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RLH Corporation Reports First Quarter 2019 Results

/EIN News/ -- DENVER, May 08, 2019 (GLOBE NEWSWIRE) -- Red Lion Hotels Corporation (the “Company”) (NYSE: RLH), a growing hospitality company doing business as RLH Corporation that franchises upscale, midscale and economy hotels, today reported first quarter 2019 results.

 First Quarter Highlights

  • Adjusted EBITDA for the first quarter was $998,000, as compared to $1.1 million in the first quarter of 2018.  With the elimination of the $865,000 of EBITDA from the nine hotels sold throughout 2018, Adjusted EBITDA increased $803,000 over the prior year.
     
  • Net loss for the quarter was $4.1 million or ($0.17) per share compared to net income of $2.6 million or $0.10 per diluted share in the prior year period.
     
  • Royalty fees increased 34% year-over-year to $5.7 million reflecting the organic growth and the acquisition of the Knights Inn.
  • Franchised Segment Adjusted EBITDA increased 51% year-over-year to $3.7 million while Franchise Segment Adjusted EBITDA margin increased 400 bps.
  • Recapitalized Salt Lake City and Olympia, WA hotels with $16.6 million of mortgage debt.
  • Executed 56 franchise agreements in the first quarter comprised of 8 upscale and midscale hotels and 48 select service hotels.       
  • Launched its wholly owned subsidiary RLabs, a lodging technology innovator that will leverage the Company’s groundbreaking RevPak platform, creating additional asset light revenue streams.             

Greg Mount, RLH Corporation President and Chief Executive Officer stated: “Our first quarter results demonstrate the strength of our asset light business model, which saw royalty revenue increase approximately 34%, and a 400 basis point expansion in the franchise segment Adjusted EBITDA margin. During the quarter, we signed 56 franchise agreements, with eight in the higher margin upscale service brands.   We have strong momentum in these early months and are excited about the progress we continue to make in growing our core franchise business and the opportunities to provide new or expanded services to our franchise hotels.”

First Quarter 2019 Financial Results 

The Company reported a net loss of $4.1 million or $(0.17) per share in the first quarter as compared to net income of $2.6 million or $0.10 per diluted share in the prior year period. The year-over-year change in operating results was primarily due to an approximately $14 million gain on the sale of assets related to five hotels sold during the first quarter 2018. In addition, the net loss for the quarter also reflects the loss of $0.9 million of EBITDA from the nine hotels sold in 2018.

Adjusted EBITDA, which is adjusted for non-cash and certain one-time items, was $1.0 million for the first quarter as compared to $1.1 million in prior year period.  The change in Adjusted EBITDA primarily reflects the growth of the franchise business offset by EBITDA contribution from the hotels sold in 2018.

Royalty fees increased 34% to $5.7 million primarily reflecting the strong organic growth and the acquisition of Knights Inn.

Marketing, reservations and reimbursables revenue, which are fees from franchised properties associated with the Company’s brands and shared services, increased 28% to $6.7 million reflecting the growth of our core business from new and acquired franchise agreements as well as additional revenue initiatives building on our technology initiatives.   

Selling, general, and administrative expenses, which include franchise sales, operations and corporate costs, remained relatively flat to prior year at $7.2 million, but decreased from the fourth quarter of 2018 total of $8.5 million, reflecting our continued focus on cost reductions and the benefits of our asset light model. 

The Company executed 56 franchise agreements in the first quarter, up 20% from executed franchise agreements signed in the prior year period.  Of the 56 new franchise agreements signed, eight are in our upscale and midscale hotels and 48 are in our select service hotels. 

BALANCE SHEET AND LIQUIDITY

RLH Corporation finished the first quarter with cash and restricted cash of $25 million and debt of $61 million. During the quarter, the Salt Lake City and Olympia, WA joint venture hotels had $16.6 million of mortgage debt incurred.  Under current debt agreements, RLH Corporation transferred $4.2 million of its proceeds from the mortgages to restricted cash.  Subsequent to quarter end, those funds were applied as a principal reduction of our corporate debt.   As of March 31, 2019, the Company had a net debt to trailing 12 months Adjusted EBITDA ratio of 2.3 times.
  
2019 EXPECTATIONS

The Company is reiterating expectations for 2019 that 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 sales are closed, the Company will disclose the material terms of each transaction in 8K filings including the historical Adjusted EBITDA relating to the hotels sold. In addition, the Company will provide updated guidance to account for the sales of the hotels at the time it reports quarterly results.

  • The Company expects to execute between 160 and 200 franchise license agreements in 2019.
  • Corporate Selling, General and Administrative expenses are expected to be $29.5 million to $31.5 million, including stock compensation expense.
  • Adjusted EBITDA from continuing operations is expected to be between $20.5 million and $22.5 million in 2019.

Conference Call Information                                                                                         

RLH Corporation will conduct a conference call on Thursday, May 9 at 9:00 a.m. 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 p.m. Eastern Time on May 9 through midnight May 24, 2019 at (877) 660-6853 or (International) (201) 612-7415, using access code 13689753. The replay will also be available shortly after the call on the RLH Corporation website.

About RLH Corporation

Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation and focusing on the franchising, management and ownership 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.

To learn more about franchising with RLH Corporation, visit franchise.rlhco.com. We don’t wait for the future. We create it.

Social Media: 

www.Facebook.com/myhellorewards 
www.Twitter.com/myhellorewards 
www.Instagram.com/myhellorewards 
www.Linkedin.com/company/rlhco 

Investor Relations Contact: 

Evelyn Infurna
Investor Relations
203-682-8265
investorrelations@rlhco.com 

Media Contact: 

Dan Schacter 
Director, Social Engagement and Public Relations 
509-777-6222 
dan.schacter@rlhco.com


Red Lion Hotels Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(In thousands, except footnotes and per share data)

    Three Months Ended
March 31,
 
    2019     2018  
Revenue:
Royalty $   5,740   $   4,275  
Other franchise   542     592  
Company operated hotels   12,970     22,896  
Marketing, reservations and reimbursables   6,729     5,256  
Other   3     20  
Total revenues   25,984     33,039  
Operating expenses:    
Selling, general, administrative and other expenses   7,228     7,210  
Company operated hotels   11,545     20,255  
Marketing, reservations and reimbursables   7,161     5,559  
Depreciation and amortization   3,447     4,392  
Loss (gain) on asset dispositions, net   6     (14,043 )
Acquisition and integration costs   62     104  
Total operating expenses   29,449     23,477  
Operating income (loss)   (3,465 )   9,562  
Other income (expense):    
Interest expense   (882 )   (2,247 )
Other income (loss), net   33     158  
Total other income (expense)   (849 )   (2,089 )
Income (loss) before taxes   (4,314 )   7,473  
Income tax expense   82     135  
Net income (loss)   (4,396 )   7,338  
Net (income) loss attributable to noncontrolling interest   286     (4,750 )
 

Net income (loss) and comprehensive income (loss) attributable to RLH Corporation


$
 

  (4,110


)


$
 

  2,588
 
     
Earnings (loss) per share - basic $   (0.17 ) $   0.11  
Earnings (loss) per share - diluted $   (0.17 ) $   0.10  
     
Weighted average shares - basic   24,603     24,101  
Weighted average shares - diluted   24,603     25,166  
     
Non-GAAP Financial Measures (1)    
EBITDA $   15   $   14,112  
Adjusted EBITDA $   998   $   1,061  

(1) The definitions of "EBITDA" and "Adjusted EBITDA" and how those measures relate to net income (loss) are discussed further in this release under Reconciliation of Non-GAAP Financial Measures.


Red Lion Hotels Corporation
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands, except share data)
  March 31,
2019
December 31,
2018
ASSETS    
Current assets:    
Cash and cash equivalents $   18,008 $   17,034
Restricted cash   6,862   2,755
Accounts receivable, net of an allowance for doubtful accounts of $2,559 and $2,345, respectively   19,339   18,575
Notes receivable, net   2,180   2,103
Other current assets   6,658   6,218
    Total current assets   53,047   46,685
Property and equipment, net   114,270   115,522
Operating lease right-of-use assets   50,860  
Goodwill   18,595   18,595
Intangible assets, net   60,016   60,910
Other assets, net   8,237   8,075
    Total assets $   305,025 $   249,787
     
LIABILITIES    
Current liabilities:
Accounts payable $   6,512 $   5,322
Accrued payroll and related benefits   2,417   5,402
Other accrued liabilities   4,840   4,960
Long-term debt, due within one year   29,160   25,056
Operating lease liabilities, due within one year   4,694  
    Total current liabilities   47,623   40,740
Long-term debt, due after one year, net of debt issuance costs   21,474   9,114
Line of credit, due after one year   10,000   10,000
Operating lease liabilities, due after one year   47,294  
Deferred income and other long-term liabilities   2,035   2,245
Deferred income taxes   824   772
    Total liabilities   129,250   62,871
Commitments and contingencies        
         
STOCKHOLDER' EQUITY        


RLH Corporation stockholders' equity:            
Preferred stock - 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding        
Common stock - 50,000,000 shares authorized; $0.01 par value; 24,626,459 and 24,570,158 shares
issued and outstanding
   
247
     
246
 
Additional paid-in capital, common stock   182,703     182,018  
Accumulated deficit   (20,622 )   (16,512 )
    Total RLH Corporation stockholders' equity   162,328     165,752  
Noncontrolling interest   13,447     21,164  
    Total stockholders' equity   175,775     186,916  
    Total liabilities and stockholders’ equity $   305,025   $   249,787  


Red Lion Hotels Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited) 
(In thousands)

    Three Months Ended March 31,  
    2019     2018  
Operating activities            
Net income (loss) $ (4,396)   $ 7,338  
Adjustments to reconcile net income (loss) to net cash used in operating activities:  
Depreciation and amortization 3,447   4,392  
Amortization of debt issuance costs 47   592  
Amortization of key money and contract costs 206   111  
Amortization of contract liabilities (197 ) (160 )
Loss (gain) on asset dispositions, net 6   (14,043 )
Deferred income taxes 52   82  
Stock-based compensation expense 916   640  
Provision for doubtful accounts 245   235  
Fair value adjustments to contingent consideration   157  
Change in current assets and liabilities:    
Accounts receivable (1,009 ) (442 )
Notes receivable (8 ) (6 )
Other current assets (844 ) (4,795 )
Accounts payable 1,383   1,807  
Other accrued liabilities (1,880 ) (2,676 )
Net cash used in operating activities (2,032 ) (6,768 )
Investing activities:    
Capital expenditures (1,500 ) (1,692 )
Net proceeds from disposition of property and equipment   45,662  
Collection of notes receivable 21    
Advances on notes receivable (90 ) (135 )
Net cash provided by (used in) investing activities (1,569 ) 43,835  
Financing activities:    
Borrowings on long-term debt, net of discounts 16,513    
Repayment of long-term debt and finance leases (170 ) (38,472 )
Distributions to noncontrolling interest (7,431 )  
Contingent consideration paid for Vantage Hospitality acquisition   (4,000 )
Stock-based compensation awards canceled to settle employee tax withholding (342 ) (440 )
Stock option and stock purchase plan issuances, net and other 112   94  
      Net cash provided by (used in) financing activities 8,682   (42,818 )


Change in cash, cash equivalents and restricted cash:
Net increase (decrease) in cash, cash equivalents and restricted cash   5,081   (5,751 )
Cash, cash equivalents and restricted cash at beginning of period   19,789   44,858  
Cash, cash equivalents and restricted cash at end of period $   24,870 $   39,107  


A summary of our properties as of March 31, 2019, including the approximate number of available rooms, is provided below:

RED LION HOTELS CORPORATION
Additional Hotel Statistics
(unaudited)

 
Upscale Service Brand
Select Service Brand
Total
  Hotels Total
Available
Rooms
Hotels Total
Available
Rooms
Hotels Total
Available
Rooms
Beginning quantity, January 1, 2019 112   15,900   1,215   69,800   1,327   85,700  
Newly opened / acquired properties 1   100   11   600   12   700  
Terminated properties (4 ) (400 ) (52 ) (3,200 ) (56 ) (3,600 )
Ending quantity, March 31, 2019 109   15,600   1,174   67,200   1,283   82,800  


A summary of our executed agreements for the three months ended March 31, 2019 is provided below:

RED LION HOTELS CORPORATION
Additional Hotel Statistics
(unaudited)

  Upscale
Service
Brand
Select
Service
Brand
Total
Executed franchise license agreements, three months ended March 31, 2019:
New locations 6 13 19
New contracts for existing locations 1 35 36
Change from company operated to franchised 1 1
Total executed franchise license agreements, three months ended March 31, 2019 8 48 56


EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. The Company believes it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness.

Adjusted EBITDA is an additional measure of financial performance. The Company believes that the inclusion or exclusion of certain special items, such as stock-based compensation, gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results.

During the fourth quarter of 2018, we modified the definition of Adjusted EBITDA as used in prior periods to exclude the effect of non- cash stock compensation expense. We believe that the exclusion of this item is consistent with the purposes of the measure described below and we have applied this modification to all prior periods presented.

EBITDA and Adjusted EBITDA are commonly used measures of performance in the industry. RLH Corporation utilizes these measures because management finds them a useful tool to calculate more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. Our board of directors and executive management team consider Adjusted EBITDA to be a key performance metric and compensation measure. The Company believes the measures are a complement to reported operating results. EBITDA and Adjusted EBITDA are not intended to represent net income (loss) defined by generally accepted accounting principles in the United States of America (GAAP), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. In addition, other companies in the industry may calculate EBITDA and, in particular, Adjusted EBITDA differently than the Company does or may not calculate them at all, limiting the usefulness of EBITDA and Adjusted EBITDA as comparative measures.

The following is a reconciliation of EBITDA and Adjusted EBITDA by segment to net income (loss) for the three months ended March, 31 2019 (in thousands):

   
Franchised
Hotels
Company
Operated
Hotels
Other Total
Net income (loss) $   2,581 $   (2,029 ) $   (4,948 ) $   (4,396 )
Depreciation and amortization   914   1,956     577     3,447  
Interest expense     579     303     882  
Income tax expense         82     82  
EBITDA   3,495   506     (3,986 )   15  
Stock-based compensation (1)   110   8     798     916  
Acquisition and integration costs (2)   62           62  
Loss (gain) on asset dispositions, net     5         5  
Adjusted EBITDA   3,667   519     (3,188 )   998  
Adjusted EBITDA attributable to noncontrolling interests     (547 )       (547 )
Adjusted EBITDA attributable to RLH Corporation $   3,667 $   (28 ) $   (3,188 ) $   451  

(1) Represents total stock-based compensation for each period. These costs are included within Selling, general, administrative and other expenses, Company operated hotels and Marketing, reservations, and reimbursables on the Condensed Consolidated Statements of Comprehensive Income (Loss).

(2) Costs for the three months ended March 31, 2019 are associated with the continued integration of the Knights Inn acquisition.

The following is a reconciliation of EBITDA and Adjusted EBITDA by segment to net income (loss) for the three months ended March, 31 2018 (in thousands):

   Franchised
Hotels
Company
Operated
Hotels
 

Other
 

Total
Net income (loss) $   1,292 $   9,951   $   (3,905 ) $   7,338  
Depreciation and amortization   834   3,123     435     4,392  
Interest expense     2,247         2,247  
Income tax expense         135     135  
EBITDA   2,126   15,321     (3,335 )   14,112  
Stock-based compensation (1)   63   14     563     640  
Acquisition and integration costs (2)   104           104  
Employee separation costs (3)   131           131  
Loss (gain) on asset dispositions, net (4)     (13,926 )       (13,926 )
Adjusted EBITDA   2,424   1,409     (2,772 )   1,061  
Adjusted EBITDA attributable to noncontrolling interests     (453 )       (453 )
Adjusted EBITDA attributable to RLH Corporation $   2,424 $   956   $   (2,772 ) $   608  


(1) Represents total stock-based compensation for each period. These costs are included within Selling, general, administrative and other expenses, Company operated hotels and Marketing, reservations, and reimbursables on the Condensed Consolidated Statements of Comprehensive Income (Loss).

(2) Costs for the three months ended March 31, 2018 are associated with the acquisition and integration of the Knights Inn and Vantage acquisitions.

(3) Relates to separation costs incurred for various employees. These costs are included within Selling, general, administrative and other expenses on the Condensed Consolidated Statements of Comprehensive Income (Loss).

(4) Represents the gain on our sale of five properties during the three months ended March 31, 2018.

RLHC Logo.jpg


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