THCH - Earnings call transcript Q4 2023 | TH International Limited

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Operator

Ladies and gentlemen, welcome to Tims China Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded.

At this time, I'd like to turn the call over to Gemma Bakx, who heads Tims China Investor Relations efforts, for prepared remarks and introductions. Please go ahead, Gemma.

Gemma Bakx

Good morning, good evening, everyone, and thank you for joining us on today's call. My name is Gemma Bakx, Investor Relations. its today. and announced financial year Limited earlier results International fourth full quarter XXXX TH release well available press hear and and IR The Albert as at from financial contains presentation, website CFO. CEO highlights operational Yongchen which Li, Lu, are and you our now ir@timchina.com. Today, on our company's as the will an Director; accompanying After its Q&A the company's session. prepared remarks, the management team will conduct

webcast IR the find of website. can call our today's You on earnings

and investor you and Before are presentation about we expectations not forward-looking and that like are but which statements remind started, uncertainties. including, company's limited not are events contain get our materials statements. subject I'd to that historical future statements, facts, beliefs the to, forward-looking earnings to Statements

actual forward-looking from forward-looking factors filings cautionary and certain which results we SEC. This may Forward-looking our included believe should inherent evaluating statements statements financial release presentation our measures, also statements conjunction involve differ statements. be in these in our risks with helpful All risk considered can in and and in be earnings the non-GAAP the our materially performance. with includes uncertainties,

non-GAAP press those GAAP found not be considered those measures. The can substitutes measures However, release earnings accompanying issued reconciliation measures earlier in related to the our comparable be information for should GAAP and today.

I ahead, Yongchen. turn said, it CEO go Please over would to that now like our With Director. to Yongchen and Lu,

Yongchen Lu

strategic China. In We elements and Joy. like cities. building made our My is core existing the blue-chip Easy We delivered and we community name partners of our Yongchen XXXX, entering franchising by and with Gemma. in convenience you, new Tims in CEO guests greater our Thank density strategy. relationships of to a Lu, partnerships, growing progress our our of Sinopec‘s the expanded number cities Director

end with our delivered period a accelerating a later We locally our China Xth activities. With in is solidly in we relevant the And the particular, our rapid always of stores our brand. payback of Hortons our epidemic achieve thanks and notably, among systems breakeven in driving With capital-efficient in us. focus strategic year ever focus ongoing just anniversary behind robust for drive capital-efficient XX.X% we been place, focus China. and our to opened, in unit year. profitable And more significant to those view full on the loading we company-owned stores economics. following had and delivered which demonstrating with and and driving XXth growth COVID celebrations a and celebrated XX.X% our the growth milestones us, Tim optimized infrastructure year rapid, on XXXX, profitable of innovation, future, we in the a innovation, anniversary continue top respectively, We manner, in in corporate operational profitability the have the and EBITDA now full efficiencies growth. We to line QX and growth to squarely the this opened franchising year-over-year redouble first XXXX commitment are most

million, representing on members XX.X year-over-year average store March XX, per of registered registered XX.X% number XX reached we surpassed and members loyalty loyalty XX, December XX,XXX, club with of As growth XXXX. our club just members million XXXX, the exceeding

such stores and strategically of continues we and investments as offices prioritized business various QX the Leveraging [indiscernible] with the In success first sales we [Foreign by first year, our respectively. XXX our achieving opening starting sales, have our infrastructure, in branding, our of Tims in in of XX,XXX sub-franchises, expansion Express in on Bestore development store franchise the we opening December store Our quarter in past cities, formats, in new forged with have the shop reputable network strategy streak RMB retailers during impressive launch Bestore franchise XXXX. Language], store long-term its XX,XXX the as XXX alone. the as XXXX. Building technology Wuhan in partnerships evidenced the successfully substantial opened RMB

further such actively our pursuing strengthening as collaborations effective committed ahead, Joy Looking partnerships. while partners Easy strategic with Sinopec‘s are other we to fitting

For provide to instance, opening XX passengers to Shanghai [indiscernible] every the metro XXXX, day. transporting and a with connect that XX X Shanghai partnership the brand has In items. stations, [Foreign and stores the of we anticipate and customer our Language], best base. Continuous launched [Foreign and new has larger, Cinnamon always Latte first partnership Tea led products, Strawberry us strategic of world's been the Flavored Language] XX in largest with our amongst for city newly In total Orange We sellers. new XXXX, X Latte Tims recent launched the food Latte across greater system, Metro QX million focus [Foreign visibility Shanghai this Language] of a us. XXX will were Metro as diverse Jasmine the product approximately a one innovation beverages new Flavored merchandise

We also awareness. gaining more brand and [Foreign generates Language], collaborate which significant XX on media million SpongeBob [indiscernible] [indiscernible] exposures with than

for international to key our continue yielding an been Coffee that implement products, brand offers As unique coffee differentiator Plus had strategy, a quality the best value positive outcomes. which we

refine Campaign, campaign on Day Wednesday Coffee the to coffee meals Following our the successful Membership and further QX, welcoming offering. further Bagel bagels discounted and in offering combo deals we Brew combo advanced

to the quarter XX.X% quarter, fourth percentage from points increased X the of almost orders of that the in percentage included In XX.X%, by XXXX. same food rose

and XXX new choices XX, our in meal chicken store seafood fried Chinese XX end the had of launched more different to pace and XX every our an value on pieces infrastructure been excited XXXX, momentum X is proud of. By of Popeyes true offering XXXX. something times. flagship over in on is average since testament store burgers, strong a Within XXX,XXX team so dining Popeyes, flavors very the the days, demonstrating stores Shanghai, something of successfully achieving it built opening we the Popeyes business record-breaking of Tims, we grand store And first various Popeyes sold and days, had of August our of during our

team hot innovative exceeding created flavored popularity a XX,XXX in milkshakes, R&D local addition, In demonstrating our cups, the well. and iced as of resulting sales category beverage our

Our dedicated have to domain attracted Popeyes for mini who as in well. have not ecosystem grow customers able XXX,XXX through over the made successfully but WeChat program channels the private only purchases,

financial Looking ahead core market solidifying initiatives of point, into detail. Albert? and the our our year marketing position discuss team operational XXXX, our further management in this to I and would Albert our optimized to through fourth digital performance Li, more enhancing fully to CFO, high-quality committed to and it full the and and XXXX remainder to advancing over XXXX profitability. At is turn like products Popeyes quarter

Dong Li

Yongchen. you, Thank

a post-COVID the which decided enhanced redundant to number operated percentage dimensions, full-year respectively. During proved underperforming we fourth rental percentage to operational These of us be earlier efficiency we of to our company-owned we the of by across stores [indiscernible] that have our points a revenue headquarter reduction year-over-year stores, from give level, evaluate. and at to quarter XXXX, pruned and in costs as and deliver X.X allowed points, actions X.X a and labor percentage

percentage products, adjusted and representing of XX.X% points of XXXX, and respectively. of sold percentage administrative of beverage marketing a Our X.X year-over-year revenues general of a by we and In decreased total XX expenses over respectively. points XX bagel expenses a million total had million year-over-year, nearly and growth as X.X XXX.X%, percentage cups and

an end and Our transaction driven the by to The XXX the of growing same-store in the QX system during same percentage XXX.X of we average potential sales XXXX, orders XX.X% primarily XXX from of for takeaway as from of from X.X QX of XXXX, QX RMB and growth the to XXXX grew total X.X% customers million number of digital ] XX.X% company-owned a in XXXX. XXXX. X.X year. Digital operated sales systems quarter Overall by capabilities XXXX in an for stores monthly and in increase the growth in meet orders to as to XX.X% increased strengthen stores were and year-over-year of XX.X% QX end increase was delivery demand by as of XXXX representing [ continue million services. last our to in a million

to liquidity. Turning

XXXX, mentioned, XXX.X as financing with equity an support on XX, Capital, an in business entered investments well offset The we XXX.X cash our attributable short-term our December of XXXX. XXXX, to total and March into the bank promissory our cash XX and expansion Cartesian equivalent, RMB of deposits us XX, the disbursements as back existing the million of shareholders. compared agreement we as primarily million nationwide, was USD RMB of notes into and time as entered increase As borrowings. And change to in were network million who rapid by December settlements with cash investors with store

and supply model drive me made-to-order and front center to being that, forward, Yongchen our Thanks, efficiencies, now roll do, with differentiating out it of for closing will to our Yongchen. and everything Going pass remarks. expansion capabilities continue preparation enhance food we back sub-franchising. With let profitability and our the successful of accelerate we to chain traffic fresh

Yongchen Lu

you, Thank Albert. Yes.

cities support we opportunity formats brand. to coffee members, comprehensive over with offering an brand, your and and Before Together, like stores coffee club express international warm work. XX Q&A, products have the international over coffee turn model, advantage partners to we an gratitude continued XX unique investors, plus valuable, of franchise our offering and loyalty hard my to a and of opportunities unique quality for I business a community would team best food to a strong at in created this take heartfelt XXX-plus shareholders, store million business differentiated as

of the anniversary of our just Tim milestones Xth of the being celebrated anniversary and brand. Hortons significant We in the China XXth

behind EBITDA with to us, generate shareholders. a profitability long-term forward value for to our being fully view driving achieve this later sustainable focused With milestones corporate these look and on breakeven year we

Gemma? Now, Gemma over the I turn for Q&A session. will call today's to

Gemma Bakx

questions. Registered

Go Let's begin ahead, question. the first with operator.

Operator

over Gemma, Instructions] to [Operator you.

Gemma Bakx

the link. and How We Chinese submitted compete effectively via the years? war the questions following in does the our perceive coffee amongst company the webcast especially company recent How itself those differentiate in price the does market, competition peers? have

Yongchen Lu

Yes.

the our Okay. Thank you from good for question friend.

headwinds mean macroeconomic Germany as is coffee consumption is and early such countries increased in annual XXXx. remains is coffee Per in other U.S., China, countries XXx capita consumption Korea It disposable that even the the current capita to market in Asian extremely stages its still the growth over where such development. income. China the and still despite per to worth low So than of and robust right due urbanization South market I as annual Japan less penetration, compared now represents noting

market experiencing further war sustainable disruptions. on, going So has which saturation. expansion, growth some rapid indicating China's significant There is believe from industry the a do far been we market that with price We a reaching coffee is potential definitely overall, for do is though. see not

long the financial And this pressure in to strong will way a price unit operate lead likely margin margins to growth, to a this not strain. seem leading However, profitable get business. Despite and run, war will does to be compressed. revenue inadvertently

So be nobody to would like this for to pricing aggressive much strategy longer. maintain able

by So prices, market seek effectively audience to on availability. the helps expand and pricing making new strategy options. the and low initially coffee right, us it lower the prices these increased accessible side, as by high-quality This indirectly affordable may war eventually plus benefits consumers, through drawn wider

diverse As our price market consumers the and to segment. emerging eases well-positioned capture interested ready brand this coffee the is offerings exploring in grows, war

we compelling food the and don't take have is from those at so offering product compete actually with differentiated we good actually market. with shares some fresh to that brands, option Our prices

the the that XX good overall, in Given we ourselves. the have we seen Again, months. growth have for last very spot a of market

had have profitable We opened most date. the we amongst we stores they and previously, that more have than opened to are

profitability noticed same no and there energy the the cannibalization coming time. by at this war. is -- of the no even So price are certainly And sign

Operator

line comes Argus Steve Corporation. Next telephone from question of Silver from Research the

Steven Silver

Silver didn't great name the Argus. the Steve corporate It's case it's see achieving to In target from this come for year. EBITDA breakeven through,

openings could or it will out I in have, question markets whether forward-looking Tims whether First entering your of discuss XXth China, into plan will hoping increasing was put I penetration be focus in markets? you cities and new existing more press release of new entered on a terms the recently city more store mentioning having

Yongchen Lu

we we cities. the mean, new clusters also will Thank -- cities Yes. we I priority, our density But within to the on focus increasing organize. we for you, No, in on have Steve, the question. enter will opportunity XX good into the focus will

the clusters logistics the cluster. cluster cetera. major mainly given in As China chain, you the supply may specific right, Shanghai, [indiscernible], management, X more had Eastern and we and and North of efficiency in Then, will Shanghai. [indiscernible] Costal that et enter in China, the we into cluster, space the marketing

clusters have Shenzhen, we Beijing cluster, et clusters and we So in that's and cetera. one example. Chengdu, the we Beijing, have and Guangzhou in And clusters have in

and system more So those into build will already. cases I that we'll we infrastructure mean enter clusters into have bring those use in clusters and the

Steven Silver

Yes.

question So loyalty I program. the had also about X

I earlier just was any think and showing that this maybe little context the now provide you across compares that among of a of hoping how year registered just users surpassed active industry. could maybe very context million any growth. users I XX terms solid base. in And around the percentage

Yongchen Lu

I rate the we people emphasize briefly, above to mean, come would is, liked above okay, have measure, there. customers mean, I have I'll stores I mentioned, I for Yes. X million which transacting average will that I located industry. the prepurchase that that as average with. than our question, to think, actively to X%, the And mean, more Albert so purchase also, who Xx is we

Operator

For next you. over Gemma, our to question,

Gemma Bakx

via is well? they priced And another question as terms terms of competition webcast have We coming of in do of most terms how yourself product our offering, from you in in and differentiate in price, link. it your

Yongchen Lu

Yes.

made-to-order think with combo especially China, part offer price. differentiated in I other brands fresh most in stores, where our offer coffee the we food select [indiscernible] food. compared And is we

plus [indiscernible] for only of for which X type For coffee breakfast breakfast means combo. we at X example, price the RMB of combos bagel, XX.X,

which from for like X cup plus combos, of RMB X coffee And XX.X, of type sandwich $X. lunch starting is

with the that food orders include percentage mentioned percentage I X come increased half More XX.X%. points in in of of quarter, same the earlier, than rose XXXX. orders to the by fourth XX.X% food, as from almost of So quarter

on going grow year, sales war price strategy. XXXX given our continue last to same-store the despite our So differentiation in

Gemma Bakx

Thank you, operator.

company same-store our XXXX? from the the going link margin is question sales proceed webcast And expectation what growth how forward? is for on next the Our outlook your does

Dong Li

Gemma. Okay. Sure. will I take Thank this you, question.

rise is Yongchen growth then in some of recovery actually so believe being Chinese we So will So per terms market significantly years, terms annual have even is potential, over quite coffee strong recently ticket a beginning at intense the sales capital is though -- of And intense mentioned, I we as showing of I mean -- to of the -- okay? the right? consumption in noticed the mark. some think, strong competition

X.X% think coffee a expecting believe model our are -- just towards growth And position then I release well price of actually growth customers this X have sales that we made, single-digit existing is new the seeking subsiding, our differentiate contribute as year and for And -- like -- XXXX same-store that that so the the full run XXXX. same-store business also sales many and to press food war consumers with our for increasing So us so I you are positioned. And like with speak sales or actually consumption, high we digit was our as of built single in a noted broader year. expected have of think the exploration to we and for actually significantly options, in as in coffee a still customers, future. we same-store and probably said, seeing so will lot be their like also we

Operator

[Operator Instructions] Gemma. to For over question, next you,

Gemma Bakx

rest Popeyes is different question of And chicken rollout market? submitted Chinese from next China's community How the we the is going? fried our Tims can XXXX? built from network? can the expect what Popeyes from webcast coffee in is and benefit The How from

Yongchen Lu

question. -- mean I'll I that Yes. take

consumers another as China, western great cetera. market, can successful large which China fried and chicken, like fried has brand XX,XXX do in larger extremely over we already chicken, such Popeyes [indiscernible], accommodate et market all extremely stores Chinese [indiscernible] certainly being a chicken an kicking And So know, and and in China.

see and buds open to taste [indiscernible] Now service, has great in well as by sales casual consumers accepted offering we vibrant, and no continues planned. Shanghai, table build as as brand by can a our stores and young the Popeyes [indiscernible] in in been and that well

to of then, and capabilities Popeyes, for Tims like be deal of Now systems club new the than mentioned, to with we market can past lot over members we entry loyalty X synergies and about reach over in our Popeyes, networks to process the used Popeyes the had just digital to to XX X most typical brand able of like and and to open were them and able there members XX infrastructure achieved introducing Popeyes [indiscernible]. million I our a the the and why Tims, years at members more launch record-breaking well look year the instead as loyalty new out them systems, to be communities. [indiscernible] to million have a we capabilities, the transaction drinking That club are X to numbers. And supply the first-day as forward as of that chain is in to months one bring have

Gemma Bakx

What your sheet build thinking infrastructure model shifting is of given and that current the is of the balance on out franchises? the most state the is business to

Dong Li

Sure. one. Okay. this will take I

Okay.

So tax and in whole the actually is to think flow for the self-sufficient of achieve as top XXXX. I mentioned, operating Yongchen becoming company priorities has one [indiscernible]

more overall the we in significantly year. And that, will ratio expecting with value terms the actually like this flow to the balance quite significantly. quite the believe operating cash add the are will sub-franchising and to can in in of a in business actually -- terms So terms meantime, sub-franchising quite leverage by reduce profitability, also actually be the help significant we the to and terms the in improve brought of overall cash and flows we cash business as status model, more that overall us contribute of also are focusing of on actually our

our actually, still are still are sheet, expecting terms leverage to And are keep as in facilities. I in very on the public where the like solutions to in meantime, we Yes. access in bank ratio -- a and can company, we think, actually we a financing of balance of of alternatives. like terms financing potential declined So also of in I good still considering overall going terms such forward. And a actually have lot -- we we be actually overall the the the time, balance medium as open think

status in that actually, time can we sheet over So quite balance actually, our improve confident are overall, XXXX.

Gemma Bakx

have current We sheet. current question [indiscernible], The negative. issuance you can RMB How it balance certain XXXX, XXX cash XX promissory position? current rate is with still Net million. recent like had and nearly XX are the the At was update you in come a plans will are? year-end a stop-gap of bring while question it follow-up on a flow measure. you RMB at conversations from into million liabilities sustainable million, what us operating assets their only were RMB seems your what shareholders? a a views notes major on and And interest Have were

Yongchen Lu

Yes. to manner capital-efficient shifted have breakeven expect franchisees. note, Albert as to we soon. opening a we I mentioned EBITDA achieve of a also, X different that very just And by mean, corporate using stores

will So June, Xst operating flow cash I we'll franchise also, to leverage that open we the store network. mean, actually generate and

year unit franchise have franchisees, partnerships the individual from have to X,XXX open expect such market. building We this also the received Sinopec‘s Joy and we more than around we stores opened and to we just applications strategic Easy as XXX the by

Cartesian as we us we given balance loss flow confident, cash course, our -- strategy increase we to we can which And improve are our in operating further cash mentioned, million -- and cash our so by are sheet. okay, major -- I operating partly I soon by sheet of had and as RMB mean profitability. which and the XXX very putting and balance enhance not So has of -- shareholder, profit Capital, --

Gemma Bakx

have a Brian Jones question We RBC. from from

that to you talk locations. XX implemented For serve you fast that and clients you supply you're Can stores your own? can Popeyes, the seeing chain locations for at you have kitchen system how productivity speak I believe new the to Again, versus averages. global the your

Yongchen Lu

now, -- I service table are -- think system. used has right the we Popeyes I We the think

-- Then [indiscernible] the at to into to the casual just the I QR of sufficient actually So pay our to which order a -- kind staff code service. first. are very food store and can make mobile And phones scan take is the food the table, a using bring come and [indiscernible] -- balance will the and will table. bring so mean their

fee I the [indiscernible] accepted and to market, I expect competitive to think why So continue brand so planned. that most to well Popeyes in and stores of -- use mean we we open Shanghai our service that's continue and been has system -- as

Operator

conference coming to this the you. to We end call. Gemma, are over of

Gemma Bakx

you thank for your Albert. earnings We conference near and so with in much. forward you, for the Thank for Thank participation, to We and in you dialing interest in reconnecting for very, concludes operator, you, This you questions all very Yongchen your your future. and Tims. your today's thank call. look again

Yongchen Lu

you. Thank your Thank for you time.

Dong Li

Thank you.

Operator

our concludes today. call That

may now You disconnect.

TH International Limited (THCH) 18 Apr 242023 Q4 Earnings call transcript