Playa Hotels & Resorts N.V. Reports Second Quarter 2023 Results

FAIRFAX, Va., Aug. 3, 2023 /PRNewswire/ -- 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, 2023.

Three Months Ended June 30, 2023 Results

• Net Income was $20.6 million compared to $30.5 million in 2022
• Adjusted Net Income⁽¹⁾was $21.0 million compared to $24.9 million in 2022
• Net Package RevPAR increased 13.6% over 2022 to $312.64, driven by a 16.1% increase in Net Package ADR, partially offset by a 1.6 percentage point decrease in Occupancy
• Owned Resort EBITDA⁽¹⁾increased 14.2% versus 2022 to $83.1 million
• Owned Resort EBITDA Margin⁽¹⁾increased 1.0 percentage points versus 2022 to 35.3%
• Adjusted EBITDA⁽¹⁾increased 16.9% versus 2022 to $72.1 million, inclusive of a $4.3 million benefit from business interruption insurance related to Hurricane Fiona that impacted the Dominican Republic in the second half of 2022
• Adjusted EBITDA Margin⁽¹⁾increased 1.4 percentage points versus 2022 to 30.2%

Six Months Ended June 30, 2023 Results

• Net Income was $63.4 million compared to $73.3 million in 2022
• Adjusted Net Income⁽¹⁾was $70.0 million compared to $56.7 million in 2022
• Net Package RevPAR increased 19.2% over 2022 to $333.84, driven by a 21.8% increase in Net Package ADR, partially offset by a 1.5% percentage point decrease in Occupancy
• Comparable Net Package RevPAR increased 22.6% over 2022 to $355.71, driven by a 1.6% percentage point increase in Occupancy and a 20.1% increase in Net Package ADR
• Owned Resort EBITDA⁽¹⁾increased 20.1% versus 2022 to $192.5 million
• Owned Resort EBITDA Margin⁽¹⁾increased 1.0 percentage points versus 2022 to 38.8%
• Adjusted EBITDA⁽¹⁾increased 23.1% versus 2022 to $170.6 million, inclusive of a $4.3 million benefit from business interruption insurance related to Hurricane Fiona that impacted the Dominican Republic in the second half of 2022
• Adjusted EBITDA Margin⁽¹⁾increased 1.5% percentage points versus 2022 to 33.9%
• Comparable Adjusted EBITDA⁽¹⁾increased 29.7% versus 2022 to $175.2 million
• Comparable Adjusted EBITDA Margin⁽¹⁾increased 2.3% percentage points versus 2022 to 35.1%

_{(1) See "Definitions of Non-U.S. GAAP Measures and Operating Statistics" for a description of how we compute Adjusted Net Income/(Loss), Owned Resort EBITDA, Owned Resort EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Comparable Adjusted EBITDA, Comparable Adjusted EBITDA Margin and other non-GAAP financial figures included in this press release, as well as reconciliations of such non-GAAP financial figures to the most directly comparable financial measures calculated in accordance with GAAP.}

"We continued to execute at a high level during the second quarter, with our legacy portfolio (excluding Jewel Punta Cana and Jewel Palm Beach) growing occupancy, ADR and Owned Resort EBITDA Margins year over year. The fundamental strength was led by performance in our Jamaican segment, as the segment reported record second quarter occupancy and year over year ADR gains of 26%. As a reminder, Jamaicaremoved COVID-related travel restrictions during the second quarter of 2022, making it the last of our major geographic segments to do so. We remain optimistic about the runway for the recovery in Jamaica given the strength of that market prior to the pandemic and the major infrastructure efforts under way to help further increase tourism.

Our teams in Mexico also delivered another quarter of excellent results on a currency-adjusted basis, though the significant appreciation of the Mexican Peso was a material drag on our reported second quarter results. We remain focused on operational execution and tactical expense control, resulting in 100bps of constant currency Owned Resort EBITDA Margin expansion year over year in the Yucatan segment on mid-single-digit ADR growth. We will continue to adjust costs and drive further savings from our procurement efficiency efforts to lower the ADR gains needed to hold margins as we head into the second half of the year and beyond. In the Dominican Republic, our Hyatt and Hilton properties had another phenomenal quarter but performance in the segment was once again negatively impacted by the two properties we assumed control of earlier this year.

With half of the year behind us and factoring in the recent changes in foreign currency exchange rates, we now expect full-year Adjusted EBITDA to be in the range of $260-275 million, roughly in line with our original expectation at the beginning of the year. On the capital allocation front, we continue to believe our stock presents an attractive value given our strong fundamentals. During the second quarter, we repurchased over 3.7 million shares for $34.2 million."

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

Financial and Operating Results

The following tables set forth information with respect to the operating results of our total portfolio and comparable portfolio for the three and six months ended June 30, 2023 and 2022 ($ in thousands):

_{(1) For the three and six months ended June 30, 2022, Net Package ADR includes $2.6 million and $5.3 million, respectively, of on-property room upgrade revenue that was reclassified from non-package revenue to package revenue to conform with current period presentation.}

_{(2) 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, 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.}

_{(3) Owned Net Revenue excludes Management Fee Revenue, other corporate revenue and The Playa Collection revenue (which is a third-party owned and operated membership program).}

_{(4) For the six months ended June 30, 2023, our comparable portfolio excludes Jewel Palm Beach, which was closed for a majority of the first quarter of 2023 as we transitioned the management of the resort to us from a third-party.}

Balance Sheet

As of June 30, 2023, we held $268.8 million in cash and cash equivalents, with no restricted cash. Total interest- bearing debt was $1,094.5 million, comprised of our Term Loan due 2029 (the "Term Loan due 2029"). As of June 30, 2023, there was no balance outstanding on our $225.0 million Revolving Credit Facility. Effective April 15, 2023, we entered into two interest rate swaps to mitigate the floating interest rate risk on our Term Loan due 2029, which incurs interest based on SOFR. The interest rate swaps each have a fixed notional amount of $275.0 million and are not for trading purposes. The fixed rates paid by us on the interest rate swaps are 4.05% and 3.71%, and the variable rate received resets monthly to the one-month SOFR rate. The interest rate swaps mature on April 15, 2025 and April 15, 2026, respectively.

Earnings Call

The Company will host a conference call to discuss its second quarter results on Friday, August 4, 2023 at 8:00 a.m. (Eastern Daylight Time). The conference call can be accessed by dialing (888) 317-6003 for domestic participants and (412) 317-6061 for international participants. The conference ID number is 5071660. Additionally, interested parties may listen to a taped replay of the entire conference call commencing two hours after the call's completion on Friday, August 4, 2023. This replay will run through Friday, August 11, 2023. The access number for a taped replay of the conference call is (877) 344-7529 or (412) 317-0088 using the following conference ID number: 7836389.

There will also be a webcast of the conference call accessible on the Company's investor relations website at 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. As of June 30, 2023, Playa owned and/or managed a total portfolio consisting of 26 resorts (9,756 rooms) located in Mexico, Jamaica, and the Dominican Republic. In Mexico, Playa owns and manages Hyatt Zilara Cancún, Hyatt Ziva Cancún, Wyndham Alltra Cancún, Wyndham Alltra 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 Grande Montego Bay Resort & Spa and Jewel Paradise Cove Beach Resort & Spa. In the Dominican Republic, Playa owns and manages the Hilton La Romana All-Inclusive Family Resort, the Hilton La Romana All-Inclusive Adult Resort, Jewel Palm Beach, Jewel Punta Cana, Hyatt Zilara Cap Cana and Hyatt Ziva Cap Cana. Playa also manages nine resorts on behalf of third-party owners. Playa's strategy is to leverage its globally recognized brand partnerships and proprietary in-house direct booking capabilities to capitalize on the growing popularity of the all-inclusive resort model and reach first-time all-inclusive resort consumers in a cost-effective manner. We believe that this strategy should position us to generate attractive returns for our shareholders, build lasting relationships with our guests, and enhance the lives of our associates and the communities in which we operate.

Forward-Looking Statements

This press release contains "forward-looking statements," as defined by federal securities laws. Forward-looking statements reflect our 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 23, 2023, as such factors may be updated from time to time in our 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 our good faith beliefs, they are not guarantees of future performance. The Company 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 us (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 (as defined below) 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 Net Non-package Revenue. Although Net Package RevPAR does not include this additional revenue, it generally is considered the key performance statistic in the all-inclusive segment of the lodging industry to identify trend information with respect to Net Package 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 and premium room upgrades, food and beverage services, and entertainment activities, net of compulsory tips paid to employees. 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" includes revenue associated with premium services and amenities that are not included in net package revenue, such as dining experiences, wines and spirits, and spa packages, net of compulsory tips paid to employees. 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 is recognized after the completion of the sale when the product or service is transferred to the customer. Food and beverage 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 resorts owned by third-parties. The fees earned are typically composed of a base fee, which is computed as a percentage of resort revenue, and an incentive fee, which is computed as a percentage of resort profitability. Management Fee Revenue was a minor contributor to our operating results for the three and six months ended June 30, 2023 and 2022, but we expect Management Fee Revenue to be a more relevant indicator to assess the overall performance of our business in the future to the extent we are successful in entering into more management contracts.

"Total Net Revenue" represents Net Package Revenue, Net Non-package Revenue, Management Fee Revenue, The Playa Collection revenue and Other revenues. "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 and Net Non-package Revenue to total revenue for the three and six months ended June 30, 2023 and 2022 ($ in thousands):

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Owned Resort EBITDA, and Owned Resort 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. EBITDA and Adjusted EBITDA (as defined below) include corporate expenses, which are overhead costs that are essential to support the operation of the Company, including the operations and development of our resorts. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:

• Other miscellaneous non-operating income or expense
• Pre-opening expense
• Losses or gains on sales of assets
• Share-based compensation
• Other tax expense
• Transaction expenses
• Severance expense for employee terminations resulting from non-recurring or unusual events, such as the departure of an executive officer or the disposition of a resort
• Gains from property damage insurance proceeds (i.e., property damage insurance proceeds in excess of repair and clean up costs incurred)
• Repairs from hurricanes and tropical storms (i.e., significant repair and clean up costs incurred which are not offset by property damage insurance proceeds)
• Loss on extinguishment of debt
• Other items which may include, but are not limited to the following: contract termination fees; gains or losses from legal settlements; and impairment losses.

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

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

"Owned Resort EBITDA" represents Adjusted EBITDA before corporate expenses, The Playa Collection revenue and Management Fee Revenue.

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

Adjusted Net Income

"Adjusted Net Income" represents net income or loss attributable to Playa, determined in accordance with U.S. GAAP, excluding