Huazhu Group Limited Reports Third Quarter of 2020 Financial Results
Huazhu Group Limited (NASDAQ: HTHT) reported third-quarter 2020 financial results, showing a 3.4% year-over-year increase in net revenues to RMB3.2 billion (US$466 million), surpassing earlier guidance. The company experienced a net loss of RMB212 million, compared to a profit of RMB431 million in Q3 2019. Adjusted EBITDA was positive at RMB184 million, indicating recovery despite challenges from COVID-19. As of September 30, 2020, Huazhu operated 6,507 hotels and had 2,313 hotels in the pipeline. The fourth-quarter guidance suggests revenues may rise by 0% to 3% year-over-year.
- Net revenues increased 3.4% year-over-year to RMB3.2 billion (US$466 million).
- Adjusted EBITDA turned positive at RMB184 million.
- Recovery seen with 99% of Legacy-Huazhu's hotels operating.
- Fourth-quarter revenue guidance expects a 0% to 3% increase year-over-year.
- Net loss of RMB212 million compared to a profit of RMB431 million in Q3 2019.
- Excluding DH, net revenues decreased 10.5% year-over-year.
- Blended RevPAR decreased 19.8% year-over-year.
- A total of 6,507 hotels or 634,087 hotel rooms in operation and 2,313 unopened hotels in pipeline as of September 30, 2020. Excluding Steigenberger Hotels AG and its subsidiaries (“DH”), a total of 6,390 hotels or 610,765 hotel rooms in operation.
- Hotel turnover1 increased
7% year-over-year to RMB11 billion for the third quarter of 2020. Excluding DH, hotel turnover decreased1% . - Net revenues increased
3.4% year-over-year to RMB3.2 billion (US$466 million )2 for the third quarter of 2020, better than revenue guidance previously announced of0% to2% increase. Excluding DH, net revenues decreased10.5% year-over-year, in line with our guidance previously announced of a decline of 10 to12% . - Net loss attributable to Huazhu Group Limited was RMB212 million (US
$31 million ) for the third quarter of 2020, compared with net income attributable to Huazhu Group Limited of RMB431 million in the third quarter of 2019 and net loss attributable to Huazhu Group Limited of RMB548 million in the previous quarter. Excluding DH, net income attributable to Huazhu Group Limited was RMB482 million for the third quarter of 2020. - Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities (but including non-cash goodwill impairment loss of RMB437 million), adjusted net loss attributable to Huazhu Group Limited (non-GAAP) for the third quarter of 2020 was RMB218 million (US
$32 million ), compared with adjusted net income attributable to Huazhu Group Limited (non-GAAP) of RMB434 million for the third quarter of 2019. Excluding DH, adjusted net income attributable to Huazhu Group Limited (non-GAAP) for the third quarter of 2020 was RMB476 million. - EBITDA (non-GAAP) for the third quarter of 2020 was RMB190 million (US
$28 million ), compared with RMB898 million for the third quarter of 2019. Excluding DH, EBITDA (non-GAAP) for the third quarter of 2020 was RMB859 million. - Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities (but including non-cash goodwill impairment loss of RMB437 million), adjusted EBITDA (non-GAAP) for the third quarter of 2020 was RMB184 million (US
$27 million ), compared to RMB901 million for the third quarter of 2019. Excluding DH, adjusted EBITDA (non-GAAP) for the third quarter of 2020 was RMB853 million. - In the fourth quarter of 2020, Huazhu expects net revenues to range from a
0% to a3% increase year-over-year, or to range from a decline of 4-7% if excluding the addition of DH.
SHANGHAI, China, Dec. 04, 2020 (GLOBE NEWSWIRE) -- Huazhu Group Limited (NASDAQ: HTHT and HKEX: 1179) (“Huazhu”, “we”, “our” or “the Company”), a world-leading hotel group, today announced its unaudited financial results for the third quarter ended September 30, 2020.
As of September 30, 2020, Huazhu’s worldwide hotel network in operation totaled 6,507 hotels and 634,087 rooms, including 117 hotels from the addition of DH. During the third quarter of 2020, Legacy-Huazhu3 business opened 520 hotels, including 9 leased (or leased-and-operated) hotels and 511 manachised (or franchised-and-managed) hotels and franchised hotels, and closed a total of 201 hotels, including 12 leased hotels and 189 manachised and franchised hotels. During the third quarter of 2020, the Legacy-DH4 business opened 3 hotels, including 2 leased hotels and 1 manachised and franchised hotel, and closed 2 manachised and franchised hotels. As of September 30, 2020, Huazhu had a total of 2,313 unopened hotels in pipeline, including 2,272 hotels from Legacy-Huazhu business and 41 hotels from Legacy-DH business.
Legacy-Huazhu Only – Third Quarter of 2020 Operational Highlights
As of September 30, 2020, Legacy-Huazhu had 6,390 hotels in operation, including 687 leased and owned hotels and 5,703 manachised hotels and franchised hotels. In addition, as of the same date, Legacy-Huazhu had 610,765 hotel rooms in operation, including 91,218 under the lease and ownership model and 519,547 under the manachise and franchise models. Legacy-Huazhu also had 2,272 hotels in the pipeline, including 22 leased and owned hotels and 2,250 manachised and franchised hotels. Legacy-Huazhu has experienced continued recovery during the third quarter of 2020. As of September 30, 2020, approximately
- The ADR was RMB218 in the third quarter of 2020, compared with RMB245 in the third quarter of 2019 and RMB185 in the previous quarter.
- The occupancy rate for all hotels in operation was
82.0% in the third quarter of 2020, compared with87.7% in the third quarter of 2019 and68.8% in the previous quarter. - Blended RevPAR was RMB179 in the third quarter of 2020, compared with RMB215 in the third quarter of 2019 and RMB127 in the previous quarter.
- For all hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB178 for the third quarter of 2020, representing a
19.8% decrease from RMB222 for the third quarter of 2019, with a13.5% decrease in ADR and a 6.5-percentage-point decrease in occupancy rate.
Legacy-DH Only – Third Quarter of 2020 Operational Highlights
As of September 30, 2020, Legacy-DH had 117 hotels in operation, including 70 leased hotels and 47 manachised and franchised hotels. In addition, as of the same date, Legacy-DH had 23,322 hotel rooms in operation, including 12,820 under the lease model and 10,502 under the manachise and franchise models. Legacy-DH also had 41 hotels in the pipeline, including 28 leased hotels and 13 manachised and franchised hotels. The following discusses Legacy-DH’s RevPAR, average daily room rate (“ADR”) and occupancy rate for its leased as well as manachised and franchised hotels (excluding hotels temporarily closed) for the periods indicated.
- The ADR was EUR93 in the third quarter of 2020, compared with EUR98 in the third quarter of 2019 and EUR87 in the previous quarter.
- The occupancy rate for all Legacy-DH hotels in operation was
37.9% in the third quarter of 2020, compared with75.7% in the third quarter of 2019 and18.3% in the previous quarter. - Blended RevPAR was EUR35 in the third quarter of 2020, compared with EUR74 in the third quarter of 2019 and EUR16 in the previous quarter.
Ji Qi, Founder, Executive Chairman and CEO of Huazhu commented: “We are pleased to see our adjusted EBITDA turned to a positive at RMB184 million in third quarter from a loss of RMB97 million in second quarter 2020, mainly due to continued strong recovery of Legacy-Huazhu’s hotels during the third quarter, following an upward RevPAR trend. Legacy-DH’s operating performance has also been steadily recovering from July until late-September when a second wave of the COVID-19 pandemic occurred again in Europe. We are taking further cost and cash flow measures to mitigate the effects of this situation.
“We remain very confident,” continued Mr. Ji, “to achieve our target of 10,000 hotels by 2022 as we believe the pandemic will accelerate the industry consolidation where Huazhu, as one of the market leaders, should be the major beneficiary. In addition, we are also exploring new opportunities in lower-tier cities to further expand our presence across China.”
Third Quarter of 2020 Financial Results
The third quarter of 2020 financial results included results of Legacy-DH business, which was not included in the third quarter of 2019 financial results. In the third quarter of 2020, both Legacy-Huazhu business and Legacy-DH businesses were affected by the COVID-19 pandemic compared with that of the third quarter of 2019.
| (RMB in millions) | Q3 2019 | Q2 2020 | Q3 2020 |
| Revenues: | |||
| Leased and owned hotels | 2,089 | 1,236 | 2,131 |
| Manachised and franchised hotels | 939 | 676 | 995 |
| Others | 27 | 41 | 32 |
| Net revenues | 3,055 | 1,953 | 3,158 |
Net revenues for the third quarter of 2020 were RMB3.2 billion (US
Net revenues from leased and owned hotels for the third quarter of 2020 were RMB2.1 billion (US
Net revenues from manachised and franchised hotels for the third quarter of 2020 were RMB995 million (US
Other revenues represent revenues generated from businesses other than our hotel operations, which mainly include revenues from the provision of IT products and services to hotels, revenues from Huazhu Mall™ and other revenues from Legacy-DH business, totaling RMB32 million (US
| (RMB in millions) | Q3 2019 | Q2 2020 | Q3 2020 |
| Operating costs and expenses: | |||
| Hotel operating costs | 1,834 | 2,135 | 2,470 |
| Other operating costs | 11 | 7 | 15 |
| Selling and marketing expenses | 113 | 107 | 162 |
| General and administrative expenses | 277 | 263 | 343 |
| Pre-opening expenses | 126 | 99 | 42 |
| Total operating costs and expenses | 2,361 | 2,611 | 3,032 |
Hotel operating costs for the third quarter of 2020 were RMB2.5 billion (US
Selling and marketing expenses for the third quarter of 2020 were RMB162 million (US
General and administrative expenses for the third quarter of 2020 were RMB343 million (US
Pre-opening expenses for the third quarter of 2020 were all related to Legacy-Huazhu totaling RMB42 million (US
Goodwill impairment loss for the third quarter of 2020 was all related to Legacy-DH totaling RMB437 million (US
Other operating income, net for the third quarter of 2020 was RMB110 million (US
Loss from operations for the third quarter of 2020 was RMB201 million (US
Operating margin, defined as income from operations as a percentage of net revenues, for the third quarter of 2020, was a negative
Other expense, net for the third quarter of 2020 was RMB1 million (US
Unrealized gains from fair value changes of equity securities for the third quarter of 2020 was RMB39million (US
Income tax benefit for the third quarter of 2020 was RMB50 million (US
Net loss attributable to Huazhu Group Limited for the third quarter of 2020 was RMB212 million (US
Basic and diluted losses per share/ADS. For the third quarter of 2020, basic and diluted losses per share were RMB0.73 (US
EBITDA (non-GAAP) for the third quarter of 2020 was RMB190 million (US
Cash flow. Operating cash inflow for the third quarter of 2020 was RMB1.1 billion (US
Cash and cash equivalents and Restricted cash. As of September 30, 2020, the Company had a total balance of cash and cash equivalents of RMB6.6 billion (US
Debt financing. As of September 30, 2020, the Company had a total debt balance of RMB13.4 billion (US
COVID-19 update
During Q3 2020, our occupancy rate recovery continued, thanks to China’s effective control of the COVID-19 pandemic. In addition, our average daily room rate had also recovered gradually along with the occupancy rate. More importantly, leisure traveling was the key driver to this recovery, which had resulted in outstanding performance of our upper-midscale and upscale brand hotels. We were glad to see that the recovering trend continued in October, with our blended RevPAR recovering close to
DH operating performance also recovered steadily from July through mid-September 2020. However, this recovery trend was affected since late September due to a second wave of COVID-19 outbreak in European countries. To mitigate the effects of this situation, we are taking further cost and cash flow measures, such as deferring rental payments, reducing or eliminating discretionary corporate spending and capital expenditures, etc. As of November 30, 2020,
Guidance
In October and November, our blended RevPAR recovered to approximately
The above forecast reflects the Company’s current and preliminary view, which is subject to change.
Conference Call
Huazhu’s management will host a conference call at 8 p.m. U.S. Eastern time, Sunday, December 6, 2020 (or 9 a.m. (Hong Kong time) on Monday, December 7, 2020) following the announcement. The conference call will be a Direct Event call. All participants must preregister online prior to the call. Please use the link http://apac.directeventreg.com/registration/event/1536939 to complete the online registration at least 15 minutes prior to the commencement of the conference call. Once preregistration has been completed, participants will receive dial-in numbers, an event passcode, and a unique registrant ID. To join the conference, please dial the number you receive, enter the event passcode followed by your unique registrant ID, and you will be joined to the conference promptly. 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 December 14, 2020. Please dial +1 (855) 452 5696 (for callers in the US), 400 632 2162 (for callers in mainland China), 800 963 117 (for callers in Hong Kong) or +61 2 8199 0299 (for callers outside the US) and enter the passcode 1536939.
Use of Non-GAAP Financial Measures
To supplement the Company’s unaudited consolidated financial results presented in accordance with U.S. Generally Accepted Accounting Principles (or U.S. GAAP), the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission (or 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 (loss) 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 (losses) 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 “Unaudited Reconciliation of GAAP and non-GAAP results” at the end of this release. The Company 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. The Company 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 the Company’s historical performance. The Company 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 the Company’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.
The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before reflecting the effects of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company’s cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging and other industries, and may be used by investors and Company management as a measure of financial performance. The Company believes that EBITDA provides investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The Company 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 our hotels in operation. The Company 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.
The Company believes that unrealized gains and losses from changes in fair value of equity securities are generally meaningless in understanding our reported results or evaluating the economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in reported periodic earnings.
Therefore, the Company believes that adjusted EBITDA more closely reflects the performance capability of our hotels. The presentation of EBITDA and adjusted EBITDA, however, should not be construed as an indication that the Company’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. The Company 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 the Company.
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 the Company’s net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company’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 the Company does.
Reconciliations of the Company’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 Limited
Originated in China, Huazhu Group Limited is a world-leading hotel group. As of September 30, 2020, Huazhu operated 6,507 hotels with 634,087 rooms in operation in 16 countries. Huazhu’s brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, and Ni Hao Hotel. Upon the completion of the acquisition of DH on January 2, 2020, Huazhu added five brands to its portfolio, including Steigenberger Hotels & Resorts, Maxx by Steigenberger, Jaz in the City, IntercityHotel and Zleep Hotel. In addition, 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 includes leased and owned, manachised and franchised models. Under the lease and ownership model, Huazhu directly operates hotels typically located on leased or owned properties. Under the manachise model, Huazhu manages manachised hotels through the on-site hotel managers that Huazhu appoints, and Huazhu 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. Huazhu applies a consistent standard and platform across all of its hotels. As of September 30, 2020, Huazhu operates 16 percent of its hotel rooms under lease and ownership model, and 84 percent under manachise and franchise models.
For more information, please visit the Company’s website: https://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, the economic conditions of China, the regulatory environment in China, the Company’s ability to attract customers and leverage its brands, 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 SEC, including the Company’s 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 Information
Investor Relations
Tel: +86 (21) 6195 9561
Email: ir@huazhu.com
https://ir.huazhu.com
---Financial Tables and Operational Data Follow—
| Huazhu Group Limited | ||||||||
| Unaudited Condensed Consolidated Balance Sheets | ||||||||
| December 31, 2019 | September 30, 2020 | |||||||
| RMB | RMB | US$ | ||||||
| (in millions) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 3,234 | 6,577 | 969 | |||||
| Restricted cash | 10,765 | 1,323 | 195 | |||||
| Short-term investments | 2,908 | 3,169 | 467 | |||||
| Accounts receivable, net | 218 | 493 | 73 | |||||
| Loan receivables, net | 193 | 245 | 36 | |||||
| Amounts due from related parties | 182 | 177 | 26 | |||||
| Inventories | 57 | 93 | 14 | |||||
| Income tax receivables | - | 2 | 0 | |||||
| Other current assets, net | 699 | 697 | 102 | |||||
| Total current assets | 18,256 | 12,776 | 1,882 | |||||
| Property and equipment, net | 5,854 | 6,570 | 968 | |||||
| Intangible assets, net | 1,662 | 5,949 | 876 | |||||
| Operating lease right-of-use assets | 20,875 | 29,677 | 4,371 | |||||
| Finance lease right-of-use assets | - | 1,793 | 264 | |||||
| Land use rights, net | 215 | 209 | 31 | |||||
| Long-term investments | 1,929 | 1,866 | 275 | |||||
| Goodwill | 2,657 | 4,976 | 733 | |||||
| Loan receivables, net | 280 | 261 | 38 | |||||
| Other assets, net | 707 | 757 | 111 | |||||
| Deferred tax assets | 548 | 902 | 133 | |||||
| Total assets | 52,983 | 65,736 | 9,682 | |||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Short-term debt | 8,499 | 5,701 | 840 | |||||
| Accounts payable | 1,176 | 1,209 | 178 | |||||
| Amounts due to related parties | 95 | 73 | 11 | |||||
| Salary and welfare payables | 491 | 348 | 51 | |||||
| Deferred revenue | 1,179 | 1,317 | 194 | |||||
| Operating lease liabilities, current | 3,082 | 3,458 | 509 | |||||
| Finance lease liabilities, current | - | 27 | 4 | |||||
| Accrued expenses and other current liabilities | 1,856 | 2,573 | 379 | |||||
| Dividends payable | 678 | - | - | |||||
| Income tax payable | 231 | 127 | 19 | |||||
| Total current liabilities | 17,287 | 14,833 | 2,185 | |||||
| Long-term debt | 8,084 | 7,686 | 1,132 | |||||
| Operating lease liabilities, noncurrent | 18,496 | 27,742 | 4,086 | |||||
| Finance lease liabilities, noncurrent | - | 2,231 | 329 | |||||
| Deferred revenue | 559 | 609 | 90 | |||||
| Other long-term liabilities | 566 | 735 | 108 | |||||
| Deferred tax liabilities | 491 | 1,828 | 269 | |||||
| Retirement benefit obligations | - | 129 | 19 | |||||
| Total liabilities | 45,483 | 55,793 | 8,218 | |||||
| Equity: | ||||||||
| Ordinary shares | 0 | 0 | 0 | |||||
| Treasury shares | (107 | ) | (107 | ) | (16 | ) | ||
| Additional paid-in capital | 3,834 | 9,005 | 1,326 | |||||
| Retained earnings | 3,701 | 799 | 118 | |||||
| Accumulated other comprehensive income (loss) | (49 | ) | 162 | 24 | ||||
| Total Huazhu Group Limited shareholders' equity | 7,379 | 9,859 | 1,452 | |||||
| Noncontrolling interest | 121 | 84 | 12 | |||||
| Total equity | 7,500 | 9,943 | 1,464 | |||||
| Total liabilities and equity | 52,983 | 65,736 | 9,682 | |||||
| Huazhu Group Limited | |||||||||||
| Unaudited Condensed Consolidated Statements of Comprehensive Income | |||||||||||
| Quarter Ended | |||||||||||
| September 30, 2019 | June 30, 2020 | September 30, 2020 | |||||||||
| RMB | RMB | RMB | US$ | ||||||||
| (in millions, except share, per share and per ADS data) | |||||||||||
| Revenues: | |||||||||||
| Leased and owned hotels | 2,089 | 1,236 | 2,131 | 314 | |||||||
| Manachised and franchised hotels | 939 | 676 | 995 | 147 | |||||||
| Others | 27 | 41 | 32 | 5 | |||||||
| Net revenues | 3,055 | 1,953 | 3,158 | 466 | |||||||
| Operating costs and expenses: | |||||||||||
| Hotel operating costs: | |||||||||||
| Rents | (664 | ) | (833 | ) | (859 | ) | (126 | ) | |||
| Utilities | (105 | ) | (91 | ) | (136 | ) | (20 | ) | |||
| Personnel costs | (466 | ) | (508 | ) | (611 | ) | (90 | ) | |||
| Depreciation and amortization | (243 | ) | (320 | ) | (337 | ) | (50 | ) | |||
| Consumables, food and beverage | (203 | ) | (185 | ) | (253 | ) | (37 | ) | |||
| Others | (153 | ) | (198 | ) | (274 | ) | (41 | ) | |||
| Total hotel operating costs | (1,834 | ) | (2,135 | ) | (2,470 | ) | (364 | ) | |||
| Other operating costs | (11 | ) | (7 | ) | (15 | ) | (2 | ) | |||
| Selling and marketing expenses | (113 | ) | (107 | ) | (162 | ) | (25 | ) | |||
| General and administrative expenses | (277 | ) | (263 | ) | (343 | ) | (51 | ) | |||
| Pre-opening expenses | (126 | ) | (99 | ) | (42 | ) | (6 | ) | |||
| Total operating costs and expenses | (2,361 | ) | (2,611 | ) | (3,032 | ) | (448 | ) | |||
| Goodwill impairment loss | - | - | (437 | ) | (64 | ) | |||||
| Other operating income (expense), net | 9 | 164 | 110 | 16 | |||||||
| Income (Losses) from operations | 703 | (494 | ) | (201 | ) | (30 | ) | ||||
| Interest income | 46 | 26 | 31 | 5 | |||||||
| Interest expense | (72 | ) | (142 | ) | (136 | ) | (20 | ) | |||
| Other (expense) income, net | 86 | 21 | (1 | ) | (0 | ) | |||||
| Unrealized gains (losses) from fair value changes of equity securities | 28 | (34 | ) | 39 | 6 | ||||||
| Foreign exchange gain (loss) | (108 | ) | 34 | 48 | 7 | ||||||
| Income (Loss) before income taxes | 683 | (589 | ) | (220 | ) | (32 | ) | ||||
| Income tax (expense) benefit | (191 | ) | 68 | 50 | 7 | ||||||
| Gain (Loss) from equity method investments | (60 | ) | (33 | ) | (35 | ) | (5 | ) | |||
| Net income (loss) | 432 | (554 | ) | (205 | ) | (30 | ) | ||||
| Net (income) loss attributable to noncontrolling interest | (1 | ) | 6 | (7 | ) | (1 | ) | ||||
| Net income (loss) attributable to Huazhu Group Limited | 431 | (548 | ) | (212 | ) | (31 | ) | ||||
| Other comprehensive income | |||||||||||
| Gain arising from defined benefit plan, net of tax | - | 4 | (7 | ) | (1 | ) | |||||
| Foreign currency translation adjustments, net of tax | (65 | ) | 43 | 237 | 35 | ||||||
| Comprehensive income (loss) | 367 | (507 | ) | 25 | 4 | ||||||
| Comprehensive (income) loss attributable to noncontrolling interest | (1 | ) | 6 | (7 | ) | (1 | ) | ||||
| Comprehensive income (loss) attributable to Huazhu Group Limited | 366 | (501 | ) | 18 | 3 | ||||||
| Earnings (Losses) per share/ADS: | |||||||||||
| Basic | 1.51 | (1.91 | ) | (0.73 | ) | (0.11 | ) | ||||
| Diluted | 1.45 | (1.91 | ) | (0.73 | ) | (0.11 | ) | ||||
| Weighted average number of shares used in computation: | |||||||||||
| Basic | 284,657,577 | 286,473,344 | 291,675,396 | 291,675,396 | |||||||
| Diluted | 304,311,266 | 286,473,344 | 291,675,396 | 291,675,396 | |||||||
| Huazhu Group Limited | |||||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | |||||||||||
| Quarter Ended | |||||||||||
| September 30, 2019 | June 30, 2020 | September 30, 2020 | |||||||||
| RMB | RMB | RMB | US$ | ||||||||
| (in millions) | |||||||||||
| Operating activities: | |||||||||||
| Net income (loss) | 432 | (554 | ) | (205 | ) | (30 | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Share-based compensation | 31 | 38 | 33 | 5 | |||||||
| Depreciation and amortization, and other | 257 | 359 | 367 | 54 | |||||||
| Impairment loss | 3 | 16 | 453 | 67 | |||||||
| Loss from equity method investments, net of dividends | 99 | 33 | 14 | 2 | |||||||
| Investment (income) loss | (6 | ) | (11 | ) | (89 | ) | (13 | ) | |||
| Changes in operating assets and liabilities | 20 | 470 | 747 | 110 | |||||||
| Other | 171 | 161 | (181 | ) | (27 | ) | |||||
| Net cash provided by (used in) operating activities | 1,007 | 512 | 1,139 | 168 | |||||||
| Investing activities: | |||||||||||
| Capital expenditures | (390 | ) | (339 | ) | (452 | ) | (67 | ) | |||
| Acquisitions, net of cash received | (23 | ) | (0 | ) | (3 | ) | (0 | ) | |||
| Purchase of investments | (118 | ) | (0 | ) | (1,631 | ) | (241 | ) | |||
| Proceeds from maturity/sale of investments | 533 | 35 | 14 | 2 | |||||||
| Loan advances | (131 | ) | (24 | ) | (48 | ) | (7 | ) | |||
| Loan collections | 148 | 47 | 51 | 8 | |||||||
| Other | (8 | ) | - | 0 | 0 | ||||||
| Net cash provided by (used in) investing activities | 11 | (281 | ) | (2,069 | ) | (305 | ) | ||||
| Financing activities: | |||||||||||
| Net proceeds from issuance of ordinary shares | 2 | 0 | 5,245 | 772 | |||||||
| Proceeds from debt | 2 | 4,291 | 1,468 | 216 | |||||||
| Repayment of debt | (605 | ) | (2,930 | ) | (2,844 | ) | (419 | ) | |||
| Other | (37 | ) | (12 | ) | (33 | ) | (4 | ) | |||
| Net cash provided by (used in) financing activities | (638 | ) | 1,349 | 3,836 | 565 | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 6 | 12 | (73 | ) | (11 | ) | |||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 386 | 1,592 | 2,833 | 417 | |||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 4,065 | 3,475 | 5,067 | 747 | |||||||
| Cash, cash equivalents and restricted cash at the end of the period | 4,451 | 5,067 | 7,900 | 1,164 | |||||||
| Huazhu Group Limited | ||||||||||||||
| Unaudited Reconciliation of GAAP and Non-GAAP Results | ||||||||||||||
| Quarter Ended September 30, 2020 | ||||||||||||||
| 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 | 2,470 | 78.2 | % | 12 | 0.4 | % | 2,458 | 77.8 | % | |||||
| Other operating costs | 15 | 0.5 | % | - | 0.0 | % | 15 | 0.5 | % | |||||
| Selling and marketing expenses | 162 | 5.1 | % | 1 | 0.0 | % | 161 | 5.1 | % | |||||
| General and administrative expenses | 343 | 10.9 | % | 20 | 0.6 | % | 323 | 10.3 | % | |||||
| Pre-opening expenses | 42 | 1.3 | % | - | 0.0 | % | 42 | 1.3 | % | |||||
| Total operating costs and expenses | 3,032 | 96.0 | % | 33 | 1.0 | % | 2,999 | 95.0 | % | |||||
| Income (Loss) from operations | (201 | ) | -6.4 | % | 33 | 1.0 | % | (168 | ) | -5.4 | % | |||
| Quarter Ended September 30, 2020 | ||||||||||||||
| 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 | 364 | 78.2 | % | 2 | 0.4 | % | 362 | 77.8 | % | |||||
| Other operating costs | 2 | 0.5 | % | - | 0.0 | % | 2 | 0.5 | % | |||||
| Selling and marketing expenses | 25 | 5.1 | % | 0 | 0.0 | % | 25 | 5.1 | % | |||||
| General and administrative expenses | 51 | 10.9 | % | 3 | 0.6 | % | 48 | 10.3 | % | |||||
| Pre-opening expenses | 6 | 1.3 | % | - | 0.0 | % | 6 | 1.3 | % | |||||
| Total operating costs and expenses | 448 | 96.0 | % | 5 | 1.0 | % | 443 | 95.0 | % | |||||
| Income (Loss) from operations | (30 | ) | -6.4 | % | 5 | 1.0 | % | (25 | ) | -5.4 | % | |||
| Quarter Ended June 30, 2020 | ||||||||||||||
| 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 | 2,135 | 109.3 | % | 11 | 0.6 | % | 2,124 | 108.7 | % | |||||
| Other operating costs | 7 | 0.4 | % | - | 0.0 | % | 7 | 0.4 | % | |||||
| Selling and marketing expenses | 107 | 5.5 | % | 1 | 0.1 | % | 106 | 5.4 | % | |||||
| General and administrative expenses | 263 | 13.5 | % | 26 | 1.3 | % | 237 | 12.2 | % | |||||
| Pre-opening expenses | 99 | 5.1 | % | - | 0.0 | % | 99 | 5.1 | % | |||||
| Total operating costs and expenses | 2,611 | 133.8 | % | 38 | 2.0 | % | 2,573 | 131.8 | % | |||||
| Income (Loss) from operations | (494 | ) | -25.3 | % | 38 | 2.0 | % | (456 | ) | -23.3 | % | |||
| 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 | % | |||||
Huazhu Group Limited | |||||||||||||||||||||||
| Unaudited Reconciliation of GAAP and Non-GAAP Results | |||||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||
| September 30, 2019 | June 30, 2020 | September 30, 2020 | |||||||||||||||||||||
| RMB | RMB | RMB | US$ | ||||||||||||||||||||
| (in millions, except shares, per share and per ADS data) | |||||||||||||||||||||||
| Net income (loss) attributable to Huazhu Group Limited (GAAP) | 431 | (548 | ) | (212 | ) | (31 | ) | ||||||||||||||||
| Share-based compensation expenses | 31 | 38 | 33 | 5 | |||||||||||||||||||
| Unrealized (gains) losses from fair value changes of equity securities | (28 | ) | 34 | (39 | ) | (6 | ) | ||||||||||||||||
| Adjusted net income (loss) attributable to Huazhu Group Limited (non-GAAP) | 434 | (476 | ) | (218 | ) | (32 | ) | ||||||||||||||||
| Adjusted earnings (losses) per share/ADS (non-GAAP) | |||||||||||||||||||||||
| Basic | 1.52 | (1.66 | ) | (0.75 | ) | (0.11 | ) | ||||||||||||||||
| Diluted | 1.46 | (1.66 | ) | (0.75 | ) | (0.11 | ) | ||||||||||||||||
| Weighted average number of shares used in computation | |||||||||||||||||||||||
| Basic | 284,657,577 | 286,473,344 | 291,675,396 | 291,675,396 | |||||||||||||||||||
| Diluted | 304,311,266 | 286,473,344 | 291,675,396 | 291,675,396 | |||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||
| September 30, 2019 | June 30, 2020 | September 30, 2020 | |||||||||||||||||||||
| RMB | RMB | RMB | US$ | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Net income (loss) attributable to Huazhu Group Limited (GAAP) | 431 | (548 | ) | (212 | ) | (31 | ) | ||||||||||||||||
| Interest income | (46 | ) | (26 | ) | (31 | ) | (5 | ) | |||||||||||||||
| Interest expense | 72 | 142 | 136 | 20 | |||||||||||||||||||
| Income tax expense (benefit) | 191 | (68 | ) | (50 | ) | (7 | ) | ||||||||||||||||
| Depreciation and amortization | 250 | 331 | 347 | 51 | |||||||||||||||||||
| EBITDA (non-GAAP) | 898 | (169 | ) | 190 | 28 | ||||||||||||||||||
| Share-based compensation | 31 | 38 | 33 | 5 | |||||||||||||||||||
| Unrealized (gains) losses from fair value changes of equity securities | (28 | ) | 34 | (39 | ) | (6 | ) | ||||||||||||||||
| Adjusted EBITDA (non-GAAP) | 901 | (97 | ) | 184 | 27 | ||||||||||||||||||
Operating Results: Legacy-Huazhu
| Number of hotels | Number of rooms | |||||||
| Opened in Q3 2020 | Closed (1) in Q3 2020 | Net added in Q3 2020 | As of September 30, 2020 (2) | As of September 30, 2020 | ||||
| Leased and owned hotels | 9 | (12 | ) | (3 | ) | 687 | 91,218 | |
| Manachised and franchised hotels | 511 | (189 | ) | 322 | 5,703 | 519,547 | ||
| Total | 520 | (201 | ) | 319 | 6,390 | 610,765 | ||
| (1) The reasons for hotel closures mainly include non-compliance with brand standards, operating losses, and property-related issues. In Q3 2020, we had 17 hotels closed for brand upgrade and business model change purposes. (2) As of September 30, 2020, 83 hotels were requisitioned by governmental authorities. | ||||||||
| As of September 30, 2020 | ||
| Number of hotels | Unopened hotels in pipeline | |
| Economy hotels | 4,213 | 1,097 |
| Leased and owned hotels | 446 | 4 |
| Manachised and franchised hotels | 3,767 | 1,093 |
| Midscale and upscale hotels | 2,177 | 1,175 |
| Leased and owned hotels | 241 | 18 |
| Manachised and franchised hotels | 1,936 | 1,157 |
| Total | 6,390 | 2,272 |
| Operational hotels (excluding hotels under requisition) | |||||||
| For the quarter ended | |||||||
| September 30, | June 30, | September 30, | yoy | ||||
| 2019 | 2020 | 2020 | change | ||||
| Average daily room rate (in RMB) | |||||||
| Leased and owned hotels | 288 | 205 | 255 | - | |||
| Manachised and franchised hotels | 235 | 181 | 211 | - | |||
| Blended | 245 | 185 | 218 | - | |||
| Occupancy rate (as a percentage) | |||||||
| Leased and owned hotels | -7.1p.p. | ||||||
| Manachised and franchised hotels | -5.3p.p. | ||||||
| Blended | -5.7p.p. | ||||||
| RevPAR (in RMB) | |||||||
| Leased and owned hotels | 259 | 138 | 211 | - | |||
| Manachised and franchised hotels | 205 | 125 | 173 | - | |||
| Blended | 215 | 127 | 179 | - | |||
| Same-hotel operational data by class | ||||||||||||||||
| Mature hotels in operation for more than 18 months (excluding hotels under requisition) | ||||||||||||||||
| Number of hotels | Same-hotel RevPAR | Same-hotel ADR | Same-hotel Occupancy | |||||||||||||
| As of September 30, | For the quarter | yoy | For the quarter | yoy | For the quarter | yoy | ||||||||||
| ended September 30, | change | ended September 30, | change | ended September 30, | change | |||||||||||
| 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | (p.p.) | ||||||||
| Economy hotels | 2,604 | 2,604 | 185 | 144 | -21.9 | % | 199 | 168 | -15.7 | % | 92.7 | % | 85.9 | % | -6.8 | |
| Leased and owned hotels | 421 | 421 | 207 | 159 | -23.0 | % | 222 | 184 | -17.2 | % | 93.4 | % | 86.9 | % | -6.6 | |
| Manachised and franchised hotels | 2,183 | 2,183 | 179 | 140 | -21.6 | % | 193 | 164 | -15.3 | % | 92.6 | % | 85.7 | % | -6.9 | |
| Midscale and upscale hotels | 1,108 | 1,108 | 289 | 238 | -17.4 | % | 335 | 298 | -11.2 | % | 86.1 | % | 80.1 | % | -6.0 | |
| Leased and owned hotels | 188 | 188 | 352 | 269 | -23.5 | % | 402 | 345 | -14.2 | % | 87.4 | % | 78.0 | % | -9.4 | |
| Manachised and franchised hotels | 920 | 920 | 271 | 230 | -15.2 | % | 316 | 284 | -9.9 | % | 85.8 | % | 80.7 | % | -5.0 | |
| Total | 3,712 | 3,712 | 222 | 178 | -19.8 | % | 245 | 212 | -13.5 | % | 90.4 | % | 83.8 | % | -6.5 | |
Operating Results: Legacy-DH
| Number of hotels | Number of rooms | Unopened hotels in pipeline | ||||||||
| Opened in Q3 2020 | Closed in Q3 2020 | Net added in Q3 2020 | As of September 30, 2020(3) | | As of September 30, 2020 | | As of September 30, 2020 | |||
| Leased hotels | 2 | - | 2 | 70 | 12,820 | 28 | ||||
| Manachised and franchised hotels | 1 | (2 | ) | (1 | ) | 47 | 10,502 | 13 | ||
| Total | 3 | (2 | ) | 1 | 117 | 23,322 | 41 | |||
| (3) As of September 30, 2020, a total of 12 hotels were temporarily closed due to COVID-19 outbreak. | ||||||||||
| For the quarter ended | |||||||
| September 30, | June 30, | September 30, | yoy | ||||
| 2019 | 2020 | 2020 | change | ||||
| Average daily room rate (in EUR) | |||||||
| Leased hotels | 100 | 82 | 88 | - | |||
| Manachised and franchised hotels | 94 | 97 | 101 | ||||
| Blended | 98 | 87 | 93 | - | |||
| Occupancy rate (as a percentage) | |||||||
| Leased hotels | -40.5p.p. | ||||||
| Manachised and franchised hotels | -34.8p.p. | ||||||
| Blended | -37.8p.p. | ||||||
| RevPAR (in EUR) | |||||||
| Leased hotels | 79 | 15 | 34 | - | |||
| Manachised and franchised hotels | 68 | 17 | 38 | - | |||
| Blended | 74 | 16 | 35 | - | |||
Hotel Portfolio by Brand
| As of September 30, 2020 | |||
| Hotels | Rooms | Unopened hotels | |
| in operation | in pipeline | ||
| Economy hotels | 4,226 | 355,402 | 1,107 |
| HanTing Hotel | 2,722 | 253,155 | 477 |
| Hi Inn | 443 | 25,946 | 103 |
| Elan Hotel(4) | 849 | 53,471 | 461 |
| Ibis Hotel | 199 | 21,323 | 56 |
| Zleep Hotel | 13 | 1,507 | 10 |
| Midscale and upscale hotels | 2,281 | 278,685 | 1,206 |
| Ibis Styles Hotel | 63 | 7,470 | 28 |
| Starway Hotel | 428 | 37,137 | 307 |
| JI Hotel | 1,033 | 128,994 | 453 |
| Orange Hotel | 308 | 35,101 | 171 |
| Crystal Orange Hotel | 110 | 14,896 | 50 |
| Manxin Hotel | 59 | 5,854 | 34 |
| Madison Hotel | 23 | 2,953 | 24 |
| Mercure Hotel | 98 | 16,685 | 60 |
| Novotel Hotel | 12 | 3,387 | 13 |
| Joya Hotel | 10 | 1,926 | 1 |
| Blossom House | 26 | 978 | 25 |
| Grand Mercure Hotel | 7 | 1,489 | 8 |
| Steigenberger Hotels & Resorts | 49 | 11,556 | 8 |
| IntercityHotel | 44 | 7,827 | 20 |
| Maxx by Steigenberger | 5 | 777 | 1 |
| Jaz in the City | 2 | 424 | 2 |
| Other partner hotels | 4 | 1,231 | 1 |
| Total | 6,507 | 634,087 | 2,313 |
| (4) As of September 30, 2020, 4 Ni Hao hotels were included in the operational hotel of Elan Hotel and 27 Ni Hao hotels were included in the pipeline of Elan Hotel. | |||
_______________________
1 Hotel turnover refers to total transaction value of room and non-room revenues (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
3 Legacy-Huazhu refers to Huazhu and its subsidiaries, excluding DH.
4 Legacy-DH refers to DH.
FAQ
What were Huazhu Group's third-quarter 2020 revenues?
What is the future outlook for Huazhu Group for the fourth quarter of 2020?
What was the net loss reported by Huazhu Group for the third quarter of 2020?
How many hotels does Huazhu Group operate as of September 30, 2020?
What is the current hotel pipeline for Huazhu Group?
