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GreenTree Hospitality Group Ltd. Reports Fourth Quarter and Fiscal Year 2021 Financial Results

  • Thursday, May 12, 2022, 9:03 am
  • ACROFAN=PRNewswire
  • mediainquiries@prnewswire.com
  • Total revenues increased by 6.1% year over year to RMB307.4 million (US48.2 million)[1] for the fourth quarter 2021.
  • Income from operations decreased by 69.5% year over year to RMB36.1 million (US$5.7 million) [1] for the fourth quarter 2021.
  • Adjusted EBITDA (non-GAAP) [2] decreased by 47.4% year over year to RMB68.8 million (US10.8 million) for the fourth quarter 2021.
  • Core net income (non-GAAP) [3] decreased by 67.2% year over year to RMB35.8 million (US$5.6 million) [1] for the fourth quarter 2021. 
  • GreenTree's board of directors has approved a share repurchase program of up to US$20 million over the next 12 months.

SHANGHAI, May 12, 2022 /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 fourth quarter and fiscal year of 2021.


Fourth Quarter of 2021 Operational Highlights


  • A total of 4,659 hotels with 337,153 hotel rooms were in operation as of December31, 2021, compared to 4,626 hotels and 334,162 hotel rooms as of September 30, 2021.
  • As of December 31, 2021, the Company had 66 leased-and-operated ("L&O") hotels and 4,593 franchised-and-managed ("F&M") hotels in operation in 367 cities across China, compared to 40 L&O hotels and 4,300 F&M hotels in operation in 345 cities as of December 31, 2020. Geographic coverage increased by 6.4% year-over-year.
  • During the quarter, the Company opened 138 hotels, a decrease of 65 compared to 203 hotels opened in the fourth quarter of 2020. Of the hotels opened in the fourth quarter of 2021, three were in the luxury segment, 44 were in the mid-to-up-scale segment, 59 were in the mid-scale segment, and 32 were in the economy segment. Geographically speaking, 15 hotels were in Tier 1 cities [3], 34 were in Tier 2 cities and the remaining 89 were in Tier 3 and lower cities in China as of December 31, 2021.
  • As of December 31, 2021, the Company had a pipeline of 1,225 hotels contracted for or under development, of which 57 hotels were in the luxury hotel segment, 347 were in the mid-to-up-scale segment, 478 were in the mid-scale segment, and 343 were in the economy segment.
  • The average daily room rate, or ADR, for all hotels in operation was RMB170, a 4.6% increase from RMB162 in the fourth quarter of 2020, and a 0.8% increase from RMB168 in the fourth quarter of 2019, before the COVID-19 outbreak.
  • The occupancy rate, or OCC, for all hotels in operation was 69.2%, a decrease of 7.5% compared with 76.7% in the fourth quarter of 2020, and a 7.2% decrease compared with 76.4% in the fourth quarter of 2019, before the COVID-19 outbreak.
  • The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB117, a 5.6% year-over-year decrease, and a 8.7% decrease compared with RMB129 in the fourth quarter of 2019, before the COVID-19 outbreak.
  • As of December 31, 2021 the Company's loyalty program had over 69 million individual members and approximately 1,850,000 corporate members, compared to over 66 million individual members and approximately 1,810,000 corporate members, respectively, as of September 30, 2021. The Company sold approximately 91.0% of room nights directly during the fourth quarter of 2021.

2021 Full Year Operational Highlights


  • For the full year 2021, the Company opened 722 hotels, an increase of 34.2% comparing to 538 newly-opened hotels in the full year 2020. Of the hotels opened in 2021, 10 were in the luxury hotel segment, 189 were in the mid-to-up-scale segment, 415 were in the mid-scale segment, and 108 were in the economy segment. Geographically speaking, 46 hotels were in Tier 1 cities, 200 were in Tier 2 cities and the remaining 476 were in Tier 3 and other cities in China as of December 31, 2021. During 2021, the Company closed 403 hotels, and added a net of 319 hotels to its portfolio.
  • The average daily room rate, or ADR, for all hotels in operation, was RMB164 in the full year 2021, a 7.5% year-over-year increase.
  • The occupancy rate, or OCC for all hotels in operation was 71.1% in the full year 2021, compared with 68.7% in the full year 2020.
  • The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB116 in the full year 2021, a 11.3% year-over-year increase.

"While addressing unprecedented challenges brought by the pandemic, we have continued to focus on the execution of our strategic growth plan for the long term," said Mr. Alex Xu, Chairman and Chief Executive Officer of GreenTree. "Thanks to the hard work and vigilance of our team, franchisees and partners to protect the health, safety and comfort of our customers, we delivered solid results during the fourth quarter of 2021, recovering 91.3% of our RevPAR in this quarter compared to the same period in 2019.


Several waves of COVID-19 infections in parts of China in the fourth quarter of 2021 dampened user demand for hotels stays overall. Despite the impact of COVID-19 in November, and thanks to our resilient business model, RevPAR for the quarter recovered to 91.3% of its level in the same period in 2019. This performance was better than our industry's average and gave momentum to our business. We also made progress in some of our new business models, such as E-sports hotels. As a result, E-sports hotels have performed better throughout the pandemic, bringing stable occupancy rates and profits to our franchisees and partners.


Going into 2022, we are pleased to see that our business has maintained better momentum than our industry in January and February, especially during Chinese New Year. However, additional COVID-19 outbreaks in March slowed down the pace of recovery in the domestic hospitality industry, especially in top-tier cities. March was negatively impacted by the resurgence of COVID-19 in many parts of China, particularly in Jilin Province, Guangdong Province and Shanghai. While the hotel industry as a whole has been hit hard and is under tremendous pressure, we have been strongly supported by the unwavering dedication of our staff and partners. Their dedication gives us confidence for the future, in our ability to continue to navigate uncertainty and to emerge from the pandemic stronger than ever."


Fourth Quarter 2021 Financial Results



Quarter Ended



December 31, 2020



December 31, 2021



December 31, 2021



RMB



RMB



US$


Revenues







Leased-and-operated hotels


76,113,015



112,445,788



17,645,198


Franchised-and-managed hotels


207,222,721



184,749,925



28,991,295


others


6,420,830



10,236,732



1,606,366


Total revenues


289,756,566



307,432,445



48,242,859









Year Ended



December 31, 2020



December 31, 2021



December 31, 2021



RMB



RMB



US$


Revenues







Leased-and-operated hotels


227,074,041



391,960,031



61,507,082


Franchised-and-managed hotels


677,480,818



774,359,348



121,513,879


others


25,455,237



39,826,579



6,249,660


Total revenues


930,010,096



1,206,145,958



189,270,621


 


Total revenues for the fourth quarter of 2021 were RMB307.4 million (US$48.2 million) [1], a 6.1% year-over-year increase. The increase was primarily due to newly opened L&O and F&M hotels. Compared with the fourth quarter of 2019, before the COVID-19 outbreak, total revenues for the fourth quarter of 2021 increased by 6.2%. Total revenues for the full year 2021 were RMB1,206.1 million (US$189.3 million) [1], a 29.7% year-over-year increase. 


Total revenues from leased-and-operated hotels for the fourth quarter of 2021 were RMB112.4 million (US$17.6 million) [1], a 47.7% year-over-year increase. The increase was primarily due to a 1.2% year-over-year increase in L&O hotels' RevPAR and revenues from the 29 L&O hotels opened since the beginning of 2021. This revenue increase was partially offset by the closure of three L&O hotels over the same period. Total revenues from L&O hotels for the full year 2021 were RMB392.0 million (US$61.5 million) [1], a 72.6% year-over-year increase.


Total revenues from franchised-and-managed hotels for the fourth quarter of 2021 were RMB184.7 million (US$29.0 million) [1], a 10.8% year-over-year decrease. Initial franchise fees for the fourth quarter of 2021 increased by 5.7% year-over-year, mainly attributable to the gross opening of 132 F&M hotels and the closure of 105 F&M hotels. Recurring franchisee management fees and others for the fourth quarter of 2021 decreased by 12.4% year-over-year, primarily due to a 5.8% decrease in RevPAR due to impact of COVID-19  and the fee waiver to franchisees of quarantined hotels and hotels whose RevPAR has been severely affected by the pandemic. Total revenues from F&M hotels for the full year 2021 were RMB774.4 million (US$121.5 million) [1], a 14.3% year-over-year increase.



Quarter Ended



December 31, 2020



 December 31, 2021



 December 31, 2021



RMB



RMB



US$


Initial franchise fee


18,065,889



19,091,150



2,995,818


Recurring franchise management fee and others


189,156,832



165,658,775



25,995,477


Revenues from franchised-and-managed hotels


207,222,721



184,749,925



28,991,295









Year Ended



December 31, 2020



 December 31, 2021



 December 31, 2021



RMB



RMB



US$


Initial franchise fee


61,051,369



76,263,574



11,967,419


Recurring franchise management fee and others


616,429,449



698,095,774



109,546,460


Revenues from franchised-and-managed hotels


677,480,818



774,359,348



121,513,879


Total operating costs and expenses



Quarter Ended



 December 31, 2020



 December 31, 2021



 December 31, 2021



RMB



RMB



US$


Operating costs and expenses







Hotel operating costs


99,817,161



191,912,281



30,115,225


Selling and marketing expenses


24,232,688



10,649,862



1,671,196


General and administrative expenses


50,885,097



72,474,197



11,372,783


Other operating expenses


98,341



30,485



4,783


3Total operating costs and expenses


175,033,287



275,066,825



43,163,987









Year Ended



 December 31, 2020



 December 31, 2021



 December 31, 2021



RMB



RMB



US$


Operating costs and expenses







Hotel operating costs


392,522,306



651,376,905



102,215,250


Selling and marketing expenses


75,347,166



66,921,718



10,501,478


General and administrative expenses


172,557,554



268,252,836



42,094,724


Other operating expenses


1,731,405



4,937,625



774,821


Total operating costs and expenses


642,158,431



991,489,084



155,586,273


 


Hotel operating costs for the fourth quarter of 2021 were RMB191.9 million (US$30.1 million) [1], a 92.3% year-over-year increase. The increase was mainly attributable to the opening of 29 L&O hotels since the beginning of 2021, which resulted in higher rents, higher utilities and consumables, higher staff headcount and compensation expenses, higher depreciation and amortization, and higher ramp up costs. Excluding the impact from newly-opened L&O hotels in 2021, hotel operating costs for the fourth quarter of 2021 increased 19.7%. Hotel operating costs for the full year 2021 were RMB651.4 million (US$102.2 million) [1], a 65.9% year-over-year increase.



Quarter Ended



December 31,



December 31,



December 31,


2020



2021



2021



RMB



RMB



US$


Rental


28,196,927



63,622,588



9,983,772


Utilities


4,113,416



6,306,575



989,639


Personnel cost


10,034,679



29,867,603



4,686,879


Depreciation and amortization


13,450,611



29,110,325



4,568,045


Consumable, food and beverage


11,584,105



20,471,596



3,212,440


Costs of general managers of franchised-and-managed hotels


26,088,907



29,807,622



4,677,466


Other costs of franchised-and-managed hotels


5,132,814



6,004,107



942,175


Others


1,215,702



6,721,865



1,054,809


Hotel Operating Costs


99,817,161



191,912,281



30,115,225









Year Ended



December 31,



December 31,



December 31,


2020



2021



2021



RMB



RMB



US$


Rental


118,295,183



235,568,383



36,965,820


Utilities


15,372,385



25,782,913



4,045,902


Personnel cost


41,330,758



82,114,394



12,885,540


Depreciation and amortization


50,324,493



80,575,644



12,644,077


Consumable, food and beverage


43,257,796



69,495,702



10,905,392


Costs of general managers of franchised-and-managed hotels


91,664,745



114,779,305



18,011,378


Other costs of franchised-and-managed hotels


22,985,917



26,123,578



4,099,359


Others


9,291,029



16,936,986



2,657,782


Hotel Operating Costs


392,522,306



651,376,905



102,215,250


 


Selling and marketing expenses for the fourth quarter of 2021 were RMB10.6 million (US$1.7 million) [1], a 56.1% year-over-year decrease. The decrease was mainly attributable to lower advertising expenses. Selling and marketing expenses for the full year 2021 were RMB66.9 million (US$10.5 million) [1], a 11.2% year-over-year decrease. 


General and administrative expenses for the fourth quarter of 2021 were RMB72.5 million (US$11.4 million) [1], a 42.4% year-over-year increase. The increase was mainly attributable to the opening of 29 L&O hotels since the beginning of 2021, increased one-time consulting fees for capital markets advice and increased bad debts during 2021. Excluding the impact from newly-opened L&O hotels and one-time consulting fees, general and administrative expenses for the fourth quarter of 2021 increased by 19.9%. General and administrative expenses for the full year 2021 were RMB268.3 million (US$42.1 million) [1], a 55.5% year-over-year decrease.


Gross profit for the fourth quarter of 2021 was RMB115.5 million (US$18.1 million) [1], a year-over-year decrease of 39.2%. Gross margin for the fourth quarter of 2021 was 37.6%, compared to 65.6% a year ago. The decrease was primarily due to the operating loss recorded by newly-opened L&O hotels during their ramp-up period. Gross profit for the full year 2021 was RMB554.8 million (US$87.1 million[1], a 3.2% year-over-year increase.


Income from operations for the fourth quarter of 2021 was RMB36.1 million (US$5.7 million) [1], a year-over-year decrease of 69.5%, with a margin of 11.8%. The decrease was mainly due to the operating loss recorded by newly-opened L&O hotels during their ramp-up period. Excluding the impact of newly-opened hotels, income from operations for the fourth quarter of 2021 was RMB261.4 million, a year-over-year increase of 16.6%, with a margin of 54.3%. Income from operations for the full year 2021 was RMB241.7 million (US$37.9 million)  [1], a year-over-year decrease of 24.3%.


Net income for the fourth quarter of 2021 was RMB28.6 million (US$4.5 million) [1], compared to RMB79.5 million in the fourth quarter of 2020 and net margin was 9.3%. The year-over-year decrease was mainly attributable to the operating loss recorded by newly-opened L&O hotels during their ramp-up period. Net income for the full year 2021 was RMB207.8 million(US$32.6 million) [1], a year-over-year decrease of 15.1%.


Adjusted EBITDA (non-GAAP) [2] for the fourth quarter of 2021 was RMB68.7 million (US$10.8 million) [1], a year-over-year decrease of 47.4%. Adjusted EBITDA margin, defined as adjusted EBITDA (non-GAAP) as a percentage of total revenues, for the fourth quarter of 2021 was 22.4%, compared to 45.1% a year ago. Excluding the impact of newly-opened hotels, adjusted EBITDA (non-GAAP) for the fourth quarter of 2021 was RMB105.0 million, with a margin of 40.2%. Adjusted EBITDA (non-GAAP) for the full year 2021 was RMB317.7 million (US$49.9 million) [1], a year-over-year decrease of 10.6%.


Core net income (non-GAAP) for the fourth quarter of 2021 was RMB35.8 million (US$5.6 million) [1], a year-over-year decrease of 67.2%. The core net margin, defined as core net income (non-GAAP) as a percentage of total revenues, for the fourth quarter of 2021 was 11.7%, compared to 37.7% one year ago. Core net income (non-GAAP) for the full year 2021 was RMB208.8 million (US$32.7 million) [1], a year-over-year decrease of 27.9%.


Earnings per ADS (basic and diluted) for the fourth quarter of 2021 were RMB0.25 (US$0.04[1], down from RMB0.83 one year ago. Core net income per ADS (basic and diluted) (non-GAAP) for the fourth quarter of 2021 was RMB0.35 (US$0.05) [1], down from RMB1.06 a year ago. Earnings per ADS (basic and diluted) for the full year 2021 was RMB2.05 (US$0.32[1] down from RMB2.54 one year ago. Core net income per ADS (basic and diluted) (non-GAAP) was RMB2.03 (US$0.32[1] for the full year 2021, a decrease from RMB2.81 a year ago.


Cash flow Operating cash inflow for the fourth quarter of 2021 was RMB201.3 million (US$31.6 million) [1] as a result of income from operations. Investing cash outflow for the fourth quarter of 2021 was RMB256.4 million (US$40.2 million) [1], which was primarily attributable to purchases of short-term investment, investments and deposits for property and equipment, and loans to franchisees. The investing cash outflow was partially offset by proceeds from short-term investments. Financing cash inflow for the fourth quarter of 2021 was RMB154.2 million (US$24.2 million), mainly attributable to dividends distributed by the end of the year 2021. Operating cash inflow for the full year 2021 was RMB361.0 million (US$56.6 million) [1]. Investing cash outflow for the full year 2021 was RMB928.4 million (US$145.7 million) [1]. Financing cash inflow for the full year 2021 was RMB255.6 million (US$40.1 million) [1].  


Cash and cash equivalents, restricted cash, short-term investments, investments in equity securities and time deposit. As of December 31 , 2021, the Company had total cash and cash equivalents, restricted cash, short term investments, investments in equity securities and time deposits of RMB1,235.9 million (US$193.9 million[1], compared to RMB1,192.1 million as of September 30, 2021. The increase from the prior quarter was primarily attributable to drawing down of bank facilities offset by dividend distribution to our shareholders, acquisition costs of our L&O hotels, changes in fair value of equity securities and loans to franchisees.


COVID-19 Update


Despite the resurgence of COVID-19 in the fourth quarter of 2021, we delivered solid results, with RevPAR recovering to 91.3% of its level in the same period in 2019. At the end of December 2021, our RevPAR had bounced back to almost 100% of its level in the fourth quarter of 2019 (the "4Q2019 Level"). With the resurgence of COVID-19 nationwide, our RevPAR fell to around 81.3% of the 4Q2019 Level in the first week of November 2021, but gradually recovered to 98.5% of the 4Q2019 Level in the last week of December 2021. In early 2022, hotels braced for a rush of guests during the Chinese New Year due to family reunions and anticipated recovery in domestic tourism, leading to a boom for the hospitality industry. In the first quarter of 2022, the Company's RevPAR temporarily reached 88% of its level in the first quarter of 2019. However, the reintroduction of travel restrictions due to increased omicron variant cases led to a decline in RevPAR.


At the beginning of 2022, another round of COVID outbreaks in March and April led to some restrictions in major cities being locked down, and millions of residents confined at home, slowing down the recovery pace of the domestic hospitality industry, especially in top-tier cities. Outbreaks in Jilin Province, Guangdong Province and Shanghai in March led to a drop in our RevPAR of the first week of May to only 56.0% of its level at the same time in 2019. A certain number of our hotels participate in domestic quarantine programs. We help local governments implement quarantine policies, help our guests isolate safely, and help our franchisees stabilize their income. We believe our hotels' participation can help them stay competitive in the industry. While China's domestic market remains under pressure due to a new wave of infections and the rapid increase in omicron cases, we believe we can continue to outperform the industry across business lines.


Guidance


Assuming the recent resurgences of COVID-19 remain under control in China and the market will recover in the third quarter and fourth quarter, the Company expects an increase in total revenues of up to 5% for the full year 2022, compared to 2021.


The guidance set forth above reflects the Company's current and preliminary views based on its recovery and may not be indicative of the final financial results for any future interim period and/or the full year ending December 31, 2022.


Share Repurchase Program


The Company today also announced that its board of directors has authorized a share repurchase program under which the Company may repurchase up to US$20 million worth of its outstanding (i) American depositary shares ("ADSs"), each representing one Class A ordinary share, and/or (ii) Class A ordinary shares over the next 12 months.


Under the share repurchase program, the Company may repurchase its ADSs from time to time through open market transactions at prevailing market prices, privately negotiated transactions, block trades or any combination thereof. The Company will also effect repurchase transactions in compliance with Rule 10b5-1 and/or Rule 10b-18 under the Securities Exchange Act of 1934, as amended, and its insider trading policy, as applicable. The number of ADSs repurchased and the timing of repurchases will depend on a number of factors, including, but not limited to, price, trading volume and general market conditions, along with the Company's working capital requirements and general business conditions. The Company's board of directors will review the share repurchase program periodically, and may authorize adjustment of its terms and size. The Company plans to fund the repurchases from its existing cash balance and does not expect the repurchase program to adversely affect its existing growth plan and strategies.


Conference Call


GreenTree's management will hold an earnings conference call at 8:00 PM U.S. Eastern Time on May 11, 2022, (9:00 AM Beijing/Hong Kong Time on May12, 2022).


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 


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 conference call will be available after the conclusion of the live conference call until May, 2022.


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:


6891497


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 December 31 2021, GreenTree had a total number of 4,659 hotels. In 2020, HOTELS magazine ranked GreenTree Top 12 Ranking among 225 largest global hotel groups in terms of number of