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Despite strong revenue and GMV growth, positive overseas expansion, and increased membership, the lack of formal guidance, rising operating costs, and competitive pressures in Greater China weigh on sentiment. The Q&A highlighted management's avoidance of specific financial impacts, adding uncertainty. The decision not to provide guidance, coupled with increased expenses, offsets the positives, leading to a neutral outlook.
Revenue RMB 3.3 billion, up by 10.2% year-over-year. The increase was mainly driven by the continued expansion of the teahouse network.
GMV (Gross Merchandise Value) RMB 8.1 billion, a year-over-year increase of 15.5%. Growth was attributed to strategic store expansion and growing brand awareness, especially in overseas markets.
Non-GAAP Net Income RMB 629.8 million, up by 0.1% year-over-year. The increase reflects resilience in the business model despite intensified delivery platform subsidy competition in China.
Membership Total membership exceeded 200 million, increasing by 14.5 million from the first quarter and 42.7% year-over-year. Growth reflects efficient operations and strong market recognition.
Overseas GMV Increased 77.4% year-over-year and 31.8% quarter-over-quarter. Growth was driven by strategic store expansion and growing brand awareness in international markets.
Gross Margin 53.9%, up from 48.4% in the second quarter of last year and 53.1% in the first quarter of 2025. Margin expansion was driven by economies of scale and procurement optimization.
Operating Income (Non-GAAP) RMB 660.1 million, representing a 19.8% margin. The margin reflects investments in brand building, marketing, R&D, and global expansion.
Sales and Marketing Expenses RMB 385 million, up 54.6% year-over-year. The increase was due to higher advertising costs for new product launches and payroll growth to support business expansion.
G&A Expenses (Non-GAAP) 13.2% of revenue compared to 7.8% a year ago. The increase was driven by IPO-related share-based compensation, team expansion for global operations, and higher IT service costs.
Cash and Cash Equivalents RMB 8.9 billion, up from RMB 4.9 billion at the end of 2024. The increase reflects strong cash flow management and operational efficiency.
New Product Launches: Introduced Lychee Black Tea Milk and Melon Oolong Milk Tea, both of which showed strong sales performance. The Earl Grey series co-branded with the British Library and Hojicha Genmai milk tea also performed well in Southeast Asia.
North American Market Expansion: Assembled a new North American leadership team, including Emily Chang as Chief Commercial Officer and Aaron Harris as Chief Development Officer. Expanded presence in the U.S. with notable performance in Los Angeles.
Southeast Asia Market Growth: Hojicha Genmai milk tea and Earl Grey series gained significant traction. Pop-up events in Singapore and Malaysia boosted brand visibility and sales.
Store Expansion: Added 52 new overseas stores in the first half of 2025, bringing the total to 208. Expanded in Indonesia, Thailand, and the U.S.
Operational Efficiency: Improved gross margin to 53.9% due to economies of scale and procurement optimization. Enhanced efficiency in company-owned teahouses.
Membership Growth: Total membership exceeded 200 million, with a 42.7% year-over-year increase.
Global Talent Acquisition: Invested in building local teams in Asia Pacific and North America to support global expansion.
Brand Positioning: Maintained premium brand positioning and disciplined pricing strategy despite competitive pressures.
Intensified Delivery Platform Subsidy Competition: The competitive environment in China, driven by intensified delivery platform subsidy competition, has created headwinds for the business. This has impacted near-term performance and poses challenges to maintaining pricing integrity and premium brand positioning.
Short-term Profitability Impact from International Expansion: The company's strategic expansion into international markets involves significant investments in organizational infrastructure, talent acquisition, and operational capabilities. These initiatives are currently affecting short-term profitability.
Increased Operating Costs: Operating costs for company-owned teahouses have risen significantly due to expansion efforts, including higher payroll costs and investments in new product launches and marketing campaigns.
Higher Tax Expenses: Income tax expenses have increased significantly, primarily driven by the impact of share-based compensation expenses recognized during the quarter.
Competitive Market Conditions in Greater China: The average monthly GMV per teahouse in Greater China has declined year-over-year due to a high base from the previous year and a more severe competitive environment.
Net Losses from Overseas Operations: The overseas operations, while showing growth, are still ramping up and contributing to net losses, impacting overall profitability.
North American Market Expansion: The company has assembled a new North American leadership team to accelerate market expansion. Investments in organizational capabilities and talent acquisition are expected to drive development in the U.S. market.
Global Talent Pipeline: The company plans to continue investing in overseas markets in the second half of the year, enhancing the development of a global talent pipeline and operational system.
Raw Material Upgrade Plan: A comprehensive upgrade plan for essential raw materials, including tea, milk, and syrups, will be launched in the second half of the year to elevate product quality.
Overseas Market Growth: Overseas markets are becoming a key growth engine, with strong momentum driven by localized product and marketing innovation, disciplined geographic expansion, and operational excellence.
Store Expansion: The company plans to continue expanding its overseas store network, with significant progress already made in Indonesia, the United States, and Thailand.
Product Innovation: The company will focus on product innovation, with new product launches and limited-time offerings driving growth.
Operational Efficiency: Investments in digital infrastructure and operational capabilities are expected to enhance efficiency and customer experience.
Profitability and Margins: While short-term profitability is affected by investments in global expansion, the company expects operational leverage to improve as new markets mature.
The selected topic was not discussed during the call.
The earnings call summary reveals a mixed picture: while there is strong overseas growth and a special dividend announcement, there are significant challenges such as declining same-store sales, increased operating costs, and margin pressures. The Q&A provided some clarity on strategic initiatives, but ongoing economic uncertainty and competitive pressures present risks. The overall sentiment is negative due to the decline in net revenue, increased costs, and margin pressures, despite some positive developments in overseas markets and shareholder returns.
Despite strong revenue and GMV growth, positive overseas expansion, and increased membership, the lack of formal guidance, rising operating costs, and competitive pressures in Greater China weigh on sentiment. The Q&A highlighted management's avoidance of specific financial impacts, adding uncertainty. The decision not to provide guidance, coupled with increased expenses, offsets the positives, leading to a neutral outlook.
The earnings call reveals mixed results: strong revenue growth and IPO proceeds are positive, but declining operating margins, negative same-store sales growth, and refusal to provide guidance are concerning. The Q&A highlights international expansion success, but also significant challenges in same-store sales. Given these factors, coupled with competitive pressures and rising costs, the stock is likely to react negatively over the next two weeks, especially without guidance, which typically unnerves investors.
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