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LUXURBAN HOTELS INC. (LUXH)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 net rental revenue was $27.5M, up 113% year over year, driven by unit growth and pricing power, but down sequentially due to the one-time Wyndham onboarding that temporarily removed rooms from sales channels and seasonal factors .
  • FY 2023 EBITDA rose 78% to $25.3M and Adjusted EBITDA rose 109% to $29.8M; margins (22% EBITDA, 26% Adjusted) reflect material non-cash and non-recurring items taken to “clean up” legacy issues; management expects 2024 results to be “cleaner” with fewer charges .
  • Q1 2024 guidance: net rental revenue $27–$30M; FY 2024 priorities include higher-quality assets, improved working capital/liquidity, increased TRevPAR, and higher EBITDA; G&A margin target tightened to 11–13% (vs. prior 10–12%) .
  • Key operational developments: full Wyndham platform integration, surety bond facility up to $10M for lease deposits, growing direct bookings via Wyndham (target >50% in 2024), and union payroll bonding in NYC raising per-key deposit capital requirements (~$5k/key added) but still attractive ROI .
  • S&P Global consensus estimates were unavailable for LUXH at time of analysis due to missing mapping; therefore, beat/miss vs. Street cannot be assessed (consensus unavailable via S&P Global) [SpgiEstimatesError].

What Went Well and What Went Wrong

What Went Well

  • “Following 2023’s significant growth, 2024 will be a period of measured expansion… enhancing the guest experience, and continuing to fortify our executive team and board,” with a robust pipeline and Wyndham support, positioning the company for scale and quality mix shift .
  • FY 2023 EBITDA increased to $25.3M; Adjusted EBITDA to $29.8M (pro forma for the Wyndham transition), demonstrating underlying profitability despite heavy non-cash/non-recurring charges taken to reset the business .
  • Direct Wyndham distribution ramping: ~22% of revenues in Q4 2023 from Wyndham franchise platform with management targeting >50% direct bookings by end of 2024, supporting commission savings and margin lift .

What Went Wrong

  • Q4 sequential revenue downtick vs. Q3 largely due to the one-time Wyndham platform onboarding that removed rooms from OTAs (~$5M revenue and ~$4.5M EBITDA impact), plus seasonality; rooms were not available to rent during transition .
  • 2023 included $61.1M in non-cash charges and $24.6M in non-recurring cash costs (exit from apartment business, surrender of underperforming leases, property tax timing change), obscuring core profitability, with cash on hand ending at ~$0.8M .
  • New NYC union payroll bonding requirements increased upfront per-key deposit capital from ~$14–15k to ~$20–21k, tightening near-term working capital and raising capital intensity for scaling union properties .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$31.9 $31.2 $27.5
EPS ($USD)$(0.78) $0.11 N/A (not disclosed in Q4 materials)
Gross Profit Margin %31.8% 25.0% N/A
EBITDA Margin %26.5% 27.0% N/A
YoY ComparisonQ4 2022Q4 2023
Revenue ($USD Millions)$12.9 $27.5
YoY Growth (%)—113.2% (derived from $27.5 vs $12.9)
KPIs and Operating MetricsQ2 2023Q3 2023FY 2023
TRevPAR ($ per night)$291 (YTD) $274 (YTD) $249 (FY)
Occupancy (%)—81% (first nine months) —
Avg. Units Available to Rent1,086 1,423 1,249 (avg)
Property-Level Breakeven TRevPAR——$160–$180 per night
Leased Properties / Units at 12/31/23——14 properties / 1,406 units

Notes:

  • Q4 margins were not separately disclosed; FY margin context: EBITDA 22%, Adjusted EBITDA 26% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Rental Revenue ($)Q1 2024—$27–$30M New
G&A Margin (%)FY 202410–12% 11–13% Raised (narrowed higher)
Direct Bookings via Wyndham (%)FY 2024 (end)—“Could exceed 50%” New directional target
EBITDA Margin Goal (%)LT Target25%+ (long-term), 20%+ (near-term) Reiterated margin goals Maintained
Net Rental Revenue (directional)FY 2024Increase vs. 2023 Increase vs. 2023; more specific guidance to come Maintained (specifics pending)

Earnings Call Themes & Trends

TopicQ2 2023 (Prior-2)Q3 2023 (Prior-1)Q4/FY 2023 (Current)Trend
Wyndham PartnershipAnnounced; expected commission savings and key money; integration underway Fully onboarded 17 initial properties; distribution and margin benefits emphasized Onboarding completed; 22% of Q4 revenue via Wyndham; target >50% direct by YE’24 Strengthening distribution, margin tailwinds
Ancillary RevenueStrategic focus to add 5% top-line, 3–5% margin over 2–4 quarters Amazon Hospitality pilot and other partnerships in discussion COO hired to drive ancillary revenue; initiatives underway Executing initiatives
Working Capital & ReceivablesProcessor holdbacks improving; plan to release over coming quarters Working capital improved; continued focus Expect improvements by Q2–Q3 2024; NYC receivables collection; union bonds increased deposit needs Improving with near-term capital headwinds
Union/Labor——New payroll bond requirement in NYC adds ~$5k/key deposits; still attractive ROI per key New capital requirement headwind
RevPAR & SeasonalityYTD RevPAR $291; mix and summer seasonality tailwinds YTD RevPAR $274; slight softening due to onboarding/seasonality Adjusted for onboarding, Q4 RevPAR “low $200s”; resilient vs typical NYC seasonal downtick Resilient despite transition
Tax/Accounting Changes—Tax benefit tied to rev share deductibility; normalized 2024 tax rate later Expensed property taxes timing shift; 2023 burdened; cleaner in 2024 “Clean-up” completed

Management Commentary

  • “We believe that we have properly aligned our operations to the market, stripped away operational drags to our financial performance, fortified our fiscal foundation, and put ourselves on the path to generate improving results in 2024” — Shanoop Kothari, Co-CEO & CFO .
  • “With a refined approach and seasoned industry veterans joining the team, the opportunity for LuxUrban is more exciting than we could ever have foreseen… focused on customer engagement and professional hotel operations up to industry standards” — Brian Ferdinand, Chairman .
  • “Ancillary revenue… over the course of 2024, we believe we can add up to 5% top line revenues and drive 3% to 5% margin improvement” — Shanoop Kothari .
  • “Sales through the Wyndham franchise platform generated approximately 22% of our revenues in Q4 2023… could exceed 50% by the end of 2024” — Shanoop Kothari .

Q&A Highlights

  • Union payroll bonding: NYC union now requires 3 months of payroll bonds (~$5k/key), raising deposit capital per key to ~$20–21k; despite higher upfront capital, return profile remains attractive at ~$100k top-line per key and ~24% EBITDA margins in NYC .
  • Working capital outlook: management expects collections (City of NYC) and accrual reductions to improve working capital by Q2/Q3 2024, with operating cash flow turning positive in 2H 2024 .
  • Wyndham key money: $5.67M on balance sheet at 12/31/23; ~$3M received in March quarter; amortizes over franchise term, with liquidated damages only if performance not met .
  • Q1 revenue and run rate: guidance $27–$30M; sequential seasonality anticipated; bookings and ADRs trending up into spring; mid-200s ADR on average .
  • Q4 RevPAR resilience: adjusted for the ~$5M onboarding impact, Q4 RevPAR was “low $200s,” with presold inventory and cancellation strategy supporting occupancy despite typical NYC seasonal downtick .

Estimates Context

  • S&P Global/Capital IQ consensus estimates for LUXH were unavailable due to missing company mapping at time of analysis; as a result, we cannot assess beats/misses vs. Street (consensus unavailable via S&P Global) [SpgiEstimatesError].
  • Company did not disclose Q4 EPS in the press release; FY 2023 EPS was $(2.05), reflecting significant non-cash and non-recurring items .

Key Takeaways for Investors

  • Sequential Q4 revenue decline vs. Q3 was principally a one-time platform transition effect and seasonality; underlying demand appears intact, with RevPAR resilient and ADRs improving into Q2 .
  • The distribution shift to Wyndham (22% of Q4 revenue; target >50% direct by YE’24) is a material structural margin tailwind via commission savings and enhanced demand channels .
  • Near-term capital intensity has increased (union payroll bonds add ~$5k/key) and tight liquidity (cash ~$0.8M at YE) necessitates disciplined growth and improved working capital execution; surety bonds up to $10M and Wyndham key money are important funding tools .
  • 2023 “clean-up” charges should largely not recur, positioning 2024 for cleaner comparative results; G&A margin target refined to 11–13% and ancillary revenue initiatives underway to lift margins .
  • Q1 2024 revenue guide $27–$30M provides a baseline; more specific FY 2024 guidance is expected over coming quarters, with growth tied to higher-quality assets and improved cash conversion .
  • Without Street estimates, trading reactions will hinge on operational milestones (direct booking mix, union bond resolution, receivables collections) and evidence of sequential margin/FCF improvement in 1H–2H 2024 .
  • Monitor pipeline execution and unit additions in core markets (NYC focus; Miami/LA/New Orleans) and any updates on Amazon Hospitality and other ancillary partnerships for incremental RevPAR/margin benefits .

Appendix: Additional Data Points

  • FY 2023: Net rental revenue $113.4M; Gross profit $8.9M (7.9%); Total operating expenses $39.5M; Net loss $(78.5)M; Cash & equivalents ~$0.8M; Total debt ~$4.3M .
  • FY EBITDA $25.3M; Adjusted EBITDA $29.8M (ex-Wyndham transition impact) .
  • Q3 2023: Record net rental revenue $31.2M; EBITDA margin 27%; GAAP net income $4.9M ($0.11/share) .
  • Q2 2023: Net rental revenue $31.9M; EBITDA margin 26.5%; net loss $(26.8)M (primarily non-cash financing related) .