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Edited Transcript of AINC.A earnings conference call or presentation 31-Oct-19 4:00pm GMT

Q3 2019 Ashford Inc Earnings Call

DALLAS Nov 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Ashford Inc earnings conference call or presentation Thursday, October 31, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Deric S. Eubanks

Ashford Inc. - CFO & Treasurer

* Jeremy J. Welter

Ashford Inc. - Co-President & COO

* Jordan Jennings

Ashford Inc. - Manager of IR

* Montgomery J. Bennett

Ashford Inc. - Founder, Chairman of the Board & CEO

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Conference Call Participants

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* Bryan Anthony Maher

B. Riley FBR, Inc., Research Division - Analyst

* Stephen Biggar

Argus Research Company - Director of Financial Institutions Research

* Tyler Anton Batory

Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure

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Presentation

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Operator [1]

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Greeting, and welcome to Ashford's Third Quarter 2019 Results Conference Call. (Operator Instructions) A question-and-answer session will follow the formal presentation. (Operator Instructions) Please note this conference is being recorded.

It is now my pleasure to introduce your host, Jordan Jennings. Please go ahead.

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Jordan Jennings, Ashford Inc. - Manager of IR [2]

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Good day, everyone, and welcome to today's conference call to review results for Ashford for the third quarter of 2019 and to update you on recent developments. On the call today will be Monty Bennett, Chairman and CEO; Deric Eubanks, Chief Financial Officer; and Jeremy Welter, Co-President and Chief Operating Officer.

Your results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday afternoon in a press release that has been covered by the financial media.

At this time, let me remind you that certain statements and assumptions in this conference call contain, or are based upon, forward-looking information are being made pursuant to the safe harbor provisions of the federal securities regulation. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on October 30, 2019, and may also be accessed through the company's website at www.ashfordinc.com. Each listener is encouraged to review those reconciliations provided in the earnings release, together with all other information provided in the release. Also unless otherwise stated, all reported results discussed in this call compare to third quarter of 2019 to third quarter of 2018.

I will now turn the call over to Monty. Please go ahead, sir.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [3]

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Good morning, and welcome to our call to discuss our financial results for the third quarter of 2019. I will begin by giving a brief overview of our quarterly results, and then will discuss our recently announced formation of Ashford Securities, a dedicated platform to raise capital. I'll also provide an update on our agreement to acquire the hotel management business of privately-held Remington Holdings, as well as discuss our stock repurchase from Ashford Trust and Braemar. I will conclude with an update on our investor outreach efforts. Afterwards, Deric will review our financial results. Jeremy will provide an update regarding our strategic investments as well as other initiatives. And then we will open it up for Q&A.

We delivered strong operating and financial performance for the third quarter, and we are pleased with the groundwork we are laying for the continued success of our platform. For the quarter, revenues increased by 37%. Adjusted EBITDA was $8.4 million, which reflects 104% growth over the prior-year quarter. And adjusted net income per share was $1.58, which reflects (technical difficulty) growth over the prior-year quarter. Ashford (technical difficulty) believe that these results demonstrate the benefits of our strategy.

Last week, our shareholders approved the acquisition of the hotel management business of Remington Holdings. And we are working to close that transaction on or around November 6. Once we close that transaction, all of the pieces will be in place to significantly grow our business. We have a one-of-a-kind unique structure that no one else in our space has. With our existing (technical difficulty) platforms and our growing stable of products and services businesses, we are uniquely positioned to grow and create value for our shareholders.

We have two main strategies for growth -- increase our AUM, thereby growing our advisory and services businesses, and [separately], have our service businesses pursue third-party growth. One of the ways we plan to grow our AUM is through the creation of Ashford Securities. During the quarter, we announced the formation of Ashford Securities LLC, a dedicated platform to raise retail capital through (technical difficulty) and grow dealer channels in order to grow our existing and future platforms.

Our goal for Ashford Securities is to provide the market with highly differentiated alternative investment products. The types of capital raised may include, but are not limited to, preferred equity (technical difficulty) nontraded REIT common equity for future platforms. We believe it's a natural fit for us. Additionally, given Ashford's broad experience and ability to execute on many different types of lodging strategies, we believe we have a unique opportunity for new investors. Also, having a dedicated fundraising platform will provide Ashford and its advised platforms an additional source of capital that is not dependent on the traditional publicly traded capital markets.

Following registration with the financial industry regulatory authority, and other regulatory authorities, we expect to begin raising capital late in the first half of next year. We are excited to pursue a fresh source of capital that will help us prudently grow all our platforms over the long term and increase shareholder value.

Regarding our agreement to acquire the hotel management business, privately held Remington Holdings, we are on the verge of closing this transaction. The transaction will immediately add scale, diversification and enhance competitive position for Ashford in the hospitality industry. It'll also expand the breadth of our services we offer to our advised REITs. Heretofore, Remington has not pursued third-party business. Remington recently hired an executive to spearhead third-party growth and we are excited about the prospects to grow this part of the business post-closing of the transaction.

Strategically, after completion of this transaction, we will add hotel property management to our stable of hotel-related businesses, which already includes our asset management business, Premier Project Management, Pure Wellness, OpenKey, JSAV, RED Hospitality & Leisure and Lismore Capital. Now, when our advisory platforms acquire hotels, we will have the exclusive right to provide all of these services to those hotels. These services include hotel asset management, hotel property management, project management, design, architecture, procurement, construction management, audiovisual services, financing services, advisory services, property sales services, mobile room key services, hypoallergenic hotel rooms and water sports activities.

In early October, we announced the repurchase of 412,974 shares of our common stock from Ashford Trust in Braemar. Deric will provide additional details, but we are extremely pleased to complete this transaction, as we believe acquiring this significant block of approximately 16% of our common stock for $30 per share is in the best interest of our shareholders, and we believe will provide substantial long-term accretion. Given our track record at Ashford Hospitality Trust during the global financial crisis, we clearly understand the benefits of share repurchases, and remain committed to actively pursuing prudent capital management strategies. Additionally, both Ashford Trust and Braemar have announced plans to distribute their remaining shares of Ashford Inc. to their respective shareholders and unit holders before the closing of the Remington transaction.

Ashford currently advises 2 publicly traded REIT platforms, Ashford Trust and Braemar, which together own 131 hotels, with approximately 29,000 rooms and approximately $8.1 billion of gross assets as of September 30, 2019. Ashford has a high-growth fee-based business model with a diversified platform of multiple fee generators. We believe it is a scalable platform with attractive margins. Additionally, it has a very stable cash flow base, as the advisory agreements with the REIT stipulate that the base fee is maintained at a level of at least 90% of the previous year's base fee.

We have a fee structure in place that incentivizes Ashford to create shareholder value at its advisory platforms. With our base fee driven by their share price performance and our incentive fee based on total shareholder return performance outperforms versus their REIT peers, our management team's primary focus is maximizing returns. We continue to be excited for all of strategic investments and we are optimistic about the prospects for our 2 advisory platforms.

We also believe that our hospitality service businesses are well positioned to initiate meaningful growth both for advised REITs as well as our third-party channels. We see great opportunity for the platform to grow and deliver superior returns to our shareholders by adding additional investment platforms, as well as investing in or integrating other hospitality-related businesses.

On the investor relations front, we believe having an active investor outreach effort and broadening our investor base are important areas of focus. To that end, since the beginning of 2019, we've held over 300 meetings with sell-side analysts, existing shareholders and potential shareholders. And a few weeks ago, we held our Annual Investor Day in New York. It was very well attended and gave us the opportunity to share the Ashford story and strategy with a number of existing and potential investors.

Over the coming months, we plan to attend a number of investor conferences targeting a wide range of investors from small and midcap-focused funds to industry-dedicated investors as well as to family offices and retail holders. We believe exposure at these conferences will provide further opportunity to tell our story and provide a meaningful dialogue with potential investors, which should in turn continue to have a positive impact on expanding our investor base.

I will now turn the call over to Deric.

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Deric S. Eubanks, Ashford Inc. - CFO & Treasurer [4]

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Thanks, Monty. Net loss attributable to common stockholders for the third quarter was $9.4 million or $3.94 per diluted share compared with net income of $1.4 million or $0.18 per diluted share for the prior-year quarter. For the third quarter, total revenues were $56.9 million reflecting a 36.9% growth rate over the prior-year quarter.

Adjusted EBITDA for the third quarter was $8.4 million, reflecting a 104.1% growth rate over the prior-year quarter. Adjusted net income for the third quarter was $7 million or $1.58 per diluted share, which reflected a growth rate of 110.7% over the prior-year quarter.

In early October, we announced the repurchase of 412,974 shares of our common stock from Ashford Trust and Braemar for $30 per share resulting a total cost of approximately $12.4 million. This stock purchase represented approximately 16% of the company's common shares outstanding.

Due to the parameters of the Private Letter Ruling received from the Internal Revenue Service, the company was only able to acquire the shares held by Ashford Trust and Braemar's taxable REIT subsidiaries. Subsequently, both Ashford Trust and Braemar announced plans to distribute the remaining shares of Ashford to their respective shareholders and unit holders. Those distributions are expected to be completed on November 5, 2019, to shareholders of record as of October 29, 2019.

At the end of the third quarter, the company had $33.2 million in corporate cash. We currently have a fully diluted equity market capitalization of approximately $56 million. Also as of September 30, 2019, the company had 3 million fully diluted total shares of common stock and units. At September 30, we had 2.6 million common shares issued and outstanding, 0.2 million common shares earmarked for issuance under our deferred compensation program, and the balance relates to the GAAP treatment for in-the-money stock options, put options associated with minority interest of our strategic investments and some restricted stock. In our financial results, we also include 1.45 million common shares from our series B convertible preferred stock.

During the quarter, we purchased $8.9 million of FF&E from Braemar as part of our ERFP commitment associated with its acquisition of the Ritz-Carlton Lake Tahoe.

I will now turn the call over to Jeremy to discuss our strategic investments and other initiatives.

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [5]

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Thank you, Deric. We are excited to provide updates on our hospitality products and services businesses and the strong results and accomplishments during the third quarter. To explain this strategy more fully, our products and services initiative is a unique investment strategy in the hospitality industry, where we strategically invest in operating companies that service the industry, and we act as an accelerator to grow these companies. In doing so, we believe we are able to establish synergies for our hotel platforms, providing attractive pricing and higher levels of service than they would otherwise receive from a third-party vendor.

We're also able to grow our portfolio companies in a number of ways, by referring them to hotels owned by our advised REITs, by leveraging our vast industry relationships and by consulting on best operating practices.

We're very excited to discuss more about Ashford Securities, our new capital raising platform that was recently announced. Jay Steigerwald was appointed as President and Head of Distribution of Ashford Securities. Most recently, Jay was an executive at W.P. Carey, Inc. for 9 years and was instrumental in raising $7 billion of fresh capital by building strong relationships with the broker-dealer community. We are currently in the process of hiring other key executives and support staff, as the full team continues to be developed.

Ashford Securities believes the key to success is to offer a differentiated investment strategy, hire the best people in the industry, build excellent relationships with our distribution partners, and provide exceptional services to all of our stakeholders. Ashford Securities anticipates filing its first full offering in the fourth quarter and anticipates fundraising to begin late in the second quarter of 2020. Longer-term, we believe there is a substantial opportunity to offer different types of product structures and strategies, all with the goal of providing differentiated alternative investment products to retail investors looking to diversify their portfolios. In short, we are excited to pursue a fresh source of capital that will help us grow all our platforms over the long term, all with the goal of increasing shareholder value.

Premier Project Management provides comprehensive and cost-effective design, development, architecture, procurement and project management services to the hospitality industry. Through our first full year of ownership, we have been focused on executing several initiatives and branding exercises to accelerate growth and profitability over the long term.

Premier's new architecture service, which was launched in February 2019, generated $422,000 of revenue in the third quarter and $1.6 million of revenue for the full year-to-date period through the third quarter. Donald Kelly was appointed as Co-Chief Executive Officer in May, and continues to focus on opportunities to expand Premier's services to other owners, property managers and institutions in the hospitality industry. Initial market feedback has been very positive, given the company's unique value proposition and comprehensive project management services. To that end, Premier has approximately $400 million of total project renovation in the pipeline related to third-party business, including opportunities to be the exclusive project manager for several large hospitality entrepreneurs.

Financial results for the third quarter include revenue of $7.9 million and adjusted EBITDA of $3.7 million. For the year-to-date period through the third quarter, Premier generated $23.4 million of revenue and $11 million of adjusted EBITDA. We continue to see significant opportunities going forward for this business.

JSAV is a leading single-source solution for meeting and event needs with an integrated suite of audiovisual services, including show and event services, hospitality services, creative services and design and integration. We continue to see outstanding growth at the company with revenue up 54% in the third quarter compared to the prior-year period and 36% for the year-to-date period through the third quarter compared to the prior-year period.

Additionally, the company's acquisition of BAV in the first quarter of 2019 is already providing meaningful upside with BAV revenue up 48% in the third quarter compared to the prior-year period. Furthermore, BAV adjusted EBITDA is up 52% through our first full 2 quarters of ownership compared to the prior-year period.

Overall, the company continues to see success from the implementation of many initiatives over the past year, with adjusted EBITDA up $2.1 million in the third quarter compared to the prior-year period, highlighting the great team we have at JSAV from our executive management leaders to our associates in the field.

We remain focused on additional initiatives being implemented to support future growth and profitability, including integrating a new executive management team highlighted by CEO Chuck Bauman, [refueling] the company's show services business unit to optimize performance, integrating and optimizing BAV sales processes and cost sharing, and optimizing the continuing ramp-up of newly transitioned hotels. We remain excited about the opportunity to optimize performance going forward and continue to grow profitability.

We also continue to see positive results from integrating JSAV into Ashford asset managed hotels with average revenue per group room night up 29.7% and average customer satisfaction scores up 9.5% from the prior AV provider, highlighting JSAV's incredible service level. In the third quarter, JSAV executed 1 new non-Ashford hotel contract and 2 new Ashford hotel contracts, increasing the number of multiyear contracts in place with hotels and convention centers to 93 compared to 59 at the end of 2017, representing 58% growth.

We have engaged JSAV at 28 hotels owned by our advised REITs and we expect to have JSAV in more Ashford hotels by the end of the year. After JSAV partners with a hotel, it can take a year or 2 for AV operations to ramp up, so we believe there are still significant growth opportunities for JSAV at our hotels. We see a tremendous opportunity for integrating JSAV into more hotels in the U.S. and internationally, given the company's outstanding reputation as a leading service provider in the industry.

RED Hospitality & Leisure is a leading provider of watersports activities and other travel and transportation services in the U.S. Virgin Islands and Key West. We continue to see significant ramp of the company's U.S. VI operations, including the Ferry Transportation Services and beach and watersport services to the Weston St. John, beach and water services to the Ritz-Carlton St. Thomas Club, the timeshare and rental property adjacent to the Ritz-Carlton St. Thomas Hotel and increased direct bookings and private charter business.

In the third quarter, the company generated $1.7 million of revenue representing 526% growth over the prior-year period and $419,000 of adjusted EBITDA. Year-to-date, through the third quarter, the company generated $5.2 million of revenue and $1.3 million of adjusted EBITDA representing 466% and 752% growth respectively over the prior-year period.

Additionally, the company continues to ramp up integration of its acquisition of Sebago in the third quarter with [unintelligible] revenue of $1.2 million and adjusted EBITDA of $346,000 in the quarter. We remain optimistic about the growth outlook for RED Hospitality going forward.

Moving on to OpenKey, OpenKey continues to lead the market in mobile keyless entry, with strong sales and revenue growth. With a strong base of hotels in the InnDependent segment, OpenKey has expanded its scope to include in-depth discussions with several of the largest hotel brands regarding powering their mobile key initiatives. These brands have used OpenKey technology within the branded loyalty programs to add keyless entry as a utility to increase guest engagement.

The ability to offer a brand-level solution has been facilitated by the creation and introduction of a universal upgrade module that adds mobile key capability to any guest room lodge at the lowest cost available today. This technology innovation will allow brands to upgrade thousands of hotels with older locks that have no other option available. The universal upgrade module is sold as supporting hardware to OpenKey mobile key service, creating an additional revenue stream for the company.

While we continue to remain active in evaluating additional investments in operating companies, the pace of these investments will be slowing, and our attention will be focused on growing our existing businesses.

That concludes our prepared remarks. And we will now open the call up for Q&A.

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Questions and Answers

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Operator [1]

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Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Bryan Maher with B. Riley.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [2]

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When it comes to Ashford Securities, what specific capital raising needs are being met in the marketplace that compelled you to go this route? And how do you go about planning to distribute the securities to retail investors?

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [3]

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Well, as far as the rationale behind it in the part of our business that relies on asset management growth, we don't want to solely rely on the traditional public markets because as you know, those windows for raising capital can be open, and then they can be closed for long periods of time. Other markets, such as private markets, which we're starting to explore as well, as the nontraded space, alternative investment space, has either been traditionally more reliable, or have cycles that aren't highly correlated with the public market cycle.

So for that part of our business that relies on asset growth, we want as many different lines in the water to grow, and so Ashford Securities is a way to grow in that space. And there's been many, many, many, many different platforms that raise capital there over the years.

As far as how it's sold to individual investors, it depends upon exactly what security we're offering for what platform. And there's a number of broker-dealers around the country. I'm sure you're familiar with the whole process, but we go through a process of due diligence with these brokers and modifying the exact offering and designing a product that's attractive to investors at that period of time. And then these broker-dealers, with their financial advisors, go through the process of selling them, of course, with a lot of regulatory involvement along the way from the SEC and from FINRA. Does that answer your question, Bryan?

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [4]

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Yes, that's definitely very helpful. Moving on to JSAV, the numbers coming out of that division continue to be very impressive. And we were particularly impressed with the third quarter on a year-over-year basis. I don't know, maybe this is a question for Deric or Jeremy. Has the seasonality that's incorporated in the new acquisition earlier this year made it such that the third quarter will be less of a weak quarter for JSAV, or should we continue to expect kind of weaker third quarter relative to the rest of the year?

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Deric S. Eubanks, Ashford Inc. - CFO & Treasurer [5]

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I think the latter. The seasonality still exists. We were able to capture -- in a lot of our initiatives we put in place with the new management team, to drive additional profitability. And then we still have the ramp of growth in our hotels, but when you forecast it out over a 12-month basis, the seasonality in the third quarter will still exist.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [6]

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Okay. And when we think about -- when you talk about adding JSAV contracts with hotels, typically, how long are those contracts for? Is it a year, is it a multiyear, is it exclusive? Do the guests have to use JSAV, and is there a termination fee payable to JSAV if a hotel later opts out?

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [7]

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Sure, I'll take that. Okay. So typically, the term is 5 years on average, so they're multiyear contracts. And in terms of exclusivity, we're only talking right now just their hotel segment; they've got a separate show services segment that we can talk about as well. But in the hotel segment, they are basically the preferred vendor at that particular hotel to service any incoming guest's audiovisual needs. And so what happens is, the hotel will sell the group business and then to negotiate audiovisual services, they'll refer that to the onsite AV provider. In many of those cases, most cases, our hotels now is JSAV, of course, and then it's JSAV's role to be able to execute, to get that business, and then to be able to service that business. So there's a high take rate of using the in-house provider.

And the way the model works is that in order to -- the way the hotel gets paid is that basically, there's a referral commission from the JSAV provider onsite at the hotel to the hotel property management company, and ultimately, the owner. And it depends on what type of revenue source exists; there's all different types of revenue sources that we charge to provide AV services.

A big group that has a preferred AV provider that has a very big show services business certainly can go and book a piece of business at a hotel, a big convention hotel or meeting-space hotel, and contract directly with their AV provider. And that's actually the business that BAV traditionally has been in. Most of their business is association business out of the D.C. market and Northeast market, but they do shows all over the country. JSAV has a big show services segment as well, and they've got some large, big Fortune 500-type clients that use them to service their show services.

So there's different ways to capture business, but right now, we're focused on rolling out their hospitality segment to our hotels. And we think there's a big opportunity for them to continue to grow outside our hotels and expand the footprint.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [8]

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Okay. Thanks. And then just last for me, with Remington Hotels management business about to be acquired, has the company, either Remington itself, or Ashford Inc., started to market those management services to potential hotel owners who might want to make a change?

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [9]

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Yes. Remington hasn't gone after third-party business in all these years. And in anticipation of this transaction closing, Remington went ahead and hired a gentleman about -- he came on board maybe 2 months ago now to head up that effort. And so Remington has been out starting to pitch third-party business. We did this because over Premier, we got a late start; we didn't start looking for someone until after the transaction closed, and then we had a few hiccups along the way, where someone accepted and turned us down, and on and on. And so we didn't want that to happen for Remington, and so we started the Remington efforts before the closing even occurred.

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Bryan Anthony Maher, B. Riley FBR, Inc., Research Division - Analyst [10]

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Okay. Thank you. That's all for me.

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Operator [11]

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Tyler Batory with Janney Capital Markets.

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Tyler Anton Batory, Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure [12]

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A couple of questions for me. And the first one, when we look at the share price and the valuation of your stock right here, obviously, it's come down quite a bit over the past year or so. What, in your minds, are the key points that you think the Street is missing here? And are you able to just reiterate, in this public forum, what, in your view, shareholders or potential shareholders should be focused on just as they evaluate the company?

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [13]

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Sure. This is Monty. I think what's happened to our stock price is the fact that here, in the past year with these 2 transactions, we've almost tripled the size of the company. And that is a lot for investors to swallow. That's a lot of share issuance and we've got this big share distribution that's going to happen next week, which is about 15% of our platform. And in the end, a lot of investors just want to sit on the sidelines and to wait until it happens. It's difficult for shareholders to buy in volume right now because of the relatively small amount that's traded. And those that are interested are waiting for this distribution event. So I think that's going to be a watershed, once that occurs and all that overhang will be cleared out.

As far as going forward, I can't emphasize enough the better mousetrap that we've got. This is incredible. No one has ever done this anywhere in the industry, public or private, where we've got a service company that has all these service providers to hospitality properties, asset management, property management, project management, architecture, all the way down. And these are all first-in-class providers and so that every time one of these REIT platforms that we advise at a hotel, it is just an absolute tremendous amount of business to us. And it allows us to then provide key money that you know very well.

And so what I think investors are going to have to do is once this transaction is done, which we hope will happen next week on the 6th, is to see the big picture here, where we've got all these services, all this revenue coming into Ashford Inc. It is as stable as can be from these advised platforms. And then in a couple of platforms, 2 of the larger ones, Remington and Premier, we have never pursued third-party business before. And these are just incredible growth opportunities. They take a little bit to get going, but we all know of a number of companies out in the public that offer these services I think very well.

Even if you look at Premier, just by itself, and the opportunities there, there's no one else out there that provides all of these services bundled, project management, architecture, procurement, expediting warehousing, interior design. And if you're trying to build or renovate a hotel right now, you have to go and collect all these different providers, do it yourself, interview them all, make sure that they're all good for you, negotiate all the contracts, and then hope they all work well together, and it is a pain the neck. And to have a one-stop shop when you renovate a hotel is an incredible blessing and opportunity from someone that's done it their whole life.

So there is just so many opportunities in this platform that I think once investors start to see it, they'll get really excited, and excited as I am. And I think what it's going to take is for investors to start seeing us work the machine and start seeing the machine post results, and it will. And once that starts to happen, then I think the stock will perform very, very well. I think those investors that can see it before it starts to actually happen and get in early, they'll do exceptionally well because many, many investors won't buy until they actually see it happening. But by then, the stock price has [run] up a good bit.

So we've got something very unique; it's never been done before. It's something that I've been working on for over 4 years now to try to put all this together. November 6, it'll be put together. So we are just very, very excited about it, and we'll see if investors want to jump on right away, or if they want to wait and see. But the ones that jump in early will do very, very well.

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Tyler Anton Batory, Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure [14]

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All right. That's very clear. I think that's helpful for a lot of folks out there. And the other follow-up question I had, just in a hypothetical situation, obviously, I think your stock is very undervalued down here. But if it doesn't move very higher in the near future, what sort of avenues could you look at? And where I'm going with the question, after Remington closes, could you look at buying back stock at size as a potential use of capital to potentially create some value and move the share price higher?

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Deric S. Eubanks, Ashford Inc. - CFO & Treasurer [15]

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As part of the transaction that's going to happen next week, the Remington transaction is [unintelligible] of tax-free stock-for-stock transaction. As part of that, tax counsel has advised us that we are not to discuss buying back stock, or doing anything post-transaction, and to make no plans. And so we haven't even discussed it internally and we won't discuss it until and unless that transaction closes. Then we can talk about it amongst ourselves and then we can talk about it to the public too, if that's warranted. But until then, we are just prohibited from even entertaining such.

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Tyler Anton Batory, Janney Montgomery Scott LLC, Research Division - Director of Travel, Lodging and Leisure [16]

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Okay. Okay. That's all for me. I appreciate it. Thank you.

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Operator [17]

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(Operator Instructions) Stephen Biggar with Argus Research.

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Stephen Biggar, Argus Research Company - Director of Financial Institutions Research [18]

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You had mentioned that Remington's hotel management business had very little third-party business outside the advised REIT. So I'm just wondering if there was any limiting factors there that are now freed up once the acquisition takes place? And if you could expand on any areas of expansion, at least the initial focus; is it geographic, or hotel brands where you expect the initial focus to be?

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [19]

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Sure. This is Monty. Remington was held privately by myself and my father, still is. And to have an outside manager, that was not always ideal for us, and we didn't want to face -- I didn't want to face any criticism from our public company investors that Remington was out chasing anything, or doing anything other than focusing exclusively on REIT business. So we never hired anybody, we never pursued it, never did anything of the sort. So the barrier that's been lifted is my own disposition because since it was private and held by an insider, that was just a criticism I didn't want to deal with.

But now that it's going to be part of a public company, and has a fiduciary duty to that public company in order to maximize the profits from Remington, investors understand that. And they understand that's just something that needs to happen, has to happen. So that's why Remington has been let loose and they're out there scouring the markets.

As far as geographically where to focus, really any part of the United States, very little outside the United States, although if it's close, we'll look at it. The gentleman that we hired came from a firm that was successful in getting a lot of management contracts from larger properties, 300 rooms, 400 rooms-plus, with lots of food and beverage, lots of independents. Although Remington has got specialties and [all this], we do a lot of limited service management through Remington. We do independents, branded, you name it.

So I wouldn't say there's a particular focus, other than probably very little focus below traditional mid-lower upscale type limited service properties, down into the hard-budget segments or harder budget segments probably, such as Days Inns and these things, but probably Hampton Inn quality and higher, which is what Remington manages now, all the way up to very high-end luxury properties. Remington manages the Bardessono property, which has an ADR of over $1,000 a night, and is one of the top-ranked properties in the country. So we'll be out there looking at all these opportunities.

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Stephen Biggar, Argus Research Company - Director of Financial Institutions Research [20]

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Okay. Yes, that makes sense. It looks like an awful lot of untapped growth potential then. And then just regarding J&S, you had mentioned in earlier commentary about the growth over the past year. But if I look at the figure for multiyear contracts last quarter, it was 93 and that was unchanged this quarter. So I'm just wondering if you could add more color on the leveling off there. And previously, you had said that they would -- you'd have that count wrapped up by, I guess, 2020. So I'm wondering if not the new business, at least the remaining conversions of the affiliated hotels.

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [21]

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Yes, so we elected to not renew a few smaller properties that were remote locations, not close to any of our other hotels, that were essentially unprofitable. And so that's why the number was flat for the quarter, but we're anticipating maybe as many as 4 to 5 in Q4 and then 5 to 7 from our existing properties. You can understand that our existing properties do have some encumbrances with multiyear contracts with the existing AV providers. So as they tail off, we will put JSAV in.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [22]

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You mean -- when he said existing properties, he means the Ashford --

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [23]

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Yes, existing.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [24]

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-- Ashford Trust and Braemar properties.

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [25]

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That's right. And then there's a whole third-party effort. They've been successful in growing outside of Ashford and that's going to be a huge focus for us going forward.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [26]

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How many properties did JSAV have when we bought them? Wasn't it something like 50 or 60 or something?

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [27]

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54, I think, something like that, 54, yes.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [28]

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So we had 54; now, they have over 90.

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [29]

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93.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [30]

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93. And this has been in 2 years?

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [31]

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Yes.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [32]

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And so of that 40 that they've picked up, right, just an incredible amount, how many would you say is from our managed platforms, maybe 10 or 15 or so?

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [33]

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No, it's been about 28.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [34]

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About 28.

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [35]

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It's a good number, yes.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [36]

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So about 15 or so third-party and so --

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [37]

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It is a little bit more, but again, we've pulled the portfolio a little bit on some hotels that just weren't strategic for us.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [38]

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That just weren't making any money. So even so with a base of 50 and this third-party of another 15, that's 30% growth over 2 years. So 15% a year just in the third-party business is what JSAV has been averaging, which is -- I think it's higher than they've ever done before we purchased them.

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Stephen Biggar, Argus Research Company - Director of Financial Institutions Research [39]

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Right. Okay. And you said 4 to 5 for Q4, and what was the 5 to 7 number?

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [40]

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That would be for next year from our existing Ashford portfolio assuming we don't acquire anymore assets.

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Stephen Biggar, Argus Research Company - Director of Financial Institutions Research [41]

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Right.

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Jeremy J. Welter, Ashford Inc. - Co-President & COO [42]

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And then there's a whole separate [event] in show services business. You saw in the third quarter, the growth of BAV, which was up, I think, somewhere around 50%. That doesn't require any contracts with any hotels. That's just one-off shows that they're contracting and referrals from existing clients and continued business, or more business from existing clients as well. So I see multiple paths of growth, both domestically; hospitality, within our portfolio; outside our portfolio, in-show services domestically, and then also in the Dominican and Mexico.

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Stephen Biggar, Argus Research Company - Director of Financial Institutions Research [43]

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Okay. Thanks. That's all for me. Appreciate it.

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Operator [44]

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Thank you. I would like to turn the floor over to management for closing comments.

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Montgomery J. Bennett, Ashford Inc. - Founder, Chairman of the Board & CEO [45]

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Thank you all for your participation today, and thank you for your continued support.

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Operator [46]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.