2023 Net Rental Revenue Increased to
Approximately $114.0 Million from $43.8 Million
EBITDA Rose to Approximately $30.6 Million
from $14.3 Million
Adjusted EBITDA Rose to Approximately $35.0
Million from $14.3 Million
LuxUrban Hotels Inc. (or the “Company”) (Nasdaq: LUXH,
LUXHP), a hospitality company which leases entire existing
hotels on a long-term basis and rents rooms in its hotels to
business and vacation travelers, including through its partnership
with Wyndham Hotels & Resorts (“Wyndham”), today announced
preliminary unaudited financial results for the fourth quarter (“Q4
2023”) and full year ended December 31, 2023, including cash net
income, adjusted cash net income, EBITDA, and adjusted EBITDA,
which are non-GAAP measures and are accompanied by reconciliation
tables in this release. As further discussed herein, the completion
of the Company’s audit for 2023 includes additional procedures that
are in process. While management believes the results herein will
not materially change following completion of the audit, the
information presented herein cannot be deemed final until the
filing of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2023. Accordingly, undue reliance should not be
placed on the preliminary results set forth herein.
“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 160% and 146%,
respectively, and signed a groundbreaking collaboration agreement
with Wyndham that provides financial, brand, and operating support
to advance our growth objectives on our existing portfolio.”
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 $10 million in surety bonds that can be used to fund deposit
requirements under long-term hotel leases (see the section of this
release entitled, “Surety Bond Agreement”). “We intend to focus on
higher end (3.5 star to 4.5 star) properties and adopt a slower
pace of acquisitions allowing us to better absorb the impact of our
growth on working capital. We have recently surrendered certain
underperforming leases in our non-core market that had created a
drag on our operating results and represented in total less than
200 keys. These properties are lower star, smaller in size, lower
occupancy and of shorter remaining lease terms. As a result of
this, we expect that Total RevPAR1 and operating margins will
improve from 2023 levels.”
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 $5
million from the onboarding of the Company’s initial hotels to the
Wyndham platform (“Wyndham Transition”), during which time these
hotel rooms were not available for rent. As of January 1, 2024, the
initial properties were onboarded to the Wyndham platform.
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
from $43.8 million, driven by an increase in average units
available to rent to 1,249 from 487, as well as an improvement in
TRevPAR. Adjusted for the impact for the Wyndham Transition, net
rental revenue was approximately $119 million for 2023.
- TRevPAR improved to approximately $250 from $247; as adjusted
for the Wyndham transition, TRevPAR for 2023 was $261.
- Net loss was approximately $65.2 million, compared to a net
loss of $9.4 million. Adjusted for the impact for the Wyndham
Transition, net loss was approximately $60.8 million.
- EBITDA increased to approximately $30.6 million from $14.3
million. Pro-forma the impact for the Wyndham transition, Adjusted
EBITDA increased to approximately $35.0 million from $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 as compared to $5.6 million in 2022. Adjusted for the
impact of the Wyndham Transition and the estimated costs for the
exit of the apartment rental business and restructuring, Cash Net
Income was $15.3 million.
- Total debt declined to approximately $4.3 million from total
debt of $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
from $12.9 million, driven by an increase in average units
available to rent to 1,548 from 680, as well as improved
TRevPAR.
- Net rental revenue pro-forma for the impact of the Wyndham
transition for Q4 2023 would have risen 156% to approximately $33.2
million from $12.9 million
- Adjusted EBITDA increased to approximately $6.2 million from
$5.9 million. Pro forma for the impact of the Wyndham transition,
adjusted EBITDA increased to approximately $10.7 million from $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 in security deposits and
accrued $2.8 million in potential claims against the Company. These
costs are included in the results above.
- 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 $10 million in surety bonds that can be used to fund deposit
requirements under long-term hotel leases. The bonds have a 70%
collateral requirement. For example, a $1,000,000 bond would
require us to maintain a collateral position of $700,000, which can
be deposited in either cash or in the form of a letter of credit.
In addition to collateral, we entered into an agreement of
indemnity with the provider. The bonds will cost 2.5% of the
penalty amount of each bond annually.
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 U.S. Securities and Exchange Commission
that allows for a 15-day grace period for the filing of its Form
10-K. The Company believes that this expanded audit procedure will
be completed in time so that it may file its Form 10-K within the
15-day grace period. As of the date of this release, there have
been no disagreements between the Company and its auditors, or
reason to believe the audit will not close within this time
frame.
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
Ended
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
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