Chagee Holdings Limited American Depositary Shares Q4 FY2025 earnings call

In 2025, the market underwent fierce volatility and complex competition. 2023 - 2024 were a period of rapid expansion in greater China markets with the strategy of quality scale expansion. In 2025, the management team conducted deep review and reflection. From the second half of 2025, a series of internal adjustments were implemented, including organizational structure optimization, business model transition, and strategic slowdown of new product rhythm. Looking ahead to 2026, the core strategy is to insist on high - value brand positioning, focus on user value, and focus on five key areas: brand upgrade, product innovation, scenario expansion, experience enhancement, and organizational improvement. At the brand level, new formats for regular and personalized tea houses will be launched. In product innovation, will innovate across categories anchored on the 18 - 30 demographic coordinates. In experience upgrade, will enhance tea house environments and overhaul the sales system. In organizational capability, will promote systematized ability construction and optimize internal operation processes.

For the full year 2025, total GMV reached 31.6 billion RMB, representing a 7.2% increase from 29.5 billion RMB in 2024. In the fourth quarter, total GMV was 7,322.9 million RMB. As of December 1st, 2025, the tea house network totaled 7,453 locations across greater China and overseas, a 15.7% increase from 6,440 a year ago. Net revenue for the full year 2025 increased by 4% to 12.9 billion RMB. In the fourth quarter, net revenues from franchisee tea houses were 2,434.9 million RMB, representing 81.9% of total net revenues, while net revenue from company-owned tea house was 539.6 million RMB, up 126.2% from the fourth quarter of 2024. Gross margin was 53.2% this quarter, an improvement from 51.6% last year. Operating loss was 35.5 million RMB, but excluding share - based compensation expenses, non - GAAP operating income was 30.5 million RMB, representing a 1% margin.

Internal adjustments have been basically completed and business rhythm has returned to normal. In 2026, the core strategy is to insist on high - value brand positioning and focus on user value. The company expects to be focused on high - quality growth in 2026, with revenue and profits basically remaining the same as in 2025. Will focus on store operation, user experience, product innovation, and organizational efficiency, with the same - store sales as a key KPI.

The market has fierce competition. The price war of third - party delivery platforms has impacted the offline industry. Internal organizational adjustment rhythm has affected income. The company has not responded timely to market changes, resulting in some missed opportunities in short - term response strategies.

Q: About copper electricity sales decline and repair measures in 2026.

A: There are external challenges and internal strategy adjustment pace. Underestimated the complexity of a company with over 3,000 employees, which delayed strategy rolling out. Also underestimated the impact of foreign trade platform price war. Made a series of internal adjustments. In 2026, will focus on store operation, user experience, product innovation, and organizational efficiency.

Q: Motivation and status of business model transformation.

A: Core motivation is to build true shared risk, shared reward, strategic partnership with franchisees. Due to industry price upgrade, franchisees faced dual pressure. Restructured incentives to a GMV - based revenue - sharing model. From 2026, will fully roll out the new model.

Q: Overseas market performance and expansion plan.

A: In 2025 fourth quarter, overseas GMV grew 84.6% year - over - year. Entered many new markets. In 2026, domestic market focuses on existing, moderating expansion pace. Overseas will continue expansion, with about 200 new overseas stores planned.

Q: Cost reduction effect and progress.

A: Cost reduction and efficiency efforts are long - term. Completed first stage of organizational efficiency optimization, integrating middle and back - office functions. Have stricter cost control systems, focusing on sales and marketing investment efficiency and overall spending control.