LuxUrban Hotels Inc. Provides Preliminary Unaudited 2023 Fourth Quarter and Full Year Financial Results
- LuxUrban Hotels Inc. reported a substantial increase in net rental revenue for 2023, reaching approximately $114.0 million compared to $43.8 million in 2022, driven by an expansion in available units and improved TRevPAR.
- EBITDA rose to approximately $30.6 million from $14.3 million, showcasing a significant growth in operational profitability.
- Adjusted EBITDA also saw a notable increase to approximately $35.0 million from $14.3 million, reflecting the company's improved financial performance.
- The company emphasized its strategic growth initiatives, including enhancing its working capital profile, focusing on higher-end properties, and improving Total RevPAR and operating margins.
- LuxUrban entered into a surety bond agreement to secure up to $10 million in surety bonds for future leases, aiming to support its growth and credit profile.
- The company provided an update on its 2024 priorities, highlighting its commitment to increasing its hotel portfolio, generating higher TRevPAR, improving EBITDA, and enhancing its cash flow profile.
- LuxUrban announced enhanced audit procedures and a delayed 10-K filing to ensure transparency and compliance with best practices in risk and audit procedures.
- The company decided not to host an earnings call in connection with its results due to ongoing audit procedures and the filing status of the 10-K, focusing on timely disclosures of material information.
- LuxUrban's business model focuses on securing long-term operating rights for hotels through Master Lease Agreements and renting out hotel rooms to travelers, with a strategic partnership with Wyndham Hotels & Resorts.
- The company provided non-GAAP financial metrics including EBITDA, Adjusted EBITDA, cash net income, and adjusted cash net income to evaluate and manage its business, highlighting its commitment to profitable, long-term growth.
- None.
Insights
The substantial rise in net rental revenue and EBITDA for LuxUrban Hotels Inc. reflects a strong year-over-year operational performance. The shift in strategy towards higher-end properties and the shedding of underperforming assets are strategic moves to improve the company's revenue quality and operating margins. The collaboration with Wyndham could provide a competitive edge in marketing and distribution, potentially enhancing the company's brand recognition and customer reach.
The significant increase in net loss, however, raises questions about the sustainability of growth and the effectiveness of the current business model. The surety bond agreement indicates a proactive approach to financing growth, but the reliance on such instruments may also signal underlying challenges in cash flow generation. The reduction in total debt is a positive sign, suggesting management's focus on balance sheet health.
For investors, the key takeaway is the company's aggressive growth trajectory and its impact on financial stability. While the expansion and strategic partnerships could yield long-term benefits, the near-term financials indicate a period of investment and transition that requires careful monitoring.
LuxUrban's operational pivot towards high-end properties aligns with broader industry trends favoring quality over quantity. This strategy, combined with the partnership with Wyndham, positions LuxUrban to potentially capture a more affluent demographic. The focus on properties with higher Total RevPAR is indicative of a targeted approach to revenue maximization.
However, the hospitality industry is highly competitive and sensitive to economic fluctuations. The company's performance must be contextualized within the broader market dynamics, including travel trends and consumer spending patterns. Investors should consider the risks associated with LuxUrban's expansion strategy, particularly in light of the increased net losses and the ongoing need for capital to fund growth.
Overall, LuxUrban's strategy reflects a nuanced understanding of the hospitality market's current state and a calculated bet on its future direction. The success of this bet will depend on the company's ability to execute its growth strategy without compromising financial health.
The reported financials of LuxUrban Hotels Inc. come at a time when the hospitality sector is navigating post-pandemic recovery and shifting consumer preferences. The company's decision to streamline its portfolio and concentrate on higher-end properties suggests an anticipation of increased demand in this market segment. The reduction in total debt and the strategic use of surety bonds for lease acquisitions are reflective of a conscious effort to manage liquidity and solvency risks.
However, the reported net loss warrants attention. While it is not uncommon for companies in growth phases to incur losses, the scale and trend of these losses merit scrutiny. The company's long-term financial health will hinge on its ability to translate its strategic initiatives into sustainable profit margins. Furthermore, the reliance on non-GAAP measures such as EBITDA and adjusted EBITDA can sometimes obscure the real costs of expansion and should be analyzed in conjunction with GAAP measures for a comprehensive understanding of the company's financial position.
Investors should be cognizant of macroeconomic factors such as interest rates, inflation and consumer confidence, which could impact the hospitality sector's recovery trajectory and, by extension, LuxUrban's performance.
2023 Net Rental Revenue Increased to Approximately
EBITDA Rose to Approximately
Adjusted EBITDA Rose to Approximately
“2023 was a transformative year for LuxUrban,” said Brian Ferdinand, Chairman of the Board. “We increased our portfolio of hotel properties under long-term Master Lease Agreement, increased net rental revenue and Adjusted EBITDA by
Mr. Ferdinand further stated, “We have an unwavering commitment to elevating LuxUrban’s industry profile and expanding the adoption of our distinct and successful operating model. In a little more than 18 months, we have grown from a newly public start up to an evolving and maturing operator of a wide range of hotel properties in destination cities. In that time, we have learned a lot and have gained a better understanding of the inherent opportunities and complexities of our industry. Although there is still much work to be done, we have responded in kind so that we may fully capitalize on these prospects while both addressing the concerns of and delivering long-term value to our shareholders. We added industry veterans Elan Blutinger and Kim Schaefer to the Board of Directors, and Robert Arigo as Chief Operating Officer. We remain focused on attracting the management, personnel, and capital necessary to execute on our vision and reach our full potential.”
“Following a period of significant expansion, we have adopted a more strategic approach to growth in 2024 with a focus on improving our working capital profile, receivables, and free cash flow,” said Shanoop Kothari, Co-CEO and Chief Financial Officer. Mr. Kothari further stated, “Our pipeline of potential operating rights acquisitions remains strong, and we expect to continue to increase our portfolio of hotels under long-term Master Lease Agreement throughout release entitled end, we have taken an important step to finance future lease acquisitions by entering into a master collateral trust agreement that provides us with up to an aggregate of
As a result of the transition to the Wyndham platform in the fourth quarter of 2023, net rental revenue for Q4 and full year 2023 reflected a one-time negative impact of approximately
Select Preliminary Unaudited Full Year 2023 Financial Results Overview
All comparisons are to the full year ended December 31, 2022 (“FY 2022”) as audited unless otherwise stated.
-
Net rental revenue rose
160% to approximately$114.0 million $43.8 million $119 million -
TRevPAR improved to approximately
$250 $247 $261 -
Net loss was approximately
$65.2 million $9.4 million $60.8 million -
EBITDA increased to approximately
$30.6 million $14.3 million $35.0 million $14.3 million -
Cash Net Income adjusted for non-cash items including the surrender of deposits, as well as bad debt expense, was
$1.6 million $5.6 million $15.3 million -
Total debt declined to approximately
$4.3 million $14.0 million
Select Preliminary Unaudited Q4 2023 Financial Results Overview
All comparisons are to the fourth quarter ended December 31, 2022 (“Q4 2022”) unless otherwise stated.
-
Net rental revenue rose
117% to approximately$28.2 million $12.9 million -
Net rental revenue pro-forma for the impact of the Wyndham transition for Q4 2023 would have risen
156% to approximately$33.2 million $12.9 million -
Adjusted EBITDA increased to approximately
$6.2 million $5.9 million $10.7 million $5.9 million
Property Summary
- As of December 31, 2023, the Company leased 18 properties with 1,599 units available for rent
-
In March of 2024, the Company surrendered four properties that had created a consistent drag on its operating results, the characteristics of which included: 1) demonstrated poor performance, 2) in markets that have deteriorated since the signing of the lease, 3) possessed suboptimal size and scale, and 4) of a quality that could create other risks to the Company. In addition, in late 2023, the Company decided to not move forward on a previously agreed to Master Lease Agreement due to repairs not being completed by the landlord. As a result of this, the Company wrote off approximately
$3.0 million $2.8 million - After giving pro forma effect to the surrender of these properties, at December 31, 2023, the Company leased 14 properties with 1,406 units available for rent, with an average weighted lease term of 14.2 years and 19.0 years, including extension options
____________________________________________________________
1The Company defines Total RevPAR (or TRevPAR) as total revenue received by the Company inclusive of room rental rates, ancillary fees (which include but are not limited to resort fees, late/early check-in, baggage fees, parking fees paid to us, and upgrade fees), cancellation fees, taxes (including other pass-through expenses) and other miscellaneous income received by the Company, divided by the average available rooms for rent during a given period.
Surety Bond Agreement
In March 2024, the Company entered into an agreement to secure surety bonds for future leases. The provider of the bond is currently rated A+ by A.M. Best (Superior).
The agreement will provide the Company with up to an aggregate of
The terms of this agreement are reviewed annually and the Company believes as its continues to grow and improve its credit profile, the amount it is required to post will decrease over time while the size of the facility will increase over time. The Company anticipates this will fulfill in most instances where accepted by landlord the entire upfront deposit on an absolute dollar basis in connection with various key money arrangements the Company has entered into or is contemplating.
“This is a significant step to institutionally capitalize the business," said Mr. Kothari. “We have made significant strides in growing the business and believe that the willingness of a highly rated surety bond provider to back LuxUrban is an indication of its support of the Company and a validation of our business model."
2024 Guidance Update
For full year 2024, the Company has committed the following priorities:
- increase its portfolio of hotels under long term Master Lease Agreement with a focus on higher-quality 3.5 star to 4.5-star properties
- generate increased TRevPAR compared to 2023, driven by portfolio expansion, the addition of 3.5 star to 4.5-star properties to the portfolio, and an increase in ancillary revenues
- generate increased EBITDA compared to 2023
- improve its working capital profile, receivables, and cash flow profile by adopting a slower pace of acquisitions, increasing Total RevPAR, and realizing the benefits of the above referenced surrender of certain underperforming leases
Although the Company believes that its prior guidance for 2024 is achievable, its ability to do so may be impacted by the above-referenced priorities and other corporate initiatives. The Company expects to quantify its 2024 guidance later this year.
Institutes Enhanced Audit Procedures; Updates 10-K Filing Timeline
On the recommendation of the Audit Committee and with the full support of management, the Company has expanded its annual audit procedures as part of its adoption of a more robust best practices risk and audit procedures protocol. This review is consistent with its commitment to full transparency regarding its operations.
The Company has engaged Grassi Advisors and Accountants, its independent registered public accounting firm, to conduct a thorough internal review of certain aspects of the Company’s operations.
Due to the expanded nature of the audit and time required to complete it, the Company plans to file a Form 12b-25, Notification of Late Filing, with the
The Company does not expect material changes to its operating financial results for the fourth quarter and full year ended December 31, 2023 as a result of the completion of its audit, including with respect to these expanded audit procedures.
Investor Call
In light of the ongoing, enhanced audit procedures and the filing status of the 10-K, the Company will not host an earnings call in connection with these results, and the event previously scheduled for March 27, 2024 at 10:00 AM EDT has been cancelled. Management will continue to make timely disclosures of material information regarding the filing of its Annual Report on Form 10-K, the completion of the expanded audit process, and any other corporate developments.
LuxUrban Hotels Inc.
LuxUrban Hotels Inc. secures long-term operating rights for entire hotels through Master Lease Agreements (MLA) and rents out, on a short-term basis, hotel rooms to business and vacation travelers. The Company is strategically building a portfolio of hotel properties in destination cities by capitalizing on the dislocation in commercial real estate markets and the large amount of debt maturity obligations on those assets coming due with a lack of available options for owners of those assets. LuxUrban’s MLA allows owners to hold onto their assets and retain their equity value while LuxUrban operates and owns the cash flows of the operating business for the life of the MLA. Through its partnership with Wyndham Hotels & Resorts, the largest hotel company in the world by rooms, LuxUrban gains several competitive advantages including joint branding for marketing, sales, and distribution, capital allocation from Wyndham for each hotel it acquires, and ongoing customer support and training across its portfolio.
Non-GAAP Information
The Company defines EBITDA as net income (loss) before income taxes and other taxes, interest and financing costs, non-cash compensation expense, non-cash expenses associated with common stock issuance and stock options, non-cash rent expense amortization, depreciation and amortization, non-cash financing costs, costs associated with its exit from SoBeNY, incremental processing and channel financing fees, legacy union costs, non-cash write offs associated with its exit from the apartment rental business, and bad debt expense. Adjusted EBITDA is defined as EBITDA less the estimated impact of the Wyndham transition.
The Company defines cash net income as net income (loss) before non-cash stock compensation expense, non-cash expenses associated with common stock issuance and stock options, non-cash rent amortization expense, accrued taxes, depreciation and amortization, non-cash financing costs, and non-cash write off associated with its exit from the apartment rental business. Adjusted cash net income is defined as cash net income less costs associated with the Company’s exit from SoBeNY and bad debt expense.
The Company seeks to achieve profitable, long-term growth by monitoring and analyzing key operating metrics, including EBITDA, Adjusted EBITDA, cash net income, and adjusted cash net income. The Company’s management uses these non-GAAP financial metrics and related computations to evaluate and manage the business and to plan and make near and long-term operating and strategic decisions. The management team believes these non-GAAP financial metrics are useful to investors to provide supplemental information in addition to the GAAP financial results. Management reviews the use of its primary key operating metrics from time-to-time.
EBITDA, Adjusted EBITDA, cash net income, and adjusted cash net income are not intended to be a substitute for any GAAP financial measure and as calculated, may not be comparable to similarly titled measures of performance of other companies in other industries or within the same industry. The Company’s management team believes it is useful to provide investors with the same financial information that it uses internally to make comparisons of historical operating results, identify trends in underlying operating results, and evaluate its business. For purposes of the guidance provided herein for the year ended December 31, 2024, however, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation could not be accomplished without unreasonable effort. Non-GAAP measures for future periods, which cannot be reconciled to the most comparable GAAP financial measures are calculated in a manner which is consistent with the accounting policies applied in the Company’s consolidated financial statements.
Attached to this release is a preliminary reconciliation of the nonGAAP measures of EBITDA, Adjusted EBITDA, cash net income and adjusted net income to net loss, which management believes are the nearest correlated GAAP measures. This reconciliation is based on the preliminary unaudited data presented in this release and should not be relied upon. The Annual Report on Form 10-K for the year ended December 31, 2023 will contain a final reconciliation when filed with the SEC.
Forward Looking Statements
This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). The statements contained in this release that are not purely historical are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Generally, the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this release may include, for example, statements with respect to the success of the Company’s collaboration with Wyndham Hotels & Resorts, scheduled property openings, expected closing of noted lease transactions, the Company’s ability to continue closing on additional leases for properties in the Company’s pipeline, as well the Company’s anticipated ability to commercialize efficiently and profitably the properties it leases and will lease in the future. The forward-looking statements contained in this release are based on current expectations and belief concerning future developments and their potential effect on the Company. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements are subject to a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results of performance to be materially different from those expressed or implied by these forward-looking statements, including those set forth under the caption “Risk Factors” in our public filings with the SEC, including in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, and any updates to those factors as set forth in subsequent Quarterly Reports on Form 10-Q or other public filings with the SEC. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.
Non-GAAP Financial Measures
To supplement the condensed consolidated financial statements, which are prepared in accordance with GAAP, we use EBITDA and cash net income as non-GAAP financial measures. We define EBITDA and cash net income above in the paragraph entitled “Non-GAAP Information.”
The following table provides reconciliation of our preliminary unaudited net income (loss) to EBITDA and cash net income. While management believes the following reconciliation will not materially change following completion of the audit, the following information is based on preliminary unaudited estimates and cannot be deemed final until the filing of the Company’s Annual Report on Form 10-K for the year ended December 31 2023. Such Annual Report on Form 10-K will include a final reconciliation with respect to the information presented below:
For The Year Ended |
||||
($ in millions) |
December 31, |
|||
2023 |
2022 |
|||
Net Loss |
$ |
(65.2) |
$ |
(9.4) |
Non-Cash Financing, Stock Compensation Expense, Stock Option Expense, Rent Expense Amortization, Issuance of Common Stock |
|
60.3 |
|
6.5 |
Taxes and Cash Interest and Financing Costs |
|
11.6 |
|
6.1 |
Depreciation and Amortization Expense |
|
0.6 |
|
2.1 |
Exit Apartment Rental Costs, Restructuring Costs, Legacy Union Costs and Bad Debt Expense |
|
17.7 |
|
4.1 |
Non-Cash Write Off Net Right-of-Use Assets Associated With Apartment Rental Exit |
|
- |
|
2.4 |
Incremental Processing and Channel Financing Fees For Credit Risk |
|
5.5 |
|
2.5 |
EBITDA |
$ |
30.6 |
$ |
14.3 |
Estimated Net Wyndham Transition Impact |
|
4.5 |
|
- |
Adjusted EBITDA |
$ |
35.0 |
$ |
14.3 |
Net Loss |
$ |
(65.2) |
$ |
(9.4) |
Non-Cash Financing, Stock Compensation Expense, Stock Option Expense, Rent Expense Amortization, Issuance of Common Stock |
|
60.3 |
|
6.5 |
Non-Cash Write Off of Net Right of Use Assets Associated with Apartment Rental Exit |
|
- |
|
2.4 |
Depreciation and Amortization Expense |
|
0.6 |
|
2.1 |
Surrender of Deposits and Bad Debt Expense |
|
5.9 |
|
- |
Cash Net Income |
$ |
1.6 |
$ |
1.5 |
Exit Apartment Rental and Restructuring Costs |
|
9.2 |
|
4.1 |
Estimated Net Wyndham Transition Impact |
|
4.5 |
|
- |
Adjusted Cash Net Income |
$ |
15.3 |
$ |
5.6 |
For The Three Months
|
||||||
December 31, |
||||||
($ in millions) |
2023 |
2022 |
||||
Net Loss |
$ |
(40.6) |
$ |
(8.4) |
||
Non-Cash Financing, Stock Compensation Expense, Stock Option Expense, Rent Expense Amortization, Issuance of Common Stock |
|
21.6 |
|
2.2 |
||
Taxes and Cash Interest and Financing Costs |
|
6.1 |
|
2.8 |
||
Depreciation and Amortization Expense |
|
0.5 |
|
2.1 |
||
Exit Apartment Rental Costs, Restructuring Costs, Legacy Union Costs, and Bad Debt Expense |
|
16.5 |
|
2.3 |
||
Non-Cash Write Off of Net Right-of-Use Assets Associated with Apartment Rental Exit |
|
- |
|
2.4 |
||
Incremental Processing and Channel Financing Fees for Credit Risk |
|
2.1 |
|
2.5 |
||
EBITDA |
$ |
6.2 |
$ |
5.9 |
||
Estimated Net Wyndham Transition Impact |
|
4.5 |
|
- |
||
Adjusted EBITDA |
$ |
10.7 |
$ |
5.9 |
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240326885286/en/
Shanoop Kothari
Co-Chief Executive Officer & Chief Financial Officer
LuxUrban Hotels Inc.
shanoop@luxurbanhotels.com
Devin Sullivan
Managing Director
The Equity Group Inc.
dsullivan@equityny.com
Conor Rodriguez, Analyst
crodriguez@equityny.com
Source: LuxUrban Hotels Inc.
FAQ
What was the percentage increase in net rental revenue for LuxUrban Hotels Inc. in 2023 compared to 2022?
What is the purpose of the surety bond agreement entered into by LuxUrban Hotels Inc.?
What are LuxUrban's priorities for 2024 as mentioned in the press release?
How did LuxUrban describe its business model in the press release?
What non-GAAP financial metrics did LuxUrban provide in the press release?
Why did LuxUrban decide not to host an earnings call in connection with its results?
