DENVER, May 08, 2019 (GLOBE NEWSWIRE) -- Red Lion Hotels Corporation (the “Company”) (NYSE: RLH), a growing hospitality company doing business as RLH Corporation that franchises upscale, midscale and economy hotels, today reported first quarter 2019 results.

 First Quarter Highlights

  • Adjusted EBITDA for the first quarter was $998,000, as compared to $1.1 million in the first quarter of 2018.  With the elimination of the $865,000 of EBITDA from the nine hotels sold throughout 2018, Adjusted EBITDA increased $803,000 over the prior year.
     
  • Net loss for the quarter was $4.1 million or ($0.17) per share compared to net income of $2.6 million or $0.10 per diluted share in the prior year period.
     
  • Royalty fees increased 34% year-over-year to $5.7 million reflecting the organic growth and the acquisition of the Knights Inn.
  • Franchised Segment Adjusted EBITDA increased 51% year-over-year to $3.7 million while Franchise Segment Adjusted EBITDA margin increased 400 bps.
  • Recapitalized Salt Lake City and Olympia, WA hotels with $16.6 million of mortgage debt.
  • Executed 56 franchise agreements in the first quarter comprised of 8 upscale and midscale hotels and 48 select service hotels.       
  • Launched its wholly owned subsidiary RLabs, a lodging technology innovator that will leverage the Company’s groundbreaking RevPak platform, creating additional asset light revenue streams.             

Greg Mount, RLH Corporation President and Chief Executive Officer stated: “Our first quarter results demonstrate the strength of our asset light business model, which saw royalty revenue increase approximately 34%, and a 400 basis point expansion in the franchise segment Adjusted EBITDA margin. During the quarter, we signed 56 franchise agreements, with eight in the higher margin upscale service brands.   We have strong momentum in these early months and are excited about the progress we continue to make in growing our core franchise business and the opportunities to provide new or expanded services to our franchise hotels.”

First Quarter 2019 Financial Results 

The Company reported a net loss of $4.1 million or $(0.17) per share in the first quarter as compared to net income of $2.6 million or $0.10 per diluted share in the prior year period. The year-over-year change in operating results was primarily due to an approximately $14 million gain on the sale of assets related to five hotels sold during the first quarter 2018. In addition, the net loss for the quarter also reflects the loss of $0.9 million of EBITDA from the nine hotels sold in 2018.

Adjusted EBITDA, which is adjusted for non-cash and certain one-time items, was $1.0 million for the first quarter as compared to $1.1 million in prior year period.  The change in Adjusted EBITDA primarily reflects the growth of the franchise business offset by EBITDA contribution from the hotels sold in 2018.

Royalty fees increased 34% to $5.7 million primarily reflecting the strong organic growth and the acquisition of Knights Inn.

Marketing, reservations and reimbursables revenue, which are fees from franchised properties associated with the Company’s brands and shared services, increased 28% to $6.7 million reflecting the growth of our core business from new and acquired franchise agreements as well as additional revenue initiatives building on our technology initiatives.   

Selling, general, and administrative expenses, which include franchise sales, operations and corporate costs, remained relatively flat to prior year at $7.2 million, but decreased from the fourth quarter of 2018 total of $8.5 million, reflecting our continued focus on cost reductions and the benefits of our asset light model. 

The Company executed 56 franchise agreements in the first quarter, up 20% from executed franchise agreements signed in the prior year period.  Of the 56 new franchise agreements signed, eight are in our upscale and midscale hotels and 48 are in our select service hotels. 

BALANCE SHEET AND LIQUIDITY

RLH Corporation finished the first quarter with cash and restricted cash of $25 million and debt of $61 million. During the quarter, the Salt Lake City and Olympia, WA joint venture hotels had $16.6 million of mortgage debt incurred.  Under current debt agreements, RLH Corporation transferred $4.2 million of its proceeds from the mortgages to restricted cash.  Subsequent to quarter end, those funds were applied as a principal reduction of our corporate debt.   As of March 31, 2019, the Company had a net debt to trailing 12 months Adjusted EBITDA ratio of 2.3 times.
  
2019 EXPECTATIONS

The Company is reiterating expectations for 2019 that do not contemplate incremental sales of the owned hotels. However, the Company expects that in the event of any sales of the remaining hotels, there will be a reduction in the Company’s profitability in 2019. As sales are closed, the Company will disclose the material terms of each transaction in 8K filings including the historical Adjusted EBITDA relating to the hotels sold. In addition, the Company will provide updated guidance to account for the sales of the hotels at the time it reports quarterly results.

  • The Company expects to execute between 160 and 200 franchise license agreements in 2019.
  • Corporate Selling, General and Administrative expenses are expected to be $29.5 million to $31.5 million, including stock compensation expense.
  • Adjusted EBITDA from continuing operations is expected to be between $20.5 million and $22.5 million in 2019.

Conference Call Information                                                                                         

RLH Corporation will conduct a conference call on Thursday, May 9 at 9:00 a.m. Eastern Time, to discuss the results for interested investors, analyst and portfolio managers. Hosting the call will be RLH Corporation President & Chief Executive Officer Greg Mount and Executive Vice President, Chief Financial Officer and Treasurer, Julie Shiflett.

To participate in the conference call, please dial the following number 10 minutes prior to the scheduled time: (877) 407-8289. International callers should dial (201) 689-8341.

This conference call will also be webcast live on www.rlhco.com in the Investor Relations section of the website. To listen to the live call, please go to the RLH Corporation website at least 15 minutes prior to the start of the call to register and to download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at approximately 12:00 p.m. Eastern Time on May 9 through midnight May 24, 2019 at (877) 660-6853 or (International) (201) 612-7415, using access code 13689753. The replay will also be available shortly after the call on the RLH Corporation website.

About RLH Corporation

Red Lion Hotels Corporation is an innovative hotel company doing business as RLH Corporation and focusing on the franchising, management and ownership of upscale, midscale and economy hotels. The Company strives to maximize return on invested capital for hotel owners across North America through relevant brands, industry-leading technology and forward-thinking services. For more information, please visit the company’s website at www.rlhco.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn, upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, economic cycles; international conflicts; changes in future demand and supply for hotel rooms; competitive conditions in the lodging industry; relationships with franchisees and properties; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; ability to locate lessees for rental property; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other matters discussed in the Company's annual report on Form 10-K for the year ended December 31, 2018, and in other documents filed by the Company with the Securities and Exchange Commission.

To learn more about franchising with RLH Corporation, visit franchise.rlhco.com. We don’t wait for the future. We create it.

Social Media: 

www.Facebook.com/myhellorewards 
www.Twitter.com/myhellorewards 
www.Instagram.com/myhellorewards 
www.Linkedin.com/company/rlhco 

Investor Relations Contact: 

Evelyn Infurna
Investor Relations
203-682-8265
investorrelations@rlhco.com 

Media Contact: 

Dan Schacter 
Director, Social Engagement and Public Relations 
509-777-6222 
dan.schacter@rlhco.com


Red Lion Hotels Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(In thousands, except footnotes and per share data)

  Three Months Ended
March 31,
 
  2019  2018 
Revenue:
Royalty$  5,740 $  4,275 
Other franchise 542  592 
Company operated hotels 12,970  22,896 
Marketing, reservations and reimbursables 6,729  5,256 
Other 3  20 
Total revenues 25,984  33,039 
Operating expenses:  
Selling, general, administrative and other expenses 7,228  7,210 
Company operated hotels 11,545  20,255 
Marketing, reservations and reimbursables 7,161  5,559 
Depreciation and amortization 3,447  4,392 
Loss (gain) on asset dispositions, net 6  (14,043)
Acquisition and integration costs 62  104 
Total operating expenses 29,449  23,477 
Operating income (loss) (3,465) 9,562 
Other income (expense):  
Interest expense (882) (2,247)
Other income (loss), net 33  158 
Total other income (expense) (849) (2,089)
Income (loss) before taxes (4,314) 7,473 
Income tax expense 82  135 
Net income (loss) (4,396) 7,338 
Net (income) loss attributable to noncontrolling interest 286  (4,750)
 

Net income (loss) and comprehensive income (loss) attributable to RLH Corporation


$
 

  (4,110


)


$
 

  2,588
 
   
Earnings (loss) per share - basic$  (0.17)$  0.11 
Earnings (loss) per share - diluted$  (0.17)$  0.10 
   
Weighted average shares - basic 24,603  24,101 
Weighted average shares - diluted 24,603  25,166 
   
Non-GAAP Financial Measures (1)  
EBITDA$  15 $  14,112 
Adjusted EBITDA$  998 $  1,061 

(1) The definitions of "EBITDA" and "Adjusted EBITDA" and how those measures relate to net income (loss) are discussed further in this release under Reconciliation of Non-GAAP Financial Measures.


Red Lion Hotels Corporation
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands, except share data)
 March 31,
2019
December 31,
2018
ASSETS  
Current assets:  
Cash and cash equivalents$  18,008$  17,034
Restricted cash 6,862 2,755
Accounts receivable, net of an allowance for doubtful accounts of $2,559 and $2,345, respectively 19,339 18,575
Notes receivable, net 2,180 2,103
Other current assets 6,658 6,218
    Total current assets 53,047 46,685
Property and equipment, net 114,270 115,522
Operating lease right-of-use assets 50,860 
Goodwill 18,595 18,595
Intangible assets, net 60,016 60,910
Other assets, net 8,237 8,075
    Total assets$  305,025$  249,787
   
LIABILITIES  
Current liabilities:
Accounts payable$  6,512$  5,322
Accrued payroll and related benefits 2,417 5,402
Other accrued liabilities 4,840 4,960
Long-term debt, due within one year 29,160 25,056
Operating lease liabilities, due within one year 4,694 
    Total current liabilities 47,623 40,740
Long-term debt, due after one year, net of debt issuance costs 21,474 9,114
Line of credit, due after one year 10,000 10,000
Operating lease liabilities, due after one year 47,294 
Deferred income and other long-term liabilities 2,035 2,245
Deferred income taxes 824 772
    Total liabilities 129,250 62,871
Commitments and contingencies    
     
STOCKHOLDER' EQUITY    


RLH Corporation stockholders' equity:      
Preferred stock - 5,000,000 shares authorized; $0.01 par value; no shares issued or outstanding    
Common stock - 50,000,000 shares authorized; $0.01 par value; 24,626,459 and 24,570,158 shares
issued and outstanding
  
247
   
246
 
Additional paid-in capital, common stock 182,703  182,018 
Accumulated deficit (20,622) (16,512)
    Total RLH Corporation stockholders' equity 162,328  165,752 
Noncontrolling interest 13,447  21,164 
    Total stockholders' equity 175,775  186,916 
    Total liabilities and stockholders’ equity$  305,025 $  249,787 


Red Lion Hotels Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited) 
(In thousands)

  Three Months Ended March 31, 
  2019  2018 
Operating activities      
Net income (loss)$(4,396) $7,338 
Adjustments to reconcile net income (loss) to net cash used in operating activities: 
Depreciation and amortization3,447 4,392 
Amortization of debt issuance costs47 592 
Amortization of key money and contract costs206 111 
Amortization of contract liabilities(197)(160)
Loss (gain) on asset dispositions, net6 (14,043)
Deferred income taxes52 82 
Stock-based compensation expense916 640 
Provision for doubtful accounts245 235 
Fair value adjustments to contingent consideration 157 
Change in current assets and liabilities:  
Accounts receivable(1,009)(442)
Notes receivable(8)(6)
Other current assets(844)(4,795)
Accounts payable1,383 1,807 
Other accrued liabilities(1,880)(2,676)
Net cash used in operating activities(2,032)(6,768)
Investing activities:  
Capital expenditures(1,500)(1,692)
Net proceeds from disposition of property and equipment 45,662 
Collection of notes receivable21  
Advances on notes receivable(90)(135)
Net cash provided by (used in) investing activities(1,569)43,835 
Financing activities:  
Borrowings on long-term debt, net of discounts16,513  
Repayment of long-term debt and finance leases(170)(38,472)
Distributions to noncontrolling interest(7,431) 
Contingent consideration paid for Vantage Hospitality acquisition (4,000)
Stock-based compensation awards canceled to settle employee tax withholding(342)(440)
Stock option and stock purchase plan issuances, net and other112 94 
      Net cash provided by (used in) financing activities8,682 (42,818)


Change in cash, cash equivalents and restricted cash:
Net increase (decrease) in cash, cash equivalents and restricted cash 5,081 (5,751)
Cash, cash equivalents and restricted cash at beginning of period 19,789 44,858 
Cash, cash equivalents and restricted cash at end of period$  24,870$  39,107 


A summary of our properties as of March 31, 2019, including the approximate number of available rooms, is provided below:

RED LION HOTELS CORPORATION
Additional Hotel Statistics
(unaudited)

 
Upscale Service Brand
Select Service Brand
Total
 HotelsTotal
Available
Rooms
HotelsTotal
Available
Rooms
HotelsTotal
Available
Rooms
Beginning quantity, January 1, 2019112 15,900 1,215 69,800 1,327 85,700 
Newly opened / acquired properties1 100 11 600 12 700 
Terminated properties(4)(400)(52)(3,200)(56)(3,600)
Ending quantity, March 31, 2019109 15,600 1,174 67,200 1,283 82,800 


A summary of our executed agreements for the three months ended March 31, 2019 is provided below:

RED LION HOTELS CORPORATION
Additional Hotel Statistics
(unaudited)

 Upscale
Service
Brand
Select
Service
Brand
Total
Executed franchise license agreements, three months ended March 31, 2019:
New locations61319
New contracts for existing locations13536
Change from company operated to franchised11
Total executed franchise license agreements, three months ended March 31, 201984856


EBITDA is defined as net income (loss), before interest, taxes, depreciation and amortization. The Company believes it is a useful financial performance measure due to the significance of our long-lived assets and level of indebtedness.

Adjusted EBITDA is an additional measure of financial performance. The Company believes that the inclusion or exclusion of certain special items, such as stock-based compensation, gains and losses on asset dispositions and impairments, is necessary to provide the most accurate measure of core operating results and as a means to evaluate comparative results.

During the fourth quarter of 2018, we modified the definition of Adjusted EBITDA as used in prior periods to exclude the effect of non- cash stock compensation expense. We believe that the exclusion of this item is consistent with the purposes of the measure described below and we have applied this modification to all prior periods presented.

EBITDA and Adjusted EBITDA are commonly used measures of performance in the industry. RLH Corporation utilizes these measures because management finds them a useful tool to calculate more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of core, ongoing operations. Our board of directors and executive management team consider Adjusted EBITDA to be a key performance metric and compensation measure. The Company believes the measures are a complement to reported operating results. EBITDA and Adjusted EBITDA are not intended to represent net income (loss) defined by generally accepted accounting principles in the United States of America (GAAP), and such information should not be considered as an alternative to reported information or any other measure of performance prescribed by GAAP. In addition, other companies in the industry may calculate EBITDA and, in particular, Adjusted EBITDA differently than the Company does or may not calculate them at all, limiting the usefulness of EBITDA and Adjusted EBITDA as comparative measures.

The following is a reconciliation of EBITDA and Adjusted EBITDA by segment to net income (loss) for the three months ended March, 31 2019 (in thousands):

  
Franchised
Hotels
Company
Operated
Hotels
OtherTotal
Net income (loss)$  2,581$  (2,029)$  (4,948)$  (4,396)
Depreciation and amortization 914 1,956  577  3,447 
Interest expense  579  303  882 
Income tax expense    82  82 
EBITDA 3,495 506  (3,986) 15 
Stock-based compensation (1) 110 8  798  916 
Acquisition and integration costs (2) 62     62 
Loss (gain) on asset dispositions, net  5    5 
Adjusted EBITDA 3,667 519  (3,188) 998 
Adjusted EBITDA attributable to noncontrolling interests  (547)   (547)
Adjusted EBITDA attributable to RLH Corporation$  3,667$  (28)$  (3,188)$  451 

(1) Represents total stock-based compensation for each period. These costs are included within Selling, general, administrative and other expenses, Company operated hotels and Marketing, reservations, and reimbursables on the Condensed Consolidated Statements of Comprehensive Income (Loss).

(2) Costs for the three months ended March 31, 2019 are associated with the continued integration of the Knights Inn acquisition.

The following is a reconciliation of EBITDA and Adjusted EBITDA by segment to net income (loss) for the three months ended March, 31 2018 (in thousands):

  Franchised
Hotels
Company
Operated
Hotels
 

Other
 

Total
Net income (loss)$  1,292$  9,951 $  (3,905)$  7,338 
Depreciation and amortization 834 3,123  435  4,392 
Interest expense  2,247    2,247 
Income tax expense    135  135 
EBITDA 2,126 15,321  (3,335) 14,112 
Stock-based compensation (1) 63 14  563  640 
Acquisition and integration costs (2) 104     104 
Employee separation costs (3) 131     131 
Loss (gain) on asset dispositions, net (4)  (13,926)   (13,926)
Adjusted EBITDA 2,424 1,409  (2,772) 1,061 
Adjusted EBITDA attributable to noncontrolling interests  (453)   (453)
Adjusted EBITDA attributable to RLH Corporation$  2,424$  956 $  (2,772)$  608 


(1) Represents total stock-based compensation for each period. These costs are included within Selling, general, administrative and other expenses, Company operated hotels and Marketing, reservations, and reimbursables on the Condensed Consolidated Statements of Comprehensive Income (Loss).

(2) Costs for the three months ended March 31, 2018 are associated with the acquisition and integration of the Knights Inn and Vantage acquisitions.

(3) Relates to separation costs incurred for various employees. These costs are included within Selling, general, administrative and other expenses on the Condensed Consolidated Statements of Comprehensive Income (Loss).

(4) Represents the gain on our sale of five properties during the three months ended March 31, 2018.