Huazhu Group Limited Reports Third Quarter of 2019 Financial Results

Tuesday, 12. November 2019 22:30
  • A total of 5,151 hotels or 504,414 hotel rooms in operation as of September 30, 2019.
  • Hotel turnover1 increased 19% year-over-year to RMB10 billion for the third quarter of 2019.
  • Net revenues increased 10.4% year-over-year to RMB3.1 billion (US$427 million)2 for the third quarter of 2019, in line with the revenue guidance previously announced of 9%-11%.
  • The Company entered into a share purchase agreement to acquire all shares in Steigenberger Hotels Aktiengesellschaft, Germany (“Deutsche Hospitality”). The acquisition is expected to complete in January 2020.

SHANGHAI, China, Nov. 12, 2019 (GLOBE NEWSWIRE) -- 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 2018Q3 2019
Revenues:  
Leased and owned hotels2,0532,089
Manachised and franchised hotels699939
Others1627
Net revenues2,7683,055

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 2018Q3 2019
Operating costs and expenses:  
Hotel operating costs1,6581,834
Other operating costs211
Selling and marketing expenses91113
General and administrative expenses233277
Pre-opening expenses60126
Total operating costs and expenses2,0442,361

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 Standards
Beginning 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 Call
Huazhu’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 Measures
To 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 Limited
Huazhu 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 Information
Huazhu Investor Relations
Tel: 86 (21) 6195 9561
Email: ir@huazhu.com
http://ir.huazhu.com

---Financial Tables and Operational Data Follow—

Huazhu Group Limited
Unaudited Condensed Consolidated Balance Sheets
 December 31, 2018 September 30, 2019
    
 RMBRMBUS$
 (in millions)
  
ASSETS   
Current assets:   
Cash and cash equivalents4,262 4,013 561 
Restricted cash622 438 61 
Short-term investments89 63 9 
Accounts receivable, net195 194 27 
Loan receivables94 192 27 
Amounts due from related parties176 278 39 
Prepaid rent955 - - 
Inventories41 47 7 
Other current assets540 639 89 
Total current assets6,974 5,864 820 
    
Property and equipment, net5,018 5,504 770 
Intangible assets, net1,834 1,659 232 
Operating lease right-of-use assets- 20,729 2,900 
Land use rights, net220 217 30 
Long-term investments6,152 5,730 802 
Goodwill2,630 2,657 372 
Loan receivables189 273 38 
Other assets471 566 79 
Deferred tax assets505 488 68 
Total assets23,993 43,687 6,111 
    
    
LIABILITIES AND EQUITY   
Current liabilities:   
Short-term debt948 2,831 396 
Accounts payable890 991 139 
Amounts due to related parties75 93 13 
Salary and welfare payables521 318 44 
Deferred revenue1,005 1,156 162 
Operating lease liabilities, current- 2,978 417 
Accrued expenses and other current liabilities1,607 1,762 247 
Dividends payable658 - - 
Income tax payable265 230 32 
Total current liabilities5,969 10,359 1,450 
    
Long-term debt8,812 5,880 823 
Deferred rent1,507 - - 
Operating lease liabilities, noncurrent- 18,416 2,577 
Deferred revenue458 518 72 
Other long-term liabilities453 537 74 
Deferred tax liabilities475 476 67 
Total liabilities17,674 36,186 5,063 
    
    
Equity:   
Ordinary shares0 0 0 
Treasury shares(107)(107)(15)
Additional paid-in capital3,713 3,811 533 
Retained earnings2,610 3,760 526 
Accumulated other comprehensive (loss) income(42)(78)(12)
Total Huazhu Group Limited shareholders’ equity6,174 7,386 1,032 
Noncontrolling interest145 115 16 
Total equity6,319 7,501 1,048 
Total liabilities and equity23,993 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
     
 RMBRMBRMBUS$
 (in millions, except share, per share and per ADS data)
Revenues:    
Leased and owned hotels2,053 2,001 2,089 292 
Manachised and franchised hotels699 803 939 131 
Others16 55 27 4 
Net revenues2,768 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), net51 29 9 1 
Income from operations775 657 703 98 
Interest income42 41 46 6 
Interest expense(64)(83)(72)(10)
Other (expense) income, net16 135 86 12 
Unrealized gains (losses) from fair value changes of equity securities179 149 28 4 
Foreign exchange gain (loss)0 35 (108)(15)
Income (Loss) before income taxes948 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 Limited668 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 Limited521 549 366 51 
     
     
Earnings (Losses) per share/ADS:    
Basic2.37 2.16 1.51 0.21 
Diluted2.23 2.05 1.45 0.20 
     
Weighted average number of shares used in computation:  
Basic282,149,039 284,029,267 284,657,577 284,657,577 
Diluted303,605,292 304,526,084 304,311,266 304,311,266 
         



 
Huazhu Group Limited
Unaudited Condensed Consolidated Statements of Cash Flows
 Quarter Ended
 September 30, 2018 June 30, 2019 September 30, 2019
     
 RMBRMBRMBUS$
 (in millions)
Operating activities:    
Net income675 605 432 60 
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation20 31 31 4 
Depreciation and amortization, and other228 252 257 36 
Loss (Income) from equity method investments, net of dividends18 43 99 14 
Investment (income) loss(193)(194)(6)(1)
Changes in operating assets and liabilities147 382 20 3 
Other19 42 174 24 
Net cash provided by operating activities914 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 investments66 - 533 75 
Loan advances(77)(149)(131)(19)
Loan collections47 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 debt643 1,682 2 0 
Repayment of debt(3)(2,756)(605)(85)
Other(99)13 (37)(5)
Net cash provided by (used in) financing activities541 (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 cash60 (392)386 53 
Cash, cash equivalents and restricted cash at the beginning of the period4,487 4,457 4,065 569 
Cash, cash equivalents and restricted cash at the end of the period4,547 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 costs1,834 60.0%10 0.3%1,824 59.7%
Other operating costs11 0.4%- 0.0%11 0.4%
Selling and marketing expenses113 3.7%1 0.0%112 3.7%
General and administrative expenses277 9.1%20 0.7%257 8.4%
Pre-opening expenses126 4.1%- 0.0%126 4.1%
Total operating costs and expenses2,361 77.3%31 1.0%2,330 76.3%
Income from operations703 23.0%31 1.0%734 24.0%
          
 Quarter Ended September 30, 2019
 GAAP Result % of Net RevenuesShare-based Compensation % of Net RevenuesNon-GAAP Result % of Net Revenues
 US$  US$  US$  
 (in millions)
Hotel operating costs256 60.0%1 0.3%255 59.7%
Other operating costs2 0.4%- 0.0%2 0.4%
Selling and marketing expenses16 3.7%0 0.0%16 3.7%
General and administrative expenses38 9.1%3 0.7%35 8.4%
Pre-opening expenses18 4.1%- 0.0%18 4.1%
Total operating costs and expenses330 77.3%4 1.0%326 76.3%
Income from operations98 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 costs1,743 61.0%10 0.3%1,733 60.7%
Other operating costs17 0.6%- 0.0%17 0.6%
Selling and marketing expenses102 3.6%1 0.0%101 3.6%
General and administrative expenses247 8.6%20 0.7%227 7.9%
Pre-opening expenses122 4.3%- 0.0%122 4.3%
Total operating costs and expenses2,231 78.1%31 1.0%2,200 77.1%
Income from operations657 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 costs1,658 59.9%7 0.2%1,651 59.7%
Other operating costs2 0.1%- 0.0%2 0.1%
Selling and marketing expenses91 3.3%0 0.0%91 3.3%
General and administrative expenses233 8.4%13 0.5%220 7.9%
Pre-opening expenses60 2.2%- 0.0%60 2.2%
Total operating costs and expenses2,044 73.9%20 0.7%2,024 73.2%
Income from operations775 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
     
 RMBRMBRMBUS$
 (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 expenses20 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)
Basic1.80 1.74 1.52 0.21 
Diluted1.71 1.66 1.46 0.20 
     
Weighted average number of shares used in computation
Basic282,149,039 284,029,267 284,657,577 284,657,577 
Diluted303,605,292 304,526,084 304,311,266 304,311,266 
     
 Quarter Ended
 September 30, 2018 June 30, 2019 September 30, 2019
     
 RMBRMBRMBUS$
 (in millions)
Net income (loss) attributable to Huazhu Group Limited (GAAP)668 613 431 60 
Interest income(42)(41)(46)(6)
Interest expense64 83 72 10 
Income tax expense255 286 191 27 
Depreciation and amortization222 245 250 35 
EBITDA (non-GAAP)1,167 1,186 898 126 
Share-based compensation20 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, 
 201820192019 
Total hotels in operation:4,055 4,665 5,151  
Leased and owned hotels698 696 697  
Manachised hotels3,139 3,692 4,087  
Franchised hotels218 277 367  
Total hotel rooms in operation409,516 463,296 504,414  
Leased and owned hotels86,825 87,179 88,206  
Manachised hotels301,451 351,128 387,174  
Franchised hotels21,240 24,989 29,034  
Number of cities391 413 420  
     
 For the quarter ended 
 September 30,June 30,September 30, 
 201820192019 
Average daily room rate (in RMB)    
Leased and owned hotels279 281 288  
Manachised hotels228 225 235  
Blended239 236 245  
Occupancy rate (as a percentage)    
Leased and owned hotels92.0%89.4%90.0% 
Manachised hotels90.4%86.3%87.2% 
Blended90.7%86.9%87.7% 
RevPAR (in RMB)    
Leased and owned hotels257 252 259  
Manachised hotels206 194 205  
Blended217 206 215  
     
 As of September 30, 2019
 Hotels in operationUnopened hotels in pipeline
Economy hotels3,204546
Leased and owned hotels4251
Manachised and franchised hotels2,779545
Midscale and upscale hotels1,9471,190
Leased and owned hotels27251
Manachised and franchised hotels1,6751,139
Total5,1511,736
 


  
Hotel portfolio by brand 
  As of September 30, 2019
 Number of hotels in operation Number of rooms in operation 
Economy hotels3,204  278,142  
HanTing Hotel2,381 227,925 
Hi Inn450 27,282 
Elan Hotel373 22,935 
Midscale and upscale hotels1,947  226,272  
HanTing Premium Hotel180 16,385 
Ibis Hotel179 20,061 
Ibis Styles Hotel50 6,132 
Starway Hotel317 27,264 
JI Hotel759 96,232 
Orange Select Hotel233 27,311 
Crystal Orange Hotel77 10,207 
Manxin Hotels & Resorts39 3,308 
Madison Hotel5 536 
Mercure Hotel63 11,972 
Novotel Hotel9 2,928 
Grand Madison Hotel1 203 
Joya Hotel6 1,250 
Vue Hotels & Resorts21 727 
Grand Mercure Hotel8 1,756 
Total hotels5,151   504,414   
 


Same-hotel operational data by segment        
 Number of hotelsSame-hotel RevPARSame-hotel ADRSame-hotel Occupancy
 As of
September 30,
For the quarter ended
yoyFor the quarter ended
yoyFor the quarter ended
yoy 
 September 30,
change 
September 30,
change 
September 30,  change  
 20182019 20182019 20182019 2018 2019   (p.p.) 
Economy hotels2,5002,500 186179-3.7%196194-0.7%95.2%92.2%-3.0 
Leased and owned hotels414414 200197-1.6%2112120.6%95.0%92.9%-2.0 
Manachised and franchised hotels2,0862,086 182175-4.3%192190-1.0%95.3%92.1%-3.2 
Midscale and upscale hotels861861 289278-3.9%332325-2.2%87.1%85.6%-1.5 
Leased and owned hotels184184 355337-5.3%396382-3.5%89.8%88.1%-1.7 
Manachised and franchised hotels677677 265257-3.2%308303-1.5%86.1%84.7%-1.5 
Total3,3613,361 219211-3.8%236234-1.1%92.6%90.1%-2.5 
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