Earnings call transcript Q4 2022

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Operator

Hello! And welcome to today's Sotherly Hotels, 4Q 2022 Earnings Call and Webcast. My name is Bailey and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions-and-answers at the end. [Operator Instructions].

I would now like to pass the conference over to our host, Mack Sims, Vice President of Operations. ahead. go Please

Mack Sims

good and Thank morning you everyone.

all did the of you www.sotherlyhotels.com. comparable the has GAAP a most accordance to our requirements. copy release, you In reconciled company the Reg receive measure earnings release, financial may directly at measures the If website not non-GAAP with access G in on it

are constitute forward-looking may statements during Any historical, made this not conference call which statements.

in no Although assumptions, any that the we reflected forward-looking reasonable be give expectations based will we are expectations can assurance statements these on believe attained.

those company update results in Factors time or and does not revise cause are release can forward-looking or risks press duty forward-looking statements. detailed any The to time the by undertake that a company's to and actual differ in from today's filings materially from with to implied statements SEC. expressed the

over I'll call And with the to that, Scott. turn

Scott Kucinski

key our Good for the Mack. to call Thanks review everyone. today's morning, operating metrics off start portfolio's I'll quarter.

quarter same quarter the RevPAR of in an at ADR period Fourth XX.X% $XXX.XX. results occupancy Looking of XX.X% of increase for and an XXXX. portfolio, fourth store RevPAR performance $XXX.XX, by the same the an driven was over composite represents

with and store for occupancy RevPAR the was For ADR XX% year composite portfolio of of $XXX.XX, $XXX.XX. the same the

for XXXX same quarter fourth results, full of period travel, increase were and year the with with RevPAR strength business coupled for our portfolio's group highlighted demand performance XX.X% in and we over leisure represents growing an travel. sustained pleased XXXX. demand Overall by

with the however, up more softness with XX%. for nearly our X.X% was to X.X% impact some produced strong business RevPAR of busiest XX%. in by outpacing Southern year Nicole months is than over ADR threatened similarly travel in up one which experienced the due hurricane RevPAR historically of with results November the October, ADR XXXX U.S.; levels, XXXX December During portfolio, to on group

an On QX, increasing RevPAR off off X.X%. RevPAR occupancy annualized XXXX by was X.X% with For by ADR XXXX. as was whole, a with quarter X.X% basis, the to XXXX XX.X%, down

rates be the biggest strong, expect believe we occupancy to we While remain opportunity forward. going growth will

and portfolios the these booking travel group segments for Our from to continues trends grow. recent demand business demonstrate

segment, our to produced to - XXX% continues the of portfolio XXXX. be group XXXX business QX, improvements, fourth in quarter quarter-over-quarter the make continues which group For compared to of the

of was During positive representing bookings change XXXX, where nature the bookings. year, group XX% prior XX% the a our total of from corporate accounted corporate, group for

and our DC performance. QX, and in came of business was than the business improvements the produced QX, greater For but most properties urban best segment, in XXXX. XX% in XXXX, Washington but portfolio of These was notably portfolio, the travel and entire travel XX% transient which business gains year-over-year across out demand travel Atlanta, experienced the and group

Meanwhile, outperform our group to focused strong expected by quarter. the supplemented during was the Sustained food expectations these portfolio's markets. with hotels beverage levels in than contributions, leisure in and resulting in over pre-pandemic improvement segment strength continue leisure better

across results our continues growth strong rate drive portfolio. segments all to for Overall,

further our shown call. for are sign improvement will encouraging to an company. have the Our which for the these on forecast more for XXXX, in later comment trends this Dave portfolio

Fourth and improvement as the steady highlights XXXX compared a XXXX, continued business show down portfolio, group only during XX.X% by third RevPAR return Hyatt quarter. deficit relative Centric the to the of to quarter across by X.X% travel Looking some the Arlington sequential fueled hotel. was at to to the

a and quarter market further RevPAR the quarter position over hotel the fourth during XX.X% compared its share, to XX.X% index up was gained property and the competitive of of set, improvement. is XXXX this RevPAR as driver to XXX% outperform which The solidifying achieved continues the Rate, leader. its over the

which performance, is The of DeSoto, excellent Savannah and a business. driven strike well balanced leisure mix by continued group its of

XXXX growth over During fueled the with XX.X% gain easily in significant by a XX.X% RevPAR outpaced XXXX. of metrics the property rate quarter

during Hotel Fourth quarter. in performance results a repositioning Tampa XXXX Alba were quarter not but occupancy, this hotel's for rate, a the gain in continues hotel by fueled to an XX.X% RevPAR results, only significantly exceptional highlights the in XX% XX.X% strategy. record outpacing increase that also notable by successful

by controlling during Our the commendable management variable rate properties. at and costs achieved revenue management team at profitability executing driving metrics fourth aimed strategies our quarter

points margin rooms basis XXXX fourth As a during expanded profit result XX.X% to over of these quarter. efforts, XXX the

basis for EBITDA XXX quarter margins hotel to expanded XX.X%. impressive an points Meanwhile, the fourth XXXX XXXX versus

XXX expanded margins XX%. EBITDA to XXXX hotel year the basis points over For

environment, we going revenue during post-pandemic additional the managers, drivers, during to of forward. and the by seeing the the layered into properties. back scaled which our focus are trends progress encouraged are portfolios area we crucial a As pandemic be our we pleased operating especially were All-in-all year as continue navigate with margin will control are our are for

turn now will Tony. over to call the I

Tony Domalski

performance period for December Reviewing XX, Scott. you, XXXX. the Thank ended

quarter fourth million, was increase total quarter over XXXX. same of representing the For an approximately in revenue the $XX.X XX.X%

the total represented million, revenue year, And performance current prior the XX.X% XXXX. period total representing represented increase For XX.X% the an revenue total of Comparing of in of for approximately the to levels, full pre-pandemic XXXX. year fourth $XXX.X year. quarter the revenue the total for revenue year, total revenue same was XX.X% over for for

Year-to-date, hotel XXX.X% the XX.X% XX.X% full of EBITDA representing year the of was same to was approximately for of the million, increase Comparing for approximately XXXX. quarter Hotel $XX.X XXXX. over $XX.X levels, million, fourth XXXX. performance quarter representing over of EBITDA an hotel EBITDA hotel represented increase same EBITDA quarter quarter pre-pandemic an

XXXX. XX% EBITDA EBITDA represented of For year, for hotel full full hotel the year

increase XXXX. $X.X quarter was $X.X representing over same of approximately adjusted FFO the million, an For quarter million the

$XX.X representing $XX.X For million XXXX. the year, of adjusted approximately FFO full was approximately an over million, year improvement

adjusted on fourth the a basis full than and an levels, year charges or represented aborted of XXXX. of XXXX compensation excludes full FFO as note more on adjusted FFO abandoned our FFO and same as eight Comparing performance adjusted for that quarter in adjusted fold securities adjusted to gains items. year FFO FFO pre-pandemic offerings, to to in quarter stock represented debt, derivative losses a the XXX.X% related expense charges the and for ESOP early other well and related Please extinguishment instruments, increase

these Hotel as as charges general well. refer earnings interest and of EBITDA interest additional our our provision for other tax to expense, the excludes detail. portion release well expenses, Please current income, administrative items as corporate, income and

balance our at Looking sheet.

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

interest agreements. At of account balances company's quarter at swap X.X%. the $XXX.X million taking interest carried XX% of company's of end fixed of Approximately we the the into the of rate debt weighted a interest after had average outstanding a debt principal rate rate approximately

rate This subject rate week has in interest floating announced to of until floor Rate of we principal five approximately existing existing $XX.X million loan Prime balance February Whitehall X.XX%. a for New of The extended the the an loan was on and modification X.XX%, which XXXX, The of the a overall plus York maintains Houston, lender. with of years

In approved. received of associated $X.X application loans plus related third the $X.X second to forgiveness, that in business with had accrued administration. application December still pending million A been approximately of we interest. also million approved. forgiveness principal total approximately small is the In received a Payroll we forgiveness application In one under we a we notified were XXXX, forgiveness January, the notified had SPA Protection the that were been Program

norms, we and As environment, amount normalized anticipate enter more a to capital with estimate expenditures will XXXX. expenditure more million approximately calendar capital $X.X mind operating historic for we in year

quarter. guidance We the a resuming results with for of are anticipated forecast first

accounts current performance and accounts portfolio. for Our and guidance market expected within takes conditions the into

projecting quarter $XX.X for are $XX.X in range the We of million revenue XXXX. first total the million to

the quarter represents of revenue. the million a the a prior At range period total increase XX% projected range, is prior the – in and the of the over million hotel midpoint same this $XX.X over of increase midpoint the at the for in prior EBITDA this XX.X% EBITDA $XX.X year. Hotel this to represents range,

or range in midpoint adjusted projected the was increase the $X.X than XXX% prior a for $X.X share. range And to year. At FFO the more FFO the million $X.XX to quarter same represents million per adjusted the of this over in of $X.XX

I And will now turn over call to Dave. the

Dave Folsom

everyone. good you, morning and Tony, Thank

the leisure continued the transient to demonstrate at contributed further record by the encouraging which portfolio trends in demand Impressive and our profitability our portfolio, was markets. growth fourth for sustained Our notable rate business markets of focused company quarter, to characterized leisure hotel, during leisure and metrics Coast in especially our for in demand quarter. urban group strength and for our improvement

highlights of their markets year pandemic. improvement significant far, from in year. made the management Thus the during momentum our portfolio's the of this respective of been capped continued quarter into positioning its in fourth assets a off which first forward and this quarter carried recovery the progress has The

outperformed Overall, XXXX our significantly expectations.

our the the year in outlook transformative management for objectives, the which in team executed a shift ultimately soundly resulted During several company.

assets concurrently our cycle allowed repay expensive improvements year for hotels. mortgage reduce at the need CapEx loan, sale eliminating corporate an near-term of for two The Raleigh the Louisville in secured to debt while and life additionally us expensive and these required

company. In provided for of cash improved the loan asset the modification and additional Tampa terms our addition, proceeds

Companies. And aforementioned complete of reserve. series and with a return result, as of the interest the repayment This the corporate transactions the high onerous significant allowed current loan Wilson of the elimination Kemmons of loan covenants the payments, interest for

approach the industry's proved in addition, performance strategic outsized we believe these as In markets the southern towards experienced recovery locations properties during our following holding successful pandemic.

best Georgia, RevPAR year DeSoto history. is over the the Savannah, property's represented lengthy where performance the examples the in of best XXXX of XX% the of gain trend XXXX's One of of performance this in

record Meanwhile, revenue second, margins quarters, to and the led fourth outperforming periods for XXXX. and same profitability strong metrics each third growth the in

for same XXXX As hotel a XXXX's EBITDA recovery our following completing portfolio hotel these efforts, a EBITDA, result remarkable notably pandemic. surpassed store the of

we our reinstatement quarterly fundamentals, the by continued announced improvement of January preferred company's dividends. Facilitated the the operating of in

that confidence announcement preferred the intend health market demonstrates and of ability special we our cumulative conditions dividends, in addition, company's navigate the management's profitability. In to lodging and to financial announced of unpaid warranted through changing future in by periodic dividends as reduce we our the the This is environment. amount announcement the

portfolio, our and is travel believe especially for segments, positively thus upside in forward, Looking there business trending this year. group we transient which far the are significant

time travel fact, XXX% the for tremendous same growth of the pacing year, reservations In already projecting transient business last year. are

for progress currently Meanwhile, we business ahead on year with seeing are improvement, bookings comp of to group quarter the to this year, the operations pleased are difficult of XX% the Overall, forecasted the this in by first us, of first Super included range for pacing prior be RevPAR which XXXX, we year. with Atlanta. in quarter Bowl far build of we XXX% expect to group year's last in our XX% so a

and and the We tailwinds are closely cautiously trends, policies seen data, demand, to as in monitoring pace as forward. or encouraging behavior discussed continue pullback corporate macroeconomic remain our room yet growth these any We well fuel have not future will prospects rates. that consumer we've booking booking optimistic travel moving

And with questions. call open for we'll up the everyone, that

Operator

Thank you. Instructions]. [Operator

Piper Our from Please Goldfarb first question today comes ahead. from go the line Alexander of Sandler.

Your line now is open.

Alexander Goldfarb

Hey! Good there. down morning

So questions. a few

definitely obviously, see chunk see. in the It but PPP to of great certainly drove beat, good the First FFO forgiveness a to good the quarter.

release the $XX just million is, out took of per Question PPP. over you guys

expectation you on about PPP anticipate being call million? roughly been back submitted that another You've that expected the of $X $X There's balance for I million. forgiveness Are of forgiven also granted your the to pay portion? loan, $XXX,XXX that you think for. it you you What's now or said

Tony Domalski

round million. additional will one Alex, loan. applications submitted this forgiveness around is unfortunately. We've there's no made already and somewhere on total Tony. of $X the payments No, We forgiveness forgiveness that be

and we've got $X.X to five between got the a of and repay we've it down remainder So million that. $X year left, period to million

will So, sometime the we'll is, get early paid. mid, until whatever to in balance that have have mid-XXXX to

Alexander Goldfarb

on rate that? the what's And

Tony Domalski

X%.

Alexander Goldfarb

work. at dollars taxpayer Yes,

So you're the... on welcome

Tony Domalski

long. all Keep that day loan

Alexander Goldfarb

welcome you're Well, a taxpayer. Yes. as

Okay, and mid-XXXX great. X%, a it's okay due

is... The second question

Tony Domalski

a is not monthly just add that's a required, that, it's to payment Alex, there to if balloon.

Alexander Goldfarb

the balance got once No, come of down. got last correct million it. yes. was if Not The question next still with $XX you that's time it. preferred. the Yes, I I I sure or accrual that's think spoke, the and on preferred, of the the payment dividend on I I again But the Scott, around of resumption rough is think reconsidered. common payments you dividend, after know a you sort year flow we another again, would sort post of have numbers, on preferred, after could be basis, million our CapEx, which free before cash two preferred cash post years $XX suggest preferred of

to is and hotels that accrued, would proceeds. Would you timeline about? asset your you anything know of think much imply sort of special then settle I mentioned – – to some And means I but that that which up fair to dividends the there separate, are think probably levered, presumably is most a not sales,

So correct, fund the and just year would fair for is of any you two sort is curious common dividend? accelerated one, timeline million if returning then my on how flow two, free a of cash $XX about repayment;

Dave Folsom

Alex, Dave its Yes. here.

Let your me second question first. address

with respect timeline, now repayment. amount you on give or So frequency or I I right longevity the to mean of definitive the can't the guidance any this

will profitability capital, That the mortgage our depend any is mean probably like relicensing these repayment double essentially think CapEx how activity, I payments refinancing right things how debt is lot I just and out. on nonrecurring includes in existing making shake how on progresses, for ballpark. the industry you're dividend. the the a this, which evident really preferred other hotels, will that our demands for lodging of

time you And repay to off. I – our said get other basis we this how free last dividends. periodic so on and tell to will and it's is to today paid as take we going make to can't to long going what on do call second we're cash we to take have said just question, accrued your flow, special it a your

minus number, I very million of amount. the end number plus $XX think the or is XXXX the small at correct a

your pricing. exchanges we're there can advantage we take to are last through opportunities fresh right help what raise the would we dividend. the that's include two capital considering accelerating But years, for preferred is I I accelerate assets, selling not function things looking that's really repayment we're repayment, lowering comment tell of, always of you now which will principal the about mean did And that that respect three which could that preferred. accelerate of the anything the or for preferred then With to a of to repayment

Alexander Goldfarb

I you balance that question. the that's made payment, dividend. – And answered of initial Yes $XX Dave, what still the preferred is as the is that today? Okay. million preferred You year-end, then

that – payment the that million the is So the to $XX would we of reduce is or million $XX by have preferred? net

Dave Folsom

growing that and accrual as just paying growing Well, stop you know, kept once we preferred, growing. and

pay is accrual. preferred we now that reinstated we just dividends off. have fixes that Now it the that fixed, and The unpaid to have accrual

its other and or So million of $XX off pay out to then dividends. total that through flow cash through mechanisms we'll special have sequentially

Alexander Goldfarb

okay, the question of about anything Okay, then guess it. your got your down And markets. you recession the in final know not really is, seeing I comments

group sort travel, change operational at at of in what planning, Are as sign You is, that Florida, travel, sense? seeing talked group to urban whether and or an Is down and you from strength really business group, all business in your etc. hear your there's throughout on sense your and about you're market just from anything no it's individual Philly there cracks by various Texas any planning, hotels portfolio, there back etc. all no

Dave Folsom

very know, the very now the and we You that's staff or mean two have corporate no. weeks lengthy calls DOSs, is the with I right correct. GMs, our every answer the management frankly company detailed,

it's tell cracks be, customer BT not layer that And to you We're see mix. right group I'm will see seeing bookings, change, just there. tell but now. we're any but BT you, as it's can I can't rate, customer you mentioned. don't we our it the business sure and thankful going when to very into back group corporate all Additional bookings, the I

Alexander Goldfarb

Thank Okay, you. listen.

Dave Folsom

Alex. Thanks

Tony Domalski

Thanks Alex.

Operator

waiting no additional time. questions are this at you. Instructions]. Thank [Operator There

remarks. like Dave the conference to Folsom ahead. go closing for to over I'd pass So Please any

Dave Folsom

one you Thank you, months. operator, And and joining a thank quarterly our we everyone call. another look for us for few Thank to forward you. in

Operator

concludes all call. your you participation. conference This Thank today's for

You lines. may your now disconnect

Dave Folsom	President, Chief Executive Officer
Scott Kucinski	Executive Vice President, Chief Operating Officer
Tony Domalski	Vice President, Chief Financial Officer
Mack Sims	Vice President of Operations
Alexander Goldfarb	Piper Sandler

Sotherly Hotels (SOHO) 2 Mar 232022 Q4 Earnings call transcript