Ashford Hospitality Trust Inc

Greetings and welcome to the Ashford Hospitality Trust 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 call over to Jordan Jennings, Investor Relations for Ashford Hospitality Trust. Thank you. You may begin.

Good day, everyone, and welcome to today's conference call to review the results for Ashford Hospitality Trust for the second quarter of 2022 and to update you on recent developments. On the call today will be Rob Page, President and Chief Executive Officer, Derek Eubanks, Chief Financial Officer, and Chris Nixon, Senior Vice President and Head of Asset Management. The results, as well as notice of accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon 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 hardware provisions of the federal securities regulations. Such forward-looking statements are subject to numerous assumptions and certainties and known 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 with 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 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 August 2, 2022, Each listener is encouraged to view those reconciliations provided in the earnings release together with all 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 Rob Haight. Please go ahead, sir.

Good morning. Welcome to our call. I'll start by providing an overview of the current industry environment and how Ashford Trust has been navigating it. After that, Derek will review our financial results and then Chris will provide an operational update on our portfolio. I'd like to highlight some of our recent accomplishments and the main themes for the call. First, we saw sequential RESPAR improvement each month as we moved through the second quarter and expect continued strength through the third quarter. Additionally, we're excited that June's RevPower performance was the best month we've had versus 2019 thus far. Second, our liquidity and cash position continue to be strong. We ended the quarter with approximately $615 million of net working capital, which equates to approximately $17 per diluted share, and is an increase from where we ended the first quarter. With yesterday's closing stock price of $9.23, we believe we are trading at a meaningful discount to both our net asset value per share and our net working capital per share. I'm also pleased to report that we generated approximately $23 million of positive cash flow in the quarter after CapEx and our preferred dividends. Third, we have lowered our leverage and improved our overall financial position. Since its peak in 2020, we have lowered our net debt plus preferred equity by over $1 billion equating to a decrease in our leverage ratio, defined as net debt plus preferred equity to gross assets by approximately 12 percentage points. Fourth, in the last quarter, we filed a registration statement with the SEC for a future offering of non-traded preferred equity. Importantly, this announcement demonstrates our strategic pivot from defense to offense, as we believe this offering will provide an attractive cost of capital and allow us to accretively grow our portfolio over time, subject to future market conditions. We believe access to this attractive growth capital is a significant competitive advantage, particularly given the fact that large companies are trading at material discounts to their net asset values. We are now effective on this offering and expect to commence issuing limited amounts of the non-traded preferred equity beginning in the third quarter of 2022. We are optimistic about the long-term outlook for the company, and by taking strategic actions to strengthen our balance sheet, we feel well positioned to capitalize on opportunities we are seeing in the hospitality industry. Having said that, we have refrained from raising any common equity capital this year. Given the softness of our stock price in our current circumstances, we don't currently anticipate raising common equity capital at these levels. To the extent we're successful with our non-traded preferred capital raise, our preference would be to use that capital for future growth. We expect several of our loan pools to remain in cash traps over the next 12 to 24 months. However, we're pleased to note that several of our hotels, including the Renaissance Nashville and Hilton Back Bay, have recently come out of their respective cash traps. we believe several other of our loans may be successful in exiting their traps in 2022, including Key's Pools D and E and our Marriott Crystal Gateway. For 2022, our CapEx spending is higher than the previous two years, but still well below our historical run rate for CapEx. CapEx spend during the second quarter was approximately $20.1 million. Additionally, while we're monitoring risks related to the current high inflation environment and the potential impacts of our portfolio, CBRE recently issued an industry report that highlighted the benefits of hotels as a good hedge against inflation. Their model cited that due to the uniquely short lease periods measured in days rather than months or years, hotels have been seen as an effective hedge against inflation given hotels can adjust prices rapidly to account for any short-term variations in inflation. In fact, the report highlighted that historically during periods of high inflation, hotels have shown their ability to grow profits above the inflation rate. We are seeing this play out during the current high inflation period we are experiencing in the industry. Let me now turn to the operating environment performance at our hotels. The lodging industry is clearly showing signs of improvement. RevPAR for all hotels in the portfolio increased approximately 73% for the second quarter versus last year. This RevPAR result equates to a decrease of approximately 6% versus the second quarter of 2019. June was the best performing month of the second quarter, along with being the best month we've had versus 2019 thus far, with REVPAR down only 4% versus 2019. Preliminary numbers from July are consistent with what we saw in June across the portfolio, with REVPAR for the month down about 5% versus 2019. Looking ahead to the remainder of 2022, we believe our geographically diverse portfolio consisting of high-quality US assets with best-in-class brands and management companies is well-positioned to capitalize on the strong demand we're seeing across leisure, business, and group. We also believe that our relationship with our affiliated property manager, Remington, really sets us apart. We believe Remington has been able to consistently manage costs and optimize revenues aggressively, enabling us to outperform the industry from an operations standpoint for many years. Additionally, capital recycling remains an important component of our strategy, and we are pursuing opportunities to sell certain Encore assets. We have one full service asset under contract to sell with closing most likely in the third quarter and another full service asset currently market for sale. We expect any net proceeds from these sales will go towards paying down our strategic financing. Whenever we sell assets, our approach takes into consideration many factors such as impact on EBITDA, leverage, future capex spending, potential market growth, and rev par among others. Turning to investor relations, we continue to get on the road in order to meet with investors, communicate our strategy, and explain what we believe to be an attractive investment opportunity in Ashford Trust. We've attended numerous industry and Wall Street conferences this year, which have led to nearly 300 investor meetings year to date. We have several more conferences coming up in the second half of the year and look forward to speaking with many of you during those events. We believe we have the right plan in place to move forward and maximize value at Ashford Trust. This plan includes continuing to grow liquidity across the company, optimizing the operating performance of our assets, improving our balance sheet over time, and looking for opportunities to invest and grow our portfolio. We have a track record of success when it comes to property acquisitions, joint ventures, and asset sales, and we expect they will continue to be part of our plans moving forward. We ended 2022 second quarter with a substantial amount of cash in our balance sheet, and with the launch of our non-traded preferred stock offering, we are excited about the opportunities we see in front of us. And I'll turn the call over to Derek to review our second quarter financial performance.