Ryman Hospitality Properties (RHP) - Executive Chairman Colin Reed, CEO (Opry) Patrick Moore

I have the pleasure of introducing Ryman Hospitality Properties trading under the New York Stock Exchange with the ticker RHP. Ryman is a real estate investment trust specializing in large-scale group oriented hotels. Ryman has 60 million shares trading around $95 for a market cap of 5.7 billion. Fully consolidated net debt of just under three billion plus a minority interest of 392 million for a total enterprise value of 9.1 billion. Today we'll be focusing on Ryman's media and entertainment assets, the Opry Entertainment Group, which they operate as a consolidated subsidiary. The Opry Entertainment Group is a preeminent live entertainment company focused on the 150 million country music and lifestyle fans. To give you a sense of their growth, OEG has been growing at an adjusted EBITDA of 17% CAGR over the last seven years. Joining me today is executive chairman of Ryman, Colin Reed. Colin has been with Ryman for almost 24 years. He previously served as CEO from 2001 to 2022 and led the company through a strategic reorganization. He also oversaw the minority investment by Atairos and NBC Universal into OEG in 2022. Prior to Ryman, he was part of the senior leadership team of Harrah's Entertainment. Also joining us is Patrick Moore, CEO of the Opry Entertainment Group. Patrick has served on the board of directors for Ryman from 2015 to 2023 when he was appointed CEO. He's been involved with Ryman though for almost 18 years including time he spent consulting while he was at McKinsey where he was a partner. Welcome.

Thank you.

So I think maybe for some of the audience that isn't as familiar with the Opry Entertainment Group, maybe let's start with sort of an overview. What does Opry Entertainment Group own and what is the strategy?

Shall I start?

Yeah. Good morning everyone and thanks for having us, Mario. It's good to see you again and you've been a loyal shareholder of our company for 24 years at least. Hopefully we made you a bunch of money in that period of time. So Ryman, as Justin mentioned, we own primarily two businesses. We're in the big hotel resort business predominantly under the Gaylord name. We created that brand back 20 plus years ago and it really is the dominant force in the convention resort hotel market in the United States and we've done very well with that business. And then we have this entertainment business which is extraordinarily precious. In Nashville we own the Ryman, we own the Ryman Chapel, the Grand Ole Opry, and many other assets in this city which is quite frankly an extraordinary city. You don't see what is going on in Nashville anywhere else on the planet. It really is the hub of music, traditional American country music. It's where the artists live, it's where the songwriters live, the labels, the management companies and venues. And it is quite extraordinary. And what is happening with this industry, this music, is because of technology, because of iPhones, iPads, it is now becoming ubiquitous. When you talked about the 130ish million country lifestyle consumers in the United States that we're very much focused on, my personal view is that there's probably at least 130 million of them living outside of the United States. And we're going to talk about that because we've got some very exciting plans for the Opry group. We also own several businesses where we've partnered up with country artists Blake Shelton with Ole Red and recently we've launched a new brand called Category 10 with probably the most successful country artist today in America which is a guy called Luke Combs, a really high quality individual who's a very good friend. So that's the business and it's growing like a weed. Our issue with this business is you normally think about a business where you have a long runway but the issue for us is the runway is very wide. These country lifestyle consumers touch many different businesses and we're going to talk about some of those in a minute I suspect.

So what do you think differentiates OEG from other live entertainment companies?

No, I'll take that.

Congratulations again on the Grand Ole Opry turning 100 this year. You mentioned the performance that you did in March. Are you planning on doing any other activations for the brand to celebrate the 100 years?

Many, many, many. Actually Patrick and I were in London last week and we were doing a whole bunch of press stuff, BBC and the like, because we're taking the Opry in September to the Royal Albert Hall in London and it will be televised. It will be streamed all across Northern Europe. The reception over there is off the charts and we've got an incredible lineup. Any one of the artists that we're taking would sell out the O2 Arena in an hour, which is a 25,000 seater arena. The Royal Albert Hall is about 6,000 seats. But we put the tickets up last Friday and they sold out within an hour at a fairly reasonable price. This is going to be really good stuff. We're interested in this because what we want to do is communicate with these consumers all across Northern Europe. We now have direct flights internationally with British Air. We have them coming from Ireland, from Iceland, and all of Northern Europe. We want to bring these consumers to the city of Nashville, care for them, love them, spend time with them, put them through the Opry, put them through all of our businesses, and create even more value for our shareholders.

Great. So you recently reported first quarter results. Opry Entertainment Group, which you report as a segment, both revenues and EBITDA was up around 34% year-over-year. A lot of that was driven by some of the new investments you mentioned, Category 10 with Luke Combs. That opened in November I believe. How is that performing and any additional color you can provide on that?

You can do the performance bit, but let me explain to you why we did this deal. This guy Luke Combs is very, very unusual. I've been in this business as you said 24, 25 years. I haven't seen an artist in Nashville that has the combined qualities that this individual has. Not only is he a great performer, but he's literally like Taylor Swift, he writes all this music. He's had 22 number ones in the space of seven years. 19 of those he's written himself. Most of the early stuff he wrote was all about the woman he fell in love with, his wife now Nicole. He now has like 6 million TikTok followers, the 17 to 23 year old females. This is extraordinary stuff. So this is why we got into business with him. Not only that, he's a hell of a guy and really nice person. So talk about the business.

Yeah. It's running a little bit ahead of where we pro forma with this thing and we're very happy with it. We preempt your next question, which I'm sure is what are we going to do with that brand? We're going to find locations where the country lifestyle consumer wants to be, wants to frequent, or lives. We'll probably roll two or three of these things out over the course of the next two to three years. It's a very exciting concept. The other thing that's intriguing to me, Patrick and I have talked a lot about this. Luke was in Australia in January. He played six locations, rugby football stadiums, 400,000 people. He's now the most successful, the most sought after artist in Australia. I'd like to find a way that maybe we can lift this product, not do it ourselves but find other people's capital to essentially take this product and put it in the remote location of Australia. I think we have opportunities too because of the demand for this music all across Northern Europe. I think there's opportunities there, but primarily right now we're focused domestically here in the United States.

That's great. So I'd like to talk about Southern Entertainment. You made a majority stake which brings OEG into the festivals business. Can you talk about what you liked about Southern Entertainment and specifically how you're going to integrate that into the artist development program?

Patrick can describe it. He was very instrumental in getting this deal done. But to me, this is part of the widening of the runway. The consumers that frequent these fairs and festivals are the same consumers that come to Nashville. They're the same consumers that go to Vegas and go to our place on the strip in Las Vegas. So it's part of the widening of the runway, but talk about the actual economics of the business.

Are you able to share some of your plans for growing the Southern Entertainment platform? Is that going to be bringing new festivals to different geographies and how large can it be within the overall portfolio?

So you mentioned you also recently won the contract to manage the Ascend Amphitheater in Nashville. That's another capital-light structure like Southern Entertainment. Is that going to be easier to accelerate growth given its capital light? What are the advantages of that?

Let me start on this one. If we had an aerial view of Nashville, real estate in Nashville has just extraordinarily gone through the roof. An acre, half an acre of real estate in downtown Nashville goes for many multiples of millions of dollars. It's like the strip in Las Vegas. If you look at the aerial view, this amphitheater sits right on the river just up from Broadway. It is strategically an incredible piece of real estate. We've just won the rights to control that piece of real estate for a 10-year period of time. We see an opportunity with that amphitheater not just to put 30, 40 high quality summertime events through there, but activating that real estate more on a 365-day a year basis. I think this is a wonderful opportunity both for the city of Nashville and for our company.

So you talked about the variety of different stages that you have within the portfolio. Obviously in the mecca of country music in Nashville, you've got the two most iconic venues. You got the Moody Theater in Austin. Kind of going down a little bit smaller stages with Category 10 and Ole Red. Now you have the music festivals. And on the distribution side, you've got radio, television with your partner NBCU, and also on the digital side with Whiskey Riff. As you look at the portfolio, are there any areas that you think there are gaps or parts that you'd like to fill out more or grow?

I have to be a little bit careful here, but we have this incredible IP, Opry shows dating back to the 60s with some of the most iconic artists that we all know, Johnny Cash, Hank Williams, George Jones. Two days ago we did a statue unveiling in front of the Ryman of George Jones and I was talking to his wife Nancy. How do we bring that music alive? We did this 100th anniversary show a couple of months back that was hugely successful. The incredible thing about that show, if any of you in this room watched it, the artists, we had all of the best artists in country music on that stage, but they weren't playing their music, they were playing music of the 60s and 70s and 80s. Garth did a George Jones song. The issue for us is how do we bring that stuff alive and put it in front of the consumer because the consumer is listening to that music. I think there's some really interesting ideas we're working on about the resurrection of this incredible music that was the heart and soul of this nation back in the 50s, 60s, 70s, and 80s that we have a unique relationship with.

Yes, Mario. Question.

You did one of the best road shows for an offering of a public company that I've attended in a long time. You own 70%, 30% put call. What does the 30% say about a liquidity event? And secondly, are you going to compare yourself on a road show to Live Nation? Sony Music in Nashville is taking on everything they can. You don't have A&R. You don't get recurring revenues from all the young singers that you're sprouting. So give me that part of the world. How much money am I going to make for owning Ryman?

Well, hopefully as much as you've made in the past.

I agree with that. I'm delighted. I'm here to applaud your efforts, but keep going.

Yeah. Look, this is a very interesting time for us. We've talked about this a million times off stream. For us getting this business ready for prime time, this business OEG should not be part of a real estate investment trust. The investors in real estate do not really truly understand this IP-driven business that we own. We've been really focused on multiple things. The growth of this business, the visibility of this business is one of the reasons we're taking the Opry to London because we've got a ton of investors from that neck of the woods that love this business. We're building the growth curve in terms of profitability. We brought in a really high level executive to run this business. We made an offer two days ago for a chief marketing officer. We're getting the deck stacked from a structural perspective. The profitability this year will be somewhere around 120 million. But we've also got two or three really interesting growth initiatives that we're working on that we want the investment community to have visibility to. Then it comes down to market conditions and we all know we're living in a very tumultuous period of time. But at the right time, we're going to separate this business and at the right time you're going to see a world-class road show teeing this business up. This business will make our investors a bunch more money. So that was the waffle. What about other questions?

Are there any other questions from the audience, sir?

I'm a small stockholder. The question is what percent of your profits for the last year came from the real estate and what part came from the entertainment section?

Yeah. The way to think about it, it's somewhere in the region between 80 and 85% real estate, 15ish% entertainment. But fortunately for us, and we haven't really talked about it, our hotel business has been growing like a gangbusters. It's been really doing well. We just a week and a half ago, two weeks ago, announced that we're acquiring the JW Desert Ridge in Scottsdale. We've got a very unique strategy in our hotel business that has created loyalty amongst the convention customers and it's really grown so well. Even though this percentage has stayed about flat because both businesses have been growing at reasonably high levels of growth. We will uncouple this business at some reasonably period of time in the future because my sense is this business handled properly could trade at very good multiples.

Any other questions? Yes sir.

I love your numbers. I think your numbers are really solid. You guys are doing very well. Intrigued about your intellectual property. I think you got some good value there. Along with the read, I'm going to ask a very two maybe two to three years down the line approach of this with your IP. Have you ever given a thought of tokenizing it where you can increase use that IP as a tokenization to kind of digitize some of your assets to the real estate side? I think there's a chance there when you look at it from a digital standpoint. You got the GENIUS Act is probably going to be passed in June or July maybe July or August and you got some really solid assets here. Tokenization on the on-chain will probably create a secondary source of liquidity opportunity there. These are things I'm hearing when I speak to my clients.

The interesting part of your question is something that we spend so much time on. So many businesses today are struggling with all of the external pressures that are coming into them. Our business is how do we deal with the opportunities we have? You've just laid out an interesting avenue of opportunity and there are many like this in this business which we're very excited about.

Unfortunately, I have a question. Please just make it quick. We're two minutes over, so we can squeeze one more in.

Ryman Hospitality just announced yesterday to close millions of dollars of senior notes due to 2033. What's the financial strategy behind this? Because that will restrain the liquidity of your cash flow at least for short term. Why is this?

When we acquired Desert Ridge, our leverage levels as a company were running at about four times. We picked up in 78 during COVID, brought it down to four times. By the way, if any of you in this room are shareholders, you know what we do dividend wise. Our dividend yield is a fraction under 5%. We're paying very good dividends because we're generating a lot of cash. The issue for us when we decided to buy this asset, we could spend 10 minutes talking about why we did it and why tariffs allowed us, all this nonsense that's going on in the market, why we were able to actually get hold of this asset that we have seriously chased for about eight years. It's a market that we absolutely want to be in because we know these convention customers want to go through this market. We did it, but we decided that we weren't going to increase leverage. So we went out and we issued three and a half million shares. The reaction from our shareholders, we did this on an overnight, was unbelievable. It was many, many times oversubscribed. It was the same when we did a bond offering the next day. We had like four and a half billion chasing in the space of three hours, four and a half billion chasing $600 million. The balance sheet's in great shape. We've got assets generating very high levels of cash flow. Our leverage levels, as we look at our long range plan over the next two to three years, even with the enormous amount of capital that we're spending right now, we've got capital programs going on right now this year of about half a billion to generate 13, 14, 15% unlevered internal rates of return on these projects. The balance sheet over the next two to three years looks extremely good. This is one of the reasons why one of the rating agencies a couple of weeks ago upgraded us. Sorry I'm getting into detail. Thank you for having us.

Very sorry to have to cut it off, but thank you Colin and Patrick.