Sign in

You're signed outSign in or to get full access.

LH

LUXURBAN HOTELS INC. (LUXH)·Q1 2024 Earnings Summary

Executive Summary

  • Net rental revenue rose 27.6% year over year to $29.1M, with adjusted EBITDA of $2.5M; the quarter was burdened by elevated other expenses and non-cash charges related to exiting the Wyndham franchise, driving a net loss of $(16.8)M and gross loss of $(4.6)M .
  • Management unwound the Wyndham franchise agreements and expects de-platforming to complete by end of May 2024; the shift back to independent operations is intended to improve flexibility, revenue management, and ancillary monetization .
  • Q1 occupancy was 77% and Total RevPAR was $208, above property-level breakeven ($160–$180/night); management expects Total RevPAR to rise quarter-over-quarter in the remainder of 2024 .
  • Q1 revenue of $29.1M came in above the midpoint of the prior outlook of $27–$30M; consensus estimates from S&P Global were unavailable to compare EPS/Revenue results (unavailable via SPGI mapping) .
  • Near-term stock reaction catalysts: de-franchising and tech/ancillary rollout (Cloudbeds, Amazon/Alexa pilots) versus near-term cash drain risks from liability settlements tied to franchise unwind and elevated costs; management reiterated a 20% EBITDA margin goal over time .

What Went Well and What Went Wrong

What Went Well

  • Net rental revenue grew 27.6% YoY to $29.1M on higher average units available (1,535 vs. 571), despite mix and franchise exit headwinds; “bookings outlook…as we enter the seasonally stronger spring and summer months is encouraging” .
  • Management expects Total RevPAR to rise quarter-over-quarter for the remainder of 2024; “we estimate property level breakeven to be at $160 to $180 per night, so we're still well above that threshold” .
  • Strategic reset to independent operations: “we believe that these initiatives are necessary…priorities for 2024 include improving our working capital resources and cash flow profile while also enhancing our balance sheet and delivering organic revenue growth” .

What Went Wrong

  • Gross margin swung to a loss: gross (loss) profit $(4.6)M vs. $5.4M a year ago, with Other Expenses rising by $12.1M tied to commissions, relocation, employee costs, and property surrenders .
  • Total operating expenses rose to $7.6M (26.2% of revenue) including $2.7M non-cash “partnership considerations” from the franchise exit and $1.6M other non-cash charges; adjusted EBITDA fell to $2.5M from $4.0M .
  • Net loss widened to $(16.8)M (EPS $(0.35)), including $2.5M cash interest and financing costs and $2.3M non-cash financing costs; Q&A clarified add-backs include property taxes paid in advance in adjusted EBITDA .

Financial Results

MetricQ1 2023Q3 2023Q4 2023Q1 2024
Net Rental Revenue ($USD Millions)$22.814 $31.2 $27.5 $29.101
Gross (Loss) Profit ($USD Millions)$5.362 $7.8 —$(4.595)
Net (Loss) Income ($USD Millions)$(2.781) $4.9 —$(16.786)
Basic EPS ($USD)$(0.10) $0.11 —$(0.35)
EBITDA ($USD Millions)—$8.4 ——
Adjusted EBITDA ($USD Millions)$4.040 ——$2.542
Cash and Cash Equivalents ($USD Millions)——$0.753 $0.995

KPIs and Operating Metrics

KPIQ3 2023Q4 2023Q1 2024
RevPAR / TRevPAR ($)YTD RevPAR $274 —Total RevPAR $208
Occupancy (%)81% (first nine months) —77%
Properties Leased (as of period-end)16 (Sep 30) 14 (Dec 31) 13 (Mar 31)
Units Available for Rent (as of period-end)1,446 (Sep 30) 1,406 (Dec 31) 1,341 (Mar 31)
Avg Units Available During Period——1,535
Guests Welcomed (during period)——~120,000
Property-Level Breakeven ($/night)——$160–$180

Notes:

  • Estimates from S&P Global for Q1 2024 revenue/EPS were unavailable (SPGI mapping failure); therefore, no consensus comparison is shown .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ActualChange
Net Rental RevenueQ1 2024$27–$30M $29.1M Achieved above midpoint
EBITDA Margin (%)FY 2024 (near-term)Target 20% (25% LT) Mgmt “expects margins to continue to rise during 2024 to our stated goal of 20% EBITDA margins” Maintained
Net Rental RevenueFY 2024$220–$240M “expects to increase net rental revenue…will provide more specific guidance” Withdrawn/qualitative only
EBITDA ($M)FY 2023$25–$30M EBITDA $25.3M; Adjusted EBITDA $29.8M Achieved lower end

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
Technology initiativesAnnounced Amazon Hospitality pilot; leveraging Wyndham tech; scale benefits on processing and supplies Pursuing “high tech” in-room experience with Amazon/Alexa; focus on simple, usable tech; Cloudbeds PMS transition complete in ~4 days Progressing pilots and platform shift; independent stack
Revenue management & ancillaryFocus on ancillary revenue (early/late, bundled services); expected 3–5% margin lift over time Building valet, in-room dining, grab-and-go marketplaces; expect revenue impact to be guided by Q3; many partnerships structured on net profit share, limited CapEx Expanding ancillary monetization in H2
Portfolio/RegionalNYC robust; seasonal markets require targeted actions; RevPAR mix/seasonality affected Q3 Q1 occupancy 77%; NYC near max capacity; expecting stronger May–June and improving fall Y/Y by +3–4% Momentum in NYC; seasonal normalization
Franchise/Brand strategyWyndham partnership expected to drive distribution and lower OTA commissions Terminated Wyndham franchise agreements; de-platforming in May; move to independent branding and SOPs Strategic pivot to independence
Financing/Working capitalSurety bond up to $10M for lease deposits; working capital improved in 2023 Exploring financing alternatives post-Wyndham; acknowledgment of cash drain timing for returning key cash liabilities; cautious expansion Seeking alternatives; manage cash impacts
Guidance postureRobust 2023/2024 guidance (revenue and EBITDA) Q1 2024 outlook met; 2024 guidance now qualitative; margins targeted 20% More conservative/qualitative while resetting operations

Management Commentary

  • “We reported Q1 2024 net rental revenue of $29.1 million… and adjusted EBITDA of $2.5 million… We have taken a series of actions designed to stabilize our operations, refine our strategy… While some of these choices have been difficult, notably our decision to unwind our franchise partnership with Wyndham, we believe that these initiatives are necessary.” — Shanoop Kothari, CEO/CFO .
  • “We remain laser-focused on rebuilding trust with our stakeholders… The most significant of these initiatives is our mutual decision to unwind our franchise agreement with Wyndham… We expect that process to be completed by the end of May 2024 with minimal operational disruption.” — Shanoop Kothari .
  • “Adjusted EBITDA was $2.5 million… we expect margins to continue to rise during 2024 to our stated goal of 20% EBITDA margins.” — Shanoop Kothari .
  • “Our goal… is a revamped approach to revenue management… with new ancillary income opportunities such as valet, in-room dining concepts, grab-and-go marketplaces… expected by Q3, we expect to give guidance on impact to revenues.” — Robert Origo, COO .

Q&A Highlights

  • Wyndham unwind rationale: “mutually… didn’t make sense… metrics laid out… didn’t get to that point” .
  • Other Expenses surge detail: driven by property surrenders and incremental commission, relocation, labor, OTA costs; expect normalization toward Q3 2023 levels .
  • “Partnership considerations” line item: accruals; non-cash, non-recurring .
  • Adjusted EBITDA tax add-back: relates to property taxes paid in advance, expensed on payment .
  • Occupancy and revenue impact from de-platforming: Q1 occupancy 77%; no expected negative impact to room rates or revenues from exiting Wyndham .
  • PMS/Tech stack: moving back to Cloudbeds; transition was seamless (~4 days); pursuing Amazon/Alexa in-room tech .
  • Liability return and cash drain: booked as a liability; eventual cash outflow expected upon return timing .
  • Pipeline timing: back-half loaded; announcements at opening, not before .

Estimates Context

  • S&P Global consensus estimates for Q1 2024 revenue and EPS were unavailable due to missing CIQ mapping for LUXH; as a result, comparison to Street consensus is not provided .
  • Company-delivered Q1 revenue was above the midpoint of its prior outlook ($27–$30M vs. $29.1M actual), suggesting estimates may need to reflect stronger near-term RevPAR/occupancy into seasonally stronger periods .

Key Takeaways for Investors

  • Q1 delivered solid top-line growth and met prior revenue outlook, but profitability was pressured by elevated costs tied to franchise exit and property surrenders; adjusted EBITDA fell to $2.5M .
  • Strategic pivot away from Wyndham to independent operations increases control over revenue management and branding; execution risk near-term, but potential medium-term margin and RevPAR upside from ancillary initiatives .
  • Occupancy and NYC demand are strong; management expects Total RevPAR to rise sequentially through 2024, supporting improving EBITDA trajectory versus Q1 trough .
  • Watch cash/liquidity: liabilities tied to franchise unwind may drain cash upon settlement; financing alternatives (surety bonds, others) are being explored to support lease deposits and growth .
  • Margin framework intact: management reiterated a 20% EBITDA margin near-term goal and 25% long-term ambition; current quarter below target reflects transition noise .
  • Portfolio trimming continues: properties leased decreased to 13 with 1,341 units at quarter-end, focusing on higher-quality assets; expect H2 updates as initiatives roll in .
  • Near-term trading implications: stock likely sensitive to updates on de-platforming completion, sequential RevPAR/occupancy data, ancillary revenue pilots, and financing/liability resolution timing .