TH International Limited (THCH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong growth in key areas such as digital orders, non-coffee beverage sales, and customer engagement, despite a decline in total revenues. The strategic focus on high-margin stores, cost optimization, and expansion into special channels suggests positive future prospects. The Q&A session provides clarity on mitigating risks and improving margins, with no unclear responses. The company's plans for expansion and improved margins, along with strong franchise applications, indicate a positive outlook, leading to a likely stock price increase in the 2% to 8% range.
Key Financial Performance
Total System Sales RMB 1.57 billion in 2025, a 7.6% increase compared with 2024, fueled by 25 net new store openings and expanding the store network to 1,047 across 92 cities in China.
Food Sales as Percentage of Total Revenues 33.4% in Q4 2025, increased from 24% in Q1 2023, driven by increased orders with food items.
Orders with Food Items 51% of total orders in Q4 2025, increased from 45.2% in Q1 2023, reflecting a shift towards food-inclusive orders.
Same-Store Sales Growth Comparable transaction growth of 2.7% in 2025, but a 2.4% decline in same-store sales growth for system-wide stores due to higher discounts on delivery business amidst intensified competition.
Company-Owned and Operated Store Contribution Margin 7% in 2025 compared with 7.4% in 2024, primarily due to temporarily increased delivery-related costs.
Adjusted Corporate EBITDA Margin Improved by 1 percentage point in 2025, attributed to optimized store capital expenditures and enhanced store unit economics.
Franchisee Store Contribution Margin in Special Channels High teens in 2025, with an expected payback period of approximately 2 years, showcasing reasonable returns.
Profits from Other Revenues Achieved a year-over-year growth of 55.7% in 2025, driven by sub-franchisee business contributions.
Non-Coffee Beverage Sales 18.3% of total beverage cups sold in 2025 compared to 14% in 2024, reflecting diversification in product offerings.
Monthly Average Transacting Customers 3.43 million in Q4 2025, a 14.3% increase from 3.01 million in Q4 2024, driven by enhanced digital capabilities and delivery services.
Digital Orders as Percentage of Total Orders 89.3% in Q4 2025, up from 86.1% in Q4 2024, reflecting growing demand for delivery and takeaway services.
Delivery Orders Increased by 33.7% year-over-year during Q4 2025, driven by enhanced digital capabilities.
Total Revenues Dropped by 7.3% year-over-year in Q4 2025, mainly due to the closure of certain underperforming stores.
Food and Packaging Costs as Percentage of Revenues Reduced by 1.4 percentage points year-over-year in 2025, attributed to refinements in supply chain capabilities and economy of scale.
Store Labor Costs as Percentage of Revenues Reduced by 0.8 percentage points year-over-year in 2025, due to optimized staffing arrangements and managerial efficiency.
Other Operating Expenses as Percentage of Revenues Reduced by 0.1 percentage points year-over-year in 2025, reflecting operational streamlining.
Marketing Expenses as Percentage of Total Revenues Increased by 1.2 percentage points year-over-year in 2025, aimed at driving traffic through branding initiatives and promotional offers.
Adjusted General and Administrative Expenses as Percentage of Total Revenues Decreased by 7.4 percentage points year-over-year in 2025, mainly due to a RMB 9.7 million decrease in credit loss of accounts receivables.
Cash and Cash Equivalents RMB 129.7 million as of December 31, 2025, compared to RMB 184.2 million as of December 31, 2024, primarily due to cash disbursements for business expansion.
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Operating Highlights
Product Innovation: Launched 178 new products in 2025, including 96 beverages and 82 food items, contributing over 25% of top-line sales. Seasonal beverages like pomegranate, low cheese, and oat latte series were introduced. Non-coffee beverages accounted for 18.3% of total beverage cups sold in 2025, up from 14% in 2024. Expanded breakfast and lunch offerings with new croissant and bagel sandwich options.
Sustainability Initiatives: Expanded 'Bring Your Own Cup' program, attracting over 200,000 participants and reducing carbon emissions by approximately 8 tons. Introduced eco-friendly stores using carbon capture technology in collaboration with Tencent's CarbonXmade program.
Market Expansion: Expanded store network to 1,047 stores across 92 cities in China, including new entries in Nanchong, Datong, and Xinxiang. Opened over 300 franchise stores since December 2023, with franchise stores in special channels achieving high teens store contribution margin and a payback period of approximately 2 years.
Loyalty Program Growth: Registered loyalty members exceeded 31 million, a 29% year-over-year growth. Average members per store surpassed 29,600.
Operational Efficiencies: Improved adjusted corporate EBITDA margin by 1 percentage point for the full year 2025. Reduced food and packaging costs by 1.4 percentage points and store labor costs by 0.8 percentage points year-over-year. Enhanced digital capabilities, with digital orders rising to 89.3% of total orders in Q4 2025.
Store Optimization: Completed made-to-order renovations for over 74% of stores and strategically closed underperforming locations. Focused on optimizing unit economics and staffing arrangements.
Strategic Positioning: Solidified 'Coffee Plus freshly prepared food' model. Focused on high-density Tier 1 cities for better margins and economies of scale.
Franchise Model Expansion: Accelerated market penetration through franchise partnerships, receiving over 10,000 applications and opening over 300 stores by year-end 2025.
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Risk or Challenges
Intensified competition from low-priced local brands: The company faced fierce competition from local brands offering lower prices, which led to the need for higher discounts on delivery services and impacted same-store sales growth negatively by 2.4% in 2025.
Aggregator platform dynamics: The dynamics of aggregator platforms increased delivery-related costs, which temporarily affected store contribution margins, reducing them from 7.4% in 2024 to 7% in 2025.
Closure of underperforming stores: The company had to close certain underperforming stores, which contributed to a 7.3% year-over-year drop in total revenues during Q4 2025.
Macroeconomic volatility: Macroeconomic uncertainties posed challenges, requiring the company to demonstrate resilience and focus on operational efficiencies to maintain profitability.
Increased marketing expenses: Marketing expenses as a percentage of total revenues increased by 1.2 percentage points year-over-year, reflecting higher costs to drive traffic amidst competitive pressures.
Liquidity constraints: Total cash and cash equivalents decreased from RMB 184.2 million in 2024 to RMB 129.7 million in 2025, primarily due to business expansion and partially offset by additional bank facilities.
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Guidance & Outlook
Profitability Focus for 2026: The company aims to prioritize profitability in 2026 by enhancing supply chain capabilities and efficiencies, rolling out a differentiating made-to-order fresh and healthy food preparation model, optimizing store unit economics, and accelerating the expansion of its successful sub-franchising model.
Expansion of Franchise Stores: The company plans to accelerate the opening of franchise stores in special channels such as railway stations, hospitals, and highway rest areas, which are expected to achieve a payback period of approximately 2 years.
Store Network Growth: The company will continue adding more company-owned and operated stores in Tier 1 cities and existing locations to achieve higher economies of scale.
Product Innovation: Tims China will continue to focus on product innovation, including launching new beverages and food items to drive customer engagement and sales.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you quantify how much of the future store mix you expect special channels (railway stations, hospitals, highway rest areas) to comprise, and what impact will this have on future operating results?
A:The CEO highlighted that stores in special channels are purely dine-in, have high gross margins, low delivery costs, and attractive payback periods of around 2 years. The company plans to accelerate openings in these channels, leveraging their unique position as the only international coffee brand open to individual franchises.
Q:What is the company doing to mitigate higher delivery costs and improve same-store sales growth and store contribution margins in 2026?
A:The CFO explained that the company is managing top-line growth, same-store sales, margins, and pricing. Measures include pruning underperforming stores, negotiating better delivery costs with aggregator platforms, increasing pricing on delivery products, and optimizing cost structures. Despite challenges, the company aims to maintain or improve store contribution margins.
Q:What are your thoughts on system sales growth in 2026 given the modest net store growth in 2025 and strong franchise applications and loyalty membership expansion?
A:The CEO stated that the company is pruning underperforming stores opened during 2019-2023 with high rents. Newer stores opened in 2024-2025 have higher margins (~15%). The company plans to achieve at least 100 net store openings in 2026, focusing on high-margin formats for both company-owned and franchise stores.
Q:What factors contributed to the 1.4 percentage point improvement in gross margin in 2025, and what is the expectation for 2026?
A:The CFO attributed the improvement to better economies of scale, supply chain optimization, renegotiated vendor pricing, optimized discount programs, higher-margin new product launches, and recipe optimization. The company targets a further 1-2 percentage point reduction in food and packaging costs as a percentage of revenue in 2026.
Q:Can you explain the differences in margin profiles between company-owned and operated stores in Tier 1 cities and other tier cities with lower store density?
A:The CEO explained that higher store density in Tier 1 cities leads to better brand awareness, more efficient marketing, lower delivery and supply chain costs, and improved management efficiency. Stores in Tier 1 cities and high-tier cities opened in 2024-2025 have margins around 15%.
Q:What is the store opening and closure target for 2026, and what is the expected mix between company-owned and franchise stores?
A:The CEO reiterated the target of achieving at least 100 net store openings in 2026, including both company-owned and franchise stores. The company will continue to prune underperforming stores while focusing on opening high-margin stores.
Q:Review of Unclear Management Responses
A:None of the questions were avoided or lacked clarity. All responses provided detailed and specific information.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bagel
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cheese
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collaboration
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food item
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note
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product beverage
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THCH Transcript
TH International Limited (THCH) Q4 2025 Earnings Call Transcript
Positive4-14
The earnings call highlights strong growth in key areas such as digital orders, non-coffee beverage sales, and customer engagement, despite a decline in total revenues. The strategic focus on high-margin stores, cost optimization, and expansion into special channels suggests positive future prospects. The Q&A session provides clarity on mitigating risks and improving margins, with no unclear responses. The company's plans for expansion and improved margins, along with strong franchise applications, indicate a positive outlook, leading to a likely stock price increase in the 2% to 8% range.
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Neutral12-9
TH International Limited (THCH) Q3 2025 Earnings Call Transcript
Positive12-9
The earnings call presents a mixed but overall positive outlook. Strong points include a 58.2% increase in profits from other revenues, significant growth in registered loyalty club members, and a successful franchise expansion. The Q&A section reveals effective liquidity management and strategic focus on improving margins. However, concerns about increased costs and a decline in company-owned store revenues are balanced by optimistic guidance and strategic measures to enhance profitability. The market is likely to react positively, especially with the promising franchise model and strategic partnerships.
TH International Limited (THCH) Q2 2025 Earnings Call Transcript
Positive8-26
The earnings call indicates positive sentiment due to strong franchise revenue growth, improved operational efficiencies, and successful marketing campaigns driving same-store sales recovery. Despite a decrease in company-owned store revenues, the strategic focus on sub-franchising and digital orders shows promise. Positive EBITDA and cash flow self-sufficiency add to the optimism. The Q&A section reveals confidence in liquidity and growth, although some responses lack detail. Overall, the company's growth strategies and financial health suggest a positive stock price movement over the next two weeks.
THCH Report
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