Contradicciones en las llamadas de resultados de TH International para los años 2024-2025: Liquidez, márgenes y estrategias de crecimiento

Date of Call: Not explicitly provided in transcript

Financials Results

• Revenue: Company-owned and operated store revenues dropped 5.5% YOY; system sales grew 12.8% YOY; franchised business revenues increased 25.0% YOY
• Operating Margin: Adjusted corporate EBITDA margin was negative 4.2% in Q3 2025 vs positive 0.6% in Q3 2024

Guidance:

• Expect to generate positive operating cash inflows and become more self-sustainable.
• Plan to achieve double-digit store level margin next year.
• Expecting another progress towards the end of the year and much even better next year.

Business Commentary:

• Positive Net New Store Openings and System Sales Growth:
• Tims China achieved a 12.8% year-over-year growth in system sales and returned to positive net new store openings in Q3.

• Growth was driven by the expansion of store footprint into new cities and the success of the Light & Fit Lunch Box platform products.

• Increased Food Revenue Contribution:

• Food revenues increased by 24.2% year-over-year, and food revenue contribution reached a historical high of 36.5%, up 5 percentage points from the previous year.

• This increase was attributed to the enhanced Coffee Plus Freshly Prepared Food strategy and the introduction of new food SKUs.

• Loyalty Club Membership Growth:

• Registered Loyalty club members reached 27.9 million, reflecting a 22.3% year-over-year growth.

• The growth in members is seen as a strong catalyst for future growth, supported by marketing initiatives and digital engagement.

• Digital Order Increase:

• Digital orders as a percentage of total orders rose to an all-time high of 91.0% in Q3 2025, up from 86.6% in Q3 2024.

• This improvement was driven by enhanced digital capabilities to meet the growing demand for delivery and takeaway services.

• Strategic Financing Transactions:

• The company issued approximately USD 89.9 million in senior secured convertible notes, facilitating the repurchase of outstanding notes and restructuring others.
• These transactions are aimed at reducing offshore leverage, enabling focus on store network development, and supporting long-term sustainable growth.

Sentiment Analysis:

Overall Tone: Positive

• Returned to positive net new store openings, positive same-store sales growth, system sales grew 12.8% YOY, 'resilience and discipline in execution', 'successful issuance' of convertible notes, 'very, very well' performing special channel stores, 'much even better next year'.

Q&A:

• Question from Steven Silver (Argus Research Corporation): With the closing of the new convertible notes transaction in Q3, I was hoping you could provide just the company's latest thinking on its liquidity status and its long-term financing plan.
  Response: After the transactions, the company has no near-term offshore liabilities, expects reduced onshore leverage, is seeking additional financing to support store network growth, and aims for self-sustainability through positive operating cash inflows.

• Question from Steven Silver (Argus Research Corporation): In Q3 specifically, it looks like there was some pressure on the store contribution margins. It sounds like gross margin and delivery costs were impacted a bit. Do you expect that trend to continue over the near term? And maybe what the company's thoughts about the margin profile moving forward?
  Response: The lower margin was due to temporary higher delivery revenue mix from platform subsidies. Aims to expand store contribution margin to mid-to-high teens by enhancing gross margins, same-store sales, and network optimization, expecting double-digit store level margin next year.

• Question from Steven Silver (Argus Research Corporation): The company has discussed focusing on strategic special channel stores under the franchise model. Curious if there's any information about the performance of some of these stores.
  Response: Over 60 special channel stores perform very well, generating mid-to-high teens store contribution margin and EBITDA margin with around 2-year payback. High interest from franchisees and plans to open many more next year.

Contradiction Point 1

Liquidity Position and Financing Strategy

A direct contradiction exists regarding the company's stated financial health and immediate capital needs. In late 2024, management projected strong self-sufficiency and ample bank facilities for growth. By late 2025, the narrative shifted dramatically to having "no near-term offshore liabilities" only after a significant refinancing event, with a new focus on securing *additional* financing for expansion, indicating a prior liquidity position and strategy that may have been more precarious than initially communicated.

Could you update us on the company’s liquidity position and long-term financing plans following the Q3 convertible notes issuance? - Steven Silver (Argus Research Corporation)

20251209-2025 Q3: After successfully issuing the USD 89.9 million 2025 senior secured convertible notes... This results in no near-term offshore liabilities, allowing focus on daily operations... The company is working to secure additional alternative debt or equity financing to support the development of the company-owned and operated store network... - Dong Li(CFO)

What is your current thinking on the balance sheet state, especially regarding profitable growth and subfranchise expansion in 2025, and what specific strategies are you using to manage cash flow while balancing growth and debt obligations? - Steve Silver (Argus Research Corporation)

2024Q4: As of the end of 2024, total cash and cash equivalents were approximately **RMB 184 million**, with a stable **RMB 400 million** in drawable bank facilities... The company is no longer cash-burning like in past years and can rely on bank facilities for company-owned store expansion if needed. - Albert Li(CFO)

Contradiction Point 2

Store Contribution Margin Trajectory and Outlook

There is a clear contradiction in the explanation for store margin pressures and the path to improvement. In late 2024, the focus was on achieving a full-year EBITDA breakeven without mentioning the specific margin compression seen later. By late 2025, a significant Q3 margin decline was attributed to a new, temporary "delivery war" tactic, with a specific timeline for margin recovery. This represents a change in both the identified cause of a key financial metric and the projected trajectory for improvement.

Will the pressure on store contribution margins from Q3 gross margin and delivery cost impacts persist in the near term? How does the company view the margin profile going forward? - Steven Silver (Argus Research Corporation)

20251209-2025 Q3: The lower store contribution margin in Q3 was mostly due to higher delivery revenue mix driven by aggressive platform subsidies in a delivery war. This is viewed as a temporary play... The company expects to achieve double-digit store level margin next year. - Yongchen Lu(CEO)

How are comp store sales trending so far in 2025? Has the coffee price war subsided at all? - Jonathan Norwood (via webcast)

2024Q4: The company is at a turning point to achieve **full-year corporate EBITDA breakeven** in 2025. The proven sub-franchising model with attractive unit economics will be used to expand the store network, which is capital-efficient and does not require significant capital. - Yongchen Lu(CEO)

Contradiction Point 3

Liquidity and Financing Strategy (Q2 vs. Q3)

This point reveals a significant shift in the company's framing of its financial health between consecutive quarters. In Q2, management confidently stated the company was "very close to achieving full-year breakeven" and had a "good liquidity position." By Q3, after a major refinancing event, the same situation is reframed as a strategic restructuring to eliminate "near-term offshore liabilities," suggesting the earlier claims of strong liquidity and self-sufficiency may have been based on a more constrained financial reality.

Can you provide the company's current liquidity status and long-term financing plans following the Q3 convertible notes transaction? - Steven Silver (Argus Research Corporation)

20251209-2025 Q3: After successfully issuing the USD 89.9 million 2025 senior secured convertible notes, the company used part of the proceeds to fully repurchase the remaining amount of the 2021 variable notes due 2026 and extended the due date of the 2024 unsecured convertible notes to September 2029. This results in no near-term offshore liabilities... - Dong Li(CFO)

How is Tims balancing investments in growth with maintaining conservative operating capital, and what are your current capital requirements to achieve sustainable profitable growth? - Steven Silver (Argus Research Company)

2025Q2: The company has returned to positive adjusted corporate EBITDA this quarter and is very close to achieving full-year breakeven, indicating operating cash flow self-sufficiency. ...The company is confident in its current good liquidity position. - Dong Li(CFO)

Contradiction Point 4

Store Network Growth and Franchising Strategy

This contradiction highlights a strategic pivot in the company's growth narrative. In Q2, the focus was on a clear, quantitative target for new stores with a specified mix. In Q3, the emphasis shifted entirely to a specialized subset of "special channel" stores under the franchise model, promising "many more" without reconciling this new focus with the broader, previously stated numerical targets. This represents a change in market strategy and growth priorities.

Have any of the company's strategic special channel franchise stores reported performance data yet? - Steven Silver (Argus Research Corporation)

20251209-2025 Q3: As of the end of September 2025, there are over 60 special channel stores (e.g., high-speed rail stations, airports, hospitals). These stores perform very well... The company expects to open many more such stores next year. - Yongchen Lu(CEO)

How quickly can you process the growing number of sub-franchise applications to accelerate new store growth and return to net store growth? - Steven Silver (Argus Research Company)

2025Q2: The target for 2025 is to open around 200 new MTO stores on a gross basis, with a majority being sub-franchisee stores. The company expects to achieve over 100 net openings this year and aims for 200 to 300 new openings annually in the coming years. - Yongchen Lu(CEO)

Contradiction Point 5

Financing Strategy and Liquidity Position (Q1 vs. Q3)

This point underscores a material change in the company's financial narrative between the start and end of the fiscal year. In Q1, the focus was purely on franchise growth and store openings, with no mention of imminent debt maturities or the need for urgent refinancing. By Q3, the company's narrative centers on a major refinancing event to eliminate "near-term offshore liabilities," indicating a significant change in financial strategy or circumstances that was not previously disclosed.

Following the Q3 convertible notes transaction, could you update us on the company's current liquidity status and long-term financing plans? - Steven Silver (Argus Research Corporation)

20251209-2025 Q3: After successfully issuing the USD 89.9 million 2025 senior secured convertible notes... This results in no near-term offshore liabilities... - Dong Li(CFO)

With limited net store openings in Q1, what is your outlook for the full-year new store count and the pace for addressing the growing franchise applications? - Steven Silver (Argus Research Corporation)

2025Q1: The company has received over 7,000 franchise applications since December 2023 and has converted nearly 200 stores by end of March 2025. - Yongchen Lu(CEO)