BETHESDA, Md., Nov. 9, 2016 — DiamondRock Hospitality Company (the "Company") (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 26 premium hotels in the United States, today announced results of operations for the quarter ended September 30, 2016.
Third Quarter 2016 Highlights
- Net Income: Net income was $29.9 million and earnings per diluted share was $0.15.
- Comparable RevPAR: RevPAR was $187.91, a 0.8% increase from the comparable period of 2015.
- Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 32.12%, an increase of 23 basis points from the comparable period of 2015.
- Adjusted EBITDA: Adjusted EBITDA was $65.6 million, a decrease of $3.7 million or 5.3% from 2015. Adjusted EBITDA for the comparable period of 2015 included $6.8 million of Adjusted EBITDA from the three non-core hotels that were sold in 2016.
- Adjusted FFO: Adjusted FFO was $52.1 million and Adjusted FFO per diluted share was $0.26.
- Hotel Disposition: As previously announced, the Company sold the 169-room Hilton Garden Inn Chelsea on July 7, 2016 for $65.0 million.
- Share Repurchases: The Company repurchased 92,600 shares at an average price of $8.90 per share during the third quarter. Subsequent to September 30, 2016, the Company repurchased an additional 634,537 shares at an average price of $8.92 per share.
- Dividends: The Company declared a dividend of $0.125 per share during the third quarter, which was paid on October 12, 2016.
Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company, stated, "Our portfolio gained 2.1 points of market share in the quarter despite moderating transient demand. Our tight cost controls resulted in impressive third quarter profit margins. Year-to-date, the Company has kept total expenses flat. Additionally, the Company has successfully executed on its strategic priority of increasing liquidity and expects to end the year with over $200 million in corporate cash, no outstanding borrowings on our corporate credit facility, and more than half the portfolio unencumbered by debt. DiamondRock continues to pay a competitive, well-covered dividend and remains well positioned to deploy capital opportunistically, including through share repurchases, which began at the end of the quarter."
Operating Results
Please see "Non-GAAP Financial Measures" attached to this press release for an explanation of the terms "EBITDA," "Adjusted EBITDA," "Hotel Adjusted EBITDA Margin," "FFO" and "Adjusted FFO"and a reconciliation of these measures to net income. Comparable operating results include our 2015 acquisitions for all periods presented and exclude our 2016 dispositions for all periods presented. See "Reconciliation of Comparable Operating Results" attached to this press release for a reconciliation to historical amounts.
For the quarter ended September 30, 2016, the Company reported the following:
Third Quarter
2016
2015
Change
Comparable Operating Results (1)
ADR
$223.44
$223.34
0.0
%
Occupancy
84.1
%
83.5
%
0.6 percentage points
RevPAR
$187.91
$186.47
0.8
%
Revenues
$220.1 million
$214.1 million
2.8
%
Hotel Adjusted EBITDA Margin
32.12
%
31.89
%
23 basis points
Actual Operating Results
Revenues
$220.2 million
$238.5 million
-7.7
%
Net income
$29.9 million
$24.5 million
$5.4 million
Earnings per diluted share
$0.15
$0.12
$0.03
Adjusted EBITDA
$65.6 million
$69.3 million
-$3.7 million
Adjusted FFO
$52.1 million
$52.3 million
-$0.2 million
Adjusted FFO per diluted share
$0.26
$0.26
$0.00
(1)
The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.
For the nine months ended September 30, 2016, the Company reported the following:
Year to Date
2016
2015
Change
Comparable Operating Results (1)(2)
ADR
$223.98
$223.05
0.4
%
Occupancy
80.9
%
81.4
%
-0.5 percentage points
RevPAR
$181.30
$181.66
-0.2
%
Revenues
$644.6 million
$639.1 million
0.9
%
Hotel Adjusted EBITDA Margin
31.96
%
31.72
%
24 basis points
Actual Operating Results
Revenues
$689.9 million
$697.2 million
-1.1
%
Net income
$90.9 million
$59.9 million
$31.0 million
Earnings per diluted share
$0.45
$0.30
$0.15
Adjusted EBITDA
$200.1 million
$198.9 million
$1.2 million
Adjusted FFO
$158.0 million
$151.5 million
$6.5 million
Adjusted FFO per diluted share
$0.78
$0.75
$0.03
(1)
The amounts for all periods presented exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.
(2)
The 2015 amounts include pre-acquisition operating results for the Shorebreak Hotel from January 1, 2015 to February 5, 2015 and Sheraton Suites Key West from January 1, 2015 to June 29, 2015 in order to reflect the period in 2015 comparable to our ownership period in 2016. The pre-acquisition operating results were obtained from the respective sellers of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the respective sellers. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.
Share Repurchase Program
In September 2016, the Company began repurchasing shares of its common stock pursuant to its previously announced $150 million share repurchase program, and it has continued such repurchases since the end of the third quarter. Year-to-date, the Company has repurchased 727,137 shares of its common stock at an average price of $8.92 per share for a total purchase price of $6.5 million. The Company has $143.5 million of remaining authorized capacity under its share repurchase program. The shares are purchased in the open market or through private transactions from time-to-time, depending upon market conditions, pursuant to a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.
Capital Expenditures
The Company spent approximately $78.7 million on capital improvements during the nine months ended September 30, 2016. The investments relate primarily to three major projects: the second phase of the Chicago Marriott Downtown renovation; the first phase of the renovation at The Gwen; and the Worthington Renaissance guest room renovation. The Company currently expects to spend approximately $130 million on capital improvements at its hotels in 2016. Significant projects in 2016 include:
- The Gwen, a Luxury Collection Hotel: The Company rebranded the Conrad Chicago to Marriott's Luxury Collection brand on September 1, 2015. The renovation work associated with the brand conversion will be completed in two phases. The first phase, consisting of the lobby, rooftop bar and other public spaces, was completed in May 2016. The second phase of the renovation, consisting of the guest rooms, is expected to be completed during the seasonally slow winter season beginning in late 2016.
- Chicago Marriott Downtown: The second and largest phase of the multi-year renovation was completed early in the second quarter 2016. This phase included the upgrade renovation of approximately 460 guest rooms as well as construction of a new, state-of-the-art fitness center. The remaining guest rooms will be renovated during the seasonally slow winter months over the next two years.
- The Lodge at Sonoma: The Company expects to renovate the guest rooms at the hotel during the seasonally slow period during late 2016 through early 2017.
- Charleston Renaissance: The Company expects to renovate the guest rooms at the hotel during the seasonally slow period from the end of the year through early 2017.
- Worthington Renaissance: The Company has commenced the guest room renovation at the hotel and expects to complete the project at the end of 2016.
Balance Sheet
As of September 30, 2016, the Company had $236.0 million of unrestricted cash on hand and approximately $0.9 billion of total debt, which consisted of property-specific mortgage debt and $100.0 million of borrowings on its term loan. The Company expects to end the year with over $200 million in unrestricted cash, approximately $0.9 billion of total debt and no outstanding borrowings on its senior unsecured credit facility.
Dividends
The Company's Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of September 30, 2016. The dividend was paid on October 12, 2016.
Guidance
The Company is providing annual guidance for 2016, but does not undertake to update it for any developments in its business. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission. Comparable RevPAR assumes that all of the Company's 26 hotels were owned since January 1, 2015.
Given recent moderating trends in business transient demand, the Company is reducing its RevPAR outlook. However, because of better than expected cost controls from asset management initiatives, the Company is maintaining prior full year 2016 Adjusted EBITDA and Adjusted FFO guidance. In addition, the Company now expects full year 2016 corporate expenses to range from $23 million to $24 million.
The Company now expects the full year 2016 results to be as follows:
Previous Guidance
Current Guidance
Metric
Low End
High End
Low End
High End
Comparable RevPAR Growth
0 percent
1 percent
-0.75 percent
0 percent
Adjusted EBITDA
$250 million
$263 million
$250 million
$263 million
Adjusted FFO
$199 million
$209 million
$199 million
$209 million
Adjusted FFO per share
(based on 201.5 million shares)
$0.99 per share
$1.04 per share
$0.99 per share
$1.04 per share
Selected Quarterly Comparable Operating Information
The following table is presented to provide investors with selected quarterly comparable operating information for 2015 and 2016 year-to-date. The operating information includes our 2015 acquisitions for all periods presented and excludes our 2016 dispositions for all periods presented.
Quarter 1, 2015
Quarter 2, 2015
Quarter 3, 2015
Quarter 4, 2015
Full Year 2015
ADR
$
211.89
$
232.75
$
223.34
$
227.67
$
224.17
Occupancy
76.5
%
84.3
%
83.5
%
77.1
%
80.3
%
RevPAR
$
162.02
$
196.15
$
186.47
$
175.45
$
180.09
Revenues (in thousands)
$
195,263
$
229,647
$
214,144
$
208,741
$
847,795
Hotel Adjusted EBITDA (in thousands)
$
52,351
$
82,072
$
68,300
$
65,624
$
268,347
% of full Year
19.5
%
30.6
%
25.5
%
24.4
%
100.0
%
Hotel Adjusted EBITDA Margin
26.81
%
35.74
%
31.89
%
31.44
%
31.65
%
Available Rooms
844,784
856,751
867,168
866,732
3,435,435
Quarter 1, 2016
Quarter 2, 2016
Quarter 3, 2016
YTD 2016
ADR
$
216.03
$
231.31
$
223.44
$
223.98
Occupancy
73.2
%
85.5
%
84.1
%
80.9
%
RevPAR
$
158.22
$
197.69
$
187.91
$
181.30
Revenues (in thousands)
$
192,034
$
232,500
$
220,087
$
644,621
Hotel Adjusted EBITDA (in thousands)
$
51,968
$
83,362
$
70,686
$
206,016
Hotel Adjusted EBITDA Margin
27.06
%
35.85
%
32.12
%
31.96
%
Available Rooms
857,311
858,039
867,468
2,582,818
To view full financial release and corresponding tables please click the PDF icon or visit: http://investor.drhc.com/phoenix.zhtml?c=181049&p=irol-IRHome
