Summit Hotel Properties(US:INN)2021-11-03 21:03PART I — FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and management's discussion for Q3 and YTD 2021 Item 1. Financial Statements Presents unaudited condensed consolidated financial statements for Summit Hotel Properties, Inc. as of September 30, 2021 Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, as of September 30, 2021 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $2,248,320 | $2,233,019 | | Investment in hotel properties, net | $2,078,014 | $2,105,946 | | Cash and cash equivalents | $59,650 | $20,719 | | Total Liabilities | $1,148,813 | $1,180,956 | | Debt, net of debt issuance costs | $1,056,667 | $1,094,745 | | Total Equity | $1,099,507 | $1,052,063 | Condensed Consolidated Statements of Operations Presents revenues, operating income, and net loss for the three and nine months ended September 30, 2021 Statement of Operations Highlights (in thousands, except per share amounts) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $110,686 | $52,412 | $255,064 | $186,233 | | Operating Income (Loss) | $5,023 | $(26,281) | $(31,814) | $(74,543) | | Net Loss | $(4,239) | $(35,775) | $(57,679) | $(104,537) | | Net Loss Attributable to Common Stockholders | $(10,964) | $(38,256) | $(68,439) | $(111,413) | | Loss Per Share (Basic and Diluted) | $(0.10) | $(0.37) | $(0.66) | $(1.07) | Condensed Consolidated Statements of Cash Flows Presents cash flows from operating, investing, and financing activities for the nine months ended September 30, 2021 Cash Flow Summary for the Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Provided By (Used In) Operating Activities | $50,289 | $(21,391) | | Net Cash Used In Investing Activities | $(51,880) | $(27,355) | | Net Cash Provided By Financing Activities | $47,866 | $35,520 | | Net Change in Cash, Cash Equivalents and Restricted Cash | $46,275 | $(13,226) | Notes to the Condensed Consolidated Financial Statements Offers detailed explanations and additional information for the condensed consolidated financial statements - The company's portfolio consisted of 73 hotels with 11,398 guestrooms across 23 states as of September 30, 2021, focusing on premium-branded hotels in the Upscale segment24 - The COVID-19 pandemic significantly impacted operations since March 2020, but sequential improvement was observed in the first three quarters of 2021, driven primarily by leisure travel2526 - In January 2021, the company issued $287.5 million of 1.50% convertible senior notes due 2026, using the net proceeds of approximately $280.0 million to repay debt and fund capped call transactions118 - In August 2021, the company issued 4,000,000 shares of 5.875% Series F Cumulative Redeemable Preferred Stock for net proceeds of $96.6 million, and in September 2021, redeemed all 3,000,000 outstanding shares of its 6.45% Series D Preferred Stock for $75.0 million141142 - Subsequent to the quarter end, on November 2, 2021, the company agreed to acquire a 27-hotel portfolio for a total consideration of $822 million through its joint venture with GIC182 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes hotel demand recovery, operational results, non-GAAP measures, and liquidity for the first nine months of 2021 Overview and COVID-19 Impact Reviews portfolio, business recovery from leisure travel, and operational adjustments due to COVID-19 - As of September 30, 2021, the company's portfolio consisted of 73 premium-branded, select-service hotels with 11,398 guestrooms in 23 states190 - The business experienced a significant downturn due to the COVID-19 pandemic but saw a significant recovery in the first nine months of 2021, driven by leisure travelers, while corporate and group demand recovery has been slower196198 - In response to the pandemic, the company adjusted labor cost structures, reduced staffing levels, and implemented enhanced cleaning protocols to ensure guest and employee safety199202 Results of Operations Analyzes operating performance, including revenues, occupancy, ADR, and RevPAR, for Q3 and YTD 2021 Q3 2021 vs. Q3 2020 Operating Metrics (Total Portfolio) | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $110,686K | $52,412K | 111.2% | | Occupancy | 68.7% | 45.0% | 52.4% | | ADR | $142.52 | $103.98 | 37.1% | | RevPAR | $97.85 | $46.83 | 108.9% | YTD 2021 vs. YTD 2020 Operating Metrics (Total Portfolio) | Metric | YTD 2021 | YTD 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $255,064K | $186,233K | 37.0% | | Occupancy | 61.4% | 43.6% | 40.9% | | ADR | $124.28 | $126.97 | (2.1)% | | RevPAR | $76.28 | $55.31 | 37.9% | - The significant increase in revenues and RevPAR in Q3 and YTD 2021 was attributed to the business recovery driven by leisure travel as COVID-19 restrictions eased211217 Non-GAAP Financial Measures Reconciles and discusses key non-GAAP financial measures such as FFO, AFFO, EBITDAre, and Adjusted EBITDAre FFO and AFFO Reconciliation (in thousands) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net loss applicable to common shares | $(10,974) | $(38,326) | $(68,537) | $(111,616) | | FFO applicable to common shares | $16,841 | $(12,642) | $9,160 | $(33,647) | | AFFO applicable to common shares | $20,484 | $(10,806) | $21,981 | $(23,459) | EBITDAre and Adjusted EBITDAre Reconciliation (in thousands) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(4,239) | $(35,775) | $(57,679) | $(104,537) | | EBITDAre | $37,523 | $2,258 | $60,013 | $12,329 | | Adjusted EBITDAre | $34,024 | $2,539 | $61,982 | $16,498 | Liquidity and Capital Resources Details financial position, capital structure, and recent financing activities to enhance liquidity - The company enhanced liquidity through several transactions in 2021, including a $287.5 million convertible notes offering, a $96.6 million Series F preferred stock offering, and an $84.3 million cash contribution from its JV partner241243244 - Proceeds from financing activities were used to repay senior debt, redeem $75.0 million of Series D preferred stock, and fund acquisitions241245246 Contractual Obligations Summary (in thousands) | Obligation | Total | Less than 1 Year | 1-3 Years | 4-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt obligations | $1,069,064 | $4,030 | $496,454 | $429,703 | $138,877 | | Projected interest | $103,659 | $36,647 | $53,900 | $12,100 | $1,012 | | Lease obligations | $33,143 | $1,983 | $2,026 | $1,834 | $27,300 | | Total | $1,213,417 | $50,211 | $552,380 | $443,637 | $167,189 | Item 3. Quantitative and Qualitative Disclosures about Market Risk Addresses interest rate risk exposure on variable-rate debt and its management through derivatives - The company's primary market risk exposure is to interest rates, specifically 30-day LIBOR, on its variable-rate debt267 - The company is monitoring the transition from LIBOR to a new benchmark rate like SOFR, as its loan agreements contain provisions to establish an alternative rate268 Debt Structure by Interest Rate Type | Debt Type | Sep 30, 2021 | % of Total | Dec 31, 2020 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Fixed-rate debt | $830.5M | 78% | $545.8M | 50% | | Variable-rate debt | $238.5M | 22% | $555.7M | 50% | Item 4. Controls and Procedures Confirms effective disclosure controls and procedures with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021271 - No changes in internal control over financial reporting occurred during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, internal controls272 PART II — OTHER INFORMATION Provides disclosures on legal proceedings, risk factors, equity sales, defaults, and other information Item 1. Legal Proceedings Reports on ordinary course litigation with no expected material adverse effects on financial position - There are currently no pending legal actions that the company believes would have a material adverse effect on its financial position or results of operations275 Item 1A. Risk Factors Reports no material changes to risk factors previously disclosed in the Annual Report on Form 10-K - No material changes to risk factors have occurred since the filing of the Annual Report on Form 10-K for the year ended December 31, 2020276 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Confirms no unregistered sales of equity securities occurred during the reporting period - None277 Item 3. Defaults Upon Senior Securities Confirms no defaults upon senior securities occurred during the reporting period - None278 Item 4. Mine Safety Disclosures States that this item is not applicable to the company's operations - Not applicable279 Item 5. Other Information Indicates that there is no other information requiring disclosure in this section - None280 Item 6. Exhibits Lists the exhibits accompanying the quarterly report, including required certifications and XBRL documents - Exhibits filed with the report include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, along with XBRL data files282