Th International Limited ((THCH)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call of Th International Limited painted a mixed picture of the company’s financial health and strategic progress. While the company celebrated significant achievements in store expansion and profitability improvements, it also faced challenges with declining revenues and same-store sales, which impacted its cash reserves.
Store Expansion Milestone
Th International Limited reached a significant milestone with the grand opening of its 1,000th store in Shanghai. This achievement underscores the company’s aggressive national expansion strategy, marking its presence in 82 cities and reinforcing its commitment to broadening its market footprint.
Improved Profitability
The company reported notable improvements in profitability, with a 5.3 percentage point increase in the contribution margin of company-owned and operated stores. Additionally, the adjusted corporate EBITDA margin saw a substantial year-over-year improvement of 9.9 percentage points, reflecting enhanced operational efficiencies.
Loyalty Program Growth
The loyalty program of Th International Limited experienced significant growth, with registered members exceeding 24 million, marking a 29.7% increase from the previous year. This growth highlights the company’s success in engaging and retaining its customer base.
Successful Franchise Model
The franchise model of Th International Limited showed promising results, with over 6,200 subfranchisee applications received and approximately 100 new stores opened by the end of 2024. This expansion contributed to a 105.3% increase in revenues from the sub-franchisee business.
Product Innovation Impact
In 2024, Th International Limited launched 92 new products, which accounted for approximately 25% of top-line sales. This focus on product innovation is part of the company’s strategy to boost sales and cater to diverse customer preferences.
Decline in Total Revenues
Despite these positive developments, the company faced a 10.8% decline in total revenues and a 6.2% drop in system sales year-over-year. This decline poses a challenge to the company’s financial performance and necessitates strategic adjustments.
Same-Store Sales Decrease
The earnings call revealed a concerning 15.8% decrease in same-store sales growth for system-wide stores. This decline indicates potential challenges in maintaining customer traffic and sales consistency across existing locations.
Cash Position Decline
The company’s cash position weakened, with total cash and cash equivalents dropping from RMB 219.5 million to RMB 184.2 million by the end of 2024. This decline in cash reserves highlights the financial pressures faced by the company amidst revenue challenges.
Forward-Looking Guidance
Looking ahead, Th International Limited remains focused on improving financial performance and driving efficiencies. The company aims for corporate EBITDA breakeven in 2025 and continues to emphasize product innovation and operational enhancements. The successful introduction of new healthy food options and all-day solutions is expected to boost sales across different meal periods, supporting the company’s growth ambitions.
In conclusion, the earnings call of Th International Limited reflected a blend of optimism and caution. While the company achieved significant milestones in expansion and profitability, it faces challenges in revenue growth and cash management. The forward-looking guidance suggests a strategic focus on innovation and efficiency to navigate these challenges and achieve sustainable growth.