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UPDATE - Playa Hotels & Resorts N.V. Reports Second Quarter 2018 Results

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FAIRFAX, Va., Aug. 06, 2018 (GLOBE NEWSWIRE) -- Playa Hotels & Resorts N.V. (the "Company" or "Playa") (NASDAQ:PLYA) today announced results of operations for the three and six months ended June 30, 2018.

Three Months Ended June 30, 2018 Results

  • Net Income was $16.8 million compared to a Net Loss of $10.5 million in 2017
  • Adjusted Net Income(1) was $13.4 million compared to Adjusted Net Income of $3.6 million in 2017
  • Net Package RevPAR decreased 1.8% over 2017 to $203.23, driven by a decrease in Net Package ADR of 4.1% and partially offset by Occupancy growth of 190 basis points
  • Owned Resort EBITDA increased 1.9% over 2017 to $50.0 million
  • Owned Resort EBITDA Margin decreased 0.5% over 2017 to 35.2%
  • Adjusted EBITDA increased 0.7% over 2017 to $41.3 million 

Six Months Ended June 30, 2018 Results

  • Net Income was $38.6 million compared to $17.1 million in 2017
  • Adjusted Net Income(1) was $48.5 million compared to $37.2 million in 2017
  • Net Package RevPAR decreased 0.7% over the comparable 2017 period to $237.08, driven by a decrease in Net Package ADR of 1.8% and partially offset by Occupancy growth of 90 basis points
  • Owned Resort EBITDA increased 0.9% over the comparable 2017 period to $132.5 million
  • Owned Resort EBITDA Margin decreased 0.5% over the comparable 2017 period to 42.1%
  • Adjusted EBITDA increased 0.3% over the comparable 2017 period to $115.9 million

(1) Adjusted Net Income/(Loss) excludes special items, which are those items deemed not to be reflective of ongoing operations.

"We are very excited about the Sagicor transaction which we completed in June and we are happy to welcome those resorts and their significant base of earnings and brand affiliations to Playa's portfolio. While only including one-month of contribution to our Second Quarter results, the portfolio is performing above our initial expectations and this is before implementing many of the value-enhancing initiatives we've identified. We are very encouraged by these early results and look forward to further enhancing value at these excellent resorts."

Bruce D. Wardinski, Chairman and CEO of Playa Hotels & Resorts

  • On June 1, 2018 we completed a business combination with certain companies affiliated with Sagicor Group Jamaica Limited (collectively, "Sagicor"), whereby Sagicor contributed to Playa a portfolio of five all-inclusive resorts and two adjacent oceanfront developable land sites located on the desirable North Coast of Jamaica. The portfolio includes four existing resorts including the 495-room Hilton Rose Hall Resort & Spa, the 268-room Jewel Runaway Bay Beach & Golf Resort, the 250-room Jewel Dunn's River Beach Resort and the 225-room Jewel Paradise Cove Beach Resort & Spa. It also includes an 88- room hotel tower and spa, two developable land sites with a potential density of up to 700 rooms and a hotel management contract for the Jewel Grande Montego Bay. The existing assets were previously managed by an external third-party operator but Playa assumed management of the assets on the closing of the transaction. Consideration for such assets, which was subject to certain post-closing adjustments, was comprised of 20,000,000 shares of Playa's common stock and $93.1 million in net cash. In addition, two individuals nominated by Sagicor joined Playa's Board of Directors upon the consummation of the transaction.

  • On June 7, 2018 we entered into the Second Amendment (the "Amendment") to our Amended & Restated Credit Agreement dated as of April 27, 2017 (the "Existing Credit Agreement"). The Amendment amended the Existing Credit Agreement to, among other things (i) effect an incremental term loan facility of $100.0 million (the "Incremental Term Loan" and, together with the existing terms loans that were in effect prior to the amendment, the "Term Loan") pursuant to the exercise of our option to request incremental loans under the Existing Credit Agreement and (ii) decrease the interest rate applicable to the Term Loan by 0.50% to, at our option, at either a base rate plus a margin of 1.75% or LIBOR plus a margin of 2.75%. Other terms set forth in the Existing Credit Agreement, including those disclosed in our Annual Report on Form 10-K filed on March 1, 2018, were not effected by the Amendment.

The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Total Net Revenue, Owned Resort EBITDA, Corporate Expenses, and Adjusted EBITDA for the three and six months ended June 30, 2018 and 2017 for our portfolio (in thousands):

Playa Hotels & Resorts N.V.                        
Total Portfolio Summary                        
    Three Months Ended June 30,       Six Months Ended June 30,    
    2018   2017   Change   2018   2017   Change
Occupancy   83.8%   81.9%   1.9 pts   85.6%   84.7%   0.9 pts
Net Package ADR   $242.43   $252.68   -4.1%   $276.86   $281.94   -1.8%
Net Package RevPAR   $203.23   $207.04   -1.8%   $237.08   $238.71   -0.7%
Total Net Revenue (1)   $141,753   $137,415   3.2%   $314,905   $307,925   2.3%
Owned Resort Revenue (2)   $141,707   $137,413   3.1%   $314,211   $307,923   2.0%
Owned Resort EBITDA (3)   $49,951   $49,020   1.9%   $132,534   $131,302   0.9%
Owned Resort EBITDA Margin 35.2%   35.7%   (0.5) pts   42.2%   42.6%   (0.4) pts
Corporate Expenses   $8,689   $8,001   8.6%   $17,009   $15,810   7.6%
Management Fee Revenue   $55   $0   100.0%   $351   $0   100.0%
Adjusted EBITDA (4)   $41,317   $41,019   0.7%   $115,876   $115,492   0.3%
Adjusted EBITDA Margin   29.1%   29.9%   (0.8) pts   36.8%   37.5%   (0.7) pts
                         
                         
Comparable Portfolio Summary                    
    Three Months Ended June 30,       Six Months Ended June 30,    
    2018   2017   Change   2018   2017   Change
Occupancy   83.4%   81.9%   1.5 pts   85.5%   84.7%   0.8 pts
Net Package ADR   $244.55   $252.68   -3.2%   $279.09   $281.94   -1.0%
Net Package RevPAR   $203.86   $207.04   -1.5%   $238.49   $238.71   -0.1%
Total Net Revenue (1)   $133,817   $137,415   -2.6%   $306,968   $307,925   -0.3%
Owned Resort Revenue (2)   $133,771   $137,413   -2.7%   $306,275   $307,923   -0.5%
Owned Resort EBITDA (3)   $47,166   $49,020   -3.8%   $129,748   $131,302   -1.2%
Owned Resort EBITDA Margin 35.3%   35.7%   (0.4) pts   42.4%   42.6%   (0.2) pts
Corporate Expenses   $8,689   $8,001   8.6%   $17,009   $15,810   7.6%
Management Fee Revenue   $55   $0   100.0%   $351   $0   100.0%
Adjusted EBITDA (4)   $38,530   $41,019   -6.1%   $113,091   $115,492   -2.1%
Adjusted EBITDA Margin   28.8%   29.9%   (1.1) pts   36.8%   37.5%   (0.7) pts

 

(1) Total Net Revenue represents revenue from the sale of all-inclusive packages, which include room accommodations, food and beverage services and entertainment activities, net of compulsory tips paid to employees in Mexico and Jamaica, as well as revenue from other goods, services and amenities not included in the all-inclusive package. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment as they are already excluded from revenue in accordance with U.S. GAAP. A description of how we compute Total Net Revenue and a reconciliation of Total Net Revenue to total revenue can be found in the section "Definitions of Non-U.S. GAAP Measures and Operating Statistics" below.

(2) Owned Resort Revenue excludes Management Fee Revenue, Jamaica delayed opening accrual reversal and MICE (meetings, incentives, conventions and events) income.

(3) A description of how we compute Owned Resort EBITDA and a reconciliation of Net Income to Owned Resort EBITDA can be found in the section "Definitions of Non-U.S. GAAP Measures and Operating Statistics" below.

(4) A description of how we compute Adjusted EBITDA and a reconciliation of Net Income to Adjusted EBITDA can be found in the section "Definitions of Non-U.S. GAAP Measures and Operating Statistics" below.

Balance Sheet

As of June 30, 2018, the Company held $145.9 million in cash and cash equivalents. Total interest-bearing debt was
$1.0 billion, comprised fully of Term Loan B secured debt due 2024. As of June 30, 2018, there were no amounts outstanding on the Company's $100.0 million Revolving Credit Facility. 

We have spent $88.9 million thus far on the development of our 750-room Hyatt Ziva and Zilara in Cap Cana, Dominican Republic, including purchasing the land. Adjusted net debt excluding cash and the spending on Hyatt Ziva and Zilara in Cap Cana is $766.8 million.

Guidance

The Company's previously announced annual guidance for 2018 remains unchanged. Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission. The Company expects Adjusted EBITDA for the full year 2018 to be as follows:

  Low End      High End
Adjusted EBITDA  $179.0 million   $185.0 million

Earnings Call

The Company will host a conference call to discuss its second quarter results on Tuesday, August 7, 2018 at 9:00  a.m. (Eastern Daylight Time). The conference call can be accessed by dialing (833) 683-7154 for domestic participants and (409) 983-9744 for international participants. The conference ID number is 7453898. Additionally, interested parties may listen to a taped replay of the entire conference call commencing two hours after the call's completion on Tuesday, August 7, 2018. This replay will run through Tuesday, August 21, 2018. The access number for a taped replay of the conference call is (855) 859-2056 or (404) 537-3406 using the same conference ID number. There will also be a webcast of the conference call accessible on the Company's investor relations website at www.investors.playaresorts.com.

About the Company

Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. Playa owns and/or manages a total portfolio consisting of 20 resorts (7,769 rooms) located in Mexico, Jamaica, and the Dominican Republic. In Mexico, Playa owns and manages Hyatt Zilara Cancun, Hyatt Ziva Cancun, Panama Jack Resorts Cancun, Panama Jack Resorts Playa del Carmen, THE Royal Playa del Carmen, Hyatt Ziva Puerto Vallarta and Hyatt Ziva Los Cabos. In Jamaica, Playa owns and manages Hyatt Zilara Rose Hall and Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Dunn's River Beach Resort, Jewel Runaway Bay Beach & Golf Resort and Jewel Paradise Cove Beach Resort & Spa. Playa also owns five resorts in Mexico and the Dominican Republic that are managed by a third party. Playa manages two resorts for third party owners, the Sanctuary Cap Cana, in the Dominican Republic, and the Jewel Grande Montego Bay, in Jamaica.

Forward-Looking Statements  

This press release contains ‘‘forward-looking statements,'' as defined by federal securities laws. Forward-looking statements reflect Playa's current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words "believe," "expect," "anticipate," "will," "could," "would," "should," "may," "plan," "estimate," "intend," "predict," "potential," "continue," and the negatives of these words and other similar expressions generally identify forward looking statements. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled "Risk Factors" in Playa's Annual Report on Form 10-K, filed with the SEC on March 1, 2018, as such factors may be updated from time to time in Playa's periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Playa's filings with the SEC. While forward-looking statements reflect Playa's good faith beliefs, they are not guarantees of future performance. Playa disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to Playa (or to third parties making the forward-looking statements).     

Definitions of Non-U.S. GAAP Measures and Operating Statistics

Occupancy

"Occupancy" represents the total number of rooms sold for a period divided by the total number of rooms available during such period. Occupancy is a useful measure of the utilization of a resort's total available capacity and can be used to gauge demand at a specific resort or group of properties for a period. Occupancy levels also enable us to optimize Net Package ADR by increasing or decreasing the stated rate for our all- inclusive packages as demand for a resort increases or decreases.

Net Package Average Daily Rate ("Net Package ADR")

"Net Package ADR" represents total Net Package Revenue for a period divided by the total number of rooms sold during such period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the guest base of our portfolio or comparable portfolio, as applicable. Net Package ADR is a commonly used performance measure in the all-inclusive segment of the lodging industry, and is commonly used to assess the stated rates that guests are willing to pay through various distribution channels.

Net Package Revenue per Available Room ("Net Package RevPAR")

"Net Package RevPAR" is the product of Net Package ADR and the average daily occupancy percentage. Net Package RevPAR does not reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it generally is considered the key performance measure in the all-inclusive segment of the lodging industry to identify trend information with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating performance on a consolidated basis or a regional basis, as applicable.

Net Package Revenue, Net Non-package Revenue, Net Revenue, Management Fee Revenue, Cost Reimbursements and Total Net Revenue

"Net Package Revenue" is derived from the sale of all-inclusive packages, which include room accommodations, food and beverage services and entertainment activities, net of compulsory tips paid to employees in Mexico and Jamaica. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Revenue is recognized, net of discounts and rebates, when the rooms are occupied and/or the relevant services have been rendered. Advance deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant services have been rendered, at which point the revenue is recognized.

"Net Non-package Revenue" represents all other revenues earned from the operations of our resorts, other then Net Package Revenue, net of compulsory tips paid to employees in Mexico and Jamaica. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Net Non-package Revenue includes revenue associated with guests' purchases of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa packages, which are not included in the all-inclusive package. Revenue not included in a guest's all-inclusive package is recognized when the goods are consumed.

"Net Revenue" represents Net Package Revenue and Net Non-Package Revenue. Net Revenue represents a key indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and competition. In analyzing our Net Revenues, our management differentiates between Net Package Revenue and Net Non-package Revenue. Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage services and entertainment activities, in contrast to other lodging business models, which typically only include the room accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants, bars, activities, and shows and entertainment throughout the day.

"Management Fee Revenue" is derived from fees earned for managing hotels owned by third-parties. The fees earned are typically composed of a base fee, which is computed as a percentage of resort revenue, and an incentive fee, which is computed as a percentage of resort profitability. Management Fee Revenue was immaterial to our operations for the six months ended June 30, 2018, but we expect Management Fee Revenue to be a more relevant indicator to assess the overall performance of our business in the future as we enter into more management contracts.

"Total Net Revenue" represents Net Package Revenue, Net Non-package Revenue and Management Fee Revenue for the six months ended June 30, 2018 and Net Package Revenue and Net Non-package Revenue for the six months ended June 30, 2017. "Cost Reimbursements" is excluded from Total Net Revenue as it is not considered a key indicator of financial and operating performance. Cost reimbursements is derived from the reimbursement of certain costs incurred by Playa on behalf of resorts managed by Playa and owned by third parties. This revenue is fully offset by reimbursable costs and has no net impact on Operating (loss) income or Net income (loss).

The following table shows a reconciliation of Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the three and six months ended June 30, 2018 and 2017:

Playa Hotels & Resorts N.V.              
Revenue Reconciliation              
               
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
  ($ in thousands)
Net Package Revenue              
Comparable Net Package Revenue $113,721   $115,470   $264,611   $265,092
Non-comparable Net Package Revenue 6,944     6,944  
Net Package Revenue $120,665   $115,470   $271,555   $265,092
               
Net Non-package Revenue              
Comparable Net Non-package Revenue 20,041   21,945   42,006   42,833
Non-comparable Net Non-package Revenue $992     $992  
Net Non-package Revenue 21,033   21,945   42,998   42,833
               
Net Management Fee Revenue              
Comparable Net Management Fee Revenue $55     $351  
Non-comparable Net Management Fee Revenue      
Net Management Fee Revenue $55     $351  
               
Net Revenue:              
Comparable Net Revenue 133,817   137,415   306,968   307,925
Non-comparable Net Revenue $7,936     $7,936  
Total Net Revenue 141,753   137,415   314,904   307,925
Plus: compulsory tips $3,741   $3,183   $7,392   $6,740
Cost reimbursements 78     122  
Total revenue $145,572   $140,598   $322,419   $314,665

EBITDA, Adjusted EBITDA and Owned Resort EBITDA

We define EBITDA, a non-U.S. GAAP financial measure, as net income or loss, determined in accordance with U.S. GAAP, for the period presented, before interest expense, income tax and depreciation and amortization expense. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:

  • Other expense, net
  • Impairment loss
  • Pre-opening expense
  • Transaction expenses
  • Severance expense
  • Other tax expense
  • Gain on property damage insurance proceeds
  • Share-based compensation
  • Loss on extinguishment of debt
  • Non-service cost components of net periodic pension cost (benefit)
  • Other items which may include, but are not limited to the following: management contract termination fees; gains or losses from legal settlements; repairs from hurricanes and tropical storms; and Jamaica delayed opening accrual reversals.

We define Owned Resort EBITDA as Adjusted EBITDA before corporate expenses and management fee income.

We believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which are the principal driver of changes in other expense, net), and expenses related to capital raising, strategic initiatives and other corporate initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example, revenue from insurance policies, other than business interruption insurance policies, is infrequent in nature, and we believe excluding these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time.

The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance indicator by our board of directors (our "Board") and management. In addition, the compensation committee of our Board determines the annual variable compensation for certain members of our management based, in part, on consolidated Adjusted EBITDA. We believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.

EBITDA, Adjusted EBITDA and Owned Resort EBITDA are not a substitute for net income (loss) or any other measure determined in accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, EBITDA, Adjusted EBITDA, and Owned Resort EBITDA should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and investors should carefully consider our U.S. GAAP results presented in this release.

Adjusted Net Income

"Adjusted Net Income" is a non-GAAP performance measure. We define Adjusted Net Income as net income attributable to Playa, determined in accordance with U.S. GAAP, excluding special items which are not reflective of our core operating performance, such as one-time expenses related to debt extinguishment and transaction expenses. We believe Adjusted Net Income provides meaningful comparisons of ongoing operating results, by removing from net income the impact of items that do not reflect our normalized operations.

Adjusted Net Income is not a substitute for net income or any other measure determined in accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted Net Income. For example, other companies in our industry may define Adjusted Net Income differently than we do. As a result, it may be difficult to use Adjusted Net Income or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of those companies to our performance. Because of these and other limitations, Adjusted Net Income should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and investors should carefully consider our U.S. GAAP results presented in this release.

Comparable Non-U.S. GAAP Measures

We believe that presenting Adjusted EBITDA, Total Net Revenue, Net Package Revenue and Net Non-package Revenue on a comparable basis is useful to investors because these measures include only the results of resorts owned and in operation for the entirety of the periods presented and thereby eliminate disparities in results due to the acquisition or disposition of resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate Comparable Adjusted EBITDA, comparable Total Net Revenue, comparable Net Package Revenue and comparable Net Non-package Revenue as the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were not owned or in operation during some or all of the relevant reporting period. For the three and six months ended June 30, 2018, our non-comparable resorts were: Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort, Jewel Dunn's River Beach Resort, and Jewel Paradise Cove Beach Resort & Spa, which were acquired on June 1, 2018.

For a reconciliation of net income to Comparable Adjusted EBITDA as computed under U.S. GAAP, see "Non-U.S. GAAP Financial Measures." For a reconciliation of comparable net package revenue, comparable net non- package revenue, comparable management fee revenue and comparable total net revenue to total revenue as computed under U.S. GAAP, see "Net Package Revenue, Net Non-package Revenue, Net Revenue, Management Fee Revenue, Cost Reimbursements and Total Net Revenue" in this section.

Playa Hotels & Resorts N.V.
Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Owned Resort EBITDA
($ in thousands)

The following is a reconciliation of our U.S. GAAP net income (loss) to EBITDA, Adjusted EBITDA and Owned Resort EBITDA for the three and six months ended June 30, 2018 and 2017:

Playa Hotels & Resorts N.V.                
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Resort EBITDA            
           
      Three Months Ended June 30,   Six Months Ended June 30,
      2018   2017   2018   2017
                   
Net income (loss) for the period    $  16,821    $  (10,530)    $  38,638    $  17,109
Interest expense     5,632     14,073     27,514     28,088
Income tax provision     (3,356)     6,291     6,227     19,879
Depreciation and amortization     15,882     13,875     31,571     26,285
EBITDA    $  34,979    $  23,709    $  103,950    $  91,361
                   
Other (income) expense, net (a)   (378)     239     1,446     1,313
Share-based compensation expense     2,104     960     3,890     960
Loss on extinguishment of debt     -      12,526     -      12,526
Transaction expense (b)   3,887     3,300     6,231     9,300
Severance expense     -      442     -      442
Other tax expense (c)   427     247     858     423
Jamaica delayed opening accrual (d)   -      (111)     (342)     (111)
Other Components of net Periodic Benefit (Cost) (g)   298     (293)     (157)     (722)
Adjusted EBITDA    $  41,317    $  41,019    $  115,876    $  115,492
Corporate expenses   8,689   8,001   17,009   15,810
Management fees     (55)     -      (351)     - 
Owned Resort EBITDA    $  49,951    $  49,020    $  132,534    $  131,302
Less: Non-comparable Adjusted Resort EBITDA   2,785   0   2,785   0
Comparable Adjusted Owned Resort EBITDA    $  47,166    $  49,020    $  129,749    $  131,302

(a) Represents changes in foreign exchange and other miscellaneous expenses or income.

(b) Represents expenses incurred in connection with corporate initiatives, such as: debt refinancing costs; other capital raising efforts including the business combination with Pace in 2017; the redesign and build-out of our internal controls and strategic initiatives, such as possible expansion into new markets.

(c) Relates primarily to a Dominican Republic asset/revenue tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this expense from Adjusted EBITDA because it is substantially similar to the income tax provision we eliminate from our calculation of EBITDA.

(d) Represents a reversal on an expense accrual recorded in 2014 related to our future stay obligations provided to guests affected by the delayed opening of Hyatt Ziva and Hyatt Zilara Rose Hall. This reversal concluded in the first quarter of 2018.

(e) Represents the non-service cost components of net periodic pension benefit (cost) recorded within other (income) expense, net in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Previously, these expenses were presented within direct expense. We include these benefits (costs) for the purposes of calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.

(f) Adjusted EBITDA for Sagicor Hotels.

Playa Hotels & Resorts N.V.
Reconciliation of Net Income to Adjusted Net Income
($ in thousands)

The following table reconciles our net income (loss) to Adjusted Net Income for the three and six months ended June 30, 2018 and 2017:

Playa Hotels & Resorts N.V.              
Reconciliation of Net Income (Loss) to EBITDA, Adjusted EBITDA and Resort EBITDA              
               
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
               
Net income (loss)  $  16,821    $  (10,530)    $  38,638    $  17,109
Reconciling items              
Transaction expense (a)   3,887     3,300     6,231     9,300
Loss on extinguishment of debt  —      12,526    —      12,526
Change in fair value of interest rate swaps (b)   (7,273)    —      3,687    — 
Total reconciling items before tax   (3,386)     15,826     9,918     21,826
Income tax provision for reconciling items   (58)     (1,698)     (58)     (1,698)
Total reconciling items after tax   (3,444)     14,128     9,860     20,128
Adjusted net income  $  13,377    $  3,598    $  48,498    $  37,237
               
 
The following table presents the impact of Adjusted Net Income on our net income available to ordinary shareholders and diluted earnings per share for the three and six months ended June 30, 2018 and 2017:
               
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Net income (loss) available to ordinary shareholders  $  16,821    $  (11,409)    $  38,638    $  8,308
Total reconciling items after tax   (3,444)     14,128     9,860     20,128
Adjusted net income available to ordinary shareholders  $  13,377    $  2,719    $  48,498    $  28,436
               
Earnings (loss) per share - Diluted  $  0.14    $  (0.11)    $  0.34    $  0.08
Total reconciling items impact per diluted share   (0.03)     0.14     0.09     0.24
Allocation of reconciling items to preferred shareholders impact per diluted share (c)  —     —     —      (0.04)
Adjusted earnings per share - Diluted  $  0.11    $  0.03    $  0.43    $  0.28

(a) Represents expenses incurred in connection with corporate initiatives, such as: debt refinancing costs; other capital raising efforts including the business combination with Pace in 2017; the redesign and build-out of our internal controls and strategic initiatives, such as possible expansion into new markets.

(b) Represents the loss on extinguishment from the refinancing of our Term Loan on April 27, 2017.

(c) Represents the change in fair value, excluding interest paid and accrued, of our interest rate swaps recognized as interest expense in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

(d) Represents the net impact per diluted share resulting from the allocation of adjusted net income to preferred shareholders.

Playa Hotels & Resorts N.V.
Condensed Consolidated Balance Sheet
($ in thousands, except share data)
(unaudited) 

  As of June 30,     As of December 31,  
  2018     2017  
           
ASSETS          
Cash and cash equivalents   145,864       117,229  
Restricted cash   -        -   
Trade and other receivables   54,201       51,527  
Accounts receivable from related parties   3,090       1,495  
Insurance Recoverable   -        -   
Inventories   15,306       11,309  
Prepayments and other assets   36,227       34,066  
Property, plant and equipment, net   1,784,667       1,466,326  
Investments   936       990  
Goodwill   79,028       51,731  
Other intangible assets   4,785       2,087  
Deferred tax assets   1,063       1,063  
Total assets   2,125,167       1,737,823  
LIABILITIES AND SHAREHOLDERS' EQUITY          
Trade and other payables   136,814       139,528  
Accounts payable to related parties   3,750       2,966  
Income tax payable   1,867       1,090  
Debt   993,741       898,215  
Debt to related party   -        -   
Deferred consideration   3,720       -   
Other liabilities   22,027       19,394  
Deferred tax liabilities   105,834       77,081  
Total liabilities   1,267,753       1,138,274  
Shareholders' equity          
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 110,109,076 and          
50,481,822 shares issued and outstanding as of June 30, 2017 and December 31, 2016,          
respectively)   14,160       11,803  
Treasury shares (at cost; 5,373,884 shares as of December 31, 2016 and 2015)   (80 )     (80 )
Paid-in capital   990,127       773,194  
Accumulated other comprehensive loss   (3,889 )     (3,826 )
Accumulated deficit   (142,904 )     (181,542 )
Total shareholders' equity   857,414       599,549  
Total liabilities, cumulative redeemable preferred shares and shareholders' equity   2,125,167       1,737,823  
           

Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
($ in thousands)
(unaudited)

  Three Months Ended June 30,      Six Months Ended June 30,   
  2018     2017     2018     2017  
               
Revenue:                      
Package    124,286       118,453       278,994       271,409  
Non-package   21,153       22,145       42,952       43,256  
Management Fees   55       -        351        
Cost reimbursements   78       -        122        
Total revenue 145,572     140,598     322,419     314,665  
Direct and selling, general and administrative expenses:                      
Direct   78,113       79,083       159,169       155,760  
Selling, general and administrative   32,780       25,041       59,253       53,705  
Pre-opening   -        -        -        -   
Depreciation and amortization   15,882       13,875       31,571       26,285  
Reimbursed Costs   78             122        
Gain on insurance proceeds   (0 )           (1,521 )      
Direct and selling, general and administrative expenses  $  126,853      $  117,999      $  248,594      $  235,750  
Operating income 18,719     22,599     73,825     78,915  
Interest expense   (5,632 )     (14,073 )     (27,514 )     (28,088 )
Loss on extinguishment of debt   -        (12,526 )     -        (12,526 )
Other expense, net   378       (239 )     (1,446 )     (1,313 )
Net income before tax   13,465       (4,239 )     44,865       36,988  
Income tax provision   3,356       (6,291 )     (6,227 )     (19,879 )
Net income 16,821     (10,530 )   38,638     17,109  
Other comprehensive (loss) income, net of taxes:                      
Benefit obligation (loss) gain 18     29     (63 )   (42 )
Other comprehensive (loss) income, net of taxes:   18       29       (63 )     (42 )
Total comprehensive income  $  16,839      $  (10,501 )    $  38,575      $  17,067  
Dividends of cumulative redeemable preferred shares                    $  (7,922 )
Non-cash dividend to warrant holders       (879 )         (879 )
Net income available to ordinary shareholders  $  16,821      $  (11,409 )    $  38,638      $  8,308  
Losses per share - Basic  $  0.14      $  (0.11 )    $  0.34      $  0.08  
Losses per share - Diluted  $  0.14      $  (0.11 )    $  0.34      $  0.08  
Weighted average number of shares outstanding during the period - Basic 116,987,887     104,064,220     113,685,219     83,275,443  
Weighted average number of shares outstanding during the period - Diluted   117,325,223       104,064,220       113,981,763       83,289,884  
                       

Playa Hotels & Resorts N.V.
Consolidated Debt Summary - As of June 30, 2018 
($ in millions) 

Playa Hotels & Resorts N.V.                  
Debt Summary                  
  Maturity        
  Date   # of Years   Debt   Applicable Rate   LTM Interest
Debt                  
Revolving Credit Facility (1) Apr-22   3.8   $  -   0.5%   $0.5
Term Loan (2) Apr-24   5.8   1,001.6   5.4%   36.0
Senior Notes -   -   -       12.7
Total Debt     5.8   $1,001.6   5.4%   $49.2
Less: cash and cash equivalents (3)         145.9        
Net debt (Face)         $855.7        
Cap Cana Spending         88.9        
Adjusted Net debt         $766.8        
                   

(1) As of June 30, 2018, the total borrowing capacity under our revolving credit facility was $100.0 million. The interest rate on outstanding balances of our revolving credit facility is L+300 bps with no LIBOR floor. As of June 30, 2018, the commitment fee on undrawn balances of our revolving credit facility is 0.5%.

(2) The interest rate on our term loan is L+275 bps with a LIBOR floor of 1%. The interest rate was 4.8% as of June 30, 2018, which includes the LIBOR rate that was locked in on June 29, 2018 for the 1-month period of June 29, 2018 to July 31, 2018. Effective March 29, 2018, we entered into two interest rate swaps to mitigate the long term interest rate risk inherent in our variable rate Term Loan. The interest rate swaps have an aggregate fixed notional value of $800.0 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly to the one-month LIBOR rate.

(3) Based on cash balances on hand as of June 30, 2018.

(4) Represents last twelve months interest expense and commitment fee and does not include amortization on deferred financing costs or the discount / premium on debt.

Playa Hotels & Resorts N.V.
Reportable Segment Operating Statistics - Three Months Ended June 30, 2018 and 2017

Reportable Segment Operating Statistics - Three Months Ended June 30, 2018 and 2017                      
        Occupancy
      Net Package ADR   Net Package RevPAR   Owned Net Revenue   Owned Resort EBITDA   Owned EBITDA Margin
 Total Portfolio   Rooms   2018   2017   Pts. Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   Pts. Change
Yucatán Peninsula     2,708   86.2%   88.7%   (2.5) pts   $263.11   $272.45   -3.4%   $226.91   $241.66   -6.1%     63,667     68,927   -7.6%     25,726     29,176   -11.8%   40.4%   42.3%   (1.9) pts
Pacific Coast     926   76.6%   73.4%   3.2 pts   $258.38   $301.17   -14.2%   $197.98   $221.15   -10.5%     19,815     23,073   -14.1%     6,550     9,212   -28.9%   33.1%   39.9%   (6.8) pts
Dominican Republic     1,876   85.4%   82.2%   3.2 pts   $175.98   $180.64   -2.6%   $150.31   $148.46   1.2%     31,496     30,938   1.8%     9,586     8,364   14.6%   30.4%   27.0%   3.4 pts
Jamaica     1,946   81.1%   64.4%   16.7 pts   $299.40   $329.47   -9.1%   $242.68   $212.05   14.4%     26,729     14,475   84.7%     8,089     2,268   256.7%   30.3%   15.7%   14.6 pts
Total Portfolio     7,456   83.8%   81.9%   1.9 pts   $242.43   $252.68   -4.1%   $203.23   $207.04   -1.8%     141,707     137,413   3.1%    $  49,951    $  49,020   1.9%   35.2%   35.7%   (0.5) pts
                                                                             
                                                                             
Reportable Segment Operating Statistics - Three Months Ended June 30, 2018 and 2017                   
        Occupancy
      Net Package ADR   Net Package RevPAR   Owned Net Revenue   Owned Resort EBITDA   Owned EBITDA Margin
Comparable Portfolio   Rooms   2018   2017   Pts. Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   Pts. Change
Yucatán Peninsula     2,708   86.2%   88.7%   (2.5) pts   $263.11   $272.45   -3.4%   $226.91   $241.66   -6.1%     63,667     68,927   -7.6%     25,726     29,176   -11.8%   40.4%   42.3%   (1.9) pts
Pacific Coast     926   76.6%   73.4%   3.2 pts   $258.38   $301.17   -14.2%   $197.98   $221.15   -10.5%     19,815     23,073   -14.1%     6,550     9,212   -28.9%   33.1%   39.9%   (6.8) pts
Dominican Republic     1,876   85.4%   82.2%   3.2 pts   $175.98   $180.64   -2.6%   $150.31   $148.46   1.2%     31,496     30,938   1.8%     9,586     8,364   14.6%   30.4%   27.0%   3.4 pts
Jamaica     620   74.6%   64.4%   10.2 pts   $367.11   $329.47   11.4%   $274.02   $212.05   29.2%     18,793     14,475   29.8%     5,304     2,268   133.9%   28.2%   15.7%   12.5 pts
Total Comparable Portfolio   6,130   83.4%   81.9%   1.5 pts   $244.55   $252.68   -3.2%   $203.86   $207.04   -1.5%     133,771     137,413   -2.7%    $  47,166    $  49,020   -3.8%   35.3%   35.7%   (0.4) pts

Highlights

Yucatán Peninsula

  • Net Package RevPAR decreased 6.1% over the comparable period in the prior year, driven by a decrease in Net Package ADR of 3.4%, and a decrease in occupancy of 250 basis points. Results were impacted by the Easter holiday falling on April 16th in 2017 as compared to April 1st in 2018. During these additional two weeks of 2017, we were able to maintain increased rates across the market for high season.
  • Owned Resort EBITDA decreased $3.5 million or 11.8% over the prior year
    - This decrease was primarily the result of all properties in this segment (except Hyatt Ziva Cancun and Hyatt Zilara Cancun), which accounted for a decrease of $3.7 million in Adjusted EBITDA compared to the three months ended June 30, 2017. This was offset by strong performance of Hyatt Ziva Cancun and Hyatt Zilara Cancun, which accounted for a $0.2 million increase. All properties within this segment have been affected by increased insurance premiums year over year which have contributed to the decrease in Adjusted EBITDA compared to the three months ended June 30, 2017.

Pacific Coast

  • Net Package RevPAR decreased 10.5% over the comparable period in the prior year, driven by a decrease in Net Package ADR of 14.2%, which was partially offset by an increase in occupancy of 320 basis points. Results were impacted by the Easter holiday falling on April 16th in 2017 as compared to April 1st in 2018. During these additional two weeks of 2017, we were able to maintain increased rates across the market for high season. Additionally, Hyatt Ziva Los Cabos has had less group business due to cancellations versus the prior year, whereas results from Hyatt Ziva Puerto Vallarta have remained strong. As groups generally pay increased rates, a decrease in group business contributed to the decrease in Net Revenue compared to the three months ended June 30, 2017.
  • Owned Resort EBITDA decreased $2.7 million or 28.9% over the prior year.
    - This decrease was due to decreased Adjusted EBITDA by both hotels in this region. All properties within this segment have been affected by increased insurance premiums year over year which have contributed to the decrease in Adjusted EBITDA compared to the three months ended June 30, 2017.

Dominican Republic

  • Net Package RevPAR increased 1.2% over the prior year, driven by an increase in occupancy of 320 basis points , which was partially offset by a decrease in Net Package ADR of 2.6%.
  • Owned Resort EBITDA increased $1.2 million, or 14.6%, over the prior year.
    - The increase was primarily due to the performance of Dreams La Romana and Dreams Palm Beach, which accounted for $1.4 million increase in Adjusted EBITDA compared to the three months ended June 30, 2017. This was offset by Dreams Palm Beach which accounted for a $0.2 million decrease in Adjusted EBITDA compared to the three months ended June 30, 2017. All properties within this segment have been affected by increased insurance premiums year over year which were an offset to the increase in Adjusted EBITDA compared to the three months ended June 30, 2017.

Jamaica

  • Net Package RevPAR increased 14.4% over the prior year, driven by an increase in occupancy of 1,670 basis points, which was partially offset by a decrease in Net Package ADR of 9.1%
  • Owned Resort EBITDA increased $5.8 million, or 256.7%, over the prior year.
    - This increase was due to the performance of Hyatt Ziva and Zilara Jamaica which accounted for a $3.0 million increase. The Hyatt Ziva and Zilara Jamaica continues to show positive results after completion of renovations in 2017. Furthermore, this increase is also attributable to the addition of Sagicor properties, which accounted for the remaining $2.8 million increase compared to the three months ended June 30, 2017. All properties within this segment have been affected by increased insurance premiums year over year which were an offset to the increase in Adjusted EBITDA compared to the three months ended June 30, 2017.

Playa Hotels & Resorts N.V.
Reportable Segment Operating Statistics - Six Months Ended June 30, 2018 and 2017

Reportable Segment Operating Statistics - Six Months Ended June 30, 2018 and 2017
                                                                             
        Occupancy
      Net Package ADR   Net Package RevPAR   Total Net Revenue   Resort EBITDA   EBITDA Margin
 Total Portfolio   Rooms   2018   2017   Pts. Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   Pts. Change
Yucatán Peninsula     2,708   88.3%   89.7%   (1.4) pts   $293.70   $299.26   -1.9%   $259.25   $268.34   -3.4%     142,938     149,675   -4.5%     65,330     72,246   -9.6%   45.7%   48.3%   (2.6) pts
Pacific Coast     926   78.9%   75.5%   3.3 pts   $308.32   $335.97   -8.2%   $243.16   $253.71   -4.2%     48,870     51,505   -5.1%     20,458     23,484   -12.9%   41.9%   45.6%   (3.7) pts
Dominican Republic     1,876   87.4%   86.0%   1.4 pts   $205.72   $206.74   -0.5%   $179.79   $177.72   1.2%     71,913     70,796   1.6%     28,013     25,803   8.6%   39.0%   36.4%   2.6 pts
Jamaica     1,946   80.5%   72.5%   8.0 pts   $357.92   $373.88   -4.3%   $288.14   $271.23   6.2%     50,490     35,947   40.5%     18,733     9,769   91.8%   37.1%   27.2%   9.9 pts
Total Portfolio     7,456   85.6%   84.7%   0.9 pts   $276.86   $281.94   -1.8%   $237.08   $238.71   -0.7%     314,211     307,923   2.0%    $  132,534    $  131,302   0.9%   42.2%   42.6%   (0.4) pts
                                                                             
                                                                             
Reportable Segment Operating Statistics - Six Months Ended June 30, 2018 and 2017
                                                                             
        Occupancy
      Net Package ADR   Net Package RevPAR   Total Net Revenue   Resort EBITDA   EBITDA Margin
Comparable Portfolio   Rooms   2018   2017   Pts. Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   % Change   2018   2017   Pts. Change
Yucatán Peninsula     2,708   88.3%   89.7%   (1.4) pts   $293.70   $299.26   -1.9%   $259.25   $268.34   -3.4%     142,938     149,675   -4.5%     65,330     72,246   -9.6%   45.7%   48.3%   (2.6) pts
Pacific Coast     926   78.9%   75.5%   3.4 pts   $308.32   $335.97   -8.2%   $243.16   $253.71   -4.2%     48,870     51,505   -5.1%     20,458     23,484   -12.9%   41.9%   45.6%   (3.7) pts
Dominican Republic     1,876   87.4%   86.0%   1.4 pts   $205.72   $206.74   -0.5%   $179.79   $177.72   1.2%     71,913     70,796   1.6%     28,013     25,803   8.6%   39.0%   36.4%   2.6 pts
Jamaica     620   77.1%   72.5%   4.6 pts   $413.02   $373.88   10.5%   $318.44   $271.23   17.4%     42,554     35,947   18.4%     15,947     9,769   63.2%   37.5%   27.2%   10.3 pts
Total Comparable Portfolio   6,130   85.5%   84.7%   0.8 pts   $279.09   $281.94   -1.0%   $238.49   $238.71   -0.1%     306,275     307,923   -0.5%    $  129,748    $  131,302   -1.2%   42.4%   42.6%   (0.2) pts

Highlights

Yucatán Peninsula

  • Net Package RevPAR decreased 3.4% over the comparable period in the prior year, driven by a decrease in Net Package ADR of 1.9% and a decrease in occupancy of 140 basis points. Results were impacted by the Easter holiday falling on April 16th in 2017 as compared to April 1st in 2018. During these additional two weeks of 2017, we were able to maintain increased rates across the market for high season.
  • Owned Resort EBITDA decreased $6.9 million or 9.6% over the prior year.
    - This decrease was primarily the result of all properties in this segment except Hyatt Ziva Cancun and Hyatt Zilara Cancun, which accounted for a decrease of $8.1 million in Resort EBITDA compared to the six months ended June 30, 2017, offset by the performance of Hyatt Ziva Cancun and Hyatt Zilara Cancun, which accounted for a $1.2 million increase in Adjusted EBITDA compared to the six months ended June 30, 2017. All properties within this segment have been affected by increased insurance premiums year over year which have contributed to the decrease in Adjusted EBITDA compared to the six months ended June 30, 2017.

Pacific Coast

  • Net Package RevPAR decreased 4.2% over the comparable period in the prior year, driven by a decrease in Net Package ADR of 8.2% and partially offset by an increase in occupancy of 340 basis points. Results were impacted by the Easter holiday falling on April 16th in 2017 as compared to April 1st in 2018. During these additional two weeks of 2017, we were able to maintain increased rates across the market for high season. Additionally, Hyatt Ziva Los Cabos has had less group business due to cancellations versus the prior year, whereas results from Hyatt Ziva Puerto Vallarta have remained strong. As groups generally pay increased rates, a decrease in group business contributed to the decrease in Net Revenue compared to the six months ended June 30, 2017.
  • Owned Resort EBITDA decreased $3.0 million or 12.9% over the prior year.
    - This decrease was due to decreased Adjusted EBITDA by both hotels in this region compared to the six months ended June 30, 2017. All properties within this segment have been affected by increased insurance premiums year over year which have contributed to the decrease in Adjusted EBITDA compared to the six months ended June 30, 2017.

Dominican Republic

  • Net Package RevPAR increased 1.2% over the prior year, driven by an increase in Occupancy of 140 basis points, which was partially offset by a decrease in Net Package ADR of 0.5%.
  • Owned Resort EBITDA increased $2.2 million, or 8.6%, over the prior year.
    - This increase was due to increased Adjusted EBITDA by all properties in this region. All properties within this segment have been affected by increased insurance premiums year over year which were an offset to the increase in Adjusted EBITDA compared to the six months ended June 30, 2017.

Jamaica

  • Net Package RevPAR increased 6.2% over the prior year, driven by an increase in Occupancy of 800 basis points, which was offset by a decrease in Net Package ADR of 4.3%.
  • Owned Resort EBITDA increased $9.0 million, or 91.8%, over the prior year.
    - This increase was due to the strong performance by Hyatt Ziva and Zilara Rose Hall, which accounted for an increase in Adjusted EBITDA of $6.2 million compared to the six months ended June 30, 2017. The Hyatt Ziva and Zilara Jamaica continues to show positive results after completion of renovations in 2017. Furthermore, this increase is also attributable to the addition of Sagicor properties, which accounted for the remaining $2.8 million increase compared to the six months ended June 30, 2017. All properties within this segment have been affected by increased insurance premiums year over year which were an offset to the increase in Adjusted EBITDA compared to the six months ended June 30, 2017.

Company Contact

Ryan Hymel, EVP and Chief Financial Officer
(571) 529-6113

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