SHANGHAI--Home Inns & Hotels Management today announced its unaudited financial results for the first quarter ended March 31, 2012.
View the full release, with tables.
First Quarter of 2012 Financial Highlights
Total revenues increased 66.0% year over year to RMB 1,255.7 million (US$199.4 million). Excluding Motel 168 (acquired and fully consolidated starting October 1, 2011) total revenue increased 22.7% year over year to RMB 928.4 million.
Loss from operations was RMB 36.9 million (US$5.9 million). Adjusted income from operations was RMB 9.7 million (US$1.5 million), compared to RMB 60.0 million in the same period of 2011.
Net loss attributable to Home Inns' shareholders was RMB 103.2 million (US$16.4 million) which includes a net loss of RMB 53.2 million (US$8.4 million) from Motel 168, compared to a net income of RMB 32.5 million in the first quarter of 2011.
EBITDA (non-GAAP) was RMB 93.1 million (US$14.8 million), compared to RMB 137.5 million in the same period of 2011. Excluding non-operating items and one-time charges, adjusted EBITDA (non-GAAP) increased to RMB 165.9 million (US$26.3 million) from RMB 152.5 million in the first quarter of 2011.
Diluted losses per ADS for the first quarter of 2012 were RMB 2.28 (US$0.36); adjusted diluted losses per ADS (non-GAAP) for the first quarter were RMB 0.54 (US$0.09).
"Despite seasonality and relatively lethargic market environment, our core mature hotels maintained stable performance during the past quarter," said Mr. David Sun, Home Inns' Chief Executive Officer. "Due to margin impact by new hotels opened in the late fourth quarter of 2011, higher pre-opening costs, near-term profitability dilution by Motel 168 and non-recurring acquisition-related charges, we experienced an overall net loss in the first quarter. This was, however, within our expectations and there were no surprises."
"Based on what we are experiencing in current operations and the integration results we achieved so far, we remain optimistic about the full year's outlook. As new hotels ramp up, Motel 168 further improves its operations and our control mechanisms continue to address rising costs, we are confident of the Company's ability to generate profitable growth and sustained return for our shareholders."
Home Inns completed its acquisition of 100% equity interest in Motel 168, and took control of Motel 168 effective on October 1, 2011. The Company has consolidated Motel 168's operating and financial results since October 1, 2011. Home Inns presents certain separated financial data of Motel 168 in this earning release, for the purpose of providing more information to investors, and will continue to provide separated financial data of Motel 168 through the 2012 fiscal year.
Operational Highlights
During the first quarter of 2012, Home Inns opened 59 new hotels, including five new leased-and-operated hotels and 54 new franchised-and-managed hotels (including six Motel 168 hotels). Meanwhile Home Inns closed six hotels including one leased-and-operated hotel and five franchised-and-managed hotels (including two Motel 168 hotels), mainly due to city rezoning, expiration and termination of franchise agreements.
As of March 31, 2012, Home Inns operated across 219 cities in China with a total of 1,479 hotels, of which 702 were leased-and-operated hotels (including three Yitel Hotels and 144 Motel 168 hotels) and 777 were franchised-and-managed hotels (including one Yitel hotel and 167 Motel 168 hotels). The average number of guest rooms per hotel was 123.
In addition, Home Inns had another 218 hotels contracted or under construction as of March 31, 2012, of which, 72 were leased-and-operated hotels (including five hotels under Motel 168 brand) and 146 were franchised-and-managed hotels (including 21 hotels under Motel 168 brand).
As of March 31, 2012, combining 2.7 million active non-corporate members from Motel 168 brand, Home Inns had total of 7.9 million unique active non-corporate members.
The occupancy rate for all hotels in operation was 80.7% in the first quarter of 2012. Excluding Motel 168, the occupancy rate was 84.4%, compared with 85.1% in the same period in 2011 and 88.4% in the fourth quarter of 2011. The decrease in occupancy rate both year over year and sequentially was mainly due to relatively soft market conditions and, to a lesser extent, seasonality. The occupancy rate for Motel 168 in the first quarter of 2012 was 70.4%, decreased from 73.5% in the fourth quarter of 2011 mainly due to seasonality.
RevPAR, defined as revenue per available room, was RMB 132 in the first quarter of 2012. Excluding Motel 168, RevPAR was RMB 139, compared with RMB 140 in the same period of 2011 and RMB 141 in the fourth quarter of 2011. The slight year-over-year RevPAR decrease was attributed to a lower occupancy rate described above while average daily rate were flat year over year. The sequential decrease in RevPAR was primarily due to seasonality. RevPAR for Motel 168 was RMB 111, decreased from RMB 113 in the fourth quarter of 2011 mainly driven by increased averaged daily rate from RMB 154 to RMB 158 yet offset by decrease in occupancy rate described above.
Excluding Motel 168, RevPAR for Home Inns' mature hotels that had been in operation for at least 18 months was RMB 151 for the first quarter of 2012, increased slightly from RMB 149 for the same group of hotels in the first quarter of 2011. The RevPAR growth at mature hotels was attributed to a higher average daily rate.
First Quarter 2012 Financial Results
Home Inns' total revenues for the first quarter of 2012 increased 66.0% year over year to RMB 1.26 billion (US$199.4 million), including revenues from Motel 168 of RMB 327.3 million (US$52.0 million). Excluding Motel 168, total revenues for the first quarter of 2012 were RMB 928.4 million (US$147.4 million), representing an increase of 22.7% year over year.
Total revenues from leased-and-operated hotels for the first quarter of 2012 were RMB 1.13 billion (US$179.1 million), representing a 64.1% increase year over year and a 4.5% decrease sequentially. Excluding Motel 168, total revenues from leased-and-operated hotels for the first quarter of 2012 were RMB 816.1 million (US$129.6 million), an increase of 18.7% year over year and a decrease of 1.7% sequentially. Excluding Motel 168, the year-over-year increases were mainly driven by a greater number of hotels in operation and better RevPAR at mature hotels even with a number of new hotels not yet making full revenue contribution. The sequential decrease was mainly due to seasonality.
Total revenues from franchised-and-managed hotels for the first quarter of 2012 were RMB 127.9 million (US$20.3 million), representing an 84.6% increase year over year and a 0.7% decrease sequentially. Excluding Motel 168, total revenues from franchised-and-managed hotels for the first quarter of 2012 were RMB 112.3 million (US$17.8 million), an increase of 62.2% year over year and a decrease of 0.1% sequentially. Excluding Motel 168, the year-over-year increases in revenues from franchised-and-managed hotels for the current quarter were mainly driven by a larger number of such hotels in operation, while the sequential decrease was mainly due to seasonality.
Total operating costs and expenses for the first quarter of 2012 were RMB 1.22 billion (US$193.3 million). Excluding Motel 168, total operating costs and expenses for the first quarter of 2012 were RMB 850.8 million (US$135.1 million). Excluding Motel 168, operating costs and expenses excluding any share-based compensation expenses and acquisition expenses (non-GAAP) for the current quarter was RMB 828.7 million (US$131.6 million), representing 89.3% of total revenues, compared with 85.7% for the same quarter a year ago and 84.2% for the fourth quarter of 2011.
Total leased-and-operated hotel costs for the first quarter of 2012 were RMB 1.10 billion (US$174.2 million), including share-based compensation expenses of RMB 2.0 million (US$0.3 million) and integration costs of RMB 14.5 million (US$2.3 million), representing 97.3% of the leased-and-operated hotel revenues. Excluding Motel 168, total leased-and-operated hotel costs excluding any share-based compensation expenses and acquisition expenses for the first quarter of 2012 were RMB 755.6 million (US$120.0 million), representing 92.6% of the leased-and-operated hotel revenues compared to 86.2% for the same quarter in 2011 and 85.3% for the fourth quarter of 2011. This year-over-year increase was mainly driven by higher dilutive impact by hotels in their ramp-up stage incurring full operating costs without generating full revenue, increase in personnel costs and higher pre-opening costs of RMB 19.5 million (US$3.1 million) this quarter than RMB 14.3 million in the first quarter of 2011. The sequential increase was mainly driven by seasonality.
Personnel costs of franchised-and-managed hotels for the first quarter of 2012 were RMB 22.6 million (US$3.6 million), including share-based compensation expenses of RMB 2.2 million (US$0.3 million), representing 17.7% of franchised-and-managed hotel revenues. This compared to 14.8% for the same quarter in 2011 and 15.6% for the fourth quarter of 2011. Excluding Motel 168, personnel costs of franchised-and-managed hotels excluding share-based compensation expenses for the first quarter of 2012 were RMB 16.8 million (US$2.7 million), representing 14.9% of franchised-and-managed hotel revenues compared to that of 14.8% for the first quarter of 2011.
Sales and marketing expenses for the first quarter of 2012 were RMB 18.2 million (US$2.9 million), including share-based compensation expenses of RMB 0.4 million (US$0.1 million), representing 1.4% of total revenues, compared to RMB 10.0 million or 1.3% of total revenues in the same period of 2011. Excluding Motel 168, sales and marketing expenses excluding shared-based compensation expenses for the first quarter of 2012 were RMB 14.5 million (US$2.3 million), representing 1.6% of total revenues. This year-over-year increase in sales and marketing expenses resulted from higher spending on marketing programs.
General and administrative expenses for the first quarter of 2012 were RMB 80.0 million (US$12.7 million), including share-based compensation expenses of RMB 17.6 million (US$2.8 million) and integration costs of RMB 10.1 million (US$1.6 million). General and administrative expenses excluding share-based compensation expenses and integration cost (non-GAAP) were RMB 52.3 million (US$8.3 million), or 4.2% of the total revenues, compared with 4.7% of the total revenues in the same period of 2011 and 4.7% in the fourth quarter of 2011. Excluding Motel 168, general and administrative expenses excluding share-based compensation expenses for the quarter were RMB 41.9 million (US$6.7 million), or 4.5% of total revenues compared to 4.7% same period a year ago and 5.6% in the previous quarter. The Company continues to benefit from economies of scale.
The above resulted in a loss from operations for the first quarter of 2012 of RMB 36.9 million (US$5.9 million). Income from operations excluding share-based compensation expenses and integration cost (non-GAAP) for the first quarter of 2012 was RMB 9.7 million (US$1.5 million), or 0.8% of total revenues. Excluding Motel 168, income from operations for the first quarter of 2012 was RMB 21.1 million (US$3.4 million). Excluding Motel 168, income from operations excluding share-based compensation expenses (non-GAAP) for the first quarter of 2012 was RMB 43.2 million (US$6.9 million), or 4.7% of total revenues, compared to RMB 60.0 million or 7.9% of total revenues in the same period of 2011 and RMB 89.3 million or 9.5% of total revenues in the fourth quarter of 2011. The year-over-year decrease in income from operations was caused by market conditions not suitable for selling price increase which would offset cost inflations. It was also driven by less revenue contribution by hotels in ramp-up stage yet incurring full costs, and a higher level of pre-opening expenses. The sequential decrease in income from operations was mainly due to seasonality.
EBITDA (non-GAAP) for the first quarter of 2012 was RMB 93.1 million (US$14.8 million). Excluding any share-based compensation expenses, foreign exchange gain, loss from fair value change of convertible notes, integration cost and non-operating expenses, adjusted EBITDA (non-GAAP) was RMB 165.9 million (US$26.3 million), or 13.2% of total revenues. Integration costs refer to costs incurred by Motel 168 during its integration into the Company's business. Excluding Motel 168, EBITDA (non-GAAP) for the first quarter of 2012 was RMB 105.7 million (US$16.8 million). Excluding Motel 168, adjusted EBITDA (non-GAAP) excluding any share-based compensation expenses, foreign exchange gain, loss from fair value change of convertible notes and non-operating expenses, was RMB 153.4 million (US$24.4 million), or 16.5% of total revenues, compared to RMB 152.5 million or 20.2% of total revenue in the same period in 2011.
Net loss attributable to Home Inns' shareholders for the first quarter of 2012 was RMB 103.2 million (US$16.4 million). Adjusted net loss attributable to Home Inns' shareholders (non-GAAP), which excludes any share-based compensation expenses, foreign exchange gain, loss from fair value change of convertible notes, integration cost, non-operating expenses and upfront fee amortization of term loan, was RMB 24.6 million (US$3.9 million) for the first quarter of 2012. Excluding Motel 168, net loss attributable to Home Inns' shareholders for the first quarter of 2012 was RMB 50.0 million (US$7.9 million). Excluding Motel 168, adjusted net income attributable to Home Inns' shareholders (non-GAAP) excluding any share-based compensation expenses, foreign exchange gain, loss from fair value change of convertible notes, non-operating expenses and amortization of upfront fee incurred for the term loan borrowing, was RMB 3.6 million (US$0.6 million), compared to that of RMB 47.5 million from the same period in 2011 and RMB 35.2 million for the fourth quarter of 2011.
The following data refers to the first quarter of 2012. Basic and diluted losses per share were both RMB 1.14 (US$0.18). Basic and diluted losses per ADS were both RMB 2.28 (US$0.36). Excluding any share-based compensation expenses, foreign exchange gain, loss from fair value change of convertible notes, integration cost, non-operating expenses and amortization of upfront fee of the term loan borrowing, adjusted basic and diluted losses per share (non-GAAP) were both RMB 0.27 (US$0.04). Adjusted basic and diluted losses per ADS (non-GAAP) were both RMB 0.54 (US$0.09). Outstanding convertible bonds issued in 2007, outstanding convertible notes issued in 2010 and stock options were excluded in the computation of diluted earnings per share due to their anti-dilutive effect for the first quarter of 2012..
Net operating cash flow for the first quarter of 2012 was RMB 30.8 million (US$4.9 million), compared to RMB 55.4 million from the first quarter of 2011. Capitalized expenditures for the first quarter of 2012 were RMB 170.3 million (US$27.0 million), while related cash paid for capital expenditures during the quarter was RMB 299.8 million (US$47.6 million).
As of March 31, 2012, Home Inns had cash and cash equivalents of RMB 1.51 billion (US$240.3 million). The outstanding balance of its convertible bonds (issued in 2007) was RMB 113.2 million (US$18.0 million) including principal and accrued interest. Outstanding balance of long-term financial liability (measured at fair value) arose from the convertible notes issued in December 2010 was RMB 1.01 billion (US$159.8 million). The balance of US Dollar-denominated 4-year term loan facility was RMB 1.51 billion (US$239.9 million).
This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.2975 to US$1.00, the noon buying rate for March 30, 2012 set forth in the H.10 statistical release of the Federal Reserve Board.
Because of the lack of dilutive impact on net loss, basic and diluted losses per ADS are the same. Adjusted basic and diluted losses per ADS (non-GAAP) exclude foreign exchange gain, share-based compensation expenses, integration cost, loss from change in fair value of convertible notes, non-operating expenses and amortization of upfront fee of the term loan borrowing. Please refer to "Reconciliations of GAAP and Non-GAAP Results" at the end of this press release.
Outlook for Second Quarter 2012
Home Inns expects total revenues for the group in the second quarter of 2012 to be in the range of RMB 1,430 million to (US$227.1 million) to RMB 1,460 million (US$231.8 million).
Total revenues for Motel 168 brand in the second quarter of 2012 are expected to be in the range of RMB 390 million (US$61.9 million) to RMB 400 million (US$63.5 million).
Excluding Motel 168, total revenues in the second quarter of 2012 are expected to be in the range of RMB 1,040 million (US$165.1 million) to RMB 1,060 million (US$168.3 million).
This forecast reflects Home Inns' current and preliminary view, which is subject to change. Our revenue and new hotel openings guidance for the full year 2012 remains unchanged.
