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spk04: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Ashford, Inc. 4th Quarter 2023 Results Conference Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Jordan Jennings, Director of Investment Relations. Thank you. You may begin.
spk01: Good day, and welcome to today's conference call to review results for Ashford for the 4th Quarter and full year, 2023, and to update you on recent developments. On the call today will be Derek Eubanks, Chief Financial Officer and Eric Bates, Executive Vice President of Operations. 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 State's Harbor provisions as a federal securities regulation. Forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risk, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-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-GAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8K with the SEC on February 29, 2024, and may also be accessed through the company's website at .ashfordinc.com. Each listener is encouraged to reuse these 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 fourth quarter and year ended December 31, 2023 with the fourth quarter and year ended December 31, 2022. I will now turn the call over to Derek.
spk02: Thanks Jordan, and welcome everyone to our call to discuss our fourth quarter and full year financial results for 2023. I'll start by giving you an overview of our operations, strategy, and financial results and then Eric will provide an update regarding our operating businesses. After that, we'll open it up for Q&A. The key things we're going to highlight today are first, the lodging industry has continued to perform well and for the quarter we reported solid overall revenue growth over the prior year period. Second, we continue to see an attractive pace of capital raising through Ashford Securities and have raised approximately $580 million of gross capital since its launch in 2021. And third, we're excited to provide an update on our newest advised platforms, the Texas Strategic Growth Fund and Sterling Hotels and Resorts. The Texas Strategic Growth Fund is a private investment vehicle focused on investing in all types of commercial real estate in Texas. Sterling Hotels and Resorts is a newly formed private NAV REAP that plans to invest in a diverse portfolio of hotels and resorts across all chain scales, primarily located in the United States with a focus on both income and growth. As of December 31, 2023, our three advised REAP platforms, Ashford Trust, Braemar, and Sterling, had ownership interests in 113 hotels with approximately 25,000 rooms and approximately $7.5 billion of gross assets. Braemar's resort portfolio continues to see some stabilization and both demand and pricing as leisure guests now have more options for travel. While its urban hotels continue to recover nicely, as both corporate and group demand continues to strengthen. Additionally, as the hotel's debt capital markets continue to improve, Braemar recently addressed multiple near-term debt maturities and has refinanced or extended almost all of its 2024 debt maturities. Ashford Trust continues to focus on deleveraging its balance sheet and extending its debt maturities and into the quarter with $209 million of net working capital. To date, Ashford Trust has issued approximately $105 million of its non-trade and preferred stock, and we believe this is an attractive source of capital for that platform. Ashford Trust recently announced its plan for paying off its corporate financing during 2024, primarily through select asset sales, refinancing, extending upcoming debt maturities, and raising capital through its non-trade and preferred stock offering. Our newest advised platform is the Texas Strategic Growth Fund, which we launched in late 2022. Ashford made a $2.5 million investment into this fund, and that capital, along with other capital raised from outside investors, was used to make an equity investment in a multifamily property in San Antonio, Texas. We're also excited about our newest platform, a private SNAP REIT called Sterling Hotels and Resorts. Sterling will invest in a diversified portfolio of hotels and resorts across all chain scales. We plan to raise capital for this platform through Ashford Securities. Our strategy and structure are designed for growth. We have a powerful ecosystem of businesses that all benefits as we grow our assets under management. Our size and scale in the lodging industry also bring benefits to third-party owners and other capital providers, as we are one of the largest owners and fee payers for the major hotel brands. We believe we have a superior strategy and structure that is unique within the hospitality space, and we are excited about the potential growth of our platform. Over the past few years, we have completed numerous bolt-on acquisitions for our operating businesses, and we continue to look for attractive opportunities to strategically and creatively grow our business. I will now turn to our financial results for the quarter and full year. Net loss attributable to common stockholders for the fourth quarter was $13.6 million, and net loss attributable to common stockholders for the full year was $40.8 million. Adjusted EBITDA was $13.2 million for the fourth quarter and $60.4 million for the full year. Adjusted net income for the fourth quarter was $8.6 million, and adjusted net income per diluted share was $1.02. Adjusted net income and adjusted net income per share for the full year 2023 were $42.4 million and $5.20 respectively. Our share count currently stands at $8.4 million, fully diluted shares outstanding, which is comprised of $3.1 million, common shares outstanding, $0.2 million common shares earmarked for issuance under a deferred compensation plan, $4.3 million common shares associated with our Series D convertible preferred stock, and the remaining $0.8 million shares are for acquisition-related shares and restricted stock. I'll now turn the call over to Eric to discuss our operating businesses in more detail.
spk03: Thank you, Derek. We are excited to provide fourth quarter updates on our products and services businesses. Throughout 2023, our businesses successfully gained market share through organic and inorganic initiatives, positioning the company well for 2024. This is highlighted by Inspire's third straight year of more than 20% revenue growth, Remington's expansion into the Caribbean and Latin American markets, Red's acquisition of Alit Nui and Maui Dive Shop, and Premier's diversification into new verticals. The first business I'd like to discuss is Inspire. Inspire generated $36.3 million of audiovisual revenue in the fourth quarter and $3.9 million of adjusted EBITDA. On the sales front, Inspire executed three new hospitality contracts during the fourth quarter, which are expected to contribute $3.1 million of annual audiovisual revenue. For the full year of 2023, Inspire generated $148.6 million of audiovisual revenue, $39.2 million of which was from international markets, representing a .6% and .0% increase over the prior year, respectively. Inspire also executed 11 new hospitality contracts in 2023, which are expected to contribute $10.1 million of annual audiovisual revenue. We are thrilled with Inspire's growth in 2023 and look forward to continuing the momentum throughout 2024. Moving to Remington, in November, the company began managing its first hotel outside of the United States, Crocs Resort and Casino in Costa Rica. Remington also signed on to manage Autograph Sarchi in Costa Rica and two resorts in Larimar City, Dominican Republic, Royal Senesta Hotel and the James Senesta. During the fourth quarter, Remington generated hotel management revenue and adjusted EBITDA of $13.1 million and $5.1 million, respectively, representing a .5% adjusted EBITDA margin. Remington also executed nine new third-party hotel management agreements, which are expected to contribute $2.9 million of annual hotel management revenue. At the end of the fourth quarter, Remington managed 122 properties that were open and operating. Remington managed 68 properties for Ashford's Advised Reach, Ashford Hospitality Trust, Braemar Hotels and Resorts, and Sterling Hotels and Resorts. Remington also managed 54 third-party properties for 31 different ownership groups, 13 of which have hired Remington to manage two or more of their hotels. These ownership groups include real estate funds, family offices, -net-worth individuals, private equity groups, and developers. We're pleased to see that Remington's hotels under management for third-party owners now represents approximately 44% of its total hotels under management. Remington's managed portfolio operates in 25 states, Washington, D.C., and Costa Rica, across 28 brands, including 14 independent and boutique properties. In the fourth quarter, RED generated $8.3 million of revenue, representing a .3% increase over the prior year quarter and $0.3 million of adjusted EBITDA. The company expanded into new geographies, grew its asset base, and entered new verticals. RED established a strategic foothold in Hawaii with the acquisition of a Lee Inui and Maui Dive Shop, which we are pleased to report has recovered to normalized demand levels following the Maui fires in August. In addition, RED expanded its services to now include ground transportation services in the U.S. Virgin Islands. Premier generated $5.8 million of design and construction fee revenue in the fourth quarter, culminating in $27.7 million total design and construction fee revenue for 2023, a .1% increase over the prior year. Premier also generated $1.7 million of adjusted EBITDA in the fourth quarter and $9.5 million of adjusted EBITDA in 2023, resulting in adjusted EBITDA margins of .2% and 34.4%, respectively. We continue to see strong growth with Premier's third-party business, as revenues surpassed $4 million for the first time in 2023 and grew .9% over the prior year. During the quarter, Premier executed seven new third-party contracts, representing $0.4 million of expected design and construction fee revenue. Premier plans to continue to grow their third-party business and build upon their ground-up architecture capabilities in the year ahead. We are very pleased with the ongoing success of Ashford Securities fundraising efforts. To date, Ashford Securities has raised approximately $580 million of capital. Ashford Securities is currently in the market with a redeemable non-traded preferred stock offering for Ashford Hospitality Trust and has continued to build momentum by growing our institutional broker-dealer and RIA relationships. Since the launch of the Ashford Hospitality Trust non-traded preferred stock offering, Ashford Securities has placed approximately $104.7 million of capital from a syndicate of 42 firms. This is an attractive source of capital for Ashford Hospitality Trust to both improve its balance sheet and deploy for growth. Ashford Securities has also raised in capital for a growth-oriented investment product focused on commercial real estate in the state of Texas. To date, Ashford Securities has raised $11.5 million of gross capital, which comprises $2.5 million from Ashford Inc. and $9 million from a syndicate of dealers that includes 22 broker-dealers. 2023 was a successful year with our two primary initiatives, third-party sales and strategic acquisitions, and we are excited to continue this momentum into 2024. That concludes our prepared remarks, and we will now open up the call for Q&A.
spk04: Ladies and gentlemen, if you would like to ask a question, simply press star, then the number one on your telephone keypad. Your first question is from the line of Tyler Torrey with Oppenheimer. Please go ahead.
spk05: Thank you and good afternoon. This is Jonathan on for Tyler. Thanks for taking our questions. First one from me, understanding there's a lot of moving pieces, but given the industry is kind of seeing this normalization of leisure trends and accelerating group demand, any color on kind of how that played out for you guys over the quarter and how you're thinking about the opportunity for that mixed shift going forward?
spk03: Yeah, sure. In terms of our portfolio company performance and our hotel performance, we're excited about the trends with the continued growth of leisure and the kind of normalizing of the performance of our urban properties. You can see some of that showing up in our ability to add contracts at Remington, and then across our portfolio companies, Premier's getting some increased third-party business, which is representative of the industry normalizing and coming back to spending normal amounts of catbacks and leisure remaining strong with Red, for example, in their revenue growth. Also with Inspire, the continued stabilization of travel to urban markets and business travel is helping those guys with their continued growth. By and large, in addition to what we're seeing at our advice at Telles, we're seeing the impact of the stabilization across our portfolio companies as well.
spk05: Okay, great. And then can you provide some additional color on the Sterling hotels and resorts offering? Maybe how that opportunity came about? How are you thinking about the long-term potential of that offering and kind of the opportunity set for a private NAV REIT that's out there?
spk02: Yeah, I'm happy to take that one, Jonathan. The genesis of the idea for that platform is we've obviously operated publicly traded REITs for over 20 years now, and we've just seen the challenge of raising equity capital in the public markets. And publicly traded hotel REITs are very rarely traded in NAV or a preemptive NAV, and so it's very difficult to raise equity accretively. And so we were intrigued by the NAV REIT concept where the portfolio is constantly valued at the NAV of the underlying assets. And there's been a lot of capital raised in that space. We now have Ashford Securities. We've raised significant capital through Ashford Securities. That channel has been a very resilient source of capital over multiple cycles. And so we think it's an interesting product. We're obviously very early days on it. We've just launched it. But we think it's interesting because investors can come in and come out at NAV. And so it's hopefully an interesting product for us to be able to grow our asset center management. And so over time, we're hopeful that we can raise significant capital in that vehicle and grow our portfolio of asset center management, which would ultimately help all of our portfolio companies as well.
spk05: Okay, excellent. And then last one for me, if I could. Any color from the release this morning on the compliance plan with the exchange, kind of what that entails and kind of what needs to happen to satisfy the exchange requirements? Anything you can add there?
spk02: Yeah, it really boils down to the value of our public float and the challenge we've had. We've got a lot of preferred equity in our capital structure, a very small piece of our company's publicly traded, publicly listed. You know, commercial real estate asset managers in general have not fared very well in the public markets lately. I think we got swept up into that somewhat. And so we're hopeful that over time, the value would get back to a level that's consistent with the listing standards within NYSE America. NYSE America has given us some time to get back in compliance with that criteria.
spk05: Okay, great. Thank you for all the color. That's all for me.
spk04: Ladies and gentlemen, we have reached the end of the questions and answer session. Thank you for your participation and you may disconnect your lines at this time.
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