Playa Hotels & Resorts N.V. [PLYA] Filings

10-Q 1 plya-20230630.htm FORM 10-Q plya-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________

FORM 10-Q

_______________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NO. 1-38012

Playa Hotels & Resorts N.V.

(Exact name of registrant as specified in its charter)




The	Netherlands	98-1346104
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

Nieuwezijds Voorburgwal 104

1012 SG

Amsterdam,

the

Netherlands

Not Applicable

(Address of Principal Executive Offices)

(Zip Code)

+31 6 82 55 84 30

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Ordinary Shares, €0.10 par value	PLYA	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (90) days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of July 31, 2023, there were 147,716,466 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.

Table of Contents


Playa Hotels & Resorts N.V. TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 3 0 , 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 3 0 , 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 3 0 , 2023 and 2022	3
	Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 3 0 , 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2023 and 2022	5
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Playa Hotels & Resorts N.V.

Condensed Consolidated Balance Sheets

($ in thousands, except share data)

(unaudited)


	As of June 30,		As of December 31,
	2023		2022
ASSETS
Cash and cash equivalents	$	268,845	$	283,945
Trade and other receivables, net	73,360		62,946
Insurance recoverable	9,750		34,191
Accounts receivable from related parties	8,189		8,806
Inventories	20,426		20,046
Prepayments and other assets	56,896		44,177
Property and equipment, net	1,517,130		1,536,567
Derivative financial instruments	8,850		3,510
Goodwill, net	61,654		61,654
Other intangible assets	6,003		6,556
Deferred tax assets	7,092		7,422
Total assets	$	2,038,195	$	2,069,820
LIABILITIES AND SHAREHOLDERS’ EQUITY
Trade and other payables	$	183,270	$	231,652
Payables to related parties	13,209		6,852
Income tax payable	554		990
Debt	1,063,210		1,065,453
Other liabilities	32,152		30,685
Deferred tax liabilities	74,997		69,326
Total liabilities	1,367,392		1,404,958
Commitments and contingencies (see Note 7)
Shareholders’ equity
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 169,423,980 shares issued and 150,650,437 shares outstanding as of June 30, 2023 and 168,275,504 shares issued and 158,228,508 shares outstanding as of December 31, 2022)	18,822		18,700
Treasury shares (at cost, 18,773,543 shares as of June 30, 2023 and 10,046,996 shares as of December 31, 2022)	(138,002)		(62,953)
Paid-in capital	1,195,576		1,189,090
Accumulated other comprehensive income (loss)	4,045		(6,985)
Accumulated deficit	(409,638)		(472,990)
Total shareholders’ equity	670,803		664,862
Total liabilities and shareholders’ equity	$	2,038,195	$	2,069,820

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Operations

($ in thousands, except share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue
Package	$	208,356	$	183,232	$	441,924	$	370,047
Non-package	33,124		33,957		66,605		63,200
The Playa Collection	828		398		1,554		694
Management fees	2,122		1,343		4,051		2,400
Cost reimbursements	3,008		2,080		6,542		4,032
Other revenues	602		257		1,166		468
Total revenue	248,040		221,267		521,842		440,841
Direct and selling, general and administrative expenses
Direct	132,606		119,125		261,574		225,965
Selling, general and administrative	47,614		41,478		92,741		78,717
Depreciation and amortization	19,316		19,628		38,507		39,128
Reimbursed costs	3,008		2,080		6,542		4,032
(Gain) loss on sale of assets	(2)		9		11		9
Business interruption insurance recoveries	(495)		—		(495)		—
Gain on insurance proceeds	(3,794)		—		(3,794)		—
Direct and selling, general and administrative expenses	198,253		182,320		395,086		347,851
Operating income	49,787		38,947		126,756		92,990
Interest expense	(26,119)		(12,892)		(55,785)		(22,060)
Other (expense) income	(203)		5,756		29		5,242
Net income before tax	23,465		31,811		71,000		76,172
Income tax provision	(2,832)		(1,286)		(7,648)		(2,900)
Net income	$	20,633	$	30,525	$	63,352	$	73,272

Earnings per share
Basic	$	0.14	$	0.18	$	0.41	$	0.44
Diluted	$	0.13	$	0.18	$	0.40	$	0.44
Weighted average number of shares outstanding during the period - Basic	151,955,076		165,894,797		154,619,822		165,819,508
Weighted average number of shares outstanding during the period - Diluted	154,192,223		167,249,294		156,511,568		167,088,771

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Comprehensive Income

($ in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	20,633	$	30,525	$	63,352	$	73,272
Other comprehensive income, net of taxes
Gain on interest rate swaps	8,558		2,926		11,453		5,820
Pension obligation loss	(205)		(116)		(423)		(350)
Total other comprehensive income	8,353		2,810		11,030		5,470
Comprehensive income	$	28,986	$	33,335	$	74,382	$	78,742

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Shareholders’ Equity

($ in thousands, except share data)

(unaudited)


	Ordinary Shares			Treasury Shares			Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	164,438,280	$	18,518	2,208,004	$	(16,697)	$	1,177,380	$	(18,671)	$	(529,696)	$	630,834
Net income	—	—		—	—		—		—		42,747		42,747
Other comprehensive income	—	—		—	—		—		2,660		—		2,660
Share-based compensation	1,339,787	152		—	—		3,204		—		—		3,356
Balance at March 31, 2022	165,778,067	$	18,670	2,208,004	$	(16,697)	$	1,180,584	$	(16,011)	$	(486,949)	$	679,597
Net income	—	—		—	—		—		—		30,525		30,525
Other comprehensive income	—	—		—	—		—		2,810		—		2,810
Share-based compensation	251,784	26		—	—		2,884		—		—		2,910
Balance at June 30, 2022	166,029,851	$	18,696	2,208,004	$	(16,697)	$	1,183,468	$	(13,201)	$	(456,424)	$	715,842


	Ordinary Shares			Treasury Shares			Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	158,228,508	$	18,700	10,046,996	$	(62,953)	$	1,189,090	$	(6,985)	$	(472,990)	$	664,862
Net income	—	—		—	—		—		—		42,719		42,719
Other comprehensive income	—	—		—	—		—		2,677		—		2,677
Share-based compensation	1,148,476	122		—	—		3,044		—		—		3,166
Repurchase of ordinary shares	(4,974,132)	—		4,974,132	(40,890)		—		—		—		(40,890)
Balance at March 31, 2023	154,402,852	$	18,822	15,021,128	$	(103,843)	$	1,192,134	$	(4,308)	$	(430,271)	$	672,534
Net income	—	—		—	—		—		—		20,633		20,633
Other comprehensive income	—	—		—	—		—		8,353		—		8,353
Share-based compensation	—	—		—	—		3,442		—		—		3,442
Repurchase of ordinary shares	(3,752,415)	—		3,752,415	(34,159)		—		—		—		(34,159)
Balance at June 30, 2023	150,650,437	$	18,822	18,773,543	$	(138,002)	$	1,195,576	$	4,045	$	(409,638)	$	670,803

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	63,352	$	73,272
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization	38,507		39,128
Amortization of debt discount and issuance costs	3,473		2,053
Share-based compensation	6,608		6,266
Loss (gain) on derivative financial instruments	6,113		(17,429)
Deferred income taxes	6,001		2,435
Loss on sale of assets	11		9
Amortization of key money	(386)		(800)
Provision for (recovery of) doubtful accounts	416		(887)
Other	260		(40)
Changes in assets and liabilities:
Trade and other receivables, net	(10,879)		(12,619)
Insurance recoverable	6,633		—
Accounts receivable from related parties	617		(5,727)
Inventories	(388)		(1,519)
Prepayments and other assets	(11,623)		4,786
Trade and other payables	(47,896)		4,641
Payables to related parties	6,357		2,385
Income tax payable	(436)		(288)
Other liabilities	371		1,635
Net cash provided by operating activities	67,111		97,301
INVESTING ACTIVITIES
Capital expenditures	(18,796)		(11,892)
Purchase of intangibles	(152)		(103)
Proceeds from the sale of assets, net	9		25
Property damage insurance proceeds	17,808		—
Net cash used in investing activities	(1,131)		(11,970)
FINANCING ACTIVITIES

Repayments of debt	(5,500)		(29,913)


Repurchase of ordinary shares	(75,364)		—
Principal payments on finance lease obligations	(216)		(198)
Net cash used in financing activities	(81,080)		(30,111)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(15,100)		55,220
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD	$	283,945	$	293,577
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	268,845	$	348,797

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Cash Flows (continued)

($ in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	47,215	$	36,971
Cash paid for income taxes, net	$	2,649	$	820
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Capital expenditures incurred but not yet paid	$	1,327	$	1,239
Repurchase of ordinary shares not yet settled	$	1,353	$	—
Intangible assets capitalized but not yet paid	$	—	$	83
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,243	$	—
Par value of vested restricted share awards	$	122	$	178

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Note 1. Organization, operations and basis of presentation

Background

Playa Hotels & Resorts N.V. (“Playa” or the “Company”) is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations. We own and/or manage a portfolio of 26 resorts located in Mexico, the Dominican Republic and Jamaica. Unless otherwise indicated or the context requires otherwise, references in our condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its subsidiaries.

Basis of preparation, presentation and measurement

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements as of and for the year ended December 31, 2022, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2023 (the “Annual Report”).

In our opinion, the unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. Results for the comparative prior periods have been reclassified to conform to the current period presentation.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2023. All dollar amounts (other than per share amounts) in the following disclosures are in thousands of United States dollars, unless otherwise indicated.

Note 2. Significant accounting policies

Cloud Computing Arrangements

We capitalize application development stage costs associated with cloud computing arrangements (CCAs). Capitalized implementation costs are included in prepayments and other assets in our Condensed Consolidated Balance Sheets. Amortization is calculated on a straight-line basis over the term of the hosting arrangement and is included in selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

Accounting standards

New accounting pronouncements recently issued or effective were not applicable to the Company or are not expected to have a material impact on the Condensed Consolidated Financial Statements.

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Note 3. Revenue

The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in Note 15) ($ in thousands):


	Three Months Ended June 30, 2023
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	67,749	$	33,786	$	55,557	$	51,264	$	—	$	208,356
Non-package revenue	9,536		4,997		9,867		8,724		—		33,124
The Playa Collection	—		—		—		—		828		828
Management fees	40		—		—		—		2,082		2,122
Cost reimbursements	—		—		—		1,270		1,738		3,008
Other revenues	—		—		—		—		602		602
Total revenue	$	77,325	$	38,783	$	65,424	$	61,258	$	5,250	$	248,040


	Three Months Ended June 30, 2022
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue (1)	$	61,898	$	29,972	$	53,564	$	37,798	$	—	$	183,232
Non-package revenue (1)(2)(3)	10,028		4,432		11,343		8,154		—		33,957
The Playa Collection (2)	—		—		—		—		398		398
Management fees	32		—		—		—		1,311		1,343
Cost reimbursements	—		—		—		1,132		948		2,080
Other revenues (3)	—		—		—		—		257		257
Total revenue	$	71,958	$	34,404	$	64,907	$	47,084	$	2,914	$	221,267


	Six Months Ended June 30, 2023
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	149,036	$	70,589	$	115,159	$	107,140	$	—	$	441,924
Non-package revenue	19,236		9,744		19,034		18,591		—		66,605
The Playa Collection	—		—		—		—		1,554		1,554
Management fees	78		—		—		—		3,973		4,051
Cost reimbursements	—		—		—		2,607		3,935		6,542
Other revenues	—		—		—		—		1,166		1,166
Total revenue	$	168,350	$	80,333	$	134,193	$	128,338	$	10,628	$	521,842


	Six Months Ended June 30, 2022
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue (1)	$	123,435	$	56,195	$	114,427	$	75,990	$	—	$	370,047
Non-package revenue (1)(2)(3)	18,869		8,053		20,189		16,089		—		63,200
The Playa Collection (2)	—		—		—		—		694		694
Management fees	62		—		—		—		2,338		2,400
Cost reimbursements	—		—		—		2,130		1,902		4,032
Other revenues (3)	—		—		—		—		468		468
Total revenue	$	142,366	$	64,248	$	134,616	$	94,209	$	5,402	$	440,841

________

(1)Includes $2.6 million and $5.3 million of on-property room upgrade revenue for the quarter-to-date and year-to date periods, respectively, that was reclassified from non-package revenue to package revenue to conform with current period presentation.

(2)Includes $0.4 million and $0.7 million that was reclassified from non-package revenue to The Playa Collection for the quarter-to-date and year-to date periods, respectively, to conform with current period presentation.

(3)Includes $0.3 million and $0.5 million that was reclassified from non-package revenue to other revenues for the quarter-to-date and year-to date periods, respectively, to conform with current period presentation.

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Contract assets and liabilities

We do not have any material contract assets as of June 30, 2023 and December 31, 2022 other than trade and other receivables on our Condensed Consolidated Balance Sheet. Our receivables are primarily the result of contracts with customers, which are reduced by an allowance for doubtful accounts that reflects our estimate of amounts that will not be collected.

We record contract liabilities when cash payments are received or due in advance of guests staying at our resorts, which are presented as advance deposits (see Note 14) within trade and other payables on our Condensed Consolidated Balance Sheet. Our advanced deposits are generally recognized as revenue within one year.

Note 4. Property and equipment

The balance of property and equipment, net is as follows ($ in thousands):


	As of June 30,		As of December 31,
	2023		2022
Property and equipment, gross
Land, buildings and improvements	$	1,767,707	$	1,765,130
Fixtures and machinery (1)	89,430		88,333
Furniture and other fixed assets	219,009		213,005
Construction in progress	17,802		10,293
Total property and equipment, gross	2,093,948		2,076,761
Accumulated depreciation	(576,818)		(540,194)
Total property and equipment, net	$	1,517,130	$	1,536,567

________

(1) Includes the gross balance of our finance lease right-of-use assets, which was $6.3 million as of June 30, 2023 and December 31, 2022.

Depreciation expense for property and equipment was $19.0 million and $19.3 million for the three months ended June 30, 2023 and 2022, respectively, and $37.8 million and $38.4 million for the six months ended June 30, 2023 and 2022, respectively.

Hurricane Fiona

On September 19, 2022, Hurricane Fiona, a Category 1 hurricane, made landfall on the eastern coast of the Dominican Republic and caused non-structural damage to several of our resorts. Our insurance policies provide coverage for business interruption, including lost profits, and reimbursement for costs related to the property damages and losses we have incurred.

We received property damage insurance proceeds of $17.8 million and business interruption proceeds of $11.1 million related to Hurricane Fiona during the six months ended June 30, 2023.

The property we manage in the Dominican Republic, Sanctuary Cap Cana, also sustained damage from Hurricane Fiona and was temporarily closed in late September for necessary clean-up and repairs. The resort reopened on January 20, 2023.

Lessor contracts

We rent certain real estate to third parties for office and retail space within our resorts. Our lessor contracts are considered operating leases and generally have a contractual term of one to three years. The following table presents our rental income for the three and six months ended June 30, 2023 and 2022 ($ in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
Leases	2023		2022		2023		2022
Operating lease income (1)	$	1,101	$	1,076	$	2,051	$	2,302

________

(1) Our operating lease income, which is recorded within non-package revenue in the Condensed Consolidated Statements of Operations, includes variable lease revenue which is typically calculated as a percentage of our tenant’s net sales.

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Note 5. Income taxes

We file tax returns for our entities in key jurisdictions including Mexico, the Dominican Republic, Jamaica, the United States, and the Netherlands. We are domiciled in the Netherlands and our Dutch subsidiaries are subject to a Dutch general tax rate of 25.8%. Our other operating subsidiaries are subject to tax rates of up to 30% in the jurisdictions in which they are domiciled.

All of our outstanding Advance Pricing Agreements (“APAs”) for our Dominican Republic entities expired as of December 31, 2021. We are currently in the process of finalizing the terms of new APAs, which we expect to complete before the end of 2023. Our estimated annual effective tax rate calculation reflects the terms of the APAs that are expected to apply for the year ending December 31, 2023.

We had no uncertain tax positions or unrecognized tax benefits as of June 30, 2023. We expect no significant changes in unrecognized tax benefits over the next twelve months.

We regularly assess the realizability of our deferred tax assets by evaluating historical and projected future operating results, the reversal of existing temporary differences, taxable income in permitted carry back years, and the availability of tax planning strategies. As of June 30, 2023, a valuation allowance has been maintained as a reserve on a portion of our net deferred tax assets due to the uncertainty of realization of our loss carry forwards and other deferred tax assets. If our operating results continue to improve and our projections show continued utilization of tax attributes, we may consider that as significant positive evidence and our future reassessment may result in the determination that all or a portion of the valuation allowance is no longer required. The exact timing and amount of the valuation allowance releases are ultimately contingent upon the level of profitability achieved in future periods.

Note 6. Related party transactions

Relationship with Hyatt and AMResorts

Hyatt Hotels Corporation (“Hyatt”) is considered a related party due to its ownership of our ordinary shares by its affiliated entities. We pay Hyatt fees associated with the franchise agreements of our resorts operating under the all-ages Hyatt Ziva and adults-only Hyatt Zilara brands and receive reimbursements for guests that pay for their stay using the World of Hyatt® guest loyalty program.

Hyatt also owns Apple Leisure Group (“ALG”), the brand management platform AMResorts, and various tour operators and travel agencies. We previously paid AMResorts and its affiliates, as operators of the Jewel Punta Cana and Jewel Palm Beach through December 20, 2022 and January 6, 2023, respectively, management and marketing fees, and sold all-inclusive packages through ALG’s tour operators and travel agencies.

Relationship with Sagicor

Sagicor Financial Corporation Limited and its affiliated entities (collectively “Sagicor”) is considered a related party due to its ownership of our ordinary shares and representation on our Board of Directors. We pay Sagicor for employee insurance coverage at one of our Jamaica properties. Sagicor is also a part owner of the Jewel Grande Montego Bay Resort & Spa and compensates us as manager of the property.

Relationship with Davidson Kempner Capital Management L.P.

Davidson Kempner Capital Management L.P. (“DKCM”) is the investment manager of multiple affiliated funds and is considered a related party due to the DKCM funds’ ownership of our ordinary shares. An affiliate of DKCM was also a lender of $25.0 million in aggregate principal of our Term Loan due 2029 (as defined in Note 11) as of December 31, 2022.

Relationship with HG Vora Capital Management, LLC

HG Vora Capital Management, LLC is considered a related party due to its ownership of our ordinary shares and was a lender of $8.5 million and $42.5 million in aggregate principal of the Term Loan due 2029 as of June 30, 2023 and December 31, 2022, respectively.

Lease with our Chief Executive Officer

One of our offices is owned by our Chief Executive Officer and we sublease the space at that location from a third party.

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Transactions with related parties

Transactions between us and related parties during the three and six months ended June 30, 2023 and 2022 were as follows ($ in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
Related Party	Transaction	2023		2022		2023		2022
Revenues
ALG	Package revenue	$	—	$	4,951	$	—	$	10,825
Sagicor	Cost reimbursements(1)	$	1,270	$	1,317	$	2,747	$	2,420
Expenses
Hyatt	Franchise fees(2)	$	9,309	$	7,802	$	19,263	$	15,215
Sagicor	Insurance premiums(2)	$	377	$	255	$	697	$	534
Chief Executive Officer	Lease expense(3)	$	153	$	192	$	349	$	380
DKCM	Interest expense(4)	$	—	$	5,472	$	—	$	10,877
AMResorts	Management fees(2)	$	—	$	872	$	41	$	1,984
AMResorts	Marketing fees(3)	$	—	$	972	$	37	$	2,055

________

(1)Equivalent amount included as reimbursed costs in the Condensed Consolidated Statements of Operations.

(2)Included in direct expense in the Condensed Consolidated Statements of Operations with the exception of certain immaterial fees associated with the Hyatt franchise agreements, which are included in selling, general, and administrative expense.

(3)Included in selling, general, and administrative expense in the Condensed Consolidated Statements of Operations.

(4)Includes interest expense and amortization of deferred financing costs and discounts.

Note 7. Commitments and contingencies

We are involved in various claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims, and workers’ compensation and other employee claims. Most occurrences involving liability and claims of negligence are covered by insurance with solvent insurance carriers. We recognize a liability when we believe the loss is probable and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material effect on our Condensed Consolidated Financial Statements.

The Dutch corporate income tax act provides the option of a fiscal unity, which is a consolidated tax regime wherein the profits and losses of group companies can be offset against each other. With the exception of Playa Hotels & Resorts N.V., our Dutch companies file as a fiscal unity. Playa Resorts Holding B.V. is the head of our Dutch fiscal unity and is jointly and severally liable for the tax liabilities of the fiscal unity as a whole.

In 2015, the local taxing authorities in Mexico challenged $3.4 million of value added tax (“VAT”) receivable that was recognized in connection with the renovation of the Hyatt Ziva Cancún. During the second quarter of 2022, the tax authorities ruled in our favor resulting in receipt of the VAT and an additional $6.2 million for interest and inflation since the date the VAT refund was requested. The gain of $6.2 million is reported within other (expense) income in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022.

Note 8. Ordinary shares

On February 9, 2023, our Board of Directors authorized a $200.0 million share repurchase program, pursuant to which we may repurchase our outstanding ordinary shares as market conditions and our liquidity warrant. The repurchase program is subject to certain limitations under Dutch law, including the existing repurchase authorization granted by our shareholders. Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the three months ended June 30, 2023, we repurchased 3,752,415 ordinary shares under the program at an average price of $9.10 per share. As of June 30, 2023, we had approximately $135.1 million remaining under our $200.0 million share repurchase program.

As of June 30, 2023, our ordinary share capital consisted of 150,650,437 ordinary shares outstanding, which have a par value of €0.10 per share. In addition, 4,868,770 restricted shares and performance share awards and 32,658 restricted share units were outstanding under the 2017 Plan (as defined in Note 9). The holders of restricted shares and performance share awards are entitled to

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vote, but not dispose of, such shares until they vest. The holders of restricted share units are neither entitled to vote nor dispose of such shares until they vest.

Note 9. Share-based compensation

We adopted our 2017 Omnibus Incentive Plan (the “2017 Plan”) to attract and retain independent directors, executive officers and other key employees and service providers. On May 11, 2023, our shareholders approved an amendment to the 2017 Plan to increase the number of ordinary shares authorized and available for grant from 12,000,000 shares to 24,000,000 shares. As of June 30, 2023, there were 12,933,071 shares available for future grants under the 2017 Plan.

Restricted share awards consist of restricted shares and restricted share units that are granted to eligible employees, executives, and board members and consist of ordinary shares (or the right to receive ordinary shares).

A summary of our restricted share awards from January 1, 2023 to June 30, 2023 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2023	2,288,821	$	6.94
Granted	1,744,579	6.77
Vested	(1,148,476)	6.91
Forfeited	(31,846)	6.91
Unvested balance at June 30, 2023	2,853,078	$	6.85

Performance share awards consist of ordinary shares that may become earned and vested at the end of a three-year performance period based on the achievement of performance targets adopted by our Compensation Committee. Our performance shares have market conditions where 50% of the performance share awards will vest based on the total shareholder return (“TSR”) of our ordinary shares relative to those of our peer group and 50% will vest based on the compound annual growth rate of the price of our ordinary shares. The peer shareholder return component may vest between 0% and 150% of target, with the award capped at 100% of target should Playa’s TSR be negative. The growth rate component may vest up to 100% of target.

The table below summarizes the key inputs used in the Monte-Carlo simulation to determine the grant date fair value of our performance share awards ($ in thousands):


Performance Award Grant Date	Percentage of Total Award		Grant Date Fair Value by Component		Volatility (1)		Interest Rate (2)		Dividend Yield
January 18, 2023
Peer Shareholder Return	50	%	$	2,751	71.82	%	3.70	%	—	%
Growth Rate	50	%	$	2,194	71.82	%	3.70	%	—	%

________

(1) Expected volatility was determined based on our historical share prices.

(2) The risk-free rate was based on U.S. Treasury zero coupon issues with a remaining term equal to the remaining term of the measurement period.

A summary of our performance share awards from January 1, 2023 to June 30, 2023 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2023	1,329,123	$	6.05
Granted	719,227	6.88
Unvested balance at June 30, 2023	2,048,350	$	6.34

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Note 10. Earnings per share

Basic and diluted earnings or loss per share (“EPS”) are as follows ($ in thousands, except share data):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Numerator
Net income	$	20,633	$	30,525	$	63,352	$	73,272
Denominator
Denominator for basic EPS - weighted-average number of shares outstanding	151,955,076		165,894,797		154,619,822		165,819,508
Effect of dilutive securities
Unvested performance share awards	1,165,943		481,048		1,093,612		460,336
Unvested restricted share awards	1,071,204		873,449		798,134		808,927
Denominator for diluted EPS - adjusted weighted-average number of shares outstanding	154,192,223		167,249,294		156,511,568		167,088,771

EPS - Basic	$	0.14	$	0.18	$	0.41	$	0.44
EPS - Diluted	$	0.13	$	0.18	$	0.40	$	0.44

For the six months ended June 30, 2022, unvested performance share awards in the amount 187,500 shares were not included in the computation of diluted EPS as their effect would have been anti-dilutive. We had no anti-dilutive unvested performance share awards for all other periods presented in our Condensed Consolidated Statement of Operations. The performance targets of our unvested performance share awards were partially achieved as of June 30, 2023 and 2022.

For the three and six months ended June 30, 2023 and 2022, we had no anti-dilutive unvested restricted share awards.

Note 11. Debt

Our debt consists of the following ($ in thousands):


			Outstanding Balance as of
	Interest Rate	Maturity Date	June 30, 2023		December 31, 2022
Senior Secured Credit Facilities
Revolving Credit Facility (1)	SOFR + 3.50% (1)	January 5, 2028	$	—	$	—
Term Loan due 2029 (2)	SOFR + 4.25%	January 5, 2029	1,094,500		1,100,000
Total Senior Secured Credit Facilities (at stated value)			1,094,500		1,100,000
Unamortized discount			(29,603)		(32,428)
Unamortized debt issuance costs			(7,129)		(7,776)
Total Senior Secured Credit Facilities, net			$	1,057,768	$	1,059,796

Financing lease obligations			$	5,442	$	5,657

Total debt, net			$	1,063,210	$	1,065,453

________

(1)Undrawn balances bear interest between 0.25% to 0.50% depending on certain leverage ratios. We had an available balance of $225.0 million as of June 30, 2023 and December 31, 2022. Interest is incurred on any outstanding balance based on the Secured Overnight Financing Rate (“SOFR”) plus a margin ranging from 3.25% to 3.75%, depending on our consolidated secured net leverage ratio.

(2)The effective interest rate for the Term Loan due 2029 was 9.34% and 8.58% as of June 30, 2023 and December 31, 2022, respectively.

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Second Restatement Agreement

On December 16, 2022, we entered into the Second Restatement Agreement to amend and restate our Senior Secured Credit Facility to consist of (i) a $225.0 million revolving line of credit with a maturity date of January 5, 2028 (the “Revolving Credit Facility”) and (ii) a $1.1 billion term loan with a maturity of January 5, 2029 (the “Term Loan due 2029” and collectively with the Revolving Credit Facility, the “Senior Secured Credit Facility”).

The Term Loan due 2029 bears interest at SOFR plus a margin of 4.25% (where the applicable SOFR rate has a 0.50% floor). The Revolving Credit Facility bears interest at SOFR plus a margin ranging from 3.25% to 3.75%, in each case, depending on the level of our consolidated secured net leverage ratio in effect from time to time.

Financial maintenance covenants

We were in compliance with all applicable covenants as of June 30, 2023. A summary of our applicable covenants and restrictions is as follows:


Debt						Covenant Terms
Senior Secured Credit Facility						We are subject to a total net leverage ratio of 5.20x if we have more than 35% drawn on the Revolving Credit Facility.

Note 12. Derivative financial instruments

We have entered into interest rate swaps to mitigate the interest rate risk inherent to our floating rate debt. Our interest rate swaps outstanding during the three and six months ended June 30, 2023 and 2022 are as follows:

Notional Amount

Interest Rate Received

Fixed Rate Paid

Effective Date

Maturity Date

Designated as Cash Flow Hedges

$275 million

One-month SOFR

4.05%

April 15, 2023

April 15, 2025

$275 million

One-month SOFR

3.71%

April 15, 2023

April 15, 2026

Not Designated as Hedging Instrument (1)

$800 million

One-month LIBOR

2.85%

March 29, 2018

March 31, 2023

________

(1) Our LIBOR-based interest rate swaps were designated as cash flow hedges in March 2019, but were deemed ineffective in February 2020 due to the decrease in interest rates.

The following tables present the effect of our interest rate swaps, net of tax, in the Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 ($ in thousands):


	2023		2022
AOCI from our cash flow hedges as of January 1	$	2,895	$	14,632
Change in fair value	—		—
Reclassification from AOCI to interest expense	(2,895)		(2,894)
AOCI from our cash flow hedges as of March 31	—		11,738
Change in fair value	(9,874)		—
Reclassification from AOCI to interest expense	1,316		(2,926)
AOCI from our cash flow hedges as of June 30(1)	(8,558)		8,812

________

(1) As of June 30, 2023, the total amount expected to be reclassified from AOCI to interest expense during the next twelve months is $7.3 million.

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Derivative Financial Instruments	Financial Statement Classification	Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
Designated as Cash Flow Hedges
Interest rate swap	Interest expense	$	(1,316)	$	—	$	(1,316)	$	—
Not Designated as Hedging Instruments

Playa Hotels & Resorts N.V. [PLYA] Filings
10-Q	[2023-08-03]
10-Q	[2023-05-04]
10-K	[2023-02-23]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-02-24]
10-Q	[2021-11-03]
10-Q	[2021-08-04]
10-Q	[2021-05-05]
10-K	[2021-03-04]
10-Q	[2020-11-04]
10-Q	[2020-08-06]
10-Q	[2020-05-11]
10-K	[2020-02-27]
10-Q	[2019-11-06]
10-Q	[2019-08-06]
10-Q	[2019-05-07]
10-K	[2019-02-28]
10-Q	[2018-11-06]
10-Q	[2018-08-06]
10-Q	[2018-05-07]
10-K	[2018-03-01]
10-Q	[2017-11-07]
10-Q	[2017-08-04]
10-Q	[2017-05-08]
S-1	[2017-04-03]