Finance
Elon Musk's Twitter takeover has ended up as the worst buyout deal for banks since the financial crisis
Elon Musk’s Twitter purchase has ended up being the worst buyout financing deal for banks since the 2008 recession, according to The Wall Street Journal.
The $13 billion in loans Musk took out to fund his takeover of the social media platform have remained stuck on the balance sheets of the seven banks that financed the deal, largely due to the poor performance of the company, the Journal reported on Tuesday.
That’s unusual for lenders, who typically offload loans quickly to get them off their books and collect fees related to the sale of the debt.
The lenders, which include banks like Morgan Stanley, Bank of America, and Barclays, have held onto Musk’s loans for 22 months. That’s the longest unsold debt financing deal for banks since the Great Financial Crisis, according to data from PitchBook LCD cited by the Journal.
Sources told the outlet that banks were willing to finance the deal mostly because Musk, who still ranks as one of the world’s wealthiest people, made the opportunity too attractive.
However, sources added that the loans have mostly been a burden on banks’ balance sheets, with some lenders writing down their value considerably since the deal went through at the end of 2022.
In one instance, the burden of taking on Musk’s debt limited the amount of money available for other mergers and financing deals, the sources said.
The debt has also eaten into bankers’ pay, with some M&A bankers seeing compensation reduced by 40% in 2023 compared to the prior year, largely because of loans stuck on balance sheets, the largest of which by far was for Musk’s Twitter takeover.
Musk’s loans have been bringing in some cash for lenders through large interest payments, the report said.
Banks could recoup the total value of the debt if X is able to pay back the principal on the loans when they mature. Lenders, though, are expecting to incur a sum $2 billion loss, people familiar with the matter told the Journal in a separate report.
X, meanwhile, still appears to be struggling financially, despite Musk’s controversial revamp and cost-cutting measures. The company saw $1.48 billion in revenue in the first half of 2023, a 40% decline from the same period a year earlier, according to Bloomberg.
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Finance
H World Group Limited Reports Second Quarter and Interim of 2024 Unaudited Financial Results
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A total of 10,286 hotels or 1,001,865 hotel rooms in operation as of June 30, 2024.
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Hotel turnover1 increased 15.5% year-over-year to RMB23.4 billion in the second quarter of 2024. Excluding Steigenberger Hotels GmbH and its subsidiaries (“DH”, or “Legacy-DH”), hotel turnover from the Legacy-Huazhu segment increased 16.2% year-over-year in the second quarter of 2024; and hotel turnover from the Legacy-DH segment increased 7.8% year-over-year in the second quarter of 2024.
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Revenue increased 11.2% year-over-year to RMB6.1 billion (US$846 million)2 in the second quarter of 2024, at the high end of the previously announced 7% to 11% revenue increase guidance as compared to the second quarter of 2023. Revenue from the Legacy-Huazhu segment in the second quarter of 2024 increased 11.1% year-over-year, also at the high end of the previously announced 7% to 11% guidance; and revenue from the Legacy-DH segment in the second quarter of 2024 increased 11.6% year-over-year.
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Net income attributable to H World Group Limited was RMB1.1 billion (US$147 million) in the second quarter of 2024, compared with RMB1.0 billion in the second quarter of 2023 and RMB659 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-Huazhu segment was RMB1.0 billion in the second quarter of 2024, compared with RMB993 million in the second quarter of 2023 and RMB833 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-DH segment was RMB34 million in the second quarter of 2024, compared with RMB22 million in the second quarter of 2023 and a net loss of RMB174 million in the previous quarter.
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EBITDA (non-GAAP) in the second quarter of 2024 was RMB1.9 billion (US$255 million), compared with RMB1.7 billion in the second quarter of 2023 and RMB1.3 billion in the previous quarter.
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Adjusted EBITDA (non-GAAP), which excluded share-based compensation expenses, gain (loss) from fair value changes of equity securities, net foreign exchange gain (loss), and gain (loss) on disposal of investments from EBITDA (non-GAAP), was RMB2.0 billion (US$280 million) in the second quarter of 2024, compared with RMB1.8 billion in the second quarter of 2023 and RMB1.4 billion in the previous quarter.
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Adjusted EBITDA by segment is our segment measure. Adjusted EBITDA from the Legacy-Huazhu segment was RMB1.9 billion in the second quarter of 2024, compared with RMB1.7 billion in the second quarter of 2023 and RMB1.5 billion in the previous quarter. Adjusted EBITDA from the Legacy-DH segment was RMB131 million in the second quarter of 2024, compared with RMB97 million in the second quarter of 2023 and a loss of RMB66 million in the previous quarter.
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For the third quarter of 2024, H World expects its revenue growth to be in the range of 2%-5% compared to the third quarter of 2023, or in the range of 1%-4% excluding DH.
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We revise up our hotel opening guidance for the full year of 2024, expecting to open over 2,200 hotels, up from our previous guidance of around 1,800 hotels.
SINGAPORE and SHANGHAI, Aug. 20, 2024 (GLOBE NEWSWIRE) — H World Group Limited (NASDAQ: HTHT and HKEX: 1179) (“H World”, the “Company”, “we” or “our”), a key player in the global hotel industry, today announced its unaudited financial results for the second quarter and the first half ended June 30, 2024.
As of June 30, 2024, H World’s worldwide hotel network in operation totaled 10,286 hotels and 1,001,865 rooms, including 136 hotels and 27,552 rooms from DH. During the second quarter of 2024, our Legacy-Huazhu business opened 567 hotels, including 4 leased and owned hotels, and 563 manachised and franchised hotels, and closed a total of 101 hotels, including 10 leased and owned hotels and 91 manachised and franchised hotels. As of June 30, 2024, H World had a total of 3,294 unopened hotels in the pipeline, including 3,266 hotels from the Legacy-Huazhu business and 28 hotels from the Legacy-DH business.
Legacy-Huazhu – Second Quarter of 2024 Operational Highlights
As of June 30, 2024, Legacy-Huazhu had 10,150 hotels in operation, including 592 leased and owned hotels, and 9,558 manachised and franchised hotels. In addition, as of the same date, Legacy-Huazhu had 974,313 hotel rooms in operation, including 84,814 rooms under the lease and ownership model, and 889,499 rooms under the manachise and franchise models. Legacy-Huazhu also had 3,266 unopened hotels in its pipeline, including 8 leased and owned hotels, and 3,258 manachised and franchised hotels. The following discusses Legacy-Huazhu’s revenue per available room (“RevPAR”), average daily room rate (“ADR”) and occupancy rate for its leased and owned hotels, as well as manachised and franchised hotels for the periods indicated.
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The ADR was RMB296 in the second quarter of 2024, compared with RMB305 in the second quarter of 2023 and RMB280 in the previous quarter.
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The occupancy rate for all the Legacy-Huazhu hotels in operation was 82.6% in the second quarter of 2024, compared with 81.8% in the second quarter of 2023 and 77.2% in the previous quarter.
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Blended RevPAR was RMB244 in the second quarter of 2024, compared with RMB250 in the second quarter of 2023 and RMB216 in the previous quarter.
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For all the Legacy-Huazhu hotels which had been in operation for at least 18 months, the same-hotel RevPAR was RMB248 in the second quarter of 2024, representing a 3.6% decline from RMB257 in the second quarter of 2023, with a 4.1% decrease in same-hotel ADR partially offset by a 0.4 percentage-point increase in same-hotel occupancy rate.
Legacy-DH – Second Quarter of 2024 Operational Highlights
As of June 30, 2024, Legacy-DH had 136 hotels in operation, including 87 leased hotels, and 49 manachised and franchised hotels. In addition, as of the same date, Legacy-DH had 27,552 hotel rooms in operation, including 16,789 rooms under the lease model, and 10,763 rooms under the manachise and franchise models. Legacy-DH also had 28 unopened hotels in the pipeline, including 13 leased hotels and 15 manachised and franchised hotels. The following discusses Legacy-DH’s RevPAR, ADR and occupancy rate for its leased as well as manachised and franchised hotels (excluding hotels temporarily closed) for the periods indicated.
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The ADR was EUR120 in the second quarter of 2024, compared with EUR117 in the second quarter of 2023 and EUR104 in the previous quarter.
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The occupancy rate for all Legacy-DH hotels in operation was 68.3% in the second quarter of 2024, compared with 67.1% in the second quarter of 2023 and 55.8% in the previous quarter.
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Blended RevPAR was EUR82 in the second quarter of 2024, compared with EUR78 in the second quarter of 2023 and EUR58 in the previous quarter.
Jin Hui, CEO of H World commented: “We are pleased to announce that the Group and Legacy-Huazhu has achieved a remarkable 10,000-hotel milestone during the second quarter of 2024. This milestone also marked a new start for the Group. We believe the Chinese market still presents huge opportunities and growth potentials, and we are ready to scale new heights, moving from 10,000+ hotels in over 1,000 cities to 20,000+ hotels in over 2,000 cities. In the second quarter of 2024, we continued our fast high-quality network growth, opening 567 new hotels in China. While Legacy-Huazhu’s blended RevPAR declined by 2% year-over-year in the second quarter due mainly to a high ADR base in the same period last year, our occupancy rate increased by 0.7 percentage-point year-over-year despite our continued rapid rate of hotel network expansion. In spite of the near-term volatilities in macro and consumption, China’s overall travel demand remains robust. As for Legacy-Huazhu, we will continue focusing on product upgrades, service excellence, and membership programs to enhance our core competitive edges and drive a long-term sustainable RevPAR growth.”
“Regarding our business outside China, our Legacy-DH recorded a 4.5% year-over-year blended RevPAR increase in the second quarter of 2024. We are committed to extend our global footprint, seeking growth opportunities in the Asia-Pacific (APAC) and the Middle East.”
Second Quarter and Interim of 2024 Unaudited Financial Results
(RMB in millions) |
Q2 2023 |
Q1 2024 |
Q2 2024 |
H1 2023 |
H1 2024 |
Revenue: |
|
|
|
|
|
Leased and owned hotels |
3,592 |
3,099 |
3,681 |
6,466 |
6,780 |
Manachised and franchised hotels |
1,856 |
2,063 |
2,334 |
3,410 |
4,397 |
Others |
82 |
116 |
133 |
134 |
249 |
Total revenue |
5,530 |
5,278 |
6,148 |
10,010 |
11,426 |
|
|
|
|
|
|
Revenue in the second quarter of 2024 was RMB6.1 billion (US$846 million), representing an 11.2% year-over-year increase and a 16.5% quarter-over-quarter increase. Revenue from the Legacy-Huazhu segment in the second quarter of 2024 was RMB4.8 billion, representing an 11.1% year-over-year increase and a 13.7% quarter-over-quarter increase. The 11.1% year-over-year increase was mainly driven by continued hotel network expansion. Revenue from the Legacy-DH segment in the second quarter of 2024 was RMB1.3 billion, representing an 11.6% year-over-year increase and a 27.8% quarter-over-quarter increase. The year-over-year increase was attributable to both business recovery and network expansion, and the quarter-over-quarter increase was mainly due to seasonality.
Revenue in the first half of 2024 was RMB11.4 billion (US$1.6 billion), representing an increase of 14.1% from the first half of 2023. Revenue from Legacy-Huazhu in the first half of 2024 was RMB9.1 billion, representing a 14.3% year-over-year increase. Revenue from Legacy-DH in the first half of 2024 was RMB2.4 billion, representing a 13.7% year-over-year increase.
Revenue from leased and owned hotels in the second quarter of 2024 was RMB3.7 billion (US$507 million), representing a 2.5% year-over-year increase and a 18.8% quarter-over-quarter increase. Revenue from leased and owned hotels from the Legacy-Huazhu segment in the second quarter of 2024 was RMB2.4 billion, representing a 2.9% year-over-year decrease, due mainly to the net closure of leased and owned hotels in operation. Revenue from leased hotels from the Legacy-DH segment in the second quarter of 2024 was RMB1.3 billion, representing a 14.2% year-over-year increase.
In the first half of 2024, revenue from our leased and owned hotels was RMB6.8 billion (US$933 million), representing a 4.9% year-over-year increase. Revenue from our Legacy-Huazhu’s leased and owned hotels in the first half of 2024 was RMB4.5 billion, representing a 0.5% year-over-year increase. Revenue from our Legacy-DH’s leased hotels in the first half of 2024 was RMB2.3 billion, representing a 14.8% year-over-year increase.
Revenue from manachised and franchised hotels in the second quarter of 2024 was RMB2.3 billion (US$321million), representing a 25.8% year-over-year increase and a 13.1% quarter-over-quarter increase. Revenue from manachised and franchised hotels from the Legacy-Huazhu segment in the second quarter of 2024 was RMB2.3 billion, representing a 26.0% year-over-year increase. Revenue from manachised and franchised hotels from the Legacy-DH segment in the second quarter of 2024 was RMB29 million, representing an 11.5% year-over-year increase.
In the first half of 2024, revenue from manachised and franchised hotels was RMB4.4 billion (US$605 million), representing a 28.9% year-over-year increase. These hotels accounted for 38.5% of revenue, compared to 34.1% of revenue in the first half of 2023. Revenue from our Legacy-Huazhu’s manachised and franchised hotels in the first half of 2024 was RMB4.3 billion, representing a 29.1% year-over-year increase. Revenue from our Legacy-DH’s manachised and franchised hotels in the first half of 2024 was RMB50 million, representing a 13.6% year-over-year increase.
Other revenue represents revenue generated from businesses other than our hotel operations, which mainly includes revenue from the provision of IT products and services and Huazhu Mall™ and other revenue from the Legacy-DH segment, totaling RMB133 million (US$18 million) in the second quarter of 2024, compared to RMB82 million in the second quarter of 2023 and RMB116 million in the previous quarter.
In the first half of 2024, other revenue was RMB249 million (US$34 million), compared to RMB134 million in the first half of 2023.
(RMB in millions) |
Q2 2023 |
Q1 2024 |
Q2 2024 |
H1 2023 |
H1 2024 |
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Operating costs and expenses: |
|
|
|
|
|
|||||
Hotel operating costs |
(3,482 |
) |
(3,565 |
) |
(3,731 |
) |
(6,732 |
) |
(7,296 |
) |
Other operating costs |
(6 |
) |
(9 |
) |
(6 |
) |
(17 |
) |
(15 |
) |
Selling and marketing expenses |
(262 |
) |
(260 |
) |
(317 |
) |
(457 |
) |
(577 |
) |
General and administrative expenses |
(477 |
) |
(509 |
) |
(602 |
) |
(902 |
) |
(1,111 |
) |
Pre-opening expenses |
(12 |
) |
(8 |
) |
(19 |
) |
(21 |
) |
(27 |
) |
Total operating costs and expenses |
(4,239 |
) |
(4,351 |
) |
(4,675 |
) |
(8,129 |
) |
(9,026 |
) |
|
|
|
|
|
|
|
|
|
|
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Hotel operating costs in the second quarter of 2024 were RMB3.7 billion (US$512 million), compared to RMB3.5 billion in the second quarter of 2023 and RMB3.6 billion in the previous quarter. The year-over-year increase was mainly due to our hotel network expansion. Hotel operating costs from the Legacy-Huazhu segment in the second quarter of 2024 were RMB2.7 billion, which represented 56.7% of the quarter’s revenue, compared to RMB2.6 billion or 58.9% of revenue in the second quarter of 2023 and RMB2.6 billion or 61.6% in the previous quarter. Hotel operating costs from the Legacy-DH segment in the second quarter of 2024 were RMB995 million, which represented 75.4% of revenue, compared to RMB923 million or 78.0% of revenue in the second quarter of 2023, and RMB950 million or 92.0% in the previous quarter.
In the first half of 2024, hotel operating costs were RMB7.3 billion (US$1.0 billion), compared to RMB6.7 billion in the first half of 2023. Hotel operating costs from Legacy-Huazhu in the first half of 2024 were RMB5.4 billion, which represented 59.0% of revenue, compared to 62.2% in the first half of 2023. Hotel operating costs from Legacy-DH in the first half of 2024 were RMB1.9 billion, which represented 82.7% of revenue, compared to RMB1.8 billion or 86.5% in the first half of 2023.
Selling and marketing expenses in the second quarter of 2024 were RMB317 million (US$44 million), compared to RMB262 million in the second quarter of 2023 and RMB260 million in the previous quarter. Selling and marketing expenses from the Legacy-Huazhu segment in the second quarter of 2024 were RMB193 million, which represented 4.0% of this quarter’s revenue, compared to RMB153 million or 3.5% of revenue in the second quarter of 2023, and RMB159 million or 3.7% for the previous quarter. The year-over-year expense increase was mainly due to continued business expansion. Selling and marketing expenses from the Legacy-DH segment in the second quarter of 2024 were RMB124 million, which represented 9.4% of revenue, compared to RMB109 million or 9.2% of revenue in the second quarter of 2023, and RMB101 million or 9.8% for the previous quarter.
In the first half of 2024, selling and marketing expenses were RMB577 million (US$79 million), compared to RMB457 million in the first half of 2023. Selling and marketing expenses from Legacy-Huazhu in the first half of 2024 were RMB352 million, which represented 3.9% of revenue, compared to RMB270 million or 3.4% of revenue in the first half of 2023. Selling and marketing expenses from Legacy-DH in the first half of 2024 were RMB225 million, which represented 9.6% of revenue, compared to RMB187 million or 9.0% of revenue in the first half of 2023.
General and administrative expenses in the second quarter of 2024 were RMB602 million (US$83 million), compared to RMB477 million in the second quarter of 2023 and RMB509 million in the previous quarter. General and administrative expenses from the Legacy-Huazhu segment in the second quarter of 2024 were RMB483 million, which represented 10.0% of this quarter’s revenue, compared to RMB352 million or 8.1% of revenue in the second quarter of 2023 and RMB395 million or 9.3% of revenue in the previous quarter. The year-over-year expense increase was mainly due to headcount normalization and a rise in share-based compensation to secure and reward core employees for our sustainable long-term business growth. General and administrative expenses from the Legacy-DH segment in the second quarter of 2024 were RMB119 million, which represented 9.0% of revenue, compared to RMB125 million or 10.6% of revenue in the second quarter of 2023 and RMB114 million or 11.0% in the previous quarter.
In the first half of 2024, general and administrative expenses were RMB1.1 billion (US$153 million), compared to RMB902 million in the first half of 2023. General and administrative expenses from Legacy-Huazhu in the first half of 2024 were RMB878 million, which represented 9.7% of revenue, compared to RMB664 million or 8.4% of revenue in the first half of 2023. General and administrative expenses from Legacy-DH in the first half of 2024 were RMB233 million, which represented 9.9% of revenue, compared to RMB238 million or 11.5% of revenue in the first half of 2023.
Pre-opening expenses in the second quarter of 2024 were primarily related to the Legacy-Huazhu segment and totaled RMB19 million (US$3 million), compared to RMB12 million in the second quarter of 2023 and RMB8 million in the previous quarter.
Pre-opening expenses in the first half of 2024 were RMB27 million (US$4 million), compared to RMB21 million in the first half of 2023. Pre-opening expenses from Legacy-Huazhu were 0.3% of revenue in the first half of 2024, the same as the 0.3% of revenue in the first half of 2023.
Other operating income, net in the second quarter of 2024 was RMB99 million (US$13 million), compared to RMB94 million in the second quarter of 2023 and RMB76 million in the previous quarter.
Other operating income, net in the first half of 2024 was RMB175 million (US$24 million), compared to RMB168 million in the first half of 2023.
Income from operations in the second quarter of 2024 was RMB1.6 billion (US$216 million), compared to income from operations of RMB1.4 billion in the second quarter of 2023 and income from operations of RMB1.0 billion in the previous quarter. Income from operations from the Legacy-Huazhu segment in the second quarter of 2024 was RMB1.5 billion, compared to income from operations of RMB1.3 billion in the second quarter of 2023 and income from operations of RMB1.1 billion in the previous quarter. The Legacy-DH segment had income from operations of RMB73 million in the second quarter of 2024, compared to income from operations of RMB35 million in the second quarter of 2023 and a loss from operations of RMB128 million in the previous quarter.
Income from operations in the first half of 2024 was RMB2.6 billion (US$354 million), compared to income from operation of RMB2.0 billion in the first half of 2023. Income from operations from Legacy-Huazhu in the first half of 2024 was RMB2.6 billion, compared to income from operations of RMB2.2 billion in 2023. Loss from operations from Legacy-DH in the first half of 2024 was RMB55 million, compared to a loss of RMB123 million in the first half of 2023.
Operating margin, defined as income from operations as a percentage of revenue, was 25.6% in the second quarter of 2024, compared with 25.0% in the second quarter of 2023 and 19.0% for the previous quarter. The margin improvement was mainly due to higher revenue contribution from Legacy-Huazhu’s manachised and franchised business as well as margin improvement from the Legacy-DH business. This was in line with our asset-light expansion strategy. Operating margin from the Legacy-Huazhu segment in the second quarter of 2024 was 31.0%, compared with 31.1% in the second quarter of 2023 and 26.6% in the previous quarter. Operating margin from the Legacy-DH segment in the second quarter of 2024 was 5.5%, compared with 3.0% in the second quarter of 2023 and a negative 12.4% in the previous quarter.
Operating margin in the first half of 2024 was 22.5%, compared with 20.5% in the first half of 2023. Operating margin from Legacy-Huazhu in the first half of 2024 was 29.0%, compared with 27.4% in the first half of 2023. Operating margin from Legacy-DH in the first half of 2024 was a negative 2.3%, compared with a negative 5.9% in the first half of 2023.
Other income, net in the second quarter of 2024 was RMB24 million (US$3 million), compared to RMB32 million in the second quarter of 2023 and RMB40 million in the previous quarter.
Other income, net in the first half of 2024 was RMB64 million (US$9 million), compared to RMB546 million in the first half of 2023, which was mainly due to gains from selling AccorHotels shares.
Gains (losses) from fair value changes of equity securities in the second quarter of 2024 were losses of RMB51 million (US$7 million), compared to losses of RMB19 million in the second quarter of 2023, and gains of RMB38 million in the previous quarter. Gains (losses) from fair value changes of equity securities mainly represent the unrealized gains (losses) from our investments in equity securities with readily determinable fair values.
In the first half of 2024, losses from fair value changes of equity securities were RMB13 million (US$2 million), compared to losses of RMB6 million in the first half of 2023.
Income tax expense in the second quarter of 2024 was RMB423 million (US$58 million), compared to RMB308 million in the second quarter of 2023 and RMB279 million in the previous quarter.
In the first half of 2024, income tax expense was RMB702 million (US$97 million), compared to RMB502 million in the first half of 2023.
Net income attributable to H World Group Limited in the second quarter of 2024 was RMB1.1 billion (US$147 million), compared with RMB1.0 billion in the second quarter of 2023 and RMB659 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-Huazhu segment was RMB1.0 billion in the second quarter of 2024, compared with RMB993 million in the second quarter of 2023 and RMB833 million in the previous quarter. Net income attributable to H World Group Limited from the Legacy-DH segment was RMB34 million in the second quarter of 2024, compared with RMB22 million in the second quarter of 2023 and a net loss of RMB174 million in the previous quarter.
Net income attributable to H World Group Limited in the first half of 2024 was RMB1.7 billion (US$238 million), compared with RMB2.0 billion in the first half of 2023. Net income attributable to H World Group Limited from Legacy-Huazhu in the first half of 2024 was RMB1.9 billion, compared to RMB2.1 billion in the first half of 2023. Net loss attributable to H World Group Limited from Legacy-DH in the first half of 2024 was RMB140 million, compared to a net loss of RMB143 million in the first half of 2023.
EBITDA (non-GAAP) in the second quarter of 2024 was RMB1.9 billion (US$255 million), compared with RMB1.7 billion in the second quarter of 2023 and RMB1.3 billion in the previous quarter.
EBITDA (non-GAAP) in the first half of 2024 was RMB3.2 billion (US$436 million), compared with RMB3.4 billion in the first half of 2023.
Adjusted EBITDA (non-GAAP), which excluded share-based compensation expenses, gain (loss) from fair value changes of equity securities, net foreign exchange gain (loss), and gain (loss) on disposal of investments from EBITDA (non-GAAP), was RMB2.0 billion (US$280 million) in the second quarter of 2024, compared with RMB1.8 billion in the second quarter of 2023 and RMB1.4 billion in the previous quarter. Adjusted EBITDA from the Legacy-Huazhu segment, which is a segment measure, was RMB1.9 billion in the second quarter of 2024, compared with RMB1.7 billion in the second quarter of 2023 and RMB1.5 billion in the previous quarter. Adjusted EBITDA from the Legacy-DH segment, which is a segment measure, was RMB131 million in the second quarter of 2024, compared with RMB97 million in the second quarter of 2023 and a loss of RMB66 million in the previous quarter.
Adjusted EBITDA (non-GAAP) in the first half of 2024 was RMB3.5 billion (US$476 million), compared with RMB2.8 billion in the first half of 2023. Adjusted EBITDA from Legacy-Huazhu, which is a segment measure, was RMB3.4 billion in the first half of 2024, compared with RMB2.8 billion in the first half of 2023. Adjusted EBITDA from Legacy-DH, which is a segment measure, was RMB65 million in the first half of 2024.
To better reflect the profitability of our core business, we have redefined the non-GAAP measure of adjusted EBITDA, and therefore the above adjusted EBITDA for the second quarter of 2023 and the first half of 2023 have been restated.
Cash flow. Operating cash inflow in the second quarter of 2024 was RMB2.2 billion (US$307 million). Investing cash inflow in the second quarter of 2024 was RMB346 million (US$47 million). Financing cash outflow in the second quarter of 2024 was RMB1.1 billion (US$152 million).
Operating cash inflow in the first half of 2024 was RMB3.1 billion (US$430 million), compared to RMB4.1 billion in the first half of 2023. Investing cash inflow in the first half of 2024 was RMB694 million (US$95 million), compared to RMB849 million in the first half of 2023. Financing cash outflow in the first half of 2024 was RMB3.4 billion (US$463 million), compared to RMB2.4 billion in the first half of 2023.
Cash, cash equivalents and restricted cash. As of June 30, 2024, the Company had a total balance of cash and cash equivalents of RMB7.8 billion (US$1.1 billion) and restricted cash of RMB364 million (US$50 million).
Debt financing. As of June 30, 2024, the Company had a total debt and net cash balance of RMB5.5 billion (US$762 million) and RMB2.6 billion (US$361 million), respectively; the unutilized credit facility available to the Company was RMB3.1 billion.
Shareholder return plan
On July 23 2024, the Company’s board of directors (the “Board”) has announced a three-year shareholder return plan with an aggregate amount of distribution that may be made to the Company’s shareholders of up to US$2 billion, effective from July 23, 2024. Under the shareholder return plan, the Board has the sole discretion to: (i) declare and distribute ordinary dividends semi-annually, the aggregate amount of which for each financial year shall be no less than 60% of the Company’s net income in such financial year, and (ii) declare and distribute, from time to time, special dividends and/or make repurchases of the American Depositary Shares of the Company (“ADS(s)”) pursuant to the share repurchase program, considering the financial position of the Company.
Semi-annual dividend
The Board has declared a cash dividend for the first half of 2024 in the aggregate amount of approximately US$200 million, of US$0.063 per ordinary share, or US$0.63 per ADS.
Share repurchase program
On July 23 2024, the Board approved a five-year share repurchase program of ADSs with an aggregate amount of up to US$1 billion, effective from August 21, 2024. This share repurchase program replaces the Company’s share repurchase program previously approved and adopted on August 21, 2019 with an aggregate amount of up to US$750 million.
Guidance
For the third quarter of 2024, H World expects its revenue growth to be in the range of 2%-5% compared to the third quarter of 2023, or in the range of 1%-4% excluding DH.
We revise up our hotel opening guidance for the full year of 2024, expecting to open over 2,200 hotels, and up from our previous guidance of around 1,800 hotels.
The above forecast reflects the Company’s current and preliminary view, which is subject to change.
Conference Call
H World’s management will host a conference call at 9 p.m. U.S. Eastern time on Tuesday, August 20, 2024 (9 a.m. Hong Kong time on Wednesday, August 21, 2024) following the announcement.
To join by phone, all participants must pre-register this conference call using the Participant Registration link of https://register.vevent.com/register/BI29b37e1152634b2aaaec173dd6f6fb8a. Upon registration, each participant will receive details for the conference call, which include dial-in numbers, conference call passcode and a unique access PIN.
A live webcast of the call can be accessed at https://edge.media-server.com/mmc/p/8no94rwr or the Company’s website at https://ir.hworld.com/news-and-events/events-calendar.
A replay of the conference call will be available for twelve months from the date of the conference at the Company’s website, https://ir.hworld.com/news-and-events/events-calendar.
Use of Non-GAAP Financial Measures
To supplement the Company’s unaudited consolidated financial results presented in accordance with U.S. Generally-Accepted Accounting Principles (“GAAP”), the Company uses the following non-GAAP measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission (“SEC”): adjusted net income (loss) attributable to H World Group Limited excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments; adjusted basic and diluted earnings (losses) per share/ADS excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments; EBITDA; adjusted EBITDA excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Unaudited Reconciliations of GAAP and non-GAAP Results” set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding Company performance by excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments that may not be indicative of Company operating performance. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Company performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance. The Company believes these non-GAAP financial measures are also useful to investors in allowing for greater transparency with respect to supplemental information used regularly by Company management in financial and operational decision-making. A limitation of using non-GAAP financial measures excluding share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments is that share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments have been and may continue to be significant and recurring in the Company’s business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
The Company believes that EBITDA is a useful financial metric to assess the operating and financial performance before the impact of investing and financing transactions and income taxes, given the significant investments that the Company has made in leasehold improvements, depreciation and amortization expense that comprise a significant portion of the Company’s cost structure. In addition, the Company believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of financial performance. The Company believes that EBITDA information provides investors with a useful tool for comparability between periods because it excludes depreciation and amortization expense attributable to capital expenditures. The Company also uses adjusted EBITDA to assess operating results of its hotels in operation. The Company believes that the exclusion of share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments helps facilitate year-over-year comparisons of the results of operations as the share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments may not be indicative of Company operating performance.
Therefore, the Company believes adjusted EBITDA more closely reflects the financial performance capability of our hotels. The presentation of EBITDA and adjusted EBITDA should not be construed as an indication that the Company’s future results will be unaffected by other charges and gains considered to be outside the ordinary course of business.
The use of EBITDA and adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets (including land use rights), income tax, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments have been and will be incurred and are not reflected in the presentation of adjusted EBITDA. Each of these items should also be considered in the overall evaluation of the results. The Company compensates for these limitations by providing the relevant disclosure of depreciation and amortization, interest income, interest expense, income tax expense, share-based compensation expenses, gain (loss) from fair value changes of equity securities, foreign exchange gain (loss), net and gain (loss) on disposal of investments all in the reconciliations to the U.S. GAAP financial measures and in the consolidated financial statements, all of which should be considered when evaluating the performance of the Company.
The terms EBITDA and adjusted EBITDA are not defined under U.S. GAAP, and neither EBITDA nor adjusted EBITDA is a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing the operating and financial performance, investors should not consider these data in isolation or as a substitute for the Company’s net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, the Company’s EBITDA or adjusted EBITDA may not be comparable to EBITDA or adjusted EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA or adjusted EBITDA in the same manner as the Company does.
Reconciliations of the Company’s non-GAAP financial measures, including EBITDA and adjusted EBITDA, to the consolidated statement of operations information are included at the end of this press release.
About H World Group Limited
Originated in China, H World Group Limited is a key player in the global hotel industry. As of June 30, 2024, H World operated 10,286 hotels with 1,001,865 rooms in operation in 18 countries. H World’s brands include Hi Inn, Elan Hotel, HanTing Hotel, JI Hotel, Starway Hotel, Orange Hotel, Crystal Orange Hotel, Manxin Hotel, Madison Hotel, Joya Hotel, Blossom House, Ni Hao Hotel, CitiGO Hotel, Steigenberger Hotels & Resorts, MAXX, Jaz in the City, IntercityHotel, Zleep Hotels, Steigenberger Icon and Song Hotels. In addition, H World also has the rights as master franchisee for Mercure, Ibis and Ibis Styles, and co-development rights for Grand Mercure and Novotel, in the pan-China region.
H World’s business includes leased and owned, manachised and franchised models. Under the lease and ownership model, H World directly operates hotels typically located on leased or owned properties. Under the manachise model, H World manages manachised hotels through the on-site hotel managers that H World appoints, and H World collects fees from franchisees. Under the franchise model, H World provides training, reservations and support services to the franchised hotels, and collects fees from franchisees but does not appoint on-site hotel managers. H World applies a consistent standard and platform across all of its hotels. As of June 30, 2024, H World operated 10 percent of its hotel rooms under the lease and ownership model, and 90 percent under the manachise and franchise model.
For more information, please visit H World’s website: https://ir.hworld.com.
Safe Harbor Statement Under the U.S. Private Securities Litigation Reform Act of 1995: The information in this release contains forward-looking statements which involve risks and uncertainties. Such factors and risks include our anticipated growth strategies; our future results of operations and financial condition; economic conditions; the regulatory environment; our ability to attract and retain customers and leverage our brands; trends and competition in the lodging industry; the expected growth of demand for lodging; and other factors and risks detailed in our filings with the U.S. Securities and Exchange Commission. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements, which may be identified by terminology such as “may,” “should,” “will,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “forecast,” “project” or “continue,” the negative of such terms or other comparable terminology. Readers should not rely on forward-looking statements as predictions of future events or results.
H World undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.
—Financial Tables and Operational Data—
H World Group Limited |
|||||||||
Unaudited Condensed Consolidated Balance Sheets |
|||||||||
|
December 31, 2023 |
|
June 30, 2024 |
||||||
|
RMB |
RMB |
US$3 |
||||||
|
(in millions) |
||||||||
ASSETS |
|
|
|
||||||
Current assets: |
|
|
|
||||||
Cash and cash equivalents |
6,946 |
|
|
7,801 |
|
|
1,073 |
|
|
Restricted cash |
764 |
|
|
364 |
|
|
50 |
|
|
Short-term investments |
2,189 |
|
|
1,112 |
|
|
153 |
|
|
Accounts receivable, net |
755 |
|
|
840 |
|
|
116 |
|
|
Loan receivables, net |
184 |
|
|
163 |
|
|
23 |
|
|
Amounts due from related parties, current |
210 |
|
|
258 |
|
|
36 |
|
|
Inventories |
59 |
|
|
61 |
|
|
8 |
|
|
Other current assets, net |
949 |
|
|
868 |
|
|
119 |
|
|
Total current assets |
12,056 |
|
|
11,467 |
|
|
1,578 |
|
|
|
|
|
|
||||||
Property and equipment, net |
6,097 |
|
|
5,882 |
|
|
809 |
|
|
Intangible assets, net |
5,280 |
|
|
5,174 |
|
|
712 |
|
|
Operating lease right-of-use assets |
25,658 |
|
|
25,814 |
|
|
3,552 |
|
|
Finance lease right-of-use assets |
2,171 |
|
|
2,053 |
|
|
283 |
|
|
Land use rights, net |
181 |
|
|
177 |
|
|
24 |
|
|
Long-term investments |
2,564 |
|
|
2,499 |
|
|
344 |
|
|
Goodwill |
5,318 |
|
|
5,261 |
|
|
724 |
|
|
Amounts due from related parties, non-current |
25 |
|
|
21 |
|
|
3 |
|
|
Loan receivables, net |
163 |
|
|
158 |
|
|
22 |
|
|
Other assets, net |
663 |
|
|
672 |
|
|
93 |
|
|
Deferred tax assets |
1,043 |
|
|
1,035 |
|
|
142 |
|
|
Assets held for sale |
2,313 |
|
|
2,239 |
|
|
308 |
|
|
Total assets |
63,532 |
|
|
62,452 |
|
|
8,594 |
|
|
|
|
|
|
||||||
LIABILITIES AND EQUITY |
|
|
|
||||||
Current liabilities: |
|
|
|
||||||
Short-term debt |
4,049 |
|
|
315 |
|
|
44 |
|
|
Accounts payable |
1,019 |
|
|
865 |
|
|
119 |
|
|
Amounts due to related parties |
77 |
|
|
119 |
|
|
16 |
|
|
Salary and welfare payables |
1,067 |
|
|
843 |
|
|
116 |
|
|
Deferred revenue |
1,637 |
|
|
1,760 |
|
|
242 |
|
|
Operating lease liabilities, current |
3,609 |
|
|
3,531 |
|
|
486 |
|
|
Finance lease liabilities, current |
45 |
|
|
45 |
|
|
6 |
|
|
Accrued expenses and other current liabilities |
3,261 |
|
|
3,599 |
|
|
495 |
|
|
Dividends payable |
2,085 |
|
|
– |
|
|
– |
|
|
Income tax payable |
562 |
|
|
782 |
|
|
107 |
|
|
Total current liabilities |
17,411 |
|
|
11,859 |
|
|
1,631 |
|
|
|
|
|
|
||||||
Long-term debt |
1,265 |
|
|
5,220 |
|
|
718 |
|
|
Operating lease liabilities, non-current |
24,215 |
|
|
24,334 |
|
|
3,348 |
|
|
Finance lease liabilities, non-current |
2,697 |
|
|
2,587 |
|
|
356 |
|
|
Deferred revenue |
1,072 |
|
|
1,182 |
|
|
163 |
|
|
Other long-term liabilities |
1,118 |
|
|
1,215 |
|
|
167 |
|
|
Deferred tax liabilities |
845 |
|
|
818 |
|
|
113 |
|
|
Retirement benefit obligations |
124 |
|
|
120 |
|
|
17 |
|
|
Liabilities held for sale |
2,536 |
|
|
2,400 |
|
|
330 |
|
|
Total liabilities |
51,283 |
|
|
49,735 |
|
|
6,843 |
|
|
|
|
|
|
||||||
Equity: |
|
|
|
||||||
Ordinary shares |
0 |
|
|
0 |
|
|
0 |
|
|
Treasury shares |
(906 |
) |
|
(1,569 |
) |
|
(216 |
) |
|
Additional paid-in capital |
11,861 |
|
|
11,300 |
|
|
1,555 |
|
|
Retained earnings |
794 |
|
|
2,520 |
|
|
347 |
|
|
Accumulated other comprehensive income |
386 |
|
|
331 |
|
|
46 |
|
|
Total H World Group Limited shareholders’ equity |
12,135 |
|
|
12,582 |
|
|
1,732 |
|
|
Noncontrolling interest |
114 |
|
|
135 |
|
|
19 |
|
|
Total equity |
12,249 |
|
|
12,717 |
|
|
1,751 |
|
|
Total liabilities and equity |
63,532 |
|
|
62,452 |
|
|
8,594 |
|
H World Group Limited |
||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Comprehensive Income |
||||||||||||||||||||
|
Quarter Ended |
|
Six Months Ended |
|||||||||||||||||
|
June 30, |
|
March 31, |
|
June 30, 2024 |
|
June 30, |
|
June 30, 2024 |
|||||||||||
|
RMB |
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|||||||||||||
|
(in millions, except shares, per share and per ADS data) |
|||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|||||||||||||
Leased and owned hotels |
3,592 |
|
|
3,099 |
|
|
3,681 |
|
|
507 |
|
|
6,466 |
|
|
6,780 |
|
|
933 |
|
Manachised and franchised hotels |
1,856 |
|
|
2,063 |
|
|
2,334 |
|
|
321 |
|
|
3,410 |
|
|
4,397 |
|
|
605 |
|
Others |
82 |
|
|
116 |
|
|
133 |
|
|
18 |
|
|
134 |
|
|
249 |
|
|
34 |
|
Total revenue |
5,530 |
|
|
5,278 |
|
|
6,148 |
|
|
846 |
|
|
10,010 |
|
|
11,426 |
|
|
1,572 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|||||||||||||
Hotel operating costs: |
|
|
|
|
|
|
|
|||||||||||||
Rents |
(1,088 |
) |
|
(1,086 |
) |
|
(1,091 |
) |
|
(150 |
) |
|
(2,139 |
) |
|
(2,177 |
) |
|
(300 |
) |
Utilities |
(137 |
) |
|
(192 |
) |
|
(149 |
) |
|
(20 |
) |
|
(341 |
) |
|
(341 |
) |
|
(47 |
) |
Personnel costs |
(1,131 |
) |
|
(1,225 |
) |
|
(1,337 |
) |
|
(184 |
) |
|
(2,167 |
) |
|
(2,562 |
) |
|
(353 |
) |
Depreciation and amortization |
(332 |
) |
|
(319 |
) |
|
(315 |
) |
|
(43 |
) |
|
(678 |
) |
|
(634 |
) |
|
(87 |
) |
Consumables, food and beverage |
(335 |
) |
|
(293 |
) |
|
(327 |
) |
|
(45 |
) |
|
(613 |
) |
|
(620 |
) |
|
(85 |
) |
Others |
(459 |
) |
|
(450 |
) |
|
(512 |
) |
|
(70 |
) |
|
(794 |
) |
|
(962 |
) |
|
(132 |
) |
Total hotel operating costs |
(3,482 |
) |
|
(3,565 |
) |
|
(3,731 |
) |
|
(512 |
) |
|
(6,732 |
) |
|
(7,296 |
) |
|
(1,004 |
) |
Other operating costs |
(6 |
) |
|
(9 |
) |
|
(6 |
) |
|
(1 |
) |
|
(17 |
) |
|
(15 |
) |
|
(2 |
) |
Selling and marketing expenses |
(262 |
) |
|
(260 |
) |
|
(317 |
) |
|
(44 |
) |
|
(457 |
) |
|
(577 |
) |
|
(79 |
) |
General and administrative expenses |
(477 |
) |
|
(509 |
) |
|
(602 |
) |
|
(83 |
) |
|
(902 |
) |
|
(1,111 |
) |
|
(153 |
) |
Pre-opening expenses |
(12 |
) |
|
(8 |
) |
|
(19 |
) |
|
(3 |
) |
|
(21 |
) |
|
(27 |
) |
|
(4 |
) |
Total operating costs and expenses |
(4,239 |
) |
|
(4,351 |
) |
|
(4,675 |
) |
|
(643 |
) |
|
(8,129 |
) |
|
(9,026 |
) |
|
(1,242 |
) |
Other operating income (expense), net |
94 |
|
|
76 |
|
|
99 |
|
|
13 |
|
|
168 |
|
|
175 |
|
|
24 |
|
Income (loss) from operations |
1,385 |
|
|
1,003 |
|
|
1,572 |
|
|
216 |
|
|
2,049 |
|
|
2,575 |
|
|
354 |
|
Interest income |
57 |
|
|
51 |
|
|
56 |
|
|
8 |
|
|
101 |
|
|
107 |
|
|
15 |
|
Interest expense |
(94 |
) |
|
(83 |
) |
|
(84 |
) |
|
(12 |
) |
|
(224 |
) |
|
(167 |
) |
|
(23 |
) |
Other income (expense), net |
32 |
|
|
40 |
|
|
24 |
|
|
3 |
|
|
546 |
|
|
64 |
|
|
9 |
|
Gains (losses) from fair value changes of equity securities |
(19 |
) |
|
38 |
|
|
(51 |
) |
|
(7 |
) |
|
(6 |
) |
|
(13 |
) |
|
(2 |
) |
Foreign exchange gains (losses) |
(5 |
) |
|
(92 |
) |
|
(24 |
) |
|
(3 |
) |
|
99 |
|
|
(116 |
) |
|
(15 |
) |
Income (loss) before income taxes |
1,356 |
|
|
957 |
|
|
1,493 |
|
|
205 |
|
|
2,565 |
|
|
2,450 |
|
|
338 |
|
Income tax (expense) benefit |
(308 |
) |
|
(279 |
) |
|
(423 |
) |
|
(58 |
) |
|
(502 |
) |
|
(702 |
) |
|
(97 |
) |
Income (Loss) from equity method investments |
(12 |
) |
|
(11 |
) |
|
12 |
|
|
2 |
|
|
(27 |
) |
|
1 |
|
|
0 |
|
Net income (loss) |
1,036 |
|
|
667 |
|
|
1,082 |
|
|
149 |
|
|
2,036 |
|
|
1,749 |
|
|
241 |
|
Net (income) loss attributable to noncontrolling interest |
(21 |
) |
|
(8 |
) |
|
(15 |
) |
|
(2 |
) |
|
(31 |
) |
|
(23 |
) |
|
(3 |
) |
Net income (loss) attributable to H World Group Limited |
1,015 |
|
|
659 |
|
|
1,067 |
|
|
147 |
|
|
2,005 |
|
|
1,726 |
|
|
238 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Gains(losses) from fair value changes of debt securities, net of tax |
20 |
|
|
– |
|
|
(25 |
) |
|
(3 |
) |
|
20 |
|
|
(25 |
) |
|
(3 |
) |
Foreign currency translation adjustments, net of tax |
183 |
|
|
(31 |
) |
|
1 |
|
|
0 |
|
|
222 |
|
|
(30 |
) |
|
(4 |
) |
Comprehensive income (loss) |
1,239 |
|
|
636 |
|
|
1,058 |
|
|
146 |
|
|
2,278 |
|
|
1,694 |
|
|
234 |
|
Comprehensive (income) loss attributable to noncontrolling interest |
(21 |
) |
|
(8 |
) |
|
(15 |
) |
|
(2 |
) |
|
(31 |
) |
|
(23 |
) |
|
(3 |
) |
Comprehensive income (loss) attributable to H World Group Limited |
1,218 |
|
|
628 |
|
|
1,043 |
|
|
144 |
|
|
2,247 |
|
|
1,671 |
|
|
231 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Earnings (Losses) per share: |
|
|
|
|
|
|
|
|||||||||||||
Basic |
0.32 |
|
|
0.21 |
|
|
0.34 |
|
|
0.05 |
|
|
0.63 |
|
|
0.55 |
|
|
0.08 |
|
Diluted |
0.31 |
|
|
0.21 |
|
|
0.33 |
|
|
0.05 |
|
|
0.62 |
|
|
0.54 |
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Earnings (Losses) per ADS: |
|
|
|
|
|
|
|
|||||||||||||
Basic |
3.18 |
|
|
2.10 |
|
|
3.40 |
|
|
0.47 |
|
|
6.30 |
|
|
5.50 |
|
|
0.76 |
|
Diluted |
3.11 |
|
|
2.08 |
|
|
3.32 |
|
|
0.46 |
|
|
6.16 |
|
|
5.41 |
|
|
0.74 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Weighted average number of shares used in computation: |
|
|
|
|
|
|||||||||||||||
Basic |
3,187,331,990 |
|
|
3,139,466,152 |
|
|
3,137,722,145 |
|
|
3,137,722,145 |
|
|
3,180,817,047 |
|
|
3,138,594,148 |
|
|
3,138,594,148 |
|
Diluted |
3,354,717,904 |
|
|
3,172,770,493 |
|
|
3,303,934,814 |
|
|
3,303,934,814 |
|
|
3,349,256,828 |
|
|
3,300,316,153 |
|
|
3,300,316,153 |
|
H World Group Limited |
||||||||||||||||||||
Unaudited Condensed Consolidated Statements of Cash Flows |
||||||||||||||||||||
|
Quarter Ended |
|
Six Months Ended |
|||||||||||||||||
|
June 30, |
|
March 31, |
|
June 30, 2024 |
|
June 30, |
|
June 30, 2024 |
|||||||||||
|
RMB |
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|||||||||||||
|
(in millions) |
|||||||||||||||||||
Operating activities: |
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
1,036 |
|
|
667 |
|
|
1,082 |
|
|
149 |
|
|
2,036 |
|
|
1,749 |
|
|
241 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Share-based compensation |
34 |
|
|
58 |
|
|
112 |
|
|
15 |
|
|
61 |
|
|
170 |
|
|
23 |
|
Depreciation and amortization, |
359 |
|
|
345 |
|
|
337 |
|
|
46 |
|
|
744 |
|
|
682 |
|
|
94 |
|
Impairment loss |
80 |
|
|
– |
|
|
36 |
|
|
5 |
|
|
80 |
|
|
36 |
|
|
5 |
|
Loss (Income) from equity method investments, net of dividends |
68 |
|
|
11 |
|
|
30 |
|
|
4 |
|
|
83 |
|
|
41 |
|
|
6 |
|
Investment (income) loss and foreign exchange (gain) loss |
(96 |
) |
|
29 |
|
|
41 |
|
|
6 |
|
|
(640 |
) |
|
70 |
|
|
10 |
|
Changes in operating assets and liabilities |
712 |
|
|
(230 |
) |
|
750 |
|
|
103 |
|
|
1,732 |
|
|
520 |
|
|
71 |
|
Other |
45 |
|
|
6 |
|
|
(153 |
) |
|
(21 |
) |
|
(14 |
) |
|
(147 |
) |
|
(20 |
) |
Net cash provided by (used in) operating activities |
2,238 |
|
|
886 |
|
|
2,235 |
|
|
307 |
|
|
4,082 |
|
|
3,121 |
|
|
430 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Investing activities: |
|
|
|
|
|
|
|
|||||||||||||
Capital expenditures |
(171 |
) |
|
(281 |
) |
|
(203 |
) |
|
(28 |
) |
|
(393 |
) |
|
(484 |
) |
|
(67 |
) |
Purchase of investments |
(961 |
) |
|
(254 |
) |
|
(632 |
) |
|
(87 |
) |
|
(962 |
) |
|
(886 |
) |
|
(122 |
) |
Proceeds from maturity/sale and return of investments |
2 |
|
|
842 |
|
|
1,139 |
|
|
157 |
|
|
2,202 |
|
|
1,981 |
|
|
272 |
|
Loan advances |
(41 |
) |
|
(52 |
) |
|
(12 |
) |
|
(2 |
) |
|
(75 |
) |
|
(64 |
) |
|
(9 |
) |
Loan collections |
38 |
|
|
38 |
|
|
53 |
|
|
7 |
|
|
72 |
|
|
91 |
|
|
13 |
|
Other |
1 |
|
|
55 |
|
|
1 |
|
|
0 |
|
|
5 |
|
|
56 |
|
|
8 |
|
Net cash provided by (used in) investing activities |
(1,132 |
) |
|
348 |
|
|
346 |
|
|
47 |
|
|
849 |
|
|
694 |
|
|
95 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Financing activities: |
|
|
|
|
|
|
|
|||||||||||||
Net proceeds from issuance of ordinary shares |
– |
|
|
– |
|
|
– |
|
|
– |
|
|
1,973 |
|
|
– |
|
|
– |
|
Payment of share repurchase |
– |
|
|
(544 |
) |
|
(132 |
) |
|
(18 |
) |
|
– |
|
|
(676 |
) |
|
(93 |
) |
Proceeds from debt |
300 |
|
|
536 |
|
|
53 |
|
|
7 |
|
|
728 |
|
|
589 |
|
|
81 |
|
Repayment of debt |
(4,103 |
) |
|
(137 |
) |
|
(292 |
) |
|
(40 |
) |
|
(4,992 |
) |
|
(429 |
) |
|
(59 |
) |
Dividend paid |
– |
|
|
(2,091 |
) |
|
– |
|
|
– |
|
|
– |
|
|
(2,091 |
) |
|
(288 |
) |
Purchase of prepaid put option |
– |
|
|
– |
|
|
(710 |
) |
|
(98 |
) |
|
– |
|
|
(710 |
) |
|
(98 |
) |
Other |
(21 |
) |
|
(22 |
) |
|
(24 |
) |
|
(3 |
) |
|
(71 |
) |
|
(46 |
) |
|
(6 |
) |
Net cash provided by (used in) financing activities |
(3,824 |
) |
|
(2,258 |
) |
|
(1,105 |
) |
|
(152 |
) |
|
(2,362 |
) |
|
(3,363 |
) |
|
(463 |
) |
|
|
|
|
|
|
|
|
|||||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
202 |
|
|
(17 |
) |
|
10 |
|
|
2 |
|
|
181 |
|
|
(7 |
) |
|
(1 |
) |
Net increase (decrease) in cash, cash equivalents and restricted cash |
(2,516 |
) |
|
(1,041 |
) |
|
1,486 |
|
|
204 |
|
|
2,750 |
|
|
445 |
|
|
61 |
|
Less: net increase (decrease) in cash and cash equivalents classified within assets held for sale |
– |
|
|
5 |
|
|
(15 |
) |
|
(2 |
) |
|
– |
|
|
(10 |
) |
|
(1 |
) |
Cash, cash equivalents and restricted cash at the beginning of the period |
10,352 |
|
|
7,710 |
|
|
6,664 |
|
|
917 |
|
|
5,086 |
|
|
7,710 |
|
|
1,061 |
|
Cash, cash equivalents and restricted cash at the end of the period |
7,836 |
|
|
6,664 |
|
|
8,165 |
|
|
1,123 |
|
|
7,836 |
|
|
8,165 |
|
|
1,123 |
|
H World Group Limited |
||||||||||||||||||||
Unaudited Reconciliation of GAAP and Non-GAAP Results |
||||||||||||||||||||
|
Quarter Ended |
|
Six Months Ended |
|||||||||||||||||
|
June 30, |
|
March 31, |
|
June 30, 2024 |
|
June 30, |
|
June 30, 2024 |
|||||||||||
|
RMB |
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|||||||||||||
|
(in millions, except shares, per share and per ADS data) |
|||||||||||||||||||
Net income (loss) attributable to H World Group Limited (GAAP) |
1,015 |
|
|
659 |
|
|
1,067 |
|
|
147 |
|
|
2,005 |
|
|
1,726 |
|
|
238 |
|
Share-based compensation expenses |
34 |
|
|
58 |
|
|
112 |
|
|
15 |
|
|
61 |
|
|
170 |
|
|
23 |
|
(Gain) loss from fair value changes of equity securities |
19 |
|
|
(38 |
) |
|
51 |
|
|
7 |
|
|
6 |
|
|
13 |
|
|
2 |
|
Foreign exchange (gain) loss, net |
5 |
|
|
92 |
|
|
24 |
|
|
3 |
|
|
(99 |
) |
|
116 |
|
|
15 |
|
(Gain) loss on disposal of investments |
– |
|
|
– |
|
|
– |
|
|
– |
|
|
(516 |
) |
|
– |
|
|
– |
|
Adjusted net income (loss) attributable to H World Group Limited (non-GAAP) |
1,073 |
|
|
771 |
|
|
1,254 |
|
|
172 |
|
|
1,457 |
|
|
2,025 |
|
|
278 |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Adjusted earnings (losses) per share (non-GAAP) |
|
|
|
|
|
|||||||||||||||
Basic |
0.34 |
|
|
0.25 |
|
|
0.40 |
|
|
0.05 |
|
|
0.46 |
|
|
0.65 |
|
|
0.09 |
|
Diluted |
0.33 |
|
|
0.24 |
|
|
0.39 |
|
|
0.05 |
|
|
0.45 |
|
|
0.63 |
|
|
0.09 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Adjusted earnings (losses) per ADS (non-GAAP) |
||||||||||||||||||||
Basic |
3.37 |
|
|
2.46 |
|
|
3.99 |
|
|
0.55 |
|
|
4.58 |
|
|
6.45 |
|
|
0.89 |
|
Diluted |
3.29 |
|
|
2.43 |
|
|
3.88 |
|
|
0.53 |
|
|
4.51 |
|
|
6.31 |
|
|
0.87 |
|
|
|
|
|
|
|
|
|
|||||||||||||
Weighted average number of shares used in computation |
|
|
|
|
|
|||||||||||||||
Basic |
3,187,331,990 |
|
|
3,139,466,152 |
|
|
3,137,722,145 |
|
|
3,137,722,145 |
|
|
3,180,817,047 |
|
|
3,138,594,148 |
|
|
3,138,594,148 |
|
Diluted |
3,354,717,904 |
|
|
3,172,770,493 |
|
|
3,303,934,814 |
|
|
3,303,934,814 |
|
|
3,349,256,828 |
|
|
3,300,316,153 |
|
|
3,300,316,153 |
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
|
Quarter Ended |
|
Six Months Ended |
|||||||||||||||||
|
June 30, |
|
March 31, |
|
June 30, 2024 |
|
June 30, |
|
June 30, 2024 |
|||||||||||
|
RMB |
RMB |
RMB |
US$ |
RMB |
RMB |
US$ |
|||||||||||||
|
(in millions, except per share and per ADS data) |
|||||||||||||||||||
Net income (loss) attributable to H World Group Limited (GAAP) |
1,015 |
|
|
659 |
|
|
1,067 |
|
|
147 |
|
|
2,005 |
|
|
1,726 |
|
|
238 |
|
Interest income |
(57 |
) |
|
(51 |
) |
|
(56 |
) |
|
(8 |
) |
|
(101 |
) |
|
(107 |
) |
|
(15 |
) |
Interest expense |
94 |
|
|
83 |
|
|
84 |
|
|
12 |
|
|
224 |
|
|
167 |
|
|
23 |
|
Income tax expense |
308 |
|
|
279 |
|
|
423 |
|
|
58 |
|
|
502 |
|
|
702 |
|
|
97 |
|
Depreciation and amortization |
354 |
|
|
339 |
|
|
335 |
|
|
46 |
|
|
721 |
|
|
674 |
|
|
93 |
|
EBITDA (non-GAAP) |
1,714 |
|
|
1,309 |
|
|
1,853 |
|
|
255 |
|
|
3,351 |
|
|
3,162 |
|
|
436 |
|
Share-based compensation |
34 |
|
|
58 |
|
|
112 |
|
|
15 |
|
|
61 |
|
|
170 |
|
|
23 |
|
(Gain) loss from fair value changes of equity securities |
19 |
|
|
(38 |
) |
|
51 |
|
|
7 |
|
|
6 |
|
|
13 |
|
|
2 |
|
Foreign exchange (gain) loss, net |
5 |
|
|
92 |
|
|
24 |
|
|
3 |
|
|
(99 |
) |
|
116 |
|
|
15 |
|
(Gain) loss on disposal of investments |
– |
|
|
– |
|
|
– |
|
|
– |
|
|
(516 |
) |
|
– |
|
|
– |
|
Adjusted EBITDA (non-GAAP) |
1,772 |
|
|
1,421 |
|
|
2,040 |
|
|
280 |
|
|
2,803 |
|
|
3,461 |
|
|
476 |
|
H World Group Limited |
||||||||||||
Segment Financial Summary |
||||||||||||
|
Quarter Ended June 30, 2023 |
|
Quarter Ended March 31, 2024 |
|
Quarter Ended June 30, 2024 |
|||||||
|
Legacy- Huazhu |
|
Legacy- DH |
|
Legacy- Huazhu |
|
Legacy- DH |
|
Legacy- Huazhu |
|
Legacy- DH |
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
(in millions) |
(in millions) |
(in millions) |
|||||||||
Leased and owned hotels |
2,466 |
|
1,126 |
|
2,112 |
|
987 |
|
|
2,395 |
|
1,286 |
Manachised and franchised hotels |
1,830 |
|
26 |
|
2,042 |
|
21 |
|
|
2,305 |
|
29 |
Others |
51 |
|
31 |
|
91 |
|
25 |
|
|
128 |
|
5 |
Revenue |
4,347 |
|
1,183 |
|
4,245 |
|
1,033 |
|
|
4,828 |
|
1,320 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
294 |
|
60 |
|
280 |
|
59 |
|
|
279 |
|
56 |
Adjusted EBITDA |
1,675 |
|
97 |
|
1,487 |
|
(66 |
) |
|
1,909 |
|
131 |
H World Group Limited |
||||||||
Segment Financial Summary |
||||||||
|
Six Months Ended June 30, 2023 |
|
Six Months Ended June 30, 2024 |
|||||
|
Legacy- Huazhu |
|
Legacy- DH |
|
Legacy- Huazhu |
|
Legacy- DH |
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
(in millions) |
(in millions) |
||||||
Leased and owned hotels |
4,486 |
|
1,980 |
|
|
4,507 |
|
2,273 |
Manachised and franchised hotels |
3,366 |
|
44 |
|
|
4,347 |
|
50 |
Others |
89 |
|
45 |
|
|
219 |
|
30 |
Revenue |
7,941 |
|
2,069 |
|
|
9,073 |
|
2,353 |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
598 |
|
123 |
|
|
559 |
|
115 |
Adjusted EBITDA |
2,803 |
|
(0 |
) |
|
3,396 |
|
65 |
Operating Results: Legacy-Huazhu(1)
Number of hotels |
Number of rooms |
|||||
Opened |
Closed (2) |
Net added |
As of |
As of |
||
Leased and owned hotels |
4 |
(10) |
(6) |
592 |
|
84,814 |
Manachised and franchised hotels |
563 |
(91) |
472 |
9,558 |
|
889,499 |
Total |
567 |
(101) |
466 |
10,150 |
|
974,313 |
(1) Legacy-Huazhu refers to H World and its subsidiaries, excluding DH. |
As of June 30, 2024 |
||
Number of hotels |
Unopened hotels in pipeline |
|
Economy hotels |
5,270 |
1,209 |
Leased and owned hotels |
313 |
0 |
Manachised and franchised hotels |
4,957 |
1,209 |
Midscale, upper-midscale hotels and others |
4,880 |
2,057 |
Leased and owned hotels |
279 |
8 |
Manachised and franchised hotels |
4,601 |
2,049 |
Total |
10,150 |
3,266 |
For the quarter ended |
||||
June 30, |
March 31, |
June 30, |
yoy |
|
2023 |
2024 |
2024 |
change |
|
Average daily room rate (in RMB) |
|
|
|
|
Leased and owned hotels |
384 |
346 |
375 |
-2.2% |
Manachised and franchised hotels |
295 |
272 |
288 |
-2.3% |
Blended |
305 |
280 |
296 |
-2.9% |
Occupancy rate (as a percentage) |
|
|
|
|
Leased and owned hotels |
83.6% |
81.0% |
85.6% |
+2.0 p.p. |
Manachised and franchised hotels |
81.6% |
76.8% |
82.3% |
+0.6 p.p. |
Blended |
81.8% |
77.2% |
82.6% |
+0.7 p.p. |
RevPAR (in RMB) |
|
|
|
|
Leased and owned hotels |
321 |
280 |
321 |
0.1% |
Manachised and franchised hotels |
241 |
209 |
237 |
-1.6% |
Blended |
250 |
216 |
244 |
-2.0% |
Same-hotel operational data by class |
|
|
|
|
|
|
|
|
|||||||
Mature hotels in operation for more than 18 months |
|||||||||||||||
|
Number of hotels |
Same-hotel RevPAR |
Same-hotel ADR |
Same-hotel Occupancy |
|||||||||||
|
As of |
For the quarter |
yoy |
For the quarter |
yoy |
For the quarter |
yoy |
||||||||
|
ended |
change |
ended |
change |
ended |
change |
|||||||||
|
2023 |
2024 |
2023 |
2024 |
|
2023 |
2024 |
|
2023 |
|
2024 |
|
(p.p.) |
||
Economy hotels |
3,751 |
3,751 |
198 |
190 |
-4.2 |
% |
235 |
225 |
-4.1 |
% |
84.4 |
% |
84.3 |
% |
-0.1 |
Leased and owned hotels |
299 |
299 |
241 |
235 |
-2.6 |
% |
281 |
268 |
-4.6 |
% |
85.8 |
% |
87.5 |
% |
+1.7 |
Manachised and franchised hotels |
3,452 |
3,452 |
193 |
184 |
-4.5 |
% |
229 |
219 |
-4.1 |
% |
84.3 |
% |
83.9 |
% |
-0.3 |
Midscale, upper-midscale hotels and others |
3,169 |
3,169 |
308 |
299 |
-3.2 |
% |
377 |
361 |
-4.2 |
% |
81.7 |
% |
82.6 |
% |
+0.9 |
Leased and owned hotels |
260 |
260 |
397 |
390 |
-1.9 |
% |
481 |
461 |
-4.3 |
% |
82.5 |
% |
84.6 |
% |
+2.1 |
Manachised and franchised hotels |
2,909 |
2,909 |
296 |
286 |
-3.3 |
% |
363 |
348 |
-4.2 |
% |
81.6 |
% |
82.4 |
% |
+0.7 |
Total |
6,920 |
6,920 |
257 |
248 |
-3.6 |
% |
310 |
297 |
-4.1 |
% |
83.0 |
% |
83.4 |
% |
+0.4 |
Operating Results: Legacy-DH(3)
Number of hotels |
Number of |
Unopened hotels |
||||||
|
Opened |
Closed |
Net added |
As of |
|
As of |
|
As of |
Leased hotels |
4 |
(1) |
3 |
87 |
|
16,789 |
|
13 |
Manachised and franchised hotels |
1 |
(1) |
– |
49 |
|
10,763 |
|
15 |
Total |
5 |
(2) |
3 |
136 |
|
27,552 |
|
28 |
(3) Legacy-DH refers to DH. |
|
For the quarter ended |
|||
|
June 30, |
March 31, |
June 30, |
yoy |
2023 |
2024 |
2024 |
change |
|
Average daily room rate (in EUR) |
|
|
|
|
Leased hotels |
119 |
110 |
124 |
4.0% |
Manachised and franchised hotels |
112 |
95 |
112 |
0.1% |
Blended |
117 |
104 |
120 |
2.7% |
Occupancy rate (as a percentage) |
|
|
|
|
Leased hotels |
69.4% |
55.4% |
71.2% |
+1.9 p.p. |
Manachised and franchised hotels |
63.8% |
56.4% |
63.8% |
+0.0 p.p. |
Blended |
67.1% |
55.8% |
68.3% |
+1.2 p.p. |
RevPAR (in EUR) |
|
|
|
|
Leased hotels |
83 |
61 |
88 |
6.8% |
Manachised and franchised hotels |
71 |
54 |
72 |
0.1% |
Blended |
78 |
58 |
82 |
4.5% |
Hotel Portfolio by Brand
As of June 30, 2024 |
|||
Hotels |
Rooms |
Unopened hotels |
|
in operation |
in pipeline |
||
Economy hotels |
5,288 |
433,604 |
1,220 |
HanTing Hotel |
3,883 |
341,015 |
816 |
Hi Inn |
512 |
26,183 |
234 |
Ni Hao Hotel |
348 |
25,935 |
148 |
Elan Hotel |
299 |
15,734 |
– |
Ibis Hotel |
228 |
22,582 |
11 |
Zleep Hotels |
18 |
2,155 |
11 |
Midscale hotels |
4,028 |
430,320 |
1,465 |
Ibis Styles Hotel |
108 |
10,679 |
19 |
Starway Hotel |
712 |
58,791 |
168 |
JI Hotel |
2,472 |
282,926 |
954 |
Orange Hotel |
736 |
77,924 |
324 |
Upper midscale hotels |
801 |
110,897 |
515 |
Crystal Orange Hotel |
206 |
26,181 |
147 |
CitiGO Hotel |
35 |
5,248 |
7 |
Manxin Hotel |
147 |
13,441 |
87 |
Madison Hotel |
110 |
13,658 |
87 |
Mercure Hotel |
182 |
29,082 |
65 |
Novotel Hotel |
30 |
6,740 |
16 |
IntercityHotel(5) |
81 |
14,802 |
101 |
MAXX(6) |
10 |
1,745 |
5 |
Upscale hotels |
143 |
21,337 |
86 |
Jaz in the City |
3 |
587 |
1 |
Joya Hotel |
7 |
1,237 |
– |
Blossom House |
69 |
3,031 |
71 |
Grand Mercure Hotel |
9 |
1,796 |
2 |
Steigenberger Hotels & Resorts(7) |
55 |
14,686 |
12 |
Luxury hotels |
15 |
2,234 |
3 |
Steigenberger Icon(8) |
8 |
1,721 |
2 |
Song Hotels |
7 |
513 |
1 |
Others |
11 |
3,473 |
5 |
Other hotels(9) |
11 |
3,473 |
5 |
Total |
10,286 |
1,001,865 |
3,294 |
(5) As of June 30, 2024, 23 operational hotels and 96 pipeline hotels of IntercityHotel were in China.
(6) As of June 30, 2024, 5 operational hotels and 4 pipeline hotels of MAXX were in China.
(7) As of June 30, 2024, 12 operational hotels and 5 pipeline hotels of Steigenberger Hotels & Resorts were in China.
(8) As of June 30, 2024, 3 operational hotels and 1 pipeline hotel of Steigenberger Icon were in China.
(9) Other hotels include other partner hotels and other hotel brands in Yongle Huazhu Hotel & Resort Group (excluding Steigenberger Hotels & Resorts and Blossom House).
_________________________________
1 Hotel turnover refers to total transaction value of room and non-room revenue from H World hotels (i.e., leased and operated, manachised and franchised hotels).
2 The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of US$1.00=RMB7.2672 on June 28, 2024, as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.
3 The conversion of Renminbi (“RMB”) into United States dollars (“US$”) is based on the exchange rate of US$1.00=RMB7.2672 on June 28, 2024, as set forth in H.10 statistical release of the U.S. Federal Reserve Board and available at http://www.federalreserve.gov/releases/h10/hist/dat00_ch.htm.
Contact Information
Investor Relations
Tel: +86 (21) 6195 9561
Email: ir@hworld.com
https://ir.hworld.com
Finance
West Fargo hires California man as new finance director
![West Fargo hires California man as new finance director West Fargo hires California man as new finance director](https://cdn.forumcomm.com/dims4/default/c3c181b/2147483647/strip/true/crop/5472x3648+0+0/resize/1599x1066!/quality/90/?url=https%3A%2F%2Fforum-communications-production-web.s3.us-west-2.amazonaws.com%2Fbrightspot%2F5f%2F52%2F676834034a5a990f069b497d0c58%2F111622.N.WF.Logo.06.jpg)
WEST FARGO — Willy Galindo, from California, has been named the city of West Fargo’s new finance director.
Galindo has served as a senior financial analyst with the city of Palmdale, Calif., since 2017. Prior to that, he worked in various finance and accounting roles for Princess Cruise Lines from 2007-2017.
Palmdale is a city with a population of more than 165,000. While there, Galindo was directly involved in the preparation and management of a $512 million budget. He also worked on financial reporting, audits, debt service, and the implementation of new financial software. Galindo holds a Bachelor of Arts in Business Economics from the University of California, Santa Barbara.
“I am honored to be joining the city of West Fargo and am excited to be taking on the leadership role of finance director,” said Galindo in a statement issued by the city. “I was drawn to the growth of the area and hope to use my years of experience in city government finance as the city continues to grow into the future.”
The city has been searching for a new finance director since Heidi Delorme resigned in February.
She was hired in May 2023.
West Fargo interviewed three candidates in April after receiving about 20 applications. Two of the interviewees were from outside the region, City Administrator Dustin Scott said.
Following those interviews, the city decided to post the director position a second time as few applicants had prior city government experience.
The finance director is responsible for the management of accounting, debt/treasury, utility billing, budgeting, accounts payable/receivable, payroll and investments. Former finance directors have been paid between $123,600 and $140,000.
Galindo will begin in late September.
Wendy Reuer covers all things West Fargo for The Forum.
Finance
Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2024 Financial Results
![Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2024 Financial Results Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2024 Financial Results](https://mma.prnewswire.com/media/325503/palo_alto_networks_logo_2015.jpg?p=facebook)
- Fiscal fourth quarter revenue grew 12% year over year to $2.2 billion. Fiscal year 2024 revenue grew 16% year over year to $8.0 billion.
- Next-Generation Security ARR grew 43% year over year to $4.2 billion.
- Remaining performance obligation grew 20% year over year to $12.7 billion.
SANTA CLARA, Calif., Aug. 19, 2024 /PRNewswire/ — Palo Alto Networks (NASDAQ: PANW), the global cybersecurity leader, announced today financial results for its fiscal fourth quarter and fiscal year ended July 31, 2024.
Total revenue for the fiscal fourth quarter 2024 grew 12% year over year to $2.2 billion, compared with total revenue of $2.0 billion for the fiscal fourth quarter 2023. GAAP net income for the fiscal fourth quarter 2024 was $357.7 million, or $1.01 per diluted share, compared with GAAP net income of $227.7 million, or $0.64 per diluted share, for the fiscal fourth quarter 2023.
Non-GAAP net income for the fiscal fourth quarter 2024 was $522.2 million, or $1.51 per diluted share, compared with non-GAAP net income of $482.5 million, or $1.44 per diluted share, for the fiscal fourth quarter 2023. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
“We finished off the year with strong execution on our platformization strategy in Q4,” said Nikesh Arora, chairman and CEO of Palo Alto Networks. “As we look forward to fiscal year 2025 and beyond, we are focused on scaling our Next-Generation Security business through continued innovation and execution.”
“Our top-line strength showed through in our remaining performance obligation and Next-Generation Security ARR,” said Dipak Golechha, chief financial officer of Palo Alto Networks. “At the same time we successfully balanced profitable growth, as our non-GAAP operating margins increased by more than 300 basis points for the year with strong cash generation, marking one of the best years for Palo Alto Networks.”
Financial Outlook
Palo Alto Networks provides guidance based on current market conditions and expectations.
For the fiscal first quarter 2025, we expect:
- Total revenue in the range of $2.10 billion to $2.13 billion, representing year-over-year growth of between 12% and 13%.
- Diluted non-GAAP net income per share in the range of $1.47 to $1.49, representing year-over-year growth of between 7% and 8%.
For the fiscal year 2025, we expect:
- Total revenue in the range of $9.10 billion to $9.15 billion, representing year-over-year growth of between 13% and 14%.
- Non-GAAP operating margin in the range of 27.5% to 28.0%.
- Diluted non-GAAP net income per share in the range of $6.18 to $6.31, representing year-over-year growth of between 9% and 11%.
- Adjusted free cash flow margin in the range of 37% to 38%.
The board of directors authorized an additional $500 million for share repurchases, increasing the remaining authorization for future share repurchases to $1 billion, expiring December 31, 2025.
Guidance takes into account the expected financial impact of the pending acquisition of IBM’s QRadar SaaS assets. Guidance for non-GAAP financial measures excludes share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs, amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, restructuring and other costs, non-cash charges related to convertible notes, foreign currency gains (losses), and income tax and other tax adjustments related to our long-term non-GAAP effective tax rate, along with certain non-recurring expenses and certain non-recurring cash flows. We have not reconciled non-GAAP operating margin guidance to GAAP operating margin, diluted non-GAAP net income per share guidance to GAAP net income per diluted share or adjusted free cash flow margin guidance to GAAP net cash from operating activities because we do not provide guidance on GAAP operating margin, GAAP net income or net cash from operating activities and would not be able to present the various reconciling cash and non-cash items between GAAP and non-GAAP financial measures because certain items that impact these measures are uncertain or out of our control, or cannot be reasonably predicted, including share-based compensation expense, without unreasonable effort. The actual amounts of such reconciling items will have a significant impact on the company’s GAAP net income per diluted share and GAAP net cash from operating activities.
Earnings Call Information
Palo Alto Networks will host a video webcast for analysts and investors to discuss the company’s fiscal fourth quarter and fiscal year 2024 results as well as the outlook for its fiscal first quarter and fiscal year 2025 today at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. Open to the public, investors may access the webcast, supplemental financial information and earnings slides from the “Investors” section of the company’s website at investors.paloaltonetworks.com. A replay will be available three hours after the conclusion of the webcast and archived for one year.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks, uncertainties, and assumptions including statements regarding our platformization strategy and financial outlook for the fiscal first quarter 2025 and fiscal year 2025. In addition, the financial outlook for the fiscal first quarter 2025 and fiscal year 2025 assumes consummation of the pending acquisition of IBM’s QRadar SaaS assets during the fiscal first quarter of 2025, and reflects revenue contribution and ongoing expenses from such acquisition. There are a significant number of factors that could cause actual results to differ materially from forward-looking statements made in this press release, including: developments and changes in general market, political, economic, and business conditions; failure of our platformization product offerings; failure to achieve the expected benefits of our strategic partnerships and acquisitions; risks associated with managing our growth; risks associated with new product, subscription and support offerings, including our efforts to leverage AI; shifts in priorities or delays in the development or release of new offerings, or the failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing product, subscription and support offerings; failure of our business strategies; rapidly evolving technological developments in the market for security products, subscriptions and support offerings; defects, errors, or vulnerabilities in our products, subscriptions or support offerings; our customers’ purchasing decisions and the length of sales cycles; our competition; our ability to attract and retain new customers; our ability to acquire and integrate other companies, products, or technologies in a successful manner; our debt repayment obligations; and our share repurchase program, which may not be fully consummated or enhance shareholder value, and any share repurchases which could affect the price of our common stock.
Additional risks and uncertainties that could affect our financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q filed with the SEC on May 21, 2024, which is available on our website at investors.paloaltonetworks.com and on the SEC’s website at www.sec.gov. Additional information will also be set forth in other filings that we make with the SEC from time to time. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Non-GAAP Financial Measures and Other Key Metrics
Palo Alto Networks has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). The company uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes that the use of these non-GAAP financial measures and key metrics are helpful to investors as an additional tool to evaluate ongoing operating results and trends, and in comparing the company’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures or key metrics.
The presentation of these non-GAAP financial measures and key metrics are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP. A reconciliation of the company’s historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review these reconciliations.
Non-GAAP operating margin. Palo Alto Networks defines non-GAAP operating margin as non-GAAP operating income divided by total revenue. The company defines non-GAAP operating income as operating income plus share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs, amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, and restructuring and other costs. The company believes that non-GAAP operating margin provides management and investors with greater visibility into the underlying performance of the company’s core business operating results.
Non-GAAP net income and net income per share, diluted. Palo Alto Networks defines non-GAAP net income as net income plus share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs, amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, restructuring and other costs, and non-cash charges related to convertible notes. The company also excludes from non-GAAP net income foreign currency gains (losses) and tax adjustments related to our long-term non-GAAP effective tax rate in order to provide a complete picture of the company’s recurring core business operating results. The company defines non-GAAP net income per share, diluted, as non-GAAP net income divided by the weighted-average diluted shares outstanding, which includes the potentially dilutive effect of the company’s employee equity incentive plan awards and the company’s convertible senior notes outstanding and related warrants, after giving effect to the anti-dilutive impact of the company’s note hedge agreements, which reduces the potential economic dilution that otherwise would occur upon conversion of the company’s convertible senior notes. Under GAAP, the anti-dilutive impact of the note hedge is not reflected in diluted shares outstanding. The company considers these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that it uses non-GAAP operating margin.
Next-Generation Security ARR. Palo Alto Networks defines Next-Generation Security ARR as the annualized allocated revenue of all active contracts as of the final day of the reporting period for Prisma and Cortex offerings inclusive of the VM-Series and related services, and certain cloud-delivered security services. The company considers Next-Generation Security ARR to be a useful metric for management and investors to evaluate the performance of the company because Next-Generation Security is where the company has focused its innovation and the company expects its overall revenue to be disproportionately driven by this Next-Generation Security portfolio. Because Next-Generation Security ARR does not have the effect of providing a numerical measure that is different from any comparable GAAP measure, the company does not consider it a non-GAAP measure.
Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Many of the adjustments to the company’s GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the company’s financial results for the foreseeable future, such as share-based compensation, which is an important part of Palo Alto Networks employees’ compensation and impacts their performance. Furthermore, these non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP, and the components that Palo Alto Networks excludes in its calculation of non-GAAP financial measures may differ from the components that its peer companies exclude when they report their non-GAAP results of operations. Palo Alto Networks compensates for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures. In the future, the company may also exclude non-recurring expenses and other expenses that do not reflect the company’s core business operating results.
About Palo Alto Networks
Palo Alto Networks is the global cybersecurity leader, committed to making each day safer than the one before with industry-leading, AI-powered solutions in network security, cloud security and security operations. Powered by Precision AI, our technologies deliver precise threat detection and swift response, minimizing false positives and enhancing security effectiveness. Our platformization approach integrates diverse security solutions into a unified, scalable platform, streamlining management and providing operational efficiencies with comprehensive protection. From defending network perimeters to safeguarding cloud environments and ensuring rapid incident response, Palo Alto Networks empowers businesses to achieve Zero Trust security and confidently embrace digital transformation in an ever-evolving threat landscape. This unwavering commitment to security and innovation makes us the cybersecurity partner of choice.
At Palo Alto Networks, we’re committed to bringing together the very best people in service of our mission, so we’re also proud to be the cybersecurity workplace of choice, recognized among Newsweek’s Most Loved Workplaces (2021-2024), with a score of 100 on the Disability Equality Index (2024, 2023, 2022), and HRC Best Places for LGBTQ+ Equality (2022). For more information, visit www.paloaltonetworks.com.
Palo Alto Networks, the Palo Alto Networks logo, and Precision AI are trademarks of Palo Alto Networks, Inc. in the United States and in jurisdictions throughout the world. All other trademarks, trade names, or service marks used or mentioned herein belong to their respective owners. Any unreleased services or features (and any services or features not generally available to customers) referenced in this or other press releases or public statements are not currently available (or are not yet generally available to customers) and may not be delivered when expected or at all. Customers who purchase Palo Alto Networks applications should make their purchase decisions based on services and features currently generally available.
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Statements of Operations |
|||||||
(In millions, except per share data) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
Year Ended |
||||||
July 31, |
July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
Revenue: |
|||||||
Product |
$ 480.5 |
$ 507.4 |
$ 1,603.3 |
$ 1,578.4 |
|||
Subscription and support |
1,709.0 |
1,445.9 |
6,424.2 |
5,314.3 |
|||
Total revenue |
2,189.5 |
1,953.3 |
8,027.5 |
6,892.7 |
|||
Cost of revenue: |
|||||||
Product |
104.7 |
104.3 |
348.2 |
418.3 |
|||
Subscription and support |
469.0 |
402.5 |
1,711.0 |
1,491.4 |
|||
Total cost of revenue |
573.7 |
506.8 |
2,059.2 |
1,909.7 |
|||
Total gross profit |
1,615.8 |
1,446.5 |
5,968.3 |
4,983.0 |
|||
Operating expenses: |
|||||||
Research and development |
494.8 |
414.4 |
1,809.4 |
1,604.0 |
|||
Sales and marketing |
742.3 |
664.0 |
2,794.5 |
2,544.0 |
|||
General and administrative |
140.3 |
114.6 |
680.5 |
447.7 |
|||
Total operating expenses |
1,377.4 |
1,193.0 |
5,284.4 |
4,595.7 |
|||
Operating income |
238.4 |
253.5 |
683.9 |
387.3 |
|||
Interest expense |
(0.3) |
(5.7) |
(8.3) |
(27.2) |
|||
Other income, net |
80.9 |
68.7 |
312.7 |
206.2 |
|||
Income before income taxes |
319.0 |
316.5 |
988.3 |
566.3 |
|||
Provision for (benefit from) income taxes |
(38.7) |
88.8 |
(1,589.3) |
126.6 |
|||
Net income |
$ 357.7 |
$ 227.7 |
$ 2,577.6 |
$ 439.7 |
|||
Net income per share, basic |
$ 1.10 |
$ 0.74 |
$ 8.07 |
$ 1.45 |
|||
Net income per share, diluted |
$ 1.01 |
$ 0.64 |
$ 7.28 |
$ 1.28 |
|||
Weighted-average shares used to compute net income per share, basic |
324.4 |
306.9 |
319.2 |
303.2 |
|||
Weighted-average shares used to compute net income per share, diluted |
353.9 |
354.5 |
354.0 |
342.3 |
Palo Alto Networks, Inc. |
|||||||
Reconciliation of GAAP to Non-GAAP Financial Measures |
|||||||
(In millions, except per share amounts) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
Year Ended |
||||||
July 31, |
July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
GAAP operating income |
$ 238.4 |
$ 253.5 |
$ 683.9 |
$ 387.3 |
|||
Share-based compensation-related charges |
287.1 |
274.1 |
1,161.7 |
1,145.1 |
|||
Acquisition-related costs(1) |
3.5 |
— |
13.6 |
19.5 |
|||
Amortization expense of acquired intangible assets |
33.7 |
24.7 |
119.0 |
103.1 |
|||
Litigation-related charges(2) |
25.6 |
1.7 |
211.5 |
7.1 |
|||
Restructuring and other costs(3) |
— |
— |
— |
(2.2) |
|||
Non-GAAP operating income |
$ 588.3 |
$ 554.0 |
$ 2,189.7 |
$ 1,659.9 |
|||
Non-GAAP operating margin |
26.9 % |
28.4 % |
27.3 % |
24.1 % |
|||
GAAP net income |
$ 357.7 |
$ 227.7 |
$ 2,577.6 |
$ 439.7 |
|||
Share-based compensation-related charges |
287.1 |
274.1 |
1,161.7 |
1,145.1 |
|||
Acquisition-related costs(1) |
3.5 |
— |
13.6 |
19.5 |
|||
Amortization expense of acquired intangible assets |
33.7 |
24.7 |
119.0 |
103.1 |
|||
Litigation-related charges(2) |
25.6 |
1.7 |
211.5 |
7.1 |
|||
Restructuring and other costs(3) |
— |
— |
— |
(2.2) |
|||
Non-cash charges related to convertible notes(4) |
0.6 |
1.5 |
3.5 |
6.8 |
|||
Foreign currency loss associated with non-GAAP adjustments |
— |
— |
— |
0.5 |
|||
Income tax and other tax adjustments(5) |
(186.0) |
(47.2) |
(2,138.8) |
(279.6) |
|||
Non-GAAP net income |
$ 522.2 |
$ 482.5 |
$ 1,948.1 |
$ 1,440.0 |
|||
GAAP net income per share, diluted |
$ 1.01 |
$ 0.64 |
$ 7.28 |
$ 1.28 |
|||
Share-based compensation-related charges |
0.85 |
0.86 |
3.44 |
3.59 |
|||
Acquisition-related costs(1) |
0.01 |
0.00 |
0.04 |
0.06 |
|||
Amortization expense of acquired intangible assets |
0.10 |
0.07 |
0.34 |
0.30 |
|||
Litigation-related charges(2) |
0.07 |
0.00 |
0.60 |
0.02 |
|||
Restructuring and other costs(3) |
0.00 |
0.00 |
0.00 |
(0.01) |
|||
Non-cash charges related to convertible notes(4) |
0.00 |
0.00 |
0.01 |
0.02 |
|||
Foreign currency loss associated with non-GAAP adjustments |
0.00 |
0.00 |
0.00 |
0.00 |
|||
Income tax and other tax adjustments(5) |
(0.53) |
(0.13) |
(6.04) |
(0.82) |
|||
Non-GAAP net income per share, diluted |
$ 1.51 |
$ 1.44 |
$ 5.67 |
$ 4.44 |
|||
GAAP weighted-average shares used to compute net income per share, diluted |
353.9 |
354.5 |
354.0 |
342.3 |
|||
Weighted-average anti-dilutive impact of note hedge agreements |
(7.4) |
(19.3) |
(10.4) |
(17.9) |
|||
Non-GAAP weighted-average shares used to compute net income per share, diluted |
346.5 |
335.2 |
343.6 |
324.4 |
(1) |
Consists of acquisition transaction costs, share-based compensation related to the cash settlement of certain equity awards, and costs to terminate certain employment, operating lease, and other contracts of the acquired companies. |
(2) |
Consists of the amortization of intellectual property licenses and covenant not to sue. During the three months and fiscal year ended July 31, 2024, it also includes a legal contingency charge and a litigation settlement charge. |
(3) |
Consists of adjustments to restructuring and other costs. |
(4) |
Consists of non-cash interest expense for amortization of debt issuance costs related to the company’s convertible senior notes. |
(5) |
Consists of income tax adjustments related to our long-term non-GAAP effective tax rate. During fiscal year 2024, it included a tax benefit from a release of our valuation allowance on U.S. federal, U.S. states other than California, and United Kingdom deferred tax assets. During fiscal year 2023, it included tax benefits from releases of tax reserves related to uncertain tax positions resulting from tax settlements. |
Palo Alto Networks, Inc. |
|||
Preliminary Condensed Consolidated Balance Sheets |
|||
(In millions) |
|||
July 31, 2024 |
July 31, 2023 |
||
(unaudited) |
|||
Assets |
|||
Current assets: |
|||
Cash and cash equivalents |
$ 1,535.2 |
$ 1,135.3 |
|
Short-term investments |
1,043.6 |
1,254.7 |
|
Accounts receivable, net |
2,618.6 |
2,463.2 |
|
Short-term financing receivables, net |
725.9 |
388.8 |
|
Short-term deferred contract costs |
369.0 |
339.2 |
|
Prepaid expenses and other current assets |
557.4 |
466.8 |
|
Total current assets |
6,849.7 |
6,048.0 |
|
Property and equipment, net |
361.1 |
354.5 |
|
Operating lease right-of-use assets |
385.9 |
263.3 |
|
Long-term investments |
4,173.2 |
3,047.9 |
|
Long-term financing receivables, net |
1,182.1 |
653.3 |
|
Long-term deferred contract costs |
562.0 |
547.1 |
|
Goodwill |
3,350.1 |
2,926.8 |
|
Intangible assets, net |
374.9 |
315.4 |
|
Deferred tax assets |
2,399.0 |
23.1 |
|
Other assets |
352.9 |
321.7 |
|
Total assets |
$ 19,990.9 |
$ 14,501.1 |
|
Liabilities and stockholders’ equity |
|||
Current liabilities: |
|||
Accounts payable |
$ 116.3 |
$ 132.3 |
|
Accrued compensation |
554.7 |
548.3 |
|
Accrued and other liabilities |
506.7 |
390.8 |
|
Deferred revenue |
5,541.1 |
4,674.6 |
|
Convertible senior notes, net |
963.9 |
1,991.5 |
|
Total current liabilities |
7,682.7 |
7,737.5 |
|
Long-term deferred revenue |
5,939.4 |
4,621.8 |
|
Deferred tax liabilities |
387.7 |
28.1 |
|
Long-term operating lease liabilities |
380.5 |
279.2 |
|
Other long-term liabilities |
430.9 |
86.1 |
|
Total liabilities |
14,821.2 |
12,752.7 |
|
Stockholders’ equity: |
|||
Preferred stock |
— |
— |
|
Common stock and additional paid-in capital |
3,821.1 |
3,019.0 |
|
Accumulated other comprehensive loss |
(1.6) |
(43.2) |
|
Retained earnings (accumulated deficit) |
1,350.2 |
(1,227.4) |
|
Total stockholders’ equity |
5,169.7 |
1,748.4 |
|
Total liabilities and stockholders’ equity |
$ 19,990.9 |
$ 14,501.1 |
SOURCE Palo Alto Networks, Inc.
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