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Ryman Hospitality Properties, Inc. (NYSE:RHP) Q1 2024 Earnings Call Transcript

Ryman Hospitality Properties, Inc. (NYSE:RHP) Q1 2024 Earnings Call Transcript May 2, 2024

Ryman Hospitality Properties, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to Ryman Hospitality Properties First Quarter 2024 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Executive Chairman; Mr. Mark Fioravanti, President and Chief Executive Officer; Ms. Jennifer Hutcheson, Chief Financial Officer; Mr. Patrick Chaffin, Chief Operating Officer; and Mr. Patrick Moore, Chief Executive Officer of Opry Entertainment Group. This call will be available for digital replay. The number is 800-839-7414 with no conference ID required. At this time, all participants have been placed on a listen only mode. It's now my pleasure to turn the floor over to Ms. Jennifer Hutcheson. Ma'am, you may begin.

Jennifer Hutcheson : Good morning. Thank you for joining us today. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the company's expected financial performance. Any statements we make today that are not statements of historical facts may be deemed to forward-looking statements. Words such as believes or expects are intended to identify these statements, which may be affected by many factors, including those listed in the company's SEC filings and in today's release. The company's actual results may differ materially from the results we discuss or project today. We will not update any forward-looking statements, whether as a result of new information, further events or any other reason.


We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most directly comparable GAAP measure in exhibits to today's release. I will now turn the call over to Colin.

Colin Reed: Thank you, Jen, and good afternoon, everyone. Let me start this afternoon's discussion about our first quarter results by first reminding you what an incredible first quarter we had in ‘19, in 2023. Last year's first quarter was the best first quarter for same store hospitality ADR, revenue and adjusted EBITDAre. and same store hospitality banquet, and AV revenue was the highest on record of any quarter. Production was also strong with record first quarter gross group, ADR booked for all future years. On the entertainment side of our business, we also achieved record first quarter revenue and adjusted EBITDAre. Now, against that strong backdrop in the first quarter of ‘24, we achieved some very compelling results.

Yet again, we set first quarter records for same store hospitality ADR, traveled and gross group ADR booked for all future periods, same store, hospitality, banquet, and AV revenue was the second highest on record behind only last year's first quarter and several properties set monthly catering records in February, including Gayl Palms and JW Hill Country. Equally impressive, our entertainment business set a new first quarter record for adjusted EBITDAre. Despite significant weather and construction disruption during the quarter. The first quarter was not without his challenges and Mark will speak to challenges and Mark will speak to the impact of Easter timing shift and some transient softness. We saw in our same store hospitality portfolio results in a minute, but we also have dealt with quite a lot of construction disruption across our portfolio.

As an example, the Gaylord Palms, we are reconfiguring -- completely reconfiguring our lobby and at the Rockies we're almost finished completely transforming the Great Lodge. Our entertainment business is also under a large transformation with the public spaces at the W Hotel completely under construction, and also, of course, the wild horse is shut as we transform it to a category 10. As you know from our Investor Day, we are being quite bold with our capital plans as we believe that the transformation of our physical assets will support the very good growth we anticipate over the next few years. But what will become clear as Mark and Jen speak, is the fact that our primary focus, the group segment, remains very robust. For more than 20 years, our management team has executed a differentiated strategy that delivers long-term customer satisfaction with a particular focus on group customers.

We built and continue to enhance an industry leading portfolio of hotels to serve that customer. And our service model continues to drive high customer loyalty, the byproduct of which being retention. As a result, we have significant visibility into future bookings and meaningful recurring revenue stream, strong pricing power and multiple high return investment opportunities to sustain our growth trajectory. On top of all of that, we own an incredibly valuable entertainment business built on some of the most iconic brands in the music industry, but also we believe will demonstrate very strong growth over the period ahead. I've said this before; our business is not based on hope. Our strategy is grounded on things we know well and can control extensive knowledge of our customers and delivering what our customers want, thus driving quality.

This is ever -- as ever in our first quarter results. Now, with that, let me turn over to Mark to give you some color on the detail.

Mark Fioravanti : Thanks Colin. Good afternoon, everyone. I'll start with some segment highlights from the quarter. First focusing on our hospitality portfolio, which continues to see strong group performance then I'll take you through the results of our entertainment business, which benefited from growth in our old red brand. And finally, I'll review our guidance before handing it over to Jennifer to discuss our balance sheet, recent financing activities, liquidity and capital expenditures outlook. Our same store hospitality results reflected the impact of the Easter shift in a challenging comparison to the first quarter of 2023, as Colin detailed at the outset. Accordingly compared to the first quarter of ‘23, same store hospitality RevPAR in total RevPAR declined 4.6% and 4.1% respectively, and adjusted EBITD, our margin declined 210 basis points.

Despite a strong start in the first half of the quarter, the second half came in modestly below our expectations due to some transient softness in the Nashville, Orlando and Denver markets. In fact, all the markets in which our Gaylord hotels operate experience challenging year-over-year comparisons and four of the five markets in which our Gaylord hotels operate experienced RevPAR declines. These trends reflect the normalization of transient demand. Despite the tough comp, there were plenty of bright spots in the quarter. First, our rate strategy is working. The first quarter of 2024 was the best first quarter performance best first quarter performance ever for same store hospitality ADR eclipsing the prior best ever first quarter performance in 2023.

Both group and transient rate increased year-over-year. Second, outside the room spend remains resilient. This quarter marked the second best quarterly performance ever for same store hospitality Banquet Navy revenue trailing only the first quarter of last year. Banquet Navy contribution per group room night travel increased year-over-year. A positive leading indicator that our value proposition and the capital investments we've made are compelling and groups are continuing to spend on property. These trends continued into April with Gaylord, Opryland achieving all time high monthly catering revenue across the same store portfolio. Together, our rate strategy outcomes and continue robust outside the room spend have translated into higher RevPAR and total RevPAR index premiums versus our comp spend.

In the first quarter of 2024, our Gaylord Hotels portfolio, RevPAR Index and total RevPAR Index increased 9% and 13% respectively relative to pre-pandemic levels. Third, the results at JW Hill Country performed in line with our expectations demonstrating the value of our early integration efforts. We estimate first quarter RevPAR and total RevPAR increased approximately 26% and 28% from the same period in 2023 respectively, which we believe was driven primarily by increased group occupancy and strong outside the room spend, as group catering contribution per group room night in the first quarter of 2024 improved approximately 22% from the same period in 2023. GOP margin for the first quarter of 2024 was 45.4% approximately 500 basis points higher than the same period in 2023.

An interior shot of the Grand Ole Opry House, showing the iconic country music brand and its architechtural grandeur.
An interior shot of the Grand Ole Opry House, showing the iconic country music brand and its architechtural grandeur.

And finally, our group focus provides visibility for our portfolio, which gives us confidence to reiterate our full year guidance. As of March 31st, same store group room nights on the books for the rest of the year were up 2.4% compared to the same period last year for the rest of 2023 and we're projecting to set a new full year record for group room nights traveled in 2024, surpassing the prior record in 2019. In addition, same store group room’s revenue on the books for the rest of the year was up 8.4% compared to the same period last year for the rest of 2023. As a result, we're reiterating our full year guidance ranges for same store hospitality, RevPAR and total RevPAR growth, and same store hospitality and JW Hill Country adjusted EBITDAre.

Turning now to same store production. In the first quarter of 2024, we booked nearly 288,000 gross group room nights for all future years. At first quarter record ADR of $265. Group room night production was down sequentially in year-over-year due to our record performance in the fourth quarter of 2023. Recall, in the fourth quarter of 2023, we booked a record 1.2 million growth group room nights for all future years, which was an increase of 19% compared to the fourth quarter of 2022. Therefore, having closed a large portion of the late-stage funnel in the fourth quarter, our focus in the first quarter was on replenishing the sales funnel. Lead volumes now sit at record high levels giving us confidence in the continued strength of the group segment in our positioning.

We continue to be encouraged by production results at JW Hill Country. In the first quarter of 2024, we booked nearly 42,000 gross group broom nights for all future years at an ADR of $315. Turning to the entertainment segment, another bright spot in the quarter, this business delivered a record first quarter adjusted EBITDAre of $15.5 million, up 8.3% despite the impact of severe winter weather in Nashville and construction disruption at the W Austin and the WildHorse Saloon. Our old red brand performed well in our newest venue. Old red Las Vegas, which opened in mid-January, is off to an encouraging start. Our entertainment business continues to perform in line with our expectations, and as a result, we're reiterating our entertainment adjusted EBITDAre guidance.

Turning to our consolidated outlook for 2024, we're also reiterating our full year guidance range for corporate and other and consolidated adjusted EBITDAre. We're raising our full year guidance ranges for adjusted funds from operations or AFFO by $7 million to $489.8 million to $535.5 million, and for AFFO per share by $0.11 to $7.69 to $8.33 to reflect the net interest expense savings associated with our refinancing transactions, which Jennifer will discuss in a moment. Note that the fully diluted share account used in our AFFO per share calculation reflects the put rights held by Atairos as part of their operating entertainment group investment. And although those rights are not exercisable and we retain the option to settle any exercise of those rights in cash, any exercise of the foot rights would also result in Atairos's 30% ownership in OEG reverting back to Ryman.

To provide some color on the second quarter, we now expect mid-single-digit same store hospitality RevPAR growth year-over-year, which assumes continued transient normalization in the second quarter. We continue to expect high single digit year-over-year growth and same store hospitality total RevPAR, along with year over year adjusted EBITDAre margin expansion, driven by group strength and robust out of room spend. As Colin discussed at the outset, we remain incredibly well positioned. We have significant visibility into future bookings, a meaningful recurring revenue stream, strong pricing power, and ample high return investment opportunities available to us. The investments we're making though disruptive in 2024 will sustain our long-term growth trajectory.

And importantly, we can fund this growth plus our dividend from our balance sheet and free cash flow generation. And following the refinancing transactions we undertook in March, our balance sheet has never been better positioned. So to that end, I'll turn it over to Jennifer to discuss our balance sheet, liquidity and capital.

Jennifer Hutcheson : Thanks Mark. We ended the first quarter with $455 million of unrestricted cash on hand and our $700 million revolving credit facility was undrawn. OEG's $65 million revolving credit facility had a balance of $22 million outstanding. Taken together, our total available liquidity was approximately $1.2 billion net of approximately $4.3 million of outstanding letters of credit. We retained an additional $82 million of restricted cash available for FF&E and other maintenance projects. During the quarter, we took advantage of favorable market conditions and undertook transactions to address our nearest term maturity to lower our weighted average interest rate and further unencumber our asset base. In March, we completed the private placement of $1 billion of aggregate principal amount of 6.5% unsecured senior notes due 2032.

The proceeds of which were used to repay the Gaylord Rocky secured term loan in full, along with $200 million of the corporate term loan term loan B. The transaction was very well received by the market and was upsized from $800 million to $1 billion in part to satisfy the strong demand for our securities. In addition, in April, we repriced the remaining outstanding corporate term loan B from, SOFR plus 275 basis points to SOFR plus 225 basis points. As a result, we are raising our full year guidance for AFFO and AFFO per share as Mark outlined. Acknowledging the actions we have taken to strengthen the balance sheet, as well as the merits of our group focused business model. S&P ratings upgraded our corporate credit rating from B2B plus, while maintaining a positive outlook.

And Fitch ratings revised our outlook from stable to positive. Our net leverage ratio at the end of the quarter based on total consolidated net debt to adjusted EBITDAre was 4.3x within our targeted 4x to 4.5x range. On a pro-forma basis, assuming a full year contribution of adjusted EBITDAre from the JW Hill Country, our net leverage ratio was 4.1x. In 2024, we continued to expect to generate free cash flow before payment of dividends and capital expenditures of $500 million to $550 million, which together with our unrestricted cash reserves and funds available in our FF&E escrow accounts, will be more than sufficient to fund our dividend and capital investment priorities. Regarding our dividend, it remains our intention to continue to pay a 100% of our retaxable income through dividends.

Regarding our capital investment priorities, in 2024, we continue to expect to invest approximately $290 million to $360 million in our hospitality business and $70 million to $80 million in our entertainment business. On our last earnings call, we detailed the major projects, so today; I'll provide some highlights on our progress year-to-date. At the Gaylord Rockies, the first phase of the Grand Lodge repositioning, including embers, the new lobby bar is now open. Remaining work includes repositioning of several additional F&B outlets in the lobby, which are scheduled to open later this year in the fourth quarter. Construction of the new group pavilion at Gaylord Rockies is also progressing quickly and is expected to open in June with both of these projects ahead of schedule and on budget.

At the Gaylord Palms, renovation of the lobby and remaining 14, 16 rooms is underway and we expect this work to be completed by the end of the year. At Gaylord Opryland transformation of the Governor's ballroom and pre-function space is set to begin in June. Construction schedule there will be managed to limit disruption. At Block 21, the W Austin Rooms and Public Space renovation is underway and we expect to complete this work by the end of the year. And finally, the transformation of the Wild Ore Saloon in downtown Nashville to category trend continues, and we expect that venue to reopen in phases beginning in the third quarter. As our projections demonstrate our balance sheet and liquidity position continues to be in excellent shape to support the capital deployment opportunities available to us and the continued growth of our business.

And with that, let's it open it up for questions.

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