Huazhu Group Limited (NASDAQ:HTHT) Q4 2018 Earnings Conference Call Transcript

Mar 14, 2019 • 09:00 pm ET

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Huazhu Group Limited (NASDAQ:HTHT) Q4 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by and welcome to Huazhu Group Limited Quarter Four 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. There'll be a presentation followed by a question-and-answer session. (Operator Instructions) And I must advise you that this conference is being recorded today, the 15th of March 2019.

I would now like to hand the conference over to your speaker today, Ida Yu. Thank you. Please go ahead.

Executive
Ida Yu

Thank you, Richie. Good morning, everyone. Thanks to all of you for dialing in and welcome to our fourth quarter and full year 2018 earnings conference call. Joining us today is Mr. Qi Ji, our Founder and Executive Chairman; Ms. Jenny Zhang, our CEO; and Mr. Teo Nee Chuan, our CFO. Jenny and Teo will present the strategy review and the Q4 full year results. Following their prepared remarks, Management will be available to answer your questions.

Before we continue please note that the discussion today will include forward-looking statements made under the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. Huazhu Group does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliations of those measures to compatible GAAP information can be found in the earnings release that was distributed earlier today. As a reminder, this conference call is being recorded. The webcast of this conference call, as well as supplementary slide presentation is available on the Investor Relations section of Huazhu Group's website at ir.huazhu.com.

Now, I would like to turn the call over to Jenny. Jenny, please?

Executive
Min Zhang

Good morning, everyone. I'm pleased to report that Huazhu has delivered very strong results for 2018. To help all investors apprehend the scale of our business in different of leased and managed models, we introduced a new metric called hotel turnover, which for managed and the franchised hotels reflect the total revenue captured at hotel level instead of fees charged by Huazhu.

As shown on Page 2, our hotel turnover increased by 23% to RMB29.7 billion in 2018. Our net revenues stood at RMB10 billion, a year-over-year increase of 22%, exceeding the high end of our guidance. Our adjusted EBITDA grew by 37% with a margin of 32.5%, up 3.6 percentage points from 28.9% last year. The adjusted net income increased by 36% with a margin of 17%, up 1.7 percentage points from 15.3% last year. Teo will provide (technical difficulty) analysis later.

Our robust top line growth is driven by both hotel network expansion and RevPAR growth, as illustrated on Page 3. In 2018, Huazhu's number of hotels in operation expanded by 13% net to 4,230 hotels..