TH International Limited Q4 FY2025 earnings call

• Tim Hortons China was the largest international market in Tim Hortons' global system by number of stores as of December 31, 2025.
• In 2025, there were 25 new store openings, and system sales increased. Over 74% of stores underwent meant-to-order renovations, and some underperforming stores were pruned.
• Overall comparable transaction growth of 2.7% was achieved in 2025, but same-store sales growth for system-wide wireless stores declined by 2.4% due to delivery business competition.
• Product innovation: 178 new products were launched in 2025, contributing over 25% of top-line sales. Brand cultural collaborations were carried out, such as limited-edition partnership with 'The Longest Day in Chang'an 24G' and co-branded campaign with People's Daily.
• Sustainability initiatives: Bring Your Own Cup program attracted over 200,000 participants, reducing carbon emissions. Eco-friendly stores were introduced.
• Registered Florida club members exceeded 31 million, a year-over-year growth of 29%

In 2025, the total system sales reached RMB 1.57 billion, an increase of 7.6% compared with 2024. The number of stores expanded to 1,047 in 92 cities. Food sales accounted for 33.4% of total revenue in Q4 2025, up from 24% in Q1 2023. For company-owned stores, the full-year store contribution margin was 7% in 2025, down from 7.4% in 2024, mainly due to increased delivery-related costs. The adjusted corporate EBITDA margin improved by 1 percentage point in 2025. Since the launch of individual franchising in December 2023, over 10,000 applications were received and over 300 stores were successfully opened by the end of 2025. Franchised stores in special channels had high store contribution margins and were expected to have a payback period of about two years. Subcontracting business contributed steady cash flows and profits. Profits from other revenues grew by 55.7% year-over-year.

• In 2026, will enhance supply chain capabilities and efficiencies, roll out differentiating made-to-order fresh and healthy food preparation model to drive traffic, optimize store unit economics, and accelerate sub-franchising expansion.
• Target to achieve at least 100 net store openings in 2026, including both company-owned and franchised stores

• Risk of delivery business cost increase and same-store sales decline due to aggregator platform competition.
• Risk of underperforming stores in store expansion, especially high-rent stores opened in previous years.
• Risk of margin differences among stores in different cities due to store density

Q: Steve asked about the proportion of special channel stores in future store mix and its impact on operating results.

A: Stores on special channels have high gross margins and no delivery costs. There are many such areas in China, and the company will accelerate openings on these channels in 2026.

Q: Steve asked about measures to mitigate risks of delivery costs affecting company-owned store contribution margins and same-store sales growth in 2026.

A: Will optimize supply chain, negotiate better delivery costs with aggregator platforms, increase pricing on delivery products, and continue to prune underperforming stores to improve margins.

Q: Fu Li He asked about factors behind 2025 gross margin increase and 2026 expectations.

A: Factors include better scale economy, supply chain optimization, new product high margins, and recipe optimization. Target to further reduce food and packaging costs by 1-2 percentage points in 2026.

Q: Fu Li He asked about margin differences of stores in Tier 1 cities and cities with 10-plus stores.

A: Density matters; more stores in a city lead to higher brand awareness, lower marketing, delivery, and supply chain costs, and better management efficiency, so Tier 1 cities and cities with 10-plus stores have higher margins.

Q: Fu Li He asked about store opening and closure targets and mix in 2026.

A: Target to achieve at least 100 net store openings in 2026, including both company-owned and franchised stores, and will continue to prune underperforming stores while opening new stores with high margins