THCH - Earnings call transcript Q3 2024 | TH International Limited

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, welcome to Tims China's Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded.

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

Gemma Bakx

Thank you, Sarah. evening, call. thank good us for and today's on morning everyone, you and joining Good is Bakx, name My Gemma Investor Relations. I'm Head of

China company's well quarter The Tims financial highlights, which third results available and at its today. on ir.timschina.com. now earlier the contains XXXX operational press website an as financial as are accompanying IR presentation, release announced

a our the Today, you team question-and-answer CFO. and After company's Albert remarks, Director; will will hear session. conduct CEO from Li, and Yongchen management prepared Lu, the our

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

remind Before materials conjunction we about the get and SEC. not statements. you and are and started, be those that and statements. statements, These not beliefs our forward-looking company's that earnings All I'd uncertainties, forward-looking materially subject the investor but factors filings in are included and like historical and our in Statements risk actual to, future in the forward-looking inherent statements including, events should from involve may differ to uncertainties. limited presentation our earnings forward-looking statements with which expectations with to forward-looking our statements contain are release cautionary statements risks results facts, considered

believe includes financial also certain performance. This presentation helpful measures, can which non-GAAP in we be our evaluating

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

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

Yongchen Lu

morning Thank everyone. evening, Good you, Gemma. and good

competition achieving profitability of the first-ever profitability of corporate quarter adjusted corporate coffee market, quarter XXXX, after adjusted third our EBITDA In Chinese despite second price the ongoing the maintained in XXXX. EBITDA in the we

in expansion and margin of value continuous as margin customers. demonstrating points, margin, operated adjusted store chain contribution for We our differentiation EBITDA operational to achieved providing delivering quarterly highest-ever efficiencies and on efforts product We store our XX.X%, our and company-owned improvements previously of our focusing towards great supply X.X and year-over-year percentage further are committed disclosed capabilities.

strategy and meals prepared our open efficient, freshly October, differentiated existing kitchens. products freshly end prices and with customers. the prepared, new stores our by made-to-order of our we On working our high-quality of completed adding watch Warm to have alignment XXX and from Food, designed the In finish. prioritize investment, to guests food, this preparation start food craft stations Coffee affordable of can fresh and healthy delivering With renovation staff for we and Plus handmade fresh

launched healthy and high-quality and plant-based nutrition preservation emphasis product On ingredients. high-quality of flavor freshness particular our we and offerings, options with of the low-sugar, high-fiber on and a

and information products benefits the also make easily. on our We can provide decisions calories nutrition of so our guests health evaluate our that transparent menu and

creamer, in X Five than instant and whitener, hydrogenated make our trans fats [ product bagels team order is nondairy coffee our with sandwich beverage audiences, that calories; plus products fewer all broader ] Smile to In healthy limiting coffee Bagels fewer our offerings, X promising R&D and launched Zeros XXX calories, to powder. bagel than and X X oil, to options XXX vegetable bagels cream and tea all accessible bagel X

products our value, On competitively, combos. providing great we price our especially

is of from about only Our XX.X, food item $X. breakfast RMB cup start one combos, and one coffee that and

about RMB $X. only Our start lunch XX.X, that's combo at

item one get XX% our have to which rights addition, Chibaobao drink discount. launched the each drink -- and to RMB food one Card, guests at time In X.X we buy pay Xx

guests usage. get even Our much onetime can than more for X.X savings RMB

demonstrated did QX. over drive They tool cards a purchase Those card purchased with in guests. success sold X.Xx XXX,XXX our The who who revenue to frequency. very a purchase of those cards have frequency not have been been the year. a have RMB during increase million resounding sales, of We this effective card. third to to Moreover, a X.X a total driven in a efforts our in quarter contributing purchase compared

and value growth, capital-efficient and committed remain deliver our to offering guests. for absolute we convenience to continue We

with sub-franchisees is the partnership store our including services our cities quicker cities in of network, existing density strategic new and guests. Our underpinning expansion broadening into new outreach for welcome our to

franchising. We momentum have strong generated of individual

September. last received launched have XX year, applications, additional the we Since and end the program as already signed opened X,XXX of we over of XX late

the met New services open ], with and quarter new city, Heze cities Haerbin, XXXX included welcome guests. every are our store an of new we products we brand a -- the and and leveraging support from Dongying, Shijiazhuang, [ provide Leverage and we enthusiastic brand experience third entered Shenzhen we in high-quality Guangzhou. influence during our time our a

For instance, over attention. considerable garnering media in X Haerbin our store XXX,XXX its RMB sales during achieved inaugural days, business in first

demonstrating By The average September remarkable reached now serving as members has surpassed strong store XX, XXXX, catalyst our year-over-year reflecting XX.X% growth. registered of number members a loyalty continue our XX.X a club our the per future ongoing China have XX,XXX, clearly million, value quality for best customers to programs. from and for deliver growth The our loyalty customers' inspires products. Tims for consistent support support our team to

food items. In beverages XXXX, introduced X we XX QX and new new

principle launched integrating our We newly more healthy have been freshly products alongside of ingredients handmade. into

to Chinese only with our not of also but current self-care trends, cater consumers. increasing demands Our successful the resonate health-driven products

Chinese prime Multi-Grain Red products September. the merged Tims in A with introduction during is example annual Festival Signature Language] Language] Multi-Grain of Tims the Bagel principles Bagel and concept Green [Foreign These of Bagel Black the traditional Five herbs. Five Bagel [Foreign the our

collaborate our eye-catching popular we compared excellent bagel ranking green in funny to an hugely within with products star in boosting of coffee August. diet, quickly proved media Tims Meng us. Lan, for and exposures Bagel doubled on innovative to seedings guests' to XXXX be X content Tims garnered position. million for panda XXX% sparked exposures. industry brand contributed user-generated Tims Meng healthy XX Red Thanks the panda, its over mascot, our a Festival September, X KOL lifestyle, alone Lan, a the healthy by recognition million mascot the Searches with focus the and surge nearly In on

At I turn our CFO, Albert? time, would quarter performance discuss third more over this to financial it Albert detail. to to Li, in our like

Dong Li

of economics level. delivered our third Yongchen. Thank EBITDA remain by adjusted the you, efficiencies refining enhancing driving XXXX, profitability performance corporate quarter to unit financial we In the again. at our We store dedicated corporate and

stream rapidly to growing of base. delivering growing generate continues our a bolstering Concurrently, flows products remain high-quality our margins. cash customer committed business We to steady our profitability, and sub-franchising to cost-effective,

reached X.X million of X.X% from in overall million customers average Our same quarter transacting the a X.X monthly QX XXXX. in XXXX, increase

a total orders from in QX as digital orders Additionally, XX.X% XXXX XX.X% to percentage of rose in QX XXXX.

growing demand delivery We digital continue and to meet capabilities enhance services. to for the takeaway our

we the and supply made we scale, third percentage economy stores of from of and strides chain as and quarter points the Through more revenues packaging in significant in year-over-year. company-owned our During operational X.X of a costs by management enhancing food XXXX, our refinement reduced operated efficiency. percentage

and revenues operated streamline continued expenses other stores operations led We store by percentage optimizing in points company-owned to and costs respectively. percentage our a reduction to by operating X.X a of from labor unit as This year-over-year X.X and points, percentage economics.

percentage marketing increased as year-over-year. and cost revenues measures our expenses our recognition, points optimization a brand from total X.X decreased of Benefiting percentage by

adjusted of our we costs, as significant reduction resulting percentage expenses revenues year-over-year. administrative a general points by in in a total X.X and headquarter streamlined Additionally, percentage

margin result, quarter after profitability a second our As quarterly consecutively contribution the company-owned achieved operated and we adjusted XXXX. of and highest-ever quarterly store XX.X% of corporate EBITDA

liquidity. to Turning

shareholders, XX.X the by and disbursements total back primarily XXXX, store change was of XX, the million, XXX.X USD the equivalents of to our company's September were million of borrowings. the As of deposits on attributable and network certain RMB partially cash financing expansion and our December as XXXX. compared of million, to the from business and nationwide time RMB XX, bank cash XXX.X repayment cash offset founding The

our strategic remains forward, on capital-efficient Moving firmly growth. delivering profitable, focus

are brand selections. healthy our offering our with value fresh money by We our to committed appeal for and great and broadening food bolstering

thereby our supply sub-franchisees overall our chain efficiency, profitability. traffic economics Additionally, store we closely boost customer to bottom our are and with collaborating enhancing optimize line and

concluding I will to remarks now by it Yongchen for followed turn over Q&A.

Yongchen Lu

Albert. Thank you,

would to today. I Now like to before core take X highlight away turn messages to we Q&A,

China war. itself products great guests, delivering by and our differentiate to ongoing value the committed is to our distinguish price Tims in continuing to avoiding First, direct participation

improving to committed equally growth profitability. of us to are particularly help via our proven Together, capital-efficient continue we growth, initiatives of deployment drive and stores pursue network. these X Secondly, most our further small-format sub-franchisee

encouragement to the would investors employee, China Tims love diligent support like trust opportunity gratitude of guests, the and partners work our of to from the stakeholders. our to take our express our this I every the and of and heartfelt

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

Gemma Bakx

Albert, Thank you, thank you, Yongchen. and

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

Operator

question, Steve will line this Corporation. first from is Silver now [Operator Instructions] We take the Research from our Argus of

Steven Silver

the that contained see industry-wide moving being to leverage continuing great the costs room growth see expense revenue curious do much to challenges. forward? as It's you how I'm navigates as are for the

Yongchen Lu

you -- leverage, mean cost operating the the mean Steve? I Yes, right,

Steven Silver

Yes.

percentage a As Yes. of sales.

Yongchen Lu

definitely, you the and G&A. cost paper, then, rent labor major as mean, include okay, and mean, items I I Yes. our office the and know, food

we year-over-year. to able can F&P see, variable, reduce So mean, as are materially I still we F&P are cost but

fixed. fixed. office As the Albert almost G&A, majority reduced labor, for rent, points. are half for for are a X percentage And not have over And mentioned, we is fixed. majority And

we these fixed our revenue, allocated. increase costs when be So will

continue why we'll increase when revenues, the improvement Steve. our see that's So to margin we

Steven Silver

That's helpful.

for that guess, prepared to date. I the time line Is there these were status? received converting there status and you applications sub-franchise mentioned many of then a in on to to, So operating granted remarks, X,XXX

Yongchen Lu

are stores. locations some the mean partners most I okay, the partners locations mean, careful choosing we are right factors I But critical to in and lines. the right are and choosing extremely right be right in franchisee opening Yes. the successful time there because, importantly,

received X,XXX process. very I we strict in are more although So applications, vetting mean, we than

very third whether their we And our networking locations for locations, are We background checks. and applicants willingness to party We us. are conducting fit they right to interview carefully, planning stores. to the their checking experience other team estate whether to team -- also, and use real open see using vet

the I strong far. is so progress So mean

Now as XX. and we mentioned, we opened already signed XX additional

the the -- year and So faster and in much then quarter next the progress we'll fourth see year. a

Steven Silver

one last And one Great. me. for

you Do very transaction repeat on the among customers rate. impact loyalty perhaps have members loyalty You of mentioned loyalty differences any size XX.X members? the a at program any the shows growing and the that data healthy in million

Yongchen Lu

loyalty purchase the purchased more Card, rise multiple alone, in members. third mean I Chibaobao ]. the than times the X.X is members do. members mean the And the about the we nonmembers. Chibaobao average member [ I X.Xx powerful. is okay, That's discussed quarter especially the have frequency program Card, mean for just much more as Yes, we tend I to than, why frequency purchase

So months the our I come. tools use drive can we'll effective frequency to days do a the lot to work various or mean among we which members, over of

Operator

more [Operator we questions, Instructions] think, wait a you any Whilst have telephone Gemma, for question? I do

Gemma Bakx

reached the franchising, There's update anything that ask, the a please have. give the us about outlook what number it on of applications question qualitative the is is, an status you types units, and the of to of

You on Yongchen. already, touched it

update And an the the combination give that the going? strategy? How other question how bundling is coffee, competition is, meal if pricing in you is please could about

Yongchen Lu

from strategy than Yes. for food I prepared really using and ourselves again, The mean peers. Tims, I Tims competition longer affordable price. differentiate much is ongoing, freshly mean, literally I differentiate warm expected. price plus But coffee we our the still

So to need head compete we don't head. to

And products our we competitively. price

For XX. RMB prepared one And about freshly cup start of combos, food earlier, RMB our coffee our price mentioned competitive from then starts XX.X, coffee from RMB lunch our XX.X, $X. breakfast our especially lines, and one from I about And $X. with combos, start our example, as combo

one used we plus at rights card, coffee discount. XX% enjoy our again, so Card, guests Chibaobao one And food multiple of can the cup

that's So more the much see for buy we people purchase those why card. a who frequency

price competitively we mean benefits I really in the of use combos. market. We So members to the use, okay,

Gemma. you, to Back

Gemma Bakx

Yongchen. one. any there other Sarah, have so, If you I Thank questions? are not,

Operator

Not Instructions] yet. [Operator

Gemma Bakx

Albert, or renovated how for and Yongchen important why? open are question the Tims franchises is Another in, that came kitchens

Yongchen Lu

differentiate sales the other to Tims is to finish. a our couple this drive And just help in I with drink affordable mean craft allow fresh example, kitchen to peers compared time. with and into important very start coffee even brands more daypart really price That our I meals or differentiated open prepared of freshly into coffee dayparts, growth for over coupled food is will our prepared for lunch Tims continue expand dinner Yes, will food at guests daypart. the from And from mentioned staff that the since watch China. big freshly point and will help Tims

you. to Back

Gemma Bakx

one your Otherwise, are Sarah, came I other more you. there Thank questions have that queue? in. any in

Operator

None on [Operator the Instructions] phone currently.

Gemma Bakx

speak that One to the question us stores the include to way required is payback. capital-light company-owned you can the capital sub-franchised reached whether the for fund and versus the

Dong Li

Yes.

Sure. Okay.

So with for between RMB USD I actually to X CapEx will a our payback a typical it's XXX,XXX, XXX,XXX basically to take this RMB years. around yes, question, XX,XXX, and currently, store X So around is so of period right?

it So model actually, franchisees is to number economics. continue large actually, of use this actually we a and believe very Yes. we unit audiences. a attractive will attract store And like to

very X record. So X proven of we think attractive, it actually, track years to is and a the is payback period

Gemma Bakx

Sarah? you. Thank

Operator

the questions phone on lines. No

Gemma Bakx

All be I think might right. Then we through.

Yongchen Lu

all. Thank Thank Great. you you.

Dong Li

you. Thank

Yongchen Lu

time. your for you Thank

Gemma Bakx

the we and dialing you in, coming in Thank for days connecting look forward to weeks. all and

questions Of see let you have course, any us, very Thank us much, you and soon. know. please very, for if you

Yongchen Lu

Thank soon. you Bye. you. See

Operator

Thank you. Speakers, and call. you This may Thank now today's you stand please concludes conference by. participating, for disconnect.

TH International Limited (THCH) 12 Nov 242024 Q3 Earnings call transcript