Atour Lifestyle (ATAT) - 2023 Q1 - Quarterly Report

Financial & Operational Highlights Atour reported strong FY2022 adjusted net income growth and significant network expansion, despite Q4 GAAP loss and declining RevPAR due to market conditions Financial Highlights Atour's FY2022 net revenues grew 5.4% to RMB 2,263 million, with adjusted net income surging 85.6% to RMB 259 million, despite a Q4 GAAP net loss of RMB 83 million Q4 & Full Year 2022 Key Financial Metrics | Metric | Q4 2022 (RMB) | Q4 2021 (RMB) | YoY Change | FY 2022 (RMB) | FY 2021 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | 626M | 592M | +5.8% | 2,263M | 2,148M | +5.4% | | Net Income (Loss) | (83M) | 27M | - | 96M | 140M | -31.4% | | Adjusted Net Income (Non-GAAP) | 81M | 27M | +199.8% | 259M | 140M | +85.6% | | Adjusted EBITDA (Non-GAAP) | 116M | 64M | +82.2% | 424M | 299M | +41.9% | Operational Highlights Atour expanded its hotel network by 25% to 932 hotels and 107,998 rooms by year-end 2022, though key performance indicators like RevPAR declined to RMB 261 due to market conditions - As of December 31, 2022, the hotel network grew to 932 hotels with 107,998 rooms, a 25% year-over-year increase. There were 363 hotels under development in the pipeline[3] Key Performance Indicators (KPIs) Comparison | Indicator | FY 2022 | FY 2021 | Change | | :--- | :--- | :--- | :--- | | ADR (RMB) | 391 | 415 | -5.8% | | Occupancy Rate | 63.0% | 67.7% | -4.7 p.p. | | RevPAR (RMB) | 261 | 295 | -11.5% | Management Commentary Management highlighted the company's fourth consecutive year of profitability and its strategic goal to operate 2,000 premier hotels by the end of 2025, positioning for post-pandemic growth - The company achieved a 5.4% year-over-year increase in total revenues and recorded profitability for the fourth consecutive year in 2022[6] - A key strategic goal is to operate a total of 2,000 premier hotels by the end of 2025[6] Detailed Financial Results (Q4 & FY 2022) FY2022 net revenues grew 5.4% driven by manachised hotel and retail growth, while operating costs were managed effectively, leading to a GAAP net income of RMB 96 million Net Revenues FY2022 net revenues increased 5.4% to RMB 2,263 million, driven by manachised hotel and retail growth, partially offset by a 12.3% decline in leased hotel revenues due to COVID-19 Net Revenues Breakdown (RMB in thousands) | Revenue Source | FY 2022 (RMB thousands) | FY 2021 (RMB thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Manachised hotels | 1,360,843 | 1,220,301 | +11.5% | | Leased hotels | 552,929 | 630,238 | -12.3% | | Retail revenues and others | 349,211 | 297,038 | +17.6% | | Total Net Revenues | 2,262,983 | 2,147,577 | +5.4% | Manachised Hotels Revenue Revenue from manachised hotels increased by 11.5% to RMB 1,361 million for the full year 2022, primarily due to the expansion of the hotel network from 712 to 899 hotels - The increase in manachised hotel revenue was primarily driven by the expansion of the hotel network, with the total number of manachised hotels growing from 712 at the end of 2021 to 899 at the end of 2022[8] Leased Hotels Revenue Revenues from leased hotels decreased by 12.3% to RMB 553 million in 2022, attributed to diminished customer traffic and weaker consumption demand due to COVID-19 resurgences - The decrease in leased hotel revenue was primarily due to diminished customer traffic and weakened consumption demand amid the resurgence of COVID-19 in China during 2022[8] Retail Revenues and Others The retail segment demonstrated robust growth, with revenues increasing by 17.6% to RMB 349 million in 2022, driven by scenario-based retail expansion, brand recognition, and enhanced private label offerings - The growth in retail revenue was attributable to the rapid expansion of the scenario-based retail business, driven by hotel network expansion and growing brand recognition[9] Operating Costs and Expenses For FY2022, total operating costs and expenses were RMB 2,136 million, with RMB 163 million in share-based compensation; excluding this, costs were in line with 2021, reflecting effective cost management - Excluding the impact of RMB 163 million in share-based compensation expenses, operating costs and expenses for full-year 2022 were RMB 1,973 million, which was in line with 2021[10] Hotel Operating Costs Hotel operating costs for 2022 decreased by 1.9% to RMB 1,393 million, mainly due to effective expense and labor cost controls, and pandemic-related lease concessions - The decrease in hotel operating costs was mainly attributable to effective cost controls and pandemic-related lease concessions received from landlords[11] Selling and Marketing Expenses Selling and marketing expenses increased by 12.7% to RMB 140 million in 2022, primarily driven by increased investment in brand promotion and channel development for the retail business - The increase in selling and marketing expenses was mainly driven by increased investment in brand promotion and channel development for the scenario-based retail business[11] General and Administrative Expenses General and administrative expenses for 2022 were RMB 350 million, a significant increase from RMB 197 million in 2021, almost entirely due to RMB 160 million in share-based compensation - Excluding the impact of RMB 160 million in share-based compensation, general and administrative expenses for full-year 2022 decreased by 3.8% to RMB 190 million[12] Technology and Development Expenses Technology and development expenses increased by 27.0% to RMB 66 million in 2022, attributed to greater investments in technology systems and infrastructure supporting network expansion and customer experience - The year-over-year increase in technology expenses was mainly due to increased investments in technology systems and infrastructure to support the expanding hotel network[13] Profitability Analysis Q4 2022 saw a GAAP net loss of RMB 83 million, but adjusted net income surged 199.8% to RMB 81 million; for FY2022, net income was RMB 96 million, with adjusted net income growing 85.6% to RMB 259 million Profitability Metrics (FY 2022 vs FY 2021) | Metric | FY 2022 (RMB million) | FY 2021 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Income from Operations | 165 | 196 | -15.8% | | Net Income | 96 | 140 | -31.4% | | Adjusted Net Income (Non-GAAP) | 259 | 140 | +85.6% | | EBITDA (Non-GAAP) | 261 | 299 | -12.7% | | Adjusted EBITDA (Non-GAAP) | 424 | 299 | +41.9% | Earnings Per Share (EPS/ADS) Q4 2022 reported a basic and diluted loss per share of RMB 0.21 and per ADS of RMB 0.64, while FY2022 achieved income per share of RMB 0.26 and per ADS of RMB 0.78 Earnings Per Share/ADS | Period | Basic & Diluted EPS (RMB) | Basic & Diluted ADS (RMB) | | :--- | :--- | :--- | | Q4 2022 | (0.21) | (0.64) | | FY 2022 | 0.26 | 0.78 | Financial Position and Cash Flow As of December 31, 2022, Atour maintained robust liquidity with RMB 1,589 million in cash, supported by significant financing cash inflow from its IPO Balance Sheet Analysis As of December 31, 2022, Atour maintained healthy liquidity with RMB 1,589 million in cash, RMB 174 million in debt, and RMB 279 million in unutilized credit facilities Key Balance Sheet Items (as of Dec 31, 2022) | Item | Amount (RMB million) | | :--- | :--- | | Cash and cash equivalents | 1,589 | | Total outstanding indebtedness | 174 | | Unutilized credit facility | 279 | Cash Flow Statement Analysis FY2022 operating cash inflow was RMB 284 million, with investing outflow of RMB 192 million, and financing inflow of RMB 456 million, primarily from the IPO Cash Flow Summary (Full Year) | Cash Flow Activity | 2022 (RMB million) | 2021 (RMB million) | | :--- | :--- | :--- | | Operating Cash Inflow | 284 | 418 | | Investing Cash Outflow | (192) | (42) | | Financing Cash Inflow (Outflow) | 456 | (161) | Key Operating Data Atour significantly expanded its hotel network to 932 properties in 2022, diversifying its brand portfolio, though key operational metrics like RevPAR declined year-over-year Hotel Portfolio Overview In 2022, Atour expanded its network to 932 hotels with 107,998 rooms, predominantly manachised (899 hotels), by opening 191 new manachised hotels Hotel Network Changes in FY 2022 | Hotel Type | Opened in FY22 | Closed in FY22 | Total as of Dec 31, 2022 | Total Rooms | | :--- | :--- | :--- | :--- | :--- | | Manachised hotels | 191 | 4 | 899 | 102,945 | | Leased hotels | 0 | 0 | 33 | 5,053 | | Total | 191 | 4 | 932 | 107,998 | Brand Portfolio Atour's diversified brand portfolio spans midscale to luxury, with the core 'Atour' brand comprising 753 hotels, alongside 'Atour S' and 'Atour Light' offerings Brand Breakdown as of Dec 31, 2022 | Brand | Positioning | Total Hotels | Total Rooms | | :--- | :--- | :--- | :--- | | A.T. House | Luxury | 1 | 214 | | Atour S | Upscale | 54 | 8,235 | | ZHOTEL | Upscale | 1 | 52 | | Atour | Upper midscale | 753 | 87,709 | | Atour X | Upper midscale | 48 | 4,893 | | Atour Light | Midscale | 75 | 6,895 | | Total | | 932 | 107,998 | Key Performance Indicators (KPIs) Operational metrics for 2022, excluding requisitioned rooms, showed declines with occupancy at 63.0%, ADR at RMB 391.2, and RevPAR at RMB 260.7, reflecting challenging market conditions Full Year KPI Comparison (All Hotels, Exclusive of requisitioned) | Metric | FY 2022 | FY 2021 | YoY Change | | :--- | :--- | :--- | :--- | | Occupancy Rate | 63.0% | 67.7% | -4.7 p.p. | | ADR (RMB) | 391.2 | 415.2 | -5.8% | | RevPAR (RMB) | 260.7 | 294.9 | -11.6% | Appendix This section provides supplementary information including conference call details, the company's use of non-GAAP financial measures, and detailed reconciliations and financial statements Conference Call Information An earnings conference call was scheduled for March 30, 2023, at 8:00 a.m. U.S. Eastern time to discuss the Q4 and FY2022 financial results - The earnings conference call was scheduled for March 30, 2023, at 8:00 a.m. U.S. Eastern time[19] Use of Non-GAAP Financial Measures The company uses non-GAAP measures like adjusted net income and EBITDA, excluding share-based compensation, to provide a clearer assessment of operational performance and facilitate period-to-period comparisons - The company uses non-GAAP measures like adjusted net income and adjusted EBITDA to provide supplemental information by excluding share-based compensation expenses[20] - Management believes these non-GAAP measures help investors better understand performance and compare business trends on a consistent basis, as they are used internally for financial and operational decision-making[21] Reconciliation of GAAP and Non-GAAP Results This section details the reconciliation of GAAP to non-GAAP figures, showing how FY2022 GAAP Net Income of RMB 96.1 million is adjusted to RMB 259.3 million Adjusted Net Income by adding back RMB 163.2 million in share-based compensation FY 2022 Reconciliation of Net Income to Adjusted Net Income (RMB in thousands) | Description | Amount (RMB thousands) | | :--- | :--- | | Net income (GAAP) | 96,082 | | Add: Share-based compensation expenses | 163,193 | | Adjusted net income (non-GAAP) | 259,275 | FY 2022 Reconciliation of Net Income to Adjusted EBITDA (RMB in thousands) | Description | Amount (RMB thousands) | | :--- | :--- | | Net income (GAAP) | 96,082 | | Adjustments (Interest, Tax, D&A) | 165,080 | | EBITDA (non-GAAP) | 261,162 | | Add: Share-based compensation expenses | 163,193 | | Adjusted EBITDA (non-GAAP) | 424,355 | Financial Statements This section presents Atour's unaudited condensed consolidated financial statements as of December 31, 2022, including Balance Sheets, Statements of Comprehensive Income, and Statements of Cash Flows Unaudited Condensed Consolidated Balance Sheets As of December 31, 2022, total assets increased significantly to RMB 4,762 million, driven by cash and operating lease assets, with total liabilities also growing to RMB 3,575 million Key Balance Sheet Items (RMB in thousands) | Item | Dec 31, 2022 (RMB thousands) | Dec 31, 2021 (RMB thousands) | | :--- | :--- | :--- | | Total current assets | 2,124,659 | 1,416,217 | | Total non-current assets | 2,637,367 | 828,930 | | Total assets | 4,762,026 | 2,245,147 | | Total current liabilities | 1,347,614 | 1,051,386 | | Total non-current liabilities | 2,227,006 | 629,146 | | Total liabilities | 3,574,620 | 1,680,532 | | Total equity | 1,187,406 | 564,615 | Unaudited Condensed Consolidated Statements of Comprehensive Income For FY2022, the income statement shows net revenues of RMB 2,263 million and total operating costs of RMB 2,136 million, resulting in an income from operations of RMB 165 million and a net income of RMB 96 million FY 2022 Income Statement Summary (RMB in thousands) | Item | FY 2022 (RMB thousands) | FY 2021 (RMB thousands) | | :--- | :--- | :--- | | Net revenues | 2,262,983 | 2,147,577 | | Total operating costs and expenses | (2,136,117) | (1,973,892) | | Income from operation | 164,960 | 196,056 | | Net income | 96,082 | 139,670 | Unaudited Condensed Consolidated Statements of Cash Flows FY2022 saw net cash from operating activities of RMB 284 million, investing outflow of RMB 192 million, and financing inflow of RMB 456 million, leading to a net cash increase of RMB 551 million FY 2022 Cash Flow Summary (RMB in thousands) | Item | FY 2022 (RMB thousands) | FY 2021 (RMB thousands) | | :--- | :--- | :--- | | Net cash from operating activities | 283,677 | 417,879 | | Net cash from investing activities | (192,225) | (42,225) | | Net cash from financing activities | 456,310 | (161,080) | | Net increase in cash | 550,578 | 206,393 |