LuxUrban Hotels Inc. Provides Preliminary Unaudited 2023 Fourth Quarter and Full Year Financial Results

LuxUrban Hotels Inc. (or the "Company") (Nasdaq: LUXH, LUXHP), a hospitality company which leases entire existing hotels on a long-term basis and rents rooms in its hotels to business and vacation travelers, including through its partnership with Wyndham Hotels & Resorts ("Wyndham"), today announced preliminary unaudited financial results for the fourth quarter ("Q4 2023") and full year ended December 31, 2023, including cash net income, adjusted cash net income, EBITDA, and adjusted EBITDA, which are non-GAAP measures and are accompanied by reconciliation tables in this release. As further discussed herein, the completion of the Company's audit for 2023 includes additional procedures that are in process. While management believes the results herein will not materially change following completion of the audit, the information presented herein cannot be deemed final until the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Accordingly, undue reliance should not be placed on the preliminary results set forth herein.

"2023 was a transformative year for LuxUrban," said Brian Ferdinand, Chairman of the Board. "We increased our portfolio of hotel properties under long-term Master Lease Agreement, increased net rental revenue and Adjusted EBITDA by 160% and 146%, respectively, and signed a groundbreaking collaboration agreement with Wyndham that provides financial, brand, and operating support to advance our growth objectives on our existing portfolio."

Mr. Ferdinand further stated, "We have an unwavering commitment to elevating LuxUrban's industry profile and expanding the adoption of our distinct and successful operating model. In a little more than 18 months, we have grown from a newly public start up to an evolving and maturing operator of a wide range of hotel properties in destination cities. In that time, we have learned a lot and have gained a better understanding of the inherent opportunities and complexities of our industry. Although there is still much work to be done, we have responded in kind so that we may fully capitalize on these prospects while both addressing the concerns of and delivering long-term value to our shareholders. We added industry veterans Elan Blutinger and Kim Schaefer to the Board of Directors, and Robert Arigo as Chief Operating Officer. We remain focused on attracting the management, personnel, and capital necessary to execute on our vision and reach our full potential."

"Following a period of significant expansion, we have adopted a more strategic approach to growth in 2024 with a focus on improving our working capital profile, receivables, and free cash flow," said Shanoop Kothari, Co-CEO and Chief Financial Officer. Mr. Kothari further stated, "Our pipeline of potential operating rights acquisitions remains strong, and we expect to continue to increase our portfolio of hotels under long-term Master Lease Agreement throughout release entitled end, we have taken an important step to finance future lease acquisitions by entering into a master collateral trust agreement that provides us with up to an aggregate of $10 million in surety bonds that can be used to fund deposit requirements under long-term hotel leases (see the section of this release entitled, "Surety Bond Agreement"). "We intend to focus on higher end (3.5 star to 4.5 star) properties and adopt a slower pace of acquisitions allowing us to better absorb the impact of our growth on working capital. We have recently surrendered certain underperforming leases in our non-core market that had created a drag on our operating results and represented in total less than 200 keys. These properties are lower star, smaller in size, lower occupancy and of shorter remaining lease terms. As a result of this, we expect that Total RevPAR¹ and operating margins will improve from 2023 levels."

As a result of the transition to the Wyndham platform in the fourth quarter of 2023, net rental revenue for Q4 and full year 2023 reflected a one-time negative impact of approximately $5 million from the onboarding of the Company's initial hotels to the Wyndham platform ("Wyndham Transition"), during which time these hotel rooms were not available for rent. As of January 1, 2024, the initial properties were onboarded to the Wyndham platform.

Select Preliminary Unaudited Full Year 2023 Financial Results Overview
All comparisons are to the full year ended December 31, 2022 ("FY 2022") as audited unless otherwise stated.

• Net rental revenue rose 160% to approximately $114.0 million from $43.8 million, driven by an increase in average units available to rent to 1,249 from 487, as well as an improvement in TRevPAR. Adjusted for the impact for the Wyndham Transition, net rental revenue was approximately $119 million for 2023.
• TRevPAR improved to approximately $250 from $247; as adjusted for the Wyndham transition, TRevPAR for 2023 was $261.
• Net loss was approximately $65.2 million, compared to a net loss of $9.4 million. Adjusted for the impact for the Wyndham Transition, net loss was approximately $60.8 million.
• EBITDA increased to approximately $30.6 million from $14.3 million. Pro-forma the impact for the Wyndham transition, Adjusted EBITDA increased to approximately $35.0 million from $14.3 million.
• Cash Net Income adjusted for non-cash items including the surrender of deposits, as well as bad debt expense, was $1.6 million as compared to $5.6 million in 2022. Adjusted for the impact of the Wyndham Transition and the estimated costs for the exit of the apartment rental business and restructuring, Cash Net Income was $15.3 million.
• Total debt declined to approximately $4.3 million from total debt of $14.0 million.

Select Preliminary Unaudited Q4 2023 Financial Results Overview
All comparisons are to the fourth quarter ended December 31, 2022 ("Q4 2022") unless otherwise stated.

• Net rental revenue rose 117% to approximately $28.2 million from $12.9 million, driven by an increase in average units available to rent to 1,548 from 680, as well as improved TRevPAR.
• Net rental revenue pro-forma for the impact of the Wyndham transition for Q4 2023 would have risen 156% to approximately $33.2 million from $12.9 million
• Adjusted EBITDA increased to approximately $6.2 million from $5.9 million. Pro forma for the impact of the Wyndham transition, adjusted EBITDA increased to approximately $10.7 million from $5.9 million

Property Summary

• As of December 31, 2023, the Company leased 18 properties with 1,599 units available for rent
• In March of 2024, the Company surrendered four properties that had created a consistent drag on its operating results, the characteristics of which included: 1) demonstrated poor performance, 2) in markets that have deteriorated since the signing of the lease, 3) possessed suboptimal size and scale, and 4) of a quality that could create other risks to the Company. In addition, in late 2023, the Company decided to not move forward on a previously agreed to Master Lease Agreement due to repairs not being completed by the landlord. As a result of this, the Company wrote off approximately $3.0 million in security deposits and accrued $2.8 million in potential claims against the Company. These costs are included in the results above.
• After giving pro forma effect to the surrender of these properties, at December 31, 2023, the Company leased 14 properties with 1,406 units available for rent, with an average weighted lease term of 14.2 years and 19.0 years, including extension options

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¹The Company defines Total RevPAR (or TRevPAR) as total revenue received by the Company inclusive of room rental rates, ancillary fees (which include but are not limited to resort fees, late/early check-in, baggage fees, parking fees paid to us, and upgrade fees), cancellation fees, taxes (including other pass-through expenses) and other miscellaneous income received by the Company, divided by the average available rooms for rent during a given period.

Surety Bond Agreement
In March 2024, the Company entered into an agreement to secure surety bonds for future leases. The provider of the bond is currently rated A+ by A.M. Best (Superior).

The agreement will provide the Company with up to an aggregate of $10 million in surety bonds that can be used to fund deposit requirements under long-term hotel leases. The bonds have a 70% collateral requirement. For example, a $1,000,000 bond would require us to maintain a collateral position of $700,000, which can be deposited in either cash or in the form of a letter of credit. In addition to collateral, we entered into an agreement of indemnity with the provider. The bonds will cost 2.5% of the penalty amount of each bond annually.

The terms of this agreement are reviewed annually and the Company believes as its continues to grow and improve its credit profile, the amount it is required to post will decrease over time while the size of the facility will increase over time. The Company anticipates this will fulfill in most instances where accepted by landlord the entire upfront deposit on an absolute dollar basis in connection with various key money arrangements the Company has entered into or is contemplating.

"This is a significant step to institutionally capitalize the business," said Mr. Kothari. "We have made significant strides in growing the business and believe that the willingness of a highly rated surety bond provider to back LuxUrban is an indication of its support of the Company and a validation of our business model."

2024 Guidance Update
For full year 2024, the Company has committed the following priorities:

• increase its portfolio of hotels under long term Master Lease Agreement with a focus on higher-quality 3.5 star to 4.5-star properties
• generate increased TRevPAR compared to 2023, driven by portfolio expansion, the addition of 3.5 star to 4.5-star properties to the portfolio, and an increase in ancillary revenues
• generate increased EBITDA compared to 2023
• improve its working capital profile, receivables, and cash flow profile by adopting a slower pace of acquisitions, increasing Total RevPAR, and realizing the benefits of the above referenced surrender of certain underperforming leases

Although the Company believes that its prior guidance for 2024 is achievable, its ability to do so may be impacted by the above-referenced priorities and other corporate initiatives. The Company expects to quantify its 2024 guidance later this year.

Institutes Enhanced Audit Procedures; Updates 10-K Filing Timeline
On the recommendation of the Audit Committee and with the full support of management, the Company has expanded its annual audit procedures as part of its adoption of a more robust best practices risk and audit procedures protocol. This review is consistent with its commitment to full transparency regarding its operations.

The Company has engaged Grassi Advisors and Accountants, its independent registered public accounting firm, to conduct a thorough internal review of certain aspects of the Company's operations.

Due to the expanded nature of the audit and time required to complete it, the Company plans to file a Form 12b-25, Notification of Late Filing, with the U.S. Securities and Exchange Commission that allows for a 15-day grace period for the filing of its Form 10-K. The Company believes that this expanded audit procedure will be completed in time so that it may file its Form 10-K within the 15-day grace period. As of the date of this release, there have been no disagreements between the Company and its auditors, or reason to believe the audit will not close within this time frame.

The Company does not expect material changes to its operating financial results for the fourth quarter and full year ended December 31, 2023 as a result of the completion of its audit, including with respect to these expanded audit procedures.

Investor Call
In light of the ongoing, enhanced audit procedures and the filing status of the 10-K, the Company will not host an earnings call in connection with these results, and the event previously scheduled for March 27, 2024 at 10:00 AM EDT has been cancelled. Management will continue to make timely disclosures of material information regarding the filing of its Annual Report on Form 10-K, the completion of the expanded audit process, and any other corporate developments.

LuxUrban Hotels Inc.
LuxUrban Hotels Inc. secures long-term operating rights for entire hotels through Master Lease Agreements (MLA) and rents out, on a short-term basis, hotel rooms to business and vacation travelers. The Company is strategically building a portfolio of hotel properties in destination cities by capitalizing on the dislocation in commercial real estate markets and the large amount of debt maturity obligations on those assets coming due with a lack of available options for owners of those assets. LuxUrban's MLA allows owners to hold onto their assets and retain their equity value while LuxUrban operates and owns the cash flows of the operating business for the life of the MLA. Through its partnership with Wyndham Hotels & Resorts, the largest hotel company in the world by rooms, LuxUrban gains several competitive advantages including joint branding for marketing, sales, and distribution, capital allocation from Wyndham for each hotel it acquires, and ongoing customer support and training across its portfolio.

Non-GAAP Information
The Company defines EBITDA as net income (loss) before income taxes and other taxes, interest and financing costs, non-cash compensation expense, non-cash expenses associated with common stock issuance and stock options, non-cash rent expense amortization, depreciation and amortization, non-cash financing costs, costs associated with its exit from SoBeNY, incremental processing and channel financing fees, legacy union costs, non-cash write offs associated with its exit from the apartment rental business, and bad debt expense. Adjusted EBITDA is defined as EBITDA less the estimated impact of the Wyndham transition.

The Company defines cash net income as net income (loss) before non-cash stock compensation expense, non-cash expenses associated with common stock issuance and stock options, non-cash rent amortization expense, accrued taxes, depreciation and amortization, non-cash financing costs, and non-cash write off associated with its exit from the apartment rental business. Adjusted cash net income is defined as cash net income less costs associated with the Company's exit from SoBeNY and bad debt expense.

The Company seeks to achieve profitable, long-term growth by monitoring and analyzing key operating metrics, including EBITDA, Adjusted EBITDA, cash net income, and adjusted cash net income. The Company's management uses these non-GAAP financial metrics and related computations to evaluate and manage the business and to plan and make near and long-term operating and strategic decisions. The management team believes these non-GAAP financial metrics are useful to investors to provide supplemental information in addition to the GAAP financial results. Management reviews the use of its primary key operating metrics from time-to-time.

EBITDA, Adjusted EBITDA, cash net income, and adjusted cash net income are not intended to be a substitute for any GAAP financial measure and as calculated, may not be comparable to similarly titled measures of performance of other companies in other industries or within the same industry. The Company's management team believes it is useful to provide investors with the same financial information that it uses internally to make comparisons of historical operating results, identify trends in underlying operating results, and evaluate its business. For purposes of the guidance provided herein for the year ended December 31, 2024, however, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation could not be accomplished without unreasonable effort. Non-GAAP measures for future periods, which cannot be reconciled to the most comparable GAAP financial measures are calculated in a manner which is consistent with the accounting policies applied in the Company's consolidated financial statements.

Attached to this release is a preliminary reconciliation of the nonGAAP measures of EBITDA, Adjusted EBITDA, cash net income and adjusted net income to net loss, which management believes are the nearest correlated GAAP measures. This reconciliation is based on the preliminary unaudited data presented in this release and should not be relied upon. The Annual Report on Form 10-K for the year ended December 31, 2023 will contain a final reconciliation when filed with the SEC.

Forward Looking Statements
This press release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). The statements contained in this release that are not purely historical are forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Generally, the words "anticipates," "believes," "continues," "could," "estimates," "expects," "intends," "may," "might," "plans," "possible," "potential," "predicts," "projects," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this release may include, for example, statements with respect to the success of the Company's collaboration with Wyndham Hotels & Resorts, scheduled property openings, expected closing of noted lease transactions, the Company's ability to continue closing on additional leases for properties in the Company's pipeline, as well the Company's anticipated ability to commercialize efficiently and profitably the properties it leases and will lease in the future. The forward-looking statements contained in this release are based on current expectations and belief concerning future developments and their potential effect on the Company. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements are subject to a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results of performance to be materially different from those expressed or implied by these forward-looking statements, including those set forth under the caption "Risk Factors" in our public filings with the SEC, including in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, and any updates to those factors as set forth in subsequent Quarterly Reports on Form 10-Q or other public filings with the SEC. The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.

Non-GAAP Financial Measures
To supplement the condensed consolidated financial statements, which are prepared in accordance with GAAP, we use EBITDA and cash net income as non-GAAP financial measures. We define EBITDA and cash net income above in the paragraph entitled "Non-GAAP Information."

The following table provides reconciliation of our preliminary unaudited net income (loss) to EBITDA and cash net income. While management believes the following reconciliation will not materially change following completion of the audit, the following information is based on preliminary unaudited estimates and cannot be deemed final until the filing of the Company's Annual Report on Form 10-K for the year ended December 31 2023. Such Annual Report on Form 10-K will include a final reconciliation with respect to the information presented below: