DiamondRock Hospitality pany(DRH) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for DiamondRock Hospitality Company as of June 30, 2025, including balance sheets, statements of operations, equity, and cash flows, with detailed notes on accounting policies and activities Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $3.06 billion from $3.17 billion, primarily due to a hotel sale, while total liabilities decreased to $1.48 billion from $1.57 billion, mainly from debt repayments, with total equity remaining stable at $1.58 billion Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $3,061,315 | $3,172,251 | | Cash and cash equivalents | $52,402 | $81,381 | | Property and equipment, net | $2,615,010 | $2,631,221 | | Assets held for sale | $0 | $93,400 | | Total Liabilities | $1,476,817 | $1,573,319 | | Debt, net | $1,020,320 | $1,095,294 | | Total Equity | $1,584,498 | $1,598,932 | Consolidated Statements of Operations and Comprehensive Income For Q2 2025, total revenues slightly decreased to $305.7 million, but net income attributable to common stockholders significantly increased to $38.4 million ($0.18 per diluted share) from $22.1 million ($0.10 per diluted share) in Q2 2024, driven by reduced corporate expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $305,720 | $309,280 | $560,573 | $565,703 | | Total Operating Expenses | $249,586 | $268,274 | $479,672 | $502,252 | | Net Income | $41,039 | $24,631 | $52,954 | $32,989 | | Net Income Attributable to Common Stockholders | $38,381 | $22,076 | $47,784 | $27,950 | | Diluted EPS | $0.18 | $0.10 | $0.23 | $0.13 | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, operating activities provided $101.2 million, investing activities provided $47.8 million from a hotel sale, and financing activities used $174.2 million for debt repayments and dividends, resulting in a total cash decrease to $103.6 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $101,174 | $86,953 | | Net cash provided by (used in) investing activities | $47,753 | $(35,778) | | Net cash used in financing activities | $(174,159) | $(47,922) | | Net (decrease) increase in cash | $(25,232) | $3,253 | Notes to the Consolidated Financial Statements The notes detail the sale of the Westin Washington, D.C. City Center for $92.0 million, a reduction in total debt to $1.02 billion, significant share repurchase activity, and the company's operation as a single 'hotel ownership' segment - As of June 30, 2025, the company owned a portfolio of 36 premium hotels with 9,595 guest rooms[24] - 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[32] - Subsequent to the quarter end, on July 22, 2025, the company amended its credit facility, increasing its size from $1.2 billion to $1.5 billion and extending its maturity schedule[39] - During the first six months of 2025, the company repurchased 3.1 million shares of common stock for $23.7 million under its share repurchase program[55] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, strategic direction, and liquidity, highlighting a slight revenue decrease, flat RevPAR, improved net income due to lower corporate expenses, a conservative capital structure, and recent credit facility amendment and share repurchase activities Results of Operations For Q2 2025, total revenues decreased by 1.2% to $305.7 million due to a 2.6% decline in rooms revenue, while RevPAR was nearly flat with a 0.1% increase, primarily driven by a significant $19.1 million reduction in corporate expenses compared to Q2 2024 Q2 2025 vs Q2 2024 Revenue Breakdown (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Rooms | $198,237 | $203,487 | $(5,250) | (2.6)% | | Food and beverage | $78,828 | $78,111 | $717 | 0.9% | | Other | $28,655 | $27,682 | $973 | 3.5% | | Total revenues | $305,720 | $309,280 | $(3,560) | (1.2)% | Key Hotel Operating Statistics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Occupancy % | 76.7% | 77.5% | (0.8)% | | ADR | $295.78 | $292.59 | 1.1% | | RevPAR | $226.95 | $226.83 | 0.1% | - Corporate expenses decreased by $19.1 million in Q2 2025 compared to Q2 2024, primarily due to severance expenses recognized in the 2024 period related to leadership changes[110] Liquidity and Capital Resources The company maintains a conservative capital structure with $400.0 million borrowing capacity as of June 30, 2025, and subsequently upsized its credit facility to $1.5 billion to extend maturities and repay remaining 2025 mortgage debt, aiming for a fully unencumbered portfolio while actively repurchasing shares - The company amended its credit facility on July 22, 2025, increasing its size to $1.5 billion and extending maturities, with proceeds used to repay remaining 2025 mortgage loans, resulting in a fully unencumbered portfolio[130][137] - Under its $200 million share repurchase program, the company bought back 3.1 million shares for $23.7 million in the first six months of 2025, with $146.8 million of capacity remaining as of August 7, 2025[133] Non-GAAP Financial Measures The company uses non-GAAP measures like EBITDA and FFO, reporting Adjusted EBITDA of $90.5 million for Q2 2025 (down from $95.0 million) and Adjusted FFO of $72.3 million (down from $75.0 million), noting a restatement of prior periods for comparability after excluding share-based compensation from January 1, 2025 Reconciliation to Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 (As Adjusted) | | :--- | :--- | :--- | | Net income | $41,039 | $24,631 | | EBITDA/EBITDAre | $85,054 | $70,074 | | Adjusted EBITDA | $90,457 | $95,038 | Reconciliation to Adjusted FFO (in thousands) | Metric | Q2 2025 | Q2 2024 (As Adjusted) | | :--- | :--- | :--- | | Net income | $41,039 | $24,631 | | FFO | $69,195 | $52,504 | | Adjusted FFO available to common stock and unit holders | $72,330 | $75,014 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations, with $0.8 billion of its $1.0 billion total debt being variable-rate, mitigated by interest rate swaps on $325 million, where a 100 basis point change on unhedged debt would impact annual interest expense by $4.8 million - The company's primary market risk is interest rate risk, with $0.8 billion of its $1.0 billion total debt being variable-rate as of June 30, 2025[175] - The company uses interest rate swaps to effectively fix the rate on $325 million of its variable-rate debt[175] - A 100 basis point fluctuation in interest rates on unhedged variable rate debt would impact annual interest expense by $4.8 million[175] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[176] - No changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal controls were identified during the most recent fiscal quarter[177] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal proceedings but does not anticipate any material adverse impact on its financial condition or results of operations - The company is subject to routine litigation but does not expect any material adverse impact on its financial condition[179] Item 1A. Risk Factors 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, or the Q1 2025 Form 10-Q were reported - No material changes to risk factors were reported for the period[180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchase of 1,684,299 shares of common stock during Q2 2025 as part of its $200 million share repurchase program Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 639,949 | $7.26 | | May 2025 | 86,960 | $7.48 | | June 2025 | 957,390 | $7.60 | - The share repurchase program was approved on May 1, 2024, for up to $200.0 million and expires on May 1, 2026[181] Item 5. Other Information No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements during Q2 2025, and the company changed its transfer agent to Broadridge Financial Solutions, Inc. on July 25, 2025 - On July 25, 2025, the company changed its transfer agent to Broadridge Financial Solutions, Inc.[184] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Seventh Amended and Restated Credit Agreement, CEO and CFO certifications, and XBRL data files