DENVER, Aug. 05, 2020 // GLOBE NEWSWIRE // - Red Lion Hotels Corporation (“RLHC”, “Red Lion”) (NYSE: RLH), a hospitality company doing business as RLH Corporation which franchises midscale and economy hotels, today reported second quarter 2020 results and provided an update regarding financial and operational activities.
Second Quarter Financial Results
Red Lion reported a net loss of ($4.0) million, or ($0.16) per share compared to a net loss of ($3.0) million or ($0.12) per share in the prior year period. Adjusted EBITDA was $0.3 million compared to $3.7 million for the same period in 2019.
In the core franchise hotel segment, which excludes company operated hotels, second quarter revenues were $8.8 million compared to $14.7 million in the prior year period and Core Adjusted EBITDA was $0.8 million, compared to $1.1 million in the prior year period.
Year-over-year results continue to reflect the loss of income from the sale of four company owned and operated hotels, franchise agreement terminations, as well as reduced travel due to COVID-19.
Cash and equivalents at quarter end were $33.8 million, up $2.0 million from year end.
Red Lion CEO John Russell stated, “We continue to make positive strides with respect to franchisee retention as we focus on our ROAR initiatives. Our franchised hotels remain ideally positioned to benefit from a resurgence in drive-to travel as economies re-open, however due to ongoing uncertainty caused by the pandemic, we are also continuing with our cost savings and cash preservation initiatives. We were encouraged by having 98% of our franchisees’ hotels open and we remain confident that we are well positioned to benefit as travel, especially drive-to, picks up.”
Operating Summary
As a result of the renewed focus on its ROAR initiatives, RLHC signed 92 franchise agreements in the first half of 2020, including adding 19 new franchised locations. This pace of signings reflects the value franchisees find in the Red Lion brands and is even more impressive considering the uncertain environment COVID has created. Additionally, by reestablishing the important relationship with franchisees — Promises Made, Promises Kept— RLHC improved retention trends, seeing 22% fewer franchisees leaving the brand year over year.
Royalty fees for the second quarter were $3.6 million compared to $5.9 million in the prior year quarter primarily due to terminated franchise agreements and the impact of COVID-19 on midscale brands, which generally pay royalties and marketing fees as a percentage of gross rooms revenue. Royalty revenue mix for the second quarter of 2020 was 83% from economy hotels and 17% from midscale hotels.
Selling, general, administrative, and other expenses, which include franchise sales; operations and corporate costs; and bad debt expense were $4.8 million, a 28% improvement from $6.7 million in the year-ago period. The improvement was driven by cost containment efforts initiated earlier in 2020.
Transaction costs for the quarter were $1.0 million comprised of fees paid to advisors engaged to review and respond to bona fide inquiries received from parties considering an investment in or acquisition of the Company. The Board remains committed to evaluating strategic alternatives that are in the best interest of shareholders, particularly as RLHC has attracted attention from those who recognize that its portfolio of franchised hotels are located in areas that are less impacted by a reduction in leisure travel, and are well positioned to respond quickly to upticks in travel, especially drive-to travel.
Balance Sheet and Liquidity
As of June 30, 2020, cash and cash equivalents totaled $33.8 million, a $4.1 million decrease from March 31, 2020. The decrease included a portion of the $1.1 million in fee deferrals offered to assist franchisees through this difficult period; $0.3 million in severance and other costs to implement the cost-savings measures established at the onset of COVID; and $0.2 million of advisor fees as previously described.
Adjusted free cash flow for the six months ended June 30, 2020, was $2.0 million as compared to $5.4 million for the six months ended June 30, 2019. Cash flow from operations was ($5.8) million and $3.1 million for the same periods, respectively. RLHC has $5.6 million of debt on its balance sheet related to a non-recourse mortgage on the Hotel RL Olympia held in a joint venture in which RLHC holds a 55% equity interest.
Webcast and Conference Call
Red Lion’s senior management team plans to host a webcast and conference call to review its financial results at 9:00 a.m. ET, Thursday, August 6, 2020.
The live webcast can be accessed through the Investor Relations section of RLHC’s website.
For those unable to access the webcast, the conference call will be accessible domestically or internationally, by dialing 877-407-8289 or 201-689-8341, respectively, and requesting the Red Lion Hotel Corporation Second Quarter 2020 Earnings Conference Call.
A replay of the conference call will be available after 11:30 a.m. ET on Thursday, August 6, 2020 through 11:59 p.m. ET on Thursday, August 20, 2020. To access the replay, listeners may use 877-660-6853 (domestic) or 201-612-7415 (international). The passcode for the replay is 13698294. The recorded replay will be available on the Company’s website for one year after the call date.
Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation, which focuses on the franchising of 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.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning operational and financial impacts of the COVID-19 pandemic, 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, risks associated with our asset light model; relationships with our franchisees and properties; competitive conditions in the lodging industry; economic cycles; changes in future demand and supply for hotel rooms; international conflicts and conditions; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; the extent and duration of the COVID-19 pandemic; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other risks and uncertainties discussed in the Company's annual report on Form 10-K for the year ended December 31, 2019, 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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A summary of activity relating to our open midscale franchise and company operated hotels by brand from January 1, 2020 through June 30, 2020 is provided below:
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A summary of activity relating to our open economy franchise hotels by brand from January 1, 2020 through June 30, 2020 is provided below:
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A summary of our executed agreements for the six months ended June 30, 2020 is provided below:
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SOURCE RLH Corporation
Red Lion Hotels Corporation is a hospitality company primarily engaged in the franchising, management and ownership of upscale, midscale and economy hotels.