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TH International (THCH) - 2025 Q2 - Earnings Call Transcript
2025-08-26 13:02
Financial Data and Key Metrics Changes - In Q2 2025, food revenue increased by 8.6% year over year, with food revenue contribution reaching a historical high of 35.2%, up 2.8 percentage points from 32.5% in 2024 [5] - System sales achieved a 1.4% year over year increase, while adjusted corporate EBITDA returned to positive, and adjusted net losses were reduced by 16.2% [6][19] - Monthly average transacting customers reached 3,590,000, a 14.3% increase from 3,140,000 in Q2 2024 [15] Business Line Data and Key Metrics Changes - Company-owned and operated store revenues dropped by 12.5% year over year due to planned closures of underperforming stores and a 3.6% decrease in same store sales growth [15] - Revenues from franchised and retail businesses increased by 50.7% year over year, with the number of franchised stores rising from 333 to 449 [16] - Food and packaging costs accounted for 30.1% of revenues from company-owned stores, with a reduction in labor costs and other operating expenses as a percentage of revenues [17] Market Data and Key Metrics Changes - The average number of members per store reached approximately 26,600, serving as a strong catalyst for future growth [7] - Digital orders as a percentage of total orders rose from 86.5% in Q2 2024 to an all-time high of 90.4% in Q2 2025 [15] Company Strategy and Development Direction - The company reinforced its coffee plus freshly prepared food strategy with the launch of the live lunch box platform and new combo products [5] - Plans to open around 200 new franchise stores in 2025, focusing on special channel store development in high-traffic locations [7] - The company aims to enhance operational efficiencies through supply chain optimizations and rigorous cost controls [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, expecting positive same store sales growth and continued improvements in profitability [21][45] - The company is focused on balancing the need for revenue growth with conservative operating capital management [30] Other Important Information - The company has established a unique coffee plus fresh prepared food business model, with a payback period of two to three years for franchise opportunities [22] - Marketing expenses as a percentage of total revenues increased to approximately 4% during the quarter, reflecting investments in the lunch box campaign [18] Q&A Session Summary Question: Current thinking on the rate of sub franchise applications and new store growth - Management clarified that 41 of the 49 closures in Q2 were non-MTO Express stores, with a target of around 200 new MTO stores in 2025 [25] Question: Sustainability of increased marketing expenses and impact on same store sales growth - Management noted that same store sales have been recovering well and expect positive growth in the third quarter [27] Question: Balancing investment for revenue growth with operating capital needs - Management indicated they are close to achieving operating cash flow self-sufficiency and are working on securing additional capital for growth [30] Question: Update on refinancing of convertible debt - Management confirmed good progress on refinancing and will disclose details when available [38] Question: Monetizing loyalty members and potential sales generation - Management acknowledged the challenge of deriving value from memberships and is working on product and campaign designs to attract spending [39] Question: Expectation of liquidity position improvement - Management expressed confidence in a good liquidity position and the approach to operating cash flow self-sufficiency [41]