HWORLD(HTHT) - 2022 Q2 - Quarterly Report

Financial Performance - Hotel turnover decreased 10.3% year-over-year to RMB11.8 billion in Q2 2022, with a decrease of 18.9% excluding Legacy-DH[2]. - Revenue in Q2 2022 was RMB3.4 billion (US $504 million), a 5.7% year-over-year decrease, aligning with previous guidance of a 2% to 6% decrease[3]. - Net loss attributable to H World Group Limited was RMB350 million (US$ 52 million) in Q2 2022, compared to a net income of RMB378 million in Q2 2021[4]. - Adjusted EBITDA (non-GAAP) was RMB53 million (US $7 million) in Q2 2022, down from RMB1.0 billion in Q2 2021[6]. - Total revenue for the quarter ended June 30, 2022, was RMB 3,382 million, a decrease of 6% compared to RMB 3,587 million for the same quarter in 2021[84]. - Net income attributable to H World Group Limited for the quarter was a loss of RMB 350 million, compared to a profit of RMB 378 million in the same quarter of the previous year[84]. - Adjusted EBITDA for the quarter ended June 30, 2022, was RMB 53 million (approximately USD 7 million), a significant decrease from RMB 1,043 million in the same quarter of 2021[88]. - The company reported a loss from operations of RMB 700 million for the six months ended June 30, 2022, compared to a profit of RMB 54 million in the same period of 2021[92]. Operational Metrics - The average daily rate (ADR) for Legacy-Huazhu hotels was RMB218 in Q2 2022, down from RMB255 in Q2 2021[12]. - The occupancy rate for all Legacy-Huazhu hotels was 64.6% in Q2 2022, compared to 82.3% in Q2 2021[12]. - RevPAR in Q2 2022 recovered to 69% of the 2019 level, with April and May 2022 at 53% and 65% respectively, improving to 86% in June 2022 due to lifted lockdowns[60]. - In Q2 2022, DH experienced a RevPAR recovery, with March 2022 RevPAR at 35% lower than 2019 levels, while June 2022 RevPAR was only 1% lower than 2019 levels[62]. - The average daily room rate for leased and owned hotels decreased by 21.7% year-over-year to RMB 243 in Q2 2022[96]. - The occupancy rate for leased and owned hotels was 62.9% in Q2 2022, down 18.1 percentage points from the previous year[96]. - Same-hotel RevPAR for economy hotels decreased by 34.8% year-over-year, from RMB 172 in June 2021 to RMB 112 in June 2022[99]. Cost and Expenses - Hotel operating costs in Q2 2022 were RMB2.97 billion (US$ 443 million), an increase from RMB2.74 billion in Q2 2021 and RMB2.81 billion in Q1 2022, primarily due to hotel network expansion and business recovery[32]. - In H1 2022, hotel operating costs totaled RMB5.8 billion (US $864 million), up from RMB5.2 billion in H1 2021, with Legacy-Huazhu segment costs representing 93.4% of revenue compared to 76.2% in 2021[33]. - Selling and marketing expenses in Q2 2022 were RMB142 million (US$ 21 million), a decrease from RMB161 million in Q2 2021 and RMB122 million in Q1 2022, with Legacy-Huazhu segment expenses at 2.6% of revenue[34]. - General and administrative expenses in Q2 2022 were RMB368 million (US $55 million), down from RMB392 million in Q2 2021 and RMB462 million in Q1 2022, with Legacy-Huazhu segment expenses at 10.8% of revenue[36]. - The company experienced a significant increase in personnel costs, which rose to RMB 899 million for the quarter, compared to RMB 757 million in the same quarter of 2021[84]. Cash Flow and Liquidity - Operating cash inflow in Q2 2022 was RMB989 million (US$ 147 million), while operating cash inflow in H1 2022 was RMB68 million (US $11 million), down from RMB281 million in H1 2021[57][58]. - As of June 30, 2022, the company had cash and cash equivalents of RMB4.6 billion (US$ 693 million) and total debt of RMB10.4 billion (US$1.6 billion)[59]. - The company reported a net cash provided by operating activities of RMB 989 million (approximately USD 147 million) for the quarter ended June 30, 2022, compared to RMB 1,238 million in the same quarter of 2021[85]. - The company reported a net cash used in investing activities of RMB 201 million (approximately USD 10 million) for the quarter ended June 30, 2022, compared to RMB 582 million in the same quarter of 2021[85]. - The net cash provided by financing activities for the quarter ended June 30, 2022, was RMB 146 million (approximately USD 22 million), a decrease from RMB (185) million in the same quarter of 2021[85]. Future Outlook - H World expects revenue in Q3 2022 to increase by 13% to 17% compared to Q3 2021, or by 5% to 9% excluding Legacy-DH[9]. - The company will suspend providing annual revenue guidance due to the unpredictable business performance caused by COVID-19 in China[63]. - DH is focusing on cash flow improvement measures, including efficiency improvements and re-negotiation of lease contracts[62]. Hotel Portfolio - As of June 30, 2022, H World had a total of 2,236 unopened hotels in its pipeline, including 2,199 from Legacy-Huazhu[10]. - As of June 30, 2022, H World operated 8,176 hotels with 773,898 rooms across 17 countries[78]. - H World operates 14% of its hotel rooms under lease and ownership models, and 86% under manachise and franchise models[79]. - The number of leased and owned hotels as of June 30, 2022, was 646, with a net addition of 5 hotels in Q2 2022[93]. - The total number of operational hotels as of June 30, 2022, was 8,051, with a total of 748,942 rooms[93]. - The company has 985 unopened hotels in the pipeline as of June 30, 2022[104]. - Five new hotels were opened in Q2 2022, contributing to a total of 125 hotels as of June 30, 2022[101].