10-Q 1 plya2017q310-q.htm 10-Q Document


        
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 10-Q
 _______________________________________________
 
 
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended September 30, 2017

OR
 
 
 
o
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
 
Not Applicable
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification Number)
 
 
 
Prins Bernhardplein 200
 
 
1097 JB Amsterdam, the Netherlands
 
Not Applicable
(Address of Principal Executive Offices)
 
(Zip Code)
 
 
 
+31 20 521 49 62
(Registrant's Telephone Number, Including Area Code)
 
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 ý   NO  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    YES  ý      NO  o

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

Large accelerated filer
o
Accelerated filer
ý
Non-accelerated filer  
o
Smaller reporting company         
o
 
 
Emerging growth company
ý

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.  ý  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  o    NO  ý  

As of November 7, 2017, there were 110,305,064 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.






Playa Hotels & Resorts N.V.
TABLE OF CONTENTS
 
 
 
 
 
Page
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.




2



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 September 30,
 
As of December 31,
 
2017
 
2016
ASSETS
 
 
 
Cash and cash equivalents
$
137,827

 
$
33,512

Restricted cash
4,571

 
9,651

Trade and other receivables, net
33,747

 
48,881

Accounts receivable from related parties
1,128

 
2,532

Inventories
11,180

 
10,451

Prepayments and other assets
30,193

 
28,633

Property, plant and equipment, net
1,447,657

 
1,400,317

Investments
1,174

 
1,389

Goodwill
51,731

 
51,731

Other intangible assets
1,727

 
1,975

Deferred tax assets
1,818

 
1,818

Total assets
$
1,722,753

 
$
1,590,890

LIABILITIES, CUMULATIVE REDEEMABLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY
 
 
 
Trade and other payables
$
127,788

 
$
145,042

Accounts payable to related parties
3,363

 
8,184

Income tax payable
6,284

 
5,128

Debt
877,699

 
780,725

Debt to related party

 
47,592

Deferred consideration

 
1,836

Other liabilities
20,362

 
8,997

Deferred tax liabilities
76,832

 
76,832

Total liabilities
1,112,328

 
1,074,336

Commitments and contingencies

 

Cumulative redeemable preferred shares (par value $0.01; 0 and 28,510,994 shares authorized, issued and outstanding as of September 30, 2017 and December 31, 2016, respectively; aggregate liquidation preference of $0 and $345,951 as of September 30, 2017 and December 31, 2016, respectively)

 
345,951

Shareholders' equity
 
 
 
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 110,305,064 and 50,481,822 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively)
11,803

 
5,386

Paid-in capital
772,231

 
349,358

Accumulated other comprehensive loss
(3,750
)
 
(3,719
)
Accumulated deficit
(169,859
)
 
(180,422
)
Total shareholders' equity
610,425

 
170,603

Total liabilities, cumulative redeemable preferred shares and shareholders' equity
$
1,722,753

 
$
1,590,890


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

3



Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
($ in thousands)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Package
$
102,093

 
$
99,798

 
$
373,502

 
$
348,808

Non-package
16,249

 
14,316

 
59,505

 
52,562

Total revenue
118,342

 
114,114

 
433,007

 
401,370

Direct and selling, general and administrative expenses:
 
 
 
 
 
 
 
Direct
75,650

 
67,995

 
232,132

 
214,039

Selling, general and administrative
23,008

 
22,034

 
76,713

 
66,237

Depreciation and amortization
13,808

 
13,022

 
40,093

 
38,809

Insurance proceeds

 
(179
)
 

 
(309
)
Direct and selling, general and administrative expenses
112,466

 
102,872

 
348,938

 
318,776

Operating income
5,876

 
11,242

 
84,069

 
82,594

Interest expense
(13,099
)
 
(13,418
)
 
(41,187
)
 
(40,619
)
Loss on extinguishment of debt

 

 
(12,526
)
 

Other income (expense), net
1,782

 
(225
)
 
1,191

 
(2,414
)
Net (loss) income before tax
(5,441
)
 
(2,401
)
 
31,547

 
39,561

Income tax (provision) benefit
(226
)
 
841

 
(20,105
)
 
5,270

Net (loss) income
(5,667
)
 
(1,560
)
 
11,442

 
44,831

Other comprehensive income (loss), net of taxes:
 
 
 
 
 
 
 
Benefit obligation gain (loss)
11

 
35

 
(31
)
 
44

Other comprehensive income (loss)
11

 
35

 
(31
)
 
44

Total comprehensive (loss) income
$
(5,656
)
 
$
(1,525
)
 
$
11,411

 
$
44,875

Dividends of cumulative redeemable preferred shares

 
(11,469
)
 
(7,922
)
 
(33,164
)
Non-cash dividend to warrant holders

 

 
(879
)
 

Net (loss) income available to ordinary shareholders
$
(5,667
)
 
$
(13,029
)
 
$
2,641

 
$
11,667

(Losses) earnings per share - Basic
$
(0.05
)
 
$
(0.26
)
 
$
0.03

 
$
0.12

(Losses) earnings per share - Diluted
$
(0.05
)
 
$
(0.26
)
 
$
0.03

 
$
0.12

Weighted average number of shares outstanding during the period - Basic
110,286,197

 
50,481,822

 
92,377,968

 
50,481,822

Weighted average number of shares outstanding during the period - Diluted
110,286,197

 
50,481,822

 
92,453,447

 
50,481,822


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

4



Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cumulative Redeemable Preferred Shares, Shareholders'
Equity and Accumulated Other Comprehensive Loss for the nine months ended September 30, 2016 and 2017
($ in thousands, except share data)
(unaudited)
 
 
 
 
 
Shareholders' Equity
 
Cumulative Redeemable Preferred Shares
 
Ordinary Shares
 
Treasury Shares
 
Paid-In Capital
 
Accumulated Other
Comprehensive Loss
 
Accumulated Deficit
 
Total
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
Balance at December 31, 2015
32,738,094

 
$
352,275

 
60,249,330

 
$
656

 
5,373,884

 
$
(23,108
)
 
$
420,872

 
$
(4,067
)
 
$
(200,638
)
 
$
193,715

Retroactive application of recapitalization
 
 
 
 
(9,767,508
)
 
4,730

 
(5,373,884
)
 
23,108

 
(27,838
)
 
 
 
 
 

Adjusted balance at December 31, 2015
32,738,094

 
$
352,275

 
50,481,822

 
$
5,386

 

 
$

 
$
393,034

 
$
(4,067
)
 
$
(200,638
)
 
$
193,715

Net income for the period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44,831

 
44,831

Benefit obligation gain, net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44

 
 
 
44

Dividends of cumulative redeemable preferred shares
 
 
33,164

 
 
 
 
 
 
 
 
 
(33,164
)
 
 
 
 
 
(33,164
)
Balance at September 30, 2016
32,738,094

 
$
385,439

 
50,481,822

 
$
5,386

 

 
$

 
$
359,870

 
$
(4,023
)
 
$
(155,807
)
 
$
205,426

 
 
 
 
 
Shareholders' Equity
 
Cumulative Redeemable Preferred Shares
 
Ordinary Shares
 
Treasury Shares
 
Paid-In Capital
 
Accumulated Other
Comprehensive Loss
 
Accumulated Deficit
 
Total
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
 
 
Balance at December 31, 2016
28,510,994

 
$
345,951

 
60,249,330

 
$
656

 
5,373,884

 
$
(23,108
)
 
$
377,196

 
$
(3,719
)
 
$
(180,422
)
 
$
170,603

Retroactive application of recapitalization
 
 
 
 
(9,767,508
)
 
4,730

 
(5,373,884
)
 
23,108

 
(27,838
)
 
 
 
 
 

Adjusted balance at December 31, 2016
28,510,994

 
$
345,951

 
50,481,822

 
$
5,386

 

 
$

 
$
349,358

 
$
(3,719
)
 
$
(180,422
)
 
$
170,603

Net income for the period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,442

 
11,442

Benefit obligation loss, net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(31
)
 
 
 
(31
)
Recapitalization transaction
 
 
 
 
52,982,364

 
5,653

 
 
 
 
 
427,878

 
 
 
 
 
433,531

Dividends on cumulative redeemable preferred shares
 
 
7,922

 
 
 
 
 
 
 
 
 
(7,922
)
 
 
 
 
 
(7,922
)
Purchase of cumulative redeemable preferred shares
(28,510,994
)
 
(239,492
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Settlement of accrued dividends of cumulative redeemable preferred shares
 
 
(114,381
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Issuance of ordinary shares in exchange for warrants
 
 
 
 
6,689,309

 
747

 
 
 
 
 
132

 
 
 
(879
)
 

Share-based compensation
 
 
 
 
151,569

 
17

 
 
 
 
 
2,785

 
 
 
 
 
2,802

Balance at September 30, 2017

 
$

 
110,305,064

 
$
11,803

 

 
$

 
$
772,231

 
$
(3,750
)
 
$
(169,859
)
 
$
610,425

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

5



Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2017
 
2016
CASH FLOW FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
11,442

 
$
44,831

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
40,093

 
38,809

Amortization of debt discount, premium and issuance costs
1,900

 
2,349

Share-based compensation
2,803

 

Loss on extinguishment of debt
12,526

 

Gain on insurance recoverables

 
(309
)
Other
(306
)
 
18

Changes in assets and liabilities:
 
 
 
Trade and other receivables, net
14,238

 
11,851

Accounts receivable from related parties
48

 
895

Inventories
(784
)
 
(629
)
Prepayments and other assets
(26,564
)
 
(4,230
)
Trade and other payables
9,183

 
(41,969
)
Accounts payable to related parties
(1,567
)
 
2,038

Income tax payable
1,256

 
(4,431
)
Deferred consideration
654

 
237

Other liabilities
299

 
(560
)
Net cash provided by operating activities
65,221

 
48,900

INVESTING ACTIVITIES:
 
 
 
Purchase of property, plant and equipment
(69,945
)
 
(11,814
)
Contract deposit
(2,700
)
 

Purchase of intangibles
(438
)
 
(254
)
Proceeds from disposal of property, plant and equipment
53

 
53

Insurance proceeds

 
479

Net cash used in investing activities
(73,030
)
 
(11,536
)
FINANCING ACTIVITIES:
 
 
 
Proceeds from debt issuance, net of $1.3 million discount
528,675

 

Issuance costs of debt
(7,984
)
 

Repayment of deferred consideration
(2,490
)
 
(1,891
)
Repayment of Term Loan
(364,138
)
 
(2,813
)
Repayment of Senior Notes due 2020
(121,597
)
 

Recapitalization transaction
79,658

 

Repayments of borrowings on revolving credit facility

 
(33,000
)
Net cash provided by (used in) financing activities
112,124

 
(37,704
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
104,315

 
(340
)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
$
33,512

 
$
35,460

CASH AND CASH EQUIVALENTS, END OF THE PERIOD
$
137,827

 
$
35,120

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
 
 
Cash paid for interest, net of interest capitalized
$
47,051

 
$
46,399

Cash paid for income taxes
$
17,108

 
$
12,976

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
 
 
 

6



Capital expenditures incurred but not yet paid
$
11,075

 
$
53

Interest capitalized but not yet paid
$
134

 
$

Re-class from restricted cash to land
$
(5,625
)
 
$

Non-cash PIK Dividends
$
7,922

 
$
33,164

   Purchase of cumulative redeemable preferred shares
$
(239,492
)
 
$

Settlement of accrued dividends of cumulative redeemable preferred shares
$
(114,381
)
 
$

Par value of vested restricted share awards
$
17

 
$

Par value of ordinary shares issued in exchange for warrants
$
747

 
$

Non-cash dividend to warrant holders
$
879

 
$


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

7


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 a portfolio of 13 resorts located in Mexico, the Dominican Republic and Jamaica. We currently manage eight of the 13 resorts we own, as well as one resort owned by a third party. 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 GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements as of and for the year ended December 31, 2016, included in our Form 8-K filed on March 14, 2017.
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 nine months ended September 30, 2017 are not necessarily indicative of the results of operations to be expected for the full year ended December 31, 2017. 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
Share-based compensation
The Company has adopted an equity incentive plan that provides for the grant of share options, share appreciation rights, restricted shares, share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards. Share-based compensation is measured at the fair value of the award on the date of grant and recognized as an expense on a straight-line basis over the vesting period. For awards with market conditions, the conditions are incorporated into the fair value measurement and the compensation expense is not adjusted if the conditions are not met. For awards with performance conditions, compensation expense is recognized when it becomes probable that the performance criteria specified in the awards will be achieved and, accordingly, the compensation value is adjusted following the changes in the estimates of shares likely to vest based on the performance criteria. The determination of fair value of the market based awards on the date of grant is subjective and involves significant estimates and assumptions including expected volatility of the Company's shares, expected dividend yield, expected term and assumptions of whether these awards will achieve performance thresholds. The effects of forfeitures are recognized in compensation expense when they occur.
Future Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers. The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year to apply to annual reporting periods beginning after December 15, 2017, but the early adoption of this ASU is permitted. The guidance permits companies to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. Based on our preliminary assessment of our revenue streams under the new standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements and related disclosures. The performance obligations related to our package and non-package revenue streams are generally

8


fully satisfied at the point that revenue is recognized due to the short-term day-to-day nature of these revenue streams. We currently expect to adopt ASU 2014-09 utilizing the modified retrospective transition method on January 1, 2018, noting that the cumulative adjustment applied in the year of adoption is expected to be immaterial.
In March 2017, the FASB issued ASU No. 2017-07 ("ASU 2017-07"), Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. Net periodic benefit cost is currently reported as an employee cost within operating income. ASU 2017-07 requires bifurcation of net benefit cost resulting in the service cost component being presented with other employee compensation costs in operating income. The other components will be reported separately outside of operations and will not be eligible for capitalization. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods therein. We do not expect the implementation of ASU 2017-07 to have a material impact on our financial statements. All non-service cost components of our net periodic benefit cost will be presented retrospectively for all comparative periods within the consolidated statements of income as other income (expense), net instead of direct expense with no impact to overall net income. For purposes of evaluating the performance of our operating segments, all components of net periodic benefit cost will be included in the operating results of the resorts we own as we consider them to be ongoing costs of operations.
Adopted accounting standards

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which is intended to simplify various aspects of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The new standard requires excess tax benefits and tax deficiencies to be recorded in the statements of income as a component of the provision for income taxes when stock awards vest or are settled. In addition, it eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the consolidated statements of cash flows. The standard also provides an accounting policy election to account for forfeitures as they occur, allows us to withhold more of an employee’s vesting shares for tax withholding purposes without triggering liability accounting, and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement. We adopted this standard in the second quarter of 2017 in connection with our initial grant of restricted share awards. Upon adoption, excess tax benefits or deficiencies from share-based award activity are reflected in the consolidated statements of income as a component of the provision for income taxes. We also elected to account for forfeitures as they occur, rather than estimate expected forfeitures. 
Note 3. Business combination
At 12:00 a.m. Central European Time on March 12, 2017, we consummated a business combination (the "Business Combination") pursuant to that certain transaction agreement by and among us, Playa Hotels & Resorts B.V. (our "Predecessor"), Pace Holdings Corp. ("Pace") and New Pace Holdings Corp. ("New Pace"), the effects of which replicated the economics of a reverse merger between our Predecessor and Pace. In connection with the Business Combination, Pace formed Porto Holdco B.V., a Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid), as a wholly-owned subsidiary to facilitate the reverse merger with our Predecessor. Prior to the consummation of the Business Combination, Porto Holdco B.V. was converted to a Dutch public limited liability company (naamloze vennootschap) and changed its name to Porto Holdco N.V. Upon the consummation of the Business Combination, the Company's name was changed to Playa Hotels & Resorts N.V.

For accounting and financial reporting purposes, the Business Combination was accounted for as a recapitalization of our Predecessor because Pace was incorporated as a special purpose acquisition company and considered a public shell company. Our Predecessor also maintained effective control of the combined entity because our Predecessor's operations comprise the ongoing operations of the combined entity, our Predecessor's senior management became the senior management of the combined entity and our Predecessor's directors were appointed to, and constitute the majority of, the combined entity's board of directors. Accordingly, no step-up in basis of assets or goodwill were recorded.

The Condensed Consolidated Financial Statements presented herein are those of our Predecessor for all periods prior to the completion of the Business Combination and the recapitalization of the number of ordinary shares attributable to our Predecessor shareholders is reflected retroactively to the earliest period presented. Accordingly, the number of ordinary shares presented as outstanding as of January 1, 2016 totaled 50,481,822 and consisted of the number of ordinary shares issued to Predecessor shareholders. This number of shares was also used to calculate the Company’s earnings per share for all periods prior to the Business Combination.


9


The consideration received as a result of the Business Combination is summarized as follows ($ in thousands):
Purchase of all of our Predecessor's cumulative redeemable preferred shares (1)
$
353,873

Net cash transferred from Pace
78,859

Playa Employee Offering (2)
799

Total Consideration Transferred
$
433,531

________
(1) Balance consisted of the face value of our Predecessor's cumulative redeemable preferred shares ("Preferred Shares") and their associated PIK dividends as of March 10, 2017, per the terms of the Business Combination.
(2) In connection with the Business Combination, we entered into subscription agreements (the “Subscription Agreements”) with Playa employees, their family members and persons with business relationships with Playa, pursuant to which those persons agreed to purchase 82,751 ordinary shares for an aggregate purchase price of $0.8 million.
Note 4. Property, plant and equipment
The balance of property, plant and equipment is as follows ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Land, buildings and improvements
$
1,478,087

 
$
1,421,371

Fixtures and machinery
63,536

 
60,294

Furniture and other fixed assets
162,714

 
163,753

Construction in progress
26,437

 
3,866

Total property, plant and equipment, gross
1,730,774

 
1,649,284

Accumulated depreciation
(283,117
)
 
(248,967
)
Total property, plant and equipment, net
$
1,447,657

 
$
1,400,317

Depreciation expense for property, plant and equipment was $39.4 million and $38.1 million for the nine months ended September 30, 2017 and 2016, respectively. Depreciation expense for property, plant and equipment was $13.6 million and $12.8 million for the three months ended September 30, 2017 and 2016, respectively.
For the three and nine months ended September 30, 2017, $0.7 million of interest expense was capitalized on qualifying assets. For the three and nine months ended September 30, 2016, no interest expense was capitalized on qualifying assets. Interest expense was capitalized at the weighted average interest rate of the debt.

Cap Cana Development

On July 12, 2017, we acquired the land for the new Hyatt Zilara Cap Cana and Hyatt Ziva Cap Cana in Punta Cana, Dominican Republic for total consideration of $56.2 million. We paid $45.6 million of the consideration in cash upon closing of the acquisition, including by way of the release of our $5.6 million escrow deposit, which was presented as restricted cash on our Condensed Consolidated Balance Sheet as of December 31, 2016. The remaining $10.6 million balance is due on the earlier of (i) two years from the beginning of construction of the resorts or (ii) the opening of the resorts and is recorded in other liabilities within the Condensed Consolidated Balance Sheet.
Note 5. Fair value of financial instruments
Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable from related parties, trade and other payables, accounts payable to related parties, deferred consideration and debt. We believe the carrying value of these assets and liabilities, excluding deferred consideration and debt, approximate their fair values as of September 30, 2017 and December 31, 2016.

10


Fair value measurements
The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. U.S. GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of observability of inputs used in measuring fair value as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3: Inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing an asset or liability.
We did not have any movements in and out of Level 3 for our fair valued instruments during any of the above periods.
As of September 30, 2017, there were no financial assets or liabilities measured at fair value on a recurring basis as our deferred consideration was settled during the three months ended September 30, 2017 (see Note 7). The following table presents our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of December 31, 2016 ($ in thousands):
 
 
December 31, 2016
 
Level 1
 
Level 2
 
Level 3
Fair value measurements on a recurring basis:
 
 
 
 
 
 
 
 
Deferred Consideration
 
$
1,836

 
$

 
$

 
$
1,836

The following table presents a reconciliation from the opening balances to the closing balances for our Level 3 fair valued instruments as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
Deferred Consideration
Balance as of December 31, 2015
$
4,145

Total losses included in earnings (or change in net assets) (1)
160

Settlements
(625
)
Balance as of March 31, 2016
3,680

Total losses included in earnings (or change in net assets) (1)
49

Settlements
(638
)
Balance as of June 30, 2016
3,091

Total losses included in earnings (or change in net assets) (1)
28

Settlements
(628
)
Balance as of September 30, 2016
2,491

Total gains included in earnings (or change in net assets) (1)
(36
)
Settlements
(619
)
Balance as of December 31, 2016
1,836

Total gains included in earnings (or change in net assets) (1)
(26
)
Settlements
(630
)
Balance as of March 31, 2017
1,180

Total losses included in earnings (or change in net assets) (1)
675

Settlements
(735
)
Balance as of June 30, 2017
1,120

Total losses included in earnings (or change in net assets) (1)
5

Settlements
(1,125
)
Balance as of September 30, 2017
$

________
(1) All losses and gains (other than changes in net assets) are included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

11


The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
 
Carrying Value
 
Fair Value
 
 
As of September 30, 2017
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial liabilities not recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Debt:
 
 
 
 
 
 
 
 
 
 
Term Loan
 
$
519,948

 
$

 
$

 
$
537,214

 
$
537,214

Revolving Credit Facility(1)
 

 

 

 

 

Senior Notes due 2020
 
357,751

 

 
379,531

 

 
379,531

Total
 
$
877,699

 
$

 
$
379,531

 
$
537,214

 
$
916,745

 
 
Carrying Value
 
Fair Value
 
 
As of December 31, 2016
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial liabilities not recorded at fair value:
 
 
 
 
 
 
 
 
 
 
Debt:
 
 
 
 
 
 
 
 
 
 
Term Loan
 
$
356,937

 
$

 
$

 
$
363,060

 
$
363,060

Revolving Credit Facility(1)
 

 

 

 

 

Senior Notes due 2020
 
471,380

 

 
513,405

 

 
513,405

Total
 
$
828,317

 
$

 
$
513,405

 
$
363,060

 
$
876,465

________
(1) We estimate that the carrying value of our revolving credit facility (the "Revolving Credit Facility") is the fair value as of September 30, 2017 and December 31, 2016. The valuation technique and significant unobservable inputs are consistent with our term loan (the "Term Loan"), but the valuation using the discounted cash flow technique approximates the carrying value as the expected term is significantly shorter in duration. We typically use our Revolving Credit Facility solely for short term liquidity.
The following table displays valuation techniques and the significant unobservable inputs for our Level 3 assets and liabilities measured at fair value as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
 
 
Fair Value Measurements as of September 30, 2017
 
Fair Value
 
Significant Valuation Techniques
 
Significant Unobservable Inputs
 
Input
Term Loan
$
537,214

 
 Discounted Cash Flow
 
 Discount Rate
 
3.00%
 
 
 

 
 Forward Rate
 
4.33
%
-
5.42%
 
 
 
 
 
 Expected Term
 
79 months
 
 
 
Fair Value Measurements as of December 31, 2016
 
Fair Value
 
Significant Valuation Techniques
 
Significant Unobservable Inputs
 
Input
Deferred Consideration
$
1,836

 
 Discounted Cash Flow
 
 Discount Rate
 
4.00%
 
 
 

 
 Forward Rate
 
4.63
%
-
5.00%
 
 
 
 
 
 Expected Term
 
7 months
Term Loan
$
363,060

 
 Discounted Cash Flow
 
 Discount Rate
 
3.00%
 
 
 

 
 Forward Rate
 
4.00
%
-
5.33%
 
 
 
 
 
 Expected Term
 
32 months
Term Loan and deferred consideration
The fair value of our Term Loan and deferred consideration are estimated using cash flow projections applying market forward rates and discounted back at the appropriate discount rate. The primary sensitivity in each estimate is based on the selection of an

12


appropriate discount rate. Fluctuations in this assumption will result in a different estimate of fair value as an increase in the discount rate would result in a decrease in the fair value.
Senior Notes due 2020
The fair value of the Senior Notes due 2020 is estimated using unadjusted quoted prices in a market that is not active. Current pricing was compiled and applied to the outstanding principal amount.
Note 6. Income taxes
We are domiciled in The Netherlands and are taxed in The Netherlands with our other Dutch subsidiaries. Dutch companies are subject to Dutch corporate income tax at a general tax rate of 25%.
For the three months ended September 30, 2017, our income tax provision was $0.2 million, compared to a $0.8 million tax benefit for the three months ended September 30, 2016. The increased income tax provision was driven primarily by the increased discrete expense associated with foreign exchange rate fluctuations and the decreased tax benefit associated with the non-recurring valuation allowance release in September 2016. This income tax provision increase was partially offset by the tax benefit on decreased pre-tax book income in our tax paying entities and the increase in the tax benefit associated with future tax liabilities of some Mexican entities.
For the nine months ended September 30, 2017, our income tax provision was $20.1 million, compared to a $5.3 million tax benefit for the nine months ended September 30, 2016. The $25.4 million increase in the income tax provision was driven primarily by the increased discrete expense associated with foreign exchange rate fluctuations, the increase in the tax impact on increased pre-tax book income in our tax paying entities, and the decreased tax benefit associated with the non-recurring valuation allowance release in September 2016.
Dominican Republic

Taxes in the Dominican Republic are determined based upon Advance Pricing Agreements (“APA”) with the Internal Tax General Directorate of the Dominican Republic (the “Tax Authority”). Historically, based upon our APAs all three of our Dominican entities were subject to the greater of an asset tax or gross receipts tax; thus, such entities have not been subject to income tax accounting under U.S. GAAP. To date, the Tax Authority executed a Memoranda of Understanding (“MOU”) with the Association of Hotels and Tourism of the Dominican Republic, which we are party to, and which provides a framework for the negotiation of the new Company APAs. However, our APAs for 2016 and subsequent years have not been finalized with the Tax Authority as of September 30, 2017. As such, we maintain our position from the December 31, 2016 income tax provision, which contemplates the existing Dominican statutory law without consideration of an MOU and associated APA. Accordingly, the Dominican branch of Playa Cana B.V. is treated as an income taxpayer, and our other two Dominican entities, Inversiones Vilazul, S.A.S and the Dominican branch of Playa Romana Mar B.V., are treated as asset taxpayers.

We expect the Tax Authority and our Dominican entities to sign APAs for tax years 2016 through 2019 in the fourth quarter of 2017. Pursuant to the approved APAs, our three Dominican entities will be subject to the greatest of an asset tax, gross receipts tax or an income tax, and are therefore subject to a hybrid tax regime under ASC 740. Following this guidance, we estimate that a net collective income tax benefit in the range of $1.0 to $2.0 million for our three Dominican entities will be recognized in the fourth quarter of 2017. The estimated net income tax benefit is primarily driven by an income tax benefit of approximately $4.0 million from Playa Cana B.V. due to the reversal of the income tax expense booked in 2016, which will be partially offset by an income tax expense that ranges between $2.0 to $3.0 million from Playa Romana Mar, B.V. Under the hybrid tax regime, we expect Playa Cana B.V. and Playa Romana Mar, B.V. to be subject to non-income taxes in the range of $1.0 to $2.0 million, which will be recorded into pre-tax book income during the fourth quarter of 2017. We expect Inversiones Vilazul, S.A.S will continue to be a non-income tax payer.

13


Note 7. Related party transactions
The following summarizes transactions and arrangements that we have entered into with related parties. The details of the balances between us and related parties as of September 30, 2017 and December 31, 2016 are as follows ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Accounts receivable
$
1,128

 
$
2,532

Accounts payable
$
3,363

 
$
8,184

Deferred consideration(1)
$

 
$
1,836

Term Loan(2)
$

 
$
47,592

Preferred Shares Non-cash PIK Dividends(3)
$

 
$
106,459

________
(1) 
Playa H&R Holdings B.V., our wholly owned subsidiary, agreed to make payments of $1.1 million per quarter to the selling shareholder of Real Resorts (the “Real Shareholder”) through the quarter ending September 30, 2017. The Real Shareholder is no longer considered a related party and deferred consideration is not considered a related party balance as of September 30, 2017.
(2) 
The Real Shareholder was one of the lenders under our Term Loan as of December 31, 2016. The Real Shareholder's portion of the original Term Loan was $50.0 million. The balance is net of the discount on the Term Loan and associated deferred financing costs.
(3) 
No Non-cash PIK Dividends had been issued or declared with respect to the Preferred Shares. The total accumulated amounts of Non-cash PIK Dividends payable to the Real Shareholder were $0 million and $19.4 million as of September 30, 2017 and December 31, 2016, respectively. The total accumulated amounts of Non-cash PIK Dividends payable to HI Holdings Playa B.V., an affiliate of Hyatt Hotels Corporation ("HI Holdings Playa"), were $0 million and $87.1 million as of September 30, 2017 and December 31, 2016, respectively.
Relationship with Hyatt
In connection with the Business Combination, all outstanding Preferred Shares of our Predecessor owned by HI Holdings Playa were purchased at a purchase price of $8.40 per share for $196.0 million in face value and $93.6 million of associated PIK dividends.
Relationship with Real Shareholder
In connection with the Business Combination, all outstanding Preferred Shares of our Predecessor owned by the Real Shareholder were purchased at a purchase price of $8.40 per share for $43.5 million in face value and $20.8 million of associated PIK dividends. The Real Shareholder's portion of the original Term Loan was settled in connection with the refinancing of our Senior Secured Credit Facility on April 27, 2017 (See Note 14). Upon the consummation of the Business Combination, the Real Shareholder was no longer considered a related party because the Preferred Shares were extinguished in connection with the Business Combination.
Transactions with related parties
Transactions between us and related parties during the three and nine months ended September 30, 2017 and 2016 were as follows ($ in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Dividends on the Preferred Shares (1)
$

 
$
11,469

 
$
7,922

 
$
33,164

Deferred consideration accretion (2)

 
47

 
36

 
142

Interest expense on related party debt (2)

 
497

 
372

 
1,484

Franchise fees (3)
2,980

 
917

 
10,754

 
8,848

Lease payments (3)
270

 
323

 
848

 
974

Total transactions with related parties
$
3,250

 
$
13,253

 
$
19,932

 
$
44,612

________
(1) 
Included in accretion and dividends of Preferred Shares in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
(2) 
Included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
(3) 
Included in direct expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
Franchise fees relate to resorts currently operating under the all-ages Hyatt Ziva and adults-only Hyatt Zilara brands.
One of our offices is owned by our Chief Executive Officer, and we sublease the space at that location from a third party. Lease payments related to this space were $0.8 million and $0.8 million for the nine months ended September 30, 2017 and 2016,

14


respectively. Lease payments related to this space were $0.3 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively.
One of our offices in Cancún, Mexico is owned by an affiliate of the Real Shareholder, and we subleased the space from a third party also affiliated with the Real Shareholder. We terminated this lease agreement effective July 1, 2017. Lease payments related to this space were less than $0.1 million and $0.2 million for the nine months ended September 30, 2017 and 2016, respectively. Lease payments related to this space were less than $0.1 million for the three months ended September 30, 2016.
Note 8. Commitments and contingencies
Litigation, claims and assessments
We are subject, currently and from time to time, to various claims and contingencies related to lawsuits, taxes and environmental matters, as well as commitments under contractual obligations. Many of these claims are covered under current insurance programs, subject to deductibles. We recognize a liability associated with commitments and contingencies when a loss is probable and reasonably estimable. Although the ultimate liability for these current matters cannot be determined at this point, based on information currently available, we do not expect that the ultimate resolution of such claims and litigation will 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. Our Dutch companies file as a fiscal unity, with the exception of Playa Romana B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V. 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.

The Mexican tax authorities issued an assessment to one of our Mexican subsidiaries. In February 2014, we filed an appeal before the tax authorities, which was denied on May 26, 2014. On June 11, 2014, we arranged for the posting of a tax surety bond issued by a surety company, which guaranteed the payment of the claimed taxes and other charges (and suspended collection of such amounts by the tax authorities) while our further appeal to the tax court was resolved. To secure reimbursement of any amounts that may be paid by the surety company to the tax authorities in connection with the surety bond, we provided cash collateral to the surety company valued at approximately $4.6 million as of September 30, 2017. During the third quarter of 2017, we received a favorable resolution from the tax court and the litigation was terminated. As of September 30, 2017, the cash collateral was still held by the surety company, which restricted our use of such cash. The surety company is currently in the process of releasing our cash collateral.
During the third quarter of 2015, we identified and recorded a potential Dutch operating tax contingency resulting from allocations to be made of certain corporate expenses from 2014 and 2015. We have provided all requested documentation to the Dutch tax authorities for their review and are currently waiting for their final determination. We have an estimated amount of $1.6 million as a tax contingency at September 30, 2017 that is recorded in other liabilities within the Condensed Consolidated Balance Sheet.
Electricity supply contract
One of our subsidiaries entered into an electricity supply contract wherein we committed to purchase electricity from a provider over a five-year period ending December 2019. In consideration for our commitment, we received certain rebates. Should this contract be terminated prior to the end of the five-year period, we will be obligated to refund to the supplier the undepreciated portion of (i) the capital investment it made to connect our facilities to the power grid (original amount approximately $1.4 million) and (ii) the unearned rebates we received (total unearned rebates of $0.9 million and $1.2 million as of September 30, 2017 and December 31, 2016, respectively), in each case using a 20% straight-line depreciation per annum.
Leases and other commitments
We lease certain equipment for the operations of our hotels under various lease agreements. The leases extend for varying periods through 2021 and contain fixed components and utility payments. In addition, several of our administrative offices are subject to leases of building facilities from third parties, which extend for varying periods through 2023 and contain fixed and variable components.
Rental expense under non-cancelable operating leases, including contingent leases, consisted of $1.5 million and $1.6 million for the nine months ended September 30, 2017 and 2016, respectively. Rental expense under non-cancelable operating leases, including contingent leases, consisted of $0.5 million and $0.5 million for the three months ended September 30, 2017 and 2016, respectively.

15


Note 9. Ordinary shares
As of January 1, 2016, the number of ordinary shares presented as outstanding totaled 50,481,822, consisting of the number of ordinary shares issued to Predecessor shareholders after the retroactive application of the recapitalization. On March 12, 2017, 52,982,364 ordinary shares were issued as part of a recapitalization completed in the Business Combination (see Note 3).
As of September 30, 2017, our ordinary share capital consisted of 110,305,064 ordinary shares outstanding, which have a par value of €0.10 per share.
Note 10. Warrants
Public Warrants: 
We issued 45,000,000 warrants to former shareholders of Pace as consideration in the Business Combination (the "Public Warrants"), which entitled such warrant holders to purchase one-third of one ordinary share for an exercise price of one-third of $11.50. The Public Warrants became exercisable on April 10, 2017, which was thirty days after the completion of the Business Combination. The Public Warrants were set to expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms.

Founder Warrants: 
We issued 22,000,000 warrants to former holders of certain privately placed warrants of Pace and our Predecessor's former ordinary shareholders as consideration in the Business Combination (the "Founder Warrants"), which entitled such warrant holders to purchase one-third of one ordinary share for an exercise price of one-third of $11.50. The Founder Warrants became exercisable on April 10, 2017, which was thirty days after the completion of the Business Combination. The Founder Warrants were set to expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms.

Earnout Warrants:
We issued a total of 3,000,000 warrants to our Predecessor's former ordinary shareholders and TPG Pace Sponsor, LLC, a Cayman Islands limited liability company and an affiliate of TPG Global, LLC, as consideration in the Business Combination (the "Earnout Warrants"). The Earnout Warrants entitle such warrant holders to acquire one ordinary share for each Earnout Warrant for an exercise price of €0.10 per ordinary share in the event that the price per share underlying the Earnout Warrants on the NASDAQ is greater than $13.00 for a period of more than 20 days out of 30 consecutive trading days within the five years after the closing date of the Business Combination. The Earnout Warrants expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their term. As of September 30, 2017, none of the Earnout Warrants have been exercised.

All warrants issued as part of the Business Combination are classified as paid-in capital and were considered part of a value for value exchange. There was no fair value adjustment to accumulated deficit and no earnings per share impact.

Warrant Exchange: 
On May 22, 2017, we commenced an offer to exchange 0.1 ordinary shares for each outstanding Public Warrant and Founder Warrant, up to a maximum of 67,000,000 warrants (the "Warrant Exchange"). On June 23, 2017, a total of 65,933,459 warrants were tendered in the Warrant Exchange resulting in the issuance of 6,593,321 ordinary shares and the cash settlement of fractional shares. We concluded that the exchange of the Founder Warrants was a value for value exchange, but the fair value of the Public Warrants exchanged was less than the fair value of ordinary shares issued. We recorded a $0.9 million non-cash dividend based on the difference in fair value. After the completion of the Warrant Exchange, 1,066,541 Public Warrants remained outstanding, which were exchanged for 95,988 ordinary shares on July 17, 2017 at an exchange of 0.09 ordinary share per Public Warrant pursuant to a mandatory exchange provision added to the terms of the Public Warrants and Founder Warrants in connection with the Warrant Exchange. There were no cash proceeds to the Company from the exchange transaction.
Prior to the Warrant Exchange, no Public Warrants or Founder Warrants were exercised. As of September 30, 2017, there were no Public Warrants, no Founder Warrants and 3,000,000 Earnout Warrants outstanding.
Note 11. Share-based compensation

The Company adopted the 2017 Omnibus Incentive Plan (the "2017 Plan") to attract and retain independent directors, executive officers and other key employees and service providers. The 2017 Plan was approved by the Board of Directors and shareholders of the Company on March 10, 2017. The 2017 Plan is administered by the Compensation Committee of our Board of Directors, who may grant awards covering a maximum of 4,000,000 of our ordinary shares under the 2017 Plan. The Compensation Committee may award

16


share options, share appreciation rights, restricted shares, share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards. As of September 30, 2017, there were 2,172,547 shares available for future grants under the 2017 Plan.

Restricted Share Awards

Restricted share awards are granted to eligible employees, executives, and board members. Restricted shares are ordinary shares that are subject to restrictions and to a risk of forfeiture.

On May 16, 2017, the Compensation Committee of the Board approved the issuance of 994,115 restricted share awards to employees and executives of the Company. Each award granted vests over a five year period with 25% of the underlying award vesting on the third anniversary of the grant date of the award, 25% vesting on the fourth anniversary of the grant date of the award and 50% vesting on the fifth anniversary of the grant date of the award.

On May 26, 2017, the Compensation Committee of the Board approved the issuance of 410,096 restricted share awards to employees and executives of the Company and 51,569 restricted share awards to directors of the Company for their services as directors. Each award granted to employees and executives vests pro rata over a three year period. Each award granted to a director was fully vested on the date of grant.

The vesting of restricted share awards is subject to the holder's continued employment through the applicable vesting date. Unvested awards will be forfeited if the employee's or the executive's employment terminates during the vesting period, provided that unvested awards will accelerate upon certain terminations of employment as set forth in the applicable award agreements. The holders of these awards have the right to vote the restricted shares and receive all dividends declared and paid on such shares, provided that dividends paid on unvested restricted shares will be subject to the same conditions and restrictions applicable to the underlying restricted shares.

Compensation expense for the restricted share awards is measured based upon the fair market value of our ordinary shares at the date of grant and compensation expense is recognized on a straight-line basis over the vesting period.

A summary of our restricted share awards from January 1, 2017 to September 30, 2017 is as follows:
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2017

 
$

Granted
1,455,780

 
10.19

Vested
(151,569
)
 
10.19

Forfeited
(26,160
)
 
10.20

Unvested balance at September 30, 2017
1,278,051

 
$
10.19


The total fair value of vested restricted share awards during the three and nine months ended September 30, 2017 was $1.0 million and $1.5 million, respectively. As of September 30, 2017, the unrecognized compensation cost related to restricted share awards was $11.9 million and is expected to be recognized over a weighted average period of approximately 4.0 years. Compensation expense related to the restricted share awards was $1.8 million and $2.7 million for the three and nine months ended September 30, 2017, respectively, and is recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

Performance Share Awards

Performance share awards consist of a grant of ordinary shares that may become earned and vested based on the achievement of performance targets adopted by our Compensation Committee. 

On May 26, 2017, the Compensation Committee of the Board approved a target award of 265,222 performance-shares to executives of the Company. The actual number of ordinary shares that ultimately vest will range from 0% to 150% of the target award and will be determined in 2020 based on two performance criteria as defined in the award agreements for the period of performance from January 1, 2017 through December 31, 2019. Any ordinary shares that ultimately vest based on the achievement of the applicable performance criteria will be deemed to be vested on the date on which our Compensation Committee certifies the level of achievement of such performance criteria. Except in connection with certain qualifying terminations of employment, as set forth in the applicable award agreements, the awards require continued service through the certification date. The holders of these awards have the right to vote the

17


ordinary shares granted to the holder and any dividends declared on such shares will be accumulated and will be subject to the same vesting conditions as the awards. 

The grant date fair value of the portion of the award based on the compounded annual growth rate of the Company's total shareholder return was estimated using a Monte-Carlo model. The table below summarizes the key inputs used in the Monte-Carlo simulation ($ in thousands):
Performance Award Grant Date
 
Percentage of Total Award
 
Grant Date Fair Value by Component
 
Volatility (1)
 
Interest
Rate (2)
 
Dividend Yield
May 26, 2017
 
 
 
 
 
 
 
 
 
 
Total Shareholder Return
 
50
%
 
$
770

 
27.02
%
 
1.39
%
 
%
Adjusted EBITDA Comparison
 
50
%
 
$
1,350

 
%
 
%
 
%
________
(1) Expected volatility was determined based on the historical share prices in our industry.
(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.

In the table above, the total shareholder return component is a market condition as defined by ASC 718 and compensation expense related to this component is recognized on a straight-line basis over the vesting period. The grant date fair value of the portion of the awards based on the compounded annual growth rate of the Company's adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") was based on the closing stock price of our ordinary shares on such date. The Adjusted EBITDA component is a performance condition as defined by ASC 718, and, therefore, compensation expense related to this component will be reassessed at each reporting date based on the Company's estimate of the probable level of achievement, and the accrual of compensation expense will be adjusted as appropriate.

As of September 30, 2017, the unrecognized compensation cost related to the performance share awards was $2.0 million and is expected to be recognized over a weighted average period of 2.3 years. Compensation expense related to the performance share awards was approximately $0.1 million for the three and nine months ended September 30, 2017 and is recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.
Note 12. Preferred Shares
Prior to the consummation of the Business Combination, all of our Predecessor's Preferred Shares were purchased at a purchase price of $8.40 per share for an aggregate amount of $353.9 million, which consisted of $239.5 million in face value and $114.4 million of associated PIK dividends. The Preferred Shares issued by our Predecessor were eliminated and extinguished as part of the reverse merger in the Business Combination. The extinguishment is reflected as a non-cash financing activity in the Condensed Consolidated Statements of Cash Flows.
The following summarizes the Preferred Shares as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Face value
$

 
$
239,492

Non-cash PIK Dividends

 
106,459

Net value of the Preferred Shares
$

 
$
345,951

Note 13. (Losses) earnings per share
Prior to the consummation of the Business Combination, our Preferred Shares and their related accumulated Non-cash PIK Dividends were participating securities. If a dividend was declared or paid on our Predecessor's ordinary shares, holders of our Predecessor's ordinary shares and Preferred Shares were entitled to proportionate shares of such dividend, with the holders of our Predecessor's Preferred Shares participating on an as-if converted basis.
Under the two-class method, basic (losses) earnings per share (“EPS”) attributable to ordinary shareholders is computed by dividing the net (loss) income attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Net (loss) income attributable to ordinary shareholders is determined by allocating undistributed earnings between ordinary and preferred shareholders. For periods in which there are undistributed losses, there is no allocation of undistributed earnings to preferred shareholders.

18


Diluted EPS attributable to ordinary shareholders is computed by using the more dilutive result of the two-class method, the if-converted method or the treasury stock method. The if-converted method uses the weighted-average number of ordinary shares outstanding during the period, including potentially dilutive ordinary shares assuming the conversion of the outstanding Preferred Shares of our Predecessor, as of the first day of the reporting period. The dilutive effect of awards under our equity compensation plan is reflected in diluted earnings per share by application of the treasury stock method.
Under the two-class method, the number of shares used in the computation of diluted losses per share is the same as that used for the computation of basic losses per share for participating securities, as the result would be anti-dilutive. The net loss attributable to ordinary shareholders is not allocated to the Preferred Shares until all other reserves have been exhausted or such loss cannot be covered in any other way.
The calculations of basic and diluted EPS are as follows ($ in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Numerator:
 
 
 
 
 
 
 
Net (loss) income
$
(5,667
)
 
$
(1,560
)
 
$
11,442

 
$
44,831

Non-cash dividend to warrant holders

 

 
(879
)
 

Convertible Preferred Share dividends

 
(11,469
)
 
(7,922
)
 
(33,164
)
Allocation of undistributed earnings to preferred shareholders (1)

 

 
(277
)
 
(5,555
)
Numerator for basic EPS - (loss) income available to ordinary shareholders
(5,667
)
 
(13,029
)
 
2,364

 
6,112

Add back convertible Preferred Share dividends (2)

 

 

 

Add back of undistributed earnings to preferred shareholders (2)

 

 

 

Numerator for diluted EPS - (loss) income available to ordinary shareholders after assumed conversions
$
(5,667
)
 
$
(13,029
)
 
$
2,364

 
$
6,112

Denominator:

 

 
 
 
 
Denominator for basic EPS-weighted shares
110,286,197

 
50,481,822

 
92,377,968

 
50,481,822

Effect of dilutive securities:
 
 
 
 
 
 
 
Unvested restricted share awards

 

 
75,479

 

Convertible Preferred Shares

 

 

 

Denominator for diluted EPS - adjusted weighted-average shares
110,286,197

 
50,481,822

 
92,453,447

 
50,481,822

 
 
 
 
 
 
 
 
EPS - Basic
$
(0.05
)
 
$
(0.26
)
 
$
0.03

 
$
0.12

EPS - Diluted
$
(0.05
)
 
$
(0.26
)
 
$
0.03

 
$
0.12

________
(1) For the three months ended September 30, 2016, no undistributed earnings were allocated to the preferred shareholders of our Predecessor as we had undistributed losses after deducting preferred shareholder dividends of our Predecessor from net loss.
(2) For the nine months ended September 30, 2017 and 2016, cumulative preferred shareholder dividends of our Predecessor of $7.9 million and $33.2 million, respectively, and the preferred shareholders’ allocation of undistributed earnings of our Predecessor of $0.3 million and $5.6 million, respectively, were not added back for purposes of calculating diluted EPS - (loss) income available to ordinary shareholders because the effect of treating our Predecessor's Preferred Shares as if they had been converted to their 10,560,175 and 41,937,483 ordinary share equivalents as of January 1, 2017 and 2016, respectively, was anti-dilutive.

For the three months ended September 30, 2017, 1,278,051 of unvested restricted share awards were not included in the computation of diluted EPS-(loss) income available to ordinary shareholders after assumed conversions as their effect would have been anti-dilutive. For the three and nine months ended September 30, 2017265,222 of unvested performance-based equity awards were not included in the computation of diluted EPS-(loss) income available to ordinary shareholders after assumed conversions, as the performance criteria were not met as of the end of the reporting period.

For the three and nine months ended September 30, 2017, outstanding Earnout Warrants to acquire a total of 3,000,000 ordinary shares were not included in the computation of diluted EPS-(loss) income available to ordinary shareholders after assumed conversions because the warrants were not exercisable as of September 30, 2017.

19


Note 14. Debt
Debt consists of the following ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Debt Obligations
 
 
 
Term Loan(1)
$
528,675

 
$
362,813

Revolving Credit Facility

 

Senior Notes due 2020 - 8.00%
360,000

 
475,000

Total Debt Obligations
888,675

 
837,813

Unamortized (discount) premium
 
 
 
Discount on Term Loan
(1,242
)
 
(811
)
Premium on Senior Notes due 2020
2,546

 
4,123

Total unamortized (discount) premium
1,304

 
3,312

Unamortized debt issuance costs:
 
 
 
Term Loan
(7,485
)
 
(5,065
)
Senior Notes due 2020
(4,795
)
 
(7,743
)
Total unamortized debt issuance costs
(12,280
)
 
(12,808
)
Total Debt
$
877,699

 
$
828,317

_____
(1) 
Borrowings under the Term Loan bear interest at floating rates equal to LIBOR plus 3.0% (where the applicable LIBOR rate has a 1.0% floor). The interest rate used was 4.32% and 4.00% as of September 30, 2017 and December 31, 2016, respectively.

Senior Secured Credit Facility Refinance

On April 27, 2017, we amended and restated our existing Senior Secured Credit Facility, consisting of a new $530.0 million term loan ("Term Loan") priced at 99.75% of the principal amount which matures on April 27, 2024 and a revolving credit facility with a maximum aggregate borrowing capacity of $100.0 million which matures on April 27, 2022. The maturity date with respect to the Revolving Credit Facility and the Term Loan are subject to an earlier maturity date (the "Springing Maturity Date") if on the date that is 91 days prior to August 15, 2020 (the final maturity date of our Senior Notes due 2020), either the outstanding principal amount of the Senior Notes due 2020 is greater than or equal to $25.0 million or, if less than $25.0 million, we are unable to demonstrate that we have sufficient liquidity to repay such outstanding principal amount without causing our liquidity to be less than $50.0 million. The proceeds received from the Term Loan were used to repay our existing term loan and $115.0 million of our Senior Notes due 2020 and for other general corporate purposes. The repayment of our existing term loan and partial repayment of our Senior Notes due 2020 was accounted for as an extinguishment of debt and resulted in a loss on extinguishment of debt of $12.5 million.
Revolving Credit Facility
Our Revolving Credit Facility, which permits us to borrow up to a maximum aggregate principal amount of $100.0 million, matures on April 27, 2022 (subject to the Springing Maturity Date) and bears interest at variable interest rates that are either based on London Interbank Offered Rates ("LIBOR") or based on an alternate base rate derived from the greatest of the federal funds rate plus a spread, prime rate, one-month euro-currency rate plus a spread and, solely with respect to the Term Loan, the initial term loan rate ("ABR Rate"). We are required to pay a commitment fee ranging from 0.25% to 0.5% per annum (depending on the level of our consolidated secured leverage ratio in effect from time to time) on the average daily undrawn balance.
Term Loan
We borrowed $530.0 million under our Term Loan on April 27, 2017. We received net proceeds of approximately $32.5 million from our Term Loan after prepaying our existing senior secured credit facility and a portion of our Senior Notes due 2020, deducting a debt issuance discount of $1.3 million and unamortized debt issuance costs of $8.0 million. The unamortized debt issuance costs are accreted on an effective interest basis over the term of our Term Loan.
The Term Loan bears interest at a rate per annum equal to LIBOR plus 3.0% (where the applicable LIBOR rate has a 1.0% floor), and interest continues to be payable in cash in arrears on the last day of the applicable interest period (unless we elect to use the ABR rate).

20


Our Term Loan requires quarterly payments of principal equal to 0.25% of the $530.0 million original principal amount on the last business day of each March, June, September and December. The remaining unpaid amount of our Term Loan is due and payable at maturity on April 27, 2024 (subject to the Springing Maturity Date).
Financial Maintenance Covenants
Our refinanced Senior Secured Credit Facility also requires us to meet a springing leverage ratio financial maintenance covenant, but only if the aggregate amount outstanding on our Revolving Credit Facility exceeds 35% of the aggregate revolving credit commitments as defined in our Senior Secured Credit Facility. We were in compliance with all applicable covenants as of September 30, 2017.
Note 15. Employee benefit plan
In accordance with labor law regulations in Mexico, certain employees are legally entitled to receive severance that is commensurate with the tenure they had with us at the time of termination without cause, which results in an unfunded benefit obligation. There were no plan assets as of September 30, 2017 or December 31, 2016 as contributions are made only to the extent benefits are paid.

The following table presents the components of net periodic benefit cost for the three and nine months ended September 30, 2017 and 2016 ($ in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Service cost
$
183

 
$
174

 
$
542

 
$
507

Interest cost
87

 
64

 
234

 
185

Effect of foreign exchange rates
(78
)
 
(125
)
 
514

 
(495
)
Amortization of prior service cost

 

 

 
2

Amortization of gain
(7
)
 
(2
)
 
(22
)
 
(8
)
Compensation-non-retirement post employment benefits
(41
)
 
24

 
(36
)
 
54

Settlement gain
(84
)
 

 
(91
)
 

Curtailment gain
(34
)
 

 
(34
)
 
(5
)
Net periodic benefit cost
$
26

 
$
135

 
$
1,107

 
$
240

Note 16. Other balance sheet items
Trade and other receivables, net
The following summarizes the balances of trade and other receivables, net as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Gross trade and other receivables
$
34,625

 
$
49,942

Allowance for doubtful accounts
(878
)
 
(1,061
)
Total trade and other receivables, net
$
33,747

 
$
48,881

Our allowance for doubtful accounts as of September 30, 2017 and December 31, 2016 was approximately $0.9 million and $1.1 million, respectively. We have not experienced any significant write-offs to our accounts receivable.

21


Prepayments and other assets
The following summarizes the balances of prepayments and other assets as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Advances to suppliers
$
11,872

 
$
5,769

Prepaid income taxes
1,508

 
2,759

Prepaid other taxes(1)
10,627

 
15,343

Contract deposit (2)
2,700

 

Other assets
3,486

 
4,762

Total prepayments and other assets
$
30,193

 
$
28,633

_____
(1) 
Includes recoverable value-added tax and general consumption tax accumulated by our Mexico and Jamaica entities, respectively.
(2) Represents a cash deposit related to the Sanctuary Cap Cana management contract. We are in the process of negotiating final terms for the purchase of a 30% interest in the resort in 2018, and the deposit will be used towards this purchase if we are able to agree on terms. If the purchase is not completed, this amount, together with an additional $0.8 million due, will be treated as key money.
Goodwill
The gross carrying values and accumulated impairment losses of goodwill as of September 30, 2017 and December 31, 2016 are as follows ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Gross carrying value
$
51,731

 
$
51,731

Accumulated impairment loss

 

Carrying Value
$
51,731

 
$
51,731

Other intangible assets
The summary of other intangible assets as of September 30, 2017 and December 31, 2016 consisted of the following ($ in thousands):
 
As of September 30,
 
As of December 31,
 
Weighted average
 
2017
 
2016
 
useful life
Strategic Alliance
$
3,717

 
$
3,748

 
 
Licenses
991

 
987

 
 
Other
2,632

 
2,196

 
 
Acquisition Cost
7,340

 
6,931

 
 
 
 
 
 
 
 
Strategic Alliance
(3,693
)
 
(3,472
)
 
 
Other
(1,920
)
 
(1,484
)
 
 
Accumulated Amortization
(5,613
)
 
(4,956
)
 
 
 
 
 
 
 
 
Strategic Alliance
24

 
276

 
3 years
Licenses
991

 
987

 
 
Other
712

 
712

 
3 years
Carrying Value
$
1,727

 
$
1,975

 
 
Amortization expense for intangibles was $0.7 million and $0.7 million for the nine months ended September 30, 2017 and 2016, respectively. Amortization expense for intangibles was $0.2 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively. Our licenses have indefinite lives. Accordingly, there is no associated amortization expense or accumulated amortization. As of September 30, 2017 and December 31, 2016, such indefinite lived assets totaled $1.0 million.

22


Trade and other payables
The following summarizes the balances of trade and other payables as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Trade payables
$
14,377

 
$
21,229

Advance deposits
40,269

 
41,621

Withholding and other taxes payable
32,547

 
27,432

Accrued professional services
7,300

 
19,566

Interest payable
7,559

 
16,151

Payroll and related accruals
13,908

 
12,963

Other payables
11,828

 
6,080

Total trade and other payables
$
127,788

 
$
145,042

Other liabilities
The following summarizes the balances of other liabilities as of September 30, 2017 and December 31, 2016 ($ in thousands):
 
As of September 30,
 
As of December 31,
 
2017
 
2016
Tax contingencies
$
3,025

 
$
2,969

Pension obligations
4,552

 
3,556

Casino loan and license
994

 
1,027

Cap Cana land purchase obligation
10,625

 

Other
1,166

 
1,445

Total other liabilities
$
20,362

 
$
8,997

Note 17. Segment information
We consider each one of our hotels to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and assess operating performance based on individual hotels. Our operating segments meet the aggregation criteria and thus, we report three separate segments by geography: (i) Yucatán Peninsula, (ii) Pacific Coast and (iii) Caribbean Basin.
Our operating segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, all of whom represent our chief operating decision maker (“CODM”). Financial information for each reportable segment is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources. We did not provide a reconciliation of reportable segments' assets to our consolidated assets as this information is not reviewed by the CODM to assess performance and make decisions regarding the allocation of resources.
The performance of our operating segments is evaluated primarily on adjusted earnings before interest expense, income tax (provision) benefit, and depreciation and amortization expense (“Adjusted EBITDA”), which should not be considered an alternative to net (loss) income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. We define Adjusted EBITDA as net (loss) income, determined in accordance with U.S. GAAP, for the period presented, before interest expense, income tax (provision) benefit, and depreciation and amortization expense, further adjusted to exclude the following items: (a) other income (expense), net; (b) transaction expenses; (c) severance expense; (d) other tax expense; (e) share-based compensation; (f) loss on extinguishment of debt; (g) Jamaica delayed opening, (h) insurance proceeds and (i) repairs from hurricanes and tropical storms.
There are limitations to using financial measures such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income or loss generated by our business or discretionary

23


cash available for investment in our business and investors should carefully consider our U.S. GAAP results presented in our Condensed Consolidated Financial Statements.
The following tables present segment net revenue, a reconciliation to gross revenue and segment Adjusted EBITDA and a reconciliation to net (loss) income ($ in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Yucatàn Peninsula
$
59,630

 
$
56,883

 
$
209,305

 
$
189,640

Pacific Coast
15,872

 
15,121

 
67,377

 
58,178

Caribbean Basin
39,283

 
39,165

 
146,026

 
144,445

Segment net revenue (1)
114,785

 
111,169

 
422,708

 
392,263

Other
10

 
2

 
12

 
6

Tips
3,547

 
2,943

 
10,287

 
9,101

Total gross revenue
$
118,342

 
$
114,114

 
$
433,007

 
$
401,370

________
(1) Net revenue represents total gross revenue less compulsory tips paid to employees and other miscellaneous revenue not derived from segment operations.

Three Months Ended September 30,
 
Nine Months Ended September 30,

2017
 
2016
 
2017
 
2016
Adjusted EBITDA:
 
 
 
 
 
 
 
Yucatàn Peninsula
$
20,824

 
$
23,274

 
$
93,070

 
$
84,073

Pacific Coast
3,758

 
3,851

 
27,242

 
20,639

Caribbean Basin
7,281

 
6,760

 
42,853

 
43,763

Segment Adjusted EBITDA
31,863

 
33,885

 
163,165

 
148,475

Other corporate - unallocated
(7,544
)
 
(8,288
)
 
(23,354
)
 
(22,536
)
Total consolidated Adjusted EBITDA
24,319

 
25,597

 
139,811

 
125,939

Less:
 
 
 
 
 
 
 
Other (income) expense, net
(1,782
)
 
225

 
(1,191
)
 
2,414

Share-based compensation
1,843

 

 
2,803

 

Loss on extinguishment of debt

 

 
12,526

 

Transaction expenses
1,893

 
1,203

 
11,193

 
3,874

Severance expense

 

 
442

 

Other tax expense
175

 
309

 
598

 
971

Jamaica delayed opening expenses
(41
)
 

 
(152
)
 

Property damage insurance proceeds

 
(179
)
 

 
(309
)
Repairs from hurricanes and tropical storms (1)
765

 

 
765

 

Add:
 
 
 
 
 
 
 
Interest expense
(13,099
)
 
(13,418
)
 
(41,187
)
 
(40,619
)
Depreciation and amortization
(13,808
)
 
(13,022
)
 
(40,093
)
 
(38,809
)
Net (loss) income before tax
(5,441
)
 
(2,401
)
 
31,547

 
39,561

Income tax (provision) benefit
(226
)
 
841

 
(20,105
)
 
5,270

Net (loss) income
$
(5,667
)
 
$
(1,560
)
 
$
11,442

 
$
44,831

________
(1) Represents repairs and maintenance expenses incurred in connection with damage from Tropical Storm Lidia and Hurricane Maria at Hyatt Ziva Los Cabos and Dreams Punta Cana, respectively, which were included in direct expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

24


Note 18. Subsequent events
In preparing the interim Condensed Consolidated Financial Statements as of September 30, 2017, we have evaluated subsequent events occurring after September 30, 2017. Based on this evaluation, there were no subsequent events from September 30, 2017 through the date the Condensed Consolidated Financial Statements were issued.


The following discussion and analysis of Playa Hotels & Resorts N.V.'s ("Playa") financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements (our "Condensed Consolidated Financial Statements") and the notes related thereto which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, "we," "us," "our" and the "Company" refer to Playa and its subsidiaries.

Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this quarterly report constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect our current views with respect to, among other things, our capital resources, portfolio performance and results of operations. Likewise, our Condensed Consolidated Financial Statements and all of our statements regarding anticipated growth in our operations, anticipated market conditions, demographics and results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases.
The forward-looking statements contained in this quarterly report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
general economic uncertainty and the effect of general economic conditions on the lodging industry in particular;
the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market;
the success and continuation of our relationship with Hyatt;
the volatility of currency exchange rates;
the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the future, including the rebranding of two of our resorts under the new all-inclusive “Panama Jack” brand;
our failure to successfully complete expansion, repair and renovation projects in the timeframes and at the costs anticipated;
significant increases in construction and development costs;
our ability to obtain and maintain financing arrangements on attractive terms;
the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which we operate;
the effectiveness of our internal controls and our corporate policies and procedures and the success and timing of the remediation efforts for the material weaknesses that we identified in our internal control over financial reporting;
changes in personnel and availability of qualified personnel;
environmental uncertainties and risks related to adverse weather conditions and natural disasters;
dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;

25



the volatility of the market price and liquidity of our ordinary shares and other of our securities; and
the increasingly competitive environment in which we operate.
 
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this quarterly report, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements).
Explanatory Note
At 12:00 a.m. Central European Time on March 12, 2017 (the "Closing Time"), we consummated a business combination (the "Business Combination") pursuant to that certain transaction agreement by and among us, Playa Hotels & Resorts B.V. (our "Predecessor") and Pace Holdings Corp. ("Pace"), an entity that was formed as a special purpose acquisition company, for the purpose of effecting a merger or other similar business combination with one or more target businesses, and New Pace Holdings Corp. In connection with the Business Combination, which is described in detail in our Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on March 14, 2017, we changed our name from Porto Holdco N.V. to Playa Hotels & Resorts N.V. In addition, in connection with the Business Combination, (i) prior to the consummation of the Business Combination, all of our Predecessor's cumulative redeemable preferred shares were purchased and were subsequently extinguished upon the reverse merger of our Predecessor with and into us, (ii) Pace's former shareholders and our Predecessor's former shareholders received a combination of our ordinary shares and warrants as consideration in the Business Combination. Our Predecessor was the accounting acquirer in the Business Combination, and the business, properties, and management team of our Predecessor prior to the Business Combination are the business, properties, and management team of the Company following the Business Combination.
Our financial statements, other financial information and operating statistics presented in this Form 10-Q reflect the results of our Predecessor for all periods prior to the Closing Time. Our financial statements and other financial information also include the consolidation of Pace from the Closing Time of the Business Combination to September 30, 2017.
Overview
We are a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. As of September 30, 2017, we owned a portfolio consisting of 13 resorts (6,130 rooms) located in Mexico, the Dominican Republic and Jamaica. In addition, we signed an agreement pursuant to which, beginning on October 1, 2017, we began managing a resort owned by a third party, located in the Dominican Republic. We believe that the resorts we own, as well as the resorts we manage, are among the finest all-inclusive resorts in the markets they serve. All of our resorts offer guests luxury accommodations, noteworthy architecture, extensive on-site activities and multiple food and beverage options. Our guests also have the opportunity to purchase upgrades from us such as premium rooms, dining experiences, wines and spirits and spa packages.
For the three months ended September 30, 2017, we generated a net loss of $5.7 million, total revenue of