LUXH Q2 2024 Reports $62.6M Deficit, Sees 15–18% ADR Growth in Q4
- ADR and RevPAR Upside: With the expiration of presold rooms, management expects a significant increase in ADR—potentially moving into the low 3s—with projected 15%-18% ADR growth in Q4, laying the groundwork for an improved RevPAR and revenue base.
- Operational Efficiency Improvements: The company has implemented a leaner, more cost‐efficient structure by reducing labor and overhead through its Lux 2.0 transition, which supports margin expansion and a more robust operating platform.
- Favorable New York Market Dynamics: Strong market fundamentals, including robust demand driven by improved Q1 bookings and a revitalized New York hospitality market, support future revenue growth and strengthen the company's long‑term outlook.
- Discounted Room Presales Impact Revenue: The reliance on preselling a significant portion of room inventory at rates substantially lower than market can depress current RevPAR and ADR, making near-term revenue recovery uncertain.
- Ongoing Legal and Settlement Risks: Potential legal costs and settlement expenses from exiting non-strategic properties (e.g., Florida and L.A.) might continue to weigh on margins and impair financial performance.
- High Working Capital Deficit and Liquidity Concerns: A working capital deficit of over $60 million raises concerns about liquidity and the ability to finance operations without further capital infusions, despite efforts to raise funds and streamline costs.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
RevPAR Growth | Q4 2024 | no prior guidance | Substantial growth expected in 2025 due to the release of inventory from presold rooms | no prior guidance |
ADR | Q4 2024 | no prior guidance | Expected to be in the low $300s if market conditions remain stable, with at least 15% growth anticipated in Q4 2024, potentially reaching 18% | no prior guidance |
EBITDA Margins | FY 2025 | no prior guidance | Potentially in the range of 25% to 30% in a clean first year without the impact of presold rooms | no prior guidance |
Cost Management | Q4 2024 | no prior guidance | Overhead reduced by a few million dollars, with costs expected to remain relatively low | no prior guidance |
Cash Flow | Q4 2024 | no prior guidance | Focus on becoming cash flow positive and reducing liabilities, including unearned revenue from presold rooms | no prior guidance |
NASDAQ Compliance | Q4 2024 | no prior guidance | Plans to address compliance issues potentially through a reverse stock split to increase stock price above $1 and achieve a market cap above $35 million | no prior guidance |
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Working Capital
Q: Capital raise offset deficit details?
A: Management confirmed a near-term net raise of $10M in Q3 to help reduce the working capital deficit of $62.6M, with presold revenue burning off about $2M monthly, setting a cleaner balance for the future. -
NASDAQ Compliance
Q: What’s the timeline for NASDAQ compliance?
A: They plan a reverse split with a proxy filing in 30–45 days and a hearing in October, aiming to push the market cap above $35M. -
Clean Outlook
Q: What’s the first-year outlook post-presell?
A: With the presold rooms expiring at year-end, management expects substantial RevPAR growth and a clean slate, driven by a significant ADR lift and streamlined operations. -
Market ADR
Q: What’s the current expected market ADR?
A: They anticipate market ADR to settle in the low $3 range, buoyed by strong Q1 conditions and improvements in occupancy patterns. -
Q3 Timeliness
Q: Can we expect timely Q3 results?
A: Management’s top goal is to deliver a clean, on‐time product for Q3 moving forward. -
One-Time Expenses
Q: Any notable one-time operating expenses?
A: While specific numbers weren’t provided, management noted that most one-time expenses occurred in Q1 along with some in Q2, with detailed figures forthcoming. -
Property Count
Q: Are current property figures final?
A: The team is comfortable with the current portfolio of 9 properties, with no plans for additional exits at this time. -
Lease Liabilities
Q: Any lingering liabilities from exited leases?
A: Most liabilities from exited properties, particularly in Florida and L.A., have been resolved; any remaining legal or settlement costs are expected to be minimal.
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