DENVER, Nov. 08, 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 third quarter 2019 results.
Third Quarter Highlights
Third Quarter 2019 Financial Results
The Company reported a net loss attributable to RLH Corporation of $3.5 million or $(0.14) per share in the third quarter as compared to net income attributable to RLH Corporation of $8.9 million or $0.35 per diluted share in the prior year period. The year-over-year change was primarily related to the loss of revenue from sale of the Company Operated hotels as well as the associated gain of $26.0 million in the 2018 period.
Adjusted EBITDA for the third quarter was $5.9 million, an increase of $0.1 million as compared to the third quarter of 2018, reflecting a reduction in operating costs and compensation expense offset by lower company operated hotel profits and higher bad debt expense primarily due to one large customer.
Royalty fees decreased 9.5% to $5.9 million primarily due to terminated agreements in SSB branded hotels. Marketing, reservations and reimbursables revenue, which are fees from franchised properties associated with the Company’s brands and shared services, increased 9.3% to $8.3 million due to an increase in transaction and reservation fees.
Selling, general, administrative and other expenses, which include franchise sales, operations and corporate costs and bad debt expense, remained relatively flat at $8.2 million, as the Company’s continued focused on leveraging technology to drive efficiencies, controlling costs and reducing payroll, including a decrease in incentive compensation, was offset by an increase in bad debt and related expenses due to a large customer.
An asset impairment charge of $5.4 million was recorded in the current year quarter based on carrying values of hotels under non-binding sale agreements compared to the sale values.
For the quarter, the Company executed 47 franchise agreements comprised of 10 upscale and midscale hotels and 37 select service hotels, an increase of 56% from executed franchise agreements signed in the prior year period. Year-to-date, the Company has signed 143 contracts including 23 upscale and midscale hotels and 120 select service hotels. Of the 143 contracts signed to date, 40 are for new locations. Our midscale franchise contracts typically open six to eighteen months after signing and contain future royalty rate increases, which allow our revenue to increase without needing to increase support costs. For instance, midscale contracts, signed throughout 2019, contributed just $0.1 million in 2019 royalty revenues and are expected to contribute approximately $0.5 million of royalty revenue in 2020 and increase annually by 10% to 20% for the following two years.
Offsetting the newly executed signings in the quarter were 60 terminations which included 9 midscale hotels as well as 51 economy hotels. Year to date, there have been 176 terminations comprised of 17 midscale hotels and 159 economy hotels.
Balance Sheet and Liquidity
RLH Corporation finished the third quarter with cash and restricted cash of $21 million including $7.3 million of cash and cash equivalents held by the joint ventures and debt of $55 million comprised of a corporate term loan of $4.0 million, a corporate level $10 million revolving line of credit, and $41 million of hotel mortgages. As of September 30, 2019, the Company had a low net debt to trailing 12 months Adjusted EBITDA ratio of 2.5 times. Adjusted free cash flow for the nine months ended September 30, 2019 was approximately $3.8 million as compared to the prior year period of $(16) million and $(15.) million for the twelve months ended December 31, 2018.
Hotel Sales
During the quarter, the Company entered into non-binding agreements to sell four Company owned hotels for gross proceeds of approximately $85 million and net proceeds to the Company of $32 million to $36 million after hotel debt repayments and joint venture distributions. The hotels include Red Lion Atlanta Airport, Hotel RL Washington D.C. and Hotel RL Salt Lake City, all of which are held in joint venture entities of which RLH owns 55%. The Company also announced the execution of a non-binding sales agreement for the Red Lion Hotel Anaheim, which is a wholly owned unencumbered asset. Net proceeds to the Company will be used to pay down corporate debt and fund future franchise growth opportunities.
The sales are expected to be completed by the end of Q1 2020.
2019 Expectations
The Company is providing updated guidance with respect to the number of franchise agreements, Corporate Selling General and Administrative expenses, and a reduction in Adjusted EBITDA from continuing operations. Revised expectations for 2019 do not contemplate the sale of the owned hotels under contract due to the unknown timing of the sales. 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.
Conference Call Information
RLH Corporation will host a conference call on Friday, November 8 at 9:00 AM Eastern Time, to discuss the results for interested investors, analyst and portfolio managers.
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 November 8 through midnight November 22, 2019 at (877) 660-6853 or (International) (201) 612-7415, using access code 13695406. The replay will also be available shortly after the call on the RLH Corporation website.
To learn more about franchising with RLH Corporation, visit franchise.rlhco.com. 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. The forward-looking statements contained herein speak only to the date of this press release. The Company undertakes no obligation to update or revise any forward-looking statements except as required by law.
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Nikki Saks
Investor Relations
203-682-8263
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 activity relating to our USB hotels by brand from January 1, 2019 through September 30, 2019 is provided below:
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A summary of activity relating to our SSB hotels by brand from January 1, 2019 through September 30, 2019 is provided below:
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A summary of our executed agreements for the nine months ended September 30, 2019 is provided below:
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Source: RLHC (Red Lion Hotels Corporation)
Red Lion Hotels Corporation is a hospitality company primarily engaged in the franchising, management and ownership of upscale, midscale and economy hotels.