SUPER HI (09658) Q1 2026 Earnings Call Transcript

Hello, respected investors and analysts. Thank you for joining today's super high earnings call. Participating in today's meeting on Mr. Li Yu, Executive Director and CEO, and Ms. Chuzong, Financial Controller and Board Secretary. Today's meeting may contain forward-looking statements, including but not limited to the company's statements of strategies and business plans, as well as outlook on performance, the content published by the company during the earnings presentation, as well as comments in response to all your questions, represent all your management views as of today. Please refer to the latest Safe Harbor Statement in earnings press release, which applies to the conference call. The meeting is conducted in Chinese with simultaneous English interpretation provided by external agency. In case of any discrepancies, the Chinese version shall prevail. The presentation materials have been uploaded to the company's investor relations page for your review. Hello investors and analysts. I'm the Executive Director and CEO of Superhigh International. Welcome to Superhigh International Q1 2026 earnings call. And I'm going to be talking to you about, on behalf of the company, I thank you for your interest and support. It is my honor to share with you the Superhigh International operating performance for this quarter. In the first quarter of 2026, the company's operations maintain a positive improvement trend with all core operating metrics achieving simultaneous increases. As of the 31st, 2026, the company operated a total of 127 high-day-low restaurants in the overseas market, added one new store in Southeast Asia during the period, recorded a net increase of four stores compared to the same period last year. At the same time, the operating quality of the existing store is continuously being strengthened. In the first quarter, high-day-low restaurant revenue was $204 million, an increase of 8.4% year-over-year. Same store sales, increased by 4% year-over-year. Total customer traffic exceeded 8.1 million visits, and this overall table turnover rate was four turns per day, an increase of 0.1 turn per day compared to the same period last year. Meanwhile, the delivery business, the Red Promo Granted Project, and other businesses continue to contribute to incremental growth with a combined year-over-year increase of 130.9%. The multiple initiatives that drove the company's total revenue to $226 million a year-over-year increase of 14.2%. On this basis, thanks to increased customer traffic and refined operations, we have seen a significant release of operating leverage. In the first quarter, the company's operating profit reached $13.993 million, a year-over-year increase of 70.7%. The operating profit margin rose from 4.1% last year to 6.2%, representing a substantial improvement in profitability. In terms of specific business initiatives, we continue to focus on strengthening the three fundamentals, focus on employees, focus on customers, and focus on products. During the daily store visits, we realized that past reliance on standards had, to some extent limited to the warmth of service provided by frontline employees therefore the quarter we continuously emphasized flexible operations helping employees understand the logic behind services actions by strengthening post-event reviews and store manager mentoring and granting them more unsighted discretion while maintaining high standard operations we provide more personalized and flexible service thereby continuously improving customer satisfaction at individual stores were gradually seeing that these actions focused on enhancing employee awareness and capabilities are translating into better customer experiences. In terms of the product and menu innovation, this headquarters focused on scenario segmentation, differentiation, and product empowerment, providing targeted support to various regional markets globally. First, we deeply explored dining scenarios. We offered various kids meal sets for families with young children. For late night hours, we focused on launching spicy braised dishes paired with refreshing drinks to precisely join the consumption during that period. Second, following the summer season, we collaboratively launched a combination of products such as vegetable and mushroom platter and beef and lamb combo in multiple regions. For core categories, we focused on upgrading the beef series, offering premium Australian Wagyu and freshly cut beef to meet the quality experience needs of different customer segments. Looking at the results, the menu innovation in the first quarter were more customer-centric, and each market produced excellent localized products. This not only effectively drove a single store sale, but also validated the effectiveness of our strategy of localized product selection and refining menu planning. In terms of the business expansion, we added one new restaurant in Southeast Asia during this period. Since last year, the company has imposed stricter requirements on new store location accuracy, profit expectation, and execution quality. Currently, our pipeline of reserved stores remains in the double digits, and the overall expansion pace going forward will continue to adhere to the principle of balancing stability and quality. Regarding the Red Prama-Granite project, we are actively building a multiple-brand matrix, continuously incubating prototype stores and second-brand projects in different countries. To date, we have operated a total of 10 brands with a total of 18 stores, including formats such as Canadian Marathon, Indonesian Halal Hot Pot, Japanese Isakawa, Korean Scores, and Spark Cora BBQ. This quarter, other business revenues achieved strong growth of 166.7%, marking substantial growth in the diversifying of our revenue structure and expanding our customer base. Looking ahead, the company remains committed to its long-term development goal of becoming a leading global integrated catering group, continuously improving in five areas, customer experience, restaurants and network, operational enhancement, new businesses and headquarter capabilities. That concludes my introduction of the business situation. Next, let me invite Mr. Qizong to present the financials. Thank you, President Li Yu. Next, I will report on the financial situation. In the first quarter of 2026, the company achieved a total revenue of $226 million, an increase of 14.2% year-over-year. Hydealaw restaurants' operating revenue accounted for 90.4% of total revenue, reaching $204 million this quarter, an increase of 8.4% year-over-year. This was mainly attributable to, first, the continued improvement in operating performance of existing high-deal-off stores with increases in both the table turnover rate and the customer traffic. Second, a net increase of four stores in the company's restaurant network compared to the same period last year, with adjustment in the store network layout contributing incremental revenue. Delivery businesses' revenue accounted for 3.2% of total revenue, reaching $7.3 million this quarter, an increase of 82.5% year-over-year, primarily because we continue to optimize delivery products and services based on market demand and strengthen cooperation and joint marketing with local delivery platforms. Other businesses' revenue accounted for 6.4% of total revenue, reaching $14.4 million this quarter, an increase of 166.7% year over year. The revenue growth came primarily from the sales of food products and seasoning under the Hydenol brand and from the company's own central kitchen, as well as from the active development of some new brand restaurant business under the red pomegranate project. In other businesses this quarter, external sales from the central kitchen contributed significantly. We have commercially converted some of the central kitchen's excess capacity for external use. Although the The growth margin of this type of the B-end supply chain business is lower than that of the C-end restaurant business. And there is order volatility. It dilutes our supply chain fixed cost, of course, from the perspective of our core model. The highly low restaurant, the main business remains our most core business. Next, regarding cost and expenses, benefiting from the company's pro-active investment in employee management and customer experiences throughout 2025, The operating leverage brought by revenue growth in this quarter has led to further improvement in the cost structure. Roll material cost for this quarter was $76 million with a growth margin of 66.1%, an increase of 0.1 percentage points compared to the same period last year. employee costs were 76.66 million with employees cost as a percentage of the revenue at 34%, a decrease of a 1.3 percentage point compared to the same period last year. This improvement was mainly because after the company proactively shared profits with the employees and strengthened the team last year, we began to see in the first quarter of this year the release of a personal efficiency brought by higher customer traffic. Rental expenses over 6 million, representing 2.8% of revenue, remaining relatively stable. Utilities expenses were 7 million, representing 3.2% revenue, a decrease of 0.4 percentage points compared to the same period last year. Depreciation and amortization were 20.658 million, representing 9.2% of revenue, a decrease of 0.9 percentage points compared to the same period last year, demonstrating the diluting effect of revenue growth on the fixed cost. Meanwhile, the end of the amortization period of certain individual stores brought to some short-term optimization. Travel and other operating expenses were 23.891 million, representing 10.6% revenue, a decrease of 0.1% compared to the same period last year. On the profit side, driven by both revenue growth and cost structure optimization, the company's core profitability improved significantly this quarter. Operating profit reaches 13.99 million, a substantial year-over-year increase of 70.7% with an operating margin of 6.2%, a year-over-year increase of 2.6 percentage point representing a clear improvement in operating quality a special note is warranted regarding the fluctuation in net profit for the period this quarter we had a net foreign exchange loss of approximately 4.292 million compared to a foreign exchange of compared to a foreign exchange gain of the 7.435 million in the same period last year. The difference in non-operating exchange rate fluctuations amounts to $11.73 million affected by this book change. Translation impact, the reported net profit for this quarter was $4 million, a decline compared to the same period last year, excluding the non-operating factor of the exchange rate fluctuations. The company's actual business profitability showed a growth trend. The company's operating cash flow for this quarter was 24.24 million, an increase of 23.1% compared to 19.69 million in the same period last year. As of the same period end, our cash reserves were 240 million, a decrease of 30 million compared to 270 million at the end of 2025, primarily due to investment in the continuous expansion of the stores and the development of a second brand business. Regarding key restaurant performance metrics. This quarter, Haidenau restaurants served approximately 8.1 million customers, an increase of 3.8 year-over-year. Driven by customer traffic, the overall average table turnover rate for Haidenau restaurants was 4 turns per day, an increase of 0.1 turn from 3.9 turns per day in the same period last year. The average check per customer at Heidi Lau restaurant this quarter was 25.3, an increase of 1.1 from the same period of last year, of which approximately $0.8 of the increase came from exchange rate fluctuations, driven by both customer traffic and an average check. The average daily revenue per Heidi Lau restaurant was $18.4,000, an increase of 3.4% year-over-year, effectively improving single-store operating efficiency. Looking at the region breakdown, there was some divergence in regional performance, but the overall foundation of restaurant operations remained stable. This quarter, the Southeast Asia region served 5.2 million customers, an increase of 2% year-over-year. Beneficing from customer traffic, the table turnover rate increased by 0.1% term year-over-year to 3.8 terms. The average tax in Southeast Asia this quarter was 19.6, an increase of $0.9 from $18.7 in the same period last year, mainly affected by the exchange rate fluctuations of the U.S. dollar against other currencies. As of the end of this quarter, the company operated a total of 72 high-digital restaurants in Southeast Asia, a net increase of one restaurant compared to the end of previous quarter, and a decrease of one restaurant compared to the same period last year. Overall, Southeast Asia remained the company's most profitable and stable foundation with relatively steady customer traffic and average checks this quarter. The East Asia region continued its strong growth momentum this quarter. Heidi Law restaurants in this region served 1.3 million customers, an increase of 18.2% year-over-year. The table turnover rate for Heidi Law restaurants this quarter was 5.1% turns. A further increase of 0.1 turn from 5 turns in the same period last year. The average check in East Asia was $28.2 flat compared to the same period last year. As of the end of this quarter, the company operated a total of 21 Hydeala restaurants in East Asia unchanged from the end of previous quarter, a net increase of two restaurants compared to the same period last year. The North America region served 1 million customers this quarter, roughly flat year over year. Due to the frequent extreme cold weather in North America in January and February, as well as the new stores opened at the end of last year in both the U.S. and Canada that are still in the ramping of space. The overall table turnover for North American restaurants fell from 4.0 turns to 3.6 turns this quarter. The average check was $41.4, an increase of $1.8 from the same period last year, over which is $0.7 of the increase came from the exchange rate fluctuations. As of the end of this quarter, the company operated a total of 22 had at all restaurants in North America unchanged from the end of previous quarter and a net increase of two restaurants compared to the St. Pierre Ridge last year. The other regions had a table turnover rate of 3.6 turns this quarter, a decrease of 0.4 turns year over year, mainly because the geopolitical volatility in the Middle East had a significant impact on restaurant operations. The average check was $41.3, an increase of $3.1 from the same period last year, primarily due to the exchange rate fluctuations. As of the end of this quarter, the company operated a total of 12 highly long restaurants in other regions, unchanged from the end of previous quarter and an increase of one restaurant compared to the same period last year. Facing the uncontrollable external macro environment, we have implemented more prudent cost-control measures locally to enhance our risk-resistance capabilities there. This quarter, same-store revenue for highly-long restaurants was $184 million, representing same-store revenue growth of approximately 4%. Among them, East Asia performed the most prominently with the same-store sales growth of approximately 10.6% year-over-year. Southeast Asia and other regions saw same-store sales growth of approximately 6.3% and 1.8% year-over-year, respectively. Same-store sales in North America declined by 5.1% this quarter, still affected by the extreme weather impacting customer in-store dining behavior. Table turnover rate and average check performance were generally consistent with the overall trends and will not be reiterated here. The above is the performance review of the first quarter of 2026, and we now go into the QA session. We welcome questions and comments. Will Mr. Yang's departure affect the company's established strategy of prioritizing customer and employee benefits to drive long-term growth? Will the approach to balance short-term profits and long-term development change? What specific consideration does the new management have to ensure strategic continuity and team stability? Mr. Yang's departure will not affect the deeply embedded strategy of prioritizing customer and employee benefits. customer experience satisfaction, and employee engagement remain our core focus and will not change in the short term. Employee benefits, service enhancement, and food quality control are key areas we continue to advance. This quality is a profit improvement, mainly comes from a more proficient daily store operations, identifying more areas for improvement in strategy execution and boosting employee motivation. With the revenue growth, we are managing cost and expenses more efficiently, but our long-term strategic direction remains unchanged. Since the second half of 2025, this strategy has become ingrained in store operations. The proactive investment made earlier are part of our strategic design. As we balance short-term returns and long-term growth, we will continue to follow the logic of quality first, growth second. Even after Mr. Young's department from Superhigh, the system aware oversees regional managers and store managers are responsible for store openings and operation remains unchanged. We will further deepen employee training incentives and mentoring to steadily improve store operation quality. How is the category layout and decision-making authority of the red pomegranate plan allocated across the region? How is the collaboration achieved from regions of headquarters? Will Ms. Yang have any linkage and collaboration on the Red Pomegranate Plan after restructuring to Haidilao in China? The Red Pomegranate Plan is a key part of our development strategy. It now combines regional decision-making with headquarters empowerment, Successful projects such as Hypo Malaton in Canada and Yoimodo Izakaya in Japan were incubated by regional managers after in-depth local market research and customer analysis, including selections of business types and products. During incubation and operation, we continuously adjusted management approaches across functional team covering product, brand, marketing, business analysis, technology, and legal has been formed at the headquarter level to deeply engage in key projects, better mobilize material resources, and make brand new incubation more efficient whilst decision-making authorities remain with regional managers. Some brands are driven top-down and involve collaboration with China. For example, Sparkcora BBQ Overseas was inspired by BBQ in China with brand design and menu selection unified from the top. After opening the first prototype store in Malaysia, Sparkcora has been replicated to Indonesia and Vietnam with daily operations managed by local country managers. We maintain regular but informal communication with Heidi Lau's Red Pomegranate Plan in China. After Ms. Yang returns to Heidi Lau, China, she will share her experience with overseas Red Pomegranate Projects in the new business format. We continue to give regions sufficient autonomy to ensure local adaptation and innovation. What changes in consumer demand have been observed since the beginning of this year? Are there any noticeable new trends or characteristics based on recent consumption trends? How do you assess our medium- to long-term growth potential? The most noticeable trend this year is that overseas consumer markets are not deteriorating. Rather, consumers have become more rational and value-conscious. Value is not just about price, but also about memorable products, dining experience, service quality, and suitable ambience. intangible value for their money. This trend varies by market. North America customers focus more on cost performance and are more cautious in ordering. Southeast Asia remains vibrant but prioritizes the convenience delivery and use-oriented dining scenarios. Mature markets like Japan and Korea are more sensitive to efficiency, limited time offerings, light burden, and social sharing. Australia, the UK, and the Middle East and others have their own habits and pressure points. The common thread is that customers increasingly want restaurants to give them a clear reasoning to choose them. For Heidi Law, this trend clarifies our direction. What we have always done is essentially to provide clearer value choices for customers. We continue to advance quality to price racial initiatives, adjusting menu structure, product combinations, portion sizes, and price reasonableness, combined with effective promotions to make it easier for customers to choose and feel value. We are building the experiences. We are building a different idea, not just through decoration and gimmicks, but by designing our products and experiences tailored to different scenarios, such as family meals, late night snacks, friends, de-gatherings, and people's interactions. Fresh cuts, set meals, combo launches, and extended delivery scenarios all follow the same logic, giving customers a reason to choose Heidi Law in different contexts. In the meantime, in the medium to long term, we do not see the market space shrinking, but rather industry barriers rising. Our earlier management adjustment and strategy execution are making the company more resilient from employees to products, from organization to operations. We believe a resilient company can quickly adapt to any market change and capture medium- to long-term growth opportunities. Next question, what is the current status of member consumption, member spending share, repurchase rate, what are the future strategies and expected outcome for member management? As of the end of this quarter, Heidi Lau's overseas membership reached $9.05 million. We continue to promote membership work overseas. This quarter, over 92% of the table turns came from member customers, member login rate 92.5%. A slight increase from last year in terms of consumption composition, over 20% of spending came from newly registered members this year. And about one-third came from repeat customers within three months. The overall members' contribution structure remains stable. Regarding membership work, we will continue to strengthen front-end and back-end cooperation. At the headquarter level, we will enhance the digitalization of the membership system and focus on optimizing member experience, including improving each reach rate and refining the point system and benefit designs. On the operation side, we are committed to having a store manager and frontline staff place a greater emphasis on customers. By designing different tiered benefits, we enable members to experience exclusive services and thereby increasing customer loyalty. Next question. Based on current oil prices and raw material cost, what is the impact on the company's growth margin this year? Based on current observations, the impact of rising oil prices and cost on our gross margin is relatively controllable. On one hand, product mix adjustment and supply chain optimization can buffer some pressure. Regional managers can choose more cost-advanced suppliers while ensuring quality. the local supplier model, we can see that the overall margin is controllable. And the first reason is that for hot pots, and basically there is control and there is flexibility. So we can see, for instance, including different seafood and restaurants, et cetera, and all of these are actually quite flexible, and this means that whilst we are ensuring the experience of the customers, we are able to provide them with better choices, and the second is that with respect to our overseas business, we continue to have a localization, we have a localized supply chain, and some of those we have worked to strengthen our collaboration with the local customers, and some of those we will be working with, for instance, collaborations, and this has helped us to offset the commodities cost, and in the meantime, in terms of our cost on the storefront side, and we have also been able to control the storefront, and with respect to other fees, for instance, the labor cost, etc. On this front, in terms of our optimization, it's not sacrificing the benefits of the customers. And the growth really comes from the business growth. In terms of the human labor, at the moment, it's about 3.3% to 3.4%. And that is in the reasonable range. And going forward in the future, it's about the flexible arrangement of the labor allocation to further improve our human efficiency, for instance, in terms of rent. And we can see that it is quite stable. Going forward, we'll also be adopting more strict selection of locations and to further improve our space in the stores and to further improve our negotiation prices. So apart from this, we can also see that in terms of different cost consumptions as well as the storefront management for the cost in terms of cost outside we do think that is quite under control thank you mr chi is very clear thank you mr how do you see the room for optimization in labor cost ratio rent cost and other expenses this year we have always maintained that ensuring customer experience and service quality is the most important so store staffing has a certain rigid rigidity this quarter overall labor cost accounted for 34 percent a reasonable level that it should thank you very much for your question and with respect to the turnover since april and our performance overall speaking is relatively stable and generally speaking we have been able to continue with the trend of the first quarter And in terms of the turnover rate, and we can see that in different regions that there are some variations and the reasons would be roughly the same. In terms of the price wise, we have been working through optimization of dish combinations in the localized marketing. And in the meantime, we continue to maintain a stable unit price per customer. And right now, we have entered into the off-season of hot pot, and we are relying on the following areas to further improve. So, first of all, we know that this is the low season, and that's something that we cannot change. But during this period, we continue to improve our internal capabilities. And, for instance, for the summer and as well as for the customers. We will be providing them with summer food. And in the meantime, we're also launching new products as well as in the summer. And we have, for instance, barbecued fish and various different drinks that are suitable for the summer drinks. We are also adjusting our staff allocation in a more flexible fashion. In the meantime, in terms of our scenarios, we continue to further expand our scenarios. For instance, interactive marketing with various IPs using local performance and social events overseas with set meals and gifts to attract customers. Number four, whether it is our existing customers or it is our new customers, and we will be able to find new ways to tap into these garments. and we are trying our best so that we are able to maintain healthy turnover and a good customer experience even during the half season. So my next question is about the store opening expectations and the store opening plans for this year and the next three years, as well as the approximate numbers by regions. Can you please tell us more about these aspects? Okay, no problem. Thank you for your question. Our store opening strategy, we have always adhered to bottom-up, and Mr. Li has also said that we have put forward strict requirements, and at the moment, we have double-digit stores that we have already signed or we're already entering into the substantial contract signing stage. Apart from Heidi Long, in various places, we will also have red pomegranate plants, and one type is bottom-up, so this is based on the local regional managers, and those are the ones that rely on the local platforms. And another one is from top to bottom, and those are the ones being pushed by the company from the headquarter, which will also help us to further expand and grow within the company ourselves. So we are not going to be providing any specific numbers or figures. And it's really because relying on the local people and relying on their local situations to specifically come up with a plan that is suitable for them for their future development and opening. Thank you. Thank you management and thank you hosting. Thank you everyone for joining the call.