Record Quarterly Net Rental Revenue of $11.6 Million - Significant Increases in Gross Profit, RevPAR, and Occupancy Rates
LuxUrban Hotels Inc. (Nasdaq: LUXH) today announced financial results for the third quarter (“Q3 2022”) and nine months ended September 30, 2022.
2022 Third Quarter Financial Overview Compared to 2021 Third Quarter
- Net rental revenue rose 74.2% to $11.6 million from $6.6 million
- Gross profit improved to $4.9 million, or 42.2% of net rental revenue, from $0.8 million, or 11.9% of net rental revenue
- Net loss of $3.2 million, or $(0.13) per share, was primarily impacted by a one-time, non-cash $2.4 million warrant expense and a one-time cash expense of $1.8 million related to the Company’s planned exit from its legacy apartment rental business as part of its rebranding initiatives; net loss in Q3 2021, which did not include these expenses, was less than $0.1 million
- Adjusted net income (a non-GAAP measure; see reconciliation tables in this press release) improved to $0.6 million, or $0.03 per share, from a net loss of less than $0.1 million
- Adjusted EBITDA (a non-GAAP measure; see reconciliation tables in this press release) increased to $2.4 million from $0.5 million
Operational Highlights
- For the 2022 nine-month period, RevPAR rose 30% to $149 from $115, and occupancy rates improved to 87% from 71%
- Currently operate approximately 1,200 short term hotel rental units, which have been fully funded
- Expect to operate a total of approximately 1,500 short term hotel rental units by or around December 31, 2022, with no outside funding required for the additional 300 units
- Launched corporate rebranding initiative
- Implemented initiatives to expand margins, generate positive cash flows, and drive profitability
“Our performance in Q3 2022 validated the growth, sustainability, and predictability of our operating model,” said Brian Ferdinand, Chairman and Chief Executive Officer. “We recorded the highest quarterly net revenue in our history, expanded our operating portfolio of short-term rental hotel units, and grew RevPAR and occupancy rates across the portfolio. Excluding the one-time, non-cash warrant expense charges and one-time costs associated with our planned exit from our legacy apartment rental business, adjusted net income improved to $0.6 million and adjusted EBITDA rose 348%, respectively, from last year’s third quarter.
“We are confident in the trajectory of our business and excited about our performance through the first nine months of the year, reporting net rental revenue of $30.9 million, adjusted net income of $3.5 million, EBITDA of $4.3 million, and adjusted EBITDA of $6.5 million. As such, we are pleased to reiterate our full year 2022 and 2023 net revenue and EBITDA guidance.”
He concluded, “As a complement to anticipated net revenue growth, we have commenced initiatives designed to expand margins, generate positive cash flows, and drive profitability. This includes our agreement with Rebel Hotel Company, which we estimate will deliver margin enhancements that we would not have been able to realize until at least 2024, and our recently announced agreement with a new credit card processing company that eliminates the need for reserves and reduces associated processing expenses by approximately 400 bps compared to our former processor relationships. As a result of this new relationship, our former credit card processors will release to the Company approximately $5.5 million in reserves over the next 12 months.”
Q3 2022 Overview
Net rental revenue in Q3 2022 increased 74.2% to $11.6 million from $6.6 million in the third quarter ended September 30, 2021 (“Q3 2021”), driven primarily by an increase in average units available to rent from 446 in Q3 2021 to 571 at Q3 2022, as well as improved occupancy rates and ADRs during this period.
Cost of revenue, which includes rental expenses for available units to rent, rose to $6.7 million in Q3 2022 from $5.9 million in Q3 2021, due primarily to the increase in size of the Company’s rental unit portfolio, as well as related increases in furniture rentals, cleaning costs, cable / WIFI costs and credit card processing fees.
Gross profit improved to $4.9 million, or 42.2% of net rental revenue, from $0.8 million, or 11.9% of net rental revenue, in Q3 2021, driven primarily by a reduction in the impact of COVID-19 on our operations, higher unit counts and better occupancy rates and ADRs.
Total general and administrative expenses in Q3 2022 increased to $5.3 million from $0.3 million in Q3 2021. This increase reflected costs incurred in Q3 2022 that were not incurred in Q3 2021, including $1.8 million in one-time exit costs related to the Company’s planned exit from its legacy apartment rental business and a non-cash stock compensation expense of $0.4 million, as well as costs associated with being a public company. Operating costs also include contracted services, selling and administrative expenses, professional fees, and software fees, all of which increased over these periods primarily attributable to the operation of additional units compared to Q3 2021.
Total other expenses rose to $3.5 million from $0.6 million in Q3 2021, and primarily reflected a one-time, non-cash charge of $2.4 million (included in Interest and Financing Costs) associated with the issuance of warrants to debt investors.
As a result of the above, net loss for Q3 2022 was $3.2 million, or $(0.13) per share, as compared to a net loss of less than $0.1 million in Q3 2021.
Adjusted net income, which excluded the above referenced charges (see reconciliation tables in this press release) improved to $0.6 million, or $0.03 per share, compared to net income of less than $0.1 million in Q3 2021.
Adjusted EBITDA rose to $2.4 million, or 20.8% of net rental revenue, in Q3 2022 compared to adjusted EBITDA of $0.5 million, or 8% of net rental revenue in Q3 2021.
Reiterating Guidance: 2022-2023 Net Revenue and EBITDA
For the years ending December 31, 2022 and 2023, the Company is reiterating the following guidance:
- Full Year 2022 (based on its current operating portfolio of approximately 1,200 short-term rental hotel units): Net revenue of $42 - $46 million, and EBITDA of $7 - $9 million.
- Full Year 2023: Net revenue of $100 - $110 million, and EBITDA of $16 - $20 million, based on its expectation that it will operate approximately 1,500 short-term rental hotel units by or around December 31, 2022.
In addition to the existing and anticipated additional units discussed above, this guidance is based on, among other factors, the Company’s current business, economic, and public health conditions; the status of its acquisition pipeline and its ability to close on these potential acquisitions; and its current view of forward-looking unit operating metrics.
LuxUrban Hotels Inc.
LuxUrban Hotels Inc. (formerly named CorpHousing Group Inc.) utilizes a long-term lease, asset-light business model to acquire and manage a growing portfolio of short-term rental properties in major metropolitan cities. The Company’s future growth focuses primarily on seeking to create “win-win” opportunities for owners of dislocated hotels, including those impacted by COVID-19 travel restrictions, while providing LuxUrban Hotels favorable operating margins. LuxUrban Hotels operates these properties in a cost-effective manner by leveraging technology to identify, acquire, manage, and market them globally to business and vacation travelers through dozens of third-party sales and distribution channels, and the Company’s own online portal. Guests at the Company’s properties are provided high quality service under the Company’s consumer brand, LuxUrbanTM.
LUXURBAN HOTELS INC. Condensed Consolidated Balance Sheets
| (unaudited) | ||||||||
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 1,190,033 | $ | 6,998 | ||||
| Treasury bills | 50,658 | — | ||||||
| Processor retained funds | 7,366,187 | 56,864 | ||||||
| Prepaid expenses and other current assets | 1,432,418 | 166,667 | ||||||
| Deferred offering costs | — | 771,954 | ||||||
| Security deposits - current | 112,290 | 276,943 | ||||||
| Total Current Assets | $ | 10,151,586 | $ | 1,279,426 | ||||
| Other Assets | ||||||||
| Furniture and equipment, net | 50,780 | 11,500 | ||||||
| Restricted cash | 1,100,000 | 1,100,000 | ||||||
| Security deposits - noncurrent | 5,958,385 | 1,377,010 | ||||||
| Operating lease right-of-use asset, net | 79,821,828 | — | ||||||
| Total Other Assets | 86,930,993 | 2,488,510 | ||||||
| Total Assets | $ | 97,082,579 | $ | 3,767,936 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 3,653,939 | $ | 4,209,366 | ||||
| Rents received in advance | 1,279,992 | 1,819,943 | ||||||
| Merchant cash advances - net of unamortized costs of $5,143 and $57,768, respectively | 324,527 | 1,386,008 | ||||||
| Loans payable - current portion | 5,750,721 | 1,267,004 | ||||||
| Loans payable - SBA - PPP Loan - current portion | 298,958 | 815,183 | ||||||
| Loans payable - related parties - current portion | 248,500 | 22,221 | ||||||
| Operating lease liability - current | 5,931,418 | — | ||||||
| Total Current Liabilities | 17,488,055 | 9,519,725 | ||||||
| Long-Term Liabilities | ||||||||
| Loans payable | 814,244 | 925,114 | ||||||
| Loans payable - SBA - EIDL Loan | 800,000 | 800,000 | ||||||
| Loans payable - related parties | — | 496,500 | ||||||
| Convertible loans payable - related parties | — | 2,608,860 | ||||||
| Line of credit | 94,975 | 94,975 | ||||||
| Deferred rent | — | 536,812 | ||||||
| Operating lease liability | 73,090,410 | — | ||||||
| Total Long-Term Liabilities | 74,799,629 | 5,462,261 | ||||||
| Total Liabilities | 92,287,684 | 14,981,986 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Members’ Deficit | — | (11,214,050 | ) | |||||
| Common stock (par value $0.00001, shares authorized, issued and outstanding - 90,000,000; 26,529,418; 26,529,418; respectively) | 265 | — | ||||||
| Additional Paid-In Capital | 17,458,989 | — | ||||||
| Accumulated deficit | (12,664,359 | ) | — | |||||
| Total Stockholders’ Equity (Deficit) | 4,794,895 | (11,214,050 | ) | |||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | 97,082,579 | $ | 3,767,936 | ||||
LUXURBAN HOTELS INC. Condensed Consolidated Statement of Operations (Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Rental Revenue | $ | 14,443,842 | $ | 9,796,194 | $ | 38,863,281 | $ | 21,485,067 | ||||||||
| Refunds and Allowances | 2,868,517 | 3,149,813 | 7,987,193 | 7,349,791 | ||||||||||||
| Net Rental Revenue | 11,575,325 | 6,646,381 | 30,876,088 | 14,135,276 | ||||||||||||
| Cost of Revenue | 6,686,373 | 5,853,295 | 20,617,255 | 13,773,826 | ||||||||||||
| Gross Profit | 4,888,952 | 793,086 | 10,258,833 | 361,450 | ||||||||||||
| General and Administrative Expenses | ||||||||||||||||
| Administrative and other | 5,076,181 | 95,898 | 6,635,923 | 1,354,356 | ||||||||||||
| Professional fees | 234,845 | 166,328 | 540,330 | 256,732 | ||||||||||||
| Total General and Administrative Expenses | 5,311,026 | 262,226 | 7,176,253 | 1,611,088 | ||||||||||||
| Net (Loss) Income Before Other Income (Expense) | (422,074 | ) | 530,860 | 3,082,580 | (1,249,638 | ) | ||||||||||
| Other Income (Expense) | ||||||||||||||||
| Other income | 606,090 | 136 | 1,193,157 | 603 | ||||||||||||
| Interest and financing costs | (4,151,578 | ) | (566,924 | ) | (5,311,457 | ) | (1,226,931 | ) | ||||||||
| Total Other Expenses | (3,545,488 | ) | (566,788 | ) | (4,118,300 | ) | (1,226,328 | ) | ||||||||
| Loss Before Benefit from Income Taxes | (3,967,562 | ) | (35,928 | ) | (1,035,720 | ) | (2,475,966 | ) | ||||||||
| Benefit from Income Taxes | ||||||||||||||||
| Current | (750,000 | ) | — | — | — | |||||||||||
| Net Loss | $ | (3,217,562 | ) | $ | (35,928 | ) | $ | (1,035,720 | ) | $ | (2,475,966 | ) | ||||
| Basic and diluted loss per common share | $ | (0.13 | ) | $ | — | $ | (0.05 | ) | $ | — | ||||||
| Basic and diluted weighted average number of common shares outstanding | 24,092,231 | — | 22,251,412 | — | ||||||||||||
Non-GAAP Financial Measures
To supplement the condensed consolidated financial statements, which are prepared in accordance with GAAP, we use EBITDA and Adjusted EBITDA as a non-GAAP financial measures.
The following table provides reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:
| Three Months Ended September 30, (unaudited) | Nine Months Ended September 30, (unaudited) | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net Loss | $ | (3,217,562 | ) | $ | (35,928 | ) | $ | (1,035,720 | ) | $ | (2,475,966 | ) | ||||
| Benefit from Income Taxes | $ | (750,000 | ) | $ | — | $ | — | $ | — | |||||||
| Interest and Financing Costs | $ | 4,151,578 | $ | 566,924 | $ | 5,311,457 | $ | 1,226,931 | ||||||||
| Depreciation and Amortization | $ | 2,464 | $ | — | $ | 5,020 | $ | — | ||||||||
| EBITDA | $ | 186,480 | $ | 530,996 | $ | 4,280,757 | $ | (1,249,035 | ) | |||||||
| Stock Compensation Expense | $ | 358,285 | $ | — | $ | 358,285 | $ | — | ||||||||
| Exit SoBeNY Costs | $ | 1,835,571 | $ | — | $ | 1,835,571 | $ | — | ||||||||
| Adjusted EBITDA | $ | 2,380,336 | $ | 530,996 | $ | 6,474,613 | $ | (1,249,035 | ) | |||||||
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.
To supplement EBITDA and Adjusted EBITDA, we have adjusted our net income for non-cash items to calculate, Cash Net Income as another non-GAAP financial measure. We have also removed the one-time costs associated with the exit costs associated with SoBeNY. The follow table provides reconciliation of net income (loss) to Cash Net Income (Loss) and Adjusted Cash Net Income (Loss):
| Three Months Ended September 30, (unaudited) | Nine Months Ended September 30, (unaudited) | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net Loss | $ | (3,217,562 | ) | $ | (35,928 | ) | $ | (1,035,720 | ) | $ | (2,475,966 | ) | ||||
| Benefit from Income Taxes | $ | (750,000 | ) | $ | — | $ | — | $ | — | |||||||
| Stock Compensation Expense | $ | 358,285 | $ | — | $ | 358,285 | $ | — | ||||||||
| Depreciation and Amortization | $ | 2,464 | $ | — | $ | 5,020 | $ | — | ||||||||
| Warrant Expense | $ | 2,386,369 | $ | — | $ | 2,386,369 | $ | — | ||||||||
| Cash Net Income (Loss) | $ | (1,220,444 | ) | $ | (35,928 | ) | $ | 1,713,954 | $ | (2,475,966 | ) | |||||
| Exit SoBeNY Costs | $ | 1,835,571 | $ | — | $ | 1,835,571 | $ | — | ||||||||
| Adjusted Cash Net Income (Loss) | $ | 615,127 | $ | (35,928 | ) | $ | 3,549,525 | $ | (2,475,966 | ) | ||||||
| Adjusted Cash Net Income per share | $ | 0.03 | — | $ | 0.16 | — | ||||||||||
| Fully diluted weighted average number of common shares outstanding | 24,092,231 | — | 22,251,412 | — | ||||||||||||