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7 Days Group Holdings Limited

Investor Presentation

May 2013

Do not refresh this file

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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 second 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 2012 Annual Report on Form 20-F filed with the SEC

on April 10, 2013 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 2012 Annual Report on Form 20-F. The Company’s actual results of operations for the first quarter 2013 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 56.3 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

• 1,427 hotels in operation, expect to have 2,000 hotels by 2014

• 383 new hotels opened during last twelve months

• 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

-- China’s Best Economy Hotel, the 8th China Hotel Starlight Award Presentation Ceremony, 2013

Sustainable profitability: • 2010Q1 to 2013Q1 – thirteenth 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

2007 2008 2009 2010 2011 2012 1Q2013

0.3 bn 0.8 bn 1.3 bn 2.1 bn 3.7 bn 5.6 bn 1.5 bn

20 33 54 89 141 208 223

~2m ~6m ~10m ~16.5m ~33.8m ~52.9m ~56.3m

Opening schedule and growth roadmap Total addressable market in China

Accelerated Growth Driven by Managed Hotels

2,000+

1,704

337 568

944

1,345


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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

Thirteenth 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: 56.3 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

-- China’s Best Economy Hotel, the 8th China Hotel Starlight Award Presentation

Ceremony, 2013

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 2013 Target 2,000+ hotels

in operation

310

Managed Hotels

50

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: 223 cities

Continued market penetration with one-brand strategy in

economy hotel segment


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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 hotels65%

Leased-and-Operated hotels

35%

Managed hotels94%

Leased-and-Operated hotels

6%

Asset-light Growth Strategy

Pipeline mix as at 31 Mar 2013

Portfolio mix as at 31 Mar 2013


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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

93.8 76.6

2008 2009 2010 2011 2012 12Q1 13Q1

721.4

1,141.3

1,498.9

2,003.4

2,557.2

545.0 640.5

2008 2009 2010 2011 2012 12Q1 13Q1


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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.

• In 13Q1， going-private transaction related expenses were about 12mm, about 1.8% of total net revenues.

(104.0)

117.7 128.9 176.0

7.9% * 6.4%6.9%

2009 2010 2011 2012

Net Income Net Margin

114.6

112.9

21.0%

17.6%

1Q12 1Q13

Adjusted EBITDA Adjusted EBITDA Margin

19.05.4

6.5%

0.8%

1Q12 1Q13

Net Income Net Margin


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17

Managed Hotels - Record Expansion with Sustainable Operational

Performance

1Q 13 operating performance:

300 new hotels added during last twelve months

Y-o-Y ADR for 1Q 2013 increased by 2.0%

Key operating metrics

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

2009 2010 2011 2012 1Q12 1Q13

2009 2010 2011 2012 1Q12 1Q132009 2010 2011 2012 1Q12 1Q13

156.2 156.7 155.8 158.0 152.1 155.2 82.8% 84. 0% 81.5% 80.3% 76.3% 75.5% 129.3 131.6 127.0 126.9 116.0 117.1


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18

Leased & Operated Hotels - Improving Mature Hotel Performance

Key operating metrics

1Q 2013 Operating performance

Y-o-Y ADR for 1Q 2013 increased by 2.2%

Improving mature hotel metrics demonstrates underlying strength of portfolio

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

2009 2010 2011 2012 1Q12 1Q13 2009 2010 2011 2012 1Q12 1Q13 2009 2010 2011 2012 1Q12 1Q13

160.0 164.9 166.2 167.0 161.9 165.5 89.2% 91.0% 87.9% 82.9% 79.5% 75.0% 142.7 150.0 146.0 138.3 128.8 124.1


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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)

23.8%

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

16.3%

Happy Travel Limited (Owned by Actis)

11.8%

Fortune News International Limited (Owned by Nanyan Zheng)

6.1%

* As in Company’s 2012 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 6,415 hotels1

Growth

potential

China market

0.6 economy hotel rooms per 1,000 people

Fragmentation Highly fragmented

Largest player, Home Inns, has 1,859 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 2013Q1; 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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22

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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855 927 586 520

185

662 500

484

880 203

515 468 150

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 35 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 March 31, 2013)

1,517 1,427

1,070

723

515 468 335

Top 8 economy hotel brands in China2

880

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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Streamlined and Modularized Product Design

25


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26

Financial Information – 2013 Q1 Balance Sheet (Unaudited)

7 Days Group Holdings Limited

Consolidated balance sheet information

Quarter Ended

31/Mar/12 31/Dec/12 31/Mar/13

RMB' 000 RMB' 000 RMB' 000 US$'000

ASSETS

Current assets:

Cash 466,556 378,809 375,321 60,430

Pledged bank deposits 3,054 3,443 3,897 627

Short-term investment 60,000 - - -

Accounts receivable 6,758 17,015 13,919 2,241

Prepaid rent 158,746 171,370 176,589 28,433

Other prepaid expenses and current assets 56,059 77,608 77,399 12,462

Hotel supplies 46,826 56,591 46,204 7,439

Amounts due from related parties 71 87 15 2

Deferred tax assets 19,978 26,222 26,406 4,252

Total current assets 818,048 731,145 719,750 115,886

Property and equipment, net 1,679,664 1,970,763 1,927,978 310,423

Rental deposits 79,091 90,824 93,618 15,073

Land use right 23,889 23,426 23,272 3,747

Prepaid rent 63,268 71,088 68,328 11,001

Intangible assets, net 29,374 26,221 25,170 4,053

Goodwill 61,041 61,041 61,041 9,828

Other non-current assets 500 - - -

Deferred tax assets 53,287 62,513 63,518 10,227

Total assets 2,808,162 3,037,021 2,982,675 480,238

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable 208,758 300,240 230,034 37,038

Bills payable 10,177 11,475 12,990 2,092

Short-term bank borrowings 342,993 130,015 187,377 30,170

Accrued expenses and other payables 403,048 511,800 471,170 75,863

Amounts due to related parties 1,793 2,601 3,204 516

Income taxes payable 19,694 25,617 21,858 3,519

Total current liabilities 986,463 981,748 926,633 149,198

Long-term bank borrowings 26,930 121,381 97,329 15,671

Accrued lease payment 218,184 256,472 263,404 42,411

Unfavorable lease contract liability 7,643 7,136 6,967 1,122

Refundable deposits 15,250 14,850 15,750 2,536

Deferred revenue 748 - - -

Deferred rebate income 6,350 5,727 6,916 1,114

Borrowings from related parties 1,238 752 - -

Income taxes payable 6,644 3,317 3,317 534

Deferred tax liabilities 3,039 7,527 6,977 1,123

Total liabilities 1,272,489 1,398,910 1,327,293 213,709

Equity:

Ordinary shares 141,097 141,317 141,610 22,801

Treasury stock - (67,137) (67,137) (10,810)

Additional paid-in capital 1,632,426 1,649,880 1,664,124 267,940

Accumulated other comprehensive income (475) (721) (941) (152)

Accumulated deficit (219,379) (62,303) (56,859) (9,158)

Total equity attributable to 7 Days Group Holdings limited 1,553,669 1,661,036 1,680,797 270,621

Non-controlling interests (17,996) (22,925) (25,415) (4,092)

Total equity 1,535,673 1,638,111 1,655,382 266,529

Total liabilities and equity 2,808,162 3,037,021 2,982,675 480,238


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Financial Information – 2013 Q1 Income Statement (Unaudited)

Quarter Ended

Mar 31 Dec 31 Mar 31

2012 2012 2013

RMB'000 RMB'000 RMB'000 US$'000

Total Revenues 577,639 736,385 678,110 109,182

Leased-and-operated hotels 519,459 648,427 596,929 96,111

Managed hotels 58,180 87,958 81,181 13,071

Less: Business tax and surcharges (32,612) (40,355) (37,570) (6,049)

Net revenues 545,027 696,030 640,540 103,133

Operating costs and expenses

Hotel operating costs (466,480) (560,637) (556,912) (89,668)

Rental expenses (165,391) (190,645) (192,826) (31,047)

Staff cost (89,142) (114,169) (116,089) (18,691)

Depreciation and amortization (73,021) (84,790) (87,435) (14,078)

Hotel supplies (24,468) (40,439) (34,268) (5,517)

Utilities (57,773) (46,554) (60,954) (9,814)

Other (56,685) (84,040) (65,340) (10,520)

Sales and marketing expenses (12,459) (31,702) (16,097) (2,592)

General and administrative expenses (42,785) (52,555) (53,806) (8,663)

Total operating costs and expenses (521,724) (644,894) (626,815) (100,923)

Income from operations 23,303 51,136 13,725 2,210

Other income (expenses)

Interest income 2,109 800 1,099 177

Interest expense (6,385) (2,875) (4,591) (739)

Income before income tax 19,027 49,061 10,233 1,648

Income tax expenses (7,341) (13,844) (7,043) (1,134)

Net income 11,686 35,217 3,190 514

Net income attributable to non-controlling interest 7,283 2,683 2,254 363

Net income attributable to 7 Days Group Holdings Limited ordinary shareholders 18,969 37,900 5,444 877

Basic earnings per ordinary share 0.13 0.26 0.04 0.01

Diluted earnings per ordinary share 0.13 0.26 0.04 0.01

Other Comprehensive loss

Foreign currency transaction adjustment, net of nil income tax (805) (1,857) (220) (35)

Comprehensive income 10,881 33,360 2,970 479

Less: Comprehensive income attributable to noncontrolling interest (7,283) (2,683) (2,254) (363)

Comprehensive income attributable to 7 Days Group Holdings Limited ordinary shareholders 18,164 36,043 5,224 842


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Financial Information – Selected Non-GAAP Financial Statement

28

EBITDA(non-GAAP)

Quarter Ended


2012 2012 2013

RMB'000 RMB'000 RMB'000 US$'000

Net income attributable to 7 Days Group Holdings Limited ordinary shareholders 18,969 37,900 5,444 877

Interest income (2,109) (800) (1,099) (177)

Interest expense 6,385 2,875 4,591 739

Income tax expenses 7,341 13,844 7,043 1,134

Depreciation and amortization 75,170 87,429 90,226 14,527

EBITDA (non-GAAP) 105,756 141,248 106,205 17,100

EBITDA% 19.4% 20.3% 16.6% 16.6%

Share-based compensation expenses 8,868 5,187 6,682 1,076

Adjusted EBITDA (non- GAAP) excluding share-based compensation expenses 114,624 146,435 112,887 18,176

Adjusted EBITDA% 21.0% 21.0% 17.6% 17.6%

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

Quarter Ended


2012 2012 2013

RMB'000 RMB'000 RMB'000 US$'000

Net income attributable to 7 Days Group Holdings Limited ordinary shareholders (GAAP) 18,969 37,900 5,444 877

Share-based compensation expenses 8,868 5,187 6,682 1,076

Net income attributable to ordinary shareholders excluding share-based compensation

expenses (Non GAAP net income) 27,837 43,087 12,126 1,953


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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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