Dpc Dash Ltd

to DPC-Limited Interim 2025 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 conference over to Cathy Xiong, IR 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're 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 Ms. Eileen Wang, Executive Director and CEO of DPC Dash, Ms. Helen Wu, CFO of DPC Dash, and Mr. Michael Xu, 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 the first half 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 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 announcements and interim report to be published in accordance with the rules governing the listing of the 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 today as we discuss DPC-DASH limits results. for the first half of year of 2025. As the exclusive master franchisee with Domino's Pizza in mainland China, Hong Kong SAR, and Macau SAR, we continue to see significant growth opportunities and underserved the China pizza market. Our global franchisor, Domino's Pizza Inc., is one of the largest pizza companies worldwide, with more than 21,500 stores across over 90 markets, as of June 30, 2025. This global presence gives us a strong foundation as we execute our 4D strategy, development, delicious pizza value, delivery, and digital. We are pleased to share our robust financial results for the first half of the year of 2025. Our total revenue reached RMB 2.59 billion, marking a solid 27% increase compared to the same period of last year, with 119 net new stores added during the period, bringing our total store count to 1,198 across 48 cities. Once again, we have delivered strong results, achieving close to 30% revenue growth. This consistent performance underscores the effective execution of our growth strategy and highlights the vast potential of China's QSR market. As of June 30, 2025, our market ranked as the third largest international market in the Domino's Pizzas global network in terms of store count. Our profitability has shown strong improvement across all levels. Store level EBITDA reached RMB 502.8 million, up 27.7% year-over-year, with the margin at 19.4% compared to 19.3% last year. Store-level operating profit grew by 28% year-over-year to RMB 379.2 million, with the margin at 14.6% compared to 14.5% a year ago. At the group level, adjusted EBITDA increased 38.3% year-over-year to RMB 322.9 million, with the margin expanding to 12.4% from 11.4% in the prior year. Adjusted net profit rose by 79.6% to RMB 91.4 million, with the margin improving to 3.5% from 2.5% in the same period of 2024. These improvements demonstrate our ability to drive profitability. Let me share more details on the key drivers behind our performance. On development, We maintain our disciplined expansion approach, strategically deepening our presence in existing cities by adding new stores, while broadening our reach into new markets. By entering nine new cities in H1 2025, we now operate across 48 cities, expanding our footprint into more markets in China. As of June 30, 2025, while maintaining a solid 7.2% growth in tier 1 cities, reaching RMB 1.08 billion revenue. Our non-tier one markets delivered remarkable 46.6% revenue growth, reaching RMB 1.51 billion revenue. Non-tier one cities contributed 58.2% of the total revenue, up from 50.4% just a year ago. Our youngest region, the central and western China region, reached 100 stores in just 2.5 years, since the entry in December 2022. This momentum fairly validates our strategic focus of expansion and a vast potential that will continue to offer growth opportunities going forward. After setting so many global sales records over the past couple of years, our first door in Shenyang continues to legend. It not only set a new global record for the first 30-day sales, They also surpassed the previous global annual sales report of RMB 31 million held by Xiamen SM Phase 3 store in just 198 days of operation. Similarly, our first store in Handan, which opened on August 3, 2025, delivered a record-breaking first-day sales, exceeding RMB 540,000 with over 6,000 orders. As of June 30, 2025, we hold 48 of the top 50 positions for the first 30-day sales among Domino's global network. During the first half of the year, the 64 stores we operated across 15 new markets, opening in the end of 2024 and H1 2025, delivered impressive average daily sales of RMB 47,102. By August 15, 2025, 24 of these stores had already achieved a full cash payback within average payback months of within 12 months. More broadly, the stores in the new markets we have opened since December 2022 have maintained strong average daily sales around RMB 17,438, even as we continue to add new stores in these markets. This performance highlights our strong brand recognition, the effectiveness of our site selection, and operational excellence across the markets. Let's switch gears to talk about same-store sales. The same-store sales landed at negative 1% for the first half of year of 2025. We have shared before that for the new markets we entered since December 2022, we have been opening new stores with very strong sales performance. which continuously set new global sales records within Domino's system. As more of these high sales record stores gradually enter the theme store sales cycle, they start to bring negative theme store sales impact to the group theme store sales initially. Calving out the impact of the stores in these new markets, the group's SSG remained positive. And tier one markets' SSG also remained positive, despite a high sales base with the consecutive 31 quarters of positive theme sauce sales accumulated over the past seven years, as we mentioned before. We also believe this showcased the Brazilian's upper results in a context of a challenging environment. On the delicious pizza at value front, we continue to focus on menu innovations with a range of successful new product launches. This includes our popular durian series featuring new Dubai chocolate and lychee flavors, the beef Wellington-style pizza, the Tuscany-inspired salmon pizza, and the cocoa crust and cocoa volcano pizza. Our approach to product development and localization continues to generate exciting products that resonate strongly with the Chinese customers across different markets. Turning to delivery, we hold up to industry-leading service standards by faithfully executing our well-known 30-minute delivery promise. our overall delivery on-time rate further improved to 94% of all the delivery orders. In Tier 1 cities, delivery sales as share of total sales increased from 70.4% to 73.7% during the first half of year of 2025, reflecting growing consumer preference for our efficient delivery service. This is just the beginning of our delivery potential. As we deepen our presence across non-Tier 1 cities, we will systematically roll out delivery services in this market. This measured approach unlocks incremental growth opportunities, enabling us to extend proven tier one service efficiencies to China's emerging markets when capacity allows it. Our digital initiatives deliver outstanding results with loyalty membership growing 55% to 30.1 million members and member revenue contribution increased to 66% from 63.6% a year ago. We have attracted 13.2 million new customers placing the order over the past 12 months from all channels. These results demonstrate the effectiveness of our marketing campaigns and smart consumer engagement in driving growth. Looking ahead, we're continuing our expansion with confidence, with healthy unit economics, and strengthening brand equity from January to as of August 15th. We have opened 233 stores, have 27 stores under construction, and have signed 35 sites. This represents approximately 98% to our goal of opening 300 new stores by 2025. Our strong execution capabilities and operational efficiency enable us to consistently deliver strong results in a dynamic market environment. We're well positioned to further solidify our leadership and drive sustainable growth that creates long-term value for our shareholders. With that, I'll now hand the call over to Helen Wu, our CFO, to discuss the financial details.

Thank you, Eileen. Hello, everyone. Thank you again for attending the earnings call tonight. To start, I will walk you through our financial highlights for the first half of 2025. Please note that all the numbers that we're presenting today are in RMB terms, and all presentations are on a year-over-year basis unless otherwise stated. We delivered a strong financial result during the first half of 2025, demonstrating our resilience and strategic execution in a dynamic market environment. Our robust revenue growth, combined with our ongoing initiative to improve operational efficiency, has yielded improved profitability at both the store and corporate levels. For the first six months of this year, our revenue increased by 27% to $2.59 billion from $2.04 billion in the same period of 2024, breaking down our revenue performance by market segments. our tier-one city markets, including Beijing, Shanghai, Shenzhen, and Guangzhou, generated $1.08 billion in revenue, representing 41.8% of the total revenue and a 7.2% year-over-year growth. This was driven by positive same-store sales growth in these highly competitive markets, supported by 17 incremental stores in operation during the reporting period. Our non-TL1 city markets delivered exceptional growth of 46.6% year-over-year, reaching $1.51 billion and representing 58.2% of the total revenue, up from 58.4% in prior year. The growth was fueled by our store network expansion of 184 net new stores added in these markets, making more stores in operation during reporting period and also the strong performance in newly entered markets. Our average daily sales per store declined by 4.4% year-over-year to 12,915 in the first half of 2025 from 13,515 in the same period of 2024. This decrease was mainly attributable to the decrease in average daily sales in those post-December 2022 high-performing stores as they gradually stabilized sales over time. This stabilizing trend is a natural part of our unique business evolution for the new market we are entering, and we remain focused on optimizing our stock portfolio to maximize long-term sustainable growth of our business and also the profitability. A few notes before we get into the specifics of our costs. First, our raw materials and consumables cost includes the COGS related to both our stores and the Central Kitchen. Staff compensation expenses encompasses store-level cash-based salaries, which include labor costs at our central kitchen, corporate-level cash-based salaries, and share-based compensation. The vast majority of rental costs are incurred at our store level, as are a majority of plan and equipment depreciation, utility expenses, and advertising and promotion expenses. Meanwhile, the majority of amortization of intangible assets is incurred at the corporate level, as is the majority of our other expenses on the P&L. Please refer to our income statement and financial statement footnotes for more context on both store and corporate level cost components. With that, let's look at the cost and margins at both the store and corporate levels. Our raw materials and consumables costs for the first six months of 2025 amounted to $706.8 million, representing an increase of 26.7% in line with our revenue growth. We have managed to keep the ratio of our raw materials and consumables costs to revenues stable at 27.3% in the first six months. of 2024 and in the same period of 2025 as our proactive cost management initiative continues to yield results. Advertising and promotion expenses as percentage of revenue decreased to 5.3% in the first six months of this year from 5.4% a year ago. This was mainly because our brand marketing activities became more targeted and cost effective as we strengthen our brand through stored network growth and remarkable performance in newly entered markets. Store-level cash-based staff compensation expenses as a percentage of revenue increased to 27.7% during the first half of the year from 27.4% a year ago. The increase was primarily attributable to the growth in the number of store-level employee per store. As we accelerate our store openings in the first half of 2025, we recruited more store-level staff for training in advance in order to better serve our customers and become more familiar with new markets. Cash-based compensation expenses for corporate-level staff as a percentage of revenue decreased to 5.1% in the first half of 2025 from 5.5% in the same period of last year. This was primarily due to our corporate level start becoming more experienced and better equipped to support operations of an expanding network of stores and also reflects the continued benefits of economies of scale for cost efficiency at the corporate level. Our rental or lease-related expenses are reflected in three lines on our income statements under the IFRS 16 accounting rule. The first is depreciation of right-of-use assets. Second is variable lease rental payments, short-term rental, and other related expenses. These two lines aggregate amount was $259.2 million during the first half of 2025, compared with $201.7 million in the same period of last year, representing a 28.5% increase year-over-year. As a percentage of revenue, the charge rate was 9.99%. The third line is lease liability in the finance cost category, recorded under IFRS 16 accounting rule. The aggregate three lines are marked as the percentage of revenue was 11.48% as compared to 11.51% of the revenue in the same period of 2024. The charge rates for depreciation of plant and equipment, amortization of intangibles, utility expenses, store operation and maintenance expenses, and other expenses experienced a slight decrease respectively, with an aggregate decrease of 1% relative to our growing revenue. By splitting the cost between store activities and corporate activities, we look at profitability performance at both the store level and group level. Building on our consistent effort to drive machine efficiency, our store-level operating profit achieved robust growth. In the first half of 2025, our store-level operating profit reached 379.2 million, a 28% year-over-year increase. we are particularly pleased that our store level operating profit margin remain resilient at 14.6% even as we invest in talent development and market expansion. This positive trend also extends to the corporate level. Charge rates for both share-based, cash-based compensation expenses for corporate-level staff and the depreciation and mortization costs decreased during the first half of 2025. This improvement aligns with our continued revenue growth and unfolding benefits of scale and efficiency. Building on our robust revenue growth, effective cost controls at the store level, and the increasing benefits of scale and efficiency at the corporate level, our group adjusted EBITDA grew to $322.9 million. EBITDA growth outpaced our revenue growth by a notable margin, rising 38.3% year-over-year from $233.4 million in the first half of 2024. a sign of a strong operating leverage. Our group adjusted EBITDA margin also saw positive growth rising to 12.4% in the first six months of this year from 11.4% in the same period of 2024. As a result, our adjusted net profit, which reflects our core recurring business, reached $91.4 million compared to an adjusted net profit of $50.9 million in the first half of 2024. Our reported net profit after tax reached $65.9 million in the first half of 2025 compared to $10.9 million in the same period of 2024. You can find more details on the cost items at both store and corporate level in our result presentation which is posted on our IR website. Finally, some updates on the liquidity. Our cash position remained strong through the first half of the year. As of June 30, 2025, we held $1.02 billion in cash and cash equivalents, which includes restricted cash. Additionally, we have an interest-bearing bank loan of $200 million, with the final maturity set for 2028. Looking ahead, we remain confident in our ability to navigate the evolving market landscape. Our strong fundamentals, continuous rising brand recognition by customers, proven execution capability, and strategic market positioning provides a solid foundation for our continued expansion in this under-penetrated Peter market in China. We will continue to execute our 4D strategy with a primary focus on expanding our store network and gaining more market share, coupled with a balance of healthy and sustainable profitability level. This concludes my prepared remarks for today's earnings call. Operator, we are now ready to take some questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause for a moment to assemble our roster. Our first question today will come from Lucy Yu of Bank of America. Please go ahead.

Hi, Eileen, Michael, Helen. Thank you for taking that question. So I have three questions here. First one is we have seen the things store decline by 1%. Normally, negative things store means that store level margin will contract given the operating deal average. Well, surprisingly, we are glad to see that our store-level operating margin was still up slightly year-over-year. Could you please elaborate what we have done here? Second question is store expansion. We already reached 43 cities so far, which is up a lot. Can I ask that our future expansion will continue to expand to new cities, or we will temporarily shift our focus on deepening penetration in existing cities? Question number three is on the social security impact. There has been a lot of discussion on that. So if the social security got strictly implemented by the government, what kind of impact do we see on our company? Thank you. Hey, Lucy, thank you for the question. I'll take the first one about the SST and its relationship to the operating profit margin. I think this is the real unique part of our business so far, of our stage, because as you said, typically you will see a store when you open, you start from low and then you gradually ramp up and then you will see that actually you have positive central sales and the margins improving, right? But I think, you know, we actually mentioned a lot of times that because we have a very strong, you know, brand momentum. So whenever we enter a new market, there's always record high sales, right? So the first half, I would highlight that actually, even though you see that actually our group level same-store sales is negative, it's partly, it's actually aimed by the high global record setting stores coming into the same-store sales cycle. But I have to say that actually, even though the sales level at these stores are still pretty solid, pretty high. So in terms of profit margin of these stores are still very strong. So that's one reason, right? And the second is we're now still entering new markets. So these markets, these stores are not in the same sales cycle yet. But these are also high profit margin contributing stores. So that's why even if you see that actually, you see a slightly negative sense of sales, but our profit margin, store level profit margin is still actually pretty resilient and solid and also moved up a little bit. So that's the reason. Now, you asked a good question. So I think at the same time, just leveraging this question, I also want to highlight that a company like us, which has a strong brand momentum, when we have a solid base, of the market that we've built up over the years, but also because we're entering the new markets and always hitting the global record high sales. So this kind of, you know, so SST is probably not the only KPI or matrix or the number that you should actually evaluate how good we're performing because we're a fast-growing company and we'll be entering new market with very, very high and strong sales. And then gradually when we add more stores, when these stores, you know, itself, they're normalizing, even though you will see These stores recorded initial negative same-store sales, which will have negative impact on the same-store sales of the group, but in terms of profitability, it is still very solid. So that's why for a company like us, you'll probably need to look collectively a few numbers. Are we growing the store counts? Are we engaging the market share? Are we actually growing the top line? Overall, as we scale up, are we improving the margins at the store level And at the same time, are we actually unfolding continuously the benefit, the scale of the economy at the corporate level? And this is how we believe, our management believes that you should actually look at how we perform and how we can carry out the business. And in terms of the second question, store opening.

I can answer the question. Okay, so when we allocate the new store openings each year, We will look at how many cities we have already opened and then whether we should go to new cities. Typically, based on the store potential and also the return of last year, we allocate We will gradually sort of open in existing cities. The cities will open. And also we will check whether we should move to new cities based on, you know, several things. One is sort of the brand momentum and then the demand we see of consumers from those markets. and also the readiness of the operation team, i.e., whether these cities, they're actually close to the supply chain centers, they're actually close to the cluster centers, we can leverage the existing operational resources, et cetera. So in terms of the allocation, I think for the stores we open sort of before the end of 2022, probably we'll still open 20% to 30% of the new stores there. And then for the cities, we opened since the end of 2022 to this year. At the end of this year, probably we'll open about 40 to 50% of the new stores. Then for the rest, we'll open sort of brand new markets. It's a balanced approach between sort of the deeper and then our broader.

I think your last question is about the security. Let me put it this way. At the very beginning, even in our perspective, we say that actually in terms of store staffing, we actually have full-time and also we have a part-time. This is actually determined, decided by our business model and also the flexibility of the staffing, which actually works with us. For our full-time, we are fully compliant with the Chinese regulatory regulations. The part-time, their securities are covered by their full-time job. which actually will cover their social security. And we do have a part of the orders or deliveries actually outsourced to the delivery companies, which when we actually engage with these companies, we will request them to actually represent to us that they are in compliance with the Chinese, rather than Chinese laws on the security matter.

Thank you. That's very clear.

Thank you.

Our next question today will come from Viola Yang of UBS. Please go ahead.

Hello? Hello? Hello, Viola?

Viola? Hi. Can you hear me? Not very clear, actually. Yeah. Hello, can you hear me? Yes. Hello? Yes, go ahead.

Yeah, great. Hi, this is from UBS. Thank you for the management for taking my question. So my question on the salesperson. because you mentioned in the press release that the daily sales of new markets that entered since the December of 2022 was like over 30% higher than the average of your overall stock portfolio. So can we like add more color of the performance by storage? I'm asking this question because I'm trying to understand how long it normally takes for a store to normalize to its normal sales level. And the second question is that, based on our expansion pace, how long do we expect the base pressure to continue? And the last one is, ultimately, how do we expect the daily sales of, like, Tier 2 and Tier 3 city stores, comparing to the level we've achieved in the Tier 1 cities? Thank you so much.

Okay, I'll take this one. So thank you for your question. As you mentioned, right, when we introduce new markets, consumers, you know, love the brand. They're very excited. And then the sales is actually very high. They kept breaking the global records. As we continue to open more new stores in the cities, so we sort of, you know, before you can only go to this one store. Now you probably have choices to go to 20 stores, 30 stores. So naturally, the actual daily sales of these stores will actually go down. Now that said, how much, what level will this be normalized and when will that be normalized? We actually don't know the answer yet because all these markets are very new, right? So none of them actually reach a steady state. I think it depends on several things. One thing is how big is the city in terms of stock potential and one thing is how many we choose to open And then one thing is how quickly it will open. And also the existing brand strength. And also after sort of the first phase is gone, how do we decide to continue to build the brand? So all these factors will play some role in determining sort of the steady state. But so far I can say that it's still sort of where in the early phase I couldn't tell. That's basically the three questions you're asking.

Okay, got you. Thank you, Eddie.

Our next question today will come from Lisa Lau of Jefferies. Please go ahead.

Hi, management team. Thank you for taking my questions. This is Lisa Lau from Jefferies. Congratulations to our strong growth as always. So my question is mainly on the Tier 1 cities. So first of all, I wonder what measures we do to achieve the positive same-store sales growth in the Tier 1 cities, especially Beijing and Shanghai, pretty outstanding results as is our mature markets with relatively high penetration and industry competition is fierce. And also for other tier one cities like Guangzhou and Shenzhen, I did a very simple calculation. So it seems compared to Beijing and Shanghai, the average store sales is something like close to 80% of the store sales. but also deliver good same-store sales growth. But what do we think about the potential in Guangzhou and cities like Guangzhou and Shenzhen in the future, considering there's also a local competitor and also the people's preferences on pizza products in South China? Thank you so much.

Thank you for the question. So I heard two questions. One is on Tier 1 City, what do we do to maintain the positive things ourselves? To start with, I think in today's environment, for us to get the positive things ourselves for the Tier 1 City, I think the team actually did a good job on that, right? Back to the basics, I think when consumers choose the bread to eat, they typically will think about several things. The first thing is actually the product. So you can see that we continue to sort of innovate on the products. So for example, this year, it's actually the Dubai chocolate flavor is actually quite popular. So we start to introduce that to combine with our durian flavors, right? Which is very interesting. And in the summertime, We find some of the consumers may find it's a little bit greasy to endure it by itself. So then we add the lychee to make the taste more balanced, right? And then we are also quite innovative to introduce the beef Wellington-style pizza, et cetera. So you can see we continue to offer the exciting products. to consumers. Like I mentioned before, I do think tier one cities consumers want this kind of product innovations and they resonate with their case buts. So that's one. The second thing is that we continue to deliver this delivery 30-minute promise, right? Now, you may say that lots of sort of channels make claims they can deliver 30 minutes, but we actually managed to maintain or even improve our delivery on time rate. So I think that actually means a lot to help people in their busy lives to get this convenience on time, you know, and then make their life easier and less stressful. And then also we provide consistent value, as we mentioned before. And also on the digital side, I think we not only should have, you know, existing channels, we open new channels, And then we emphasize the conversion. And then we emphasize now sort of interactions and customized offers to the members. And that's why you see the membership number also increase significantly, right? So all of these things, and also we continue to open stores, and that will help to continue to strengthen the brand positioning in T1City. So it's nothing magical, but doing the foundational things well. and then consistently doing that. I think over the time, you'll win people, you know, on their hearts, right? So that's one. The second question is on South, so Guangzhou and Shenzhen. Now, Guangzhou and Shenzhen, actually, when we opened the, you know, Guangzhou and Shenzhen with a large opening number, it was actually before the COVID time. So then right before the COVID time. And then since, so then, their sales was about to take off, but then they actually went into the COVID period, which sort of delayed the sales growth. Nowadays, I think, you know, we sort of revamp the people base there, and also we emphasize the best practices from, you know, the old market. And the same thing, right, the product, the service, the value, the digital, et cetera, we emphasize on those sort of foundational benefits. to offer that to customers, and we start to win consumers. And then this is actually a market with sort of two years in a row, very strong think for sales. But that said, Beijing and Shanghai think for sales is quite strong too. So I can see the same kind of growth pattern across the T1 cities. So in terms of potential, I do think that given the momentum in South, there's no reason that we cannot reach you know, Shanghai and Beijing potential. But it probably will take a few years. Yeah.

Got it. Thank you so much. Our next question today will come from Linda Huang of Macquarie. Please go ahead.

Hi, management.

Thank you very much for this opportunity. So my question is regarding for the delivery competition in the second quarter, because we know that the delivery educators and launch very strong subsidies and the benefit that quite a lot of the fresh made the beverage chain. So I just want to know that the, are these delivery subsidies positive or negative to our business? Do you see that these subsidies was even stronger in July, August, or the subsidies are fading out? I just want to know how this impact to our business in the 2025 and 26 and how to evaluate that. Thank you very much.

Okay, I'll take this question. So for the first half of the year, so the impact of, you know, the recent sort of the aggregator dynamics didn't actually have a lot of impact to us, right? Now that said, recently we did see there's more dynamics in this aspect. As a name brand, we actually sort of benefit more in the whole sort of situation, right? Because of more traffic and also the support from the algorithm platforms, right? So, so far the benefit to us is actually positive. Now that said, whether this sort of situation will continue, I think the situation is quite dynamic. We'll continue to monitor that. But I do believe that as a delivery brand, right, so if the consumers, if the price of aggregators ends and consumers, I do think they will have more of them will actually sort of form the habit to actually order delivery. And then as the delivery expert in this aspect, we will benefit just like we did in the COVID time, right? So that's my perspective.

I think the way we look at it, third-party aggregator, is always, because it is a large platform, and we can always, you know, and wider access to consumers. So we actually use them as more sort of a new customer acquisition channel, right? So given that, you know, these platforms, they are directing more traffic to these, you know, to these platforms like Early Miami Twins. So we are actually getting more exposure, which is good. But we do our own delivery ourselves. So we will monitor the situation, but I think more importantly that once they experience the 30-minute delivery, the convenience from our delivery, they get used to this habit. And then we also, the way we manage that is we actually attract or acquire more new customers and using differentiated loyalty programs to convert them into our own platform. So in the long run, we were consistently doing that so that this platform will still continue to be our channels to acquire more new customers, convert them into our own platform. So this is how we actually operate that. How we look at it rather than purely actually relying on the traffic there to boost our business. So this is not the way we do that.

Okay, I got it. Thank you very much.

Our next question today will come from Walter Wu of CMB International. Please go ahead.

Hi, hello. Can you hear me? Yes. Great. Hello, Eileen, Helen, and Michael. This is Walter from CMBI. Congratulations once again on your impressive results, and thanks for the chance to ask questions. There's only one question from my side, and it's about the semi-new and new markets. The performance in the semi-new and new markets has been extremely strong in recent years. But looking ahead, how do you foresee the same sort of growth in these markets, and perhaps in the medium terms, like two to three years? And also, how do you think about the margin trend evolving in these markets as well, will it be higher than that in the material market, and will it continue to trend up in the future? Thank you.

Okay, I'll take this question. So I think you will observe the following things for the seminar and new markets, right? So at the beginning, because people are looking forward to us coming to this market, so once we opened there, we got very strong results there. And then, as I mentioned before, we should continue to open stores there, right, to, you know, to build the brand and also to leverage the supply chain. And then as we continue to do that, over the time, at the beginning, I think the average daily sales for these stores on average will actually go down. But then at the same time, we actually have levers to add to sort of the, you know, these stores. So, for example, at the beginning, we were, you know, so crunched on capacity because the line is very long. We didn't open delivery. Nowadays, as we open more stores to shoulder the demand, and then we can actually open delivery gradually, right, as we mentioned. And then at the same time, we can actually replicate the other best practices proven in the tier one cities. So, for example, you know, the value, sometimes we don't even offer the full menu. in those new stores, right? And then I think as you continue to build the stores and replicate these best practices in these markets, the brand will continue to get stronger. The other component I forgot to mention is actually people. Are people in these markets very sort of young and new? They got hired. They got trained. We want to train them more. But then because the new markets only exist maximally for three years, less than three years, so we don't have enough time to train them as much as we train people in Beijing and Shanghai and older markets as they gain more experience. They can actually get faster. They can actually, you know, deliver sort of better service and products consistently to the consumers. That will actually, you know, create more demand for the brand, too. So I think that's a curve. So at the beginning, probably when you open more stores, that will be the major impact. But as you continue to add those sales levers and build the brand and build a critical mass of the stores, you will start to see the inflection points. But then, like I mentioned before, this is also new in the system. We don't know how soon, how long, but we'll try our best to do the right thing, just focus on the foundational benefits to serve the customers right.

Yeah. Well, in terms of margin, obviously, because the sales is pretty high, Right, so obviously the margin is very, very strong, very high as well, you know, much higher than our group level, right? But initially when they actually, the sales, you know, slightly coming down a bit, as we add more stores, as the store itself start to kind of normalize, it will come down naturally, right? But then in terms of profitability, it's still pretty strong, right? So it's actually higher than, it still contributes positively, to the groups, you know, overall profitability. But when you see, if you look even longer term, and then we need to talk about, you know, in these markets, there are more stores and the store, the market itself has scaled economy in terms of how we operate these stores in the market. And the brand name penetration is, brand name is stronger with more stores there. So it's, I do not have a definite answer for you yet in terms of, you know, where it could go. But then I think a positive sign is that actually we do believe that actually these will be maintained at the higher than the current group level profit margin for the stores. Thank you.

Yes, yes, very helpful. Thank you.

The next question. We'll come from Xiaowei Lu of Citix. Please go ahead.

Hi, management. Thank you for taking my question. This is Jiwei from Citix. You mentioned the importance of the member customer base, so I have questions regarding membership. Do you have any long-term plans for acquiring members, boosting member opportunities, and designing member benefits? Thank you.

Okay, so it's about members. So you're right, right? So our membership actually number increased very quickly. And then at the same time, the members already contributed to 66% of the sales. And so we have, you know, existing mechanism in terms of where to acquire the members across different channels. And then also, you know, the existing membership sort of loyalty program. And we also do sort of CDP, CRM program to design customized offers for different consumers. Now, recently, we find that in a new market, it's actually very interesting. Because when we open a new market, you know, we get a lot of consumers coming in at the beginning. And then we actually left the time to interact with them to get them into the membership program. And we do understand that to get people in is not the intention, but to get the members to come back is important. And which is, you know, not only sort of the offer, but also the first-time experience. I think our operation team has continued to optimize their capacity, their training, and to make sure the service and also the food quality of the first time is actually very good. So typically, loyalty members, the frequency is actually higher than average customer. And then as the market actually gets more mature, the frequency of the consumers will get higher too, right? So we do think that with more new markets sort of entering, becoming more tenured, and they will see the same pattern happening for them. And we're very happy that the frequency we see for the beginning phase of the new markets is already sort of speed up compared to before. So it's relatively higher than what we see before. And then I think in terms of the benefits, the other interesting thing we find is that for the older markets and newer markets, people may want different things. So then when we design the benefits, we will actually fine-tune based on the city type, location type, etc.

I think it's very helpful.

We will take one more question. The next question will come from Shengwei Lai of CICC. Please go ahead.

Hi, management. I'm Shengwei Lai from CICC, and thanks for taking my question. I have one question. As your store density is relatively high in Beijing and Shanghai, What are future sales drivers in cities like new models, new day parts, etc.? Thank you.

Got it. So I think even in sort of older cities, you will continue to leverage those existing levers. So for example, as you continue to open stores, your brand gets strengthened, your market share gets bigger. And then as you your brand goes up, you're also sort of the sales penetration and also frequency will actually go up from the existing stores. And then also as the sales goes up in the city, your media will go up, right? And then we'll continue to do many innovations. So every single year, we actually present new innovations to consumers to create excitement. Sometimes it's pizza, sometimes it's size, sometimes it's drink, sometimes it's day part, sometimes it's location. sometimes it's crust, right? And then for the last year's, you know, the volcano, we actually first used the cheddar cheese. Now this year we have the chocolate. And marshmallow, yeah. Yeah, so if you haven't tried it, you should try it. You know, we will continue to have new ideas to make it very fun and tasty for people to have our pizza and food, right? And then as we build more stores in these existing older cities, our speed is actually getting faster and faster for delivery, which I think convenience is very important for these, you know, busy people in these cities, right? And then for the value, we also have, you know, different levers. And for the digital, as I mentioned, we have the data behind it. And then for digital, we have, you know, several areas we continue to focus on. So for example, the customer facing, right? How do you become only channels for those new channels? How do you actually make it easy to place orders? And then for the existing channels, how do you optimize the conversion into purchase, right? And then also for, you know, day park, like you mentioned, right? We opened the late night day park. And then it's not that you open it just the end of the story because it will take a while for people to realize you actually offered this day park. You continue to build that for years, right? And then you have other daypads you can open. For example, we have the afternoon tea, but probably we're not viewed as afternoon tea daypad players yet. So how do you view that daypad, et cetera, right? So I do think that even for, you know, the existing markets, there are ways to continue to, you know, build up the sales and the breadth.

Got it. Very clear. Thank you.

At this time, we will conclude our question and answer session. I'd like to turn the conference back over to management for any closing remarks.

Thank you for coming to our call. We look forward to continuing the conversation with you. Thank you.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.