GUANGZHOU, China—7 Days Group Holdings Limited (“7 Days Group” or the “Company”) announced its unaudited financial results for the second quarter 2012.
Second Quarter 2012 Financial Highlights
- Total net revenues for the second quarter 2012 increased by 27.3% year-over-year to RMB632.7 million (US$99.6 million).
- Income from operations for the second quarter 2012 was RMB76.2 million (US$12.0 million), a 36.3% year-over-year increase compared to RMB55.9 million in the second quarter 2011. Non-GAAP income from operations for the quarter was RMB82.1 million (US$12.9 million), compared to RMB67.0 million for the same period in 2011.
- EBITDA for the second quarter 2012 was RMB158.9 million (US$25.0 million), an increase of 35.6% year-over-year from RMB117.2 million for the same period in 2011. Adjusted EBITDA for the quarter was RMB164.8 million (US$25.9 million), an increase of 28.4% year-over-year. EBITDA margin was 25.1% compared to 23.6% in the same period in 2011. Adjusted EBITDA margin was 26.0%, compared to 25.8% in the prior year period.
- Net income attributable to the Company’s ordinary shareholders was RMB55.6 million (US$8.7 million), a 23.3% year-over-year increase compared to RMB45.1 million for the same period in 2011. Non-GAAP net income attributable to the Company’s ordinary shareholders was RMB61.4 million (US$9.7 million), representing a year-over-year increase of 9.5%.
Basic and diluted earnings per ADS were RMB1.11 (US$0.18) and RMB1.11 (US$0.17), respectively. Non-GAAP basic and diluted earnings per ADS were RMB1.23 (US$0.19) and RMB1.22 (US$0.19), respectively. Net operating cash inflow was RMB189.5 million (US$29.8 million), compared to RMB132.8 million in the same period in 2011.
Second Quarter 2012 Operational Highlights
- Added 88 net hotels, comprising 18 net leased-and-operated hotels and 70 net managed hotels in the second quarter 2012.
- As of June 30, 2012, 7 Days Group had 1,132 hotels in operation, consisting of 435 leased-and-operated hotels and 697 managed hotels, representing a total of 112,631 rooms covering 168 cities.
- As of June 30, 2012, there were a total of 226 hotels in the pipeline, including 50 leased-and-operated hotels under conversion and 176 managed hotels contracted but not yet opened.
- For the second quarter 2012, occupancy rates for leased-and-operated hotels, managed hotels and all hotels were 86.8%, 83.0% and 84.6%, respectively, compared to 91.1%, 83.8% and 87.5%, respectively, in the second quarter 2011. The year-over-year decrease in occupancy rates was mainly due to the higher number of new hotels in operation compared to the prior year period. RevPAR2 for leased-and-operated hotels was RMB145.1 in the second quarter 2012, compared to RMB152.4 in the same period in 2011. RevPAR for managed hotels for the period was RMB130.9 in the second quarter 2012, compared to RMB129.7 for the same period in 2011.
- As of June 30, 2012, the number of 7 Days Club members was over 43.8 million, a 91.3% increase from 22.9 million as of June 30, 2011.
Recent Business Developments:
Mr. Yuezhou Lin, 7 Days Group’s Chief Executive Officer and Director, commented, "As announced during the second quarter 2012, we have begun to implement the strategy to increase emphasis towards our managed hotel portfolio to maximize our growth opportunities in China’s expanding economy hotel industry. By adopting a more asset-light growth strategy, we are leveraging our leading hotel operating platform, best-in-class proprietary e-Commerce system and industry leading loyalty program to take advantage of the lower risk, less capital intensive and more profitable nature of the managed hotel business model. We believe that this approach will allow us to deliver increasing profitability and stronger free cash flow over time. With a robust pipeline of managed hotels contracted but not yet opened, and continuing strong demand from prospective managed hotel partners, we remain confident in our ability to deliver sustainable earnings growth in the coming quarters and beyond.”
Second Quarter 2012 Unaudited Financial Results
Gross revenues. Gross revenues for the second quarter of 2012 were RMB671.1 million (US$105.6 million), representing a year-over-year increase of 27.1% from RMB528.1 million in the second quarter 2011.
Gross revenues from leased-and-operated hotels. Gross revenues from leased-and-operated hotels for the second quarter 2012 amounted to RMB595.6 million (US$93.7 million), representing a 24.5% increase from RMB478.2 million in the second quarter 2011.
Gross revenues from managed hotels. Gross revenues from managed hotels for the second quarter of 2012 increased by 51.4% to RMB75.5 million (US$11.9 million) from RMB49.9 million in the same period in 2011, and increased by 29.8% from RMB58.2 million in the first quarter 2012. During the second quarter 2012, 70 net managed hotels were opened.
Total net revenues. Total net revenues for the second quarter of 2012 totaled RMB632.7 million (US$99.6 million), representing a year-over-year increase of 27.3% from RMB497.1 million in second quarter 2011, primarily resulting from the continued growth in the number of hotels in operation.
Hotel operating costs. Hotel operating costs for the second quarter of 2012 were RMB489.3 million (US$77.0 million), or 77.3% of total net revenues, compared with 77.0% of total net revenues in the second quarter 2011 and 85.6% of total net revenues in the first quarter 2012. Pre-opening expenses for the second quarter 2012 were RMB15.1 million (US$2.4 million), compared to RMB15.4 million in the first quarter of 2012.
Sales and marketing expenses. Sales and marketing expenses for the second quarter of 2012 were RMB18.9 million (US$3.0 million), or 3.0% of total net revenues, compared with 1.8% of total net revenues in the same period of 2011 and 2.3% in the first quarter 2012. The increase in sales and marketing expenses resulted from expanded promotional activities in the second quarter of 2012.
General and administrative expenses. General and administrative expenses for the second quarter 2012 were RMB48.3 million (US$7.6 million), or 7.6% of total net revenues, compared to RMB49.3 million, or 9.9% of total net revenues in the same period of 2011, and RMB42.8 million, or 7.9% of total net revenues in the first quarter of 2012. The decrease in general and administrative expenses was primarily a result of improved operating efficiency as well as the benefits of economies of scale.
Accordingly, total operating costs and expenses amounted to RMB556.5 million (US$87.6 million), representing 88.0% of total net revenues, compared to 88.7% of total net revenues in the same period of 2011 and 95.7% in the first quarter 2012.
Income from operations. Income from operations for the second quarter 2012 was RMB76.2 million (US$12.0 million), compared to RMB55.9 million in the second quarter 2011 and RMB23.3 million in the first quarter 2012. Non-GAAP income from operations was RMB82.1 million (US$12.9 million), compared to RMB67.0 million for the same period of 2011 and RMB32.2 million in the first quarter 2012.
EBITDA. EBITDA for the second quarter 2012 was RMB158.9 million (US$25.0 million), an increase of 35.6% year-over-year from RMB117.2 million for the same period in 2011. Adjusted EBITDA for the quarter was RMB164.8 million (US$25.9 million) an increase of 28.4% year-over-year. EBITDA margin was 25.1% compared to 23.6% in the same period in 2011. Adjusted EBITDA margin was 26.0% compared to 25.8% in the prior year period.
Interest expense. Interest expense for the second quarter 2012 was RMB7.0 million, (US$1.1 million) compared to RMB0.4 million for the same period of 2011 and RMB6.4 million in the first quarter 2012.
Income tax expense. Income tax expense for the second quarter 2012 was RMB21.3 million (US$3.4 million), compared to RMB15.6 million in the same period of 2011 and RMB7.3 million in the first 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 RMB55.6 million (US$8.7 million) in the second quarter 2012, compared to RMB45.1 million in the second quarter 2011 and RMB19.0 million in the first quarter 2012.
Non-GAAP net income. Non-GAAP net income was RMB61.4 million (US$9.7 million), compared to Non-GAAP net income of RMB56.1 million for the second quarter 2011 and Non-GAAP net income of RMB27.8 million in the first quarter 2012.
Basic and diluted earnings per ADS. Basic and diluted earnings per ADS were RMB1.11 (US$0.18) and RMB1.11 (US$0.17), respectively, for the second quarter 2012, compared to basic and diluted earnings per ADS of RMB0.90 and RMB0.89, respectively, in the second quarter 2011 and basic and diluted earnings per ADS of RMB0.38 in the first quarter 2012. Non-GAAP basic and diluted earnings per ADS were RMB1.23 (US$0.19) and RMB1.22 (US$0.19), respectively, for the second quarter 2012, compared to non-GAAP basic and diluted earnings per ADS of RMB1.12 and RMB1.11, respectively, in the same period of 2011and basic and diluted earnings per ADS of RMB0.56 and RMB0.55, respectively, in the first quarter 2012.
Cash and pledged bank deposits. As of June 30, 2012, the Company had cash and pledged bank deposits of RMB615.6 million (US$96.9 million), representing a year-over-year increase of 88.7% from RMB326.3 million as of June 30, 2011.
Operating cash flow. Net operating cash inflow for the second quarter 2012 was RMB189.5 million (US$29.8 million), representing an increase of 42.7% from RMB132.8 million in the second quarter 2011.
Guidance
The Company expects to generate total net revenues in the range of RMB670 million to RMB685 million in the third quarter 2012. These forecasts reflect the Company’s current and preliminary view, which is subject to change.
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