Ashford Inc. (Holding Company)

Greetings. Welcome to the Ashford Inc. First Quarter 2022 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Jordan Jennings, Manager, Investor Relations. You may begin.

Good day everyone and welcome to today's conference call to review results for Ashford for the first quarter of 2022 and to update you on recent developments. On the call today will be Derek Eubanks, Chief Financial Officer, and Eric Batis, Managing Director and Senior Vice President of Portfolio Management. The results as well as notice of accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the federal securities regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the accompanying filings with the Securities and Exchange Commission. Before-looking statements, including this conference call, are only made as of the date of this call, and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and in company tables or schedules, which have been filed on Form 8K with the SEC on May 4, 2022, and may also be accessed through the company's website at www.ashburyinc.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the first quarter of 2020 with the first quarter of 2021. I will now turn the call over to Derek.

Good morning and welcome to our call to discuss our financial results for the first quarter of 2022. I'll start by giving you an overview of our operations, strategy, and financial results for the quarter, and then Eric will provide an update regarding our operating businesses. After that, we will open it up for Q&A. We have a lot of exciting developments to discuss on today's call. The key themes we're going to highlight today are, first, the recovery of the lodging industry continues to gain momentum. While the year started off a little slow, we saw demand trends ramp up quickly in late February, and that strength has continued into the second quarter. Both of our advised REIT platforms are on solid footing. AstroTrust has significant liquidity, recently reinstated its preferred dividends and filed an S3 with the SEC for the future offering of its non-traded preferred stock. Braemar is back on office and growing with its recent acquisition of the Ritz-Carlton Reserve Corrado Beach in Puerto Rico. Second, we continue to see strong results in our third-party growth initiative. highlighted with Remington's recent acquisition of Chesapeake Hospitality which added 30 third-party hotels to Remington's portfolio. Remington's mix of third-party hotels under management now stands at approximately 40% and Eric will discuss more details around this transformational transaction in a minute. Third, through our focus on growing AUM, we've been successful in raising substantial amounts of capital and continue to ramp up our capital raising efforts at Ashford Securities. In fact, when comparing the first three quarters of capital raising in the broker-dealer channel for non-traded preferred stock, Ashford Securities is significantly outpacing its peers. And four, as of the end of the first quarter, our trailing 12-month adjusted EBITDA is now $57.7 million, which is nearly back to our pro forma 2019 adjusted EBITDA level, and we continue to be well-positioned for future growth. Last year, for the first time in our history as a public company, We provided long-term guidance for what we expected our adjusted EBITDA to be for 2023 and 2025. While we have historically not provided earnings guidance, we felt that it was important for the market to better understand the growth potential for our platform over the long term. As a result of the improved recovery we've been seeing in the hospitality industry, along with significant progress that we've made on our growth strategies, yesterday we updated those projections. Our updated guidance includes projections for adjusted EBITDA for the calendar years of 2023 through 2026. Our current projection for adjusted EBITDA in 2023 is $70 million, which is a 25% increase above our previous guidance. These projections are driven by the continued recovery we are seeing in the hospitality industry, the continued ramp up of Ashford securities and growth in our assets under management, and continued growth in our third party business for our portfolio companies. We encourage investors and analysts to review the projections which can be found in a presentation on our website. Our two publicly traded REIT platforms, Ashford Trust and Braemar, owned 115 hotels with approximately 26,000 rooms and had approximately $7.9 billion of gross assets as of March 31, 2022. Braemar is currently benefiting from its focus on the luxury segment and specifically its luxury resorts. Braemar continues to report industry leading results and its first quarter results significantly exceeded its 2019 results. Braemar also announced the reinstatement of its quarterly common stock dividend and completed its second acquisition of the cycle with the 96-room Ritz-Carlton Reserve Toronto Beach in Dorado, Puerto Rico. Ashford Trust has significantly delivered its balance sheet, is now paying interest current on its strategic financing, is paying its preferred dividends and filed a registration statement in early March for the future offering of a Series J and Series K redeemable non-traded preferred stock which will be issued through Ashford Securities. Ashford Trust also continues to maintain a significant cash balance which ended the quarter at $549 million and remains encouraged by the positive momentum in its portfolio. Looking ahead, both platforms now have significant liquidity and with both re-stabilized and performing well, we believe both are well positioned for the continued recovery of the hotel industry and we remain focused on their future strategic objectives. Our strategy and structure is designed for growth. We have a powerful ecosystem of businesses that all benefit as we grow our assets under management. We estimate that for every $100 million increase in AUM, Our adjusted EBITDA would increase approximately $1 million. Our size and scale in the lodging industry also brings benefits to third party owners and other capital providers. We believe we have a superior strategy and structure that is unique within the hospitality space and we are excited about the potential future growth of our platform. I'll now turn to our financial results for the quarter. Net loss attributable to common stockholders for the first quarter was $8.4 million. Adjusted EBITDA was $14.9 million, an increase of 170% over the prior year quarter. Our strong growth in adjusted EBITDA for the quarter was driven by our REIT advisory business and improved financial performance at Inspire, Remington, Premier and Red Hospitality. We are particularly excited to report $3.9 million of adjusted EBITDA for Inspire in the first quarter. We are seeing an acceleration in the bookings for group events and Inspire is well positioned to continue to benefit from that recovery. In terms of growth in adjusted EBITDA over the prior year, our performance was led by Inspire with an increase of $5.3 million, then Remington with an increase of $2 million, and then Premier with an increase of $1.7 million. Adjusted net income for the quarter was $11.2 million and adjusted net income for share was $1.50. These results reflect growth rates over the prior year of 134% and 131% respectively. Our share count currently stands at 7.6 million fully diluted shares outstanding which is comprised of 3.1 million common shares outstanding, 0.2 million common shares earmarked for issuance under our deferred compensation plan, 4.1 million common shares associated with our Series D convertible preferred stock, 0.1 million common shares associated with preferred OP units issued as part of the Chesapeake acquisition that closed after the end of the first quarter. and the balance is primarily restricted stock. Subsequent to the end of the quarter, we entered into a new $100 million corporate term loan. The corporate financing commitment has an initial term of five years with three one-year extension options subject to the satisfaction of certain conditions and bears interest at a rate of liable plus 7.35%. At closing, we drew down $50 million and have the option to draw the additional $50 million over the next 24 months. We currently have $70 million drawn on this loan. Additionally, subsequent to the end of the quarter, Ashford's Board of Directors declared cash dividends for our Series D convertible preferred stock, reflecting accrued and unpaid dividends for the quarters ending June 30, 2020 and December 31, 2020. We paid an aggregate cash dividend of .932 cents per share on April 15, 2022, representing approximately 50% of the accrued dividends. We hope to be in a position to pay the remaining accrued preferred dividends sometime during 2023, and going forward, we plan to keep the preferred dividend payments current. I will now turn the call over to Eric to discuss our operating businesses in more detail.