Ashford Reports Fourth Quarter And Year End 2018 Results

DALLAS, Feb. 28, 2019 /PRNewswire/ -- Ashford Inc. (NYSE American: AINC) ("Ashford" or the "Company") today reported the following results and performance measures for the fourth quarter and year ended December 31, 2018.  Unless otherwise stated, all reported results compare the fourth quarter and year ended December 31, 2018, with the fourth quarter and year ended December 31, 2017 (see discussion below).  The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release. 

STRATEGIC OVERVIEW

• High-growth, fee-based business model
• Diversified platform of multiple fee generators
• Seeks to grow in three primary areas:
• Expanding existing platforms accretively, and accelerating performance to earn incentive fees;
• Starting new platforms for additional base and incentive fees; and
• Investing in or incubating strategic businesses that can achieve accelerated growth through doing business with our existing platforms, and by leveraging our deep knowledge and extensive relationships within the hospitality sector
• Highly-aligned management team with superior long-term track record
• Leader in asset and investment management for the real estate & hospitality sectors

FINANCIAL AND OPERATING HIGHLIGHTS

• Net income attributable to common stockholders for the fourth quarter of 2018 totaled $0.3 million, or $0.14 per share, compared with a net loss of $7.4 million, or $3.58 per share, in the prior year quarter. Adjusted net income for the fourth quarter was $9.3 million, or $2.20 per diluted share, compared with $4.9 million, or $1.91 per diluted share, in the prior year quarter.
• Total revenue for the fourth quarter of 2018 was $51.0 million, reflecting a growth rate of 72% over the prior year quarter. Total revenue for the full year 2018 was $195.5 million, reflecting a growth rate of 140% over the prior year.
• Adjusted EBITDA for the fourth quarter was $8.0 million reflecting a growth rate of 65% over the prior year quarter. Adjusted EBITDA for the full year 2018 was $28.8 million, reflecting a growth rate of 65% over the prior year.
• At the end of the fourth quarter of 2018, the Company had approximately $6.5 billion of assets under management.
• In September and October, the Company completed an underwritten public offering of 280,000 shares of common stock resulting in net proceeds of approximately $19 million.
• On January 17, 2019, the Company announced the new Enhanced Return Funding Program agreement with Braemar Hotels & Resorts.
• As of December 31, 2018, the Company had corporate cash of $50.4 million.

ENHANCED RETURN FUNDING PROGRAM WITH BRAEMAR HOTELS & RESORTS
On January 17, 2019, the Company announced that it entered into an agreement with Braemar Hotels & Resorts, Inc. (NYSE: BHR) ("Braemar") for the new Enhanced Return Funding Program ("ERFP" or the "Program").  Under the Program with Braemar, the Company has agreed to provide up to $50 million in connection with the acquisition by Braemar of additional hotels. Ashford will provide 10% of the purchase price of each hotel acquired by Braemar up to $500 million in total acquisitions.

Braemar's acquisition of the Ritz-Carlton Lake Tahoe located in Truckee, California, which was completed on January 15, 2019 for $103 million, is the first hotel acquisition by Braemar to benefit from the Program. In connection with this acquisition, and subject to the terms of the ERFP, the Company has committed to provide Braemar with approximately $10.3 million of cash via the future purchase of hotel furniture, fixtures, and equipment ("FF&E") at Braemar properties.

The Program is expected to generate attractive returns on invested capital for Ashford via incremental base advisory fees, potential incentive fees, fees for various products and services offered, and tax savings.   

ENHANCED RETURN FUNDING PROGRAM WITH ASHFORD TRUST
During the second quarter of 2018, the Company entered into an agreement with Ashford Hospitality Trust, Inc. (NYSE: AHT) ("Ashford Trust" or "Trust") for an ERFP. Under the Program with Trust, the Company agreed to provide $50 million in connection with the acquisition by Trust of additional hotels. Ashford will provide 10% of the purchase price of each hotel acquired by Trust, and, to date, Trust has acquired four hotels for a combined $406 million under the Program.

During the quarter, Trust completed the acquisition of the La Posada de Santa Fe in Santa Fe, New Mexico for $50 million, which is the second hotel acquisition to benefit from the ERFP.  Also, during the quarter, the Company acquired $16.1 million in FF&E from Ashford Trust, fulfilling its ERFP obligation on the Hilton Alexandria Old Town and La Posada de Santa Fe acquisitions. 

Subsequent to quarter end, Trust completed the acquisition of the Embassy Suites New York Midtown Manhattan in New York, New York for $195 million, becoming the third hotel acquisition to benefit from the ERFP. In connection with the acquisition, the Company has committed to provide Ashford Trust with approximately $19.5 million of cash under the ERFP via the future purchase of FF&E at Trust properties.

Subsequent to quarter end, Trust completed the acquisition of the Hilton Santa Cruz/Scotts Valley in Santa Cruz, California for $50 million, becoming the fourth hotel acquisition to benefit from the ERFP. In connection with the acquisition, the Company has committed to provide Ashford Trust with approximately $5 million of cash under the ERFP via the future purchase of FF&E at Trust properties.

PREMIER PROJECT MANAGEMENT UPDATE
In August 2018, the Company completed the acquisition of Premier Project Management ("Premier") for $203 million.  Premier provides comprehensive and cost-effective design, development, and project management services. It provides project oversight, coordination, planning, and execution of renovation, capital expenditure or ground-up development projects. Its operations are responsible for managing and implementing substantially all capital improvements at Ashford Trust and Braemar hotels. Additionally, it has extensive experience working with many of the major hotel brands in the areas of renovating, converting, developing or repositioning hotels. Premier produced Adjusted EBITDA of $3.7 million in the fourth quarter and $5.4 million since the acquisition.

J&S AUDIO VISUAL UPDATE
The Company currently owns an 85% controlling interest in a privately-held company that conducts the business of J&S Audio Visual in the United States, Mexico, and the Dominican Republic ("J&S"). J&S provides an integrated suite of audio visual services, including show and event services, hospitality services, creative services, and design and integration, making J&S a leading single-source solution for their clients' meeting and event needs.  The Company's 85% interest in J&S resulted in Adjusted EBITDA of $0.3 million in the fourth quarter, which is consistent with historical seasonality, and $5.1 million in Adjusted EBITDA for the full year.  Additionally, as of the end of the fourth quarter, J&S had multi-year contracts in place with 74 hotels and convention centers, in addition to regular business representing over 2,500 annual events and productions, 500 venue locations, and 650 clients.

FINANCIAL RESULTS
Net income attributable to common stockholders for the quarter totaled $0.3 million, or $0.14 per share, compared with a net loss of $7.4 million, or $3.58 per share, in the prior year quarter.  Adjusted net income for the quarter was $9.3 million, or $2.20 per diluted share, compared with $4.9 million, or $1.91 per diluted share, in the prior year quarter.

For the quarter ended December 31, 2018, base advisory fee revenue was $11.4 million, which reflected a growth rate of 4.0% over the prior year quarter.  The base advisory fee revenue in the fourth quarter was comprised of $8.9 million from Ashford Trust and $2.5 million from Braemar.

Adjusted EBITDA for the quarter was $8.0 million, compared with $4.8 million for the fourth quarter of 2017, reflecting a growth rate of 65%.

For 2018, the Company earned a $2.0 million incentive fee from Braemar.  The incentive fee will be paid and recognized as revenue by the Company over a three-year period, subject to the FCCR condition in accordance with the advisory agreement. 

CAPITAL STRUCTURE
At the end of the fourth quarter of 2018, the Company had approximately $6.5 billion of assets under management from its advised platforms.  The Company had corporate cash of $50.4 million, 2.8 million fully diluted shares, and a current fully diluted equity market capitalization of approximately $165 million.  The Company's financial results include 1.45 million common shares associated with its Series B convertible preferred stock.  The Company had $18.0 million of loans at December 31, 2018, of which approximately $2.8 million related to its joint venture partners' share of those loans.

In September and October 2018, the Company completed its underwritten public offering of 280,000 shares of common stock at a price to the public of $74.50 per share.  Total net proceeds from the offering, after deducting the underwriters' discounts, commissions and offering expenses, were approximately $19 million.

QUARTERLY HIGHLIGHTS FOR ADVISED PLATFORMS

ASHFORD TRUST HIGHLIGHTS

• During the quarter, Trust completed the acquisition of the 157-room La Posada de Santa Fe in Santa Fe, New Mexico for $50 million. This was the second Trust acquisition to benefit from the ERFP.
• Subsequent to quarter end, Trust completed the acquisition of the 310-room Embassy Suites New York Midtown Manhattan in New York, New York for $195 million. This was the third Trust acquisition to benefit from the ERFP.
• Subsequent to quarter end, Trust completed the acquisition of the 178-room Hilton Santa Cruz/Scotts Valley in Santa Cruz, California for $50 million. This was the fourth Trust acquisition to benefit from the ERFP.

BRAEMAR HOTELS & RESORTS HIGHLIGHTS

• During the quarter, Braemar completed an offering of its 8.25% Series D Cumulative Preferred Stock raising net proceeds of approximately $38.7 million, which were used to partially fund the acquisition of the Ritz-Carlton Lake Tahoe.
• Braemar remains on track with its Autograph Collection conversions at both the Courtyard Philadelphia Downtown and Courtyard San Francisco Downtown.
• Subsequent to quarter end, Braemar entered into the new Enhanced Return Funding Program with Ashford Inc.
• Subsequent to quarter end, Braemar completed the acquisition of the 170-room Ritz-Carlton Lake Tahoe in Truckee, California for $103 million. This was the first Braemar acquisition to benefit from the ERFP.
• Subsequent to quarter end, Braemar refinanced a mortgage loan with an existing outstanding balance totaling approximately $187 million with a new mortgage loan totaling $195 million.

"We are pleased with our operating results for 2018, which reflect the diligent execution of our strategy focused on growing our advised platforms and acquiring growth-oriented hospitality-related businesses," commented Monty J. Bennett, Ashford's Chairman and Chief Executive Officer. "During the year, through the acquisition of Premier Project Management, we added scale, diversification and enhanced our competitive position in the hospitality industry, and we also continued to benefit from strong growth within our service businesses.  We remain extremely excited about our Enhanced Return Funding Program with our advised platforms and so far have successfully partnered with them on the acquisition of five high-quality hotels totaling over $500 million in new assets.  We believe these two ERFP Programs should continue to create substantial growth in assets under management for us while also delivering attractive returns to our shareholders and the shareholders of our advised platforms.  Looking ahead to 2019, we are well-positioned to continue to successfully execute on our strategy."

INVESTOR CONFERENCE CALL AND SIMULCAST
The Company will conduct a conference call on Friday, March 1, 2019, at 12:00 p.m. ET.  The number for this interactive teleconference is (323) 794-2093.  A replay of the conference call will be available through Friday, March 8, 2019, by dialing (719) 457-0820 and entering the confirmation number 8529693.

The Company will also provide an online simulcast and rebroadcast of its fourth quarter 2018 earnings release conference call.  The live broadcast of the Company's quarterly conference call will be available online at the Company's web site, www.ashfordinc.com on Friday, March 1, 2019, beginning at 12:00 p.m. ET.  The online replay will follow shortly after the call and continue for approximately one year.

Included in this press release are certain supplemental measures of performance which are not measures of operating performance under GAAP, to assist investors in evaluating the Company's historical or future financial performance. These supplemental measures include adjusted earnings before interest, tax, depreciation and amortization ("Adjusted EBITDA") and Adjusted Net Income. We believe that Adjusted EBITDA and Adjusted Net Income provide investors and management with a meaningful indicator of operating performance. Management also uses Adjusted EBITDA and Adjusted Net Income, among other measures, to evaluate profitability and our board of directors includes these measures in reviews to determine quarterly distributions to stockholders. We calculate Adjusted EBITDA by subtracting or adding to net income (loss): interest expense, income taxes, depreciation, amortization, net income (loss) to noncontrolling interests, transaction costs, and other expenses. We calculate Adjusted Net Income by subtracting or adding to net income (loss): net income (loss) to noncontrolling interests, transaction costs, and other expenses. Our methodology for calculating Adjusted EBITDA and Adjusted Net Income may differ from the methodologies used by other comparable companies, when calculating the same or similar supplemental financial measures and may not be comparable with these companies. Neither Adjusted EBITDA nor Adjusted Net Income represents cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income (loss) as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity nor are such measures indicative of funds available to satisfy our cash needs. The Company urges investors to carefully review the U.S. GAAP financial information as shown in our periodic reports on Form 10-Q and Form 10-K, as amended and our Current Report on Form 8-K to reflect the acquisition of the Remington project management business.

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Ashford provides global asset management, investment management and related services to the real estate and hospitality sectors.

Follow Chairman and CEO Monty Bennett on Twitter at www.twitter.com/MBennettAshford or @MBennettAshford.

Ashford has created an Ashford App for the hospitality REIT investor community.  The Ashford App is available for free download at Apple's App Store and the Google Play Store by searching "Ashford."

Forward Looking Statements

Certain statements and assumptions in this press release contain or are based upon "forward-looking" information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties. When we use the words "will likely result," "may," "can," "anticipate," "estimate," "should," "expect," "believe," "intend," or similar expressions, we intend to identify forward-looking statements. Such statements are subject to numerous assumptions and uncertainties, many of which are outside Ashford's control.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated, including, without limitation:  adverse litigation or regulatory developments; general volatility of the capital markets and the market price of our common stock; changes in our business or investment strategy; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the market in which we operate, interest rates or the general economy; the degree and nature of our competition; risks associated with the Remington Project Management business combination transaction, such as the risk that the Project Management business will not be integrated successfully, that such integration may be more difficult, time-consuming or costly than expected or that the expected benefits of the acquisition will not be realized. These and other risk factors are more fully discussed in Ashford's filings with the Securities and Exchange Commission (SEC) including Ashford's definitive proxy statement filed with the SEC on July 12, 2018 and Ashford's 10-K filed with the SEC on March 12, 2018. 

The forward-looking statements included in this press release are only made as of the date of this press release. Investors should not place undue reliance on these forward-looking statements. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations or otherwise.