eHi Car Services Announces Fourth Quarter and Full Year 2016 Results

Maintaining margin expansion and profitabilitySHANGHAI, March 22, 2017 /PRNewswire/ -- eHi Car Services Limited ("eHi" or the "Company") (NYSE: EHIC), a leading car rental and car services provider in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2016.

Mr. Ray Zhang, eHi's Chairman and Chief Executive Officer, said, "2016 was a successful year for eHi both operationally and financially, as we increased our fleet size significantly and achieved robust topline growth, profitability and margin improvement. We also enhanced our partnerships with leading companies in the automobile industry, aimed at establishing an ecosystem from vehicle procurement to car services and used car sales. Looking ahead, we will continue to explore strategic cooperation and investment opportunities to enhance our operating synergies, and to capture the technology-driven demand in the car rental and sharing economy, while maintaining growth and profitability in our car rental and car services business. We are also looking forward to the close cooperation with our marketing partner NBA China and our renowned brand ambassador NBA All-Star Stephen Curry. Recently we were recognized by the China-NPS (China Net Promoter Score) as the most recommended car rental brand by Chinese customers, and we will continue our efforts to bring the best-in-class services as well as freer and healthier life styles to our Chinese customers."

Mr. Colin Sung, eHi's Chief Financial Officer, said, "We are pleased to finish a strong 2016 by delivering year-over-year net revenues growth of 34.1% and 45.4% in the fourth quarter and full year, respectively, while achieving net income of RMB13.7 million in the fourth quarter and RMB33.1 million in the full year of 2016. Benefiting from stringent cost control measures, we have also realized broad-based margin expansion, resulting in record-high full year gross profit margin of 28.1%, non-GAAP adjusted EBIT margin of 12.9% and non-GAAP adjusted EBITDA margin of 44.6%. With a healthy balance sheet, we also added additional vehicles in the fourth quarter to capture the growing travel demand during the 2017 Chinese New Year holidays. In 2017, our goal remains to improve profitability with an emphasis on margin expansion through increased operating efficiencies."

Fourth Quarter 2016 Highlights

• Net revenues increased by 34.1% year-over-year to RMB565.0 million (US$81.4 million^[1]) for the fourth quarter of 2016, from RMB421.5 million for the fourth quarter of 2015.

• Gross profit^[2] increased by 53.6% year-over-year to RMB156.7 million (US$22.6 million) for the fourth quarter of 2016, from RMB102.0 million for the fourth quarter of 2015. Gross profit margin^[2] increased to 27.7% for the fourth quarter of 2016, from 24.2% for the fourth quarter of 2015.
• Net income was RMB13.7 million (US$2.0 million) for the fourth quarter of 2016, compared with a net loss of RMB12.3 million for the fourth quarter of 2015. Net income margin was 2.4% for the fourth quarter of 2016.
• Non-GAAP adjusted EBIT^[3] increased by 166.8% year-over-year to RMB76.7 million (US$11.1 million) for the fourth quarter of 2016, from RMB28.8 million for the fourth quarter of 2015. Non-GAAP adjusted EBIT margin^[3] increased to 13.6% for the fourth quarter of 2016, from 6.8% for the fourth quarter of 2015.
• Non-GAAP adjusted EBITDA^[4] increased by 53.6% year-over-year to RMB256.0 million (US$36.9 million) for the fourth quarter of 2016, from RMB166.7 million for the fourth quarter of 2015. Non-GAAP adjusted EBITDA margin^[4] increased to 45.3% for the fourth quarter of 2016, from 39.6% for the fourth quarter of 2015.
• Total average available fleet size^[5] increased by 32.4% year-over-year to 42,712 vehicles for the fourth quarter of 2016, from 32,255 vehicles for the fourth quarter of 2015. Total fleet RevPAC^[6] increased to RMB144 for the fourth quarter of 2016, from RMB142 for the fourth quarter of 2015.

• Fleet utilization rate^[7] for car rentals was 71.2% for the fourth quarter of 2016, compared with 70.4% for the fourth quarter of 2015.
• As of December 31, 2016, total period-end fleet size^[8] was 56,916 vehicles.

Full Year 2016 Highlights

• Net revenues increased by 45.4% to RMB2,108.9 million (US$303.8 million^[1]) for the full year of 2016, from RMB1,450.6 million for the full year of 2015.

• Gross profit^[2] increased by 89.9% year-over-year to RMB593.7 million (US$85.5 million) for the full year of 2016, from RMB312.7 million for the full year of 2015. Gross profit margin^[2] increased to 28.1% for the full year of 2016, from 21.6% for the full year of 2015.
• Net income for the full year of 2016 was RMB33.1 million (US$4.8 million), compared with RMB696.3 million for the full year of 2015 (including a net gain of RMB736.8 million related to sales of investment assets after transaction costs and tax provision). Net income margin was 1.6% for the full year of 2016.
• Non-GAAP adjusted EBIT^[3] increased by 175.1% year-over-year to RMB272.3 million (US$39.2 million) for the full year of 2016, from RMB99.0 million for the full year of 2015. Non-GAAP adjusted EBIT margin^[3] increased to 12.9% for the full year of 2016, from 6.8% for the full year of 2015.
• Non-GAAP adjusted EBITDA^[4] increased by 63.9% to RMB940.4 million (US$135.4 million) for the full year of 2016, from RMB573.7 million for the full year of 2015. Non-GAAP adjusted EBITDA margin^[4] was 44.6% for the full year of 2016, compared with 39.5% for the full year of 2015.
• Total average available fleet size^[5] increased by 47.2% to 38,944 vehicles for the full year of 2016, from 26,460 vehicles for the full year of 2015. Total fleet RevPAC^[6] decreased to RMB148 for the full year of 2016, from RMB150 for the full year of 2015.

• Fleet utilization rate^[7] for car rentals was 72.4% for the full year of 2016, compared with 71.4% for the full year of 2015.

Fourth Quarter 2016 Financial Results

Net revenues for the fourth quarter of 2016 were RMB565.0 million (US$81.4 million), up 34.1% year-over-year, attributable to increased net revenues from both car rentals and car services.

Net revenues from car rentals for the fourth quarter of 2016 were RMB446.5 million (US$64.3 million), up 38.9% year-over-year, primarily driven by the growing average available fleet size for car rentals in response to customer demand.

Net revenues from car services for the fourth quarter of 2016 were RMB118.6 million (US$17.1 million), up 18.6% year-over-year, primarily driven by increased demand from existing and new customers for car services.

Cost of revenues (vehicle operating expenses) for the fourth quarter of 2016 was RMB408.3 million (US$58.8 million), up 27.8% year-over-year, primarily driven by increased depreciation and labor costs.

In the fourth quarter of 2016, 1,823 used vehicles were disposed of, and 1,871 used vehicles were under sales contracts pending title transfer. The Company recognized a disposal gain of RMB2.8 million (US$0.4 million) in aggregate for these 3,694 vehicles^[9]. In addition, a disposal gain of RMB1.4 million (US$0.2 million) was recognized in the fourth quarter of 2016 as a result of the completion of title transfer during such period. These disposal gains were both recognized as adjustments to the vehicle-related depreciation expense as part of the cost of revenues.

Gross profit for the fourth quarter of 2016 was RMB156.7 million (US$22.6 million), up 53.6% year-over-year. Gross profit margin for the fourth quarter of 2016 was 27.7%, compared with 24.2% for the fourth quarter of 2015. Gross profit margin improvement was primarily due to a percentage decrease of labor costs in terms of net revenues, which was benefited from economies of scale and improved operating efficiency.

Selling and marketing expenses for the fourth quarter of 2016 were RMB19.5 million (US$2.8 million), decreased by 22.7% year-over-year, as the Company focused more on the planning of the 2017 branding and marketing activities in the fourth quarter of 2016.

General and administrative expenses for the fourth quarter of 2016 were RMB72.6 million (US$10.5 million), up 29.1% year-over-year, primarily due to increased employee-related costs including salaries and welfare expenses as a result of increased headcount, as well as increased foreign exchange loss in the fourth quarter of 2016 caused by the utilization of the US dollar denominated debts.

Profit from operations for the fourth quarter of 2016 was RMB71.5 million (US$10.3 million), up 204.2% year-over-year.

Interest expense for the fourth quarter of 2016 was RMB56.7 million (US$8.2 million), up 54.2% year-over-year, primarily attributable to the interest expense associated with the Company's US$200 million senior unsecured notes.

Net income for the fourth quarter of 2016 was RMB13.7 million (US$2.0 million), compared with a net loss of RMB12.3 million for the fourth quarter of 2015. Net income margin for the fourth quarter of 2016 was 2.4%.

Basic and diluted earnings per ADS for the fourth quarter of 2016 were RMB0.20 (US$0.03) each, compared with basic and diluted loss per ADS of RMB0.18 each for the fourth quarter of 2015.

Non-GAAP adjusted EBIT for the fourth quarter of 2016 was RMB76.7 million (US$11.1 million), up 166.8% year-over-year. Non-GAAP adjusted EBIT margin for the fourth quarter of 2016 was 13.6%, compared with 6.8% for the fourth quarter of 2015.

Non-GAAP adjusted EBITDA for the fourth quarter of 2016 was RMB256.0 million (US$36.9 million), up 53.6% year-over-year. Non-GAAP adjusted EBITDA margin for the fourth quarter of 2016 was 45.3%, compared with 39.6% for the fourth quarter of 2015.

Full Year 2016 Financial Results

Net revenues for the full year of 2016 were RMB2,108.9 million (US$303.8 million), up 45.4% compared with the full year of 2015, attributable to increases in net revenues from both car rentals and car services.

Revenues from car rentals for the full year of 2016 were RMB1,663.5 million (US$239.6 million), up 51.2% compared with the full year of 2015, primarily driven by the growing average available fleet size for car rentals in response to customer demand.

Revenues from car services for the full year of 2016 were RMB445.4 million (US$64.2 million), up 27.2% compared with the full year of 2015, primarily driven by increased demand from existing and new customers for car services.

Cost of revenues (vehicle operating expenses) for the full year of 2016 were RMB1,515.3 million (US$218.2 million), up 33.2% compared with the full year of 2015, primarily due to increased depreciation and labor costs.

In 2016, 4,775 used vehicles were disposed of, and 1,890 used vehicles were under sales contracts pending title transfer. The Company recorded a disposal gain of RMB1.8 million (US$0.3 million) in aggregate for these 6,665 vehicles^[10]. The gain was recognized as an adjustment to the vehicle related depreciation expense as part of the cost of revenues.

Gross profit for the full year of 2016 was RMB593.7 million (US$85.5 million), up 89.9% year-over-year. Gross profit margin for the full year of 2016 was 28.1%, compared with 21.6% for the full year of 2015. Gross profit margin improvement was due to certain cost controls primarily in vehicle insurance, and to a lesser extent, in vehicle repair and maintenance, which were benefited from enhanced economies of scale and operating efficiency.

Selling and marketing expenses for the full year of 2016 were RMB97.2 million (US$14.0 million), up 49.4% compared with the full year of 2015, primarily due to increased sales and promotion activities in 2016.

General and administrative expenses for the full year of 2016 were RMB251.9 million (US$36.3 million), up 37.3% compared with the full year of 2015, primarily due to increases in employee-related costs such as salaries and welfare expenses as a result of increased headcount, as well as a foreign exchange loss in 2016 compared with a foreign exchange gain in 2015.

Profit from operations for the full year of 2016 was RMB254.8 million (US$36.7 million), up 240.7% compared with the full year of 2015.

Interest expense for the full year of 2016 was RMB225.0 million (US$32.4 million), up 81.8% compared with the full year of 2015, primarily attributable to the interest expense associated with the Company's US$200 million senior unsecured notes.

Net income for the full year of 2016 was RMB33.1 million (US$4.8 million), compared with RMB696.3 million for the full year of 2015 (including a net gain of RMB736.8 million related to sales of investment assets after transaction costs and tax provision). Net income margin for the full year of 2016 was 1.6%.

Basic and diluted earnings per ADS for the full year of 2016 were RMB0.48 (US$0.07) each, compared with basic and diluted earnings per ADS of RMB10.99 and RMB10.85, respectively, for the full year of 2015.

Non-GAAP adjusted EBIT for the full year of 2016 was RMB272.3 million (US$39.2 million), up 175.1% compared with the full year of 2015. Non-GAAP adjusted EBIT margin for the full year of 2016 was 12.9%, compared with 6.8% for the full year of 2015.

Non-GAAP adjusted EBITDA for the full year of 2016 was RMB940.4 million (US$135.4 million), up 63.9% compared with the full year of 2015. Non-GAAP adjusted EBITDA margin for the full year of 2016 was 44.6%, compared with 39.5% for the full year of 2015.

As of December 31, 2016, the Company's cash, cash equivalents and restricted cash balance was RMB786.6 million (US$113.3 million).

Recent Developments

On December 13, 2016, the Company announced a multiyear marketing partnership that will make eHi the Official Marketing Partner and Car Rental Services Partner of the NBA in China. The new partnership marked NBA China's first relationship in the car rental and chauffeured car services category and eHi's first association with a professional sports league. Throughout the years, eHi will have the opportunity to promote its car rental services to NBA fans across the country along with being integrated into NBA China's marquee events. Concurrently, the Company also announced that two-time NBA MVP and three-time NBA All-Star Stephen Curry will serve as the Company's new brand ambassador.

On February 16, 2017, the Company entered into a strategic partnership with China Yongda Automobiles Services Holdings Limited (03669.HK, "Yongda Auto"), a leading passenger vehicle retailer and comprehensive services provider in China. The strategic partnership will enable comprehensive collaboration between eHi and Yongda Auto in multiple areas and formats, including vehicle procurement, used car sales, automobile financing, customer services and network expansion. In particular, eHi and Yongda Auto will explore various channels for used car sales, repurchase programs and outlet marketing, as well as establishing an ecosystem from vehicle procurement, to car services, to used car sales.

Outlook

The Company estimates that net revenues for the first quarter of 2017 will range from RMB600 million to RMB615 million, and for full year of 2017 will range from RMB2.9 billion to RMB3.0 billion. This outlook reflects the Company's current and preliminary view, which is subject to change.

Conference Call Information

The Company's management will host an earnings conference call at 8:00 PM U.S. Eastern Time on March 22, 2017 (8:00 AM Beijing/Hong Kong time on March 23, 2017).

Dial-in details for the earnings conference call are as follows:

Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the "eHi Car Services call."

Additionally, a live and archived webcast of the conference call will be available on the investor relations section of eHi's website at http://ir.ehi.com.cn.

A replay of the conference call will be accessible by phone at the following numbers until March 29, 2017:

About eHi Car Services Limited

eHi Car Services Limited (NYSE: EHIC) is one of the leading car rental and car services providers in China. The Company's mission is to provide comprehensive mobility solutions as an alternative to car ownership by best utilizing existing resources and sharing economy to create optimal value. eHi distinguishes itself in China's fast-growing car rental and car services market through its complementary business model, customer-centric corporate culture, broad geographic coverage, efficient fleet management, leading brand name, and commitment to technological innovation. eHi is the exclusive strategic partner in China of Enterprise, the largest car rental company in the world, and is the designated and preferred business partner of Ctrip, a leader in the online travel agency industry in China. For more information regarding eHi, please visit http://en.1hai.cn.

About Non-GAAP Financial Measures

To supplement its unaudited condensed consolidated financial statements which are presented in accordance with U.S. GAAP, the Company uses adjusted EBIT and adjusted EBITDA as non-GAAP financial measures. Adjusted EBIT represents net income or loss before share-based compensation, interest expense, interest income, provision for income taxes, gains from waiver of warrants and gains from sale of cost method investment. Adjusted EBITDA represents net income or loss before depreciation and amortization, share-based compensation, interest expense, interest income, provision for income taxes, gains from waiver of warrants and gains from sale of cost method investment. The Company's management believes that adjusted EBIT and adjusted EBITDA facilitate a better understanding of operating results from quarter to quarter and provide management with a better capability to plan and forecast future periods. For more information on the non-GAAP financial measures, please see the table captioned "Reconciliation of GAAP and Non-GAAP Results" set forth at the end of this press release.

Non-GAAP information is not prepared in accordance with GAAP and may be different from non-GAAP methods of accounting and reporting used by other companies. The presentation of this additional information should not be considered a substitute for GAAP results. A limitation of using these Non-GAAP financial measures excludes depreciation and amortization, share-based compensation, interest expense, interest income and provision for income taxes, as applicable, that have been and will continue to be significant recurring portions of the Company's business for the foreseeable future.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. 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," "confident" and similar statements. eHi may also make written or oral forward-looking statements in its reports filed with or furnished to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about eHi's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: eHi's goals and strategies; its future business development, financial condition and results of operations; its ability to achieve and sustain profitability; its heavy reliance on its proprietary technology platform; its ability to compete successfully against current and future competitors; the expected growth of China's car rentals and car services market; its ability to sustain its growth rates and manage its expansion plan; its ability to dispose used vehicles at desirable prices or timing or through appropriate channels; its ability to raise sufficient capital to fund and expand its operations at a reasonable cost; various government policies on automobile control and purchase restrictions in certain Chinese cities; its ability to enhance its brand recognition and maintain a high level of customer satisfaction; its ability to control the losses resulting from customer violation of traffic rules; and its ability to obtain all of the requisite permits, licenses or making all of the requisite filings or registrations or meeting other regulatory requirements for operating car rentals and car services business in China. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the SEC. All information provided in this press release is current as of the date of the press release, and eHi does not undertake any obligation to update such information, except as required under applicable law.

^[1] The Company's business is conducted in China and substantially all of its revenues are denominated in Renminbi (RMB). However, this earnings announcement contains translations of RMB amounts into U.S. dollars (US$) at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.9430 to US$1.00, the effective noon buying rate as of December 31, 2016 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.

^[2] Gross profit is defined as net revenues less cost of net revenues (vehicle operating expenses). Gross profit margin is defined as the percentage representing gross profit divided by net revenues.

^[3] Non-GAAP adjusted EBIT is defined as net income before share-based compensation, interest expense, interest income, provision for income taxes, gains from waiver of warrants and gains from sale of cost method investment. For more information, refer to "About Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results" at the end of this press release. Non-GAAP adjusted EBIT margin is defined as the percentage representing Non-GAAP adjusted EBIT divided by net revenues.

^[4] Non-GAAP adjusted EBITDA is defined as net income before depreciation and amortization, share-based compensation, interest expense, interest income, provision for income taxes, gains from waiver of warrants and gains from sale of cost method investment. For more information, refer to "About Non-GAAP Financial Measures" and "Reconciliation of GAAP and Non-GAAP Results" at the end of this press release. Non-GAAP adjusted EBITDA margin is defined as the percentage representing Non-GAAP adjusted EBITDA divided by net revenues.

^[5] "Average available fleet size" is calculated by dividing the aggregate number of days in which the Company's fleet was in operation during a given period by the total number of days during the same period. In determining the size of the Company's fleet in operation, eHi includes all vehicles in its car rentals and/or car services fleets except for vehicles that have been written off in accordance with its accounting policy and vehicles that have not been consistently made available for rent and that it may consider to dispose of when appropriate opportunities arise.

^[6] "RevPAC" refers to average daily net revenue per available car, which is calculated by dividing the net revenues during a given period by the aggregate number of days in which the Company's fleet was in operation during the same period.

^[7] "Fleet utilization rate" refers to the aggregate transaction days for the Company's car rental fleet during a given period divided by the aggregate days the car rental fleet was in operation during the same period.

^[8] "Period-end fleet size" refers to the aggregate number of vehicles in the Company's car rentals and car services fleets as of the last day of a given period which the Company holds legal title to and reflects in its balance sheet, including vehicles that are currently missing but have not been written off in accordance with its accounting policy. The period-end fleet size as of December 31, 2016 excluded 162 vehicles which the Company had written off from its balance sheet in accordance with its accounting policy.

^[9] The gain of RMB2.8 million is a net amount of (i) the disposal gain and loss of the 1,823 used vehicles which were disposed of, and (ii) the disposal loss of the 1,871 used vehicles which were under sales contracts pending title transfer. If there is any disposal gain for the vehicles pending title transfer, such a gain will be recognized in the next period when the title transfer has been completed.

^[10] The gain of RMB1.8 million is a net amount of (i) the disposal gain and loss of the 4,775 used vehicles which were disposed of, and (ii) the disposal loss of the 1,890 used vehicles which were under sales contracts pending title transfer. If there is any disposal gain for the vehicles pending title transfer, such a gain will be recognized in the next period when the title transfer has been completed.

For investor and media inquiries, please contact:

eHi Car Services Limited
Tel: +86 (21) 6468-7000 ext. 8742
E-mail: ir@ehic.com.cn

The Piacente Group, Inc.
Ms. Brandi Piacente
Tel: +1-212-481-2050
E-mail: ehi@tpg-ir.com

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