LuxUrban Hotels Inc. Announces Record 2022 Financial Results

2022 Net Rental Revenue Rose 105% to $43.8 Million from $21.4 Million in 2021

LuxUrban Hotels Inc. (Nasdaq: LUXH), which utilizes an asset-light business model to lease entire hotels on a long-term basis and rent out hotel rooms in these properties in key major metropolitan cities, today announced financial results for the full year ended December 31, 2022. 

2022 Full Year Financial Overview Compared to 2021 Full Year

• Net rental revenue rose 105% to $43.8 million from $21.4 million in 2021, driven primarily by an increase in average units available to rent from 473 for the twelve months ended December 31, 2021 to 680 for the twelve months ended December 31, 2022, as well as improved revenue per available room, or RevPAR, during this period.
• Gross profit rose to $12.4 million, or 28% of net rental revenue, from $2.1 million, or 9.9% of net rental revenue in 2021.
• Net loss of $(9.4) million, or $(0.40) per share, compared to net loss of $(2.2) million in 2021. Net loss in 2022 included:
  • $9.0 million of non-cash expenses related to rent expense amortization, stock compensation, depreciation, and financing;
  • $4.1 million of non-recurring cash expenses related to the exit of SoBeNY, the Company’s apartment rental business;
  • $5.5 million of cash interest and financing costs; and
  • Other income of $1.6 million
• Adjusted cash net income improved to $3.8 million from an adjusted cash net loss of $(2.2) million.
• EBITDA and Adjusted EBITDA increased to $8.3 million and $12.4 million in 2022, respectively, from $(0.6 million) for both EBITDA and Adjusted EBITDA in 2021.

Select 2022 Fourth Quarter Financial Overview Compared to 2021 Fourth Quarter

• Net rental revenue rose 79% to $12.9 million from $7.2 million in the 2021 fourth quarter, driven primarily by an increase in average units available to rent from 462 for the three months ended December 31, 2021 to 680 for the three months ended December 31, 2022, as well as improved RevPAR during this period.
• Gross profit excluding Non-Cash Rent Expense Amortization of $1.9 million rose to $4.0 million, or 31% of net rental revenue, from $1.7 million, or 24% of net rental revenue, in the 2021 fourth quarter.

2022 Full Year Operational Highlights Compared to 2021 Full Year

• RevPAR rose 99% to $247 from $124 in 2021.
• Increased short-term stay hotels under long-term Master Lease Agreements (MLA) to 10 from one in 2021.
• Increased total short-term rental units at period end to 844 units from 473 in 2021.
• Hosted approximately 220,000 guests, up from approximately 110,000 guests in 2021.

Select Recent 2023 Developments

• Increased total short-term stay hotel units under MLAs to more than 1,200 with the leasing of, and commencement of operations at, four short-term stay hotels in New York, Los Angeles, and Miami.
• Named Bradley Theodore LuxUrban’s First Brand Ambassador.
• Entered into Preferred U.S. Hotel Partnership with Indonesia’s NusaTrip.
• Increased Growth Capital by $5 million via Amended Revenue Share Agreement with strategic investor.

Financial Condition

At December 31, 2022, cash and cash equivalents and Treasury Bills totaled $3.7 million, restricted cash was $1.1 million, and total debt was $16.5 million, $9.1 million of which consisted of Senior Secured Notes, $2.0 million of short-term business financing, and other debt of $5.4 million. The Company estimates that total debt has been reduced by over $6 million subsequent to December 31, 2022 via its previously announced debt to equity conversion initiatives and debt paydown via cash generated from operations.

Commentary

“Our performance in 2022 reflected our thoughtful approach to creating a sustainable, scalable and predictable operating model,” said Brian Ferdinand, Chairman and Chief Executive Officer. “The costs and expenses we recorded in 2022 should not mask the significant progress we made in expanding our business and establishing a foundation for anticipated continued growth in 2023. We more than doubled net rental revenue, improved the efficiency of our operations, and, on an adjusted basis, reported our fifth consecutive quarter of positive EBITDA. We completed our initial public offering, underwent a corporate re-branding, increased our property portfolio on a fully funded basis, established LuxUrban’s presence in New Orleans, and added property density in New York City and Miami. We also exited our legacy apartment rental business, SoBeNY, as part of our plan to focus exclusively on the short-term stay hotel rental business. Although this shift resulted in non-recurring cash exit costs of $4.1 million in 2022, we believe that we are now well-positioned to capitalize on the ongoing recovery in global travel.”

Mr. Ferdinand continued, “The ongoing distress in hotel assets created by the pandemic and exacerbated by rapidly rising interest rates has resulted in new and challenging financial requirements for hotel owners and created an elongated multi-year opportunity for LuxUrban to secure long-term operating rights to quality, turnkey hotel properties at historic cycle lows. We plan to continue to expand our property portfolio throughout 2023 with selective, high-quality assets to drive further growth via our asset light business model, which includes exploring new locations in the U.S. and the expected opening of our first property in London during Q2 2023. We will continue to apply our advanced revenue management capabilities and plan to pursue previously untapped, high margin revenue streams at each of our leased properties beginning in the second quarter of 2023.”

“The continued scaling, maturation, and evolution of our business is expected to produce higher RevPAR, expanded margins, and accelerated free cash flow generation as we move through 2023,” said Shanoop Kothari, President and Chief Financial Officer. “Our previously announced amended Revenue Share Agreement and debt to equity conversions also strengthened our balance sheet. We expect that our working capital position will improve materially beginning in Q1 2023 and plan to direct a portion of our estimated free cash flow in 2023 towards substantially reducing or potentially eliminating debt by year end, while still meeting projected growth targets.”

2023 Guidance

The Company is currently in various stages of negotiation with multiple property owners to acquire the long-term operating rights for hotels in the United States and Europe. For the year ending December 31, 2023, the Company is reiterating its previous guidance of net rental revenue of $115 to $120 million and EBIDTA of $21 to $25 million.

This financial guidance for 2023 does not reflect any expected material positive contribution that the 2,500-3,000 total short term stay hotel units that the Company expects to have operational by December 31, 2023 will produce on net rental revenue and EBITDA.

This financial and operations guidance is based on, among other factors, current business, economic, and public health conditions; the status of the Company’s acquisition pipeline and its ability to enter into these potential leases; and its current view of forward-looking unit operating metrics.

LuxUrban Hotels Inc.

LuxUrban Hotels Inc. utilizes an asset light business model to lease entire hotels on a long-term basis and rent out hotel rooms in the properties it leases to business and vacation travelers through the company’s online portal and third-party sales and distribution channels. The company currently manages a portfolio of hotel rooms in New York, Washington D.C., Miami Beach, New Orleans and Los Angeles. As of the date of this release, the company has approximately 1,200 hotel rooms available for rent, and seeks to rapidly build its portfolio on favorable economics through the acquisition of additional accommodations that were dislocated or are underutilized as a result of the pandemic and current economic conditions. In late 2021, the company commenced the process of winding down its legacy business of leasing and re-leasing multifamily residential units, as it pivoted toward its new strategy of leasing hotels. This transition has been substantially completed.

Non-GAAP Financial Measures

To supplement the condensed consolidated financial statements, which are prepared in accordance with GAAP, we use EBITDA ,Adjusted EBITDA and Adjusted Cash Net Income as a non-GAAP financial measures.

EBITDA is defined as net income or loss before the impact of interest, taxes and depreciation and amortization. EBITDA is a key measure of our financial performance and measures our efficiency and operating cash flow before financing costs, taxes and working capital needs. Adjusted EBITDA adjusts for non-cash stock compensation expense, as well as the costs associated with the exit of our apartment rental business under SoBeNY. Adjusted EBITDA is a key measure of our financial performance as, like EBITDA, measures our efficiency and operating cash flow before non-cash stock compensation costs, financing costs, taxes and working capital as well as the one-time nature of exit costs associated with SoBeNY. We utilize EBITDA and Adjusted EBITDA because they provide us with an operating metric closely tied to the operations of the business.

The following table provides reconciliation of net loss to EBITDA, Adjusted EBITDA, and Adjusted Cash Net Income: