Dpc Dash Ltd

Ladies and gentlemen, welcome to DPC-Limited Full Year 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 call will be recorded. At this time, I would like to turn the call over to Kathy Zong, our Director of DPC-DASH, 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, CPO of DPC-DASH. Eileen will provide insights into company's overall performance and share recent developments While Helen will go a bit deeper into the 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 investment materials contain forward-looking statements about our business that may be considered as forward-looking statements. under applicable security 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 the 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 financial information and certain non-IFRS financial measures. Please refer to our results announcement and annual 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 Wong, Executive Director and CEO of DPC-DASH. Eileen, please go ahead.

Hello, everyone, and thank you for joining us to review DPC-DASH Limited's performance for the full year of 2024. We're the exclusive master franchisee of Domino's Pizza across mainland China, Hong Kong Special Administrative Region, and Macau Special Administrative Region. Our global franchisor, Domino's Pizza Inc., is one of the world's leading pizza companies, with over 21,300 stores across more than 90 markets. as of December 31st, 2024. This global reach provides us with valuable brand and operational knowledge as we implement our 4D strategy, development, delicious pizza value, delivery, and digital. We're pleased with our performance in 2024, a year that marked several important milestones in our growth journey. According to Fra and Sullivan, Domino's Pizza is now ranked the second nationally based on 2024 pizza sales in China, our total revenues for the year reached RMB 4.3 billion, representing a 41.4% increase compared to RMB 3.1 billion in 2023. This strong growth was mainly attributable to both the increase in our average daily sales per store and our expanded store network. Our average daily sales per store increased by 4.3%, from RMB 12,580 in 2023 to RMB 13,126 in 2024, primarily driven by growth in average daily orders per store, which increased from 145 in 2023 to 160 in 2024. We maintain our track record of positive theme store sales growth, or SSG, in 2024, we achieved a same-store sales growth of 2.5%, following an impressive 8.9% growth in 2023. This achievement marks our 30th consecutive quarter of positive same-store sales, dating back to the third quarter of 2017. This consistent performance is a testament to the effectiveness of our strategy and also the strength of our execution in the China market. By year end, our network expanded to 1,008 stores across 39 cities in China, including our 1,000th store, which was opened in November. We added a net of 240 new stores during 2024, meeting our annual target on top of the 180 net new stores we added in 2023. This accelerated pace of expansion reflects our confidence in market opportunity. In January 2025, we entered six new cities, demonstrating the continued momentum in our expansion. Our profitability metrics also showed meaningful improvement in 2024. Store-level operating profit margin increased to 14.5% from 13.8% in 2023, and store-level operating profit reached RMB 624.0 million, a 48.7% increase from RMB 419.7 million in 2023. At the corporate level, adjusted EBITDA rose to RMB 495.2 million, 64.1% higher than RMB 301.7 million in 2023, with adjusted EBITDA margin improving to 11.5% from 9.9%. We achieved an important milestone with our adjusted net profit reaching RMB 131.2 million up from RMB 8.8 million in 2023, demonstrating a considerable improvement in our profitability. Our reported net profit turned positive at RMB 55.2 million versus the reported net loss of RMB 26.6 million in 2023. This marks our first full year of positive reporting net profit after tax, reflecting the success of our scaling strategy and operational focus. Let me share more specific insights on our 2024 performance through the lens of our 4D strategy. Regarding development, we pursued our balance the go deeper and go broader approach by strengthening our presence in existing markets while strategically expanding into new territories. In 2024, we expanded to 10 new cities, with the total city number reaching 39. We are now ranked as the third-largest Domino's Pizza international market by STOCON as of January 31, 2025. The performance of our new locations has been remarkable. As of early 2025, We hold all 40 top positions in Domino's global system for the first 30-day sales, with our Shenyang First Store setting a new global record with approximately RMB 11.1 million in revenue during its first months. Our expansion economics remain positive. The 80 new stores open across 18 new cities. from December 2023 through December 2024 show payback periods averaging within 12 months, reflecting the efficiency of our site selection and operational capabilities. Our revenue mix continues to evolve. Revenues in Shanghai and Beijing reached RMB 1.6 billion, growing 6.8% year-over-year with 20 net new stores. Meanwhile, our new growth markets delivered impressive results with revenue increasing by 77.0% to RMB 2.7 billion with 220 net new locations. These new growth markets now represent 61.8% of our total revenue, up from 49.4% in 2023, making them the main growth driver for our company. The performance in these new growth markets demonstrate both the potential of our national expansion strategy and the progress in building our brand momentum as we continue to expand our footprint to other major cities in China. Underlying this revenue growth was our continued menu development, excellent product taste, good service and value, and improved brand recognition. On our delicious pizza value dimension, We continue our focus on menu innovation to address evolving consumer preferences. Throughout 2024, we strategically introduced new pizza varieties and crust options, enhancing our menu diversity. Our menu now includes over 30 pizza varieties and approximately 20 crust options, with pizza products accounting for more than 75% of total sales. This variety reinforces our position as one of China's leading pizza brands and allows us to cater to the diverse tastes of Chinese consumers. Regarding delivery, we have continued to refine our service mix based on the market characteristics. In Shanghai and Beijing, delivery remains a cornerstone of our business where our hit rate to deliver within 30 minutes is consistently higher than 90%. while new territories show strong initial demand for dyeing and carry-out as consumers discover our brand. The high dyeing and carry-out volumes in our newly entered markets have led us to voluntarily suspend delivery services temporarily in some locations. We plan to gradually resume delivery services when the timing is appropriate. As a result of the strategic choice and our accelerated expansion into new cities, The percentage of delivery services decreased from 59.2% of total revenue in 2023 to 46.1% in 2024. This shift in delivery mix contributed to a slight decrease in average sales value per order from RMB 86.8 in 2023 to RMB 82.1 in 2024. This flexibility in our service model allows us to adapt effectively to local market conditions while maintaining operational efficiency. Our digital initiative delivered impressive results with our loyalty program membership increasing from 14.6 million at the end of 2023 to 24.5 million by December 31st of 2024, adding nearly 10 million new members in just the one year. Revenue from loyalty members grew from 59.2% to 64.5% our total sales, highlighting the growing engagement of our consumer base. We have effectively leveraged our digital capabilities, supply chain infrastructure, and increasing scale to enhance operational efficiency. These efforts contributed to our improved margins, and we continue to identify opportunities to further optimize our operations as we grow. Looking ahead to 2025, we're continuing our expansion with plans to open about 300 stores while maintaining our focus on operational excellence. Including investments in new stores, store remodeling, relocations, and maintenance, we anticipate capital expenditure of approximately RMB 570 million, which we expect to fund through our existing cash reserves including proceeds from our global offering and cash generated from our operating activities. From the beginning of 2025 to March 14, 2025, we have opened 82 additional stores with 26 locations under construction and 62 sites signed, positioning us well to achieve our 2025 expansion targets. While the China market remains dynamic, In the face of global uncertainty, we believe our proven business model and operational experience position us well to move forward. We're steadfast in our commitment to sustainable growth and to generating long-term value for our shareholders. With that, I'll now hand the call over to Helen Wu, our CFO, to discuss the financial results.