Ryman Hospitality Properties, Inc. (REIT)

Welcome to Ryman Hospitality Properties' first quarter 2022 earnings conference call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Mark Fioravanti, President, Ms. Jennifer Hutchison, Chief Financial Officer, Mr. Patrick Chafin, Chief Operating Officer, and Mr. Scott Bailey, President, Opry Entertainment Group. This call will be available for digital replay. The number is 800-925-9951 with no conference ID required. At this time, all participants have been placed on listen-only mode. It is now my pleasure to turn the floor over to Ms. Jennifer Hutchison. Ma'am, you may begin.

Good morning. Thank you all 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 fact may be deemed to be 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, future events, or any other reason. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP measure and exhibit to today's release. I will now turn the call over.

Thank you, Jen, and good morning, everyone. The first quarter of 22 was one of the most remarkable quarters I've witnessed in this business and I've been in it a long time. The rate of change from week to week and month to month as the Omicron variant receded and the group demand resurged was unlike any other trajectory I've seen except perhaps for the earliest days of the pandemic when the trajectory was essentially reversed. Our hospitality portfolio went from 60 points of occupancy and 42 million of adjusted EBITDA in the month of December, down to 33% and less than 1 million in January as the Omicron impact was felt. Then in February, it rose to 46% occupancy and nearly 17 million of EBITDA RE, before in March reaching over 63 points of occupancy and 52 million of adjusted EBITDA RE. The pace of recovery exceeded our expectations as we anticipated it would be much harder to offset the Omicron cancellations in such a short window as we discussed very clearly on our February earnings call. But there were two primary factors that helped deliver these results. One is the continued strength of our leisure transient business which we have highlighted before. This trend carried over from the holidays through to a robust spring break season in March. Leisure transient ADR grow 26% compared to the first quarter of 19 and 35% over the first quarter of last year. The Gaylord Palms saw some of the largest spring break crowds hosting 5,000 more transient room nights in the first quarter of this year than in the first quarter of 19. In March, the Palms turned in their single best month's performance on record for revenue and adjusted EBITDA RE. And the hotel's first quarter was only 1.1 million below its first quarter of 19 levels in profitability, despite 27 fewer points of occupancy due to the Omicron cancellations on the group side. This was truly a remarkable performance. The other factor leading us to surpass internal expectations was the rapid recovery in group travel as the weeks went on. Now, to give you a sense of just how fast things were happening, we quite literally had groups who early in the quarter indicated that they were likely to cancel. And then as things started to look better, their message became, well, we still plan to meet, but you should expect higher than normal attrition. Then as the meeting date arrived, some of these groups not only traveled, but exceeded their original blocks. Crazy times indeed. On the group side, we collected close to 20 million in cancellation and attrition fees. And since the beginning of the pandemic, we've collected now over $95 million in fees. We feel very good about the strength of our contracts going forward, as some of the last vestiges of the pandemic restrictions fall away, such as the airline mask mandate and travel truly normalizes. Looking ahead for our hospitality business, we feel confident that the momentum we experienced in the first quarter will continue, barring an exogenous event. To highlight this, at the end of the first quarter, our lead volumes were the highest they have been since the pandemic began, and only 4% below 2019 lead volumes. having added 2 million new leads in the three months in the first quarter. And within those leads, our near-term in-the-year, four-of-a-year lead volumes continue to exceed 2019 levels. In terms of production, the 422,000 gross group room nights booked in the first quarter exceeded the first quarter of 2019 by almost 7%. Now, to help frame how impressive this is, consider that in the immediately preceding quarter, that is in the fourth quarter of 21, we booked nearly 1 million gross group room nights. Typically, a large fourth quarter production number like that, like the one I just talked about, includes some amount of draining the funnel at the year end. So the following first quarter of the new year is more likely to see slower production as the funnel of new leads gets replenished. And our emphasis on driving future rate growth paid off handsomely in the first quarter, with ADR on new group bookings 8% higher than in the first quarter of 21, and 13% higher than the first quarter of 2019. The value proposition we offer meeting planners through the investments that we've made in our portfolio over the last five years positions our hotels with a significant competitive advantage in terms of quality and volume of meeting space, variety and attractiveness of food and beverage outlets, renovated room product, and extensive and unique amenities. Altogether, we feel very good about the trajectory our hospitality is on as we exit the first quarter. And the prospects for continued recovery in organic production for both this year and future years. Now, turning to our entertainment business, we saw a similar pattern of month-by-month improvements as Omicron abated. If we set aside our investment in Circle and look at the wholly owned operating businesses in this segment, led by the Ryman Opry House and our old Red Venues, these businesses started January at a loss of $1.1 million in adjusted EBITDA RE. By February, as attendance recovered, they generated positive 2.3 million, and in March turned in 6.4 million. For this first quarter as a whole, these businesses reached 7.4 million of positive adjusted EBITDA RE. On the same store basis compared to the first quarter of 19, and thus excluding both Circle and Old Red Orlando, which opened in 2020, this segment reached 93% of its first quarter 2019 performance, even with the impact of Omicron in January and February. Our big news in the first quarter was that we have reached an agreement with Ateros and NBC Universal to partner with them and sell 30% of our entertainment business at a minimum enterprise value of $1.415 billion, with the potential decline to $1.515 billion if certain performance metrics are met in 23 and 24, with both valuations inclusive of the presumed closing of Block 21. This agreement is a win all around for our shareholders, our employees, our customers, the artists that are on our stage, and our new partners. For starters, it sets a public valuation mark on this business, which we have long argued was undervalued by the market given the demand for live entertainment assets, especially ones as unique and irreplaceable as the Ryman Auditorium and the Grand Ole Opry House. It provides a boost of liquidity to Ryman in the form of , roughly $290 million equity purchase, which will lower our combined leverage by nearly a half a turn after fees and expenses, and helps accelerate our post-pandemic deleveraging plans. It brings the extensive expertise and strategic capabilities of Ateros and NBC Universal to accelerate the reach and expand the growth opportunities of this business across live entertainment performances, content creation, and digital distribution. It also creates scale and must new opportunities for our employees and new avenues and outlets for our artists and consumers to discover each other. It retains 70% of the upside of all of these opportunities for our existing shareholders with a clear set of options to eventually fully separate this business from the REIT, something we've always said was the best alignment for both businesses. Now turning back to our hotel business just for a moment, let me talk briefly about the future. And here's where we get really, really excited. All of the proactive decisions that we have taken over the last few years including product enhancements and expansion, group sales staff retention, and bringing in new folks to bolster our group sales processes have all resulted in a really strong book of forward business and a very impressive leisure business. As a consequence of all of this, the remainder of this year is shaping up to be remarkably strong. At the beginning of April of this year, we had over 524,000 net group room nights on the books for the second quarter, and approximately 1.4 million for the remaining nine months of the year. Now in terms of how these numbers compare to where we sat at the same time in 19, here's what's interesting. As of the 31st of March of this year, our room nights on the books for the rest of 22 represent 97% of 2019 group room nights on the books for 19, but with an ADR growth of 8.6%. And by the way, when you look at the group room nights that we have on the books as of the 31st of March 2022 for the year of 2023, these represent 102% of the 2019 group room nights we had on the books as of the 31st of March of 2018. Again, with an ADR growth of 8.6%. These are incredibly strong numbers, considering we just spent the last two years fighting a global pandemic. Now, Jen will share with you details of our guidance for the second quarter of the year. And you'll see, given the strength of our business, we're projecting that the next nine months on a consolidated basis, at the midpoint, will exceed our 2019 performance from adjusted EBITDA RE perspective. Now, I'll stop here as I have both Mark and Jen joining me today. As Jennifer has now stepped into our Chief Financial Officer role, and Jen, congratulations again on that. And Mark's duties have expanded as President of the company, and congrats to you, Mark, as well. So I'll turn it over to them for additional comments And then we'll open up the lines for questions, Mark.