GreenTree Hospitality Group Ltd. Reports Third Quarter 2020 Financial Results

  • Total revenues increased 23.6% to RMB266.9 million (US$39.3 million) [1] from RMB216.0 million in the second quarter.
  • Income from operations increased 61.1% to RMB100.9 million (US$14.9 million) [1] from RMB62.7 million in the second quarter.
  • Adjusted EBITDA (non-GAAP) increased 46.6% to RMB134.0 million (US$19.7 million) [1] from RMB91.4 million in the second quarter.
  • Core net income (non-GAAP) increased 23.8% to RMB92.4 million (US$13.6 million) [1] from RMB74.6 million in the second quarter.

GreenTree Hospitality Group Ltd. (NYSE: GHG), a leading hospitality management group in China, yesterday announced its unaudited financial results for the third quarter ended September 30, 2020.

Operational Highlights

  • A total of 4,195 hotels with 305,125 hotel rooms were in operation as of September 30, 2020, compared to 4,066 hotels and 296,307 hotel rooms as of June 30, 2020.
  • As of September 30, 2020, the Company had 37 leased-and-operated (“L&O”) hotels and 4,158 franchised-and-managed (“F&M”) hotels in operation in 341 cities across China, compared to 30 L&O hotels and 3,072 F&M hotels in operation in 309 cities as of September 30, 2019. The geographic coverage increased by 10.4% year over year.
  • During the quarter, the Company opened 162 hotels, a decrease of 19 comparing to 181 hotels in the third quarter of 2019. Among the hotels opened, 1 was in the luxury segment, 45 in the mid-to-up-scale segment, 80 in the mid-scale segment, and 36 in the economy segment. Geographically speaking, 6 hotels were in Tier 1 cities [1], 31 in Tier 2 cities and the remaining 125 in Tier 3 and smaller cities in China.
    The Company closed 33 hotels, 3 due to brand upgrades, and 26 due to their non-compliance with the Company’s brand and operating standards. The remaining 4 were closed for property related issues. The Company added a net opening of 129 hotels to its portfolio.
  • As of September 30, 2020, the Company had a pipeline of 1,110 hotels contracted for or under development, among which 55 hotels were in the luxury hotel segment, 218 in the mid-to-up-scale segment, 455 in the mid-scale segment, and 382 in the economy segment.
  • The average daily room rate, or ADR, for all hotels in operation, was RMB151, a decrease of 12.9% year-over-year, an increase of 6.5% compared with the second quarter.
  • The occupancy rate, or OCC for all hotels in operation was 79.1%, compared with 85.9% in the third quarter of 2019, and compared with 63.4% in the second quarter of 2020.
  • The revenue per available room, or RevPAR, which is calculated by multiplying our hotels’ ADR by its occupancy rate, was RMB120, representing a 19.8% year-over-year decrease, and a 32.9% sequential increase.
  • As of September 30, 2020, the Company’s loyalty program had more than 52 million individual members and approximately 1,610,000 corporate members, compared to approximately 49 million and over 1,560,000 corporate members as of June 30, 2020. The Company had approximately 92.5% of room nights sold directly.

“We are glad to see a meaningful improvement in the third quarter of 2020 in some of our key operating and financial metrics, as a result of a return to more normal economic activities and living conditions in mainland China,” said Mr. Alex Xu, Chairman and Chief Executive Officer of GreenTree. “We continued to serve and protect guests, constantly adapting our operations and marketing campaigns to the evolving market conditions, and we increased income from operations, net income, and Adjusted EBITDA. Our margins continue to rise thanks to our flexible cost structure and the measures we have implemented since the outbreak of COVID-19,” continued Mr. Xu.

China has been walking a fine line in balancing pandemic control and economic recovery, with targeted measures introduced to help companies safely restart their businesses and people get back to their normal daily life. As COVID-19 came under control gradually since the second quarter, we saw a sustained recovery in domestic tourism and business. Riding on the recovery, we continued to optimize our brands, products and technology to capture domestic travel demand. As a result, our same-hotel RevPAR, excluding hotels being used for quarantine and temporary closures, decreased 16.3% in the third quarter to 125 RMB. For the third consecutive quarter in 2020, our overall performance was better than the average performance across the hospitality industry in China.

Thanks to the tireless work and dedication of our staff and franchisees, and the strong support of our loyal individual members and corporate members, the performance of our hotels continued to improve, with our occupancy rate approaching 85% during October Golden week, nearly the same as last year. In November, our occupancy rate rebounded to nearly the same level as last year, and RevPAR recovered to almost 95% of last year’s level.”

“Having gone through the challenges of the first nine months of 2020, we believe we can continue to execute our growth strategy and further enhance our partnership with our franchisees. We have accumulated extensive experience and are well prepared should the pandemic last much longer. We are confident in our ability to consistently achieve profitable growth and create long-term value for our shareholders.”

Third Quarter of 2020 Financial Results

Quarter Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

Revenues

Leased-and-operated hotels

72,530,518

66,823,544

9,842,044

Franchised-and-managed hotels

219,606,332

200,044,031

29,463,302

Total revenues

292,136,850

266,867,575

39,305,346

Nine Months Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

Revenues

Leased-and-operated hotels

184,867,320

150,961,027

22,234,156

Franchised-and-managed hotels

617,493,389

489,292,503

72,064,997

Total revenues

802,360,709

640,253,530

94,299,153

Total revenues for the third quarter of 2020 were RMB266.9 million (US$39.3 million) [1], representing a 8.6% 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, as well as partial reduction and extension of sublease income recognition. Total revenues increased from 216.0 million RMB in the second quarter, a 23.6% sequential increase, which was mainly attributable to a RevPAR growth from 90 RMB to 120 RMB. Total revenues for the first nine months of 2020 were RMB640.3 million (US$94.3 million) [1], representing a 20.2% decrease.

  • Total revenues from leased-and-operated hotels for the third quarter of 2020 were RMB66.8 million (US$9.8 million) [1], representing a 7.9% year-over-year decrease. The decrease was primarily due to RevPAR decrease of 26.3%, and partial reduction and extension of sublease income recognition, and partially offset by the revenue contributed by 7 L&O hotels of the Urban Hotel Group (“Urban”) which was acquired in November of 2019. Compared with the second quarter, total revenues from L&O hotels increased by 32.8%, mainly attributable to rising RevPAR and newly opened 3 L&O hotels. Total revenues from L&O hotels for the first nine months of 2020 were RMB151.0 million (US$22.2 million) [1], representing a 18.3% decrease.
  • Total revenues from franchised-and-managed hotels for the third quarter of 2020 were RMB200.0 million (US$29.5 million) [1], representing a 8.9% year-over-year decrease. Initial franchise fees increased by 8.8% year-over-year, mainly attributable to the gross opening of 159 hotels. The 10.2% decrease from the third quarter of 2019 in recurring franchisee management fees and others was primarily due to RevPAR decrease of 19.6%. Compared with the second quarter, initial franchise fees increased by 24.8%, mainly attributable to more hotels opened; recurring franchisee management fees and others increased by 20.4%, mainly due to RevPAR sequential growth from 90RMB to 120 RMB. Total revenues from F&M hotels for the first nine months of 2020 were RMB489.3 million (US$72.1 million) [1], representing a 20.8% decrease.

Quarter Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

Initial franchise fee

15,277,606

16,619,577

2,447,799

Recurring franchise management
fee and others

204,328,726

183,424,454

27,015,503

Revenues from franchised-and-
managed hotels

219,606,332

200,044,031

29,463,302

Nine Months Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

Initial franchise fee

41,274,393

42,985,481

6,331,077

Recurring franchise management
fee and others

576,218,996

446,307,022

65,733,920

Revenues from franchised-and-
managed hotels

617,493,389

489,292,503

72,064,997

Total operating costs and expenses

Quarter Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

Operating costs and expenses

Hotel operating costs

87,277,200

108,025,295

15,910,406

Selling and marketing expenses

20,785,447

21,273,500

3,133,248

General and administrative expenses

39,891,061

44,782,915

6,595,811

Other operating expenses

53,736

434,792

64,038

Total operating costs and expenses

148,007,444

174,516,502

25,703,503

 Nine Months Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

Operating costs and expenses

Hotel operating costs

246,216,861

292,705,145

43,110,808

Selling and marketing expenses

61,815,183

51,114,478

7,528,349

General and administrative expenses

105,391,932

121,672,457

17,920,417

Other operating expenses

161,710

1,633,064

240,524

Total operating costs and expenses

413,585,686

467,125,144

68,800,098

Hotel operating costs for the third quarter of 2020 were RMB108.0 million (US$15.9 million) [1], representing a 23.8% increase year-over-year. The increase was mainly attributable to higher rents, higher depreciation and amortization, and the consolidation of operation costs of Urban. In the third quarter, there were 3 L&O hotels newly opened and 5 L&O hotels under construction, which accounted for the main increase in hotel operating costs. Excluding L&O hotel operating costs, costs related to F&M hotels and others increased 0.8%, primarily due to the expansion of our business and F&M hotels. Comparing hotel operating costs with the second quarter, we observe a 13.8% sequential growth, mainly due to more L&O hotels coming into development. For the first nine months of 2020, hotel operating costs were RMB292.7 million (US$43.1 million) [1], representing a 18.9% increase.

Quarter Ended

September 30,

September 30,

September 30,

2019

2020

2020

RMB

RMB

US$

Rental

17,679,757

27,189,274

4,004,547

Utilities

4,231,308

3,666,479

540,014

Personnel cost

10,918,296

11,732,599

1,728,025

Depreciation and amortization

5,627,887

14,946,857

2,201,434

Consumable, food and beverage

7,760,883

7,937,167

1,169,018

Costs of general managers of
franchised-and-managed hotels

27,616,095

24,241,736

3,570,422

Other costs of franchised-and-managed
hotels

8,400,931

7,873,516

1,159,644

Others

5,042,043

10,437,667

1,537,302

Hotel Operating Costs

87,277,200

108,025,295

15,910,406

 Nine Months Ended

September 30,

September 30,

September 30,

2019

2020

2020

RMB

RMB

US$

Rental

57,327,190

90,098,256

13,270,039

Utilities

15,277,291

11,258,969

1,658,267

Personnel cost

28,207,871

31,296,079

4,609,414

Depreciation and amortization

19,326,123

36,873,883

5,430,936

Consumable, food and beverage

21,529,959

23,477,610

3,457,878

Costs of general managers of
franchised-and-managed hotels

73,106,207

65,575,838

9,658,277

Other costs of franchised-and-managed
hotels

21,393,731

17,853,103

2,629,478

Others

10,048,489

16,271,407

2,396,519

Hotel Operating Costs

246,216,861

292,705,145

43,110,808

Selling and marketing expenses for the third quarter of 2020 were RMB21.3 million (US$3.1 million) [1], representing a 2.3% year-over-year increase. The increase was mainly attributable to the Company’s first attempt to cooperate with Internet social platforms which became prevalent because of COVID-19. Excluding the above-mentioned advertising fees, selling and marketing expenses in this quarter decreased 40.4% year over year, and increased 3.3% quarter over quarter. For the first nine months of 2020, selling and marketing expenses were RMB 51.1 million (US$7.5 million) [1], representing a 17.3% decrease.

General and administrative expenses for the third quarter of 2020 were RMB44.8 million (US$6.6 million) [1], representing a 12.3% year-over-year increase. The increase was primarily attributable to higher depreciation and amortization for our property and equipment, increased investment in Research and Development, higher consulting fees, and the consolidation of expenses from Argyle Hotel Management Group (Australia) Pty Ltd (“Argyle”) and Urban. Compared with the second quarter, G&A expenses decreased by 7.0%. General and administrative expenses for the first nine months of 2020 were RMB121.7 million (US$17.9 million) [1], representing a 15.4% year-over-year increase.

Gross profit for the third quarter of 2020 was RMB158.8 million (US$23.4 million) [1], representing a year-over-year decrease of 22.5%. Gross margin was 59.5%, compared to 70.1% a year ago. The decrease was primarily due the impact of COVID-19. Compared with the second quarter, gross profit increased by 31.2%, and gross margin increased from 56.1% to 59.5%. Gross profit for the first nine months of 2020 was RMB347.5 million (US$51.2 million) [1], representing a 37.5% year-over-year decrease.

Income from operations for the third quarter of 2020 totaled RMB100.9 million (US$14.9 million) [1], representing a year-over-year decrease of 33.9%. 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 37.8%, compared to 52.2% a year ago. Compared with the second quarter, income from operations increased by 61.1%, and operating margin increased from 29.0% to 37.8%, mainly attributable to revenue increase. Income from operations for the first nine months of 2020 totaled RMB200.8 million (US$29.6 million) [1], representing a year-over-year decrease of 50.5%.

Adjusted EBITDA (non-GAAP) for the third quarter of 2020 was RMB134.0 million (US$19.7 million) [1], representing a year-over-year decrease of 24.3%. Adjusted EBITDA margin, defined as adjusted EBITDA (non-GAAP) as a percentage of total revenues, was 50.2%, compared to 60.6% a year ago. Compared with the second quarter, adjusted EBITDA increased by 46.6%, and adjusted EBITDA margin increased from 42.3% to 50.2%. Adjusted EBITDA (non-GAAP) for the first nine months of 2020 was RMB272.9 million (US$40.2 million) [1], representing a year-over-year decrease of 43.6%.

Net income for the third quarter of 2020 was RMB85.6 million (US$12.6 million) [1], representing a year-over-year decrease of 16.2%. Net margin was 32.1%, compared to 35.0% a year ago. The year-over-year decrease was primarily due to revenue decrease partially offset by gains from investments in equity securities. Compared with the second quarter, net income decreased by 8.6%, and net margin decreased from 43.4% to 32.1%, mainly due to decline in gains from investment in equity securities since the second quarter. Net income for the first nine months of 2020 was RMB165.2 million (US$24.3 million) [1], representing a year-over-year decrease of 54.5%.

Core net income (non-GAAP) for the third quarter of 2020 was RMB92.4 million (US$13.6 million) [1], representing a year-over-year decrease of 31.5%. The core net margin, defined as core net income (non-GAAP) as a percentage of total revenues, was 34.6%, compared to 46.2% one year ago. Compared with the second quarter, core net income increased by 23.8%. Core net income (non-GAAP) for the first nine months of 2020 was RMB194.8 million (US$28.7 million) [1], representing a year-over-year decrease of 44.8%.

Earnings per ADS (basic and diluted) for the third quarter of 2020 was RMB0.81 (US$0.12) [1], down from earnings per ADS of RMB1.01 one year ago, down from RMB1.01 in the second quarter of 2020, mainly due to the decline in gains from investment in equity securities since the second quarter. Core net income per ADS (basic and diluted) (non-GAAP) was RMB0.90 (US$0.13) [1], down from RMB1.32 a year ago, up from RMB0.72 of the second quarter of 2020. Earnings per ADS (basic and diluted) for the first nine months of 2020 was RMB1.71 (US$0.25) [1] down from RMB3.60 one year ago. Core net income per ADS (basic and diluted) (non-GAAP) was RMB1.89 (US$0.28) [1] for the first nine months of 2020, decreased from RMB3.46 of 2019.

Cash flow. Operating cash inflow for the third quarter of 2020 was RMB175.4 million (US$25.8 million) [1] as a result of the recovery from COVID-19 and improved operating performance. Investing cash outflow for the third quarter of 2020 was RMB54.9 million (US$8.1 million) [1], which was primarily attributable to loans to franchisees, and investment in property and equipment. The investing cash outflow was partially offset by repayment from franchisees, as well as proceeds from short-term investments. Financing cash outflow was RMB4.1 million (US$0.6 million). Operating cash inflow for the first nine months of 2020 was RMB176.8 million (US$26.0  million) [1]. Investing cash inflow for the first nine months of 2020 was RMB53.8 million (US$7.9 million) [1]. Financing cash inflow for the first nine months of 2020 was RMB17.7 million (US$2.6 million) [1].

Cash and cash equivalents, restricted cash, short-term investments, investments in equity securities and time deposit. As of September 30, 2020, the Company had total cash and cash equivalents, restricted cash, short term investments, investments in equity securities and time deposits of RMB1,815.4 million (US$267.4 million) [1], compared to RMB1,714.0 million as of June 30, 2020. The increase from the second quarter was primarily attributable to cash inflow from operating activities, changes in fair value of equity securities and dividends from equity securities, and offset by loans to franchisees, investment in the decoration of L&O hotels, and cash outflow for balance fees for acquisitions.

COVID-19 Update

With effective control measures implemented by the Chinese government. Recently, China showed strong signs of economic rebound as the government introduced various policies to encourage domestic consumption. During the October Golden week, the number of domestic tourists rebounded to 637 million reaching 79 percent of last year’s level and generating 466.6 billion RMB in revenue reaching 69.9 percent of last year’s level, according to statistics from China’s Ministry of Culture and Tourism. These figures pointed to a considerable improvement compared to the three-day Dragon Boat Festival vacation period this June, when there were 48.81 million tourists, accounting for 50.9% of last year’s level.

With all these efforts the performance of our hotels continued to improve, with our occupancy rate approaching 85% during the October Golden week, nearly the same as last year. In November, our occupancy rate rebounded to nearly the same level as last year, and RevPAR recovered to almost 95% of last year’s level.

Guidance

So far in 2020, our operations are in line with our previous forecast. Assuming the pandemic remains under control in China in Q4, the Company expects a decline in total revenues of 12%-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.                                

GreenTree Hospitality Group Ltd.

Unaudited Condensed Consolidated Balance Sheets

December 31,

September 30,

September 30,

2019

2020

2020

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

319,847,701

567,434,639

83,574,090

Short-term investment

437,279,026

205,186,988

30,220,777

Investments in equity securities

207,007,926

181,974,105

26,801,889

Accounts receivable, net of allowance

99,701,226

121,005,102

17,822,125

Amounts due from related parties

31,739,731

29,114,524

4,288,106

Prepaid rent

18,794,665

8,230,135

1,212,168

Inventories

2,537,717

4,064,736

598,671

Other current assets

66,004,017

62,839,705

9,255,288

Loans receivable, net

82,312,201

181,054,867

26,666,500

Total current assets

1,265,224,210

1,360,904,801

200,439,614

Non-current assets:

Restricted cash

22,312,522

22,169,900

3,265,273

Long-term time deposits

560,000,000

570,000,000

83,951,926

Loan receivable, net

121,563,742

163,841,761

24,131,283

Property and equipment, net

614,936,505

641,366,729

94,463,110

Intangible assets, net

496,280,316

492,028,655

72,467,989

Goodwill

100,078,236

100,231,487

14,762,503

Long-term investments

398,637,701

410,512,592

60,461,970

Other assets

76,957,992

56,102,628

8,263,023

Deferred tax assets

160,488,193

170,466,037

25,106,934

 TOTAL ASSETS

3,816,479,417

3,987,624,590

587,313,625

LIABILITIES AND EQUITY

Current liabilities:

Short-term bank loans

60,000,000

60,000,000

8,837,045

Accounts payable

15,296,042

22,783,708

3,355,678

Advance from customers

40,105,627

32,007,939

4,714,260

Amounts due to related parties

3,518,031

1,991,598

293,331

Salary and welfare payable

42,650,527

52,459,503

7,726,450

Deferred rent

5,179,664

1,454,458

214,218

Deferred revenue

231,925,272

239,482,475

35,271,956

Accrued expenses and other current liabilities

302,448,361

310,355,001

45,710,351

Income tax payable

93,909,177

63,387,103

9,335,911

Total current liabilities

795,032,701

783,921,785

115,459,200

Deferred rent

17,821,686

26,330,439

3,878,055

Deferred revenue

410,807,248

370,646,075

54,590,267

Other long-term liabilities

118,112,511

136,266,485

20,069,884

Deferred tax liabilities

195,303,547

206,682,669

30,441,067

Unrecognized tax benefits

261,641,717

275,349,655

40,554,621

 TOTAL LIABILITIES

1,798,719,410

1,799,197,108

264,993,094

Shareholders’ equity:

Class A ordinary shares

219,526,699

222,587,070

32,783,531

Class B ordinary shares

115,534,210

115,534,210

17,016,349

Additional paid-in capital

1,152,108,217

1,149,280,404

169,270,709

Retained earnings

308,698,533

484,484,710

71,356,886

Accumulated other comprehensive income

65,300,854

64,250,172

9,463,028

Total GreenTree Hospitality Group Ltd. shareholders’
equity

1,861,168,513

2,036,136,566

299,890,503

Non-controlling interests

156,591,494

152,290,916

22,430,028

Total shareholders’ equity

2,017,760,007

2,188,427,482

322,320,531

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

3,816,479,417

3,987,624,590

587,313,625

GreenTree Hospitality Group Ltd.

Unaudited Condensed Consolidated Statements of Comprehensive Income

Quarter Ended

 Nine Months Ended

 September 30,
2019

 September 30,
2020

 September 30,
2020

 September 30,
2019

 September 30,
2020

 September 30,
2020

RMB

RMB

US$

RMB

RMB

US$

Revenues

Leased-and-operated hotels

72,530,518

66,823,544

9,842,044

184,867,320

150,961,027

22,234,156

Franchised-and-managed hotels

219,606,332

200,044,031

29,463,302

617,493,389

489,292,503

72,064,997

Total revenues

292,136,850

266,867,575

39,305,346

802,360,709

640,253,530

94,299,153

Operating costs and expenses

Hotel operating costs

(87,277,200)

(108,025,295)

(15,910,406)

(246,216,861)

(292,705,145)

(43,110,808)

Selling and marketing expenses

(20,785,447)

(21,273,500)

(3,133,248)

(61,815,183)

(51,114,478)

(7,528,349)

General and administrative expenses

(39,891,061)

(44,782,915)

(6,595,811)

(105,391,932)

(121,672,457)

(17,920,417)

Other operating expenses

(53,736)

(434,792)

(64,038)

(161,710)

(1,633,064)

(240,524)

Total operating costs and expenses

(148,007,444)

(174,516,502)

(25,703,503)

(413,585,686)

(467,125,144)

(68,800,098)

Other operating income

8,449,390

8,577,445

1,263,321

16,995,685

27,671,358

4,075,551

Income from operations

152,578,796

100,928,518

14,865,164

405,770,708

200,799,744

29,574,606

Interest income and other, net

18,055,095

23,140,692

3,408,256

52,283,638

47,861,876

7,049,293

Interest expense

(735,927)

(203,604)

(29,988)

(2,121,402)

(2,941,850)

(433,288)

(Losses)/gains from investment in
equity securities

(21,796,444)

2,905,553

427,942

54,040,607

(9,734,782)

(1,433,778)

Other income, net

517,981

76,290

2,690,742

517,981

76,290

Income before income taxes

148,101,520

127,289,140

18,747,664

512,664,293

236,502,969

34,833,123

Income tax expense

(46,994,932)

(41,821,938)

(6,159,706)

(150,211,254)

(72,398,501)

(10,663,147)

Income before share of gains in equity
investees

101,106,588

85,467,202

12,587,958

362,453,039

164,104,468

24,169,976

Share of gains in equity investees, net of tax

1,067,166

170,211

25,070

779,369

1,118,542

164,743

Net income

102,173,754

85,637,413

12,613,028

363,232,408

165,223,010

24,334,719

Net losses/(gains) attributable to non-
controlling interests

939,576

(2,347,248)

(345,713)

3,271,890

10,563,167

1,555,787

Net income attributable to ordinary
shareholders

103,113,330

83,290,165

12,267,315

366,504,298

175,786,177

25,890,506

Net earnings per share

Class A ordinary share-basic and
diluted

1.01

0.81

0.12

3.60

1.71

0.25

Class B ordinary share-basic and
diluted

1.01

0.81

0.12

3.60

1.71

0.25

Net earnings per ADS

Class A ordinary share-basic and
diluted

1.01

0.81

0.12

3.60

1.71

0.25

Class B ordinary share-basic and
diluted

1.01

0.81

0.12

3.60

1.71

0.25

Weighted average shares outstanding

Class A ordinary share-basic and
diluted

67,416,046

68,286,954

68,286,954

67,183,025

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 income, net
of tax

Foreign currency translation
adjustments

19,606,912

(11,616,690)

(1,710,954)

15,824,409

(7,800,682)

(1,148,916)

Unrecognized gain on an available-for-
sale investment

6,750,000

994,168

6,750,000

994,168

Comprehensive income, net of tax

121,780,666

80,770,723

11,896,242

379,056,817

164,172,328

24,179,971

Comprehensive (losses)/income attributable to
non-controlling interests

939,576

(2,347,248)

 

(345,713)

3,271,890

10,563,167

1,555,786

Comprehensive income attributable
to ordinary shareholders

122,720,242

78,423,475

11,550,529

382,328,707

174,735,495

25,735,757

GreenTree Hospitality Group Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

 Quarter Ended

 Nine Months Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

RMB

RMB

US$

Operating activities:

Net income

102,173,754

85,637,413

12,613,028

363,232,408

165,223,010

24,334,719

Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation and amortization

11,069,474

18,063,004

2,660,393

26,890,288

50,068,849

7,374,344

Share of gains in equity method investments

(757,717)

(170,211)

 

(25,070)

(469,920)

(1,118,542)

(164,743)

Gains from disposal of a long-term investment

(309,449)

(309,449)

Interest income

(4,248,415)

(2,217,211)

(326,560)

(14,662,224)

(7,059,071)

(1,039,689)

Bad debt expense

10,663,023

4,123,789

607,368

5,663,910

22,052,714

3,248,014

Losses/(gains) from investment in equity securities

21,796,444

(2,905,553)

(427,942)

(54,040,607)

9,734,782

1,433,778

Foreign exchange losses/(gains)

614,390

(51,687)

(7,613)

85,951

(261,556)

(38,523)

Share-based compensation

7,522,984

18,632,776

232,558

34,252

Income tax expenses related to dividend distribution
or retained profits

4,140,689

6,486,874

955,413

11,940,633

14,576,403

2,146,872

Contingent consideration included in other current
liabilities and other assets

2,046,066

301,353

2,046,066

301,353

Changes in operating assets and liabilities:

Accounts receivable

(6,591,451)

(4,658,499)

(686,123)

(30,460,379)

(43,356,590)

(6,385,736)

Prepaid rent

(2,070,338)

642,280

94,599

(1,358,757)

10,564,530

1,555,988

Inventories

(55,490)

(1,274,556)

(187,722)

1,113,304

(1,511,933)

(222,684)

Amounts due from related parties

(1,974,899)

8,625,331

1,270,374

(1,996,450)

10,135,528

1,492,802

Other current assets

4,784,543

(18,021,028)

(2,654,211)

4,970,725

(3,193,950)

(470,418)

Other assets

4,267,763

(8,142,812)

(1,199,306)

(7,875,091)

(17,157,334)

(2,527,002)

Accounts payable

1,332,798

4,598,670

677,311

3,302,907

7,487,666

1,102,814

Amounts due to related parties

(76,817)

521,868

76,863

755,531

(1,526,433)

(224,819)

Salary and welfare payable

(471,404)

8,405,275

1,237,963

(5,521,054)

9,778,026

1,440,148

Deferred revenue

5,676,928

6,439,785

948,478

10,502,629

(32,603,970)

(4,802,046)

Advance from customers

3,127,446

(339,768)

(50,042)

849,222

(8,097,688)

(1,192,661)

Accrued expenses and other current liabilities

3,050,771

36,865,011

5,429,629

31,312,003

16,760,864

2,468,608

Income tax payable

11,452,280

15,896,890

2,341,359

(15,880,832)

(30,522,077)

(4,495,416)

Unrecognized tax benefits

7,662,789

16,917,849

2,491,730

36,577,122

13,707,938

2,018,961

Deferred rent

(681,471)

632,148

93,106

(2,532,739)

4,783,547

704,541

Other long-term liabilities

8,456,070

424,893

62,580

12,049,539

1,603,859

236,223

Deferred taxes

(2,297,390)

(3,180,335)

(468,413)

2,700,045

(15,548,950)

(2,290,113)

Net cash provided by operating activities

188,257,305

175,365,486

25,828,545

395,471,491

176,798,246

26,039,567

Investing activities:

Purchases of property and equipment

(33,707,518)

(26,948,009)

(3,969,013)

(47,218,828)

(68,576,946)

(10,100,293)

Purchases of intangible assets

(9,075)

(1,337)

Proceeds from disposal of property and equipment

60,262

8,876

1,300,000

71,387

10,514

Acquisitions, net of cash received

(4,318,317)

(6,660,000)

(980,912)

(248,978,924)

(7,915,807)

(1,165,872)

Advances for acquisitions

(11,244,749)

(59,111,449)

Repayment of advances for acquisitions

872,700

128,535

36,312,700

5,348,283

Purchases of short-term investments

(405,305,933)

(610,180)

(89,870)

(617,825,906)

(148,300,207)

(21,842,260)

Proceeds from short-term investments

4,248,415

8,817,211

1,298,635

761,078,783

407,451,316

60,011,093

Increase of long-term time deposits

(40,000,000)

(500,000,000)

(30,000,000)

(4,418,522)

Purchases of investments in equity securities

(65,086,928)

(89,123,279)

Purchases of long term investments

(247,456,740)

Proceeds from disposal of equity securities

76,361,856

263,768

38,849

221,583,600

263,768

38,849

Dividends received from investment in equity
securities

5,081,888

748,481

7,622,306

1,122,644

Proceeds from disposal of equity method investments

6,380,000

939,672

Loan to a related party

 

(220,536,455)

(119,400,000)

(17,585,719)

(337,516,205)

(304,766,500)

(44,887,254)

Repayment from a related party

 

220,300,000

111,100,000

16,363,261

337,279,750

297,256,179

43,781,103

Loan to third parties

(104,000,000)

(3,800,000)

(559,680)

(255,775,219)

(7,000,000)

(1,030,987)

Repayment of loan from third parties

121,280,219

Loan to franchisees

(34,861,152)

(59,310,002)

(8,735,419)

(66,451,152)

(205,761,780)

(30,305,435)

Repayment from franchisees

3,187,806

35,586,060

5,241,260

10,455,159

70,801,095

10,427,874

Net cash (used in)/provided by investing activities

(614,962,975)

(54,946,302)

(8,092,716)

(1,016,480,191)

53,828,436

7,928,072

Financing activities:

Distribution to the shareholders

(208,025,814)

Proceeds from short-term borrowings

2,997,225

441,444

21,437,555

3,157,411

Repayment of short-term borrowings

(10,000,000)

(1,472,841)

(10,000,000)

(1,472,841)

Capital contribution from noncontrolling interest
holders

2,370,000

2,884,202

424,797

12,760,000

6,262,589

922,380

Net cash provided by/(used in) financing activities

2,370,000

(4,118,573)

(606,600)

(195,265,814)

17,700,144

2,606,950

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

8,375,549

(1,474,708)

(217,201)

(64,704)

(882,510)

(129,980)

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

(415,960,121)

114,825,903

16,912,028

(816,339,218)

247,444,316

36,444,609

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

866,946,688

474,778,636

69,927,335

1,267,325,785

342,160,223

50,394,754

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

450,986,567

589,604,539

86,839,363

450,986,567

589,604,539

86,839,363

GreenTree Hospitality Group Ltd.

Unaudited Reconciliation of GAAP and Non-GAAP Results

Quarter Ended

 Nine Months Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

RMB

RMB

US$

Net income

102,173,754

85,637,413

12,613,028

363,232,408

165,223,010

24,334,719

Deduct:

Other operating income

8,449,390

8,577,445

1,263,321

16,995,685

27,671,358

4,075,551

Gains from investment in equity securities

2,905,553

427,942

54,040,607

45,440,136

6,692,609

Share of gain in equity investees, net of tax

1,067,166

170,211

 

25,070

779,369

1,118,542

164,743

Other income, net

517,981

76,290

2,690,742

517,981

76,290

Add:

Other operating expenses

53,736

434,792

64,038

161,710

1,633,064

240,524

Income tax expense

46,994,932

41,821,938

6,159,706

150,211,254

72,398,501

10,663,147

Interest expense

735,927

203,604

29,988

2,121,402

2,941,850

433,288

Share-based compensation

7,643,465

19,819,047

232,558

34,252

Depreciation and amortization

7,172,700

18,063,004

2,660,393

22,993,514

50,068,849

7,374,344

Losses from investment in equity securities

21,796,444

55,174,918

8,126,387

Adjusted EBITDA (Non-GAAP)

177,054,402

133,989,561

19,734,530

484,032,932

272,924,733

40,197,468

Quarter Ended

 Nine Months Ended

 September 30, 2019

 September 30, 2020

 September 30, 2020

 September 30, 2019

 September 30, 2020

 September 30, 2020

RMB

RMB

US$

RMB

RMB

US$

Net income

102,173,754

85,637,413

12,613,028

363,232,408

165,223,010

24,334,719

Deduct:

Government subsidies (net of 25% tax)

1,005,153

148,043

5,048,981

14,217,238

2,093,973

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

2,179,165

320,956

40,530,455

34,080,102

5,019,457

Other income  (net of 25% tax)

388,486

57,218

2,018,057

388,486

57,218

Add:

Share-based compensation

7,643,465

19,819,047

232,558

34,252

Losses from investments in equity securities  (net
of  25% tax)

16,347,333

50,081,189

7,376,162

One-off selling expense(net of 25% tax)

4,306,969

4,306,969

One-time fees and expense

210,000

3,839,368

565,478

1,153,650

3,839,368

565,478

One-time provision of bad debt

9,501,082

1,399,358

Income tax expenses related to dividend
distribution

4,140,689

6,486,874

955,413

11,940,633

14,576,403

2,146,872

Core net income(Non-GAAP)

134,822,210

92,390,851

13,607,702

352,855,214

194,767,784

28,688,193

Core net income per ADS (Non-GAAP)

Class A ordinary share-basic and diluted

1.32

0.90

0.13

3.46

1.89

0.28

Class B ordinary share-basic and diluted

1.32

0.90

0.13

3.46

1.89

0.28

Operational Data

As of September 30, 2019

As of September 30, 2020

 Total hotels in operation:

3,102

4,195

 Leased-and-owned hotels

30

37

 Franchised hotels

3,072

4,158

 Total hotel rooms in operation

245,705

305,125

 Leased-and-owned hotels

3,724

4,620

 Franchised hotels

241,981

300,505

 Number of cities

309

341

Quarter Ended

As of September 30, 2019

As of September 30, 2020

 Occupancy rate (as a percentage)

 Leased-and-owned hotels

73.1%

70.6%

 Franchised hotels

86.1%

79.3%

 Blended

85.9%

79.1%

 Average daily rate (in RMB)

 Leased-and-owned hotels

224

171

 Franchised hotels

173

151

 Blended

174

151

RevPAR (in RMB)

 Leased-and-owned hotels

164

121

 Franchised hotels

149

120

 Blended

149

120

Number of Hotels in Operation

Number of Hotel Rooms in Operation

As of September 30, 2019

As of September 30, 2020

As of September 30, 2019

As of September 30, 2020

Luxury

21

20

4,739

4,042

Argyle

21

20

4,739

4,042

 Mid-to-up-scale

171

337

17,147

30,303

 GreenTree Eastern

100

137

10,691

14,305

 Deepsleep Hotel (????)

2

3

161

221

 Gem

22

33

2,002

3,016

 Gya

18

39

1,566

3,340

 Vx

19

32

1,544

2,563

Ausotel

10

12

1,183

1,561

Urban Garden and others*

/

81

/

5,297

 Mid-scale

2,412

2,684

202,235

217,922

 GreenTree Inn

1,986

2,113

169,889

178,179

 GT Alliance

297

321

22,951

24,560

 GreenTree Apartment

7

13

373

862

Vatica                                    

122

123

9,022

8,925

City 118 Selected and others*

/

114

/

5,396

 Economy hotels

498

1,154

21,584

52,858

Shell

498

593

21,584

25,791

City 118 and others*

/

561

/

27,067

Total

3,102

4,195

245,705

305,125

 * 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:

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

Christensen

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

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

In US 
Ms. Linda Bergkamp 
Phone: +1-480-614-3004
Email: 

1  The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of US$1.00=RMB6.7896 on September 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/h10/20201005/

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.

SOURCE GreenTree Hospitality Group Ltd.