TH International Ltd. Q4 FY2024 earnings call

• Solidified differentiated strategic positioning in Coffee Plus Fresh Prepared Food.
• Completed made-to-order renovation of almost all company owned and operated stores.
• Surpassed 24 million registered loyalty club members and received over 6,200 individual subfranchisee applications by year-end.
• Grand opening of the 1,000th Tims China Shopping Center Shanghai in Q4 2024.
• Launched a total of 92 new products in 2024, contributing approximately 25% of top line sales.
• Strategically expanded store footprint, entering 82 cities by year-end and opening around 100 sub-franchised stores by year-end 2024.
• Overall monthly average transacting customers reached 3.01 million in Q4 2024, a 1.0% increase from the same quarter in 2023.

In Q4 2024, Tims China achieved significant profitability improvements. Full year 2024 company-owned and operated store contribution margin improved by 5.3 percentage points, and adjusted corporate EBITDA margin improved by 9.9 percentage points year-over-year. Total revenues and system sales dropped by 10.8% and 6.2% year-over-year respectively, but sub-franchisee business revenues increased by 105.3% as the number of franchised stores grew from 283 to 446. Digital orders as a percentage of total orders rose from 83.6% in Q4 2023 to 86.1% in Q4 2024. The food and packaging costs as a percentage of revenues from company-owned and operated stores decreased by 3.5 percentage points year-over-year, while rental and property management fees, labor costs, and other operating expenses as a percentage of revenues decreased by 0.5, 2.4, and 0.5 percentage points respectively.

• Plans to open at least 200 stores in 2025, majority through subfranchise.
• Aiming for full year corporate EBITDA breakeven with profitable growth as the focus.
• Continue to enhance supply chain capabilities and efficiencies, roll out made-to-order fresh and healthy food preparation model to drive traffic, optimize store unit economics, and accelerate sub-franchising expansion.

• Geopolitical tensions, natural disasters, and unexpected events can disrupt supply chains, though Tims China has mitigated risks with a strong and diversified supply chain.
• Coffee bean price volatility, but mitigated by sourcing locally from Yunnan coffee beans and having a diverse menu including non-coffee items which helps mitigate impact.

Q: Curious as to what your current thinking is on the state of the balance sheet, in particular, with the focus on profitable growth and subfranchise expansion in 2025, if there are any specific strategies you're employing to manage cash flow while balancing growth and your debt obligations?

A: As of end-2024, total cash and cash equivalents were RMB 184 million. Maintained stable drawable bank facilities of approx. RMB 400 million. In process of obtaining new bank facilities. Profitability improvements at store and corporate level, cost control initiatives, and sub-franchising generating steady cash flow. Sub-franchisee model has attractive unit economics with 2-3 years payback on average.

Q: The price of coffee beans has been extremely volatile so far in 2025. I'm curious as to whether there are any implications on your thinking about food and packaging costs and store contribution margins?

A: Reliant on RBI global coffee bean ecosystem. Sourcing locally from Yunnan coffee beans which is less expensive. Coffee bean cost as a percentage of total cost is less than 14%. Diverse menu helps mitigate impact. Last year, total supply chain gross margin improved by 3.5% year-over-year. If coffee bean costs maintain current pricing, impact on margins will be less than 90 basis points for full year 2025.

Q: How are comp store sales trending so far in calendar 2025? And have the coffee price wars recessed at all?

A: Same-store sales growth reflects short-term uncertainties in China economic and consumption sentiment and intense industry competition. Mid-to-long term, increasing coffee consumption demand and strong demand for freshly prepared healthy food products. Saw improving trend in same-store sales growth since October 2024. Goal to achieve positive same-store sales growth in 2025.

Q: Your current thinking about how the company is planning on driving product innovation in 2025. You spoke a lot about the healthy food strategy evolving to meet customers' trends and demand. Just curious, your current thinking about the speed at which you're able to bring new innovative products to the product menu?

A: Product innovation is a core strategic focus. In 2024, 92 new products were introduced, accounting for approx. 25% of total net revenue. Product innovation will focus on freshness and healthiness for key target segments. Coffee plus bagel combo and light bagel burger lunchbox are examples of successful innovative products. Plan to launch more waves of lunch box offerings to drive growth.

Q: Given the fact that we are now into April of 2025, whether there's any color you can provide directionally about the expansion of the loyalty program without giving any specific numbers just in terms of the trend there, whether it's continuing from 2024 levels?

A: Loyalty club members continue to grow. New stores opened through franchising model bring in new customers. Online channels and cross-over branding with other brands attract new loyalty club members.