svn investor ppt

7 Days Group Holdings Limited

Investor Presentation

March 2013

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1

Safe Harbor Statement

Statements in this presentation contain “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 of 2013 and business forecast for 2013 including the expected number of hotels to be opened, Company’s business strategies, 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 2011 Annual Report on Form 20-F filed with the SEC on April 26, 2012 and 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 actual results of operations for the fourth 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.


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2

Agenda

Company Overview

Financial and Operational Highlights

Investment Highlights

Growth Strategies

Appendix


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3

Fast-growing National Economy Hotel Market Leader

No. 1 in loyalty programs e-Commerce platforms • Over 52.9 mm members

• Highest room night contribution from members

• Website has highest internet traffic ranking

• Highest online booking ratio

No. 1 in growth in hotel expansion • Highest number of new hotels opened in 2010 – 2012

• 1,345 hotels in operation, expect to have 2,000 hotels by 2014

• 401 new hotels opened during 2012 – industry record

• Total Transaction Value (TTV1) year-over-year growth 50.4% in 2012

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.

“No. 1 Brand Influence in Economy Hotel Industry” -- China Brand Power Index, Ministry of Industry and Information Technology, 2012

-- CCTV China Brand, CCTV, 2012

Sustainable profitability: • 2010Q1 to 2012Q4 – twelfth consecutive profitable quarters


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Total Transaction Value

4

Members

Cities covered

* Source: China Tourism Bureau as of 12/31/10 and Company report

2006 2007 2008 2009 2010 2011 2012

0.06 bn 0.3 bn 0.8 bn 1.3 bn 2.1 bn 3.7 bn 5.6 bn

7 20 33 54 89 141 208

~0.2m ~2m ~6m ~10m ~16.5m ~33.8m ~52.9m

Opening schedule and growth roadmap Total addressable market in China

Accelerated Growth Driven by Managed Hotels

2009 2010 2011 2012 2013E 2014E

236 321 411 491 541101247

533

853

1163

Managed Hotels L&O Hotels

337 568

944

1,344

2,000+

1,704


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5

Agenda

Company Overview



Growth Strategies

Appendix


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Unique Business Model Leads to Faster Growth

6

Managed hotel model provides the best alignment of

interest with owners and most attractive terms

Largest membership base with improved brand recognition

and growing presence in new markets

Well-designed and executed hiring and in-house training

program + incentive scheme

Best-in-class IT infrastructure and industry leading e-

commerce system

Single brand strategy in economy segment, with highly

standardized and efficient hotel operations

Accelerated pace of hotel openings

114


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Rapid Expansion Supports Sustainable Margin and Cash Flow

Growth

7

Leads to increasing economies of scale, supporting

profit growth

Twelfth consecutive profitable quarters since 1Q10

Improved cash flow

Net revenues (RMB mm)

EBITDA exl. Share-based compensation expenses (RMB mm) Rapid hotel expansion driving top-line growth and total

transaction value (TTV)

Focused on managed hotels to drive the long-term

growth

• Lower risk

• Higher margin

• Better cash flow

Leverage economies of scale inherent in managed

hotel business model

Strategic shift

20%


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Largest Membership Base Provides Competitive Aadvantages

Largest and most effective membership base: 52.9 million members

8

Best-in-class proprietary integrated IT System

Most active e-commerce platform

Helps improve

operating

performance

One of the highest

overnight occupancy

rates in the industry

Provides built-

in customer

base

Allowing faster

expansion

Shorter ramp up

period

Lower

customer

acquisition cost

Established

industry leader

7 Days Club far

exceeds competitors’

loyalty programs in

terms of size and

benefits

Enhances

customer

loyalty

Majority of total

room nights by

repeat customers

Lowers

operating

costs

200k+ surveys received

from members every

month¹

Additional

revenue streams

Rental car and

air ticket service

on our website


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Industry Cost Leader With Higher Operational Efficiency

9

¹ source: 2009 China economy hotel survey

Lower conversion costs Lower rent per room Lower staff costs

Streamlined product design

Modular fixtures and

furnishings

Lower Cap-ex per room

Target existing properties in

prime area

Largest membership base

allows the flexibility to select

slightly off-main-street buildings

Efficient use of real estate

Lean operations while

maintaining high customer

satisfaction

Performance-oriented incentive

program

Industry Average Industry Average

Industry Average

Conversion cost per room¹

(RMB 000)

0.0

1.0

2.0

3.0

Rent cost¹ (RMB/day/sq) Staff-to-room¹

Our distinguished competencies in membership program, eCommerce and information technology, as well as our unique

ability to interact directly with our customers ensures high level of efficiency in both hotel and headquarter operations:

20

40

60

80

0.00

0.25

0.50


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10

Unique Competitive Edge Improves Brand Influence and Drives

Demand

High-quality services and

amenities in core areas

Better beddings

Better showers

Better cleanliness

More interactive with members

Cultivates customer

loyalty

Encourage members to

monitor the hotel

service

Hotel rating based on

member’s reviews

Value-oriented pricing

Bring more value to

members

Competitive and

consistent pricing

Enhances member

stickiness

“No. 1 Brand Influence in Economy Hotel Industry”

-- China Brand Power Index, Ministry of Industry and Information Technology, 2012

-- CCTV China Brand, CCTV, 2012

Always Focus on What Consumers Want Most ……


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11

Agenda

Company Overview



Growth Strategies

Appendix


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7 Days’ Long Term Growth Strategies

12

FY 2012 Target 2,000+ hotels

in operation

320

Managed Hotels

81

L&O Hotels

FY 2014

City with 1 hotel: 44% of total cities

City with 2–5 hotels: 35%

City with 6–9 hotels: 7%

City with more than 10 hotels: 14%

Total Current Coverage: 208 cities

Continued market penetration with one-brand strategy in

economy hotel segment

44%

35%

14%

7%


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Strategic Focus on Managed Hotels to Drive Profitable Growth

Focus on managed hotels as main growth driver

Support continued rapid growth, stable revenue

generation, expanding brand presence and influence

with lower capital requirements and higher return on

employed capital

Strategic shift expect to increase profitability and free

cash flow generation

Leverage 7 Days’ leading loyalty club and best-in-

class proprietary e-Commerce platform

13

Managed hotels63%

Leased-and-Operated hotels

37%

Managed hotels91%

Leased-and-Operated hotels

9%

Asset-light Growth Strategy

Pipeline mix as at 31 Dec 2012

Portfolio mix as at 31 Dec 2012


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14

Agenda

Company Overview


Industry Overview


Growth Strategies

Appendix


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15

Consistent & Sustainable Growth Track Record

Operating cash flow (RMB mm)

Total net revenue (RMB mm)

4.4

248.6 335.3

457.5

572.5

106.1 154.5

2008 2009 2010 2011 2012 11Q4 12Q4

721.4

1,141.3 1,498.9

2,003.4

2,557.2

454.6 696.0

2008 2009 2010 2011 2012 11Q4 12Q4


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229.7348.8 455.6

608.4

20.1%

23.3% * 22.7%23.3%

2009 2010 2011 2012

Adjusted EBITDA Adjusted EBITDA Margin

16

Sustainable Profitability

EBITDA exl. SBC (RMB ‘000,000)

Net Income attributable to 7 Days (RMB ‘000,000)

* For 2010, there was positive impact from EXPO held in Shanghai during May to Oct.

(104.0)

117.7 128.9 176.0

7.9% * 6.4%6.9%

2009 2010 2011 2012

Net Income Net Margin

118.0146.4

21.6% 21.0%

4Q11 4Q12

Adjusted EBITDA Adjusted EBITDA Margin

35.2 37.9

6.5%

5.4%

4Q11 4Q12

Net Income Net Margin


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17

Managed Hotels - Record Expansion with Sustainable Operational

Performance

4Q & FY12 operating performance:

320 new hotels added during last twelve months

Y-o-Y ADR for 4Q and FY 2012 increased by 2.0% and 1.4% respectively

Key operating metrics

Average Daily Rate (RMB) RevPAR (RMB) Occupancy Rate

2009 2010 2011 2012 4Q11 4Q12 2009 2010 2011 2012 4Q11 4Q12 2009 2010 2011 2012 4Q11 4Q12

156.2 156.7 155.8 158.0 154.3 157.4 82.8% 84. 0% 81.5% 80.3% 80.0% 77.4% 129.3 131.6 127.0 126.9 123.5 121.9


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18

Leased & Operated Hotels - Improving Mature Hotel Performance

Key operating metrics

4Q & FY 2012 Operating performance

Y-o-Y ADR for 4Q and FY 2012 increased by 1.6% and 0.5% respectively

Improving mature hotel metrics demonstrates underlying strength of portfolio

Average Daily Rate (RMB) RevPAR (RMB) Occupancy Rate

2009 2010 2011 2012 4Q11 4Q12 2009 2010 2011 2012 4Q11 4Q12 2009 2010 2011 2012 4Q11 4Q12

160.0 164.9 166.2 167.0 165.8 168.5 89.2% 91.0% 87.9% 82.9% 86.4% 79.2% 142.7 150.0 146.0 138.3 143.3 133.4


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19

Agenda

Appendix

Management team

Hotel business model and economics

Income statement & balance sheet

Reconciliation of GAAP and non-GAAP results

Industry Overview


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20

Management Team

Boquan He, Chairman

Founder and former CEO of Robust Group

Leading Chinese F&B company later acquired by

Danone

Over 20 years of entrepreneurial and consumer sector

experience

“The Best Angel Investor”

“2008 Top Ten Angel Investors”

Over eight years management experience in China

high-growth companies

Four years at Ctrip.com,

Vice President, marketing

General Manager, southern China

Highly respected entrepreneur and award-winning

industry leader

Nanyan (Alex) Zheng, Chairman

Over nine years of work experience in

PricewaterhouseCoopers in the U.S. and China

Specialized in internal controls, risk

management, corporate governance and audit

support

CPA and MBA

Eric Haibing Wu, CFO

Principal Shareholders*

Prototal Enterprises Limited (Owned by Boquan He)

23.5%

WP RE (Cayman) International Ltd (Owned by Warburg Pincus)

16.0%

Happy Travel Limited (Owned by Actis)

11.7%

Fortune News International Limited (Owned by Nanyan Zheng)

9.1%

* As in Company’s 2011 20-F report

One of the founding management team members of

7 Days

Over 7 years with the Company

Held various key functions

Expert in IT system, e-commerce platform,

business development

Yuezhou Lin, CEO


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21

US China

Largely untapped market in China allows significant expansion opportunities

US market

2.5 economy hotel rooms per 1,000 people

Dominated by a small number of players

Largest player, Choice, has 6,243 hotels1

Growth

potential

China market

0.6 economy hotel rooms per 1,000 people

Fragmentation Highly fragmented

Largest player, Home Inns, has 1,772 economy hotels1

Branding Established brands

68% of hotels with a brand affiliation

Relatively new phenomenon

Only 15% of hotels with a brand affiliation

Sources: STR Global, China Economy Hotel Survey, Global Insight, CEIC Data, U.S. Census Bureau, www.inn.net.cn, IMF

¹ Data as of 2012Q4; ² United Nations population database, data projection for 2010; Population data from IMF as of 2011

The Chinese Economy Hotel Chain Industry Today:

A Highly Fragmented, Early-stage Industry

Population size2

Smaller population base

312mm

Established middle class

108mm+ households with income over US$10,000

Moderate population density

9 cities with over 3mm population

Larger population base

1,348mm

Large and growing middle class

20mm+ households with income over US$10,000

High population density

Over 250 cities with over 3mm population


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Industry Growth Well Supported by Underlying Demand Catalysts…

Sources: National Bureau of Statistics of China; China Statistics Yearbook (2011); World Travel and Tourism Council 2012; iResearch; CEIC Data

Fast-growing

China economy

Robust

domestic

tourism

Increasing capital

investment for

tourism

development

Growing

GDP

contribution

of Travel &

Tourism

Large

Internet

population

18 22 27 31 3440

47

2005 2006 2007 2008 2009 2010 2011

273384

513457

210137111

2005 2006 2007 2008 2009 2010 2011

1,2581,018875777623529

1,931

2005 2006 2007 2008 2009 2010 2011

2,616 3,114 3,398 3,562 3,709 4,156

2006 2007 2008 2009 2010 2011

102120

141 155182

206

2006 2007 2008 2009 2010 2011

China GDP (RMBtrn)

Internet population

(mm)

Total contribution of Travel &

Tourism to GDP (RMB bn)

Government expenditure on

tourism industry (RMB bn)

Domestic travel spending

(RMB bn)


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786 853 516 498

183

652 492

465

970 192

466 447 151

Home Inns+ 7 Days Inn Hantings³ Green Tree Jinjiang Thank Super 8 Motel 168+

Managed hotels Leased-and-operated hotels

Addressable market

23

+ Motel 168 was accquaried by Home Inns in 2011 1 China Tourism Bureau as of 1Q 2012 2 2012Q2 China’s Budget Hotel Ranking by Inntie (http://www.inn.net.cn/)

³ Excluded 54 hotels of Starway

Growth of economy hotel chains has been accelerating due to growing consumer demand

for well-managed and affordable hotels

~9,860 hotels

~0.9 million

hotel rooms

Mixture of

globally flagged

hotels and

locally run

hotels

Highly

fragmented

Dominated

largely by local

operators

1–3 star-rated

hotels1

Economy

hotels2

Private

guesthouses

Large number of

low-end

guesthouses

operated by

independent

operators

Non-standardized

accommodations

Number of hotels (as of December 31, 2012)

1,438 1,345

981

690

466 447 334

Top 8 economy hotel brands in China2

970

http://www.inn.net.cn/


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24

Leased-and-operated Hotels vs. Managed Hotels

Lease existing properties from real estate owners

Large supply of qualified buildings owned by PRC state-owned

enterprises in desirable locations

Convert properties to conform to 7 Days Inn standards

Easily replicable product designs, such as modular bathroom and

furniture designs, expedite installation and fit-out time

Leased-and-operated hotels Managed hotels

Lean capital deployment

RMB52,000 (US$7,613) per room

– Industry average of RMB62,500 (US$9,151)

Fast pay-back

Typical conversion period of 4 months

– Versus more than one year construction period for own-build-

operate model

High-margin with minimal cost

Ongoing management fee 5-7% of hotel revenues

One-time management fee

Revenues from managed hotels have grown significantly

Capitalize on our hotel chain’s maturity and brand recognition

without the same level of capital expenditure

License our brand to third parties and manage the hotels, including

hiring and training hotel staff under stringent control of 7 Days Inn’s

quality standards

Business

model

Economics

Unified management and quality control standards

All hotels are operated and managed under 7 Days Inn’s unified hotel operating system, including management functions such as: staff

recruitment, training, daily operation, financial management, sales and marketing, etc.

Provide full range of services to managed hotels so as to meet the quality control and internal control standards of leased-and-operated hotels,

including decision-making assistance, customer base and efficiency analysis, investment and consulting services, cost control analysis and

guidance, etc.

Recruitment, training, and management of all hotel managers and staffs conducted by head office, with rigorous selection process

Centralized procurement and unified financial management; gradually reduce average cost by achieving economies of scale

Mature IT infrastructure (e.g. central reservation system and hotel management system) and service platform effectively centralize the

monitoring and quality control of all hotels


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25

Streamlined and Modularized Product Design

25


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26

Financial Information – 2012 FY Balance Sheet (Unaudited)

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


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27

Financial Information – 2012 Q4 & FY Income Statement (Unaudited)

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


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Financial Information – Selected Non-GAAP Financial Statement

28

EBITDA(non-GAAP)



2011 2012 2012 2011 2012


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



2011 2012 2012 2011 2012


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 expenses (Non GAAP net income) 44,805 70,836 43,087 6,917

172,369 203,172 32,611


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Use of Non-GAAP Financial Measures

29

To supplement 7 Days Group's 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 SEC:

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, loss

on debt extinguishment and change in fair value of ordinary share purchase warrants

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, loss on debt extinguishment and change in fair

value of ordinary share purchase warrants

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

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