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Summit Hotel Properties, Inc. (INN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was mixed: revenue modestly exceeded consensus while EBITDA beat significantly, but GAAP EPS and FFO/share missed; management flagged near‑term demand softness and reduced 2025 capex guidance to $60–$70M pro rata .
  • Revenue beat: $184.48M vs consensus $183.60M (+0.5%); EBITDA beat: $56.88M vs $46.01M (+23.6%); EPS miss: -$0.04 vs -$0.02; FFO/share miss: $0.19 vs $0.20 .
  • Operating metrics resilient: pro forma RevPAR +0.9% to $124.99 and hotel EBITDA margin 35.6% (-48 bps); same‑store RevPAR +1.5% and margin 35.9% (-49 bps), supported by tight cost control (+1.5% y/y pro forma operating expenses) .
  • Balance sheet actions and capital allocation are key catalysts: $275M delayed‑draw term loan to address Feb‑2026 converts and a new $50M share repurchase program; pro rata debt ~71% fixed after swaps; total liquidity ≈$310M .

What Went Well and What Went Wrong

What Went Well

  • Cost discipline limited margin compression despite low revenue growth; pro forma operating expenses rose just ~1.5% y/y, and EBITDA margin contracted <50 bps; management emphasized successful wage and contract labor management .
  • Urban markets led performance (e.g., San Francisco RevPAR +13.5% with strong convention pace into Q2), and group RevPAR in urban portfolio +17% y/y, underpinning future outperformance as macro normalizes .
  • Strategic capital moves: closed a $275M delayed‑draw term loan extending maturities to 2030 and eliminating near‑term debt risk; authorized $50M buyback to capitalize on equity dislocation .

Quotes:

  • “RevPAR…increased 1.5%…and hotel EBITDA margin contracted less than 50 basis points…” — Jonathan P. Stanner, CEO .
  • “Contract labor now represents 10% of our total labor costs…750 bps below peak COVID era levels” — CFO Trey Conkling .
  • “The term loan…eliminates all of our debt maturity risk until 2027…” — CEO .

What Went Wrong

  • Demand softened in March (government and inbound international travel), and mix shifted to lower‑rated segments, pressuring ADR; April RevPAR expected -4% to -5% given tough calendar comps (solar eclipse; Easter shift) .
  • GAAP EPS (-$0.04) and FFO/share ($0.19) missed consensus (-$0.02 and $0.20), reflecting near‑term revenue pressure and JV/portfolio effects .
  • Management reduced 2025 capex guidance by ~$10M to $60–$70M (pro rata), citing macro uncertainty and tariff risk to renovation costs .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$176.81 $172.93 $184.48
Net Loss per Diluted Share ($)($0.04) $0.01 ($0.04)
FFO per Diluted Share and Unit ($)$0.19 $0.25 $0.19
Adjusted EBITDAre ($USD Millions)$45.34 $42.13 $45.01
Pro Forma Hotel EBITDA ($USD Millions)$59.75 $60.37 $65.61
Pro Forma Hotel EBITDA Margin (%)33.8% 34.1% 35.6%

KPI Trends (Pro Forma)

KPIQ3 2024Q4 2024Q1 2025
Occupancy (%)73.7% 71.5% 72.2%
ADR ($)$162.95 $164.00 $173.06
RevPAR ($)$120.02 $117.21 $124.99

Segment Breakdown (Ownership Interest)

SegmentOccupancy Q1’25ADR Q1’25 ($)RevPAR Q1’25 ($)Occupancy Q1’24ADR Q1’24 ($)RevPAR Q1’24 ($)Hotel EBITDA Margin Q1’25
Wholly-Owned (53)70.2% 164.48 115.42 69.0% 168.12 116.06 29.8%
GIC JV (41)74.4% 178.46 132.79 76.1% 170.63 129.89 41.9%
Other JVs (3)90.5% 286.66 259.41 86.0% 277.74 238.99 44.0%
Pro Forma (97)72.2% 173.06 124.99 72.1% 171.64 123.83 35.6%

Q1 2025 vs Consensus (S&P Global)

MetricConsensusActualSurprise
Revenue ($USD Millions)$183.60$184.48+$0.88 (+0.5%)
EBITDA ($USD Millions)$46.01$56.88+$10.87 (+23.6%)
Primary EPS ($)($0.02)($0.04)-$0.02
FFO / Share (REIT) ($)$0.20$0.19-$0.01

Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAreFY 2025$184M–$198M Tracking to low end Maintained (low end bias)
Adjusted FFOFY 2025$111.9M–$125.6M Tracking to low end Maintained (low end bias)
Adjusted FFO per shareFY 2025$0.90–$1.00 Tracking to low end Maintained (low end bias)
Capital Expenditures (pro rata)FY 2025$65M–$85M $60M–$70M Lowered
RevPARQ2 2025N/A-2% to -4% y/y New (cautious)
Interest Expense (pro rata)FY 2025$50M–$55M (non‑op) $50M–$55M (non‑op) Maintained
Preferred Dividends (E+F)FY 2025~$15.9M ~$16.0M Slightly higher noted
Common DividendQuarterly$0.08/share $0.08/share (Apr 24 declaration) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑2: Q3’24; Q‑1: Q4’24)Current Period (Q1’25)Trend
Demand mix & government/internationalHurricanes impacted Q3; mix stable overall Softness in March; government and inbound international down; stabilization expected Softness, stabilizing at lower levels
Urban/group strengthUrban/suburban outperformed; group RevPAR +10–12% FY’24 Urban led Q1; group RevPAR +17% in urban; SF convention pace up >30% for Q2 Positive
Pricing/ADR and channel mixFY’24 ADR stable; margin discipline Shift to discount/OTA offsetting qualified segment declines; absolute ADR still rising by segment Mix pressure on ADR
Expense control & laborContract labor -17% in Q4; wages +3.4% FY’24 Contract labor -9–10%; hourly wages +1.2% y/y; margins held within <50 bps contraction Continued improvement
Capital markets & maturitiesRefis and JV financing in Q4; converts due 2026 $275M delayed‑draw term loan to refinance 2026 converts; maturities pushed beyond 2027 De‑risked
Tariffs/macro uncertaintyFY’24 guidance balanced Reduced 2025 capex; awaiting trade policy clarity; potential tariff impact on renovations Cautious

Management Commentary

  • “While lodging demand softened in early March…we remain confident in the long‑term fundamentals…our Board…authorized a $50 million share repurchase program” — CEO Jonathan P. Stanner .
  • “We expect April RevPAR to decline between 4% and 5%…calendar comparisons related to the solar eclipse…shift of Easter…” — CEO .
  • “Moderating expense growth continued…operating expenses increasing ~1.5% y/y…contract labor…declined by 10% per occupied room” — CFO Trey Conkling .
  • “Delayed draw term loan…preserve the attractive 1.5% coupon on the convertible notes through maturity” — CFO .

Q&A Highlights

  • Government/international segments: most acute impact in March; now stabilized at lower levels with partial recovery expected through the year .
  • Business transient: midweek negotiated business held up reasonably well; no meaningful deterioration to date .
  • Pricing/mix: more reliance on discount channels/OTAs offsetting declines in qualified/government; absolute rates by segment generally still increasing .
  • Expense levers: no “COVID‑era” cuts; further room to reduce contract labor; ability to pull capex lever if demand deteriorates .
  • Buyback funding: mix of reduced capex, opportunistic asset sales; full program would raise leverage by ~0.25 turn, within comfort zone .
  • JV partner appetite: well‑capitalized GIC JV remains willing to pursue opportunities amid potential value dislocations .

Estimates Context

  • Revenue modest beat; EBITDA significant beat, implying stronger flow‑through than modeled. EPS and FFO/share misses reflect JV mix, preferred dividends, and near‑term demand softness affecting per‑share REIT metrics .
  • Near term estimate risk skewed lower on Q2 RevPAR (-2% to -4%) and management’s “low end” bias for FY 2025 ranges; capex cut should support cash flow but may defer some renovation‑driven uplift .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near‑term demand caution persists (government/international softness; calendar headwinds), but core urban/group strength is intact; watch Q2 comps and mix‑driven ADR pressure .
  • Cost discipline is a differentiator; limited margin compression with operating expenses up ~1.5% y/y signals continued flow‑through resilience if demand normalizes .
  • Capital structure de‑risked: $275M delayed‑draw term loan addresses 2026 converts; pro rata debt ~71% fixed after swaps; liquidity ≈$310M .
  • Buyback authorization ($50M) adds an opportunistic capital return lever amid equity dislocation; monitor execution pace and asset sale funding .
  • 2025 framework: capex trimmed to $60–$70M; FY ranges maintained but tracking to low end; result path hinges on H2 demand reacceleration and group strength .
  • Property‑level upside: Fort Lauderdale Courtyard repositioning expected to drive rate and F&B cash yields (>20% cash‑on‑cash) into H2’25/2026 .
  • For positioning: focus on normalization in urban/group segments and continued labor/expense tailwinds; treat Q2 as a transitional quarter before clearer H2 trajectory .
Supplementary details:
- Q1 2025 consolidated P&L: Room $163.73M; F&B $10.99M; Other $9.76M; Net loss attributable to common stockholders ($4.68M) **[1497645_0001497645-25-000050_exhibit99103-31x2025.htm:5]**.  
- Dividend: $0.08 common declared April 24, 2025; preferred dividends maintained (Series E/F/Z) **[1497645_20250424DA72666:0]**.  
- Debt & fixed/floating mix (pro rata, incl. swaps): $1.10B total; 71% fixed; 29% variable; effective rate ~4.63%; maturities pushed beyond 2027 **[1497645_0001497645-25-000050_earningsreleasesupplemen.htm:12]** **[1497645_0001497645-25-000050_exhibit99103-31x2025.htm:2]**.