GreenTree Hospitality Group Ltd.

08/16/2019 | Press release | Distributed by Public on 08/16/2019 06:41

GreenTree Hospitality Group Ltd. Reports Second Quarter of 2019 Financial Results

GreenTree Hospitality Group Ltd. Reports Second Quarter of 2019 Financial Results

Revenue Increased by 20% for the Sixth Consecutive Quarter

  • A total of 2,955 hotels with 236,557 hotel rooms in operation as of June 30, 2019, comparedto 2,829 hotels and 225,757 hotel rooms as of March 31, 2019.
  • Total revenues increased 21.6% to RMB274.9million (US$40.0 million)[1] for the second quarter of 2019. Totalrevenues increased 20.9% to RMB510.2 million(US$74.3 million)[1] for the first half of 2019.
  • Adjusted EBITDA (non-GAAP) increased 19.1% to RMB173.1 million(US$25.2 million)[1] for the second quarter of 2019. Adjusted EBITDA (non-GAAP) increased 19.5% to RMB307.0 million(US$44.7 million)[1] for the first half of 2019.
  • Net income increased 35.2% to RMB127.1 million(US$18.5 million)[1] for the second quarter of 2019. Net income increased 46.4% to RMB261.1 million(US$38.0 million)[1] for the first half of 2019.
  • Core net income (non-GAAP) increased 16.9% to RMB125.8 million(US$18.3 million)[1] for the second quarter of 2019. Core net income (non-GAAP) increased 17.4% to RMB218.0 million(US$31.8 million)[1] for the first half of 2019.
  • Net income per ADS (basic and diluted) totaled RMB1.26(US$0.18)[1] for the second quarter of 2019. Net income per ADS (basic and diluted) totaled RMB2.59(US$0.38)[1] for the first half of 2019.
  • Core net income per ADS (basic and diluted) (non-GAAP) of the Company totaled RMB1.23(US$0.18)[1] for the second quarter of 2019. Core net income per ADS (basic and diluted) (non-GAAP) totaled RMB2.14(US$0.31)[1] for the first half of 2019.
  • The Company expects total revenuefor thefull year 2019 total to grow23-28% from 2018.

SHANGHAI, Aug. 16, 2019/PRNewswire / -- GreenTree Hospitality Group Ltd. (NYSE: GHG) ('GreenTree', the 'Company', 'we', 'us' and 'our'), a leading hospitality management group in China, today announced its unaudited financial results for the second quarter ended June 30, 2019.

Second Quarter of 2019 Operational Highlights

  • As of June 30, 2019, the Company had 30 leased-and-operated ('L&O') hotels and 2,925 franchised-and-managed ('F&M') hotels in operation in 300 cities across China, compared to 26 L&O hotels and 2,408 F&M hotels in operation in 267 cities as of June 30, 2018. The geographic coverage increased by 12.4% year over year.
  • During the second quarter of 2019, the Company opened 134 hotels, increased by 30 comparing to 104 newly opened hotels in the second quarter of 2018. Among the hotels opened, one was in the luxury hotel segment, 21 were in the mid-to-up-scale segment, 60 were in the mid-scale segment, and 52 were in the economy segment. Geographically speaking, 7hotels were in Tier 1 cities[2] 34 were in Tier 2 cities[3] and the remaining 93 were in select Tier 3and other cities in China.
    During this quarter, the Company closed 35 hotels, 26 due to their non-compliance with the Company's brand and operating standards, and 8 due to property related issues. The remainingone that was closed for brand upgrade. The Company addeda net opening of 99 hotels tothe portfolio.
  • As of June 30, 2019, the Company had a pipeline with a total of 596 hotels contracted for or under development, among which 47 hotels were in the luxury hotel segment, 117 in the mid-to-up-scale segment, 239 in the mid-scale segment, and 193 in the economy segment.
  • The average daily room rate, or ADR, for all hotels in operation, was RMB172 in the second quarter of 2019, an increase of 4.8% year-over-year.
  • The occupancy rate, or OCC for all hotels in operation was 81.1% in the second quarter of 2019, compared with 82.6% in the second quarter of 2018.
  • The revenue per available room, or RevPAR, which is calculated by multiplying our hotels' ADR by its occupancy rate, was RMB139in the second quarter of 2019, representing a 2.9% year-over-year increase.
  • As of June 30, 2019, the Company's loyalty program had more than 36 million individual loyal members and over 1,380,000 corporate members, compared to approximately 33 million and over 1,320,000 corporate members as of March 31, 2019. The Company had approximately 93.8% of room nights sold directly.

'We are proud to have delivered a 6th consecutive quarter of improved operating and financial performance. During the quarter, we further improved the quality of our hotels, our RevPAR and market share. We will continue to focus on enhancing our value proposition to deliver better service and support to our customers and franchisees, and, as a result, deliver solid growth for the long run.' said Mr. Alex Xu, Chairman and Chief Executive Officer of GreenTree.

Second Quarter of 2019 Financial Results

Quarter Ended

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

Revenues[3]

Leased-and-operated hotels

51,305,036

60,510,976

8,814,417

Franchised-and-managed hotels

174,724,851

214,419,775

31,233,762

Total revenues

226,029,887

274,930,751

40,048,179

Six Months Ended

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

Revenues

Leased-and-operated hotels

96,920,132

112,336,802

16,363,700

Franchised-and-managed hotels

325,068,200

397,887,057

57,958,785

Total revenues

421,988,332

510,223,859

74,322,485

[3] On January 1, 2019, the Company adopted ASC 606 by using the full retrospective method and restate the comparable periods

Total revenues for the second quarter of 2019 were RMB274.9 million(US$40.0 million)[1], representing a 21.6% year-over-year increase. The increase was primarily attributable to the addition of 134 hotels to our current network, improved RevPAR, contribution from membership growth, and the consolidation of the Argyle's results of operation into our statement. Growth was partially offset by the renovation of 9 L&O hotels during this quarter. Total revenues for the first half of 2019 were RMB510.2 million(US$74.3 million)[1], representing a 20.9% increase.

  • Total revenues from leased-and-operated hotels for the second quarter of 2019 were RMB60.5 million(US$8.8 million)[1], representing a 17.9% year-over-year increase. The increase was primarily attributable to increasing RevPAR, moderate sublease revenue growth; and was partially offset by the renovation of 9 L&O hotels during the quarter. Total revenues from leased-and-operated hotels for the first half of 2019 were RMB112.3 million(US$16.4 million)1, representing a 15.9% increase.
  • Total revenues from franchised-and-managed hotels for the second quarter of 2019 were RMB214.4 million(US$31.2 million)[1], representing a 22.7% year-over-year increase. Initial franchise fees increased by 8.0% year-over-year in the second quarter of 2019, primarily due to the gross opening of 134 hotels in the second quarter of 2019 as compared to 104 hotels opened in the second quarter of 2018. The 23.8% increase from the second quarter of 2018 in recurring franchisee management fees and others was primarily due to the new openings, RevPAR growth of 2.8% as well as growth in central reservation system ('CRS') usage fees, annual IT and marketing fees and hotel manager fees, which in turn resulted from the increased number of hotels and hotel rooms in operation. Total revenues from franchised-and-managed hotels for the first half of 2019 were RMB397.9 million(US$58.0 million)[1], representing a 22.4% increase.

Quarter Ended

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

Initial franchise fee

12,261,211

13,243,838

1,929,183

Recurring franchise management fee and others

162,463,640

201,175,937

29,304,579

Revenues from franchised-and-managed hotels

174,724,851

214,419,775

31,233,762

Six Months Ended

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

Initial franchise fee

21,104,652

25,996,787

3,786,859

Recurring franchise management fee and others

303,963,548

371,890,270

54,171,926

Revenues from franchised-and-managed hotels

325,068,200

397,887,057

57,958,785

Total operating costs and expenses

Quarter Ended

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

Operating costs and expenses

Hotel operating costs

64,206,723

78,939,817

11,498,881

Selling and marketing expenses

10,919,269

16,353,634

2,382,175

General and administrative expenses

25,150,930

39,768,385

5,792,918

Other operating expenses

35,330

65,350

9,520

Total operating costs and expenses

100,312,252

135,127,186

19,683,494

Six Months Ended

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

Operating costs and expenses

Hotel operating costs

127,952,267

158,939,661

23,152,172

Selling and marketing expenses

21,388,124

41,029,736

5,976,655

General and administrative expenses

45,551,787

65,500,871

9,541,278

Other operating expenses

178,592

107,974

15,728

Total operating costs and expenses

195,070,770

265,578,242

38,685,833

Hotel operating costs for the second quarter of 2019 were RMB78.9million(US$11.5 million)1, representing a 22.9% increase from the second quarter of 2018. The increase was mainly attributable to costs associated with the expansion of our F&M hotels including staff costs; higher rents, consumables, depreciation and amortization associated with the 4 new L&O hotels added to our portfolio in the third quarter of 2018, 1 new L&O hotel opened in the first quarter of 2019; as well as the operation costs of Argyle. For the first half year of 2019, hotel operating costs were RMB158.9million(US$23.2 million)1, representing a 24.2% increase.

Quarter Ended

June 30,
2018

June 30,
2019

June 30,
2019

RMB

RMB

US$

Rental

17,660,357

19,039,168

2,773,368

Utilities

5,104,337

4,891,420

712,516

Personnel cost

7,937,739

8,495,301

1,237,480

Depreciation and amortization

3,714,393

7,174,031

1,045,015

Consumable, food and beverage

4,602,750

6,931,925

1,009,749

Costs of general managers of franchised-and-operated hotels

15,729,674

23,045,469

3,356,951

Other costs of franchised-and-operated hotels

5,990,938

7,306,217

1,064,271

Others

3,466,535

2,056,286

299,531

Hotel Operating Costs

64,206,723

78,939,817

11,498,881

Six Months Ended

June 30,
2018

June 30,
2019

June 30,
2019

RMB

RMB

US$

Rental

35,292,424

39,647,433

5,775,300

Utilities

10,215,337

11,045,983

1,609,029

Personnel cost

15,169,589

17,289,575

2,518,511

Depreciation and amortization

8,534,806

13,698,236

1,995,373

Consumable, food and beverage

9,039,387

13,769,076

2,005,692

Costs of general managers of franchised-and-operated hotels

31,315,282

45,490,112

6,626,382

Other costs of franchised-and-operated hotels

11,375,446

12,992,800

1,892,615

Others

7,009,996

5,006,446

729,270

Hotel Operating Costs

127,952,267

158,939,661

23,152,172

Selling and marketing expenses for the second quarter of 2019 were RMB16.4 million(US$2.4 million)[1], representing a 49.8% year-over-year increase. The increase was mainly attributable to the operation of our two newly-added brands, as well as increased advertising and promotion expenses to improve our brands' market recognition, and increased personnel, compensation and other costs. Selling and marketing expenses for the first half of 2019 were RMB41.0 million(US$6.0 million)[1], representing a 91.8% increase.

General and administrative expenses for the second quarter of 2019 were RMB39.8 million(US$5.8 million)[1], representing a 58.1% year-over-year increase. The increase was primarily attributable to the consolidation of Argyle's G&A expense, as well as increased share-based compensation expenses, consulting fee, and travelling expenses. General and administrative expenses for the first half of 2019 were RMB65.5 million(US$9.5 million)[1], representing a 43.8% year-over-year increase.

Gross profit for the second quarter of 2019 was RMB196.0 million(US$28.5 million)[1], representing an increase of 21.1% from the second quarter of 2018. Gross margin in this quarter was 71.3%, compared to 71.6% a year ago. The decrease of the margin resulted from increased operating costs caused by rising staff numbers and one-time costs related to the renovation of 9 L&O hotels. Gross profit for the first half of 2019 was RMB351.3 million(US$51.2 million)[1], representing a 19.5% year-over-year increase.

Income from operations for the second quarter of 2019 totaled RMB141.4 million(US$20.6 million)[1], representing a year-over-year increase of 2.5%. The operating margin, defined as income from operations as percentage of total revenues, for the second quarter of 2019 was 51.4%, compared to 61.0% a year ago. Income from operations for the first half of 2019 totaled RMB253.2 million(US$36.9 million)[1], representing a year-over-year increase of 0.1%.

Adjusted EBITDA (non-GAAP) for the second quarter of 2019 was RMB173.1 million(US$25.2 million)[1], representing a year-over-year increase of 19.1%. The adjusted EBITDA margin, defined as adjusted EBITDA (non-GAAP) as a percentage of total revenues, was 63.0% in the second quarter of 2019, compared to 64.3% in the second quarter of 2018. Adjusted EBITDA (non-GAAP) for the first half of 2019 was RMB307.0 million(US$44.7 million)[1], representing a year-over-year increase of 19.5%.

Net income for the second quarter of 2019 was RMB127.1 million(US$18.5 million)[1], representing a year-over-year increase of 35.2%. Net margin in the second quarter was 46.2%, compared to 41.6% a year ago. The year-over-year increase in net income and net income margin was mainly attributable to the Company's expanded hotel network and the improved RevPAR. Net income for the first half of 2019 was RMB261.1 million(US$38.0 million)1, representing a year-over-year increase of 46.4%.

Core net income (non-GAAP) for the second quarter of 2019 was RMB125.8 million(US$18.3 million)[1], representing a year-over-year increase of 16.9%. The core net margin, defined as core net income (non-GAAP) as a percentage of total revenues, was 45.7% in the second quarter of 2019, compared to 47.6% one year ago. Core net income (non-GAAP) for the first half of 2019 was RMB218.0 million(US$31.8 million)[1], representing a year-over-year increase of 17.4%.

Earnings per ADS (basic and diluted) for the second quarter of 2019 was RMB1.26(US$0.18)[1], representing a year-over-year increase of 35.5%. Core net income per ADS (basic and diluted) (non-GAAP) was RMB1.23(US$0.18)[1] for the second quarter of 2019, representing a year-over-year increase of 16.0%. Earnings per ADS (basic and diluted) for the first half of 2019 was RMB2.59(US$0.38)[1], representing a year-over-year increase of 40.6%. Core net income per ADS (basic and diluted) (non-GAAP) was RMB2.14(US$0.31)[1] for the first half of 2019, representing a year-over-year increase of 11.5%.

Cash flow. Operating cash inflow for the second quarter of 2019 was RMB85.0 million(US$12.4 million)[1], due primarily to improved operating performance across our hotel portfolio. Operating cash inflow for the first half of 2019 was RMB207.2 million(US$30.2 million)[1]. Investing cash outflow for the second quarter of 2019 was RMB295.0 million(US$43.0 million)[1], which was primarily attributable to acquisitions, increase of long-term time deposits, loans to franchisees and partially offset by proceeds from disposal of investments in equity securities. Investing cash outflow for the first half of 2019 was RMB401.5 million(US$58.5 million)[1]. Financing cash outflow for the second quarter of 2019 was nil while net financing cash outflow for the first half of 2019 was RMB197.6 million(US$28.8 million)[1].

Cash and cash equivalents, restricted cash, short-term investments, investments in equity securities[4] and time deposit[5]. As of June 30, 2019, the Company had a total balance of cash and cash equivalents, restricted cash, short term investments, investments in equity securities and time deposit of RMB2,053.7 million(US$299.1 million)[1], as compared to RMB2,180.8 millionas of March 31, 2019, primarily due to cash outflow due to acquisitions, offset by operating cash inflow and loan to third parties and franchisees.

Recent Developments

During this quarter, the Company continued to develop its mid-scale segment and luxury brands, including GreenTree Eastern, GMe, GYa, VX, Deep Sleep Hotel[6], and two newly-added brands Argyle and Ausotel, to expand the scope of its distribution network and hotel portfolio in order to offer more diversified choices for both franchisees and customers.

The Company also integrated membership programs with its partners including but not limited to Da Niang Dumplings and Yibon Hotel Group. This will enable members to use membership points and benefits interchangeably.

In the meantime, the Company is continuously developing and improving its systems to better serve its clients and franchisees.

Guidance

For the full year 2019, the Company expects organic growth in total revenues of 23-28% compared to 2018.

The guidance set forth above reflects the Company's current and preliminary view based on our estimates, may not be indicative of our financial results for future interim periods and the full year ended December 31, 2019and is subject to change.

Conference Call

GreenTree's management will hold an earnings conference call at 8:00 AMU.S. Eastern Time on August 16, 2019(8:00 PMBeijing/Hong Kong Time on August 16, 2019).

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

International

1-412-902-4272

China

4001-201-203

US

1-888-346-8982

Hong Kong

800-905-945 or 852-3018-4992

Singapore

800-120-6157

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

A telephone replay of the call will be available after the conclusion of the conference call until August 23, 2019.

Dial-in numbers for the replay are as follows:

International Dial-in

1-412-317-0088

U.S. Toll Free

1-877-344-7529

Canada Toll Free

855-669-9658

Passcode:

10133916

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

Use of Non-GAAP Financial Measures

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

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

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

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

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

About GreenTree Hospitality Group Ltd.

GreenTree Hospitality Group Ltd. ('GreenTree' or the 'Company') (NYSE: GHG) is a leading hospitality management group in China. As of June 30, 2019, GreenTree had a total number of 2,955 hotels. In 2018, GreenTree ranked among the Top 12 worldwide in terms of number of hotels in 'World's Largest Hotel Companies: HOTELS' 325', published by HOTELS magazine, and was as well the fourth largest hospitality company in Chinain 2018 based on the statistics issued by the China Hospitality Association.

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

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

Safe Harbor Statements

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

[1]

The conversion of Renminbi ('RMB') into United States dollars ('US$') is based on the exchange rate of US$1.00=RMB6.8650 on June 28, 2019 as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at https://www.federalreserve.gov/releases/H10/hist/dat00_ch.htm.

[2]

'Tier 1 cities' refers to the term used by the National Bureau of Statistics of China and refer to Beijing, Shanghai, Shenzhen and Guangzhou.

[3]

'Tier 2 cities' refers to the 32 major cities, other than Tier 1 cities, as categorized by the National Bureau of Statistics of China, 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.

[4]

Investments in equity securities include securities and investment in Gingko and New Century which is recorded in Long-term investments account.

[5]

Investments in equity securities include securities and investment in Gingko and New Century which is recorded in Long-term investments account.

[6]

Time deposits are the time deposit certificates last over three months.

[7]

Wumian Hotel changed its brand name to Deep Sleep Hotel in the second quarter of 2019, while its English trademark is currently being registered.

---Financial Tables and Operational Data Follow-

GreenTree Hospitality Group Ltd.
Unaudited Condensed Consolidated Balance Sheets

December 31, 2018

June 30,
2019

June 30,
2019

RMB

RMB

US$

ASSETS

Current assets:

Cash and cash equivalents

1,264,025,785

850,661,068

123,912,756

Short-term investment

685,512,063

151,615,477

22,085,284

Investments in equity securities

307,693,782

248,171,341

36,150,232

Accounts receivable, net of allowance for doubtful accounts

64,864,184

94,605,153

13,780,794

Amounts due from related parties

228,600

250,151

36,438

Prepaid rent

4,478,413

3,766,832

548,701

Inventories

2,547,729

1,432,429

208,657

Other current assets

53,969,039

54,477,884

7,935,599

Loans receivable, net

67,196,568

91,672,017

13,353,535

Total current assets

2,450,516,163

1,496,652,352

218,011,996

Non-current assets:

Restricted cash

3,300,000

16,285,620

2,372,268

Long-term time deposits

60,000,000

520,000,000

75,746,540

Loan receivable, net

39,352,863

69,695,061

10,152,230

Property and equipment, net

222,389,573

426,585,281

62,139,152

Intangible assets, net

27,213,391

256,942,055

37,427,830

Goodwill

5,787,068

45,485,971

6,625,779

Long-term investments

112,219,460

378,850,506

55,185,798

Other assets

25,701,523

81,078,922

11,810,479

Deferred tax assets

133,300,966

134,070,982

19,529,640

TOTAL ASSETS

3,079,781,007

3,425,646,750

499,001,712

LIABILITIES AND EQUITY

Current liabilities:

Short-term bank loans

60,000,000

60,000,000

8,739,985

Accounts payable

9,182,058

11,708,087

1,705,475

Advance from customers

36,370,325

34,092,101

4,966,074

Amounts due to related parties

285,578

1,117,926

162,844

Salary and welfare payable

42,767,219

39,241,585

5,716,181

Deferred rent

4,421,427

3,208,628

467,389

Deferred revenue

210,585,604

215,123,608

31,336,287

Accrued expenses and other current
liabilities

241,407,979

271,306,037

39,520,182

Income tax payable

104,988,638

77,823,166

11,336,222

Total current liabilities

710,008,828

713,621,138

103,950,639

Deferred rent

20,519,682

19,881,213

2,896,025

Deferred revenue

380,173,585

397,461,282

57,896,764

Other long-term liabilities

96,573,810

100,167,279

14,591,009

Deferred tax liabilities

43,538,624

134,389,663

19,576,062

Unrecognized tax benefits

169,619,409

198,533,742

28,919,700

TOTAL LIABILITIES

1,420,433,938

1,564,054,317

227,830,199

Shareholders' equity:

Class A ordinary shares

217,421,867

219,526,699

31,977,669

Class B ordinary shares

115,534,210

115,534,210

16,829,455

Additional paid-in capital

1,003,026,803

1,073,071,903

156,310,547

Retained earnings

252,617,450

307,982,604

44,862,725

Accumulated other comprehensive (loss) income

62,367,692

58,585,189

8,533,895

Total GreenTree Hospitality Group Ltd. shareholders' equity

1,650,968,022

1,774,700,605

258,514,291

Non-controlling interests

8,379,047

86,891,828

12,657,222

Total shareholders' equity

1,659,347,069

1,861,592,433

271,171,513

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

3,079,781,007

3,425,646,750

499,001,712

GreenTree Hospitality Group Ltd.
Unaudited Condensed Consolidated Statements of Comprehensive Income

Quarter Ended

Six Months Ended

June 30,
2018

June 30, 2019

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

RMB

RMB

US$

Revenues

Leased-and-operated hotels

51,305,036

60,510,976

8,814,417

96,920,132

112,336,802

16,363,700

Franchised-and-managed hotels

174,724,851

214,419,775

31,233,762

325,068,200

397,887,057

57,958,785

Total revenues

226,029,887

274,930,751

40,048,179

421,988,332

510,223,859

74,322,485

Operating costs and expenses

Hotel operating costs

(64,206,723)

(78,939,817)

(11,498,881)

(127,952,267)

(158,939,661)

(23,152,172)

Selling and marketing expenses

(10,919,269)

(16,353,634)

(2,382,175)

(21,388,124)

(41,029,736)

(5,976,655)

General and administrative
expenses

(25,150,930)

(39,768,385)

(5,792,918)

(45,551,787)

(65,500,871)

(9,541,278)

Other operating expenses

(35,330)

(65,350)

(9,520)

(178,592)

(107,974)

(15,728)

Total operating costs and
expenses

(100,312,252)

(135,127,186)

(19,683,494)

(195,070,770)

(265,578,242)

(38,685,833)

Other operating income

12,242,088

1,639,842

238,870

26,067,489

8,546,295

1,244,908

Income from operations

137,959,723

141,443,407

20,603,555

252,985,051

253,191,912

36,881,560

Interest income and other, net

11,420,031

17,759,532

2,586,968

16,123,893

34,228,543

4,985,949

Interest expense

-

(700,350)

(102,017)

-

(1,385,475)

(201,817)

Gains (losses) from investment
in equity securities

(25,862,935)

15,902,581

2,316,472

(31,036,562)

75,837,051

11,046,912

Other income, net

-

1,860,961

271,079

-

2,690,742

391,951

Income before income taxes

123,516,819

176,266,131

25,676,057

238,072,382

364,562,773

53,104,555

Income tax expense

(29,339,034)

(49,050,930)

(7,145,074)

(58,625,445)

(103,216,322)

(15,035,152)

Income before share of loss in equity method investments

94,177,785

127,215,201

18,530,983

179,446,937

261,346,451

38,069,403

Share of losses in equity investees, net of tax

(182,988)

(114,566)

(16,688)

(1,090,024)

(287,797)

(41,922)

Net income

93,994,797

127,100,635

18,514,295

178,356,913

261,058,654

38,027,481

Net loss attributable to non-controlling interests

(3,152)

1,376,781

200,551

26,367

2,332,314

339,739

Net income attributable to ordinary shareholders

93,991,645

128,477,416

18,714,846

178,383,280

263,390,968

38,367,220

Net earnings per share

Class A ordinary share-basic and diluted

0.93

1.26

0.18

1.84

2.59

0.38

Class B ordinary share-basic and diluted

0.93

1.26

0.18

1.84

2.59

0.38

Net earnings per ADS

Class A ordinary share-basic and diluted

0.93

1.26

0.18

1.84

2.59

0.38

Class B ordinary share-basic and diluted

0.93

1.26

0.18

1.84

2.59

0.38

Weighted average shares outstanding

Class A ordinary share-basic and diluted

66,789,300

67,113,004

67,113,004

58,866,739

67,064,583

67,064,583

Class B ordinary share-basic and diluted

34,762,909

34,762,909

34,762,909

37,839,060

34,762,909

34,762,909

Other comprehensive income, net of tax

Foreign currency translation adjustments

1,213,623

11,020,015

1,605,246

1,043,741

(3,782,503)

(550,984)

Comprehensive income, net of tax

95,208,420

138,120,650

20,119,541

179,400,654

257,276,151

37,476,497

Comprehensive (gain)/loss attributable to non-controlling interests

(3,152)

1,376,781

200,551

26,367

2,332,314

339,740

Comprehensive income attributable to ordinary shareholders

95,205,268

139,497,431

20,320,092

179,427,021

259,608,465

37,816,237

GreenTree Hospitality Group Ltd.

Unaudited Condensed Consolidated Statements of Cash Flows

Quarter Ended

Six Months Ended

June30, 2018

June 30, 2019

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

RMB

RMB

US$

Operating activities:

Net income

93,994,797

127,100,635

18,514,295

178,356,913

261,058,654

38,027,481

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

Depreciation and amortization

4,557,247

8,150,042

1,187,187

9,951,749

15,820,814

2,304,561

Share of loss in equity method investments

182,988

114,566

16,688

1,090,024

287,797

41,922

Interest income

(234,004)

(2,452,171)

(357,199)

(4,937,866)

(10,413,809)

(1,516,942)

Bad debt expense

379,445

(5,890,482)

(858,045)

698,703

(4,999,113)

(728,203)

(Gains) loss from investments in equity securities

25,862,935

(15,902,581)

(2,316,472)

31,036,562

(75,837,051)

(11,046,912)

Foreign exchange losses (gains)

(1,340,059)

(324,322)

(47,243)

(614,853)

(528,439)

(76,976)

Share-based compensation

3,586,930

6,260,341

911,921

3,746,769

11,109,792

1,618,324

Income tax expenses related to dividend distribution or retained profits

-

3,955,452

576,177

-

7,799,944

1,136,190

Changes in operating assets and liabilities:

Accounts receivable

(8,246,047)

(5,850,767)

(852,260)

(19,468,637)

(23,868,928)

(3,476,901)

Prepaid rent

(1,455,073)

-

-

131,304

711,581

103,653

Inventories

186,242

(280,089)

(40,800)

961,422

1,168,794

170,254

Amounts due from related parties

1,938,481

(25,151)

(3,664)

1,522,123

(21,551)

(3,139)

Other current assets

(19,562,202)

(7,010,607)

(1,021,210)

(26,365,951)

186,182

27,120

Other assets

-

(7,453,225)

(1,085,685)

-

(12,142,854)

(1,768,806)

Accounts payable

(4,359,732)

(2,228,556)

(324,626)

337,208

1,970,109

286,979

Amounts due to related parties

154,006

899,112

130,970

480,702

832,348

121,245

Salary and welfare payable

27,794

2,313,943

337,064

(1,651,291)

(5,049,650)

(735,564)

Deferred revenue

27,635,223

9,218,777

1,342,866

49,878,884

4,825,701

702,943

Advance from customers

8,017,444

(607,442)

(88,483)

(471,039)

(2,278,224)

(331,863)

Accrued expenses and other current liabilities

(29,094,444)

2,668,564

388,720

(25,606,665)

28,261,232

4,116,713

Income tax payable

(56,273,754)

(51,216,175)

(7,460,477)

(36,539,914)

(27,333,112)

(3,981,517)

Unrecognized tax benefits

43,190,003

22,867,582

3,331,039

46,941,155

28,914,333

4,211,847

Deferred rent

(1,028,699)

(1,558,697)

(227,050)

(2,043,147)

(1,851,268)

(269,668)

Other long-term liabilities

7,701,591

2,545,743

370,831

9,474,980

3,593,469

523,450

Deferred taxes

(9,523,172)

(272,719)

(39,726)

(14,570,166)

4,997,435

727,958

Net cash provided by operating activities

86,297,940

85,021,773

12,384,818

202,338,969

207,214,186

30,184,149

Investing activities:

Purchases of property and equipment

(54,676,146)

(4,451,361)

(648,414)

(113,008,255)

(3,511,310)

(1,968,144)

Purchases of intangible assets

(900,000)

-

-

(900,000)

-

-

Advances for acquisitions

-

(47,866,700)

(6,972,571)

-

(47,866,700)

(6,972,571)

Purchases of short-term investments

(275,105,052)

(28,283,130)

(4,119,902)

(791,666,641)

(212,519,973)

(30,957,024)

Proceeds from short-term investments

234,004

40,774,393

5,939,460

745,234,004

756,830,368

110,244,773

Proceeds from disposal of property and equipment

-

1,000,000

145,666

-

1,300,000

189,366

Acquisitions, net of cash received

-

(234,660,607)

(34,182,171)

-

(244,660,607)

(35,638,836)

Increase of long-term time deposits

-

(20,000,000)

(2,913,328)

-

(460,000,000)

(67,006,555)

Purchases of investments in equity securities

-

(22,060,000)

(3,213,401)

(4,795,838)

(24,036,351)

(3,501,289)

Purchases of long term investments

-

-

-

-

(247,456,740)

(36,046,138)

Proceeds from disposal of investments in equity securities

7,604,063

36,617,830

5,333,988

18,871,973

145,221,744

21,153,932

Loan to third parties

(5,000,000)

(135,835,219)

(19,786,631)

(10,000,000)

(151,775,219)

(22,108,553)

Loan to a related party

(4,300,000)

(106,979,750)

(15,583,358)

(4,300,000)

(116,979,750)

(17,040,022)

Loan to franchisees

(13,000,000)

(13,460,000)

(1,960,670)

(28,000,000)

(31,590,000)

(4,601,603)

Repayment of loan from third parties

-

121,280,219

17,666,456

-

121,280,219

17,666,456

Repayment from a related party

-

116,979,750

17,040,022

-

116,979,750

17,040,022

Repayment from a franchisee

4,920,000

1,973,956

287,539

8,420,000

7,267,353

1,058,609

Net cash used in investing activities

(340,223,131)

(294,970,619)

(42,967,315)

(180,144,757)

(401,517,216)

(58,487,577)

Financing activities:

Distribution to the shareholders

(160,840,918)

-

-

(200,532,021)

(208,025,814)

(30,302,376)

Income tax paid related to the above distribution

-

-

-

(3,000,000)

-

-

Proceeds from NCI

-

-

-

-

10,390,000

1,513,474

Proceeds from IPO, net of capitalized expenses

-

-

-

837,505,007

-

-

Payment for initial public offering costs

(25,087,646)

-

-

(29,390,408)

-

-

Net cash provided by (used in) financing activities

(185,928,564)

-

-

604,582,578

(197,635,814)

(28,788,902)

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

1,509,941

3,249,707

473,373

614,853

(8,440,253)

(1,229,461)

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

(438,343,814)

(206,699,139)

(30,109,124)

627,391,643

(400,379,097)

(58,321,791)

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

1,230,699,122

1,073,645,827

156,394,148

164,963,665

1,267,325,785

184,606,815

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

792,355,308

866,946,688

126,285,024

792,355,308

866,946,688

126,285,024

* Upon the adoption of ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, restricted cash was included within cash and cash equivalents in the consolidated statement of cash flows for the three months and six months period ended June 30, 2019and the comparative disclosure had been restated to conform to the current period presentation.

GreenTree Hospitality Group Ltd.

Unaudited Reconciliation of GAAP and Non-GAAP Results

Quarter Ended

Six Months Ended

June 30, 2018

June 30, 2019

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

RMB

RMB

US$

Net income

93,994,797

127,100,635

18,514,295

178,356,913

261,058,654

38,027,481

Deduct:

Other operating income

12,242,088

1,639,842

238,870

26,067,489

8,546,295

1,244,908

Reimbursement related to the ADS program

-

-

Gains on investments in equity securities

-

15,902,581

2,316,472

-

75,837,051

11,046,912

Other income, net

-

1,860,961

271,079

-

2,690,742

391,951

Add:

Other operating expenses

35,330

65,350

9,520

178,592

107,974

15,728

Income tax expense

29,339,034

49,050,930

7,145,074

58,625,445

103,216,322

15,035,152

Share of loss in equity investees, net of tax

182,988

114,566

16,688

1,090,024

287,797

41,922

Interest expense

-

700,350

102,017

-

1,385,475

201,817

Share-based compensation

3,586,930

7,326,131

1,067,171

3,746,769

12,175,582

1,773,573

Depreciation and amortization

4,557,247

8,150,042

1,187,187

9,951,749

15,820,814

2,304,561

Losses on investments in equity securities

25,862,935

-

-

31,036,562

-

-

Adjusted EBITDA (Non-GAAP)

145,317,173

173,104,620

25,215,531

256,918,565

306,978,530

44,716,463

Quarter Ended

Six Months Ended

June 30, 2018

June 30, 2019

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2019

RMB

RMB

US$

RMB

RMB

US$

Net income

93,994,797

127,100,635

18,514,295

178,356,913

261,058,654

38,027,481

Deduct:

Government subsidies (net of 25% tax)

76,774

233,981

34,083

10,312,776

5,048,981

735,467

Gains on investments in equity securities (net of 25% tax)

-

11,926,936

1,737,354

-

56,877,788

8,285,184

Reimbursement related to the ADS program

9,271,648

-

-

9,271,648

-

-

Other income (net of 25% tax)

-

1,395,721

203,309

-

2,018,057

293,963

Add:

Share-based compensation

3,586,930

7,326,131

1,067,171

3,746,769

12,175,582

1,773,573

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

19,397,201

-

-

23,277,422

-

-

one-time consulting fees for M&A

-

943,650

137,457

-

943,650

137,458

Income tax expenses related to dividend distribution

-

3,955,452

576,177

-

7,799,944

1,136,190

Core net income (Non-GAAP)

107,630,506

125,769,230

18,320,354

185,796,680

218,033,004

31,760,088

Core net income per ADS (Non-GAAP)

Class A ordinary share-basic and diluted

1.06

1.23

0.18

1.92

2.14

0.31

Class B ordinary share-basic and diluted

1.06

1.23

0.18

1.92

2.14

0.31

Operational Data

As of June 30, 2018

As of June 30, 2019

Total hotels in operation:

2,434

2,955

Leased-and-owned hotels

26

30

Franchised hotels

2,408

2,925

Total hotel rooms in operation

201,275

236,557

Leased-and-owned hotels

3,358

3,803

Franchised hotels

197,917

232,754

Number of cities

267

300

Quarter Ended

As of June 30, 2018

As of June 30, 2019

Occupancy rate (as a percentage)

Leased-and-owned hotels

70.7%

70.5%

Franchised hotels

82.9%

81.3%

Blended

82.6%

81.1%

Average daily rate (in RMB)

Leased-and-owned hotels

201

216

Franchised hotels

163

171

Blended

164

172

RevPAR (in RMB)

Leased-and-owned hotels

142

152

Franchised hotels

135

139

Blended

136

139

Number of Hotels in Operation

Number of Hotel Rooms in Operation

As of June

As of June

As of June

As of June

30, 2018

30, 2019

30, 2018

30, 2019

Luxury

/

19

/

4,017

Argyle

/

19

/

4,017

Mid-to-up-scale

60

152

6,760

15,357

GreenTree Eastern

59

96

6,650

10,200

Deepsleep Hotel

-

1

-

62

GMe

-

18

-

1,669

Geya

-

11

-

918

VX

1

17

110

1,397

Ausotel

/

9

/

1,111

Mid-scale

2,062

2,229

177,665

189,357

GreenTree Inn

1,785

1,931

155,470

166,183

GT Alliance

277

295

22,195

22,994

GreenTree Apartment

-

3

-

180

Economy hotels

312

555

16,850

27,826

Vatica

111

119

8,295

8,819

Shell

201

436

8,555

19,007

Total

2,434

2,955

201,275

236,557

For more information, please contact:

GreenTree

Ms. Selina Yang
Phone: +86-21-3617-4886 ext. 7999
E-mail: [email protected]

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

Christensen

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

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

In US
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: [email protected]

SOURCE GreenTree Hospitality Group Ltd.