BRAEMAR HOTELS & RESORTS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q) – Marketscreener.com

FORWARD-LOOKING STATEMENTS
•our business and investment strategy;
•anticipated or expected purchases or sales of assets;
•our projected operating results;
•completion of any pending transactions;
•our understanding of our competition;
•market trends;
•projected capital expenditures; and
•the impact of technology on our operations and business.
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•extreme weather conditions may cause property damage or interrupt business;
•our ability to raise sufficient capital and/or take other actions to improve our liquidity position or otherwise meet our liquidity requirements;
•general volatility of the capital markets and the market price of our common and preferred stock;
•general business and economic conditions affecting the lodging and travel industry;
•changes in our business or investment strategy;
•availability, terms and deployment of capital;
•unanticipated increases in financing and other costs, including a rise in interest rates;
•changes in our industry and the markets in which we operate, interest rates, or local economic conditions;
•the degree and nature of our competition;
•changes in personnel of Ashford LLC or the lack of availability of qualified personnel;
•changes in governmental regulations, accounting rules, tax rates and similar matters;
•legislative and regulatory changes, including changes to the Internal Revenue Code of 1986, as amended (the “Code”) and related rules, regulations and interpretations governing the taxation of REITs;
•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and
•future sales and issuances of our common stock or other securities might result in dilution and could cause the price of our common stock to decline.
Overview
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Recent Developments
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Key Indicators of Operating Performance
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RESULTS OF OPERATIONS
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
The following table summarizes changes in key line items from our condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 (in thousands except percentages):
Expenses
Gain (loss) on insurance settlement and disposition of assets
Interest expense and amortization of discounts and loan costs
Net income (loss) attributable to the Company $ 14,663 $ (8,708) $ 23,371
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The following table illustrates the key performance indicators of all hotel properties for the periods indicated:
161.73
54,323
83,848
161.73
54,323
83,848
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Other Hotel Revenue. Other hotel revenue, which consists mainly of condo management fees, health center fees, resort fees, golf, telecommunications, parking, rentals and business interruption revenue, increased $7.1 million, or 54.9%, to $20.0 million during the 2022 quarter compared to the 2021 quarter.
Food and Beverage Expense. Food and beverage expense increased $14.1 million, or 100.9%, to $28.0 million during the 2022 quarter compared to the 2021 quarter.
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Advisory Services Fee. Advisory services fee increased $2.5 million, or 52.7%, to $7.3 million in the 2022 quarter compared to the 2021 quarter due to increases in the base advisory fee of $394,000, reimbursable expenses of $604,000, an incentive fee of $606,000 and an increase in equity-based compensation of $923,000.
Corporate General and Administrative. Corporate general and administrative expense was $2.5 million in the 2022 quarter and $1.6 million in the 2021 quarter. The increase in corporate general and administrative expenses is primarily due to higher professional fees of $399,000, higher public company costs of $208,000, higher miscellaneous expenses of $101,000 and higher reimbursed operating expenses of Ashford Securities of $187,000.
Gain (loss) on Insurance Settlement and Disposition of Assets. In the 2021 quarter, we recognized a gain of $481,000 associated with proceeds received from an insurance claim and a gain of $18,000 upon disposition of certain fixed assets. There was no such gain (loss) in the 2022 quarter.
Interest Income. Interest income was $25,000 and $9,000 in the 2022 quarter and the 2021 quarter, respectively.
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Write-off of loan costs and exit fees was $351,000 in the 2021 quarter, resulting from several amendments executed with various lenders, which included deferral of debt service payments and allowed the use of reserves for property-level operating shortfalls and/or to cover debt service payments. Third-party fees incurred in conjunction with these amendments, totaling $351,000, were expensed in accordance with applicable accounting guidance.
Unrealized Gain (Loss) on Derivatives. Unrealized gain on derivatives of $408,000 for the 2022 quarter consisted of an unrealized gain of approximately $843,000 on interest rate caps, partially offset by an unrealized loss of approximately $435,000 on warrants.
Unrealized loss on derivatives of $20,000 in the 2021 quarter consisted of an unrealized loss on interest rate caps.
LIQUIDITY AND CAPITAL RESOURCES
•advisory fees payable to Ashford LLC;
•recurring maintenance necessary to maintain our hotel properties in accordance with brand standards;
•interest expense and scheduled principal payments on outstanding indebtedness;
•dividends on our common stock;
•dividends on our preferred stock; and
•capital expenditures to improve our hotel properties.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, capital market activities and existing cash balances.
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Equity Transactions
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Debt Transactions
On March 11, 2022, in connection with the acquisition of The Ritz-Carlton Reserve Dorado Beach the Company assumed a $54.0 million mortgage loan. See note 6 to our condensed consolidated financial statements.
Sources and Uses of Cash
We had approximately $185.2 million and $216.0 million of cash and cash equivalents at March 31, 2022 and December 31, 2021, respectively.
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Seasonality
Critical Accounting Policies
The following non-GAAP presentations of EBITDA, EBITDAre, Adjusted EBITDAre, Funds From Operations (“FFO”) and Adjusted FFO are presented to help our investors evaluate our operating performance.
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The following table reconciles net income (loss) to EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) (unaudited):
Amortization of favorable (unfavorable) contract assets (liabilities)
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The following table reconciles net income (loss) to FFO and Adjusted FFO (in thousands) (unaudited):
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