TH International (THCH)2024-11-12 15:07Financial Data and Key Metrics Changes - The company maintained adjusted corporate EBITDA profitability in Q3 2024, following its first-ever adjusted corporate EBITDA profitability in Q2 2024 [8][20]. - The company achieved its highest-ever quarterly company-owned and operated store contribution margin of 13.3%, reflecting a year-over-year margin expansion of 5.8 percentage points [9][24]. - Total cash and cash equivalents as of September 30, 2024, were RMB203.7 million (approximately US$29.1 million), down from RMB219.5 million as of December 31, 2023 [25]. Business Line Data and Key Metrics Changes - The company completed renovations of 539 stores to enhance freshly prepared food offerings, which included adding working stations for efficient food preparation [10]. - In Q3 2024, the company introduced 10 new beverages and nine new food items, focusing on healthy ingredients [18]. - The average number of registered Loyalty Club Members reached 22.8 million, a 35.3% year-over-year growth [17]. Market Data and Key Metrics Changes - Monthly average transacting customers reached 3.3 million in Q4 2024, a 2.4% increase from the same quarter in 2023 [21]. - Digital orders as a percentage of total orders rose from 82.6% in Q3 2023 to 86.6% in Q3 2024, indicating a growing demand for delivery and takeaway services [21]. Company Strategy and Development Direction - The company is focused on product differentiation and providing great value, avoiding direct participation in price wars [28]. - The strategic partnership with sub-franchises is aimed at expanding the store network and increasing density in existing cities [15]. - The company is committed to capital-efficient growth, particularly through small format stores and the growth of its sub-franchisee network [29][26]. Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing price competition in the coffee market but emphasized their differentiated strategy of Coffee Plus Warm Food at affordable prices [38]. - The company plans to continue leveraging its loyalty program to drive purchase frequency among members [35]. - Management expressed confidence in the strong momentum of individual franchising, with 5,000 applications received and 43 stores opened as of the end of September [15][33]. Other Important Information - The company launched the Chibaobao Cards, which have been successful in driving purchase frequency, with over 120,000 cards sold in Q3 [14]. - The company reported a significant reduction in food and packaging costs as a percentage of revenues by 6.1 percentage points year-over-year [22]. Q&A Session Summary Question: How much room do you see for continuing expense leverage moving forward? - Management indicated that fixed costs will be allocated as revenue increases, leading to margin improvement [32]. Question: Is there a timeline for converting sub-franchise applications to operating status? - Management stated that they are careful in choosing partners and locations, with strong progress expected in Q4 and next year [33]. Question: Do you have data showing the impact of the loyalty program on repeat customers? - Management confirmed that loyalty members have a significantly higher purchase frequency compared to non-members [35]. Question: How important are the renovated open kitchens for Tims franchises? - Management emphasized that open kitchens are crucial for differentiating Tims through freshly prepared food [41]. Question: What is the capital required for company-owned stores versus sub-franchises? - Management noted that the CapEx for a typical store is around RMB450,000 to RMB500,000, with a payback period of two to three years [42].