2014

7 Days Group Holdings Limited Announces Unaudited 2012 Fourth Quarter and Full Year Financial Results - Fourth quarter net revenues rose 27.6% year-over-year to RMB696.0 million, exceeding guidance.

- Fourth quarter adjusted EBITDA rose 24.1% year-over year to RMB146.4 million.

- 109 net hotels added in fourth quarter to a total of 1,345 hotels in operation.

- Total transaction value[1], a measure of total room revenue generated from all hotels, reached RMB5,585.7 million in 2012, an increase of 50.4% year-over-year.

- 401 net hotels added in the full year 2012.

GUANGZHOU, China, March 11, 2013 /PRNewswire/ -- 7 Days Group Holdings Limited ("7 Days Group" or the "Company") (NYSE: SVN), a leading and fast growing national economy hotel chain based in China, today announced its unaudited financial results for the fourth quarter and full year 2012.

Fourth Quarter 2012 Financial Highlights

  • Total net revenues for the fourth quarter 2012 increased by 27.6% year-over-year to RMB696.0 million (US$111.7 million)[2].
  • Income from operations for the fourth quarter 2012 was RMB51.1 million (US$8.2 million), compared to RMB34.9 million in the fourth quarter 2011. Non-GAAP income from operations for the quarter was RMB56.3 million (US$9.0 million), compared to RMB44.5 million for the same period in 2011. 
  • EBITDA for the fourth quarter was RMB141.2 million (US$22.7 million), an increase of 30.3% year-over-year from RMB108.4 million for the same period in 2011. Adjusted EBITDA for the quarter was RMB146.4 million (US$23.5 million), an increase of 24.1% year-over-year. EBITDA margin was 20.3% compared to 19.9% in the same period in 2011. Adjusted EBITDA margin was 21.0%, compared to 21.6% in the prior year period. 
  • Net income attributable to the Company's ordinary shareholders for the quarter was RMB37.9 million (US$6.1 million), compared to RMB35.2 million for the same period in 2011. Non-GAAP net income attributable to the Company's ordinary shareholders for the quarter was RMB43.1 million (US$6.9 million), representing a year-over-year decrease of 3.8%.
  • Basic and diluted earnings per ADS[3] were RMB0.77 (US$0.12) and RMB0.77 (US$0.12) respectively. Non-GAAP basic and diluted earnings per ADS were RMB0.88 (US$0.14) and RMB0.88 (US$0.14), respectively.
  • Net operating cash inflow was RMB154.5 million (US$24.8 million), compared to RMB106.1 million in the same period in 2011.

Full Year 2012 Financial Highlights

  • Total net revenues for the full year 2012 increased by 27.6% year-over-year to RMB2,557.2 million (US$410.5 million).
  • Income from operations for 2012 was RMB240.3 million (US$38.6 million), compared to RMB151.1 million in 2011. Non-GAAP income from operations increased by 37.4% to RMB267.4 million (US$42.9 million) from RMB194.6 million in 2011. 
  • EBITDA for the full year 2012 was RMB581.3 million (US$93.3 million), an increase of 41.0% year-over-year from RMB412.1 million in 2011. Adjusted EBITDA was RMB608.4 million (US$97.7 million), an increase of 33.5% year-over-year compared to RMB455.6 million in 2011. EBITDA margin was 22.7% compared to 20.6% in 2011. Adjusted EBITDA margin was 23.8% compared to 22.7% in 2011. 
  • Net income attributable to the Company's ordinary shareholders for 2012 was RMB176.0 million (US$28.3 million), compared to RMB128.9 million in the previous year. Non-GAAP net income attributable to the Company's ordinary shareholders was RMB203.2 million (US$32.6 million), representing a year-over-year increase of 17.9%.
  • Basic and diluted earnings per ADS were RMB3.55 (US$0.57) and RMB3.54 (US$0.57), respectively. Non-GAAP basic and diluted earnings per ADS were RMB4.10 (US$0.66) and RMB4.09 (US$0.66), respectively.
  • Net operating cash inflow was RMB572.5 million (US$91.9 million), compared to RMB457.5 million in 2011.

Fourth Quarter and Full Year 2012 Operational Highlights

  • Added 109 net hotels, comprising 32 net leased-and-operated hotels and 77 net managed hotels in the fourth quarter 2012.
  • Added 401 net hotels, comprising 81 net leased-and-operated hotels and 320 net managed hotels in the full year 2012.
  • As of December 31, 2012, 7 Days Group had 1,345 hotels in operation, consisting of 492 leased-and-operated hotels and 853 managed hotels, representing a total of 133,497 rooms covering 208 cities.
  • As of December 31, 2012, there were a total of 223 hotels in the pipeline, including 21 leased-and-operated hotels under conversion and 202 managed hotels contracted but not yet opened.
  • For the fourth quarter 2012, occupancy rates for leased-and-operated hotels, managed hotels and all hotels were 79.2%, 77.4% and 78.1%, respectively, compared to 86.4%, 80.0% and 82.8%, respectively, in the fourth quarter 2011.
  • For the full year 2012, the occupancy rates for leased-and-operated hotels, managed hotels and overall occupancy rates were 82.9%, 80.3% and 81.3%, respectively, compared to 87.9%, 81.5% and 84.6%, respectively, in 2011. The year-over-year decrease in occupancy rates in the full year 2012 was primarily a result of the impact from the macro economic situation.
  • RevPAR[4] for leased-and-operated hotels in the fourth quarter 2012 was RMB133.4, compared to RMB143.3 in the same period in 2011. RevPAR for managed hotels for the period was RMB121.9, compared to RMB123.5 for the same period in 2011.  For the full year 2012, RevPAR for all hotels decreased to RMB131.5 from RMB136.2 in 2011; while RevPAR for leased-and-operated hotels and managed hotels was RMB138.3 and RMB126.9, respectively, compared to RMB146.0 and RMB127.0, respectively, in the full year 2011.
  • As of December 31, 2012, the number of 7 Days Club members was approximately 52.9 million, a 57% increase from 33.8 million as of December 31, 2011.

[1]

Definition of Total transaction value: total room revenue from leased-and-operated hotels and managed hotels. The metric is highlighted as an indicator of the scale and reach of 7 Days' brands.

[2]

The Company's reporting currency is Renminbi ("RMB"). The translation of amounts from RMB to United States Dollars is solely for the convenience of the reader. RMB amounts included in this press release have been translated into U.S. dollars at the exchange rate of December 31, 2012 as set forth in the H.10 statistical release of the Federal Reserve Board, which was US$1.00 = RMB6.2301. No representation is made that RMB amounts could have been, or could be, converted into U.S. Dollars at that rate or at any other rate on December 31, 2012.

[3]

Each ADS represents 3 of the Company's ordinary shares.

[4]

RevPAR represents revenue per available room.

Recent Business Developments:

Mr. Yuezhou Lin, 7 Days Group's Chief Executive Officer and Director, commented, "We are pleased to report a strong fourth quarter with financial results exceeding our guidance, concluding a solid year of steady strategic and operational progress. With our healthy pipeline and increasing economies of scale, we expect to maintain our fast expansion pace in 2013, which we believe will further solidify our position as the market leader in the economy hotel industry."

On February 28, 2013, 7 Days Group announced it entered into a definitive Agreement and Plan of Merger  with various parties pursuant to which Keystone Lodging Company Limited will acquire 7 Days Group for US$4.60 per ordinary share or US$13.80 per American Depositary Share, each representing three ordinary shares ("ADSs"), through the merger of its wholly owned acquisition subsidiary, Keystone Lodging Acquisition Limited, with and into 7 Days Group, with 7 Days Group continuing as the surviving corporation and a wholly owned subsidiary of Keystone Lodging Company Limited (the "Merger"). The consideration to be paid in the Merger represents a 30.6% premium over the closing price of US$10.57 per ADS as quoted by the New York Stock Exchange on September 25, 2012, the last trading day prior to 7 Days Group's announcement on September 26, 2012 that it had received a "going private" proposal, and implies an equity value for 7 Days Group of approximately US$688 million, on a fully diluted basis.

For detailed information, please refer to the Company's news release on February 28, 2013 at the Company's website (http://en.7daysinn.cn).

Fourth Quarter 2012 Unaudited Financial Results

Gross revenues. Gross revenues for the fourth quarter 2012 were RMB736.4 million (US$118.2 million), representing a year-over-year increase of 27.3% from RMB578.5 million in the fourth quarter 2011 and an increase of 1.7% from RMB724.3 million in the third quarter 2012.

Gross revenues from leased-and-operated hotels. Gross revenues from leased-and-operated hotels for the fourth quarter 2012 amounted to RMB648.4 million (US$104.1 million), representing a 22.9% increase from RMB527.6 million in the fourth quarter 2011 and an increase of 0.3% from RMB646.3 million in the third quarter 2012. 

Gross revenues from managed hotels. Gross revenues from managed hotels for the fourth quarter 2012 increased by 72.9% to RMB88.0 million (US$14.1 million) from RMB50.9 million in the same period in 2011, and increased by 12.9% from RMB77.9 million in the third quarter 2012. During the fourth quarter 2012, the Company opened 77 net managed hotels. 

Total net revenues. Total net revenues for the fourth quarter 2012 totaled RMB696.0 million (US$111.7 million), representing a year-over-year increase of 27.6% from RMB545.6 million in fourth quarter 2011 and a quarter-over-quarter increase of 1.8% from RMB683.4 million in the third quarter 2012, primarily resulting from the continued growth in the number of hotels in operation.

Hotel operating costs. Hotel operating costs for the fourth quarter 2012 were RMB560.6 million (US$90.0 million), or 80.5% of total net revenues, compared with 77.5% of total net revenues in the fourth quarter 2011 and 75.7% of total net revenues in the third quarter  2012.

Sales and marketing expenses. Sales and marketing expenses for the fourth quarter 2012 were RMB31.7 million (US$5.1 million), or 4.6% of total net revenues, compared with 3.4% of total net revenues in the same period of 2011 and 2.8% in the third quarter 2012. The quarter-over-quarter increase in sales and marketing expenses was due to business development activities and associated media and brand promotions at the year end and slightly increased advertising expenses and sales commissions during the fourth quarter 2012.

General and administrative expenses. General and administrative expenses for the fourth quarter 2012 were RMB52.6 million (US$8.4 million), or 7.6% of total net revenues, compared to RMB69.5 million, or 12.7% of total net revenues in the same period of 2011, and RMB57.6 million, or 8.4% of total net revenues in the third quarter 2012. The year-over-year decrease in general and administrative expenses was primarily due to the decreased impairment loss for property and equipment as well as decreased share-based compensation expenses.

Accordingly, total operating costs and expenses amounted to RMB644.9 million (US$103.5 million), representing 92.7% of total net revenues, compared to 93.6% of total net revenues in the same period of 2011 and 86.9% in the third quarter 2012.

Income from operations. Income from operations for the fourth quarter 2012 was RMB51.1 million (US$8.2 million), compared to RMB34.9 million in the fourth quarter 2011 and RMB89.6 million in the third quarter 2012. Non-GAAP income from operations was RMB56.3 million (US$9.0 million), compared to RMB44.5 million for the same period of 2011 and RMB96.8 million in the third quarter 2012.

EBITDA. EBITDA for the fourth quarter was RMB141.2 million (US$22.7 million), an increase of 30.3% year-over-year from RMB108.4 million for the same period in 2011. Adjusted EBITDA for the quarter was RMB146.4 million (US$23.5 million) an increase of 24.1% year-over-year. EBITDA margin was 20.3% compared to 19.9% in the same period in 2011. Adjusted EBITDA margin was 21.0% compared to 21.6% in the prior year period.

Interest expense. Interest expense for the fourth quarter 2012 was RMB2.9 million, (US$0.5 million) compared to RMB4.6 million for the same period of 2011 and RMB5.2 million in the third quarter 2012.

Income tax expense. Income tax expense for the fourth quarter 2012 was RMB13.8 million (US$2.2 million), compared to RMB2.5 million in the same period of 2011 and RMB25.0 million in the third quarter 2012.

Net income attributable to 7 Days Group Holdings Limited ordinary shareholders. Net income attributable to 7 Days Group Holdings Limited ordinary shareholders was RMB37.9 million (US$6.1 million) in the fourth quarter 2012, compared to RMB35.2 million in the fourth quarter 2011 and RMB63.6 million in the third quarter 2012.

Non-GAAP net income. Non-GAAP net income was RMB43.1 million (US$6.9 million), compared to Non-GAAP net income of RMB44.8 million for the fourth quarter 2011 and Non-GAAP net income of RMB70.8 million in the third quarter 2012.

Basic and diluted earnings per ADS. Basic and diluted earnings per ADS were RMB0.77 (US$0.12) and RMB0.77 (US$0.12), respectively, for the fourth quarter 2012, compared to basic and diluted earnings per ADS of RMB0.70 in the fourth quarter 2011 and basic and diluted earnings per ADS of RMB1.29 in the third quarter 2012. Non-GAAP basic and diluted earnings per ADS were RMB0.88 (US$0.14) and RMB0.88 (US$0.14), respectively, for the fourth quarter 2012, compared to non-GAAP basic and diluted earnings per ADS of RMB0.90 and RMB0.89, respectively, in the same period of 2011 and basic and diluted earnings per ADS of RMB1.44 and RMB1.43, respectively, in the third quarter 2012.

Cash and pledged bank deposits. As of December 31, 2012, the Company had cash and pledged bank deposits of RMB382.3 million (US$61.4 million), representing a quarter-over-quarter decrease of 1.6% from RMB388.6 million as of September 30, 2012 and a year-over-year decrease of 25.5% from RMB513.1 million as of December 31, 2011, respectively.

Operating cash flow. Net operating cash inflow for the fourth quarter 2012 was RMB154.5million (US$24.8 million), representing an increase of 45.5% from RMB106.1 million in the fourth quarter 2011.

Full Year 2012 Unaudited Financial Results

Gross revenues. Gross revenues for the full year 2012 were RMB2,709.4 million (US$434.9 million), representing a year-over-year increase of 27.3% from RMB2,127.9 million in the full year 2011.

Gross revenues from leased-and-operated hotels. Gross revenues from leased-and-operated hotels for 2012 amounted to RMB2,409.8 million (US$386.8 million), representing a 25.0% increase from RMB1,927.5 million in 2011. During 2012, the Company opened 81 net leased-and-operated hotels.

Gross revenues from managed hotels. Gross revenues from managed hotels for 2012 increased by 49.5% to RMB299.6 million (US$48.1 million) from RMB200.4 million in 2011. During 2012, the Company opened 320 net managed hotels.

Total net revenues. Total net revenues for 2012 were RMB2,557.2 million (US$410.5 million), representing a year-over-year increase of 27.6% from RMB2,003.4 million in the full year 2011, primarily resulting from the continued growth in the number of hotels in operation.

Hotel operating costs. Hotel operating costs for 2012 were RMB2,033.5 million (US$326.4 million), or 79.5% of total net revenues, compared with 79.5% of total net revenues in 2011.

Sales and marketing expenses. Sales and marketing expenses for 2012 totaled RMB82.1 million (US$13.2 million), or 3.2% of total net revenues, compared with 2.5% of total net revenues in 2011. The year-over-year increase in sales and marketing expenses was due to business development activities and associated media and brand promotions at the year end and increased advertising expenses and sales commissions during 2012.

General and administrative expenses. General and administrative expenses for 2012 were RMB201.3 million (US$32.3 million), or 7.9% of total net revenues, compared to RMB209.8 million, or 10.5% of total net revenues in 2011. The year-over-year decrease in general and administrative expenses was a result of decreased impairment loss for property and equipment as well as decreased share-based compensation expenses in 2012.

Accordingly, total operating costs and expenses were RMB2,316.9 million (US$371.9 million), representing 90.6% of total net revenues, compared to 92.5% of total net revenues in 2011.

Income from operations. Income from operations for 2012 was RMB240.3 million (US$38.6 million), compared to RMB151.1 million in 2011. Non-GAAP income from operations was RMB267.4 million (US$42.9 million), compared to RMB194.6 million for 2011.

EBITDA. EBITDA was RMB581.3 million (US$93.3 million), an increase of 41.0% year-over-year from RMB412.1 million in 2011. Adjusted EBITDA was RMB608.4 million (US$97.7 million) an increase of 33.5% year-over-year. EBITDA margin was 22.7% compared to 20.6% in 2011. Adjusted EBITDA margin was 23.8% compared to 22.7% in 2011.

Interest expense. Interest expense for the full year 2012 was RMB21.5 million (US$3.4 million) compared to RMB7.2 million for 2011.

Income tax expense. Income tax expense for 2012 was RMB67.5 million (US$10.8 million), compared to RMB36.3 million in the full year 2011.

Net income attributable to 7 Days Group Holdings Limited ordinary shareholders. Net income attributable to 7 Days Group Holdings Limited ordinary shareholders was RMB176.0 million (US$28.3 million) in the full year 2012, compared to RMB128.9 million in 2011.

Non-GAAP net income. Non-GAAP net income was RMB203.2 million (US$32.6 million), compared to Non-GAAP net income of RMB172.4 million in 2011.

Basic and diluted earnings per ADS. Basic and diluted earnings per ADS were RMB3.55 (US$0.57) and RMB3.54 (US$0.57), respectively, for the full year 2012, compared to basic and diluted earnings per ADS of RMB2.58 and RMB2.56 for 2011, respectively. Non-GAAP basic and diluted earnings per ADS were RMB4.10 (US$0.66) and RMB4.09 (US$0.66), respectively, for the full year 2012, compared to non-GAAP basic and diluted earnings per ADS of RMB3.45 and RMB3.43 in the full year 2011.

Operating cash flow. Net operating cash inflow for the full year 2012 was RMB572.5 million (US$91.9 million), representing an increase of 25.1% from RMB457.5 million in 2011.

Guidance

The Company expects to generate total net revenues in the range of RMB620 million to RMB635 million in the first quarter 2013 and full year 2013 total net revenues to grow 15% to 18% over the full year 2012. For the full year 2013, the Company expects to open 360 new hotels, including 50 leased-and-operated hotels and 310 managed hotels. These forecasts reflect the Company's current and preliminary view, which is subject to change.

Conference Call

7 Days Group Holdings Limited senior management will host a conference call at 10:00 pm (Eastern) / 7:00 pm (Pacific) Monday, March 11, 2013, which is 10:00 am (Beijing) on Tuesday, March 12, 2013 to discuss its fourth quarter and full year 2012 financial results and recent business activity. The conference call may be accessed by calling the following numbers:



China:

800 8190 121

Hong Kong:

852 2475 0994

US Toll Free:

1 866 519 4004

US New York:

1 718 354 1231

International:

65 6723 9381

Passcode:

7Days

A live webcast of the conference call and replay will be available on the investor relations page of 7 Days Group's website at http://en.7daysinn.cn/.

A telephone replay will be available shortly after the call.  The dial-in details are as follows:

US:

1 855 452 5696

International:

61 2 8199 0299

Conference ID number:

97171556

About 7 Days Group Holdings Limited


7 Days Group is a leading and fast growing national economy hotel chain based in China. It converts and operates limited service economy hotels across major metropolitan areas in China under its award-winning "7 Days Inn" brand. The Company strives to offer consistent and high-quality accommodations and services primarily to the growing population of value conscious business and leisure travelers who demand affordable, clean, comfortable, convenient and safe lodging, and to respond to its guests' needs.

Use of Non-GAAP Financial Measures 

To supplement 7 Days Group's unaudited financial results presented in accordance with U.S. GAAP, the Company has used the following non-GAAP measures defined as non-GAAP financial measures by the Securities and Exchange Commission (the "SEC") to report its financial results:

  • Non-GAAP income from operations represents income from operations reported in accordance with GAAP, excluding share-based compensation expense.
  • Non-GAAP net income represents net income reported in accordance with GAAP, excluding share-based compensation expense.
  • Non-GAAP earnings per ADS represents non-GAAP net income divided by the number of ADS used in computing basic and diluted earnings per ADS.   
  • EBITDA represents net income reported in accordance with GAAP, adjusted for the effects of interest income and expense, provision for income taxes, depreciation and amortization.
  • Adjusted EBITDA represents EBITDA, excluding share-based compensation expense.

The Company believes EBITDA is a useful financial metric to assess its operating and financial performance before the impact of investing and financing transactions, if any, and income taxes. In addition, 7 Days Group believes that EBITDA is widely used by other companies in the lodging industry and may be used by investors as a measure of its financial performance. Given the significant investments that 7 Days Group has made in the past in property and equipment, depreciation and amortization expense comprises a meaningful portion of its cost structure. 7 Days Group believes that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that the Company's future results will be unaffected by other charges and gains the Company considers to be outside the ordinary course of its business. 7 Days Group also calculates Adjusted EBITDA excluding share-based compensation expense. The Company prepares its financial statements in accordance with GAAP and, accordingly, expenses its employee share options. Since share-based compensation expenses are non-cash expenses, the Company believes excluding them from its calculation of EBITDA allows it to provide investors with a more useful tool for assessing its operating and financial performance.

The use of EBITDA and Adjusted EBITDA has certain limitations. Depreciation and amortization expense for various long-term assets, such as property and equipment, income tax expense, interest expense and interest income have been and will be incurred and are not reflected in the presentation of EBITDA. Each of these items should also be considered in the overall evaluation of its results. Additionally, EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of the Company's liquidity. The Company compensates for these limitations by providing the relevant disclosure of its depreciation and amortization, interest expense and interest income, income tax expense, capital expenditures, share-based compensation expense and other relevant items both in its reconciliations to the GAAP financial measures and in its consolidated financial statements, all of which should be considered when evaluating the Company's performance. The terms EBITDA and Adjusted EBITDA are not defined under GAAP, and EBITDA and Adjusted EBITDA are not measures of net income, operating income, operating performance or liquidity presented in accordance with GAAP. When assessing the Company's operating and financial performance, investors should not consider this 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 GAAP. In addition, the Company's EBITDA and 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 and Adjusted EBITDA in the same manner as the Company does. 

For reasons same to the use of EBITDA and Adjusted EBITDA described above, the Company has also reported net income, basic and diluted earnings per ADS and income (loss) from operations on a non-GAAP basis, excluding share-based compensation expenses in the relevant period.  These non-GAAP operating measures are useful for understanding and assessing the Company's underlying business performance and operating trends and the Company expects to report net income, basic and diluted earnings per ADS and income from operations on a non-GAAP basis using a consistent method on a quarterly basis going forward. 

7 Days Group believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing 7 Days Group's financial performance and liquidity and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results for the periods set forth in the tables at the end of this release. 

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements and including, among other things, 7 Days Group's revenue guidance for the first quarter and the full year 2012 and business forecast for 2012 including the expected number of hotel to be opened (including the breakdown of expected new leased-and-operated hotels and new managed hotels), Company's business strategies, its ability to offer consistent and high-quality accommodations and services at an affordable price, its ability to leverage economies of scale and its ability to achieve strict cost controls and to deliver continued growth. These forward-looking statements are not historical facts but instead represent only the Company's belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. The Company's actual results and financial condition and other circumstances may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. In particular, the Company's operating results for any period are impacted significantly by the mix of leased-and-operated hotels and managed hotels in its chain, causing the Company's operating results to fluctuate and making them difficult to predict.

Other factors that could cause forward-looking statements to differ materially from actual future events or results include risks and uncertainties related to: uncertainties associated with factors typically affecting the lodging industry, including changes in economic conditions, adverse weather conditions, natural disasters or outbreaks of serious contagious diseases in markets where the Company has a presence; uncertainties regarding the Company's ability to respond to competitive pressures; uncertainties regarding the Company's ability to manage its expected growth; uncertainties regarding the Company's ability to continue its growth and achieve profitability; risks associated with the Company's limited operating history and historical operating losses; uncertainties regarding the Company's ability to fund its working capital needs; uncertainties regarding its ability to successfully and timely identify, secure or operate additional hotel properties. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2010 Annual Report on Form 20-F filed with the SEC on May 4, 2011, which is available on the SEC's website at www.sec.gov. For a discussion of other important factors that could adversely affect the Company's business, financial condition, results of operations and prospects, see "Risk Factors" beginning on page 7 of the Company's 2010 Annual Report on Form 20-F. The Company's results of operations for the fourth quarter and the full year of 2011 are not necessarily indicative of its operating results for any future periods. Any projections in this release are based on limited information currently available to the Company, which is subject to change. Although such projections and the factors influencing them will likely be changed, the Company will not necessarily update the information. Such information speaks only as of the date of this release.

Statement Regarding Unaudited Financial Information

The financial information set forth above is unaudited and subject to adjustments. Adjustments to the financial statements may be identified when the annual financial statements are prepared and audit work is performed for the year end audit, which could result in significant differences from this unaudited financial information.

Contacts:

Investor Contact:
Vivian Chen, Investor Relations Director
7 Days Group Holdings Limited
+86-20-8922-5858
IR@7daysinn.cn

Investor Relations (US):
Mahmoud Siddig, Managing Director
Taylor Rafferty
Tel: +1 (212) 889-4350
7DaysInn@taylor-rafferty.com

Investor Relations (HK):
Candy Cheung, Senior Consultant
Taylor Rafferty
+852 3196 3712
7DaysInn@taylor-rafferty.com

 

-- FINANCIAL AND OPERATIONAL TABLES FOLLOW --

 



7 Days Group Holdings Limited

Consolidated balance sheet information

 


Quarter Ended


31/Dec/11


30/Sep/12


31/Dec/12


RMB' 000


RMB' 000


RMB' 000

US$'000

 ASSETS







 Current assets:







 Cash

493,256


385,070


378,809

60,803

 Pledged bank deposits

19,852


3,484


3,443

553

 Short-term investment

10,000


-


-

-

 Accounts receivable

7,881


16,870


17,015

2,731

 Prepaid rent

152,629


173,112


171,370

27,507

 Other prepaid expenses and current assets

52,550


69,433


77,608

12,457

Hotel supplies

47,371


51,904


56,591

9,083

Amounts due from related parties

-


87


87

14

Deferred tax assets

19,842


19,144


26,222

4,209

 Total current assets

803,381


719,104


731,145

117,357

 Property and equipment, net

1,701,431


1,851,653


1,970,763

316,329

 Rental deposits

69,861


90,731


90,824

14,578

Land use right

24,044


23,581


23,426

3, 760

 Prepaid rent

73,419


63,822


71,088

11,410

Intangible assets, net

30,426


27,272


26,221

4,209

Goodwill

61,041


61,041


61,041

9,798

Other non-current assets

500


-


-

-

 Deferred tax assets

46,096


62,615


62,513

10, 034

 Total assets

2,810,199


2,899,819


3,037,021

487,475

 LIABILITIES AND EQUITY







 Current liabilities:







 Accounts payable

249,592


247,871


300,240

48,192

 Bills payable

16,009


13,182


11,475

1,842

 Short-term bank borrowings

334,686


71,000


130,015

20,869

 Accrued expenses and other payables

418,308


477,603


511,800

82,150

 Amounts due to related parties

333


1,850


2,601

417

 Income taxes payable

25,509


36,947


25,617

4,112

 Total current liabilities

1,044,437


848,453


981,748

157,582

Long-term bank borrowings

-


178,975


121,381

19,483

 Accrued lease payment

206,113


238,642


256,472

41,167

Unfavorable lease contract liability

7,812


7,305


7,136

1,145

 Refundable deposits

15,823


15,050


14,850

2,384

 Deferred revenue

770


608


-

-

Deferred rebate income

6,663


5,984


5,727

919

 Borrowings from related parties

1,388


892


752

121

Income taxes payable

6,644


6,644


3,317

532

   Deferred tax liabilities

4,565


2,935


7,527

1,208

 Total liabilities

1,294,215


1,305,488


1,398,910

224,541

 Equity:







 Ordinary shares

141,080


141,133


141,317

22,683

Treasury stock

-


(67,137)


(67,137)

(10,776)

 Additional paid-in capital

1,623,275


1,638,948


1,649,880

264,824

 Accumulated other comprehensive income

330


1,136


(721)

(116)

 Accumulated deficit

(238,348)


(100,203)


(62,303)

(10,001)

Total 7 Days Group Holdings Limited share holders' equity

1,526,337


1,613,877


1,661,036

266,614

Non-controlling interests

(10,353)


(19,546)


(22,925)

(3,680)

Total equity

1,515,984


1,594,331


1,638,111

262,934

Total liabilities and equity

2,810,199


2,899,819


3,037,021

487,475









7 Days Group Holdings Limited

Unaudited Consolidated Statements of Income and Comprehensive Income

 


Quarter Ended


Year Ended


Dec 31


Sep 30


Dec 31


Dec 31


Dec 31


2011


2012


2012


2011


2012


RMB'000


RMB'000


RMB'000

US$'000


RMB'000


RMB'000

US$'000

 Total Revenues

578,481


724,252


736,385

118,198


2,127,938


2,709,356

434,881

 Leased-and-operated hotels

527,609


646,330


648,427

104,080


1,927,537


2,409,805

386,800

 Managed hotels

50,872


77,922


87,958

14,118


200,401


299,551

48,081

 Less: Business tax and surcharges

(32,852)


(40,854)


(40,355)

(6,477)


(124,560)


(152,171)

(24,425)

 Net revenues

545,629


683,398


696,030

111,721


2,003,378


2,557,185

410,456













 Operating costs and expenses












 Hotel operating costs

(422,878)


(517,129)


(560,637)

(89,988)


(1,593,260)


(2,033,508)

(326,400)

Rental expenses

(152,923)


(179,513)


(190,645)

(30,601)


(571,351)


(707,692)

(113,592)

Staff cost

(88,794)


(100,887)


(114,169)

(18,325)


(317,374)


(406,623)

(65,267)

Depreciation and amortization

(66,961)


(80,602)


(84,790)

(13,610)


(241,020)


(314,189)

(50,431)

Hotel supplies

(25,967)


(35,800)


(40,439)

(6,491)


(97,452)


(135,112)

(21,687)

Utilities

(35,618)


(47,744)


(46,554)

(7,472)


(145,468)


(190,030)

(30,502)

Other

(52,615)


(72,583)


(84,040)

(13,489)


(220,595)


(279,862)

(44,921)

 Sales and marketing expenses

(18,336)


(19,059)


(31,702)

(5,089)


(49,222)


(82,116)

(13,181)

 General and administrative expenses 

(69,542)


(57,596)


(52,555)

(8,436)


(209,786)


(201,271)

(32,306)













 Total operating costs and expenses

(510,756)


(593,784)


(644,894)

(103,513)


(1,852,268)


(2,316,895)

(371,887)

 Income from operations

34,873


89,614


51,136

8,208


151,110


240,290

38,569













 Other income (expenses)












 Interest income

2,350


1,716


800

128


6,224


7,887

1,266

 Interest expense

(4,627)


(5,221)


(2,875)

(461)


(7,212)


(21,459)

(3,444)

Equity income (loss) of an affiliate

-


-


-

-


120


-

-

Income before income tax 

32,596


86,109


49,061

7,875


150,242


226,718

36,391

   Income tax expenses

(2,507)


(25,011)


(13,844)

(2,222)


(36,259)


(67,540)

(10,841)

 Net income

30,089


61,098


35,217

5,653


113,983


159,178

25,550

 Net income attributable to non-controlling interest

5,131


2,511


2,683

431


14,903


16,867

2,707

 Net income attributable to 7 Days
Group Holdings Limited
ordinary
shareholders

35,220


63,609


37,900

6,084


128,886


176,045

28,257













 Basic earnings per ordinary share

0.23


0.43


0.26

0.04


0. 86


1.18

0.19

 Diluted earnings per ordinary share

0.23


0.43


0.26

0.04


0.85


1.18

0.19













 Other Comprehensive income (loss)












  Foreign currency transaction
adjustment, net of nil income tax

(2,861)


480


(1,857)

(298)


(15,319)


(1,051)

(169)













 Comprehensive income

27,228


61,578


33,360

5,355


98,664


158,127

25,381

  Less: Comprehensive income
attributable to noncontrolling interest

(5,131)


(2,511)


(2,683)

(431)


(14,903)


(16,867)

(2,707)

 Comprehensive income attributable to
7 Days Group Holdings Limited
ordinary shareholders

32,359


64,089


36,043

5,786


113,567


174,994

28,088













 

7 Days Group Holdings Limited

Reconciliation of GAAP and Non-GAAP Results

 

EBITDA (non-GAAP)















Quarter Ended


Year Ended



Dec 31


Sep 30


Dec 31


Dec 31


Dec 31



2011


2012


2012


2011


201



RMB'000


RMB'000


RMB'000

US$'000


RMB'000


RMB'000

US$'000

Net income attributable to 7 Days Group Holdings Limited ordinary shareholders


35,220


63,609


37,900

6,084


128,886


176,045

28,257

Interest income


(2,350)


(1,716)


(800)

(128)


(6,224)


(7,887)

(1,266)

Interest expense


4,627


5,221


2,875

461


7,212


21,459

3,444

Income tax expenses


2,507


25,011


13,844

2,222


36,259


67,540

10,841

Depreciation and amortization


68,382


83,237


87,429

14,033


246,007


324,126

52,026

EBITDA (non-GAAP)


108,386


175,362


141,248

22,672


412,140


581,283

93,302

EBITDA%


19.9%


25.7%


20.3%

20.3%


20.6%


22.7%

22.7%

Share-based compensation expenses


9,585


7,227


5,187

833


43,483


27,127

4,354














Adjusted EBITDA (non-GAAP) excluding share-based compensation expenses


117,971


182,589


146,435

23,505


455,623


608,410

97,656

Adjusted EBITDA%


21.6%


26.7%


21.0%

21.0%


22.7%


23.8%

23.8%















 

 

Non-GAAP net income attributable to 7 Days Group Holdings Limited ordinary shareholders

 




Quarter Ended


Year Ended



Dec 31


Sep 30


Dec 31


Dec 31


Dec 31



2011


2012


2012


2011


2012



RMB'000


RMB'000


RMB'000

US$'000


RMB'000


RMB'000

US$'000

Net income attributable to 7 Days Group
Holdings Limited
ordinary shareholders
(GAAP)


35,220


63,609


37,900

6,084


128,886


176,045

28,257














Share-based compensation expenses


9,585


7,227


5,187

833


43,483


27,127

4,354














Net income attributable to ordinary                               

shareholders excluding share-based
compensation expense
s (Non-GAAP net 
income)


44,805


70,836


43,087

6,917


172,369


203,172

32,611

 

Earnings per share















Quarter Ended


Year Ended



Dec 31


Sep 30


Dec 31


Dec 31


Dec 31



2011


2012


2012


2011


2012



RMB


RMB


RMB

USD


RMB


RMB

USD

Basic earnings per ordinary share
(GAAP)


0.23


0.43


0.26

0.04


0.86


1.18

0.19

Diluted earnings per ordinary share
(GAAP)


0.23


0.43


0.26

0.04


0.85


1.18

0.19














 

Basic earnings per ordinary
share(Non-GAAP), excluding
share-based compensation expenses

 


 

0.30

 


 

0.48

 


 

0.29

 

 

0.05

 


 

1.15

 


 

1.37

 

 

0.22

 

 

Diluted earnings per ordinary
share(Non-GAAP), excluding
share-based compensation expenses

 


 

0.30

 


 

0.48

 


 

0.29

 

 

0.05

 


 

1.14

 


 

1.36

 

 

0.22

 

Denominator:













Basic weighted average number of
ordinary shares


149,926,081


147,769,286


146,813,397


149,811,784


148,602,762

Diluted weighted average number of
ordinary shares


151,023,253


148,164,932


147,384,945


151,473,066


149,145,386















 



Quarter Ended


Year Ended



31-Dec-11

30-Sep-12

31-Dec-12


31-Dec-11

31-Dec-12



RMB '000

RMB '000  

RMB'000

USD'000


RMB '000

RMB'000

USD'000

Hotel operating cost










GAAP Result

(422,878)

(517,129)

(560,637)

(89,988)


(1,593,260)

(2,033,508)

(326,400)


% of Total net revenue

77.50%

75.67%

80.55%

80.55%


79.53%

79.52%

79.52%


Share-based Compensation

384

582

313

50


2,551

1,723

277


% of Total net revenue

0.07%

0.09%

0.04%

0.04%


0.13%

0.07%

0.07%


Non-GAAP Result

(422,494)

(516,547)

(560,324)

(89,938)


(1,590,709)

(2,031,785)

(326,123)


% of Total net revenue

77.43%

75.59%

80.50%

80.50%


79.40%

79.45%

79.45%











Sales and marketing expenses










GAAP Result

(18,336)

(19,059)

(31,702)

(5,089)


(49,222)

(82,116)

(13,181)


% of Total net revenue

3.36%

2.79%

4.55%

4.55%


2.46%

3.21%

3.21%


Share-based Compensation

627

703

578

93


1,094

2,481

398


% of Total net revenue

0.11%

0.10%

0.08%

0.08%


0.05%

0.10%

0.10%


Non-GAAP Result

(17,709)

(18,356)

(31,124)

(4,996)


(48,128)

(79,635)

(12,783)


% of Total net revenue

3.25%

2.69%

4.47%

4.47%


2.40%

3.11%

3.11%











General and administrative expenses










GAAP Result

(69,542)

(57,596)

(52,555)

(8,436)


(209,786)

(201,271)

(32,306)


% of Total net revenue

12.75%

8.43%

7.55%

7.55%


10.47%

7.87%

7.87%


Share-based Compensation

8,574

5,942

4,296

690


39,838

22,923

3,679


% of Total net revenue

1.57%

0.87%

0.62%

0.62%


1.99%

0.90%

0.90%


Non-GAAP Result

(60,968)

(51,654)

(48,259)

(7,746)


(169,948)

(178,348)

(28,627)


% of Total net revenue

11.17%

7.56%

6.93%

6.93%


8.48%

6.97%

6.97%











Total operating cost and expenses










GAAP Result

(510,756)

(593,784)

(644,894)

(103,513)


(1,852,268)

(2,316,895)

(371,887)


% of Total net revenue

93.61%

86.89%

92.65%

92.65%


92.46%

90.60%

90.60%


Share-based Compensation

9,585

7,227

5,187

833


43,483

27,127

4,354


% of Total net revenue

1.76%

1.06%

0.75%

0.75%


2.17%

1.06%

1.06%


Non-GAAP Result

(501,171)

(586,557)

(639,707)

(102,680)


(1,808,785)

(2,289,768)

(367,533)


% of Total net revenue

91.85%

85.83%

91.91%

91.91%


90.29%

89.54%

89.54%











Income from operations










GAAP Result

34,873

89,614

51,136

8,208


151,110

240,290

38,569


% of Total net revenue

6.39%

13.11%

7.35%

7.35%


7.54%

9.40%

9.40%


Share-based Compensation

9,585

7,227

5,187

833


43,483

27,127

4,354


% of Total net revenue

1.76%

1.06%

0.75%

0.75%


2.17%

1.06%

1.06%


Non-GAAP Result

44,458

96,841

56,323

9,041


194,593

267,417

42,923


% of Total net revenue

8.15%

14.17%

8.09%

8.09%


9.71%

10.46%

10.46%












 


 

7 Days Group Holdings Limited Operating Data

 



As of and for

the Quarter Ended


As of and for

the Year Ended



Dec 31

Sep 30

Dec 31


Dec 31

Dec 31



2011

2012

2012


2011

2012









Hotels in operation


944

1,236

1,345


944

1,345

Leased-and-operated hotels


411

460

492


411

492

Managed hotels


533

776

853


533

853









Hotels under conversion


234

228

223


234

223

Leased-and-operated hotels


32

43

21


32

21

Managed hotels


202

185

202


202

202









Total hotel rooms for hotels in operation


94,684

123,080

133,497


94,684

133,497

Leased-and-operated hotels


43,021

48,380

51,725


43,021

51,725

Managed hotels


51,663

74,700

81,772


51,663

81,772









Total hotel rooms for hotels under conversion


22,485

21,674

20,368


22,485

20,368









Number of cities covered for hotels in operation


141

191

208


141

208









Average occupancy rate


82.8%

85.0%

78.1%


84.6%

81.3%

Leased-and-operated hotels


86.4%

86.1%

79.2%


87.9%

82.9%

Managed hotels


80.0%

84.3%

77.4%


81.5%

80.3%









Average daily rate (in RMB)


159.6

165.6

161.8


161.0

161.7

Leased-and-operated hotels


165.8

169.5

168.5


166.2

167.0

Managed hotels


154.3

163.0

157.4


155.8

158.0









RevPAR (in RMB)


132.2

140.9

126.4


136.2

131.5

Leased-and-operated hotels


143.3

145.9

133.4


146.0

138.3

Managed hotels


123.5

137.5

121.9


127.0

126.9

 

 

SOURCE 7 Days Group Holdings Limited



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