TH International Limited

ladies and gentlemen welcome to teams china fourth quarter elko year 2023 earnings conference call all participants will be in listen only mode during management's prepared remarks and there will be question and answer session to follow today's conference is being recorded at this time i'd like to turn the call over to jemma bax who hits teams china investor relations efforts for prepared remarks and introductions please go ahead jemma

Good morning, good evening, everyone, and thank you for joining us on today's call. My name is Gemma Box, Investor Relations. TH International Limited announced its fourth quarter and full year 2023 financial results earlier today. The press release, as well as an accompanying presentation, which contains operational and financial highlights, are now available on the company's IR website at ir.timschina.com. Today you will hear from Yongchen Liu, our CEO and Director, and Albert Li, our CFO. After the company's prepared remarks, the management team will conduct its Q&A session. You can find the webcast of today's earnings call on our IR website. Before we get started, I'd like to remind you that our earnings presentation and investor materials contain forward-looking statements which are subject to future events and uncertainties. Statements that are not historical facts, including but not limited to statements, about the company's beliefs and expectations are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and our actual results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release, and risk factors included in our filings with the SEC. This presentation also includes certain non-GAAP financial measures which we believe can be helpful in evaluating our performance. However, those measures should not be considered substitutes for the comparable GAAP measures. The accompanying reconciliation information related to those non-GAAP and GAAP measures can be found in our earnings press release issues earlier today. With that said, I would now like to turn it over to Yongchen Lu, our CEO and Director. Please go ahead, Yongchen.

Thank you, Gemma. My name is Yongchen Lu, CEO and Director of Teams China. In 2023, we may progress in a number of the core elements of our strategy. We deliver greater convenience to our guests. by building density in existing cities and entering new cities. We expanded our community and our partnerships, growing our strategic franchising relationships with blue-chip partners like SinoPax EasyJoy. We continue to drive locally relevant innovation, which has always been a strategic focus for us. and we deliver growth in a capital-efficient manner, loading up stores with a more rapid payback period and accelerating our franchising activity. With our systems and infrastructure solidly in place, our focus is now squarely on driving profitability with a view to achieve corporate EBITDA break-even later this year. We just celebrate the significant milestones of our fifth anniversary in China and the 60th anniversary of the Tim Hortons brand. With those celebrations behind us, we redouble our focus on the future, and in particular, driving rapid, profitable, and capital efficient growth. We deliver 29.8% and 55.9% year-over-year top-line growth in Q4 and four-year 2023, respectively, demonstrating robust growth in the first four years following the end of COVID epidemic in China. And notably, the company-owned stores we opened in 2023 are among the most profitable we have ever opened. thanks to our ongoing commitment to innovation, operational efficiencies, and optimized unit economics. As of December 31st, 2023, our registered loyalty club members reached 18.7 million, representing 66.3% year-over-year growth, with the average number of members per store exceeding 20,000. and we just surpassed 20 million registered Lory club members on March 31, 2024. Our store network development strategy continues its streak of success, as evidenced by the impressive sales during the launch of Yichang and Tangshan cities. achieving RMB $88,000 and RMB $46,000 in sales respectively. Leveraging our various store formats, we have forged new partnerships with reputable retailers as our sub-franchisees, such as B-Store in Chinese, Liangping Puts, opening the first Teams Express store in B-Store's shop in Wuhan in December 2023. Building on our substantial long-term investments in branding technology and infrastructure, we have strategically prioritized the expansion of of our franchise business starting in Q4 2023. In the past year, we successfully opened 213 franchise stores with 109 of these opening in the first quarter alone. Looking ahead, we are committed to further strengthening our collaborations with established strategic partners such as SinoPAC's ETHJOY, while actively pursuing other fitting partnerships. For instance, our recent partnership with Shanghai Metro led to the opening of the first seven software-positioned stores in Shanghai Metro stations, as Shanghai has one of the world's largest metro systems. transporting approximately 13 million passengers across the city every day. We anticipate that this partnership will provide greater visibility to the Teams brand and connect us with a larger, diverse customer base. Continuous product innovation has always been a strategic focus for us. In 2023, we launched a total of 147 new products, 47 new beverages, and 51 new foods, and nine merchandise items. In Q4 2023, our newly launched jasmine tea coffee series products. In Chinese, , orange flavored cinnamon latte. In Chinese, , and Strawberry Flavor Latte, in Chinese, Bu Zi Na Tie Fa Si Cao Mei, who are among the best sellers. We also collaborate with Sponge Bob, in Chinese, Hai Mian Bao Bao, which generate more than 10 million media exposures on Xiaohongshu and Douyin, gaining significant brand awareness. As an international coffee brand that offers best value for quality products, we continue to implement our unique coffee plus strategy which has been a key differentiator yielding positive outcomes. Following the successful bagel and brew coffee campaign in Q3, we further advance the Wednesday membership day campaign offering discounted combo deals on coffee and bagels to further refine our welcoming combo meals offering. In the first quarter, the percentage of orders that included food lost to 54.7%, increased by almost 8 percentage points from 47.1% in the same quarter of 2022. And something on Popeyes. Our Popeyes business has been demonstrating strong momentum since the record-breaking grand opening of our first flagship store on August 19, 2023. Within 135 days, we successfully launched 10 Popeyes stores in Shanghai. achieving an average pace of one new store every 14 days, a true testament to the value of the infrastructure we built in Tink, and something our team is very excited and proud of. By the end of 2020, our Chinese Popeye's store had sold over 154,700 pieces of various flavors of fried chicken and seafood burgers offering more dining choices during different meal times. In addition, our local innovative R&D team created flavored iced and hot milkshakes, resulting in sales exceeding 52,000 cups, demonstrating the popularity of our beverage category as well. Our private domain channels for Popeyes through the mini program and WeChat ecosystem have successfully attracted over 200,000 dedicated customers who have not only made purchases but refills as well. Looking ahead to the remainder of 2024 and into 2025, the Popeyes team is fully committed to further enhancing our core products and advancing digital marketing initiatives and solidifying our market position through high-quality operational management and optimized profitability. At this point, I would like to turn over to our CFO, Albert Li, to discuss our fourth quarter and full-year 1023 financial performance in more detail. Albert.