Q4 2023 Ashford Inc Earnings Call

Participants

Jordan Jennings; Director of IR; Ashford Inc.

Deric Eubanks; CFO; Ashford Inc.

Eric Batis; EVP; Ashford Inc.

Presentation

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by, and welcome to the Ashford Inc. fourth quarter 2023 results conference call. Please note, this conference is being recorded. I will now turn the conference over to your host, Jordan Jennings, Director of Investor Relations. Thank you. You may begin.

Jordan Jennings

Good day and welcome to today's conference call to review results for Ashford for the fourth quarter and full year 2023. And to update you on recent developments on the call today will be Deric Eubanks, Chief Financial Officer; and Eric Batis, Executive Vice President of Operations the results as well as notice of accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday in a press release.
At this time, I remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the Safe Harbor provisions of the federal securities regulations 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.
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. And 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 seventh on Form 8-K with the SEC on February 29t, 2024, and may also be accessed through the Company's website at www.ashfordinc.com. It was very encouraged to review these references. Reconciliations provided in our earnings release, together with all other information provided in the release.
Also, unless otherwise stated, all reported results discussed in this call comparing the fourth quarter and year ended December 31, 2023, with the fourth quarter and year ended December 31st, 2022. I will now turn the call over to Deric.

Deric Eubanks

Thanks, Jordan, and welcome, everyone, to our call to discuss our fourth quarter and full year financial results for 2023. I'll start by giving you an overview of our operations strategy and financial results, and then Eric will provide an update regarding our operating businesses. After that, we'll open it up for Q&A.
The key things we're going to highlight today are first, the lodging industry has continued to perform well. And for the quarter, we reported solid overall revenue growth over the prior year period. Second, we continue to see an attractive pace of capital raising through Ashford Securities and have raised approximately $580 million of gross capital since its launch in 2021.
And third, we're excited to provide an update on our newest advice platforms, the Texas Strategic Growth Fund and Sterling Hotels and Resorts. Second, strategic growth funded a private investment vehicle focused on investing in all types of commercial real estate in Texas, Sterling Hotels and Resorts, the newly formed private nav Re, the plan to invest in a diverse portfolio of hotels and resorts across all chain scales, primarily located in the United States with a focus on both income and growth.
As of December 31, 2023, our three advisory platforms, Ashford Trust and Braemar at Sterling at ownership interest in 113 hotels with approximately 25,000 rooms and approximately $7.5 billion of gross assets. Braemar resort portfolio continues to see some stabilization in both demand and pricing at leisure guests now have more options for travel well, as urban hotels continue to recover nicely as both corporate and group demand continues to strengthen.
Additionally, as the hotel debt capital markets continue to improve, Braemar recently addressed multiple near term debt maturities, refinanced or extended almost all of its 2024 debt maturities. Ashford Trust continued to focus on deleveraging its balance sheet and extending its debt maturities and ended the quarter with $209 million of net working capital to date Ashford Trust has issued approximately $105 million of its non-traded preferred stock, and we believe this is an attractive source of capital for that platform. After Trump's recently announced plan for paying off its corporate financing during 2024 primarily through select asset sales refinancing, extending upcoming debt maturities and raising capital through its non-traded first stock offering.
Our newest advice platform is the Texas Strategic Growth Fund, which we launched in late 2022. Ashford made a $2.5 million investment into this fund and that capital along with other capital raised from outside investors was used to make an equity investment in a multifamily property in San Antonio, Texas. We're also excited about our newest platform, a private Nat recall, Sterling hotels, resorts Sterling will invest in a diversified portfolio of hotels and resorts across all chain scales. We plan to raise capital for this platform through Ashford Securities.
Our strategy and structure are designed for growth. We have a powerful ecosystem of businesses that all benefits we grow. Our assets under management, our size and scale in the lodging industry also brings benefits to third party owners and other capital providers. As we are one of the largest owners of fee payers for the major hotel brands, we believe we have a superior strategy and structure that is unique within the hospitality space, and we are excited about the potential growth of our platform. Over the past few years, we have completed numerous bolt-on acquisitions for our operating businesses, and we continue to look for attractive opportunities to strategically and accretively grow our business.
I will now turn to our financial results for the quarter and full year net loss attributable to common stockholders for the fourth quarter was $13.6 million and net loss attributable to common stockholders for the full year was $40.8 million adjusted EBITDA was $ 13.2 million for the fourth quarter and $60.4 million for the full year.
Adjusted net income for the fourth quarter was $8.6 million and adjusted net income per diluted share was $1.02. Adjusted net income and adjusted net income per share for the full year 2023 were $42.4 million and $5.20, respectively, reflecting strong growth over the prior year.
Our share count currently stands at 8.4 million fully diluted shares outstanding, which is comprised of 3.1 million common shares outstanding, 0.2 million common shares earmarked for issuance under our deferred compensation plan, 4.3 million common shares associated with our Series D convertible preferred stock and the remaining 0.8 million shares for acquisition related shares and restricted stock.
I'll now turn the call over to Eric to discuss our operating businesses. In more detail.

Eric Batis

Thank you, Deric. We're excited to provide fourth quarter updates on our products and services businesses. Throughout 2023, our businesses successfully gained market share through organic and inorganic initiatives, positioning the company well for 2024.
This is highlighted by Inspire's third straight year of more than 20% revenue growth, Remington's expansion into the Caribbean and Latin American markets, Red acquisition of Elite annuity and Maldives shop and Premier's diversification into new verticals.
First, business I'd like to discuss with Inspire. Inspire generated $36.3 million of audiovisual revenue in the fourth quarter and $3.9 million of adjusted EBITDA on a sales front and Spire executed three new hospitality contracts during the fourth quarter, which are expected to contribute $3.1 million of annual audiovisual revenue.
For the full year of 2023, Inspire generated $148.6 million of audiovisual revenue $39.2 million of which was from international markets, representing a 22.6% and 35.0% increase over the prior year, respectively. Inspire also executed 11 new hospitality contracts in 2023, which are expected to contribute $10.1 million of annual audiovisual revenue. We are thrilled with Inspire's growth in 2023 and look forward to continuing the momentum throughout 2024.
Moving to Remington, in November, the Company began managing its first hotel outside of the United States, Crocs Resort and Casino in Costa Rica. Remington also signed on to manage autographs, Archie in Costa Rica and two resorts in Landmark city, Dominican Republic, Royal Sonesta Hotel and the James semester during the fourth quarter, Remington generated hotel management revenue and adjusted EBITDA of $13.1 million and $5.1 million, respectively, representing a 38.5% adjusted EBITDA margin.
Remington also executed nine new third party hotel management agreements, which are expected to contribute $2.9 million of annual hotel management revenue at the end of the fourth quarter, Remington managed 122 properties that were open and operating Remington managed 68 properties for Ashford's advised reach Ashford Hospitality Trust, Braemar Hotels & Resorts and Sterling Hotels and Resorts. Remington also managed 50 for third party properties for 31 different ownership groups, 13 of which have hired Remington to manage two or more of their hotels.
These ownership groups include real estate funds, family offices, high-net-worth individuals, private equity groups and developers. We're pleased to see that Remington's hotels under management for third party owners now represents approximately 44% of its total hotels under management. Remington's Vantage portfolio operates in 25 states, Washington, D.C. and Costa Rica across 28 brands, including 14 independent and boutique properties in the fourth quarter, Red generated $8.3 million of revenue, representing a 38.3% increase over the prior year quarter and $0.3 million of adjusted EBITDA.
[2020] was a transformational year for RED, the company expanded into new geographies, grew its asset base and entered new verticals. We had established a strategic foothold in Hawaii with the acquisition of Elite newly married shop, which we are pleased to report has recovered to normalized demand levels following the Mallay fires in August. In addition, Red expanded its services to now include ground transportation services in the U.S. Virgin Islands, Premier generated $5.8 million of design and construction fee revenue in the fourth quarter, culminating in $27.7 million. Total design and construction fee revenue for 2023.
But 25.1% increase over the prior year. Premier also generated $1.7 million of adjusted EBITDA in the fourth quarter and $9.5 million of adjusted EBITDA in 2023, resulting in adjusted EBITDA margins of 30.2% and 34.4%, respectively.
We continued to see strong growth with Premier's third party business as revenue surpassed $4 million for the first time in 2023 and grew 32.9% over the prior year. During the quarter, Premier executed seven new third-party contracts, representing $0.4 million of expected design and construction fee revenue. And we have plans to continue to grow their third party business and build upon their ground-up architecture capabilities in the year ahead.
We are very pleased with the ongoing success of Ashford Securities fundraising efforts. To date, Ashford Securities has raised approximately [$580 million] of capital. Ashford Securities is currently in the market with a redeemable non-traded preferred stock offering for Ashford Hospitality Trust and has continued to build momentum by growing our institutional broker-dealer and RA relationships.
Since the launch of the Ashford Hospitality Trust non-traded preferred stock offering, Ashford Securities has placed approximately $104.7 million of capital from a syndicate of 42 firms. This is an attractive source of capital for Ashford Hospitality Trust to both improve its balance sheet and Deploy for Growth. Ashford Securities is also raising capital for a growth oriented investment product focused on commercial real estate in the state of Texas.
To date, Ashford Securities has raised $11.5 million of gross capital, which comprises $2.5 million from Ashford Inc. and $9 million from a syndicate of dealers that includes 22 broker dealers. 2023 was a successful year with our two primary initiatives, third party sales and strategic acquisitions, and we are excited to continue this momentum into 2024.
That concludes our prepared remarks, and we will now open up the call for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Tyler Batory, Oppenheimer.

Thank you and good afternoon. This is Jonathan on for Tyler. Thanks for taking our questions. First one from me understanding there's a lot of moving pieces given the industry is kind of seeing this normalization of leisure leisure trends and accelerating group demand. Any color on kind of how that played out for you guys over the quarter and how you're thinking about the opportunity for that so that mix shifts going forward?

Eric Batis

Yes, sure. In terms of our portfolio company performance and our hotel performance, you know, we're excited about the trends.
And with the continued growth of leisure and the kind of normalizing of the performance of our urban properties, you can see some of that showing up in our ability to add contracts at Remington. And then across our portfolio companies, Premier's getting some increased third party business, which is representative of the industry normalizing and coming back to spending normal amounts of CapEx and leisure remaining strong with Red Hat, for example, and their revenue growth.
Also with Inspire, the continued stabilization of travel to urban markets and business travel is helping those guys with their continued growth. So that by and large, in addition to what we're seeing at our advised hotels, we're seeing the impact of stabilization across our portfolio companies as well.

Okay. And then can you provide some additional color on the certainly Hotels and Resorts offering, maybe how that opportunity came about, how you're thinking about the long-term potential of that offering and kind of the opportunity set for a private NAV read that's out there.

Deric Eubanks

Yes let me just take that one, Jonathan. The I mean, the genesis of the idea for that platform, as we've obviously operated publicly traded reads for over 20 years now. And we've just seen the challenge of raising equity capital in the public markets and that publicly traded hotel rates, very rarely trade at NAV or a premium to NAV. And so it's very difficult to raise equity accretively. And um and so we were intrigued by the nav re concept where the portfolio is constantly valued at the NAV of the underlying assets. And there's been a lot of capital raised in that space. We've now have Ashford Securities.
We've raised significant capital for Ashford Securities.
That channel has been a very resilient source of capital over multiple cycles.
And so we think it's an interesting product.
We're obviously very early days on it. We've just we've just launched it, but we think it's interesting because investors can come in and come out at an AB. And so it's hopefully a an interesting product for us, be able to grow our assets under management. And so over time, we're hopeful that we could raise significant capital in that vehicle and we grow our portfolio of assets under management, which would ultimately help all of our portfolio companies as well.

Okay. And then last one for me, if I could. Any color from the release this morning on the compliance plan with the exchange kind of what that entails and kind of what needs to happen to satisfy exchange requirements? Any anything you can add there?

Deric Eubanks

Yes, it really boils down to our the value of our public float and the challenge we've had. We've got a lot of preferred equity at our capital structure, a very small piece of our companies publicly traded publicly listed on commercial real estate asset managers in general have not fared very well in the public marketplace. I think we got swept up into that into that somewhat. And so we're hopeful that over time, the value with the would get back to a level that's consistent with the listing standards with NYSE American, the NYSE American has given us some time to get back in compliance with that criteria.

Okay, great. Thank you for all the color. That's helpful.

Operator

Ladies and gentlemen, we have reached the end of questions-and-answer session, and thank you for your participation and you may disconnect your lines at this time.