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Date
Tuesday, April 14, 2026 at 8 a.m. ET
Call participants
- Chief Executive Officer and Director — Yongchen Lu
- Chief Financial Officer — Albert Li
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Takeaways
- System Sales -- RMB 1.57 billion for 2025, marking a 7.6% year-over-year increase, primarily driven by 25 net new store openings and expansion to 1,047 stores across 92 cities.
- Company-Owned Store Contribution Margin -- 7% for the full year, down from 7.4% in the previous year, mainly due to increased delivery-related costs from aggregator platform dynamics.
- Adjusted Corporate EBITDA Margin -- Improved by 1 percentage point for the full year and by 3.3 percentage points in Q4, both year over year.
- Same-Store Sales -- Declined 2.4% for systemwide stores due to intensified competition and elevated delivery discounts.
- Total Revenues -- Decreased by 7.3% year over year, predominately from the closure of underperforming stores.
- Franchise Store Expansion -- Grew from 446 to 485 locations by year-end, with over 300 individual franchise stores opened since December 2023 and more than 10,000 applications received.
- Store Contribution Margin by Vintage -- 2024 vintage company-owned stores produced nearly 15% contribution margin, while franchise stores in special channels achieved high-teens contribution margins and payback periods of around two years.
- Loyalty Membership -- Registered loyalty members increased to 31 million, reflecting 29% year-over-year growth.
- Digital Orders -- Reached 89.3% of total orders in Q4, up from 86.1% in Q4 2024; total delivery orders grew 33.7% year over year.
- Product Innovation -- Launched 178 new products (96 beverages and 82 food items), which contributed over 25% of annual top-line sales, and increased non-coffee beverage sales to 18.3% of beverage volume, versus 14% a year before.
- Operational Efficiencies -- Food and packaging costs as a percentage of company-owned store revenues declined by 1.4 percentage points, and store labor costs and other operating expenses fell by 0.8 percentage points and 0.1 percentage points, respectively.
- Liquidity -- Total cash and equivalents were RMB 129.7 million ($18.5 million) as of year-end, down from RMB 184.2 million, due to expansion investments and partially offset by new bank facility draws.
Summary
TH International Limited (THCH 0.93%) highlighted moderating overall revenue due to continued pruning of underperforming stores, while rapidly growing its loyalty base and franchise footprint across China. Management emphasized the margin lift from new store vintages and operational cost reductions, alongside robust digital and delivery penetration. Material product innovation and differentiated store formats supported customer engagement amid ongoing competition from local brands and rising aggregator delivery costs.
- Yongchen Lu said, "our 2024 vintage company-owned and operated stores generated a store contribution margin of nearly 15% in 2025, and are expected to achieve a payback period within two to three years."
- Albert Li reported, "2025 full-year food and packaging costs as a percentage of revenues from company-owned and operated stores by 1.4 percentage points year over year."
- The company plans at least 100 net new store openings in 2026, continuing to focus on profitable formats and maintaining ongoing pruning of underperforming units.
- Management indicated the goal to further reduce food and packaging costs by 1%-2% of revenues in 2026, building on prior-year gains.
- Special channel franchise locations, such as those in transit hubs and hospitals, will be a key growth focus and are noted as producing superior margins without relying on delivery or discounts.
Industry glossary
- Made-to-order stores: Store formats where food and beverages are freshly prepared for each customer order, as opposed to pre-prepared or ready-to-go items, supporting product differentiation and margin expansion.
- Store contribution margin: The profitability from store-level operations after deducting direct costs—including labor, occupancy, and delivery expenses—but before corporate overhead and certain one-time items.
Full Conference Call Transcript
Yongchen Lu, our CEO, and Albert Li, our CFO. After the company’s prepared remarks, the management team will conduct a question-and-answer session. You will find the webcast of today’s earnings call on our IR website. Before we get started, I would 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.
All forward-looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included 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 Yongchen Lu, our CEO and director. Please go ahead, Yongchen.
Yongchen Lu: Thank you. Good morning and good evening, everyone. Thank you for joining us today. As we just celebrated the 62nd anniversary of the globally renowned Tim Hortons brand and the seventh anniversary of TH International Limited, we are excited to continue serving our innovative, locally relevant offerings to our fast-growing guests. As of December 31, 2025, China stood as the largest international market in the Tim Hortons global system by number of stores. We continued our growth trajectory, generating total system sales of RMB 1.57 billion in 2025, a 7.6% increase compared with 2024, fueled mainly by 25 new store openings and expanding our store network to 1,047 across 92 cities in China.
Food sales as a percentage of total revenues accounted for 33.4% in Q4 2025, increased from 24% in Q1 [inaudible]. Orders with food items accounted for 51% of total orders in Q4 2025, increased from 45.2% in Q1 2023. 2025 marked a critical transition year for the company. We further solidified our differentiated positioning in coffee plus fresh and prepared foods, completed [inaudible] made-to-order [inaudible] over 74% [inaudible] systemwide stores, while we integrated and pruned certain underperforming stores, especially those [inaudible] 2.7% in 2025. We had to apply higher discounts on delivery business to mitigate intensified competition due to aggregator platform dynamics, which led to a 2.4% decline in the same-store sales growth for systemwide stores in 2025.
Despite headwinds on competition, especially from low-price local brands, our team demonstrated strong resilience and maintained our margins well at both store and corporate levels. 2025 full-year company-owned and operated store contribution margin was 7%, compared with 7.4% before, which was primarily attributable to temporarily increased delivery-related costs due to aggregator platform dynamics. 2025 full-year adjusted corporate EBITDA margin actually improved by 1 percentage point. With further optimized store capital expenditures and enhanced store unit economics, our 2024 vintage company-owned and operated stores generated a store contribution margin of nearly 15% in 2025, and are expected to achieve a payback period within two to three years. Our 2025 vintage stores are still new, but they are ramping up right now.
We believe they will have similar unit economics too. In the meantime, our company-owned and operated stores in tier-one cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, and in those cities with 10-plus stores, generated over 107% store contribution margin in 2025, respectively, outperforming other tier cities with lower store density. We will continue adding more company-owned and operated stores in these cities to achieve a higher economy of scale. In 2025, we strategically expanded our store footprint while maintaining capital efficiency and improving convenience for our customers. Leveraging franchisee partnerships, we accelerated market penetration, entering 92 cities by year-end, including the debut of our first stores in Nanchong, Sichuan Province, Datong, Shanxi Province, and Xinxiang, Henan Province during 2025.
This growth strategy not only further strengthened our brand presence, but also ensured sustainable scalability to optimize resource allocation. Since we launched our individual franchise in December 2023, we have received over 10,000 applications and successfully opened over 300 stores by year-end 2025, showcasing continued market confidence in our franchise model. We have witnessed reasonable returns for our franchised stores. For instance, our franchised stores in special channels, including railway stations, hospitals, and highway rest areas, generated store contribution margins in the high teens in 2025 and are expected to achieve a payback period of approximately two years. We will accelerate opening franchise stores in these special channels. In the meantime, our subfranchise business contributes steady cash flows and profitability.
Profits from other revenues achieved a year-over-year growth of 55.7% in 2025. Product innovation has always been an important strategic focus for us. In 2025, TH International Limited accelerated product innovation across both beverages and food, launching a total of 178 new products—96 new beverages and 82 new food items—which contributed over 25% of our top-line sales. Standout offers have resonated strongly with customers. Seasonal beverage highlights during the fourth quarter included the pomegranate cheese and oat latte series, offering a diverse and differentiated flavor portfolio. We also focused on adding non-coffee beverage offers, complementary to our existing product portfolio during the afternoon tea daypart.
Total non-coffee beverages accounted for approximately 18.3% of total beverage cups sold in 2025, compared to 14% in 2024. On the flip side, we continued to strengthen the breakfast daypart and launched several campaigns to promote the lunch daypart in 2025. For instance, we introduced a breakfast combo with expansion of our croissant lineup. New offerings such as cheese chicken and coconut cheese croissants fit morning routines and offer greater value. Building on our classic bagel breakfast sets, the croissant combo includes protein-rich options like meat, catering to higher energy needs in colder months. Meanwhile, the croissant itself is light yet satisfying—perfect for those who prefer a not overly filling breakfast.
TH International Limited continued to broaden its bagel sandwich range, introducing new products including the black truffle mushroom bagel and the spicy pickled cabbage beef bagel. Further enriching the savory menu, we continued to strengthen our leadership in the bagel platform, selling a total of over 80 million bagels and bagel sandwich products cumulatively as of 2025. The fourth quarter being the holiday season saw us rolling out a series of marketing campaigns designed for special occasions from Halloween to Thanksgiving and Christmas. We joined the festive spirit with creative promotions and themed activities to grab consumer attention.
During the fourth quarter, TH International Limited continued to enhance brand relevance and consumer engagement through a series of marketing and product innovation initiatives. The company strengthened its cultural positioning through high-profile collaborations, including a limited-edition partnership with the hit TV series [inaudible], as well as a co-branded campaign with People’s Daily to celebrate China’s National Day and honor everyday heroes across the country. These initiatives leveraged culturally relevant storytelling to deepen consumer connections and drive social engagement. In parallel, TH International Limited advanced sustainability initiatives by expanding its Bring Your Own Cup program and increasing the incentive to [inaudible] per cup.
As of now, the program had attracted over 200,000 participants, reducing carbon emissions by approximately [inaudible], equivalent to planting around 360 trees. The company also introduced eco-friendly lids and straws in collaboration with Tencent’s Carbon X lab program, using carbon capture technology to convert industrial carbon dioxide into sustainable materials. SGS certification indicates that every kind of store [inaudible] 3.185 grams of carbon dioxide, reinforcing our commitment to sustainable product innovation. As of December 31, 2025, our registered loyalty members reached 31 million, reflecting a remarkable 29% year-over-year growth.
The average number of members per store has now surpassed 29,600, serving as a strong catalyst for our growth and clearly demonstrating our consumers’ ongoing support for TH International Limited’s loyalty programs. At this time, I would like to turn it over to our CFO, Albert Li, to discuss our fourth quarter and full-year 2025 financial performance in more detail. Thank you.
Albert Li: Thank you, Yongchen. We continue to strive for excellence in delivering high-value, quality, healthy products and cheerful services to our ever-growing customers. In the fourth quarter, we achieved positive net new store openings and continued our strong momentum in system sales, achieving a 4% year-over-year growth. Our overall monthly average transacting customers reached 3.43 million during 2025, a 14.3% increase from 3.01 million in the same quarter of 2024. Additionally, digital orders as a percentage of total orders rose from 86.1% in Q4 2024 to 89.3% in Q4 2025. We continue to enhance our digital capabilities to meet the growing demand for delivery and takeaway services. Total number of delivery orders increased by 33.7% year over year during 2025.
Amid macroeconomic volatility and intensive market competition, our team demonstrated strong resilience and achieved profitability improvement through enhanced operational efficiencies, supply chain optimizations, and rigorous cost controls. In Q4 2025, our adjusted corporate EBITDA margin improved by 3.3 percentage points year over year. During 2025, our total revenues dropped by 7.3% year over year, mainly due to the closure of certain underperforming stores. Benefiting from the expansion of our franchised store network, with the number of our franchised stores increasing from 446 as of December 31, 2024 to 485 as of December 31, 2025, our system sales increased by 4% year over year to RMB 359.4 million during 2025.
We are committed to improving our financial performance by refining store unit economics and boosting operational efficiencies at both store and corporate levels, setting the stage for our long-term sustainable growth. Specifically, through refinements in our supply chain capabilities and economies of scale, we reduced 2025 full-year food and packaging costs as a percentage of revenues from company-owned and operated stores by 1.4 percentage points year over year. We continued to streamline our operations by pruning underperforming stores, optimizing unit economics, refining staffing arrangements, and optimizing store managerial efficiency.
These actions led to a reduction in 2025 full-year store labor costs and other operating expenses as a percentage of revenues from company-owned and operated stores by 0.8 percentage points and 0.1 percentage points year over year, respectively. We expanded our branding initiatives and promotional offers to drive traffic. Our marketing expenses as a percentage of total revenues increased by 1.2 percentage points year over year. Our adjusted general and administrative expenses as a percentage of total revenues decreased by 7.4 percentage points year over year, which was mainly attributable to a RMB 9.7 million ($1.4 million) decrease in credit loss of accounts receivable.
Turning to liquidity, as of December 31, 2025, our total cash and cash equivalents, time deposits, and restricted cash were RMB 129.7 million ($18.5 million), compared to RMB 184.2 million as of December 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 facilities. In the meantime, with the issuance of the $89.9 million 2025 senior secured convertible notes and the amendment to our existing 2024 unsecured convertible notes in December 2025, we have successfully repurchased the entire outstanding amount due under our variable rate convertible senior notes due 2026.
Looking ahead to 2026, with profitability being front and center of everything we do, we will continue to enhance our supply chain capabilities and efficiencies, roll out our differentiating made-to-order fresh and healthy food preparation model to drive traffic, optimize overall store unit economics, and accelerate the expansion of our successful sub-franchising. I will now turn it over to Yongchen for concluding remarks followed by Q&A.
Yongchen Lu: Thank you, Albert. Before we turn to Q&A, I would like to take this opportunity to once again express my heartfelt gratitude to our customers, employees, business partners, and investors for your continued support, dedication, and trust. Together, we have created an overwhelming community of over 31 million loyal members, a unique cafe-plus-fresh-healthy-food business model offering the best value for quality products as an international coffee brand, differentiated and comprehensive store formats with over 1,000 stores in 92 cities—most of which are made-to-order stores. We expect a payback period between two to three years and a unique advantage of offering franchising opportunities as an international coffee brand.
With these milestones behind us, we are steadfast in our commitment to sustainable growth and to generating long-term value for our shareholders. We will now open the call for questions. I will turn the call over to the operator to begin the Q&A session.
Operator: Thank you, Yongchen. We will now open the call for questions and begin with our registered questions. To ask a question via the telephone, please press 1 and then 1 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press 1 and then 1 again. To ask your question via the webcast, please use the online portal. We will now take our first question from the phone line of Steve Silver of August Research Corporation. Please ask your question, Steve. Your line is now open.
Steve Silver: Thanks, operator, and thanks for taking my questions. Over the past few quarters now, you have highlighted franchise stores in special channels such as railway stations, hospitals, and highway rest areas, and you have cited their strong contribution margins and the two-year payback periods. While you mentioned in your prepared remarks that you see openings under this model accelerating, can you quantify how much of the future store mix you expect these channels to comprise? And what impact do you expect this to have on future operating results?
Yongchen Lu: Sure. Thank you, Steve, for your question. The beauty of stores in special channels, especially in railway stations and highway rest areas, is that it is purely dine-in business, so they do not rely on delivery. Also, we do not need to give discounts in those special channels. Those stores have very high gross margin and no delivery cost. Despite [inaudible] rent might be higher, those stores are generating high-teens store contribution margin, and the payback is very attractive—around two years, even lower than two years. In China, there are a lot of such areas—there are thousands, tens of thousands of stations, airports, rest areas on highways, and hospitals. We have generated strong momentum in those channels.
As we mentioned, we are essentially the only international coffee brand that is open to individual franchise, so we are attracting a lot of interest from franchisee partners, and this year we will accelerate our openings in those channels.
Steve Silver: Great. And company-owned and operated store contribution margins have been negatively impacted by higher delivery costs over the past few quarters. Is the company doing anything specifically to mitigate these risks in 2026 to improve same-store sales growth as well as store contribution margins?
Albert Li: Steve, thank you for the question. As you mentioned, due to aggregator platform dynamics in 2025, which led to very aggressive subsidies, we saw higher delivery orders and a higher percentage of delivery revenue mix. In the meantime, we also suffered from increased delivery costs because of this. Overall, it is within our expectations because we want to manage our top-line growth, same-store sales, margins, and pricing well. We are taking steps to maintain or even expand our store contribution margin. Even though the full-year 2025 store contribution margin for company-owned stores slightly decreased from 7.4% to 7%, we increased our gross margin. Food and packaging costs as a percentage of revenue decreased by 1.4 percentage points.
We are pruning underperforming stores and achieving better economies of scale. Labor costs and other store operating expenses also improved. We are doing everything we can to mitigate delivery costs, including negotiating with delivery aggregator platforms to strike better delivery cost terms. We aim to streamline delivery cost per order and have increased some pricing on delivery products to mitigate headwinds from higher delivery costs. Our goal is to at least maintain and even achieve some margin improvement in our store contribution margin. While aggressive subsidies from delivery aggregator platforms might continue in 2026, we expect that trend to be mitigated or slow down this year. Thank you, Steve.
Steve Silver: That is helpful. Thank you. And one more if I may. In 2025, net store growth turned positive, but it was a little more modest than what previous thoughts might have been around store expansion. Yet at the same time, franchise applications continue to be very strong, and loyalty membership expanded significantly, almost 30% in 2025. I would love to hear your thoughts on underlying demand and what we might think about for system sales growth in 2026.
Yongchen Lu: We are in the process of pruning underperforming stores for the past two years, and we will do so this year as well. We opened a lot of high-rent stores during 2019 to 2022 and even 2023—high rent and larger store formats for brand building—and back then rents were much higher than the current situation. We are continuing to prune those underperforming stores. That is why you see revenue for company-owned and operated stores dropping last year and this year—probably for the last two years. This year, we will continue to prune some underperforming stores. As we mentioned, the newer vintage of our stores has higher store contribution margins.
Stores we opened in 2024 and 2025 have store margins around 15%. This newer vintage format has been proven, so we will continue to open such formats for both company-owned and franchised stores. We target to achieve net store openings this year of at least 100, and possibly more when we secure additional capital. We will continue to expand the network, and that is the plan for now.
Steve Silver: Great. Thanks for taking the questions, and best of luck throughout the year.
Yongchen Lu: Thank you. Thank you, Steve.
Operator: Thank you. Our next question comes from the phone line of Fuli He from TF Securities.
Analyst: Hello. Thanks for taking my question. I have three questions. The first one is about gross margins. Your gross margin improved by 1.4 percentage points in full year 2025. This is quite impressive. Can you explain more on the factors behind this? And how would you expect your gross margin in 2026?
Albert Li: Thank you, Fuli. As you mentioned, food and packaging costs as a percentage of revenue from company-owned and operated stores decreased from 31.5% in 2024 to 30.1% in 2025, representing an improvement of 1.4 percentage points. I also want to highlight that in the fourth quarter of 2025, the cost percentage was 29.4%, representing a 2 percentage point margin improvement from 2024.
The overall improvement was mostly due to the following factors: first, better economies of scale as our overall GMV increased and our network expanded; second, multiple supply chain optimization projects—renegotiation of unit costs and pricing with each of our vendors; third, optimization of our discounts program, improving average pricing a little bit, especially with increased pricing on delivery products; fourth, higher margins on new product launches—nearly 178 new LTO products in 2025, most with higher margins; and lastly, recipe optimization of existing core products and reductions in material, transportation, and freight costs.
Going forward, we will continue to implement the above measures and target to further reduce food and packaging costs as a percentage of revenues by at least 1 to 2 percentage points in 2026. Thank you for your question.
Analyst: Very clear.
Analyst: The second one is about margin profile. You mentioned company-owned and operated stores in tier-one cities and in those cities with 10-plus stores generated over 107% store contribution margin in 2025, outperforming other tier cities with lower store density. Can you explain more details about the differences in margin profile of these stores?
Yongchen Lu: Thank you. It is a great question. Density really matters. The more stores we have in a city, the more brand awareness we build, and the more efficient our marketing campaigns become. We also see lower costs in delivery and supply chain, and higher efficiency in management. The data clearly show we have the highest margins in tier-one cities. As we mentioned earlier, for the 2024 and 2025 vintage stores, our store margins are about 15%, and most of these stores were opened in tier-one and other higher-tier cities. We will continue to add more company-owned and franchised stores in existing cities to add density, which helps on everything. Thank you.
Analyst: The last one is about store count target. What is the store opening and closure target for 2026, and the expected mix between company-owned and operated stores and franchised stores? That is all.
Yongchen Lu: We just answered a similar question. We target to achieve net store openings of at least 100, including both company-owned and franchised stores. We are very happy to see our newer vintages have very high margins, so we will continue to open. Although we will continue to prune some underperforming stores, we should be able to achieve net store openings of at least 100 this year.
Albert Li: Thank you.
Operator: I will now hand back to the operator to review any questions coming through via the webcast. It seems that we have no questions online. At this time, there are no further questions. With that, we conclude today’s question-and-answer session. I would like to hand the call back to Yongchen for his closing comments.
Yongchen Lu: Thank you all for your time. It has been a challenging year, but we have been able to improve our margins and achieve net store openings, and we expect to improve our margins further this year and accelerate openings this year. Stay tuned. We will see you soon. Thank you.
Operator: Thank you. That does conclude today’s conference call. Thank you for your participation. You may now disconnect your lines.
