RLJ Lodging Trust(RLJ) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls for the reporting period Item 1. Financial Statements The company's financial statements for the period ended June 30, 2025, reflect a slight decrease in total assets and equity, with net income and operating cash flow declining year-over-year due to lower room revenue and a prior-year gain on asset sales Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets and equity as of June 30, 2025, compared to December 31, 2024 Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $4,822,810 | $4,883,879 | | Cash and cash equivalents | $373,896 | $409,809 | | Investment in hotel properties, net | $4,214,058 | $4,250,524 | | Total Liabilities | $2,582,575 | $2,585,602 | | Debt, net | $2,220,768 | $2,220,081 | | Total Equity | $2,240,235 | $2,298,277 | Consolidated Statements of Operations and Comprehensive Income The income statement indicates a year-over-year decline in total revenues and net income for both Q2 and H1 2025 Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $363,103 | $369,297 | $691,222 | $693,707 | | Net Income | $28,631 | $37,291 | $31,803 | $42,037 | | Net Income Attributable to Common Shareholders | $22,174 | $30,827 | $19,258 | $29,486 | | Diluted EPS | $0.15 | $0.20 | $0.12 | $0.19 | Consolidated Statements of Cash Flows Cash flow from operating activities decreased for the first half of 2025 compared to the prior year Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $117,620 | $134,294 | | Net cash used in investing activities | ($58,186) | ($225,038) | | Net cash used in financing activities | ($91,597) | ($57,369) | | Net change in cash | ($32,163) | ($148,113) | Notes to the Consolidated Financial Statements Key notes detail the company's hotel portfolio, recent asset sales, debt refinancing, and capital allocation strategies - As of June 30, 2025, the Company owned a portfolio of 95 hotel properties with approximately 21,200 rooms across 23 states and the District of Columbia[36] - On March 6, 2025, the Company sold the 181-room Courtyard Atlanta Buckhead hotel for a sales price of $24.3 million[48] - In April 2025, the Company refinanced a term loan, increasing it to $300.0 million and extending the maturity to April 2028. The incremental $100.0 million in proceeds were used to pay off the outstanding balance on the Revolver[57][58] - The company declared cash dividends of $0.15 per common share in each of the first and second quarters of 2025, an increase from $0.10 per share in the same periods of 2024[82] - During the first six months of 2025, the Company repurchased approximately 3.1 million common shares for $27.2 million. A new $250.0 million share repurchase program was authorized in April 2025[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the year-over-year decline in Q2 2025 revenue and net income to decreased room revenue, while focusing on portfolio enhancement, capital recycling, and maintaining a prudent capital structure through asset sales, debt refinancing, and share repurchases - The company's strategy is to own primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels in high-growth urban markets[112][113] - Significant activities in 2025 include selling one hotel for $24.3 million, refinancing a term loan to $300 million, paying off the $100 million Revolver balance, and repurchasing 3.3 million common shares for $28.2 million[116] Comparable Properties Key Operating Statistics (Q2) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Occupancy | 75.5 % | 76.8 % | | ADR | $205.03 | $206.10 | | RevPAR | $154.90 | $158.27 | Comparable Properties Key Operating Statistics (H1) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Occupancy | 72.4 % | 73.2 % | | ADR | $204.72 | $203.28 | | RevPAR | $148.18 | $148.70 | Reconciliation to Adjusted FFO (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $28,631 | $37,291 | $31,803 | $42,037 | | FFO | $69,216 | $72,105 | $110,945 | $115,625 | | Adjusted FFO | $72,658 | $78,619 | $119,579 | $130,473 | Reconciliation to Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $28,631 | $37,291 | $31,803 | $42,037 | | EBITDA | $100,332 | $106,421 | $174,199 | $178,161 | | EBITDAre | $100,710 | $102,875 | $173,256 | $174,615 | | Adjusted EBITDA | $104,008 | $108,971 | $181,602 | $188,563 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on variable-rate debt, though 72.8% of total indebtedness is fixed or effectively fixed, with a 100 basis point increase potentially decreasing earnings by $6.1 million annually - As of June 30, 2025, 72.8% of the company's total indebtedness was fixed or effectively fixed after taking into account interest rate swaps[178] - A 1.00% (100 basis points) increase in market interest rates on variable rate debt not subject to swaps would decrease future earnings and cash flows by approximately $6.1 million annually[178] Item 4. Controls and Procedures The company's disclosure controls and procedures were deemed effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[183] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[184] PART II. OTHER INFORMATION This section covers legal proceedings, updated risk factors, equity security sales, and other significant corporate information Item 1. Legal Proceedings The company is not currently subject to any material litigation beyond routine claims arising in the ordinary course of business - Other than routine litigation arising out of the ordinary course of business, the Company is not presently subject to any material litigation[185] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report - There have been no material changes to the risk factors previously disclosed in the Company's Annual Report[186] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not sell unregistered securities but repurchased 947,262 shares during Q2 2025, primarily under publicly announced programs Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | April 2025 | 556,869 | $7.06 | 496,021 | | May 2025 | 209,646 | $7.39 | 209,646 | | June 2025 | 180,747 | $7.31 | 180,747 | | Total | 947,262 | | 886,414 | Item 5. Other Information On August 4, 2025, the President and CEO, Leslie D. Hale, was appointed interim principal financial officer - On August 4, 2025, the Board of Trustees appointed Leslie D. Hale, the President and CEO, to serve as the Company's interim principal financial officer[192]