SUPER HI INTERNATIONAL HOLDING LTD.

Dear investors and analysts, hello. Thank you for attending Super High International's Q2 2025 earnings conference call. With us today are Executive Director and CEO, Ms. Yang Lijuan, and CFO and Secretary of the Board, Ms. Ju Cong. Today's conference call may include forward-looking statements, such as comments on the company's strategy, business plans, and financial outlook. Management's comments and response during this earnings release reflect their views as of today. Please see the latest safe harbor statement in the earnings press release, which applies here. The call will be conducted in Mandarin Chinese with simultaneous English translation from an external agency. If there are discrepancies, the Chinese version will take precedence. This presentation materials are available on the company's investor relations page for review. Next, we invite Ms. Yang Lijuan, CEO and Executive Director of Superhigh International, to discuss the company's second quarter performance for 2025. Thank you, host. Hello, investors and analysts. I am Yang Lijuan, CEO and Executive Director of Superhigh International. I'd like to share the key performance highlights of Superhigh International in the second quarter of 2025. Our table turnover remains steady with an average of 3.7%. eight rounds per day overall, and 3.9 rounds per day for same-store tables, both consistent with the previous year, same period. Revenue reached $199 million, marking an 8.5% year-on-year growth, same-store revenue at Hai Di Lao restaurant increased by 5.3%. This quarter, we continue our profit sharing strategy from the first quarter, providing better value for consumers and fostering strong morale and unity among our employees. Operating profit was $3.65 million, down 56.5% from the same period last year. Operating profit margin was 1.9%, a decline of 2.7 percentage points year-on-year. While this aligned with our expectations for implementing the profit-sharing plan, it also highlights areas where our refined management during dynamic operations can improve. Next, I'll review the key business initiatives for this quarter. First, this quarter, we maintain and refine our customer and employee savings strategy from the previous quarter. This involved adjusting menu prices, portion sizes, and presentation of our dishes in select markets to boost customer value. We also enhanced employee compensation, benefits, training, development, and daily support to foster greater fulfillment and team unity. Although the second quarter is usually slow, our table turnover suggests that these savings policies have produced positive outcomes. Second, this quarter, we advanced in developing a different Haidilao strategy. We enhanced late-night dining areas by upgrading decor, lighting, and sound at pilot locations to create a more immersive, interactive experience during late hours. We also introduced fresh-cut meats in several countries featuring different Fresh cut workshops or open air fresh cut workshops where customers can watch the meat being prepared and engage more deeply with our product upgrade. Our goal is to deliver a distinctive dining experience through concessions, improved quality price ratios and enhancements in product space and interior design. Third, to enable frontline stores and regions to concentrate more on the market, customers and employees. This quarter, we established fundamental management red lines and gradually streamlined some headquarter functions. This included cancelling certain store inspections and reducing the emphasis on data rankings for regions and stores. Instead, our focus shifted to monitoring early warning and support, thereby enhancing the vitality and efficiency of the frontline. Now, in terms of our store network expansion, we launched four new Heidi Lau restaurants this quarter, located in Malaysia, Indonesia, South Korea, and UAE. We also continued the implementation of our woodpecker plant initiative, which included closing one underperforming store in Thailand. In the first half of the year, we opened a total of eight new Heidi Lau restaurants and closed four underperforming ones. By the end of the second quarter, our overseas Heidi Lau store counts reached 126. So far, we have signed contracts with more than 10 Haidilao stores that are not yet operational. Based on current landlord property handover progress and construction timelines, we anticipate opening several new stores in the second half of the year. Overall, we expect to open more than 10 new stores throughout the year. Now, under the pomegranate initiative or projects, we are also making steady progress with our second brands in overseas markets. We opened our first overseas barbecue restaurants in Malaysia in June, and table turnover is already meeting expectations. We also identify over 10 potential projects, including hot pot, barbecue, Chinese cuisine, and other Asian restaurants, and also Western fast food, all of which are currently being polished and developed in prototype stores. We currently have plans to create or replicate existing second brand formats in each market, emphasizing the concept of extreme value for money. We'll keep working on refining the current issues through ongoing improvement and management. Our focus will also be on advancing the pomegranate initiative or plan and dynamically executing the woodpecker initiative for stores that are underperforming. Additionally, we'll actively adopt new technological innovations and incorporate artificial intelligence or AI to boost organizational efficiency and address current challenges. This is my overview of the business situation of the quarter. Now, Ms. Chutong is going to present the financials to you. Thank you. Thank you, Ms. Young. Hello, investors and analysts coming up. I'm going to present to you the financials of our second quarter. The company posted total revenue of $199 million in the second quarter, reflecting a 8.5% increase compared to the same period last year. This includes Haidilao restaurant operating revenue of $189 million, a 7.3% year-on-year growth, driven mainly by ongoing expansion, with four additional Haidilao outlets or restaurants compared to the second quarter of 2024. Customer traffic also grew by 6.9% year-over-year. Now, we also maintain a strong focus on takeout for Q2, adding more items to several menus and actively broadening our online ordering channels and delivery area. Takeout revenue reached $3.7 million, a substantial 61% increase from the previous year. Revenue from other business segments totaled $6.1 million, up 27.1% year-over-year, supported by our highest sales of our hotpot condiments, sub-branded food, and also grow from restaurants under the Pomegranate Projects. In terms of cost, raw material costs amounted to 67.577 million U.S. dollars with a gross profit margin of 66% down by 0.3 percentage points from the same period last year. Employee costs reached 70.328 million U.S. dollars representing 35.3% of revenue, a 1.1 percentage points increase year over year. The increase was mainly driven by strategies to pass savings to customers and employees. However, the proportion of raw materials and labor costs to revenue is slightly narrowed in the second quarter compared to the first quarter, mainly due to a higher revenue base in the second quarter and also the company's moderate adjustment to some profit-sharing measures. Rent and related expenses were $6.02 million, accounting for 3% of revenue, up 0.4 percentage points year-over-year. Utility costs were $7.177 million, a 3.6% of revenue, a decrease of 0.2 percentage points compared to the same period last year. Depreciation and amortization totaled $19.79 million, representing 9.9% of revenue, down by 0.2 percentage points. Operating expenses, including travel and other costs, total $23.25 million, or 11.7% of revenue, an increase of approximately 1.1 percentage points year over year. The most significant increase in operating expenses this quarter is in other was actually in other expenses which included higher outsourcing service fees professional consulting fees and brand marketing costs in certain regions these were primarily related to store activities the pornography Pornogra initiatives and brand development. The second highest increase was in rental costs, which amounted for 3% of revenue. This was mainly due to the expansion of lease properties this year, including renovations and Heidi Law restaurants and also our second brand stores, leading to increased revenue. in property expenses. The company's operating profit in Q2 was around $3.6 million, down $4.812 million from $8.46 million a year over year. The operating profit margin stood at 1.9%, a decline of 2.7 percentage points from 4.6% a year earlier. While this outcome aligns with our expectations for Q2, Our profit-sharing strategy also indicates that we still face challenges in enhancing our management during our operations. In Q2, the company reported a net profit after tax of $16.39 million, reversing a loss of $104,000 from the same period last year. This improvement was primarily due to not only operational results, but also other net income of $15.4 million. million us dollars mainly driven by foreign exchange gains of 16.3 million us dollars the net operating cash inflow in the queue in the second quarter reached 26.6 million us dollars representing a 2.6 million us dollars increase from the same period last year in the second quarter of the year approximately 7.7 million customers were served representing a 6.9 percent increase compared to the same period last year. The average table turnover rate remained steady at 3.8 rounds per day, identical to the same period last year. Our average customer expenditure was $24.3, a slight decrease of $0.1 from $24.4 year-over-year due to many pricing adjustments and marketing efforts this year. Also, our four main regions have maintained steady performance with slight growth year over year. East Asia continued to lead this quarter, serving around 1 million customers, a 42.9% increase from the previous year. The growth contributed to an increase of 0.7 tables per day in table turnover, now averaging 4.8 tables daily. Per capita spending in East Asia rose to US$29.4, up by $2.1 year-over-year. The average daily revenue per restaurant also grew by 30.3%, reaching US$19,800. Table turnover in North America was four in the second quarter and changed year over year. Although average customer spending decreased by $2.8 year over year, the average daily revenue per restaurant grew by 5.8%, driven by higher restaurant traffic and more guests per table. The average daily revenue per restaurant stood at $21,900, reflecting a notable increase in operational capacity. Table turnover in all the regions remained at 3.9%. This quarter, unchanged from the previous year, average customer spending across the region was $39.7, a decrease of $2.7 year-over-year, mainly driven by higher customer engagement and feedback, along with pricing adjustment. Our table turnover in Southeast Asia was $3.6, slightly lower year-over-year. Average customer spending was $18.6, a decrease of $0.5 year-over-year. The decline was mainly because of high investment in customer feedback, enhanced value for money as well. The quarter, we saw a 5.3% increase in same-store revenue. The average daily turnover was around, you know, across 104 stores, remained steady at 3.9%, sorry, at 3.9 rounds compared to last year. Customer spending per visit, rose slightly to 24.5 U.S. dollars, an increase of 0.5 dollars year-over-year. The regional performance of same stores followed the same overall trend. We're not going to repeat it here. That's all. Thank you. Now is question and answer. The first question comes from Zhongye Qin from Zhejiang Securities. Hi, everyone. Good evening. I actually have two questions here. The first one is our overseas expansion. First of all, we talked about overseas expansion and its strategies, and a lot of restaurants' brands are now talking about the overseas expansion. Currently, what is our long-term strategy and plan and our vision? And my second question is that during last quarter's earnings call, we talked about this year's investment being limited. more than last year for our employees. So by what time will we go back to the original level? Thank you. The first question is about our long-term strategy of our overseas expansion. I think Ms. Young is going to take this question. Great. Thank you for the question. Now, the first question is about our overseas expansion. The overseas market offers vast potential. China's demographics or population in total is 1.4 billion. China's catering market reached 5.6 trillion RMB in 2024. Currently, Heidi Lau and its second brands actually accounted for less than 1% of this market. In contrast, the overseas market has over 6 billion people. Even within just the U.S. market, the catering restaurant market exceeded 1.1 trillion U.S. dollars in 2024. So compared to this enormous market, definitely super high demand. Our current scale is minimal and there's lots of growth potential. Our goal is to really build a leading global restaurant group. We will focus on growing the core brand of Heidi Law, establishing a strong presence in each market and also developing capable management and teams. Simultaneously, we will also actively promote our projects to create a comprehensive brand matrix and also serve a broader customer base worldwide. Now, we understand we are aware of existing management shortcomings. Significant changes and improvements are needed in management skills, team development, organizational efficiencies, and implementation of new technologies and AI. Thank you. Thank you, Miss Young, for your answer. And just about the second question was about our investment and also profit sharing investment that covers two areas. I would like to take this question. Now, we focus on two areas of passing our profits or savings. The first one is on the customer side, including, you know, price concessions and also large portion sizes for some products and the second area of investment is our employee investment which is salary benefit and also training development etc now excessive investment is actually being allocated to our employees as salary benefits in boosting their sense of achievement and belonging and actually from our q2's performance we already seen positive results so the policy will actually continue From Q1 to Q2, we have been consistently and constantly reviewing and adjusting our profit-sharing policy. Some methods and scales were unreasonable or not that effective. And also, after certain concessions, some cost-cutting and efficiency optimization measures were not properly implemented, exposing some weaknesses in our refined management. And from Q2 through July and August, we also have been optimizing the menu structure. et cetera, and also adjusting shift schedules and managing staffing levels. And we have conducted a lot of measures and actions that have now seemed to be better, you know, in Q2 than Q1. Our financial results also show that the gross profit margin in Q2 was 66%, a 0.3 percentage points decrease from the same period last year. And also in Q1, our gross profit margin decreased by 0.5 percentage points year on year, also declined narrowly as well. The employee ratio in Q2 was 35.3%, up 1.1 percentage points year over year. And actually, we are able to narrow the rate of increase. Also, since June, we have scaled back some functions at the headquarter level, maintaining key standards like food safety. We also have reduced and canceled some headquarter inspections of frontline stores. These kind of effective measures has unleashed the vitality and efficiency of frontline stores and staff. And this allows regional managers and stores to confidently improve efficiency and focus more on employees, customers and the market. We believe that most of the cost increases caused by profit concessions will be offset going forward. Thank you so much for your answers. Very clear answers. We also hope that super high international will become more and more well developed so that our Chinese cuisine can be internationalized. Thank you. The next question comes from Huatai Securities. Mr. Zhong Jun, please go ahead. Ms. Zhong Jun. Hi. I am Zhong Jun from Huatai. I would like to first congratulate the company on another successful quarter with great performance. I actually have two questions here. The first one is about your expansion initiatives or referred to as the pomegranate project. We would like to ask about your overseas progress of implementing this initiative and policy because we definitely have seen excellent development and rapid expansions in China. And my second question actually is about your store closure in Singapore. Actually, the first store in Singapore was closed. What are the plans for opening future stores and how do you see the layout of mature markets like Singapore in the company's efforts to expand into new markets. That's all for my two questions. Thank you. Great. Thank you, Ms. Sung, for your questions. The first one is about our pomegranate initiatives.

Ms. Yang, would you like to take that? Great. Thank you, Ms.

Sung, from Huatai, for your question. After actually years of learning and accumulation, our Superheart International's pomegranate initiative has become more mature in areas like store selection, vertical selection, and also first store model design, product development, also store operations. In June, a new barbecue restaurant under our new brand was opened in Malaysia. The overseas team modeled their expansion on the domestic market. model, actually extending the barbecue concept internationally. And in addition to that, we also have actually opened a new hot pot brand. We call it High Bowl. And right now, the daily sales has already meet our expectation. And we also have potential to actually increase the daily turnover and also to replicate the success at scale. In this process of preparation, we actually have been constantly adjusting our way of management. We actually have formed a very, very successful team of management that allow us to work on across departments such as products, brands, marketing, business analysis, technology, and also legal compliance to actively participate in key projects. Additionally, we've identified and launched over 10 new overseas projects, including Hot Pot, Barbecue, China's Cuisine, and other Asian restaurants and fast food. These initiatives are led by regional managers or top-performing source managers. Long-term, our goal is to really build a comprehensive brand portfolio to serve a broader customer base across various markets worldwide. Thank you. Now, the second question is actually about the closure of the first store in Singapore and also future plans for expanding in Singapore. Now, the store that was shut down in Singapore was mainly because of the lease expiration. It's been open for 13 years since 2012, considering the current situation. operation and business district and the condition for renewal and other factors, the regional manager and the company agreed that not renewing the lease was the best option. Singapore market has a population of 6 million, over 10,000 restaurants and a market value of around 10 billion US dollars. We currently have actually fewer than 20 hot pot restaurants. This is far from enough in terms of market share. However, we also need to understand the structural features of the Singapore restaurant market. It's small in scale and also very high customer spending and fierce competition. We need to execute our layout or store strategy across different layers. First of all, we will continue to target prime business districts or areas for new locations. while upgrading existing stores to support the creating a different Heidi Lau kind of strategy. This includes introducing fresh-cut products and also enhancing the presentation and quality of other offerings. We also plan to renovate a black gold store and also a late-night snack outlet in Singapore, gradually boosting revenue in current stores by adding products For example, mobility sales, peripheral retail, and also expanding takeaway options. And when it comes to our second tier brand, we will focus on developing brands and store formats that deliver delicious products, high unit efficiency, especially through automated equipment and new technology to reduce labor costs and increase efficiency and also pricing that offers customer better value. That's all. Thank you. Thank you, Ms. Young and Ms. Chu for your answers, very clear. We also wish you the best when it comes to restaurant expansion and development. That's all for my questions. Thank you. Thank you. The next question comes from Hilti with Morgan Stanley. Please go ahead. Hi, I am Hilde from Morgan Stanley. I have two questions. The first one is about your profit sharing strategies with your customers and with your employees. We saw that definitely there's investment. the investment has been substantial and we definitely expect to generate positive outcomes. Right now, as was mentioned, we already saw some positive outcome from the investment, but specifically when it comes to table turnover rate, what is your goal and target to meet the expectation and also the current investment level? And when it comes to timeline, when do you think we are going to see that target being achieved? Is it this quarter or next quarter? And the second question is about the European and also American markets. I think a lot of investors and analysts are concerned about these overseas markets. Are they experiencing slow or low demand or weak demand? What is our perspective here? And in the coming second half of the year and also next year, what is your outlook on Thank you. Allow me to take both of your questions. This is Chi Tong. The first one is about our outcome and also target for our profit sharing investment and also timeline. First of all, judging from our table turnover rate and also traffic, performance, we believe positive results have been achieved. Typically, Q2 is an off-season. This year, it's compounded by the downward trend in global economic growth and also the restructuring of industrial and trade structures. However, the overall table turnover rate and same-store table turnover rate in Q2 were 3.8 and 3.9, respectively, remaining stable year over year. And actually, if you look at more people... Actually, look more specifically, we see sustained increase. Additionally, the number of customers per table in Q2 this year increased by 0.1 compared to last year, resulting in a 6.9% rise in customer traffic. At the same time, with the average customer spending decreasing by 0.1 US dollars, the revenue still grew by 8.5% year-over-year. and this indicates our efforts in creating various dining scenes attracting customers to employees and also offering concessions have all contributed to this positive outcome and we have demonstrated a growing focus on employee care and benefit across all countries some of this is reflected in salary increase improved benefits for example in indonesia we offer a so-called milk formula allowance benefit to employees with newborns. Even though this is small, we believe that it helps employees feel a sense of belonging and genuine care. And Vietnam has implemented a also 13th month salary program to improve employee benefits and also encourage them to to have a sense of belonging and also to grow their career more substantially. In addition to that, some of the benefits include daily care and nurturing and developing growth pathways. We organize outings and recreational activities to foster mutual understanding and team unity. We also provide employees with a more detailed sort of career development map or pathway to help them understand each step of their development. Employee motivation increases, allowing them to deliver a positive expectation to customers. Meanwhile, our customers can genuinely feel our investment in like product quality, environment, and also productivity. creating a welcoming atmosphere, which helps strengthen customer loyalty and attract new patrons as well. For example, our fresh cut products we've gradually introduced across various regions this year has greatly enhanced customer experience. In Vietnam, we piloted additional Durian to the condiment counter in Singapore, we introduced high quality about good value for money. Milk tea or boba tea in our stores with daily sales exceeding 300 cups. These changes bring very good and pleasant surprises to our customers. Obviously, our investment is a long term investment and it's going to take time for it to generate outcomes. in Q2 already see a positive outcome and from Q2 and I mean going into Q3 and Q4 typically these are you know popular seasons or traditional peak seasons and so as I mentioned answer your second question we talked about our cost optimization And also efficiency enhancement. We believe that by that time in Q3 and Q4, we're going to offset some of the cost pressures from this profit sharing strategy. And the operational results will actually be expected to be better than Q2. The second question is about the European and American markets. It's experiencing slow demand. Well, actually, on the contrary, we see more opportunities in these markets. Although global economic growth has generally slowed this year and also trade and industrial orders are, you know, undergoing ongoing restructuring. opportunities still exist within these markets. And also, when we look at Q2, going into Q2, there's going to be a lot of overseas students returning home. And we felt that so far, our traffic and also table turnover rates were not hit significantly negatively. And while for this year, even though global economic growth has been on the downturn, and we hear a lot of critical voices regarding the European and also American markets, but we actually saw a lot of opportunities. And we believe that the key lies in maximizing value for money and leveraging new technologies and AI to enhance efficiency. We believe that along with our steady development of our core brand and progress of our work, pomegranate projects, we actually still have a lot of opportunities. That's all for my answer. Thank you for your answers. We also wish the company all the best as we progress with the profit sharing initiative and that we can see results soon. Thank you. The next question comes from Weijiaobao with CITIC. Please go ahead. Hi, I am with Citic. I have two questions. The first one is about our store opening outlook. Historically speaking, we have experienced relatively rapid store opening cycles. In the future, what kind of conditions are we looking for for us to decide to actually accelerate store opening? And the second question is that in April this year, Chargis actually opened their first U.S. location. In Los Angeles and right in the same shopping mall, you also have a Heidi Lau restaurant. The founders of actually both companies currently serve on the same board of directors. Could there be opportunities for these two brands to collaborate overseas in the future? Thank you for your questions. The first one is about store opening. I mean, historically, we actually experienced rapid store opening cycles. Well, first of all, we insist on a bottom-up approach when it comes to store opening, and we're not going to interfere with regional managers' judgment of store opening. But our headquarter will provide regional managers with talent support, insight into new and old markets, and incubation of new brands etc so that our regional managers have the confidence to develop in new markets and new stores so far in you know our judgment is that for 2026 we are going to have more actually store opening compared to 2025 and also we have new incubation projects and brands under our pomegranate initiatives We have more in the pipeline, but then store opening overseas has a lot of investment and cost is relatively higher. We need to be optimistically considering the opportunities while being very disciplined and cautious. And so we're not making any guarantees regarding the second question. First of all, it's. Both stores located in the same shopping mall near Beverly Hills in Los Angeles. It's both a coincidence and also a natural and organic progression for both companies because we prioritize prime shopping districts. Currently, there are no plans for collaboration between the two companies. When collaborating with a peer or a different brand in a different industry, we prioritize business logic, customer experience, and financial returns. Thank you for the answers. I don't have any further questions. Thank you. The next question comes from Lai-Shun Wei with CICC. Please go ahead. Hi, I'm with CICC. I have two questions. The first one is that when we look at Q2 performance, performance has been very satisfactory, especially in East Asia. I mean, when it comes to the table turnover rate, what is our Q3 expectation and also what is the regional breakdown? And the second question is actually about our gross profit margin. You know, when it comes to our discount or price concessions benefiting our customers, what is the plan there? And also overseas raw material procurement costs, you know, is evolving. What is our outlook for the future gross profit margin? Thank you. Thank you, Mr. Lai, for your question. The first one is about the table turnover rate and outlook. Typically, Q3 and Q4 will gradually enter the peak season. Basically, July and August are summer vacations, summer holidays. There will be a lot of eating or dining outside in restaurants, and then September after the fall semester begins. especially into Q4, northern hemisphere will be getting colder and colder and the demand for Hapa will gradually increase. So that is the organic demand increase, especially in December where there's a huge amount of holidays and celebration. And when it comes to the geographical breakdown, typically across the world, you know, regions follow the Q3, Q4, Typically, September will be slower than the rest of the month, and October and November will be a slow ramp up. and December will peak. When it comes to the second question, when it comes to our discount or price concessions, actually compared to the same period last year, we basically maintained the same and we did not deliberately, you know, sort of attempt to enlarge it or narrow it. I think the customers definitely feel great value for money. But when it comes to Q1, Q2, raw materials procurement were basically done locally and we maintain a very stable level and overall it's declining. The reason why we procure locally is because we want to prioritize the freshness of our raw ingredients. When it comes to tariffs and all kinds of trade barriers, it mainly affects equipment and also utensils and construction materials, etc. that we need to ship outside from China to North America. Overall, the impact has been minimal and we are expanding a wider ways, I mean, a more diverse way of procurement. And what we discover is that especially when it comes to procuring construction materials and also equipment, appliances, etc., by comparison with procurement locally versus shipping or exporting outside from China, even with the addition of tariffs and shipping costs, China still is very competitive when it comes to this kind of material, and it's more cost-effective too. When it comes to our outlook for gross profit margin, first of all, it's not going to decline, especially going into the second half of the year. Typically, you expect to have higher table turnover rate and also the quarter performance will enter the peak level of the year. And another reason for our confidence is that our procurement cost overall is relatively stable this year. Third, we have been implementing our price concession policy for a while, and we kind of have found a way to find out the most cost-effective implementation. And so that's why for gross profit margin outlook, we believe the second half will be stable, and we expect a slight increase as well. Thank you for the answer. We also wish all the best to the company for the second half of the year and going forward. Thank you. The next question comes from the Jenny with Function Securities.

Please go ahead. Jenny, please unmute yourself and go ahead with your questions.

Hi, can you hear me okay? Yes, we can. I'm sorry, I forgot to unmute myself. Hi, Ms. Young and Ms. Chu. I have two questions here. The first one is, about the impact of tariffs policy from North America. How are they impacting your raw material costs? And does the company have a long-term supply chain diversification strategy to reduce risks in this regard? For example, are you going to diversify your suppliers, et cetera? What are your preparation there? And the second question is, Actually, about the exchange rate fluctuation and how it affects your net profit. Are there any hedging mechanisms? Can you elaborate on that? And what kind of measures are you taking to actually offset this risk? Thank you. These are my two questions. Thank you. The first one is about the tariff fluctuation in North America and how it impacts us. First of all, when it comes to raw material costs, the impact has been minimum because, you know, we mainly procure raw ingredients for food locally and locally. For building materials, facilities, equipment, supplies, procurement, we, first of all, carefully evaluate functionality, quality, and cost of these materials and equipment to select suppliers and also choose the sourcing channels. We intentionally and systematically broaden our sourcing options to reduce the risk of trade barriers and friction. For example, in the United States, some facilities, I mean, some equipments are currently sourced locally. However, considering the strong manufacturing, you know, base in China and Asia, even with tariffs and shipping costs, some categories of products still offer more competitive pricing and greater flexibility in China than sourcing from the United States or from third countries. The second question is about the impact from exchange rate fluctuation in our hedging mechanisms. The company conducts its business in each of its operating markets using local currencies. While our consolidated financial statements are prepared in US dollars, fluctuations in exchange rates of various currencies against the US dollars during the balance sheet translations process will create certain foreign exchange gains and losses, mainly shown as the conversion differences. These gains and losses do not impact our actual operating cash flow or reflect any fundamental changes in our business and are therefore classified as non-operating gains and losses. That's why we currently do not have dedicated foreign exchange hedging mechanisms to offset these differences. Very clear. Thank you. I don't have any further questions. Thank you. Thank you. The next question comes from Liu Kunyu with Haitong International. Please go ahead. Please unmute yourself. Can you hear me? Yes, we can. Sorry, I forgot to amuse myself. Hi, I am Liu Kunyu with Hightone International. Thank you for taking my question. My question is about the store opening plan for the second half of the year. And by what time do you think that we can actually open more stores more quickly? And if that happens, are you going to increase the density of stores in your existing market or go into new regions? About store opening, for the first half of the year, we opened eight new stores. And regarding the current progress, in the second half of the year, we actually expect to open more stores for the whole year. It's going to be over 10 stores in total of new stores opening. As we mentioned, our store opening strategy is bottom-up. We're not going to interfere with sales. our regional managers' judgment. But there's a lot of opportunities and resources that we can provide to support this kind of decision-making is talent and also insight into new and old market. We also have new brands being incubated as well. And so far from the pipeline, 2026, we expect to actually open more stores by comparison with 2025. And also we will have more new brands being incubated When it comes to whether or not we are going to increase the density of stores in existing market or go into new markets, both make sense and have their own advantages and pros and cons. And obviously, it's easier if we just increase the density of stores in existing market and we can form the scale, the economy of scale. But going into new markets will help us to have the first mover advantage, too. So we're going to do both at the same time. We're not going to prioritize one over the other. Thank you. Thank you. The answer is very clear. The next question comes from Eddie Tung with Jingheng Investment. Please go ahead. Hi, I am Andy with Jingheng. I have two questions. The first one is, again, regarding table turnover rates. When you look at first half of 2025, the table turnover rate is very similar year over year. Is there any room for improvement, especially in the second half of the year? Do we expect to have a huge improvement of table turnover rates? And the second question is about your regs. pomegranate initiative. So we know that you actually opened a new barbecue store. About second half of the year, any exciting brands that you can share with us are being incubated from the pomegranate initiatives that you expect to actually start for the second half of the year. Thank you. Table turnover rate in the second half of the year would definitely increase versus first half. And year over year, we expect seeable growth with like growth. stable development with slight growth and the altitude or the extent of growth you know it's very hard to pinpoint because it continues to happen and In Kyushu, the growth has been slight. And for the second half of 2025, I think our profit sharing strategy has been implemented for a while. And I think markets, I mean, our stores around the world have been able to figure out a way to do it very, very effectively. So I think that strategy will be implemented with more maturity in the second half. Regarding your second question, actually in August, we opened a new hotpot restaurant in Canada. And right now, the daily order sales has reached 300 to 400 orders per day. We also haven't really started a lot of improvement of design efficiency, etc. We haven't started, you know, substantial marketing and promotion policy yet. So there's definitely room for substantial growth in the future. After we mature this model of this Malatang hot pot, we believe that we can actually expand it and replicate the success in the future. and with great prime location selection. In addition to that, as Ms. Yang mentioned, we actually have identified the possibility of over 40 different tracks, and we have already identified enter the site selection progress you know of different sites and also some for some sites we have actually already have signed contracts and we're doing all kinds of preparation so we have a lot in the pipeline for the second half of the year. Thank you. The next question comes from with . Please go ahead. Hi. My question is about your takeout business. Right now it's doing really well and it's growing fast. Mainly the growth comes from new markets or can you specify the overall takeout strategy versus an overseas market versus domestic strategy? Now, the growth of our takeout market comes mainly from North America and Europe. Now, we also see some growth in Asia, but more substantially in North America. Basically, what we did is to launch more options on the menu for takeout. We also expanded third-party partnerships. It's different from China because in China, you know, everything is very concentrated and it's a huge market, which with a lot of consolidation and you are working with only a handful of delivery companies. But across the world, we cover over 10 countries or regions. Different countries have their own local delivery platforms. And also when it comes to the product assigned for takeout, you know, apart from hot pot, you know, some customers actually accept smaller portions, takeout food in small cups, et cetera. And some other countries may not be able to accept that or may not have that kind of variety and diversity. So it depends on our regional manager's judgment. So takeout definitely has great potential. Sometimes it can both increase your overall revenue and increase your net profit. But sometimes it helps with the traffic revenue, but not so much your actual margin or profit. So mainly right now, the takeout growth comes from European market and North American market. Thank you. Due to time constraints, we are going to end the call here. Thank you so much for your participation. See you next time. Thank you.