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Earnings call: Ashford Inc. announces solid growth and strategic updates

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Earnings call: Ashford Inc. announces solid growth and strategic updates
© Reuters.

Ashford Inc . (NYSE: NYSE:) has reported a successful fourth quarter for 2023, emphasizing solid revenue growth in the lodging industry, strategic capital raising initiatives, and progress in operating businesses.

The company’s conference call highlighted the expansion of Premier with a 32.9% growth and the raising of approximately $580 million through Ashford Securities. Despite a net loss, Ashford Inc. remains optimistic about its growth strategy and focus on deleveraging its balance sheet.

The company also launched a redeemable non-traded preferred stock offering for Ashford Hospitality (NYSE:) Trust and discussed various aspects of its portfolio and compliance plan during the Q&A session.

Key Takeaways

  • Ashford Inc. experienced solid revenue growth in the lodging sector.
  • Premier grew by 32.9% in 2023, securing 7 new contracts.
  • Ashford Securities raised roughly $580 million, with ongoing offerings including redeemable non-traded preferred stock for Ashford Hospitality Trust.
  • The company is focusing on third-party sales and strategic acquisitions for 2024.
  • The Q&A session addressed the impact of leisure and group demand, the Stirling Hotels and Resorts offering, and the NYSE America compliance plan.

Company Outlook

  • Ashford Inc. plans to maintain momentum in 2024 through third-party sales and strategic acquisitions.
  • The company is optimistic about its strategy and structure for growth.
  • Focus remains on deleveraging the balance sheet.

Bearish Highlights

  • The company reported a net loss for the quarter and full year.

Bullish Highlights

  • Premier secured significant growth and new contracts, indicating potential for future revenue.
  • Capital raising through Ashford Securities was successful, indicating strong investor confidence.

Misses

  • Specific figures detailing the net loss and other financial results were not disclosed in the summary.

Q&A Highlights

  • Discussion included the positive impact of leisure and group demand on the company’s portfolio.
  • The Stirling Hotels and Resorts offering was explained as a strategic response to public market challenges.
  • The company’s compliance plan with NYSE America listing standards was discussed, with a focus on addressing the public float value and preferred equity in the capital structure.

In summary, Ashford Inc. has shown resilience and strategic savvy in navigating the challenges of the past year. The company’s focus on expanding its third-party business, coupled with successful capital raising efforts, sets a positive tone for the coming year. However, the net loss reported indicates that there are still hurdles to overcome.

As Ashford Inc. continues to execute its growth strategy and works towards compliance with exchange listing standards, investors and stakeholders will be watching closely to see how these efforts translate into financial performance.

InvestingPro Insights

Ashford Inc. (NYSE American: AINC) has demonstrated a robust performance in terms of revenue growth, as reflected in the company’s solid 170.94% revenue growth over the last twelve months as of Q4 2023. This aligns with the company’s strategic capital raising initiatives and the expansion of Premier, underscoring the company’s optimistic outlook despite reporting a net loss.

InvestingPro Tips indicate that analysts predict Ashford Inc. will be profitable this year, which is a positive signal for investors considering the company’s recent growth trajectory. Additionally, the stock’s significant return of 22.39% over the last week suggests a potential rebound or investor response to recent company developments.

In terms of financial metrics, Ashford Inc. has a notably high Gross Profit Margin of 72.49% for the last twelve months as of Q4 2023, which may interest investors looking for companies with strong profitability potential. Still, it is important to note that the company has experienced high volatility in its stock price, as indicated by the 76.67% decline in the 1 Year Price Total Return as of the 64th day of 2024.

For those interested in further analysis and additional InvestingPro Tips, there are 12 more tips available for Ashford Inc. at https://www.investing.com/pro/AINC. To gain deeper insights into Ashford Inc.’s financial health and stock performance, consider subscribing to InvestingPro. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript – Ashford Inc (AINC) Q4 2023:

Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Ashford Inc. Fourth Quarter 2023 Results Conference Call. [Operator Instructions] 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 the press release. At this time, let me 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. 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 February 29, 2024, and may also be accessed through the company’s website at www.ashfordinc.com. Each listener is encouraged to review these 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 the fourth quarter ended year-ended December 31, 2023, with the fourth quarter and year-ended December 31, 2022. I’ll 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 for the quarter and then Eric will provide an update regarding our operating businesses. After that, we will 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 advised platforms, the Texas Strategic Growth Fund and Stirling Hotels and Resorts. The Texas Strategic Growth Fund is a private investment vehicle focused on investing in all types of commercial real estate in Texas. Stirling Hotels and Resorts is a newly formed private NAV REIT that plans 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 advised REIT platforms Ashford Trust, Braemar and Stirling had ownership interest in 113 hotels with approximately 25,000 rooms and approximately $7.5 billion of gross assets. Braemar’s resort portfolio continues to see some stabilization and both demand and pricing as leisure guests now have more options for travel, while its urban hotels continue to recover nicely as both corporate and group demand continue to strengthen. Additionally, as the hotels debt capital markets continue to improve, Braemar recently addressed multiple near-term debt maturities and has refinanced or extended almost all of its 2024 debt maturities. Ashford Trust continues 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. Ashford Trust recently announced its 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 preferred stock offering. Our newest advised 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 NAV REIT called Stirling Hotels and Resorts. Stirling 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 bring benefits to third-party owners and other capital providers as we are one of the largest owners and fee payers for the major hotel brands. We believe we have a superior strategy and structure that is unique within the hospitality space. 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 $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 a deferred compensation plan, 4.3 million common shares associated with our Series D convertible preferred stock, and the remaining 0.8 million shares of our 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 are 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’s acquisition of Alii Nui and Maui Dive Shop, and Premier’s diversification into new verticals. The first business I’d like to discuss is INSPIRE. INSPIRE generated $36.3 million of audiovisual revenue in the fourth quarter and $3.9 million of adjusted EBITDA. On the sales front, INSPIRE 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 Audio Visual 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, Croc’s Resort and Casino in Costa Rica. Remington also signed on to manage Autograph Archie in Costa Rica and two resorts in Larimar City, Dominican Republic, Royal Sonesta Hotel and the James Sonesta. 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 9 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 REITs, Ashford Hospitality Trust, Braemar Hotels and Resorts, and Stirling Hotels and Resorts. Remington also managed 54 third-party properties for 31 different ownership groups, 13 of which have hired Remington to manage 2 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 total hotels under management. Remington’s managed portfolio operates in 25 states, Washington DC, 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. 2023 was a transformational year for RED. The company expanded into new geographies, grew its asset base and entered new verticals. RED established a strategic foothold in Hawaii with the acquisition of Alii Nui and Maui Dive Shop, which we are pleased to report has recovered to normalized demand levels following the Maui 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, a 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 continue 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 7 new third-party contracts, representing $0.4 million of expected design and construction fee revenue. Premier 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 RIA 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.

Operator: [Operator Instructions] Your first question is from the line of Tyler Batory with Oppenheimer.

Jonathan Jenkins: This is Jonathan on for Tyler. Thanks for taking our questions. First one for me, understanding there’s a lot of moving pieces, but given the industry is kind of seeing this normalization of 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 mix shift going forward?

Eric Batis: Yeah. Sure. In terms of our portfolio company performance and our hotel performance, we’re excited about the trends, 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 is 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, for example, in 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 by and large, you know, in addition to what we’re seeing at our advised hotels, we’re seeing the impact of the stabilization across our portfolio companies as well.

Jonathan Jenkins: And then, can you provide some additional color on the Stirling Hotels and Resorts offering, maybe how that opportunity came about? How are you thinking about the long-term potential of that offering and kind of the opportunity set for a private NAV REIT that’s out there?

Deric Eubanks: Yes, I’m happy to take that one Jonathan. I mean the genesis of the idea for that platform is we’ve obviously operated publicly traded REITs 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 REITs very rarely traded NAV or premium to NAV. And so it’s very difficult to raise equity accretively. And so we were intrigued by the NAV REIT 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 through 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 launched it. But we think it’s interesting because investors can come in and come out at NAV. And so it’s hopefully an interesting product for us to be able to grow our asset center management. And so over time we’re hopeful that we could raise significant capital in that vehicle and grow our portfolio of assets under management which would ultimately help all of our portfolio companies as well.

Jonathan Jenkins: And 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 the exchange requirements? Anything you can add there?

Deric Eubanks: Yes. It really boils down to our value of our public float and the challenge we’ve had. We’ve got a lot of preferred equity in our capital structure, a very small piece of our company is publicly traded, publicly listed. Commercial real estate asset managers in general have not fared very well in the public markets lately. I think we got swept up into that somewhat. And so we’re hopeful that over time the value would get back to a level that’s consistent with the listing standards within NYSE America and the NYSE America has given us some time to get back in compliance with that criteria.

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

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Stock Markets

Palantir, Anduril join forces with tech groups to bid for Pentagon contracts, FT reports

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(Reuters) – Data analytics firm Palantir Technologies (NASDAQ:) and defense tech company Anduril Industries are in talks with about a dozen competitors to form a consortium that will jointly bid for U.S. government work, the Financial Times reported on Sunday.

The consortium, which could announce agreements with other tech groups as early as January, is expected to include SpaceX, OpenAI, autonomous shipbuilder Saronic and artificial intelligence data group Scale AI, the newspaper said, citing several people with knowledge of the matter.

“We are working together to provide a new generation of defence contractors,” a person involved in developing the group told the newspaper.

The consortium will bring together the heft of some of Silicon Valley’s most valuable companies and will leverage their products to provide a more efficient way of supplying the U.S. government with cutting-edge defence and weapons capabilities, the newspaper added.

Palantir, Anduril, OpenAI, Scale AI and Saronic did not immediately respond to a Reuters request for comment. SpaceX could not be immediately reached for a comment.

Reuters reported earlier this month that President-elect Donald Trump’s planned U.S. government efficiency drive involving Elon Musk could lead to more joint projects between big defense contractors and smaller tech firms in areas such as artificial intelligence, drones and uncrewed submarines.

Musk, who was named as a co-leader of a government efficiency initiative in the incoming government, has indicated that Pentagon spending and priorities will be a target of the efficiency push, spreading anxiety at defense heavyweights such as Boeing (NYSE:) , Northrop Grumman (NYSE:) , Lockheed Martin (NYSE:) and General Dynamics (NYSE:) .

Musk and many small defense tech firms have been aligned in criticizing legacy defense programs like Lockheed Martin’s F-35 fighter jet while calling for mass production of cheaper AI-powered drones, missiles and submarines.

Such views have given major defense contractors more incentive to partner with emerging defense technology players in these areas.

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Weakened Iran could pursue nuclear weapon, White House’s Sullivan says

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By Simon Lewis (JO:)

(Reuters) -The Biden administration is concerned that a weakened Iran could build a nuclear weapon, White House National Security Adviser Jake Sullivan said on Sunday, adding that he was briefing President-elect Donald Trump’s team on the risk.

Iran has suffered setbacks to its regional influence after Israel’s assaults on its allies, Palestinian Hamas and Lebanon’s Hezbollah, followed by the fall of Iran-aligned Syrian President Bashar al-Assad.

Israeli strikes on Iranian facilities, including missile factories and air defenses, have reduced Tehran’s conventional military capabilities, Sullivan told CNN.

“It’s no wonder there are voices (in Iran) saying, ‘Hey, maybe we need to go for a nuclear weapon right now … Maybe we have to revisit our nuclear doctrine’,” Sullivan said.

Iran says its nuclear program is peaceful, but it has expanded uranium enrichment since Trump, in his 2017-2021 presidential term, pulled out of a deal between Tehran and world powers that put restrictions on Iran’s nuclear activity in exchange for sanctions relief.

Sullivan said that there was a risk that Iran might abandon its promise not to build nuclear weapons.

“It’s a risk we are trying to be vigilant about now. It’s a risk that I’m personally briefing the incoming team on,” Sullivan said, adding that he had also consulted with U.S. ally Israel.

Trump, who takes office on Jan. 20, could return to his hardline Iran policy by stepping up sanctions on Iran’s oil industry.

© Reuters. FILE PHOTO: Iranian flag flies in front of the UN office building, housing IAEA headquarters, in Vienna, Austria, May 24, 2021. REUTERS/Lisi Niesner/File Photo

Sullivan said Trump would have an opportunity to pursue diplomacy with Tehran, given Iran’s “weakened state.”

“Maybe he can come around this time, with the situation Iran finds itself in, and actually deliver a nuclear deal that curbs Iran’s nuclear ambitions for the long term,” he said.

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Ukraine says Russian general deliberately targeted Reuters staff in August missile strike

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(Reuters) -Ukraine’s security service has named a Russian general it suspects of ordering a missile strike on a hotel in eastern Ukraine in August and said he acted “with the motive of deliberately killing employees of” Reuters.

The Security Service of Ukraine (SBU) said in a statement on Friday that Colonel General Alexei Kim, a deputy chief of Russia’s General Staff, approved the strike that killed Reuters safety adviser Ryan Evans and wounded two of the agency’s journalists on Aug. 24.

In a statement posted on Telegram messenger the SBU said it was notifying Kim in absentia that he was an official suspect in its investigation into the strike on the Sapphire Hotel in Kramatorsk, a step in Ukrainian criminal proceedings that can later lead to charges.

In a separate, 15-page notice of suspicion, in which the SBU set out findings from its investigation, the agency said that the decision to fire the missile was made “with the motive of deliberately killing employees of the international news agency Reuters who were engaged in journalistic activities in Ukraine”.

The document, which was published on the website of the General Prosecutor’s Office on Friday, said that Kim had received intelligence that Reuters staff were staying in Kramatorsk. It added that Kim would have been “fully aware that the individuals were civilians and not participating in the armed conflict”.

The Russian defence ministry did not respond to a request for comment on the SBU’s findings and has not replied to previous questions about the attack. The Kremlin also did not respond to a request for comment. Kim did not reply to messages sent by Reuters to his mobile telephone seeking comment about the SBU’s statement and whether the strike deliberately targeted Reuters staff.

The SBU did not provide evidence to support its claims, nor say why Russia targeted Reuters. In response to questions from the news agency, the security agency declined to provide further details, saying its criminal investigation was still under way and it was therefore not able to disclose such information.

Reuters has not independently confirmed any of the SBU’s claims.

Reuters said on Friday: “We note the news today from the Ukrainian security services regarding the missile attack on August 24, 2024, on the Sapphire Hotel in Kramatorsk, a civilian target more than 20 km from Russian-occupied territory.”

“The strike had devastating consequences, killing our safety adviser, Ryan Evans, and injuring members of our editorial team. We continue to seek more information about the attack. It is critically important for journalists to be able to report freely and safely,” the statement said.

Reuters declined to comment further on the allegation that its staff were deliberately targeted.

The SBU statement said Kim had been named a suspect under two articles of the Ukrainian criminal code: waging an aggressive war and violating the laws and customs of war.

“It was Kim who signed the directive and gave the combat order to fire on the hotel, where only civilians were staying,” it said.

Evans, a 38-year-old former British soldier who had worked as a safety adviser for Reuters since 2022, was killed instantly in the strike.

The SBU statement gave some details about how the strike had occurred, according to its investigation.

“To carry out the attack, the Russian colonel general involved one of his subordinate missile forces units,” the Ukrainian agency said, adding that the strike was carried out with an Iskander-M ballistic missile.

The SBU did not identify the specific unit.

© Reuters. FILE PHOTO: Reuters safety advisor Ryan Evans holds a cat during a news assignment, as Russia's attack on Ukraine continues, during intense shelling in Kramatorsk, Ukraine, December 26, 2022. REUTERS/Clodagh Kilcoyne/File Photo

Ivan Lyubysh-Kirdey, a videographer for the news agency who was in a room across the corridor, was seriously wounded. Kyiv-based text correspondent Dan Peleschuk was also injured.

The remaining three members of the Reuters team escaped with minor cuts and scratches.

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