GreenTree Hospitality Group Ltd. Reports Second Quarter 2020 Financial Results

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  • The Company’s operations and performance, while still impacted by COVID-19, showed a steady recovery in the second quarter.
  • A total of 4,066 hotels with 296,307 hotel rooms were in operation as of June 30, 2020, compared to 3,998 hotels and 292,716 hotel rooms as of March 31, 2020.
  • Total revenues decreased 21.4% to RMB216.0 million (US$30.6 million) [1] for the second quarter and decreased 26.8% to RMB373.4 million (US$52.8 million) [1] for the first half of 2020.
  • Net income decreased 26.3% to RMB93.7 million (US$13.3 million) [1] for the second quarter and decreased 69.5% to RMB79.6 million (US$11.3 million) [1] for the first half of 2020.
  • Adjusted EBITDA (non-GAAP) decreased 47.2% to RMB91.4 million (US$12.9 million) [1] for the second quarter and decreased 54.7% to RMB138.9 million (US$19.7 million) [1] for the first half of 2020.
  • Core net income (non-GAAP) decreased 40.2% to RMB74.6 million (US$10.6 million) [1] for the second quarter and decreased 56.8% to RMB93.7 million (US$13.3 million) [1] for the first half of 2020.
  • Net income per ADS (basic and diluted) was RMB1.01 (US$0.14) [1] for the second quarter, and RMB0.90 (US$0.13) [1] for the first half of 2020.
  • Core net income per ADS (basic and diluted) (non-GAAP) was RMB0.72 (US$0.10) [1] for the second quarter, and RMB0.91 (US$0.13) [1] for the first half of 2020.

SHANGHAI, Aug. 14, 2020 /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 second quarter ended June 30, 2020.

Second Quarter 2020 Operational Highlights

  • As of June 30, 2020, the Company had 35 leased-and-operated (“L&O”) hotels and 4,031 franchised-and-managed (“F&M”) hotels in operation in 343 cities across China, compared to 30 L&O hotels and 2,925 F&M hotels in operation in 300 cities as of June 30, 2019. The geographic coverage increased by 14.3% year over year.
  • During the quarter, the Company opened 111 hotels, a decrease of 23 comparing to 134 hotels in the second quarter of 2019. Among the hotels opened, 1 was in the luxury segment, 28 were in the mid-to-up-scale segment, 50 in the mid-scale segment, and 32 in the economy segment. Geographically speaking, 5 hotels were in Tier 1 cities [2], 34 in Tier 2 cities and the remaining 72 in Tier 3 and smaller cities in China.
    The Company closed 43 hotels, 5 due to brand upgrades, and 20 due to their non-compliance with the Company’s brand and operating standards. The remaining 18 were closed for property related issues. The Company added a net opening of 68 hotels to its portfolio.
  • As of June 30, 2020, the Company had a pipeline of 1,087 hotels contracted for or under development, among which 54 hotels were in the luxury hotel segment, 215 in the mid-to-up-scale segment, 439 in the mid-scale segment, and 379 in the economy segment.
  • The average daily room rate, or ADR, for all hotels in operation, was RMB142, a decrease of 17.4% year-over-year.
  • The occupancy rate, or OCC for all hotels in operation was 63.4%, compared with 81.1% in the second quarter of 2019.
  • The revenue per available room, or RevPAR, which is calculated by multiplying our hotels’ ADR by its occupancy rate, was RMB90, representing a 35.4% year-over-year decrease. 
  • As of June 30, 2020, the Company’s loyalty program had more than 49 million individual members and over 1,560,000 corporate members, compared to approximately 46 million and over 1,520,000 corporate members as of March 31, 2020. The Company had approximately 93.7% of room nights sold directly.

[1] The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate
of US$1.00=RMB7.0651 on June 30, 2020 as set forth in H.10 statistical release of the U.S. Federal
Reserve Board and available at https://www.federalreserve.gov/releases/h10/current/

[2] 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.

“I am proud of the Q2 results we achieved, especially considering the difficult environment that we operated under as a result of COVID-19. Through it all, our business remained resilient and highly adaptable. We continued to serve and protect our guests, our sales recovered, and we returned to profitability,” said Mr. Alex Xu, Chairman and Chief Executive Officer of GreenTree. “I know it was not easy for our staff and franchisees who worked tirelessly to guarantee the safety and health of our guests. I know it was a real challenge for anyone in the hospitality industry to overcome the headwinds from COVID-19” continued Mr. Xu.

“I am also proud of our staff and franchisees for what they delivered this quarter. We quickly adjusted our operations and marketing campaigns to meet evolving consumer preferences and weaker market conditions. We protected our margins thanks to our flexible cost structure and the measures we implemented over recent quarters and that we will continue to implement for the rest of 2020. As a result, our organic same-hotel RevPAR, excluding hotels under requisition, temporary closures, and impact from consolidated entities, deceased 22.2% in the second quarter to 112 RMB. Our overall performance was better than the average across the hospitality industry in China. Our occupancy rate has rebounded and exceeded 75% on average during the second half of July, exceeded 82% during the first two weeks of August, up substantially from 65% in the second half of May.

With the Chinese government’s efforts to bring the spread of COVID-19 under control, domestic tourism and business is gradually bouncing back. On July 15, 2020, the Ministry of Culture and Tourism lifted restrictions on inter-provincial travel. The lifting of these restrictions has stimulated business travel and summer travel and helped the hospitality sector to deliver steady and improved performance. With assistance and support from the government and our business partners, together with our core strengths such as our large and loyal membership and strong operational capabilities, we are well positioned to deliver another year of outstanding service to our guests, strong performance to our franchisees, and sustainable growth to our shareholders.”

Second Quarter of 2020 Financial Results

Quarter Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

Revenues

Leased-and-operated hotels

60,510,976

50,337,339

7,124,788

Franchised-and-managed hotels

214,419,775

165,652,625

23,446,607

Total revenues

274,930,751

215,989,964

30,571,395

Six Months Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

Revenues

Leased-and-operated hotels

112,336,802

84,137,483

11,908,888

Franchised-and-managed hotels

397,887,057

289,248,472

40,940,464

Total revenues

510,223,859

373,385,955

52,849,352

Total revenues for the second quarter of 2020 were RMB216.0 million (US$30.6 million) [1], representing a 21.4% year-over-year decrease. The decrease was primarily due to the impact of COVID-19, which resulted in declined RevPAR of L&O hotels and F&M hotels, renovation of 5 L&O hotels, delay in new hotel openings, as well as partial reduction and extension of sublease income recognition. Total revenues for the first half of 2020 were RMB373.4 million (US$52.8 million) [1], representing a 26.8% decrease.

  • Total revenues from leased-and-operated hotels for the second quarter of 2020 were RMB50.3 million (US$7.1 million) [1], representing a 16.8% year-over-year decrease. The decrease was primarily due to RevPAR decrease of 47.1%, renovation of 5 L&O hotels, and partial reduction and extension of sublease income recognition, and partially offset by the revenue contributed by 6 L&O hotels of the Urban Hotel Group (“Urban”). Total revenues from L&O hotels for the first half of 2020 were RMB84.1 million (US$11.9 million) [1], representing a 25.1% decrease.
  • Total revenues from franchised-and-managed hotels for the second quarter of 2020 were RMB165.7 million (US$23.4 million) [1], representing a 22.7% year-over-year decrease. Initial franchise fees increased by 0.5% year-over-year, mainly attributable to the gross opening of 111 hotels and contribution from historical amortization under ASC606, which was adopted since the first quarter of 2019. The 24.3% decrease from the second quarter of 2019 in recurring franchisee management fees and others was primarily due to the delay in new hotel openings and RevPAR decrease of 35.2%. Total revenues from F&M hotels for the first half of 2020 were RMB289.2 million (US$40.9 million) [1], representing a 27.3% decrease.

Quarter Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

Initial franchise fee

13,243,838

13,313,072

1,884,343

Recurring franchise management fee
and others

201,175,937

152,339,553

21,562,264

Revenues from franchised-and-
managed hotels

214,419,775

165,652,625

23,446,607

Six Months Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

Initial franchise fee

25,996,787

26,365,904

3,731,851

Recurring franchise management fee
and others

371,890,270

262,882,568

37,208,613

Revenues from franchised-and-
managed hotels

397,887,057

289,248,472

40,940,464

Total operating costs and expenses

Quarter Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

Operating costs and expenses

Hotel operating costs

78,939,817

94,916,577

13,434,570

Selling and marketing expenses

16,353,634

11,999,656

1,698,441

General and administrative expenses

39,768,385

48,143,971

6,814,337

Other operating expenses

65,350

41,123

5,820

Total operating costs and expenses

135,127,186

155,101,327

21,953,168

 Six Months Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

Operating costs and expenses

Hotel operating costs

158,939,661

184,679,850

26,139,736

Selling and marketing expenses

41,029,736

29,840,978

4,223,716

General and administrative expenses

65,500,871

76,889,542

10,883,008

Other operating expenses

107,974

1,198,272

169,605

Total operating costs and expenses

265,578,242

292,608,642

41,416,065

Hotel operating costs for the second quarter of 2020 were RMB94.9 million (US$13.4 million) [1], representing a 20.2% increase year-over-year. The increase was mainly attributable to higher rents, higher depreciation and amortization, and the consolidation of operation costs of Argyle Hotel Management Group (Australia) Pty Ltd (“Argyle”) and Urban. Argyle’s costs increased compared to one year ago, primarily due to rents for 2 L&O hotels in development. Excluding the impact from acquired entities, hotel operating costs for this quarter decreased 6.2%, which was primarily due to a decrease in salaries of hotel staffs and regional general managers, and decreases in utilities, consumable, food and beverage, which resulted from the declined occupancy rate. For the first half of 2020, hotel operating costs were RMB184.7 million (US$26.1 million) [1], representing a 16.2% increase.

Quarter Ended

June 30,

June 30,

June 30,

2019

2020

2020

RMB

RMB

US$

Rental

19,039,168

35,806,000

5,068,010

Utilities

4,891,420

3,172,300

449,010

Personnel cost

8,495,301

9,332,835

1,320,977

Depreciation and amortization

7,174,031

10,588,191

1,498,661

Consumable, food and beverage

6,931,925

6,789,575

961,002

Costs of general managers of franchised-and-
managed hotels

 

23,045,469

 

20,691,454

 

2,928,685

Other costs of franchised-and-managed hotels

7,306,217

5,476,527

775,152

Others

2,056,286

3,059,695

433,073

Hotel Operating Costs

78,939,817

94,916,577

13,434,570

 Six Months Ended

June 30,

June 30,

June 30,

2019

2020

2020

RMB

RMB

US$

Rental

39,647,433

62,908,982

8,904,188

Utilities

11,045,983

7,592,490

1,074,647

Personnel cost

17,289,575

19,563,480

2,769,031

Depreciation and amortization

13,698,236

21,927,026

3,103,569

Consumable, food and beverage

13,769,076

15,540,443

2,199,607

Costs of general managers of franchised-and-
managed hotels

 

45,490,112

 

41,334,102

 

5,850,462

Other costs of franchised-and-managed hotels

12,992,800

9,979,587

1,412,519

Others

5,006,446

5,833,740

825,713

Hotel Operating Costs

158,939,661

184,679,850

26,139,736

Selling and marketing expenses for the second quarter of 2020 were RMB12.0 million (US$1.7 million) [1], representing a 26.6% year-over-year decrease. The decrease was mainly attributable to sustainable reductions in costs for advertising and meals. Excluding Argyle’s and Urban’s expenses, selling and marketing expenses in this quarter decreased 37.6%. For the first half of 2020, selling and marketing expenses were RMB29.8 million (US$4.2 million) [1], representing a 27.3% decrease.

General and administrative expenses for the second quarter of 2020 were RMB48.1 million (US$6.8 million) [1], representing a 21.1% year-over-year increase. The increase was primarily attributable to higher depreciation and amortization for our property and equipment, increased consulting fees, and the consolidation of expenses from Argyle and Urban. Additionally, a one-time bad debt regarding to account receivable due to COVID-19 was accrued. Excluding the impact from acquired entities and accrued bad debts, G&A expenses decreased by 21.6%. General and administrative expenses for the first half of 2020 were RMB76.9 million (US$10.9 million) [1], representing a 17.4% year-over-year increase.

Gross profit for the second quarter of 2020 was RMB121.1 million (US$17.1 million) [1], representing a year-over-year decrease of 38.2%. Gross margin was 56.1%, compared to 71.3% a year ago. The decrease was primarily due the impact of COVID-19. Gross profit for the first half of 2020 was RMB188.7 million (US$26.7 million) [1], representing a 46.3% year-over-year decrease.

Income from operations for the second quarter of 2020 totaled RMB62.7 million (US$8.9 million) [1], representing a year-over-year decrease of 55.7%. The decrease was mainly due to decreased revenues resulting from lower RevPAR, delays in new hotel openings, and certain extension of sublease income recognition. Operating margin, defined as income from operations as percentage of total revenues, was 29.0%, compared to 51.4% a year ago. Income from operations for the first half of 2020 totaled RMB99.9 million (US$14.1 million) [1], representing a year-over-year decrease of 60.6%.

Adjusted EBITDA (non-GAAP) for the second quarter of 2020 was RMB91.4 million (US$12.9 million) [1], representing a year-over-year decrease of 47.2%. Adjusted EBITDA margin, defined as adjusted EBITDA (non-GAAP) as a percentage of total revenues, was 42.3%, compared to 63.0% a year ago. Adjusted EBITDA (non-GAAP) for the first half of 2020 was RMB138.9 million (US$19.7 million) [1], representing a year-over-year decrease of 54.7%.

Net income for the second quarter of 2020 was RMB93.7 million (US$13.3 million) [1], representing a year-over-year decrease of 26.3%. Net margin was 43.4%, compared to 46.2% a year ago. The year-over-year decrease was primarily due to revenue decrease partially offset by gains from investments in equity securities. Net income for the first half of 2020 was RMB79.6 million (US$11.3 million) [1], representing a year-over-year decrease of 69.5%.

Core net income (non-GAAP) for the second quarter of 2020 was RMB74.6 million (US$10.6 million) [1], representing a year-over-year decrease of 40.2%. The core net margin, defined as core net income (non-GAAP) as a percentage of total revenues, was 34.6%, compared to 45.4% one year ago. Core net income (non-GAAP) for the first half of 2020 was RMB93.7 million (US$13.3 million) [1], representing a year-over-year decrease of 56.8%.

Earnings per ADS (basic and diluted) for the second quarter of 2020 was RMB1.01 (US$0.14) [1], down from earnings per ADS of RMB1.26 one year ago. Core net income per ADS (basic and diluted) (non-GAAP) was RMB0.72 (US$0.10) [1], down from RMB1.23 a year ago. Earnings per ADS (basic and diluted) for the first half of 2020 was RMB0.90 (US$0.13) [1] up from RMB2.59 one year ago. Core net income per ADS (basic and diluted) (non-GAAP) was RMB0.91 (US$0.13) [1] for the first half of 2020, decreased from RMB2.11 of 2019.

Cash flow. Operating cash inflow for the second quarter of 2020 was RMB58.3 million (US$8.2 million) [1] as a result of recovery from COVID-19 and improved operating performance. Investing cash outflow for the second quarter of 2020 was RMB46.2 million (US$6.5 million) [1], which was primarily attributable to short-term investments, investment in property, and loans to franchisees. The investing cash outflow was also partially offset by repayment of advances for investments, as well as repayment from franchisees. Financing cash inflow was RMB3.0 million (US$0.4 million). Operating cash inflow for the first half of 2020 was RMB9.9 million (US$1.4 million) [1]. Investing cash inflow for the first half of 2020 was RMB108.8 million (US$15.4 million) [1]. Financing cash inflow for the first half of 2020 was RMB13.4 million (US$1.9 million) [1].

Cash and cash equivalents, restricted cash, short-term investments, investments in equity securities and time deposit. As of June 30, 2020, the Company had a total balance of cash and cash equivalents, restricted cash, short term investments, investments in equity securities and time deposits of RMB1,714.0 million (US$242.6 million) [1], as compared to RMB1,613.9 million as of March 31, 2020. The increase from Q1 was primarily attributable to cash inflow from operating activities, changes in fair value of equity securities, proceeds from disposal of investments, and offset by loans to franchisees and investment on upgrade decoration.

COVID-19 Update

With the Chinese government’s efforts to bring the spread of COVID-19 under control, domestic tourism and business is gradually bouncing back. According to the STR data, the occupancy rate of hotels in China has been improving steadily during the second quarter and reached 63.1% during the last week of July, up substantially from the low of 8.4% during the week of February 9, 2020. Although new COVID-19 cases were reported in Beijing and Dalian in the middle of June, the outbreak quickly came under control thanks to local governments’ effective measures and an adequate supply of nucleic acid detection test kits. With the economic environment improving, business traveling gradually returned to normal starting late June.

On July 15, 2020, The Ministry of Culture and Tourism announced that the restrictions on cross provincial travel would be lifted. The lifting of these restrictions will stimulate business travel and summer travel and help the hospitality sector to deliver steady and improved performance. With all the endeavor and assistance from the government and our business partners, most franchisees have now resumed business operations. Our occupancy rate has rebounded and exceeded 75% on average in the second half of July, exceeded 82% during the first two weeks of August, up substantially from 65% in the second half of May.

Guidance

Due to the impact of COVID-19, the Company expects a decline in total revenues in the third quarter of 2020 of 8%-13% year-over-year, and a decline in total revenues of 10%-15% for the full year 2020, 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 9:00 PM U.S. Eastern Time on August 13, 2020 (9:00 AM Beijing/Hong Kong Time on August 14, 2020).

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 call will be available after the conclusion of the conference call until August 20, 2020.

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:

10146314

Additionally, a live and archived webcast of this conference call will be available at http://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 June 30, 2020, GreenTree had a total number of 4,066 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 2019 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 http://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,

June 30,

June 30,

2019

2020

2020

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

319,847,701

452,608,736

64,062,609

Short-term investment

437,279,026

191,176,808

27,059,321

Investments in equity securities

207,007,926

173,261,027

24,523,507

Accounts receivable, net of allowance

99,701,226

120,470,392

17,051,477

Amounts due from related parties

31,739,731

29,439,855

4,166,941

Prepaid rent

18,794,665

8,872,415

1,255,809

Inventories

2,537,717

2,790,179

394,924

Other current assets

66,004,017

44,818,677

6,343,672

Loans receivable, net

82,312,201

145,035,382

20,528,425

Total current assets

1,265,224,210

1,168,473,471

165,386,685

Non-current assets:

Restricted cash

22,312,522

22,169,900

3,137,946

Long-term time deposits

560,000,000

590,000,000

83,509,080

Loan receivable, net

121,563,742

172,337,304

24,392,762

Property and equipment, net

614,936,505

631,423,774

89,372,235

Intangible assets, net

496,280,316

493,363,778

69,831,110

Goodwill

100,078,236

100,231,487

14,186,846

Long-term investments

398,637,701

422,585,859

59,813,146

Other assets

76,957,992

50,332,514

7,124,105

Deferred tax assets

160,488,193

168,657,703

23,871,949

 TOTAL ASSETS

3,816,479,417

3,819,575,790

540,625,864

LIABILITIES AND EQUITY

Current liabilities:

Short-term bank loans

60,000,000

70,000,000

9,907,857

Accounts payable

15,296,042

18,185,038

2,573,925

Advance from customers

40,105,627

32,347,707

4,578,521

Amounts due to related parties

3,518,031

1,469,730

208,027

Salary and welfare payable

42,650,527

44,054,228

6,235,471

Deferred rent

5,179,664

6,265,589

886,837

Deferred revenue

231,925,272

224,959,453

31,840,944

Accrued expenses and other current liabilities

302,448,361

276,933,394

39,197,378

Income tax payable

93,909,177

47,490,213

6,721,802

Total current liabilities

795,032,701

721,705,352

102,150,762

Deferred rent

17,821,686

20,887,160

2,956,386

Deferred revenue

410,807,248

378,729,312

53,605,655

Other long-term liabilities

118,112,511

135,731,808

19,211,590

Deferred tax liabilities

195,303,547

199,317,796

28,211,603

Unrecognized tax benefits

261,641,717

258,431,806

36,578,648

 TOTAL LIABILITIES

1,798,719,410

1,714,803,234

242,714,644

Shareholders’ equity:

Class A ordinary shares

219,526,699

222,587,070

31,505,155

Class B ordinary shares

115,534,210

115,534,210

16,352,806

Additional paid-in capital

1,152,108,217

1,149,280,404

162,670,083

Retained earnings

308,698,533

401,194,544

56,785,402

Accumulated other comprehensive income

65,300,854

69,116,862

9,782,857

Total GreenTree Hospitality Group Ltd. shareholders’ equity

1,861,168,513

1,957,713,090

277,096,303

Non-controlling interests

156,591,494

147,059,466

20,814,917

Total shareholders’ equity

2,017,760,007

2,104,772,556

297,911,220

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

3,816,479,417

3,819,575,790

540,625,864

GreenTree Hospitality Group Ltd.

Unaudited Condensed Consolidated Statements of Comprehensive Income

Quarter Ended

 Six Months Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

RMB

RMB

US$

Revenues

Leased-and-operated hotels

60,510,976

50,337,339

7,124,788

112,336,802

84,137,483

11,908,888

Franchised-and-managed hotels

214,419,775

165,652,625

23,446,607

397,887,057

289,248,472

40,940,464

Total revenues

274,930,751

215,989,964

30,571,395

510,223,859

373,385,955

52,849,352

Operating costs and expenses

Hotel operating costs

(78,939,817)

(94,916,577)

(13,434,570)

(158,939,661)

(184,679,850)

(26,139,736)

Selling and marketing expenses

(16,353,634)

(11,999,656)

(1,698,441)

(41,029,736)

(29,840,978)

(4,223,716)

General and administrative expenses

(39,768,385)

(48,143,971)

(6,814,337)

(65,500,871)

(76,889,542)

(10,883,008)

Other operating expenses

(65,350)

(41,123)

(5,820)

(107,974)

(1,198,272)

(169,605)

Total operating costs and expenses

(135,127,186)

(155,101,327)

(21,953,168)

(265,578,242)

(292,608,642)

(41,416,065)

Other operating income

1,639,842

1,762,982

249,534

8,546,295

19,093,913

2,702,568

Income from operations

141,443,407

62,651,619

8,867,761

253,191,912

99,871,226

14,135,855

Interest income and other, net

17,759,532

14,107,924

1,996,847

34,228,543

24,721,184

3,499,056

Interest expense

(700,350)

(1,727,991)

(244,581)

(1,385,475)

(2,738,246)

(387,574)

Gains/(losses) from investment in equity securities

15,902,581

42,534,583

6,020,379

75,837,051

(12,640,335)

(1,789,123)

Other income, net

1,860,961

2,690,742

Income before income taxes

176,266,131

117,566,135

16,640,406

364,562,773

109,213,829

15,458,214

Income tax expense

(49,050,930)

(24,399,003)

(3,453,454)

(103,216,322)

(30,576,563)

(4,327,831)

Income before share of (losses)/gains in equity investees

127,215,201

93,167,132

13,186,952

261,346,451

78,637,266

11,130,383

Share of (losses)/gains in equity investees, net of tax

(114,566)

553,487

78,341

(287,797)

948,331

134,227

Net income

127,100,635

93,720,619

13,265,293

261,058,654

79,585,597

11,264,610

Net loss attributable to non-controlling interests

1,376,781

10,621,047

1,503,311

2,332,314

12,910,415

1,827,351

Net income attributable to ordinary shareholders

128,477,416

104,341,666

14,768,604

263,390,968

92,496,012

13,091,961

Net earnings per share

Class A ordinary share-basic and diluted

1.26

1.01

0.14

2.59

0.90

0.13

Class B ordinary share-basic and diluted

1.26

1.01

0.14

2.59

0.90

0.13

Net earnings per ADS

Class A ordinary share-basic and diluted

1.26

1.01

0.14

2.59

0.90

0.13

Class B ordinary share-basic and diluted

1.26

1.01

0.14

2.59

0.90

0.13

Weighted average shares outstanding

Class A ordinary share-basic and diluted

67,113,004

68,286,954

68,286,954

67,064,583

68,286,954

68,286,954

Class B ordinary share-basic and diluted

34,762,909

34,762,909

34,762,909

34,762,909

34,762,909

34,762,909

Other comprehensive (loss)/income, net of tax

Foreign currency translation adjustments

11,020,015

(1,181,225)

(167,192)

(3,782,503)

3,816,008

540,121

Comprehensive income/(loss), net of tax

138,120,650

92,539,394

13,098,101

257,276,151

83,401,605

11,804,731

Comprehensive loss attributable to non-controlling interests

1,376,781

10,621,047

1,503,312

2,332,314

12,910,415

1,827,351

 

 

Comprehensive income/(loss) attributable to ordinary shareholders

139,497,431

103,160,441

14,601,413

259,608,465

96,312,020

13,632,082

GreenTree Hospitality Group Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

 Quarter Ended

 Six Months Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

RMB

RMB

US$

Operating activities:

Net income

127,100,635

93,720,619

13,265,293

261,058,654

79,585,597

11,264,610

Adjustments to reconcile net income to net cash provided by operating a
ctivities:

Depreciation and amortization

8,150,042

16,339,200

2,312,664

15,820,814

32,005,845

4,530,133

Share of losses/(gains) in equity method investments

114,566

(553,487)

(78,341)

287,797

(948,331)

(134,228)

Interest income

(2,452,171)

(2,097,419)

(296,870)

(10,413,809)

(4,841,860)

(685,321)

Bad debt expense

(5,890,482)

12,009,289

1,699,805

(4,999,113)

17,928,925

2,537,675

(Gains)/losses from investments in equity securities

(15,902,581)

(42,534,582)

(6,020,379)

(75,837,051)

12,640,335

1,789,123

Foreign exchange gains

(324,322)

(1,367,301)

(193,529)

(528,439)

(209,869)

(29,705)

Share-based compensation

6,260,341

11,109,792

232,558

32,916

Income tax expenses related to dividend distribution or retained profits

3,955,452

4,089,529

578,835

7,799,944

8,089,529

1,144,999

Changes in operating assets and liabilities:

Accounts receivable

(5,850,767)

(44,819,542)

(6,343,794)

(23,868,928)

(38,698,091)

(5,477,359)

Prepaid rent

5,586,585

790,730

711,581

9,922,250

1,404,403

Inventories

(280,089)

156,836

22,199

1,168,794

(237,377)

(33,599)

Amounts due from related parties

(25,151)

715,354

101,252

(21,551)

1,510,197

213,755

Other current assets

(7,010,607)

(5,488,452)

(776,840)

186,182

14,827,078

2,098,637

Other assets

(7,453,225)

(3,332,215)

(471,646)

(12,142,854)

(9,014,522)

(1,275,923)

Accounts payable

(2,228,556)

1,602,850

226,869

1,970,109

2,888,996

408,911

Amounts due to related parties

899,112

(30,278)

(4,286)

832,348

(2,048,301)

(289,918)

Salary and welfare payable

2,313,943

3,390,002

479,824

(5,049,650)

1,372,751

194,300

Deferred revenue

9,218,777

(8,125,238)

(1,150,053)

4,825,701

(39,043,755)

(5,526,285)

Advance from customers

(607,442)

(5,183,719)

(733,708)

(2,278,224)

(7,757,920)

(1,098,062)

Accrued expenses and other current liabilities

2,668,564

76,631,257

10,846,450

28,261,232

(28,104,147)

(3,977,884)

Income tax payable

(51,216,175)

(30,267,700)

(4,284,115)

(27,333,112)

(46,418,967)

(6,570,178)

Unrecognized tax benefits

22,867,582

(17,495,140)

(2,476,276)

28,914,333

(3,209,911)

(454,333)

Deferred rent

(1,558,697)

(910,363)

(128,854)

(1,851,268)

4,151,399

587,592

Other long-term liabilities

2,545,743

4,624,768

654,593

3,593,469

17,619,297

2,493,850

Deferred taxes

(272,719)

1,599,014

226,327

4,997,435

(12,368,615)

(1,750,664)

Net cash provided by (used in) operating activities

85,021,773

58,259,867

8,246,150

207,214,186

9,873,091

1,397,445

Investing activities:

Purchases of property and equipment

(4,451,361)

(18,550,705)

(2,625,682)

(13,511,310)

(41,628,937)

(5,892,194)

Purchases of intangible assets

(9,075)

(1,284)

(9,075)

(1,284)

Proceeds from disposal of property and equipment

1,000,000

11,125

1,575

1,300,000

11,125

1,575

Acquisitions, net of cash received

(234,660,607)

(1,255,807)

(177,748)

(244,660,607)

(1,255,807)

(177,748)

Advances for acquisitions

(47,866,700)

(47,866,700)

Repayment of advances for investments  

35,440,000

5,016,206

35,440,000

5,016,206

Purchases of short-term investments

(28,283,130)

(46,420,027)

(6,570,328)

(210,512,312)

(147,690,027)

(20,904,167)

Proceeds from short-term investments

40,774,393

3,567,419

504,935

756,830,368

398,634,105

56,422,995

Increase of long-term time deposits

(20,000,000)

(460,000,000)

(30,000,000)

(4,246,224)

Purchases of investments in equity securities

(22,060,000)

(24,036,351)

Purchases of long term investments

(249,464,401)

Proceeds from disposal of equity securities

36,617,830

145,221,744

Dividends received from investment in equity securities

2,540,418

359,573

2,540,418

359,573

Proceeds from disposal of equity method investments

6,380,000

903,030

6,380,000

903,030

Loan to related parties

(106,979,750)

(19,850,000)

(2,809,585)

(116,979,750)

(185,366,500)

(26,236,925)

Repayment from a related party

116,979,750

20,639,679

2,921,357

116,979,750

186,156,179

26,348,697

Loan to third parties

(135,835,219)

(1,200,000)

(169,849)

(151,775,219)

(3,200,000)

(452,931)

Repayment of loan from third parties

 

121,280,219

 

 

 

121,280,219

 

 

Loan to franchisees

(13,460,000)

(47,721,778)

(6,754,580)

(31,590,000)

(146,451,778)

(20,728,903)

Repayment from a franchisee

1,973,956

20,199,572

2,859,064

7,267,353

35,215,035

4,984,365

Net cash (used in) provided by investing activities

(294,970,619)

(46,229,179)

(6,543,316)

(401,517,216)

108,774,738

15,396,065

Financing activities:

Distribution to the shareholders

(208,025,814)

Proceeds from short-term borrowings

10,000,000

1,415,408

Capital contribution from non-controlling interest holders

2,978,387

421,563

10,390,000

3,378,387

478,180

Net cash (used in) provided by financing activities

2,978,387

421,563

(197,635,814)

13,378,387

1,893,588

Effect of exchange rate changes on cash and cash equivalents and restricted
cash

3,249,707

1,167,214

165,208

(8,440,253)

592,196

83,820

Net (decrease) increase in cash and cash equivalents and restricted
cash

(206,699,139)

16,176,289

2,289,605

(400,379,097)

132,618,412

18,770,918

Cash and cash equivalents and restricted cash at the beginning of the period

1,073,645,827

458,602,346

64,910,949

1,267,325,785

342,160,223

48,429,636

Cash and cash equivalents and restricted cash at the end of the period

866,946,688

474,778,635

67,200,554

866,946,688

474,778,635

67,200,554

GreenTree Hospitality Group Ltd.

Unaudited Reconciliation of GAAP and Non-GAAP Results

Quarter Ended

 Six Months Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

RMB

RMB

US$

Net income

127,100,635

93,720,619

13,265,293

261,058,654

79,585,597

11,264,610

Deduct:

Other operating income

1,639,842

1,762,982

249,534

8,546,295

19,093,913

2,702,568

Gains from investment in equity securities

15,902,581

42,534,583

6,020,379

75,837,051

42,534,583

6,020,379

Share of gain in equity investees, net of tax

553,487

78,341

948,331

134,228

Other income, net

1,860,961

2,690,742

Add:

Other operating expenses

65,350

41,123

5,820

107,974

1,198,272

169,604

Income tax expense

49,050,930

24,399,003

3,453,455

103,216,322

30,576,563

4,327,832

Share of loss in equity investees, net of tax

114,566

287,797

Interest expense

700,350

1,727,991

244,581

1,385,475

2,738,246

387,574

Share-based compensation

7,326,131

12,175,582

232,558

32,916

Depreciation and amortization

8,150,042

16,339,200

2,312,663

15,820,814

32,005,845

4,530,133

Losses from investment in equity securities

55,174,918

7,809,503

Adjusted EBITDA (Non-GAAP)

173,104,620

91,376,884

12,933,558

306,978,530

138,935,172

19,664,997

Quarter Ended

 Six Months Ended

 June 30, 2019

 June 30, 2020

 June 30, 2020

 June 30, 2019

 June 30, 2020

 June 30, 2020

RMB

RMB

US$

RMB

RMB

US$

Net income

127,100,635

93,720,619

13,265,293

261,058,654

79,585,597

11,264,610

Deduct:

Government subsidies (net of 25% tax)

233,981

779,513

110,332

5,048,981

13,212,085

1,870,049

Gains from investment in equity securities 
(net of 25% tax)

11,926,936

31,900,937

4,515,285

56,877,788

31,900,937

4,515,285

Other income  (net of 25% tax)

1,395,721

2,018,057

Add:

Share-based compensation

7,326,131

12,175,582

232,558

32,916

Losses from investments in equity securities

41,381,189

5,857,127

One-time provision of bad debt

9,501,082

1,344,791

9,501,082

1,344,791

Income tax expenses related to dividend
distribution

3,955,452

4,089,529

578,835

7,799,944

8,089,529

1,144,999

 Core net income(Non-GAAP)

124,825,580

74,630,780

10,563,302

217,089,354

93,676,933

13,259,109

Core net income per ADS (Non-GAAP)

Class A ordinary share-basic and diluted

1.23

0.72

0.10

2.11

0.91

0.13

Class B ordinary share-basic and diluted

1.23

0.72

0.10

2.11

0.91

0.13

Operational Data

As of June 30, 2019

As of June 30, 2020

 Total hotels in
operation:

2,955

4,066

 Leased-and-owned
hotels

30

35

 Franchised hotels

2,925

4,031

 Total hotel rooms in
operation

236,557

296,307

 Leased-and-owned
hotels

3,803

4,359

 Franchised hotels

232,754

291,948

 Number of cities

300

343

Quarter Ended

As of June 30, 2019

As of June 30, 2020

 Occupancy rate (as a
percentage)

 Leased-and-owned
hotels

70.5%

46.5%

 Franchised hotels

81.3%

63.7%

 Blended

81.1%

63.4%

 Average daily rate (in
RMB)

 Leased-and-owned
hotels

216

173

 Franchised hotels

171

142

 Blended

172

142

RevPAR (in RMB)

 Leased-and-owned
hotels

152

80

 Franchised hotels

139

90

 Blended

139

90

Number of Hotels in Operation

Number of Hotel Rooms in Operation

As of June 30, 2019

As of June 30, 2020

As of June 30, 2019

As of June 30, 2020

Luxury

19

21

4,017

4,388

Argyle

19

21

4,017

4,388

 Mid-to-up-scale

152

296

15,357

26,682

 GreenTree Eastern

96

118

10,200

12,509

 Deepsleep Hotel

1

2

62

161

 Gem

18

32

1,669

2,896

 Gya

11

28

918

2,348

 Vx

17

28

1,397

2,260

Ausotel

9

11

1,111

1,521

Urban Garden and others*

/

77

/

4,987

 Mid-scale

2,348

2,610

198,176

212,674

 GreenTree Inn

1,931

2,047

166,183

173,519

 GT Alliance

295

316

22,994

24,176

 GreenTree Apartment

3

10

180

488

Vatica                                    

119

124

8,819

9,026

City 118 Selected and others*

/

113

/

5,465

 Economy hotels

436

1,139

19,007

52,563

Shell

436

574

19,007

25,017

City 118 and others*

/

565

/

27,546

Total

2,955

4,066

236,557

296,307

* Others include other brands in each segment of Urban.

For more information, please contact:

GreenTree

Ms. Selina Yang
Phone: +86-21-3617-4886 ext. 7999
E-mail: ir@998.com

Mr. Nicky Zheng
Phone: +86-21-3617-4886 ext. 6708
E-mail: ir@998.com  

Christensen

In Shanghai
Ms. Constance Zhang
Phone: +86-138-1645-1798
E-mail: czhang@christensenIR.com

In Hong Kong 
Ms. Karen Hui 
Phone: +852-9266-4140 
E-mail: khui@christensenIR.com

In US 
Ms. Linda Bergkamp 
Phone: +1-480-614-3004
Email: lbergkamp@ChristensenIR.com

Cision View original content:http://www.prnewswire.com/news-releases/greentree-hospitality-group-ltd-reports-second-quarter-2020-financial-results-301112293.html

Source: GreenTree Hospitality Group Ltd.

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