Apple Hospitality REIT Inc (APLE, Financial) announced its earnings for the third quarter ended September 30, 2023, with a mixed set of financial results. The company reported a slight decrease in net income for the quarter, down 1.1% to $58.5 million compared to $59.1 million in the same quarter of the previous year. However, for the nine-month period, net income increased by 10.0% to $156.7 million from $142.5 million in 2022.
Financial Performance Overview
Operating income for the quarter saw a modest increase of 1.2% year-over-year, reaching $76.3 million. The operating margin experienced a slight contraction of 80 basis points to 21.3%. Adjusted EBITDAre and Modified funds from operations (MFFO) both showed improvement, with Adjusted EBITDAre increasing by 2.6% to $121.9 million and MFFO growing by 1.5% to $104.1 million for the quarter.
Key Operating Metrics
Apple Hospitality's key operating metrics reflected positive trends, with ADR for the quarter up by 0.9% to $159.36, and occupancy rates improving by 1.8% to 77.1%. This led to a 2.8% increase in RevPAR to $122.91. The Comparable Hotels segment, which excludes one non-hotel property leased to third parties, showed a 3.0% increase in RevPAR to $122.91.
Strategic Growth and Portfolio Management
Justin Knight, CEO of Apple Hospitality, highlighted the company's strong performance and strategic asset management, which have allowed it to maintain robust margins despite inflationary and wage pressures. Knight also emphasized the company's focus on maximizing shareholder returns through operating fundamentals and strategic portfolio growth.
"Performance across our portfolio remained strong during the quarter, and we are pleased to report Comparable Hotels RevPAR growth of 3% as compared to the third quarter of 2022, driven by improvements in Comparable Hotels occupancy of 2% and ADR of 1%," said Justin Knight.
Apple Hospitality's portfolio consisted of 220 hotels as of September 30, 2023. The company has been active in the acquisition space, with four hotels purchased since the beginning of the year and three additional hotels under contract for purchase.
Capital Allocation and Shareholder Returns
The company has maintained a strong balance sheet with total debt to total capitalization, net of cash and cash equivalents, at approximately 28%. Distributions paid per share for the quarter increased significantly by 41.2% to $0.24. The company's share repurchase program and at-the-market offering program remain active, providing flexibility in capital allocation.
Outlook and Conference Call
Apple Hospitality provided an updated outlook for 2023, adjusting its guidance for net income and Adjusted EBITDAre, reflecting slightly higher operating costs. The company will host a conference call to discuss the quarterly results and provide further insights into its performance and strategy.
For a detailed analysis of Apple Hospitality REIT Inc (APLE, Financial)'s financial results, including complete financial tables and a reconciliation of GAAP to non-GAAP measures, interested readers are encouraged to visit the full earnings release and filings on the company's website or the SEC's EDGAR database.
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Explore the complete 8-K earnings release (here) from Apple Hospitality REIT Inc for further details.
