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GreenTree Hospitality Group Ltd. Reports First Quarter 2021 Financial Results

  • Thursday, July 29, 2021, 7:15 am
  • ACROFAN=PRNewswire
  • mediainquiries@prnewswire.com


  • Total revenues increased 53.3% year-over-year to RMB241.2 million (US$36.8 million[1] .
  • Income from operations increased 64.9% year-over-year to RMB61.4 million (US$9.4 million) [1].
  • Adjusted EBITDA (non-GAAP) [2] increased 74.3% year-over-year to RMB64.0 million (US$9.8 million) [1].
  • Core net income (non-GAAP) increased 58.3% year-over-year to RMB43.9 million (US$6.7 million) [1].


SHANGHAI, July 29, 2021 /PRNewswire/ -- GreenTree Hospitality Group Ltd. (NYSE: GHG) ("GreenTree", the "Company", "we", "us" and "our"), a leading hospitality management group in China, today announced its unaudited financial results for the first quarter and fiscal year of 2021.


First Quarter of 2021 Operational Highlights


  • A total of 4,464 hotels with 323,648 hotel rooms were in operation as of March 31, 2021, compared to 4,340 hotels and 315,335 hotel rooms as of December 31, 2020.
  • As of March 31, 2021, the Company had 43 leased-and-operated ("L&O") hotels and 4,421 franchised-and-managed ("F&M") hotels in operation in 353 cities across China, compared to 35 L&O hotels and 3,963 F&M hotels in operation in 342 cities as of March 31, 2020. The geographic coverage increased by 3.2% year over year.
  • During the quarter, the Company opened 201 hotels, an increase of 139 compared to 62 hotels in the first quarter of 2020. Three of those hotels were in the luxury segment, 32 in the mid-to-up-scale segment, 136 in the mid-scale segment, and 30 in the economy segment. Geographically speaking, 9 hotels were in Tier 1 cities [3], 65 in Tier 2 cities and the remaining 127 in Tier 3 and lower cities in China.
    The Company closed 77 hotels, 6 due to brand upgrades, and 30 due to non-compliance with the Company's brand and operating standards. The remaining 41 were closed for property related issues. The Company added 124 hotels to its portfolio.
  • As of March 31, 2021, the Company had a pipeline of 1,265 hotels contracted for or under development, among which 53 hotels were in the luxury hotel segment, 291 in the mid-to-up-scale segment, 516 in the mid-scale segment, and 405 in the economy segment.
  • The average daily room rate, or ADR, for all hotels in operation, was RMB 151, an increase of 0.8% from RMB150 in the first quarter of 2020, and a 7.0% decrease compared with RMB162 in the pre-COVID-19 first quarter of 2019.
  • The occupancy rate, or OCC for all hotels in operation was 63.4%, an increase of 16.1% compared with 47.3% in the first quarter of 2020, and a 14.7% decrease compared with 78.1% in the pre-COVID-19 first quarter of 2019.
  • The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB 96, a 35.1% year-over-year increase, and a 24.5% decrease compared with RMB127 in the pre-COVID-19 first quarter of 2019.
  • As of March 31, 2021, the Company's loyalty program had more than 59 million individual members and more than 1,710,000 corporate members, compared to over 56 million individual members and approximately 1,670,000 corporate members respectively as of December 31, 2020. The Company sold approximately 92.2% of room nights directly during the first quarter 2021 .

"We achieved steady growth during the first quarter and continued to recover from the pandemic despite the resurgence of COVID-19 in many regions of China" said Mr. Alex Xu, Chairman and Chief Executive Officer of Greentree. "As the year unfolds, we remain very focused on our growth strategy which covers three particular areas. First, we are adding L&O hotels in strategic locations, second, we are further expanding in tier 3 and lower cities and, third, we are further penetrating the Mid-to-Upscale segment. We are optimistic that travel will continue to recover as vaccine rollouts accelerate. This should translate into even better results next quarter. On behalf of our Board, I want to thank our team, franchisees and shareholders for their tremendous efforts and support."


1


The conversion of Renminbi ("RMB") into United States dollars ("US$") is based on the exchange rate of  US$1.00=RMB6.5518 on March 31, 2021 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at https://www.federalreserve.gov/releases/h10/20210405/


2


Adjusted EBITDA (non-GAAP) is calculated as net income plus other operating expenses, income tax expense, interest expense, depreciation and amortization, losses from investment in equity securities, share of loss in equity investees (net of tax), but excludes other operating income, interest income and other, net, gains from investment in equity securities, share of gain in equity investees (net of tax) and other income net. The calculation of Adjusted EBITDA (non-GAAP) included in this report has been aligned according to the abovementioned definition.


3


Tier 1 Cities refers to Beijing, Shanghai, Shenzhen and Guangzhou; Tier 2 Cities refers to the 32 major cities, other than Tier 1 Cities, including provincial capitals, administrative capitals of autonomous regions, direct-controlled municipalities and other major cities designated as municipalities with independent planning by the State Council.  


First Quarter of 2021 Financial Results



Quarter Ended



March 31,
2020



March 31,
2021



March 31,
2021



RMB



RMB



US$


Revenues







Leased-and-operated hotels


33,800,144



56,113,308



8,564,564


Franchised-and-managed hotels


117,663,102



177,949,627



27,160,418


others


5,932,745



7,149,523



1,091,230


Total revenues


157,395,991



241,212,458



36,816,212


 


Total revenues were RMB241.2 million (US$36.8 million) [1] , a 53.3% year-over-year increase. The increase was primarily due to the sustained recovery in hotel operations from the impact of COVID-19 and our newly opened L&O hotels.  Compared with the pre-COVID-19 first quarter of 2019, total revenues increased by 2.5%.


Total revenues from leased-and-operated hotels were RMB56.1 million (US$8.6 million) [1], a 66.0% year-over-year increase. The increase was primarily due to the 71.7% year-over-year increase in L&O hotels' RevPAR and revenues from the 12 L&O hotels opened since the second quarter of 2020. The revenue increase was partially offset by the closure of 4 L&O hotels over the same period.


Total revenues from franchised-and-managed hotels were RMB177.9 million (US$27.2 million) [1], a 51.2% year-over-year increase. Initial franchise fees increased by 37.7% year-over-year, mainly attributable to the gross opening of 198 F&M hotels. Recurring franchisee management fees and others increased 52.9% year-over-year primarily due to the 34.3% increase in RevPar and the 11.6% increase in the number of F&M hotels, and was offset by the fee reduction to franchisees during the first quarter 2021. 



Quarter Ended



March 31, 2020



 March 31, 2021



 March 31, 2021



RMB



RMB



US$


Initial franchise fee


13,052,832



17,978,858



2,744,110


Recurring franchise management fee and others


104,610,270



159,970,769



24,416,308


Revenues from franchised-and-managed hotels


117,663,102



177,949,627



27,160,418


 


Total operating costs and expenses



Quarter Ended



 March 31,
2020



 March 31,
2021



 March 31,
2021



RMB



RMB



US$


Operating costs and expenses







Hotel operating costs


89,763,274



122,230,252



18,655,980


Selling and marketing expenses


17,841,322



18,118,110



2,765,364


General and administrative expenses


28,745,571



55,958,157



8,540,883


Other operating expenses


1,157,149



1,393,556



212,698


Total operating costs and expenses


137,507,316



197,700,075



30,174,925


 


Hotel operating costs were RMB122.2 million (US$18.7 million) [1], a 36.2% increase year over year. The increase was mainly attributable to higher rents due to the opening of 12 L&O hotels since the second quarter of 2020. Excluding these, hotel operating costs increased 17.9%, mainly due to increase in staff number and staff salaries.



Quarter Ended



December 31,



March 31,



March 31,


2020



2021



2021



RMB



RMB



US$


Rental


27,102,982



39,720,751



6,062,571


Utilities


4,420,190



5,896,419



899,969


Personnel cost


10,230,645



13,653,447



2,083,923


Depreciation and amortization


11,338,835



16,167,503



2,467,643


Consumable, food and beverage


8,750,868



11,339,390



1,730,729


Costs of general managers of franchised-and-managed hotels


20,642,648



27,318,710



4,169,650


Other costs of franchised-and-managed hotels


4,503,060



5,541,994



845,873


Others


2,774,046



2,592,039



395,622


Hotel Operating Costs


89,763,273



122,230,252



18,655,980


 


Selling and marketing expenses were RMB18.1 million (US$2.8 million) [1], a 1.6% year-over-year increase. The increase was mainly attributable to increases in advertising expenses.


General and administrative expenses were RMB56.0 million (US$8.5 million) [1], a 94.7% year-over-year increase. The increase was mainly attributable to increased consulting fees and other one-time expenses. Excluding these impacts, G&A expenses increased by 40.0% as a result of the increase in the number of staff.


Gross profit was RMB119.0 million (US$18.2 million) [1], a year-over-year increase of 75.9%. Gross margin was 49.3%, compared to 43.0% a year ago. The increase was primarily due to the recovery in our hotel RevPAR from COVID-19.


Income from operations were RMB61.4 million (US$9.4 million) [1], a year-over-year increase of 64.9%. The increase was mainly due to the sustained recovery in RevPar, the higher number of hotels and better control of costs and expenses during the quarter. Operating margin was 25.4%, compared to 23.6% a year ago.


Net income was RMB66.0 million (US$10.1 million) [1], compared to a loss of  RMB14.1 million in the first quarter of 2020 and net margin was 27.4%.The year-over-year increase was mainly attributable to the recovery in RevPAR.


Adjusted EBITDA (non-GAAP) [2] was RMB64.0 million (US$9.8 million) [1], a year-over-year increase of 74.3%. Adjusted EBITDA margin, defined as adjusted EBITDA (non-GAAP) as a percentage of total revenues, was 26.5%, compared to 23.3% a year ago.


Core net income (non-GAAP) was RMB43.9 million (US$6.7 million) [1], a year-over-year increase of 58.3%. The core net margin, defined as core net income (non-GAAP) as a percentage of total revenues, was 18.2%, compared to 17.6% one year ago.


Earnings per ADS (basic and diluted) was RMB0.68 (US$0.10) [1], up from negative RMB0.11 one year ago.Core net income per ADS (basic and diluted) (non-GAAP) was RMB0.43 (US$0.07) [1], up from RMB0.27 a year ago.


Cash flow. Operating cash outflow was RMB1.7 million (US$0.3 million) [1] as a result of income from operations but offset by prepaid rents for L&O hotels and deposit. Investing cash outflow was RMB 258.2 million (US$39.4 million) [1], which was primarily attributable to loans to franchisees, increase in long-term time deposits, acquisition costs of our L&O hotels, and investment in property and equipment. The investing cash outflow was partially offset by proceeds from short-term investments. Financing cash inflow was RMB136.1 million (US$20.8 million). 


Cash and cash equivalents, restricted cash, short-term investments, investments in equity securities and time deposit. As of March 31, 2021, the Company had total cash and cash equivalents, restricted cash, short term investments, investments in equity securities and time deposits of RMB1,734.0 million (US$264.7 million) [1], compared to RMB1,904.9 million as of December 31, 2020. The decrease from the fourth quarter was primarily attributable to loans to franchisees and acquisition costs of our L&O hotels, offset by drawing down of bank facilities. 


COVID-19 Update


Due to the implementation of travel restrictions and the government's stay-local policy during the Chinese spring festival, our occupancy rate declined in January and February 2021, but rebounded quickly after this as more people are getting vaccinated and more pent-up demand in China as travel restrictions are lifted. We saw a substantial month over month increase in RevPAR in March, April and May, especially during the Tomb Sweeping holiday and Golden Week. As we expected, these holidays really ushered in a resurgence in travel with 230 million domestic tourists traveling during Golden Week. According to report from the Ministry of Culture and Tourism, this represents 103.2% of the number of domestic tourists in the same period in 2019 and a year-over-year growth of 119.7%. By the end of June, our RevPAR had recovered to 106.0% of the 2019 level. Based upon industry data, our performance and recovery exceeded that of most of our peers. 


Guidance


So far, our operations are in line with our previous forecast. Assuming the pandemic remains under control in China in the coming quarters, the Company expects an increase in total revenues of 48%-53% for the full year 2021, compared to 2020 and an increase in total revenues of 25%-30% for the full year 2021, compared to 2019.


The guidance set forth above reflects the Company's current and preliminary views based on our recovery speed and may not be indicative of the final financial results for future interim periods and the full year.


Conference Call


GreenTree's management will hold an earnings conference call at 9:00PM U.S. Eastern Time on July 28, 2021 (9:00 AM Beijing/Hong Kong Time on July 29, 2021).


Dial-in numbers for the live conference call are as follows:


International 


1-412-902-4272 


Mainland China


4001-201-203 


US 


1-888-346-8982 


China Hong Kong  


800-905-945 or 852-3018-4992 


Singapore


800-120-6157 


Participants should ask to join the GreenTree call, please dial in approximately 10 minutes before the scheduled time of the call.


A telephone replay of the call will be available after the conclusion of the conference call until August 4, 2021.


Dial-in numbers for the replay are as follows:


International Dial-in  


1-412-317-0088


U.S. Toll Free 


1-877-344-7529


Canada Toll Free


855-669-9658


Passcode:


10157730


Additionally, a live and archived webcast of this conference call will be available at https://ir.998.com.


Use of Non-GAAP Financial Measures


We believe that Adjusted EBITDA and core net income, as we present it, is a useful financial metric to assess our operating and financial performance before the impact of investing and financing transactions, income taxes and certain non-core and non-recurring items in our financial statements.


The presentation of Adjusted EBITDA and core net income should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.


The use of Adjusted EBITDA and core net income has certain limitations because it does not reflect all items of income and expenses that affect our operations. Items excluded from Adjusted EBITDA and core net income are significant components in understanding and assessing our operating and financial performance. Depreciation and amortization expense for various long-term assets, income tax and share-based compensation 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 our results. Additionally, Adjusted EBITDA and core net income does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, interest expense/income, gains/losses from investments in equity securities, income tax expenses, share-based compensation, share of loss in equity investees, government subsidies and other relevant items both in our reconciliations to the corresponding U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance.


The term Adjusted EBITDA and core net income is not defined under U.S. GAAP, and Adjusted EBITDA and core net income is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing our operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our Adjusted EBITDA and core net income may not be comparable to Adjusted EBITDA and core net income or similarly titled measures utilized by other companies since such other companies may not calculate Adjusted EBITDA and core net income in the same manner as we do.


Reconciliations of the Company's non-GAAP financial measures, including Adjusted EBITDA and core net income, to the consolidated statement of operations information are included at the end of this press release.


About GreenTree Hospitality Group Ltd.


GreenTree Hospitality Group Ltd. ("GreenTree" or the "Company") (NYSE: GHG) is a leading hospitality management group in China. As of March 31, 2021, GreenTree had a total number of 4,464 hotels. In 2019, GreenTree ranked among the Top 12 worldwide in terms of number of hotels in "World's Largest Hotel Companies: HOTELS' 325", published by HOTELS magazine, and was as well the fourth largest hospitality company in China in 2020 based on the statistics issued by the China Hospitality Association.


GreenTree has built a strong suite of brands including its flagship "GreenTree Inns" brand as a result of its long-standing dedication to the hospitality industry in China and consistent quality of its services, signature hotel designs, broad geographic coverage and convenient locations. GreenTree has further expanded its brand portfolio into mid-to-up-scale and luxury segments through a series of strategic investments. By offering diverse brands, through its strong membership base, expansive booking network, superior system management with moderate charges, and fully supported by its operating departments including Decoration, Engineering, Purchasing, Operation, IT and Finance, GreenTree aims to keep closer relationships with all of its clients and partners by providing a brand portfolio that features comfort, style and value.


For more information on GreenTree, please visit https://ir.998.com


Safe Harbor Statements


This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995.  In some cases, these forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to," "confident," "future," or other similar expressions. GreenTree may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about or based on GreenTree's current beliefs, expectations, assumptions, estimates and projections about us and our industry, are forward-looking statements that involve known and unknown factors, risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such factors and risks include, but not limited to the following: GreenTree's goals and growth strategies; its future business development, financial condition and results of operations; trends in the hospitality industry in China and globally; competition in our industry; fluctuations in general economic and business conditions in China and other regions where we operate; the regulatory environment in which we and our franchisees operate; and assumptions underlying or related to any of the foregoing. You should not place undue reliance on these forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided, including the forward-looking statements made, in this press release are current as of the date of the press release. Except as required by law, GreenTree undertakes no obligation to update any such information or forward-looking statements to reflect events or circumstances after the date on which the information is provided or statements are made, or to reflect the occurrence of unanticipated events.


 ---Financial Tables and Operational Data Follow—


 


GreenTree Hospitality Group Ltd.  


Unaudited Condensed Consolidated Balance Sheets  




December 31,



March
31,



March
31, 


2020



2021



2021



RMB



RMB



US$


ASSETS







Current assets:







Cash and cash equivalents


611,358,209



487,966,856



74,478,289


Short-term investment


301,983,182



515,447,537



78,672,660


Investments in equity securities


242,378,696



250,459,364



38,227,566


Accounts receivable, net of allowance


101,511,057



106,403,840



16,240,398


Amounts due from related parties


9,770,871



44,018,293



6,718,504


Prepaid rent


13,597,867



21,703,579



3,312,613


Inventories


3,804,680



2,631,703



401,676


Other current assets


77,649,794



197,327,460



30,118,054


Loans receivable, net


222,244,629



270,721,404



41,320,157


Total current assets


1,584,298,985



1,896,680,036



289,489,917








Non-current assets:







Restricted cash


22,369,900



22,369,900



3,414,314


Long-term time deposits


490,000,000



200,000,000



30,525,962


Loan receivable, net


145,703,988



242,149,315



36,959,204


Property and equipment, net


668,605,661



728,286,926



111,158,296


Intangible assets, net


491,513,073



490,171,550



74,814,791


Goodwill


100,231,487



100,231,487



15,298,313


Long-term investments


369,525,917



390,838,455



59,653,600


Other assets


66,635,394



112,912,719



17,233,848


Deferred tax assets


156,070,112



147,935,125



22,579,310


 TOTAL ASSETS


4,094,954,517



4,331,575,513



661,127,555














LIABILITIES AND EQUITY







Current liabilities:







Short-term bank loans


150,000,000



280,000,000



42,736,347


Accounts payable


19,606,344



21,412,026



3,268,113


Advance from customers


34,305,508



30,051,962



4,586,825


Amounts due to related parties


3,198,253



3,299,440



503,593


Salary and welfare payable


51,567,587



52,241,724



7,973,644


Deferred rent


1,356,132



1,728,841



263,873


Deferred revenue


221,314,997



222,478,868



33,956,908


Accrued expenses and other current liabilities


300,696,673



326,435,111



49,823,730


Income tax payable


87,483,970



92,472,787



14,114,104


Total current liabilities


869,529,464



1,030,120,759



157,227,137








Deferred rent


28,642,973



32,505,167



4,961,258


Deferred revenue


361,901,369



346,072,720



52,821,014


Other long-term liabilities


115,862,713



127,274,124



19,425,825


Deferred tax liabilities