7 Days Group Holdings (NYSE:SVN)

First Quarter 2012 Financial Highlights

• Total net revenues for the first quarter 2012 increased by 29.6% year-over-year to RMB545.0 million(US$86.5 million)[1].
  
• Income from operations for the first quarter 2012 was RMB23.3 million (US$3.7 million), compared toRMB7.4 million in the first quarter 2011. Non-GAAP income from operations for the quarter was RMB32.2 million (US$5.1 million), compared to RMB18.2 million for the same period in 2011.
  
• EBITDA for the first quarter 2012 was RMB105.8 million (US$16.8 million), an increase of 69.1% year-over-year from RMB62.5 million for the same period in 2011. Adjusted EBITDA for the quarter was RMB114.6 million (US$18.2 million), an increase of 56.4% year-over-year. EBITDA margin was 19.4% compared to 14.9% in the same period in 2011. Adjusted EBITDA margin was 21.0%, compared to 17.4% in the prior year period.
  
• Net income attributable to the Company's ordinary shareholders was RMB19.0 million (US$3.0 million), compared to RMB4.3 million for the same period in 2011. Non-GAAP net income attributable to the Company's ordinary shareholders was RMB27.8 million (US$4.4 million), representing a year-over-year increase of 84.3%.
  
• Basic and diluted earnings per ADS[2] were RMB0.38 (US$0.06). Non-GAAP basic and diluted earnings per ADS were RMB0.56 (US$0.09) and RMB0.55 (US$0.09), respectively.
  
• Net operating cash inflow was RMB93.8 million (US$14.9 million), compared to RMB97.5 million in the same period in 2011.

Mr. Alex Nanyan Zheng, 7 Days Group's Co-Chairman of the Board of Directors and Chief Executive Officer, commented, "We are pleased to report solid results for the first quarter of 2012. Our financial performance was in line with our expectations and was mainly driven by the performance of our existing hotels as well as new hotel openings. Our outlook for the remainder of 2012 is favorable, as we believe the rapid expansion of our hotel portfolio will help to drive continued growth in revenue and profitability, which we believe will ultimately create greater value for our shareholders."

Guidance

The Company expects to generate total net revenues in the range of RMB630 million to

RMB640 million in the second quarter 2012. These forecasts reflect the Company's current and preliminary view, which is subject to change.

Fourth Quarter 2011 Financial Highlights

• Total net revenues for the fourth quarter 2011 increased by 24.3% year-over-year to RMB545.6 million(US$86.7 million)(1).
• Income from operations for the fourth quarter 2011 was RMB34.9 million (US$5.5 million), compared toRMB32.1 million in the fourth quarter 2010. Non-GAAP income from operations for the quarter was RMB44.5 million (US$7.1 million), compared to RMB41.1 million for the same period in 2010.
• EBITDA for the fourth quarter was RMB108.4 million (US$17.2 million), an increase of 27.9% year-over-year from RMB84.7 million for the same period in 2010. Adjusted EBITDA for the quarter was RMB118.0 million(US$18.7 million), an increase of 25.9% year-over-year. EBITDA margin was 19.9% compared to 19.3% in the same period in 2010. Adjusted EBITDA margin was 21.6%, compared to 21.3% in the prior year period.
• Net income attributable to the Company's ordinary shareholders for the quarter was RMB35.2 million(US$5.6 million), compared to RMB22.0 million for the same period in 2010. Non-GAAP net income attributable to the Company's ordinary shareholders for the quarter was RMB44.8 million (US$7.1 million), representing a year-over-year increase of 44.6%.
• Basic and diluted earnings per ADS(2) were RMB0.70 (US$0.11) and RMB0.70 (US$0.11) respectively. Non-GAAP basic and diluted earnings per ADS were RMB0.90 (US$0.14) and RMB0.89 (US$0.14), respectively.
• Net operating cash inflow was RMB106.1 million (US$16.9 million), compared to RMB97.8 million in the same period in 2010.

Mr. Alex Nanyan Zheng, 7 Days Group's Chief Executive Officer 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 keep our fast expansion pace in 2012, which we believe will further solidify our position as the market leader in the economy hotel industry."

Third Quarter 2011 Results

• Gross revenues for the third quarter of 2011 were RMB574.0 million (US$90.0 million), representing a year-over-year increase of 33.9% from RMB428.5 million in the third quarter of 2010 and an increase of 8.7% from RMB528.1 million in the second quarter of 2011.
• Non-GAAP basic and diluted earnings per ADS were RMB1.13 (US$0.18) and RMB1.12 (US$0.18), respectively, for the third quarter of 2011, compared to non-GAAP basic and diluted earnings per ADS of RMB1.24 and RMB1.23, respectively, in the same period of 2010 and basic and diluted earnings per ADS of RMB1.12 and RMB1.11, respectively, in the second quarter of 2011.

Second Quarter 2011 Financial Highlights

• Total net revenues increased by 41.2% to RMB497.1 million (US$76.9 million)(1), compared to RMB352.2 million for the same period in the fiscal year 2010.
  
• Income from operations was RMB55.9 million (US$8.7 million), compared to RMB43.8 million in the second quarter of 2010. Non-GAAP income from operations increased by 46.6% to RMB67.0 million (US$10.4 million) from RMB45.7 million for the same period in the fiscal year 2010.
  
• EBITDA was RMB117.2 million (US$18.1 million), compared to RMB84.6 million for the same period in 2010. Adjusted EBITDA increased by 48.2% year-over-year to RMB128.3 million (US$19.8 million). EBITDA margin was 23.6% compared to 24.0% in the same period in the fiscal year 2010. Adjusted EBITDA margin was 25.8% compared to 24.6% in the same period in the fiscal year 2010.
  
• Net income attributable to the Company's ordinary shareholders increased by 49.4% to RMB45.1 million (US$7.0 million) from RMB30.2 million for the same period in the fiscal year 2010. Non-GAAP net income increased by 74.8% to RMB56.1 million (US$8.7 million) from RMB32.1 million for the same period in the fiscal year 2010.
  
• Basic and diluted earnings per ADS(2) were RMB0.90 (US$0.14) and RMB0.89 (US$0.14) respectively.

• Non-GAAP basic and diluted earnings per ADS were RMB1.12 (US$0.17) and RMB1.11 (US$0.17) respectively.

• Net operating cash inflow was RMB132.8 million (US$20.5 million), an increase of 44.9% compared to RMB91.6 million in the same period in the fiscal year 2010.

Mr. Alex Nanyan Zheng, 7 Days Group's Chief Executive Officer and Director, commented, "We are pleased to report solid results for the second quarter of 2011, which exceeded our expectations. Our strong financial and operating performance was supported by the continued expansion of our hotel portfolio. As we continue to execute our expansion strategy, we are well-positioned to deliver further growth and development, while remaining committed to providing our guests with a high quality and comfortable experience at a competitive price."

Mr. Eric Haibing Wu, 7 Days Group's Chief Financial Officer, added, "In the second quarter of 2011, we delivered a strong set of financial results with both top- and bottom-line growth on a year-over-year basis. We will continue to leverage our growing economies of scale and competitive advantages as we expand our hotel chain."

Guidance

The Company expects to generate total net revenues in the range of RMB525 million to RMB535 million in the third quarter of 2011, representing year-over-year growth of 30% to 32%. The Company reiterates its full year revenue guidance and expects full-year 2011 total net revenues from organic growth to increase 32% to 36% over the full-year 2010. The forecasts reflect the Company's current and preliminary view, which is subject to change.

Historically, we had incurred operating losses each quarter and only started to achieve income from operations in the second quarter of 2009. Our principal sources of liquidity have been our issuance of ordinary shares, preferred shares, and senior notes and warrants through private placements, issuance of our ADSs in our IPO, as well as borrowings from related party and third-party lenders. As of December 31, 2010, we had cash of RMB388.8 million (US$58.9 million).

We intend to fund our capital expenditures with cash generated from our operating activities, existing cash balances and additional domestic bank financing activities.

We expect to need additional capital to implement our growth strategy, remain competitive or expand our hotel network. Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties.

First Quarter Results:

• Total net revenues increased by 39.2% to RMB420.7 million (US$64.2 million)(1), compared to RMB302.2 million for the same period in the fiscal year 2010.
• Income from operations was RMB7.4 million (US$1.1 million), compared to RMB12.8 million in the first quarter of 2010. Non-GAAP income from operations increased by 16.4% to RMB18.2 million (US$2.8 million) from RMB15.6 million for the same period in the fiscal year 2010.
• EBITDA was RMB62.5 million (US$9.5 million), compared to RMB52.9 million for the same period in 2010. Adjusted EBITDA increased by 31.6% year-over-year to RMB73.3 million (US$11.2 million). EBITDA margin was 14.9% as compared to 17.5% in the same period in the fiscal year 2010. Adjusted EBITDA margin was 17.4% compared to 18.4% in the same period in the fiscal year 2010.
• Net income attributable to the Company's ordinary shareholders was RMB4.3 million (US$0.7 million), compared to RMB5.7 million for the same period in the fiscal year 2010. Non-GAAP net income was RMB15.1 million (US$2.3 million), compared to RMB8.5 million for the same period in the fiscal year 2010.
• Basic and diluted earnings per ADS(2) were RMB0.09 (US$0.01). Non-GAAP basic and diluted earnings per ADS were RMB0.30 (US$0.05

Mr. Alex Nanyan Zheng, 7 Days Group's Chief Executive Officer and Director, commented, "I am pleased to report another solid quarter of growth in the first quarter of 2011, which demonstrates the Company's rapid expansion and leadership in China's economy hotel industry. During the quarter, we continued to capitalize on favorable industry trends and ongoing growth in China's travel and lodging sector in order to expand our hotel chain, enhance customer loyalty and grow our customer base. Looking forward, we will make continuous efforts to enhance our customers' experience across our hotel chain."

The Company expects to generate total net revenues in the range of RMB475 million to RMB485 million in the second quarter of 2011, representing year-over-year growth of 35% to 38%. The forecasts reflect the Company's current and preliminary view, which is subject to change.

Fourth Quarter Results:

• Total net revenues increased by 41.4% to RMB439.1 million (US$66.5 million) (1), compared to RMB310.5 million for the same period in the fiscal year 2009.
• Income from operations was RMB32.1 million (US$4.9 million), compared to RMB26.8 million in the fourth quarter of 2009. Non-GAAP income from operations increased by 38.9% to RMB41.1million (US$6.2 million) from RMB29.6 million for the same period in the fiscal year 2009.
• EBITDA was RMB84.7 million (US$12.8 million), compared to a loss of RMB30.1 million for the same period in 2009.
• Adjusted EBITDA increased by 35.6% year-over-year to RMB93.7 million (US$14.2 million).
• Net income attributable to the Company's shareholders was RMB22.0million (US$3.3 million), compared to a net loss of RMB93.4 million for the same period in the fiscal year 2009. Non-GAAP net income was RMB31.0million (US$4.7 million), compared to RMB5.8 million for the same period in the fiscal year 2009.
• Basic and diluted earnings per ADS(2) were RMB0.45 (US$0.07). Non-GAAP basic and diluted earnings per ADS were RMB0.61 (US$0. 09).and RMB0.60 (US$ 0.09), respectively

"The impressive growth we achieved in 2010 has further strengthened the 7 Days Inn brand, and we are now the second largest economy hotel chain in China in terms of both number of hotels and rooms. Our success is attributable in large part to a deep understanding of our customer base and a consistent focus on catering to their core needs."

"We continue to see significant growth opportunities in the economy hotel segment in China and we aim to accelerate our business development efforts in 2011, particularly within our managed hotel portfolio. We have made significant and rapid progress in developing our managed hotels, and thus far we are encouraged by the performance of our newly opened managed hotels. For 2011, in light of the favorable market conditions and our successful expansion efforts to date, we are revising our initial goal of opening 240 hotels and now target to open 290 new properties, including 80 leased-and-operated hotels and 210 managed hotels."

The Company expects to generate total net revenues in the range of $61.6 million to $62.4 million in the first quarter 2011. 7 Days Group expects full-year 2011 total net revenues to grow 32% to 36% over the full-year 2010. The forecasts reflect the Company's current and preliminary view, which is subject to change.

Third Quarter 2010 Financial Highlights

• Total net revenues increased by 30.9% to RMB405.5 million (US$60.6 million), compared to RMB309.7 million for the same quarter in 2009.

• Net income attributable to the Company's shareholders wasRMB59.8 million (US$8.9 million), compared to RMB3.4 millionfor the third quarter 2009.  

• Non-GAAP net income was RMB61.7 million (US$9.2 million), compared to RMB9.6 million for the third quarter 2009.

• Basic and diluted earnings per ADS were RMB1.20(US$0.18) and RMB1.19(US$0.18), respectively. Non-GAAP basic and diluted earnings per ADS were RMB1.24(US$0.19) and RMB1.23(US$0.18), respectively.

The Company expects to generate total net revenues in the range of RMB430 million to RMB440 million in the fourth quarter 2010. The forecasts reflect the Company's current and preliminary view, which is subject to change.