华住集团有限公司呈报2018年第四季度及全年财务业绩

• Hotel turnover¹ for Huazhu hotels increased by 23% in 2018, driven by both hotel network expansion and RevPAR growth. The hotel network expanded by 13% to 4,230 hotels in operation as of December 31, 2018. The blended RevPAR grew by 10% in 2018.
• Net revenues increased 20.6% year-over-year to RMB2,683.3 million (US$390.3 million)² for the fourth quarter, and increased 22.3% to RMB10,063.4 million (US$1,463.7 million) for the full year of 2018, exceeded the high-end of revenue guidance previously announced of 18% to 22%.
• EBITDA (non-GAAP) for the fourth quarter of 2018 was negative RMB45.2 million (US$6.6 million), compared with RMB445.8 million for the fourth quarter of 2017. EBITDA (non-GAAP) for the full year of 2018 was RMB2,271.9 million (US$330.4 million), compared with RMB2,349.2 million for 2017.
• Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, the adjusted EBITDA (non-GAAP) for the fourth quarter increased 67.3% year-over-year to RMB737.4 million (US$107.3 million) and increased 37.3% to RMB3,268.9 million (US$475.4 million) for the full year of 2018.
• Net loss attributable to Huazhu Group Limited was RMB418.5 million (US$60.9 million) for the fourth quarter of 2018, compared with net income attributable to Huazhu Group Limited of RMB225.7 million in the fourth quarter of 2017 and RMB667.8 million in the previous quarter. Net income attributable to Huazhu Group Limited was RMB716.2 million (US$104.2 million) for the full year of 2018, compare with RMB1,228.3 million for the full year of 2017.
• Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, the adjusted net income for the fourth quarter of 2018 increased 64.9% year-over-year to RMB364.1 million (US$53.0 million) and the adjusted net income for the full year of 2018 increased 36.1% to RMB1,713.2 million (US$249.2 million).
• The Company provided guidance year-over-year net revenues growth of 13% to 15% for Q1 2019 and net revenues growth of 15% to 17% for the full year 2019.

SHANGHAI, China, March 14, 2019 (GLOBE NEWSWIRE) -- Huazhu Group Limited (NASDAQ: HTHT) (“Huazhu” or the “Company”), a leading and fast-growing multi-brand hotel group in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2018.

Fourth Quarter of 2018 Operational Highlights

• During the fourth quarter of 2018, Huazhu opened 214 hotels, including 9 leased (“leased-and-operated”) hotels and 205 manachised (“franchised-and-managed”) hotels and franchised hotels.
   
• The Company closed a total of 39 hotels, which included 8 leased hotels and 31 manachised and franchised hotels, during the fourth quarter of 2018. This was mainly due to:
  
  a)  The Company's strategic focus to upgrade the quality of the product and service. The Company closed 15 hotels for brand upgrade purposes and permanently removed 10 hotels from its network for their non-compliance with the brand and operating standards. These hotels were mainly under HanTing and Elan brands. By removing hotels of lower quality, the Company is able to provide a more consistent customer experience, which will help enhance both the brands and future profitability.
  
  b)  Property related issues, including rezoning and returning of military-owned properties, and expiry of leases, which resulted in the closure of 9 hotels.
  
  c)  Operating losses from hotels located mainly in selected 3^rd or lower tier cities which resulted in the closure of 5 hotels.
   
• The ADR, which is defined as the average daily rate for all hotels in operation, was RMB230 in the fourth quarter of 2018, compared with RMB211 in the fourth quarter of 2017 and RMB239 in the previous quarter. The year-over-year increase of 9.2% was due to both an increase in ADR of the mature hotels, as well as an increase in the proportion of mid- and up-scale hotels with higher ADR in the Company’s brand mix. The sequential decrease resulted mainly from seasonality.
   
• The occupancy rate for all hotels in operation was 85.2% in the fourth quarter of 2018, compared with 86.0% in the fourth quarter of 2017 and 90.7% in the previous quarter. The year-over-year decrease of 0.9 percentage point was due to the soft macro economy and a dilutive impact from newly-opened hotels. The sequential decrease resulted mainly from seasonality.
   
• Blended RevPAR, defined as revenue per available room for all hotels in operation, was RMB196 in the fourth quarter of 2018, compared with RMB181 in the fourth quarter of 2017 and RMB217 in the previous quarter. The year-over-year increase of 8.1% was attributable to higher ADR. The sequential decrease resulted mainly from seasonality.
   
• For all hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB189 for the fourth quarter of 2018, representing a 3.9% increase from RMB182 for the fourth quarter of 2017, with a 4.9% increase in ADR and a 0.8-percentage-point decrease in occupancy rate. The economy hotels registered a 4.1% same-hotel RevPAR improvement. The midscale and upscale hotels registered a 3.7% same-hotel RevPAR improvement.

Operational Highlights of full year 2018

• For the full year of 2018, the company opened 53 leased hotels and 670 manachised hotels and franchised hotels, and closed 25 leased hotels and 214 manachised and franchised hotels. As of December 31, 2018, the Company had 699 leased hotels, 3,309 manachised hotels, and 222 franchised hotels in operation in 403 cities.  The number of hotel rooms in operation totaled 422,747, an increase of 11.3% from a year ago.
   
• As of December 31, 2018, the Company had a total number of 1,105 hotels contracted or under construction, including 42 leased hotels and 1,063 manachised and franchised hotels. The pipeline represented 26.1% of the number of hotels in operation as end of 2018.
   
• For the full year of 2018, the ADR for all hotels in operation was RMB226, increasing 11.2% year-over-year from RMB203 in 2017. The occupancy rate for all hotels in operation was 87.3%, compared with 88.3% in 2017. As a result, the blended RevPAR for all hotels in operation was RMB197 in 2018, a 10.0% increase from RMB180 in 2017.
   
• The same-hotel RevPAR was RMB189 in 2018, a 5.5% increase from RMB179 in 2017, with a 6.3% increase in ADR and a 0.6-percentage-point decrease in occupancy rate. In 2018, the economy hotels and the midscale and upscale hotels posted an increase of 5.6% and 5.2% in same-hotel RevPAR, respectively.
   
• As of December 31, 2018, the Company’s loyalty program had approximately 122 million members, who contributed approximately 76% of room nights sold during the full year of 2018 and approximately 86% of room nights were sold through the Company’s own direct channels.

“We are pleased to announce that Huazhu delivered a strong set of results in 2018. Our hotel turnover increased by 23% in 2018, thanks to a 13% growth in hotel network and a 10% increase in blended RevPAR. At the end of 2018, our hotel pipeline was at a record high of 1,105 hotels, or 26% of hotels in operation. Therefore, we expect our hotel network expansion to further accelerate in 2019. Our hotel network expansion will be primarily driven by midscale hotel openings,” commented Ms. Jenny Zhang, Chief Executive Officer of Huazhu Group.

“We are also pleased to see the remarkable growth for our midscale brands at their respective development stage. JI, our flagship midscale brand, is expected to reach 1,000 hotels by 2020 supported by its operational excellence and strong pipeline. The other younger brands also see significant increase in their hotel pipelines and, and thus are poised to take off. Furthermore, our innovation in upscale segment is well on track. After we acquired Blossom Hill in 2018, we have been working on bringing this upscale lifestyle and resort brand from the typical remote scenic spots to higher tier cities. This year, we will open two new urban Blossom Hill hotels in Shanghai and Beijing. The Beijing Blossom Hill Hotel is a conversion from our VUE hotel located at Beijing Hou Hai,” Jenny added. “Looking into 2019, we will continue to focus on fast and quality expansion, hotel technology to further improve guest experiences and operating efficiencies, and innovation for our upscale brands. We remain optimistic about long-term growth prospects for the lodging market in China. Huazhu is well positioned to deliver high return to franchisees and shareholders.”

Fourth Quarter and Full Yearof 2018 Financial Results
Since the first quarter of 2018, the Company adopted new revenue recognition standards and all prior year numbers are restated using the new standards. Please see the “Adoption of New Revenue Recognition Accounting Standards” section of this release for more information.

(RMB in thousands)	Q4 2017	Q3 2018	Q4 2018	2017FY	2018FY
Revenues:
Leased and owned hotels	1,716,259	2,052,581	1,942,225	6,338,119	7,470,490
Manachised and franchised hotels	495,851	699,223	702,999	1,850,525	2,526,990
Others	13,032	15,757	38,071	40,257	65,880
Net revenues	2,225,142	2,767,561	2,683,295	8,228,901	10,063,360

Net revenues for the fourth quarter of 2018 were RMB2,683.3 million (US$390.3 million), representing a 20.6% year-over-year increase and a 3.0% sequential decrease. The year-over-year increase was primarily attributable to our hotel network expansion and RevPAR growth, the sequential decrease was due to seasonality.

Net revenues for the full year of 2018 were RMB10,063.4 million (US$1,463.7 million), representing an increase of 22.3% from the full year of 2017.

Net revenues from leased and owned hotels for the fourth quarter of 2018 were RMB1,942.2 million (US$282.5 million), representing a 13.2% year-over-year increase and a 5.4% sequential decrease.

For the full year of 2018, net revenues from leased and owned hotels were RMB7,470.5 million (US$1,086.5 million), representing a 17.9% year-over-year increase.

Net revenues from manachised and franchised hotels for the fourth quarter of 2018 were RMB703.0 million (US$102.2 million), representing a 41.8% year-over-year increase and a 0.5% sequential increase.

For the full year of 2018, net revenues from manachised and franchised hotels were RMB2,527.0 million (US$367.5 million), representing a 36.6% year-over-year increase. It accounts for 25.1% of net revenues, compared to 22.5% of net revenues for the full year of 2017.

Other revenues represent revenues generated from businesses other than the hotel operation, which mainly include revenues from the provision of IT products and services to hotels and from Huazhu mall, totaling RMB38.1 million (US$5.5 million) in the fourth quarter of 2018, compared to RMB13.0 million in the fourth quarter of 2017 and RMB15.8 million in the previous quarter.

For the full year of 2018, other revenues were RMB65.9 million (US$9.6 million), compared to RMB40.3 million in 2017.

(RMB in thousands)	Q4 2017	Q3 2018	Q4 2018	2017FY	2018FY
Operating costs and expenses:
Hotel operating costs	1,623,449	1,657,803	1,737,390	5,674,780	6,476,327
Other operating costs	6,836	1,685	7,896	17,324	14,560
Selling and marketing expenses	98,464	91,322	107,841	284,900	348,080
General and administrative expenses	236,213	233,353	269,285	690,970	850,904
Pre-opening expenses	71,575	59,894	53,853	206,454	254,629
Total operating costs and expenses	2,036,537	2,044,057	2,176,265	6,874,428	7,944,500

Hotel operating costs for the fourth quarter of 2018 were RMB1,737.4 million (US$252.7 million), compared to RMB1,623.4 million in the fourth quarter of 2017 and RMB1,657.8 million in the previous quarter, representing a 7.0% year-over-year increase and a 4.8% sequential increase. Total hotel operating costs excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2018 were RMB1,728.8 million (US$251.4 million), representing 64.4% of net revenues, compared to 72.7% for the fourth quarter in 2017 and 59.7% for the previous quarter. The year-over-year decrease in the percentage was mainly attributable to the improved blended RevPAR and the increased portion of manachised-and-franchised hotels. The sequential increase in the percentage was mainly due to seasonality.

For the full year of 2018, hotel operating costs were RMB6,476.3 million (US$941.9 million), compared to RMB5,674.8 million in 2017. Excluding share-based compensation, hotel operating costs (non-GAAP) were RMB6,449.2 million (US$938.0 million), representing 64.1% of net revenues, compared to 68.8% in 2017.

Selling and marketing expenses for the fourth quarter of 2018 were RMB107.8 million (US$15.7 million), compared to RMB98.5 million in the fourth quarter of 2017 and RMB91.3 million in the previous quarter. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2018 were RMB107.2 million (US$15.6 million), or 4.0% of net revenues, compared to 4.4% for the fourth quarter of 2017 and 3.3% for the previous quarter. The year-over-year decrease were mainly attributable to timing of certain brand building and marketing activities that occurred in earlier quarters in 2018 compared to 2017.

For the full year of 2018, selling and marketing expenses were RMB348.1 million (US$50.6 million), compared to RMB284.9 million in 2017. Selling and marketing expenses excluding share-based compensation expenses (non-GAAP) were RMB345.5 million (US$50.3 million), representing 3.5% of net revenues, both in 2018 and 2017.

General and administrative expenses for the fourth quarter of 2018 were RMB269.3 million (US$39.2 million), compared to RMB236.2 million in the fourth quarter of 2017 and RMB233.4 million in the previous quarter. General and administrative expenses excluding share-based compensation expenses (non-GAAP) for the fourth quarter of 2018 were RMB251.8 million (US$36.6 million), representing 9.3% of net revenues, compared with 10.0% of net revenues in the fourth quarter of 2017 and 7.9% in the previous quarter. The year-over-year decrease in the percentage was mainly due to the amount of RMB32.7 million for long-term profit-sharing bonus for full year 2017 was accrued in the fourth quarter of 2017 when we established the plan, while the amount for the year of 2018 was accrued in each quarter. The long-term profit-sharing bonus accrued in the fourth quarter of 2018 was approximately RMB19.0 million.

For the full year of 2018, general and administrative expenses were RMB850.9 million (US$123.8 million), compared to RMB691.0 million in 2017. General and administrative expenses excluding share-based compensation expenses (non-GAAP) were RMB797.7 million (US$116.0 million), representing 8.0% of net revenues, compared to 7.9% in 2017.

Pre-opening expenses for the fourth quarter of 2018 were RMB53.9 million (US$7.8 million), representing a 24.8% year-over-year decrease and a 10.1% sequential decrease.

Pre-opening expenses for the full year of 2018 were RMB254.6 million (US$37.0 million), compared to RMB206.5 million in 2017, representing a year-over-year increase of 23.3%. The increase in pre-opening expenses was mainly attributable to more leased mid-and-upscale hotels opened or under construction in 2018 than in 2017. The pre-opening expenses as a percentage of net revenues was 2.5% in both 2018 and 2017.

Other operating income, net for the fourth quarter of 2018 were RMB85.0 million (US$12.4 million) mainly related to subsidy income and gains related to compensation from the landlords on termination of certain leased hotels, compared to RMB42.6 million in the fourth quarter of 2017 and RMB51.3 million in the previous quarter.

Other operating income, net for the full year of 2018 were RMB225.6 million (US$32.8 million), compared to RMB71.2 million in 2017. Other operating income, net in 2018 mainly comprised of subsidy income of RMB105.8 million, compensations received or reversal of losses related to termination of certain lease hotels of RMB92.6 million, as well as the compensation of RMB35.0 million received from the selling shareholders of Crystal Orange as the final settlement of the sales and purchase transaction. The subsidy income recorded in 2018 included approximately RMB16 million of subsidy that were related to 2017.

Income from operations for the fourth quarter of 2018 was RMB592.0 million (US$86.1 million), compared to RMB231.2 million in the fourth quarter of 2017 and RMB774.8 million in the previous quarter. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the fourth quarter of 2018 was RMB618.8 million (US$90.0 million), compared to RMB250.4 million for the fourth quarter of 2017 and RMB795.2 million for the previous quarter. The adjusted operating margin, defined as adjusted income from operations (non-GAAP) as percentage of net revenues, for the fourth quarter of 2018 was 23.1%, compared with 11.3% in the fourth quarter of 2017 and 28.7% in the previous quarter. The year-over-year improved operating margin was mainly due to our improved blended RevPAR, asset-light strategy and decreased impairment loss in the fourth quarter of 2018.

Income from operations for the full year of 2018 was RMB2,344.4 million (US$341.0 million), compared to RMB1,425.6 million in 2017. Excluding share-based compensation expenses, adjusted income from operations (non-GAAP) for the full year of 2018 was RMB2,427.3 million (US$353.0 million), compared to RMB1,492.0 million for the full year of 2017. The adjusted operating margin (non-GAAP) for the year of 2018 was 24.1%, compared with 18.0% for the full year of 2017. The improvement of the adjusted operating margin was mainly attributable to the higher blended RevPAR and the increased portion of manachised-and-franchised hotels in 2018.

Other income, net for the fourth quarter of 2018 was RMB0.7 million (US$0.1 million), compared to other expense, net of RMB12.9 million for the fourth quarter of 2017 and other income, net of RMB16.3 million for the previous quarter.

Other income, net for the full year of 2018 was RMB203.1 million (US$29.5 million), compared to RMB128.1 million in 2017. The increase was mainly due to gross dividends received from AccorHotels of RMB103.8 million in the second quarter of 2018.

Unrealized losses from fair value changes of equity securities for the fourth quarter of 2018 was RMB755.9 million (US$109.9 million), compared to unrealized gains from fair value changes of equity securities of RMB24.1 million in the fourth quarter of 2017 and unrealized gains from fair value changes of equity securities of RMB179.2 million in the previous quarter.

For the full year of 2018, unrealized losses from fair value changes of equity securities was RMB914.1 million (US$133.0 million), compared to unrealized gains from fair value changes of equity securities of RMB35.5 million in 2017. Unrealized gains (losses) from fair value changes of equity securities mainly represents the unrealized gains (losses) from our investment in equity securities with readily determinable fair values, such as AccorHotels.

Income tax expense for the fourth quarter of 2018 was RMB106.1 million (US$15.4 million), compared to RMB17.7 million in the same period of 2017 and RMB254.8 million in the previous quarter. For the full year of 2018, income tax expense was RMB568.9 million (US$82.8 million), compared to RMB357.0 million in 2017. The change in our effective tax rate primarily reflected certain non-taxable loss of the fair value changes in equity securities investments.

Net loss attributable to Huazhu Group Limitedfor the fourth quarter of 2018 was RMB418.5 million (US$60.9 million), compared to net income attributable to Huazhu Group Limited of RMB225.7 million in the fourth quarter of 2017 and RMB667.8 million in the previous quarter. Excluding share-based compensation expenses and the unrealized gains (losses) from fair value changes of equity securities, adjusted net income attributable to Huazhu Group Limited (non-GAAP) for the fourth quarter of 2018 was RMB364.1 million (US$53.0 million), representing a 64.9% year-over-year increase and a 28.5% sequential decrease.

Net income attributable to Huazhu Group Limited for the full year of 2018 was RMB716.2 million (US$104.2 million), compared to RMB1,228.3 million in 2017. Excluding share-based compensation expenses and the unrealized gains (losses) from fair value changes of equity securities, adjusted net income attributable to Huazhu Group Limited (non-GAAP) for the full year of 2018 was RMB1,713.2 million (US$249.2 million), compared to RMB1,259.1 million in 2017. The increase of 36.1% was mainly attributable to the expanded hotel network, improved blended RevPAR and the proportion of manachised and franchised hotels.

Basic and diluted earnings per share/ADS. For the fourth quarter of 2018, basic and diluted losses per share were RMB1.48(US$0.22). For the fourth quarter of 2018, excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted basic earnings per share (non-GAAP) were RMB1.29(US$0.19) and adjusted diluted earnings per share (non-GAAP) were RMB1.23(US$0.17).

For the full year of 2018, basic earnings per share were RMB2.54(US$0.37) and diluted earnings per share were RMB2.49(US$0.36). For the full year of 2018, excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted basic earnings per share (non-GAAP) were RMB6.08(US$0.88), while adjusted diluted earnings per share (non-GAAP) were RMB5.77(US$0.84).

EBITDA (non-GAAP) for the fourth quarter of 2018 was negative RMB45.2 million (US$6.6 million), compared with EBITDA (non-GAAP) of RMB445.8 million in the fourth quarter of 2017 and RMB1,165.6 million in the previous quarter. Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted EBITDA (non-GAAP) for the fourth quarter of 2018 was RMB737.4 million (US$107.3 million), compared with RMB440.9 million for the fourth quarter of 2017 and RMB1,006.8 million for the previous quarter.

EBITDA (non-GAAP) for the full year of 2018 was RMB2,271.9 million (US$330.4 million), compared to RMB2,349.2 million in 2017. Excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, adjusted EBITDA (non-GAAP) for the full year of 2018 was RMB3,268.9 million (US$475.4 million), compared with RMB2,380.0 million in 2017, representing a 37.3% year-over-year increase. The year-over-year increase was mainly due to the expansion of the Company’s hotel network, the improved RevPAR and the proportion of manachised and franchised hotels. The adjusted EBITDA margin (non-GAAP) for the year of 2018 was 32.5%, compared with 28.9% for the full year of 2017.

Cash flow. Operating cash inflow for the fourth quarter of 2018 was RMB574.3 million (US$83.5 million). Investing cash outflow for the fourth quarter was RMB733.2 million (US$106.6 million).

Operating cash inflow for the full year of 2018 was RMB3,048.6 million (US$443.4 million), representing an increase of 24.3% from 2017. Investing cash outflow for the full year of 2018 was RMB6,345.3 million (US$922.9 million), compared to RMB6,235.4 million in 2017.

Cash and cash equivalents and Restricted cash. As of December 31, 2018, the Company had a total balance of cash and cash equivalents, restricted cash of RMB4,884.3 million (US$710.4 million).

Debt financing. As of December 31, 2018, the Company had a total loan balance of RMB9,759.3 million (US$1,419.4 million) and the unutilized credit facility available to the Company was RMB689.4 million.

Adoption of New Revenue Recognition Accounting Standards
The Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) on January 1, 2018 on a full retrospective basis in the condensed consolidated financial statements. As such, prior period results have been adjusted to reflect the adoption of ASU 2014-09.

The most meaningful impacts of the adoption of ASU 2014-09 are as follows:

Under previous guidance, initial one-time franchise fee was recognized when the hotels opened for business and the Company had fulfilled its commitments and obligations. Upon adoption of new revenue standards, the one-time franchise fee will be recognized over the term of the franchise contract.

Under previous guidance, the Company adopted the incremental cost model to account for customer loyalty program. The estimated incremental costs, net of the reimbursement received from the franchisees, are accrued and recorded as accruals for customer loyalty program as members accumulate points and are recognized as cost and expense in the accompanying consolidated statements of comprehensive income. Under new revenue standards, loyalty program is considered a separate performance obligation and the consideration allocated to the loyalty program will be recognized as revenue upon point redemption, net of any cost paid to the franchisees and other third parties.

Guidance
In the first quarter of 2019, the Company expects net revenues to grow 13% to 15% year-over-year. For the full year 2019, the Company expects net revenues to grow 15% to 17% from 2018.

The Company anticipates the gross opening of 800-900 hotels in 2019, about 75% of which are midscale and upscale hotels.

The above forecast reflects the Company’s current and preliminary view, which is subject to change.

Conference Call
Huazhu’s management will host a conference call at 9 p.m. ET, Thursday, March 14, 2019 (or 9 a.m. on Friday, March 15, 2019 in the Shanghai/Hong Kong time zone) following the announcement. To participate in the event by telephone, please dial +1 (845) 675 0438 (for callers in the US), +86 400 120 0654 (for callers in China Mainland), +852 3018 6776 (for callers in Hong Kong) or +65 6713 5440 (for callers outside of the US, China Mainland, and Hong Kong) and enter pass code 9697413.  Please dial in approximately 10 minutes before the scheduled time of the call.

A recording of the conference call will be available after the conclusion of the conference call through March 22, 2019. Please dial +1 (855) 452 5696 (for callers in the US) or +61 2 9003 4211 (for callers outside the US) and entering pass code 9697413.

The conference call will also be webcast live over the Internet and can be accessed by all interested parties at the Company’s Web site, http://ir.huazhu.com .

Use of Non-GAAP Financial Measures
To supplement the Company’s unaudited consolidated financial results presented in accordance with U.S. GAAP, the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the SEC: hotel operating costs excluding share-based compensation expenses; general and administrative expenses excluding share-based compensation expenses; selling and marketing expenses excluding share-based compensation expenses; adjusted income from operations excluding share-based compensation expenses; adjusted net income attributable to Huazhu Group Limited excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities; adjusted basic and diluted earnings per share/ADS excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities; EBITDA; and adjusted EBITDA excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of GAAP and non-GAAP results” set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities is that share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities have been and will continue to be significant and recurring in the Company’s business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company’s cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The Company also uses adjusted EBITDA, which is defined as EBITDA before share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities, to assess operating results of the hotels in operation. The Company believes that the exclusion of share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities helps facilitate year-on-year comparison of the results of operations as the share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities may not be indicative of Company operating performance.

The Company believes that unrealized gains and losses from changes in fair value of equity securities are generally meaningless in understanding our reported results or evaluating our economic performance of our businesses. These gains and losses have caused and will continue to cause significant volatility in periodic earnings.

Therefore, the Company believes adjusted EBITDA more closely reflects the performance capability of hotels. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company’s future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.

The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets (including land use rights), income tax, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Share-based compensation expenses and unrealized gains (losses) from fair value changes of equity securities have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the results. The Company compensates for these limitations by providing the relevant disclosure of the depreciation and amortization, interest income, interest expense, income tax expense, share-based compensation expenses, and unrealized gains (losses) from fair value changes of equity securities and other relevant items both in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance of the Company.

The terms EBITDA and adjusted EBITDA are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA is a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing the operating and financial performance, investors should not consider these data in isolation or as a substitute for the Company’s net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company’s EBITDA or adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA or adjusted EBITDA in the same manner as the Company does.

Reconciliations of the Company’s non-GAAP financial measures, including EBITDA and adjusted EBITDA, to the consolidated statement of operations information are included at the end of this press release.

About Huazhu Group Limited
Huazhu Group Limited is a leading hotel operator and franchisor in China. As of December 31, 2018, the Company had 4,230 hotels or 422,747 rooms in operation. With a primary focus on economy and midscale hotel segments, Huazhu’s brands include Hi Inn, Elan Hotel, HanTing Hotel, HanTing Premium Hotel, JI Hotel, Starway Hotel, Manxin Hotel, Joya Hotel, Crystal Orange Hotel, Orange Hotel Select, Orange Hotel and Blossom Hill. The Company also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in Pan-China region.

The Company's business includes leased and owned, manachised and franchised models. Under the lease and ownership model, the Company directly operates hotels typically located on leased or owned properties. Under the manachise model, the Company manages manachised hotels through the on-site hotel managers it appoints and collects fees from franchisees. Under the franchise model, the Company provides training, reservation and support services to the franchised hotels and collects fees from franchisees but does not appoint on-site hotel managers. The Company applies a consistent standard and platform across all of its hotels. As of December 31, 2018, Huazhu Group operates 21 percent of its hotel rooms under lease and ownership model, 79 percent under manachise and franchise models.

For more information, please visit the Company’s website: http://ir.huazhu.com.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties, including statements regarding the Company’s capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as “may,” “should,” “will,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “forecast,” “project,” or “continue,” the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results. Any or all of the Company’s forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, readers should consider various factors, including the anticipated growth strategies of the Company, the future results of operations and financial condition of the Company, the economic conditions of China, the regulatory environment in China, the Company’s ability to attract customers and leverage its brands, trends and competition in the lodging industry, the expected growth of the lodging market in China and other factors and risks outlined in the Company’s filings with the Securities and Exchange Commission, including its annual report on Form 20-F and other filings. These factors may cause the Company’s actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for the Company to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. Any projections in this release are based on limited information currently available to the Company, which is subject to change. This release also contains statements or projections that are based upon information available to the public, as well as other information from sources which the Company believes to be reliable, but it is not guaranteed by the Company to be accurate, nor does the Company purport it to be complete. The Company disclaims any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this document, except as required by applicable law.

---Financial Tables and Operational Data Follow—

Huazhu Group Limited
Unaudited Condensed Consolidated Balance Sheets
	December 31, 2017			December 31, 2018
	RMB			RMB			US$
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	3,474,719			4,262,010			619,884
Restricted cash	481,348			622,308			90,511
Short-term investments	129,911			89,010			12,946
Accounts receivable, net	162,910			194,417			28,277
Loan receivables	380,580			93,957			13,665
Amounts due from related parties	118,537			176,235			25,632
Prepaid rent	659,973			955,000			138,899
Inventories	24,006			40,651			5,912
Other current assets	329,140			539,928			78,530
Total current assets	5,761,124			6,973,516			1,014,256
Property and equipment, net	4,522,878			5,017,790			729,807
Intangible assets, net	1,643,972			1,834,235			266,778
Land use rights	140,108			220,099			32,012
Long-term investments	2,361,969			6,152,140			894,792
Goodwill	2,264,758			2,629,611			382,461
Loan receivables	42,330			188,673			27,441
Other assets	364,660			471,630			68,597
Deferred tax assets	405,975			504,814			73,422
Total assets	17,507,774			23,992,508			3,489,566
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	130,815			947,810			137,853
Accounts payable	766,565			890,486			129,516
Amounts due to related parties	36,890			75,252			10,945
Salary and welfare payables	427,070			520,829			75,751
Deferred revenue	942,651			1,004,747			146,134
Accrued expenses and other current liabilities	1,249,032			1,606,673			233,682
Dividends payable	-			658,007			95,703
Income tax payable	218,238			265,546			38,622
Total current liabilities	3,771,261			5,969,350			868,206
Long-term debt	4,921,774			8,811,511			1,281,581
Deferred rent	1,380,484			1,507,303			219,228
Deferred revenue	398,303			458,280			66,654
Other long-term liabilities	380,578			452,420			65,802
Deferred tax liabilities	422,090			474,641			69,034
Total liabilities	11,274,490			17,673,505			2,570,505
Equity:
Ordinary shares	212			214			31
Treasury shares	(107,331	)		(107,331	)		(15,611	)
Additional paid-in capital	3,624,135			3,712,988			540,032
Retained earnings	2,512,719			2,610,200			379,638
Accumulated other comprehensive income (loss)	167,965			(41,634	)		(6,055	)
Total Huazhu Group Limited shareholders' equity	6,197,700			6,174,437			898,035
Noncontrolling interest	35,584			144,566			21,026
Total equity	6,233,284			6,319,003			919,061
Total liabilities and equity	17,507,774			23,992,508			3,489,566

 

 

Huazhu Group Limited
Unaudited Condensed Consolidated Statements of Comprehensive Income
	Quarter Ended												Year Ended
	December 31, 2017			September 30, 2018			December 31, 2018						December 31, 2017			December 31, 2018
	RMB			RMB			RMB			US$			RMB			RMB			US$
	(in thousands, except per share and per ADS data)
Revenues:
Leased and owned hotels	1,716,259			2,052,581			1,942,225			282,485			6,338,119			7,470,490			1,086,538
Manachised and franchised hotels	495,851			699,223			702,999			102,247			1,850,525			2,526,990			367,535
Others	13,032			15,757			38,071			5,537			40,257			65,880			9,582
Net revenues	2,225,142			2,767,561			2,683,295			390,269			8,228,901			10,063,360			1,463,655
Operating costs and expenses:
Hotel operating costs:
Rents	(560,178	)		(594,593	)		(661,698	)		(96,240	)		(2,058,954	)		(2,405,946	)		(349,930	)
Utilities	(89,418	)		(110,019	)		(87,588	)		(12,739	)		(365,507	)		(399,404	)		(58,091	)
Personnel costs	(412,990	)		(428,924	)		(436,205	)		(63,443	)		(1,388,355	)		(1,662,638	)		(241,821	)
Depreciation and amortization	(204,147	)		(215,942	)		(222,954	)		(32,427	)		(773,202	)		(869,129	)		(126,410	)
Consumables, food and beverage	(154,454	)		(179,414	)		(178,894	)		(26,019	)		(550,664	)		(672,632	)		(97,830	)
Others	(202,262	)		(128,911	)		(150,051	)		(21,824	)		(538,098	)		(466,578	)		(67,861	)
Total hotel operating costs	(1,623,449	)		(1,657,803	)		(1,737,390	)		(252,692	)		(5,674,780	)		(6,476,327	)		(941,943	)
Other operating costs	(6,836	)		(1,685	)		(7,896	)		(1,148	)		(17,324	)		(14,560	)		(2,118	)
Selling and marketing expenses	(98,464	)		(91,322	)		(107,841	)		(15,685	)		(284,900	)		(348,080	)		(50,626	)
General and administrative expenses	(236,213	)		(233,353	)		(269,285	)		(39,167	)		(690,970	)		(850,904	)		(123,759	)
Pre-opening expenses	(71,575	)		(59,894	)		(53,853	)		(7,833	)		(206,454	)		(254,629	)		(37,034	)
Total operating costs and expenses	(2,036,537	)		(2,044,057	)		(2,176,265	)		(316,525	)		(6,874,428	)		(7,944,500	)		(1,155,480	)
Other operating income (expense), net	42,563			51,268			84,997			12,363			71,175			225,562			32,807
Income from operations	231,168			774,772			592,027			86,107			1,425,648			2,344,422			340,982
Interest income	40,713			41,870			32,449			4,719			112,645			147,511			21,455
Interest expense	(34,295	)		(63,306	)		(70,210	)		(10,212	)		(87,320	)		(243,801	)		(35,459	)
Other (expense) income, net	(12,939	)		16,286			665			97			128,138			203,105			29,540
Unrealized gains (losses) from fair value changes of equity securities	24,134			179,229			(755,916	)		(109,943	)		35,540			(914,129	)		(132,955	)
Foreign exchange (loss) gain	(2,341	)		(433	)		(41,908	)		(6,095	)		(18,128	)		(143,975	)		(20,940	)
Income (Loss) before income taxes	246,440			948,418			(242,893	)		(35,327	)		1,596,523			1,393,133			202,623
Income tax expense	(17,747	)		(254,843	)		(106,059	)		(15,426	)		(356,992	)		(568,942	)		(82,750	)
(Loss) from equity method investments	(2,871	)		(18,432	)		(64,146	)		(9,330	)		(11,783	)		(96,801	)		(14,079	)
Net income (loss)	225,822			675,143			(413,098	)		(60,083	)		1,227,748			727,390			105,794
Net (income) loss attributable to noncontrolling interest	(116	)		(7,391	)		(5,443	)		(791	)		555			(11,229	)		(1,633	)
Net income (loss) attributable to Huazhu Group Limited	225,706			667,752			(418,541	)		(60,874	)		1,228,303			716,161			104,161
Other comprehensive income
Unrealized securities holding gains, net of tax	11,400			-			-			-			868			-			-
Reclassification of gains realized to net income, net of tax	-			-			-			-			(5,282	)		-			-
Foreign currency translation adjustments, net of tax	58,502			(147,736	)		20,349			2,960			176,882			(168,958	)		(24,574	)
Comprehensive income (loss)	295,724			527,407			(392,749	)		(57,123	)		1,400,216			558,432			81,220
Comprehensive (income) loss attributable to noncontrolling interest	(116	)		(7,391	)		(5,443	)		(791	)		555			(11,229	)		(1,633	)
Comprehensive income (loss) attributable to Huazhu Group Limited	295,608			520,016			(398,192	)		(57,914	)		1,400,771			547,203			79,587
Earnings (Losses) per share/ADS1:
Basic	0.81			2.37			(1.48	)		(0.22	)		4.40			2.54			0.37
Diluted	0.77			2.23			(1.48	)		(0.22	)		4.21			2.49			0.36
Weighted average number of shares used in computation:
Basic	279,861			282,149			282,500			282,500			279,272			281,717			281,717
Diluted	298,903			303,605			282,500			282,500			293,074			303,606			303,606

 

Huazhu Group Limited
Unaudited Condensed Consolidated Statements of Cash Flows
	Quarter Ended												Year Ended
	December 31, 2017			September 30, 2018			December 31, 2018						December 31, 2017			December 31, 2018
	RMB			RMB			RMB			US$			RMB			RMB			US$
	(in thousands)
Operating activities:
Net income (loss)	225,822			675,143			(413,098	)		(60,083	)		1,227,748			727,390			105,794
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation	19,245			20,397			26,746			3,890			66,367			82,902			12,058
Depreciation and amortization	208,756			221,552			229,486			33,377			789,252			890,524			129,521
Amortization of issuance cost of convertible senior notes	2,598			6,852			6,962			1,013			2,598			28,226			4,105
Deferred taxes	(82,338	)		4,332			(97,461	)		(14,175	)		(79,203	)		(90,887	)		(13,219	)
Bad debt expenses	1,434			788			8,356			1,215			2,446			10,426			1,516
Deferred rent	103,688			(5,959	)		93,160			13,550			209,074			140,264			20,401
Loss (Gain) from disposal of property and equipment	(2,795	)		7,933			(1,554	)		(226	)		12,884			157			23
Impairment loss	92,480			10,818			24,269			3,530			169,213			35,087			5,103
Loss from equity method investments, net of dividends	2,871			18,432			124,102			18,050			11,783			156,756			22,799
Investment (income) loss	(44,403	)		(192,796	)		797,824			116,040			(159,974	)		1,009,394			146,810
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable	10,735			21,849			(8,803	)		(1,280	)		4,207			(36,281	)		(5,277	)
Prepaid rent	(131,592	)		2,777			(383,928	)		(55,840	)		(188,653	)		(283,227	)		(41,194	)
Inventories	3,684			(6,697	)		(1,514	)		(220	)		2,766			(14,371	)		(2,090	)
Amounts due from related parties	(23,967	)		(21,927	)		(10,143	)		(1,475	)		(31,151	)		(31,678	)		(4,607	)
Other current assets	(56,720	)		(34,568	)		(1,283	)		(187	)		(76,320	)		(56,282	)		(8,186	)
Other assets	4,691			3,375			(37,620	)		(5,472	)		(54,411	)		(32,145	)		(4,675	)
Accounts payable	35,417			(14,372	)		27,816			4,046			8,141			10,748			1,563
Amounts due to related parties	4,234			(5,051	)		25,495			3,708			3,093			38,361			5,579
Salary and welfare payables	223,455			(19,666	)		192,123			27,943			133,142			90,510			13,164
Deferred revenue	23,014			53,559			(33,984	)		(4,943	)		26,178			113,719			16,540
Accrued expenses and other current liabilities	(44,280	)		38,876			(52,189	)		(7,592	)		277,888			139,759			20,328
Income tax payable	(39,224	)		114,238			25,678			3,735			44,688			47,755			6,946
Other long-term liabilities	17,386			14,220			33,833			4,921			50,840			71,481			10,397
Net cash provided by operating activities	554,191			914,105			574,273			83,525			2,452,596			3,048,588			443,399
Investing activities:
Purchases of property and equipment	(267,332	)		(271,615	)		(312,129	)		(45,397	)		(819,523	)		(1,115,276	)		(162,210	)
Purchases of intangibles	(4,079	)		(2,020	)		(326	)		(47	)		(7,854	)		(3,787	)		(551	)
Purchases of land use rights	-			(75,850	)		-			-			-			(75,850	)		(11,032	)
Amount received as a result of government zoning	2,593			-			-			-			2,593			7,188			1,045
Acquisitions, net of cash received	(330	)		(430,890	)		(26,951	)		(3,920	)		(3,745,588	)		(496,882	)		(72,268	)
Proceeds from disposal of subsidiary and branch, net of cash disposed	13,684			-			2,555			372			13,684			8,408			1,223
Purchases of long-term investments	(856,682	)		(651,309	)		(365,564	)		(53,169	)		(1,327,508	)		(4,959,526	)		(721,333	)
Proceeds from maturity/sale and return of long-term investments	1,857			66,238			3,757			545			128,174			177,383			25,799
Payment for shareholder loan to equity investees	(6,079	)		-			(1,000	)		(145	)		(113,206	)		(7,240	)		(1,053	)
Collection of shareholder loan from equity investees	-			-			-			-			119,855			-			-
Purchases of short-term investments	-			-			-			-			(95,802	)		-			-
Payment for the origination of loan receivables	(319,500	)		(76,930	)		(54,440	)		(7,918	)		(445,892	)		(313,040	)		(45,530	)
Proceeds from collection of loan receivables	20,303			47,448			20,876			3,036			55,662			433,319			63,024
Net cash used in investing activities	(1,415,565	)		(1,394,928	)		(733,222	)		(106,643	)		(6,235,405	)		(6,345,303	)		(922,886	)
Financing activities:
Net proceeds from issuance of ordinary shares upon exercise of options	1,875			398			1,297			189			9,073			13,702			1,993
Proceeds from short-term bank borrowings	-			268,405			369,893			53,798			136,488			928,298			135,015
Repayment of short-term bank borrowings	-			(90	)		-			-			(294,677	)		(128,378	)		(18,672	)
Proceeds from long-term bank borrowings	-			343,960			480,424			69,875			3,633,174			4,275,036			621,778
Repayment of long-term bank borrowings	(1,650,916	)		-			(291,654	)		(42,419	)		(1,650,917	)		(798,861	)		(116,190	)
Funds advanced from noncontrolling interest holders	34,972			30,520			-			-			83,573			36,150			5,258
Repayment of funds advanced from noncontrolling interest holders	-			(2,500	)		(2,000	)		(291	)		(8,730	)		(8,430	)		(1,226	)
Acquisition of noncontrolling interest	-			(7,000	)		(74,586	)		(10,848	)		(3,750	)		(83,677	)		(12,170	)
Proceeds from amounts due to related parties	-			-			-			-			-			103,158			15,004
Repayment of amounts due to related parties	-			(112,964	)		-			-			-			(112,964	)		(16,430	)
Contribution from noncontrolling interest holders	17,743			23,267			792			115			25,575			28,886			4,201
Dividends paid to noncontrolling interest holders	(240	)		(2,309	)		(762	)		(111	)		(2,810	)		(4,900	)		(713	)
Dividends paid	(306,343	)		-			-			-			(306,343	)		-			-
Proceeds from issuance of convertible senior notes, net of issuance cost and capped call option	2,925,203			-			-			-			2,925,203			-			-
Debt financing costs paid	(9,763	)		-			-			-			(9,763	)		-			-
Proceeds from ADS Lending	7			-			-			-			7			-			-
Net cash provided by financing activities	1,012,538			541,687			483,404			70,308			4,536,103			4,248,020			617,848
Effect of exchange rate changes on cash and cash equivalents, and restricted cash	(21,717	)		(334	)		12,423			1,807			(32,733	)		(23,054	)		(3,352	)
Net increase in cash and cash equivalents, and restricted cash	129,447			60,530			336,878			48,997			720,561			928,251			135,009
Cash, cash equivalents and restricted cash at the beginning of the period	3,826,620			4,486,910			4,547,440			661,398			3,235,506			3,956,067			575,386
Cash, cash equivalents and restricted cash at the end of the period	3,956,067			4,547,440			4,884,318			710,395			3,956,067			4,884,318			710,395

 

Huazhu Group Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
	Quarter Ended December 31, 2018
	GAAP Result			% of Net Revenues			Share-based Compensation			% of Net Revenues			Non-GAAP Result			% of Net Revenues
	RMB						RMB						RMB
	(in thousands)
Hotel operating costs	1,737,390			64.7	%		8,551			0.3	%		1,728,839			64.4	%
Other operating costs	7,896			0.3	%		-			0.0	%		7,896			0.3	%
Selling and marketing expenses	107,841			4.0	%		669			0.0	%		107,172			4.0	%
General and administrative expenses	269,285			10.0	%		17,526			0.7	%		251,759			9.3	%
Pre-opening expenses	53,853			2.0	%		-			0.0	%		53,853			2.0	%
Total operating costs and expenses	2,176,265			81.0	%		26,746			1.0	%		2,149,519			80.0	%
Income from operations	592,027			22.1	%		26,746			1.0	%		618,773			23.1	%
	Quarter Ended December 31, 2018
	GAAP Result			% of Net Revenues			Share-based Compensation			% of Net Revenues			Non-GAAP Result			% of Net Revenues
	US$						US$						US$
	(in thousands)
Hotel operating costs	252,692			64.7	%		1,244			0.3	%		251,448			64.4	%
Other operating costs	1,148			0.3	%		-			0.0	%		1,148			0.3	%
Selling and marketing expenses	15,685			4.0	%		97			0.0	%		15,588			4.0	%
General and administrative expenses	39,167			10.0	%		2,549			0.7	%		36,618			9.3	%
Pre-opening expenses	7,833			2.0	%		-			0.0	%		7,833			2.0	%
Total operating costs and expenses	316,525			81.0	%		3,890			1.0	%		312,635			80.0	%
Income from operations	86,107			22.1	%		3,890			1.0	%		89,997			23.1	%
	Quarter Ended September 30, 2018
	GAAP Result			% of Net Revenues			Share-based Compensation			% of Net Revenues			Non-GAAP Result			% of Net Revenues
	RMB						RMB						RMB
	(in thousands)
Hotel operating costs	1,657,803			59.9	%		6,607			0.2	%		1,651,196			59.7	%
Other operating costs	1,685			0.1	%		-			0.0	%		1,685			0.1	%
Selling and marketing expenses	91,322			3.3	%		472			0.0	%		90,850			3.3	%
General and administrative expenses	233,353			8.4	%		13,318			0.5	%		220,035			7.9	%
Pre-opening expenses	59,894			2.2	%		-			0.0	%		59,894			2.2	%
Total operating costs and expenses	2,044,057			73.9	%		20,397			0.7	%		2,023,660			73.2	%
Income from operations	774,772			28.0	%		20,397			0.7	%		795,169			28.7	%
	Quarter Ended December 31, 2017
	GAAP Result			% of Net Revenues			Share-based Compensation			% of Net Revenues			Non-GAAP Result			% of Net Revenues
	RMB						RMB						RMB
	(in thousands)
Hotel operating costs	1,623,449			73.0	%		6,091			0.3	%		1,617,358			72.7	%
Other operating costs	6,836			0.3	%		-			0.0	%		6,836			0.3	%
Selling and marketing expenses	98,464			4.4	%		551			0.0	%		97,913			4.4	%
General and administrative expenses	236,213			10.6	%		12,603			0.6	%		223,610			10.0	%
Pre-opening expenses	71,575			3.2	%		-			0.0	%		71,575			3.2	%
Total operating costs and expenses	2,036,537			91.5	%		19,245			0.9	%		2,017,292			90.6	%
Income from operations	231,168			10.4	%		19,245			0.9	%		250,413			11.3	%

 

	Year Ended December 31, 2018
	GAAP Result			% of Net Revenues			Share-based Compensation			% of Net Revenues			Non-GAAP Result			% of Net Revenues
	RMB						RMB						RMB
	(in thousands)
Hotel operating costs	6,476,327			64.4	%		27,158			0.3	%		6,449,169			64.1	%
Other operating costs	14,560			0.1	%		-			0.0	%		14,560			0.1	%
Selling and marketing expenses	348,080			3.5	%		2,583			0.0	%		345,497			3.5	%
General and administrative expenses	850,904			8.5	%		53,161			0.5	%		797,743			8.0	%
Pre-opening expenses	254,629			2.5	%		-			0.0	%		254,629			2.5	%
Total operating costs and expenses	7,944,500			79.0	%		82,902			0.8	%		7,861,598			78.2	%
Income from operations	2,344,422			23.3	%		82,902			0.8	%		2,427,324			24.1	%

 

	Year Ended December 31, 2018
	GAAP Result			% of Net Revenues			Share-based Compensation			% of Net Revenues			Non-GAAP Result			% of Net Revenues
	US$						US$						US$
	(in thousands)
Hotel operating costs	941,943			64.4	%		3,950			0.3	%		937,993			64.1	%
Other operating costs	2,118			0.1	%		-			0.0	%		2,118			0.1	%
Selling and marketing expenses	50,626			3.5	%		376			0.0	%		50,250			3.5	%
General and administrative expenses	123,759			8.5	%		7,732			0.5	%		116,027			8.0	%
Pre-opening expenses	37,034			2.5	%		-			0.0	%		37,034			2.5	%
Total operating costs and expenses	1,155,480			79.0	%		12,058			0.8	%		1,143,422			78.2	%
Income from operations	340,982			23.3	%		12,058			0.8	%		353,040			24.1	%

 

	Year Ended December 31, 2017
	GAAP Result			% of Net Revenues			Share-based Compensation			% of Net Revenues			Non-GAAP Result			% of Net Revenues
	RMB						RMB						RMB
	(in thousands)
Hotel operating costs	5,674,780			69.0	%		19,725			0.2	%		5,655,055			68.8	%
Other operating costs	17,324			0.2	%		-			0.0	%		17,324			0.2	%
Selling and marketing expenses	284,900			3.5	%		1,530			0.0	%		283,370			3.5	%
General and administrative expenses	690,970			8.4	%		45,112			0.5	%		645,858			7.9	%
Pre-opening expenses	206,454			2.5	%		-			0.0	%		206,454			2.5	%
Total operating costs and expenses	6,874,428			83.6	%		66,367			0.7	%		6,808,061			82.9	%
Income from operations	1,425,648			17.3	%		66,367			0.7	%		1,492,015			18.0	%

 

Huazhu Group Limited
Unaudited Reconciliation of GAAP and Non-GAAP Results
	Quarter Ended												Year Ended
	December 31, 2017			September 30,2018			December 31, 2018						December 31, 2017			December 31, 2018
	RMB			RMB			RMB			US$			RMB			RMB			US$
	(in thousands, except per share and per ADS data)
Net income (loss) attributable to Huazhu Group Limited (GAAP)	225,706			667,752			(418,541	)		(60,874	)		1,228,303			716,161			104,161
Share-based compensation expenses	19,245			20,397			26,746			3,890			66,367			82,902			12,058
Unrealized (gains) losses from fair value changes of equity securities	(24,134	)		(179,229	)		755,916			109,943			(35,540	)		914,129			132,955
Adjusted net income attributable to Huazhu Group Limited (non-GAAP)	220,817			508,920			364,121			52,959			1,259,130			1,713,192			249,174
Earnings (Losses) per share/ADS (GAAP)
Basic	0.81			2.37			(1.48	)		(0.22	)		4.40			2.54			0.37
Diluted	0.77			2.23			(1.48	)		(0.22	)		4.21			2.49			0.36
Adjusted earnings (losses) per share/ADS (non-GAAP)
Basic	0.79			1.80			1.29			0.19			4.51			6.08			0.88
Diluted	0.75			1.71			1.23			0.17			4.31			5.77			0.84
Weighted average number of shares used in computation
Basic	279,861			282,149			282,500			282,500			279,272			281,717			281,717
Diluted	298,903			303,605			303,162			303,162			293,074			303,606			303,606
	Quarter Ended												Year Ended
	December 31, 2017			September 30,2018			December 31, 2018						December 31, 2017			December 31, 2018
	RMB			RMB			RMB			US$			RMB			RMB			US$
	(in thousands, except per share and per ADS data)
Net income (loss) attributable to Huazhu Group Limited (GAAP)	225,706			667,752			(418,541	)		(60,874	)		1,228,303			716,161			104,161
Interest income	(40,713	)		(41,870	)		(32,449	)		(4,719	)		(112,645	)		(147,511	)		(21,455	)
Interest expense	34,295			63,306			70,210			10,212			87,320			243,801			35,459
Income tax expense	17,747			254,843			106,059			15,426			356,992			568,942			82,750
Depreciation and amortization	208,756			221,552			229,486			33,377			789,252			890,524			129,521
EBITDA (non-GAAP)	445,791			1,165,583			(45,235	)		(6,578	)		2,349,222			2,271,917			330,436
Share-based compensation	19,245			20,397			26,746			3,890			66,367			82,902			12,058
Unrealized (gains) losses from fair value changes of equity securities	(24,134	)		(179,229	)		755,916			109,943			(35,540	)		914,129			132,955
Adjusted EBITDA (non-GAAP)	440,902			1,006,751			737,427			107,255			2,380,049			3,268,948			475,449

 

Huazhu Group Limited
Operational Data
	As of
	December 31,			September 30,			December 31,
	2017			2018			2018
Total hotels in operation:	3,746			4,055			4,230
Leased hotels	671			698			699
Manachised hotels	2,874			3,139			3,309
Franchised hotels	201			218			222
Total hotel rooms in operation	379,675			409,516			422,747
Leased hotels	85,018			86,825			86,787
Manachised hotels	275,065			301,451			314,932
Franchised hotels	19,592			21,240			21,028
Number of cities	378			391			403
	For the quarter ended
	December 31,			September 30,			December 31,
	2017			2018			2018
Average daily room rate  (in RMB)
Leased and owned hotels	251			279			275
Manachised hotels	197			226			216
Franchised hotels	232			264			248
Blended	211			239			230
Occupancy rate (as a percentage)
Leased and owned hotels	87.2	%		92.0	%		86.7	%
Manachised hotels	86.6	%		91.1	%		85.5	%
Franchised hotels	72.1	%		80.7	%		74.5	%
Blended	86.0	%		90.7	%		85.2	%
RevPAR  (in RMB)
Leased and owned hotels	219			257			238
Manachised hotels	170			205			185
Franchised hotels	167			213			185
Blended	181			217			196
	For the full year ended
	December 31,			December 31,
	2017			2018
Occupancy rate (as a percentage)
Leased and owned hotels	89.0	%		89.0	%
Manachised hotels	89.1	%		87.6	%
Franchised hotels	73.1	%		75.8	%
Blended	88.3	%		87.3	%
Average daily room rate (in RMB)
Leased and owned hotels	237			267
Manachised hotels	191			213
Franchised hotels	216			248
Blended	203			226
RevPAR (in RMB)
Leased and owned hotels	211			237
Manachised hotels	171			186
Franchised hotels	158			188
Blended	180			197

 

Same-hotel Operational Data: like-for-like performance for leased, manachised and franchised hotels opened for at least 18 months during the current quarter and full year
	As of and for the quarter ended
	December 31,
	2017			2018
Total	2,980			2,980
Leased and owned hotels	545			545
Manachised hotels	2,435			2,435
Occupancy rate (as a percentage)	88.3	%		87.5	%
Average daily room rate (in RMB)	206			216
RevPAR (in RMB)	182			189
	As of and for full year ended
	December 31,
	2017			2018
Total	2,980			2,980
Leased and owned hotels	545			545
Manachised hotels	2,435			2,435
Occupancy rate (as a percentage)	90.4	%		89.8	%
Average daily room rate (in RMB)	198			211
RevPAR (in RMB)	179			189

 

Hotel breakdown by segment
	Number of Hotels in Operation			Number of Hotel Rooms in Operation
	As of December 31, 2018			As of December 31, 2018
Economy hotels	2,892			261,037
HanTing Hotel	2,283			220,646
Hi Inn	402			25,403
Elan Hotel	200			14,266
Orange Hotel	7			722
Midscale and upscale hotels	1,338			161,710
JI Hotel	553			72,370
Starway Hotel	212			18,878
Joya Hotel	6			1,250
Manxin Hotels & Resorts	24			1,901
HanTing Premium Hotel	74			6,656
Ibis Hotel	137			16,575
Ibis Styles Hotel	34			4,279
Mercure Hotel	39			8,510
Novotel Hotel	7			2,512
Grand Mercure	6			1,304
Orange Select	172			19,863
Crystal Orange	56			7,150
Blossom Hill	18			462
Total	4,230			422,747

 

Same-hotel operational data by segment
	Number of hotels in operation				Same-hotel RevPAR							Same-hotel ADR							Same-hotel Occupancy
	As of				For the quarter ended							For the quarter ended							For the quarter ended
	December 31,				December 31,							December 31,							December 31,
	2017		2018		2017		2018		yoy change			2017		2018		yoy change			2017			2018			yoy change (p.p.)
Economy hotels	2,454		2,454		157		164		4.1	%		174		183		5.3	%		90.5	%		89.4	%		(1.1	)
Leased hotels	440		440		165		177		7.7	%		186		198		6.7	%		88.6	%		89.4	%		0.8
Manachised and franchised hotels	2,014		2,014		155		160		3.0	%		171		179		4.8	%		91.0	%		89.4	%		(1.6	)
Midscale and upscale hotels	526		526		255		264		3.7	%		311		322		3.9	%		82.1	%		82.0	%		(0.1	)
Leased and owned hotels	105		105		316		325		3.0	%		367		384		4.4	%		86.0	%		84.8	%		(1.2	)
Manachised and franchised hotels	421		421		229		238		4.2	%		284		295		3.7	%		80.4	%		80.8	%		0.3
Total	2,980		2,980		182		189		3.9	%		206		216		4.9	%		88.3	%		87.5	%		(0.8	)
	Number of hotels in operation				Same-hotel RevPAR							Same-hotel ADR							Same-hotel Occupancy
	As of				For the year ended							For the year ended							For the year ended
	December 31,				December 31,							December 31,							December 31,
	2017		2018		2017		2018		yoy change			2017		2018		yoy change			2017			2018			yoy change (p.p.)
Economy hotels	2,454		2,454		159		168		5.6	%		172		184		6.7	%		92.5	%		91.6	%		(1.0	)
Leased hotels	440		440		165		181		9.3	%		182		197		8.3	%		90.6	%		91.4	%		0.8
Manachised and franchised hotels	2,014		2,014		158		165		4.5	%		169		180		6.1	%		93.1	%		91.6	%		(1.5	)
Midscale and upscale hotels	526		526		250		263		5.2	%		301		314		4.6	%		83.1	%		83.6	%		0.5
Leased hotels	105		105		307		321		4.6	%		350		367		4.8	%		87.7	%		87.5	%		(0.2	)
Manachised and franchised hotels	421		421		226		239		5.5	%		279		291		4.5	%		81.2	%		82.0	%		0.8
Total	2,980		2,980		179		189		5.5	%		198		211		6.3	%		90.4	%		89.8	%		(0.6	)

___________________________________
¹ Hotel turnover, refers to total transaction value of room and non-room revenues from Huazhu hotels (i.e., leased and operate, manachised and franchised hotels).
² The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of US$1.00=RMB6.8755 on December 31, 2018 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.
³ As of May 25, 2018, the company changed its ADS to its ordinary share ratio from one ADS representing four ordinary shares to one ADS representing one ordinary share. Therefore, the company recalculated earnings per ADS of the previous quarter using the new ratio.

Contact Information
Investor Relations
Tel: +86 (21) 6195 9561
Email: ir@huazhu.com
http://ir.huazhu.com

 

Source: Huazhu Group Limited