Today's Top SOA Links
From the Wires
7 Days Group Holdings Limited Announces Unaudited 2012 Third Quarter Financial Results
By: PR Newswire
Nov. 7, 2012 05:00 PM
GUANGZHOU, China, Nov. 7, 2012 /PRNewswire-FirstCall/ -- 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 third quarter 2012.
Third Quarter 2012 Financial Highlights
Third Quarter 2012 Operational Highlights
Recent Business Developments:
Mr. Yuezhou Lin, 7 Days Group's Chief Executive Officer and Director, commented, "We are pleased to report strong results for the third quarter, with revenue growth near the high end of our guidance range and robust profit growth. Our results were driven by a healthy performance from our existing hotels and new hotel openings. In-line with our asset-light strategy, we continue to expand our hotel portfolio with a greater focus on managed hotels, which now account for over sixty percent of our hotels in operation and the majority of hotels in our pipeline. By placing a greater emphasis on managed hotels, we are seeking to take advantage of the lower risk, less capital intensive and more profitable nature of the managed hotel business model. We believe that the merits of our strategy have been proven based on the increasing profitability and free cash flow that we generated in the third quarter. With a healthy pipeline and continued demand from both guests and managed hotel partners, we remain confident in our ability to further expand our hotel portfolio and deliver profitable growth going forward."
Third Quarter 2012 Unaudited Financial Results
Gross revenues. Gross revenues for the third quarter of 2012 were RMB724.3 million (US$115.2 million), representing a year-over-year increase of 26.2% from RMB574.0 million in the third quarter 2011.
Gross revenues from leased-and-operated hotels. Gross revenues from leased-and-operated hotels for the third quarter 2012 amounted to RMB646.3 million (US$102.8 million), representing a 25.3% increase from RMB516.0 million in the third quarter 2011.
Gross revenues from managed hotels. Gross revenues from managed hotels for the third quarter of 2012 increased by 34.3% to RMB77.9 million (US$12.4 million) from RMB58.0 million in the same period in 2011. During the third quarter 2012, 79 net managed hotels were opened.
Total net revenues. Total net revenues for the third quarter of 2012 totaled RMB683.4 million (US$108.7 million), representing a year-over-year increase of 26.6% from RMB540.0 million in third quarter 2011, primarily resulting from the continued growth in the number of hotels in operation.
Hotel operating costs. Hotel operating costs for the third quarter of 2012 were RMB517.1 million (US$82.3 million), or 75.7% of total net revenues, compared with 78.9% of total net revenues in the third quarter 2011 and 77.3% of total net revenues in the second quarter 2012. Pre-opening expenses for the third quarter 2012 were RMB17.9 million (US$2.9 million), compared to RMB15.1 million in the second quarter of 2012.
Sales and marketing expenses. Sales and marketing expenses for the third quarter of 2012 were RMB19.1 million (US$3.0 million), or 2.8% of total net revenues, compared with 1.9% of total net revenues in the same period of 2011 and 3.0% in the second quarter 2012.
General and administrative expenses. General and administrative expenses for the third quarter 2012 were RMB57.6 million (US$9.2 million), or 8.4% of total net revenues, compared to RMB50.7 million, or 9.4% of total net revenues in the same period of 2011, and RMB48.3 million, or 7.6% of total net revenues in the second quarter of 2012.
Accordingly, total operating costs and expenses amounted to RMB593.8 million (US$94.5 million), representing 86.9% of total net revenues, compared to 90.2% of total net revenues in the same period of 2011 and 88.0% in the second quarter 2012.
Income from operations. Income from operations for the third quarter 2012 was RMB89.6 million (US$14.3 million), compared to RMB52.9 million in the third quarter 2011 and RMB76.2 million in the second quarter 2012. Non-GAAP income from operations was RMB96.8 million (US$15.4 million), compared to RMB65.0 million for the same period of 2011 and RMB82.1 million in the second quarter 2012.
EBITDA. EBITDA for the third quarter 2012 was RMB175.4 million (US$27.9 million), an increase of 41.4% year-over-year from RMB124.0 million for the same period in 2011. Adjusted EBITDA for the quarter was RMB182.6 million (US$29.1 million) an increase of 34.2% year-over-year. EBITDA margin was 25.7% compared to 23.0% in the same period in 2011. Adjusted EBITDA margin was 26.7% compared to 25.2% in the prior year period.
Interest expense. Interest expense for the third quarter 2012 was RMB5.2 million (US$0.8 million), compared to RMB2.0 million for the same period of 2011 and RMB7.0 million in the second quarter 2012.
Income tax expense. Income tax expense for the third quarter 2012 was RMB25.0 million (US$4.0 million), compared to RMB14.8 million in the same period of 2011 and RMB21.3 million in the second 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 RMB63.6 million (US$10.1 million) in the third quarter 2012, compared to RMB44.3 million in the third quarter 2011 and RMB55.6 million in the second quarter 2012.
Non-GAAP net income. Non-GAAP net income was RMB70.8 million (US$11.3 million), compared to Non-GAAP net income of RMB56.4 million for the third quarter 2011 and Non-GAAP net income of RMB61.4 million in the second quarter 2012.
Basic and diluted earnings per ADS. Basic and diluted earnings per ADS were RMB1.29 (US$0.21) and RMB1.29 (US$0.20), respectively, for the third quarter 2012, compared to basic and diluted earnings per ADS of RMB0.89 and RMB0.88, respectively, in the third quarter 2011 and basic and diluted earnings per ADS of RMB1.11 in the second quarter 2012. Non-GAAP basic and diluted earnings per ADS were RMB1.44 (US$0.23) and RMB1.43 (US$0.23), respectively, for the third quarter 2012, compared to non-GAAP basic and diluted earnings per ADS of RMB1.13 and RMB1.12, respectively, in the same period of 2011and basic and diluted earnings per ADS of RMB1.23 and RMB1.22, respectively, in the second quarter2012.
Cash and pledged bank deposits. As of September 30, 2012, the Company had cash and pledged bank deposits of RMB388.6 million (US$61.8 million), representing a year-over-year decrease of 2.2% from RMB397.3 million as of September 30, 2011.
Operating cash flow. Net operating cash inflow for the third quarter 2012 was RMB134.8 million (US$21.4 million), representing an increase of 11.4% from RMB121.1 million in the third quarter 2011.
The Company expects to generate total net revenues in the range of RMB670 million to RMB685 million in the fourth quarter 2012. These forecasts reflect the Company's current and preliminary view, which is subject to change.
7 Days Group Holdings Limited senior management will host a conference call at 9:00 pm (Eastern) / 6:00 pm (Pacific) Wednesday, November 7, 2012, which is 10:00 am (Beijing) on Thursday, November 8, 2012 to discuss its third quarter 2012 financial results and recent business activity. The conference call may be accessed by calling the following numbers:
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:
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:
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 fourth quarter 2012 and business forecast for 2012, including the Company's hotel expansion plan, an increased focus on its portfolio of asset-light, profit-oriented managed hotels, its ability to offer consistent and high-quality accommodations and services at an affordable price, its ability to leverage the 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 2011 Annual Report on Form 20-F filed with the SEC on April 26, 2012, 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 8 of the Company's 2011 Annual Report on Form 20-F. The Company's results of operations for the third quarter 2012 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.
Investor Relations (HK):
Investor Relations (US):
-- FINANCIAL AND OPERATIONAL TABLES FOLLOW --
SOURCE 7 Days Group Holdings Limited
Subscribe to the World's Most Powerful Newsletters
Subscribe to Our Rss Feeds & Get Your SYS-CON News Live!
SYS-CON Featured Whitepapers
Most Read This Week