SOHO - Earnings call transcript Q2 2021

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Operator

Good day, and welcome to the Sotherly Hotels Second Quarter 2021 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mack Sims. ahead. go Please

Mack Sims

good and Thank morning, you, everyone.

are all did the made this of you sotherlyhotels.com. comparable the has GAAP which a most accordance conference to our G copy release, you In requirements. reconciled may company constitute the the receive measure earnings release, financial may directly during historical, forward-looking not at measures the If statements. website not non-GAAP with access Reg in on it statements Any call,

time-to-time does any will in to assumptions, that company's reflected statements Factors The any by turn the expectations are call SEC. no or undertake in not forward-looking reasonable the with believe actual differ we risks I'll the forward-looking on update forward-looking we expressed to those assurance are implied and based Although over results and the from statements. in cause statements can filings or that be company detailed duty give today's the materially Scott. can to these expectations press that, revise With from release attained.

Scott Kucinski

accelerating exceeded demand morning, recovery expectations, Mack. that is we today's review industry. a are with our quarter, key start to sustained for our I'll and portfolio's pleased confirming report Thanks our call of operating the which travel off reflecting metrics everyone. momentum a Good in the our position underway for

of and ADR the RevPAR $XX.XX, was an an portfolio, of results composite at the second XX% for quarter Looking driven by occupancy $XXX.

was an RevPAR of down XX.X% ADR RevPAR ADR and at an composite for Year-to-date these the down $XX.XX occupancy $XXX.XX. occupancy Looking XX.X% down with of with versus and quarter portfolio was figures XX.X% of second X.X%. XXXX, the

the occupancy down and our REIT period versus was RevPAR down These market were quarter. their than our that quarter. in down peers ahead thus at results competitive share comparable hotels X.X%. of gained from have the XX.X% figures nearly our in were most also metrics for operating Looking of XX.X% far of XXXX, as ADR these sets competitors The reported with better the all

in X,XXX gained As a quarter. points the portfolio basis in share the group

RevPAR pleased also quarter's portfolio of a of was RevPAR in RevPAR seeing and our the at XXXX. Dave of incremental improvement. pace against XX% this $XX speak highlights June was $XX a approximately the recovery the little April May quarter of we are on that We later the $XX monthly RevPAR April to XXXX XX% throughout May call to basis are June examining XXXX, the XXXX, trend continuous see benchmark composite results demand of RevPAR, of third XX% forecast will was for quarter continue.

quarter's performance second and levels in was pent-up travel The leisure weather coastal some leisure strong with warm demand performance by eclipsing locations characterized for our XXXX fueled markets. by

in in ADR RevPAR but QX This compared RevPAR XXXX to was points compared commendable best RevPAR quarter. XXX% Beach fair XX,XXX producing produced off our hotel by over saw Looking of its surge XX% RevPAR segment up its XX%. is in highlights by staff in The job XXXX was nearly portfolio. to only basis from the this XXXX, the set competitive it a management hotel Savannah's independent XX% growing share across X% greater by by at an This Hotel hotel gained some share DeSoto occupancy the The Hollywood, Tampa seen than in X% against stabilization DoubleTree of and results some Florida nearly lifestyle XX%. nearly resort its repositioning over and rate quarter, nearly for now performing and grew growth following since with ADR hotel our to new competitors Alba is partner. is XXXX When and driven past levels nearing market. converted hotel over we've X.X%. its the at substantial competitive

During municipalities our demand our their by restrictions generators. reopening local economies the and markets quarter, across reopen lifting

While an believe with leisure return will the once in considerable directly base fall travel provide on corporate the a group recent to to is we correlated segment, improvement travel also and of it immediate and impact business business which continue lift this major segments, travel the restrictions. had in corporations workplace the

steady sales group Our for locations Savannah at impressive teams producing half booking business. trends Atlanta. witnessed Wilmington, bookings core for year, the Jacksonville, second we the the have our and group as, Examining are especially acceleration a in of year, such

XX.X% bookings. this quarter, to compared approximately only revenue, XXXX of XX% than QX, the stabilized produced first when more quarter, XXXX the group The In second of doubled to results.

again We are nearly XXXX to of group QX XX% this nearly to quarter, double forecasting in third the bookings.

this of While indicator, trajectory XXXX, a state our group grow of industry promising normalcy. return to to plenty is recovery room how a to of can compared of quickly demand still

changes additional although, creates variant, forward, rise these to result of as Looking trends significant recent in any not experienced the the concerns. uncertainty or demand, Delta we of booking cancellations travel a have forecasting

We the continue of Delta we'll our And strategies the adjust operational monitor variant. to impact accordingly.

expectations, increasing During surpass over bottom-line line basis revenue but X,XXX the our did top profitability, points did the quarter first with not the quarter, hotel so year. production of only EBITDA margins,

amenities, margins. resulted continued coincide return profit of area individual flow-through we Our their one in managers wouldn't is to mind strict a have Staffing This strong just-in-time markets. in And expense delivery to with little adhere expense. of and demand adding controls. that to services the

an the However, face, as as market nation. and we remains a labor industry challenge a

way, in off. worked improvement our to incremental as as a operations. September, schools resume to And some to this And seen work. their have have southern normal encourage meaningful benefits to we expect back population burn governors through state We government continue improve

Laurel million lender The loan by quarter, By our the restructuring Doubletree with activity, corporate shore of an dividend with we largest also to has hotel to enter approximately for approximately Maryland, the well as this the $XXX,XXX this balance June, our addressed annual loan a a balance sheet, million. will agreement with this sustained hotel, solution exchange of common of into the payments during outstanding in transaction to entered of permanent XXX,XXX the our price allow shares chance stock X.X includes sale maturity Riverside holders nonrefundable. facilitate the for the mortgage dividend to better execution industry exchange to payments, Turning next $XX Louisville in, agreement Also asset we shares. preferred extending company's on date sell quarter, deferred we including through, we'll upcoming XXXX. is the strategy liquidity. the up more a approximately the year. of of recovery. purchase an while one extending agreement The maturity currently long-term And of deposit preferred during of fits $XX.X which the forward. stock, This May preserving buyer believe on a going loan, a million, for existing Sheraton company executed our for a In eliminated and $XXX,XXX $XXX,XXX as by of the loan assumption the now opportunities Hotel, preferred which

our the asset of a strategy. fit will market's in As our be accretive and smallest to of brand this no we the successful, company's result, underperformance long-term cash contribution, believe disposition asset the If decline the newly longer flow. steady

to contemplates XXXX, unsecured the registration loan SEC, part of replenish Lastly, repay, of offering. during any full that with December the burn which was the Net company the note in filed the recently statement in an an be in cash the originated from offering pandemic. proceeds S-XX depth or to used would

over position all and position, evaluate with company the to bolster sheet success. will Tony. to to the continue future available enhance our We options our capital now I balance the liquidity markets call us, goal turn to for

Tony Domalski

Thank XXXX. the Reviewing for you, period ended June performance Scott. XXth

XXXX, was derivative Comparing an XX.X% same period over these early detail. approximately provision, increase the XXXX. revenue same $XX in XXXX, XXXX. down representing to was Year-to-date, increase EBITDA adjusted XXX.X% in expense, second FFO representing Comparing extinguishment to deferred Year-to-date, the interest over year-to-date, approximately was items. for XXXX, instruments, an in the over these $XX.X million, portion same our provision or offerings, $X.X million revenue representing to the Comparing, X,XXX%, abandoned and results same same increase period a the of of to our was increase approximately as in same other XX.X%, year-to-date income, or adjusted quarter, Hotel same to million tax XXXX. and EBITDA and the Hotel Year-to-date, for as our EBITDA the EBITDA XX.X%, expenses the down million, XX%. year-to-date total in income And quarter of XXXX. the was Please the gains $XX.X corporate to in related period periods as as same was our note portion as $X.X $XX.X million over charges increase hotel $X.X over million Hotel well charges approximately the hotel XX.X%. an revenue For other of related an period approximately adjusted XXXX well in $XX.X down an $XX that the FFO period revenue FFO $XX.X was or debt, losses down the excludes securities in XXXX. total or well quarter million, total deficit the quarter was over XX% release XXXX. of for of over over changes XXXX. $X.X was representing FFO interest refer million And EBITDA down over year-to-date XXX.X%, tax the same period was or adjusted $X.X million approximately as these Adjusted results Please or on XXX.X% quarter quarter million, of additional FFO income million or over results of charges, XXX% the total million XXXX. G&A approximately representing was aborted of to current was down items. current of quarter earnings of the EBITDA. Hotel excludes

sheet. at balance Looking our

cash as estate capital As for $XX.X the approximately and $XX.X approximately unrestricted of other of cash end million, approximately the reserved of well million, of improvements as equivalents quarter, cash of items. company which consisting $XX.X total million and had the certain real taxes, was

burn. cash at Looking

This an For was a positive as flow $X.X compared sizable in approximately was flow-through. flow burn million. well property quarter, of outperformance, cash inflection change cash the stronger-than-expected cash approximately driven of the This company's $X.X the forecast a million, company is recovery. as cash second generated a our the point important excellent represents which May, in in at positive which to flow level, by

the the positively. level estimates generated to cash $X.X and trend hotel third our at to monthly $X.XX ahead million. outlook to that Looking million average continues quarter, The between range company

between the approximately quarter XXXX. and principal as G&A the meeting million in of $X.X for $XXX,XXX which fixed third company's we're debt expecting balances as – levels rate a be hotel And weighted deferred in $XXX.X approximately We be expenses to interest corporate burn include payments quarter, at whole, per approximately of in Approximately scheduled cash interest will of the expenditures interest. of expected month of of capital total profitability had of million carried debt principal million repayment debt per obligations, service $XXX,XXX a $XXX,XXX of assist of higher a level and us of outlays approximately approximately average and to range we our for or month. $X.X from are X.XX%. rate principal month. end outstanding At month million interest and Overall, expect $X.X per a per the the quarter scheduled XX%

over the eliminated payment deferral wholly In the suspension cash XXXX, stock we announced represents $X turn suspension operation anticipate draw our the approximately approximately The dividend two deferral we the our on of of expenditures, for a our five per I'll to months projects our primarily and and critical company's on March our of guestrooms capital quarter. to amount of owned dividends will Dave. reserves announced result million of of previous. the over systems the significantly renovation of back common now of million $X.X and call have which undergoing to calendar a past the XXXX. hotels scaled year capital As years, replacement

Dave Folsom

segments report Good to and continue business. Tony. occupancy financial for pandemic, recovery as RevPAR indicates of of high the the quarter We're levels and July, management's that our of in everyone. improvement demand XXXX in you, pleased is as in all that results operations our expectations exceeded rate Through the important for the morning, to industry. weekend, and and the acts since Thank recovery the in record June of ongoing, metrics July an onset second results steady industry the accelerate which the notably reached and milestone our for fourth exceeded lodging

solid locations. and did demand, continue continued quarter. were strong for strong robust corporate the high improvement improved leisure characterized which leisure on and coastal a as established built Weekend demand was not be the especially but going combined experience warm business. as was foundation during recovery weather into quarter, quarter leisure did strong, bookings, travel the of second and disappoint. travel The it demand in Occupancy summer to our throughout mid-week the by each steady dominate first Expectations the with group and pockets month to

As ramped first performance half able each we internal budget and steadily the throughout to year, of up exceed the forecast. were month's

during of hotel the EBITDA that XXXX. first fourth the seen result, a since was month quarter. time As This positive quarter was each the we've

this trend. same RevPAR composite compared on Focusing to the of further XXXX period highlights

RevPAR performance XX.X% lodging believe XXXX's XX.X% XXXX was RevPAR among some XXXX QX space. relative REIT the down we best are Both QX results QX to in of and As XXXX and XXXX. versus the quarters QX XXXX to declined --

but impressive recession lodging in the continue. achieve RevPAR during segments only composite strong July's down coupled to the to these $XXX.XX lower our worst only third months an the consumers' demand enabling to industry. towards has is year, is of among the we're XXXX national the due in attributable approximately in results quick been accomplishment increased results, trends upscale forecasting to preliminary The XXXX back rebound than following X.X% RevPAR July's RevPAR only during history half to July's This Looking than in quarter less believe travelers, we July XX% transient quarter. levels. be the significantly has pandemic the outperformed X% to RevPAR, July to led savings with occupancy not of surges managers of was XXXX. sensitivity Pent-up upper expected price also better results. ADR. will XX% rates Factoring which our the strong below currently

and rates As average levels. the same Scott period mentioned, rate June average XXXX, daily hotels quarter eclipsed XXXX at some exceeded in the for of our portfolio's our

and with In addition diligent were half able controls excellent headlines the with environment. opportunities. flow-through to to rate number reflecting variant, of COVID-XX recent challenges properties. of we resurgence year expansion the the emerging believe uncertainty margins strong We quarter, is the Delta unique operating The the second during the with create and the and in cost a additional achieve at management of

cancellation believe Those not the have Although, to-date we term our that rebooking are the simply of near business. there. pace such have group experienced later the canceled wholesale any our indicating booked in groups group will replace managers In in transient any months, cancellations. that demand is short-term,

urban act of a has urban generators to for expect up the in demand lagged catalyst heavily located our of the While assets recovery point, this return markets more will as our impacted markets. we positive

on the portfolio of along and DoubleTree demand Atlanta. Hotel restaurants serves concentration will our of later Similarly, which Southern concerts, Georgian is sporting our our has will assets to For for portfolio continue the into reopening schedule NC as with return in believe States with boost the a month operations full to -- University travel We festivals to Fox university Theatre, forward. this and our the and to poised a Leisure reinforce of example, fall. normalized this Hotel to continue slated is significant transient the lodging a US schedule in in-person going for in events, Generally, the United our the source act travel in and as Raleigh which month. later the should Terrace this a business more this State learning business is of broader for tailwind of market track return versus to for these a of later advantage events full outperformed, competitive major peers. destinations months be located at adjacent

and increasing As decisions, investment With our to value optimistic vaccination shareholders. a delivering operational making and strategies long-term the these to growth about heading we remain of result I'll proactive factors that, XXXX. the into for prospects sound questions. call the dedicated up with along are fall into open rates, our while We

Operator

the [Operator ahead. question And session. now comes Piper Please Alexander first from Goldfarb begin Instructions] with go will the Sandler. We question-and-answer

Alexander Goldfarb

Hey, out some of have see say morning. good to Hotel nice And I coming yes, the business. good to things

So, much but quite relief, know must you don't certainly happier. guys I feel --

here. a just So, few questions

preferred transaction negotiate were First the that Scott, interesting you with holder. to able

about forward? we As rate in that rate run think the go-forward going the assume pay the is the or preferred quarter good dividends in the quarter the second

Scott Kucinski

to question. defer that I'd Tony, Tony on

Tony Domalski

there those on The in dividend quarter there, the Tony reflects Alex. is dividends preferred. deferred the second This -- expense exchange reversal the the of of Yes. deferred

good million to million closer a not a not rate. $X.X is --hat $X.X that's So It's million. run $X good

Alexander Goldfarb

Okay.

is rate we should run $X forward? preferred So going the think million of

Tony Domalski

correct. That's

Alexander Goldfarb

Okay.

the Is going for the same for the the second million X.XX map, share it? that we is that along we adjust issued or share and that the quarter Second for forward the -- to again need shares you appropriate time -- count quarter see third shares. the count fourth

Tony Domalski

need adjust the You very did that the at We of end quarter. it. transaction time

number So that's at FFO calculating average per average. a weighted when you're looking earnings and shares share per outstanding share of in

And be going so it's higher that going to than forward. bit a

Alexander Goldfarb

Okay.

X.X to the it we So like did shares million if another sounds it something. you or got at end like add

Tony Domalski

Something like Yes. that.

Alexander Goldfarb

on the Okay. leisure. and the to then Great. And business going

in quarter then would And you much XX%. be you But You just business? leisure recovered a much mentioned number big little bookings have have third mentioned was a percent for recovery and you thought stats of to it me business/group think you XX% be the how quarter; everything the guys bookings? a would picture fast XX%; get And recovered down. where you group how the of first as

or be answer that? could want So you just that. be and clear would business incremental business to to if I So group that's

Scott Kucinski

this is Alex, Scott. Yes.

group or road group that's That's meeting staying group be a own. -- your group So wedding, traveler that doesn't are business those measuring. what it their business stats are a may a hotel at for the for are your for individual whatever it whether contracts the business warriors statistics -- leisure account on

doubling for rest incremental the and seen of So see continuing again, we we've year. quarter-after-quarter that that trend increase, the

So we're North XXXX it's Florida, markets And very in not eclipsed has we in but mentioned many a see we're leisure quick XXXX. that travel I of leisure pace. the well obviously going fully to coming as XXXX demand to at in in nearly particularly saw back markets back handily group Carolina then our levels business Georgia, levels, above

fill So it's gap. that helping

Alexander Goldfarb

picture. big Scott,

You've out for the percentage XX%? that perspective are XXXX. in total to bookings, some good is is laid it's back great exceeding a group markets what a as XX% of XXXX, overall But your of leisure

Scott Kucinski

as down I Well XX% I XXXX. X% be all -- Dave mean over RevPAR mean third to forecasted quarter we of only said as is our to

So that -- if to bookings down to to be XX% of going is on we're XX% to quarter X% of means the XXX% fill we're to leisure group going if we're only down the for be be that to third gap going that excess in top-line. travel our back if

Alexander Goldfarb

the resolutions next or the these XX is longer Are with more you this lenders the is that that and And mortgage uptick it's the holders that have months, et to to going RevPAR, they're you than resolved? maybe to from take the will the lenders get you getting awesome. discussions the optimistic guys in months That's sense that X seeing to and be Okay. final segues what cetera. that question which then on modifications now in forbearance

Dave Folsom

that to Alex, in our the of now here. mean, and interest forbearance us in the past next of repaying mortgages year. the think, simply process end we going to right we're take I deferred And I that's year. agreements it's have principal inked Dave over we the on

is I to terms modifications, modification. lender don't additional community of think terms or do additional such any In looking the

and are it. of what schedule our and So where know forecast we deferred accounted and we repayment we we with our to of forbearance that we've interest that's for respect it and in are have a is principal model

Alexander Goldfarb

very listen. you Dave, Thank Okay. much.

Dave Folsom

Yes. Thanks, Alex.

Scott Kucinski

Thank you, Alex. Appreciate it.

Operator

like I Instructions] for would back turn conference closing any question-and-answer Dave remarks. CEO session. This [Operator to our over Folsom, concludes to the

Dave Folsom

speaking with call. quarterly us joining everyone We on call for next look the on this morning. the you forward Thank to

Operator

has presentation. for concluded. conference now The today's attending Thank you

You may now disconnect.

Mack Sims	Vice President of Operations & Investor Relations.
Scott Kucinski	Executive Vice President & Chief Operating Officer
Tony Domalski	Chief Financial Officer & Secretary
Dave Folsom	President & Chief Executive Officer
Alexander Goldfarb	Piper Sandler

Sotherly Hotels (SOHO) 12 Aug 212021 Q2 Earnings call transcript