Chagee Holdings Limited American Depositary Shares Q2 FY2025 earnings call

• Talent strategy: Assembled a new North American leadership team, welcoming Emily Chang as Chief Commercial Officer for North America and Aaron Harris as Chief Development Officer for North America, both bringing extensive relevant experience for global strategic layout.
• Market expansion: Overseas markets showed strong growth, with Indonesia store launch attracting ~35,000 new member registrations, Thailand store having 15,000 new members in first 3 days, and LA store in US setting record with 5,000 cups sold in a day. Overseas stores totaled 208 as of June 30, 2025.
• Product innovation: New products like Lychee Black Tea Milk tea had strong first week sales, and return of Melon Oolong Milk Tea was popular. Domestically, introduced themed concept stores blending traditional culture with modern retail.
• Margin expansion: Gross margin improved due to growing economy of scale and lower purchasing costs from procurement optimization.

In the second quarter, Chagee's revenue reached RMB 3.3 billion, up by 10.2% year-over-year. GMV came in at RMB 8.1 billion, a year-over-year increase of 15.5%. Non-GAAP net income was RMB 629.8 million, up by 0.1% year-over-year. For the first half of 2025, non-GAAP net income rose by 6.8% year-over-year to RMB 1.3 billion. By the end of the second quarter, total membership exceeded 200 million, increasing by 14.5 million from the first quarter and 42.7% year-over-year. Net revenue from franchisee teahouse grew by 6.1% to RMB 3,020.7 million, representing 90.7% of total net revenue. Net revenue from company-owned teahouses increased by 77.3% to RMB 311.2 million, accounting for 9.3% of total revenue. Overseas markets saw GMV increase 77.4% year-over-year and 31.8% quarter-over-quarter. Gross profit was RMB 1.8 billion with a gross margin of 53.9%, up from 48.4% in the second quarter of the previous year and 53.1% in the first quarter of 2025.

• No formal full-year financial guidance provided. Priority is to execute long-term growth strategy and deliver lasting value to shareholders. Will revisit guidance possibility as conditions evolve. Focus on investing in people, infrastructure, and capabilities for future opportunities in overseas and other markets.

• Intensified delivery platform subsidy competition in China creating headwinds for near-term performance, weighing on merchant margin and brand integrity. - Short-term impact of investments in overseas markets on profitability as overseas operations are still ramping up.

Q: Impact of delivery platform subsidy program on China operations, including effect on ASP, store profit margin, and future strategy?

A: Delivery platform competition is heating up, putting pressure on merchant margin. Company has 3 principles: stay committed to high-quality products/services, not get pulled into price wars; maintain premium brand positioning; optimize operational efficiency, e.g., rolling out 4.0 automated machines to lower labor cost and improve efficiency. Also, product R&D will have changes by year-end.

Q: Update on overseas expansion plan and observations in overseas market operation?

A: Overseas has 208 stores in total. In Singapore, mature store payback period improved to less than 12 months; in Malaysia, store profitability exceeded plan; in Thailand, relaunched market with 3 net new stores and good average performance; in US, first store in LA had 5,000 cups sold a day. Going forward, will strengthen presence in mature markets and enter more countries like Philippines.

Q: Same-store sales growth trend?

A: Same-store GMV softened due to high base last year and severe competitive environment. Expected continued pressure in second half, but focus on product quality elevation, improving sugar, milk, tea, and customer experience to build premium brand and earn customer trust through consistent excellence.