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

10-Q 1 plya-20240630.htm FORM 10-Q plya-20240630

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, 2024


☐			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)

Keizersgracht 555

1017 DR

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)

Nieuwezijds Voorburgwal 104

1012 SG Amsterdam, the Netherlands

(Former name, former address and former fiscal year, if changed since last report)

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, 2024, there were 129,526,872 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 30 , 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30 , 2024 and 2023	2
	Condensed Consolidated Statements of Comprehensive Income for the three a nd six months ended June 30 , 2024 and 2023	3
	Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30 , 2024 and 2023	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30 , 2024 and 2023	5
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	58
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	60

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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,
	2024		2023
ASSETS
Cash and cash equivalents	$	233,941	$	272,520
Trade and other receivables, net	65,541		74,762
Insurance recoverable	10,931		9,821
Accounts receivable from related parties	1,346		5,861
Inventories	18,220		19,963
Prepayments and other assets	63,152		54,294
Property and equipment, net	1,424,561		1,415,572
Derivative financial assets	6,483		2,966
Goodwill, net	60,642		60,642
Other intangible assets	3,019		4,357
Deferred tax assets	12,244		12,967
Total assets	$	1,900,080	$	1,933,725
LIABILITIES AND SHAREHOLDERS’ EQUITY
Trade and other payables	$	150,712	$	196,432
Payables to related parties	8,338		10,743
Income tax payable	16,844		11,592
Debt	1,073,664		1,061,376
Derivative financial liabilities	2,470		—
Other liabilities	32,504		33,970
Deferred tax liabilities	59,523		64,815
Total liabilities	1,344,055		1,378,928
Commitments and contingencies (see Note 7)
Shareholders’ equity
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 172,016,422 shares issued and 130,960,095 shares outstanding as of June 30, 2024 and 169,423,980 shares issued and 136,081,891 shares outstanding as of December 31, 2023)	19,104		18,822
Treasury shares (at cost, 41,056,327 shares as of June 30, 2024 and 33,342,089 shares as of December 31, 2023)	(323,086)		(248,174)
Paid-in capital	1,209,602		1,202,175
Accumulated other comprehensive income	2,032		1,112
Accumulated deficit	(351,627)		(419,138)
Total shareholders’ equity	556,025		554,797
Total liabilities and shareholders’ equity	$	1,900,080	$	1,933,725

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,
	2024		2023		2024		2023
Revenue
Package	$	197,056	$	208,356	$	456,685	$	441,924
Non-package	32,682		33,124		66,825		66,605
The Playa Collection	1,579		828		2,599		1,554
Management fees	1,401		2,122		3,935		4,051
Cost reimbursements	2,348		3,008		5,237		6,542
Other revenues	409		602		829		1,166
Total revenue	235,475		248,040		536,110		521,842
Direct and selling, general and administrative expenses
Direct	127,367		132,606		265,346		261,574
Selling, general and administrative	49,794		47,614		101,013		92,741
Depreciation and amortization	19,045		19,316		37,717		38,507
Reimbursed costs	2,348		3,008		5,237		6,542
Loss (gain) on sale of assets	36		(2)		—		11
Business interruption insurance recoveries	(33)		(495)		(50)		(495)
Gain on insurance proceeds	(992)		(3,794)		(1,362)		(3,794)
Direct and selling, general and administrative expenses	197,565		198,253		407,901		395,086
Operating income	37,910		49,787		128,209		126,756
Interest expense	(23,334)		(26,119)		(46,462)		(55,785)
Loss on extinguishment of debt	(1,043)		—		(1,043)		—
Other (expense) income	(302)		(203)		(1,095)		29
Net income before tax	13,231		23,465		79,609		71,000
Income tax provision	(61)		(2,832)		(12,098)		(7,648)
Net income	$	13,170	$	20,633	$	67,511	$	63,352

Earnings per share
Basic	$	0.10	$	0.14	$	0.50	$	0.41
Diluted	$	0.10	$	0.13	$	0.50	$	0.40
Weighted average number of shares outstanding during the period - Basic	132,426,621		151,955,076		134,539,159		154,619,822
Weighted average number of shares outstanding during the period - Diluted	133,867,472		154,192,223		135,957,007		156,511,568

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,
	2024		2023		2024		2023
Net income	$	13,170	$	20,633	$	67,511	$	63,352
Other comprehensive (loss) income, net of taxes
(Loss) gain on derivative financial instruments	(5,628)		8,558		1,122		11,453
Pension obligation loss	(153)		(205)		(202)		(423)
Total other comprehensive (loss) income	(5,781)		8,353		920		11,030
Comprehensive income	$	7,389	$	28,986	$	68,431	$	74,382

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 Income		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	136,081,891	$	18,822	33,342,089	$	(248,174)	$	1,202,175	$	1,112	$	(419,138)	$	554,797
Net income	—	—		—	—		—		—		54,341		54,341
Other comprehensive income	—	—		—	—		—		6,701		—		6,701
Share-based compensation, net of tax withholdings	2,579,278	282		13,164	(109)		3,477		—		—		3,650
Repurchase of ordinary shares	(3,621,127)	—		3,621,127	(32,504)		—		—		—		(32,504)
Balance at March 31, 2024	135,040,042	$	19,104	36,976,380	$	(280,787)	$	1,205,652	$	7,813	$	(364,797)	$	586,985
Net income	—	—		—	—		—		—		13,170		13,170
Other comprehensive loss	—	—		—	—		—		(5,781)		—		(5,781)
Share-based compensation	—	—		—	—		3,950		—		—		3,950
Repurchase of ordinary shares	(4,079,947)	—		4,079,947	(42,299)		—		—		—		(42,299)
Balance at June 30, 2024	130,960,095	$	19,104	41,056,327	$	(323,086)	$	1,209,602	$	2,032	$	(351,627)	$	556,025


	Ordinary Shares			Treasury Shares			Paid-In Capital		Accumulated Other Comprehensive (Loss) 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,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	67,511	$	63,352
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization	37,717		38,507
Amortization of debt discount and issuance costs	2,875		3,473
Loss on extinguishment of debt	1,043		—
Share-based compensation	7,709		6,608
Loss on derivative financial instruments	75		6,113
Deferred income taxes	(4,569)		6,001
Loss on sale of assets	—		11
Amortization of key money	(379)		(386)
Provision for doubtful accounts	1,004		416
Other	678		260
Changes in assets and liabilities:
Trade and other receivables, net	8,217		(10,879)
Insurance recoverable	(1,110)		6,633
Accounts receivable from related parties	4,515		617
Inventories	1,743		(388)
Prepayments and other assets	(8,492)		(11,623)
Trade and other payables	(50,559)		(47,896)
Payables to related parties	(2,405)		6,357
Income tax payable	5,252		(436)
Other liabilities	(1,098)		371
Net cash provided by operating activities	69,727		67,111
INVESTING ACTIVITIES
Capital expenditures	(32,680)		(18,796)
Purchase of intangibles	(165)		(152)
Payment of key money	(485)		—
Proceeds from the sale of assets, net	91		9
Property damage insurance proceeds	—		17,808
Net cash used in investing activities	(33,239)		(1,131)
FINANCING ACTIVITIES

Issuance costs of debt	(14)		—
Repayments of debt	(5,500)		(5,500)


Repurchase of ordinary shares	(69,181)		(75,364)
Principal payments on finance lease obligations	(263)		(216)
Repurchase of ordinary shares for tax withholdings	(109)		—
Net cash used in financing activities	(75,067)		(81,080)
(DECREASE) IN CASH AND CASH EQUIVALENTS	(38,579)		(15,100)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD	$	272,520	$	283,945
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	233,941	$	268,845

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,
	2024		2023
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of interest capitalized	$	43,681	$	47,215
Cash paid for income taxes, net	$	12,594	$	2,649
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Capital expenditures incurred but not yet paid	$	1,412	$	1,327
Repurchase of ordinary shares not yet settled	$	—	$	1,353
Withholding tax on share repurchases not yet paid	$	5,622	$	—
Right-of-use assets obtained in exchange for new financing lease liabilities	$	14,073	$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	1,243
Par value of vested restricted share awards	$	282	$	122

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”), through its subsidiaries, 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 25 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, 2023, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024 (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.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2024. 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

Derivative financial instruments

Derivative financial instruments are initially recorded at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value at period end. Changes in the fair value of a derivative contract that is qualified, designated and highly effective as a cash flow hedge are recorded in total other comprehensive (loss) income in our Condensed Consolidated Statements of Comprehensive Income and reclassified into earnings in our Condensed Consolidated Statements of Operations in the same period or periods during which the hedged transaction occurs. If a derivative contract does not meet these criteria, then the total change in fair value is recognized in earnings. Cash flows from a derivative financial instrument that is classified as a cash flow hedge are recorded in the same category as the cash flows from the items being hedged in the Condensed Consolidated Statements of Cash Flows.

Standards not yet adopted

Standard

Description

Date of Adoption

Effect on the Financial Statements or Other Significant Matters

ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

Annual periods beginning after December 15, 2023

We are in the process of evaluating the impact of ASU No. 2023-07 on the Condensed Consolidated Financial Statements with respect to our segment disclosures.

ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures

The amendments in this update require that public business entities on an annual basis (i) disclose specific categories in the rate reconciliation and (ii) provide additional information for reconciling items that meet a quantitative threshold.

Annual periods beginning after December 15, 2024

We are in the process of evaluating the impact of ASU No. 2023-09 on the Condensed Consolidated Financial Statements with respect to our income tax disclosures.

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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, 2024
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	70,155	$	29,816	$	55,857	$	41,228	$	—	$	197,056
Non-package revenue	9,608		5,779		9,916		7,379		—		32,682
The Playa Collection	—		—		—		—		1,579		1,579
Management fees	37		—		—		—		1,364		1,401
Cost reimbursements	—		—		—		897		1,451		2,348
Other revenues	—		—		—		—		409		409
Total revenue	$	79,800	$	35,595	$	65,773	$	49,504	$	4,803	$	235,475


	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


	Six Months Ended June 30, 2024
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	158,217	$	69,454	$	128,070	$	100,944	$	—	$	456,685
Non-package revenue	20,402		11,695		19,424		15,304		—		66,825
The Playa Collection	—		—		—		—		2,599		2,599
Management fees	76		—		—		—		3,859		3,935
Cost reimbursements	—		—		—		1,992		3,245		5,237
Other revenues	—		—		—		—		829		829
Total revenue	$	178,695	$	81,149	$	147,494	$	118,240	$	10,532	$	536,110


	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

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Contract assets and liabilities

We do not have any material contract assets as of June 30, 2024 and December 31, 2023 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,
	2024		2023
Property and equipment, gross
Land, buildings and improvements(1)	$	1,657,953	$	1,646,452
Fixtures and machinery (1)	92,824		86,717
Furniture and other fixed assets	205,554		203,639
Construction in progress	41,548		22,077
Total property and equipment, gross	1,997,879		1,958,885
Accumulated depreciation	(573,318)		(543,313)
Total property and equipment, net	$	1,424,561	$	1,415,572

________

(1) Includes the gross balance of our finance lease right-of-use assets, which was $19.8 million and $6.3 million as of June 30, 2024 and December 31, 2023, respectively.

Depreciation expense for property and equipment was $18.5 million and $19.0 million for the three months ended June 30, 2024 and 2023, respectively and $36.2 million and $37.8 million for the six months ended June 30, 2024 and 2023, respectively.

For the three and six months ended June 30, 2024, we capitalized $0.3 million and $0.6 million of interest expense, respectively, on qualifying assets using the weighted-average interest rate of our debt. We did not capitalize any interest expense for the three and six months ended June 30, 2023.

Hurricane Fiona

We received business interruption proceeds of $1.6 million during the six months ended June 30, 2024 related to the impact of Hurricane Fiona in September 2022. We received an additional $0.6 million of business interruption insurance proceeds in July 2024 and expect to receive the remaining proceeds in 2024.

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, 2024 and 2023 ($ in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
Leases	2024		2023		2024		2023
Operating lease income (1)	$	994	$	1,101	$	2,180	$	2,051

________

(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.

The Netherlands enacted the Dutch Minimum Tax Act 2024 in December 2023. The Dutch Minimum Tax Act 2024 implements measures to ensure that large multinational groups of companies pay a minimum corporate tax rate of 15% in accordance with the European Union’s Pillar 2 Directive. As we are incorporated in the Netherlands, we are subject to certain provisions of the Dutch Minimum Tax Act 2024 from January 1, 2024. The Dutch Minimum Tax Act 2024 resulted in $16.8 million of additional income tax expense incurred in the Netherlands for the six months ended June 30, 2024, which increased our effective tax rate (“ETR”) by 21.1%. As a result, our ETR was 15.2% for the six months ended June 30, 2024 compared to 10.8% for the six months ended June 30, 2023.

Our Dominican Republic taxes are determined based upon Advanced Pricing Agreements ("APA") approved by the Ministry of Finance of the Dominican Republic. The Company’s most recent APAs were approved in May 2024 and are effective from January 1, 2022 through December 31, 2025. Our estimated annual effective tax rate calculation reflects the terms of the APAs that are expected to apply for the year ending December 31, 2024.

We had no uncertain tax positions or unrecognized tax benefits as of June 30, 2024. 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, 2024, 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

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.

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 (our “Board”). 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.

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, 2024 and 2023 were as follows ($ in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
Related Party	Transaction	2024		2023		2024		2023
Revenues
Sagicor	Cost reimbursements(1)	$	897	$	1,270	$	1,992	$	2,747
Expenses
Hyatt	Franchise fees(2)	$	9,263	$	9,309	$	20,562	$	19,263
Sagicor	Insurance premiums(2)	$	403	$	377	$	797	$	697
Chief Executive Officer	Lease expense(3)	$	162	$	153	$	315	$	349
AMResorts	Management fees(2)	$	—	$	—	$	—	$	41
AMResorts	Marketing fees(3)	$	—	$	—	$	—	$	37

________

(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.

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.

During the three months ended June 30, 2024, we entered into an arrangement for the future minimum purchase of liquified natural gas to fuel the equipment we leased to produce electricity and hot water at the Hilton Rose Hall Resort & Spa (see Note 11). Future payments under this noncancellable unconditional purchase will be made through the second quarter of 2036 and the remaining obligation was $7.3 million as of June 30, 2024.

Note 8. Ordinary shares

Our Board previously 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, 2024, we repurchased 4,079,947 ordinary shares under the program at an average price of $8.99 per share, excluding taxes. As of June 30, 2024, we had approximately $127.2 million remaining under the $200.0 million share repurchase program.

As of June 30, 2024, our ordinary share capital consisted of 130,960,095 ordinary shares outstanding, which have a par value of €0.10 per share. In addition, 5,054,782 restricted shares and performance share awards and 36,272 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 vote, but not to 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.

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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. As of June 30, 2024, there were 10,075,522 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, 2024 to June 30, 2024 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2024	2,733,532	$	6.84
Granted	1,456,506	8.03
Vested	(1,417,634)	6.61
Forfeited	(40,281)	7.43
Unvested balance at June 30, 2024	2,732,123	$	7.59

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 either 25% or 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 either 50% or 75% 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 200% 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 17, 2024
Peer Shareholder Return	50	%	$	2,915	39.05	%	4.09	%	—	%
Growth Rate	50	%	$	2,066	39.05	%	4.09	%	—	%
February 8, 2024
Growth Rate	100	%	$	4,369	38.21	%	4.20	%	—	%

________

(1) Expected volatility was determined based on Playa’s 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, 2024 to June 30, 2024 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2024	2,048,350	$	6.34
Granted	1,509,519	7.39
Vested	(1,174,808)	5.38
Forfeited	(24,130)	6.01
Unvested balance at June 30, 2024	2,358,931	$	7.35

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Note 10. Earnings per share

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator
Net income	$	13,170	$	20,633	$	67,511	$	63,352
Denominator
Denominator for basic EPS - weighted-average number of shares outstanding	132,426,621		151,955,076		134,539,159		154,619,822
Effect of dilutive securities
Unvested performance share awards	675,642		1,165,943		730,079		1,093,612
Unvested restricted share awards	765,209		1,071,204		687,769		798,134
Denominator for diluted EPS - adjusted weighted-average number of shares outstanding	133,867,472		154,192,223		135,957,007		156,511,568

EPS - Basic	$	0.10	$	0.14	$	0.50	$	0.41
EPS - Diluted	$	0.10	$	0.13	$	0.50	$	0.40

For the three and six months ended June 30, 2024 and 2023, we had no anti-dilutive unvested performance share awards. The performance targets of our unvested performance share awards were partially achieved as of June 30, 2024 and 2023.

For the three and six months ended June 30, 2024 and 2023, 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, 2024		December 31, 2023
Senior Secured Credit Facilities
Revolving Credit Facility (1)	SOFR + 3.50%	January 5, 2028	$	—	$	—
Term Loan due 2029 (2)	SOFR + 2.75%	January 5, 2029	1,083,500		1,089,000
Total Senior Secured Credit Facilities (at stated value)			1,083,500		1,089,000
Unamortized discount			(23,309)		(26,466)
Unamortized debt issuance costs			(5,633)		(6,380)
Total Senior Secured Credit Facilities, net			$	1,054,558	$	1,056,154

Finance lease obligations			$	19,106	$	5,222

Total debt, net			$	1,073,664	$	1,061,376

________

(1)We had an available balance on our Revolving Credit Facility of $225.0 million as of June 30, 2024 and December 31, 2023.

(2)The effective interest rate for the Term Loan due 2029 was 8.09% and 8.59% as of June 30, 2024 and December 31, 2023, respectively.

Credit Agreement Amendment

On June 24, 2024, we entered into the Second Amendment to Second Amended and Restated Credit Agreement (the “Second Amendment”) to decrease the interest rate applicable to the Term Loan due 2029 by 0.50% to, at our option, either a base rate plus a margin of 1.75% or the Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.75%. All other terms of the Senior Secured Credit Facility remain unchanged.

The repricing of the Term Loan due 2029 was accounted for as a partial modification and partial extinguishment of debt, which resulted in a loss on extinguishment of debt of $1.0 million and transaction costs of $1.3 million. The transaction costs are included in

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selling, general, and administrative expense in the Condensed Consolidated Statements of Operations.

Finance lease obligation

During the three months ended June 30, 2024, we entered into a ten-year finance lease arrangement with a third-party for the use of equipment to produce electricity and hot water at the Hilton Rose Hall Resort & Spa. Concurrently, we entered into a twelve-year lease arrangement with another third-party for the use of equipment to store liquified natural gas at the resort. We recognized a $5.5 million right-of-use asset and $5.1 million lease liability within property and equipment, net and debt, respectively, for these finance leases on the Condensed Consolidated Balance Sheet.

During the three months ended June 30, 2024, we entered into a finance lease arrangement with a third-party for the use of two condo units, which we expect to purchase in the third quarter, at the Hyatt Ziva Los Cabos. We recognized a $9.0 million right-of-use asset and lease liability within property and equipment, net and debt, respectively, for the finance lease on the Condensed Consolidated Balance Sheet.

Financial maintenance covenants

We were in compliance with all applicable covenants as of June 30, 2024. 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

Interest rate swaps

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, 2024 and 2023 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.

Foreign currency forward contracts

We have entered into foreign currency forward contracts to mitigate the risk of foreign exchange fluctuations on certain direct expenses, such as salaries and wages and food and beverage costs, which are denominated in Mexican Pesos. As of June 30, 2024, the total outstanding notional amount of the forward contracts was $52.0 million, or $922.3 million Mexican Pesos, which will be settled monthly with maturity dates between July 2024 and December 2024.

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Quantitative disclosures about derivative financial instruments

The following tables present the effect of our derivative financial instruments, 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, 2024 and 2023 ($ in thousands):


	Three Months Ended June 30,
	2024				2023
	Interest rate swaps(1)		Foreign currency forwards(2)		Interest rate swaps
Change in fair value	$	(1,774)	$	4,745	$	(9,874)
Reclassification from AOCI to the income statement	$	2,010	$	647	$	1,316


	Six Months Ended June 30,
	2024			2023
	Interest rate swaps(1)		Foreign currency forwards(2)	Interest rate swaps
Change in fair value	$	(7,626)

Playa Hotels & Resorts N.V. [PLYA] Filings
10-Q	[2024-08-05]
10-Q	[2024-05-06]
10-K	[2024-02-22]
10-Q	[2023-11-02]
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]