THCH — TH International Limited

Tims China (THCH) Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• System Sales Growth: Achieved 12.8% year-over-year growth.
• Same-Store Sales Growth: Positive growth of 3.3% for company-owned stores.
• Food Revenue: Increased by 24.2% year-over-year, contributing 36.5% to total sales (up from 31.5% in Q3 2024).
• Delivery Revenue: Rose by 23.1% year-over-year.
• Monthly Average Transacting Customers: Increased to 3.85 million, a 16.7% rise from Q3 2024.
• Digital Orders: Increased to 91.0% of total orders, up from 86.6% in Q3 2024.
• Adjusted Corporate EBITDA Margin: Negative 4.2%, down from positive 0.6% in Q3 2024.
• Cash Position: Total cash and equivalents decreased to RMB 159.3 million from RMB 184.2 million at year-end 2024.

2. Strategic Updates and Business Highlights

• Store Openings: Returned to positive net new store openings, expanding into 91 cities.
• Franchise Model: Over 8,400 applications received since launching the individual franchise program; 300 stores converted.
• Special Channel Stores: 64 stores in strategic locations (e.g., airports, hospitals) performing well with mid- to high teens EBITDA margins.
• Product Innovations: Launched new food SKUs and enhanced beverage offerings to attract younger consumers.
• Loyalty Program: Registered members reached 27.9 million, a 22.3% increase year-over-year.

3. Forward Guidance and Outlook

• Margin Improvement: Aiming for mid- to high teens store contribution margins by enhancing gross margins and optimizing store networks.
• Operational Efficiency: Plans to improve supply chain capabilities and cost controls to support sustainable growth.
• Positive Cash Flow: Expecting to generate positive operating cash inflows, enhancing self-sustainability for long-term growth.

4. Bad News, Challenges, or Points of Concern

• Store Contribution Margin Pressure: Declined due to higher delivery costs and aggressive discounts from delivery platforms.
• Revenue Drop: Company-owned store revenues fell by 5.5% year-over-year due to planned closures of underperforming stores.
• Increased Costs: Delivery costs as a percentage of revenues rose to 13.2%, and adjusted general and administrative expenses increased by 23.2%.
• Competitive Pressures: Intensified competition from tea brands entering the coffee market and aggressive pricing strategies from delivery platforms.

5. Notable Q&A Insights

• Liquidity Status: The issuance of USD 89.9 million in convertible notes has improved liquidity, with no near-term offshore liabilities.
• Margin Trends: Management expects current margin pressures to be temporary, with plans to enhance gross margins through pricing and product optimization.
• Performance of Special Channel Stores: These stores are performing well, with strong margins and quick payback periods, indicating potential for further expansion in this area.

Overall, Tims China demonstrated resilience in Q3 2025 with notable sales growth and strategic advancements, despite facing challenges related to competition and cost pressures. The outlook remains cautiously optimistic with plans for margin improvement and operational efficiencies.