Chatham Lodging Trust Q1 FY2026 earnings call

• Jeff Fisher highlighted strong Q1 results, increased guidance by ~15% since February, raised common dividend by 11% in Q1 with a 32% FFO payout ratio, and repurchased 2.2 million shares (~4% of common equity) at an average price of $7.04. - The company acquired six Hilton-branded hotels for $92 million, which are immediately accretive, with RevPar growth in Q1 and April. Silicon Valley has positive energy due to major tech companies' investments in AI infrastructure, and hotels benefit from client investments. - Dennis Craven discussed using free cash flow for share buybacks, completed the $25 million repurchase plan in 2025, projected $20 million free cash flow in 2026, and bought ~200,000 shares in April. CapEx spending in Q1 was ~$6 million, with renovations completed and planned, and a 2026 CapEx budget of ~$27 million.

In Q1 2026, hotel EBITDA was $21.4 million. Adjusted EBITDA was $18.4 million and adjusted FFO was $0.20 per share. GOP margin was 40.2% and hotel EBITDA margin was 31.8%. The recently acquired portfolio of six Hilton-branded hotels had RevPar growth of 6% in Q1 and 7% in April. Top RevPar hotels included Residence in Fort Lauderdale ($262), Home to Phoenix downtown ($191), etc. Silicon Valley hotels saw strong RevPar growth, with two Sunnyvale and San Mateo residence ins among top 10. The six acquired hotels diversify into areas with manufacturing and distribution benefits, like Joplin, Missouri with key industries and Paducah with relevant commerce routes and projects.

• Guidance was increased by approximately 15% since February. For the full year 2026, RevPar growth is expected to be 0 to 2%, adjusted EBITDA is expected to be $95.3 million to $99.6 million, and adjusted FFO per share is expected to be $1.21 to $1.29. Q2 2026 RevPar is projected to increase approximately 1% to 2%. The company plans to continue repurchasing shares and pursue accretive acquisitions over time.

• There are adverse repercussions from the turmoil in the Middle East, particularly regarding gas prices and their impact on travel. Although the turmoil so far has not had a meaningful impact, it remains a risk. The guidance is conservative due to various factors including potential effects from external events.

Q: Regarding the portfolio acquisition, was it an off-market deal, what were the cap rates, and why is it outperforming?

A: The transaction was a broker transaction sent to a group, cap rates weren't specified in detail, and RevPar growth is a bit above the underwriting.

Q: How does the acquisition market activity compare to last quarter?

A: It's similar to last quarter, still challenging for individual transactions but public multiples are adjusting.

Q: Are there more assets to sell for asset recycling?

A: The company is still looking to sell one or two assets by the end of the year for reinvestment.

Q: What about supply growth in the acquired markets?

A: There is very little supply growth, with only one hotel recently opening in Paducah.

Q: What are the expectations for the World Cup and its inclusion in guidance?

A: The company is being conservative in the World Cup forecast, projecting growth but taking a measured approach.

Q: What's the outlook for Silicon Valley intern business in summer?

A: Some intern business is expected from late May to mid-August.

Q: Are share repurchases still sensible at the current stock price?

A: Yes, as the stock is undervalued, trading at attractive cap rates.

Q: What's the outlook for Silicon Valley and the impact of renovation?

A: For the balance of the year, the four hotels in Silicon Valley project mid to upper single digits RevPar growth, and the renovation at Mountain View has been disruptive but there is potential upside.