Ashford Inc. (Holding Company)

Greetings, and welcome to the Ashford, Inc. second 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jordan Jennings, Investor Relations for Ashford, Inc. Please go ahead.

Good day, everyone, and welcome to today's conference call to review results for us for the second 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. Your results as well as notice of the 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 unknown or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings of the Securities and Exchange Commission. The forward-looking statements included in 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's tables or schedules, which have been filed on Form 8K with SEC on August 3, 2022, and may also be accessed through the company's website at www.afri.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 second quarter of 2022 with the second 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 second 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'll 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 rapid recovery in the lodging industry continues to gain momentum. Both of our advisory platforms are on solid footing. Astrid Trust is benefiting from increased demand and notable rate increases in many key markets. It generated positive cash flow in the quarter and has significant liquidity. Braemar continues to benefit from strong leisure demand and saw its urban hotels bounce back strongly in the second quarter as corporate and group demand has finally begun to recover. Second, we continue to see strong results in our third party growth initiative, highlighted with Remington's recent acquisition of Chesapeake Hospitality, which added significantly to Remington's mix of third party business. At the end of the second quarter, Remington's mix of third party hotels under management stood at approximately 36%. Eric will discuss more details around this transformational transaction in a minute. Third, through our focus on growing AUM, we have been successful in raising substantial amounts of capital and we continue to ramp up our capital raising efforts at Ashford Securities. To date, Braemar has issued approximately $178 million of its non-traded preferred stock. Since the inception of this offering, our retail capital raising has almost doubled each quarter, a trend that we expect to continue into the third quarter. Ashford Trust's offering of its non-traded preferred stock is now effective, and we have launched a growth-oriented private offering that will target investments in all types of commercial real estate in the state of Texas. And fourth, we've reported the highest quarterly adjusted EBITDA in the company's history. And as of the end of the second quarter, our trailing 12-month adjusted EBITDA is now $71.8 million, which is not only above our recently updated 2023 guidance of $70 million, but well above our pro forma 2019 adjusted EBITDA level. We continue to believe that we are well positioned for future growth. Our two publicly traded REIT platforms, Ashford Trust and Braemar, owned 115 hotels with approximately 26,000 rooms. and had approximately $8 billion of gross assets as of June 30, 2022. Braemar is currently benefiting from its focus on the luxury segment, and specifically its luxury resorts. While its resorts have been strong performers for several quarters now, Braemar's urban hotels began to ramp up significantly in the second quarter. Braemar continues to report industry-leading results, and its second quarter results significantly exceeded its 2019 results. Braymar also recently reinstated its quarterly common stock dividend and completed its second acquisition of this cycle with the iconic 96-room Ritz-Carlton Reserve, Dorado Beach, and Dorado Puerto Rico. Ashford Trust has significantly deleveraged its balance sheet, is now paying interest current on its strategic financing, is paying its preferred dividends, and is now effective on the registration statement for its offering of Series J and Series K redeemable non-traded preferred stocks which will be issued through Ashford Securities. Ashford Trust also continued to maintain a significant cash balance, which ended the quarter at $538 million, and remains encouraged by the positive momentum in its portfolio. Looking ahead, both platforms now have significant liquidity, and with both REITs 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. 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 second quarter was $3.5 million. Adjusted EBITDA was $24.8 million, an increase of 131% over the prior year quarter. Our strong growth in adjusted EBITDA for the quarter was driven by Inspire and Remington. We are particularly excited to report $9 million of adjusted EBITDA for Inspire in the second 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 and adjusted EBITDA over the prior year, our performance was led by Inspire with an increase of $8 million, then Remington with an increase of $4.8 million, and then Premier with an increase of $1.5 million. Adjusted net income for the second quarter was $17.3 million, and adjusted net income per share was $2.21. These results reflect growth rates over the prior year of 99% and 89% 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 the Chesapeake acquisition, and the balance is primarily restricted stock. During 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 LIBOR 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 the loan. Additionally, during the quarter, ASHRAE'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 $0.93 per share on April 15, 2022, representing approximately 50% of the accrued dividends. We currently 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. Thank you, Derek.