PEB Financial Analysis

Analysis Date: 1/29/2025

Business Model

Pebblebrook generates revenue primarily through hotel operations including room revenue, food & beverage, and other operating revenue

Revenue Sources

• Room revenue (58% of total revenue in Q3 2024)
• Food and beverage revenue (24% of total revenue in Q3 2024)
• Other operating revenue (18% of total revenue in Q3 2024)

Revenue Distribution by Channel

• Leisure Transient: 45%
• Business Transient: 25%
• Business Group: 25%
• Leisure Group: 5%

Income Statement Analysis

• Revenue increased 2.2% YoY driven by increased operations at LaPlaya Beach Resort & Club and Margaritaville Hotel San Diego
• Hotel operating expenses increased 2.9% YoY due to higher staffing costs and increased operations at reopened properties
• Operating income improved significantly due to reduced impairment charges vs prior year

Balance Sheet Analysis

• Total assets declined 1.8% since year-end 2023 primarily due to depreciation of hotel properties
• Total liabilities decreased by $94M primarily due to debt repayments

Cash Flow Analysis

• Operating cash flows increased slightly by 1.7% YoY to $205.8M
• Investing cash outflows of $79.9M primarily for hotel improvements
• Financing outflows of $175.3M mainly for debt repayment and shareholder distributions

Capital Allocation

The company maintains a balanced capital allocation strategy focused on: 1) Property reinvestment through ROI projects expected to generate 7-11% returns, 2) Debt reduction with $111M repaid YTD, 3) Common share repurchases totaling $15M YTD at average price of $13.31, 4) Quarterly common dividend of $0.01 per share, 5) Maintaining strong liquidity position with $780M available through cash and revolver

Management Commentary

Strong performance in Chicago, San Diego, Boston and Portland drove increased occupancy for urban hotels

Higher weekday demand from business group and improving weekend leisure travel drove increased occupancy at resort hotels

LaPlaya Beach Resort sustained damage from Hurricane Helene requiring partial closure

Overall Sentiment: Cautiously optimistic on continued recovery in both urban and resort markets despite macroeconomic uncertainty

Recommendation

Rating: Buy

Reason for Rating: Current share price represents ~57% discount to estimated NAV of $29.00 per share

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/29/2025, 5:18:15 AM