TH International Limited

Ladies and gentlemen, welcome to Teams China third quarter 2025 earnings conference call. All participants will be in listen-only mode during management prepared remarks, and there will be a question and answer session to follow. Today's conference is being recorded. At this time, I would like to turn the call over to Gemma Becks, who heads Teams China investor relations efforts, for prepared remarks and introductions. Please go ahead, Gemma.

Thank you, Desmond, and hello, everyone. Thank you for joining us on today's call. My name is Gemma Box, Head of Investor Relations for Tim's China, and Tim's announced its third quarter 2025 financial results earlier today. A 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 a question and answer session. You can find the slide presentation and 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 issued earlier today. With that said, I would now like to turn it over to Yongchen Liu, our CEO and Director. Please go ahead, Yongchen.

Thank you, Gemma. Good morning and good evening, everyone. In Q3, we returned to positive net new store openings and continued our strong momentum in system sales, achieving a 12.8% year-over-year growth. With our successful light and fit lunchbox platform products launched in Q2, we further enhanced our differentiated coffee plus pressure-prepared food strategy, driving a positive 3.3% same-store sales growth for company-owned and operated stores. As a result, food revenues increased by 24.2% year-over-year, and food revenue contribution as a percentage of sales reached our historical high of 36.5%, an increase of 5 percentage points. from 31.5% in the third quarter last year. We are also benefiting from the promotional offers from those delivery aggregators to take more market share. Delivery revenues increased by 23.1% year-over-year. At the same time, our sub-franchisee and retail business maintain their steadily growing contributions to cash flow and profitability. profits from other revenues achieved a year-over-year increase of 58.2% during the quarter. For the first nine months of 2025, our adjusted company-owned and operating store contribution margin was 8.1%, same as for the first nine months of last year. On adjusted corporate EBITDA and adjusted net loss, we continued to cut loss by now 10.4% and 11.5% respectively. These results unscored our team's resilience and discipline in execution. On store development, leveraging sub-franchisee partnerships, we expanded our store footprint into 91 cities, including the city of Yanji in Jilin province, Changshu in Jiangsu province, and Wuhu in Anhui province that we entered initially while maintaining capital efficiency and delivering absolute convenience for our guests. Since we launched our individual franchisees program in December 2023, we have received over 8,400 applications and successfully converted over 300 stores by the end of September, showcasing market confidence in our franchisee model. We have attractive and desirable store unit economics for our sub-franchises with a reasonable 2-3 years payback period on average. We are also focused on strategic channel development with 64 stores in locations such as high-speed train stations, airports, highway rest areas, hospitals, universities, and schools at the end of September. After the end of September 2025, our largest floating carbon members reached 27.9 million, reflecting a remarkable 22.3% year-over-year growth. The average number of members per store is now over 27,000, serving as a strong catalyst for our future growth. Q3 represents the peak season for China's beverage market. This summer experienced rock-high temperatures driving robust consumer demand for freshly prepared beverages, albeit amid heightened price sensitivity. Compounding this dynamic, the coffee sector faced intensified competitive pressure from the rapidly expanding tea beverage categories, not only due to strong demand for non-coffee alternatives but also because leading key brands have begun entering the coffee space, further intensifying market competitions. Our strategic initiatives, including a celebrity partnership during the Bagel Festival, an enhanced summer beverage portfolio, and targeted seasonal lunchtime operations enable Teams China to return to positive same-store sales growth We partnered with the last one, Huang Zihong Fan, a highly influential Gen Z celebrity, to elevate brand awareness and drive engagement. The collaboration was integrated with comparing products and bundles to convert interest into purchases, supported by targeted promotions to encourage repeat visits. This holistic marketing approach delivers strong results. July marked our highest sales month of the year, and the September Bagel Festival drove double-digit same-store sales growth, significantly outperforming the broader market. Building on the CodeBlue platform launched in Q2, we execute a series of monthly innovations through our Q3 centered around refreshing some appropriate leverages. This was an intentional offensive strategy, leveraging a balanced portfolio of candidate SKUs spanning coffee and non-coffee categories to capture incremental share in the sub-beverage market, particularly among younger consumers whose preferences align closely with our endorsers' audience. We anticipate competitive encroachment from tea brands and responding decisively, reinforcing our coffee leadership through premium offerings like cold brew and a water buffalo milk latte, while deploying non-coffee as cues to directly compete for tea drinkers' water share. Notably, this deal-check approach resonated strongly with our target demographics, contributing meaningfully to beverage sales growth. Following six months of focused lunchtime development, we proactively adapted our food strategy in Q3 to counter seasonal softness by introducing six new SKUs featuring chilled and bodily spicy options to stimulate consumer interest and maintain meal relevance. In order to sustain momentum from our ongoing lunchtime expansion strategy, We also introduced seasonal cold food offerings tailored to evolving consumer preferences during hot weather. Additionally, we expanded our afternoon tea offerings with chilled variants of cakes and Smile Bagels of 5SQ. The launch of the Smile Bagel series further reinforces our leadership in the bagel category and it enhances our competitive differentiation. These initiatives have firmly helped cement Tim's reputation as the go-to lunch destination in consumers' mindset. Thanks to our efforts over the past three quarters, more than half of all orders now include food, and food sales make up over a third of total revenues. At this time, I would like to turn it over to our CFO, Albert Li, to discuss our third quarter financial performance in more detail.