Huazhu Group Limited (NASDAQ: HTHT) (“Huazhu” or the “Company”), a
leading and fast-growing hotel group, today announced its unaudited
financial results for the third quarter ended September 30, 2019.
Third Quarter of 2019
Operational Highlights
- During the third quarter of 2019, Huazhu opened 548 hotels,
including 13 leased (“leased-and-operated”) hotels and 535
manachised (“franchised-and-managed”) hotels and franchised
hotels.
- Huazhu closed a total of 62 hotels, including 12 leased hotels
and 50 manachised and franchised hotels, during the third quarter
of 2019. This was mainly due to three reasons:a) With
strategic focus to upgrade product and service quality, Huazhu
temporarily closed 10 hotels for brand upgrade and business model
change purposes; and removed 18 hotels for non-compliance with
Huazhu’s brand and operating standards.b) Property-related
issues, including rezoning and expiry of leases, which resulted in
the closure of 19 hotels.c) 15 manachised hotels were closed
due to operating losses.
- As of September 30, 2019, Huazhu had 697 leased hotels, 4,087
manachised hotels, and 367 franchised hotels in operation in 420
China cities. The number of hotel rooms in operation totaled
504,414, an increase of 23% from a year ago. The rooms under
midscale and upscale brands accounted for 45% of total rooms in
operation, up 9 percentage points from 36% a year ago.
- As of September 30, 2019, Huazhu had a total number of 1,736
unopened pipeline hotels contracted or under construction,
including 52 leased hotels and 1,684 manachised and franchised
hotels. The unopened hotels in our pipeline represented 34% of the
number of hotels in operation as of the end of Q3 2019 compared to
23% a year ago, an 11-percentage-point increase.
- The ADR, which is defined as the average daily rate for all
hotels in operation, was RMB245 in the third quarter of 2019,
compared with RMB239 in the third quarter of 2018. The
year-over-year increase of 2.6% was due to an increase in the
proportion of midscale and upscale hotels with higher ADR in
Huazhu’s brand mix, partially offset by a decrease in ADR of our
mature hotels (where mature means those of our hotels which have
been in operation for at least 18 months).
- The occupancy rate for all hotels in operation was 87.7% in the
third quarter of 2019, compared with 90.7% in the third quarter of
2018. The year-over-year decrease of 3.1 percentage points was
mainly due to the deepening China economic slowdown.
- RevPAR, defined as revenue per available room for all hotels in
operation, was RMB215 in the third quarter of 2019, compared with
RMB217 in the third quarter of 2018. The year-over-year decrease of
0.8% was attributable to higher ADR.
- For all of our mature hotels, the same-hotel RevPAR was RMB211
for the third quarter of 2019, representing a 3.8% decrease from
RMB219 for the third quarter of 2018, with a 1.1% decrease in ADR
and a 2.5-percentage-point decrease in occupancy rate. The
year-over-year weaker performance was mainly due to macroeconomic
softness and more promotions during this year’s summer vacation
season.
- As of September 30, 2019, H Rewards (Huazhu’s loyalty program)
had approximately 139 million members, who contributed
approximately 76% of room nights sold during the third quarter of
2019 and approximately 85% of room nights were sold through
Huazhu’s direct channels.
Ji Qi, the founder, Executive Chairman and CEO
commented: “We are delighted to achieve another quarter with strong
growth. Huazhu has reached its first 5,000-hotel milestone and also
embarked on its international expansion plan through the opening of
the first Ji Hotel in Singapore as well as the recently-announced
acquisition of Deutsche Hospitality. By leveraging our brand
strength and operational excellence, we aspire to accelerate our
growth goal, and establish a global hotel network during the next
five years.”
1 Hotel turnover refers to total transaction value of room and
non-room revenues from Huazhu hotels (i.e., leased and operated,
manachised and franchised hotels).
2 The conversion of Renminbi (“RMB”) into United States dollars
(“US$”) is based on the exchange rate of US$1.00=RMB7.1477 on
September 30, 2019 as set forth in H.10 statistical release of the
U.S. Federal Reserve Board.
Third Quarter of 2019
Financial Results
(RMB in millions) |
Q3 2018 |
Q3 2019 |
Revenues: |
|
|
Leased and
owned hotels |
2,053 |
2,089 |
Manachised
and franchised hotels |
699 |
939 |
Others |
16 |
27 |
Net
revenues |
2,768 |
3,055 |
Net revenues for the third
quarter of 2019 were RMB3.1 billion (US$427 million), representing
a 10.4% year-over-year increase, primarily attributable to our
hotel network expansion and blended RevPAR growth.
Net revenues from leased and owned
hotels for the third quarter of 2019 were RMB2.1 billion
(US$292 million), representing a 1.8% year-over-year increase.
Net revenues from manachised and
franchised hotels for the third quarter of 2019 were
RMB939 million (US$131 million), representing a 34.3%
year-over-year increase. Net revenues from manachised and
franchised hotels accounted for 30.7% of Huazhu’s net revenues in
the third quarter of 2019, up from 25.3% a year ago.
(RMB in millions) |
Q3 2018 |
Q3 2019 |
Operating costs and expenses: |
|
|
Hotel operating costs |
1,658 |
1,834 |
Other operating costs |
2 |
11 |
Selling and marketing expenses |
91 |
113 |
General and administrative expenses |
233 |
277 |
Pre-opening expenses |
60 |
126 |
Total
operating costs and expenses |
2,044 |
2,361 |
Hotel operating costs for the
third quarter of 2019 were RMB1.8 billion (US$256 million),
compared to RMB1.7 billion in the third quarter of 2018,
representing a 10.6% year-over-year increase. Total hotel operating
costs excluding share-based compensation expenses (non-GAAP) for
the third quarter of 2019 represented 59.7% of net revenues, flat
with the third quarter of 2018.
Selling and marketing expenses
for the third quarter of 2019 were RMB113 million (US$16 million),
compared to RMB91 million in the third quarter of 2018. Selling and
marketing expenses excluding share-based compensation expenses
(non-GAAP) for the third quarter of 2019 were RMB112 million (US$16
million), representing 3.7% of net revenues, compared to 3.3% for
the third quarter of 2018. The year-over-year increase was mainly
related to the expansion of our sales and marketing team to
strengthen our direct sales channels, increased bank charges for
online payments, and higher commission fees to online travel
agencies.
General and administrative
expenses for the third quarter of 2019 were RMB277 million
(US$38 million), compared to RMB233 million in the third quarter of
2018. General and administrative expenses excluding share-based
compensation expenses (non-GAAP) for the third quarter of 2019 were
RMB257 million (US$35 million), representing 8.4% of net revenues,
compared with 7.9% of net revenues in the third quarter of 2018.
The year-over-year increase was mainly due to our investments to
expand our hotel development teams, upscale-brand hotels and IT
capabilities.
Pre-opening expenses for the
third quarter of 2019 were RMB126 million (US$18 million),
representing a 110% year-over-year increase, mainly involving our
upscale-brand hotels.
Other operating income, net for
the third quarter of 2019 was RMB9 million (US$1 million), compared
to RMB51 million in the third quarter of 2018. The year-over-year
variance was mainly due to compensation received from landlords on
termination of certain leased hotels in the third quarter of
2018.
Income from operations for the
third quarter of 2019 was RMB703 million (US$98 million), compared
to RMB775 million in the third quarter of 2018. Excluding
share-based compensation expenses, adjusted income from operations
(non-GAAP) for the third quarter of 2019 was RMB734 million (US$102
million), compared to RMB795 million for the third quarter of 2018.
The operating margin, defined as income from operations as
percentage of net revenues, for the third quarter of 2019 was
23.0%, compared with 28.0% in the third quarter of 2018; this was
primarily due to our investments to accelerate our network
expansion as well as pre-opening expenses for our upscale brands
mentioned above. Excluding these investments in 2019, as well as
the one-off compensation received in 2018 mentioned in the “Other
operating income” section above, the operating margin for the third
quarter of 2019 would have been approximately the same for the
third quarter of 2018.
Other income, net for the third
quarter of 2019 was RMB86 million (US$12 million), compared to
RMB16 million for the third quarter of 2018. The year-over-year
increase was mainly due to higher gains realized from our sales of
some equity securities during the third quarter of 2019.
Unrealized gains from fair value changes
of equity securities for the third quarter of 2019 was
RMB28 million (US$4 million), compared to RMB179 million in the
third quarter of 2018. These unrealized gains were mainly related
to our investments in Accor.
Net income attributable to Huazhu Group
Limited for the third quarter of 2019 was RMB431 million
(US$60 million), compared to RMB668 million in the third quarter of
2018. Excluding share-based compensation expenses and the
unrealized gains (losses) from fair value changes of equity
securities, adjusted net income attributable to Huazhu Group
Limited (non-GAAP) for the third quarter of 2019 was RMB434 million
(US$60 million), compared to RMB509 million in the third quarter of
2018.
Basic and diluted earnings per
share/ADS for the third quarter of 2019, basic earnings
per share were RMB1.51 (US$0.21) and diluted earnings per share
were RMB1.45 (US$0.20). For the third quarter of 2019, excluding
share-based compensation expenses and unrealized gains (losses)
from fair value changes of equity securities, adjusted basic
earnings per share (non-GAAP) were RMB1.52 (US$0.21) and adjusted
diluted earnings per share (non-GAAP) were RMB1.46 (US$0.20).
EBITDA (non-GAAP) for the third
quarter of 2019 was RMB898 million (US$126 million), compared with
RMB1.2 billion in the third quarter of 2018. Excluding share-based
compensation expenses and unrealized gains (losses) from fair value
changes of equity securities, adjusted EBITDA (non-GAAP) for the
third quarter of 2019 was RMB901 million (US$126 million, 29.5% of
net revenue), compared with RMB1.0 billion (36.4% of net revenue)
for the third quarter of 2018. The pro forma adjusted EBITDA
(non-GAAP) would have been RMB1.1 billion (36.3% on net revenue)
after considering the impact of our investments in development
teams, upscale brands hotel and IT capabilities mentioned above, as
well as the foreign exchange loss related to Accor’s shares
investment.
Cash flow. Operating cash
inflow for the third quarter of 2019 was RMB1.0 billion (US$140
million). Investing cash inflow for the third quarter of 2019 was
RMB11 million (US$2 million). Financing cash outflow for the third
quarter of 2019 was RMB638 million (US$90 million).
Cash, cash equivalents and Restricted
cash. As of September 30, 2019, Huazhu had a total balance
of cash, cash equivalents and restricted cash of RMB4.5 billion
(US$622 million).
Debt financing. As of September
30, 2019, Huazhu had a total loan balance of RMB8.7 billion (US$1.2
billion) and the unutilized credit facility available to Huazhu was
RMB2.8 billion.
Adoption of New Lease Accounting
StandardsBeginning January 1, 2019, the Company adopted
Accounting Standards Update 2016-02, Leases (Topic 842) utilizing
the optional transition approach allowed under ASU 2018-11 and
applying the package of practical expedients. By applying ASU
2016-02 at January 1, 2019, as opposed to at the beginning of the
earliest period presented, the reporting for periods prior to
January 1, 2019 will continue to be reported in accordance with
Leases (Topic 840).
Guidance For the full year of
2019, Huazhu maintains the net revenues growth range to be
10%-12%.
In 2020, Huazhu expects to accelerate the gross
number of hotels opened to about 1,700, and about 75%-80% of which
will be midscale and upscale brand properties.
The above forecast reflects the Company’s
current and preliminary view, which is subject to change.
Conference CallHuazhu’s
management will host a conference call at 8 p.m. ET, Tuesday,
November 12, 2019 (or 9 a.m. on Wednesday, November 13, 2019 in the
Shanghai/Hong Kong time zone) following the announcement. To
participate in the event by telephone, please dial +1 (845) 675
0437 (for callers in the US), +86 400 620 8038 (for callers in
China Mainland), +852 3018 6771 (for callers in Hong Kong) or +65
6713 5090 (for callers outside of the US, China Mainland, and Hong
Kong) and enter pass code 6577616. Please dial in
approximately 10 minutes before the scheduled time of the call.
A recording of the conference call will be
available after the conclusion of the conference call through
November 20, 2019. Please dial +1 (855) 452 5696 (for callers in
the US) or +61 2 8199 0299 (for callers outside the US) and
entering pass code 6577616.
The conference call will also be webcast live
over the Internet and can be accessed by all interested parties at
the Company’s Web site, http://ir.huazhu.com.
Use of Non-GAAP Financial
MeasuresTo supplement Huazhu’s unaudited consolidated
financial results presented in accordance with U.S. GAAP, Huazhu
uses the following non-GAAP measures defined as non-GAAP financial
measures by the SEC: hotel operating costs excluding share-based
compensation expenses; general and administrative expenses
excluding share-based compensation expenses; selling and marketing
expenses excluding share-based compensation expenses; adjusted
income from operations excluding share-based compensation expenses;
adjusted net income attributable to Huazhu Group Limited excluding
share-based compensation expenses and unrealized gains (losses)
from fair value changes of equity securities; adjusted basic and
diluted earnings per share/ADS excluding share-based compensation
expenses and unrealized gains (losses) from fair value changes of
equity securities; EBITDA; and adjusted EBITDA excluding
share-based compensation expenses and unrealized gains (losses)
from fair value changes of equity securities. The presentation of
these non-GAAP financial measures is not intended to be considered
in isolation or as a substitute for the financial information
prepared and presented in accordance with U.S. GAAP. For more
information on these non-GAAP financial measures, please see the
table captioned “Reconciliations of GAAP and non-GAAP results” set
forth at the end of this release. Huazhu believes that these
non-GAAP financial measures provide meaningful supplemental
information regarding Company performance by excluding share-based
compensation expenses and unrealized gains (losses) from fair value
changes of equity securities that may not be indicative of Company
operating performance. Huazhu believes that both management and
investors benefit from referring to these non-GAAP financial
measures in assessing Company performance and when planning and
forecasting future periods. These non-GAAP financial measures also
facilitate management’s internal comparisons to Huazhu’s historical
performance. Huazhu believes these non-GAAP financial measures are
also useful to investors in allowing for greater transparency with
respect to supplemental information used regularly by Company
management in financial and operational decision-making. A
limitation of using non-GAAP financial measures excluding
share-based compensation expenses and unrealized gains (losses)
from fair value changes of equity securities is that share-based
compensation expenses and unrealized gains (losses) from fair value
changes of equity securities have been and will continue to be
significant and recurring in Huazhu’s business. Management
compensates for these limitations by providing specific information
regarding the GAAP amounts excluded from each non-GAAP measure. The
accompanying tables have more details on the reconciliations
between GAAP financial measures that are most directly comparable
to non-GAAP financial measures.
Huazhu believes that EBITDA is a useful
financial metric to assess the operating and financial performance
before the impact of investing and financing transactions and
income taxes, given the significant investments that Huazhu has
made in leasehold improvements, depreciation and amortization
expense that comprise a significant portion of Huazhu’s cost
structure. In addition, Huazhu believes that EBITDA is widely used
by other companies in the lodging industry and may be used by
investors as a measure of financial performance. Huazhu believes
that EBITDA will provide investors with a useful tool for
comparability between periods because it eliminates depreciation
and amortization expense attributable to capital expenditures.
Huazhu also uses adjusted EBITDA, which is defined as EBITDA before
share-based compensation expenses and unrealized gains (losses)
from fair value changes of equity securities, to assess operating
results of the Huazhu hotels in operation. Huazhu believes that the
exclusion of share-based compensation expenses and unrealized gains
(losses) from fair value changes of equity securities helps
facilitate year-on-year comparison of the results of operations as
the share-based compensation expenses and unrealized gains (losses)
from fair value changes of equity securities may not be indicative
of Company operating performance.
Huazhu believes that unrealized gains and losses
from changes in fair value of equity securities are generally
meaningless in understanding our reported results or evaluating our
economic performance of our businesses. These gains and losses have
caused and will continue to cause significant volatility in
periodic earnings.
Therefore, Huazhu believes adjusted EBITDA more
closely reflects the performance capability of hotels. The
presentation of EBITDA and adjusted EBITDA should not be construed
as an indication that Huazhu’s future results will be unaffected by
other charges and gains considered to be outside the ordinary
course of business.
The use of EBITDA and adjusted EBITDA has
certain limitations. Depreciation and amortization expense for
various long-term assets (including land use rights), income tax,
interest expense and interest income have been and will be incurred
and are not reflected in the presentation of EBITDA. Share-based
compensation expenses and unrealized gains (losses) from fair value
changes of equity securities have been and will be incurred, and
are not reflected in the presentation of adjusted EBITDA. Each of
these items should also be considered in the overall evaluation of
the results. Huazhu compensates for these limitations by providing
the relevant disclosure of the depreciation and amortization,
interest income, interest expense, income tax expense, share-based
compensation expenses, and unrealized gains (losses) from fair
value changes of equity securities and other relevant items both in
the reconciliations to the U.S. GAAP financial measures and in the
consolidated financial statements, all of which should be
considered when evaluating the performance of Huazhu.
The terms EBITDA and adjusted EBITDA are not
defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA is
a measure of net income, operating income, operating performance or
liquidity presented in accordance with U.S. GAAP. When assessing
the operating and financial performance, investors should not
consider these data in isolation or as a substitute for Huazhu’s
net income, operating income or any other operating performance
measure that is calculated in accordance with U.S. GAAP. In
addition, Huazhu’s EBITDA or adjusted EBITDA may not be comparable
to EBITDA or adjusted EBITDA or similarly titled measures utilized
by other companies since such other companies may not calculate
EBITDA or adjusted EBITDA in the same manner as Huazhu does.
Reconciliations of Huazhu’s non-GAAP financial
measures, including EBITDA and adjusted EBITDA, to the consolidated
statement of operations information are included at the end of this
press release.
About Huazhu Group
LimitedHuazhu Group Limited is a leading hotel operator
and franchisor. As of September 30, 2019, Huazhu operated 5,151
hotels with 504,414 rooms in operation. Huazhu’s brands include Hi
Inn, Elan Hotel, HanTing Hotel, HanTing Premium Hotel, JI Hotel,
Starway Hotel, Orange Hotel Select, Crystal Orange Hotel, Manxin
Hotels & Resorts, Joya Hotel, and Blossom Hill Hotels &
Resorts. Huazhu also has the rights as master franchisee for
Mercure, Ibis and Ibis Styles, and co-development rights for Grand
Mercure and Novotel, in the pan-China region.
Huazhu’s business mainly includes leased,
manachised and franchised models. Under the lease model, Huazhu
directly operates hotels typically located on leased properties.
Under the manachise model, Huazhu manages manachised hotels through
the on-site hotel managers Huazhu appoints and collects fees from
franchisees. Under the franchise model, Huazhu provides training,
reservations and support services to the franchised hotels, and
collects fees from franchisees but does not appoint on-site hotel
managers. In addition, Huazhu has a limited number of hotels in
owned or partially owned properties. Huazhu applies a consistent
standard and platform across all of its hotels. As of September 30,
2019, Huazhu operates 83 percent of its hotel rooms under manachise
and franchise models.
For more information, please visit the Company’s
website: http://ir.huazhu.com.
Safe Harbor Statement Under the Private
Securities Litigation Reform Act of 1995: The information in this
release contains forward-looking statements which involve risks and
uncertainties, including statements regarding the Company’s capital
needs, business strategy and expectations. Any statements contained
herein that are not statements of historical fact may be deemed to
be forward-looking statements, which may be identified by
terminology such as “may,” “should,” “will,” “expect,” “plan,”
“intend,” “anticipate,” “believe,” “estimate,” “predict,”
“potential,” “forecast,” “project,” or “continue,” the negative of
such terms or other comparable terminology. Readers should not rely
on forward-looking statements as predictions of future events or
results. Any or all of the Company’s forward-looking statements may
turn out to be wrong. They can be affected by inaccurate
assumptions, risks and uncertainties, and other factors which could
cause actual events or results to be materially different from
those expressed or implied in the forward-looking statements. In
evaluating these statements, readers should consider various
factors, including the anticipated growth strategies of the
Company, the future results of operations and financial condition
of the Company, economic conditions in China, the regulatory
environment in China, the Company’s ability to attract and retain
customers over time, the Company’s ability to leverage its brands,
business trends and competition in the lodging industry, the
expected growth of demand for lodging in China, and other factors
and risks outlined in the Company’s filings with the U.S.
Securities and Exchange Commission, including its annual report on
Form 20-F and other filings. These factors may cause the Company’s
actual results to differ materially from any forward-looking
statement. In addition, new factors emerge from time to time and it
is not possible for the Company to predict all factors that may
cause actual results to differ materially from those contained in
any forward-looking statements. Any projections in this release are
based on limited information currently available to the Company,
which is subject to change. This release also contains statements
or projections that are based upon information available to the
public, as well as other information from sources which the Company
believes to be reliable, but it is not guaranteed by the Company to
be accurate, nor does the Company purport it to be complete. The
Company disclaims any obligation to publicly update any
forward-looking statements to reflect events or circumstances after
the date of this document, except as required by applicable
law.
Contact InformationHuazhu Investor RelationsTel:
86 (21) 6195 9561Email: ir@huazhu.comhttp://ir.huazhu.com
---Financial Tables and Operational Data
Follow—
Huazhu Group
Limited |
Unaudited
Condensed Consolidated Balance Sheets |
|
December 31, 2018 |
|
September 30, 2019 |
|
|
|
|
|
RMB |
RMB |
US$ |
|
(in
millions) |
|
|
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
4,262 |
|
4,013 |
|
561 |
|
Restricted cash |
622 |
|
438 |
|
61 |
|
Short-term investments |
89 |
|
63 |
|
9 |
|
Accounts receivable, net |
195 |
|
194 |
|
27 |
|
Loan receivables |
94 |
|
192 |
|
27 |
|
Amounts due from related parties |
176 |
|
278 |
|
39 |
|
Prepaid rent |
955 |
|
- |
|
- |
|
Inventories |
41 |
|
47 |
|
7 |
|
Other current assets |
540 |
|
639 |
|
89 |
|
Total
current assets |
6,974 |
|
5,864 |
|
820 |
|
|
|
|
|
Property
and equipment, net |
5,018 |
|
5,504 |
|
770 |
|
Intangible assets, net |
1,834 |
|
1,659 |
|
232 |
|
Operating
lease right-of-use assets |
- |
|
20,729 |
|
2,900 |
|
Land use
rights, net |
220 |
|
217 |
|
30 |
|
Long-term
investments |
6,152 |
|
5,730 |
|
802 |
|
Goodwill |
2,630 |
|
2,657 |
|
372 |
|
Loan
receivables |
189 |
|
273 |
|
38 |
|
Other
assets |
471 |
|
566 |
|
79 |
|
Deferred
tax assets |
505 |
|
488 |
|
68 |
|
Total
assets |
23,993 |
|
43,687 |
|
6,111 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Short-term debt |
948 |
|
2,831 |
|
396 |
|
Accounts payable |
890 |
|
991 |
|
139 |
|
Amounts due to related parties |
75 |
|
93 |
|
13 |
|
Salary and welfare payables |
521 |
|
318 |
|
44 |
|
Deferred revenue |
1,005 |
|
1,156 |
|
162 |
|
Operating lease liabilities, current |
- |
|
2,978 |
|
417 |
|
Accrued expenses and other current liabilities |
1,607 |
|
1,762 |
|
247 |
|
Dividends payable |
658 |
|
- |
|
- |
|
Income tax payable |
265 |
|
230 |
|
32 |
|
Total
current liabilities |
5,969 |
|
10,359 |
|
1,450 |
|
|
|
|
|
Long-term
debt |
8,812 |
|
5,880 |
|
823 |
|
Deferred
rent |
1,507 |
|
- |
|
- |
|
Operating
lease liabilities, noncurrent |
- |
|
18,416 |
|
2,577 |
|
Deferred
revenue |
458 |
|
518 |
|
72 |
|
Other
long-term liabilities |
453 |
|
537 |
|
74 |
|
Deferred tax
liabilities |
475 |
|
476 |
|
67 |
|
Total
liabilities |
17,674 |
|
36,186 |
|
5,063 |
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
Ordinary shares |
0 |
|
0 |
|
0 |
|
Treasury shares |
(107 |
) |
(107 |
) |
(15 |
) |
Additional paid-in capital |
3,713 |
|
3,811 |
|
533 |
|
Retained earnings |
2,610 |
|
3,760 |
|
526 |
|
Accumulated other comprehensive (loss) income |
(42 |
) |
(78 |
) |
(12 |
) |
Total Huazhu
Group Limited shareholders’ equity |
6,174 |
|
7,386 |
|
1,032 |
|
Noncontrolling interest |
145 |
|
115 |
|
16 |
|
Total
equity |
6,319 |
|
7,501 |
|
1,048 |
|
Total
liabilities and equity |
23,993 |
|
43,687 |
|
6,111 |
|
|
|
Huazhu Group
Limited |
Unaudited
Condensed Consolidated Statements of Comprehensive
Income |
|
Quarter Ended |
|
September 30, 2018 |
|
June 30, 2019 |
|
September 30, 2019 |
|
|
|
|
|
|
RMB |
RMB |
RMB |
US$ |
|
(in
millions, except share, per share and per ADS data) |
Revenues: |
|
|
|
|
Leased and owned hotels |
2,053 |
|
2,001 |
|
2,089 |
|
292 |
|
Manachised and franchised hotels |
699 |
|
803 |
|
939 |
|
131 |
|
Others |
16 |
|
55 |
|
27 |
|
4 |
|
Net
revenues |
2,768 |
|
2,859 |
|
3,055 |
|
427 |
|
|
|
|
|
|
|
|
|
|
|
Operating
costs and expenses: |
|
|
|
|
Hotel operating costs: |
|
|
|
|
Rents |
(595 |
) |
(646 |
) |
(664 |
) |
(93 |
) |
Utilities |
(110 |
) |
(79 |
) |
(105 |
) |
(15 |
) |
Personnel costs |
(429 |
) |
(453 |
) |
(466 |
) |
(65 |
) |
Depreciation and amortization |
(216 |
) |
(237 |
) |
(243 |
) |
(34 |
) |
Consumables, food and beverage |
(180 |
) |
(201 |
) |
(203 |
) |
(28 |
) |
Others |
(128 |
) |
(127 |
) |
(153 |
) |
(21 |
) |
Total hotel operating costs |
(1,658 |
) |
(1,743 |
) |
(1,834 |
) |
(256 |
) |
Other operating costs |
(2 |
) |
(17 |
) |
(11 |
) |
(2 |
) |
Selling and marketing expenses |
(91 |
) |
(102 |
) |
(113 |
) |
(16 |
) |
General and administrative expenses |
(233 |
) |
(247 |
) |
(277 |
) |
(38 |
) |
Pre-opening expenses |
(60 |
) |
(122 |
) |
(126 |
) |
(18 |
) |
Total
operating costs and expenses |
(2,044 |
) |
(2,231 |
) |
(2,361 |
) |
(330 |
) |
Other
operating income (expense), net |
51 |
|
29 |
|
9 |
|
1 |
|
Income from
operations |
775 |
|
657 |
|
703 |
|
98 |
|
Interest
income |
42 |
|
41 |
|
46 |
|
6 |
|
Interest
expense |
(64 |
) |
(83 |
) |
(72 |
) |
(10 |
) |
Other
(expense) income, net |
16 |
|
135 |
|
86 |
|
12 |
|
Unrealized
gains (losses) from fair value changes of equity securities |
179 |
|
149 |
|
28 |
|
4 |
|
Foreign
exchange gain (loss) |
0 |
|
35 |
|
(108 |
) |
(15 |
) |
Income
(Loss) before income taxes |
948 |
|
934 |
|
683 |
|
95 |
|
Income tax
expense |
(255 |
) |
(286 |
) |
(191 |
) |
(27 |
) |
Gain (Loss)
from equity method investments |
(18 |
) |
(43 |
) |
(60 |
) |
(8 |
) |
Net income
(loss) |
675 |
|
605 |
|
432 |
|
60 |
|
Net (income)
loss attributable to noncontrolling interest |
(7 |
) |
8 |
|
(1 |
) |
(0 |
) |
Net income
(loss) attributable to Huazhu Group Limited |
668 |
|
613 |
|
431 |
|
60 |
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income |
|
|
|
|
Foreign
currency translation adjustments, net of tax |
(147 |
) |
(64 |
) |
(65 |
) |
(9 |
) |
Comprehensive income (loss) |
528 |
|
541 |
|
367 |
|
51 |
|
Comprehensive (income) loss attributable to noncontrolling
interest |
(7 |
) |
8 |
|
(1 |
) |
(0 |
) |
Comprehensive income (loss) attributable to Huazhu Group
Limited |
521 |
|
549 |
|
366 |
|
51 |
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Losses) per share/ADS: |
|
|
|
|
Basic |
2.37 |
|
2.16 |
|
1.51 |
|
0.21 |
|
Diluted |
2.23 |
|
2.05 |
|
1.45 |
|
0.20 |
|
|
|
|
|
|
Weighted average
number of shares used in computation: |
|
|
Basic |
282,149,039 |
|
284,029,267 |
|
284,657,577 |
|
284,657,577 |
|
Diluted |
303,605,292 |
|
304,526,084 |
|
304,311,266 |
|
304,311,266 |
|
|
|
|
|
|
|
|
|
|
|
Huazhu Group
Limited |
Unaudited
Condensed Consolidated Statements of Cash Flows |
|
Quarter Ended |
|
September 30, 2018 |
|
June 30, 2019 |
|
September 30, 2019 |
|
|
|
|
|
|
RMB |
RMB |
RMB |
US$ |
|
(in
millions) |
Operating activities: |
|
|
|
|
Net income |
675 |
|
605 |
|
432 |
|
60 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
Share-based compensation |
20 |
|
31 |
|
31 |
|
4 |
|
Depreciation and amortization, and other |
228 |
|
252 |
|
257 |
|
36 |
|
Loss (Income) from equity method investments, net of dividends |
18 |
|
43 |
|
99 |
|
14 |
|
Investment (income) loss |
(193 |
) |
(194 |
) |
(6 |
) |
(1 |
) |
Changes in operating assets and liabilities |
147 |
|
382 |
|
20 |
|
3 |
|
Other |
19 |
|
42 |
|
174 |
|
24 |
|
Net cash provided by operating activities |
914 |
|
1,161 |
|
1,007 |
|
140 |
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
Capital expenditures |
(349 |
) |
(301 |
) |
(390 |
) |
(55 |
) |
Acquisitions, net of cash received |
(431 |
) |
(25 |
) |
(23 |
) |
(3 |
) |
Purchase of long-term investments |
(651 |
) |
(148 |
) |
(118 |
) |
(16 |
) |
Proceeds from maturity/sale of long-term investments |
66 |
|
- |
|
533 |
|
75 |
|
Loan advances |
(77 |
) |
(149 |
) |
(131 |
) |
(19 |
) |
Loan collections |
47 |
|
66 |
|
148 |
|
21 |
|
Other |
- |
|
4 |
|
(8 |
) |
(1 |
) |
Net cash provided by (used in) investing activities |
(1,395 |
) |
(553 |
) |
11 |
|
2 |
|
Financing
activities: |
|
|
|
|
Net proceeds from issuance of ordinary shares upon exercise of
options |
0 |
|
7 |
|
2 |
|
0 |
|
Proceeds from debt |
643 |
|
1,682 |
|
2 |
|
0 |
|
Repayment of debt |
(3 |
) |
(2,756 |
) |
(605 |
) |
(85 |
) |
Other |
(99 |
) |
13 |
|
(37 |
) |
(5 |
) |
Net cash
provided by (used in) financing activities |
541 |
|
(1,054 |
) |
(638 |
) |
(90 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash, cash equivalents and restricted
cash |
(0 |
) |
54 |
|
6 |
|
1 |
|
Net increase
(decrease) in cash, cash equivalents and restricted cash |
60 |
|
(392 |
) |
386 |
|
53 |
|
Cash,
cash equivalents and restricted cash at the beginning of the
period |
4,487 |
|
4,457 |
|
4,065 |
|
569 |
|
Cash,
cash equivalents and restricted cash at the end of the period |
4,547 |
|
4,065 |
|
4,451 |
|
622 |
|
|
|
|
|
|
|
|
|
|
|
|
Huazhu Group Limited |
Unaudited Reconciliation of GAAP and Non-GAAP
Results |
|
Quarter Ended September 30, 2019 |
|
GAAP Result |
|
% of Net Revenues |
|
Share-based Compensation |
|
% of Net Revenues |
|
Non-GAAP Result |
|
% of Net Revenues |
|
|
|
|
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
(in
millions) |
Hotel operating costs |
1,834 |
|
60.0 |
% |
10 |
|
0.3 |
% |
1,824 |
|
59.7 |
% |
Other operating costs |
11 |
|
0.4 |
% |
- |
|
0.0 |
% |
11 |
|
0.4 |
% |
Selling and marketing expenses |
113 |
|
3.7 |
% |
1 |
|
0.0 |
% |
112 |
|
3.7 |
% |
General and administrative expenses |
277 |
|
9.1 |
% |
20 |
|
0.7 |
% |
257 |
|
8.4 |
% |
Pre-opening expenses |
126 |
|
4.1 |
% |
- |
|
0.0 |
% |
126 |
|
4.1 |
% |
Total operating costs and expenses |
2,361 |
|
77.3 |
% |
31 |
|
1.0 |
% |
2,330 |
|
76.3 |
% |
Income from operations |
703 |
|
23.0 |
% |
31 |
|
1.0 |
% |
734 |
|
24.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, 2019 |
|
GAAP Result |
|
% of Net Revenues |
Share-based Compensation |
|
% of Net Revenues |
Non-GAAP Result |
|
% of Net Revenues |
|
US$ |
|
|
US$ |
|
|
US$ |
|
|
|
(in
millions) |
Hotel operating costs |
256 |
|
60.0 |
% |
1 |
|
0.3 |
% |
255 |
|
59.7 |
% |
Other operating costs |
2 |
|
0.4 |
% |
- |
|
0.0 |
% |
2 |
|
0.4 |
% |
Selling and marketing expenses |
16 |
|
3.7 |
% |
0 |
|
0.0 |
% |
16 |
|
3.7 |
% |
General and administrative expenses |
38 |
|
9.1 |
% |
3 |
|
0.7 |
% |
35 |
|
8.4 |
% |
Pre-opening expenses |
18 |
|
4.1 |
% |
- |
|
0.0 |
% |
18 |
|
4.1 |
% |
Total operating costs and expenses |
330 |
|
77.3 |
% |
4 |
|
1.0 |
% |
326 |
|
76.3 |
% |
Income from operations |
98 |
|
23.0 |
% |
4 |
|
1.0 |
% |
102 |
|
24.0 |
% |
|
|
|
|
|
Quarter Ended June 30, 2019 |
|
GAAP Result |
|
% of Net Revenues |
|
Share-based Compensation |
|
% of Net Revenues |
|
Non-GAAP Result |
|
% of Net Revenues |
|
|
|
|
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
(in
millions) |
Hotel operating costs |
1,743 |
|
61.0 |
% |
10 |
|
0.3 |
% |
1,733 |
|
60.7 |
% |
Other operating costs |
17 |
|
0.6 |
% |
- |
|
0.0 |
% |
17 |
|
0.6 |
% |
Selling and marketing expenses |
102 |
|
3.6 |
% |
1 |
|
0.0 |
% |
101 |
|
3.6 |
% |
General and administrative expenses |
247 |
|
8.6 |
% |
20 |
|
0.7 |
% |
227 |
|
7.9 |
% |
Pre-opening expenses |
122 |
|
4.3 |
% |
- |
|
0.0 |
% |
122 |
|
4.3 |
% |
Total operating costs and expenses |
2,231 |
|
78.1 |
% |
31 |
|
1.0 |
% |
2,200 |
|
77.1 |
% |
Income from operations |
657 |
|
23.0 |
% |
31 |
|
1.0 |
% |
688 |
|
24.0 |
% |
|
|
|
|
|
Quarter Ended September 30, 2018 |
|
GAAP Result |
|
% of Net Revenues |
|
Share-based Compensation |
|
% of Net Revenues |
|
Non-GAAP Result |
|
% of Net Revenues |
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
(in millions) |
Hotel operating costs |
1,658 |
|
59.9 |
% |
7 |
|
0.2 |
% |
1,651 |
|
59.7 |
% |
Other operating costs |
2 |
|
0.1 |
% |
- |
|
0.0 |
% |
2 |
|
0.1 |
% |
Selling and marketing expenses |
91 |
|
3.3 |
% |
0 |
|
0.0 |
% |
91 |
|
3.3 |
% |
General and administrative expenses |
233 |
|
8.4 |
% |
13 |
|
0.5 |
% |
220 |
|
7.9 |
% |
Pre-opening expenses |
60 |
|
2.2 |
% |
- |
|
0.0 |
% |
60 |
|
2.2 |
% |
Total operating costs and expenses |
2,044 |
|
73.9 |
% |
20 |
|
0.7 |
% |
2,024 |
|
73.2 |
% |
Income from operations |
775 |
|
28.0 |
% |
20 |
|
0.7 |
% |
795 |
|
28.7 |
% |
|
|
Huazhu Group Limited |
Unaudited Reconciliation of GAAP and Non-GAAP
Results |
|
Quarter Ended |
|
September 30, 2018 |
|
June 30, 2019 |
|
September 30, 2019 |
|
|
|
|
|
|
RMB |
RMB |
RMB |
US$ |
|
(in
millions, except share, per share and per ADS data) |
Net income (loss) attributable to Huazhu Group Limited (GAAP) |
668 |
|
613 |
|
431 |
|
60 |
|
Share-based compensation expenses |
20 |
|
31 |
|
31 |
|
4 |
|
Unrealized (gains) losses from fair value changes of equity
securities |
(179 |
) |
(149 |
) |
(28 |
) |
(4 |
) |
Adjusted net income (loss) attributable to Huazhu Group Limited
(non-GAAP) |
509 |
|
495 |
|
434 |
|
60 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (losses) per share/ADS (non-GAAP) |
Basic |
1.80 |
|
1.74 |
|
1.52 |
|
0.21 |
|
Diluted |
1.71 |
|
1.66 |
|
1.46 |
|
0.20 |
|
|
|
|
|
|
Weighted average number of shares used in computation |
Basic |
282,149,039 |
|
284,029,267 |
|
284,657,577 |
|
284,657,577 |
|
Diluted |
303,605,292 |
|
304,526,084 |
|
304,311,266 |
|
304,311,266 |
|
|
|
|
|
|
|
Quarter Ended |
|
September 30, 2018 |
|
June 30, 2019 |
|
September 30, 2019 |
|
|
|
|
|
|
RMB |
RMB |
RMB |
US$ |
|
(in
millions) |
Net income (loss) attributable to Huazhu Group Limited
(GAAP) |
668 |
|
613 |
|
431 |
|
60 |
|
Interest income |
(42 |
) |
(41 |
) |
(46 |
) |
(6 |
) |
Interest expense |
64 |
|
83 |
|
72 |
|
10 |
|
Income tax expense |
255 |
|
286 |
|
191 |
|
27 |
|
Depreciation and amortization |
222 |
|
245 |
|
250 |
|
35 |
|
EBITDA (non-GAAP) |
1,167 |
|
1,186 |
|
898 |
|
126 |
|
Share-based compensation |
20 |
|
31 |
|
31 |
|
4 |
|
Unrealized (gains) losses from fair value changes of equity
securities |
(179 |
) |
(149 |
) |
(28 |
) |
(4 |
) |
Adjusted EBITDA (non-GAAP) |
1,008 |
|
1,068 |
|
901 |
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Huazhu Group Limited |
Operational Data |
|
|
|
|
|
|
As of |
|
|
|
September 30, |
June 30, |
September 30, |
|
|
2018 |
2019 |
2019 |
|
Total hotels in operation: |
4,055 |
|
4,665 |
|
5,151 |
|
|
Leased and owned hotels |
698 |
|
696 |
|
697 |
|
|
Manachised hotels |
3,139 |
|
3,692 |
|
4,087 |
|
|
Franchised hotels |
218 |
|
277 |
|
367 |
|
|
Total hotel rooms in operation |
409,516 |
|
463,296 |
|
504,414 |
|
|
Leased and owned hotels |
86,825 |
|
87,179 |
|
88,206 |
|
|
Manachised hotels |
301,451 |
|
351,128 |
|
387,174 |
|
|
Franchised hotels |
21,240 |
|
24,989 |
|
29,034 |
|
|
Number of cities |
391 |
|
413 |
|
420 |
|
|
|
|
|
|
|
|
For the quarter ended |
|
|
September 30, |
June 30, |
September 30, |
|
|
2018 |
2019 |
2019 |
|
Average daily room rate (in RMB) |
|
|
|
|
Leased and owned hotels |
279 |
|
281 |
|
288 |
|
|
Manachised hotels |
228 |
|
225 |
|
235 |
|
|
Blended |
239 |
|
236 |
|
245 |
|
|
Occupancy rate (as a percentage) |
|
|
|
|
Leased and owned hotels |
92.0 |
% |
89.4 |
% |
90.0 |
% |
|
Manachised hotels |
90.4 |
% |
86.3 |
% |
87.2 |
% |
|
Blended |
90.7 |
% |
86.9 |
% |
87.7 |
% |
|
RevPAR (in RMB) |
|
|
|
|
Leased and owned hotels |
257 |
|
252 |
|
259 |
|
|
Manachised hotels |
206 |
|
194 |
|
205 |
|
|
Blended |
217 |
|
206 |
|
215 |
|
|
|
|
|
|
|
|
As of
September 30, 2019 |
|
Hotels in operation |
Unopened hotels in pipeline |
Economy hotels |
3,204 |
546 |
Leased and owned hotels |
425 |
1 |
Manachised and franchised hotels |
2,779 |
545 |
Midscale and upscale hotels |
1,947 |
1,190 |
Leased and owned hotels |
272 |
51 |
Manachised and franchised hotels |
1,675 |
1,139 |
Total |
5,151 |
1,736 |
|
|
|
Hotel portfolio by brand |
|
|
As of September 30,
2019 |
|
Number of hotels in operation |
|
Number of rooms in operation |
|
Economy hotels |
3,204 |
|
278,142 |
|
HanTing Hotel |
2,381 |
|
227,925 |
|
Hi Inn |
450 |
|
27,282 |
|
Elan Hotel |
373 |
|
22,935 |
|
Midscale and upscale hotels |
1,947 |
|
226,272 |
|
HanTing Premium Hotel |
180 |
|
16,385 |
|
Ibis Hotel |
179 |
|
20,061 |
|
Ibis Styles Hotel |
50 |
|
6,132 |
|
Starway Hotel |
317 |
|
27,264 |
|
JI Hotel |
759 |
|
96,232 |
|
Orange Select Hotel |
233 |
|
27,311 |
|
Crystal Orange Hotel |
77 |
|
10,207 |
|
Manxin Hotels & Resorts |
39 |
|
3,308 |
|
Madison Hotel |
5 |
|
536 |
|
Mercure Hotel |
63 |
|
11,972 |
|
Novotel Hotel |
9 |
|
2,928 |
|
Grand Madison Hotel |
1 |
|
203 |
|
Joya Hotel |
6 |
|
1,250 |
|
Vue Hotels & Resorts |
21 |
|
727 |
|
Grand Mercure Hotel |
8 |
|
1,756 |
|
Total hotels |
5,151 |
|
504,414 |
|
|
Same-hotel operational data by segment |
|
|
|
|
|
|
|
|
|
Number of hotels |
Same-hotel RevPAR |
Same-hotel ADR |
Same-hotel Occupancy |
|
As ofSeptember 30, |
For the quarter ended |
yoy |
For the quarter ended |
yoy |
For the quarter ended |
yoy |
|
|
September 30, |
change |
September 30, |
change |
September 30, |
change |
|
|
2018 |
2019 |
|
2018 |
2019 |
|
2018 |
2019 |
|
2018 |
|
2019 |
|
(p.p.) |
|
Economy hotels |
2,500 |
2,500 |
|
186 |
179 |
-3.7 |
% |
196 |
194 |
-0.7 |
% |
95.2 |
% |
92.2 |
% |
-3.0 |
|
Leased and owned hotels |
414 |
414 |
|
200 |
197 |
-1.6 |
% |
211 |
212 |
0.6 |
% |
95.0 |
% |
92.9 |
% |
-2.0 |
|
Manachised and franchised hotels |
2,086 |
2,086 |
|
182 |
175 |
-4.3 |
% |
192 |
190 |
-1.0 |
% |
95.3 |
% |
92.1 |
% |
-3.2 |
|
Midscale and upscale hotels |
861 |
861 |
|
289 |
278 |
-3.9 |
% |
332 |
325 |
-2.2 |
% |
87.1 |
% |
85.6 |
% |
-1.5 |
|
Leased and owned hotels |
184 |
184 |
|
355 |
337 |
-5.3 |
% |
396 |
382 |
-3.5 |
% |
89.8 |
% |
88.1 |
% |
-1.7 |
|
Manachised and franchised hotels |
677 |
677 |
|
265 |
257 |
-3.2 |
% |
308 |
303 |
-1.5 |
% |
86.1 |
% |
84.7 |
% |
-1.5 |
|
Total |
3,361 |
3,361 |
|
219 |
211 |
-3.8 |
% |
236 |
234 |
-1.1 |
% |
92.6 |
% |
90.1 |
% |
-2.5 |
|
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