Playa Hotels & Resorts(US:PLYA)2024-05-06 20:08PART I. FINANCIAL INFORMATION This section details the company's unaudited financial statements, management's analysis, market risk disclosures, and internal controls for Q1 2024 Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, highlighting a 9.8% revenue increase to $300.6 million and a 27.2% net income rise to $54.3 million Condensed Consolidated Financial Statements The Q1 2024 financial statements show improved profitability and stable financial position, with total assets at $1.95 billion and net income at $54.3 million Condensed Consolidated Balance Sheets Highlights ($ in thousands) | | As of March 31, 2024 | As of December 31, 2023 | | :--- | :--- | :--- | | Total assets | $1,946,998 | $1,933,725 | | Total liabilities | $1,360,013 | $1,378,928 | | Total shareholders' equity | $586,985 | $554,797 | Condensed Consolidated Statements of Operations Highlights ($ in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenue | $300,635 | $273,802 | | Operating income | $90,299 | $76,969 | | Net income | $54,341 | $42,719 | | Diluted EPS | $0.39 | $0.27 | Condensed Consolidated Statements of Cash Flows Highlights ($ in thousands) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,777 | $45,287 | | Net cash used in investing activities | ($10,446) | ($2,352) | | Net cash used in financing activities | ($33,509) | ($45,415) | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, geographic revenue, the $12.0 million Dutch Minimum Tax Act impact, share repurchases, and segment performance Geographic Segment Revenue ($ in thousands) | Geographic Segment | Q1 2024 Total Revenue ($ in thousands) | | :--- | :--- | | Yucatán Peninsula | $98,895 | | Pacific Coast | $45,554 | | Dominican Republic | $81,721 | | Jamaica | $68,736 | | Other | $5,729 | | Total | $300,635 | - The adoption of the Dutch Minimum Tax Act 2024, effective January 1, 2024, resulted in an additional $12.0 million of income tax expense for the quarter, increasing the effective tax rate to 18.1% from 10.1% in the prior-year period40 - During Q1 2024, the company repurchased 3,621,127 ordinary shares at an average price of $8.98 per share. As of March 31, 2024, approximately $163.9 million remained available under the share repurchase program51 Owned Resort EBITDA by Segment ($ in thousands) | Segment | Q1 2024 Owned Resort EBITDA ($ in thousands) | Q1 2023 Owned Resort EBITDA ($ in thousands) | | :--- | :--- | :--- | | Yucatán Peninsula | $40,053 | $37,936 | | Pacific Coast | $19,141 | $17,523 | | Dominican Republic | $37,770 | $26,849 | | Jamaica | $27,076 | $27,081 | | Total Segment | $124,040 | $109,389 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses strong Q1 2024 performance, highlighting a 9.8% revenue increase to $300.6 million and a 15.2% rise in Adjusted EBITDA to $113.5 million, driven by occupancy gains Overview and Key Performance Indicators The company's 24-resort portfolio showed significant Q1 2024 performance improvement, with Net Package RevPAR up 20.2% to $427.17, driven by a 14.3 percentage point occupancy increase - As of March 31, 2024, Playa's portfolio consists of 24 resorts (9,027 rooms) located in Mexico, Jamaica, and the Dominican Republic8790 Total Portfolio Key Performance Indicators | Metric (Total Portfolio) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Occupancy | 85.1% | 70.8% | +20.2% | | Net Package ADR | $502.12 | $501.64 | +0.1% | | Net Package RevPAR | $427.17 | $355.27 | +20.2% | | Adjusted EBITDA | $113.5M | $98.5M | +15.2% | - The comparable portfolio (excluding Jewel Palm Beach and the sold Jewel Punta Cana) saw a 7.8% increase in Net Package RevPAR, driven by a 2.6 percentage point increase in occupancy and a 4.4% increase in Net Package ADR9395 Results of Operations Q1 2024 total revenue increased 9.8% to $300.6 million, with interest expense down 22.0% and income tax provision up due to the Dutch Minimum Tax Act Key Income Statement Line Items ($ in thousands) | Line Item | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $300,635 | $273,802 | 9.8% | | Direct expenses | $137,979 | $128,968 | 7.0% | | SG&A | $51,219 | $45,127 | 13.5% | | Operating income | $90,299 | $76,969 | 17.3% | | Net income | $54,341 | $42,719 | 27.2% | - Interest expense decreased by $6.5 million (22.0%) YoY, primarily due to a $6.3 million favorable change in the fair value of prior LIBOR-based interest rate swaps that was recognized in Q1 2023104 - The income tax provision increased by $7.2 million, primarily driven by a $12.0 million tax expense incurred in the Netherlands under the new Dutch Minimum Tax Act 2024106 Segment Results All geographic segments reported Owned Net Revenue growth, led by the Dominican Republic with an 18.7% increase, while Mexican segments faced margin pressure from Mexican Peso appreciation - The Yucatán Peninsula segment's Owned Net Revenue grew 8.2% to $96.0 million, but its EBITDA margin contracted by 100 basis points to 41.7%, negatively impacted by 340 basis points due to the appreciation of the Mexican Peso136137 - The Pacific Coast segment's Owned Net Revenue increased 9.3% to $44.3 million. Its EBITDA margin was also negatively impacted by 330 basis points due to the strong Mexican Peso138139 - The Dominican Republic segment's Owned Net Revenue grew 18.7% to $81.6 million, and its Owned Resort EBITDA surged 40.7% to $37.8 million, expanding the EBITDA margin by 730 basis points to 46.3%140 - The Jamaica segment's Owned Net Revenue increased 2.6% to $64.6 million, but Owned Resort EBITDA was flat. The EBITDA margin decreased by 110 basis points to 41.9%, driven by a 19.7% decrease in Net Non-package Revenue and higher labor costs144 Liquidity and Capital Resources The company maintained strong liquidity in Q1 2024 with $285.3 million cash and a $225.0 million credit facility, supported by $56.8 million in operating cash flow - As of March 31, 2024, the company had $285.3 million of available cash and $225.0 million available on its Revolving Credit Facility149150 Cash Flow Activities ($ in thousands) | Cash Flow Activity ($ in thousands) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,777 | $45,287 | | Net cash used in investing activities | ($10,446) | ($2,352) | | Net cash used in financing activities | ($33,509) | ($45,415) | - The company estimates capital expenditures for 2024 will be between $110.0 million and $120.0 million, reflecting accelerated renovations at the Hyatt Ziva Los Cabos152 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations on its 51% floating-rate debt and foreign currency movements, mitigated by swaps and hedging 50% of Mexican Peso operating expenses - As of March 31, 2024, 51% of the company's outstanding debt bore interest at floating rates. A hypothetical 1.0% increase in market interest rates would decrease future earnings and cash flows by approximately $5.5 million annually171174 - Approximately 71.5% of resort-level operating expenses are denominated in local currencies. The company uses foreign currency forward contracts to hedge 50% of its estimated Mexican Peso operating expenses. A 5% adverse change in FX rates would have an estimated negative impact of $4.6 million on year-to-date Owned Resort EBITDA across its key operating currencies173175 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during Q1 2024 - The company's Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2024176 - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting177 PART II. OTHER INFORMATION This section covers other required disclosures, including no material legal proceedings or risk factor changes, details on 3.6 million share repurchases, and no defaults or new trading plans Item 1. Legal Proceedings & Item 1A. Risk Factors The company is subject to ordinary course legal proceedings not expected to be material, with no material changes to risk factors previously disclosed in the 2023 Annual Report on Form 10-K - The company is not involved in any legal proceedings that are expected to have a material adverse effect on its financial condition or results of operations179 - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023180 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity, with 3,634,291 ordinary shares purchased at an average of $8.97 per share, leaving $163.9 million available Share Repurchase Activity | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2024 | 1,036,182 | $8.31 | | Feb 1 - Feb 29, 2024 | 1,002,025 | $8.72 | | Mar 1 - Mar 31, 2024 | 1,596,084 | $9.56 | | Total | 3,634,291 | $8.97 | - As of March 31, 2024, approximately $163.9 million remained available for repurchase under the company's $200.0 million share repurchase program183 Other Items (Items 3, 4, 5, 6) The company reports no defaults on senior securities, mine safety disclosures are not applicable, and no new Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers - The company reports no defaults upon senior securities184 - During the quarter, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"186