Ir Presentation (TH International Limited (THCH) Q1 2025 Earnings Call Transcript 0625)

1 TH International Limited (THCH) Q1 2025 Earnings Call Transcript

2 June 24, 2025

3

1. Company Participants

2. Gemma Bakx - Head of Investor Relations

3. Yongchen Lu - CEO & Director

4. Albert Li - CFO

8

1. Conference Call Participants

2. Steven Silver - Argus Research Company

3. Jon Norwood - Viking Capital

12

1. Operator

2. Ladies and gentlemen, welcome to Tims China First Quarter 2025 Earnings Conference

3. Call. All participants will be in listen-only mode during management's prepared

4. remarks, and there will be a question-and-answer session to follow. Today's conference

5. is being recorded. At this time, I would like to turn the call over to Gemma Bakx, who

6. heads Tims China's Investor Relations effort, for prepared remarks and introduction.

7. Please go ahead, Gemma.

20

1. Gemma Bakx, Head of Investor Relations

2. Thank you very much, Desmond. Hello, everyone, and thank you for joining us on

3. today's call. My name is Gemma Bakx, Head of Investor Relations. Tims China

4. announced its first quarter 2025 financial results earlier today. A press release as well

5. as an accompanying presentation, which contains operational and financial highlights,

6. are now available on the company's IR website at ir.timschina.com.

27

1. Today, you will hear from Yongchen Lu, our CEO and Director; and Albert Li, our

2. CFO. After the company's prepared remarks, the management team will conduct a

3. question-and-answer session. You can find a slide presentation and the webcast of

4. today's earnings call on our Investor Relations website.

32

1. Before we get started, I'd like to remind you that our earnings presentation and investor

2. materials contain forward-looking statements, which are subject to future events and

3. uncertainties. Statements that are not historical facts including, but not limited to,

4. statements about the company's beliefs and expectations are forward-looking

5. statements. Forward-looking statements involve inherent risks and uncertainties, and

6. our actual results may differ materially.

39

1. All forward-looking statements should be considered in conjunction with the cautionary

2. statements in our earnings release and risk factors included in our filings with the SEC.

3. This presentation also includes certain non-GAAP financial measures, which we

4. believe can be helpful in evaluating our performance. However, those measures should

5. not be considered a substitute for the comparable GAAP measures. The accompanying

6. reconciliation information related to those non-GAAP and GAAP measures can be

7. found in our earnings press release issued earlier today.

47

1. With that, I would now like to turn it over to Yongchen Lu, our CEO and Director.

2. Please go ahead, Yongchen.

50

1. Yongchen Lu, CEO & Director

2. Thank you, Gemma. Good morning, and good evening, everyone. In Q1, we solidified

3. our differentiated strategic positioning in Coffee + Freshly Prepared Food by launching

4. Light & Fit Lunch Box, a series of new platform combo products for the lunch daypart

5. to boost lunch sales and offer our guests a healthy and tasty lunch option.

56

1. The product line ups include hot baked bagel sandwiches, energizing lunch wraps and

2. loaded power bowls, paired with our coffee or other beverage, all at an accessible price

3. point. With Tims China's Chibaobao 40% off discount card, the Light & Fit Lunch Box

4. combo products pricing start from as low as RMB 24, near about USD 3.5, delivering

5. both good value and great nutrition.

62

1. Our latest Loaded Power Bowls products were launched in May. They come in a

2. standard 2 plus 8 plus 8 configuration, featuring 18 carefully selected ingredients in

3. every bowl. The 2 stands for 2 portions of high-quality protein, while the two 8s

4. represent eight wholesome grains and eight colorful vegetables, creating a nutrient-rich

5. meal designed to meet the needs of business professionals and fitness enthusiasts alike.

68

1. The Light Lunch Box product has been a key strategic focus for Tims in 2025. It aims

2. to reshape consumer perceptions of Tims as a lunch destination beyond our traditional

3. strength in breakfast, thereby creating a second high-demand meals daypart and driving

4. sustainable revenue growth.

73

1. It also introduces a fresh take on Western style healthy lunch in a cafe setting offering

2. a complete entrée plus snack plus coffee meal solution. This is more than just an

3. extension of our product line, it's reimaging how busy urban consumers eat and

4. exceeding their expectations.

78

1. We are moving from singular coffee consumption to all-day healthy dining, embedding

2. the cafe experience deeply into a health-focused lifestyle. This initiative has been

3. enthusiastically welcomed by the market since it launched, contributing meaningful

4. incremental daily transactions to the post-holiday rebound in sales and help Tims gain

5. traction in the competitive white-collar lunch segment, setting a solid foundation for

6. continued momentum in Q2 and beyond.

85

1. Amidst macroeconomic volatility and intense market competition, our team has

2. demonstrated great resilience and achieved significant profitability improvements

3. through enhanced operational efficiencies, supply chain optimizations and rigorous cost

4. controls.

90

1. During the quarter, company-owned and operated store contribution margin and

2. adjusted corporate EBITDA margin improved by 5.9 percentage points and 6.1

3. percentage points year-over-year, respectively. We regained top line growth in the first

4. quarter and achieved 3.5% increase in system sales year-over-year.

95

1. Our sub-franchise and retail businesses also contributed steady cash flows and

2. profitability. Profits from other revenues increased by 34.5% year-over-year. At the

3. same time, we cut losses and adjusted corporate EBITDA by nearly half, 50%. These

4. achievements are testament to Tims China enduring efforts and our strive for further

5. profitable growth.

101

1. On stores development and leveraging sub-franchisee partnerships, we strategically

2. expanded our store footprint into 84 cities, including the city of Fuyang and Nanchang

3. that we entered in Q1, while maintaining capital efficiency, delivering absolute

4. convenience for our guests.

106

1. Since we launched our individual franchisees program in December 2023, we have

2. received over 7,000 applications and successfully converted nearly 200 stores by the

3. end of March, showcasing market confidence in our franchise model. We have

4. established attractive and desirable store unit economics for our sub-franchisees with a

5. reasonable two to three year payback period on average.

112

1. As of March 31, our registered loyalty club members reached 25.2 million, reflecting a

2. remarkable 25.7% year-over-year growth. The average number of members per store

3. has now surpassed 24,500, serving as a strong catalyst for our future growth.

116

1. On marketing, to offset the seasonal slowdown caused by the extended Chinese New

2. Year holiday, Tims China implemented a series of strategic initiatives in Q1, including

3. co-branded collaborations and a brand birthday campaign. These efforts are designed

4. to drive traffic, increase average transaction value and establish new consumption

5. cases.

122

1. Ahead of the Chinese New Year in January, Tims partnered with Oatly during the

2. breakfast daypart to boost sales. The collaboration featured limited-time menu items

3. paired with branded merchandise, enhancing value and helping lift consumers' average

4. spending.

127

1. In March, Tims launched a co-branded campaign with the Eagle Brand American

2. Ginseng to reinforce its health-conscious positioning and expand brand awareness