Super Hi International sees 7.8% revenue growth in Q3 2025, but operating profit declines 15.4% due to strategic changes and rising costs.

Sample. Dear investors and Analysts, Good afternoon. Thank you for attending Super Hi International's Q3 2025 earnings call today. The Company's executives present on the call are Ms. Yang Lijun, Executive Director and CEO, and Ms. Chu Tong, CFO and Board Secretary. Today's conference call may include forward looking statements such as the company's strategies, business plans and performance outlook. The content of this earnings call, along with management's comments and Q and A reflect their views as of today. Please consult the latest Safe harbor statement in the earnings press release which is applicable to this call. This session will be conducted in Chinese with simultaneous English translation provided by an external agency. If there is any discrepancy, the Chinese version shall take precedence. The presentation materials will be uploaded to the company's IR page for your review. Ms. Yang Lijun, CEO and Executive Director of Super Hi International, please thank you. Dear investors and Analysts, hello everyone, I am Yang Lijun, CEO and Executive Director of Super Hi International. Coming up, I will be highlighting the main development of Superhigh International's Q3 2025 performance this year. Thanks to our ongoing investment in customer and employee benefits and our strategy of prioritize customer satisfaction, we are pleased to see significant progress in store management, quality and restaurant operating results this quarter. Overall table turnover rate in Q3 was 3.9 times and our same store table turnover rate was 4 times, both increasing by 0.1 times. Compared to last year, Q3 revenue reached US$240 million a year over year increase of 7.8% and our Haidilao restaurant same store revenue grew by 2.3%. As we continue to implement the customer and employee benefit policies and share benefit policy introduced in the first half of the year, we achieved an operating profit of US$12.64 million this quarter, a decrease of US$2.3 million or 15.4% compared to the same period last year, the operating Profit margin was 5.9%, down 1.6 percentage points. Year over year. However, we were able to balance benefits for customers with operational improvement, adjusted some ineffective strategies and enhanced efficiency in areas such as product output and staff scheduling. As a result, our operating Profit increased by US$8.9 million or 240.5% compared to Q2 and also the op profit margin rose by 4 percentage points from Q2, demonstrating significant quarter over quarter growth. Additionally, year-on-year gap in the third quarter has also been notably narrowed year over year. Let's review Q3's key initiatives. First of all, we focus on store operations this quarter we continue to reduce headquarters oversight of stores and eliminate performance rankings for individual tasks. Our focus shifted to support guidance and improved communication, allowing frontline stores and regional offices to to better concentrate on the market customers and employees. During this process, our regional offices and stores naturally generated many excellent service cases and management practices. At the same time, we have around 90 potential key personnel building strong talent pool for our overseas management and development. Second, this quarter in creating a different Haidilao, we concentrated on the fresh cut scene or scenario. Fresh cut meat is relatively fresh and new for overseas consumers and offers a better consumption upgrade experience. Currently, over 60% of our stores have launched these products and overall the take rate or the adoption rate has been increasing month by month now surpassing 11% which led to higher per table consumption. Overall, feedback has been very positive. Additionally, some stores in Southeast Asia have completed the nightclub style scene renovation and compared to stores and other regions, the table turnover rate during late night hours has increased more significantly. Moving forward, we will continue to expand the scenario, aiming to provide customers with richer and more unique dining experience. Third, regarding the store network expansion, we opened 2 new Haidi Lao stores this quarter located in Malaysia Indonesia. Also, we discontinued a Singapore Haidilao restaurant also, so we are going to adjust one store in Thailand to a secondary brand based on changes in the surrounding business district and customer base. As of the end of Q3, we operated a total of 126 Haidilao restaurants overseas with 10 new restaurants open and 6 stores discontinued. This year, we have signed contracts for more than 10 Haidilao storess that are not yet open. Given the ongoing construction and timeline, we're anticipating opening a few stores in the fourth quarter which will result in a total of over 10 new stores opened this year. Fourth, under the Pomegranate plan, our second international brand is steadily advancing in Q3. Our Malatang brand Highball, launched in Canada and quickly became profitable at the store level. The next step we're going to work on refining customer flow products and operations, exploring the strategy internally. Currently, we aim to use information technology and smart middle office system to support management, which will make it easier to expand and roll it out to different regions, gradually avoiding overextension. Additionally, other opportunities in various sectors identified earlier are also underway. In November, we opened a Spakara BBQ store in Indonesia and also Izakaya in Japan, both showing consistent growth and ramping up. Through ongoing adjustments and innovations, we have gained greater confidence in tackling challenges in the global market. We will persist in our management philosophy of connecting interests and securing management, making necessary adjustment to incentive policies and fully leveraging the mentorship system to attract and retain employees from various countries. Additionally, we aim to pass on and develop Haidilao's culture and management practices. We will focus on advancing the Pomegranate Plan and also implement the Woodpecker Plan for stores that underperformed. Moreover, we'll actively adopt new technologies and integrate AI to boost organizational efficiency. That concludes my overview of the business performance this quarter. Now, Ms. Xu Cong will present the financial performance. Thank you, Ms. Yang. Hi everyone. I am the CFO of the company. My name is Juiceong. Next, I'll introduce the Q3 financial performance. In Q3, the company generated a total of US$214 million in revenue, 7.8% increase from last year. The same period, Haidila restaurant operating revenue was US$201 million up 5.1% year over year due to ongoing business expansion including a net addition of five Haidila restaurants year over year. Additionally, increased customer traffic led to more table turnover rate year over year. With our focus on takeaway business resulting we saw increase multiple stores launching actually take away menu items, we are able to generate better results. Takeaway revenue reached US$4.4 million, 69.2% rise from the previous years. Other business revenues stood at US$8.9 million, 74.5% increase. Regarding cost and expenses, raw material cost totaled US$71.2 million with a gross profit margin 66.7%, down 0.3 percentage points year over year. Employee costs was US$71 million representing 33.2% of revenue increase of 0.1 percentage point year over year. Since applying the discount strategy this year, these primary cost items have been optimized this quarter. Customer traffic driven by previous investment has continued to expand continue to expand our revenue. While ongoing management efficiency improvement during strategy implementation have helped compared to last year, our employee cost ratio remains similar. Efficiency gains and supply chain enhancement have partially offset the gross profit margin impact from customer discounts. Rent and related expenses reach US$612 million, 2.9% of revenue, up 0.2 percentage points Year over year. Our depreciation and amortization total US$21 million, about 10% of revenue, a decline of 0.3 percentage point from last year. Our utility expense were US$778 million, 3.6% of revenue, 0.2 percentage point decrease year over year. Operating expenses including travel and other costs was US$23.7 million, up 11.1%, an increase of 1.7 percentage points year over year. Among the operating expense mentioned earlier, we followed the same trend as last quarter. The other expenses showed the largest increase in revenue compared to last year. This includes customer sorry, higher outsourcing, service fees, professional consulting fees and brand marketing costs in some countries and the Pomegranate project and brand building resulting in higher expense year over year. The second largest increase was rental costs amounting for 2.9% of revenue. It was mainly due to companies increased number of lease properties this year including Haidilao and second Brand stores under renovation as well as short term warehouse leases. In the third quarter, the company's operating profit was US$12.6 million down US$2.29 million from the same period last year. The operating Profit margin was 5.9% dropping 1.6 percentage points from 7.5% last year. This aligns with our expectations for the profit sharing strategy but indicates room for improvement in our management during dynamic operations. In the third quarter, net profit after tax was US$3.59 million. Our shop declined from 37 US$0.6 million last year. This was because of the exchange rate fluctuation of the Japanese yen, Singapore dollar and British pounds against US dollars causing a foreign exchange loss of 5.8 million US dollars after we have revaluation compared to a gain of 25.8 million of gain US dollars in the same period last year. Regarding the operating cash flow, Q3 was US$34.1 million down US$6.5 million from last year. It was because of the cyclical fluctuation in operating receivables affecting by holidays and weekends, the fact that operating profit was lower than last year's same period and also because of our profit sharing scheme. Regarding restaurant key performance in the same in Q3 we serve approximately 8.1 million customers represented in a 9.5% rise year over year. Haidi Lau has a daily table turnover rate of 3.9 routes which is 0.1 routes higher than last year where average order value was US$24.6 down $1.20 from 25.8 last year. Because of strategic adjustment in menu pricing and marketing, the average daily revenue per restaurant reached 18,000, a $300 increase from last year driven by a higher number of diners per table. Our four regions show a slight improvement year over year. East Asia remained a top performer serving 1.2 million customers, 50% increase from last year. This basically was a 0.6 round in rice increase in the table turnover rate reaching 4.9 and the average spending per person in east Asia was 28.9 US dollars. The average daily revenue per restaurant was 20,300 US dollars, 14.7% increase. North America the table turnover rate was four rounds up by 0.1 from last year. The average transaction value decreased by 4.4 dollars compared to last year. But higher restaurant traffic and more customer per table result a 2.8% increase in average daily revenue per restaurant which was US$22,100. Southeast Asia's table turnover rate was 3.7, increased by 0.1, mainly due to increased investment in customer rewards and offering more cost effective products. Other regions show a 3.7 round average table turnover rate. It was mainly because of new stores in the UAE that are still ramping up. Our same store revenue grew by 2.7%. The average stable turnover rate across 107 stores was four rounds daily, an increase of 0.1 year over year. The average transaction value per customer average spending per customer decreased by $1.10. Regional performance trends within the same stores basically aligned with the overall results that I mentioned before. So I will not repeat. That's all for our performance review. We're now ready for your questions. Please feel free to ask questions. Thank you. Please press Star one one for your questions. If you need to cancel your questions, please press star 11 again. The first question comes from Zeng Jun with Hua Tai Securities. Please go ahead. So my first question is that what are the strategic plans for operations and expansion in each region next year? What will be the focus and pace of operation in different regions? And the second question is that I understand that business development takes time, but how should we project profit margins? And what kind of metrics can indicate a tipping point or an inflection point before starting full scale acceleration? That's all for my two questions. Thank you. Great. Thank you. Ms. Zeng from Hua Thai. For your questions, let me try to address your first question. Basically, different regions have distinct development strategies based on their unique environment and situations. As mentioned earlier, some of these Asia and East Asia now shows strong overall growth. We aim to increase local customer base by opening more high quality stores. We also trust regional managers judgment to develop new business formats tailored to local preferences. For example, a Japanese Izakaya store has already opened in Japan. And South Korea is planning to launch its own Korean BBQ restaurant as well. North America is a large market, especially in the us. We focus on internal improvement, management enhancement and developing talent. At the same time, we're actively expanding into the market. Many upcoming projects right now are in North America. So management and talent development are definitely a priority. Southeast Asia comprises many countries with very diverse conditions. Indonesia has experienced relatively stable growth and we're applying a similar strategy to East Asia by expanding new stores and exploring new business models. On the other hand, Thailand needs to improve its management, focusing on internal development, including product quality, service and customer experience. Internationally, each country has their unique condition that require us to adapt. We emphasize customer and employee focus while embracing technological advancement and AI to gradually strengthen our mid platform or middle office kind of management, easing the pressure on frontline staff. That's the first part of your question. And the second question is that first of all, we do not set short term profit target for each store. I think relying on numerical goals for operation can lead to deviations and potentially harm customers and employees. Outcomes that we aim to avoid. So instead we prioritize the efforts of managers at each country and store level along with the health of their management practices. Our evaluation criteria are multi level and multifaceted, taking into account customer satisfaction, employee efforts and reasonableness of store performance figures. Sometimes this requires offering discounts, other times focusing on internal enhancement and ultimately good table turnover and profit margins will follow. Naturally, all of our store openings, whether under the brand or pomegranate project, are driven from bottom up. We don't rush the process. We emphasize the quality of each store we launch. I hope I answer your question. Great. Thank you. Ms. Tung, thank you for the question and answer while waiting for the next question. The next question comes from Zhong Yecheng with Zhe Sheng Securities. All right, thank you for the two questions. The first question is about the profit forecast for 2025 full year and the upcoming three years. You know, in 2025, the company's total revenue reach US$610 million with an operating profit of $24.45 million, resulting in an operating profit margin of 4% from January to September and Q3 is typically the peak season. Usually the operating margin will be slightly higher. But we are waiting for the the end of the year before we can announce the official figures as of the operating profit margin over the next three years. This involves projections and it's very difficult to project. Nonetheless, the company will continue efforts to enhance store management, open high quality new stores and also explore initiative innovative business models for our pomegranate initiatives. Regarding our localization, I think we have been increasing the localization rate, but the different regions things are different. For example, internally we have done the calculation. For example, in Asia and South Korea, Indonesia and Vietnam have a localization rate above 90%, while in North America, the United States, Canada and UK the rates are around 40% to 50%. Other countries are in between. But Singapore is a unique case because its dominant kind of ethnicity is Chinese immigrants, making it very hard to define what local means. So that's basically an overview of the localization rates. Thank you. Thank you so much for the question. We're waiting for the next question. The next question comes from Lai Shunwei with cicc. Please go ahead. All right, thank you for the two questions. Mr. Lai. So regarding the plans for store inventory and also future store opening strategies, 10 Haidilao hot pot restaurants have already been opened this year, with a few more expected to open in Q4. Currently, nearly 20 projects in the pipeline are underway, including those that we have signed and also are about to be signed. However, due to varying property handover times and overseas construction periods, especially for longer timelines in Europe and in United States, there will be an inevitable kind of cycle before opening. The company's overall store opening principle remains bottom up, prioritizing the quality of new locations over speed. And as we mentioned, we have done some adjustment according to the Woodpecker initiatives. We will continue to monitor the store performance. For timely adjustment. And the second question is basically about the current status of overseas employee satisfaction and turnover rate and how store manager performance ratings distributed over time. This year, initiatives to cut employee costs and improve employee care across different regions have shown positive outcomes. The average monthly employee turnover rate has actually dropped by 1 percentage point from same period last year, which was usually above 8%. The latest Q3 figure was just over 7%. Store performance has also seen improvement with a greater number of stores earning A ranking or A Ratings or B Ratings in management reviews. Going forward, our focus will remain on the two areas of retaining customers and developing employees. That's all for my answer. Thank you. Thank you so much for the question. The next question will come from Li Juny with Founder Security. So what has been the trend of table turnover rate since Q4? What are the expectations for store performance during the upcoming peak season? Also, are there any further plans or construction projects regarding overseas supply chain? And how are the new overseas brands progressing? Are there any operational data that you can share? Are there any differences in the synergy between the new overseas brands and Heidi Lal compared to the domestic ones or landscape? Besides incubating brands yourself, are you considering acquiring promising projects? Thank you for the three questions. The first one is about the Q4 table turnover rate forecast. Q4 is typically the usual peak season for hot pot based on the current situation, the demand for gatherings on both weekdays and holidays have significantly increased compared to Q3 and also year over year. So we can see that as we mentioned, our profitability or margin was about 4% from Q1 to Q3 and Q4 usually would be higher than that, but we will wait for the official figures to become available to disclose. The second question is about construction projects or plans for a supply chain building. There are currently no plans for large scale investment in building new supply chains. We will continue to promote localized procurement of raw materials, enrich and optimize our corporation channels or partnership with importers in various countries, and establish small localized R and D labs based on business needs. But we're not going to invest heavily in assets like factories. And the last question is about new overseas or international brands. As was mentioned, we launched our Highball amount in Canada in Q3 in Q3 November. We also opened Sparkara BBQ in Indonesia and Vietnam along with an Izakaya Japanese pub in Japan. All are in very stable kind of growth phase with Malatang already profitable. Regarding other brands, we are evaluating our current management capacity and aim to empower stores to through an information and also smart platform, making it easier to manage and replicate the business across regions. We will proceed cautiously rather than rashly. The synergy between the second brand and high Delaware stores involves sourcing, sharing such as property negotiations and also procurement. Because of our economy of scale and also management, efficiency can be achieved and improved through proximity. However, new brands target different customer groups and has different products and positioning. It requires managers with innovation and strategic thinking. Therefore, we're not going to adopt a dual management model blindly. Also, you talked about potential M and A. Apart from developing our business organically, we are also open to external partnership. Currently, though we have no specific targets or plans, we welcome suggestions of any promising opportunities that you may know of. Thank you, Thank you. Thank you for the answers. The next question comes from Li Huayi with Huojin Securities. Since the beginning of this year, we have been offering discounts to customers such as more reasonable pricing, more affordable portions and more diverse dining options. In some areas, the average order value has decreased year over year. Could you provide further forecasts and trends regarding average order value and also menu pricing? How does management balance this discount strategy with long term profitability? And my next question is that how can effectiveness of employee incentive plans be quantified and evaluated? Is there any data showing a correct correlation with performance? Thank you so much for the question. The first one is about our menu pricing and also discounts to customers. This year we did optimize our pricing and portion sizes in some markets to make more consumers feel like they are getting good value for money in the short term. The average transaction or the average value per table decreased slightly in some regions, but table turnover rate remains stable with slight increase. In the long term, we focus more on the overall operational quality rather than a single metric. The core of our profit sharing strategy is to improve customer satisfaction and repeat business, which ultimately lays the foundation for long term profitability. So the long term profit will come from our efficiency of management of our customer and also employee and also the waste control etc. The second question is about how to quantify and evaluate the effectiveness of employee incentive plans. It's actually difficult to directly quantify and link employee incentives to operational metrics such as table turnover rate and profit. However, in terms of management, improving employee salaries and benefits and implementing more reasonable incentive schemes will enhance team morale and also our color coding management system which will in turn improve the customer experience. With the implementation of this year's profit sharing measures, the overall table turnover rate and same store table turnover rate both increased year over year. In Q3, the profit margin also rebounded compared to Q2, which was in line with the company's expectation. As was mentioned by one of the previous questions, return rate of employee actually reduced by 1 percentage point which was really rare in industry and that that says a lot about our effectiveness of the employees and teams. So that's my answer for your second question. Thank you. Thank you. I would like to remind everyone that if you have any questions, please press star 1 1. The next question comes from From Wei Jaba with Citic. Thank you. My questions are as below. What are the reasons for the changes in average order value and how do you predict future trends to be? And also besides, Singapore, Vietnam and Malaysia both have a relatively large number of stores in the Southeast Asian market. What effective measures have been taken? What are your views on future store expansion potential? Thank you so much for your questions. Let me address your second question first. Actually, the number of stores across different countries and regions depend on different factors including local customers, eating habits, acceptance of hot pot, population, consumption levels, economic development, etc. It also is closely linked to our management, our branding, brand awareness in the region. In the countries that you mentioned, we enter early, establish our brands for a long time and Hotbot is generally more accepted. That's why we have more stores, more present and we will keep exploring lower tier cities in these countries and regions, but only after thorough research, site selection and market preparation. Our approach will be steady and solid and deliberate to ensure the opening of high quality stores. Thank you. Thank you all for your questions. This is the end of today's earnings call. Thank you so much for your participation. See you next time.