Dpc Dash Ltd

to DPC-Limited Interim 2024 Earnings Conference Call. All participants will be in listen-only mode during management's prepared remarks, and there will be a question and answer session to follow. Today's conference will be recorded. At this time, I would like to turn the call over to Kathy Jung, IR Director of DPC- who will share the process for today's call and provide some important disclosures. Please go ahead ma'am.

thank you operator hello everyone and thank you for joining us on today's call again as a reminder you are all currently on mute we will open up the floor during q a session after management's prepared remarks we will try to answer as many questions as time allows today you will hear from eileen wang executive director and ceo of dpc dash Helen Wu, CFO of DPC Dash, and Michael Xu, Chief Performance Officer, CPO of DPC Dash. Eileen will provide insights into the company's overall performance and share recent developments. Helen will go a bit deeper into first half of 2024 financial results. The management team will address your questions after their remarks. Before we continue, I'd like to remind you that our earnings call and investor materials contain forward-looking statements about our business that may be considered as forward-looking statements under applicable securities laws, which are based on various assumptions and other factors that are beyond the company's control and are subject to risks, future events, and uncertainties. Accordingly, actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements. You can identify these forward-looking statements because they include terminology such as may, will, expect, estimate, believe, going forward, plan, projection, aim, or other similar expressions. Statements that are not historical facts, including but not limited to statements about the company's beliefs, plans, and expectations are forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the Hong Kong Stock Exchange. Also, this call includes discussions of unaudited financial information and certain non-IFRS financial measures. Please refer to our results announcement and interim report to be published in accordance with the rules governing the listing of securities on the Stock Exchange of Hong Kong Limited. which contain a reconciliation of the non-IFRS measures to IFRS measures. All information provided in this earnings call is as of the date of this call. The company, our affiliates, advisors, and representatives undertake no obligation to update any forward-looking statements except as required by law. With that, I will turn the call over to Ms. Eileen Wang, Executive Director and CEO of DPC-DASH. Eileen, please go ahead.

Hello, everyone, and thank you for joining us today as we discuss the PC-Limited results for the first half of 2024. As the exclusive master franchisee for Domino's Pizza in mainland China, Hong Kong Special Administrative Region, and Macau Special Administrative Region, we continue to see significant growth opportunities in the underserved Chinese pizza market. Our global franchisor, Domino's Pizza Inc., is one of the world's largest pizza companies, with more than 20,900 stores in over 90 markets around the world as of June 30, 2024. This global strength provides us with a solid foundation as we execute our 4D strategy, development, delicious pizza value, delivery, and digital. Our 4D strategy continues to drive our success in the China pizza market, This is evident in our financial performance for the first half of 2024. Our total revenues reached RMB 2.04 billion, a 48.3% increase year over year. We're proud to report our 28th consecutive quarter of positive same-store sales growth since the third quarter of 2017, when our current management team began its tenure. This consistent performance over seven years underscores the effectiveness of our strategy and the strength of our execution. In the first half of 2024, we achieved a same-store sales growth of 3.6%. This follows a solid 8.8% growth during the first half of 2023 and an overall 8.9% growth for the entire year of 2023. As of June 30, 2024, we operate 914 stores across 33 cities in China, including our Milestone 900 store, which opened in the same month. During the first half of 2024, we added a net of 146 new stores. As of August 20, 2024, we have opened an additional 31 stores, with 29 stores under construction and 21 stores signed, keeping us on track to meet our full-year target of approximately 240 new stores in 2024. At the same time, our profitability metrics have shown significant enhancement. Our store-level operating profit margin increased to 14.5%, up from 13.5% in the same period last year, while our store-level operating profit reached RMB 296.2 million. At the group level, our adjusted EBITDA reached RMB 233.4 million, representing an 83.7% year-over-year increase from 127.0 million in the first half of 2023. Accordingly, our adjusted EBITDA margin rose from 9.2% in the first half of 2023 to 11.4%. Our adjusted net profit for the first half of 2024 was RMB 50.9 million, compared to an adjusted net loss of RMB 17.4 million in the same period of last year. Our net profit turned positive for the first time in terms of both reported and adjusted net profit after tax. Now I'd like to take a more detailed look at our performance during the first half of the year with a particular focus on our 40 strategy. In the first half of 2024, Our revenue grew by 48.3% year-over-year, driven by both same-store sales growth and new-store openings. The average daily sales per store reached RMB 13,515, a 10.1% increase year-over-year. This growth was mainly driven by an increase in the average daily orders per store, which rose to 162 from 140 a year ago. In terms of developments, We have experienced significant growth across all our markets, driven by our deeper penetration in existing cities and our expansion into new ones. We successfully entered eight cities at the end of last year and launched the four additional cities in the first half of 2024. The performance of our new stores has been exceptional, contributing significantly to our overall success. As of July 31, 2024, We proudly hold 28 out of the top 30 positions within Domino's global system in terms of the first 30-day sales. In the new markets we entered, we have continued to expand our presence with more stores and maintain our strong performance. Of the 42 stores we opened in these 12 cities, 18 have already achieved a payback. We expect the average payback period for these stores to be within nine months, reflecting the efficiency of our expansion strategy. On delicious pizza at value, we have continuously innovated our product offerings to better serve our customers' evolving tastes. From the start of this year to the end of July 2024, we introduced three new pizza varieties and two new crust options, such as barbecue pork stuffed crust and coconut and pumpkin double-deckers. Our menu now boasts over 30 pizza varieties and approximately 20 crust options, with pizza sales contributing more than 75% of our total sales. This diverse selection reinforces our position as China's leading pizza brand. During the summer, we expanded our successful durian pizza series with a third offering. This series now includes three durian pizzas at different price points that truly resonate with durian lovers. Just 10 days ago, we launched our new cheese volcano crust, filled with oozing cheddar cheese magma and Oreo crumbs. This unique concept in the pizza industry has already garnered positive feedback and recognition from our customers, further demonstrating our commitment to menu innovation and customer satisfaction. In terms of delivery, while delivery remains a core part of our strategy, We have seen a significant uptick in dining and carry-out services during the first half of 2024, particularly in our newly entered markets. As new consumers try out Domino's Pizza brand and our products in these cities, the high volumes of dining and carry-out orders have led us to voluntarily suspend delivery services temporarily in some stores. We plan to gradually resume delivery services in these locations when the timing is right, which will contribute to our future sales performance. Despite this shift, delivery continues to account for a significant portion of our overall revenue. In Shanghai and Beijing, delivery services still make up 73.1% of total revenue. However, the increase in dine-in and carry-out orders in newly entered markets has resulted in a decrease in the overall percentage of delivery services. from 63.6% in the first half of 2023 to 46.4% in the first half of 2024. This shift in the delivery mix has also contributed a slight decrease in the average sales value per order, which fell from RMB 87.6 in the first half of 2023 to RMB 83.6 in the first half of 2024. Turning to digital, Our digital initiatives continue to drive customer engagement. We have attracted new customers by dynamically engaging them through more online channels. We're continuously enhancing our capability to offer personalized rewards, improving both new customer conversion and existing customer retention. As of today, our loyalty program has surpassed the 20 million members, a significant increase from 10.9 million members a year ago. Moreover, we have been continuously leveraging our digital advantages, supply chain capabilities, and economy of scale to further elevate our operational efficiency at both the store and corporate levels. These ongoing improvements have been instrumental in boosting our store-level operating profit margin and group-level adjusted EBITDA margin. These results illustrate the effectiveness of our 4D strategy in preparing our growth and underscore the resilience and flexibility of our business model. We're steadfast in our commitment to our expansion plans and the continuous enhancement of our operational efficiency. We look forward to delivering sustainable, profitable growth in the Basta Pizza market in China. With that, I'd like to turn the call over to Helen Wu, our CFO to discuss the financial results.