Atour Lifestyle (ATAT) - 2024 Q1 - Quarterly Report

Executive Summary This section provides a high-level overview of Atour Lifestyle Holdings Limited's strong financial and operational performance for Q4 and full year 2023 Financial Highlights Atour Lifestyle Holdings Limited reported significant financial growth for Q4 and full year 2023, with net revenues more than doubling and net income showing a substantial turnaround from a loss in the prior year, driven by robust performance across its hotel and retail businesses Financial Highlights Table | Metric (RMB million) | Q4 2022 | Q4 2023 | YoY Change (Q4) | FY 2022 | FY 2023 | YoY Change (FY) | | :-------------------- | :------ | :------ | :-------------- | :------ | :------ | :-------------- | | Net Revenues | 626 | 1,505 | 140.4% | 2,263 | 4,666 | 106.2% | | Net Income | (83) | 220 | N/A | 96 | 739 | 669.2% | | Adjusted Net Income | 81 | 222 | 175.8% | 259 | 903 | 248.3% | | EBITDA | (47) | 248 | N/A | 261 | 1,043 | 299.2% | | Adjusted EBITDA | 116 | 251 | 116.1% | 424 | 1,207 | 184.3% | Operational Highlights The company expanded its hotel network significantly in 2023, with key operational metrics like ADR, Occupancy Rate, and RevPAR surpassing 2019 levels, while the retail business also experienced remarkable growth in GMV - As of December 31, 2023, Atour's hotel network comprised 1,210 hotels with 137,921 rooms, marking year-over-year increases of 29.8% in hotels and 27.7% in rooms[1][4] - The company had 617 manachised hotels under development in its pipeline as of December 31, 2023[4] Key Operational Metrics | Metric | Q4 2022 | Q4 2023 | Q4 2023 vs 2019 Level | FY 2022 | FY 2023 | FY 2023 vs 2019 Level | | :----- | :------ | :------ | :-------------------- | :------ | :------ | :-------------------- | | ADR | RMB388 | RMB438 | 103.6% | RMB391 | RMB464 | 107.9% | | Occupancy Rate | 63.1% | 78.4% | 105.9% | 63.0% | 77.8% | 106.0% | | RevPAR | RMB259 | RMB358 | 108.8% | RMB261 | RMB377 | 114.4% | - GMV from the retail business for full year 2023 was RMB1,139 million, an increase of 298.3% year-over-year[7] Management Commentary Mr. Haijun Wang, Founder, Chairman, and CEO, expressed satisfaction with the strong full-year results, highlighting the achievement of expansion targets, resilient RevPAR growth, and the success of product offerings like Atour Light 3.0 and 'Deep Sleep' retail products, while committing to further enhancements and synergies in 2024 - Atour exceeded its 2023 expansion target with 289 newly launched hotels, expanding the network to 1,210 hotels by year-end[8] - ADR and Occupancy Rate surpassed 2019's levels for the fourth consecutive quarter, contributing to high-quality RevPAR growth[8] - The midscale product, Atour Light 3.0, delivered excellent operational performance and customer experience, progressing towards a 1,000-hotel milestone, with Atour 4.0, an upper midscale offering, also progressing smoothly[8] - Retail business GMV increased by approximately 300% year-over-year in 2023, driven by the success of 'Deep Sleep' products and enhanced brand influence[8] - For 2024, Atour is committed to further enhancing product offerings, unlocking synergies between retail and accommodation, and enriching brand value to elevate the 'Chinese experience'[8] Detailed Financial Results This section provides an in-depth analysis of Atour's financial performance, detailing revenues, operating costs, and profitability metrics for Q4 and full year 2023 Revenues Atour's net revenues for Q4 and full year 2023 saw substantial year-over-year increases, primarily driven by robust growth in both hotel (manachised and leased) and retail businesses Revenue Breakdown | Revenue Source (RMB thousand) | Q4 2022 | Q4 2023 | YoY Change (Q4) | FY 2022 | FY 2023 | YoY Change (FY) | | :----------------------------- | :-------- | :---------- | :-------------- | :---------- | :---------- | :-------------- | | Manachised hotels | 364,866 | 851,216 | 133.3% | 1,360,843 | 2,705,609 | 98.8% | | Leased hotels | 138,909 | 195,020 | 40.4% | 552,929 | 840,044 | 51.9% | | Retail | 99,195 | 412,226 | 315.6% | 253,607 | 971,931 | 283.2% | | Others | 23,203 | 46,756 | 101.5% | 95,604 | 148,383 | 55.2% | | Net Revenues | 626,173 | 1,505,218 | 140.4% | 2,262,983 | 4,665,967 | 106.2% | Manachised Hotels Revenue Revenue from manachised hotels significantly increased in Q4 and full year 2023, driven by network expansion and improved RevPAR - Revenues from manachised hotels increased by 133.3% year-over-year to RMB851 million in Q4 2023 and by 98.8% to RMB2,706 million for full year 2023[10] - This growth was primarily due to the expansion of the hotel network (from 899 to 1,178 manachised hotels) and increased RevPAR, which surpassed 2019 levels[10] Leased Hotels Revenue Leased hotel revenues grew in Q4 and full year 2023, primarily due to increased RevPAR surpassing 2019 levels - Revenues from leased hotels grew by 40.4% year-over-year to RMB195 million in Q4 2023 and by 51.9% to RMB840 million for full year 2023[11] - The increase was mainly attributed to the growth of leased hotels' RevPAR, which also exceeded 2019 levels[11] Retail Revenue Retail revenues surged in Q4 and full year 2023, attributed to brand recognition, compelling products, and enhanced distribution capabilities - Retail revenues surged by 315.6% year-over-year to RMB412 million in Q4 2023 and by 283.2% to RMB972 million for full year 2023[13] - This growth was driven by widespread recognition of retail brands, compelling product offerings, and improved product development and distribution capabilities[13] Other Revenues Other revenues increased significantly in Q4 and full year 2023, mainly due to the fast-growing membership business - Other revenues increased by 101.5% year-over-year to RMB47 million in Q4 2023 and by 55.2% to RMB148 million for full year 2023, primarily due to the fast-growing membership business[13] Operating Costs and Expenses Total operating costs and expenses increased significantly in Q4 and full year 2023, largely in line with revenue growth and strategic investments, while share-based compensation expenses decreased in Q4 2023 but remained stable for the full year Operating Costs & Expenses Summary | Operating Costs & Expenses (RMB thousand) | Q4 2022 | Q4 2023 | FY 2022 | FY 2023 | | :----------------------------------------- | :---------- | :------------ | :------------ | :------------ | | Hotel operating costs | (355,929) | (733,208) | (1,393,312) | (2,240,890) | | Retail costs | (58,689) | (232,041) | (151,815) | (513,326) | | Other operating costs | (9,446) | (30,671) | (34,870) | (72,543) | | Selling and marketing expenses | (53,992) | (206,913) | (139,929) | (469,595) | | General and administrative expenses | (217,041) | (105,434) | (350,009) | (451,470) | | Technology and development expenses | (15,966) | (22,300) | (66,182) | (77,288) | | Total operating costs and expenses | (711,063) | (1,330,567) | (2,136,117) | (3,825,112) | | Share-based compensation expenses | 163,000 | 2,000 | 163,000 | 164,000 | Hotel Operating Costs Hotel operating costs increased in Q4 and full year 2023 due to business growth, while their percentage of hotel revenues slightly decreased - Hotel operating costs increased by 106.0% year-over-year to RMB733 million in Q4 2023 and by 60.8% to RMB2,241 million for full year 2023, mainly due to increased variable costs associated with hotel business growth[15] - As a percentage of manachised and leased hotels' revenues, hotel operating costs decreased slightly from 70.7% to 70.1% in Q4 and from 72.8% to 63.2% for the full year[15] Retail Costs Retail costs rose in Q4 and full year 2023, reflecting rapid business growth and improved margins from online sales - Retail costs rose by 295.4% year-over-year to RMB232 million in Q4 2023 and by 238.1% to RMB513 million for full year 2023, reflecting the rapid growth of the retail business[16] - Retail costs as a percentage of retail revenues decreased from 59.2% to 56.3% in Q4 and from 59.9% to 52.8% for the full year, attributed to increasing contribution from higher-margin online sales[16] Selling and Marketing Expenses Selling and marketing expenses increased in Q4 and full year 2023, driven by investments in brand awareness and online retail channels - Selling and marketing expenses increased to RMB207 million in Q4 2023 (from RMB54 million) and to RMB470 million for full year 2023 (from RMB140 million), driven by increased investment in brand awareness and online channel development for the retail business[17] General and Administrative Expenses G&A expenses decreased in Q4 2023 due to lower share-based compensation but increased for the full year, excluding compensation, due to higher personnel and professional service costs - General and administrative expenses decreased to RMB105 million in Q4 2023 (from RMB217 million), primarily due to a significant reduction in share-based compensation expenses (from RMB160 million to RMB2 million)[18] - For the full year 2023, G&A expenses increased to RMB451 million (from RMB350 million), with the increase, excluding share-based compensation, mainly due to higher management personnel and professional service costs[18] Technology and Development Expenses Technology and development expenses increased in Q4 and full year 2023, reflecting investments in systems and infrastructure for expansion and customer experience - Technology and development expenses increased to RMB22 million in Q4 2023 (from RMB16 million) and to RMB77 million for full year 2023 (from RMB66 million), reflecting increased investments in technology systems and infrastructure to support network expansion, retail business, and customer experience[19] Other Operating Income Other operating income, primarily from government subsidies, increased significantly in Q4 and full year 2023 - Other operating income, primarily from government subsidies and VAT-related benefits, increased significantly to RMB40 million in Q4 2023 (from RMB7 million) and to RMB83 million for full year 2023 (from RMB38 million)[19] Profitability Atour demonstrated strong profitability in 2023, turning around from operating and net losses in Q4 2022 to significant income levels, with both GAAP and non-GAAP metrics showing substantial year-over-year improvements Income from Operations Income from operations showed a significant turnaround in Q4 2023 and substantial growth for the full year - Income from operations for Q4 2023 was RMB214 million, a significant improvement from a loss of RMB78 million in Q4 2022. For full year 2023, income from operations increased to RMB924 million from RMB165 million in 2022[20] Net Income and Adjusted Net Income Net income and adjusted net income both saw substantial year-over-year increases, turning a Q4 2022 loss into significant profit - Net income for Q4 2023 was RMB220 million, compared to a net loss of RMB83 million in Q4 2022. For full year 2023, net income increased by 669.2% year-over-year to RMB739 million[20] - Adjusted net income (non-GAAP) for Q4 2023 increased by 175.8% to RMB222 million. For full year 2023, adjusted net income increased by 248.3% to RMB903 million[21] Earnings Per Share (EPS) EPS metrics are provided for Q4 and full year 2023 in both RMB and US dollars Earnings Per Share | Metric | Q4 2023 (RMB) | Q4 2023 (US$) | FY 2023 (RMB) | FY 2023 (US$) | | :----- | :------------ | :------------ | :------------ | :------------ | | Basic Income per Share | 0.53 | 0.08 | 1.82 | 0.26 | | Diluted Income per Share | 0.53 | 0.07 | 1.78 | 0.25 | | Basic Income per ADS | 1.60 | 0.23 | 5.45 | 0.77 | | Diluted Income per ADS | 1.59 | 0.22 | 5.33 | 0.75 | EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA showed significant improvements, turning positive in Q4 2023 and growing substantially for the full year - EBITDA (non-GAAP) for Q4 2023 was RMB248 million, a significant improvement from negative RMB47 million in Q4 2022. For full year 2023, EBITDA increased by 299.2% to RMB1,043 million[22] - Adjusted EBITDA (non-GAAP) for Q4 2023 increased by 116.1% to RMB251 million. For full year 2023, adjusted EBITDA increased by 184.3% to RMB1,207 million[22] Financial Position and Cash Flows This section reviews Atour's cash flow generation and overall financial health, including cash balances and debt levels Cash Flows Atour generated substantial operating cash inflows in Q4 and full year 2023, indicating strong operational performance, while investing activities resulted in outflows for the full year Cash Flow Summary | Cash Flow Type (RMB million) | Q4 2023 | FY 2022 | FY 2023 | | :---------------------------- | :------ | :------ | :------ | | Operating Cash Inflow | 564 | 284 | 1,989 | | Investing Cash Inflow (Q4) | 43 | N/A | N/A | | Investing Cash Outflow (FY) | N/A | 192 | 601 | | Financing Cash Inflow (Q4) | 52 | N/A | N/A | | Financing Cash Outflow (FY) | N/A | (456) | 147 | Cash and Debt As of December 31, 2023, Atour maintained a healthy cash position and low outstanding borrowings, with significant unutilized credit facilities - Total balance of cash and cash equivalents and restricted cash was RMB2,842 million (US$400 million) as of December 31, 2023[24] - Total outstanding borrowings were RMB72 million (US$10 million) as of December 31, 2023, with an unutilized credit facility of RMB410 million[24] Operational Data This section presents key operational metrics and network expansion details for Atour's hotel business Hotel Network Expansion Atour significantly expanded its hotel network in 2023, primarily through manachised hotels, reaching a total of 1,210 hotels and 137,921 rooms by year-end Hotel Network Overview (Dec 31, 2023) | Hotel Type | Number of Hotels (Dec 31, 2023) | Number of Rooms (Dec 31, 2023) | | :-------------- | :------------------------------ | :----------------------------- | | Manachised hotels | 1,178 | 133,291 | | Leased hotels | 32 | 4,630 | | Total | 1,210 | 137,921 | Hotel Brands and Properties (Dec 31, 2023) | Brand | Positioning | Manachised Properties | Leased Properties | Rooms | | :------------ | :--------------- | :-------------------- | :---------------- | :------ | | A.T. House | Luxury | - | 1 | 214 | | Atour S | Upscale | 57 | 8 | 9,628 | | ZHOTEL | Upscale | 1 | - | 52 | | Atour | Upper midscale | 898 | 22 | 105,977 | | Atour X | Upper midscale | 114 | - | 12,140 | | Atour Light | Midscale | 108 | 1 | 9,910 | | Total | | 1,178 | 32 | 137,921 | Key Performance Indicators (KPIs) Atour's key operational metrics, including Occupancy Rate, ADR, and RevPAR, showed strong recovery and growth in Q4 and full year 2023, surpassing 2019 levels across all hotel types Occupancy Rate Occupancy rates for all hotel types showed strong recovery and growth in Q4 and full year 2023 Occupancy Rate by Hotel Type | Hotel Type | Q4 2022 | Q4 2023 | FY 2022 | FY 2023 | | :---------------- | :------ | :------ | :------ | :------ | | Manachised hotels | 62.8% | 78.2% | 62.9% | 77.6% | | Leased hotels | 67.3% | 84.5% | 65.8% | 83.6% | | All hotels | 63.1% | 78.4% | 63.0% | 77.8% | Average Daily Room Rate (ADR) ADR for all hotel types demonstrated strong recovery and growth in Q4 and full year 2023 Average Daily Room Rate by Hotel Type (RMB) | Hotel Type | Q4 2022 (RMB) | Q4 2023 (RMB) | FY 2022 (RMB) | FY 2023 (RMB) | | :---------------- | :------------ | :------------ | :------------ | :------------ | | Manachised hotels | 382.6 | 432.8 | 386.4 | 457.8 | | Leased hotels | 468.6 | 557.9 | 465.0 | 587.2 | | All hotels | 387.8 | 437.7 | 391.2 | 463.6 | Revenue Per Available Room (RevPAR) RevPAR for all hotel types exhibited strong recovery and growth in Q4 and full year 2023 Revenue Per Available Room by Hotel Type (RMB) | Hotel Type | Q4 2022 (RMB) | Q4 2023 (RMB) | FY 2022 (RMB) | FY 2023 (RMB) | | :---------------- | :------------ | :------------ | :------------ | :------------ | | Manachised hotels | 254.4 | 353.1 | 256.3 | 370.8 | | Leased hotels | 341.7 | 495.3 | 330.6 | 517.2 | | All hotels | 259.3 | 358.2 | 260.7 | 376.8 | - All hotels previously requisitioned for COVID-19 quarantine purposes were restored to management by the end of Q2 2023, with no hotels subject to requisition or closure in Q4 2023[48] Non-GAAP Financial Measures This section defines and reconciles Atour's non-GAAP financial measures, providing insights into core operational performance Definitions and Rationale Atour uses non-GAAP financial measures like adjusted net income, EBITDA, and adjusted EBITDA to provide investors with a clearer view of its core operational performance by excluding non-cash or non-recurring items such as share-based compensation and depreciation/amortization - Adjusted net income (non-GAAP) is defined as net income excluding share-based compensation expenses[6][26] - EBITDA (non-GAAP) is defined as earnings before interest expense, interest income, income tax expense, and depreciation and amortization[6][26] - Adjusted EBITDA (non-GAAP) is defined as EBITDA excluding share-based compensation expenses[6][26] - These non-GAAP measures are used to provide comparability between periods, especially by eliminating depreciation and amortization from significant leasehold improvements, and to better understand performance by excluding non-cash share-based compensation[27] - The company acknowledges limitations of non-GAAP measures, such as the exclusion of incurred items, and provides reconciliations to GAAP measures[28] Reconciliation of GAAP and Non-GAAP Results The reconciliation tables provide a clear bridge between GAAP net income/loss and the non-GAAP measures of adjusted net income, EBITDA, and adjusted EBITDA, primarily by adjusting for share-based compensation expenses, interest, income tax, and depreciation/amortization Reconciliation of Net Income (Loss) to Adjusted Net Income (Non-GAAP) | Metric (RMB thousand) | Q4 2022 | Q4 2023 | FY 2022 | FY 2023 | | :----------------------------------- | :-------- | :-------- | :-------- | :-------- | | Net income (loss) (GAAP) | (82,603) | 219,763 | 96,082 | 739,057 | | Share-based compensation expenses | 163,193 | 2,476 | 163,193 | 163,978 | | Adjusted net income (non-GAAP) | 80,590 | 222,239 | 259,275 | 903,035 | Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (Non-GAAP) | Metric (RMB thousand) | Q4 2022 | Q4 2023 | FY 2022 | FY 2023 | | :----------------------------------- | :-------- | :-------- | :-------- | :-------- | | Net income (loss) (GAAP) | (82,603) | 219,763 | 96,082 | 739,057 | | Interest income | (4,971) | (8,757) | (14,456) | (29,569) | | Interest expense | 1,646 | 679 | 6,501 | 5,005 | | Income tax expense | 11,712 | 17,232 | 84,474 | 243,036 | | Depreciation and amortization | 27,112 | 19,422 | 88,561 | 85,021 | | EBITDA (non-GAAP) | (47,104)| 248,339 | 261,162 | 1,042,550 | | Share-based compensation expenses | 163,193 | 2,476 | 163,193 | 163,978 | | Adjusted EBITDA (non-GAAP) | 116,089 | 250,815 | 424,355 | 1,206,528 | Company Information This section provides details regarding Atour's conference call, company profile, and investor relations contacts Conference Call Details Atour scheduled a conference call for March 28, 2024, to discuss its Q4 and full year 2023 financial results, with details provided for live webcast and telephone participation - A conference call was scheduled for 7:00 AM U.S. Eastern time on Thursday, March 28, 2024 (7:00 PM Beijing/Hong Kong time)[25] - A live webcast and replay are available on the Company's investor relations website at https://ir.yaduo.com[25](index=25&type=chunk) About Atour Lifestyle Holdings Limited Atour Lifestyle Holdings Limited is a leading hospitality and lifestyle company in China, known for its distinct portfolio of lifestyle hotel brands and its pioneering retail business within the hotel sector, aiming to innovate and build new lifestyle brands - Atour is a leading hospitality and lifestyle company in China, recognized as the leading upper midscale hotel chain and the first Chinese hotel chain to develop a retail business[29] - The company is committed to innovating China's hospitality industry and building new lifestyle brands around hotel offerings[29] Investor Relations Contact Contact information for investor relations is provided for direct inquiries to Atour and through Piacente Financial Communications - Investor relations inquiries can be directed to ir@yaduo.com or Piacente Financial Communications at Atour@tpg-ir.com[29] Unaudited Condensed Consolidated Financial Statements This section presents Atour's unaudited condensed consolidated financial statements, including balance sheets, statements of comprehensive income, and statements of cash flows Balance Sheets The consolidated balance sheets show a significant increase in total assets and shareholders' equity from December 31, 2022, to December 31, 2023, driven by growth in cash, short-term investments, and accounts receivable Consolidated Balance Sheets | Asset (RMB thousand) | Dec 31, 2022 | Dec 31, 2023 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | 1,589,161 | 2,840,807 | | Short-term investments | 157,808 | 751,794 | | Total current assets | 2,124,659 | 4,241,580 | | Total non-current assets | 2,637,367 | 2,345,445 | | Total assets | 4,762,026| 6,587,025| | | | | | Liability (RMB thousand) | Dec 31, 2022 | Dec 31, 2023 | | Total current liabilities | 1,347,614 | 2,377,851 | | Total non-current liabilities | 2,227,006 | 2,149,085 | | Total liabilities | 3,574,620| 4,526,936| | | | | | Equity (RMB thousand) | Dec 31, 2022 | Dec 31, 2023 | | Total shareholders' equity | 1,187,406 | 2,060,089 | | Total liabilities and equity | 4,762,026| 6,587,025| Statements of Comprehensive Income The consolidated statements of comprehensive income reflect strong revenue growth across all segments, leading to a significant turnaround from a net loss in Q4 2022 to substantial net income in Q4 and full year 2023 Consolidated Statements of Comprehensive Income | Metric (RMB thousand) | Q4 2022 | Q4 2023 | FY 2022 | FY 2023 | | :----------------------------------- | :---------- | :---------- | :---------- | :---------- | | Net Revenues | 626,173 | 1,505,218 | 2,262,983 | 4,665,967 | | Total operating costs and expenses | (711,063) | (1,330,567) | (2,136,117) | (3,825,112) | | Income from operations | (78,379) | 214,177 | 164,960 | 924,034 | | Income (loss) before income tax | (70,891) | 236,995 | 180,556 | 982,093 | | Income tax expense | (11,712) | (17,232) | (84,474) | (243,036) | | Net income (loss) | (82,603)| 219,763 | 96,082 | 739,057 | Statements of Cash Flows The consolidated statements of cash flows highlight a strong increase in net cash generated from operating activities for both Q4 and full year 2023, contributing to a significant net increase in cash and cash equivalents Consolidated Statements of Cash Flows | Cash Flow Activity (RMB thousand) | Q4 2022 | Q4 2023 | FY 2022 | FY 2023 | | :--------------------------------- | :--------- | :--------- | :--------- | :--------- | | Net cash from operating activities | (35,018) | 564,038 | 283,677 | 1,988,674 | | Net cash from investing activities | (173,825) | 43,208 | (192,225) | (600,521) | | Net cash from financing activities | 364,861 | 52,461 | 456,310 | (146,916) | | Net increase in cash | 153,768 | 643,432 | 550,578 | 1,251,646 | | Cash at beginning of period | 1,436,339 | 2,198,321 | 1,039,529 | 1,590,107 | | Cash at end of period | 1,590,107 | 2,841,753 | 1,590,107 | 2,841,753 |