DiamondRock Hospitality pany(DRH) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company presents its unaudited Q1 2023 consolidated balance sheets, statements of operations, equity, and cash flows Consolidated Balance Sheets Total assets slightly decreased to $3.18 billion while cash and cash equivalents increased to $76.5 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Total assets | $3,183,516 | $3,207,540 | | Cash and cash equivalents | $76,503 | $67,564 | | Property and equipment, net | $2,742,565 | $2,748,476 | | Liabilities & Equity | | | | Total liabilities | $1,588,243 | $1,611,362 | | Total debt | $1,183,578 | $1,185,793 | | Total equity | $1,595,273 | $1,596,178 | Consolidated Statements of Operations and Comprehensive Income Q1 2023 revenues grew 23.8% to $243.6 million, but higher interest expense reduced net income to $6.7 million Q1 2023 vs. Q1 2022 Statement of Operations (in thousands, except per share amounts) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenues | $243,553 | $196,833 | | Total operating expenses, net | $217,842 | $182,422 | | Interest expense | $17,172 | $4,119 | | Net income attributable to common stockholders | $6,702 | $7,574 | | Earnings per share—basic & diluted | $0.03 | $0.04 | - Comprehensive income attributable to the Company was $9.3 million in Q1 2023, compared to $10.0 million in Q1 2022[11] Consolidated Statements of Equity Total equity slightly decreased to $1.595 billion due to distributions and share repurchases offsetting net income - Distributions on common stock were $0.03 per share, totaling $6.3 million[15] - The company repurchased and retired 56,400 shares of common stock for $0.4 million[15] Consolidated Statements of Cash Flows Net cash from operations increased significantly to $58.1 million, driving a net cash increase of $15.4 million Q1 2023 vs. Q1 2022 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58,069 | $13,154 | | Net cash used in investing activities | ($21,642) | ($110,869) | | Net cash (used in) provided by financing activities | ($21,063) | $102,671 | | Net increase in cash | $15,364 | $4,956 | Notes to the Consolidated Financial Statements The notes detail the REIT's portfolio of 35 hotels, debt structure, and equity programs - As of March 31, 2023, the company owned 35 hotels with 9,607 guest rooms[26] - Total debt outstanding was approximately $1.2 billion as of March 31, 2023, consisting of mortgage debt and unsecured term loans[72][73] - The company has a share repurchase program authorized up to $200.0 million, with $187.3 million remaining as of May 5, 2023[95][96] - In Q1 2023, the company paid a common stock dividend of $0.03 per share on April 12, 2023, following a $0.06 per share dividend paid on January 12, 2023[102] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong revenue growth driven by travel demand, key performance metrics, and capital allocation plans Results of Operations Q1 2023 revenues rose 23.8% to $243.6 million, driven by a 16.8% increase in RevPAR from higher occupancy Q1 2023 vs. Q1 2022 Revenue Breakdown (in millions) | Revenue Source | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Rooms | $160.7 | $132.2 | 21.6% | | Food and beverage | $59.8 | $45.7 | 30.9% | | Other | $23.1 | $18.9 | 22.2% | | Total revenues | $243.6 | $196.8 | 23.8% | Q1 2023 vs. Q1 2022 Key Hotel Operating Statistics | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Occupancy % | 66.9% | 56.1% | 10.8 p.p. | | ADR | $277.86 | $283.72 | (2.1)% | | RevPAR | $185.80 | $159.13 | 16.8% | - Interest expense increased by $13.1 million year-over-year, primarily due to rising interest rates on variable rate debt and new unsecured term loans from September 2022[145] Liquidity and Capital Resources The company maintains strong liquidity with $76.5 million in cash and full availability on its $400 million credit facility - As of March 31, 2023, the company had $76.5 million of unrestricted cash, $46.0 million of restricted cash, and no outstanding borrowings on its senior unsecured credit facility[160] - Net cash from operations was $58.1 million for Q1 2023, with $21.6 million used for capital expenditures and $21.1 million for financing activities[161][162] - The company has a $400 million senior unsecured revolving credit facility and $800 million in unsecured term loans[157] Non-GAAP Financial Measures Adjusted EBITDA and Adjusted FFO both increased year-over-year, reflecting improved operational performance Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income | $9,188 | $10,060 | | EBITDAre | $53,606 | $43,623 | | Adjusted EBITDA | $55,372 | $44,908 | Reconciliation of Net Income to Adjusted FFO (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income | $9,188 | $10,060 | | FFO available to common stock and unit holders | $34,206 | $37,104 | | Adjusted FFO available to common stock and unit holders | $37,986 | $30,887 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure is to interest rate fluctuations on its variable-rate debt - Of the $1.2 billion total debt, $425.0 million is subject to variable interest rates[189] - A 100 basis point (1%) change in interest rates would result in a $4.5 million annual change in interest expense[189] Controls and Procedures Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - The company's disclosure controls and procedures were deemed effective as of March 31, 2023[190] - No material changes in internal control over financial reporting were identified during the most recent fiscal quarter[191] PART II. OTHER INFORMATION Legal Proceedings The company faces various legal claims in the ordinary course of business which are not expected to be material - Management believes that liabilities from ongoing legal proceedings, beyond insurance coverage, will not materially impact the company's financials[193] Risk Factors No material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K have occurred - No material changes to risk factors were reported for the quarter[194] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 56,400 shares of common stock for $0.4 million under its authorized program in March 2023 Issuer Purchases of Equity Securities (March 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Approx. Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | March 1 - 31, 2023 | 56,400 | $7.26 | 56,400 | $187,335 (in thousands) | Exhibits This section lists the required CEO and CFO certifications and Inline XBRL documents filed with the report - Exhibits filed include certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1) and XBRL data files[198]