Sotherly Hotels(SOHO) - 2023 Q4 - Annual Results

Financial Results and Corporate Overview This section details Sotherly Hotels' Q4 and full-year 2023 financial results, operational performance, and 2024 outlook Financial Highlights Q4 2023 revenue increased, but net loss occurred due to the absence of prior-year one-time gains Q4 & Full-Year 2023 Financial Summary (in thousands, except per share data) | | Three Months Ended Dec 31, | | Year Ended Dec 31, | | | :--- | :--- | :--- | :--- | :--- | | | 2023 | 2022 | 2023 | 2022 | | Total revenue | $42,148 | $41,342 | $173,838 | $166,077 | | Net (loss) income attributable to common stockholders | $(2,683) | $3,092 | $(4,036) | $24,967 | | Hotel EBITDA | $10,300 | $11,893 | $44,788 | $46,463 | | Adjusted FFO | $2,803 | $7,991 | $14,542 | $17,820 | | Net (loss) income per common share - diluted | $(0.14) | $0.17 | $(0.22) | $1.40 | | Adjusted FFO per common share and unit | $0.14 | $0.41 | $0.75 | $0.95 | - The significant decrease in full-year net income for 2023 compared to 2022 is largely attributed to a $30.1 million gain on the sale of the DoubleTree by Hilton Raleigh Brownstone–University and a $4.7 million PPP loan forgiveness that occurred in 2022[5] Operational Performance and CEO Commentary Q4 2023 RevPAR rose from higher occupancy despite ADR decline, with CEO anticipating easing cost pressures in 2024 Composite Portfolio Key Metrics Change (YoY) | Metric | Q4 2023 | Q4 2022 | % Change | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | RevPAR | $106.25 | $101.73 | +4.4% | $114.96 | $108.87 | +5.6% | | Occupancy | 60.0% | 56.5% | +3.5 p.p. | 62.8% | 60.0% | +2.8 p.p. | | ADR | $177.07 | $180.05 | -1.7% | $182.97 | $181.34 | +0.9% | - CEO Dave Folsom highlighted that RevPAR gains were driven by continued growth in room demand across transient, business, and group segments. He also noted that pressure from labor and operating costs impacted hotel margins, but expects these challenges to lessen in 2024[6] Balance Sheet, Liquidity, and Other Events Sotherly maintained strong cash, managed debt maturities, secured new financing, and declared preferred stock dividends - As of December 31, 2023, the Company had approximately $26.2 million of available cash and cash equivalents and principal balances of approximately $318.9 million in outstanding debt at a weighted average interest rate of 5.42%[7] - The maturity date on the mortgage for the DoubleTree by Hilton Philadelphia Airport hotel was extended to April 29, 2024, with a non-binding term sheet in place for a further two-year extension[8] - On February 7, 2024, the company secured a new $35.0 million mortgage loan on the Hotel Alba Tampa, with a 5-year term and a fixed interest rate of 8.49%, receiving approximately $10.25 million in net proceeds[9] - Quarterly cash dividends were announced for Series B ($0.50/share), Series C ($0.492188/share), and Series D ($0.515625/share) preferred stock, payable on March 15, 2024[10] 2024 Outlook Sotherly Hotels projects 2024 revenues of $179.0M-$182.6M, forecasting a net loss and Adjusted FFO of $12.8M-$13.8M 2024 Full-Year Guidance (in thousands, except per share/RevPAR data) | Metric | Low Range | High Range | | :--- | :--- | :--- | | Total revenue | $178,952 | $182,567 | | Net loss available to common stockholders | $(6,377) | $(5,382) | | Hotel EBITDA | $46,103 | $46,898 | | Adjusted FFO available to common stockholders | $12,778 | $13,773 | | Net loss per share | $(0.32) | $(0.27) | | Adjusted FFO per common share and unit | $0.64 | $0.69 | | RevPAR | $117.16 | $119.52 | Financial Statements and Supplemental Data This section presents detailed consolidated financial statements, key operating metrics, and property-specific supplemental data Consolidated Balance Sheets As of December 31, 2023, Sotherly's total assets, liabilities, and equity slightly decreased from year-end 2022 Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | $393,877 | $406,569 | | Cash and cash equivalents | $17,102 | $21,919 | | Investment in hotel properties, net | $354,919 | $365,071 | | Total Liabilities | $345,978 | $355,048 | | Mortgage loans, net | $315,989 | $320,482 | | Total Equity | $47,899 | $51,521 | Consolidated Statements of Operations Full-year 2023 revenues increased, but net income significantly declined due to higher expenses and absence of prior gains Statement of Operations Highlights (in thousands) | | Twelve Months Ended Dec 31, 2023 | Twelve Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total revenue | $173,838 | $166,077 | | Total hotel operating expenses | $129,050 | $119,615 | | Net operating income | $18,925 | $20,555 | | Gain on sale of hotel properties | $0 | $30,054 | | PPP debt forgiveness | $275 | $4,720 | | Net (loss) income | $3,810 | $33,960 | Key Operating Metrics by Portfolio Full-year 2023 RevPAR increased across all portfolio definitions, with Composite portfolio occupancy rising 2.8 percentage points Full-Year 2023 vs 2022 Key Operating Metrics | Portfolio | Metric | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Actual Portfolio | RevPAR | $112.84 | $104.17 | | | Occupancy | 63.5% | 60.8% | | | ADR | $177.74 | $171.34 | | Same-Store Portfolio | RevPAR | $112.84 | $105.45 | | | Occupancy | 63.5% | 61.2% | | | ADR | $177.74 | $172.28 | | Composite Portfolio | RevPAR | $114.96 | $108.87 | | | Occupancy | 62.8% | 60.0% | | | ADR | $182.97 | $181.34 | - The report distinguishes between 'Actual' (wholly-owned), 'Same-Store' (wholly-owned properties present in both periods), 'Composite' (wholly-owned plus condo-hotel rooms), and 'Same-Store (Composite)' portfolios to provide varied perspectives on performance[24] Supplemental Data by Property Property-level data shows Hyatt Centric Arlington as a top 2023 RevPAR performer, while some condo-hotels saw ADR declines - For the full year 2023, the Hyatt Centric Arlington achieved the highest RevPAR among wholly-owned properties at $154.99, a significant increase from $120.33 in 2022[30] - The Hotel Alba Tampa demonstrated strong occupancy, with a year-to-date rate of 77.8% in 2023, the highest among the wholly-owned portfolio[28] - The two Hyde condo-hotel properties experienced a significant drop in ADR in 2023 compared to 2022, which negatively impacted their RevPAR despite some occupancy gains[29][30] Reconciliation of Non-GAAP Measures The company reconciles GAAP net income to non-GAAP measures like FFO, Adjusted FFO, EBITDA, and Hotel EBITDA for 2023 and 2024 Full-Year 2023 Reconciliation Highlights (in thousands) | Metric | Amount | | :--- | :--- | | Net income | $3,810 | | Reconciled to... | | | FFO attributable to common stockholders | $13,193 | | Adjusted FFO attributable to common stockholders | $14,542 | | EBITDA | $39,079 | | Hotel EBITDA | $44,788 | - The company defines and explains its use of non-GAAP measures like FFO, Adjusted FFO, EBITDA, and Hotel EBITDA, stating they are key supplemental measures of performance used by investors and analysts[38] - Adjusted FFO excludes items such as unrealized gains/losses on hedging, losses on early debt extinguishment, and stock-based compensation to provide a measure more indicative of ongoing business performance[41]