Release Date: September 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LuxUrban Hotels Inc (LUXH, Financial) has launched the Lux 2.0 initiative, which includes the addition of experienced professionals from the hotel and finance sectors to the management team and Board of Directors.
- The company has strategically reduced its domestic operations, focusing solely on properties with the potential to generate positive cash flow.
- LuxUrban Hotels Inc (LUXH) has successfully reduced operating overhead and is starting to see the intended benefits of the Lux 2.0 initiative.
- The company has made significant reductions in labor costs and improved vendor relationships, contributing to a leaner and more efficient operation.
- LuxUrban Hotels Inc (LUXH) is optimistic about future growth, with projections of significant increases in average daily room rates (ADR) and revenue per available room (RevPAR) in 2025.
Negative Points
- Net rental revenue for the three months ended June 30, 2024, decreased by 43% compared to the same period in 2023.
- The company experienced a significant increase in the cost of revenue, primarily due to expensing unamortized lease acquisition costs and security deposits surrendered for exited properties.
- Gross profit decreased by 318% for the three months ended June 30, 2024, compared to the same period in 2023.
- LuxUrban Hotels Inc (LUXH) has a working capital deficit of $62.6 million as of June 30, 2024, compared to a deficit of $13.4 million at December 31, 2023.
- The company is facing challenges related to Nasdaq compliance and may need to undertake a reverse stock split to meet listing requirements.
Q & A Highlights
Q: Looking forward to next year when all the pre-sold rooms are gone, what might RevPAR and EBITDA margins look like?
A: (Robert Arigo, CEO) We expect substantial RevPAR growth as our inventory will be released from pre-sale constraints. Our VP of Revenue Management is optimistic about Q4 and 2025. We anticipate significant ADR increases and improved operational efficiency, projecting RevPAR in the low $300s.
Q: Can we expect a cleaner third quarter without as much noise and on time going forward?
A: (Michael James, CFO) Yes, our goal is to be on time and produce a great product. We aim for a cleaner third quarter with fewer one-time expenses.
Q: How much of the quarter's expenses were one-time operating costs?
A: (Michael James, CFO) I don't have the exact number now but can provide it later. Both Q1 and Q2 had significant one-time expenses.
Q: Do you think there are more properties you will need to sell, or do you feel good about the current number?
A: (Michael James, CFO) We feel good about the current number of properties.
A: (Robert Arigo, CEO) We are focusing on New York due to high demand and opportunities. We aim to ensure our leasing formula works well before expanding to other markets.
Q: What is left in terms of liabilities or potential litigation related to the properties you've exited?
A: (Robert Arigo, CEO) Most issues, particularly in Florida, have been resolved. There will be some legal and settlement costs, but they are not expected to substantially impact future financial results.
Q: How do you feel about the $10 million raised post-quarter end and the net working capital deficit of over $60 million?
A: (Michael James, CFO) The $10 million is realistic for Q3. We are burning off pre-sold rooms and focusing on becoming cash flow positive to reduce the working capital deficit.
Q: How will you handle Nasdaq compliance?
A: (Michael James, CFO) We plan to do a reverse stock split to get the stock price above $1 and aim to get the market cap above $35 million. We have a hearing with Nasdaq in October and will know more after that.
Q: What is the timing for Nasdaq compliance actions?
A: (Michael James, CFO) If we file a proxy, it will be 30 to 45 days out. We have a hearing with Nasdaq in October.
Q: How do you plan to improve financial stability and future growth?
A: (Robert Arigo, CEO) We are implementing transformative changes, including reducing operating overhead and focusing on high-performing properties. We aim to enhance our management team and operational expertise to generate sustainable positive cash flow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
