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dear esteemed investors and analysts good evening thank you for joining super high international 2026 second quarter earnings with conference call the company leaders attending today's meetings are mr du executive director and ceo and miss chusong 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 in 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 agency providing simultaneous english interpretation in case of any discrepancies the chinese content shall prevail the presentation materials that have been uploaded to the company's ir page please feel free to review them now we invited mr liu ceo and executive director of super high 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 liu ceo and executive the director of super high international let me present to you the key highlights of super high 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, Heidi et al. restaurants served 8.1 million customer visits, up 5.2% compared to the previous year, last year. Supported by customer traffic, overall table turnover rate for the quarter was 3.9 turns per day. Same store turnover was 4.0 turns per day, both up 0.1 turns per day year over year. Both dining service at Heidi et al. restaurants and also were expensive expanding revenue sources the revenue from delivery and other businesses both doubled this quarter driven by the above business the company achieved total revenue of 219 million in the second quarter representing a 10 percent increase year over year this quarter company's operating profit increased by 118.9 percent the year uh y-o-y the operating profit margin increased by 1.8 percentage point y-o-y profit growth significantly outpaced revenue growth reflecting the continued conversion of companies earlier investment into the beginning of the operating leverage release now i will review the major operational initiatives that there's a quarter first continue to enhance the operational management of hydro 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 strengthen 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 a menu items of marketing and labor efficiency thereby making improvements in the precision and execution efficiencies these the second quarter is a traditional low season judging from the table turnover performance we believe that these initiatives have delivered a positive response second in terms of products and menus in the first half of this year the company fully integrated local consumer dietary habits of consumption trends and dining scenarios to drive menu optimization and new product development for instance in southeast asia we introduced local flavors such as lemongrass satay and basil extended soup bases snacks and beverage combinations around the core products to enhance the cross-setting at the same time we optimize the existing products by improving taste presentation and product combination lowering the barrier for customer trial and enhanced product appeal in addition the company continuously conducts dynamic operations based on new product sales performance customer feedback and the regional market characterization characteristics providing customer with a more value-oriented and differentiated consumption experience of third in terms of a membership in marketing as of the end of June the number of overseas members are reached at nine point two four six a million this quarter we continue to improve customer management loop around sustained marketing precise the traffic acquisition and member operations on the other hand that each region combined the local consumption happens a holiday occasions the preference of the younger customer groups to continue to enhance brand exposures and reaching new customers through IP collaborations and new product launches and new local events on the other hand that 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 the in-store experience optimizations that we improve the member activities and visit frequency we're continuously exploring more scenario more across the scenario and the multi-branded membership benefits hoping to gradually transfer one-time marketing traffic into long-term membership relationships further enhancing customer repurchase and store operating resilience in terms of store expansion this quarter we opened one new hiding all restaurant in south korea one in vietnam in the first half of this year we opened a total of three hiding restaurants at end of q2 we operated a total of 129 haiti lao restaurants overseas today to the number of assigned but not yet open the haiti law stores remain in the double digits meanwhile based on the current construction statutes in july and august we expect several new stores to be opened successfully in the second half of the year in the four year new store opening target is in the double digits as of this quarter the pomegranate plan has a operated a cumulative total of 12 brands and 22 second brand restaurant overseas that we continue to optimize the hybo monoton project which originated in Canada and so we're now opening up the second hybo store in Japan at the same time the izakaya project in Japan is also standing improving in the stability with 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 like to invite chisong to present the financial results thank you mr lee i will now report about the financial results in the q2 of 2026 the company achieved a total revenue of 219 million increase of 10 percent year over year had you know restaurant the operating revenue was 198 million up by 4.6 percent year-over-year number of highly low restaurants increased by a net of three compared to the same period last year company served around 8.1 million customer visits in this quarter an increase of 5.2 percent year-over-year continuously to support the rest restaurant business beyond the dining business the company continued to expand under revenue sources, the delivery service reached 7.562 million, up by 105% year-over-year. During the period, each region continued to strengthen delivery operation investment, deepen collaboration with the major delivery platforms in each country, secure more promotional resources, and online traffic favorabilities, enrich their delivery product offerings to enhance product appeal in the delivery scenario. Other businesses reached 13.439 million, up by 119.7 year over a year many contributed by sales of food and seasoning under the hideout brand and from the company's own central kitchens as well as the active development of some new restaurant business under the pomegranate planet plan overall in this quarter delivery and other business together generated 21 million in revenue up by 114.3 year over year their share of total company revenue increased from about 25 percent in the same period last year to nearly 9.6 percent further diversifying companies 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 69 point 65.9 down slightly by 0.1 percentage point year over year restaurant operating gross margin remains stable mainly because of the central kitchen b and the supply chain business has grown significantly versus the last year in terms of employee cost of 74.951 million and the employee cost to revenue ratio decreased from 35.3 percent in the same period of last year down approximately one percent decreased as past years of Employee efforts in employee capacity building, staffing, and store management to optimization have gradually been implemented. The labor efficiency improvements have begun to materialize. The rent and related expenses were 5.6 million, accounting for approximately 2.6% of revenue, down about 0.4 percentage, mainly due to revenue growth, the by-booting rent expenses, as well as adjustment 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 a 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 25.783 million, accounting for about 11.8%, remaining broadly stable year-on-year. Overall, the declines in the employee cost ratio and expenses ratio for rent, utilities, depreciation, amortization were important factors in the operating margin improvement this quarter. Raw material and other expenses resources still have room for further optimization. In Q2, the company achieved operating profit of 8.1 million U.S. dollars, up by 118.9 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% year-over-year. As revenue grew, the employee cost ratio and several fixed operating expense ratio declined, driving the earlier investment in employees, the customers and the store management to gradually translate into operating efficiency improvements although operating profit improved significantly now operating items in this quarter were mainly affected by exchange rate fluctuations the same period of last year there was a net foreign exchange gain over 16.33 million for this quarter there was a loss of 4.3 4 million a negative swing of more than 20 million year-over-year a company resulted record recorded a net loss of after tax at 1.93 million for this quarter compared to a net profit of the 16.2 three nine million in the same period last year although final net profit was affected by non-operating factors but the company's a core operating probability improved significantly in terms of operating cash flow companies are for this quarter with a net inflow of 28 million an increase of 6.2 percent compared with a 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 per this quarter up by 5.2 percent and this reflects that hiding out the turnover ratio hands as well as a same day period is going up a further improvement in the store customer traffic and overall spending per store for the quarter was a twenty four point is three dollars a daily revenue it was a seventeen point four thousand it down slightly by 1.1 and this overall restaurant operations the customer traffic table turnover have improved this quarter though single store operating quality in certain regions have a room for further optimization by region market performance that diverged this quarter and the table turnover in south asia and east asia continue to improve the turnover take risk in north america and other regions faced of pressure for southeast asia and the restaurant revenue for this quarter was in ninety eight point six six up about two three point nine percent in term this is mainly driven by high customer traffic and then in terms of average spending per customers it was eighteen point six dollars a flat year over year other overall South East Asian stores maintain a steady and upward operating trend in East Asia had you know restaurant revenue was 33.7 million up about 9.9 percent year on year average table turnover increased from 4.8 turns per day 4.9 turns per day continuing 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 two dollars to 27.4 on the constant currency basis the average spending per customer in both countries actually increased year over year excluding exchange rate disturbances the east asia continues to maintain a strong operating trend with a good customer traffic and table turnover performance in north america hiding on restaurants revenue was approximately 14 million up about 6.6 year over year with the store count increasing from 20 to 22 average table turnover four turns and in terms of the average spending per customer increased from thirty nine point one the same period to forty one but a higher average check has not fully offset the impact of the lower turnover North America still need to focus on improving customer traffic and operating efficiency other regions that the restaurant revenue was the twenty five point one and the down by one point to 8 percent average table turnover is 3.7 turns per day down by 0.2 turn 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 All regional operating performance in the second quarter showed some divergence. The Southeast Asia improved. East Asia continued to maintain a high level. North America and other regions need to further enhance the customer traffic and the per-store output. Same-store performance, there were 111 same-store restaurants. Same-store sales was approximately 179 million, down about 0.8%. Among them, same-store sales in Southeast Asia and East Asia increased by 2.5 percent and 0.9 percent year over year same story in other regions declined by 2.7 and 8.5 percent and the same reason as a consistent over trend overall going forward company will continue to focus on corporation customers customer operations and in-store operations driving further conversion of customer traffic improvement into per store sales and probability enhancement. We now welcome questions. And our first question comes from Daishun Wei from CICC. Please welcome. Thank you, Mr. Li and Ms. Chief. Thank you for giving me this opportunity. And I have three questions. And number one is that we can see that in China and right now, there is an emphasis on empowering through an intelligent middle platform. Does the overseas operation having any new ideas or plans regarding middle platform constructions or organized structure adjustment and the second is about the pomegranate plans and how do you balance the mature single store model to share and do you balance the long-term investment the cost of the new brands with the company's short-term performance do you currently have any relatively the mature mechanisms and methodologies to further improve the probability and my third question is about further optimization measures that there are for cost and expensive controls going forward thank you mr line for your question there are a total of three 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 the labor regulations supply chain tax and marketing environments that there's no single set of operating methods that can be directly replicated across or markets therefore the principle for overseas the middle platform construction is the headquarters should build a common capabilities as well was the regions and stores that should run their local business as well in terms of a division of labor headquarters centrally build a common capabilities such as the digital systems of bulk supply chain personal management the financial management and a membership system standards and infrastructure regional teams and then adapt and implement these capabilities in combination with the local market conditions whilst specific operational decisions are left to the frontline teams who know the local markets and customers from an organizational perspective hq's role will increase become increasingly become that of a supporting platform and the frontline autonomy and operation will continue to be preserved and but things such as the food safety and service quality will not be relaxed in any way currently there are two projects that are running relatively smoothly one is a high ball marathon currently we have both in canada and one in japan it's a simple and fast schedule and easy to run low barrier in terms of turnover efficiency and operating performance both meet our expectations we're also looking at the united states canada and other markets will continue to verify the rapid recordability others is the japanese izakaya is product offering focus on sashimi yakitori and japanese side dishes at the moment in tokyo the customer acceptance and operation stability are continuing improving and the second store is being prepared in osaka regarding the balance between long-term investment and short-term performance we use we verify the certainty with a small cost at each projects that start with one or two stores the investment per store is not large a trial 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 blinding pursuing scale so the real significant spending comes in the scale replication and we only allocated replication resources to models that have been verified and proven viable so once proven the company has already designed the return pass and expectation for projects in the replication phase you know third question about the cost control the currently uh it's not about uh compressing cost across the board but to narrow the gaps between the stores there is still imbalance in operating performance among stores and 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 the efficiency we want nor is sustainable we have identified two sources of improvement the first is operating leverage as the second half enters the peak season customer traffic and the table turnover maintain good performance revenue growth itself will dilute relative relatively fix a cost such as a labor run and depreciation second is the daily refinement staffing and scheduling efficiency procurement and supply chain and the inventory shrinkage we will continue to optimize these areas as routine work not dependent on peak season and right now we still focus on our investment in pomegranate plan and we are not going to be stopping due to short-term profit pressure but will control the pace and strictly manage budgets so as you can see with the new brands gradually contribute revenue and the middle platform capability building completes its major investment face this gap will gradually narrow thank you mr lee for your comprehensive response. Our next question comes from Tseng Jun from Huatai Securities. Thank you, Mr. Li and Ms. Ju. This is Tseng Jun from Huatai. I would like to congratulate the company on your very stable performance. My first question is that with more Chinese hotpot 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 plan 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 bus and what are the localized approach approach that you would adopt? And my second question is that 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, Ms. Zung, for your questions. And I will take the first few questions and this tree will answer the third question number one in terms of overseas a market apart from a Chinese cuisine and a hot pot 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 envelopment our main brand is in the hot pot segment in Chinese cuisine we're still cultivating 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 the real demand existing and will also accelerate the process of overseas the 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 the service and customer experience especially by diversifying our customer base and continuing improving the proportion of local customers for pomegranate projects that are relatively diverse including incubating and operating restaurants serving local cuisine it's not about the brand but it's about the model and the capability first 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 bus we center on products services store experience to let bus grow organically marketing expenses have always been kept at a reasonable level and what we pursue is a discussion conversion not just impressions there are three layers the first layer is to place a marketing creativity and execution locally teams in each region have a considerable flexibility to collaborate with the local IPS artists and games to plan around the local festivals and a major events and to interact with the customers on the local online platforms so that the activities are rooted in local culture and feel familiar to local customers second is to make the products themselves the carriers of communication we launched a coriander seemed the product series in some of the regions of coriander as an ingredient it's strongly loved or hated by people and so we built a complete product portfolio around this theme expanding from soup base to dishes and snacks generated excellent excellent organic discussion and in-store conversion we plan this every season and with the same logic the theme selection comes from the real interest of local customers while supply chain and r&d are centrally supported by the company and number three is to capture and retain the bus if it only comes 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 referrals the buses 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 value is all about customer satisfaction customer willing to come come again and recommend us to other people this is where the brand influence that truly takes root marketing can amplify the process but cannot replace it the third question about turnover performance and what are the specific measures that we have i'll have a is true to answer this question thank you miss the zone for your question i will take your third question for q2 our overall increased by 0.1 turn year over year the trend is healthy but there is indeed divergence among regions east asia and southeast asia perform 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 the customer base structure is relatively concentrated and the coverage of a 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 will drive store traffic by adjusting menu combination of peak operations but at the end of the day it's already about diversifying the customer structure solidly develop surrounding customer groups and member operations and localized marketing reducing reliance on any single customer segments this is our long-term direction across all over all overseas markets in other regions there are external factors such as the geopolitics which are beyond our control what we can do is to adjust 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 stores accurately identify problems and using operating data to attribute underperforming stores by table turnover on a store-by-store basis, whether it's a customer-based issue, a trade area issue, or operational issue. And we will be looking at the solutions, for instance, whether we will be relocating adjustments and rather than continuing to invest just to maintain the store count. Thank you. that is very clear, and I would also like to thank both the CEO and CFO for their answers. Thank you. Next question, please. It comes from Wei Jiabao in CITIC. Ms. Li and Ms. Chu, this is Wei Jiabao from CITIC Securities. I have three questions. Number one is, what is the outlook for the average check, average unit price per customer trend in Q3 and Q4, and why? What are these specific measures value will be taken if there are price increase or decreases and second which region will be the focus for store openings in the coming quarters will you accelerate openings in the regions with a few current stores or enter into entirely new countries number nine now next question is on the investment and payback period and in each region compared with the past are they improving roughly flat or increasing and what are the reasons for these changes behind those if any Thank you, Mr. Wei, for your question. Your first question, with respect to the uniprised for Q3 and Q4, right now we don't really have any plans for a uniform price adjustment. We will not simply pass all costs on to customers. Each market will adjust autonomously based on the local customer acceptance, the competitive environment, and product structure. We pay more attention to the value perceived by customers rather than simply pursuing higher prices. For instance, we add new products across different price ranges, adjust set meals and combo products and give customers more choices. So that's our unit price. And with respect to store openings for second half, we expect double-digit new stores to to open in North America, East Asia, and Southeast Asia. In addition, there are still about a dozen of stores with a substantial progress, among which stores in North America and the UK are already in construction phase and will open successfully over the next two years. Layout and business expansion in existing countries continue to be handled by each country in a bottom-up manner. And the project advancement pace in each country is basically consistent with its operating rhythm. For new entrants, headquarter will more cautiously assess market conditions, consumptions, and specific site locations. There is currently no definite entry plan for new countries. We are under discussion, but they are not yet definitive. On your third question, for new stores currently, we are looking at a standard payback period of three to four years roughly, Southeast Asia relatively faster and Europe and America relatively slower. Versus the past, each region has become more careful and prudent in site selections, so the overall store payback periods are more controllable and quality has also improved. For single store investment, the fluctuates due to factors such as the location store size and the decoration style in the meantime and decoration and labor cost in some markets have indeed risen over the past two years we continue to control investments by optimizing store formats the decoration design local procurement and construction management and overall personal expenditure remains stable thank you thank you mr chi for your answer Thank you. Our next question comes from Function Securities, Ms. Jenny Lee. Thank you for giving me this opportunity to ask a question. I have two questions here. Number one, which is about the localization of supply chain. For instance, Singapore and Malaysia in these areas in Southeast Asia? Do you have central kitchens? Do you have plans for localization of central kitchens and supply chains in these areas? My second question is about the impact of exchange rate fluctuation on your net profit and hedging, because we can see that there is an impact to a certain degree on the net profit, and what are the control measures that you have taken and perhaps you can share with us on those points thank you miss lee for your question the first question on supply chain and central kitchens in singapore and malaysia after many years of operation local procurement and supply chain systems have become mature for products that can be stably procured locally and meet quality requirements that we will localize as much as possible for some core seasonings or products whose local supply is not yet stable enough will continue to source from central kitchens or established suppliers central kitchens do not necessarily expand linearly with the store counts we will consider store density delivery radius and capacity utilization existing central kitchens have a surplus capability capacity then we will also try to do some external sales to improve capacity utilization efficiency with respect to the exchange fluctuation for q2 there was indeed quite pronounced in hand that this is mainly due to base effects same period last year we recorded a larger foreign exchange gain this year is a loss positive and negative combined amplified the year-over-year fluctuation but it should be emphasized that this is a non-operating non-cash impact from the currency translation does not reflect the changes in the underlying business excluding foreign exchange gain losses operating profit and the operating profit margin include both improved significantly year over year therefore we ourselves focus on the operating profit measures in exchange rate management our approach has two layers the first layer is the natural hedging that is most of our revenue and costs occur in the same market local collections the local procurement and local labor and rent repayments the higher degree of the business localization the smaller cross-border exposure that truly needs to be managed the second layer is for exposures that do exist such as the centralized funds and the cross-border settlements company will continue to monitor them and based on the size of exposure hedging cost and local compliance requirements evaluate appropriate funds and exchange rate management method. However, we will not engage in speculative Forex operation just for the sake of reported numbers. Overall speaking, we're quite cautious. Thank you. Thank you, Ms. Chu. That's very clear. Thank you. Zhuxiang Securities, Mr. Zhong Yecheng, please. Ms. Zhong Yecheng, please. Hi, everyone. This is Zhong Yecheng from Zhuxiang Securities. I have two questions the number one is about stores if we divide them into mature stores that relatively new stores and new stores are there significantly differences in the table turnover and store model among them if we compare and which ones would perform the better and or vice versa and my second question is about incentives for overseas headquarter management teams and we are going overseas early and we have a large-scale relatively sound talent pipeline with more and more Chinese cuisine brands going overseas. So it's likely that there are people who will be approaching your staff and your talent. So how do you ensure the team's stability? Thank you for your question. And on the first point, the store age itself is not the key factor determining store performance and the difference among mature stores come from the trade areas and operational capabilities rather than how many years they have been open the real impact of the store age is mainly in the first six months after opening new stores need to go through a ramp-up period of team integration uh developing of surrounding customers and groups and stabilizing operating processes this is a normal pattern taking 2024 as a dividing line among 107 stores opened from 2018 to 2023 about 50 achieved positive cash flow in the first month of opening among the 27 stores opened from 2024 to june this year the proportion rose to about 78 percent in other words the ramp up speed of the new generation stores is significantly faster than before the underlying reason is that in recent years we have tightened requirements inside selection standards investment calculations store format design and store manager reserves stores are open more precisely and preparation before opening is also more thorough your second question with respect to the evaluation there are three levels and core of a store manager evaluation is about on one hand employees on the other hand I am customers with a focus on customer satisfaction employee development and long-term store operating quality business the results are included in incentives but they are not only uh the only metric because they're focusing solely on short-term profit can easily sacrifice the employee and customer experience that regional teams are more resource oriented looking at operating performance growth quality and talent development headquarter functional teams are evaluated on whether they can truly help frontline improve efficiency rather than merely completing their own tasks and targets in terms of talent stability intensified competition is inevitable but retaining people is not only about compensation but also growth space and operating space Heidi now when overseas early its great advantage is that it has already cultivated a group of local store managers and regional managers from the front line they have a deep understanding of of the local market and company culture. As new stores expand, new regions are entered. New regions are entered. The new prominent business are explored. Outstanding managers will always have their next bigger stage. They can also share in the fruits of the business growth through incentive mechanisms. This is our most fundamental way to maintain team stability. Thank you for your question. I would also like to thank the management for your very clear answers, and I also wish the company a bright future. Thank you. Thank you very much, everyone. And in the interest of time, this concludes today's conference earnings call. I'd like to thank all the investors and analysts for joining us in today's call. Thank you, and we'll see you next time.
