Ashford Inc.
Q2 2023 Earnings Call Transcript

Published: 6 Aug 2023

[Operator:]

Greetings, and welcome to Ashford Second Quarter 2023 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jordan Jennings, Manager 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 second quarter of 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 a 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 SEC on August 2, 2023, and may also be accessed through the company’s website at www.ashfordinc.com. Each listener is encouraged to review this 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 to second quarter ended June 30, 2023, with the second quarter ended June 30, 2022. I will now turn the call over to Deric.

[Deric Eubanks:]

Thanks, Jordan, and welcome, everyone, to our call to discuss our financial results for the second quarter of 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’ll open it up for Q&A. The key themes we are going to highlight today are

[Eric Batis:]

Thank you, Deric. We are excited to provide updates on our products and services businesses which continued to build momentum during the second quarter. As a reminder, our strategy is to acquire exceptional businesses and create shareholder value by implementing best operating practices, executing accretive add-on acquisitions and utilizing our unique ability to refer these businesses to our advised REITs. The second quarter was headlined by two key themes

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Tyler Batory with Oppenheimer. Please proceed with your question.

[Jonathan Jenkins:]

Good afternoon. This is Jonathan on for Tyler. Thanks for taking my question. First one for me is on the expense side. Can you just talk generally about the labor market? Do you feel there is additional positions to fill across your business? And any color on kind of the wage growth you’re seeing out there?

[Eric Batis:]

Yes. So as you can see from margin pressure – this is Eric, by the way, Jonathan. We are continuing to see increased labor cost. We do have some open positions, but in general, we’re not seeing a lot more open positions that we need to fill at our portfolio companies. But we are continuing to add staff as these revenue levels climb at the levels that they are. So you’re hearing me talk about 20%, 30%, 60% revenue increases. We obviously have to add staff for that, and wages are increasing. I don’t have a great number for you across the portfolio companies as they do blend quite a bit, and we have far fewer instances of hourly labor than we do at our hotels. But it is definitely a continuingly difficult labor market for us, and you’re seeing that in our margin.

[Jonathan Jenkins:]

Okay. I appreciate the color there. And then Premier saw a pretty notable pickup in third-party engagements. Can you provide some color on the drivers of the increase, what types of hotels or other assets were added? And how are you thinking about sizing that opportunity longer term?

[Eric Batis:]

Yes. So it’s a lot of hotels. And what’s happened is you see this pickup increasing. We started the third-party effort just before the pandemic, kind of have come into recovery from the pandemic. And a lot of these projects are happening 6 months to a year after we get them signed up. So the messages that we’ve been delivering over the last year about signing contracts for Premier are now starting to show in the projects actually coming to fruition. We are experiencing projects in both hospitality and multifamily. Primarily, a lot of that is in hospitality. And in terms of sizing the opportunity, it’s huge. The renovation market and the newbuild market across particularly those two, with hospitality, and multifamily in particular, is massive. And so I’d be hesitant to size it. I would say that it has a ton of room for growth from where we are today, and we’re very excited about capitalizing on more and more of that.

[Jonathan Jenkins:]

Okay. Excellent. Thank you for the color there. And then last one for me, if I could. Some modest softness in leisure was noted in the release. And I’m just curious, overall, if you’re seeing anything from a demand perspective that maybe gives you pause or is worth calling out or does everything still feel generally pretty healthy?

[Deric Eubanks:]

This is Deric, I’ll take that. I think I would say everything still feels pretty healthy. I think the softness we’ve seen in demand has been more of a shift in demand than just a decrease in overall demand, just leisure travelers having more options of whether that’s international travel or cruises or just other options. But we think that ultimately, that, that demand will come back to our properties, and feel very well about how our, especially leisure-focused assets, are positioned.

[Jonathan Jenkins:]

Okay, good. Thank you for all the color, guys. That’s all for me.

[Operator:]

This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.