Mr. Yongchen Lu of Tims China reports

TIMS CHINA ANNOUNCES FIRST QUARTER 2024 FINANCIAL RESULTS

TH International Ltd., the exclusive operator of Tim Hortons coffee shops and Popeyes restaurants in China (Tims China), and a subsidiary of Restaurant Brands International Inc., has released its unaudited financial results for the first quarter 2024.

First quarter 2024 highlights:

• Total revenues reached 346.8 million renminbi ($48-million (U.S.)), representing a 3.1-per-cent increase from the same quarter of 2023.
• System sales reached 363.5 million renminbi ($50.3-million (U.S.)), representing a 7.1-per-cent increase from the same quarter of 2023.
• Net new store openings totalled five (net closure of 15 company-owned-and-operated stores for Tims, net opening of 19 franchised stores for Tims and net opening of one company-owned-and-operated store for Popeyes).
• Adjusted store EBITDA (earnings before interest, taxes, depreciation and amortization) was 6.1 million renminbi ($800,000 (U.S.)), representing a 2-per-cent year-over-year growth.
• Adjusted store EBITDA margin was 2 per cent, slightly improved from the same quarter in 2023.
• Registered loyalty club members totalled 20.3 million members as of March 31, 2024, representing a 63.6-per-cent year-over-year growth.

Company management statement

Yongchen Lu, chief executive officer and director of Tims China, commented: "In Q1 2024, our system sales grew by 7.1 per cent, and we continued to improve our bottom-line performance, marching towards achieving our first quarterly adjusted corporate EBITDA breakeven this year. Our registered loyalty club membership exceeded 20 million as of March 31, 2024, a 63.6-per-cent year-over-year growth, serving both as a pivotal catalyst for growth and a testament to our customers' support and embrace of Tims China's loyalty program.

"Continuous product innovation remains a cornerstone of our strategic vision; we launched 14 new beverages and 18 new food products during the quarter. We just celebrated the meaningful milestones of our fifth anniversary in China, as well as the 60th anniversary of the Tim Hortons brand, in February. To commemorate both remarkable milestones and double celebrations, Tims China launched its Chinese version of 'double-double' latte series. Our collaborations with Tangle Angel and Dove Chocolate have also achieved significant success during the quarter."

Mr. Lu added: "Our Popeyes brand maintains its robust growth trajectory. So far, we have successfully launched 14 Popeyes restaurants and are actively expanding our product offerings beyond the core fried chicken products. Our restaurants represent a solid base for further growth in Shanghai and beyond."

Dong (Albert) Li, chief financial officer of Tims China, commented: "During the first quarter of 2024, and in the face of headwinds, we continued to enhance our operational efficiency. We pared back costs at the headquarter level, and we pruned our underperforming stores. These actions allowed us to deliver year-over-year reductions in food and packaging costs, rental expenses, and labour costs (as a percentage of revenues from company-owned-and-operated stores) by one percentage point, 0.9 percentage point and 1.3 percentage points, respectively. Our adjusted general and administrative expenses as a percentage of total revenues decreased by 4.1 percentage points year-over-year."

Mr. Li continued, "Going forward, and with driving profitable and capital-efficient growth being front and centre of everything we do, we will continue to optimize our store unit economics, roll out our differentiating made-to-order fresh food preparation model to drive traffic, enhance our supply chain capabilities and efficiencies, and facilitate our franchisees to manage the growth and profitability of their stores effectively."

First quarter 2024 financial results

Total revenues reached 346.8 million renminbi ($48-million (U.S.)) for the three months ended March 31, 2024, representing an increase of 3.1 per cent from 336.5 million renminbi in the same quarter of 2023. Total revenues comprise:

• Revenues from company-owned-and-operated store sales were 311 million renminbi ($43.1-million (U.S.)) for the three months ended March 31, 2024, representing an increase of 0.2 per cent from 310.5 million renminbi in the same quarter of 2023. The growth was primarily driven by an increase in the number of company-owned-and-operated stores from 551 as of March 31, 2023, to 615 as of March 31, 2024, offset by same-store sales growth for company-owned-and-operated stores of negative 11.7 per cent in the first quarter of 2024.
• Other revenues were 35.8 million renminbi ($5-million (U.S.)) for the three months ended March 31, 2024, representing an increase of 37.5 per cent from 26 million renminbi in the same quarter of 2023. The growth was primarily attributable to revenues from other franchise support activities, which was attributable to an increase in the number of franchised stores from 97 as of March 31, 2023, to 302 as of March 31, 2024.

Company-owned-and-operated store costs and expenses were 334.1 million renminbi ($46.3-million (U.S.)) for the three months ended March 31, 2024, representing a decrease of 0.7 per cent from 336.5 million renminbi in the same quarter of 2023. Company-owned-and-operated store costs and expenses comprise:

• Food and packaging costs were 108.5 million renminbi ($15-million (U.S.)), representing a decrease of 2.5 per cent from 111.3 million renminbi, as the company continues to benefit from greater economies of scale and higher efficiencies in supply chains. Accordingly, food and packaging costs as a percentage of revenues from company-owned-and-operated stores decreased by one percentage points from 35.9 per cent in the first quarter of 2023 to 34.9 per cent in the same quarter of 2024.
• Rental and property management fee was 68.6 million renminbi ($9.5-million (U.S.)), representing a decrease of 4 per cent from 71.4 million renminbi, mainly due to the closure of certain underperforming stores during the first quarter 2024. As a result, rental and property management fee as a percentage of revenues from company-owned-and-operated stores decreased by 0.9 percentage point from 23 per cent in the first quarter of 2023 to 22.1 per cent in the same quarter of 2024.
• Payroll and employee benefits expenses were 69 million renminbi ($9.6-million (U.S.)), representing a decrease of 5.4 per cent from 73 million renminbi. Payroll and employee benefits as a percentage of revenues from company-owned-and-operated stores decreased by 1.3 percentage points from 23.5 per cent in the first quarter of 2023 to 22.2 per cent in the same quarter of 2024, primarily due to the continuous refinement of staffing arrangement and optimization of store managerial efficiencies.
• Delivery costs were 28.6 million renminbi ($4-million (U.S.)), representing an increase of 25.7 per cent from 22.8 million renminbi, due to an increased proportion of home-delivery orders. Delivery costs as a percentage of revenues from company-owned-and-operated stores increased by 1.9 percentage points to 9.2 per cent in the first quarter of 2024 compared with 7.3 per cent in the same quarter of 2023.
• Other operating expenses were 25.3 million renminbi ($3.5-million (U.S.)), representing an increase of 1 per cent from 25.1 million renminbi, in line with the company's revenue growth and store network expansion. Other operating expenses as a percentage of revenues from company-owned-and-operated stores remained flat at 8.1 per cent in the first quarter of 2023 and 2024.
• Store depreciation and amortization expenses were 34 million renminbi ($4.7-million (U.S.)), representing an increase of 3.2 per cent from 33 million renminbi, driven by an increase in the number of company-owned-and-operated stores from 551 as of March 31, 2023, to 615 as of March 31, 2024. Store depreciation and amortization as a percentage of revenues from company-owned-and-operated stores increased by 0.3 percentage point from 10.6 per cent in the first quarter of 2023 to 10.9 per cent in the same quarter of 2024.

Costs for other revenues were 25 million renminbi ($3.5-million (U.S.)) for the three months ended March 31, 2024, representing an increase of 32.6 per cent from 18.9 million renminbi in the same quarter of 2023, which was primarily driven by an increase in the number of franchised stores from 97 as of March 31, 2023, to 302 as of March 31, 2024. Costs for other revenues as a percentage of other revenues decreased by 2.6 percentage points from 72.5 per cent in the first quarter of 2023 to 69.9 per cent in the same quarter of 2024, due to higher margin contribution from TH International's franchised business being realized during the first quarter of 2024.

Marketing expenses were 20.7 million renminbi ($2.9-million (U.S.)) for the three months ended March 31, 2024, representing an increase of 13.4 per cent from 18.3 million renminbi in the same quarter of 2023, which was primarily driven by the increase in the number of our system-wide stores from 648 as of March 31, 2023, to 917 as of March 31, 2024. Marketing expenses as a percentage of total revenues increased by 0.6 percentage point from 5.4 per cent in the first quarter of 2023 to 6 per cent in the same quarter of 2024.

General and administrative expenses were 58.7 million renminbi ($8.1-million (U.S.)) for the three months ended March 31, 2024, representing a decrease of 16.9 per cent from 70.6 million renminbi in the same quarter of 2023, which was primarily due to a reduction of the company's headquarter headcount. Adjusted general and administrative expenses, which excludes share-based compensation expenses of one million renminbi ($100,000 (U.S.)), and impairment losses of rental deposits of 2.5 million renminbi ($300,000 (U.S.)), were 55.2 million renminbi ($7.6-million (U.S.)), representing a decrease of 18.1 per cent from 67.5 million renminbi in the same quarter of 2023. Adjusted general and administrative expenses as a percentage of total revenues decreased by 4.1 percentage points from 20 per cent in the first quarter of 2023 to 15.9 per cent in the same quarter of 2024.

Franchise and royalty expenses were 14.1 million renminbi ($2-million (U.S.)) for the three months ended March 31, 2024, representing an increase of 18.7 per cent from 11.9 million renminbi in the same quarter of 2023, which was primarily driven by the increase in the number of the company's system-wide stores from 648 as of March 31, 2023, to 917 as of March 31, 2024. Franchise and royalty expenses as a percentage of total revenues increased by 0.6 percentage point, from 3.5 per cent in the first quarter of 2023 to 4.1 per cent in the same quarter of 2024.

Impairment losses of long-lived assets were 19 million renminbi ($2.6-million (U.S.)) for the three months ended March 31, 2024, compared with 4.4 million renminbi in the same quarter of 2023, which was primarily because of planned closings of underperforming company-owned-and-operated stores.

As a result of the foregoing, operating loss was 129.4 million renminbi ($17.9-million (U.S.)) for the three months ended March 31, 2024, compared with 130.4 million renminbi in the same quarter of 2023.

Adjusted corporate EBITDA was a loss of 53.6 million renminbi ($7.4-million (U.S.)) for the three months ended March 31, 2024, compared with a loss of 74.6 million renminbi in the same quarter of 2023. Adjusted corporate EBITDA margin was negative 15.4 per cent in the first quarter of 2024, representing an improvement of 6.8 percentage points from negative 22.2 per cent in the same quarter of 2023.

Net loss was 142.8 million renminbi ($19.8-million (U.S.)) for the three months ended March 31, 2024, compared with 174.5 million renminbi for the same quarter of 2023. Adjusted net loss was 97.8 million renminbi ($13.6-million (U.S.)) for the three months ended March 31, 2024, compared with 117.1 renminbi million for the same quarter of 2023. Adjusted net loss margin was negative 28.2 per cent in the first quarter of 2024, representing an improvement of 6.6 percentage points from negative 34.8 per cent in the same quarter of 2023.

Basic and diluted net loss per ordinary share was 0.90 renminbi (12 U.S. cents) in the first quarter of 2024, compared with 1.25 renminbi in the same quarter of 2023. Adjusted basic and diluted net loss per ordinary share was 0.62 renminbi (10 U.S. cents) in the first quarter of 2024, compared with 0.84 renminbi in the same quarter of 2023.

Liquidity

As of March 31, 2024, the company's total cash and cash equivalents, and time deposits, were 218.2 million renminbi ($30.2-million (U.S.)), compared with 220.8 million renminbi as of Dec. 31, 2023. The change was primarily attributable to the cash disbursements on the back of the expansion of the company's business and store network nationwide, and repayment of bank borrowings, offset by the $20-million (U.S.) junior promissory notes financing provided by Cartesian Capital Group, TH International's existing shareholder.

Exchange rate information

This earnings release contains translations of certain renminbi amounts into United States dollars at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from renminbi to U.S. dollars were made at the rate of 7.2203 renminbi to $1 (U.S.), the exchange rate in effect on March 29, 2024, set forth in the H.10 statistical release of the Federal Reserve Board. The company makes no representation that the renminbi or U.S. dollar amounts referred could be converted into U.S. dollars or renminbi, as the case may be, at any particular rate or at all.

Conference call

The company will hold a conference call today, on Wednesday, June 5, 2024, at 8 a.m. Eastern Time (on Wednesday, June 5, 2024, at 8 p.m. Beijing time) to discuss the financial results.

Participants are strongly encouraged to preregister for the conference call on-line.

Participants may also view the live webcast by registering on-line.

The webcast features a submit your question tab at the top, where you will have the opportunity to submit your questions before and during the call.

A live and archived webcast of the conference call will also be available at the company's investor relations website under events and presentations.

About TH International Ltd.

TH International (Tims China) is the parent company of the exclusive master franchisees of Tim Hortons coffee shops in mainland China, Hong Kong and Macau, and Popeyes restaurants in mainland China and Macau. Tims China was founded by Cartesian Capital Group and Tim Hortons Restaurants International, a subsidiary of Restaurant Brands International Inc.

The company's philosophy is rooted in world-class execution and data-driven decision making, and centred around true local relevance, continuous innovation, genuine community and absolute convenience.

We seek Safe Harbor.