TH International Limited Q3 FY2025 earnings call

• Store development: Leveraged sub-franchisee partnerships to expand into 91 cities, received over 8,400 franchise applications since December 2023, and converted over 300 stores by end-September. Had 64 stores in strategic channels like high-speed train stations, airports, etc. as of end-September 2025.
• Sales and same-store: System sales grew 12.8% year-over-year, and company-owned and operated stores had a 3.3% same-store sales growth. Food revenues increased 24.2% year-over-year, with food revenue contribution at a historical high of 36.5%.
• Loyalty: Registered Loyalty club members reached 27.9 million, a remarkable 22.3% year-over-year growth, with an average of over 27,000 members per store.
• Marketing and expenses: Marketing expenses as a percentage of total revenues were approximately 4.4%, a 0.7 percentage point decrease from the same quarter last year. Adjusted general and administrative expenses increased by 23.2% year-over-year, but marketing expenses decreased, and adjusted corporate EBITDA margin was negative 4.2% in Q3 2025 compared to positive 0.6% in Q3 2024.

In Q3, food revenues increased by 24.2% year-over-year, with food revenue contribution reaching 36.5% of sales, up from 31.5% in the third quarter of the previous year. Delivery revenues grew by 23.1% year-over-year. Profits from other revenues saw a year-over-year increase of 58.2% during the quarter. For company-owned and operated stores, revenues dropped by 5.5% year-over-year but same-store sales grew by 3.3%. Revenues from the franchised business and retail business increased by 25.0% year-over-year, with the number of franchised stores increasing from 382 as of September 30, 2024, to 479 as of September 30, 2025, leading to a 12.8% year-over-year growth in system sales.

• Expect to enhance operational efficiencies such as supply chain capabilities and cost controls to optimize store unit economics and accelerate sub-franchising expansion. Aim to achieve double-digit store level margin next year.
• Successfully issued approximately USD 89.9 million senior secured convertible notes due September 2029, restructured other notes, and plans to focus on developing the store network and core brand.
• Anticipate opening more stores in strategic channels like high-speed train stations, airports, etc., with stores in these channels performing well with mid to high teens EBITDA margin and ~2-year payback period.

• Intense competition from tea beverage categories entering the coffee space, intensifying market competition.
• Seasonal softness in food sales and price sensitivity among consumers.
• Temporary pressure on margins due to higher delivery revenue mix and aggressive subsidies from delivery aggregators.

Q: Could you provide the company's latest thinking on its liquidity status and its long-term financing plan?

A: With the successful issuance of the USD 89.9 million 2025 senior secured convertible notes, the company used proceeds to repurchase notes and extended the due date of other notes. Now, the company has no near-term offshore liabilities, can focus on operations, and expects to generate positive operating cash inflows for long-term growth.

Q: Do you expect the margin pressure to continue over the near term and what's the thought about the margin profile moving forward?

A: The lower store contribution margin in Q3 was mostly due to higher delivery revenue mix from delivery platform subsidies, which is temporary. The company aims to improve margins via supply chain optimization, increased pricing on delivery platforms, launching high-margin new products, and optimizing existing core product recipes to achieve double-digit store level margin next year.

Q: Can you share information about the performance of strategic special channel stores under the franchise model?

A: As of end-September 2025, there are over 60 stores in special channels like high-speed train stations, airports, etc. These stores have a mid to high teens EBITDA margin and a payback period of around 2 years, showing strong performance and interest from franchisees for more such locations.