TH International (THCH) - 2024 Q1 - Quarterly Report

Financial Highlights Tims China reported significant revenue growth for Q4 (29.8%) and FY2023 (55.9%), driven by store expansion to 912 total stores and a 66.3% increase in loyalty members to 18.7 million Q4 2023 Key Metrics | Metric | Value (RMB) | YoY Change | | :--- | :--- | :--- | | Total Revenues | 391.2 million | +29.8% | | Net New Store Openings | 149 | N/A | | Adjusted Store EBITDA | 15.9 million | +23.9% | | Adjusted Store EBITDA Margin | 4.6% | Approx. unchanged | Full Year 2023 Key Metrics | Metric | Value (RMB) | YoY Change | | :--- | :--- | :--- | | Total Revenues | 1,575.8 million | +55.9% | | Net New Store Openings | 295 | N/A | | System-Wide Stores (Year-End) | 912 | N/A | | Registered Loyalty Members | 18.7 million | +66.3% | Management Commentary Management emphasized strategic progress in 2023, shifting focus to achieving corporate EBITDA break-even in 2024 through efficiency gains, while Popeyes demonstrated strong initial positive adjusted store EBITDA - The company's focus is now squarely on driving profitability, with a target to achieve corporate EBITDA break-even later in 2024[6] - The Popeyes business demonstrated strong momentum, launching 10 stores in 135 days and achieving a positive adjusted store EBITDA in 2023[6] - Operational efficiency was enhanced in Q4 2023, with year-over-year reductions in rental and labor costs as a percentage of company-owned store revenues by 6.9 and 1.3 percentage points, respectively. Marketing and adjusted G&A expenses as a percentage of total revenues also decreased[6] Fourth Quarter 2023 Financial Results Q4 2023 saw total revenues grow 29.8% to RMB 391.2 million, but resulted in an operating loss of RMB 232.2 million and a net loss of RMB 311.2 million, impacted by a RMB 89.6 million impairment charge, while Adjusted Corporate EBITDA loss narrowed to RMB 52.5 million Q4 2023 Revenue Breakdown (YoY) | Revenue Source | Amount (RMB) | Growth Rate | | :--- | :--- | :--- | | Company Owned & Operated Stores | 341.5 million | +25.3% | | Other Revenues | 49.7 million | +71.4% | | Total Revenues | 391.2 million | +29.8% | - The company incurred impairment losses of RMB 89.6 million on long-lived assets, primarily due to the closure of underperforming company-owned stores in Q4 2023[15] Q4 2023 Profitability (YoY) | Metric | Q4 2023 (RMB) | Q4 2022 (RMB) | | :--- | :--- | :--- | | Operating Loss | (232.2 million) | (131.4 million) | | Net Loss | (311.2 million) | (222.9 million) | | Adjusted Corporate EBITDA | (52.5 million) | (54.7 million) | | Adjusted Net Loss | (117.8 million) | (100.8 million) | - As of December 31, 2023, the company's total cash, cash equivalents, time deposits, and short-term investments were RMB 220.8 million, a decrease from RMB 611.5 million at the end of 2022[18] Key Operating Data Key operating data as of December 31, 2023, indicates a growing network of 912 stores, 2.5% same-store sales growth for company-owned stores, 18.7 million loyalty members, and RMB 15.9 million in Adjusted Store EBITDA Key Operating Metrics (as of Dec 31, 2023) | Metric | Q4 2023 | Q3 2023 | Q4 2022 | | :--- | :--- | :--- | :--- | | Total Stores | 912 | 763 | 617 | | - Company Owned | 629 | 589 | 547 | | - Franchised | 283 | 174 | 70 | | Same-Store Sales Growth (Company Owned) | 2.5% | -0.4% | -7.1% | | Registered Loyalty Members (thousands) | 18,714 | 16,898 | 11,250 | | Adjusted Store EBITDA (RMB thousands) | 15,859 | 29,310 | 12,796 | Recent Business Developments Recent developments include surpassing 20 million loyalty members, securing US$20 million in financing, and expanding partnerships with Shanghai Metro and DiDi, alongside aggressive Popeyes expansion plans - Surpassed 20 million registered loyalty club members as of March 31, 2024[25] - Executed junior promissory notes for a total of US$20.0 million in March 2024 to support operations[25] - Announced partnerships with Shanghai Metro to open coffee shops in stations and with DiDi Chuxing for cross-brand marketing, which generated RMB 1.7 million in incremental sales in a two-week campaign[27][28] - Popeyes plans to open 500 more stores in the next five years and 1,700 stores over the next decade in China[27] Financial Statements Unaudited financial statements for FY2023 show total assets decreased to RMB 2.22 billion, liabilities increased to RMB 2.64 billion, resulting in a RMB 422.4 million shareholders' deficit, with a net loss of RMB 872.9 million on RMB 1.58 billion revenues and significant cash usage in operations and investing Balance Sheets As of December 31, 2023, the balance sheet shows total assets of RMB 2.22 billion, liabilities of RMB 2.64 billion, a cash decrease to RMB 220.8 million, and a shift to a RMB 422.4 million shareholders' deficit Selected Balance Sheet Items (RMB in thousands) | Account | Dec 31, 2023 (RMB thousands) | Dec 31, 2022 (RMB thousands) | | :--- | :--- | :--- | | Total Current Assets | 458,620 | 796,813 | | Total Assets | 2,215,439 | 2,642,010 | | Total Current Liabilities | 1,395,833 | 1,318,262 | | Total Liabilities | 2,637,868 | 2,531,706 | | Total Shareholders' Equity (Deficit) | (422,429) | 110,304 | Statements of Operations Full year 2023 revenues reached RMB 1.58 billion (+55.9%), but total costs of RMB 2.28 billion led to an operating loss of RMB 701.2 million and a net loss of RMB 872.9 million, primarily due to expansion costs and impairment charges Full Year Income Statement Highlights (RMB in thousands) | Account | Full Year 2023 (RMB thousands) | Full Year 2022 (RMB thousands) | | :--- | :--- | :--- | | Total Revenues | 1,575,780 | 1,011,064 | | Total Costs and Expenses, net | 2,276,963 | 1,592,247 | | Impairment Losses of Long-lived Assets | 111,427 | 7,223 | | Net Loss | (872,926) | (744,748) | | Basic and Diluted Loss per Share | (5.68) | (5.80) | Statements of Cash Flows Full year 2023 cash flow shows RMB 196.1 million used in operations, RMB 60.0 million provided by investing, and RMB 80.8 million from financing, resulting in a RMB 35.5 million net cash decrease, ending with RMB 203.6 million cash Full Year Cash Flow Summary (RMB in thousands) | Activity | Full Year 2023 (RMB thousands) | Full Year 2022 (RMB thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (196,130) | (286,928) | | Net cash provided by/(used in) investing activities | 59,999 | (705,172) | | Net cash provided by financing activities | 80,833 | 827,160 | | Net decrease in cash | (35,490) | (151,760) | | Cash at end of the period | 203,587 | 239,077 | Reconciliation of Non-GAAP Measures Non-GAAP metrics for Q4 2023 show Adjusted Store EBITDA of RMB 15.9 million, Adjusted Corporate EBITDA loss of RMB 52.5 million (an improvement), and Adjusted Net Loss of RMB 117.8 million, providing a clearer operational view Adjusted Store EBITDA Reconciliation Q4 2023 Adjusted Store EBITDA was RMB 15.9 million (4.6% margin), derived from a RMB 36.2 million gross loss, adjusted for RMB 35.7 million depreciation and RMB 16.3 million pre-opening expenses, with full-year Adjusted Store EBITDA at RMB 69.4 million Q4 2023 Adjusted Store EBITDA Reconciliation (RMB in thousands) | Item | Amount (RMB thousands) | | :--- | :--- | | Fully-burdened gross loss - company owned and operated stores | (36,168) | | Add: Store depreciation and amortization | 35,711 | | Add: Store pre-opening expenses | 16,316 | | Adjusted Store EBITDA | 15,859 | Adjusted Corporate EBITDA Reconciliation Q4 2023 operating loss of RMB 232.2 million adjusted for items including RMB 89.6 million impairment losses, resulted in an Adjusted Corporate EBITDA loss of RMB 52.5 million, a 4.7 percentage point margin improvement YoY Q4 2023 Adjusted Corporate EBITDA Reconciliation (RMB in thousands) | Item | Amount (RMB thousands) | | :--- | :--- | | Operating loss | (232,161) | | Add back: Depreciation and amortization | 45,613 | | Add back: Impairment losses of long-lived assets | 89,635 | | Add back: Other adjustments | 44,449 | | Adjusted Corporate EBITDA | (52,464) | Adjusted Net Loss Reconciliation Q4 2023 GAAP net loss of RMB 311.2 million was adjusted to an Adjusted Net Loss of RMB 117.8 million by excluding non-cash items like RMB 89.6 million impairment losses, resulting in RMB 0.74 Adjusted Net Loss per share Q4 2023 Adjusted Net Loss Reconciliation (RMB in thousands) | Item | Amount (RMB thousands) | | :--- | :--- | | Net loss | (311,158) | | Add back: Impairment losses of long-lived assets | 89,635 | | Add back: Changes in fair value of convertible notes | 26,909 | | Add back: Changes in fair value of Deferred Contingent consideration | 32,437 | | Add back: Other adjustments | 44,389 | | Adjusted Net loss | (117,788) | Adjusted Net Loss Per Share | Metric | Q4 2023 (RMB) | Q4 2022 (RMB) | | :--- | :--- | :--- | | Adjusted basic and diluted net loss per Ordinary Share | (0.74) | (0.73) |