TH International Limited

Ladies and gentlemen, welcome to Teams China's first quarter 2024 earnings conference call. All participants will be in the listen-only mode during management's prepared remarks, and there will be a question and answer session to follow. Today's conference is being recorded. At this time, I'd like to turn the call over to Gemma Bax, who heads Team China's investor relations efforts for prepared remarks and introductions. Please go ahead, Gemma.

Thank you very much. Good morning and good evening, everyone, and thank you for joining us on today's call. My name is Gemma Box, Head of Investor Relations at TH International, and we announced first quarter financial results 2024 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.pimschina.com. Today you will hear from Yongchen Liu, our CEO and director, and Albert Lee, our CFO. After the company's prepared remarks, the management team will conduct a question and answer session. You can find the webcast of today's earnings call on our 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 those 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 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 these non-GAAP and GAAP measures can be found in our earnings press release issued earlier today. With all that said, I'd like now to turn it over to Yongchen Liu, our CEO and Director, over to you, Yongchen.

Thank you Gemma. My name is Yongchuan Lu, CEO and Director of Teams China. During the first quarter of 2024, which is historically the weakest quarter in terms of seasonality, we delivered 7.1% year-over-year growth in system sales and our seventh consecutive quarter of positive adjusted EBITDA. We delivered this despite a challenging industrial landscape of intense price competition and significant macro headwinds. This quarter, driving profitability and improving operating cash flow remain a top priority for us and will remain so going forward. Our team has been focusing on strategic initiatives that boast our bottom line while supporting profitable growth. With a strong focus on operational efficiencies, and targeted marketing efforts, we are confident that our dedication to enhancing profitability will yield positive results. With a goal of achieving our first quarterly adjusted corporate EBITDA blue given this year, we persisted in strategically pruning underperforming stores in Q1 2024, aligning with our previously outlined strategic initiatives. On March 31, 2024, we reached a significant milestone, surpassing 20 million registered lorry club members, representing 63.6% year-over-year growth. The average number of members per store exceeds 22,000, serving both as a catalyst for growth and a testament to the customer support of Team China's lorry programs. The support from our customers has been an inspiration for our team, continually spurring us to elevate our commitment to deliver top-tier products and exceptional services. We continue to deliver growth in a capital-efficient manner and we remain committed to offer absolute convenience for our guests. Our strategic partnership with sub-franchisees is underpinning the expansion of our store network, including our density in existing cities for quicker services and broadening our outreach into new cities to welcome new customers. New cities we entered during the first quarter include Huizhou and Huzhou. Starting February 26, 2024, we launched a campaign nationwide to celebrate the significant milestones of our fifth anniversary in China and the 60th anniversary of Tim Horton's brand with the theme of 60 years of freshness and deliciousness. As part of this campaign, we introduced a new series of core products called Tim's China Double-Double, which enhances the original Double-Double Blue Coffee with rich milk, and more flavors. Additionally, three flavors of donuts were reintroduced, strawberry and rainbow. Throughout the campaign, over 160 media agencies covered the history and legacy of Tim Hortons, resulting in over 20 million media exposures. The hashtag double double reached over 14 million views on Douyin while the live broadcast on Douyin attracted over 6 million viewers during the campaign period. Continuous product innovation remains a cornerstone of our strategic vision. We launched 14 new beverages and 18 new food products during the first quarter of 2024. New products including Cherry Americano and Casson series have been a particular success. we sold over 1.7 million units between them. Recognizing the popularity of our Smile Bagels, we have expanded the platform with enticing new flavors this quarter, including low sugar dark chocolate and low lychee, offering a taste of innovation while maintaining the quality and appeal that our customers cherish. In Q1 2024, Our collaborations with Tango Angel and Dove Chocolate have also achieved significant success, reaching over 10 million media exposures on Douyin and Little Red Book during the campaign period. As a leading international coffee brand renowned for delivering exceptional value for money, high-quality products, we focused on advancing our distinctive Coffee Plus strategy. During the first quarter of 2024, we initiated the Bagel Turn-Turn-Cut campaign. This promotional offer allowed customers to enjoy a delicious Tim's Bagel for just RMB 9.9, a move designed to boost food orders and attract a fresh wave of patrons to experience our offerings. In the first quarter of 2024, The percentage of orders that included food rose to 52.7%, an increase of over 8 percentage points from 44.2% in the same quarter of 2023. Lastly, our Popeye's brand continued to grow. So far, we have launched 14 Popeye's restaurants in Shanghai and are actively fine-tuning our menu, including expanding our product offerings beyond our core fried chicken products. Our 14 restaurants will serve a solid base for further growth in Shanghai and beyond. At this time, I would like to turn it over to our CFO, Albert Li, to discuss our first quarter 2024 financial performance in more detail. Albert.