Super Hi International Holding Ltd. (9658) Earnings Call Transcript & Summary

Esteemed investors and analysts, good evening. Thank you for joining Super Hi International 2026 Second Quarter Earnings Conference Call. The company leaders attending today's meeting are Mr. Yu Li, Executive Director and CEO; and Mr. Cong Qu, Chief Financial Officer and Board Secretary. Today's meeting content may contain forward-looking statements, including, but not limited to, the company's statements regarding strategies and business plans as well as outlook on performance prospects. The content of this earnings presentation and the comments and response to your questions represent management's view only as of today. Please refer to the latest safe harbor statement in the earnings press release, which applies to the conference call. The meeting is conducted in Chinese with an external agent providing simultaneous English interpretation. In case of any discrepancies, the Chinese content shall prevail. The presentation materials have been uploaded to the company's IR page, please feel free to review them. Now we invite Mr. Li Yu, CEO and Executive Director of Super hi International to review the company's performance for the second quarter of 2026.

Thank you, moderator. Can everybody hear me okay?

Yes, we can. Please go ahead.

Dear investors and analysts, good evening. I am Li Yu, CEO and Executive Director of Super Hi International. Let me present to you the key highlights of Super Hi International for the second quarter of 2026. This quarter, the company's earlier investment in employees and customers have further translated into operating improvements, customer traffic and table turnover rates both improved year-over-year, while the employee cost ratio in several operating expense ratios declined, driving a significant year-over-year increase in operating profit. In Q2, Haidilao restaurants reserved 8.1 million customer visits, up 5.2% compared to the previous year last year. Supported customer traffic, overall table turnover rate for the quarter was 3.9 tonnes per day. Same-store turnover was 4.0 tonnes per day, both up 0.1x per day year-over-year, both dining service at Haidilao restaurants and also we're expanding revenue sources, the revenue from delivery and other business, both doubled this quarter, driven by the above business, the company achieved total revenue of $219 million in the second quarter representing a 10% increase year-over-year. This quarter, company's operating profit increased by 118.9% Y-o-Y. The operating profit margin increased by 1.8 percentage points Y-o-Y. Profit growth is significantly outpaced the revenue growth, reflecting the continued conversion of the company's earlier investment and the beginning of the operating leverage release. Now I will review the major operational initiatives of this quarter. First, continue to enhance the operational management of Haidilao restaurants. This quarter, we maintained management flexibility with each region autonomously adjusting operating strategies based on the local business conditions, market conditions and consumer trends. At the same time, we further strengthened the professionalism and support capabilities of the headquarter platform by introducing digital tools and new technologies we enhanced our insights into the industry markets and consumers empowering frontline restaurants in areas such as menu items, marketing and labor efficiency there, but making improvements in the precision and execution efficiencies. This second quarter is a traditional low season, judging from the table turnover performance. We believe that these initiatives have delivered positive reports. Secondly, in terms of products and menus us, in the first half of this year, the company fully integrated low dietary habits with consumption trends and timing scenarios to drive revenue optimization. New product development, for instance, in South East Asia, we introduced a local flavors such as lemongrass Saute and Basil, extended suit basis in snacks and beverage combinations around the core products to enhance the cross-selling. At the same time, we optimize the existing products by improving taste to presentation and product combination during the barrier for a customer trial in enhanced product appeal. In addition, the company continuously conducts dynamic operations based on new products, the sales performance, the customer feedback and regional market characteristics of providing customers with a more value-oriented and differentiated consumption experience. Third, in terms of the membership and marketing, as of the end of June, the number of overseas numbers reached 9.46 million. This quarter, we continue to improve customer management, loop around sustained marketing, pursuant to traffic acquisition and member operations. On the other hand, each region combined the local consumption happens, holiday occasions, the preference of the younger customer groups to continue to enhance brand exposures and reaching new customers through IT collaborations and new product launches and new local events. On the other hand, we place a greater emphasis on post-marketing customer retention by further strengthening tiered membership operations using member exclusive activities, differentiated benefits, the customer communications and in-store experience optimization. So we improve the member activities and visit frequency. We're continuously exploring more scenario -- more across the scenario and the multi-branded membership benefits are hoping to gradually transfer onetime marketing traffic into long-term membership relationships further enhancing customer repurchase and store operating resilience. In terms of store expansion, this quarter, we opened 1 new Haidilao restaurant in South Korea, 1 in Vietnam. In the first half of this year, we opened a total of 3 Haidilao restaurants at end of Q2, we operated a total of 120 Haidilao restaurants overseas. To date, the number of signed but not yet open Haidilao stores remain in the double digits. Meanwhile, based on the current construction schedules in July and August, we expect several new stores to be opened successfully in the second half of the year and the full year. New store opening target is in the double digits. As of this quarter, the pomegranate plant has operated a cumulative total of 12 brands and 22 2nd brand restaurant overseas. We continue to optimize the Haidilao [indiscernible] project, which originated in Canada, and we're now opening up the 2nd Haidilao store in Japan. At the same time, the Izakaya project in Japan is also improving in sustainability with the potential for further replication. Various country markets are exploring opportunities to independently incubate or replicate existing second brand formats -- that's my conclusion for the business performance for this quarter, and I'd like to invite Qu Cong to present the financial results.

Thank you, Mr. Li. I will now report about the financial results in the Q2 of 2026. The company achieved a total revenue of $219 million, an increase of 10% year-over-year. Haidilao restaurant operating revenue was $198 million, up by 4.6% year-over-year. Number of Haidilao restaurants increased by net of 3 compared to the same period last year. The company served around 8.1 million customer visits in this quarter, an increase of 5.2% year-over-year continuously to support the restaurant business. Beyond the dining business, the company continued to expand the revenue sources, the delivery service reached 7.562% up by 105% year-over-year. During the period, each region continued to strengthen delivery operation investment, keep in collaboration with the major delivery platforms in each country, secure more promotional resources and online traffic favorabilities. We enrich their delivery product offerings to enhance product appeal in the delivery scenario. Other businesses reached $13.439 million, up by $119.7 million year-over-year, many contributed by sales of food and seasoning under the Haidilao branded from the company's own central kitchens as well as the active development of some new restaurant business under the pomegranate plan. Overall, in this quarter, delivery and other business together generated $21 million in revenue, up by $114.3 million year-over-year. The share of total company revenue increased from about 5% in the same period last year to nearly 9.6%, further diversifying company's revenue. In terms of cost and expenses, overall operating efficiency improved compared to the same period last year. In the second quarter, raw material and consumable cost was $74 million with a gross profit margin of 65.9 down slightly by 0.1 percentage point year-over-year. Restaurant operating gross margin remains stable, mainly because of the Central Kitchen BN the supply chain business has grown significantly versus the last year in terms of employee cost of $74.51 million and the employee cost to revenue ratio decreased from 35.3% in the same period of last year, down approximately 1% decrease as past years efforts in employee capacity building, staffing and store management to optimization have gradually been implemented. Labor efficiencies, improvements have begun to materialize. The rent and related expenses were $5.6 million accounting for approximately 2.6% of revenue, down by 0.4 percentage, mainly due to revenue growth diluted rent expenses as well as adjustments in restaurant network layout reductions in short-term utility expenses of $7 million accounting for approximately 3.3% of revenue, down 0.3% year-over-year. Depreciation and amortization, $21 million accounting for 9.6% of revenue, down about 0.3% year-on-year. In terms of travel communications and other operating-related expenses, about $25.73 million accounting for about 11.8%, remaining broadly stable year-on-year. Overall, the decline in the employee cost ratio in expenses ratio for rent utilities and depreciation and amortization were important factors in the operating margin improvement this Raw material and other expenses, resources still have room for further optimization. In Q2, the company achieved operating profit of USD 8.1 million, up by $118.9 million from $3.7 million in the same period last year. Operating margin increased from 1.9% in the same period last year to 3.7%, up 1.8 percentage points year-over-year as revenue grew the employee cost ratio in the several fixed operating expense ratio deciding the earlier investment in employees or customers management to gradually translate into operating efficiency improvements. Although operating profit improved significantly, nonoperating items in this quarter were mainly affected by exchange rate fluctuations. The same period of last year. There was a net foreign exchange gain of $16.33 million. For this quarter, there was the loss of $4.34 million, a negative swing of more than $20 million year-over-year. A company resulted -- recorded a net loss of after tax of $1.93 million for this quarter compared to a net profit of $16.39 million in the same period last year. Although final net profit was affected by nonoperating factors, but the company's core operating profitability improved significantly. In terms of operating cash flow, companies -- for this quarter with a net inflow of $28 million, an increase of 6.2% compared with net inflow of $26 million in the same period as of the 30th of June. This year, company's cash reserve was approximately $266 million and overall liquidity remains ample to be used for continued store expansion in terms of key restaurant operating metrics. The company served approximately 8.1 million customers visits this quarter, up by 5.2%. And this reflects that the Haidilao turnover ratio and as well as same-day period is going up further improvement in the store customer traffic and overall spending per store for the quarter was $24.3. Day revenue was $17.4000, down slightly by 1.1%. And this overall restaurant operations, the customer traffic and table turnover have improved this quarter, though single-store operating quality in certain regions that have room for further optimization. By region, market performance diverged this quarter in a turnover in South Asia and East Asia continue to improve the turnover risk in North America and other regions are faced of pressure for Southeast Asia and the restaurant revenue for this quarter was 98.66%, up about 3.9% in terms -- this is mainly driven by high customer traffic and then in terms of average spending per customer was $18.6 year-over-year, the overall Southeast Asian stores maintain a steady and upward operating trends in Eastern Asia, Haidilao restaurant revenue was $33.7 million, up about 9.9% year-on-year. Average turnover increased from 4.8 tonnes per day, 4.9 tonnes per day to maintain at a high level. And this is mainly because the customer decreased the spending from 29.4% in the same period down by $2 to 27.4%. On a constant currency basis, the average spending per customer in both countries actually increased year-over-year, excluding exchange-related disturbance as the East Asia continues to maintain a strong operating trend with good customer traffic and the table turnover performance. In North America, Haidilao restaurant revenue was approximately $14 million, about 6.6% year-over-year with the store count increasing from 20 to 22 average table turnover 4 turns. And in terms of the average spending per customer increased from 39.1% in the same period to 41%, but the higher average check has not fully offset the impact of lower turnover North America still needs to focus on improving customer traffic and operating efficiency. Other regions, the restaurant revenue was 25.1% and down by 1.8%. Average table turnover is 3.7 turns per day down by 0.2x per day. This is mainly due to geopolitical volatility in the Middle East is still affecting the operation, though the impact is currently assessed to be gradually diminishing. Average spending per customer in other regions increased from 39.7% in the same period to 41%, primarily driven by exchange rate effects. Overall regional operating performance in the second quarter showed some divergence. The Southeast Asia improved, East Asia continue to maintain level, North America and other regions need to further enhance the customer traffic and per store output same-store performance, were 111 same-store restaurants. Same-store sales was approximately $179 million, down about 0.8% Among the same-store sales in Southeast Asia and East Asia increased by 2.5% and 0.9% year-over-year. Same-store in other regions declined by 2.7% and 8.5% in the same reason as consistent over trend overall. Going forward, the company will continue to focus on corporation customers -- customer operations and in-store operations or in further conversion of customer traffic improvement into per-store sales and profitability enhancement, and we now welcome questions.

And our first question comes from Shengwei Lai from CICC. Please welcome.

Thank you, Mr. Li Ms. Chief, thank you for giving me the opportunity. And I have 3 questions. And number 1 is that so we can see that in China. And right now, there is an emphasis on empowering through an intelligent middle platform because the overseas operations have any new ideas or plans regarding middle platform constructions or organized structure adjustment. And second is about the pomegranate plant and how do you balance the mature single store model to share and you balance the investment in the cost of the new brands with the company's short-term performance? Do you currently have any relatively mature mechanisms and methodologies to further improve the probability? And my third question is about further optimism measures there are for cost and expensive controls going forward.

Thank you, Mr. Lai, for your question. There are a total of 3 questions, and I will take them one by one. In terms of the middle platform capability building, overseas is similar to China, but the overseas characteristic is that each country has a different consumer habits, labor regulations, supply chain tax and marketing environment, there is no single set of operating methods that can be directly replicated across all markets. Therefore, the principle for overseas middle platform construction is is the headquarters should build common capabilities as well, whilst the regions and stores should run their local business as well. In terms of the division of labor headquarters centrally build content capabilities such as digital systems, box supply chain, personal management, the financial management and a membership system tenders and infrastructure regional teams and then adapt and implement these capabilities in combination with the local market conditions whilst specific operational decisions are lifted to the frontline teams who know the local markets and customers. From an organizational perspective, HP's role will increase become increasing become that a supporting platform and frontline autonomy and operation will continue to be preserved. But things such as food safety and service quality will not be relaxed in any way. Currently, there are 2 projects that are running relatively smoothly. One is high Bomelatong currently. We have both in Canada and one in Japan. It's a simple and fast causal and easy to run low barrier in terms of turnover efficiency and operating performance both in our expectations. So we're also looking at the United States, Canada and other markets will continue to verify recordability. Others is the Japanese Izakaya, its product offering focused on [indiscernible] and Japanese side dishes at the moment in Tokyo, the customer acceptance and operations stability are continually improving, and the second store is being prepared in Osaka. Regarding the balance between long-term investments and short-term performance, we use -- we verify the certainty with the small cost each project start with 1 or 2 stores. The investment per store is not large, try and error cost is controllable. It will not have a material impact on the short-term performance during the process, if operating performance or customer experience, it does not mean expectations will make adjustment without landing pursuing scale. So the real significant spending comes in a scale replication, and we only allocate replication resources to models that have been verified and proven viable. So once proven, the company has already designed the return on and expectation for projects in the replication phase. Third question about the cost control. The currently, it's not about compressing costs across the board, but to narrow the gap between the stores. There is still imbalance in operating performance among stores, lifting underperforming stores to the average levels, and this is a better way forward. And if we continue to compress the store level investment, this will ultimately harm a customer experience, and that's not to the efficiency we want nor is it sustainable. We have identified 2 sources of improvement. The first is operating leverage as the second half enters peak season. Customer traffic again the table turnover maintain good performance. Revenue growth itself will dilute relatively fixed costs such as labor run and depreciation. Second is the daily refinement and staffing and scheduling efficiency, procurement and supply chain and inventory shrinkage, we will continue to optimize these areas as routine work and not dependent on peak season. And right now, we still focus on our investment in pomegranate plant. And we are not going to be stopping due to short-term profit pressure, but we'll control the pace and strictly manage budgets. So as you can see, with the new brands that gradually contribute to revenue and the middle platform capability building completes its major investment phase this gap will gradually narrow.

Thank you, Mr. Li, for your comprehensive response. Our next question comes from Jun Zeng from Huatai Securities.

Thank you, Mr. Li and Ms. Qu. This is from Jun Zeng from Huatai. I would like to congratulate the company on your very stable performance. My first question is that with the more Chinese hot and catering brands are going overseas, how do you view the competition and especially that you are quite competitive in the China market, how do you view the overseas competition. And especially for the pomegranate plant in this phase, where the brands are not yet established, how do you view the competitors entry for instance, in terms of your brand's buzz and what are the localized approach that you would adopt. My second question is on, so we can see table turnover performance has been good. Average is steadily rising. What specific measures are used to improve the stores that need improvement. And in addition, what are the planned measures that you have in mind. Thank you.

Great. Thank you, Mr. Zeng for your questions. I will take the first few questions and Ms. Qu will answer the third question. Number one, in terms of overseas market apart from Chinese cruising and the [indiscernible], we also look at the entire dining market currently oversees the consumers' acceptance of Asian cuisine and Chinese food continue to rise, there's a lot of room for development. Our main brand is in the hot pot segment and Chinese cuisine. We're still contemplating the market and raising consumer awareness far from a zero-sum competition at the moment. Therefore, more Chinese brands going overseas is a positive sign. It validates they will demand existing and will also accelerate the process of overseas customers are getting to know and accept the Chinese cuisine expanding the overall category part, but of course, we maintain a healthy respect for competition. We will focus on doing our own things well, continue to enhance brand appeal through products and service and customer experience, especially by diversifying our customer base and continue improving the proportion of local customers. For pomegranate projects, they are relatively diverse, including incubating and operating restaurants and serving local cuisine. It's not about the brand, but it's about the model and capability, for instance, for these projects being the first to enter is not the most critical factor. What matters the most is to really prove the single store model and make it replicable. Second, in terms of the overseas brand building, we don't really need to increase the marketing spend to buy the buzz. We center on products and service store experience to let buzz grow organically. Marketing expenses have always been kept at a reasonable level. And what we pursue is discussion, conversion notes, impressions, there are 3 layers. The first layer is to place a marketing creativity and execution locally. Teams in each region have for considerable flexibility to collaborate with the local IP artists and games to plan around the local festivals and a major event in to interact with the customers on the local online platform so that the activities are rooted in local culture and feel familiar to local customers. Second is to make the products themselves carriers of communication. We launched a Coriander [indiscernible] product series in some of the regions, the Coriander as ingredient is strongly loved or hated by people. And so we build a complete product portfolio around this theme standing from Subasio dishes and snacks generated excellent organic discussion in in-store conversion. We plan this every season with the same logic, the theme selection comes from the real interest of local customers or supply chain and R&D are essentially supported by the company. And number three, is to capture and retain the buzz. If it only comes at once, then the value is limited. We continue to connect the market activities. The member operations and online attention is directed to offline stores and after arrival through membership benefits and refined operations, it is converted into repeat purchase and referral buzzes the entry point membership and repurchase are the lasting accumulation. Finally, we must return to the fundamentals. And no matter how from and marketing changes, the metric of win wind value is all about customer satisfaction. -- willing to come again and recommend us to other people. This is where the brand influence truly takes a verge. Marketing amplifying the process, but cannot replace it. Third question about turnover performance and what are the specific measures that we have have, will Ms. Qu to answer this question.

Thank you, Zeng, for your question. I will take your third question. For Q2, our overall increased by 0.1 turn year-over-year Yes. The trend is healthy, but there is indeed divergence among regions, East Asia and Southeast Asia performed better while North America and other regions still have room for improvement. Take North America as an example, the issue for some stores is that cost structure is relatively concentrated and coverage of mainstream local customers insufficient. For instance, if there are changes in the local immigration or visa policies, this can cause a fluctuation in traffic. In the short term, we'll drive store traffic by adjusting menu combination of peak operations above at the end of the day, it's really about diversifying the customer structure, developed surrounding customer groups and number of operations and localized marketing, reducing reliance on any single customer segment. And this is our long-term direction across all over overseas markets in other regions, there are external factors such as geopolitics which are beyond our control. What we can do is to adjust the operating strategies and control expenses in a timely manner based on local conditions. At the moment, we can see that the negative impacts are gradually diminishing. In terms of mechanisms, the headquarters role is to help store accurately identify problems and using operating data to attribute to underperforming stores. So by table turnover on a store-by-store basis, whether it's a customer base issue, or trade area issue or operational issue, and we will be looking at solutions, for instance, whether we will be relocating adjustments and rather than continuing to invest in just to maintain the store count.