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Playa Hotels & Resorts N.V. Reports Second Quarter 2019 Results

FAIRFAX, Va., Aug. 06, 2019 (GLOBE NEWSWIRE) -- Playa Hotels & Resorts N.V. (the “Company” or “Playa”) (NASDAQ: PLYA) today announced results of operations for the three and six months ended June 30, 2019.

Three Months Ended June 30, 2019 Results

  • Net Income was $1.0 million compared to $16.8 million in 2018
  • Adjusted Net Income was $1.3 million compared to $13.4 million in 2018
  • Net Package RevPAR increased 1.1% over 2018 to $205.55, driven by a 6.3% increase in Net Package ADR, and partially offset by a 400 basis points decrease in Occupancy
  • Comparable Net Package RevPAR increased 3.6% over 2018 to $217.65, driven by a 6.4% increase in Net Package ADR, and partially offset by a 220 basis points decrease in Occupancy
  • Owned Resort EBITDA decreased 1.1% over 2018 to $49.4 million
  • Owned Resort EBITDA Margin decreased 3.3 percentage points over 2018 to 31.9%
  • Adjusted EBITDA decreased 3.0% over 2018 to $40.1 million
  • Adjusted EBITDA Margin decreased 3.3 percentage points over 2018 to 25.8%

Six Months Ended June 30, 2019 Results

  • Net Income was $44.0 million compared to $38.6 million in 2018
  • Adjusted Net Income was $48.1 million compared to $48.5 million in 2018
  • Net Package RevPAR decreased 4.9% over 2018 to $225.37, driven by a 570 basis points decrease in Occupancy, and partially offset by a 1.8% increase in Net Package ADR
  • Comparable Net Package RevPAR decreased 1.5% over 2018 to $240.97, driven by a 290 basis points decrease in Occupancy, and partially offset by a 1.9% increase in Net Package ADR
  • Owned Resort EBITDA decreased 0.6% over 2018 to $131.8 million
  • Owned Resort EBITDA Margin decreased 3.8 percentage points over 2018 to 38.4%
  • Adjusted EBITDA decreased 0.9% over 2018 to $114.8 million
  • Adjusted EBITDA Margin decreased 3.5 percentage points over 2018 to 33.3%

“The second quarter once again came in ahead of our internal expectations with Easter shifting in our favor, strong Group performance in Cabo, robust trends in Jamaica and tight expense control throughout the portfolio leading to better-than-expected flow through and margins, while we progressed on our strategic initiatives.

While financial performance was positive in the first half of 2019, the diligent cost management and overall strength we are experiencing in Jamaica cannot offset the negative press regarding the Dominican Republic, and corresponding short-term business disruption, leading us to prudently lower EBITDA expectations for the second half of 2019.

Despite the change in our guidance, we are still very optimistic about the future potential of the Dominican Republic, as bookings have already begun to recover and normalize, with the impact to the first half of 2020 expected to be significantly lower than the impact felt in 2019.”

Bruce D. Wardinski, Chairman and CEO of Playa Hotels & Resorts

Financial and Operating Results

The following table sets forth information with respect to the operating results of our total portfolio and comparable portfolio for the three and six months ended June 30, 2019 and 2018 ($ in thousands):

Total Portfolio Summary                        
    Three Months Ended June 30,       Six Months Ended June 30,    
    2019   2018   Change   2019   2018   Change
Occupancy   79.8%   83.8%   (4.0) pts   79.9%   85.6%   (5.7) pts
Net Package ADR   $ 257.66   $ 242.43   6.3%   $ 281.93   $ 276.86   1.8%
Net Package RevPAR   $ 205.55   $ 203.23   1.1%   $ 225.37   $ 237.08   (4.9)%
Total Net Revenue (1)   $ 155,454   $ 141,753   9.7%   $ 344,395   $ 314,905   9.4%
Owned Net Revenue (2)   $ 154,889   $ 141,707   9.3%   $ 342,894   $ 314,211   9.1%
Owned Resort EBITDA (3)   $ 49,394   $ 49,951   (1.1)%   $ 131,751   $ 132,534   (0.6)%
Owned Resort EBITDA Margin 31.9%   35.2%   (3.3) pts   38.4%   42.2%   (3.8) pts
Other corporate - unallocated $ 9,887   $ 8,689   13.8%   $ 18,393   $ 17,009   8.1%
Management Fee Revenue   $ 551   $ 55   901.8%   $ 1,485   $ 351   323.1%
Adjusted EBITDA (4)   $ 40,058   $ 41,317   (3.0)%   $ 114,843   $ 115,876   (0.9)%
Adjusted EBITDA Margin   25.8%   29.1%   (3.3) pts   33.3%   36.8%   (3.5) pts
                         
Comparable Portfolio Summary                    
    Three Months Ended June 30,       Six Months Ended June 30,    
    2019   2018   Change   2019   2018   Change
Occupancy   81.0%   83.2%   (2.2) pts   82.4%   85.3%   (2.9) pts
Net Package ADR   $ 268.59   $ 252.54   6.4%   $ 292.33   $ 286.83   1.9%
Net Package RevPAR   $ 217.65   $ 210.10   3.6%   $ 240.97   $ 244.59   (1.5)%
Total Net Revenue (1)   $ 114,463   $ 109,545   4.5%   $ 248,487   $ 250,641   (0.9)%
Owned Net Revenue (2)   $ 113,898   $ 109,499   4.0%   $ 246,986   $ 249,948   (1.2)%
Owned Resort EBITDA (3)   $ 40,004   $ 37,674   6.2%   $ 100,100   $ 103,826   (3.6)%
Owned Resort EBITDA Margin 35.1%   34.4%   0.7 pts   40.5%   41.5%   (1.0) pts
Other corporate - unallocated $ 9,887   $ 8,689   13.8%   $ 18,393   $ 17,009   8.1%
Management Fee Revenue   $ 551   $ 55   901.8%   $ 1,485   $ 351   323.1%
Adjusted EBITDA (4)   $ 30,668   $ 29,041   5.6%   $ 83,192   $ 87,169   (4.6)%
Adjusted EBITDA Margin   26.8%   26.5%   0.3 pts   33.5%   34.8%   (1.3) pts

(1) Total Net Revenue represents revenue from the sale of all-inclusive packages, which include room accommodations, food and beverage services and entertainment activities, net of compulsory tips paid to employees in all of our jurisdictions, as well as revenue from other goods, services and amenities not included in the all-inclusive package. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment as they are already excluded from revenue in accordance with U.S. GAAP. A description of how we compute Total Net Revenue and a reconciliation of Total Net Revenue to total revenue can be found in the section “Definitions of Non-U.S. GAAP Measures and Operating Statistics” below. Total Net Revenue also includes all Management Fee Revenue.

(2) Owned Net Revenue excludes Management Fee Revenue, Jamaica delayed opening accrual reversal and MICE (meetings, incentives, conventions and events) revenue.

(3) A description of how we compute Owned Resort EBITDA and a reconciliation of net income to Owned Resort EBITDA can be found in the section “Definitions of Non-U.S. GAAP Measures and Operating Statistics” below.

(4) A description of how we compute Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA can be found in the section “Definitions of Non-U.S. GAAP Measures and Operating Statistics” below.

(5) For the three and six months ended June 30, 2019 the comparable portfolio excludes the following non-comparable resorts: Hilton La Romana All-Inclusive Resort, Hilton Playa del Carmen All-Inclusive Resort, Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort, Jewel Dunn’s River Beach Resort & Spa, Jewel Paradise Cove Beach Resort & Spa, Jewel Grande Montego Bay Resort & Spa and Hyatt Ziva & Zilara Cap Cana.

Balance Sheet

As of June 30, 2019, the Company held $104.5 million in cash and cash equivalents. Total interest-bearing debt was $991.5 million, comprised entirely of our term loan secured debt due 2024. Effective March 29, 2018, we entered into two interest rate swaps to fix LIBOR at 2.85% on $800.0 million of our variable rate Term Loan. As of June 30, 2019, there were no amounts outstanding on the Company’s $100.0 million Revolving Credit Facility.

We have spent $197.1 million on the development of our new 750-room Hyatt Ziva and Hyatt Zilara Cap Cana, inclusive of land costs. Adjusting for this construction-in-progress spending, our net leverage stood at 3.9x as of June 30, 2019.

For the remainder of 2019, we anticipate spending a total of approximately $95.0 million in capital expenditures, which breaks out as follows: approximately $30.0 million to complete the Hilton conversions, approximately $55.0 million to finish the construction of Hyatt Ziva and Zilara Cap Cana, and approximately $10.0 million in maintenance capital expenditures. All development and rebranding projects currently remain on-time and on-budget with anticipated openings in the fourth quarter of 2019.

On December 17, 2018, we announced that our Board of Directors authorized the repurchase of up to $100.0 million of Playa's outstanding ordinary shares as market conditions and the Company’s liquidity warrant. During the second quarter of 2019, we purchased 304,587 of our ordinary shares at an average price of $7.88 per share. From July 1, 2019 through August 1, 2019 we purchased an additional 360,929 of our ordinary shares at an average price of $7.51 per share. As of August 1, 2019, we have purchased a total of 910,936 shares and there was approximately $93.1 million remaining under our share repurchase authorization.

Guidance

Achievement of the anticipated results is subject to the risks disclosed in the Company’s filings with the U.S. Securities and Exchange Commission. The Company expects Adjusted EBITDA for the full year 2019 to be as follows:

       
  Low End   High End
       
Adjusted EBITDA $155.0 million   $160.0 million
       

 Our 2019 outlook is predicated on the following assumptions:

  • Comparable revenue growth: low single digit decline;
  • The change to our full year Adjusted EBITDA and comparable revenue growth forecast primarily reflects the change in our outlook for the Dominican Republic, inclusive of the impact felt in the second quarter;
  • Booking trends in the Dominican Republic remain consistent with the current pace of recovery;
  • $25 - $30 million of forgone EBITDA owing to the rebranding and renovations at the Hilton La Romana All- Inclusive Resorts and the Hilton Playa del Carmen All-Inclusive Resort;
  • $3 million in incremental electricity costs year-over-year;
  • $1 - $2 million in incremental property-level environmental taxes and minimum wage related increases;
  • A full year contribution from the Sagicor portfolio, which we acquired in June of 2018;
  • Potential future acquisitions, dispositions, or management agreement changes are explicitly excluded from our outlook.

The Company is unable to provide a reconciliation of our 2019 Adjusted EBITDA outlook to our anticipated 2019
U.S. GAAP net income as we are unable to reasonably estimate the impact of our income tax provision, which could be significantly impacted by several factors including future fluctuations in foreign currencies.

Earnings Call

The Company will host a conference call to discuss its second quarter results on Wednesday, August 7, 2019 at 11:00 a.m. (Eastern Daylight Time). The conference call can be accessed by dialing (833) 683-7154 for domestic participants and (409) 983-9744 for international participants. The conference ID number is 7379167. Additionally, interested parties may listen to a taped replay of the entire conference call commencing two hours after the call’s completion on Wednesday, August 7, 2019. This replay will run through Wednesday, August 14, 2019. The access number for a taped replay of the conference call is (855) 859-2056 or (404) 537-3406 using the same conference ID number. There will also be a webcast of the conference call accessible on the Company’s investor relations website at www.investors.playaresorts.com.

About the Company

Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. Playa owns and/or manages a total portfolio consisting of 21 resorts (7,936 rooms) located in Mexico, Jamaica, and the Dominican Republic. In Mexico, Playa owns and manages Hyatt Zilara Cancún, Hyatt Ziva Cancún, Panama Jack Resorts Cancún, Panama Jack Resorts Playa del Carmen, Hilton Playa del Carmen All-Inclusive Resort, Hyatt Ziva Puerto Vallarta and Hyatt Ziva Los Cabos. In Jamaica, Playa owns and manages Hyatt Zilara Rose Hall, Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Dunn’s River Beach Resort & Spa, Jewel Grande Montego Bay Resort & Spa, Jewel Runaway Bay Beach & Golf Resort and Jewel Paradise Cove Beach Resort & Spa. In the Dominican Republic, Playa owns and manages the Hilton La Romana All-Inclusive Family Resort and the Hilton La Romana All-Inclusive Adult Resort. Playa also owns four resorts in Mexico and the Dominican Republic that are managed by a third party and Playa manages the Sanctuary Cap Cana in the Dominican Republic.

Forward-Looking Statements

This press release contains ‘‘forward-looking statements,’’ as defined by federal securities laws. Forward-looking statements reflect Playa’s current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward looking statements. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in Playa’s Annual Report on Form 10-K, filed with the SEC on February 28, 2019, as such factors may be updated from time to time in Playa’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Playa’s filings with the SEC. While forward-looking statements reflect Playa’s good faith beliefs, they are not guarantees of future performance. Playa disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to Playa (or to third parties making the forward-looking statements).

Definitions of Non-U.S. GAAP Measures and Operating Statistics

Occupancy

“Occupancy” represents the total number of rooms sold for a period divided by the total number of rooms available during such period. The total number of rooms available excludes any rooms considered “Out of Order” due to renovation or a temporary problem rendering them inadequate for occupancy for an extended period of time. Occupancy is a useful measure of the utilization of a resort’s total available capacity and can be used to gauge demand at a specific resort or group of properties during a given period. Occupancy levels also enable us to optimize Net Package ADR by increasing or decreasing the stated rate for our all-inclusive packages as demand for   a resort increases or decreases.

Net Package Average Daily Rate (“Net Package ADR”)

“Net Package ADR” represents total Net Package Revenue for a period divided by the total number of rooms sold during such period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the guest base of our portfolio or comparable portfolio, as applicable. Net Package ADR is a commonly used performance measure in the all-inclusive segment of the lodging industry, and is commonly used to assess the stated rates that guests are willing to pay through various distribution channels.

Net Package Revenue per Available Room (“Net Package RevPAR”)

“Net Package RevPAR” is the product of Net Package ADR and the average daily occupancy percentage. Net Package RevPAR does not reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it generally is considered the key performance measure in the all-inclusive segment of the lodging industry to identify trend information with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating performance on a consolidated basis or a regional basis, as applicable.

Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements and Total Net Revenue

“Net Package Revenue” is derived from the sale of all-inclusive packages, which include room accommodations,   food and beverage services and entertainment activities, net of compulsory tips paid to employees in all of our jurisdictions. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment,  as they are already excluded from revenue. Revenue is recognized, net of discounts and rebates, when the rooms are occupied and/or the relevant services have been rendered. Advance deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant services have been rendered, at which point the revenue is recognized.

“Net Non-package Revenue” represents all other revenues earned from the operations of our resorts, other than Net Package Revenue, net of compulsory tips paid to employees in all of our jurisdictions. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Net Non-package Revenue includes revenue associated with guests' purchases of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa packages, which are not included in the all-inclusive package. Revenue not included in a guest’s all-inclusive package is recognized   when the goods are consumed.

“Owned Net Revenue” represents Net Package Revenue and Net Non-Package Revenue. Owned Net Revenue represents a key indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and competition. In analyzing our Owned Net Revenues, our management differentiates between Net Package Revenue and Net Non-package Revenue. Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage services and entertainment activities, in contrast to other lodging business models, which typically only include the room accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants, bars, activities, and shows and entertainment throughout the day.

“Management Fee Revenue” is derived from fees earned for managing hotels owned by third-parties. The fees    earned are typically composed of a base fee, which is computed as a percentage of revenue, and an incentive fee, which is computed as a percentage of profitability. Management Fee Revenue had a minor contribution to our operating results for the three months ended June 30, 2019 and 2018, but we expect Management Fee Revenue to be   a more relevant indicator to assess the overall performance of our business in the future as we enter into more management contracts.

“Total Net Revenue” represents Net Package Revenue, Net Non-package Revenue and Management Fee Revenue. “Cost Reimbursements” is excluded from Total Net Revenue as it is not considered a key indicator of financial and operating performance. Cost reimbursements is derived from the reimbursement of certain costs incurred by Playa    on behalf of resorts managed by Playa and owned by third parties. This revenue is fully offset by reimbursable costs and has no net impact on operating income or net income.

The following table shows a reconciliation of Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the three and six months ended June 30, 2019 and 2018 ($ in thousands):

Total Portfolio

                 
    Three Months Ended June 30,    Six Months Ended June 30,
    2019   2018   2019   2018
Net Package Revenue        
Comparable Net Package Revenue $   96,320 $   92,940 $   212,056 $   215,201
Non-comparable Net Package Revenue   34,576   27,725   82,627   56,354
Net Package Revenue   130,896   120,665   294,683   271,555
         
Net Non-package Revenue        
Comparable Net Non-package Revenue   17,592   16,550   34,946   35,089
Non-comparable Net Non-package Revenue   6,415   4,483   13,281   7,910
Net Non-package Revenue   24,007   21,033   48,227   42,999
         
Management Fee Revenue        
Comparable Management Fee Revenue   551   55   1,485   351
Non-comparable Management Fee Revenue        
Management Fee Revenue   551   55   1,485   351
         
Total Net Revenue:        
Comparable Total Net Revenue   114,463   109,545   248,487   250,641
Non-comparable Total Net Revenue   40,991   32,208   95,908   64,264
Total Net Revenue   155,454   141,753   344,395   314,905
Compulsory tips   5,620   3,741   11,887   7,392
Cost reimbursements   2,949   78   3,537   122
Total revenue $   164,023 $   145,572 $   359,819 $   322,419
                 

EBITDA, Adjusted EBITDA, Owned Resort EBITDA, Owned Resort EBITDA Margin and Adjusted EBITDA Margin

We define EBITDA, a non-U.S. GAAP financial measure, as net income or loss, determined in accordance with
U.S. GAAP, for the period presented, before interest expense, income tax  and  depreciation  and  amortization expense. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:

  • Other income (expense)
  • Pre-opening expense
  • Transaction expenses
  • Severance expense
  • Other tax expense
  • Gain on property damage insurance proceeds
  • Share-based compensation
  • Loss on extinguishment of debt
  • Other items which may include, but are not limited to the following: management contract termination fees; gains or losses from legal settlements; repairs from hurricanes and tropical storms; impairment losses and Jamaica delayed opening accrual reversals.

We include the non-service cost components of net periodic pension (cost) benefit recorded within other income (expense) in the Condensed Consolidated Statements of Operations in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.

“Owned Resort EBITDA” represents Adjusted EBITDA before corporate expenses and Management Fee Revenue.

“Owned Resort EBITDA Margin” represents Owned Resort EBITDA as a percentage of Owned Net Revenue.

“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of Total Net Revenue.

Adjusted Net Income

“Adjusted Net Income” represents net income attributable to Playa, determined in accordance with U.S. GAAP, excluding special items which are not reflective of our core operating performance, such as one-time expenses related to transaction expenses.

Non-U.S. GAAP Measures

Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Total Net Revenue, Net Package ADR, Net Package RevPAR and Net Direct Expenses are all useful to investors as they more accurately reflect our operating results by excluding compulsory tips. These tips have a margin of zero and do not represent our operating results.

We also believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which are the principal driver of changes in other expense), and expenses related to capital raising, strategic initiatives and other corporate initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example, revenue from insurance policies, other than business interruption insurance policies, is infrequent in nature, and we believe excluding these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time. We  believe Adjusted EBITDA Margin provides our investors a useful measurement of operating profitability for the same reasons we find Adjusted EBITDA useful.

The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance indicator by our board of directors (our “Board”) and management. In addition, the compensation committee of our Board determines the annual variable compensation for certain members of our management  based, in part, on consolidated Adjusted EBITDA. We believe that Adjusted EBITDA is useful to investors because  it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.

Adjusted Net Income is non-GAAP performance measure that provides meaningful comparisons of ongoing operating results, by removing from net income the impact of items that do not reflect our normalized operations.

Any of our non-U.S. GAAP financial measures are not substitutes for revenue, net income or any other measure determined in accordance with U.S. GAAP.  There are limitations to the utility of non-U.S. GAAP financial    measures, such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of  those  companies  to  our performance. Because of these limitations, our non-U.S. GAAP financial measures should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our  business, and investors should carefully consider our U.S. GAAP results presented. A reconciliation of net income as computed under U.S. GAAP to Adjusted Net Income is presented below.

Comparable Non-U.S. GAAP Measures

We believe that presenting Adjusted EBITDA, Total Net Revenue, Net Package Revenue and Net Non-package Revenue on a comparable basis is useful to investors because these measures include only the results of resorts  owned and in operation for the entirety of the periods presented and thereby eliminate disparities in results due to    the acquisition or disposition of resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate comparable Adjusted EBITDA, comparable Total Net Revenue, comparable Net Package Revenue and comparable Net Non-package Revenue as the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were   not owned or in operation during some or all of the relevant reporting period.

Our comparable resorts for the three and six months ended June 30, 2019 exclude the following: Hilton La Romana All-Inclusive Resort and Hilton Playa del Carmen All-Inclusive Resort, which are currently under renovations,  Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort, Jewel Dunn’s River Beach Resort &    Spa, Jewel Paradise Cove Beach Resort & Spa and Jewel Grande Montego Bay Resort & Spa, which were acquired on June 1, 2018, and Hyatt Ziva & Zilara Cap Cana, a ground-up development projected to open during the fourth quarter of 2019.

A reconciliation of net income as computed under U.S. GAAP to comparable Adjusted EBITDA is presented below. For a reconciliation of comparable Net Package Revenue, comparable Net Non-package Revenue, comparable Management Fee Revenue and comparable Total Net Revenue to total revenue as computed under U.S. GAAP, see “Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements and Total Net Revenue” in this section.

Playa Hotels & Resorts N.V.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Owned Resort EBITDA
($ in thousands)

The following is a reconciliation of our U.S. GAAP net income to EBITDA, Adjusted EBITDA, Owned Resort EBITDA and Comparable Owned Resort EBITDA for the three and six months ended June 30, 2019 and 2018:

                         
    Three Months Ended June 30,     Six Months Ended June 30,  
    2019     2018     2019     2018  
Net income $   1,040   $   16,821   $   44,028   $   38,638  
Interest expense   10,666     5,632     24,860     27,514  
Income tax (benefit) provision   (1,008 )   (3,356 )   (11,555 )   6,227  
Depreciation and amortization   25,908     15,882     48,219     31,571  
EBITDA   36,606     34,979     105,552     103,950  
Other (income) expense (a)   (364 )   (378 )   238     1,446  
Share-based compensation   2,014     2,104     4,762     3,890  
Pre-opening expenses   202         291      
Transaction expense (b)   1,273     3,887     3,240     6,231  
Severance expense (c)   133         133      
Other tax expense (d)   443     427     802     858  
Jamaica delayed opening accrual reversal (e)
Non-service cost components of net periodic pension
              (342 )
(cost) benefit (f)   (249 )   298     (175 )   (157 )
Adjusted EBITDA   40,058     41,317     114,843     115,876  
Other corporate - unallocated   9,887     8,689     18,393     17,009  
Management fee income   (551 )   (55 )   (1,485 )   (351 )
Owned Resort EBITDA   49,394     49,951     131,751     132,534  
Less: Non-comparable Owned Resort EBITDA(g)   9,390     12,277     31,651     28,708  
Comparable Owned Resort EBITDA $   40,004   $   37,674   $   100,100   $   103,826  

(a) Represents changes in foreign exchange and other miscellaneous expenses or income.

(b) Represents expenses incurred in connection with corporate initiatives, such as: debt refinancing costs; other capital raising efforts including our business combination with Sagicor in 2018; the redesign and build-out of our internal controls and strategic initiatives, such as the launch of a new resort or possible expansion into new markets.

(c) Represents expenses incurred for employee terminations during the Hilton renovations.

(d) Relates primarily to a Dominican Republic asset/revenue tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this expense from Adjusted EBITDA because it is substantially similar to the income tax provision we eliminate from our calculation of EBITDA.

(e) Represents a reversal on an expense accrual recorded in 2014 related to our future stay obligations provided to guests affected by the delayed opening of Hyatt Ziva and Hyatt Zilara Rose Hall. This reversal concluded in the first quarter of 2018.

(f) Represents the non-service cost components of net periodic pension (cost) benefit recorded within other income (expense) in the Condensed Consolidated Statements of Operations. Previously, these expenses were presented within direct expense. We include these (costs) benefits for the purposes of calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.

(g) Owned Resort EBITDA for Hilton La Romana All-Inclusive Resort, Hilton Playa del Carmen All-Inclusive Resort, Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort, Jewel Dunn’s River Beach Resort & Spa, Jewel Paradise Cove Beach Resort & Spa, Jewel Grande Montego Bay Resort & Spa and Hyatt Ziva & Zilara Cap Cana.

Playa Hotels & Resorts N.V.
Reconciliation of Net Income to Adjusted Net Income
($ in thousands)

The following table reconciles our net income to Adjusted Net Income for the three and six months ended June 30, 2019 and 2018:

  Three Months Ended June 30,      Six Months Ended June 30,
Net income   2019       2018     $ 2019     2018  
  Reconciling items  1,040      16,821        44,028     38,638   
Transaction expense (a)   1,273       3,887       3,240     6,231  
Change in fair value of interest rate swaps (b)         (7,273 )     2,001     3,687  
Amortization of interest rate swaps (c)   (902 )           (902 )    
Total reconciling items before tax   371       (3,386 )     4,339     9,918  
Income tax provision for reconciling items   (140 )     (58 )     (225 )   (58 )
Total reconciling items after tax   231       (3,444 )     4,114     9,860  
Adjusted net income $   1,271     $   13,377     $   48,142   $   48,498  

The following table presents the impact of Adjusted Net Income on our diluted earnings per share for the three and six months ended June 30, 2019 and 2018:             

  Three Months Ended June 30, Six Months Ended June 30,
  2019  2018  2019      2018 
Adjusted net income $ 1,271   $ 13,377   $ 48,142   $ 48,498
                       
Earnings per share - Diluted $ 0.01   $ 0.14   $ 0.34   $ 0.34
Total reconciling items impact per diluted share   —      (0.03)     0.03     0.09
Adjusted earnings per share - Diluted 0.01   $ 0.11   $   0.37   $   0.43

(a) Represents expenses incurred in connection with corporate initiatives, such as: debt refinancing costs; other capital raising efforts including our business combination with Sagicor in 2018; the redesign and build-out of our internal controls and strategic initiatives, such as the launch of a new resort or possible expansion into new markets.

(b) Represents the change in fair value, excluding interest paid and accrued, of our interest rate swaps recognized as interest expense in our Condensed Consolidated Statements of Operations prior to our adoption of hedge accounting on March 20, 2019.

(c) Represents the non-cash amortization of the change in fair value of our interest rate swaps recorded in interest expense prior to our adoption of hedge accounting on March 20, 2019, which results in the reclassification from interest expense in our Condensed Consolidated Statements of Operations to other comprehensive (loss) income in our Condensed Consolidated Statements of Comprehensive (Loss) Income.

 

Playa Hotels & Resorts N.V.
Condensed Consolidated Balance Sheet
($ in thousands, except share data)
(unaudited)

  As of June 30, As of December 31,
  2019     2018  
ASSETS    
Cash and cash equivalents $   104,510   $   116,353  
Trade and other receivables, net   60,722     64,770  
Accounts receivable from related parties   4,926     6,430  
Inventories   15,625     15,390  
Prepayments and other assets   38,824     32,617  
Property and equipment, net   1,857,996     1,808,412  
Goodwill   80,044     83,656  
Other intangible assets   7,067     6,103  
Deferred tax assets   15,967     1,427  
Total assets $   2,185,681   $   2,135,158  
LIABILITIES AND SHAREHOLDERS' EQUITY    
Trade and other payables $   159,662   $   159,600  
Payables to related parties   8,699     4,320  
Income tax payable   915     1,899  
Debt   985,018     989,387  
Derivative financial instruments   34,240     12,476  
Other liabilities   30,636     21,602  
Deferred tax liabilities   102,620     106,033  
Total liabilities $   1,321,790   $   1,295,317  
Commitments and contingencies (see Note 8)    
Shareholders' equity    
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 130,885,269 shares issued    
and 130,327,895 shares outstanding as of June 30, 2019, and 130,494,734 shares issued and
130,440,126 shares outstanding as of December 31, 2018)  14,205  14,161
Treasury shares (at cost, 557,374 as of June 30, 2019 and 54,608 shares as of December 31,    
2018)   (4,316 )   (394 )
Paid-in capital   997,015     992,297  
Accumulated other comprehensive loss   (24,476 )   (3,658 )
Accumulated deficit   (118,537 )   (162,565 )
Total shareholders' equity   863,891     839,841  
Total liabilities and shareholders' equity $   2,185,681   $   2,135,158  
             

Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Operations
($ in thousands)
(unaudited)

    Three Months Ended June 30,      Six Months Ended June 30,  
    2019     2018     2019     2018  
Revenue:        
Package $   136,095   $   124,286   $   305,887   $   278,994  
Non-package   24,428     21,153     48,910     42,952  
Management fees   551     55     1,485     351  
Cost reimbursements   2,949     78     3,537     122  
Total revenue   164,023     145,572     359,819     322,419  
Direct and selling, general and administrative expenses:
Direct   92,582     78,113     186,325     159,169  
Selling, general and administrative   32,048     32,780     63,876     59,253  
Pre-opening   202         291      
Depreciation and amortization   25,908     15,882     48,219     31,571  
Reimbursed costs   2,949     78     3,537     122  
Gain on insurance proceeds               (1,521 )
Direct and selling, general and administrative expenses   153,689     126,853     302,248     248,594  
Operating income   10,334     18,719     57,571     73,825  
Interest expense   (10,666 )   (5,632 )   (24,860 )   (27,514 )
Other income (expense)   364     378     (238 )   (1,446 )
Net income before tax   32     13,465     32,473     44,865  
Income tax benefit (provision)   1,008     3,356     11,555     (6,227 )
Net income $   1,040   $   16,821   $   44,028   $   38,638  
Earnings per share - Basic $   0.01   $   0.14   $   0.34   $   0.34  
Earnings per share - Diluted $   0.01   $   0.14   $   0.34   $   0.34  
Weighted average number of shares outstanding during the
period - Basic
  130,421,695     116,987,887     130,480,549     113,685,219  
Weighted average number of shares outstanding during the
period - Diluted
  130,815,177     117,325,223     130,789,467     113,981,763  
                         

 

Playa Hotels & Resorts N.V.
Consolidated Debt Summary - As of June 30, 2019
($ in millions)

  Maturity   Applicable LTM
Debt Date # of Years Balance Rate Interest (4)
Revolving credit facility (1) Apr-22 2.8 $   — 0.5 % 0.5
Term loan (2) Apr-24 4.8   991.5 5.5 % 55.7
Total debt     $   991.5 5.5 % 56.2
Less: cash and cash equivalents (3)       104.5    
Net debt (face)     $   887.0    
Less: Cap Cana spending to date       197.1    
Adjusted net debt     $   689.9    

(1) As of June 30, 2019, the total borrowing capacity under our revolving credit facility was $100.0 million. The interest rate on outstanding balances of our revolving credit facility is L+300 bps with no LIBOR floor. As of June 30, 2019, the commitment fee on undrawn balances of our revolving credit facility is 0.5%.

(2) The interest rate on our term loan is L+275 bps with a LIBOR floor of 1%. The interest rate was 5.15% as of June 30, 2019, which includes the LIBOR rate that was locked in on June 28, 2019 for the 1-month period of June 28, 2019 to July 30, 2019. Effective March 29, 2018, we entered into two interest rate swaps to mitigate the long term interest rate risk inherent in our variable rate Term Loan. The interest rate swaps have an aggregate fixed notional value of
$800.0 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly to the one-month LIBOR rate.

(3) Based on cash balances on hand as of June 30, 2019.

(4) Represents last twelve months interest expense and commitment fee. The impact of amortization of deferred financing costs and discounts, capitalized interest and the change in fair market value of our interest rate swaps before we elected hedge accounting is excluded.

Playa Hotels & Resorts N.V.
Reportable Segment Operating Statistics - Three Months Ended June 30, 2019 and 2018

    Occupancy
Net Package ADR
Net Package RevPAR 
Owned Net Revenue
Owned Resort EBITDA 
Owned EBITDA Margin
Total Portfolio Rooms 2019   2018   Pts Change   2019   2018 %
Change
  2019   2018 %
Change
  2019   2018 %
Change
  2019   2018 %
Change
2019   2018   Pts Change
Yucatán Peninsula 2,722 84.4 % 86.2 % (1.8)pts $ 256.75 $ 263.11 (2.4 )% $ 216.78 $ 226.91 (4.5 )% $ 59,772 $ 63,667 (6.1 )% $ 21,151 $ 25,726 (17.8 )% 35.4 % 40.4 % (5.0)pts
Pacific Coast 926 76.6 % 76.6 % —pts $ 295.48 $ 258.38 14.4 % $ 226.37 $ 197.98 14.3 %   22,087   19,815 11.5 %   8,569   6,550 30.8 % 38.8 % 33.1 % 5.7pts
Dominican Republic 1,890 72.6 % 85.4 % (12.8)pts $ 182.37 $ 175.98 3.6 % $ 132.34 $ 150.31 (12.0 )%   22,566   31,495 (28.4 )%   5,043   9,586 (47.4 )% 22.3 % 30.4 % (8.1)pts
Jamaica 1,946 80.6 % 81.1 % (0.5)pts $ 294.39 $ 299.40 (1.7 )% $ 237.30 $ 242.68 (2.2 )%   50,464   26,730 88.8 %   14,631   8,089 80.9 % 29.0 % 30.3 % (1.3)pts
Total Portfolio 7,484 79.8 % 83.8 % (4.0)pts $ 257.66 $ 242.43 6.3 % $ 205.55 $ 203.23 1.1 % $ 154,889 $ 141,707 9.3 % $ 49,394 $ 49,951 (1.1 )% 31.9 % 35.2 % (3.3)pts
               
    Occupancy Net Package ADR
Net Package RevPAR
Owned Net Revenue
Owned Resort EBITDA
Owned EBITDA Margin
Comparable       Pts     %     %     %     %     Pts
Portfolio Rooms 2019   2018   Change   2019   2018 Change   2019   2018 Change   2019   2018 Change   2019   2018 Change 2019   2018   Change
Yucatán Peninsula 2,198 84.7 % 87.1 % (2.4)pts $ 259.07 $ 258.31 0.3 % $ 219.39 $ 224.93 (2.5 )% $ 50,648 $ 51,312 (1.3 )% $ 18,458 $ 19,772 (6.6 )% 36.4 % 38.5 % (2.1)pts
Pacific Coast 926 76.6 % 76.6 % —pts $ 295.48 $ 258.38 14.4 % $ 226.37 $ 197.98 14.3 %   22,087   19,815 11.5 %   8,569   6,550 30.8 % 38.8 % 33.1 % 5.7pts
Dominican Republic 1,120 79.7 % 85.8 % (6.1)pts $ 186.98 $ 181.54 3.0 % $ 149.03 $ 155.69 (4.3 )%   18,924   19,578 (3.3 )%   5,751   6,049 (4.9 )% 30.4 % 30.9 % (0.5)pts
Jamaica 620 77.1 % 74.6 % 2.5pts $ 418.05 $ 367.11 13.9 % $ 322.43 $ 274.02 17.7 %   22,239   18,794 18.3 %   7,226   5,303 36.3 % 32.5 % 28.2 % 4.3pts
Total Comparable 
Portfolio
4,864 81.0  83.2   (2.2)pts $   268.59 $ $  252.54 6.4  $  217.65  $ 210.10 3.6   $  113,898  $ 109,499  4.0  $ 40,004  $ 37,674  6.2 35.1 34.4  0.7pts
                                                                       


Highlights

Yucatán Peninsula

  • Comparable Net Package RevPAR decreased 2.5% over the same period in the prior year, driven by decrease in Occupancy of 240 basis points and partially offset by an increase in Net Package ADR of 0.3%.
  • Comparable Owned Resort EBITDA decreased $1.3 million or 6.6% over the prior year.
    -- Excluding Panama Jack Cancún and Hyatt Ziva Cancún, Comparable Owned Resort EBITDA at all other properties decreased $1.9 million compared to the three months ended June 30, 2018. These decreases were partially offset by the performance of Panama Jack Cancún and Hyatt Ziva Cancún, which accounted for a $0.6 million increase. All properties within this segment have also been affected by increased energy costs year over year which contributed to a $0.5 million decrease in Comparable Owned Resort EBITDA compared to the three months ended June 30, 2018.

Pacific Coast

  • Comparable Net Package RevPAR increased 14.3% over the same period in the prior year, driven by an increase in Net Package ADR of 14.4%.
  • Comparable Owned Resort EBITDA increased $2.0 million or 30.8% over the prior year.
    -- This increase was due to increased Comparable Owned Net Revenue, as well as continued focus on controlling operating expenses by both properties within this segment.

Dominican Republic

  • Comparable Net Package RevPAR decreased 4.3% over the same period in prior year, driven by a decrease in Occupancy of 610 basis points and partially offset by an increase in Net Package ADR of 3.0%.
  • Comparable Owned Resort EBITDA decreased $0.3 million, or 4.9%, over the prior year.
    -- This decrease was a direct impact of the decrease in Comparable Net Package RevPAR discussed above.

Jamaica

  • Comparable Net Package RevPAR increased 17.7% over the same period in prior year, driven by an increase in Net Package ADR of 13.9% and an increase in Occupancy of 250 basis points.
  • Comparable Owned Resort EBITDA increased $1.9 million, or 36.3%, over the prior year.
    -- This increase was due to the performance of Hyatt Ziva and Zilara Rose Hall which accounted for the full $1.9 million increase compared to three months ended June 30, 2018. This property continues to show positive results after the completion of renovations in 2017 combined with improvements in cost control and expansion of direct sales channels.

 

Playa Hotels & Resorts N.V.
Reportable Segment Operating Statistics - Six Months Ended June 30, 2019 and 2018

    Occupancy   Net Package ADR   Net Package RevPAR     Owned Net Revenue     Owned Resort EBITDA  Owned EBITDA Margin
  Rooms 2019   2018   Pts   2019   2018 %   2019   2018 %     2019   2018 %   2019    2018 %   2019   2018   Pts
Total Portfolio           Change         Change         Change           Change         Change           Change
Yucatán Peninsula 2,722 84.8 % 88.3 % (3.5)pts $ 279.62 $ 293.70 (4.8 )% $ 236.98 $ 259.25 (8.6 )% $ 129,985 $ 142,938 (9.1 )% $ 53,310 $ 65,330 (18.4 )% 41.0 % 45.7 % (4.7)pts
Pacific Coast 926 76.2 % 78.9 % (2.7)pts $ 321.38 $ 308.32 4.2 % $ 244.91 $ 243.16 0.7 %   47,657   48,870 (2.5 )%   20,956   20,458 2.4 % 44.0 % 41.9 % 2.1pts
Dominican Republic 1,890 72.2 % 87.4 % (15.2)pts $ 210.59 $ 205.72 2.4 % $ 152.10 $ 179.79 (15.4 )%   55,641   71,913 (22.6 )%   18,506   28,013 (33.9 )% 33.3 % 39.0 % (5.7)pts
Jamaica 1,946 81.9 % 80.5 % 1.4pts $ 322.63 $ 357.92 (9.9 )% $ 264.10 $ 288.14 (8.3 )%   109,611   50,490 117.1 %   38,979   18,733 108.1 % 35.6 % 37.1 % (1.5)pts
Total Portfolio 7,484 79.9 % 85.6 % (5.7)pts $ 281.93 $ 276.86 1.8 % $ 225.37 $ 237.08 (4.9 )% $ 342,894 $ 314,211 9.1 % $ 131,751 $ 132,534 (0.6 )% 38.4 % 42.2 % (3.8)pts


    Occupancy   Net Package ADR   Net Package RevPAR   Owned Net Revenue      Owned Resort EBITDA 
  Owned EBITDA Margin
  Rooms 2019   2018    Pts   2019   2018 %     2019   2018 %     2019   2018 %     2019    2018 %   2019   2018   Pts
Comparable
Portfolio
          Change         Change           Change           Change           Change           Change
Yucatán Peninsula 2,198 85.5 % 88.9 % (3.4)pts $ 279.82 $ 287.92 (2.8 )% $ 239.15 $ 256.10 (6.6 )% $ 108,152 $ 114,746 (5.7 )% $ 44,272 $ 50,129 (11.7 )% 40.9 % 43.7 % (2.8)pts
Pacific Coast 926 76.2 % 78.9 % (2.7)pts $ 321.38 $ 308.32 4.2 % $ 244.91 $ 243.16 0.7 %   47,657   48,870 (2.5 )%   20,956   20,458 2.4 % 44.0 % 41.9 % 2.1pts
Dominican Republic 1,120 84.5 % 87.9 % (3.4)pts $ 213.01 $ 207.46 2.7 % $ 179.89 $ 182.34 (1.3 )%   43,516   43,778 (0.6 )%   15,976   17,292 (7.6 )% 36.7 % 39.5 % (2.8)pts
Jamaica 620 77.3 % 77.1 % 0.2pts $ 455.08 $ 413.02 10.2 % $ 351.83 $ 318.44 10.5 %   47,661   42,554 12.0 %   18,896   15,947 18.5 % 39.6 % 37.5 % 2.1pts
Total Comparable
Portfolio
4,864 82.4 % 85.3 % (2.9)pts $ 292.33 $ 286.83 1.9 % $ 240.97 $ 244.59 (1.5 )% $ 246,986 $ 249,948 (1.2 )% $ 100,100 $ 103,826 (3.6 )% 40.5 % 41.5 % (1.0)pts
                                       
Highlights                                      

Yucatán Peninsula

  • Comparable Net Package RevPAR decreased 6.6% over the same period in prior year, driven by a decrease in Net Package ADR of 2.8% and a decrease in Occupancy of 340 basis points.
  • Comparable Owned Resort EBITDA decreased $5.9 million or 11.7% over the prior year.
    -- Excluding Panama Jack Cancún, Comparable Owned Resort EBITDA at all other properties decreased $6.4 million compared to the six months ended June 30, 2018. This decrease was offset by the performance of Panama Jack Cancún, which accounted for a $0.5 million increase in Comparable Owned Resort EBITDA compared to the six months ended June 30, 2018. All properties within this segment have also been affected by increased insurance premiums and energy costs year over year which contributed to a $1.3 million decrease in Comparable Owned Resort EBITDA compared to the six months ended June 30, 2018.

Pacific Coast

  • Comparable Net Package RevPAR increased 0.7% over the same period in prior year, driven by an increase in Net Package ADR of 4.2% and partially offset by a decrease in Occupancy of 270 basis points.
  • Comparable Owned Resort EBITDA increased $0.5 million or 2.4% over the prior year.
    -- This increase was due to the performance of Hyatt Ziva Puerto Vallarta, which increased Comparable Owned Resort EBITDA by $1.2 million compared to the six months ended June 30, 2018. These results were offset by Hyatt Ziva Los Cabos, which had a decrease in Comparable Owned Resort EBITDA of $0.7 million compared to the six months ended June 30, 2018. Group business, which generates higher rates and additional non-package revenue, was significantly lower in in the first quarter year over year but has been partially offset on a year to date basis by significant improvement in group business during the second quarter of 2019. All properties within this segment have been affected by increased insurance premiums and energy costs year over year which contributed to a $0.6 million decrease in Comparable Owned Resort EBITDA compared to the six months ended June 30, 2018.

Dominican Republic

  • Comparable Net Package RevPAR decreased 1.3% over the same period in prior year, driven by a decrease in Occupancy of 340 basis points and partially offset by an increase in Net Package ADR of 2.7%.
  • Comparable Owned Resort EBITDA decreased $1.3 million, or 7.6%, over the prior year.
    -- This decrease was due to the performance of all properties in this segment, driven primarily by Dreams Punta Cana due to a non-recurring prior year gain from business interruption insurance proceeds of $1.5 million received during the six months ended June 30, 2018.

Jamaica

  • Comparable Net Package RevPAR increased 10.5% over the same period in prior year, driven by an increase in Net Package ADR of 10.2% and an increase in Occupancy of 20 basis points.
  • Comparable Owned Resort EBITDA increased $2.9 million, or 18.5%, over the prior year.
    -- This increase was due to the performance of Hyatt Ziva and Zilara Rose Hall, which accounted for the full $2.9 million increase in Comparable Owned Resort EBITDA compared to the six months ended June 30, 2018. This property continues to show positive growth after the completion of renovations in 2017.

Company Contact
Ryan Hymel, EVP and Chief Financial Officer
(571) 529-6113


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Source: Playa Hotels & Resorts