%, respectively. Small Metro/Town locations were the only category to post positive RevPAR growth at 2.6% Q2 2025 RevPAR Performance by Location Type (YoY % Change) | Location Type | RevPAR % Change | | :--- | :--- | | Airport | (1.6%) | | Interstate | (0.2%) | | Resort | (1.0%) | | Small Metro/Town | 2.6% | | Suburban | (2.3%) | | Urban | (1.4%) | | Total Portfolio | (1.7%) |