TH International Q2 2025 Earnings Report

TH International EPS Results

• Actual EPS: -$0.17
• Consensus EPS: -$0.17
• Beat/Miss: Beat by +$0.00
• One Year Ago EPS: N/A

TH International Revenue Results

• Actual Revenue: $48.72 million
• Expected Revenue: $53.98 million
• Beat/Miss: Missed by -$5.26 million
• YoY Revenue Growth: N/A

TH International Announcement Details

• Quarter: Q2 2025
• Date: 8/26/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 26, 2025
• Conference Call Time: 8:00AM ET

TH International (NASDAQ:THCH) operates Tim Hortons coffee shops in mainland China, Hong Kong, and Macau. The company offers brewed tea, coffee, milk tea, lemonade, hot chocolate, and coffee drinks. It is also involved in franchise related business. The company is based in Shanghai, the People's Republic of China.

TH International Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Food revenue increased by 8.6% year-over-year, raising food’s share of total sales to a record 35.2%, while system sales rose 1.4% and the company returned to positive adjusted corporate EBITDA, with adjusted net losses down 16.2%.
• Positive Sentiment: Subfranchise momentum accelerated, with over 8,100 franchise applications received and more than 400 stores converted by quarter-end, and a target to open roughly 200 new franchise stores in 2025 under a two- to three-year payback model.
• Positive Sentiment: Loyalty program membership reached 26.2 million, marking 22.4% annual growth and providing a robust marketing and sales catalyst across more than 1,000 stores.
• Negative Sentiment: Company-owned store revenues fell 12.5% year-over-year due to underperforming store closures and a 3.6% drop in same-store sales, although transaction growth turned positive from April onwards.
• Positive Sentiment: The menu expanded with 43 new products—28 beverages and 15 food items—highlighted by sparkling cold brew, water buffalo milk series, and healthy live lunch boxes aimed at boosting same-store sales and broadening consumer appeal.

Presentation

[Operator]

Ladies and gentlemen, welcome to TIM's China's Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode during management's prepared remarks and there will be a question and answer session to follow. Today's conference is being recorded. At this time, I would like to turn the call over to Gemma Fax, who heads Tim's China's Investor Relations efforts for prepared remarks and introductions. Please go ahead, Gemma.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Hello, everyone, and thank you for joining us on today's call. My name is Gemma Waks, Head of Investor Relations. And Sims China announced its second quarter twenty twenty five financial results earlier today. A press release as well as an accompanying presentation, which contain operational and financial highlights, are now available on the company's IR website at ir.tincherchina.com. Today, you will hear from Yongcheng Lu, our CEO and Director and Albert Li, our CFO.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

After the company's prepared remarks, the management team will conduct a question and answer session. You can find a slide presentation and the webcast of today's earnings call on our website. Before we get started, I'd like to remind you that our earnings presentation and investor materials contain forward looking statements, which are subject to future events and uncertainties. Statements that are not historical facts, including, but not limited to, statements about the company's beliefs and expectations are forward looking statements. Forward looking statements involve inherent risks and uncertainties, and our actual results may differ materially from those forward looking statements.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

All forward looking statements should be considered in conjunction with the cautionary statements in our earnings release and risk factors including in our filings with the SEC. This presentation also includes certain non GAAP financial measures, which we believe can be helpful in evaluating our performance. However, those measures should not be considered substitutes for the comparable GAAP measures. The accompanying reconciliation information related to those non GAAP and GAAP measures can be found in our earnings press release issued earlier today. With that said, I would now like to turn it over to Yongqian Lu, our CEO and Director. Please go ahead, Yongqian.

[Yongchen Lu, CEO & Director at TH International]

Thank you, Gemma. Good morning and good evening, everyone. In Q2, we reinforced our differentiated coffee plus fresh freshly prepared food strategy with a successful launch of live lunch box platform, a series of new combo products for the lunch daypart to further drive our top line growth and enhance store unit economics. The product lineup include hot baked bagel sandwiches, energizing lunch wraps, and loaded power bowls, paired with a coffee or other beverage, all at an acceptable price point. As a result, food revenue increased by 8.6% year over year, and food revenue contribution as a percentage of sales reached a historical high of 35.2%, an increase of 2.8 percentage points from 32.5% in the 2024.

[Yongchen Lu, CEO & Director at TH International]

Our system sales continue to grow during the quarter, achieved a 1.4% year over year increase. Our subfranchise Z and retail businesses continue to deliver steady cash flow and profitability. Profits from other revenues achieved a year over year increase of 110.3%. At the same time, we returned to positive adjusted corporate EBITDA and reduced adjusted net losses by 16.2% during the quarter. These achievements underscore Team China's successful disciplined execution and our unwavering commitment to achieve achieving sustainable long term profitable growth.

[Yongchen Lu, CEO & Director at TH International]

On store development, leveraging several franchisee partnerships, we expanded our store footprint into 98 cities, including the city of Zibo in Shandong province, Lishei in Zhejiang province, Luan in Anhui province, and in Jincheng in Shaanxi province that we entered in q two while maintaining capital efficiency and delivering absolute convenience for our guests. Since we launched our individual franchisee programs in December 2023, we have received over 8,100 applications and successfully converted over 400 stores by the end of second quarter, showcasing in this ad market confidence in our franchisee model. We have established attractive and desirable store unique economics for subfranchises with a reasonable two to three year payback period on average and have a target to open on a gross base around 200 franchise stores in 2025. We are also focused on special channel store development with 18 new store openings in locations such as railway stations, airports, highway, arrest areas, hospitals, universities and schools, etcetera. As of 06/30/2025, our registered lobbying club members reached 26,200,000, reflecting a remarkable 22.4% year over year growth.

[Yongchen Lu, CEO & Director at TH International]

The average number of members per store is now close to twenty twenty six six dollars serving as a strong catalyst for our future growth. On product category and offering in China's highly competitive beverage market, April marked the onset of peak seasonal demand, triggering intensified rivalry among brands aiming to capture market share and drive top line growth. Therefore, Teams China executed a focused product led strategy in q two, strengthening its position across key consumption occasions and customer segments. We introduced a total of 43 new items during the quarter, 28 beverages and 15 food products, reflecting our commitment to innovation and the menu diversification. This low cost pipeline supports our due goals of increasing same store sales and expanding our consumer base.

[Yongchen Lu, CEO & Director at TH International]

On beverage portfolio expansion, to meet growing consumer demand for healthier, light lighter beverage options, we launched the sparkling cold brew series, building on the success of our grape variant with additional fruit inspired flavors. The sparkling texture differentiate differentiates the lime from our value here in Americano, while the use of cold brew coffee enhances the perceived quality and attract black coffee into the ad seeking a refreshing upgrade. For our milk coffee drinkers, we reintroduced the water buffalo milk series, leveraging its naturally creamy, lightly sweet profile that resonates well in warmer weather. Positioning positioning alongside our affordable like, pay offers, this creates a compelling product mix that strengthens our appeal across both price sensitive and premium seeking customers. Recognizing rising demand for non coffee options, particularly among families and younger guests, we expect it expanded into adjacent categories by launching a series of non coffee beverages, including the ice cap line as well as cold tea, etcetera.

[Yongchen Lu, CEO & Director at TH International]

This product leverages existing product ingredients and infrastructure, enabling efficient innovation while broadening our afternoon reach. Together, these initiatives have enhanced the depth and the balance of our beverage portfolio across price tiers and consumer needs, driving higher basket diversity and the category penetration. Online time growth and data expansion, building on the successful launch of live and fit launch box series in q one, we expanded the platform in q two with two new formats, the rock series and the energy energy ball series. These additions reinforce our positioning in the growing light and healthy VO segments to strengthen our competitive advantage during the launch daypart. We are confident that the full live meal box lineup not only meets rising demand for nutritious, convenient meals, but also serves as a catalyst for traffic growth.

[Yongchen Lu, CEO & Director at TH International]

Early data indicate a positive spillover effect with increased lunchtime business contributing to higher engagement during the breakfast and even during the daypart. Beyond revenue generation, this initiative enhances brand equity by positioning Teams as a proven provider of balance and everyday solutions, not just coffee. In July, we announced the appointment appointment of of immensely popular and most talented singer songwriter and influence from to answer Lars Wong Wong as our official brand ambassador for the year. Last, we launched a dynamic series of collaborations aimed at expanding the reach of Team China brand and introducing its flavorful, healthy and light products to ever growing audiences, especially among Gen Z consumers. These efforts designed to drive traffic, increase average transaction value and establish new consumption occasions.

[Yongchen Lu, CEO & Director at TH International]

At this time, I would like to turn it over to our CFO, Albert Lee, to discuss our second quarter twenty twenty five financial performance in more detail.

[Dong Li, CFO at TH International]

Thank you, Yongchuan. We continued to demonstrate our capabilities to further improve our financial performance by refining store unit economics and driving efficiencies at both store and corporate levels. Our sub franchisee and retail business contributed steady cash flows and profitability. In the 2025, we further improved our company owned and operated store contribution margin and adjusted corporate EBITDA margin by two point seven and two point eight percentage points year over year, respectively. We remain focused on delivering high value for quality, healthy products and thoughtful services to our ever growing customer base.

[Dong Li, CFO at TH International]

Our overall monthly average transacting customers reached 3,590,000 in Q2 twenty twenty five, a 14.3% increase from 3,140,000 in the same quarter of 2024. Additionally, digital orders as a percentage of total orders rose from 86.5% in q two twenty twenty four to all time high of 90.4% in Q2 twenty twenty five. We continue to enhance our digital capabilities to meet the growing demand for delivery and takeaway services. In q two, our company owned and operated store revenues dropped by 12.5% year over year, which was primarily due to the planned closure of certain underperforming stores and a 3.6% decrease in same store sales growth. We have seen positive same store transaction growth since April, and our same store transaction growth was positive 3.4% in Q2.

[Dong Li, CFO at TH International]

In the meantime, revenues from our franchised business and retail business increased by 50.7% year over year. The number of our franchised stores increased from 333 as of 06/30/2024 to 449 as of 06/30/2025. Our system sales increased by 1.4% year over year. We also made significant progress in boosting operational efficiency in q two, setting the stage for our long term sustainable growth. Through refinements in our supply chain capabilities and economy of scale, we reduced the food and packaging costs as a percentage of revenues from company owned and operated stores by 0.8 percentage points year over year.

[Dong Li, CFO at TH International]

Food and packaging costs accounted for 30.1% of our company owned and operated store revenues during the quarter. We continued to streamline our operations by pruning underperforming stores, refining staffing arrangements, and optimizing store managerial efficiency. These actions led to a year over year reduction in labor costs and other store operating expenses as a percentage of revenues from company owned and operated stores by one point zero and zero point four percentage points year over year, respectively. Rental and property management fee as a percentage of revenues from company owned and operated stores increased by 0.9 percentage points from 19.3% in the 2024 to 20.2% in the same quarter of twenty twenty five, which was primarily due to a 3.6% decrease in same store sales volume growth for company owned and upgraded stores in the 2025. Delivery costs as a percentage of revenues from company owned and operated stores increased by 1.8 percentage points to 11.8% in the 2025 compared to 10% in the same quarter of 2024, which was primarily due to the higher delivery revenue mix as a percentage of total revenues from company owned and operated stores.

[Dong Li, CFO at TH International]

The number of delivery orders for company owned and operated stores increased by 10.2% year over year. We made more efforts to promote our newly launched Light and Fit Lunchbox series products. Our marketing expenses as a percentage of total revenues accounted for approximately 4% during the quarter, an increase of 0.5 percentage points year over year. Our general and administrative expenses decreased by 5.2 year over year, which was primarily due to our cost optimization measures at the headquarter level. General and administrative expenses as a percentage of total revenues remained relatively stable at 10.8% in the 2024 and 2025.

[Dong Li, CFO at TH International]

As a result of the foregoing effects, we have been able to achieve positive adjusted corporate EBITDA again during the quarter as we achieved earlier in the 2024. Turning to liquidity. As of 06/30/2025, our total cash and cash equivalents, time deposits, and restricted cash were RMB $10,778,800,000.0 compared to RMB 184,200,000.0 as of 12/31/2024. The change was primarily attributable to cash disbursements on the back of the expansion of our business, partially offset by the drawdown of additional bank borrowings. Looking ahead, with profitable growth always being front and center of everything we do, we are post to further enhance our operational efficiencies such as supply chain optimizations and rigorous cost controls to roll out our differentiating made to order fresh and healthy food preparation model to drive traffic, to optimize the overall store unit economics, and to accelerate the expansion of our successful sub franchising.

[Dong Li, CFO at TH International]

And I will now turn it over to Yun Chen for concluding remarks followed by Q and A.

[Yongchen Lu, CEO & Director at TH International]

Yes. Thank you, Albert. Our second quarter performance reflects continuous improvements and the resiliency of our business and execution as well as both challenges and opportunities in this industry. We extend our heartfelt gratitude to our guests, team members, and business partners, shareholders, and everyone supporting our endeavors and journey. Together, we have built over 1,000 stores in 90 cities, and robust community of now over 26,000,000 loyal club members, a unique coffee plus fresh prepared food business model offering the best value for quality products, a unique advantage of offering franchise opportunities as an international company in China and a refinance store unit economics with a check payback period within two to three years.

[Yongchen Lu, CEO & Director at TH International]

With these these milestones, we are steadfast in our commitment to sustainable profit growth and to generating long term value for our shareholders. I will now turn the call over to Gemma for today's Q and A session.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Thank you. Yes. Thank you, Yongcheng. We will turn it over to Q and A now and open it up for our registered questions. Let's begin with the first one. Go ahead, operator.

[Operator]

Thank We will take our first question from the phone lines. This is from the line of Steve Silver from Argus Research Corporation. Please go ahead.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

Thank you, operator, and thank you for taking my questions. I was hoping you could provide your current thinking on the rate at which you can review the growing number of sub franchise applications to accelerate the rate of new store growth and ultimately return to net store growth?

[Yongchen Lu, CEO & Director at TH International]

Yes. I mean, I want to clarify, okay. I mean, for the Q2, we continue to improve underperforming company owned stores as well as franchised stores, especially those non MTO stores, those Express stores. Among the 49 closures in Q2, 41 were such non MTO Express stores. So if we include exclude these stores, actually, we had 31 net openings of MTO stores.

[Yongchen Lu, CEO & Director at TH International]

So I mean, we based on the pipeline we have so far, our target is still not to open around 200 new MPO stores in 2025 on gross basis. And we'll open majority at the subfranchisee stores, and we'll continue to improve underperforming stores over the year to improve profitability. So, I mean, last year, this year, we'll continue to close nonperforming stores and aiming at improving profitability. And and we expect, okay, now we'll we'll have over 100 net openings this year, and we expect, okay, 200 to 300 new openings every year in the next few years.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

Okay. Thank you. So it looks like the company continues to make good progress in managing its costs, although marketing expenses did go up as a percentage of revenues in Q2. Curious as to your thoughts on how sustainable that trend would be? And what impact it would have on the business same store sales growth and its margins?

[Yongchen Lu, CEO & Director at TH International]

Yes. I mean, our same store sales has been recovering well. And we expect we will have positive same stores in the third quarter and in the second half of the year. And now the market spends in the second quarter, some part of third quarter was to support the the the lunch box campaign. I mean, lunch box is a yeah.

[Yongchen Lu, CEO & Director at TH International]

Is a is a is a the big campaign this year and which has been improving which has been working so far. As we can see the full contribution has been continuing now to grow and we have we reached the historical higher of the contribution in the second quarter. And we expect, okay, that will continue.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

Great. And one last one for me, just a big picture question. Just in terms of how Tim's is balancing the need to invest in order to grow revenues while at the same time being conservative with operating capital, really just your current thinking about your capital needs in order for Tim's to take the next steps towards sustainable profitable growth?

[Dong Li, CFO at TH International]

Okay. Sure, Steve. I think let me address this question. So as we just mentioned during the earnings call, we returned to positive adjusted corporate EBITDA this quarter as we did in the second and third quarter of last year. So we believe we are very close to full year adjusted corporate EBITDA breakeven as of this moment.

[Dong Li, CFO at TH International]

So which means, you know, we are very close to, you know, realizing or achieving operating cash flows self sufficient. So in terms of that, I think we are not, like, actually putting cash on at the operating level. So in the meantime, you know, if we could secure additional capital, actually, we continue working very hard on that, I think, in terms of securing, like, more bank loans onshore. And and also, you know, we are also working on, like like, certain financing plans for the company to bring more capital to the company and to the business. So if we could, like, actually secure more additional financing capital, we would consider open more profitable company owned and operated stores in the meantime.

[Dong Li, CFO at TH International]

So honestly speaking, we want to achieve a very good balance between opening more company owned stores and also in terms of balancing our overall financial position. So hopefully, I can address your question here.

[Steve Silver, Senior Equity Research Analyst at Argus Research]

Yes. That was helpful. Thank you very much.

[Dong Li, CFO at TH International]

Thank you, Steve.

[Operator]

You. I will now hand back to Gemma to read the questions coming through via the webcast.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Yes. Thank you, Sarah. We received a couple of questions online. You already commented on same store sales trends. Is there anything additional you can say about those trends thus far?

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

And also in particular your outlook for the remainder of the year that you haven't addressed when you spoke with this earlier?

[Yongchen Lu, CEO & Director at TH International]

Yes. We talked about the same stores already. I mean, we will improve quarter by quarter. And and and in the second quarter, the same store sales decreased, what has been now to only 3.6%. And we have seen, you know, very positive trend in latest in recent months.

[Yongchen Lu, CEO & Director at TH International]

And again, we expect, okay, we'll achieve a positive same store sales in Q3 and in the second half of this year.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Okay. And could you provide an update on the refinancing of the convertible debt?

[Yongchen Lu, CEO & Director at TH International]

Yes. We are in the good progress right now, and we will disclose when it's running.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Okay. Another question we received online is how can we better monetize the team's loyalty members, which is sort of $26,000,000 by now. The question is about the theoretical spend of $1 per member per week and what that would generate in annual sales. What is realistic in this regard? And how could this be better monetized?

[Yongchen Lu, CEO & Director at TH International]

Yeah. It's a it's a great question and but it's also a very challenging question. No. I mean, we kind of we have a gold mine. We need to dig and and derive the value from from from the memberships.

[Yongchen Lu, CEO & Director at TH International]

So we have the the the mind there, and we need to design a good product and campaign and attract those members to spend more in our stores. I mean, that that's something that we are working every day.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Okay. The last question I have online is do you expect your liquidity position to improve going forward?

[Dong Li, CFO at TH International]

Yeah. I I I think as, you know, what I have explained to Steve's, like, last question. So, actually, we are actually approaching to operating cash flow self sufficient. So we do not expect to burn cash. And in the meantime, we are working very hard to bring in new capital to the company.

[Dong Li, CFO at TH International]

So as of this moment, I think we are very confident that we can actually we are in a good liquidity position for now.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Sarah, those were the questions I I have that came in online.

[Operator]

Thank And as a reminder, to ask a question via the webcast, you can type it into the box and click Submit. Please stand by while we check for any further questions. There are no further questions at this time. So with that, that concludes today's question and answer session. I would like to hand the call back to Yong Chen for closing remarks.

[Yongchen Lu, CEO & Director at TH International]

Thank you always for your time and attention. And as okay, as we mentioned earlier, we are optimistic about the second half of the year. We are we are at a turning point of, you know, parts of same store sales and parts of, you know, copper EBITDA. So we'll see you again in the Q3 and report back the good news. Thank you.

[Dong Li, CFO at TH International]

Thank you.

[Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group]

Thank you all very much.

[Yongchen Lu, CEO & Director at TH International]

Thank you. Bye bye.

[Operator]

Thank you. That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

Participants

Executives

• Yongchen Lu, CEO & Director
• Dong Li, CFO

Analysts

• Gemma Bakx, IR & Corporate Communication at Cartesian Capital Group
• Steve Silver, Senior Equity Research Analyst at Argus Research