DENVER, Aug. 05, 2019 // GLOBE NEWSWIRE // - Red Lion Hotels Corporation (the “Company”) (NYSE: RLH), a growing hospitality company doing business as RLH Corporation which franchises upscale, midscale and economy hotels, today reported second quarter 2019 results.
Second Quarter Highlights
“While still at an early stage, we are pleased with the progress and improvement in our core franchise business. Our full transition to a franchise company with higher quality, sustained and growing cash flow requires time and perseverance,” stated Greg Mount, RLH Corporation President and Chief Executive Officer. “Adjusted EBITDA in our core franchise business grew and we are on pace to exceed our prior year margins. A highlight in the second quarter was the signing of 40 high-quality franchise license agreements, which allowed us to raise our 2019 expectations.”
Mr. Mount continued, “We have grown our quarterly recurring core franchise revenue at a compound annual growth rate of 44% to over $14.7 million from $2.4 million, since 2014. In addition, Canvas, our cloud-based hospitality management suite product is meeting early success and we are seeing, as believed a 30% to 50% cost savings for customers and margins to RLH with the potential to rival our franchise business as Canvas grows. We have signed seven agreements thus far and are in discussions to further expand our pipeline of opportunities. This is just one example of another asset light product that can lead to additional long-term value creation for our stakeholders.”
The Company reported a net loss attributable to RLH Corporation of $2.8 million or $(0.11) per share in the second quarter as compared to a net loss attributable to RLH Corporation of $2.3 million or $(0.10) per share in the prior year period. The year-over-year change in operating results was primarily due to lower revenue from Company-owned hotels, versus the year-ago period, as a result of the sale of hotels sold during 2018, partially offset by reductions in selling, general, administrative and other expenses.
Adjusted EBITDA, which is adjusted for non-cash and certain one-time items, was $3.7 million for the second quarter as compared to $6.6 million in prior year period. The change in Adjusted EBITDA primarily reflects the growth of the franchise business offset by $2.6 million of EBITDA contribution from the hotels sold in 2018; a $900,000 decrease in year over year hotel segment performance, partially offset by a $100,000 improvement in franchise EBITDA and $500,000 reduction in SG&A.
Royalty fees increased 1.7% to $5.9 million primarily due to the Knights Inn acquisition. Marketing, reservations and reimbursables revenue, which are fees from franchised properties associated with the Company’s brands and shared services, increased 8% to $7.6 million due to an increase in transaction and reservation fees.
Selling, general, and administrative expenses, which include franchise sales, operations and corporate costs, continued to decrease with a 21% year-over-year decline to $6.5 million, reflecting the Company’s continued focus on leveraging technology, cost controls and payroll reductions including a decrease in stock-based compensation.
The Company executed 40 franchise agreements in the second quarter, 5 upscale and midscale hotels and 35 select service hotels, up 38% from executed franchise agreements signed in the prior year period. Year-to-date, the Company has signed 96 contracts including 13 upscale and midscale hotels and 83 select service hotels. Of the 96 contracts signed to date, 30 are for new locations that will be joining the RLH platform over the next 24 months. Our upscale and midscale franchise contracts typically contain future royalty rate increases, which allows our revenue to increase as our internal costs stay stable. For instance, midscale and upscale contracts are expected to contribute approximately 30% of our royalty revenue in 2019. With contractual rate changes, these same contracts will increase their future royalty revenue contribution by over 15% in 2020 and over 40% over the next three years.
Balance Sheet And Liquidity
RLH Corporation finished the second quarter with cash and restricted cash of $23 million including $6.1 million of cash and cash equivalents held by the joint ventures and debt of $56.5 million comprised of a corporate term loan of $5.0 million, a $10 million revolving line of credit and $41.5 million of hotel mortgages. As of June 30, 2019, the Company had a low net debt to trailing 12 months Adjusted EBITDA ratio of 2.6 times. Adjusted free cash flow for the six months ended June 30, 2019 was approximately $5.4 million as compared to the prior year period of $545,000 and $(15.1) million for the twelve months ended December 31, 2018.
2019 Expectations
The Company is providing updated guidance with respect to the number of franchise agreements and a reduction in Corporate Selling General and Administrative expenses. Revised expectations for 2019 do not contemplate incremental sales of the owned hotels. However, the Company expects that in the event of any sales of the remaining hotels, there will be a reduction in the Company’s profitability in 2019. As each sale closes, the Company will disclose the material terms of each transaction in an 8K filing including the historical Adjusted EBITDA relating to the sold hotel. In addition, the Company will provide updated guidance to account for the sales of hotels at the time it reports quarterly results.
Conference Call Information
RLH Corporation will host a conference call on Tuesday, August 6 at 9:00 AM Eastern Time, to discuss the results for interested investors, analyst and portfolio managers. Hosting the call will be RLH Corporation President & Chief Executive Officer Greg Mount and Executive Vice President, Chief Financial Officer and Treasurer, Julie Shiflett.
To participate in the conference call, please dial the following number 10 minutes prior to the scheduled time: (877) 407-8289. International callers should dial (201) 689-8341.
This conference call will also be webcast live on www.rlhco.com in the Investor Relations section of the website. To listen to the live call, please go to the RLH Corporation website at least 15 minutes prior to the start of the call to register and to download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at approximately 12:00 PM Eastern Time on August 6 through midnight August 20, 2019 at (877) 660-6853 or (International) (201) 612-7415, using access code 13692664. The replay will also be available shortly after the call on the RLH Corporation website.
We don’t wait for the future. We create it.
Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation which focuses on the franchising of upscale, midscale and economy hotels. The Company strives to maximize return on invested capital for hotel owners across North America through relevant brands, industry-leading technology and forward-thinking services. For more information, please visit the company’s website at www.rlhco.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, economic cycles; international conflicts; changes in future demand and supply for hotel rooms; competitive conditions in the lodging industry; relationships with franchisees and properties; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; ability to locate lessees for rental property; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other matters discussed in the Company's annual report on Form 10-K for the year ended December 31, 2018, and in other documents filed by the Company with the Securities and Exchange Commission.
Evelyn Infurna
Investor Relations
203-682-8265
investorrelations@rlhco.com
Roxanne Robasco
Media Relations
Vice President, Brand Marketing & PR
914-217-7803
roxanne.robasco@rlhco.com
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A summary of our executed agreements for the six months ended June 30, 2019 is provided below:
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For full wide spreadsheet report, please go to: https://www.globenewswire.com/news-release/2019/08/05/1897231/0/en/RLH-Corporation-Reports-Second-Quarter-2019-Results.html
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SOURCE Red Lion
Red Lion Hotels Corporation is a hospitality company primarily engaged in the franchising, management and ownership of upscale, midscale and economy hotels.