TH International Limited

Ladies and gentlemen, welcome to Teams China fourth quarter and full year 2025 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 Patty Yu, Teams China's public and media relations manager for prepared remarks and introductions. Please go ahead, Patty.

Hello everyone and thank you for joining us on today's call. KH International Limited announced its first quarter and four-year 2025 financial results earlier today. A pre-release as well as a company presentation which contains operational and financial highlights are now available on the company's IR website at ir.teamchina.com. Today you will hear from Yongchen Lu, our CEO Director, and Albert Li, our CFO. After the companies prepare the remarks, the managed team will conduct a question and answer session. You will 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 the 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 relief and risk factors included in our findings 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 a substitute for the comparable gap measures. The accompanying reconciliation information related to those non-gap and gap measures can be found in our earnings press release issued earlier today. With that said, I would now like to turn it over to Yongcheng Lu, our CEO Director. Please go ahead, Yongcheng.

Thank you, Patty. Good morning and good evening. Everyone, thank you for joining us today. As we just celebrated the 62nd anniversary of the globally renowned Tim Hortons brand and the seventh anniversary of Tim's China, we're excited to continue serving our innovative and local and relevant offers to our fast-growing, lowly guests. As of December 31st, 2025, China stood as the largest international market in Tim Hortons' global system by number of stores. We continue our growth trajectory, generating total system sales of RMB 1.57 billion in 2025, a 7.6% increase compared with 2024, fueled by mainly 25 new store openings and expanding our store network to 1,047 across 92 cities in China. Food sales as a percentage of the total revenues account for 33.4% in Q4 2025, increased from 24% in Q1 2023. Orders with food items account for 51% of total orders 2% in Q1 2023. 2025 marked a critical transition year for the company. We further solidified our differentiated strategic positioning in coffee plus freshly prepared foods, completed meant-to-order renovations of over 74% system-wide stores, while strategically pruned certain underperforming stores, especially those non-MTO express stores. On same-store sales growth, we managed to achieve overall comparable transaction growth of 2.7% in 2025. But we had to apply higher discounts on delivery business to mitigate intensified competition due to aggregator platform dynamics, which led to 2.4% decline in the same-store sales growth for system-wide wireless stores in 2025. Despite the headwinds of CS competitions, especially from low-priced local brands, our team demonstrated strong resilience and maintained our margins well at both store and corporate levels. 2025 full-year company-owned and operating store contribution module was 7% compared with 7.4% in 2004, which was primarily attributable to the temporarily increased delivery-related cost due to aggregator platform dynamics. 2025 full-year adjusted corporate EBITDA module actually improved by one percentage point. With further optimized store capital expenditures and enhanced store unit economics, our 2024 vintage year company owned and operated stores generate store contribution margin of nearly 15% in 2025 and I expect to achieve a payback period within two to three years. Our 2025 vintage year stores are still new, but are ramping up right now. We believe they will have similar unique economics, too. In the meantime, our company-owned and operated stores in Tier 1 cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, and in those cities with 10-plus stores, generated over 10% and 7% store contribution margin in 2025, respectively. store density. We will continue adding more company-owned and operating stores in existing stores to achieve a high economy of scale. In 2020, we will strategically expand our store footprint while maintaining capital efficiency, delivering absolute convenience for our customers, leveraging sub-franchisee partnerships We accelerated market penetration entering 92 cities by end, including the debut of our first stores in Nianyang, Sichuan Province, Datong, Shaanxi Province, and Xinjiang, Henan Province during the fourth quarter of 2021. This growth strategy not only further strengthened our brand presence, but also ensured sustainable scalability through optimized resources. Since we launched our individual franchising business in December 2023, we have received over 10,000 applications and successfully opened over 300 stores by the year end of 2025, showcasing continued market confidence in our franchise model. We have witnessed reasonable returns for our franchising stores. our franchise stores at special channels, including railway stations, hospitals, and highway rest areas, generate store contribution margin of high teams in 2025, and expect to achieve a payback period of approximately two years. We'll accelerate opening franchise stores on these special channels. In the meantime, Our subcontracting business contributes steady cash flows and profitability. Profits from other revenues achieve a year-over-year growth of 55.7% in 2025. Product innovation has always been an important strategic focus for us. In 2025, Teams China accelerates product innovation across both beverages and food. launching a total of 178 new products, 96 new beverages, and 82 new food items, which contributed over 25% of our top-line sales. Standout offerings have a lot of natives joining with customers. Seasonal beverages highlighted during the first quarter included the Palmer Granate, Loews Cheese, and Oat Latte series. offering a diverse and a differentiated flavor portfolio. We also focus on adding non-coffee beverage offers complementary to existing product portfolio during the afternoon tea step-by. Total number of non-coffee beverage cups accounted for approximately 18.3% of total beverage cups sold in 2025, compared to 14% in 2024. On the food side, we continue to strengthen breakfast daypads and launch several campaigns to promote lunch daypads in 2025. For instance, we introduced a breakfast combo with expansion of our croissants lineup with new offerings such as cheese chicken and roasted coconut cheese croissants, which suits the morning routines and offering greater value. Building on our classic bagel breakfast sets, the croissant combo includes protein-rich options like meat, catering to higher energy needs in colder months. Meanwhile, the croissant itself is light yet satisfying, perfect for those wanting a hearty but not overly filling breakfast. In addition, Team China continues to broaden its bagel sandwich range, introducing new products, including the Black Shuffle Mushroom Bagel and the Spicy Pickle Cabbage Beef Bagel, further enriching its several menus. We continue to strengthen our leadership in the bagel platform, selling a total of over 80 million bagels and bagel sandwich products, cumulatively as of the end of 2025. The first quarter, being the holiday season, saw us loading out a series of marketing campaigns designed for these special occasions. From Halloween to Thanksgiving and Christmas, we joined the festive spirit with creative promotions and themed activities to grab consumer attention. During the first quarter, Team Strada continued to enhance brand relevance and consumer engagement through a series of marketing and product innovation initiatives. The company has strengthened its cultural positioning through high-profile collaborations, including a limited-edition partnership with the hit TV series of The Vendetta of Chang'an 24G, as well as a co-branded campaign with People's Daily to celebrate China's National Day and honor everyday heroes across the country. These initiatives leverage culturally relevant storytelling to deepen consumer connections and drive social engagement. In parallel, Teams China advances sustainability initiatives by expanding its Bring Your Own Cup program and increasing the incentive to R&D eight per cup. As of now, the program had attracted over 200,000 participants, reducing carbon emissions by approximately 8 tons, equivalent to planting around 360 trees. The company also introduced eco-friendly stores in collaboration with Tencent's Carbon Xmate program, using carbon capture technology to convert industrial carbon dioxide into sustainable materials. SGS certification confirms that every 100 stores store 3.185 grams of carbon dioxide, reinforcing Team China commitment to sustainable product innovation. As of December 31st, 2025, our registered Florida club members exceeded 31 million, reflecting a remarkable 29 percent year-over-year growth, the average number of members per store has now surpassed 29,600, serving as a strong catalyst for our growth and clearly demonstrating our consumers' ongoing support for Teams China's loyalty programs. At this time, I would like to turn over to our CFO, Albert Li, to discuss our fourth quarter and full year 2025 financial performance in more detail.