THCH — TH International Limited

Summary of THCH Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Total System Sales: RMB 1.57 billion for 2025, a 7.6% increase from 2024.
• Q4 2025 System Sales: RMB 359.4 million, up 4.0% year-over-year.
• Same-Store Sales Growth: Declined by 2.4% in 2025, with a 2.7% increase in overall comparable transactions.
• Food Sales Contribution: 33.4% of total revenues in Q4 2025, up from 24% in Q1 2023.
• Company-Owned Store Contribution Margin: 7% for 2025, down from 7.4% in 2024, influenced by increased delivery costs.
• Adjusted Corporate EBITDA Margin: Improved by 1 percentage point for the full year.
• Cash Position: RMB 129.7 million as of December 31, 2025, down from RMB 184.2 million in 2024.

2. Strategic Updates and Business Highlights

• Store Expansion: Opened 25 new stores in 2025, reaching a total of 1,047 stores across 92 cities.
• Franchise Growth: Over 10,000 franchise applications received, with 300 stores opened by year-end 2025.
• Product Innovation: Launched 178 new products, contributing over 25% to top-line sales.
• Sustainability Initiatives: Expanded the "Bring Your Own Cup" program, attracting over 200,000 participants and reducing carbon emissions.
• Loyalty Program: Registered loyalty members exceeded 31 million, marking a 29% year-over-year growth.

3. Forward Guidance and Outlook

• 2026 Goals: Targeting at least 100 net new store openings, with expectations of improved margins and continued focus on operational efficiencies.
• Margin Improvement: Aiming to reduce food and packaging costs as a percentage of revenues by 1-2 percentage points in 2026.

4. Bad News, Challenges, or Points of Concern

• Competitive Pressures: Increased competition from low-priced local brands and delivery aggregator platforms, leading to higher delivery costs and aggressive discounting.
• Store Closures: Continued pruning of underperforming stores, which has negatively impacted revenue from company-owned stores.
• Declining Same-Store Sales: The overall decline in same-store sales growth reflects challenges in maintaining customer traffic amidst competition.

5. Notable Q&A Insights

• Franchise Store Contribution: Strong margins and attractive payback periods for franchise stores in special channels (e.g., railway stations) are expected to accelerate openings in these areas.
• Delivery Cost Mitigation: The company is negotiating with delivery platforms to improve cost structures and has implemented price increases on delivery products to counteract rising delivery costs.
• Store Density Impact: Higher margins are observed in Tier 1 cities due to increased brand awareness and operational efficiencies, emphasizing the importance of store density in profitability.
• Future Store Mix: The company plans to maintain a balanced approach between company-owned and franchise stores while continuing to prune underperforming locations.

Overall, THCH demonstrated resilience in a challenging market, focusing on strategic growth, product innovation, and operational efficiencies, despite facing competitive pressures and declining same-store sales.