LuxUrban Hotels Inc.

Q4 2022 Earnings Conference Call


spk_0: greetings and welcome to the lux urban hotels two thousand twenty two financial results conference call at this time all participants are in a western only road a question and answer session will follow the formal presentation funny what you require operators the since during the conference please press start zero on your telephone keypad as a reminder this conference is being recorded are now like to turn the call over to japan sullivan managing director of the equity group
spk_1: thank you you may begin
spk_0: thank you darryl a good morning everyone and thank you for joining us today or speakers for today will be brian ferdinand chairman chief executive officer and she knew qatar in the company's president and chief financial officer before we begin i'd like to remind everyone that during this call we will be discussing forward looking statements with respect to financial an operational guidance schedule property openings expected closing of noted least transactions continued closing on additional leases for properties in the company's pipeline as well as the company's anticipated ability to commercialize efficiently and profitably the properties it misses and will rescind the future the sport looking statements are subject to a number of risks uncertainties and assumptions including those set forth under the caption risk factors in a public filings with the c c including an item one a of our ten k for the year ended december thirty one twenty twenty two generally such forward looking information or forward looking statements can be identified by the use of forward looking terminology such as plans expects or does not expect is expected budget scheduled estimates forecasts intense anticipates or does not anticipate or the leaves are variations of such words and phrases that making tate statements that certain actions events or results may could would might were will be taken will continue will a car or will be achieved for looking information may relate to anticipated events or results including but not limited to business strategy leasing terms high level occupancy rates and sales and growth plants the financial projections provided here and are based on certain assumptions and existing in anticipated market travel and public health conditions all of which may change the food looking information and forward looking statements contained
spk_2: in the company's press release and during this call or made as of the date of this event and the company does not undertake to update any forward looking information and or forward looking statements are contained or reference to your and except in accordance with applicable securities laws
spk_0: management will also be discussing on gaf financial metrics a reconciliation of these non gaap financial measures to the most comparable gap measures can be found in the company's press release with that said i'll now turn the call over to grind ferdinand chairman and chief executive officer brian please go ahead
spk_3: thank you didn't invent the each of you for joining us this morning
spk_2: we are excited to report record store year financial results you success in executing against or growth france
spk_3: and an outlook for continuing growth in profitability in two thousand twenty three we completed or i feel in august two thousand and twenty two which interview is important context or that we accomplished in two thousand twenty two in during the early part of two thousand twenty three we more than doubled next rental rub
spk_0: the new in two thousand twenty two to forty three point eight million from twenty one point four million in two thousand twenty one as well triples or operational you recount as if to one two thousand twenty three on an adjusted basis we reported or six consecutive quarter of cash faces net income in fifth consecutive quarter of positive either we completed a successful corporate rebranding significantly increased or property portfolio on a fully funded basis establish our presence in new cities and eric scale in two of the countries from your destination city's new york and miami
spk_3: utilizing our asses like business model we crease the number of short term say hotels under master lease agreements and expanded total units for rent in operation at year end we operated properties in new york miami los angeles new orleans in washington dc we can tell you this growth in the first quarter of two thousand and twenty three both in terms of properties under am alive and units available for less
spk_0: we exited our legacy apartment rental business so be why is part of our plan to focus exclusively on the short term stay hotel rental business although this shift resulted in nonrecurring cast exit costs of four point one million in two thousand twenty two these expenses were five to two thousand twenty two and we believe that we are now well positioned to capitalize on the ongoing recovery a global travel we are seeing robots consumer demand as well very high quality assets in or five that we are continuing to pursue and close we are for a proud of our success today however we believe that the opportunities that lie ahead of us are historic in nature approximately thirty one billion dollars of cmbs loans back by hotels are set to mature by the end of two thousand and twenty four reflecting the ongoing distress and hotel assets created by the pandemic and now exacerbated by rapidly rising interest rates this confluence of factors has resulted in new and challenging financial requirements for hotel owners would fully aligns with our supply growth strategy in acquiring turnkey hotel properties on long term yes a lease agreements and pricing that is as historic cycle los we are now accessing as the see in a long get it pipeline of hotel opportunities we think will continue through two thousand twenty five
spk_3: as the business continues the scale and mature we are well positioned to of stand margins by applying are advanced revenue management capabilities as well as pursuing previously on tap high margin revenue streams at each of our lease properties beginning in the second quarter of two thousand twenty three
spk_0: we have also completed significant steps to fortify or financial position simplify our capital structure generate cash and accelerate debt repayment of pre i feel high interest notes with non cash expense components the effects of these initiatives will begin to manage
spk_2: fs in our first quarter of two thousand and twenty three results specifically with respect to reducing or total legacy guess we're really excited to see you to see the business for it's scale in two thousand twenty three this past year has allowed us to showcase the viability of our hotel offer a
spk_0: the model and we remain focused on expanding our industry presence in two thousand twenty three we anticipate a higher deal slow environment this fiscal year allowing us to select only the most favorable properties and deal structures do with the answer from with that i'll turn it over to chinook authorities or president and chief financial officer for review of our finances
spk_4: thanks brian
spk_5: we intend to file our ten k
spk_6: by march thirtieth
spk_5: for those you may be neat or story we completed our i pl in august of twenty twenty two making the fourth quarter of twenty twenty two our first quarter as a public company as for i noted we've accomplished quite a bit for a company our size and a newly public status in terms of growth profitability and realignment of are operational priority the coffin charge associated with these activities are reflected in our results and therefore you'll need to peel back the in a bid to appreciate the strength of our business and it's many potential in many respects to most representative quarter center i pl however we believe that the term growth and earnings power inherent in our model more fully manifest beginning in the first quarter twenty twenty three at the actions we have taken since or i feel along with those and process have set the stage
spk_6: what we believe to be a strong twenty twenty three and beyond i will first provide a brief overview for financial results sure guidance for the year and then we'll open the call to questions
spk_5: next rental revenue rose one hundred and five percent to forty three point eight million from twenty one point four million and twenty twenty one
spk_6: driven primarily by an increase in wrap far from one hundred and twenty four dollars for twenty twenty one to two hundred and forty seven for twenty twenty two as a reminder we define rap far as revenue for available room or simply net revenues divided by average available units for the period
spk_5: gross profit rose twelve point four million or twenty percent of that rental revenue from two point one million or ten percent of that run revenue and twenty twenty one fourteen percent of the increases the to greater operating costs associated with hotel properties vs apartment units
spk_6: that are more than offset by greater rep far as well four percent associated to the non cash impact of least county
spk_5: general want to masquerade of expenses increased to six point eight million or sixteen percent arrived from two point eight million or thirteen percent of arrived and twenty twenty one which increase reflecting a ramp up and change in infrastructure for one italian units to the preparation for die pm and three post i peel public company expenses also included an operating expenses or two point five million of noncash stock compensation expense two point four million of non cash of non casper least expenses for the exit apartment units and four point one million of cash expenses also for the exit of apartment rental business or net loss for the year was ninety nine point four million or forty cents per share compared to a net loss of two point two million in two thousand twenty one that loss and twenty twenty two included approximately nine million of non cash charges consisting of previously mentioned one point nine million of non cash for and amortization two point five million non cash compensation expense two point four million of non chess lease expenses for the exit apartment it's as well as two point zero million of noncash financing costs we also incurred cost cost of four point one million associated with the exit from legacy apartment rental business and five point five million cash interest financing costs these costs and expenses were partially offset by one point six million of other income exclusive of these items adjusted cash net income improved to three point eight million from and adjusted cash net loss of two point two million and twenty twenty one keep it up and adjusted ebitda increased to eight point three million and twelve point four million in two thousand and twenty two respectively from a six hundred thousand our loss for both keep it up and adjusted ebitda in twenty twenty one operationally we hosted approximately two hundred and twenty thousand and guess in two thousand and twenty two which is about six hundred yesterday double the approximately one hundred and ten thousand and guess we hosted and twenty twenty one to put our growth in perspective we are currently hosting about fifteen hundred guess per day
spk_7: moving to the bounty
spk_5: at december thirty first two thousand twenty two cash and cash equivalents and treasury bills total three point seven restricted cash was one point one million in total that was sixteen point five million and consisted of nine point one million seen are secured notes two million short term business financing and other that of five point four million as an hour from february we entered into an amended revenue share raymond with our introduce your partner's that allows to convert five million in cash payments to just under two point five million shares of are common stock that will be issued at various times during the year this resulted in immediate increase in growth capital or simplifying a capital structure and aligning the interest of our constitutional partners with that of all shareholders we estimate that total that has been reduced i six million substance here and this was my the equity conversion this is and depth pay down from cash generated from operation bruce operations resulting in a pro forma depth of approximately ten million or less than one time suggested trailing off
spk_6: brick castle prime will be a primary measure of or financial performance as we move to twenty twenty three the trajectory of or business is expected to produce significant free tasks that we will use to reduce or potentially eliminate that in two thousand twenty three while still meeting are projected growth targets
spk_5: we have maintained or guidance for twenty twenty three of next rental revenue of one sixteen to one twenty million and he did off of twenty one to twenty five million we expect them all and rev for for twenty twenty three will be to twenty to two forty we continue to target gross margins of thirty plus percent which he in a excluding any items to be approximately ten to twelve percent which would result in egypt or margins twenty five twenty to twenty five plus percent after we treat adequate economies of scale
spk_6: where's with respect to guidance we are in various stages of negotiation with multiple property owners to quite a long term operating rights for hotels in the united states and europe which that to end the year
spk_5: operating between twenty five hundred and three thousand
spk_6: short term yeah and that's up from eight hundred and forty four units at december thirty one twenty twenty two
spk_5: the timing of reaching our goal of between twenty five hundred and three thousand years may positively impact of revenue guidance for the year i'll now turn the conversation back to break
spk_3: thanks to new and thanks to eg to you for joining us today on now as the athletes open ultimate cause questions when analyst that are in the questions you
spk_0: thank you we will now be conducting a question and answer session you'd like to ask a question please press star one on your telephone keypad a confirmation total indicate your lines in the question que they press start to feel like to remove your question from the que for participants using speaker equipment and may be necessary to pick up your handset before pressing the starkest one moment please what we pull for your questions our first questions come from the line of our play with maxim group please proceed with your question good morning from on strong growth like
spk_3: can you can you tell us right now how many units you have better active and with your place like how much how many units can you add without raising additional capital thank you
spk_0: two or so and just as is this week so april first on we will have just
spk_3: fortunately fifteen hundred units fully operational on generating to get read the new as is the story of the second quarter and we can add with free cash flow on as we had been approximately two hundred or units per month keeping the business and strong working capital positions leveraging your free cash flow
spk_8: oh
spk_0: two hundred units per month sits on the corner
spk_2: thank you
spk_0: you used to in your comments you said that's the plan to pursue previously unsafe high margin revenue streams at each of the these properties beginning is the second quarter to could you give us a sense of what's this what's this is or so so to for one is on utilizing the a real estate that exists in some of the larger scale properties such as conference rooms walgreens on the then spaces on so the actual real estate that came with the properties that we have utilized yet we're only utilizing it's the room revenue currently said there's and some beautiful spaces in in many other hotels are most hotels we operated on will be we have been working on a leasing important thing in those places to generate significant the it on route
spk_2: and you to some were largely property such as wants money for washington or tuscany marry and herald square and some my any properties as well as or news or los angeles property
spk_3: i'm and then in addition a typical to the larger of lands that exists are you and killed hyatt on they have on property at on read the news so property and instances as well as guess enhanced and revenues are jews are elevating why on you know reporting on food and beverage components are lots of opportunities there are sending a pm machines on typical it on read the news in hotels that we have never have
spk_2: so we're looking to generate you know somewhere around twenty dollars
spk_3: her personally so
spk_2: just it turns out on you just a high level the amount of guess we track on are you two hundred thousand last year i'm sure you've mentioned about fifteen hundred per day currently on if you're able to get on you know twenty dollars more out of every stay on you're talking about millions of dollars in the hit on revenue
spk_6: on that we have not taps in the have very strong initiative and internally on generating
spk_5: it on revenue across full capacity level as well as the guests experience
spk_0: and and and allen just to go back the the if fifteen hundred plus your current in our as of april with two hundred per month gets to that iraq and software three thousand and that's all that are three thousand you know swimming for timing differences and so forth of getting properties online so so it's that's how we get there on organic basis that's great oh one other question of jump back in the queue i am trying to figure out your fourth quarter you better adjusted either does that you have you provide for your numbers and you've added some new items are full year so the question ever or though these new items for a central showing up in the fourth quarter or they you definitions of
spk_6: of the things that you've had in the past
spk_9: basically i'm trying to figure out what the fourth quarter actual he better is so if you could help with that thank you
spk_5: so the fourth quarter adjusted ebitda is slightly under three million dollars breaking out some of these items throughout the quarters of for example
spk_6: the change
spk_10: in in lisa county in the noncash amortization of of of the of a long long term nature of releases breaking up by quarter and so on and so forth
spk_0: the other expenses so slightly under three million of adjusted ebitda for the for the quarter
spk_11: thank you very much
spk_3: thank you for our next questions come from the line frame her with the riley securities please proceed with your questions they get the morning bride and snap couple questions for me i was curious on your commentary in the release this last night on the international and i move london and and possibly more can you give us will like hello on that you can a how hard is it to implement their and in who manage those properties sure so are our focus on international expansion as london on it has a very similar operating environment to new york city thought in terms of our international arms and pan european travel to to you know central london so very high travel volume and heavy dislocation on the opposite sides of very similar to new york city so our primary focus is really on one day we have secured our first property monday or two hundred and seventy hotel and the except two or more operations we will be operating that hotel on on the ground as we do
spk_2: the twenty hotels currently that we operate
spk_0: the end is there any change in the past the couple few months on was owners of properties are you know what's their ask relative striking a deal with you as as that changed at all
spk_3: and we're seeing some the the economics we have seen in the cycle on the distressed around with and get refinancing and on the get loads on these properties on the an hour or ever stressing the owners so i'm or pipeline in terms of higher quality assets and the rents that the refs games on you know are weakening from their perspective there's there's strengthening from our perspective on and we're seeing higher quality opportunities better pricing on and and longer these times and that's that's where we are on
spk_2: focus on do you anticipate any headway dirt a change in that regard as me go through twenty twenty three and need owners you are faced with you know hire a sixpence refinance their properties granted that might motivate them to then leads them to year
spk_3: to palm but the their their ask my feet higher is their face with higher carrying cause more the suspected they might just have to do that yeah i figure it's it's it's twofold the first is they will certainly of have to eat that we're seeing on some assets come in under debt servicing currently i'm so see your point their third they're eating the spread to preserve the assets and then we're also seeing a number of properties guy are gonna be going into foreclosure that were sitting and waiting on that will change hands and much lower acid valued so if you have an asset that you know has one hundred and ten million dollar debt load army and you know they're asking a right you know to cover that get servicing at the hundred and ten million but the assets only worth sixty five million for like which is the case and many of these on the gonna go into foreclosure on the going to change hands and that's gonna on to have them write down a delta the owners gonna give back the asset lose the assets they're going to change hands and then come back to us
spk_12: lower acid value so we're seeing a number of seals on that are actually are trading or about the trade or much lower acid values which in return resets the acid value recess the caf rate and it's very shave of watch servants on those types of transactions in the anticipate over the next twenty four to thirty six months
spk_0: i'm there will be a with a lot of
spk_2: opportunity in our pipeline that we're tracking and negotiating on on that's gonna go in the foreclosure research the asset value in return come back to us at a much lower rank them
spk_13: ah that's helpful and that are just last for me ah are you seen a slowdown in the rate of increase when it comes to know wage costs and and sourcing labor
spk_0: we are not on we work closely with the idea of you lay in new york city the hotel union which is our largest spoken about half of those are currently on and they still haven't number of hotel closures and workers that are are still out of work from the can damage so i'm in a were able to work very closely the game on favorable on headcount reductions will reopen a hotel on as well as wage i'm so there's still a large supply in particular new york and huge nice hotels of labor that is willing and able to come back for work so we're not seeing that on both of our portfolio
spk_3: i guess yeah
spk_6: thank you our next questions come from the line of allen play with maxim group please proceed with your questions
spk_5: as high just to follow up some can you comment just you believed to be any seasonality and a business and then second how how did you expect revpar to trend over the yeah you can you about let you take that one so seasonality alan i'm in a first quarter is the worst former right and then it picks up
spk_6: picks up in all things equal rights and we were moving target with our with our unit growth ah but seasonality starts off right
spk_0: worry february period is of the are picking up for spring break march and then going through summer and then the holiday season so it it tears that we've seen as it can all things we got here starting to one incrementally puke approving to two to three queue for arm along with that
spk_3: here's where fr so thirty two twenty two to forty am i would say that on the lighter side on the front end and the heavier side on the back end and off which is based on supply demand dynamics again moving target we are all fighting some our party properties
spk_0: but all things equal next waited for through thank you

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