UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_______________________________________________
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For quarterly period ended September 30, 2022March 31, 2023
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
COMMISSION FILE NO. 1-38012
Playa Hotels & Resorts N.V.
(Exact name of registrant as specified in its charter)
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The | Netherlands | | 98-1346104
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(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification Number) |
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Nieuwezijds Voorburgwal 104 | | |
1012 SG | Amsterdam,
| the | Netherlands | | Not Applicable |
(Address of Principal Executive Offices) | | (Zip Code) |
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+31 6 82 55 84 30
(Registrant'sRegistrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Ordinary Shares, €0.10 par value | PLYA | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (90) days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of October 31, 2022,April 28, 2023, there were 162,387,308152,255,818 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.
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Playa Hotels & Resorts N.V. TABLE OF CONTENTS |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Playa Hotels & Resorts N.V.
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
(unaudited)
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
ASSETS | ASSETS | | | | ASSETS | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 371,688 | | | $ | 270,088 | | Cash and cash equivalents | $ | 281,465 | | | $ | 283,945 | |
Restricted cash | — | | | 23,489 | | |
Trade and other receivables, net | Trade and other receivables, net | 47,792 | | | 45,442 | | Trade and other receivables, net | 74,268 | | | 62,946 | |
Insurance recoverable | Insurance recoverable | 41,315 | | | — | | Insurance recoverable | 20,586 | | | 34,191 | |
Accounts receivable from related parties | Accounts receivable from related parties | 5,164 | | | 7,981 | | Accounts receivable from related parties | 11,408 | | | 8,806 | |
Inventories | Inventories | 19,007 | | | 18,076 | | Inventories | 20,607 | | | 20,046 | |
Prepayments and other assets | Prepayments and other assets | 43,209 | | | 38,640 | | Prepayments and other assets | 40,958 | | | 44,177 | |
Property and equipment, net | Property and equipment, net | 1,547,595 | | | 1,584,574 | | Property and equipment, net | 1,527,188 | | | 1,536,567 | |
Derivative financial instruments | Derivative financial instruments | 4,979 | | | — | | Derivative financial instruments | — | | | 3,510 | |
Goodwill, net | Goodwill, net | 61,654 | | | 61,654 | | Goodwill, net | 61,654 | | | 61,654 | |
Other intangible assets | Other intangible assets | 6,843 | | | 7,632 | | Other intangible assets | 6,293 | | | 6,556 | |
| Deferred tax assets | | Deferred tax assets | 7,334 | | | 7,422 | |
Total assets | Total assets | $ | 2,149,246 | | | $ | 2,057,576 | | Total assets | $ | 2,051,761 | | | $ | 2,069,820 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Trade and other payables | Trade and other payables | $ | 217,911 | | | $ | 160,222 | | Trade and other payables | $ | 200,694 | | | $ | 231,652 | |
Payables to related parties | Payables to related parties | 5,417 | | | 5,050 | | Payables to related parties | 9,144 | | | 6,852 | |
Income tax payable | Income tax payable | 345 | | | 828 | | Income tax payable | 785 | | | 990 | |
Debt | Debt | 913,111 | | | 944,847 | | Debt | 1,064,391 | | | 1,065,453 | |
Related party debt | 196,569 | | | 194,472 | | |
Derivative financial instruments | — | | | 22,543 | | |
Other liabilities | Other liabilities | 30,471 | | | 29,882 | | Other liabilities | 31,149 | | | 30,685 | |
Deferred tax liabilities | Deferred tax liabilities | 71,692 | | | 68,898 | | Deferred tax liabilities | 73,064 | | | 69,326 | |
Total liabilities | Total liabilities | 1,435,516 | | | 1,426,742 | | Total liabilities | 1,379,227 | | | 1,404,958 | |
Commitments and contingencies (see Note 7) | Commitments and contingencies (see Note 7) | | | | Commitments and contingencies (see Note 7) | | | |
Shareholders' equity | | |
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 168,240,253 shares issued and 165,058,318 shares outstanding as of September 30, 2022 and 166,646,284 shares issued and 164,438,280 shares outstanding as of December 31, 2021) | 18,696 | | | 18,518 | | |
Treasury shares (at cost, 3,181,935 shares as of September 30, 2022 and 2,208,004 shares as of December 31, 2021) | (22,470) | | | (16,697) | | |
Shareholders’ equity | | Shareholders’ equity | |
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 169,423,980 shares issued and 154,402,852 shares outstanding as of March 31, 2023 and 168,275,504 shares issued and 158,228,508 shares outstanding as of December 31, 2022) | | Ordinary shares (par value €0.10; 500,000,000 shares authorized, 169,423,980 shares issued and 154,402,852 shares outstanding as of March 31, 2023 and 168,275,504 shares issued and 158,228,508 shares outstanding as of December 31, 2022) | 18,822 | | | 18,700 | |
Treasury shares (at cost, 15,021,128 shares as of March 31, 2023 and 10,046,996 shares as of December 31, 2022) | | Treasury shares (at cost, 15,021,128 shares as of March 31, 2023 and 10,046,996 shares as of December 31, 2022) | (103,843) | | | (62,953) | |
Paid-in capital | Paid-in capital | 1,186,245 | | | 1,177,380 | | Paid-in capital | 1,192,134 | | | 1,189,090 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (10,088) | | | (18,671) | | Accumulated other comprehensive loss | (4,308) | | | (6,985) | |
Accumulated deficit | Accumulated deficit | (458,653) | | | (529,696) | | Accumulated deficit | (430,271) | | | (472,990) | |
Total shareholders' equity | 713,730 | | | 630,834 | | |
Total liabilities and shareholders' equity | $ | 2,149,246 | | | $ | 2,057,576 | | |
Total shareholders’ equity | | Total shareholders’ equity | 672,534 | | | 664,862 | |
Total liabilities and shareholders’ equity | | Total liabilities and shareholders’ equity | $ | 2,051,761 | | | $ | 2,069,820 | |
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Operations
($ in thousands, except share data)
(unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 |
Revenue | Revenue | | | | | | | | | Revenue | | | | | |
Package | Package | | $ | 171,126 | | | $ | 124,331 | | | $ | 535,917 | | | $ | 293,005 | | Package | | | $ | 233,568 | | | $ | 186,815 | |
Non-package | Non-package | | 29,874 | | | 25,211 | | | 99,492 | | | 60,808 | | Non-package | | | 34,045 | | | 29,454 | |
The Playa Collection | | The Playa Collection | | | 726 | | | 296 | |
Management fees | Management fees | | 786 | | | 673 | | | 3,186 | | | 1,469 | | Management fees | | | 1,929 | | | 1,057 | |
Cost reimbursements | Cost reimbursements | | 2,836 | | | 1,072 | | | 6,868 | | | 2,554 | | Cost reimbursements | | | 3,534 | | | 1,952 | |
Total revenue | Total revenue | | 204,622 | | | 151,287 | | | 645,463 | | | 357,836 | | Total revenue | | | 273,802 | | | 219,574 | |
Direct and selling, general and administrative expenses | Direct and selling, general and administrative expenses | | | | | | | | | Direct and selling, general and administrative expenses | | | | | |
Direct | Direct | | 117,333 | | | 90,788 | | | 343,298 | | | 230,543 | | Direct | | | 128,968 | | | 106,840 | |
Selling, general and administrative | Selling, general and administrative | | 51,686 | | | 32,055 | | | 130,403 | | | 85,273 | | Selling, general and administrative | | | 45,127 | | | 37,239 | |
Depreciation and amortization | Depreciation and amortization | | 19,502 | | | 19,927 | | | 58,630 | | | 60,827 | | Depreciation and amortization | | | 19,191 | | | 19,500 | |
Reimbursed costs | Reimbursed costs | | 2,836 | | | 1,072 | | | 6,868 | | | 2,554 | | Reimbursed costs | | | 3,534 | | | 1,952 | |
Impairment loss | | — | | | — | | | — | | | 24,011 | | |
Loss (gain) on sale of assets | | 2 | | | (4) | | | 11 | | | 644 | | |
Loss on sale of assets | | Loss on sale of assets | | | 13 | | | — | |
| Direct and selling, general and administrative expenses | Direct and selling, general and administrative expenses | | 191,359 | | | 143,838 | | | 539,210 | | | 403,852 | | Direct and selling, general and administrative expenses | | | 196,833 | | | 165,531 | |
Operating income (loss) | | 13,263 | | | 7,449 | | | 106,253 | | | (46,016) | | |
Operating income | | Operating income | | | 76,969 | | | 54,043 | |
Interest expense | Interest expense | | (17,832) | | | (19,047) | | | (39,892) | | | (56,164) | | Interest expense | | | (29,666) | | | (9,168) | |
Other income (expense) | Other income (expense) | | 2,608 | | | 587 | | | 7,850 | | | (747) | | Other income (expense) | | | 232 | | | (514) | |
Net (loss) income before tax | | (1,961) | | | (11,011) | | | 74,211 | | | (102,927) | | |
Income tax (provision) benefit | | (268) | | | (1,360) | | | (3,168) | | | 13,043 | | |
Net (loss) income | | $ | (2,229) | | | $ | (12,371) | | | $ | 71,043 | | | $ | (89,884) | | |
Net income before tax | | Net income before tax | | | 47,535 | | | 44,361 | |
Income tax provision | | Income tax provision | | | (4,816) | | | (1,614) | |
Net income | | Net income | | | $ | 42,719 | | | $ | 42,747 | |
| (Loss) earnings per share | | |
Earnings per share | | Earnings per share | | |
Basic | Basic | | $ | (0.01) | | | $ | (0.08) | | | $ | 0.43 | | | $ | (0.55) | | Basic | | | $ | 0.27 | | | $ | 0.26 | |
Diluted | Diluted | | $ | (0.01) | | | $ | (0.08) | | | $ | 0.43 | | | $ | (0.55) | | Diluted | | | $ | 0.27 | | | $ | 0.26 | |
Weighted average number of shares outstanding during the period - Basic | Weighted average number of shares outstanding during the period - Basic | | 165,979,839 | | | 164,218,262 | | | 165,873,539 | | | 163,067,561 | | Weighted average number of shares outstanding during the period - Basic | | | 157,314,177 | | | 165,743,382 | |
Weighted average number of shares outstanding during the period - Diluted | Weighted average number of shares outstanding during the period - Diluted | | 165,979,839 | | | 164,218,262 | | | 167,124,242 | | | 163,067,561 | | Weighted average number of shares outstanding during the period - Diluted | | | 158,772,453 | | | 166,888,129 | |
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Comprehensive Income (Loss)
($ in thousands)
(unaudited)
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Net (loss) income | | $ | (2,229) | | | $ | (12,371) | | | $ | 71,043 | | | $ | (89,884) | |
Other comprehensive income, net of taxes | | | | | | | | |
Gain on interest rate swaps | | 2,958 | | | 2,958 | | | 8,778 | | | 8,778 | |
Release of foreign currency translation reserve related to sale of Capri Resort | | — | | | — | | | — | | | 140 | |
Pension obligation gain (loss) | | 155 | | | 38 | | | (195) | | | (55) | |
Total other comprehensive income | | 3,113 | | | 2,996 | | | 8,583 | | | 8,863 | |
Comprehensive income (loss) | | $ | 884 | | | $ | (9,375) | | | $ | 79,626 | | | $ | (81,021) | |
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| | | | | | 2023 | | 2022 |
Net income | | | | | | $ | 42,719 | | | $ | 42,747 | |
Other comprehensive income, net of taxes | | | | | | | | |
Gain on interest rate swaps | | | | | | 2,895 | | | 2,894 | |
Pension obligation loss | | | | | | (218) | | | (234) | |
Total other comprehensive income | | | | | | 2,677 | | | 2,660 | |
Comprehensive income | | | | | | $ | 45,396 | | | $ | 45,407 | |
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Shareholders'Shareholders’ Equity
($ in thousands, except share data)
(unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | | | | | | | |
Balance at December 31, 2020 | 134,571,290 | | | $ | 14,871 | | | 2,198,796 | | | $ | (16,642) | | | $ | 1,030,148 | | | $ | (30,949) | | | $ | (436,606) | | | $ | 560,822 | |
Cumulative effect of accounting changes, net of tax | — | | | — | | | — | | | — | | | — | | | — | | | (3,408) | | | (3,408) | |
Balance at January 1, 2021 | 134,571,290 | | | $ | 14,871 | | | 2,198,796 | | | $ | (16,642) | | | $ | 1,030,148 | | | $ | (30,949) | | | $ | (440,014) | | | $ | 557,414 | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | (69,745) | | | (69,745) | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,883 | | | — | | | 2,883 | |
Share-based compensation, net of tax withholdings | 708,285 | | | 87 | | | 9,208 | | | (55) | | | 3,092 | | | — | | | — | | | 3,124 | |
Equity issuance, net | 28,750,000 | | | 3,512 | | | — | | | — | | | 134,204 | | | — | | | — | | | 137,716 | |
Balance at March 31, 2021 | 164,029,575 | | | $ | 18,470 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,167,444 | | | $ | (28,066) | | | $ | (509,759) | | | $ | 631,392 | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | (7,768) | | | (7,768) | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,984 | | | — | | | 2,984 | |
Share-based compensation | 180,300 | | | 22 | | | — | | | — | | | 3,428 | | | — | | | — | | | 3,450 | |
Balance at June 30, 2021 | 164,209,875 | | | $ | 18,492 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,170,872 | | | $ | (25,082) | | | $ | (517,527) | | | $ | 630,058 | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | (12,371) | | | (12,371) | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,996 | | | — | | | 2,996 | |
Share-based compensation | 10,864 | | | 1 | | | — | | | — | | | 3,269 | | | — | | | — | | | 3,270 | |
Balance at September 30, 2021 | 164,220,739 | | | $ | 18,493 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,174,141 | | | $ | (22,086) | | | $ | (529,898) | | | $ | 623,953 | |
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| Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | | | | | | | |
Balance at December 31, 2021 | 164,438,280 | | | $ | 18,518 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,177,380 | | | $ | (18,671) | | | $ | (529,696) | | | $ | 630,834 | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | 42,747 | | | 42,747 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,660 | | | — | | | 2,660 | |
Share-based compensation | 1,339,787 | | | 152 | | | — | | | — | | | 3,204 | | | — | | | — | | | 3,356 | |
Balance at March 31, 2022 | 165,778,067 | | | $ | 18,670 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,180,584 | | | $ | (16,011) | | | $ | (486,949) | | | $ | 679,597 | |
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Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Shareholders' Equity (continued)
($ in thousands, except share data)
(unaudited) | | | Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total | | Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total |
| | Shares | | Amount | | Shares | | Amount | | | | | | | | | | Shares | | Amount | | Shares | | Amount | | | | | | | | |
Balance at December 31, 2021 | 164,438,280 | | | $ | 18,518 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,177,380 | | | $ | (18,671) | | | $ | (529,696) | | | $ | 630,834 | | |
Balance at December 31, 2022 | | Balance at December 31, 2022 | 158,228,508 | | | $ | 18,700 | | | 10,046,996 | | | $ | (62,953) | | | $ | 1,189,090 | | | $ | (6,985) | | | $ | (472,990) | | | $ | 664,862 | |
Net income | Net income | — | | | — | | | — | | | — | | | — | | | — | | | 42,747 | | | 42,747 | | Net income | — | | | — | | | — | | | — | | | — | | | — | | | 42,719 | | | 42,719 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,660 | | | — | | | 2,660 | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,677 | | | — | | | 2,677 | |
Share-based compensation | Share-based compensation | 1,339,787 | | | 152 | | | — | | | — | | | 3,204 | | | — | | | — | | | 3,356 | | Share-based compensation | 1,148,476 | | | 122 | | | — | | | — | | | 3,044 | | | — | | | — | | | 3,166 | |
Balance at March 31, 2022 | 165,778,067 | | | $ | 18,670 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,180,584 | | | $ | (16,011) | | | $ | (486,949) | | | $ | 679,597 | | |
Net income | — | | | — | | | — | | | — | | | — | | | — | | | 30,525 | | | 30,525 | | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,810 | | | — | | | 2,810 | | |
Share-based compensation | 251,784 | | | 26 | | | — | | | — | | | 2,884 | | | — | | | — | | | 2,910 | | |
Balance at June 30, 2022 | 166,029,851 | | | $ | 18,696 | | | 2,208,004 | | | $ | (16,697) | | | $ | 1,183,468 | | | $ | (13,201) | | | $ | (456,424) | | | $ | 715,842 | | |
Net loss | — | | | — | | | — | | | — | | | — | | | — | | | (2,229) | | | (2,229) | | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 3,113 | | | — | | | 3,113 | | |
Share-based compensation | 2,398 | | | — | | | — | | | — | | | 2,777 | | | — | | | — | | | 2,777 | | |
Repurchase of ordinary shares | Repurchase of ordinary shares | (973,931) | | | — | | | 973,931 | | | (5,773) | | | — | | | — | | | — | | | (5,773) | | Repurchase of ordinary shares | (4,974,132) | | | — | | | 4,974,132 | | | (40,890) | | | — | | | — | | | — | | | (40,890) | |
Balance at September 30, 2022 | 165,058,318 | | | $ | 18,696 | | | 3,181,935 | | | $ | (22,470) | | | $ | 1,186,245 | | | $ | (10,088) | | | $ | (458,653) | | | $ | 713,730 | | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | 154,402,852 | | | $ | 18,822 | | | 15,021,128 | | | $ | (103,843) | | | $ | 1,192,134 | | | $ | (4,308) | | | $ | (430,271) | | | $ | 672,534 | |
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The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(unaudited)
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
CASH FLOWS FROM OPERATING ACTIVITIES | CASH FLOWS FROM OPERATING ACTIVITIES | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net income (loss) | $ | 71,043 | | | $ | (89,884) | | |
Adjustments to reconcile net income (loss) to net cash from operating activities | | |
Net income | | Net income | $ | 42,719 | | | $ | 42,747 | |
Adjustments to reconcile net income to net cash from operating activities | | Adjustments to reconcile net income to net cash from operating activities | |
Depreciation and amortization | Depreciation and amortization | 58,630 | | | 60,827 | | Depreciation and amortization | 19,191 | | | 19,500 | |
Amortization of debt discount and issuance costs | Amortization of debt discount and issuance costs | 3,097 | | | 3,078 | | Amortization of debt discount and issuance costs | 1,795 | | | 1,019 | |
Share-based compensation | Share-based compensation | 9,043 | | | 9,899 | | Share-based compensation | 3,166 | | | 3,356 | |
Gain on derivative financial instruments | (18,744) | | | (6,425) | | |
Impairment loss | — | | | 24,011 | | |
Loss (gain) on derivative financial instruments | | Loss (gain) on derivative financial instruments | 6,405 | | | (11,134) | |
Deferred income taxes | Deferred income taxes | 2,794 | | | (14,123) | | Deferred income taxes | 3,826 | | | 1,572 | |
Loss on sale of assets | Loss on sale of assets | 11 | | | 644 | | Loss on sale of assets | 13 | | | — | |
Amortization of key money | Amortization of key money | (1,031) | | | (404) | | Amortization of key money | (193) | | | (238) | |
Recovery of doubtful accounts | (1,152) | | | (210) | | |
Provision for (recovery of) doubtful accounts | | Provision for (recovery of) doubtful accounts | 81 | | | (483) | |
Other | Other | 445 | | | 641 | | Other | 198 | | | (69) | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Trade and other receivables, net | Trade and other receivables, net | (1,149) | | | (14,337) | | Trade and other receivables, net | (11,403) | | | (15,735) | |
Insurance recoverable | Insurance recoverable | (41,315) | | | — | | Insurance recoverable | 5,626 | | | — | |
Accounts receivable from related parties | Accounts receivable from related parties | 2,817 | | | (593) | | Accounts receivable from related parties | (2,602) | | | (4,946) | |
Inventories | Inventories | (1,013) | | | (1,741) | | Inventories | (569) | | | (725) | |
Prepayments and other assets | Prepayments and other assets | (4,430) | | | 8,578 | | Prepayments and other assets | 3,159 | | | (223) | |
Trade and other payables | Trade and other payables | 56,225 | | | 10,320 | | Trade and other payables | (28,743) | | | 281 | |
Payables to related parties | Payables to related parties | 367 | | | (3,556) | | Payables to related parties | 2,292 | | | 2,262 | |
Income tax payable | Income tax payable | (483) | | | (226) | | Income tax payable | (205) | | | 152 | |
Other liabilities | Other liabilities | 1,587 | | | (533) | | Other liabilities | 531 | | | 312 | |
Net cash provided by (used in) operating activities | 136,742 | | | (14,034) | | |
Net cash provided by operating activities | | Net cash provided by operating activities | 45,287 | | | 37,648 | |
INVESTING ACTIVITIES | INVESTING ACTIVITIES | | | | INVESTING ACTIVITIES | | | |
Capital expenditures | Capital expenditures | (21,566) | | | (11,727) | | Capital expenditures | (10,257) | | | (4,430) | |
Purchase of intangibles | Purchase of intangibles | (209) | | | (212) | | Purchase of intangibles | (77) | | | (30) | |
Proceeds from the sale of assets, net | Proceeds from the sale of assets, net | 32 | | | 88,904 | | Proceeds from the sale of assets, net | 3 | | | 24 | |
Net cash (used in) provided by investing activities | (21,743) | | | 76,965 | | |
Property damage insurance proceeds | | Property damage insurance proceeds | 7,979 | | | — | |
Net cash used in investing activities | | Net cash used in investing activities | (2,352) | | | (4,436) | |
FINANCING ACTIVITIES | FINANCING ACTIVITIES | | | | FINANCING ACTIVITIES | | | |
Proceeds from ordinary shares, net of issuance costs | — | | | 137,716 | | |
| Repayments of debt | Repayments of debt | (32,438) | | | (31,954) | | Repayments of debt | (2,750) | | | (2,525) | |
Repayments of debt from related parties | — | | | (681) | | |
Repayments of borrowings on revolving credit facility | — | | | (84,667) | | |
| Repurchase of ordinary shares | Repurchase of ordinary shares | (4,152) | | | — | | Repurchase of ordinary shares | (42,558) | | | — | |
Repurchase of ordinary shares for tax withholdings | — | | | (55) | | |
Principal payments on finance lease obligations | Principal payments on finance lease obligations | (298) | | | (67) | | Principal payments on finance lease obligations | (107) | | | (99) | |
Net cash (used in) provided by financing activities | (36,888) | | | 20,292 | | |
INCREASE IN CASH AND CASH EQUIVALENTS | 78,111 | | | 83,223 | | |
Net cash used in financing activities | | Net cash used in financing activities | (45,415) | | | (2,624) | |
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | | (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (2,480) | | | 30,588 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF THE PERIOD | CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF THE PERIOD | $ | 293,577 | | | $ | 172,860 | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF THE PERIOD | $ | 283,945 | | | $ | 293,577 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF THE PERIOD | CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF THE PERIOD | $ | 371,688 | | | $ | 256,083 | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF THE PERIOD | $ | 281,465 | | | $ | 324,165 | |
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH | RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH | | RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH | |
Cash and cash equivalents | Cash and cash equivalents | $ | 371,688 | | | $ | 231,460 | | Cash and cash equivalents | $ | 281,465 | | | $ | 299,802 | |
Restricted cash | Restricted cash | — | | | 24,623 | | Restricted cash | — | | | 24,363 | |
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH | TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $ | 371,688 | | | $ | 256,083 | | TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $ | 281,465 | | | $ | 324,165 | |
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows (continued)
($ in thousands)
(unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | |
Cash paid for interest | $ | 21,406 | | | $ | 18,221 | |
Cash paid for income taxes, net | $ | 1,427 | | | $ | 32 | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES |
Capital expenditures incurred but not yet paid | $ | 873 | | | $ | 696 | |
| | | |
Intangible assets capitalized but not yet paid | $ | — | | | $ | 45 | |
| | | |
Par value of vested restricted share awards | $ | 122 | | | $ | 152 | |
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows (continued)
($ in thousands)
(unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | |
Cash paid for interest | $ | 55,049 | | | $ | 58,485 | |
Cash paid for income taxes, net | $ | 1,106 | | | $ | 2,042 | |
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES |
Capital expenditures incurred but not yet paid | $ | 824 | | | $ | 1,575 | |
Repurchase of ordinary shares not yet settled | $ | 1,621 | | | $ | — | |
Intangible assets capitalized but not yet paid | $ | 114 | | | $ | 109 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | — | | | $ | 262 | |
Par value of vested restricted share awards | $ | 178 | | | $ | 110 | |
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Note 1. Organization, operations and basis of presentation
Background
Playa Hotels & Resorts N.V. (“Playa” or the “Company”) is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations. We own and/or manage a portfolio of 2526 resorts located in Mexico, the Dominican Republic and Jamaica. Unless otherwise indicated or the context requires otherwise, references in our condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its subsidiaries.
Basis of preparation, presentation and measurement
Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements as of and for the year ended December 31, 2021,2022, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 24, 202223, 2023 (the “Annual Report”).
In our opinion, the unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. Results for the comparative prior periods have been reclassified to conform to the current period presentation.
The results of operations for the three and nine months ended September 30, 2022March 31, 2023 are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2022.2023. All dollar amounts (other than per share amounts) in the following disclosures are in thousands of United States dollars, unless otherwise indicated.
Note 2. Significant accounting policies
Share repurchase program and treasury shares
From timeNew accounting pronouncements recently issued or effective were not applicable to time, our Board of Directors (the “Board”) may authorize repurchases of our outstanding ordinary shares. Shares repurchased under Board-authorized repurchase programsthe Company or are currently held in treasury for general corporate purposes. Treasury shares are accounted for on the trade date under the cost method and recorded as treasury sharesnot expected to have a material impact on the Condensed Consolidated Balance Sheet as a reduction to shareholders' equity.Financial Statements.
Standards adopted
| | | | | | | | | | | | | | | | | | | | |
Standard | | Description | | Date of Adoption | | Effect on the Financial Statements or Other Significant Matters |
Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope
| | The amendments in this update provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. | | January 2022 | | The adoption of ASU No. 2020-04 and ASU 2021-01 in January 2022 had no impact on our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2022, as we have not modified our variable rate debt that is priced using a spread over one-month London Interbank Offered Rate (“LIBOR”).
Additionally, our interest rate swaps mature on March 31, 2023, prior to the anticipated discontinuation of the one-month LIBOR rate on June 30, 2023. We do not expect to modify our interest rate swap contracts prior to their maturity date.
|
Note 3. Revenue
The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in Note 15) ($ in thousands):
| | | Three Months Ended September 30, 2022 | | Three Months Ended March 31, 2023 |
| | Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total | | Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | Package revenue | $ | 58,588 | | | $ | 27,891 | | | $ | 45,953 | | | $ | 38,696 | | | $ | (2) | | | $ | 171,126 | | Package revenue | $ | 81,287 | | | $ | 36,803 | | | $ | 59,602 | | | $ | 55,876 | | | $ | — | | | $ | 233,568 | |
Non-package revenue(1) | Non-package revenue(1) | 9,078 | | | 3,309 | | | 9,277 | | | 7,493 | | | 717 | | | 29,874 | | Non-package revenue(1) | 9,700 | | | 4,747 | | | 9,167 | | | 9,867 | | | 564 | | | 34,045 | |
The Playa Collection | | The Playa Collection | — | | | — | | | — | | | — | | | 726 | | | 726 | |
Management fees | Management fees | 35 | | | — | | | — | | | — | | | 751 | | | 786 | | Management fees | 38 | | | — | | | — | | | — | | | 1,891 | | | 1,929 | |
Cost reimbursements | Cost reimbursements | — | | | — | | | — | | | 1,256 | | | 1,580 | | | 2,836 | | Cost reimbursements | — | | | — | | | — | | | 1,337 | | | 2,197 | | | 3,534 | |
Total revenue | Total revenue | $ | 67,701 | | | $ | 31,200 | | | $ | 55,230 | | | $ | 47,445 | | | $ | 3,046 | | | $ | 204,622 | | Total revenue | $ | 91,025 | | | $ | 41,550 | | | $ | 68,769 | | | $ | 67,080 | | | $ | 5,378 | | | $ | 273,802 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | 43,993 | | | $ | 19,874 | | | $ | 35,131 | | | $ | 25,333 | | | $ | — | | | $ | 124,331 | |
Non-package revenue | 8,813 | | | 2,794 | | | 7,701 | | | 5,671 | | | 232 | | | 25,211 | |
Management fees | — | | | — | | | — | | | — | | | 673 | | | 673 | |
Cost reimbursements | — | | | — | | | — | | | 789 | | | 283 | | | 1,072 | |
Total revenue | $ | 52,806 | | | $ | 22,668 | | | $ | 42,832 | | | $ | 31,793 | | | $ | 1,188 | | | $ | 151,287 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | 180,114 | | | $ | 83,559 | | | $ | 158,050 | | | $ | 114,196 | | | $ | (2) | | | $ | 535,917 | |
Non-package revenue(1) | 29,856 | | | 11,889 | | | 31,796 | | | 24,071 | | | 1,880 | | | 99,492 | |
Management fees | 97 | | | — | | | — | | | — | | | 3,089 | | | 3,186 | |
Cost reimbursements | — | | | — | | | — | | | 3,386 | | | 3,482 | | | 6,868 | |
Total revenue | $ | 210,067 | | | $ | 95,448 | | | $ | 189,846 | | | $ | 141,653 | | | $ | 8,449 | | | $ | 645,463 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | 111,378 | | | $ | 45,167 | | | $ | 80,512 | | | $ | 55,948 | | | $ | — | | | $ | 293,005 | |
Non-package revenue | 22,637 | | | 7,603 | | | 17,137 | | | 12,705 | | | 726 | | | 60,808 | |
Management fees | — | | | — | | | — | | | — | | | 1,469 | | | 1,469 | |
Cost reimbursements | — | | | — | | | — | | | 1,970 | | | 584 | | | 2,554 | |
Total revenue | $ | 134,015 | | | $ | 52,770 | | | $ | 97,649 | | | $ | 70,623 | | | $ | 2,779 | | | $ | 357,836 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue(1) | $ | 61,537 | | | $ | 26,223 | | | $ | 60,863 | | | $ | 38,192 | | | $ | — | | | $ | 186,815 | |
Non-package revenue(1)(2) | 8,841 | | | 3,621 | | | 8,846 | | | 7,934 | | | 212 | | | 29,454 | |
The Playa Collection(2) | — | | | — | | | — | | | — | | | 296 | | | 296 | |
Management fees | 30 | | | — | | | — | | | — | | | 1,027 | | | 1,057 | |
Cost reimbursements | — | | | — | | | — | | | 998 | | | 954 | | | 1,952 | |
Total revenue | $ | 70,408 | | | $ | 29,844 | | | $ | 69,709 | | | $ | 47,124 | | | $ | 2,489 | | | $ | 219,574 | |
________
(1) Non-packageIncludes $2.7 million of on-property room upgrade revenue within Other includes licensing, marketing and other support fees earnedthat was reclassified from non-package revenue to package revenue to conform with current period presentation.
(2)Includes $0.3 million that was reclassified from non-package revenue to The Playa Collection which is a third-party owned and operated membership program. Our revenues from The Playa Collection were $0.6 million and $1.3 million for the three and nine months ended September 30, 2022, respectively.to confirm with current period presentation.
Contract assets and liabilities
We do not have any material contract assets as of September 30, 2022March 31, 2023 and December 31, 20212022 other than trade and other receivables on our Condensed Consolidated Balance Sheet. Our receivables are primarily the result of contracts with customers, which are reduced by an allowance for doubtful accounts that reflects our estimate of amounts that will not be collected.
We record contract liabilities when cash payments are received or due in advance of guests staying at our resorts, which are presented as advance deposits (see Note 14) within trade and other payables on our Condensed Consolidated Balance Sheet. Our advanced deposits are generally recognized as revenue within one year.
Note 4. Property and equipment
The balance of property and equipment, net is as follows ($ in thousands):
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Property and equipment, gross | Property and equipment, gross | | | | Property and equipment, gross | | | |
Land, buildings and improvements | Land, buildings and improvements | $ | 1,762,849 | | | $ | 1,759,837 | | Land, buildings and improvements | $ | 1,766,926 | | | $ | 1,765,130 | |
Fixtures and machinery (1) | Fixtures and machinery (1) | 85,165 | | | 84,264 | | Fixtures and machinery (1) | 88,824 | | | 88,333 | |
Furniture and other fixed assets | Furniture and other fixed assets | 209,630 | | | 205,141 | | Furniture and other fixed assets | 215,876 | | | 213,005 | |
Construction in progress | Construction in progress | 12,092 | | | 3,781 | | Construction in progress | 14,315 | | | 10,293 | |
Total property and equipment, gross | Total property and equipment, gross | 2,069,736 | | | 2,053,023 | | Total property and equipment, gross | 2,085,941 | | | 2,076,761 | |
Accumulated depreciation | Accumulated depreciation | (522,141) | | | (468,449) | | Accumulated depreciation | (558,753) | | | (540,194) | |
Total property and equipment, net | Total property and equipment, net | $ | 1,547,595 | | | $ | 1,584,574 | | Total property and equipment, net | $ | 1,527,188 | | | $ | 1,536,567 | |
________
(1) Includes the gross balance of our financingfinance lease right-of-use assets, which was $6.3 million as of September 30, 2022March 31, 2023 and December 31, 2021.2022.
Depreciation expense for property and equipment was $19.1$18.8 million and $19.6$19.1 million for the three months ended September 30,March 31, 2023 and 2022, and 2021, respectively, and $57.5 million and $59.8 million for the nine months ended September 30, 2022 and 2021, respectively.
Hurricane Fiona
On September 19, 2022, Hurricane Fiona, a Category 1 hurricane, made landfall on the eastern coast of the Dominican Republic and caused non-structural damage to the Hyatt Ziva and Hyatt Zilara Cap Cana, Hilton La Romana All-Inclusive Resort, Dreams Punta Cana and Dreams Palm Beachseveral of our resorts. The Hyatt Ziva and Hyatt Zilara Cap Cana and Hilton La Romana All-Inclusive Resort were temporarily closed in late September for necessary clean-up and repairs and are expected to reopen in the fourth quarter of 2022. Our insurance policies provide coverage for business interruption, including lost profits, and reimbursement for costs related to the property damages and losses we have incurred.
As a result of Hurricane Fiona, we expect to incur $50.2 million of clean-up and repair expenses and losses on the write off of property and equipment and inventory, which were offset with our expectedWe received property damage insurance recoveriesproceeds of $41.3 million. The net expense due$8.0 million and business interruption proceeds of $5.6 million related to property damage is recorded within selling, general and administrative expense in the Condensed Consolidated Statements of Operations forHurricane Fiona during the three and nine months ended September 30, 2022.March 31, 2023. We expect to receive our insurance proceeds for ourreceived an additional $2.2 million of property damage and business interruption claimsproceeds in late 2022 and earlyApril 2023. We expect to receive the remaining proceeds in 2023.
Our managedThe property we manage in the Dominican Republic, Sanctuary Cap Cana, also sustained damage from Hurricane Fiona and was temporarily closed in late September for necessary clean-up and repairs. We expect theThe resort to reopen in the first quarter of 2023.
Sale of Capri Resort
On March 31, 2021, we entered into an agreement to sell our equity interest in the Capri Resort, which was reported within our Yucatán Peninsula reportable segment, for $55.0 million in cash consideration. Upon entering into the agreement, we classified the resort and related deferred tax liabilities as held for sale and recorded an impairment loss of $24.0 million basedreopened on the sale price.
On June 24, 2021, we completed the sale, received total cash consideration of $55.2 million, after customary closing costs, and recognized a loss of $0.5 million within loss (gain) on sale of assets in the Condensed Consolidated Statements of Operations. We utilized 50% of the Capri Resort's net proceeds of $24.4 million, after deducting incremental expenses, to repay a portion of our Term Loan on June 29, 2021. Any remaining net proceeds, after deducting capital expenditures incurred across our portfolio for up to 18 months following the sale, are required to be used to repay our Term Loan and Term A3 Loan in December 2022.
Sale of Dreams Puerto Aventuras
On February 5, 2021, we completed the sale of the Dreams Puerto Aventuras. Upon closing, we received total cash consideration of $34.3 million, after customary closing costs. The net proceeds from the sale, after deducting incremental expenses and capital expenditures incurred across our portfolio for up to 24 months following the sale, will be used to repay our Term Loan and Term A3 Loan in FebruaryJanuary 20, 2023.
Lessor contracts
We rent certain real estate to third parties for office and retail space within our resorts. Our lessor contracts are considered operating leases and generally have a contractual term of one to three years. The following table presents our rental income for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
Leases | Leases | | 2022 | | 2021 | | 2022 | | 2021 | Leases | | 2023 | | 2022 | |
Operating lease income (1) | Operating lease income (1) | | $ | 1,045 | | | $ | 796 | | | $ | 3,347 | | | $ | 2,189 | | Operating lease income (1) | | $ | 950 | | | $ | 1,226 | | |
________
(1) Our operating lease income, which is recorded within non-package revenue in the Condensed Consolidated Statements of Operations, includes variable lease revenue which is typically calculated as a percentage of our tenant'stenant’s net sales.
Note 5. Income taxes
We file tax returns for our entities in key jurisdictions including Mexico, the Dominican Republic, Jamaica, the United States, and the Netherlands. We are domiciled in the Netherlands and our Dutch subsidiaries are subject to a Dutch general tax rate of 25.8%. Our other operating subsidiaries are subject to tax rates up to 30% in the jurisdictions in which they are domiciled.
All of our outstanding AdvancedAdvance Pricing Agreements (“APAs”) for our Dominican Republic entities expired as of December 31, 2021. We are currently in the process of renegotiatingfinalizing the terms of our APAs, andwhich we expect that the terms will be finalizedto complete before the end of 2022. This is reflected in our2023. Our estimated annual effective tax rate calculation.calculation reflects the terms of the APAs that are expected to apply for the year ending December 31, 2023.
We had no uncertain tax positions or unrecognized tax benefits as of September 30, 2022.March 31, 2023. We expect no significant changes in unrecognized tax benefits over the next twelve months.
We regularly assess the realizability of our deferred tax assets by evaluating historical and projected future operating results, the reversal of existing temporary differences, taxable income in permitted carry back years, and the availability of tax planning strategies. As of September 30, 2022,March 31, 2023, a valuation allowance has been maintained as a reserve on substantially alla portion of our net deferred tax assets due to the uncertainty of realization of our loss carry forwards and other deferred tax assets. If our operating results continue to improve and our projections show continued utilization of tax attributes, we may consider that as significant positive evidence and our future reassessment may result in the determination that all or a portion of the valuation allowance is no longer required. The exact timing and amount of the valuation allowance releases are ultimately contingent upon the level of profitability achieved in future periods.
Note 6. Related party transactions
Relationship with Hyatt and AMResorts
Hyatt Hotels Corporation (“Hyatt”) is considered a related party due to its ownership of our ordinary shares by its affiliated entities. Hyatt also had representation on our Board of Directors until August 18, 2021. We pay Hyatt fees associated with the franchise agreements of our resorts operating under the all-ages Hyatt Ziva and adults-only Hyatt Zilara brands and receive reimbursements for guests that pay for their stay using the World of Hyatt® guest loyalty program.
Hyatt also owns Apple Leisure Group (“ALG”), the brand management platform AMResorts, and various tour operators and travel agencies. We paypreviously paid AMResorts and its affiliates, as operators of two of our resorts,the Jewel Punta Cana and Jewel Palm Beach through December 20, 2022 and January 6, 2023, respectively, management and marketing fees, and sellsold all-inclusive packages through ALG’s tour operators and travel agencies.
Relationship with Sagicor
Sagicor Financial Corporation Limited and its affiliated entities (collectively “Sagicor”) is considered a related party due to its ownership of our ordinary shares and representation on our Board of Directors. We pay Sagicor for employee insurance coverage at one of our Jamaica properties. Sagicor is also a part owner of the Jewel Grande Montego Bay Resort & Spa and compensates us as manager of the property.
Relationship with Davidson Kempner Capital Management L.P.
Davidson Kempner Capital Management L.P. (“DKCM”) is the investment manager of multiple affiliated funds and is considered a related party due to the DKCM funds’ ownership of our ordinary shares. The affiliated funds managed byAn affiliate of DKCM arewas also the lenders to our Property Loan and Additional Credit Facility, which consistsa lender of $25.0 million in aggregate principal of our 2022 Term A1, Term A2 and Term A3 loans (seeLoan (as defined in Note 11). We pay DKCM periodic interest payments as of December 31, 2022.
Relationship with HG Vora Capital Management, LLC
HG Vora Capital Management, LLC is considered a related party due to its ownership of our ordinary shares and was a lender of $13.5 million and $42.5 million in aggregate principal of the outstanding debt.2022 Term Loan as of March 31, 2023 and December 31, 2022, respectively.
Lease with our Chief Executive Officer
One of our offices is owned by our Chief Executive Officer and we sublease the space at that location from a third party.
Transactions with related parties
Transactions between us and related parties during the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 were as follows ($ in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
Related Party | Related Party | | Transaction | | 2022 | | 2021 | | 2022 | | 2021 | Related Party | | Transaction | | 2023 | | 2022 | |
Revenues | Revenues | | | | | | | | | | | Revenues | | | | | | | |
ALG | ALG | | Package revenue | | $ | 3,899 | | | $ | — | | | $ | 14,724 | | | $ | — | | ALG | | Package revenue | | $ | — | | | $ | 5,874 | | |
Sagicor | Sagicor | | Cost reimbursements(1) | | $ | 1,355 | | | $ | 926 | | | $ | 3,775 | | | $ | 2,214 | | Sagicor | | Cost reimbursements(1) | | $ | 1,477 | | | $ | 1,103 | | |
Expenses | Expenses | | Expenses | | |
Hyatt | Hyatt | | Franchise fees(2) | | $ | 7,205 | | | $ | 5,310 | | | $ | 22,420 | | | $ | 13,285 | | Hyatt | | Franchise fees(2) | | $ | 9,954 | | | $ | 7,413 | | |
Sagicor | Sagicor | | Insurance premiums(2) | | $ | 264 | | | $ | 213 | | | $ | 798 | | | $ | 571 | | Sagicor | | Insurance premiums(2) | | $ | 320 | | | $ | 279 | | |
Chief Executive Officer | Chief Executive Officer | | Lease expense(3) | | $ | 192 | | | $ | 189 | | | $ | 572 | | | $ | 605 | | Chief Executive Officer | | Lease expense(3) | | $ | 196 | | | $ | 188 | | |
DKCM | DKCM | | Interest expense(4) | | $ | 5,613 | | | $ | 5,563 | | | $ | 16,490 | | | $ | 16,434 | | DKCM | | Interest expense(4) | | $ | — | | | $ | 5,405 | | |
AMResorts | AMResorts | | Management fees(2) | | $ | 779 | | | $ | — | | | $ | 2,763 | | | $ | — | | AMResorts | | Management fees(2) | | $ | 41 | | | $ | 1,112 | | |
AMResorts | AMResorts | | Marketing fees(3) | | $ | 909 | | | $ | — | | | $ | 2,964 | | | $ | — | | AMResorts | | Marketing fees(3) | | $ | 37 | | | $ | 1,083 | | |
________
(1)Equivalent amount included as reimbursed costs in the Condensed Consolidated Statements of Operations.
(2)Included in direct expense in the Condensed Consolidated Statements of Operations with the exception of certain immaterial fees associated with the Hyatt franchise agreements, which are included in selling, general, and administrative expense.
(3)Included in selling, general, and administrative expense in the Condensed Consolidated Statements of Operations.
(4)Includes interest expense and amortization of deferred financing costs and discounts.
Note 7. Commitments and contingencies
We are involved in various claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims, and workers’ compensation and other employee claims. Most occurrences involving liability and claims of negligence are covered by insurance with solvent insurance carriers. We recognize a liability when we believe the loss is probable and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material effect on our Condensed Consolidated Financial Statements.
The Dutch corporate income tax act provides the option of a fiscal unity, which is a consolidated tax regime wherein the profits and losses of group companies can be offset against each other. With the exception of Playa Dominican Resort B.V., Playa Romana B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V., our Dutch companies file as a fiscal unity. Playa Resorts Holding B.V. is the head of our Dutch fiscal unity and is jointly and severally liable for the tax liabilities of the fiscal unity as a whole.
In 2015, the local taxing authorities in Mexico challenged $3.4 million of value added tax (“VAT”) receivable that was recognized in connection with the renovation of the Hyatt Ziva Cancún. During the second quarter of 2022, the tax authorities ruled in our favor resulting in receipt of the VAT and an additional $6.2 million for interest and inflation since the date the VAT refund was requested. The gain of $6.2 million is reported within other income (expense) in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2022.
In 2019, an appeal was filed by the Mexican Energy Regulatory Commission against the electricity rates that were charged to certain of our resorts in Mexico. During the third quarter of 2022, we received a favorable outcome resulting in the receipt of $4.3 million, of which $0.6 million related to VAT. The gain of $3.7 million is reported within other income (expense) in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022.
Note 8. Ordinary shares
In December 2018,On February 9, 2023, our Board establishedof Directors authorized a $100.0$200.0 million share repurchase program, pursuant to which we may repurchase our outstanding ordinary shares as market conditions and our liquidity warrant. Our Board reauthorized and renewed theThe new program replaced our $100.0 million repurchase authorizationprogram announced in September 2022 so that there was again $100.0 million available under the program.2022. The repurchase program is subject to certain limitations under Dutch law, including the existing repurchase authorization granted by our shareholders. Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the three months ended September 30, 2022,March 31, 2023, we repurchased 973,9314,974,132 ordinary shares under the programprograms at an average price of $5.93$8.17 per share. As of September 30, 2022,March 31, 2023, we had approximately $94.2$169.2 million remaining under our $200.0 million share repurchase program.
As of September 30, 2022,March 31, 2023, our ordinary share capital consisted of 165,058,318154,402,852 ordinary shares outstanding, which have a par value of €0.10 per share. In addition, 3,630,9174,893,900 restricted shares and performance share awards and 25,32632,658 restricted share units were outstanding under the 2017 Plan (as defined in Note 9). The holders of restricted shares and performance share awards are entitled to vote, but not dispose of, such shares until they vest. The holders of restricted share units are neither entitled to vote nor dispose of such shares until they vest.
Note 9. Share-based compensation
We adopted our 2017 Omnibus Incentive Plan (the “2017 Plan”) to attract and retain independent directors, executive officers and other key employees and service providers. As of September 30, 2022,March 31, 2023, there were 3,541,789907,941 shares available for future grants under the 2017 Plan.
Restricted share awards consist of restricted shares and restricted share units that are granted to eligible employees, executives, and board members and consist of ordinary shares (or the right to receive ordinary shares).
A summary of our restricted share awards from January 1, 20222023 to September 30, 2022March 31, 2023 is as follows:
| | | Number of Shares | | Weighted-Average Grant Date Fair Value | | Number of Shares | | Weighted-Average Grant Date Fair Value |
Unvested balance at January 1, 2022 | 3,006,791 | | | $ | 6.50 | | |
Unvested balance at January 1, 2023 | | Unvested balance at January 1, 2023 | 2,288,821 | | | $ | 6.94 | |
Granted | Granted | 1,034,850 | | | 8.20 | | Granted | 1,744,579 | | | 6.77 | |
Vested | Vested | (1,577,548) | | | 6.88 | | Vested | (1,148,476) | | | 6.91 | |
Forfeited | Forfeited | (136,973) | | | 7.54 | | Forfeited | (6,716) | | | 6.95 | |
Unvested balance at September 30, 2022 | 2,327,120 | | | $ | 6.94 | | |
Unvested balance at March 31, 2023 | | Unvested balance at March 31, 2023 | 2,878,208 | | | $ | 6.85 | |
Performance share awards consist of ordinary shares that may become earned and vested at the end of a three yearthree-year performance period based on the achievement of performance targets adopted by our Compensation Committee. Our performance shares have market conditions where 50% of the performance share awards will vest based on the total shareholder return (“TSR”) of our ordinary shares relative to those of our peer group and 50% will vest based on the compound annual growth rate of the price of our ordinary shares. The peer shareholder return component may vest between 0% and 150% of target, with the award capped at 100% of target should Playa'sPlaya’s TSR be negative. The growth rate component may vest up to 100% of target.
The table below summarizes the key inputs used in the Monte-Carlo simulation to determine the grant date fair value of our performance share awards ($ in thousands):
| Performance Award Grant Date | Performance Award Grant Date | | Percentage of Total Award | | Grant Date Fair Value by Component | | Volatility (1) | | Interest Rate (2) | | Dividend Yield | Performance Award Grant Date | | Percentage of Total Award | | Grant Date Fair Value by Component | | Volatility (1) | | Interest Rate (2) | | Dividend Yield |
January 4, 2022 | | | | | | | | | | | |
January 18, 2023 | | January 18, 2023 | | | | | | | | | | |
Peer Shareholder Return | Peer Shareholder Return | | 50 | % | | $ | 1,689 | | | 67.79 | % | | 1.01 | % | | — | % | Peer Shareholder Return | | 50 | % | | $ | 2,751 | | | 71.82 | % | | 3.70 | % | | — | % |
Growth Rate | Growth Rate | | 50 | % | | $ | 1,346 | | | 67.79 | % | | 1.01 | % | | — | % | Growth Rate | | 50 | % | | $ | 2,194 | | | 71.82 | % | | 3.70 | % | | — | % |
________
(1) Expected volatility was determined based on our historical share prices.
(2) The risk-free rate was based on U.S. Treasury zero coupon issues with a remaining term equal to the remaining term of the measurement period.
A summary of our performance share awards from January 1, 20222023 to September 30, 2022March 31, 2023 is as follows:
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
Unvested balance at January 1, 2022 | 1,027,519 | | | $ | 5.18 | |
Granted | 374,998 | | | 8.10 | |
Vested | (16,421) | | | 4.34 | |
Forfeited | (56,973) | | | 4.34 | |
Unvested balance at September 30, 2022 | 1,329,123 | | | $ | 6.05 | |
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
Unvested balance at January 1, 2023 | 1,329,123 | | | $ | 6.05 | |
Granted | 719,227 | | | 6.88 | |
Unvested balance at March 31, 2023 | 2,048,350 | | | $ | 6.34 | |
Note 10. Earnings per share
Basic and diluted earnings or loss per share (“EPS”) are as follows ($ in thousands, except share data):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | |
Numerator | Numerator | | | | | | | | Numerator | | | | |
Net (loss) income | $ | (2,229) | | | $ | (12,371) | | | $ | 71,043 | | | $ | (89,884) | | |
Net income | | Net income | $ | 42,719 | | | $ | 42,747 | | |
Denominator | Denominator | | Denominator | | |
Denominator for basic EPS - weighted-average number of shares outstanding | Denominator for basic EPS - weighted-average number of shares outstanding | 165,979,839 | | | 164,218,262 | | | 165,873,539 | | | 163,067,561 | | Denominator for basic EPS - weighted-average number of shares outstanding | 157,314,177 | | | 165,743,382 | | |
Effect of dilutive securities | Effect of dilutive securities | | Effect of dilutive securities | | |
Unvested performance share awards | Unvested performance share awards | — | | | — | | | 500,859 | | | — | | Unvested performance share awards | 952,494 | | | 401,903 | | |
Unvested restricted share awards | Unvested restricted share awards | — | | | — | | | 749,844 | | | — | | Unvested restricted share awards | 505,782 | | | 742,844 | | |
Denominator for diluted EPS - adjusted weighted-average number of shares outstanding | Denominator for diluted EPS - adjusted weighted-average number of shares outstanding | 165,979,839 | | | 164,218,262 | | | 167,124,242 | | | 163,067,561 | | Denominator for diluted EPS - adjusted weighted-average number of shares outstanding | 158,772,453 | | | 166,888,129 | | |
| EPS - Basic | EPS - Basic | $ | (0.01) | | | $ | (0.08) | | | $ | 0.43 | | | $ | (0.55) | | EPS - Basic | $ | 0.27 | | | $ | 0.26 | | |
EPS - Diluted | EPS - Diluted | $ | (0.01) | | | $ | (0.08) | | | $ | 0.43 | | | $ | (0.55) | | EPS - Diluted | $ | 0.27 | | | $ | 0.26 | | |
We had no anti-dilutive unvested performance share awards for the three months ended March 31, 2023. For the three and nine months ended September 30,March 31, 2022, unvested performance share awards in the amountsamount of 1,329,123 and 187,500 shares respectively, were not included in the computation of diluted EPS as their effect would have been anti-dilutive. For the three and nine months ended September 30, 2021, unvested performance share awards of 1,027,519 were not included in the computation of diluted EPS as their effect would have been anti-dilutive. The performance targets of our unvested performance share awards were partially achieved as of September 30, 2022March 31, 2023 and 2021.2022.
For the three months ended September 30,March 31, 2023 and 2022, unvested restricted share awards of 2,327,120 were not included in the computation of diluted EPS as their effect would have been anti-dilutive. Wewe had no anti-dilutive unvested restricted share awardsawards.
On March 12, 2022, all of our outstanding warrants expired and had no impact on diluted EPS for the ninethree months ended September 30,March 31, 2022. For the three and nine months ended September 30, 2021, unvested restricted share awards of 3,225,332 were not included in the computation of diluted EPS as their effect would have been anti-dilutive.
Note 11. Debt
Our debt consists of the following ($ in thousands):
| | | Outstanding Balance as of | | Outstanding Balance as of |
| | Interest Rate | | Maturity Date | | September 30, 2022 | | December 31, 2021 | | Interest Rate | | Maturity Date | | March 31, 2023 | | December 31, 2022 |
Senior Secured Credit Facilities | Senior Secured Credit Facilities | | | | | | | | Senior Secured Credit Facilities | | | | | | | |
Revolving Credit Facility (1) | Revolving Credit Facility (1) | LIBOR + 4.00% | | January 27, 2024 | | $ | — | | | $ | — | | Revolving Credit Facility (1) | SOFR + 3.50% (1) | | January 5, 2028 | | $ | — | | | $ | — | |
Term Loan (2) | LIBOR + 2.75% | | April 27, 2024 | | 909,430 | | | 941,868 | | |
Term A1 Loan | 11.4777% | | April 27, 2024 | | 35,000 | | | 35,000 | | |
Term A2 Loan | 11.4777% | | April 27, 2024 | | 31,000 | | | 31,000 | | |
Term A3 Loan (3) | LIBOR + 3.00% | | April 27, 2024 | | 27,319 | | | 27,319 | | |
2022 Term Loan (2) | | 2022 Term Loan (2) | SOFR + 4.25% | | January 5, 2029 | | 1,097,250 | | | 1,100,000 | |
Total Senior Secured Credit Facilities (at stated value) | Total Senior Secured Credit Facilities (at stated value) | | 1,002,749 | | | 1,035,187 | | Total Senior Secured Credit Facilities (at stated value) | | 1,097,250 | | | 1,100,000 | |
Unamortized discount | Unamortized discount | | (778) | | | (1,153) | | Unamortized discount | | (30,955) | | | (32,428) | |
Unamortized debt issuance costs | Unamortized debt issuance costs | | (2,853) | | | (4,207) | | Unamortized debt issuance costs | | (7,454) | | | (7,776) | |
Total Senior Secured Credit Facilities, net | Total Senior Secured Credit Facilities, net | | $ | 999,118 | | | $ | 1,029,827 | | Total Senior Secured Credit Facilities, net | | $ | 1,058,841 | | | $ | 1,059,796 | |
| Property Loan | | |
Property Loan (at stated value) | 9.25% | | July 1, 2025 | | $ | 110,000 | | | $ | 110,000 | | |
Unamortized discount | | (2,459) | | | (3,107) | | |
Unamortized debt issuance costs | | (2,738) | | | (3,459) | | |
Total Property Loan, net | | $ | 104,803 | | | $ | 103,434 | | |
| Financing lease obligations | Financing lease obligations | | $ | 5,759 | | | $ | 6,058 | | Financing lease obligations | | $ | 5,550 | | | $ | 5,657 | |
| Total debt, net | Total debt, net | | $ | 1,109,680 | | | $ | 1,139,319 | | Total debt, net | | $ | 1,064,391 | | | $ | 1,065,453 | |
________
(1)Undrawn balances bear interest between 0.25% to 0.5%0.50% depending on certain leverage ratios. We had an available balance of $68.0 million and $85.0$225.0 million as of September 30, 2022March 31, 2023 and December 31, 2021, respectively.2022. Interest is incurred on any outstanding balance based on the Secured Overnight Financing Rate (“SOFR”) plus a margin ranging from 3.25% to 3.75%, depending on our consolidated secured net leverage ratio.
(2)One-month LIBOR is subject to a 1.0% floor. The effective interest rate for the 2022 Term Loan was 5.87%8.99% and 3.75%8.58% as of September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. Our two
Second Restatement Agreement
On December 16, 2022, we entered into the Second Restatement Agreement to amend and restate our Senior Secured Credit Facility to consist of (i) a $225.0 million revolving line of credit with a maturity date of January 5, 2028 (the “Revolving Credit Facility”) and (ii) a $1.1 billion term loan with a maturity of January 5, 2029 (the “2022 Term Loan” and collectively with the Revolving Credit Facility, the “2022 Senior Secured Credit Facility”).
The 2022 Term Loan bears interest at SOFR plus a margin of 4.25% (where the applicable SOFR rate swaps fix LIBORhas a 0.50% floor). The Revolving Credit Facility bears interest at 2.85%SOFR plus a margin ranging from 3.25% to 3.75%, in each case, depending on $800.0 millionthe level of our Term Loan (see Note 12).
(3)One-month LIBOR is subjectconsolidated secured net leverage ratio in effect from time to a 1.0% floor. The effective interest rate was 5.50% and 4.00% as of September 30, 2022 and December 31, 2021, respectively.
On May 20, 2022, we repaid $24.9 million of the outstanding balance on our Term Loan in addition to our quarterly principal payments as a result of the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark in May 2020. The repayment represented 100% of the net proceeds from the sale, after deducting incremental expenses and capital expenditures incurred across our portfolio for 24 months following the sale.time.
Financial maintenance covenants
We were in compliance with all applicable covenants as of September 30, 2022.March 31, 2023. A summary of our applicable covenants and restrictions is as follows:
| | | | | | | | |
Debt | | Covenant Terms |
2022 Senior Secured Credit Facility | | We are subject to a total net leverage ratio of 4.75x5.20x if we have more than 35% drawn on the Revolving Credit Facility. |
Term A1 Loan | | Same terms as the Senior Secured Credit Facility. |
Term A2 Loan | | No applicable debt covenants. |
Term A3 Loan | | No applicable debt covenants. |
Property Loan | | No applicable debt covenants other than the requirement to maintain a cash reserve until the Properties achieve a debt service coverage ratio of 1.50x for two consecutive quarters. |
During the second quarter of 2022, our restricted cash balance related to our Property Loan was released into unrestricted cash as the Hyatt Ziva and Hyatt Zilara Cap Cana and Hilton Rose Hall Resort & Spa properties achieved the required debt service coverage ratio for two consecutive quarters. We had no restricted cash as of September 30, 2022.
Note 12. Derivative financial instruments
Our two interest rate swaps mitigatepreviously mitigated the interest rate risk inherent to our floating rate debt includingthat was tied to the Revolving Credit Facility and Term Loan.London Interbank Offered Rate (“LIBOR”). The interest rate swaps arewere not for trading purposes and havehad fixed notional values of $200.0 million and $600.00$600.0 million. The fixed rate paid by us iswas 2.85% and the variable rate received resetsreset monthly to the one-month LIBOR rate, which results in us fixing LIBOR at 2.85% on $800.0 million of our Term Loan.rate. The interest rate swaps maturematured on March 31, 2023.
Our interest rate swaps arewere designated as cash flow hedges, but were deemed ineffective due to the decrease in interest rates. All changes in fair value arewere recognized through interest expense in the Condensed Consolidated Statements of Operations.Operations through maturity.
The following tables present the effect of our interest rate swaps, net of tax, in the Condensed Consolidated Statements of Comprehensive Income (Loss) and Condensed Consolidated Statements of Operations for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | 2022 | | 2021 | | 2023 | | 2022 |
AOCI from our cash flow hedges as of January 1 | AOCI from our cash flow hedges as of January 1 | | $ | 14,632 | | | $ | 26,369 | | AOCI from our cash flow hedges as of January 1 | | $ | 2,895 | | | $ | 14,632 | |
Change in fair value | Change in fair value | | — | | | — | | Change in fair value | | — | | | — | |
Reclassification from AOCI to interest expense | Reclassification from AOCI to interest expense | | (2,894) | | | (2,894) | | Reclassification from AOCI to interest expense | | (2,895) | | | (2,894) | |
OCI related to our cash flow hedges for the three months ended March 31 | OCI related to our cash flow hedges for the three months ended March 31 | | (2,894) | | | (2,894) | | OCI related to our cash flow hedges for the three months ended March 31 | | (2,895) | | | (2,894) | |
Change in fair value | | — | | | — | | |
Reclassification from AOCI to interest expense | | (2,926) | | | (2,926) | | |
OCI related to our cash flow hedges for the three months ended June 30 | | (2,926) | | | (2,926) | | |
Change in fair value | | — | | | — | | |
Reclassification from AOCI to interest expense | | (2,958) | | | (2,958) | | |
OCI related to our cash flow hedges for the three months ended September 30 | | (2,958) | | | (2,958) | | |
AOCI from our cash flow hedges as of September 30 (1) | | $ | 5,854 | | | $ | 17,591 | | |
| AOCI from our cash flow hedges as of March 31 | | AOCI from our cash flow hedges as of March 31 | | $ | — | | | $ | 11,738 | |
________
(1) As of September 30, 2022, the total amount expected to be reclassified from AOCI to interest expense during the remaining six month term is $5.9 million, which represents prior losses recognized in AOCI when our interest rate swaps were deemed effective hedges.
| Derivative Instruments for Ineffective Hedges | Derivative Instruments for Ineffective Hedges | | Financial Statement Classification | | Three Months Ended September 30, | | Nine Months Ended September 30, | Derivative Instruments for Ineffective Hedges | | Financial Statement Classification | | Three Months Ended March 31, | |
| 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | |
Interest rate swaps (1) | Interest rate swaps (1) | | Interest expense | | $ | 16 | | | $ | 3,807 | | | $ | (7,776) | | | $ | 10,209 | | Interest rate swaps (1) | | Interest expense | | $ | 3,013 | | | $ | (5,715) | | |
________
(1) Includes the loss or (gain) from the change in fair value of our interest rate swaps and the cash interest paid or received for the monthly settlements of the derivative.
The following tables present the effect of our interest rate swaps in the Condensed Consolidated Balance Sheet as of September 30, 2022March 31, 2023 and December 31, 20212022 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | |
Derivative Assets for Ineffective Hedges | | Financial Statement Classification | | As of September 30, | | As of December 31, |
| | 2022 | | 2021 |
Interest rate swaps | | Derivative financial instruments | | $ | 4,979 | | | $ | — | |
| Derivative Liabilities for Ineffective Hedges | | Financial Statement Classification | | As of September 30, | | As of December 31, | |
| 2022 | | 2021 | |
Derivative Assets for Ineffective Hedges | | Derivative Assets for Ineffective Hedges | | Financial Statement Classification | | As of March 31, | | As of December 31, |
| | 2023 | | 2022 |
Interest rate swaps | Interest rate swaps | | Derivative financial instruments | | $ | — | | | $ | 22,543 | | Interest rate swaps | | Derivative financial instruments | | $ | — | | | $ | 3,510 | |
Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate swaps. We incorporate these counterparty credit risks in our fair value measurements (see Note 13) and believe we minimize this credit risk by transacting with major creditworthy financial institutions.
Note 13. Fair value of financial instruments
The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. U.S. GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of observability of inputs used in measuring fair value as follows:
•Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2: Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
•Level 3: Inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing an asset or liability.
We believe the carrying value of our financial instruments, excluding our debt, approximate their fair values as of September 30, 2022March 31, 2023 and December 31, 2021.2022. We did not have any Level 3 instruments during any of the periods presented in our Condensed Consolidated Financial Statements.
We did not have any financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023. The following tables presenttable presents our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 20212022 ($ in thousands):
| Financial Assets | Financial Assets | | September 30, 2022 | | Level 1 | | Level 2 | | Level 3 | Financial Assets | | December 31, 2022 | | Level 1 | | Level 2 | | Level 3 |
Fair value measurements on a recurring basis | Fair value measurements on a recurring basis | | | | | | | | | Fair value measurements on a recurring basis | | | | | | | | |
Interest rate swaps | | $ | 4,979 | | | $ | — | | | $ | 4,979 | | | $ | — | | |
Interest rate swap | | Interest rate swap | | $ | 3,510 | | | $ | — | | | $ | 3,510 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Liabilities | | December 31, 2021 | | Level 1 | | Level 2 | | Level 3 |
Fair value measurements on a recurring basis | | | | | | | | |
Interest rate swap | | $ | 22,543 | | | $ | — | | | $ | 22,543 | | | $ | — | |
The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of September 30, 2022March 31, 2023 and December 31, 20212022 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of September 30, 2022 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value | | | | | | | | |
Term Loan | | $ | 907,351 | | | $ | — | | | $ | — | | | $ | 876,294 | |
Term A1 Loan | | 34,422 | | | — | | | — | | | 35,400 | |
Term A2 Loan | | 30,488 | | | — | | | — | | | 31,355 | |
Term A3 Loan | | 26,857 | | | — | | | — | | | 26,424 | |
Property Loan | | 104,803 | | | — | | | — | | | 110,829 | |
Total liabilities | | $ | 1,103,921 | | | $ | — | | | $ | — | | | $ | 1,080,302 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of March 31, 2023 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value | | | | | | | | |
2022 Term Loan | | $ | 1,058,841 | | | $ | — | | | $ | — | | | $ | 1,110,079 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of December 31, 2021 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value | | | | | | | | |
Term Loan | | $ | 938,788 | | | $ | — | | | $ | — | | | $ | 924,917 | |
Term A1 Loan | | 34,151 | | | — | | | — | | | 35,598 | |
Term A2 Loan | | 30,248 | | | — | | | — | | | 31,530 | |
Term A3 Loan | | 26,640 | | | — | | | — | | | 27,006 | |
Property Loan | | 103,434 | | | — | | | — | | | 111,593 | |
Total liabilities | | $ | 1,133,261 | | | $ | — | | | $ | — | | | $ | 1,130,644 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of December 31, 2022 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value | | | | | | | | |
2022 Term Loan | | $ | 1,059,796 | | | $ | — | | | $ | — | | | $ | 1,114,860 | |
The following table summarizes the valuation techniques used to estimate the fair value of our financial instruments measured at fair value on a recurring basis and our financial instruments not measured at fair value:
| | | | | | | | |
| | Valuation Technique |
Financial instruments recorded at fair value | | |
Interest rate swaps | | The fair value of the interest rate swaps is estimated based on the expected future cash flows by incorporating the notional amount of the swaps, the contractual period to maturity, and observable market-based inputs, including interest rate curves. The fair value also incorporates credit valuation adjustments to appropriately reflect nonperformance risk. The fair value of our interest rate swaps is largely dependent on forecasted LIBOR as of the measurement date. If, in subsequent periods, forecasted LIBOR exceeds 2.85% we will recognize a gain and future cash inflows. Conversely, if forecasted LIBOR falls below 2.85% in subsequent periods we will recognize a loss and future cash outflows. |
Financial instruments not recorded at fair value | | |
2022 Term Loans and Property Loan | | The fair value of our 2022 Term Loans and Property Loan areis estimated using cash flow projections over the remaining contractual period by applying market forward rates and discounting back at the appropriate discount rate. |
Revolving Credit Facility | | The valuation technique of our Revolving Credit Facility is consistent with our 2022 Term Loans.Loan. The fair value of the Revolving Credit Facility generally approximates its carrying value as the expected term is significantly shorter in duration. |
Note 14. Other balance sheet items
Trade and other receivables, net
The following summarizes the balances of trade and other receivables, net as of September 30, 2022March 31, 2023 and December 31, 20212022 ($ in thousands):
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Gross trade and other receivables (1) | Gross trade and other receivables (1) | $ | 48,118 | | | $ | 47,382 | | Gross trade and other receivables (1) | $ | 74,620 | | | $ | 63,396 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | (326) | | | (1,940) | | Allowance for doubtful accounts | (352) | | | (450) | |
Total trade and other receivables, net | Total trade and other receivables, net | $ | 47,792 | | | $ | 45,442 | | Total trade and other receivables, net | $ | 74,268 | | | $ | 62,946 | |
________
(1) The opening balance as of January 1, 20212022 was $28.3$47.4 million.
We have not experienced any significant write-offs to our accounts receivable during the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022.
Prepayments and other assets
The following summarizes the balances of prepayments and other assets as of September 30, 2022March 31, 2023 and December 31, 20212022 ($ in thousands):
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Advances to suppliers | Advances to suppliers | $ | 16,300 | | | $ | 8,327 | | Advances to suppliers | $ | 10,237 | | | $ | 12,683 | |
Prepaid income taxes | Prepaid income taxes | 11,559 | | | 11,101 | | Prepaid income taxes | 10,735 | | | 11,809 | |
Prepaid other taxes (1) | Prepaid other taxes (1) | 4,568 | | | 7,995 | | Prepaid other taxes (1) | 4,465 | | | 4,539 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 3,170 | | | 3,766 | | Operating lease right-of-use assets | 2,791 | | | 2,968 | |
Key money | Key money | 2,295 | | | 2,376 | | Key money | 6,670 | | | 6,735 | |
Other assets | Other assets | 5,317 | | | 5,075 | | Other assets | 6,060 | | | 5,443 | |
Total prepayments and other assets | Total prepayments and other assets | $ | 43,209 | | | $ | 38,640 | | Total prepayments and other assets | $ | 40,958 | | | $ | 44,177 | |
________
(1) Includes recoverable value-added tax, general consumption tax, and other sales tax accumulated by our Mexico, Jamaica, Dutch and Dominican Republic entities.
Goodwill
We recognized no goodwill impairment losses on our reporting units nor any additions to goodwill during the three and nine months ended September 30, 2022.March 31, 2023. The gross carrying values and accumulated impairment losses of goodwill by reportable segment (refer to discussion of our reportable segments in Note 15) as of September 30, 2022March 31, 2023 and December 31, 20212022 are as follows ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Total |
Gross carrying value | $ | 51,731 | | | $ | — | | | $ | — | | | $ | 35,879 | | | $ | 87,610 | |
Accumulated impairment losses | (6,168) | | | — | | | — | | | (19,788) | | | (25,956) | |
Net carrying value | $ | 45,563 | | | $ | — | | | $ | — | | | $ | 16,091 | | | $ | 61,654 | |
Other intangible assets
Other intangible assets as of September 30, 2022March 31, 2023 and December 31, 20212022 consisted of the following ($ in thousands):
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Gross carrying value | Gross carrying value | | | | Gross carrying value | | | |
Casino and other licenses (1) | Casino and other licenses (1) | $ | 875 | | | $ | 875 | | Casino and other licenses (1) | $ | 875 | | | $ | 875 | |
Management contract | Management contract | 1,900 | | | 1,900 | | Management contract | 1,900 | | | 1,900 | |
Enterprise resource planning system | Enterprise resource planning system | 6,520 | | | 6,402 | | Enterprise resource planning system | 6,375 | | | 6,375 | |
Other | Other | 4,273 | | | 4,073 | | Other | 4,602 | | | 4,499 | |
Total gross carrying value | Total gross carrying value | 13,568 | | | 13,250 | | Total gross carrying value | 13,752 | | | 13,649 | |
| Accumulated amortization | Accumulated amortization | | Accumulated amortization | |
Management contract | Management contract | (404) | | | (333) | | Management contract | (451) | | | (428) | |
Enterprise resource planning system | Enterprise resource planning system | (2,548) | | | (1,895) | | Enterprise resource planning system | (2,997) | | | (2,771) | |
Other | Other | (3,773) | | | (3,390) | | Other | (4,011) | | | (3,894) | |
Total accumulated amortization | Total accumulated amortization | (6,725) | | | (5,618) | | Total accumulated amortization | (7,459) | | | (7,093) | |
| Net carrying value | Net carrying value | | Net carrying value | |
Casino and other licenses (1) | Casino and other licenses (1) | 875 | | | 875 | | Casino and other licenses (1) | 875 | | | 875 | |
Management contract | Management contract | 1,496 | | | 1,567 | | Management contract | 1,449 | | | 1,472 | |
Enterprise resource planning system | Enterprise resource planning system | 3,972 | | | 4,507 | | Enterprise resource planning system | 3,378 | | | 3,604 | |
Other | Other | 500 | | | 683 | | Other | 591 | | | 605 | |
Total net carrying value | Total net carrying value | $ | 6,843 | | | $ | 7,632 | | Total net carrying value | $ | 6,293 | | | $ | 6,556 | |
________
(1) Our casino and other licenses have indefinite lives. Accordingly, there is no associated amortization expense or accumulated amortization.
Amortization expense for intangible assets was $0.4 million and $0.3 million for the three months ended September 30, 2022March 31, 2023 and 2021, respectively, and $1.1 million and $1.0 million for the nine months ended September 30, 2022 and 2021, respectively.2022.
Trade and other payables
The following summarizes the balances of trade and other payables as of September 30, 2022March 31, 2023 and December 31, 20212022 ($ in thousands):
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Trade payables | Trade payables | $ | 17,986 | | | $ | 23,843 | | Trade payables | $ | 27,743 | | | $ | 28,422 | |
Advance deposits (1) | Advance deposits (1) | 68,089 | | | 62,644 | | Advance deposits (1) | 74,953 | | | 83,262 | |
Withholding and other taxes payable | Withholding and other taxes payable | 34,715 | | | 32,655 | | Withholding and other taxes payable | 23,115 | | | 31,111 | |
Interest payable | Interest payable | 148 | | | 99 | | Interest payable | 4,112 | | | 3,996 | |
Payroll and related accruals | Payroll and related accruals | 25,642 | | | 23,998 | | Payroll and related accruals | 20,771 | | | 29,273 | |
Accrued expenses and other payables(2) | Accrued expenses and other payables(2) | 71,331 | | | 16,983 | | Accrued expenses and other payables (2) | 50,000 | | | 55,588 | |
Total trade and other payables | Total trade and other payables | $ | 217,911 | | | $ | 160,222 | | Total trade and other payables | $ | 200,694 | | | $ | 231,652 | |
________
(1) The opening balance as of January 1, 20212022 was $29.7$62.6 million.
(2) As of September 30, 2022,March 31, 2023, accrued expenses and other payables includes approximately $1.6 million related to share repurchases not yet settled and $49.6include $25.3 million of unpaid clean up and repair expenses related to Hurricane Fiona.
Other liabilities
The following summarizes the balances of other liabilities as of September 30, 2022March 31, 2023 and December 31, 20212022 ($ in thousands):
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Pension obligation (2)(1) | Pension obligation (2)(1) | $ | 7,138 | | | $ | 5,990 | | Pension obligation (2)(1) | $ | 9,043 | | | $ | 7,777 | |
Operating lease liabilities | Operating lease liabilities | 3,683 | | | 4,298 | | Operating lease liabilities | 3,286 | | | 3,472 | |
Unfavorable ground lease liability | Unfavorable ground lease liability | 1,885 | | | 1,967 | | Unfavorable ground lease liability | 1,830 | | | 1,857 | |
Key money | Key money | 15,619 | | | 16,731 | | Key money | 15,104 | | | 15,362 | |
Other | Other | 2,146 | | | 896 | | Other | 1,886 | | | 2,217 | |
Total other liabilities | Total other liabilities | $ | 30,471 | | | $ | 29,882 | | Total other liabilities | $ | 31,149 | | | $ | 30,685 | |
________
(1) TheFor the three months ended March 31, 2023 and 2022, the service cost component of net periodic pension cost was $0.3 million and $0.2 million, for the three months ended September 30, 2022respectively, and 2021. The service cost component of net periodic pension cost was $0.6 million for the nine months ended September 30, 2022 and 2021. The costs are recorded within direct expense in the Condensed Consolidated Statements of Operations.
(2) For the three months ended September 30, 2022 and 2021, the non-service cost components of net periodic pension cost were $0.2 million and nominal, respectively. For the nine months ended September 30, 2022 and 2021, the non-service cost components were $0.7$0.9 million and $0.5$0.4 million, respectively. The costs are recorded within other income (expense) in the Condensed Consolidated Statements of Operations.
Note 15. Business segments
We consider each one of our owned resorts to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and assess operating performance based on individual resorts. Our operating segments meet the aggregation criteria and thus, we presentreport four separate reportable segments by geography: (i) Yucatán Peninsula, (ii) Pacific Coast, (iii) Dominican Republic and (iv) Jamaica. For the three and nine months ended September 30, 2022 and 2021, we have excluded the immaterial amounts of management fees, cost reimbursements and other from our segment reporting.
Our operating segments are components of the business whichthat are managed discretely and for which discrete financial information is reviewed regularly by our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, all of whom represent our chief operating decision maker (“CODM”). Financial information for each reportable segment is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources. For the three months ended March 31, 2023 and 2022, we have excluded the immaterial amounts of management fees, cost reimbursements, The Playa Collection and other from our segment reporting.
The performance of our business is evaluated primarily on adjusted earnings before interest expense, income tax (provision) benefit,provision, and depreciation and amortization expense (“Adjusted EBITDA”) and the performance of our segments is evaluated on Adjusted EBITDA before corporate expenses and management fee incomerevenue (“Owned Resort EBITDA”). Adjusted EBITDA and Owned Resort EBITDA should not be considered alternatives to net (loss) income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP.
We define Adjusted EBITDA as net (loss) income, determined in accordance with U.S. GAAP, for the periods presented, before interest expense, income tax (provision) benefit,provision, and depreciation and amortization expense, further adjusted to exclude the following items: (a) impairment loss; (b) loss (gain) on sale of assets; (c)(b) other income (expense); (d)(c) repairs from hurricanes and tropical storms; (e)(d) share-based compensation; (f)(e) other tax expense; (g)and (f) transaction expenses; (h) contract termination costs and (i) severance expenses. Adjusted EBITDA includes corporate expenses, which are overhead costs that are essential to support the operation of the Company, including the operations and development of our resorts.
There are limitations to using financial measures such as Adjusted EBITDA and Owned Resort EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business and investors should carefully consider our U.S. GAAP results presented in our Condensed Consolidated Financial Statements.
The following table presents segment owned net revenue and a reconciliation to total revenue for the three and nine months ended September 30, 2022 and 2021 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Owned net revenue | | | | | | | |
Yucatán Peninsula | $ | 65,594 | | | $ | 51,209 | | | $ | 204,200 | | | $ | 129,879 | |
Pacific Coast | 30,301 | | | 21,982 | | | 92,901 | | | 51,117 | |
Dominican Republic | 55,190 | | | 42,794 | | | 189,714 | | | 97,563 | |
Jamaica | 43,759 | | | 29,502 | | | 131,781 | | | 65,358 | |
Segment owned net revenue (1) | 194,844 | | | 145,487 | | | 618,596 | | | 343,917 | |
Other | 716 | | | 232 | | | 1,878 | | | 726 | |
Management fees | 786 | | | 673 | | | 3,186 | | | 1,469 | |
Cost reimbursements | 2,836 | | | 1,072 | | | 6,868 | | | 2,554 | |
Compulsory tips | 5,440 | | | 3,823 | | | 14,935 | | | 9,170 | |
Total revenue | $ | 204,622 | | | $ | 151,287 | | | $ | 645,463 | | | $ | 357,836 | |
________
(1) Segment owned net revenue representsOwned Net Revenue, defined as total revenue less compulsory tips paid to employees, cost reimbursements, management fees and other miscellaneous revenue not derived from segment operations.operations, and a reconciliation to total revenue for the three months ended March 31, 2023 and 2022 ($ in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Owned net revenue | | | | | | | |
Yucatán Peninsula | $ | 88,748 | | | $ | 68,629 | | | | | |
Pacific Coast | 40,515 | | | 29,104 | | | | | |
Dominican Republic | 68,769 | | | 69,664 | | | | | |
Jamaica | 62,977 | | | 44,264 | | | | | |
Segment owned net revenue | 261,009 | | | 211,661 | | | | | |
Other | 564 | | | 211 | | | | | |
Management fees | 1,929 | | | 1,057 | | | | | |
The Playa Collection | 726 | | | 296 | | | | | |
Cost reimbursements | 3,534 | | | 1,952 | | | | | |
Compulsory tips | 6,040 | | | 4,397 | | | | | |
Total revenue | $ | 273,802 | | | $ | 219,574 | | | | | |
The following table presents segment Owned Resort EBITDA, Adjusted EBITDA and a reconciliation to net (loss) income for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | |
Owned Resort EBITDA | Owned Resort EBITDA | | | | | | | | Owned Resort EBITDA | | | | |
Yucatán Peninsula | Yucatán Peninsula | $ | 21,617 | | | $ | 17,518 | | | $ | 77,049 | | | $ | 37,714 | | Yucatán Peninsula | $ | 37,936 | | | $ | 29,458 | | |
Pacific Coast | Pacific Coast | 10,512 | | | 6,429 | | | 36,966 | | | 13,992 | | Pacific Coast | 17,523 | | | 12,544 | | |
Dominican Republic | Dominican Republic | 14,014 | | | 11,267 | | | 63,138 | | | 20,859 | | Dominican Republic | 26,849 | | | 28,377 | | |
Jamaica | Jamaica | 11,267 | | | 5,632 | | | 40,567 | | | 6,924 | | Jamaica | 27,081 | | | 17,158 | | |
Segment Owned Resort EBITDA | Segment Owned Resort EBITDA | 57,410 | | | 40,846 | | | 217,720 | | | 79,489 | | Segment Owned Resort EBITDA | 109,389 | | | 87,537 | | |
Other corporate (1) | Other corporate (1) | (13,322) | | | (9,749) | | | (37,385) | | | (28,778) | | Other corporate (1) | (13,555) | | | (11,947) | | |
The Playa Collection | | The Playa Collection | 726 | | | 296 | | |
Management fees | Management fees | 786 | | | 673 | | | 3,186 | | | 1,469 | | Management fees | 1,929 | | | 1,057 | | |
Adjusted EBITDA | Adjusted EBITDA | 44,874 | | | 31,770 | | | 183,521 | | | 52,180 | | Adjusted EBITDA | 98,489 | | | 76,943 | | |
Interest expense | Interest expense | (17,832) | | | (19,047) | | | (39,892) | | | (56,164) | | Interest expense | (29,666) | | | (9,168) | | |
Depreciation and amortization | Depreciation and amortization | (19,502) | | | (19,927) | | | (58,630) | | | (60,827) | | Depreciation and amortization | (19,191) | | | (19,500) | | |
Impairment loss | — | | | — | | | — | | | (24,011) | | |
(Loss) gain on sale of assets | (2) | | | 4 | | | (11) | | | (644) | | |
| Loss on sale of assets | | Loss on sale of assets | (13) | | | — | | |
Other income (expense) | Other income (expense) | 2,608 | | | 587 | | | 7,850 | | | (747) | | Other income (expense) | 232 | | | (514) | | |
Repairs from hurricanes and tropical storms | Repairs from hurricanes and tropical storms | (8,850) | | | (435) | | | (8,850) | | | (435) | | Repairs from hurricanes and tropical storms | 861 | | | — | | |
Share-based compensation | Share-based compensation | (2,777) | | | (3,270) | | | (9,043) | | | (9,899) | | Share-based compensation | (3,166) | | | (3,356) | | |
Other tax expense | Other tax expense | — | | | (67) | | | — | | | (228) | | Other tax expense | — | | | (240) | | |
Transaction expenses | Transaction expenses | (582) | | | (210) | | | (1,384) | | | (928) | | Transaction expenses | (863) | | | (191) | | |
Contract termination costs | — | | | (400) | | | — | | | (400) | | |
Severance expense | — | | | — | | | — | | | (1,287) | | |
Non-service cost components of net periodic pension cost (benefit) (2) | 102 | | | (16) | | | 650 | | | 463 | | |
Net (loss) income before tax | (1,961) | | | (11,011) | | | 74,211 | | | (102,927) | | |
Income tax (provision) benefit | (268) | | | (1,360) | | | (3,168) | | | 13,043 | | |
Net (loss) income | $ | (2,229) | | | $ | (12,371) | | | $ | 71,043 | | | $ | (89,884) | | |
| Non-service cost components of net periodic pension cost (1) | | Non-service cost components of net periodic pension cost (1) | 852 | | | 387 | | |
Net income before tax | | Net income before tax | 47,535 | | | 44,361 | | |
Income tax provision | | Income tax provision | (4,816) | | | (1,614) | | |
Net income | | Net income | $ | 42,719 | | | $ | 42,747 | | |
________
(1)Other corporate includes revenue generated by The Playa Collection of $0.6 million and $1.3 million for the three and nine months ended September 30, 2022, respectively.
(2) Represents the non-service cost components of net periodic pension cost or benefit recorded within other income (expense) in the Condensed Consolidated Statements of Operations. We include these costs in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.
The following table presents segment property and equipment, gross and a reconciliation to total property and equipment, net as of September 30, 2022March 31, 2023 and December 31, 20212022 ($ in thousands):
| | | As of September 30, | | As of December 31, | | As of March 31, | | As of December 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Segment property and equipment, gross | Segment property and equipment, gross | | | | Segment property and equipment, gross | | | |
Yucatán Peninsula | Yucatán Peninsula | $ | 673,447 | | | $ | 667,618 | | Yucatán Peninsula | $ | 678,578 | | | $ | 676,218 | |
Pacific Coast | Pacific Coast | 290,570 | | | 288,309 | | Pacific Coast | 292,316 | | | 291,372 | |
Dominican Republic | Dominican Republic | 688,664 | | | 684,187 | | Dominican Republic | 694,314 | | | 690,181 | |
Jamaica | Jamaica | 411,700 | | | 408,107 | | Jamaica | 415,180 | | | 413,563 | |
Total segment property and equipment, gross | Total segment property and equipment, gross | 2,064,381 | | | 2,048,221 | | Total segment property and equipment, gross | 2,080,388 | | | 2,071,334 | |
Corporate property and equipment, gross | Corporate property and equipment, gross | 5,355 | | | 4,802 | | Corporate property and equipment, gross | 5,553 | | | 5,427 | |
Accumulated depreciation | Accumulated depreciation | (522,141) | | | (468,449) | | Accumulated depreciation | (558,753) | | | (540,194) | |
Total property and equipment, net | Total property and equipment, net | $ | 1,547,595 | | | $ | 1,584,574 | | Total property and equipment, net | $ | 1,527,188 | | | $ | 1,536,567 | |
The following table presents segment capital expenditures and a reconciliation to total capital expenditures for the ninethree months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Segment capital expenditures | Segment capital expenditures | | | | Segment capital expenditures | | | |
Yucatán Peninsula | Yucatán Peninsula | $ | 6,870 | | | $ | 2,709 | | Yucatán Peninsula | $ | 2,741 | | | $ | 1,265 | |
Pacific Coast | Pacific Coast | 3,817 | | | 536 | | Pacific Coast | 946 | | | 1,152 | |
Dominican Republic | Dominican Republic | 6,249 | | | 1,874 | | Dominican Republic | 3,895 | | | 946 | |
Jamaica | Jamaica | 3,999 | | | 3,288 | | Jamaica | 1,806 | | | 985 | |
Total segment capital expenditures (1) | Total segment capital expenditures (1) | 20,935 | | | 8,407 | | Total segment capital expenditures (1) | 9,388 | | | 4,348 | |
Corporate | Corporate | 570 | | | 256 | | Corporate | 126 | | | 52 | |
Total capital expenditures (1) | Total capital expenditures (1) | $ | 21,505 | | | $ | 8,663 | | Total capital expenditures (1) | $ | 9,514 | | | $ | 4,400 | |
________
(1) Represents gross additions to property and equipment.
Note 16. Subsequent events
In preparing the interim Condensed Consolidated Financial Statements, we have evaluated subsequent events through November 3, 2022,May 4, 2023, which is the date the financial statements were issued.
On October 12, 2022, we paid $4.5 million of key money to the owner of one of our managed resorts.
During the period from OctoberApril 1, 20222023 through October 31, 2022,April 30, 2023, we purchased 2,671,0102,147,034 ordinary shares at an average price of $5.73$9.29 per share. As of October 31, 2022,April 30, 2023, we had $78.9$149.3 million remaining under our $200.0 million share repurchase program.
Effective April 15, 2023, we entered into two interest rate swaps to mitigate the floating interest rate risk on our 2022 Term Loan, which incurs interest based on SOFR. The interest rate swaps each have a fixed notional amount of $275.0 million and are not for trading purposes. The fixed rates paid by us on the interest rate swaps are 4.05% and 3.71%, and the variable rate received resets monthly to the one-month SOFR rate. The interest rate swaps mature on April 15, 2025 and April 15, 2026, respectively.
The following discussion and analysis of Playa Hotels & Resorts N.V.'s’s (“Playa”) financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) and the notes related thereto which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Playa and its subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward looking statements. Forward-looking statements are subject to various factors that could cause actual outcomes or results to differ materially from those indicated in these statements, including the risks described under the sections entitled “Risk Factors” of our Annual Report on Form 10-K, filed with the SEC on February 24, 202223, 2023 and in this Quarterly Report on Form 10-Q, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effects of the current COVID-19 pandemic on our financial condition, results of operations and prospects, which include the airlines that service the locations where we own resorts, the short and longer-term demand for travel, the global economy and the local economies where we own resorts, and the financial markets. As a result of the COVID-19 pandemic, we experienced severely reduced occupancy levels at our resorts in 2020 and 2021 compared to historic levels, and the continued or worsening effects of the pandemic may again result in reduced occupancies. The extent to which the COVID-19 pandemic will continue to impact us and consumer behavior will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, continuing resurgences of the virus and its variants, the government actions taken to contain the pandemic or mitigate its impact, and the continuing effectiveness and uptake of vaccines and treatment therapies. Our business and profitability may also be adversely impacted to the extent high inflation and interest rates adversely impact macroeconomic conditions. The following factors, among others, could also cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•general economic uncertainty and the effect of general economic conditions, including inflation, and rising interest rates and a potential economic recession, on consumer discretionary spending and the lodging industry in particular;
•the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market;
•changes in economic, social or political conditions in the regions we operate, including changes in perception of public-safety, changes in unemployment rates and labor force availability, and changes in the supply of rooms from competing resorts;
•the success and continuation of our relationships with Hyatt Hotels Corporation (“Hyatt”), Hilton Worldwide Holdings, Inc. (“Hilton”), and Wyndham Hotels & Resorts, Inc. (“Wyndham”);
•the volatility of currency exchange rates;
•uncertainty regarding the ongoing conflict between Russia and Ukraine and the related impacts on inflation, supply chains and macroeconomic conditions;
•the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the future;
•our failure to successfully complete acquisitions, expansions,acquisition, expansion, repair and renovation projects in the timeframes and at the costs and returns anticipated;
•changes we may make in timing and scope of our development and renovation projects;
•significant increases in construction and development costs;
•significant increases in utilities, labor or other resort costs;
•our ability to obtain and maintain financing arrangements on attractive terms or at all;
•our ability to obtain and maintain ample liquidity to fund operations and service debt;
•the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which we operate;
•the ability of our guests to reach our resorts given government mandated travel restrictions, such as those related to COVID-19, or airline service/capacity issues, as well as changes in demand for our resorts resulting from government mandated safety protocols and/or health concerns;concerns, including those related to COVID-19;
•the effectiveness of our internal controls and our corporate policies and procedures;
•changes in personnel and availability of qualified personnel;
•extreme weather events, such as hurricanes, floods and extreme heat waves, which may increase in frequency and severity as a result of climate change, and other natural disasters;
•public health crises, such as a resurgence of COVID-19 or the outbreak of widespreadother contagious diseases other than COVID-19;diseases;
•dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;
•the volatility of the market price and liquidity of our ordinary shares and other of our securities; and
•the increasingly competitive environment in which we operate.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this quarterly report, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements).
Overview
Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. As of September 30, 2022,March 31, 2023, Playa owned and/or managed a total portfolio consisting of 2526 resorts (9,352(9,756 rooms) located in Mexico, Jamaica, and the Dominican Republic:
•In Mexico, we own and manage the Hyatt Zilara Cancún, Hyatt Ziva Cancún, Wyndham Alltra Cancún, Wyndham Alltra Playa del Carmen, Hilton Playa del Carmen All-Inclusive Resort, Hyatt Ziva Puerto Vallarta, and Hyatt Ziva Los Cabos;
•In Jamaica, we own and manage the Hyatt Zilara Rose Hall, Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Grande Montego Bay Resort & Spa, and Jewel Paradise Cove Beach Resort & Spa;
•In the Dominican Republic, we own and manage the Hilton La Romana All-Inclusive Family Resort, the Hilton La Romana All-Inclusive Adult Resort, Hyatt Zilara Cap Cana, and Hyatt Ziva Cap Cana, Jewel Palm Beach, and Jewel Punta Cana; and
•We own two resorts in the Dominican Republic that are managed by a third-party. We also manage eightnine resorts on behalf of third-party owners, one of which is currently closed for renovations but expected to open in late 2022.owners.
Playa’s strategy is to leverage its globally recognized brand partnerships and proprietary in-house direct booking capabilities to capitalize on the growing popularity of the all-inclusive resort model and reach first-time all-inclusive resort consumers in a cost-effective manner. We believe that this strategy should position us to generate attractive returns for our shareholders, build lasting relationships with our guests, and enhance the lives of our associates and the communities in which we operate.
For the three months ended September 30, 2022,March 31, 2023, we generated a net lossincome of $2.2$42.7 million, Total Revenue of $204.6$273.8 million, Net Package RevPAR of $253.17$355.27 and Adjusted EBITDA of $44.9$98.5 million. For the three months ended September 30, 2021, during which time our operations were negatively impacted by the effects of COVID-19, we generated a net loss of $12.4 million, Total Revenue of $151.3 million, Net Package RevPAR of $184.19 and Adjusted EBITDA of $31.8 million.
For the nine months ended September 30,March 31, 2022, we generated net income of $71.0$42.7 million, Total Revenue of $645.5$219.6 million, Net Package RevPAR of $268.35$285.00 and Adjusted EBITDA of $183.5 million. For the nine months ended September 30, 2021, during which time our operations were negatively impacted by the effects of COVID-19, we generated a net loss of $89.9 million, Total Revenue of $357.8 million, Net Package RevPAR of $141.66 and Adjusted EBITDA of $52.2$76.9 million.
Our Portfolio of Resorts
As of September 30, 2022,March 31, 2023, the following table presents an overview of our resorts and is organized by our four geographic business segments: the Yucatán Peninsula, the Pacific Coast, the Dominican Republic and Jamaica.
| Name of Resort | Name of Resort | | Location | | Brand and Type | | Operator | | Year Built; Significant Renovations | | Rooms | Name of Resort | | Location | | Brand and Type | | Operator | | Year Built; Significant Renovations | | Rooms |
Owned Resorts | Owned Resorts | | | | | | | | | | | Owned Resorts | | | | | | | | | | |
Yucatán Peninsula | Yucatán Peninsula | | | | | | | | | Yucatán Peninsula | | | | | | | | |
Hyatt Ziva Cancún | Hyatt Ziva Cancún | | Cancún, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1975; 1980; 1986; 2002; 2015 | | 547 | Hyatt Ziva Cancún | | Cancún, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1975; 1980; 1986; 2002; 2015 | | 547 |
Hyatt Zilara Cancún | Hyatt Zilara Cancún | | Cancún, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2006; 2009; 2013; 2017 | | 310 | Hyatt Zilara Cancún | | Cancún, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2006; 2009; 2013; 2017 | | 310 |
Wyndham Alltra Cancún | Wyndham Alltra Cancún | | Cancún, Mexico | | Wyndham (all ages) | | Playa | | 1985; 2009; 2017 | | 458 | Wyndham Alltra Cancún | | Cancún, Mexico | | Wyndham (all ages) | | Playa | | 1985; 2009; 2017 | | 458 |
Hilton Playa del Carmen All-Inclusive Resort | Hilton Playa del Carmen All-Inclusive Resort | | Playa del Carmen, Mexico | | Hilton (adults-only) | | Playa | | 2002; 2009; 2019 | | 524 | Hilton Playa del Carmen All-Inclusive Resort | | Playa del Carmen, Mexico | | Hilton (adults-only) | | Playa | | 2002; 2009; 2019 | | 524 |
Wyndham Alltra Playa del Carmen | Wyndham Alltra Playa del Carmen | | Playa del Carmen, Mexico | | Wyndham (adults-only) | | Playa | | 1996; 2006; 2012; 2017 | | 287 | Wyndham Alltra Playa del Carmen | | Playa del Carmen, Mexico | | Wyndham (adults-only) | | Playa | | 1996; 2006; 2012; 2017 | | 287 |
Pacific Coast | Pacific Coast | | | | | | | | | Pacific Coast | | | | | | | | |
Hyatt Ziva Los Cabos | Hyatt Ziva Los Cabos | | Cabo San Lucas, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2007; 2009; 2015 | | 591 | Hyatt Ziva Los Cabos | | Cabo San Lucas, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2007; 2009; 2015 | | 591 |
Hyatt Ziva Puerto Vallarta | Hyatt Ziva Puerto Vallarta | | Puerto Vallarta, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1969; 1990; 2002; 2009; 2014; 2017 | | 335 | Hyatt Ziva Puerto Vallarta | | Puerto Vallarta, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1969; 1990; 2002; 2009; 2014; 2017 | | 335 |
Dominican Republic | Dominican Republic | | | | | | | | | Dominican Republic | | | | | | | | |
Hilton La Romana All-Inclusive Resort | Hilton La Romana All-Inclusive Resort | | La Romana, Dominican Republic | | Hilton (adults-only) | | Playa | | 1997; 2008; 2019 | | 356 | Hilton La Romana All-Inclusive Resort | | La Romana, Dominican Republic | | Hilton (adults-only) | | Playa | | 1997; 2008; 2019 | | 356 |
Hilton La Romana All-Inclusive Resort | Hilton La Romana All-Inclusive Resort | | La Romana, Dominican Republic | | Hilton (all ages) | | Playa | | 1997; 2008; 2019 | | 418 | Hilton La Romana All-Inclusive Resort | | La Romana, Dominican Republic | | Hilton (all ages) | | Playa | | 1997; 2008; 2019 | | 418 |
Dreams Palm Beach | | Punta Cana, Dominican Republic | | Dreams (all ages) | | AMResorts | | 1994; 2008 | | 500 | |
Dreams Punta Cana | | Punta Cana, Dominican Republic | | Dreams (all ages) | | AMResorts | | 2004 | | 620 | |
Jewel Palm Beach | | Jewel Palm Beach | | Punta Cana, Dominican Republic | | Jewel (all ages) | | Playa (1) | | 1994; 2008 | | 500 |
Jewel Punta Cana | | Jewel Punta Cana | | Punta Cana, Dominican Republic | | Jewel (all ages) | | Playa | | 2004 | | 620 |
Hyatt Ziva Cap Cana | Hyatt Ziva Cap Cana | | Cap Cana, Dominican Republic | | Hyatt Ziva (all ages) | | Playa | | 2019 | | 375 | Hyatt Ziva Cap Cana | | Cap Cana, Dominican Republic | | Hyatt Ziva (all ages) | | Playa | | 2019 | | 375 |
Hyatt Zilara Cap Cana | Hyatt Zilara Cap Cana | | Cap Cana, Dominican Republic | | Hyatt Zilara (adults-only) | | Playa | | 2019 | | 375 | Hyatt Zilara Cap Cana | | Cap Cana, Dominican Republic | | Hyatt Zilara (adults-only) | | Playa | | 2019 | | 375 |
Jamaica | Jamaica | | Jamaica | |
Hyatt Ziva Rose Hall | Hyatt Ziva Rose Hall | | Montego Bay, Jamaica | | Hyatt Ziva (all ages) | | Playa | | 2000; 2014; 2017 | | 276 | Hyatt Ziva Rose Hall | | Montego Bay, Jamaica | | Hyatt Ziva (all ages) | | Playa | | 2000; 2014; 2017 | | 276 |
Hyatt Zilara Rose Hall | Hyatt Zilara Rose Hall | | Montego Bay, Jamaica | | Hyatt Zilara (adults-only) | | Playa | | 2000; 2014; 2017 | | 344 | Hyatt Zilara Rose Hall | | Montego Bay, Jamaica | | Hyatt Zilara (adults-only) | | Playa | | 2000; 2014; 2017 | | 344 |
Hilton Rose Hall Resort & Spa | Hilton Rose Hall Resort & Spa | | Montego Bay, Jamaica | | Hilton (all ages) | | Playa | | 1974; 2008; 2017 | | 495 | Hilton Rose Hall Resort & Spa | | Montego Bay, Jamaica | | Hilton (all ages) | | Playa | | 1974; 2008; 2017 | | 495 |
Jewel Paradise Cove Beach Resort & Spa | Jewel Paradise Cove Beach Resort & Spa | | Runaway Bay, Jamaica | | Jewel (adults-only) | | Playa | | 2013 | | 225 | Jewel Paradise Cove Beach Resort & Spa | | Runaway Bay, Jamaica | | Jewel (adults-only) | | Playa | | 2013 | | 225 |
Jewel Grande Montego Bay Resort & Spa (1)(2) | Jewel Grande Montego Bay Resort & Spa (1)(2) | | Montego Bay, Jamaica | | Jewel (all ages) | | Playa | | 2016; 2017 | | 88 | Jewel Grande Montego Bay Resort & Spa (1)(2) | | Montego Bay, Jamaica | | Jewel (all ages) | | Playa | | 2016; 2017 | | 88 |
Total Rooms Owned | Total Rooms Owned | | 7,124 | Total Rooms Owned | | 7,124 |
Managed Resorts (2)(3) | Managed Resorts (2)(3) | | Managed Resorts (2)(3) | |
Sanctuary Cap Cana | Sanctuary Cap Cana | | Punta Cana, Dominican Republic | | The Luxury Collection by Marriott (adults-only) | | Playa | | 2008; 2015; 2018 | | 324 | Sanctuary Cap Cana | | Punta Cana, Dominican Republic | | The Luxury Collection by Marriott (adults-only) | | Playa | | 2008; 2015; 2018 | | 324 |
Jewel Grande Montego Bay Resort & Spa | Jewel Grande Montego Bay Resort & Spa | | Montego Bay, Jamaica | | Jewel (condo-hotel) | | Playa | | 2016; 2017 | | 129 | Jewel Grande Montego Bay Resort & Spa | | Montego Bay, Jamaica | | Jewel (condo-hotel) | | Playa | | 2016; 2017 | | 129 |
The Yucatán Playa del Carmen All-Inclusive Resort | The Yucatán Playa del Carmen All-Inclusive Resort | | Playa del Carmen, Mexico | | Tapestry Collection by Hilton (adults-only) | | Playa | | 2012 | | 60 | The Yucatán Playa del Carmen All-Inclusive Resort | | Playa del Carmen, Mexico | | Tapestry Collection by Hilton (adults-only) | | Playa | | 2012 | | 60 |
Hyatt Ziva Riviera Cancún | Hyatt Ziva Riviera Cancún | | Riviera Maya, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2008; 2021 | | 438 | Hyatt Ziva Riviera Cancún | | Riviera Maya, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2008; 2021 | | 438 |
Hyatt Zilara Riviera Maya (3) | Hyatt Zilara Riviera Maya (3) | | Riviera Maya, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2003; 2022 | | 291 | Hyatt Zilara Riviera Maya (3) | | Riviera Maya, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2003; 2022 | | 291 |
Seadust Cancún Family Resort (4) | Seadust Cancún Family Resort (4) | | Cancún, Mexico | | Seadust (all ages) | | Playa | | 2006; 2022 | | 502 | Seadust Cancún Family Resort (4) | | Cancún, Mexico | | Seadust (all ages) | | Playa | | 2006; 2022 | | 502 |
Kimpton Hacienda Tres Ríos Resort, Spa & Nature Park (5) | Kimpton Hacienda Tres Ríos Resort, Spa & Nature Park (5) | | Playa del Carmen, Mexico | | Kimpton (all ages) | | Playa | | 2008; 2023 | | 255 | Kimpton Hacienda Tres Ríos Resort, Spa & Nature Park (5) | | Playa del Carmen, Mexico | | Kimpton (all ages) | | Playa | | 2008; 2023 | | 255 |
Wyndham Alltra Riviera Nayarit (6) | Wyndham Alltra Riviera Nayarit (6) | | Nuevo Vallarta, Mexico | | Wyndham (all ages) | | Playa | | 2009; 2022 | | 229 | Wyndham Alltra Riviera Nayarit (6) | | Nuevo Vallarta, Mexico | | Wyndham (all ages) | | Playa | | 2009; 2022 | | 229 |
Wyndham Alltra Samaná (6) | | Wyndham Alltra Samaná (6) | | Samaná, Dominican Republic | | Wyndham (all ages) | | Playa | | 1994; 1998; 2004; 2023 | | 404 |
Total Rooms Operated | Total Rooms Operated | | 2,228 | Total Rooms Operated | | 2,632 |
Total Rooms Owned and Operated | Total Rooms Owned and Operated | | | | | | 9,352 | Total Rooms Owned and Operated | | | | | | 9,756 |
________
(1) Prior to January 6, 2023, this resort was managed by AMResorts and operated under the Dreams brand.
(2) Represents an 88-unit tower and spa owned by us. We manage the majority of the units within the remaining two condo-hotel towers owned by Sagicor that comprise the Jewel Grande Montego Bay Resort & Spa.
(2)(3) Owned by a third party.
(3) We entered into a management agreement to operate this resort during the first quarter of 2021. The resort is currently closed for renovations but is expected to open in late 2022.
(4) We entered into a management agreement to operate this resort during the second quarter of 2022 and we expect to commencecommenced operations in the first quarter ofFebruary 2023.
(5) We entered into a management agreement to operate this resort during the second quarter of 2022. The resort is currently undergoing renovations and we expect to commence operations in early 2024.
(6)We entered into a management agreement to operate this resort during the first quarter of 2023. The resort is currently undergoing renovations and we expect to commence operations in the third quarter of 2022 and commenced operations in October 2022.
2023.
Results of Operations
Three Months Ended September 30,March 31, 2023 and 2022 and 2021
The following table summarizes our results of operations on a consolidated basis for the three months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Revenue | Revenue | | | | | | | | Revenue | | | | | | | |
Package | Package | $ | 171,126 | | | $ | 124,331 | | | $ | 46,795 | | | 37.6 | % | Package | $ | 233,568 | | | $ | 186,815 | | | $ | 46,753 | | | 25.0 | % |
Non-package | Non-package | 29,874 | | | 25,211 | | | 4,663 | | | 18.5 | % | Non-package | 34,045 | | | 29,454 | | | 4,591 | | | 15.6 | % |
The Playa Collection | | The Playa Collection | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management fees | Management fees | 786 | | | 673 | | | 113 | | | 16.8 | % | Management fees | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Cost reimbursements | Cost reimbursements | 2,836 | | | 1,072 | | | 1,764 | | | 164.6 | % | Cost reimbursements | 3,534 | | | 1,952 | | | 1,582 | | | 81.0 | % |
Total revenue | Total revenue | 204,622 | | | 151,287 | | | 53,335 | | | 35.3 | % | Total revenue | 273,802 | | | 219,574 | | | 54,228 | | | 24.7 | % |
Direct and selling, general and administrative expenses | Direct and selling, general and administrative expenses | | | | | | | | Direct and selling, general and administrative expenses | | | | | | | |
Direct | Direct | 117,333 | | | 90,788 | | | 26,545 | | | 29.2 | % | Direct | 128,968 | | | 106,840 | | | 22,128 | | | 20.7 | % |
Selling, general and administrative | Selling, general and administrative | 51,686 | | | 32,055 | | | 19,631 | | | 61.2 | % | Selling, general and administrative | 45,127 | | | 37,239 | | | 7,888 | | | 21.2 | % |
Depreciation and amortization | Depreciation and amortization | 19,502 | | | 19,927 | | | (425) | | | (2.1) | % | Depreciation and amortization | 19,191 | | | 19,500 | | | (309) | | | (1.6) | % |
Reimbursed costs | Reimbursed costs | 2,836 | | | 1,072 | | | 1,764 | | | 164.6 | % | Reimbursed costs | 3,534 | | | 1,952 | | | 1,582 | | | 81.0 | % |
| Loss (gain) on sale of assets | 2 | | | (4) | | | 6 | | | 150.0 | % | |
Loss on sale of assets | | Loss on sale of assets | 13 | | | — | | | 13 | | | 100.0 | % |
Direct and selling, general and administrative expenses | Direct and selling, general and administrative expenses | 191,359 | | | 143,838 | | | 47,521 | | | 33.0 | % | Direct and selling, general and administrative expenses | 196,833 | | | 165,531 | | | 31,302 | | | 18.9 | % |
Operating income | Operating income | 13,263 | | | 7,449 | | | 5,814 | | | 78.1 | % | Operating income | 76,969 | | | 54,043 | | | 22,926 | | | 42.4 | % |
Interest expense | Interest expense | (17,832) | | | (19,047) | | | 1,215 | | | 6.4 | % | Interest expense | (29,666) | | | (9,168) | | | (20,498) | | | (223.6) | % |
Other income | 2,608 | | | 587 | | | 2,021 | | | 344.3 | % | |
Net loss before tax | (1,961) | | | (11,011) | | | 9,050 | | | 82.2 | % | |
Other income (expense) | | Other income (expense) | 232 | | | (514) | | | 746 | | | 145.1 | % |
Net income before tax | | Net income before tax | 47,535 | | | 44,361 | | | 3,174 | | | 7.2 | % |
Income tax provision | Income tax provision | (268) | | | (1,360) | | | 1,092 | | | 80.3 | % | Income tax provision | (4,816) | | | (1,614) | | | (3,202) | | | (198.4) | % |
Net loss | $ | (2,229) | | | $ | (12,371) | | | $ | 10,142 | | | 82.0 | % | |
Net income | | Net income | $ | 42,719 | | | $ | 42,747 | | | $ | (28) | | | (0.1) | % |
The tables below set forth information for our total portfolio and comparable portfolio with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Management Fee Revenue, Total Net Revenue, Adjusted EBITDA and Adjusted EBITDA Margin. For a description of these operating metrics and non-U.S. GAAP measures, see “Key Indicators of Financial and Operating Performance” below. For discussion of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures” below.
Our comparable portfolio for the three months ended September 30, 2022March 31, 2023 excludes the Hilton La Romana All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap CanaJewel Palm Beach, which werewas closed the last twelve daysfor a majority of the thirdfirst quarter of 2023 as we transitioned the management of the resort to expedite necessary clean up and repair work asus from a result of Hurricane Fiona.third-party.
Total Portfolio
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Occupancy | Occupancy | 73.8 | % | | 59.3 | % | | 14.5 | pts | | 24.5 | % | Occupancy | 70.8 | % | | 72.4 | % | | (1.6) | pts | | (2.2) | % |
Net Package ADR | Net Package ADR | $ | 343.28 | | | $ | 310.65 | | | $ | 32.63 | | | 10.5 | % | Net Package ADR | $ | 501.64 | | | $ | 393.90 | | | $ | 107.74 | | | 27.4 | % |
Net Package RevPAR | Net Package RevPAR | $ | 253.17 | | | $ | 184.19 | | | $ | 68.98 | | | 37.5 | % | Net Package RevPAR | $ | 355.27 | | | $ | 285.00 | | | $ | 70.27 | | | 24.7 | % |
| | ($ in thousands) | | ($ in thousands) |
Net Package Revenue(1) | Net Package Revenue(1) | $ | 165,930 | | | $ | 120,717 | | | $ | 45,213 | | | 37.5 | % | Net Package Revenue(1) | $ | 227,786 | | | $ | 182,730 | | | $ | 45,056 | | | 24.7 | % |
Net Non-package Revenue(1) | Net Non-package Revenue(1) | 29,630 | | | 25,002 | | | 4,628 | | | 18.5 | % | Net Non-package Revenue(1) | 33,787 | | | 29,142 | | | 4,645 | | | 15.9 | % |
The Playa Collection Revenue | | The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management Fee Revenue | Management Fee Revenue | 786 | | | 673 | | | 113 | | | 16.8 | % | Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Net Revenue | Total Net Revenue | 196,346 | | | 146,392 | | | 49,954 | | | 34.1 | % | Total Net Revenue | 264,228 | | | 213,225 | | | 51,003 | | | 23.9 | % |
Adjusted EBITDA | Adjusted EBITDA | $ | 44,874 | | | $ | 31,770 | | | $ | 13,104 | | | 41.2 | % | Adjusted EBITDA | $ | 98,489 | | | $ | 76,943 | | | $ | 21,546 | | | 28.0 | % |
Adjusted EBITDA Margin | Adjusted EBITDA Margin | 22.9 | % | | 21.7 | % | | 1.2 | pts | | 5.5 | % | Adjusted EBITDA Margin | 37.3 | % | | 36.1 | % | | 1.2 | pts | | 3.3 | % |
________
(1)For the three months ended March 31, 2022, includes $2.7 million of on-property room upgrade revenue that was reclassified from non-package revenue to package revenue to conform with current period presentation.
Comparable Portfolio
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Occupancy | Occupancy | 76.6 | % | | 60.3 | % | | 16.3 | pts | | 27.0 | % | Occupancy | 75.8 | % | | 71.9 | % | | 3.9 | pts | | 5.4 | % |
Net Package ADR | Net Package ADR | $ | 335.48 | | | $ | 301.60 | | | $ | 33.88 | | | 11.2 | % | Net Package ADR | $ | 502.68 | | | $ | 409.48 | | | $ | 93.20 | | | 22.8 | % |
Net Package RevPAR | Net Package RevPAR | $ | 257.08 | | | $ | 181.80 | | | $ | 75.28 | | | 41.4 | % | Net Package RevPAR | $ | 381.06 | | | $ | 294.23 | | | $ | 86.83 | | | 29.5 | % |
| | ($ in thousands) | | ($ in thousands) |
Net Package Revenue | Net Package Revenue | $ | 132,447 | | | $ | 93,665 | | | $ | 38,782 | | | 41.4 | % | Net Package Revenue | $ | 227,174 | | | $ | 175,412 | | | $ | 51,762 | | | 29.5 | % |
Net Non-package Revenue | Net Non-package Revenue | 23,394 | | | 19,553 | | | 3,841 | | | 19.6 | % | Net Non-package Revenue | 33,715 | | | 28,102 | | | 5,613 | | | 20.0 | % |
The Playa Collection Revenue | | The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management Fee Revenue | Management Fee Revenue | 786 | | | 673 | | | 113 | | | 16.8 | % | Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Net Revenue | Total Net Revenue | 156,627 | | | 113,891 | | | 42,736 | | | 37.5 | % | Total Net Revenue | 263,544 | | | 204,867 | | | 58,677 | | | 28.6 | % |
Adjusted EBITDA | Adjusted EBITDA | $ | 33,570 | | | $ | 21,299 | | | $ | 12,271 | | | 57.6 | % | Adjusted EBITDA | $ | 100,917 | | | $ | 74,653 | | | $ | 26,264 | | | 35.2 | % |
Adjusted EBITDA Margin | Adjusted EBITDA Margin | 21.4 | % | | 18.7 | % | | 2.7 | pts | | 14.4 | % | Adjusted EBITDA Margin | 38.3 | % | | 36.4 | % | | 1.9 | pts | | 5.2 | % |
Total Revenue and Total Net Revenue
Our Total Revenue for the three months ended September 30, 2022March 31, 2023 increased $53.3$54.2 million, or 35.3%24.7%, compared to the three months ended September 30, 2021.March 31, 2022.
Our Total Net Revenue for the three months ended September 30, 2022March 31, 2023 increased $50.0$51.0 million, or 34.1%23.9%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was due to the following:
•a 10.5%27.4% increase in Net Package ADR as a result of of:
•a higher meetings, incentives, conventions and events (“MICE”) group contribution to our guest mix and the ongoing leisure travel recovery and pricing discipline to coincide with investments in guest satisfaction at our resorts;
•continued strength in Net Non-package Revenue spend per guest driven by improvements in our product offering across our resorts;mix; and
•an incremental $3.71 favorablea benefit from the lower mix of rooms sold at Jewel Punta Cana and the closure of Jewel Palm Beach for the majority of the three months ended March 31, 2023, as we transitioned management to us from a third-party. Excluding these resorts, Net Package ADR impactincreased 17.1%.
•Net Non-package Revenue for the three months ended March 31, 2023 increased $4.6 million, or 15.9%, compared to the three months ended September 30, 2021 asMarch 31, 2022 despite a resultdecrease of the change in billing methodology of an online travel agency (“OTA”), which requires Playa$2.0 million compared to present this revenue gross of commissions under U.S. GAAP. Excluding this adjustment, Net Package ADR would have been $339.57.
Compared to the same period in 2019, for our current comparable portfolio of resorts, which excludes the Hilton La Romana All-Inclusive Resort, Hyatt Ziva and Hyatt Zilara Cap Cana, Dreams Puerto Aventuras, Capri Resort, Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, Comparable Net Package ADR for the three months ended September 30,March 31, 2022 increased by $97.48, or 41.0%. Excludingdue to the aforementioned adjustment for the OTA billing methodology, the increase would have been $83.88, or 35.2%.expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect.
•the above increases were partially offset by a decrease in Occupancy of 1.6 percentage points as a result of reduced Occupancy at the Jewel Punta Cana and Jewel Palm Beach due to the transition of management to us from a third-party. The Jewel Palm Beach was also closed for the majority of the first quarter in 2023 as a result of this transition.
The following table shows a reconciliation of Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to Total Revenue for the three months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Three Months Ended September 30, | | Increase/Decrease | | Three Months Ended March 31, | | Increase/Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Net Package Revenue | Net Package Revenue | | | | | | | | Net Package Revenue | | | | | | | |
Comparable Net Package Revenue | Comparable Net Package Revenue | $ | 132,447 | | | $ | 93,665 | | | $ | 38,782 | | | 41.4 | % | Comparable Net Package Revenue | $ | 227,174 | | | $ | 175,412 | | | $ | 51,762 | | | 29.5 | % |
Non-comparable Net Package Revenue | Non-comparable Net Package Revenue | 33,483 | | | 27,052 | | | 6,431 | | | 23.8 | % | Non-comparable Net Package Revenue | 612 | | | 7,318 | | | (6,706) | | | (91.6) | % |
Net Package Revenue | Net Package Revenue | $ | 165,930 | | | $ | 120,717 | | | $ | 45,213 | | | 37.5 | % | Net Package Revenue | 227,786 | | | 182,730 | | | 45,056 | | | 24.7 | % |
| Net Non-package Revenue | Net Non-package Revenue | | Net Non-package Revenue | |
Comparable Net Non-package Revenue | Comparable Net Non-package Revenue | 23,394 | | | 19,553 | | | 3,841 | | | 19.6 | % | Comparable Net Non-package Revenue | 33,715 | | | 28,102 | | | 5,613 | | | 20.0 | % |
Non-comparable Net Non-package Revenue | Non-comparable Net Non-package Revenue | 6,236 | | | 5,449 | | | 787 | | | 14.4 | % | Non-comparable Net Non-package Revenue | 72 | | | 1,040 | | | (968) | | | (93.1) | % |
Net Non-package Revenue | Net Non-package Revenue | 29,630 | | | 25,002 | | | 4,628 | | | 18.5 | % | Net Non-package Revenue | 33,787 | | | 29,142 | | | 4,645 | | | 15.9 | % |
| The Playa Collection Revenue | | The Playa Collection Revenue | |
Comparable The Playa Collection Revenue | | Comparable The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
Non-comparable The Playa Collection Revenue | | Non-comparable The Playa Collection Revenue | — | | | — | | | — | | | — | % |
The Playa Collection Revenue | | The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
| Management Fee Revenue | Management Fee Revenue | | Management Fee Revenue | |
Comparable Management Fee Revenue | Comparable Management Fee Revenue | 786 | | | 673 | | | 113 | | | 16.8 | % | Comparable Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Non-comparable Management Fee Revenue | Non-comparable Management Fee Revenue | — | | | — | | | — | | | — | % | Non-comparable Management Fee Revenue | — | | | — | | | — | | | — | % |
Management Fee Revenue | Management Fee Revenue | 786 | | | 673 | | | 113 | | | 16.8 | % | Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
| Total Net Revenue | Total Net Revenue | | Total Net Revenue | |
Comparable Total Net Revenue | Comparable Total Net Revenue | 156,627 | | | 113,891 | | | 42,736 | | | 37.5 | % | Comparable Total Net Revenue | 263,544 | | | 204,867 | | | 58,677 | | | 28.6 | % |
Non-comparable Total Net Revenue | Non-comparable Total Net Revenue | 39,719 | | | 32,501 | | | 7,218 | | | 22.2 | % | Non-comparable Total Net Revenue | 684 | | | 8,358 | | | (7,674) | | | (91.8) | % |
Total Net Revenue | Total Net Revenue | 196,346 | | | 146,392 | | | 49,954 | | | 34.1 | % | Total Net Revenue | 264,228 | | | 213,225 | | | 51,003 | | | 23.9 | % |
Compulsory tips | Compulsory tips | 5,440 | | | 3,823 | | | 1,617 | | | 42.3 | % | Compulsory tips | 6,040 | | | 4,397 | | | 1,643 | | | 37.4 | % |
Cost Reimbursements | Cost Reimbursements | 2,836 | | | 1,072 | | | 1,764 | | | 164.6 | % | Cost Reimbursements | 3,534 | | | 1,952 | | | 1,582 | | | 81.0 | % |
Total revenue | Total revenue | $ | 204,622 | | | $ | 151,287 | | | $ | 53,335 | | | 35.3 | % | Total revenue | $ | 273,802 | | | $ | 219,574 | | | $ | 54,228 | | | 24.7 | % |
Direct Expenses
The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the three months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Three Months Ended September 30, | | Increase/Decrease | | Three Months Ended March 31, | | Increase/Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Direct expenses | Direct expenses | $ | 117,333 | | | $ | 90,788 | | | $ | 26,545 | | | 29.2 | % | Direct expenses | $ | 128,968 | | | $ | 106,840 | | | $ | 22,128 | | | 20.7 | % |
Less: compulsory tips | Less: compulsory tips | 5,440 | | | 3,823 | | | 1,617 | | | 42.3 | % | Less: compulsory tips | 6,040 | | | 4,397 | | | 1,643 | | | 37.4 | % |
Net Direct Expenses | Net Direct Expenses | $ | 111,893 | | | $ | 86,965 | | | $ | 24,928 | | | 28.7 | % | Net Direct Expenses | $ | 122,928 | | | $ | 102,443 | | | $ | 20,485 | | | 20.0 | % |
Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our Net Direct Expenses were $111.9$122.9 million, or 57.0%46.5% of Total Net Revenue, for the three months ended September 30, 2022March 31, 2023 and $87.0$102.4 million, or 59.4%48.0% of Total Net Revenue, for the three months ended September 30, 2021.March 31, 2022. Direct operating expenses fluctuate based on various factors, including changes in occupancy,Occupancy, labor costs, utilities, repair and maintenance costs and
license and property taxes. Management fees and franchise fees, which are computed as a percentage of revenue, increase or decrease as a result of changes in revenues.
Net Direct Expenses for the three months ended September 30, 2022March 31, 2023 increased $24.9$20.5 million, or 28.7%20.0%, compared to the three months ended September 30, 2021. As a percentage of Owned Net Revenue, Net Direct Expenses decreased to 57.4%, compared to 59.8% for the three months ended September 30, 2021.March 31, 2022. Net Direct Expenses at our comparable properties increased $19.8$23.3 million, or 28.8%23.9%, compared to the three months ended September 30, 2021March 31, 2022 primarily due to the following:
•Increasedincreased operating expenses associated with higher occupancyOccupancy levels for our comparable portfolio as a result of the corresponding recovery in our operations compared to the three months ended September 30, 2021;March 31, 2022, during which time occupancies were negatively affected by the Omicron variant and COVID-19 related travel restrictions; and
•An increase inappreciation of the Mexican Peso compared to the three months ended March 31, 2022, which primarily impacted labor and food and beverage expenses on a per guest basis, driven by our initiative to deliver an exceptional customer experience across our portfolio and higher food and beverage prices; and
•An increase in utilities expenses driven by a global rise in energy prices.for the three months ended March 31, 2023.
Net Direct Expenses consists of the following ($ in thousands):
Total Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Increase/Decrease |
| 2022 | | 2021 | | Change | | % Change |
| | | | | | | |
Food and beverages | $ | 27,268 | | | $ | 19,782 | | | $ | 7,486 | | | 37.8 | % |
Guest costs | 6,515 | | | 7,185 | | | (670) | | | (9.3) | % |
Salaries and wages | 39,117 | | | 31,053 | | | 8,064 | | | 26.0 | % |
Repairs and maintenance | 6,534 | | | 4,545 | | | 1,989 | | | 43.8 | % |
Utilities and sewage | 12,743 | | | 9,727 | | | 3,016 | | | 31.0 | % |
Licenses and property taxes | 640 | | | 663 | | | (23) | | | (3.5) | % |
Incentive and management fees | 779 | | | 373 | | | 406 | | | 108.8 | % |
Franchise / license fees | 9,553 | | | 7,527 | | | 2,026 | | | 26.9 | % |
Transportation and travel expenses | 1,417 | | | 1,132 | | | 285 | | | 25.2 | % |
Laundry and cleaning expenses | 1,709 | | | 1,360 | | | 349 | | | 25.7 | % |
Property and equipment rental expense | 936 | | | 699 | | | 237 | | | 33.9 | % |
Entertainment expenses and decoration | 2,795 | | | 1,838 | | | 957 | | | 52.1 | % |
Office supplies | 379 | | | 296 | | | 83 | | | 28.0 | % |
Other operational expenses | 1,508 | | | 785 | | | 723 | | | 92.1 | % |
Total Net Direct Expenses | $ | 111,893 | | | $ | 86,965 | | | $ | 24,928 | | | 28.7 | % |
Comparable portfolio
| | | Three Months Ended September 30, | | Increase/Decrease | | Three Months Ended March 31, | | Increase/Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
| Food and beverages | Food and beverages | $ | 21,325 | | | $ | 14,971 | | | $ | 6,354 | | | 42.4 | % | Food and beverages | $ | 28,487 | | | $ | 24,240 | | | $ | 4,247 | | | 17.5 | % |
Guest costs | Guest costs | 4,791 | | | 5,314 | | | (523) | | (9.8) | % | Guest costs | 5,715 | | | 7,601 | | | (1,886) | | | (24.8) | % |
Salaries and wages | Salaries and wages | 32,070 | | | 25,903 | | | 6,167 | | 23.8 | % | Salaries and wages | 47,195 | | | 35,878 | | | 11,317 | | | 31.5 | % |
Repairs and maintenance | Repairs and maintenance | 5,661 | | | 3,932 | | | 1,729 | | 44.0 | % | Repairs and maintenance | 5,955 | | | 4,588 | | | 1,367 | | | 29.8 | % |
Utilities and sewage | Utilities and sewage | 9,866 | | | 7,300 | | | 2,566 | | 35.2 | % | Utilities and sewage | 10,557 | | | 10,317 | | | 240 | | | 2.3 | % |
Licenses and property taxes | Licenses and property taxes | 452 | | | 504 | | | (52) | | (10.3) | % | Licenses and property taxes | 881 | | | 795 | | | 86 | | | 10.8 | % |
Incentive and management fees | Incentive and management fees | 779 | | | 373 | | | 406 | | 108.8 | % | Incentive and management fees | 41 | | | 1,112 | | | (1,071) | | | (96.3) | % |
Franchise / license fees | Franchise / license fees | 7,333 | | | 5,975 | | | 1,358 | | 22.7 | % | Franchise / license fees | 13,518 | | | 10,139 | | | 3,379 | | | 33.3 | % |
Transportation and travel expenses | Transportation and travel expenses | 808 | | | 684 | | | 124 | | 18.1 | % | Transportation and travel expenses | 1,655 | | | 1,302 | | | 353 | | | 27.1 | % |
Laundry and cleaning expenses | Laundry and cleaning expenses | 1,339 | | | 1,064 | | | 275 | | 25.8 | % | Laundry and cleaning expenses | 1,653 | | | 1,406 | | | 247 | | | 17.6 | % |
Property and equipment rental expense | Property and equipment rental expense | 474 | | | 351 | | | 123 | | 35.0 | % | Property and equipment rental expense | 2,173 | | | 1,306 | | | 867 | | | 66.4 | % |
Entertainment expenses and decoration | Entertainment expenses and decoration | 2,389 | | | 1,589 | | | 800 | | 50.3 | % | Entertainment expenses and decoration | 3,144 | | | 2,376 | | | 768 | | | 32.3 | % |
Office supplies | Office supplies | 303 | | | 237 | | | 66 | | 27.8 | % | Office supplies | 352 | | | 299 | | | 53 | | | 17.7 | % |
Other operational expenses | Other operational expenses | 1,028 | | | 603 | | | 425 | | 70.5 | % | Other operational expenses | 1,602 | | | 1,084 | | | 518 | | | 47.8 | % |
Total Net Direct Expenses | Total Net Direct Expenses | $ | 88,618 | | | $ | 68,800 | | | $ | 19,818 | | | 28.8 | % | Total Net Direct Expenses | $ | 122,928 | | | $ | 102,443 | | | $ | 20,485 | | | 20.0 | % |
Comparable portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase/Decrease |
| 2023 | | 2022 | | Change | | % Change |
| | | | | | | |
Food and beverages | $ | 28,344 | | | $ | 23,007 | | | $ | 5,337 | | | 23.2 | % |
Guest costs | 5,574 | | | 7,260 | | | (1,686) | | (23.2) | % |
Salaries and wages | 45,898 | | | 34,186 | | | 11,712 | | 34.3 | % |
Repairs and maintenance | 5,693 | | | 4,343 | | | 1,350 | | 31.1 | % |
Utilities and sewage | 10,184 | | | 9,601 | | | 583 | | 6.1 | % |
Licenses and property taxes | 866 | | | 690 | | | 176 | | 25.5 | % |
Incentive and management fees | — | | | 613 | | | (613) | | (100.0) | % |
Franchise / license fees | 13,518 | | | 10,139 | | | 3,379 | | 33.3 | % |
Transportation and travel expenses | 1,597 | | | 1,179 | | | 418 | | 35.5 | % |
Laundry and cleaning expenses | 1,634 | | | 1,353 | | | 281 | | 20.8 | % |
Property and equipment rental expense | 2,164 | | | 1,274 | | | 890 | | 69.9 | % |
Entertainment expenses and decoration | 3,137 | | | 2,309 | | | 828 | | 35.9 | % |
Office supplies | 349 | | | 271 | | | 78 | | 28.8 | % |
Other operational expenses | 1,537 | | | 992 | | | 545 | | 54.9 | % |
Total Net Direct Expenses | $ | 120,495 | | | $ | 97,217 | | | $ | 23,278 | | | 23.9 | % |
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the three months ended September 30, 2022March 31, 2023 increased $19.6$7.9 million, or 61.2%21.2%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was primarily driven by higher levels of occupancy from the ongoing recovery atOccupancy for our resorts during the three months ended September 30, 2022comparable portfolio which resulted in a $2.7$2.0 million increase in travel agent and tour operator commissions expenses, a $2.1 million increase in advertising expenses, and a $1.5$1.3 million increase in credit card commissions. In addition, we hadcommissions, and a $3.0$0.8 million increase in advertising expenses. We also experienced a $1.6 million increase in corporate personnel costs and a $0.8 million increase in professional fees. The increase in commissionsinsurance expenses includes an additional $2.5 million that wasas a result of a change in billing methodology of an OTA, which requires Playa to present the commissions on a gross basis under U.S. GAAP. We also incurred $8.9 million of estimated clean up and repair expenses related to Hurricane Fiona in the third quarter of 2022 which are not expected to be offset by property damagehigher insurance proceeds.premiums.
Depreciation and Amortization Expense
Our depreciation and amortization expense for the three months ended September 30, 2022March 31, 2023 decreased $0.4$0.3 million, or 2.1%1.6%, compared to the three months ended September 30, 2021.March 31, 2022 as we did not add or dispose of significant balances of property and equipment in either period.
Interest Expense
Our interest expense for the three months ended September 30, 2022 decreased $1.2March 31, 2023 increased $20.5 million, or 6.4%223.6%, compared to the three months ended September 30, 2021.March 31, 2022. The decreaseincrease in interest expense was driven primarily by a $1.8$17.5 million reduction in the interest expense on our Senior Secured Credit Facility due to the effect of our interest rate swaps, partially offset by a $0.5 million decreased benefit over the periodincrease related to thean unfavorable change in fair value of our interest rate swaps.swaps and a $6.8 million increase from our $1.1 billion term loan issued in the December 2022 debt refinancing (the “2022 Term Loan”), which incurs interest based on SOFR plus a margin of 4.25%. These increases were partially offset by a $4.7 million decrease in interest expense due to the repayment of the entire outstanding balance of our former additional senior secured credit facility (the “Additional Credit Facility”) and our former property loan agreement (the “Property Loan”) in December 2022 in connection with the December 2022 debt refinancing.
Cash interest paid was $18.1$21.4 million for the three months ended September 30, 2022,March 31, 2023, representing a $1.7$3.2 million, or 8.6% decrease17.5% increase as compared to the three months ended September 30, 2021.March 31, 2022. The decreaseincrease in cash interest paid was primarily driven by a $1.8$6.6 million reductionincrease from our 2022 Term Loan. This increase was partially offset by a $3.9 million decrease in thecash interest paid on our Senior Secured Credit Facility due to the effectrepayment of the entire outstanding balance of our interest rate swaps, as interest rates moved closer toAdditional Credit Facility and Property Loan in connection with our 1.0% LIBOR floor during the three months ended September 30, 2022.December 2022 debt refinancing.
Income Tax Provision
For the three months ended September 30, 2022,March 31, 2023, our income tax provision was $0.3$4.8 million, compared to a $1.4$1.6 million income tax provision for the three months ended September 30, 2021.March 31, 2022. The decrease in our income tax provisionincrease of $1.1$3.2 million was primarily driven by:
•by a $1.4$0.5 million decreasedincreased tax provision associated with lowerhigher pre-tax book income from our taxpaying entities primarily driven by valuation allowance releases associated with current year earnings; and
•a $0.8 million decreased tax provision associated with foreign exchange rate fluctuations.
These decreases were partially offset by:
•a $0.7 million decreased tax benefit due to prior year adjustments; and
•a $0.6 million decreased tax benefit related to valuation allowances recognized for our Jamaica and Mexico entities.
Results of Operations
Nine Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations on a consolidated basis for the nine months ended September 30, 2022 and 2021 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Revenue | | | | | | | |
Package | $ | 535,917 | | | $ | 293,005 | | | $ | 242,912 | | | 82.9 | % |
Non-package | 99,492 | | | 60,808 | | | 38,684 | | | 63.6 | % |
Management fees | 3,186 | | | 1,469 | | | 1,717 | | | 116.9 | % |
Cost reimbursements | 6,868 | | | 2,554 | | | 4,314 | | | 168.9 | % |
Total revenue | 645,463 | | | 357,836 | | | 287,627 | | | 80.4 | % |
Direct and selling, general and administrative expenses | | | | | | | |
Direct | 343,298 | | | 230,543 | | | 112,755 | | | 48.9 | % |
Selling, general and administrative | 130,403 | | | 85,273 | | | 45,130 | | | 52.9 | % |
| | | | | | | |
Depreciation and amortization | 58,630 | | | 60,827 | | | (2,197) | | | (3.6) | % |
Reimbursed costs | 6,868 | | | 2,554 | | | 4,314 | | | 168.9 | % |
Impairment loss | — | | | 24,011 | | | (24,011) | | | (100.0) | % |
Loss on sale of assets | 11 | | | 644 | | | (633) | | | (98.3) | % |
| | | | | | | |
Direct and selling, general and administrative expenses | 539,210 | | | 403,852 | | | 135,358 | | | 33.5 | % |
Operating income (loss) | 106,253 | | | (46,016) | | | 152,269 | | | 330.9 | % |
Interest expense | (39,892) | | | (56,164) | | | 16,272 | | | 29.0 | % |
Other income (expense) | 7,850 | | | (747) | | | 8,597 | | | 1,150.9 | % |
Net income (loss) before tax | 74,211 | | | (102,927) | | | 177,138 | | | 172.1 | % |
Income tax (provision) benefit | (3,168) | | | 13,043 | | | (16,211) | | | (124.3) | % |
Net income (loss) | $ | 71,043 | | | $ | (89,884) | | | $ | 160,927 | | | 179.0 | % |
The tables below set forth information for our total portfolio and comparable portfolio with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Management Fee Revenue, Total Net Revenue, Adjusted EBITDA and Adjusted EBITDA Margin. For a description of these operating metrics and non-U.S. GAAP measures, see “Key Indicators of Financial and Operating Performance” below. For discussion of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures” below.
Our comparable portfolio for the nine months ended September 30, 2022 excludes the Dreams Puerto Aventuras, which was sold in February 2021, Capri Resort, which was sold in June 2021, and Hilton La Romana All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap Cana which were closed the last twelve days of the third quarter 2022 to expedite necessary clean up and repair work as a result of Hurricane Fiona.
Total Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 73.7 | % | | 46.8 | % | | 26.9 | pts | | 57.5 | % |
Net Package ADR | $ | 363.88 | | | $ | 302.83 | | | $ | 61.05 | | | 20.2 | % |
Net Package RevPAR | $ | 268.35 | | | $ | 141.66 | | | $ | 126.69 | | | 89.4 | % |
| ($ in thousands) |
Net Package Revenue | $ | 521,897 | | | $ | 284,414 | | | $ | 237,483 | | | 83.5 | % |
Net Non-package Revenue | 98,577 | | | 60,229 | | | 38,348 | | | 63.7 | % |
Management Fee Revenue | 3,186 | | | 1,469 | | | 1,717 | | | 116.9 | % |
Total Net Revenue | 623,660 | | | 346,112 | | | 277,548 | | | 80.2 | % |
Adjusted EBITDA | $ | 183,521 | | | $ | 52,180 | | | $ | 131,341 | | | 251.7 | % |
Adjusted EBITDA Margin | 29.4 | % | | 15.1 | % | | 14.3 | pts | | 94.7 | % |
Comparable Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 74.6 | % | | 48.8 | % | | 25.8 | pts | | 52.9 | % |
Net Package ADR | $ | 354.99 | | | $ | 294.95 | | | $ | 60.04 | | | 20.4 | % |
Net Package RevPAR | $ | 264.79 | | | $ | 144.02 | | | $ | 120.77 | | | 83.9 | % |
| ($ in thousands) |
Net Package Revenue | $ | 404,816 | | | $ | 220,182 | | | $ | 184,634 | | | 83.9 | % |
Net Non-package Revenue | 76,651 | | | 47,290 | | | 29,361 | | | 62.1 | % |
Management Fee Revenue | 3,186 | | | 1,469 | | | 1,717 | | | 116.9 | % |
Total Net Revenue | 484,653 | | | 268,941 | | | 215,712 | | | 80.2 | % |
Adjusted EBITDA | $ | 131,263 | | | $ | 32,244 | | | $ | 99,019 | | | 307.1 | % |
Adjusted EBITDA Margin | 27.1 | % | | 12.0 | % | | 15.1 | pts | | 125.8 | % |
Total Revenue and Total Net Revenue
Our Total Revenue for the nine months ended September 30, 2022 increased $287.6 million, or 80.4%, compared to the nine months ended September 30, 2021.
Our Total Net Revenue for the nine months ended September 30, 2022 increased $277.5 million, or 80.2%, compared to the nine months ended September 30, 2021. The increase was due to the following:
•a 20.2% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix, the ongoing leisure travel recovery, and pricing discipline to coincide with investments in guest satisfaction at our resorts;
•continued strength in Net Non-package Revenue driven by improvements in our product offering across our resorts; and
•an incremental $4.52 favorable Net Package ADR impact as a result of the change in billing methodology of an OTA, which requires Playa to present this revenue gross of commissions under U.S. GAAP. Excluding this adjustment, Net Package ADR would have been $359.37.
Compared to the same period in 2019, for our current comparable portfolio of resorts, which excludes the Hilton La Romana All-Inclusive Resort, Hyatt Ziva and Hyatt Zilara Cap Cana, Dreams Puerto Aventuras, Capri Resort, Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, Comparable Net Package ADR for the nine months ended September 30, 2022 increased by $75.85, or 27.2%. Excluding the aforementioned adjustment for the OTA billing methodology, the increase would have been $64.87, or 23.2%.
The following table shows a reconciliation of comparable Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the nine months ended September 30, 2022 and 2021 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase/Decrease |
| 2022 | | 2021 | | Change | | % Change |
Net Package Revenue | | | | | | | |
Comparable Net Package Revenue | $ | 404,816 | | | $ | 220,182 | | | $ | 184,634 | | | 83.9 | % |
Non-comparable Net Package Revenue | 117,081 | | | 64,232 | | | 52,849 | | | 82.3 | % |
Net Package Revenue | 521,897 | | | 284,414 | | | 237,483 | | | 83.5 | % |
| | | | | | | |
Net Non-package Revenue | | | | | | | |
Comparable Net Non-package Revenue | 76,651 | | | 47,290 | | | 29,361 | | | 62.1 | % |
Non-comparable Net Non-package Revenue | 21,926 | | | 12,939 | | | 8,987 | | | 69.5 | % |
Net Non-package Revenue | 98,577 | | | 60,229 | | | 38,348 | | | 63.7 | % |
| | | | | | | |
Management Fee Revenue | | | | | | | |
Comparable Management Fee Revenue | 3,186 | | | 1,469 | | | 1,717 | | | 116.9 | % |
Non-comparable Management Fee Revenue | — | | | — | | | — | | | — | % |
Management Fee Revenue | 3,186 | | | 1,469 | | | 1,717 | | | 116.9 | % |
| | | | | | | |
Total Net Revenue | | | | | | | |
Comparable Total Net Revenue | 484,653 | | | 268,941 | | | 215,712 | | | 80.2 | % |
Non-comparable Total Net Revenue | 139,007 | | | 77,171 | | | 61,836 | | | 80.1 | % |
Total Net Revenue | 623,660 | | | 346,112 | | | 277,548 | | | 80.2 | % |
Compulsory tips | 14,935 | | | 9,170 | | | 5,765 | | | 62.9 | % |
Cost Reimbursements | 6,868 | | | 2,554 | | | 4,314 | | | 168.9 | % |
Total revenue | $ | 645,463 | | | $ | 357,836 | | | $ | 287,627 | | | 80.4 | % |
Direct Expenses
The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the nine months ended September 30, 2022 and 2021 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase/Decrease |
| 2022 | | 2021 | | Change | | % Change |
Direct expenses | $ | 343,298 | | | $ | 230,543 | | | $ | 112,755 | | | 48.9 | % |
Less: compulsory tips | 14,935 | | | 9,170 | | | 5,765 | | | 62.9 | % |
Net Direct Expenses | $ | 328,363 | | | $ | 221,373 | | | $ | 106,990 | | | 48.3 | % |
Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our Net Direct Expenses were $328.4 million, or 52.7%, of Total Net Revenue for the nine months ended September 30, 2022 and $221.4 million, or 64.0%, of Total Net Revenue for the nine months ended September 30, 2021. Direct operating expenses fluctuate based on various factors, including changes in occupancy, labor costs, utilities, repair and maintenance costs and license and property taxes. Management fees and franchise fees, which are computed as a percentage of revenue, increase or decrease as a result of changes in revenue.
Net Direct Expenses for the nine months ended September 30, 2022 increased $107.0 million, or 48.3%, compared to the nine months ended September 30, 2021. As a percentage of Owned Net Revenue, Net Direct Expenses decreased to 53.1%, compared to 64.4% for the nine months ended September 30, 2021. Net Direct Expenses at our comparable properties increased $82.8 million, or 47.7%, compared to the nine months ended September 30, 2021 primarily due to the following:
•Increased operating expenses associated with higher occupancy levels as a result of the corresponding recovery in our operations compared to the ninethree months ended September 30, 2021;
•An increase in foodMarch 31, 2022, during which time our results were negatively affected by the Omicron variant and beverage expenses on a per guest basis, driven by our initiative to deliver an exceptional customer experience across our portfolio and higher food and beverage prices; and
•An increase in utilities expenses driven by a global rise in energy prices.
Net Direct Expenses consists of the following ($ in thousands):
Total Portfolio | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase/Decrease |
| 2022 | | 2021 | | Change | | % Change |
| | | | | | | |
Food and beverages | $ | 78,711 | | | $ | 46,594 | | | $ | 32,117 | | | 68.9 | % |
Guest costs | 22,102 | | | 17,590 | | | 4,512 | | | 25.7 | % |
Salaries and wages | 114,684 | | | 84,477 | | | 30,207 | | | 35.8 | % |
Repairs and maintenance | 17,134 | | | 11,468 | | | 5,666 | | | 49.4 | % |
Utilities and sewage | 35,178 | | | 25,723 | | | 9,455 | | | 36.8 | % |
Licenses and property taxes | 1,853 | | | 2,218 | | | (365) | | | (16.5) | % |
Incentive and management fees | 2,763 | | | 806 | | | 1,957 | | | 242.8 | % |
Franchise / license fees | 29,886 | | | 17,513 | | | 12,373 | | | 70.7 | % |
Transportation and travel expenses | 4,103 | | | 3,052 | | | 1,051 | | | 34.4 | % |
Laundry and cleaning expenses | 4,647 | | | 3,313 | | | 1,334 | | | 40.3 | % |
Property and equipment rental expense | 4,071 | | | 1,328 | | | 2,743 | | | 206.6 | % |
Entertainment expenses and decoration | 8,102 | | | 4,447 | | | 3,655 | | | 82.2 | % |
Office supplies | 1,014 | | | 703 | | | 311 | | | 44.2 | % |
Other operational expenses | 4,115 | | | 2,141 | | | 1,974 | | | 92.2 | % |
Total Net Direct Expenses | $ | 328,363 | | | $ | 221,373 | | | $ | 106,990 | | | 48.3 | % |
Comparable Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase/Decrease |
| 2022 | | 2021 | | Change | | % Change |
| | | | | | | |
Food and beverages | $ | 59,902 | | | $ | 35,008 | | | $ | 24,894 | | | 71.1 | % |
Guest costs | 16,036 | | | 12,976 | | | 3,060 | | | 23.6 | % |
Salaries and wages | 94,124 | | | 68,930 | | | 25,194 | | | 36.6 | % |
Repairs and maintenance | 14,682 | | | 9,757 | | | 4,925 | | | 50.5 | % |
Utilities and sewage | 27,133 | | | 19,598 | | | 7,535 | | | 38.4 | % |
Licenses and property taxes | 1,275 | | | 1,742 | | | (467) | | | (26.8) | % |
Incentive and management fees | 2,763 | | | 764 | | | 1,999 | | | 261.6 | % |
Franchise / license fees | 22,291 | | | 13,877 | | | 8,414 | | | 60.6 | % |
Transportation and travel expenses | 2,315 | | | 1,825 | | | 490 | | | 26.8 | % |
Laundry and cleaning expenses | 3,545 | | | 2,567 | | | 978 | | | 38.1 | % |
Property and equipment rental expense | 1,961 | | | 656 | | | 1,305 | | | 198.9 | % |
Entertainment expenses and decoration | 6,923 | | | 3,809 | | | 3,114 | | | 81.8 | % |
Office supplies | 781 | | | 554 | | | 227 | | | 41.0 | % |
Other operational expenses | 2,803 | | | 1,631 | | | 1,172 | | | 71.9 | % |
Total Net Direct Expenses | $ | 256,534 | | | $ | 173,694 | | | $ | 82,840 | | | 47.7 | % |
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the nine months ended September 30, 2022 increased $45.1 million, or 52.9%, compared to the nine months ended September 30, 2021. The higher levels of occupancy from the ongoing recovery at our resorts during the nine months ended September 30, 2022 resulted in a $6.3 million increase in advertising expenses, a $13.0 million increase in commissions expenses, and a $5.1 million increase in credit card commissions. In addition, we had a $1.9 million increase in insurance expenses driven by higher premiums for the current year, a $7.4 million increase in corporate personnel costs, and a $2.2 million increase in professional fees. The increase in commissions expense includes an additional $8.6 million that was a result of a change in billing methodology of an OTA, which requires Playa to present the commissions on a gross basis under U.S. GAAP. We also incurred $8.9 million of estimated clean up and repair expensesCOVID-19 related to Hurricane Fiona in the third quarter of 2022 which are not expected to be offset by property damage insurance proceeds.
Depreciation and Amortization Expense
Our depreciation and amortization expense for the nine months ended September 30, 2022 decreased $2.2 million, or 3.6%, compared to the nine months ended September 30, 2021, which was primarily due to a $0.9 million decrease from the sale of the Capri Resort in June 2021.
Impairment Loss
Our impairment loss for the nine months ended September 30, 2022 decreased $24.0 million, or 100.0%, compared to the nine months ended September 30, 2021. The decrease was driven by $24.0 million of property and equipment impairment recognized upon classification of the Capri Resort as held for sale in March 2021, as the carrying value exceeded the sale price of the assets under the sales agreement. We had no impairment loss for the nine months ended September 30, 2022.
Interest Expense
Our interest expense for the nine months ended September 30, 2022 decreased $16.3 million, or 29.0%, compared to the nine months ended September 30, 2021. The decrease in interest expense was driven primarily by a $12.3 million benefit over the period related to the change in fair value of our interest rate swaps, which was a result of the increase in forecasted interest rates, and a $4.0 million reduction in the interest paid on our Senior Secured Credit Facility due to the effect of our interest rate swaps, as interest rates moved closer to our 1.0% LIBOR floor during the nine months ended September 30, 2022.
Cash interest paid was $55.0 million for the nine months ended September 30, 2022, representing a $3.4 million, or 5.9% decrease as compared to the nine months ended September 30, 2021. The decrease in cash interest paid was primarily driven by a $3.9 million reduction in the interest paid on our Senior Secured Credit Facility due to the effect of our interest rate swaps, as interest rates moved closer to our 1.0% LIBOR floor during the nine months ended September 30, 2022. This was partially offset by an $0.8 million increase in cash interest paid on our Property Loan due to the timing of interest payments during the nine months ended September 30, 2022.
Income Tax Provision
For the nine months ended September 30, 2022, our income tax provision was $3.2 million, compared to a $13.0 million income tax benefit for the nine months ended September 30, 2021. The increase in our income tax provision of $16.2 million was primarily driven by:
•a $12.1 million increased tax provision due to higher pre-tax book income from our taxpaying entities;
•a $5.5 million decreased tax benefit related to the sale of the Dreams Puerto Aventuras and Capri Resort in 2021; and
•travel restrictions, a $1.6 million increased tax provision associated with unfavorable foreign exchange rate fluctuations.
These increases were partially offset by:
��fluctuations, primarily at our Mexico entities, and a $3.1$0.4 million decreasedincreased tax provision related to valuation allowances recognizedassociated with 2022 tax true-ups recorded for our Jamaica and Mexico entities.Dominican Republic entities based on the expected APA tax rates.
Key Indicators of Financial and Operating Performance
We use a variety of financial and other information to monitor the financial and operating performance of our business. Some of this is financial information prepared in accordance with U.S. GAAP, while other information, though financial in nature, is not prepared in accordance with U.S. GAAP. For reconciliations of non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measure, see “Non-U.S. GAAP Financial Measures.” Our management also uses other information that is not financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to evaluate the financial and operating performance of our portfolio. Our management uses this information to measure the performance of our segments and consolidated portfolio. We use this information for planning and monitoring our business, as well as in determining management and employee compensation. These key indicators include:
•Net Package Revenue
•Net Non-package Revenue
•Owned Net Revenue
•Management Fee Revenue
•Total Net Revenue
•Occupancy
•Net Package ADR
•Net Package RevPAR
•Net Direct Expenses
•EBITDA
•Adjusted EBITDA
•Adjusted EBITDA Margin
•Owned Resort EBITDA
•Owned Resort EBITDA Margin
•Comparable Non-U.S. GAAP Measures
Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements, Total Net Revenue and Net Direct Expenses
“Net Package Revenue” is derived from the sale of all-inclusive packages, which include room accommodations and premium room upgrades, food and beverage services, and entertainment activities, net of compulsory tips paid to employees. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Revenue is recognized, net of discounts and rebates, when the rooms are occupied and/or the relevant services have been rendered. Advance deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant services have been rendered, at which point the revenue is recognized.
“Net Non-package Revenue” represents all other revenues earned from the operations of our resorts, other than Net Package Revenue,includes revenue associated with premium services and amenities that are not included in net package revenue, such as dining experiences, wines and spirits, and spa packages, net of compulsory tips paid to employees. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Net Non-package Revenue includesis recognized after the completion of the sale when the product or service is transferred to the customer. Food and beverage revenue associated with guests' purchases of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa packages, which are not included in the all-inclusive package. Revenue not included in a guest’sguest's all-inclusive package is recognized when the goods are consumed.
“Owned Net Revenue” represents Net Package Revenue and Net Non-package Revenue. Owned Net Revenue represents a key indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and competition. In analyzing our Owned Net Revenues, our management differentiates between Net Package Revenue and Net Non-package Revenue. Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage services and entertainment activities, in contrast to other lodging business models, which typically only include the room accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants, bars, activities, and shows and entertainment throughout the day.
“Management Fee Revenue” is derived from fees earned for managing resorts owned by third-parties. The fees earned are typically composed of a base fee, which is computed as a percentage of resort revenue, and an incentive fee, which is computed as a percentage of resort profitability. Management Fee Revenue hadwas a minor contributioncontributor to our operating results for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, but we expect Management Fee Revenue to be a more relevant indicator to assess the overall performance of our business in the future asto the extent we enterare successful in entering into more management contracts.
“Total Net Revenue” represents Net Package Revenue, Net Non-package Revenue and Management Fee Revenue. “Cost Reimbursements” is excluded from Total Net Revenue as it is not considered a key indicator of financial and operating performance. Cost Reimbursements is derived from the reimbursement of certain costs incurred by Playa on behalf of resorts managed by Playa and owned by third parties. This revenue is fully offset by reimbursable costs and has no net impact on operating income (loss) or net (loss) income.
“Net Direct Expenses” represents direct expenses, net of compulsory tips paid to employees.
Occupancy
“Occupancy” represents the total number of rooms sold for a period divided by the total number of rooms available during such period. The total number of rooms available excludes any rooms considered “Out of Order” due to renovation or a temporary problem rendering them inadequate for occupancy for an extended period of time. Occupancy is a useful measure of the utilization of a resort’s total available capacity and can be used to gauge demand at a specific resort or group of properties during a given period. Occupancy levels also enable us to optimize Net Package ADR (as defined below) by increasing or decreasing the stated rate for our all-inclusive packages as demand for a resort increases or decreases.
Net Package ADR
“Net Package ADR” represents total Net Package Revenue for a period divided by the total number of rooms sold during such period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the guest base of our portfolio or comparable portfolio, as applicable. Net Package ADR is a commonly used performance measure in the all-inclusive segment of the lodging industry and is commonly used to assess the stated rates that guests are willing to pay through various distribution channels.
Net Package RevPAR
“Net Package RevPAR” is the product of Net Package ADR and the average daily occupancy percentage. Net Package RevPAR does not reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it generally is considered the key performance measurestatistic in the all-inclusive segment of the lodging industry to identify trend information with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating performance on a consolidated basis or a regional basis, as applicable.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Owned Resort EBITDA, and Owned Resort EBITDA Margin
We define EBITDA, a non-U.S. GAAP financial measure, as net income or loss, determined in accordance with U.S. GAAP, for the period presented before interest expense, income tax and depreciation and amortization expense. EBITDA and Adjusted EBITDA (as defined below) include corporate expenses, which are overhead costs that are essential to support the operation of the Company, including the operations and development of our resorts. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:
•Other miscellaneous non-operating income or expense
•Pre-opening expense
•Transaction expenses
•Severance expenseShare-based compensation
•Other tax expense
•Gain onTransaction expenses
•Severance expense for employee terminations resulting from non-recurring or unusual events, such as the departure of an executive officer or the disposition of a resort
•Gains from property damage insurance proceeds (i.e., property damage insurance proceeds in excess of repair and clean up costs incurred)
•Share-based compensationRepairs from hurricanes and tropical storms (i.e., significant repair and clean up costs incurred which are not offset by property damage insurance proceeds)
•Loss on extinguishment of debt
•Other items which may include, but are not limited to the following: contract termination fees; gains or losses from legal settlements; repairs from hurricanes and tropical storms and impairment losses.
We include the non-service cost components of net periodic pension cost or benefit recorded within other income or expense in the Condensed Consolidated Statements of Operations in calculatingour calculation of Adjusted EBITDA as they are considered part of our ongoing resort operations.
“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of Total Net Revenue.
“Owned Resort EBITDA” represents Adjusted EBITDA before corporate expenses and Management Fee Revenue.
“Owned Resort EBITDA Margin” represents Owned Resort EBITDA as a percentage of Owned Net Revenue.
Usefulness and Limitation of Non-U.S. GAAP Measures
We believe that each of Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Total Net Revenue, Net Package ADR, Net Package RevPAR and Net Direct Expenses are all useful to investors as they more accurately reflect our operating results by excluding compulsory tips. These tips have a margin of zero and do not represent our operating results.
We also believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which are the principal driver of changes in other income or expense), and expenses related to capital raising, strategic initiatives and other corporate initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example, revenue from insurance policies, other than business interruption insurance policies, is infrequent in nature, and we believe excluding these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time. We believe Adjusted EBITDA Margin provides our investors a useful measurement of operating profitability for the same reasons we find Adjusted EBITDA useful.
The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance indicator by our board of directors (our “Board”) and management. In addition, the compensation committee of our Board determines a portion of the annual variable compensation for certain members of our management, including our executive officers, based, in part, on consolidated Adjusted EBITDA. We believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.
We believe that Owned Resort EBITDA and Owned Resort EBITDA Margin are useful to investors as they allow investors to measure resort-level performance and profitability by excluding expenses not directly tied to our resorts, such as corporate expenses, and excluding ancillary revenues not derived from our resorts, such as management fee revenue. We believe Owned Resort EBITDA is also helpful to investors that use it in estimating the value of our resort portfolio. Management uses these measures to monitor property-level performance and profitability.
Our non-U.S. GAAP financial measures are not substitutes for revenue, net income or any other measure determined in accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, our non-U.S. GAAP financial measures should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and investors should carefully consider our U.S. GAAP results presented.
For a reconciliation of EBITDA, Adjusted EBITDA and Owned Resort EBITDA to net income or loss(loss) as computed under U.S. GAAP, see “Non-U.S. GAAP Financial Measures.”
Comparable Non-U.S. GAAP Measures
We believe that presenting Adjusted EBITDA, Owned Resort EBITDA, Total Net Revenue, Net Package Revenue, Net Non-package Revenue and Net Direct Expenses on a comparable basis is useful to investors because these measures include only the results of resorts owned and in operation for the entirety of the periods presented and thereby eliminate disparities in results due to the acquisition or disposition of resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate comparableComparable Adjusted EBITDA, comparableComparable Owned Resort EBITDA, comparableComparable Total Net Revenue,
comparable Comparable Net Package Revenue and comparableComparable Net Non-package Revenue as the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were not owned or in operation during some or all of the relevant reporting period.
Our comparable portfolio for the three months ended September 30, 2022March 31, 2023 excludes the Hilton La Romana All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap Cana,Jewel Palm Beach, which werewas closed the last twelve daysfor a majority of the thirdfirst quarter of 20222023 as we transitioned the management of the resort to expedite necessary clean up and repair work asus from a result of Hurricane Fiona. Our comparable portfolio for the nine months ended September 30, 2022 exclude the Hilton La Romana All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap Cana as well as the Dreams Puerto Aventuras, which was sold in February 2021 and Capri Resort, which was sold in June 2021.third-party.
A reconciliation of net income as computed under U.S. GAAP to comparableComparable Adjusted EBITDA and comparable Owned Resort EBITDA is presented in “Non-U.S. GAAP Financial Measures,” below. For a reconciliation of Comparable Net Package Revenue, Comparable Net Non-package Revenue, Comparable Management Fee Revenue and Comparable Total Net Revenue to total revenue as computed under U.S. GAAP, see “Results of Operations.”
Segment Results
Three Months Ended September 30,March 31, 2023 and 2022 and 2021
We evaluate our business segment operating performance using segment Owned Net Revenue and segment Owned Resort EBITDA. The following tables summarize segment Owned Net Revenue and segment Owned Resort EBITDA for the three months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Owned Net Revenue | Owned Net Revenue | | | | | | | | Owned Net Revenue | | | | | | | |
Yucatán Peninsula | Yucatán Peninsula | $ | 65,594 | | | $ | 51,209 | | | $ | 14,385 | | | 28.1 | % | Yucatán Peninsula | $ | 88,748 | | | $ | 68,629 | | | $ | 20,119 | | | 29.3 | % |
Pacific Coast | Pacific Coast | 30,301 | | | 21,982 | | | 8,319 | | | 37.8 | % | Pacific Coast | 40,515 | | | 29,104 | | | 11,411 | | | 39.2 | % |
Dominican Republic | Dominican Republic | 55,190 | | | 42,794 | | | 12,396 | | | 29.0 | % | Dominican Republic | 68,769 | | | 69,664 | | | (895) | | | (1.3) | % |
Jamaica | Jamaica | 43,759 | | | 29,502 | | | 14,257 | | | 48.3 | % | Jamaica | 62,977 | | | 44,264 | | | 18,713 | | | 42.3 | % |
Segment Owned Net Revenue | Segment Owned Net Revenue | 194,844 | | | 145,487 | | | 49,357 | | | 33.9 | % | Segment Owned Net Revenue | 261,009 | | | 211,661 | | | 49,348 | | | 23.3 | % |
Other | Other | 716 | | | 232 | | | 484 | | | 208.6 | % | Other | 564 | | | 211 | | | 353 | | | 167.3 | % |
The Playa Collection | | The Playa Collection | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management fees | Management fees | 786 | | | 673 | | | 113 | | | 16.8 | % | Management fees | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Net Revenue | Total Net Revenue | $ | 196,346 | | | $ | 146,392 | | | $ | 49,954 | | | 34.1 | % | Total Net Revenue | $ | 264,228 | | | $ | 213,225 | | | $ | 51,003 | | | 23.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Owned Resort EBITDA | | | | | | | |
Yucatán Peninsula | $ | 21,617 | | | $ | 17,518 | | | $ | 4,099 | | | 23.4 | % |
Pacific Coast | 10,512 | | | 6,429 | | | 4,083 | | | 63.5 | % |
Dominican Republic | 14,014 | | | 11,267 | | | 2,747 | | | 24.4 | % |
Jamaica | 11,267 | | | 5,632 | | | 5,635 | | | 100.1 | % |
Segment Owned Resort EBITDA | 57,410 | | | 40,846 | | | 16,564 | | | 40.6 | % |
Other corporate (1) | (13,322) | | | (9,749) | | | (3,573) | | | (36.6) | % |
Management fees | 786 | | | 673 | | | 113 | | | 16.8 | % |
Total Adjusted EBITDA | $ | 44,874 | | | $ | 31,770 | | | $ | 13,104 | | | 41.2 | % |
________
(1) Other corporate includes $0.6 million of revenue generated by The Playa Collection for the three months ended September 30, 2022. | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Owned Resort EBITDA | | | | | | | |
Yucatán Peninsula | $ | 37,936 | | | $ | 29,458 | | | $ | 8,478 | | | 28.8 | % |
Pacific Coast | 17,523 | | | 12,544 | | | 4,979 | | | 39.7 | % |
Dominican Republic | 26,849 | | | 28,377 | | | (1,528) | | | (5.4) | % |
Jamaica | 27,081 | | | 17,158 | | | 9,923 | | | 57.8 | % |
Segment Owned Resort EBITDA | 109,389 | | | 87,537 | | | 21,852 | | | 25.0 | % |
Other corporate | (13,555) | | | (11,947) | | | (1,608) | | | (13.5) | % |
The Playa Collection | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management fees | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Adjusted EBITDA | $ | 98,489 | | | $ | 76,943 | | | $ | 21,546 | | | 28.0 | % |
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 15 to our Condensed Consolidated Financial Statements.
Yucatán Peninsula
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Yucatán Peninsula segment for the three months ended September 30,March 31, 2023 and 2022 and 2021 for the total segment portfolio:
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Occupancy | Occupancy | 77.0 | % | | 64.7 | % | | 12.3 | pts | | 19.0 | % | Occupancy | 83.8 | % | | 71.9 | % | | 11.9 | pts | | 16.6 | % |
Net Package ADR | Net Package ADR | $ | 376.40 | | | $ | 336.35 | | | $ | 40.05 | | | 11.9 | % | Net Package ADR | $ | 494.08 | | | $ | 436.51 | | | $ | 57.57 | | | 13.2 | % |
Net Package RevPAR | Net Package RevPAR | $ | 289.87 | | | $ | 217.75 | | | $ | 72.12 | | | 33.1 | % | Net Package RevPAR | $ | 414.21 | | | $ | 313.83 | | | $ | 100.38 | | | 32.0 | % |
| | ($ in thousands) | | ($ in thousands) |
Net Package Revenue(1) | Net Package Revenue(1) | $ | 56,696 | | | $ | 42,589 | | | $ | 14,107 | | | 33.1 | % | Net Package Revenue(1) | $ | 79,254 | | | $ | 60,048 | | | $ | 19,206 | | | 32.0 | % |
Net Non-package Revenue(1) | Net Non-package Revenue(1) | 8,898 | | | 8,620 | | | 278 | | | 3.2 | % | Net Non-package Revenue(1) | 9,494 | | | 8,581 | | | 913 | | | 10.6 | % |
Owned Net Revenue | Owned Net Revenue | 65,594 | | | 51,209 | | | 14,385 | | | 28.1 | % | Owned Net Revenue | 88,748 | | | 68,629 | | | 20,119 | | | 29.3 | % |
Owned Resort EBITDA | Owned Resort EBITDA | $ | 21,617 | | | $ | 17,518 | | | $ | 4,099 | | | 23.4 | % | Owned Resort EBITDA | $ | 37,936 | | | $ | 29,458 | | | $ | 8,478 | | | 28.8 | % |
Owned Resort EBITDA Margin | Owned Resort EBITDA Margin | 33.0 | % | | 34.2 | % | | (1.2) | pts | | (3.5) | % | Owned Resort EBITDA Margin | 42.7 | % | | 42.9 | % | | (0.2) | pts | | (0.5) | % |
________
(1)For the three months ended March 31, 2022, includes $1.0 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended September 30, 2022March 31, 2023 increased $14.4$20.1 million, or 28.1%29.3%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was due to the following:
•an increase in Occupancy rate increasing 12.3of 11.9 percentage points compared to the three months ended September 30, 2021,March 31, 2022, driven by an increase in demand from guestsCanadian, Mexican and United States sourced across all our major geographies;guests;
•an 11.9%a 13.2% increase in Net Package ADR as a result of the ongoing leisure travel recovery and pricing disciplinea higher MICE group contribution to coincide with investments inour guest satisfaction at our resorts;
•continued strength in Net Non-package Revenue driven by improvements in our product offering across our resorts;mix; and
•an incremental $9.55 favorableincrease in Net Package ADR impactNon-package Revenue of $0.9 million, or 10.6%, compared to the three months ended September 30, 2021March 31, 2022. Net Non-package Revenue includes a decrease of $0.7 million due to the expiration of our Extended Stay Program in late 2022 as a result of the changeCOVID-19-related travel restrictions were no longer in billing methodology of an OTA, which requires Playa to present this revenue gross of commissions under U.S. GAAP.effect. Excluding this adjustment,impact, Net Package ADR would have been $366.85.
ComparedNon-package Revenue per sold room increased 2.7% compared to the same period in 2019, for our current comparable portfolio of resorts in the Yucatán, which excludes the Dreams Puerto Aventuras and Capri Resort, Comparable Net Package ADR for the three months ended September 30, 2022 increased by $133.33, or 54.8%. Excluding the aforementioned adjustment for the OTA billing methodology, the increase would have been $107.80, or 44.3%.March 31, 2022.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended September 30, 2022March 31, 2023 increased $4.1$8.5 million, or 23.4%28.8%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practicesgrowth, which was partially offset occupancy-relatedby Occupancy-related increases in resort operating expenses, including higher food costs,union-negotiated wage and benefit increases, and a negative impact from the appreciation of the Mexican Peso compared to the three months ended September 30, 2021.March 31, 2022.
Compared to the same period in 2019, for our current comparable portfolio of resorts in the Yucatán, which excludes the Dreams Puerto Aventuras and Capri Resort, Comparable •Owned Resort EBITDA Margin for the three months ended September 30, 2022 increasedMarch 31, 2023 was 42.7%, a decrease of 0.2 percentage points compared to the three months ended March 31, 2022. Owned Resort EBITDA Margin was negatively impacted by $9.1 million, or 73.0%.370 basis points due to the appreciation of the Mexican Peso compared to the three months ended March 31, 2022. Excluding the impact of foreign exchange rate appreciation, Owned Resort EBITDA Margin would have been 46.4%, an increase of 3.5 percentage points compared to the three months ended March 31, 2022.
Pacific Coast
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Pacific Coast segment for the three months ended September 30,March 31, 2023 and 2022 and 2021 for the total segment portfolio:
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Occupancy | Occupancy | 72.3 | % | | 60.5 | % | | 11.8 | pts | | 19.5 | % | Occupancy | 79.3 | % | | 66.6 | % | | 12.7 | pts | | 19.1 | % |
Net Package ADR | Net Package ADR | $ | 439.41 | | | $ | 372.39 | | | $ | 67.02 | | | 18.0 | % | Net Package ADR | $ | 541.73 | | | $ | 459.90 | | | $ | 81.83 | | | 17.8 | % |
Net Package RevPAR | Net Package RevPAR | $ | 317.58 | | | $ | 225.43 | | | $ | 92.15 | | | 40.9 | % | Net Package RevPAR | $ | 429.80 | | | $ | 306.41 | | | $ | 123.39 | | | 40.3 | % |
| | ($ in thousands) | | ($ in thousands) |
Net Package Revenue(1) | Net Package Revenue(1) | $ | 27,055 | | | $ | 19,205 | | | $ | 7,850 | | | 40.9 | % | Net Package Revenue(1) | $ | 35,820 | | | $ | 25,535 | | | $ | 10,285 | | | 40.3 | % |
Net Non-package Revenue(1) | Net Non-package Revenue(1) | 3,246 | | | 2,777 | | | 469 | | | 16.9 | % | Net Non-package Revenue(1) | 4,695 | | | 3,569 | | | 1,126 | | | 31.5 | % |
Owned Net Revenue | Owned Net Revenue | 30,301 | | | 21,982 | | | 8,319 | | | 37.8 | % | Owned Net Revenue | 40,515 | | | 29,104 | | | 11,411 | | | 39.2 | % |
Owned Resort EBITDA | Owned Resort EBITDA | $ | 10,512 | | | $ | 6,429 | | | $ | 4,083 | | | 63.5 | % | Owned Resort EBITDA | $ | 17,523 | | | $ | 12,544 | | | $ | 4,979 | | | 39.7 | % |
Owned Resort EBITDA Margin | Owned Resort EBITDA Margin | 34.7 | % | | 29.2 | % | | 5.5 | pts | | 18.8 | % | Owned Resort EBITDA Margin | 43.3 | % | | 43.1 | % | | 0.2 | pts | | 0.5 | % |
________
(1)For the three months ended March 31, 2022, includes $0.3 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended September 30, 2022March 31, 2023 increased $8.3$11.4 million, or 37.8%39.2%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was due to the following:
•an increase in Occupancy rate increasing 11.8of 12.7 percentage points compared to the three months ended September 30, 2021,March 31, 2022, driven by an increase in demand from United StatesMexican and Canadian sourced guests;
•an 18.0%a 17.8% increase in Net Package ADR as a result of the ongoing leisure travel recovery and pricing disciplinea higher MICE group contribution to coincide with investments inour guest satisfaction at our resorts;
•continued strength in Net Non-package Revenue driven by improvements in our product offering across our resorts;mix; and
•an incremental $8.22 favorableincrease in Net Package ADR impactNon-package Revenue of $1.1 million, or 31.5%, compared to the three months ended September 30, 2021March 31, 2022. Net Non-package Revenue includes a decrease of $0.4 million due to the expiration of our Extended Stay Program in late 2022 as a result of the changeCOVID-19-related travel restrictions were no longer in billing methodology of an OTA, which requires Playa to present this revenue gross of commissions under U.S. GAAP.effect. Excluding this adjustment,impact, Net Package ADR would have been $431.18.
ComparedNon-package Revenue per sold room increased 23.2% compared to the same period in 2019, Net Package ADR for the three months ended September 30, 2022 increased by $203.17, or 86.0%. Excluding the aforementioned adjustment for the OTA billing methodology, the increase would have been $178.44, or 75.5%.March 31, 2022.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended September 30, 2022March 31, 2023 increased $4.1$5.0 million, or 63.5%39.7%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practicesgrowth, which was partially offset occupancy-relatedby Occupancy-related increases in resort operating expenses, including higher food costs,union-negotiated wage and benefit increases, and a negative impact from the appreciation of the Mexican Peso compared to the three months ended September 30, 2021.March 31, 2022.
Compared to the same period in 2019, •Owned Resort EBITDA Margin for the three months ended September 30, 2022 increasedMarch 31, 2023 was 43.3%, an increase of 0.2 percentage points compared to three months ended March 31, 2022. Owned Resort EBITDA Margin was negatively impacted by $6.0 million, or 133.9%.350 basis points due to the appreciation of the Mexican Peso compared to the three months ended March 31, 2022. Excluding the impact of foreign exchange rate appreciation, Owned Resort EBITDA Margin would have been 46.8%, an increase of 3.7 percentage points compared to the three months ended March 31, 2022.
Dominican Republic
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Dominican Republic segment for the three months ended September 30,March 31, 2023 and 2022 and 2021 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Occupancy | Occupancy | 70.7 | % | | 55.4 | % | | 15.3 | pts | | 27.6 | % | Occupancy | 51.1 | % | | 77.3 | % | | (26.2) | pts | | (33.9) | % |
Net Package ADR | Net Package ADR | $ | 266.96 | | | $ | 260.61 | | | $ | 6.35 | | | 2.4 | % | Net Package ADR | $ | 490.55 | | | $ | 330.61 | | | $ | 159.94 | | | 48.4 | % |
Net Package RevPAR | Net Package RevPAR | $ | 188.75 | | | $ | 144.26 | | | $ | 44.49 | | | 30.8 | % | Net Package RevPAR | $ | 250.47 | | | $ | 255.58 | | | $ | (5.11) | | | (2.0) | % |
| | ($ in thousands) | | ($ in thousands) |
Net Package Revenue(1) | Net Package Revenue(1) | $ | 45,913 | | | $ | 35,092 | | | $ | 10,821 | | | 30.8 | % | Net Package Revenue(1) | $ | 59,602 | | | $ | 60,818 | | | $ | (1,216) | | | (2.0) | % |
Net Non-package Revenue(1) | Net Non-package Revenue(1) | 9,277 | | | 7,702 | | | 1,575 | | | 20.4 | % | Net Non-package Revenue(1) | 9,167 | | | 8,846 | | | 321 | | | 3.6 | % |
Owned Net Revenue | Owned Net Revenue | 55,190 | | | 42,794 | | | 12,396 | | | 29.0 | % | Owned Net Revenue | 68,769 | | | 69,664 | | | (895) | | | (1.3) | % |
Owned Resort EBITDA | Owned Resort EBITDA | $ | 14,014 | | | $ | 11,267 | | | $ | 2,747 | | | 24.4 | % | Owned Resort EBITDA | $ | 26,849 | | | $ | 28,377 | | | $ | (1,528) | | | (5.4) | % |
Owned Resort EBITDA Margin | Owned Resort EBITDA Margin | 25.4 | % | | 26.3 | % | | (0.9) | pts | | (3.4) | % | Owned Resort EBITDA Margin | 39.0 | % | | 40.7 | % | | (1.7) | pts | | (4.2) | % |
________
(1)For the three months ended March 31, 2022, includes $1.2 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Comparable Portfolio
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Occupancy | Occupancy | 81.0 | % | | 54.9 | % | | 26.1 | pts | | 47.5 | % | Occupancy | 61.8 | % | | 76.9 | % | | (15.1) | pts | | (19.6) | % |
Net Package ADR | Net Package ADR | $ | 149.00 | | | $ | 142.01 | | | 6.99 | | 4.9 | % | Net Package ADR | $ | 494.31 | | | $ | 360.44 | | | 133.87 | | 37.1 | % |
Net Package RevPAR | Net Package RevPAR | $ | 120.63 | | | $ | 78.03 | | | 42.60 | | 54.6 | % | Net Package RevPAR | $ | 305.71 | | | $ | 277.26 | | | 28.45 | | 10.3 | % |
| | ($ in thousands) | | ($ in thousands) |
Net Package Revenue | Net Package Revenue | $ | 12,430 | | | $ | 8,040 | | | 4,390 | | 54.6 | % | Net Package Revenue | $ | 58,990 | | | $ | 53,500 | | | 5,490 | | 10.3 | % |
Net Non-package Revenue | Net Non-package Revenue | 3,041 | | | 2,253 | | | 788 | | 35.0 | % | Net Non-package Revenue | 9,095 | | | 7,806 | | | 1,289 | | 16.5 | % |
Owned Net Revenue | Owned Net Revenue | 15,471 | | | 10,293 | | | 5,178 | | 50.3 | % | Owned Net Revenue | 68,085 | | | 61,306 | | | 6,779 | | 11.1 | % |
Owned Resort EBITDA | Owned Resort EBITDA | $ | 2,710 | | | $ | 796 | | | 1,914 | | 240.5 | % | Owned Resort EBITDA | $ | 29,277 | | | $ | 26,087 | | | 3,190 | | 12.2 | % |
Owned Resort EBITDA Margin | Owned Resort EBITDA Margin | 17.5 | % | | 7.7 | % | | 9.8 | pts | | 127.3 | % | Owned Resort EBITDA Margin | 43.0 | % | | 42.6 | % | | 0.4 | pts | | 0.9 | % |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended September 30, 2022March 31, 2023 increased $5.2$6.8 million, or 50.3%11.1%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was due to the following:
•a 37.1% increase in Comparable Net Package ADR due to a lower mix of sold rooms at the Jewel Punta Cana during the three months ended March 31, 2023, when we transitioned management to us from a third-party. Excluding this resort, Net Package ADR increased 20.1%;
•a decrease in Occupancy rate increasing 26.1of 15.1 percentage points compared to the three months ended September 30, 2021, driven by March 31, 2022 as a result of reduced Occupancy at the Jewel Punta Cana, as we transitioned the management of the resort to us from a third-party;and
•an increase in demand from European and Canadian sourced guests;Comparable Net Non-package Revenue of $1.3 million, or 16.5%, compared to the three months ended March 31, 2022. Comparable Net Non-package Revenue includes:
•a 4.9% increasedecrease of $0.5 million due to the expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect.
•a decrease in Net Package ADRNon-package Revenue as a result of a higher MICE group contribution to our guest mix,reduced Occupancy at the ongoing leisure travel recovery, and pricing discipline to coincide with investments in guest satisfaction at our resorts, and
•continued improvement inJewel Punta Cana during the three months ended March 31, 2023. Excluding this resort, Net Non-package Revenue driven by improvements in our product offering across our resorts.increased 39.6%.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended September 30, 2022March 31, 2023 increased $1.9$3.2 million, or 240.5%12.2%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the on-going revenue recovery, Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses, including higher food costs,growth as compared to the three months ended September 30, 2021.March 31, 2022. Excluding Jewel Punta Cana, Comparable Owned Resort EBITDA for the three months ended March 31, 2023 increased 38.4% compared to the three months ended March 31, 2022.
Table•Comparable Owned Resort EBITDA Margin for the three months ended March 31, 2023 was 43.0%, an increase of Contents0.4 percentage points compared to the three months ended March 31, 2022. Comparable Owned Resort EBITDA Margin was negatively impacted by 530 basis points due to reduced Occupancy at the Jewel Punta Cana. Excluding this resort, Comparable Owned Resort EBITDA Margin for the three months ended March 31, 2023 was 48.3%, an increase of 2.8 percentage points compared to the three months ended March 31, 2022.Jamaica
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Jamaica segment for the three months ended September 30,March 31, 2023 and 2022 and 2021 for the total segment portfolio:
| | | Three Months Ended September 30, | | Increase / Decrease | | Three Months Ended March 31, | | Increase / Decrease |
| | 2022 | | 2021 | | Change | | % Change | | 2023 | | 2022 | | Change | | % Change |
Occupancy | Occupancy | 75.5 | % | | 57.7 | % | | 17.8 | pts | | 30.8 | % | Occupancy | 82.5 | % | | 67.6 | % | | 14.9 | pts | | 22.0 | % |
Net Package ADR | Net Package ADR | $ | 365.65 | | | $ | 314.62 | | | $ | 51.03 | | | 16.2 | % | Net Package ADR | $ | 500.78 | | | $ | 418.26 | | | $ | 82.52 | | | 19.7 | % |
Net Package RevPAR | Net Package RevPAR | $ | 276.05 | | | $ | 181.39 | | | $ | 94.66 | | | 52.2 | % | Net Package RevPAR | $ | 413.24 | | | $ | 282.67 | | | $ | 130.57 | | | 46.2 | % |
| | ($ in thousands) | | ($ in thousands) |
Net Package Revenue(1) | Net Package Revenue(1) | $ | 36,266 | | | $ | 23,831 | | | $ | 12,435 | | | 52.2 | % | Net Package Revenue(1) | $ | 53,110 | | | $ | 36,329 | | | $ | 16,781 | | | 46.2 | % |
Net Non-package Revenue(1) | Net Non-package Revenue(1) | 7,493 | | | 5,671 | | | 1,822 | | | 32.1 | % | Net Non-package Revenue(1) | 9,867 | | | 7,935 | | | 1,932 | | | 24.3 | % |
Owned Net Revenue | Owned Net Revenue | 43,759 | | | 29,502 | | | 14,257 | | | 48.3 | % | Owned Net Revenue | 62,977 | | | 44,264 | | | 18,713 | | | 42.3 | % |
Owned Resort EBITDA | Owned Resort EBITDA | $ | 11,267 | | | $ | 5,632 | | | $ | 5,635 | | | 100.1 | % | Owned Resort EBITDA | $ | 27,081 | | | $ | 17,158 | | | $ | 9,923 | | | 57.8 | % |
Owned Resort EBITDA Margin | Owned Resort EBITDA Margin | 25.7 | % | | 19.1 | % | | 6.6 | pts | | 34.6 | % | Owned Resort EBITDA Margin | 43.0 | % | | 38.8 | % | | 4.2 | pts | | 10.8 | % |
________
(1)For the three months ended March 31, 2022, includes $0.3 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended September 30, 2022March 31, 2023 increased $14.3$18.7 million, or 48.3%42.3%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was due to the following:
•an increase in Occupancy rate increasing 17.8of 14.9 percentage points compared to the three months ended September 30, 2021,March 31, 2022, driven by an increase in demand from United States European,and Canadian and South American sourced guests;
•a 16.2%19.7% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix, the ongoing leisure travel recovery, and pricing discipline to coincide with investments in guest satisfaction at our resorts;mix; and
•continued strengthan increase in Net Non-package Revenue driven by improvements in our product offering across our resorts.
Comparedof $1.9 million, or 24.3%, compared to the same period in 2019, for our current comparable portfolio in Jamaica, which excludes the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, Comparable Net Package ADR for the three months ended September 30,March 31, 2022. Net Non-package Revenue includes a decrease of $0.6 million due to the expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect. Excluding this impact, Net Non-package Revenue per sold room increased by $83.20, or 29.5%.9.5% compared to the three months ended March 31, 2022.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended September 30, 2022March 31, 2023 increased $5.6$9.9 million, or 100.1%57.8%, compared to the three months ended September 30, 2021.March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practices whichgrowth, partially offset occupancy-relatedby Occupancy-related increases in resort operating expenses including higher food costs, compared to the three months ended September 30, 2021.March 31, 2022.
Compared to the same period in 2019, for our current comparable portfolio in Jamaica, which excludes the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, Comparable •Owned Resort EBITDA Margin for the three months ended September 30, 2022March 31, 2023 increased by $3.6 million,4.2 percentage points, or 48.8%.
Segment Results
Nine Months Ended September 30, 2022 and 2021
We evaluate our business segment operating performance using segment Owned Net Revenue and segment Owned Resort EBITDA. The following tables summarize segment Owned Net Revenue and segment Owned Resort EBITDA for10.8%, compared to the ninethree months ended September 30, 2022 and 2021 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Owned Net Revenue | | | | | | | |
Yucatán Peninsula | $ | 204,200 | | | $ | 129,879 | | | $ | 74,321 | | | 57.2 | % |
Pacific Coast | 92,901 | | | 51,117 | | | 41,784 | | | 81.7 | % |
Dominican Republic | 189,714 | | | 97,563 | | | 92,151 | | | 94.5 | % |
Jamaica | 131,781 | | | 65,358 | | | 66,423 | | | 101.6 | % |
Segment Owned Net Revenue | 618,596 | | | 343,917 | | | 274,679 | | | 79.9 | % |
Other | 1,878 | | | 726 | | | 1,152 | | | 158.7 | % |
Management Fee Revenue | 3,186 | | | 1,469 | | | 1,717 | | | 116.9 | % |
Total Net Revenue | $ | 623,660 | | | $ | 346,112 | | | $ | 277,548 | | | 80.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Owned Resort EBITDA | | | | | | | |
Yucatán Peninsula | $ | 77,049 | | | $ | 37,714 | | | $ | 39,335 | | | 104.3 | % |
Pacific Coast | 36,966 | | | 13,992 | | | 22,974 | | | 164.2 | % |
Dominican Republic | 63,138 | | | 20,859 | | | 42,279 | | | 202.7 | % |
Jamaica | 40,567 | | | 6,924 | | | 33,643 | | | 485.9 | % |
Segment Owned Resort EBITDA | 217,720 | | 79,489 | | 138,231 | | | 173.9 | % |
Other corporate (1) | (37,385) | | | (28,778) | | | (8,607) | | | (29.9) | % |
Management Fee Revenue | 3,186 | | | 1,469 | | | 1,717 | | | 116.9 | % |
Total Adjusted EBITDA | $ | 183,521 | | | $ | 52,180 | | | $ | 131,341 | | | 251.7 | % |
________
(1) Other corporate includes $1.3 million of revenue generated by The Playa Collection for the nine months ended September 30,March 31, 2022.
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 15 to our Condensed Consolidated Financial Statements.
Yucatán Peninsula
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Yucatán Peninsula segment forwas negatively impacted by 110 basis points due to the nine months ended September 30, 2022timing of sales and 2021 for the total segment portfoliomarketing expenses and comparable segment portfolio:
Total Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 74.6 | % | | 52.2 | % | | 22.4 | pts | | 42.9 | % |
Net Package ADR | $ | 404.05 | | | $ | 320.69 | | | $ | 83.36 | | | 26.0 | % |
Net Package RevPAR | $ | 301.62 | | | $ | 167.54 | | | $ | 134.08 | | | 80.0 | % |
| ($ in thousands) |
Net Package Revenue | $ | 175,058 | | | $ | 107,764 | | | $ | 67,294 | | | 62.4 | % |
Net Non-package Revenue | 29,142 | | | 22,115 | | | 7,027 | | | 31.8 | % |
Owned Net Revenue | 204,200 | | | 129,879 | | | 74,321 | | | 57.2 | % |
Owned Resort EBITDA | $ | 77,049 | | | $ | 37,714 | | | $ | 39,335 | | | 104.3 | % |
Owned Resort EBITDA Margin | 37.7 | % | | 29.0 | % | | 8.7 | pts | | 30.0 | % |
Comparable Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 74.6 | % | | 57.2 | % | | 17.4 | pts | | 30.4 | % |
Net Package ADR | $ | 404.05 | | | $ | 322.79 | | | $ | 81.26 | | | 25.2 | % |
Net Package RevPAR | $ | 301.62 | | | $ | 184.59 | | | $ | 117.03 | | | 63.4 | % |
| ($ in thousands) |
Net Package Revenue | $ | 175,058 | | | $ | 107,133 | | | $ | 67,925 | | | 63.4 | % |
Net Non-package Revenue | 29,140 | | | 21,563 | | | 7,577 | | | 35.1 | % |
Owned Net Revenue | 204,198 | | | 128,696 | | | 75,502 | | | 58.7 | % |
Owned Resort EBITDA | $ | 76,864 | | | $ | 38,956 | | | $ | 37,908 | | | 97.3 | % |
Owned Resort EBITDA Margin | 37.6 | % | | 30.3 | % | | 7.3 | pts | | 24.1 | % |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the nine months ended September 30, 2022 increased $75.5 million, or 58.7%,franchise fees compared to the ninethree months ended September 30, 2021. The increase was due to the following:
•Occupancy rate increasing 17.4 percentage points compared to the nine months ended September 30, 2021, driven by an increase in demand from guests sourced across all our major geographies;
•a 25.2% increase in Comparable Net Package ADR as a result of a higher MICE group contribution to our guest mix, the ongoing leisure travel recovery, and pricing discipline to coincide with investments in guest satisfaction at our resorts;
•continued strength in Net Non-package Revenue driven by improvements in our product offering across our resorts; and
•an incremental $12.44 favorable Net Package ADR impact compared to the nine months ended September 30, 2021 as a result of the change in billing methodology of an OTA, which requires Playa to present this revenue gross of commissions under U.S. GAAP. Excluding this adjustment, Comparable Net Package ADR would have been $391.61.
Compared to the same period in 2019, for our current comparable portfolio of resorts in the Yucatán, which excludes the Dreams Puerto Aventuras and Capri Resort, Comparable Net Package ADR for the nine months ended September 30, 2022 increased by $122.38, or 43.5%. Excluding the aforementioned adjustment for the OTA billing methodology, the increase would have been $101.48, or 36.0%.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the nine months ended September 30, 2022 increased $37.9 million, or 97.3%, compared to the nine months ended September 30, 2021. The increase was a result of the on-going revenue recovery, particularly the strong Comparable Net Package ADR increases and cost control practices which partiallyMarch 31, 2022.
offset occupancy-related increases in resort operating expenses, including higher food costs, compared to the nine months ended September 30, 2021.
Compared to the same period in 2019, for our current comparable portfolio of resorts in the Yucatán, which excludes the Dreams Puerto Aventuras and Capri Resort, Comparable Owned Resort EBITDA for the nine months ended September 30, 2022 increased by $18.6 million, or 31.9%.
Pacific Coast
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Pacific Coast segment for the nine months ended September 30, 2022 and 2021 for the total segment portfolio:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 71.4 | % | | 49.6 | % | | 21.8 | pts | | 44.0 | % |
Net Package ADR | $ | 449.66 | | | $ | 347.61 | | | $ | 102.05 | | | 29.4 | % |
Net Package RevPAR | $ | 321.25 | | | $ | 172.36 | | | $ | 148.89 | | | 86.4 | % |
| ($ in thousands) |
Net Package Revenue | $ | 81,211 | | | $ | 43,572 | | | $ | 37,639 | | | 86.4 | % |
Net Non-package Revenue | 11,690 | | | 7,545 | | | 4,145 | | | 54.9 | % |
Owned Net Revenue | 92,901 | | | 51,117 | | | 41,784 | | | 81.7 | % |
Owned Resort EBITDA | $ | 36,966 | | | $ | 13,992 | | | $ | 22,974 | | | 164.2 | % |
Owned Resort EBITDA Margin | 39.8 | % | | 27.4 | % | | 12.4 | pts | | 45.3 | % |
Segment Owned Net Revenue. Our Owned Net Revenue for the nine months ended September 30, 2022 increased $41.8 million, or 81.7%, compared to the nine months ended September 30, 2021. The increase was due to the following:
•Occupancy rate increasing 21.8 percentage points compared to the nine months ended September 30, 2021, driven by an increase in demand from United States and Canadian sourced guests, and group room nights which were up 10.9% versus the same period in 2019;
•a 29.4% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix, the ongoing leisure travel recovery, and pricing discipline to coincide with investments in guest satisfaction at our resorts;
•continued strength in Net Non-package Revenue driven by improvements in our product offering across our resorts; and
•an incremental $10.02 favorable Net Package ADR impact compared to the nine months ended September 30, 2021 as a result of the change in billing methodology of an OTA, which requires Playa to present this revenue gross of commissions under U.S. GAAP. Excluding this adjustment, Net Package ADR would have been $439.63.
Compared to the same period in 2019, Net Package ADR for the nine months ended September 30, 2022 increased by $156.93, or 53.6%. Excluding the aforementioned adjustment for the OTA billing methodology, the increase would have been $137.77, or 47.1%.
Segment Owned Resort EBITDA.Our Owned Resort EBITDA for the nine months ended September 30, 2022 increased $23.0 million, or 164.2%, compared to the nine months ended September 30, 2021. The increase was a result of the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses, including higher food costs, compared to the nine months ended September 30, 2021.
Compared to the same period in 2019, Owned Resort EBITDA for the nine months ended September 30, 2022 increased by $11.5 million, or 45.2%.
Dominican Republic
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Dominican Republic segment for the nine months ended September 30, 2022 and 2021 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 74.2 | % | | 42.2 | % | | 32.0 | pts | | 75.8 | % |
Net Package ADR | $ | 295.01 | | | $ | 263.98 | | | $ | 31.03 | | | 11.8 | % |
Net Package RevPAR | $ | 218.78 | | | $ | 111.42 | | | $ | 107.36 | | | 96.4 | % |
| ($ in thousands) |
Net Package Revenue | $ | 157,918 | | | $ | 80,426 | | | $ | 77,492 | | | 96.4 | % |
Net Non-package Revenue | 31,796 | | | 17,137 | | | 14,659 | | | 85.5 | % |
Owned Net Revenue | 189,714 | | | 97,563 | | | 92,151 | | | 94.5 | % |
Owned Resort EBITDA | $ | 63,138 | | | $ | 20,859 | | | $ | 42,279 | | | 202.7 | % |
Owned Resort EBITDA Margin | 33.3 | % | | 21.4 | % | | 11.9 | pts | | 55.6 | % |
Comparable Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 79.0 | % | | 38.0 | % | | 41.0 | pts | | 107.9 | % |
Net Package ADR | $ | 169.15 | | | $ | 144.88 | | | $ | 24.27 | | | 16.8 | % |
Net Package RevPAR | $ | 133.56 | | | $ | 55.03 | | | $ | 78.53 | | | 142.7 | % |
| ($ in thousands) |
Net Package Revenue | $ | 40,837 | | | $ | 16,825 | | | $ | 24,012 | | | 142.7 | % |
Net Non-package Revenue | 9,872 | | | 4,750 | | | 5,122 | | | 107.8 | % |
Owned Net Revenue | 50,709 | | | 21,575 | | | 29,134 | | | 135.0 | % |
Owned Resort EBITDA | $ | 11,065 | | | $ | (319) | | | $ | 11,384 | | | 3,568.7 | % |
Owned Resort EBITDA Margin | 21.8 | % | | (1.5) | % | | 23.3 | pts | | 1,553.3 | % |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the nine months ended September 30, 2022 increased $29.1 million, or 135.0%, compared to the nine months ended September 30, 2021. The increase was due to the following:
•Occupancy rate increasing 41.0 percentage points compared to the nine months ended September 30, 2021, driven by an increase in demand from United States, European and Canadian sourced guests;
•a 16.8% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix, the ongoing leisure travel recovery, and pricing discipline to coincide with investments in guest satisfaction at our resorts,
•continued strength in Net Non-package Revenue driven by improvements in our product offering across our resorts.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the nine months ended September 30, 2022 increased $11.4 million, or 3568.7%, compared to the nine months ended September 30, 2021. The increase was a result of the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses, including higher food costs, compared to the nine months ended September 30, 2021.
Jamaica
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Jamaica segment for the nine months ended September 30, 2022 and 2021 for the total segment portfolio:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase / Decrease |
| 2022 | | 2021 | | Change | | % Change |
Occupancy | 73.1 | % | | 44.4 | % | | 28.7 | pts | | 64.6 | % |
Net Package ADR | $ | 377.83 | | | $ | 304.13 | | | $ | 73.70 | | | 24.2 | % |
Net Package RevPAR | $ | 276.29 | | | $ | 135.06 | | | $ | 141.23 | | | 104.6 | % |
| ($ in thousands) |
Net Package Revenue | $ | 107,710 | | | $ | 52,652 | | | $ | 55,058 | | | 104.6 | % |
Net Non-package Revenue | 24,071 | | | 12,706 | | | 11,365 | | | 89.4 | % |
Owned Net Revenue | 131,781 | | | 65,358 | | | 66,423 | | | 101.6 | % |
Owned Resort EBITDA | $ | 40,567 | | | $ | 6,924 | | | $ | 33,643 | | | 485.9 | % |
Owned Resort EBITDA Margin | 30.8 | % | | 10.6 | % | | 20.2 | pts | | 190.6 | % |
Segment Owned Net Revenue. Our Owned Net Revenue for the nine months ended September 30, 2022 increased $66.4 million, or 101.6%, compared to the nine months ended September 30, 2021. The increase was due to the following:
•Occupancy rate increasing 28.7 percentage points compared to the nine months ended September 30, 2021, driven by an increase in demand from United States, European, Canadian and South American sourced guests and MICE groups, and local governments easing COVID-19 related restrictions during the second quarter of 2022. The recovery in Jamaica has continued to improve but was depressed as this segment suffered the greatest impact from the Omicron variant with disrupted bookings in January as a result of more stringent COVID-19 related travel restrictions;
•a 24.2% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix, the ongoing leisure travel recovery, and pricing discipline to coincide with investments in guest satisfaction at our resorts; and
•continued strength in Net Non-package Revenue driven by improvements in our product offering across our resorts.
Compared to the same period in 2019, for our current comparable portfolio in Jamaica, which excludes the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, Comparable Net Package ADR for the nine months ended September 30, 2022 increased by $49.87, or 15.2%.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the nine months ended September 30, 2022 increased $33.6 million, or 485.9%, compared to the nine months ended September 30, 2021. The increase was a result of the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses, including higher food costs, compared to the nine months ended September 30, 2021.
Compared to the same period in 2019, for our current comparable portfolio in Jamaica, which excludes the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, Comparable Owned Resort EBITDA for the nine months ended September 30, 2022 increased by $1.0 million, or 2.6%.
Non-U.S. GAAP Financial Measures
Reconciliation of Net Income to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
The following is a reconciliation of our U.S. GAAP net (loss) income to EBITDA, Adjusted EBITDA, Owned Resort EBITDA and Comparable Owned Resort EBITDA for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 ($ in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | |
Net (loss) income | $ | (2,229) | | | $ | (12,371) | | | $ | 71,043 | | | $ | (89,884) | | |
Net income | | Net income | $ | 42,719 | | | $ | 42,747 | | |
Interest expense | Interest expense | 17,832 | | | 19,047 | | | 39,892 | | | 56,164 | | Interest expense | 29,666 | | | 9,168 | | |
Income tax provision (benefit) | 268 | | | 1,360 | | | 3,168 | | | (13,043) | | |
Income tax provision | | Income tax provision | 4,816 | | | 1,614 | | |
Depreciation and amortization | Depreciation and amortization | 19,502 | | | 19,927 | | | 58,630 | | | 60,827 | | Depreciation and amortization | 19,191 | | | 19,500 | | |
EBITDA | EBITDA | 35,373 | | | 27,963 | | | 172,733 | | | 14,064 | | EBITDA | 96,392 | | | 73,029 | | |
Other (income) expense (a) | Other (income) expense (a) | (2,608) | | | (587) | | | (7,850) | | | 747 | | Other (income) expense (a) | (232) | | | 514 | | |
Share-based compensation | Share-based compensation | 2,777 | | | 3,270 | | | 9,043 | | | 9,899 | | Share-based compensation | 3,166 | | | 3,356 | | |
| Transaction expense (b) | Transaction expense (b) | 582 | | | 210 | | | 1,384 | | | 928 | | Transaction expense (b) | 863 | | | 191 | | |
Severance expense | — | | | — | | | — | | | 1,287 | | |
Other tax expense (c) | Other tax expense (c) | — | | | 67 | | | — | | | 228 | | Other tax expense (c) | — | | | 240 | | |
Contract termination fees | — | | | 400 | | | — | | | 400 | | |
Impairment loss | — | | | — | | | — | | | 24,011 | | |
Loss (gain) on sale of assets | 2 | | | (4) | | | 11 | | | 644 | | |
Repairs from hurricanes and tropical storms (d) | Repairs from hurricanes and tropical storms (d) | 8,850 | | | 435 | | | 8,850 | | | 435 | | Repairs from hurricanes and tropical storms (d) | (861) | | | — | | |
Non-service cost components of net periodic (cost) benefit | (102) | | | 16 | | | (650) | | | (463) | | |
Loss on sale of assets | | Loss on sale of assets | 13 | | | — | | |
Non-service cost components of net periodic benefit | | Non-service cost components of net periodic benefit | (852) | | | (387) | | |
Adjusted EBITDA | Adjusted EBITDA | 44,874 | | | 31,770 | | | 183,521 | | | 52,180 | | Adjusted EBITDA | 98,489 | | | 76,943 | | |
Other corporate (e)(f) | 13,322 | | | 9,749 | | | 37,385 | | | 28,778 | | |
Management fee income | (786) | | | (673) | | | (3,186) | | | (1,469) | | |
Other corporate (e) | | Other corporate (e) | 13,555 | | | 11,947 | | |
The Playa Collection | | The Playa Collection | (726) | | | (296) | | |
Management fees | | Management fees | (1,929) | | | (1,057) | | |
Owned Resort EBITDA | Owned Resort EBITDA | 57,410 | | | 40,846 | | | 217,720 | | | 79,489 | | Owned Resort EBITDA | 109,389 | | | 87,537 | | |
Less: Non-comparable Owned Resort EBITDA | Less: Non-comparable Owned Resort EBITDA | 11,304 | | | 10,471 | | | 52,258 | | | 19,936 | | Less: Non-comparable Owned Resort EBITDA | (2,428) | | | 2,290 | | |
Comparable Owned Resort EBITDA(g) | $ | 46,106 | | | $ | 30,375 | | | $ | 165,462 | | | $ | 59,553 | | |
Comparable Owned Resort EBITDA(f) | | Comparable Owned Resort EBITDA(f) | $ | 111,817 | | | $ | 85,247 | | |
________
(a) Represents changes in foreign exchange and other miscellaneous non-operating expenses or income.
(b) Represents expenses incurred in connection with corporate initiatives, such as: system implementations, debt refinancing costs; other capital raising efforts; and strategic initiatives, such as the launch of a new resort or possible expansion into new markets.
(c) Relates primarily to a Dominican Republic asset tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this expense from Adjusted EBITDA because it is substantially similar to the income tax provision or benefit we eliminate from EBITDA.
(d) For the three and nine months ended September 30, 2022, represents expectedIncludes significant repair and clean-up expenses and write offs of property and equipment and inventory related to Hurricane Fiona,incurred from natural events which are not expected to be offset by property damage insurance proceeds. It does not include repair and clean-up costs from natural events that are not considered significant. For the three months ended March 31, 2023, represents a decrease in the expected repair and clean-up expenses for the Jewel Punta Cana related to the impact of Hurricane Fiona.
(e) For the three months ended September 30,March 31, 2023 and 2022, and 2021, represents corporate salaries and benefits of $8.8$9.7 million for 2023 and $8.3 million for 2022, and $6.2 million for 2021, professional fees of $2.5$1.9 million for 20222023 and $1.8$1.9 million for 2021,2022, corporate rent and insurance of $1.0 million for 20222023 and $1.0 million for 2021,2022, and corporate travel, software licenses, board fees and other miscellaneous corporate expenses of $1.4$1.0 million for 20222023 and $0.7 million for 2021, and includes $0.6 million of revenue generated by The Playa Collection in 2022.
(f) For the nine months ended September 30, 2022 and 2021, represents corporate salaries and benefits of $25.9 million for 2022 and $19.2 million for 2021, professional fees of $6.7 million for 2022 and $5.4 million for 2021, corporate rent and insurance of $3.0 million for 2022 and $2.6 million for 2021, and corporate travel, software licenses, board fees and other miscellaneous corporate expenses of $2.5 million for 2022 and $1.6 million for 2021, and includes $1.3 million of revenue generated by The Playa Collection in 2022.
(g) Comparable resortsOur comparable portfolio for the three months ended September 30, 2022 excludeMarch 31, 2023 excludes the Hilton La Romana All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap Cana,Jewel Palm Beach, which werewas closed the last twelve daysfor a majority of the thirdfirst quarter of 2023 as we transitioned the management of the resort to expedite necessary clean up and repair work asus from a result of Hurricane Fiona. Comparable resorts for the nine months ended September 30, 2022 exclude the Hilton La Romana All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap Cana as well as the Dreams Puerto Aventuras, which was sold in February 2021, and Capri Resort, which was sold in June 2021.third-party.
Seasonality
The seasonality of the lodging industry and the location of our resorts in Mexico, Jamaica and Dominican Republic have historically resulted in the greatest demand for our resorts occurring between mid-December and April of each year, yielding higher occupancy levels and package rates during this period. This seasonality in demand has resulted in predictable fluctuations in revenue, results of operations, and liquidity, which are consistently higher during the first quarter of each year than in successive quarters.
However, the COVID-19 pandemic altered this seasonal trend in 2021 and Net Package ADR was progressively stronger during the second, third and fourth quarters of 2021 than it was in the first quarter of 2021. We have seen a return to pre-COVID-19 seasonality trends thus far in 2022.
Inflation
We have experienced an elevated level of inflationary pressure on our direct resort expenses thus far insince the beginning of 2022. TheInflation effects were experienced mostly through higher expense inflation has primarily affected our labor costs, food and beverage prices, and utility costs. WeAlthough we experienced some improvement during 2023, we expect the elevated inflation ratethat costs will likely continueremain elevated at least through the remainderfirst half of 2022 at a similar rate.2023, but could continue for longer. While we, like most operators of lodging properties, have the ability to adjust room rates to reflect the effects of inflation, competitive pricing pressures and the continuing effects of the COVID-19 pandemic may limit our ability to raise room rates to fully offset inflationary cost increases.
Liquidity and Capital Resources
Our net cash provided by operating activities for the ninethree months ended September 30, 2022March 31, 2023 was $136.7$45.3 million, representing a significant increase over the ninethree months ended September 30, 2021 as our business continues to recover from the impacts of the COVID-19 pandemic.March 31, 2022. We believe that our sources of cash, which consist of available cash and cash from operations, together with the available borrowing capacity under our Revolving Credit Facility and our access to the capital markets, will be adequate to meet our cash requirements, including our contractual obligations, over the next twelve months and beyond.
Sources of Cash
As of September 30, 2022,March 31, 2023, we had $371.7$281.5 million of available cash, up from $270.1as compared to $283.9 million as of December 31, 2021. The increase in available cash was primarily due to improved cash flow from operations across our portfolio due to the ongoing recovery from the COVID-19 pandemic. We also benefited from increased vaccination levels, easing of government travel restrictions, and pent-up customer demand for leisure travel, as well as our strategic decision to focus on pricing discipline to coincide with investments in guest satisfaction at our resorts.
2022. Our primary short-term cash needs are paying operating expenses, maintaining our resorts, and servicing our outstanding indebtedness. We expect to meet our short-term liquidity requirements generally through our existing cash balances, net cash provided by operations, equity issuances or short-term borrowings under our Revolving Credit Facility.
Further, ourwe had no restricted cash balance related to our Property Loan of $23.5 million as of DecemberMarch 31, 2021 was released into unrestricted cash during the second quarter of 2022 due to the strong operating performance of the Hyatt Ziva and Hyatt Zilara Cap Cana and Hilton Rose Hall Resort & Spa properties.2023. As of October 31,April 30, 2022, we had approximately $347.0$266.9 million of available cash and also had $68.0$225.0 million available on our Revolving Credit Facility, which does not mature until January 2024.2028.
We expect to meet our long-term liquidity requirements generally through the sources of cash available for short-term needs, net cash provided by operations, as well as equity or debt issuances or proceeds from the potential disposal of assets.
Cash Requirements
Our expected material cash requirements for the remainder of 20222023 and thereafter consist of (i) contractually obligated expenditures, including payments of principal and interest; (ii) other essential expenditures, including operating expenses and maintenance of our resorts; and (iii) opportunistic expenditures, including possible property developments, expansions, renovations, repositioning and rebranding projects, potential acquisitions, the repayment of indebtedness and discretionary repurchases of our securities.
As of September 30, 2022,March 31, 2023, there have been no significant changes to our “Contractual Obligations” table in Item 7, “Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report, other than the change in mandatory Term Loan repayments as a result of the sales of our resorts in 2021 and 2020.Report. As of September 30, 2022, we do not expect to make any additional repayments on our outstanding Term Loan during the remainder of 2022 related to the sale of the Capri Resort in June 2021, as the remaining net proceeds from the sale after deducting incremental expenses and capital expenditures are expected to be $0 million. We expect to repay $23.9 million of our outstanding Term Loan in FebruaryMarch 31, 2023, as a result of the proceeds we received from the sale of the Dreams Puerto Aventuras in February 2021. As of September 30, 2022, we had $21.0$85.6 million of scheduled contractual obligations remaining in 20222023 which we expect to pay with available cash.
We are continuing to monitor our liquidity and we may pursue additional sources of liquidity as needed. The availability of additional liquidity options will depend on the economic and financial environment, our credit, our historical and projected financial and operating performance and continued compliance with financial covenants. If operating conditions do not continue to improve, whether as a result of the current pandemic or a resurgence thereofof COVID-19 or for other reasons, such as inflation, or global economic impacts related to the conflict between Ukraine and Russia, we may not be able to maintain our current liquidity position or access additional sources of liquidity at acceptable terms or at all.
Financing Strategy
We intend to use other financing sources that may be available to us from time to time, including financing from banks, institutional investors or other lenders, such as bridge loans, letters of credit, joint ventures and other arrangements. Future financings may be unsecured or may be secured by mortgages or other interests in our assets. In addition, we may issue publicly or privately placed debt or equity securities. When possible and desirable, we will seek to replace short-term financing with long-term financing. We may use the proceeds from any financings to refinance existing indebtedness, to finance resort projects or acquisitions or for general working capital or other purposes.
Our indebtedness may be recourse, non-recourse or cross-collateralized and may be fixed rate or variable rate. If the indebtedness is non-recourse, the obligation to repay such indebtedness will generally be limited to the particular resort or resorts pledged to secure such indebtedness. In addition, we may invest in resorts subject to existing loans secured by mortgages or similar liens on the resorts or may refinance resorts acquired on a leveraged basis.
Recent Transactions Affecting Our Liquidity and Capital Resources
The following table summarizes our net cash provided by or used in operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our Condensed Consolidated Statements of Cash Flows and accompanying notes thereto ($ in thousands):
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
Net cash provided by (used in) operating activities | $ | 136,742 | | | $ | (14,034) | |
Net cash (used in) provided by investing activities | $ | (21,743) | | | $ | 76,965 | |
Net cash (used in) provided by financing activities | $ | (36,888) | | | $ | 20,292 | |
Increase in cash, cash equivalents, and restricted cash | $ | 78,111 | | | $ | 83,223 | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
Net cash provided by operating activities | $ | 45,287 | | | $ | 37,648 | |
Net cash used in investing activities | $ | (2,352) | | | $ | (4,436) | |
Net cash used in financing activities | $ | (45,415) | | | $ | (2,624) | |
(Decrease) increase in cash, cash equivalents, and restricted cash | $ | (2,480) | | | $ | 30,588 | |
Cash Flows from Operating Activities
Our net cash from operating activities is generated primarily from operating income of our resorts. For the ninethree months ended September 30,March 31, 2023, our net cash provided by operating activities was $45.3 million. For the three months ended March 31, 2022, our net cash provided by operating activities was $136.7 million. For the nine months ended September 30, 2021, our net cash used in operating activities was $14.0$37.6 million.
Cash Flows from Investing Activities
For the nine months ended September 30, 2022, ourOur net cash used in investing activities was $21.7 million. For$2.4 million for the ninethree months ended September 30, 2021, our net cash provided by investing activities was $77.0 million.March 31, 2023 compared to $4.4 million for the three months ended March 31, 2022.
Activity for the ninethree months ended September 30,March 31, 2023:
•Purchases of property and equipment of $10.3 million, primarily for maintenance related expenditures; and
•Property damage insurance proceeds related to the impacts of Hurricane Fiona of $8.0 million.
Activity for the three months ended March 31, 2022:
•Purchases of property and equipment of $21.6 million, primarily for maintenance related expenditures.
Activity for the nine months ended September 30, 2021:
•Net proceeds from the sale of assets, primarily consisting of the Dreams Puerto Aventuras and Capri Resort, of $88.9 million; and
•Purchases of property and equipment of $11.7$4.4 million.
Capital Expenditures
We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise and license agreements and management agreements. Capital expenditures made to extend the service life or increase the capacity of our assets, including expenditures for the replacement, improvement or expansion of existing capital assets (i.e., maintenance capital expenditures), differ from ongoing repair and maintenance expense items, which do not in our judgment extend the service life or increase the capacity of assets and are charged to expense as incurred. We have approval rights over capital expenditures made by our third-party manager as part of the annual budget process for each property they manage. From time to time, certain of our resorts may be undergoing renovations as a result of our decision to upgrade portions of the resorts, such as guestrooms, public space, meeting space, gyms, spas and/or restaurants, in order to better compete with other resorts in our markets.
Cash Flows from Financing Activities
Our net cash used in financing activities was $36.9$45.4 million for the ninethree months ended September 30, 2022March 31, 2023 compared to $20.3$2.6 million of cash provided by financing activities for the ninethree months ended September 30, 2021.March 31, 2022.
Activity for the ninethree months ended September 30, 2022:March 31, 2023:
•Principal payments on our 2022 Term Loan of $32.4 million, which includes a $24.9 million mandatory repayment as a result of the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark in May 2020 as well as our quarterly principal payments;$2.8 million; and
•Repurchases of ordinary shares of $4.2$42.6 million.
Activity for the ninethree months ended September 30, 2021:
•Net proceeds from our January 2021 equity issuance of $137.7 million;March 31, 2022:
•Principal payments on our prior Term Loan of $32.0 million, which includes a $24.4 million mandatory repayment as a result of the sale of Capri Resort in June 2021 as well as our quarterly principal payments; and
•Repayments on our Revolving Credit Facility of $84.7$2.5 million.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements included herein have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts and related disclosures. A number of our significant accounting policies are critical due to the fact that they involve higher degree of judgement and estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe our estimates, assumptions and judgments with respect to our such policies are reasonable based upon information presently available. However, actual results may differ significantly from these estimates under different assumptions, judgments or conditions, which could have a material effect on our financial position, results of operations and related disclosures.
We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2021,2022, filed with the SEC on February 24, 2022.23, 2023. There have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them except for those disclosed in Note 2 to our Condensed Consolidated Financial Statements.
Fair Value of Financial Instruments
Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable from related parties, certain prepayments and other assets, trade and other payables, payables to related parties, derivative financial instruments, other liabilities including our pension obligation and debt (excluding the financing lease obligation). See Note 13, “Fair value of financial instruments,” to our Condensed Consolidated Financial Statements for more information.
Related Party Transactions
See Note 6, “Related party transactions,” to our Condensed Consolidated Financial Statements for information on these transactions.
Recent Accounting Pronouncements
See the recent accounting pronouncements in Note 2 to our Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In the normal course of operations, we are exposed to interest rate risk and foreign currency risk which may impact future income and cash flows.
Interest Rate Risk
The risk from market interest rate fluctuations mainly affects long-term debt bearing interest at a variable interest rate. We currently use an interest rate swap (see Note 12 of our Condensed Consolidated Financial Statements) to manage exposure to this risk. As of September 30, 2022, 12%March 31, 2023, 100% of our outstanding indebtedness bore interest at floating rates, and 88% boreas our 2022 Term Loan incurs interest at fixed rates.based on SOFR plus a margin of 4.25%.
•If market rates of interest on our floating rate debt were to increase by 1.0%, the increase in interest expense on our floating rate debt would decrease our future earnings and cash flows by approximately $1.5$11.0 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at $0 million. If we included the effects of our interest rate swaps effective April 2023 (discussed below), the decrease would be approximately $5.5 million annually.
•If market rates of interest on our floating rate debt were to decrease by 1.0%, the decrease in interest expense on our floating rate debt would increase our future earnings and cash flows by approximately $1.5$11.0 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at $0 million. If we included the effects of our interest rate swaps effective April 2023 (discussed below), the increase would be approximately $5.5 million annually.
Our interest rate swaps, which previously mitigated risk related to LIBOR, matured on March 31, 2023. Effective April 15, 2023, we entered into two interest rate swaps to mitigate the floating interest rate risk on our 2022 Term Loan, which incurs interest based on SOFR. The interest rate swaps each have a fixed notional amount of $275.0 million and are not for trading purposes. The fixed rates paid by us on the current LIBORinterest rate swaps are 4.05% and 3.71%, and the variable rate received resets monthly to the one-month SOFR rate. The interest rate swaps mature on our floating rate debt could not fall below the existing 1.0% LIBOR floor.April 15, 2025 and April 15, 2026, respectively.
Foreign Currency Risk
We are exposed to exchange rate fluctuations because all of our resort investments are based in locations where the local currency is not the U.S. dollar, which is our reporting currency. For the ninethree months ended September 30, 2022 approximately 2.4%March 31, 2023 less than 1% of our revenues were denominated in currencies other than the U.S. dollar. As a result, our revenues reported on our Condensed Consolidated Statements of Operations are affected by movements in exchange rates.
Approximately 75.2%75% of our resort-level operating expenses for the ninethree months ended September 30, 2022March 31, 2023 were denominated in the local currencies in the countries in which we operate. As a result, our operating expenses reported on our Condensed Consolidated Statements of Operations are affected by movements in exchange rates. The foreign currencies in which our expenses are primarily denominated are the Mexican Peso, Dominican Peso and the Jamaican Dollar.
•The effect of an immediate 5% adverse change in foreign exchange rates on Mexican Peso-denominated expenses at September 30, 2022March 31, 2023 would have impacted our Owned Resort EBITDA by approximately $6.9$2.9 million on a year-to-date basis.
•The effect of an immediate 5% adverse change in foreign exchange rates on Dominican Peso-denominated expenses at September 30, 2022March 31, 2023 would have impacted our Owned Resort EBITDA by approximately $5.2$1.7 million on a year-to-date basis.
•The effect of an immediate 5% adverse change in foreign exchange rates on Jamaican Dollar-denominated expenses at September 30, 2022March 31, 2023 would have impacted our Owned Resort EBITDA by approximately $3.8$1.4 million on a year-to-date basis.
At this time, we do not have any outstanding derivatives or other financial instruments designed to hedge our foreign currency exchange risk.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures.
We maintain a set of disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective.
Changes in Internal Control Over Financial Reporting.
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of our business, we are subject to claims and administrative proceedings, none of which we believe are material or would be expected to have, individually or in the aggregate, a material adverse effect on our financial condition, cash flows or results of operations. The outcome of claims, lawsuits and legal proceedings brought against us, however, is subject to significant uncertainties. Refer to Note 7 to our financial statements included in “Item 1. Financial Statements” of this Form 10-Q for a more detailed description of such proceedings and contingencies.
Item 1A. Risk Factors.
We are supplementingAs of March 31, 2023, there have been no material changes from the risk factors described under “Item 1A. Risk Factors”previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 20212022, filed with the additional risk factor set forth below,SEC on February 23, 2023, which supplements, and to the extent inconsistent, supersedes such risk factors.
The ongoing conflict between Russia and Ukraine has and may continue to negatively impact macro-economic conditions which could affect consumer spending adversely and as a result, our business, results of operations, cash flows or financial condition.
The current conflict between Russia and Ukraine has not had a direct or material impactis accessible on the Company. However, the conflict has negatively impacted global macro-economic conditions and a prolonged conflict, the potential expansion of the conflict into other European countries, or the involvement of the United States or other countries where we source our guests could have more significant impacts on macro-economic conditions which could adversely affect consumer spending and consequently, our operations. Further, the rising price of utilities, including increases in fuel prices, have and may continue to raise the overall vacation cost to our guests and may adversely affect demand for our vacation packages.
Additional risks to our business relating to the Russia and Ukraine conflict include potential interruptions in global supply chains and the availability of items essential to our resort operations, the heightened possibility of cyberattacks, and the potential for travel restrictions affecting our guests' ability to access our resort destinations.SEC’s website at www.sec.gov.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Unregistered Sale of Securities
None.
(b) Use of Proceeds
None.
(c) Issuer Purchases of Equity Securities
The following table sets forth information regarding our purchases of our ordinary shares during the three months ended September 30, 2022:March 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total number of shares purchased | | Average price paid per share(1) | | Total number of shares purchased as part of publicly announced program(2) | | Maximum approximate dollar value of shares that may yet be purchased under the program ($ in thousands)(2) |
July 1, 2022 to July 31, 2022 | | — | | | $ | — | | | — | | | $ | 83,492 | |
August 1, 2022 to August 31, 2022 | | — | | | — | | | — | | | 83,492 | |
September 1, 2022 to September 30, 2022 | | 973,931 | | | 5.93 | | | 973,931 | | | 94,227 | |
Total | | 973,931 | | | $ | 5.93 | | | 973,931 | | | $ | 94,227 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total number of shares purchased | | Average price paid per share(1) | | Total number of shares purchased as part of publicly announced program(2) | | Maximum approximate dollar value of shares that may yet be purchased under the program ($ in thousands)(2) |
January 1, 2023 to January 31, 2023 | | 1,541,689 | | | $ | 6.57 | | | 1,541,689 | | | $ | 43,609 | |
February 1, 2023 to February 28, 2023 | | 132,954 | | | 8.98 | | | 132,954 | | | 198,806 | |
March 1, 2023 to March 31, 2023 | | 3,299,489 | | | 8.96 | | | 3,299,489 | | | 169,245 | |
Total | | 4,974,132 | | | $ | 8.17 | | | 4,974,132 | | | $ | 169,245 | |
________
(1) The average price paid per share and maximum approximate dollar value of shares disclosed above include broker commissions.
(2) In December 2018,February 2023, our Board established a $100.0new $200.0 million share repurchase program, which authorization replaced our $100.0 million repurchase authorization announced in September 2022, pursuant to which we may repurchase our outstanding ordinary shares as market conditions and our liquidity warrant. Our Board reauthorized and renewed the repurchase authorization in September 2022 so that there was again $100.0 million available under the program. The share repurchase authorization has no expiration date. Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are filed as part of this Form 10-Q:
| | | | | | | | |
Exhibit Number | | Exhibit Description |
3.1 | | |
| | |
31.1 | | |
| | |
31.2 | | |
| | |
32.1 | | |
| | |
32.2 | | |
| | |
101 | | |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | | | | |
| | | | |
| | Playa Hotels & Resorts N.V. | |
| | | | |
Date: | November 3, 2022May 4, 2023 | By: | /s/ Bruce D. Wardinski | |
| | | Bruce D. Wardinski | |
| | | Chairman and Chief Executive Officer | |
| | | (Principal Executive Officer) | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal financial officer of the registrant.
| | | | | | | | | | | | | | |
| | | | |
| | Playa Hotels & Resorts N.V. | |
| | | | |
Date: | November 3, 2022May 4, 2023 | By: | /s/ Ryan Hymel | |
| | | Ryan Hymel | |
| | | Chief Financial Officer | |
| | | (Principal Financial Officer) | |