Sign in

You're signed outSign in or to get full access.

SP

Service Properties Trust (SVC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered mixed results: total revenues declined sequentially to $478.8M and year-over-year to $478.8M, while net loss per share remained at -$0.28; Normalized FFO fell to $0.20/share and Adjusted EBITDAre decreased to $145.0M, impacted by hotel dispositions and expense pressures .
  • Versus consensus, revenue and EPS were modest misses; revenue of $478.8M vs $481.1M estimate*, and EPS of -$0.2465 vs -$0.245 estimate*; management flagged hotel EBITDA below guidance due to asset sale timing and insurable events .
  • Strategic actions strengthened the balance sheet: $580.2M zero‑coupon senior secured notes (net ~$490M) and $800M 2026 unsecured notes redeemed; no significant maturities until 2027 with $650M revolver availability .
  • Portfolio transition advanced: 40 hotels sold in Q3 ($292.4M), six more in October ($66.5M), with 69 hotels under PSA ($567.5M) expected to close in Q4; 2025 hotel sale proceeds targeted at ~$958.9M .
  • Near-term catalysts: closing the remaining hotel sales and applying proceeds to redeem the $400M notes due Feb 2027; Q4 guidance calls for RevPAR of $86–$89 and adjusted hotel EBITDA of $20–$25M amid seasonal and industry headwinds .

Values marked with * in this section are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Liquidity and maturities de-risked: issued $580.2M zero‑coupon notes (net proceeds ~$490M) and redeemed $350M of 2026 notes, then all $450M of 2026 notes in October; no significant maturities until Feb 2027 and $650M revolver available .
  • Disposition momentum: sold 40 hotels for $292.4M in Q3; under PSA for 69 hotels aggregating $567.5M expected to close in Q4; total 2025 hotel sale proceeds now expected ~$958.9M .
  • Net lease durability: portfolio 97.3% occupied, annualized minimum rent ~$389M, weighted average lease term 7.5 years, rent coverage ~2.04x; year-over-year rent grew >2% and NOI rose 50 bps, supported by acquisitions .

Management quote: “We believe these initiatives will continue to strengthen the resilience and growth potential of our cash flows, delivering meaningful value to our shareholders.” — Christopher Bilotto, President & CEO .

What Went Wrong

  • Hotel EBITDA miss vs guidance: adjusted hotel EBITDA fell 18.9% YoY to $45.4M and below guidance by ~$9.7M due to asset sale timing and fire disruptions at two full‑service hotels; GOP margin declined 330 bps to 24.4% .
  • Expense pressure: labor, repairs, and insurance costs weighed on retained hotel portfolio; RevPAR modestly up YoY, but margins compressed; retained portfolio adjusted hotel EBITDA fell $7M YoY to ~$36M .
  • Travel center rent coverage trending lower: coverage moderated sequentially; management not concerned given BP guaranty but continues to monitor .

Financial Results

Consolidated Performance vs Prior Periods and Estimates

MetricQ3 2024 (oldest)Q2 2025Q3 2025 (newest)
Total Revenues ($USD Millions)$491.2 $503.4 $478.8
Net Loss ($USD Millions)$(46.9) $(38.2) $(46.9)
Net Loss per Share ($)$(0.28) $(0.23) $(0.28)
Normalized FFO ($USD Millions)$52.9 $57.6 $33.9
Normalized FFO per Share ($)$0.32 $0.35 $0.20
Adjusted EBITDAre ($USD Millions)$155.0 $163.8 $145.0

Actuals vs Wall Street Consensus (S&P Global) — Q3 2025

MetricActualConsensusSurprise
Revenue ($USD)$478,770,000 $481,098,670*Miss (~$2.33M)
Primary EPS ($)$(0.2465)*$(0.245)*Miss (~$0.0015)

Values marked with * are retrieved from S&P Global.

Segment Revenue Breakdown

SegmentQ3 2024Q2 2025Q3 2025
Hotel Operating Revenues ($USD Millions)$390.9 $404.4 $377.6
Rental Income ($USD Millions)$100.2 $99.0 $101.2
Total Revenues ($USD Millions)$491.2 $503.4 $478.8

Hotel KPIs (All Hotels Total/Average)

KPIQ3 2024Q2 2025Q3 2025
Occupancy (%)67.9% 69.2% 68.9%
ADR ($)$147.27 $146.32 $145.50
RevPAR ($)$100.05 $101.27 $100.25
Adjusted Hotel EBITDA ($USD Millions)$54.6 $73.1 $45.4
Adjusted Hotel EBITDA Margin (%)15.4% 18.1% 12.0%

Net Lease Metrics

KPIQ3 2024Q2 2025Q3 2025
Occupancy (%)97.6% 97.3% 97.3%
Rent Coverage (x)—2.04x 2.04x
Annualized Minimum Rent ($USD Millions)—$386.5 $388.7
Weighted Avg Lease Term (years)—7.6 7.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Hotel RevPAR ($)Q4 2025Not previously specified$86–$89 New
Adjusted Hotel EBITDA ($M)Q4 2025Not previously specified$20–$25 New
Interest Expense ($M)Q4 2025Not previously specified~$102 (cash ~$84; non‑cash ~$18) New
CapEx ($M)FY 2025~$250 ~ $200 Lowered
CapEx ($M)FY 2026~$150 initial $150 + $20–$30 shift from Nautilus deferral Increased due to deferral
Debt RedemptionFeb 2027 notes ($400M)—Expect to redeem from hotel sale proceeds New
DividendCommon ($/share)$0.01 quarterly$0.01 quarterly (announced Oct 9) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Hotel DispositionsQ1: planning 123 hotels for ~$1.1B; liquidity focus . Q2: 114 hotels under PSAs, ~$920M; buyers waived due diligence on 111 hotels .Q3: 40 sold ($292.4M); 69 under PSA ($567.5M) closing in Q4; target ~$958.9M 2025 proceeds .Continuing; execution progressing
Balance Sheet ActionsQ2: drew revolver defensively; announced early redemption of $350M 2026 notes .Issued $580.2M zero‑coupon notes (net ~$490M), redeemed $800M of 2026 notes; no significant maturities until 2027 .Improved maturity profile
Hotel Demand/MarginsQ1: RevPAR +2.6% YoY; renovation displacement . Q2: RevPAR +0.4%; margins pressured .RevPAR +0.2% YoY; adjusted hotel EBITDA -18.9% YoY; labor/insurance costs and fire disruptions .Margins pressured
Net Lease FundamentalsQ1–Q2: occupancy ~97–98%; coverage ~2.04x; rent growth modest .Occupancy 97.3%; coverage 2.04x; annualized rent ~$389M; WALT 7.5 years .Stable
TA CoverageQ2: coverage ~1.31x; moderating vs post‑COVID highs .Sequential decline moderating; BP guaranty mitigates concern .Stabilizing
CapEx & RenovationsQ1–Q2: sizable spend; multiple renovations .2025 CapEx lowered to ~$200M; Nautilus deferred to 2026 with $20–$30M shift .Lower near‑term
Capital Markets StrategyQ2: revolver draw to preserve liquidity .Zero‑coupon notes executed to lift covenant headroom; plan proceeds to redeem 2027 notes .Proactive

Management Commentary

  • “RevPAR was consistent with our guidance, while hotel EBITDA fell below our expectations, primarily due to the impact of hotel dispositions during the quarter.” — Christopher Bilotto, President & CEO .
  • “Our hotel portfolio generated adjusted hotel EBITDA of $44.3M… These results came in below the low end of our hotel EBITDA guidance range by $9.7M, primarily due to a $6.6M impact from hotels sold prior to September 30 and a $2.9M impact from fire‑related disruption at two full‑service hotels.” — Brian Donley, CFO .
  • “We have repaid all $700M of senior notes scheduled to mature in 2026… and all amounts outstanding on our $650M revolver… Our next maturity is $400M due Feb 2027, which we expect to redeem with hotel sale proceeds.” — Brian Donley, CFO .
  • “We continue to advance modest growth supporting our net lease portfolio… acquisitions intended to scale net lease, optimize portfolio composition, and unlock accretive financing.” — Jesse Abair, VP .

Q&A Highlights

  • Disposition timing: management tracking 40–50% of remaining closings in November with the balance in December; contracts obligate closing, with remedies if not met .
  • Impairment: $27M impairment tied to portfolio purchase price allocations; overall sales expected to produce significant book gains in Q4 .
  • TA rent coverage: decline moderating; BP guaranty underpins risk; continued investment at sites .
  • Q4 guide construction: excludes impact of remaining hotel sales; seasonality steeper for full‑service hotels post asset mix change; continued cost pressures .
  • Zero‑coupon notes rationale: covenant headroom on 1.5x coverage test and two‑year runway to maturities; proceeds used to retire 2026 notes and repay revolver .
  • 2026 dispositions: plan to continue selling negative‑EBITDA full‑service hotels incrementally, with details forthcoming (e.g., NAREIT update) .

Estimates Context

  • Revenue modest miss: $478.8M actual vs $481.1M consensus*; management cited asset sale timing and insurable events affecting hotel EBITDA and overall results .
  • EPS modest miss: -$0.2465 actual vs -$0.245 consensus*.
  • Implication: Street models likely to mark down near‑term hotel EBITDA, RevPAR, and margin assumptions given cost pressures and seasonality; net lease estimates should remain stable given occupancy and coverage.

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Balance sheet risk reduced: 2026 maturities retired and revolver repaid; next maturity in Feb 2027 with intent to redeem from sale proceeds .
  • Disposition execution remains the key near‑term catalyst; successful Q4 closings support deleveraging and may drive multiple re‑rating .
  • Hotel profitability under pressure near term (labor/insurance/disruption); expect seasonal step-down in Q4 and potential margin stabilization post dispositions in 2026 .
  • Net lease platform provides durable cash flows with 97.3% occupancy, ~2.04x coverage, and WALT ~7.5 years; continued small, higher‑cap‑rate acquisitions enhance portfolio .
  • CapEx discipline: 2025 lowered to ~$200M; Nautilus deferral shifts $20–$30M into 2026; monitor renovation ROI and margin recovery at retained hotels .
  • Watch TA coverage trend: moderating declines, BP guaranty mitigates credit risk; coverage >1x remains acceptable but continued monitoring warranted .
  • Tactical focus: track Q4 RevPAR ($86–$89) and adjusted hotel EBITDA ($20–$25M) delivery vs guide amid industry softness and asset mix changes .

A Maryland Real Estate Investment Trust dividend policy: $0.01/share quarterly distribution announced on Oct 9, 2025 .

Values marked with * are retrieved from S&P Global.