Playa Hotels & Resorts N.V. (PLYA) Q1 2024 Earnings Call Transcript
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Overview
The earnings call presents a mixed picture: strong margin expansion and cost efficiency are positive, but concerns about Jamaican demand due to travel advisories and unclear management responses on certain issues are negatives. The optimistic guidance and shareholder returns provide a counterbalance to these concerns. Given the company's small market cap, the stock is likely to experience volatility, but the overall sentiment remains neutral as positives and negatives appear to offset each other.
Key Financial Performance
Owned Resort EBITDA $194 million, up approximately 17% year-over-year for the total portfolio and up approximately 11% for the comparable portfolio. The growth was driven by strong demand during the high season, despite a foreign currency exchange headwind of approximately $4.8 million.
Resort EBITDA Margin Reported margin expansion of 140 basis points year-over-year, with underlying owned resort EBITDA margins increasing 290 basis points year-over-year. This included a 160 basis point headwind from foreign exchange and a 10 basis point benefit from business interruption proceeds.
MICE Group Business $65 million, up roughly 12% compared to the same time last year. This reflects a more balanced MICE business year-over-year compared to 2023.
Total Cash Balance $285.3 million at the end of Q1 2024.
Total Outstanding Interest-Bearing Debt Approximately $1.09 billion.
Net Leverage Ratio 2.8 times, excluding lease capitalization.
Cash CapEx Spend Estimated to be approximately $110 million to $120 million for the year, with $40 million to $50 million for maintenance and other critical CapEx.
Stock Repurchase Approximately $32.4 million worth of Playa stock repurchased during Q1 2024, totaling approximately $280 million since resuming the program in September 2022.
Operating Highlights
MICE Group Business: 2024 net MICE group business on the books is approximately $65 million, up roughly 12% compared to the same time last year.
Jewel Punta Cana Sale: Completed the sale of the Jewel Punta Cana in late December 2023, which is expected to lead to a meaningful year-over-year increase in EBITDA during 2024.
Jewel Palm Beach: Jewel Palm Beach was closed for a significant portion of Q1 2023, which is expected to contribute to a year-over-year increase in EBITDA.
Owned Resort EBITDA: Playa's owned resort EBITDA of $194 million in Q1 2024, with underlying owned resort EBITDA growth up approximately 17%.
Cost Efficiency: Cost efficiency efforts led to reported margin expansion of 140 basis points year-over-year.
Renovation Plans: Accelerated renovation plans in the Pacific, particularly at Hyatt Ziva Los Cabos, to capitalize on increased MICE demand.
Capital Allocation: Repurchased approximately $32.4 million worth of Playa stock during Q1 2024, totaling approximately $280 million since resuming the program.
Future Renovations: Targeting renovations for Hyatt Zilara Cancun and Hyatt Ziva and Zilara Rose Hall, funded by capital recycling from non-core asset dispositions.
Risk or Challenges
Foreign Currency Exchange Risks: The company faced a significant foreign currency exchange headwind of approximately $4.8 million due to the appreciation of the Mexican peso, impacting EBITDA margins negatively by 160 basis points.
Regulatory and Travel Advisory Risks: The US State Department's Travel Advisory for Jamaica has negatively impacted bookings and demand, leading to cancellations and a significant revenue decline in Q2 and Q3.
Supply Chain and Labor Costs: Rising wages and inflation in various expense categories continue to exert pressure on operating costs, despite efforts to streamline procurement processes.
Construction Disruption Risks: Accelerated renovation plans in the Pacific are expected to have a high impact on EBITDA, with construction disruption anticipated to negatively affect margins.
Economic Factors and Demand Fluctuations: The company anticipates a modest decline in occupancy for the legacy portfolio due to ongoing challenges in Jamaica, affecting overall revenue performance.
MICE Group Business Risks: The company is experiencing a more balanced MICE group business compared to previous years, but the impact of weaker demand in Jamaica is a concern.
Interest Rate Risks: The company has entered into interest rate swaps to mitigate floating interest rate risks, indicating exposure to interest rate fluctuations.
Guidance & Outlook
Renovation Plans: Accelerated renovation plans in the Pacific, particularly at Hyatt Ziva Los Cabos, to capitalize on increased MICE demand.
Capital Allocation: Repurchased approximately $32.4 million worth of Playa stock in Q1 2024, totaling $280 million since resuming the program.
Operational Efficiency: Ongoing efforts to streamline procurement processes and improve operational efficiency, with expected benefits to accelerate throughout 2024.
Portfolio Optimization: Targeting renovations for Hyatt Zilara Cancun and Hyatt Ziva and Zilara Rose Hall, funded by capital recycling from non-core asset dispositions.
2024 Adjusted EBITDA: Expected to be between $250 million to $275 million.
Occupancy Expectations: Expect occupancy to be up low-single digit percentage points for the total portfolio.
ADR Growth: Expected mid-single digits for the total portfolio.
RevPAR Growth: Expected high-single digit to low-double digit for the total portfolio.
CapEx for 2024: Estimated cash CapEx spend of approximately $110 million to $120 million.
Q2 2024 EBITDA Guidance: Expected owned resort EBITDA of $67 million to $72 million.
Q2 2024 Adjusted EBITDA Guidance: Expected adjusted EBITDA of $54 million to $59 million.
Shareholder Return Plan
Share Repurchase Program: Playa Hotels & Resorts repurchased approximately $32.4 million worth of stock during Q1 2024, and an additional $17.4 million in Q2 2024, totaling approximately $280 million since resuming the program in September 2022, which accounts for about 22% of the shares outstanding.
Key Q&A
Earnings Word Cloud
PLYA Transcript
The earnings call summary highlights several negative factors: significant operational disruptions from Hurricane Beryl and construction, a notable decline in occupancy and margins, and FX losses. Despite positive elements like stock repurchases and a strategic acquisition agreement, the overall sentiment is dampened by these challenges. The Q&A section does not provide additional clarity. Given the company's small market cap, these factors are likely to result in a negative stock price movement of -2% to -8% over the next two weeks.
The earnings call reveals mixed signals: strong share repurchase program, optimistic festive season bookings, and slight ADR growth are positives. However, the decline in EBITDA, occupancy, and MICE business, along with rising costs and competitive challenges, are negatives. The Q&A section highlighted management's cautious outlook and lack of specific guidance, particularly for 2026. Given the small-cap nature, the stock price is likely to react but remain within the neutral range due to balanced positive and negative factors.
The earnings call presents mixed signals: financial performance shows declines in key areas like RevPAR and EBITDA margins, while shareholder returns through stock repurchases are positive. Renovation disruptions and external factors like travel advisories and hurricanes pose risks, but optimistic guidance on MICE business and some segment growths offer balance. Analyst Q&A reveals concerns over FX impact and construction disruptions, with management providing some assurance. Given the market cap, these mixed elements suggest a neutral stock price movement, with potential fluctuations within the -2% to 2% range over the next two weeks.
The earnings call presents a mixed picture: strong margin expansion and cost efficiency are positive, but concerns about Jamaican demand due to travel advisories and unclear management responses on certain issues are negatives. The optimistic guidance and shareholder returns provide a counterbalance to these concerns. Given the company's small market cap, the stock is likely to experience volatility, but the overall sentiment remains neutral as positives and negatives appear to offset each other.
PLYA Report
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