Dpc Dash Stock

Good day, and welcome to the DPC Dash Ltd First Half 2026 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded.

I'd now like to turn the conference over to Cathy Zhang with Investor Relations. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us on today's call. [Operator Instructions] Today, you will hear from Ms. Aileen Wang, Executive Director and CEO of DPC Dash; Ms. Helen Wu, CFO of DPC Dash; and Mr. Michael Xu, CPO of DPC Dash. Aileen will provide insights into the company's overall performance and share recent developments, Helen will go a bit deeper into the first half financial results. The management team will address your questions after their remarks.

Before we continue, I'd like to remind you that our earnings call and investor materials contain forward-looking statements about our business that may be considered as forward-looking statements under applicable securities laws, which are based on various assumptions and other factors that are beyond the company's control and are subject to risks, future events and uncertainties. Accordingly, actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements.

You can identify these forward-looking statements because they include terminologies such as may, will, expect, estimate, believe, going forward, plan, projection, aim or other similar expressions. Statements that are not historical fact, including, but not limited to the statements about the company's beliefs, plans, expectations are forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the Hong Kong Stock Exchange.

Also, this call includes discussions of financial information and certain non-IFRS financial measures. Please refer to our results announcement and interim report to be published in accordance with the rules governing the listing of the securities on the Stock Exchange of Hong Kong Limited, which contain a reconciliation of the IFRS measures to IFRS measures. All information provided in this earnings call is as of the date of this call. The company, our affiliates, advisers and representatives undertake no obligation to update any forward-looking statements, except as required by law.

With that, I will turn the call over to Ms. Aileen Wang, Executive Director and CEO of DPC Dash. Aileen, please go ahead.

Hello, everyone, and thank you for joining us today as we discuss DPC Dash Ltd's results for the first half of 2026. As the exclusive master franchisee for Domino's Pizza in the Chinese Mainland, Hong Kong SAR, -- SAR, we continue to operate in a market with substantial growth opportunities. Our global franchisor, Domino's Pizza Inc. remains one of the largest pizza companies in the world with more than 32,500 stores across over 90 markets as of the end of the reporting period.

Before I discuss the figures, I want to contextualize our first half performance which provides a clearer perspective on our current trajectory. Revenue grew 20.8% to RMB 3,133.8 million, driven primarily by a 33.7% year-over-year increase in transaction volume. This growth was fueled by both our expanding store network and a 7.1% increase in same-store transactions. However, this half was characterized by two opposing forces, robust demand and network expansion versus pricing pressure from industry-wide aggregator subsidy dynamics. I will now outline how these dynamics diverged across our different types of markets.

Let's start with our initial city markets, defined as the markets we enter before 2023, where we have the longest operating history, transaction comps accelerated and same-store transaction growth was 8.5%, actually a healthy number, but same-store sales growth, SSG turned negative, marking the first such occurrence in these initial city markets in recent years. We did not see evidence of a broad-based to command deterioration in our initial city markets. Indeed, more customers were visiting us. This shift was primarily attributable to the intensified third-party platforms, subsidy campaigns leading to lower average ticket as they put in a meaningful shareholders on to these lower-priced channels.

Now let's turn to our new city markets. The market we have entered since 2023, SSG while still negative and negative 9.4% has narrowed consistently for 3 consecutive halves. We have improved from negative 19.6% to negative 13.2% and now negative 9.4%. This is the normalizing curve we expect to see. When we enter a new city, our first stores opened to extraordinary demand, often the strongest sales performance in the entire Domino's system globally. As that initial launch phase settles, and we increase more store density to drive operational efficiency, same-store comparisons naturally experienced contraction for a period.

We made a deliberate choice on managing this transition period, and I would like to outline our strategic rationale behind our decision-making. Rather than waiting out the 3PP subsidy wave, we view this as a one-of-a-kind media window and an accelerated rollout of delivery services in our new stores ahead of our original plan. As a result, deliver order contribution in these new city stores rose to 25% today and in a much faster pace as we observed in our initial city markets in the past. We want to point out that through building delivery penetration, together with landing value and other initiatives, same-store transaction growth in new city markets turn positive at 2.2%, up from negative 19.1% a year ago and negative 7.9% in the second half of last year.

However, embracing aggregated platforms meant expecting a realized transaction price in the near term. Since 3PP orders carry a lower artic their orders through our own channels. But we believe that the customer habits and brand mindshare, well building today in what is an early and informative period for delivery in these new cities like what we did in initial cities will yield long-term benefits. And importantly, even at the deep point of same-store sales comparison cycle, the underlying economics level at these stores has remained healthy.

Our 93 stores opened in new markets this half generated an average daily sales of RMB 28,230 with a weighted expected payback period of just [ 14 ] months. Beyond the network expansion in same-store story, we continue to innovate our products and collaborate with popular IPs to engage with our customers. To name a few of the highlights.

We launched the Crispy Croissant Crust, football field square shapped pizza, Chicken Pizza and Energy Bo series, alongside a successful partner with the gaming title Archnites, mainly fund to capture a larger share of the used demographics. On delivery, we maintained a delivery on-time rate of 93.6%, even as volumes grew significantly, which speaks to the quality of our operating system.

On digital engagement, our loyalty program grew to 41.9 million members, up from 30.1 million a year ago, with 18.1 million new customers placing their first order over the past 12 months. On our supply chain, our full supply chain center in Wuhan commenced operations on August 21, 2026, selling opportunity stores around Wuhan areas across the Western region. We have also secured sites in Chengdu and Nanjing, targeting opening during the second half of 2027. We believe these investments are necessary to solidify our prod and operation foundation as we keep scaling.

Moving forward, our strategy is defined by a distinct approach to our two core business segments. In our initial city markets, the priority is structural as to improvement. Orders placed through our own channels, our application and -- Program have consistently carried in ATP, meaning average transaction price above RMB 90, meaningfully higher in CPP orders. So our focus is migrating more customers back to these higher-value channels through our loyalty program, combo innovation, et cetera.

In our new city markets, the priority is still expansion and penetration, continuing to scale delivery from its current base of around 25% and communicating our iconic value programs while taking similar initiatives to migrate customers to our own channels and elevating ADP.

Regarding our network expansion, we remain on track to open approximately 350 net new stores in 2026, have already delivered 235 openings in the first half. To better quantify our long-term growth potential, we're introducing store density as a key performance indicator in this period. Currently, China's overall beta market density stands at 13.9 stores per million population, while our own national footprint is just 1.1. We believe these metrics provide a more precise illustration of the significant unpenetrated demand available to us. Highlighting a substantial runway for growth, both through new city entry and further densification of our existing markets.

With that, I'll hand the call over to Helen to discuss our financial results in more detail.

Thank you, Aileen. Our financial results this half in calculate the margin dynamics resulting from our continued network scale up amidst the ongoing market subsidies. I will now detail the specific impacts across our P&L.

Revenue performance. The total revenue grew 20.8% year-over-year to RMB 3,133.8 million. Alongside our usual Tier 1 versus non-Tier 1 breakdown, we're also sharing a new lens this half based on market maturity, the initial city markets versus new city markets, which we think gives a clearer picture of where our growth is coming from. Looking at this by market maturity, our initial city markets contributed RMB 1,723.9 million or 55% of revenue, growing modestly as strong transaction growth was largely offset by the ATP pressure I didn't described previously.

Our new city markets contributed RMB 1,410 million, now accounting for 45% of revenue and up from 34.6% a year ago, growing 57.3% as our expanding new store base scaled up. Looking at the same revenue through our Tier 1 versus non-Tier 1 lands, non-Tier 1 markets grow 36.5% to RMB 2,059.7 million and now represents 65.7% of revenue, again, reflecting our revenue network growth is concentrated.

The channel story reflects same underlying dynamic playing out again. Total delivery sales grew 44.7% to RMB 1,618.8 million, now representing 51.7% of revenue. But within that, deliveries from third-party platforms grew 81%, while deliveries through our own channel actually declined 11.8% because the subsidy put orders through 3PP. This matters for margin because our own channel delivery orders carry an ATP, average transaction price of RMB 94. So every order that shift channel has a direct effect on our realized pricing, not because the customers are spending less but because of which door they are working through.

So offering the differentiated value and services to build up a larger base of customers or high-quality loyal customers over time will help us improve ATP and order economics and a higher lifetime value of our customers.

Margins and cost efficiency. This channel and pricing dynamic flow straight through to our store level profitability. Store level EBITDA grew 8.3% to RMB 544.5 million, though the margin declined to 17.4% from 19.4%. And the store level operating profit grew 2.9% to RMB 394 million, with a margin at 12.5% versus 14.6% a year ago. The primary driver was the lower ATP or together with a higher PP delivery sales mix, which carries a different cost structure. And this was only partially offset by the cost efficiency measures that we have underway.

To put some texture on that offset, our raw material cost rental and other store level costs all grew broadly in line with our revenue and store count growth. And in a few areas, we actually improved. Advertising and promotion expenses fell to 5% of revenue from 5.3%. And the store operation and maintenance expenses improved slightly to 6% from 6.1%, both reflecting more efficient spending as we scale.

Where we saw more pressure was in a store-level of stack cost, which rose to 28.9% of revenue from 27.7%. Reflecting the staffing we put into our new stores to protect service quality, plus the simple mathematical effect that lower ADS means less revenue to spread our fixed labor costs and also the higher rider costs from our growing delivery volume.

At the group level, our company cost discipline served as an effective buffer improving from 8.1% to 7.5% of revenue as we get scale benefit and cost control at headquarters even while we keep investing to support our growth. Putting that all together, adjusted EBITDA grew 8.6% to RMB 350.7 million with margin at 11.2% versus 12.4% last year, and the adjusted net profit grew 7.4% to RMB 98.2 million.

Liquidity and capital allocation. We ended the period with cash and bank balances of RMB 934.7 million. Our operating cash flow grew to RMB 504.9 million from RMB 361.1 million. So this means that our growth continued to be substantially supported by internally generated cash. Our gearing ratio improved to 7.9% from 8.2% and we retained RMB 300 million in unutilized credit facilities. So we are comfortable with our funding positions as we continue to expand.

Looking at our capital expenditure. At the store level, our average CapEx for a new store, excluding the landlord rental deposits and net tax is approximately RMB 1.3 million per store. We will continue to optimize the store design and procurement to further lower new store CapEx and improve the cash payback cycles. Looking ahead, we will continue to invest in our three main areas: store expansion, supply chain center investment and the digital infrastructure to build our competitive strengths for the business in the longer term.

To sum up, this half's result tell a consistent story across both the operating and the financial numbers. Our underlying demand and the network growth are healthy. And in the case of our new city markets, the improving faster than expected, while pricing pressure from the current subsidy environment is a near-term drag on margin but with a clear pathway for recovery as subsidy gradually normalized, the channel mix improves and together with our other growth levers.

Now also with our own cost efficiency initiative continue to build, we believe the business remains well positioned to benefit from operating leverage as sales productivity improves.

This marks the end of our presentation, and we will open the floor for questions now. Thank you very much. Operator?

[Operator Instructions] And today's first question comes from Lisa Liao with Jefferies.

And here's two questions from my side. The first is about the same-store sales trend we have observed. In our fact sheet, we actually disclosed that we saw slightly positive same-store sales in May and June with successful marketing initiatives. So just wonder how do we see the most updated trend? And what will be our key initiatives to help further support the same-store sales in the second half?

And -- regarding my second question is more on the aggregator subsidies. So we know the most intensified subsidies actually happened last year. So how do we assess the overall subsidy level from aggregators this year? Do we see any mitigation or slightly better situation recently? And how does this impact the overall consumer behaviors? What would be our key strategies to further drive our own delivery channels regarding this part?

Thank you, Lisa, for the question. I'll take this one. So last year, the aggregate all actually started in May, right? So May and June, we already had this aggregator sort of subsidy impact. And then at the same time, we have the new market normalization impact. So with that, we can still manage to actually keep SST positive for May and June, actually shows the strength of our strategy and also our sales initiatives. As I said, going forward in H2, I think last year in H2, sort of -- we have several things happening. One thing is that the aggregator actually went to the peak, right? So in the summer time and also in sort of part of the quarter 3. So then we are counting against a very strong base of last year. And then at the same time, we have very strong sort of new markets, the record retention on that kind of new market entering the same-store life cycle. So these actually will make ST sort of got some difficulty in H2.

But then at the same time, we continue to see the ticket starting to stabilize and also improving. So then with these two together, we will still see SSG negative in the second half of the year of 2026. Now but we forecast to see in 2027, we'll start to have positive same-store sales. So that's to sort of answer sort of high level the first question.

And then in terms of the initiatives, right? So like we mentioned, so for the initial market, the key issue is actually the ever sticking because the TC is still sort of healthy. And then we also need to find a way to support H2 when the subsidy level goes down. And then for the new markets, we did have comping against the higher opening base in the has and plus the same issue on So then the initiatives actually have two aspects.

The first one is actually on the average ticket. We already see it starting to stabilize. And then we actually started to see that in the past 2 months, they actually got improving, right? So I think the key is actually sort of one the CPP with the subsidy level going down, the average ticket on CPP will actually come back naturally.

And then two, as Helen mentioned, on our own online channel for delivery, our average ticket is actually as high as 94. So then we do have people who are very loyal to us and then pay higher average ticket on one channel. So then the key is how to convert aggregated customers to our own channel and then optimize the channel mix.

And then on the TC side, we believe that in the initial markets, we will continue to launch innovative new products like we did for the ticket, for example. So during it's actually very popular in the pizza market, but we're the first brand to actually pull protein together with Studio, which is the grain innovation, and our customers like it. And also across the leadership, we actually launched the Carsales, right? It's another innovation to combine key fan bakery.

So that proves that we will continue to lead on product innovation. And then also, we launched this new combo, right? 79 with 2 pizzas, 2 sites and two drinks, right? With this, we do believe that it will help both on the average ticket side and also on the guest concept, right, because this is quite attractive value. And then also by offering the combo, we'll make it very easy for customers to make choice. And then also, we have other things like IT innovation and for the new markets, we will continue to offer the iconic value programs and also keep penetrating product delivery as we continue to build the delivery market share in these cities.

I stop here to -- for a second -- for this first question.

Now for the second question, with less aggregator subsidy this year, do we see sort of any influence on consumer behavior and also our own channel. So we did see that our own channel sales has been growing back. So we do believe that on the aggregate, there are two types of customers, either for the sort of the original oil customers, and then an aviator actually provides more subsidy, so then they spend less on hybrid better, so they move to aggregate for where we have new customers coming to agree for Domino's, right? So I think for either one, the original one is the subsidy actually goes down, they will naturally come back to oil.

And then for the second book, the new customers, we will just let them know that how our own channel actually provides a very different sort of value proposition. And in that way, we will actually build more channel mix in terms of overall.

So I'll stop here. I'm sorry, I talked a lot this question. Just to give you a full picture on what we're doing -- versus TC and then initial markets versus new markets.

Our next question today comes from Lucy Yu of BofA Securities.

So two questions here. First of all, is the subsidy will come down in the second half of this year. So how should we think about ticket counts in the second half? And also the margin -- for the first half, we saw margin had some contraction possibly because of the negative same-store sales. How should we think about the margin for the second half especially on a year-over-year basis, is going -- is it the contraction going to be wider or narrower than the first half?

Got it. Thank you for the question, Lucy. So for the first question, it will be quite similar to my answer to the first question, but then I'll reiterate that. We do think that our sort of TC momentum is healthy, right? But just copy against large year's highlights. We do believe that we actually offer and the innovative products. We do offer a new value after 10 years of having the credits on Wednesday, 30% of across Tuesday and Wednesday, we actually offer this new sort of different value in terms of the combo and the customers like it. And then at the same time, we also start to offer a single offers, right? Because we realize there is a new occasion for this new demand, right? And then at the same time, for the new markets, we'll emphasize to the delivery and also value and all the levers we mentioned for the initial market.

One thing I can mention, more is actually a media optimization. We have our new CMO joining, Harrigan is Coppola MacDon, Chief brought in a lot of new thoughts and she will help us to optimize the media and send that to create more so sales and also higher with higher -- and I'll stop here for the first question.

And the second question is on margin. I hand over to Helen.

Yes. Lucy, thank you for the questions. For the first half, our store operating profit margin is at 12.5%. That's for the whole group, right? And also, I think the initial city, the OP margin is slightly below that. But the new market is higher than that. The reason being, even though people or you have seen that the SST for the new market for the initial new market -- sorry, for the new markets, is actually negative, but we have said that because they started from a very high base in terms of dollar sales, right? So even if you -- they have a negative SSG when they enter this into the SSG cycle, but in terms of dollar value wise in terms of sales, they're still very -- pretty high and very healthy. So their OP margin for the new city are actually higher than [ 12.5% ].

Now this trend is probably going to be the same for second half. And also, I think we also actually started from -- over the first half of this year, we also are gradually rolling out a lot of our cost-saving initiative or cost control initiative at the store level. Now some of that actually started from mid of first half. So we would expect a more kind of effect or impact on the cost savings will be kicking in during the second half. So for instance, we are actually trying our best to recover in the ATB, right? And also at the same time, we have a lot of initiatives to actually maintain or to keep the pipe transaction volume.

So having improving ATP at the same time, sort of more impact on the cost saving initiative in the second half overall, we were expecting that actually the margin -- the store OP margin will be actually better than the first half. And on this basis, the performance between the initial city markets versus the new city market will be similar in pattern for the first half.

Our next question today comes from Linda Huang with Macquarie.

[Technical Difficulty]

Pardon me, Linda. This is the operator. I'm not sure if we were able to understand your question there, your line was breaking up pretty badly.

We cannot hear you, ma'am. So I'm going to move on to our next question. I apologize. And our next question today comes from Miao Zhang with CMBI.

I'm Miao Zhang from CMBI. I have just two small questions on 3PP users, not so sure as already could make me share some color on what measures are currently being implemented or what auto convert rate users into our own platform and to repurchase frequency or lift average transaction price? And also, I'm wondering is there any available statistics rate or retention rate of such measures?

Okay. I'll take this question. So the question is what measures have been taken to convert platform users to own online users, right? Okay. So like I mentioned before, right, I think for the aggregators for the Domino's users, either they're actually converted from the OLO of Domino's, or are they actually sort of new customers choosing dominion hybrid game, right? So for the first few people, we actually think that with the subsidy cutting down, they will actually naturally come back. Now that said, we're also taking attractive approach to actually attract people back to OOO. And then for the new customers, we also want to highlight our own online channel offering different things.

So first, the value we're offering on two channels are different, right? So our aggregators are more like RehabCare or if you reach this level, you deduct this level. But in our own channel, we have this combo -- credit them with me, which are very different for different needs.

And then also, we have the loyalty program. And by the way, our loyalty program actually had 42 million members already, right? So these people who are very loyal to us and they stay with us on our home channel. So we attract people to get on our own channel, and they can only actually get points through our own channels orders.

And then at the same time, once people are on our own channel, we're upgrading our oil experience, right, to make that smoother and also to help us to sort of improve the average ticket. And then also, we have different engagements, digital games, coupons and then our proprietary insect properties, these are the things we open...

[Technical Difficulty]

Pardon me, this is the operator. It looks like we may have lost audio from our main speaking line here. If you can please stand by. music on the call and we'll be right back with you.

Hello, everyone. Looks like -- apologies. It looks like the line is back. You can please proceed with your answer.

Got it. Okay. I don't know where you lost me -- so we're talking about how to convert the aggregator platform users to our own online channel. We do think that our online channel actually provides different differentiation, right, -- The first thing is the value. For example, the aggregated channel actually has the rep pocket or if you reach some fresh mood and get deduction. But then on our own channel, you have the combo, you have the is on Wednesday, I think these are very different et

for the loyalty program, you actually get rewarded for the they only do our online channel. Updating

[Technical Difficulty]

that people get smoother experience. And then also, they get this opportunity to upsell crossed which will help

[Technical Difficulty]

own channel -- investments, right, digital engagement with games and bonds by coupons and then you also have proprietary IP product. And then to get people back, we have different targeted and then customized offers through CDP. So that's why we do think that oil is actually a different offer, and then will attract people back. And then we've been continuing to monitor the conversion and retention rate.

So in the past, when the aggregator actually has higher subsidy, I think you -- naturally, these two channels, people actually coming back and forth. Then when the aggregator subsidy is higher, naturally, people will go more towards everywhere. But as the subsidy level goes down, we do see OLO channel is actually showing more growth, as I mentioned before.

Our next question today comes from Sijie Lin with CICC.

So I have one question regarding good store opening plans. So you have maintained a fast pace of store expansion year-to-date. How should we think about store opening plan for 2026 and 2027? And how do you balance entering new cities versus opening stores in existing ones?

Okay. I'll take this question. So as we mentioned in the earnings call, my part, we used this ratio of pizza stone mailing population. And if you look at the Domino's Pizza -- population, our is very low. It's only 1.1%. We do think there's a very long in China for the pizza store opening. And then we iterate that in the medium term, the 3,000 target is unchanged. That shows we have high confidence in the Chinese pizza market and also our penetration.

Now as I mentioned before, for 2026, we're very much on track to achieve the target of 350. And in 2027, we're still in the sort of the planning place. And then I think high level, we are very much on track, but then we will decide a detailed opening number based on several things, the customer dynamics and also the opening performance.

And our next question today comes from Kang with CITIC Securities Company.

I have only one question about average transaction value. And could you break down the reasons for the changes in the average transaction value first? And how do we expire the average transaction value trend going forward? That's my question.

Thank you for your question. So for the average ticket value, so we do believe that the average ticket change was primarily attributable to the channel shift. So as we mentioned, for the aggregators, the average ticket is actually lower because of the subsidy. And then for our own channel, it's actually -- stays actually quite healthy, right? So we already see that naturally the -- with the subsidy level going down, the pricing has been stabilized. And then we've been taking a lot of actions to proactively improve the average ticket. So we want to reiterate that the average ticket sort of improvement does not depend on aggregate subsidy going down on that.

Actually, our aggregators, we have offers and then we're continuing to optimize these offers so that will help to. And then on our own channel, as I mentioned, so our average ticket is originally quite high. And then the question is how to actually sort of convert people when -- from the aggregator channels to our own channels. So as I mentioned, combo is actually a very good choice, right? So it has multiple items that will naturally actually increase the average ticket. And then also, we are uplifting sites and drinks, so that people can actually cross-sell and upsell more. And then at the same time, we were launching new products, we also have average ticket in our mind. So for example, during ticket, it's actually a premium product. But as online, it's actually very good sort of taste and innovation. People are willing to pay for the hard ticket. So that's how we consider sort of on the average ticket.

That does conclude our question-and-answer session. I would like to turn the conference back over to the company for any final remarks.

Helen, do you want to comment more?

Well, first of all, for 2027, one thing that we are seeing is that -- so over the past few years, we've been going through the normalization and also the 3PP heavy subsidies, et cetera. And then -- and that's why our SSG sort of experienced something that actually normally a brand probably wouldn't see from high bays and normalized and also in the overall market.

Now I think for '27, what we've been seeing or what we are looking at is our SSG will term positive. That's number one. And second is, we would expect that ATP will gradually coming back. Now this is something that we have seen over the past few months that actually APP is coming back. It is on the back of a lot of the initiatives that we already taken for instance to lunch, for instance, the differentiated services between the 3PP and also on our online platform. So we will continue to work on that. Third-parties the margin.

Second half, as I have just said, actually, we would expect some improvement second half versus the first half. Now this trend will continue in '27 because a lot of the cost initiative savings we didn't have to put into place and stick to it. And so this -- these are the things that we will actually carry on to '27 on top of that because we are scaling up gradually. So as we build up a larger scale, a lot of other benefits in the scale will continue to unfold. So on top of that, to '27, we're also looking at margin improvement versus '26. Yes. So this is something that I will conclude for '27.

And also in terms of store counts, first of all, '27 -- '26, 96% of the total net open in the 350 has been locked in. So we are pretty much confident that we will deliver that for the net opening 350. Now for '27 and beyond, we have a medium-term target of growing to 3,000 store counts by the end of 2030. So the store planning or the expansion of planning for the next few years, we will actually work along that medium-term target to actually plan for each year. And then also depending on the factors actually in just mentioned the store performance in the sector, we will actually -- every year, we will roll out the appropriate store counts that fit our stage, fit our capacity and fit the medium-term target.

Okay. Thank you, Helen dHarlan. Well, thank you for joining today's call and for your continued support. We look forward to keeping you updated on our progress going forward. Thank you.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Ladies and gentlemen, welcome to DPC Dash Limited Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference call will be recorded. At this time, I would like to turn the call over to [ Cathy Zhang ], IR Director of DPC Dash, who will share the process for today's call and provide some important disclosures. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and thank you for joining us on today's call. [Operator Instructions] Today, you will hear from Aileen Wang, Executive Director and CEO of DPC Dash; Helen Wu, CFO of DPC Dash; and Michael Xu, CPO of DPC Dash. Aileen will provide insights into company's overall performance and share recent developments, and Helen will go a bit deeper into the financial results. The management team will address your questions after their remarks.

Before we continue, I'd like to remind you that our earnings call and investor materials contain forward-looking statements about our business that may be considered as forward-looking statements under applicable security laws, which are based on various assumptions and other factors that are beyond the company's control and are subject to risks, future events and uncertainties. Accordingly, actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements.

You can identify these forward-looking statements because they include terminologies such as may, will, expect, estimate, believe, going forward, plan, projection, aim or other similar expressions. Statements that are not historical facts, including, but not limited to, statements about the company's beliefs, plans and expectations are forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the Hong Kong Stock Exchange.

Also, this call includes discussions of financial information and certain non-IFRS financial measures. Please refer to our results announcement and annual report to be published in accordance with the rules governing the listing of securities on the Stock Exchange of Hong Kong Limited, which contain a reconciliation of the non-IFRS measures to IFRS measures. All information provided in this earnings call is as of the date of this call. The company, our affiliates, advisers and representatives undertake no obligation to update any forward-looking statements, except as required by law.

With that, I will turn the call over to Ms. Aileen Wang, Executive Director and CEO of DPC Dash. Aileen, please go ahead.

Hello, everyone. Thank you for joining us today as we review DPC Dash Limited's results for the full year of 2025. Domino's Pizza, Inc. stands as one of the world's largest pizza companies, operating more than 22,100 stores in over 90 markets as of December 31, 2025. As the exclusive master franchisee in Mainland China, Hong Kong SAR and Macau SAR, we continue to capitalize on China's underpenetrated pizza market through our proven 4D strategy, development, delicious pizza value, delivery and digital. In 2025, we continue our strong growth trajectory, generating total revenue of RMB 5.38 billion, a 24.8% increase compared with 2024, fueled by 307 net new store openings and expanding our store base to 1,315 across 60 cities.

We have consistently delivered revenue growth above 20% since 2020, reflecting both the effective execution of our growth strategy and the compelling potential of Chinese QSR market. As of December 31, 2025, we stood as the third largest international market in Domino's global system by number of stores.

Our profitability remained strong at both the group and store levels. Store level EBITDA increased to 20.4% year-on-year to RMB 1 billion with a margin of 18.6% compared to 19.3% in 2024. Store-level operating group profit grew 18.5% to RMB 739.7 million with a margin of 13.7% compared with 14.5% a year earlier. The modest margin compression at the store level was largely driven by incremental investments to support our ongoing network and market share expansion and temporary increased delivery-related costs due to aggregator platform dynamics. These incremental store level investments were more than offset by sustained corporate efficiency gains.

At the group level, adjusted EBITDA rose 28.2% to RMB 634.6 million, with margin expanding to 11.8% from 11.5%. Adjusted net profit grew 43.3% to RMB 187.9 million, with margin improving to 3.5% from 3.0% in 2024, and the reported profit attributable to owners of the company more than doubled to RMB 141.9 million. Together, these results underscore the operating leverage in our model and our ability to enhance profitability while scaling rapidly across Mainland China.

Let me now walk through the key drivers of the performance along our 4D pillars. On development, we continue to follow a disciplined expansion strategy, strategically deepening our penetration in existing cities and broadening our reach into new markets. During 2025, we added a net 307 stores and entered 21 new cities, bringing our total city coverage to 60, further extending our presence into high potential regions across China.

As of year-end of 2025, we operated 517 stores in Tier 1 cities and 798 stores in non-Tier 1 cities compared with 509 and 499, respectively, at the end of 2024. Our evolving revenue mix reflects this disciplined execution of the strategy. In our Tier 1 city markets, including Beijing, Shanghai, Shenzhen and Guangzhou, revenue grew 5.2% year-over-year from RMB 2.11 billion in 2024 to RMB 2.22 billion in 2025, driven primarily by positive same-store sales growth and slightly helped by incremental store openings in 2025. This performance reflects strong customer loyalty and the sustained strength of the brand. Tier 1 cities contributed 41.2% of total revenue in 2025 compared with 48.8% in 2024.

In non-Tier city markets, revenue grew 43.4% year-over-year from RMB 2.21 billion to RMB 3.17 billion, mainly due to 299 net new stores and strong performance in newly entered markets. As a result, non-Tier 1 markets contributed 58.8% of total revenue, up from 51.2% in 2024. This mix shift underlines how non-Tier 1 cities have become our main growth engine, while Tier 1 cities provide a resilient, high-quality base with proven unit economics.

We also continue to observe strong performance in our new stores in new growth markets, particularly those entered since the 2024 December holiday season. In December 2024, we opened 6 new cities. During 2025, we entered another 21 new cities and in total, opened 111 stores across these 27 markets during the year. These 111 stores delivered average daily sales of RMB 26,849 during the period with an actual or expected average cash payback period of about 12 months. This is ahead of our historical averages and clearly demonstrates the attractive unit economics and capital efficiency of our development model.

Our momentum also further accelerated in Domino's global sales rankings. As of January 31, 2026, our company held all of the top 50 positions for the first 30-day sales across Domino's global network. In addition to the global record set by our first store in Shenyang in the first half of 2025, several new stores opened in the second half, including our first stores in Suzhou, Handan and [indiscernible] also entered the global top 50 for the first 30-day sales, demonstrating strong brand momentum and demand in newly entered markets. Both group same-store sales growth or SSG, and average daily sales per store moved in the same direction in 2025, reflecting the same underlying evolution in our post-December 2022 markets.

Group SSG was negative 1.5% for the year, in line with the modest 5.3% year-over-year decrease in average daily sales per store to RMB 12,428 in 2025. Such evolution in the post-December 2022 markets was a result of our sales record setting stores gradually spreading sales to other stores and the increasing store counts in these cities as we look to capture more market share. This has significantly raised the prior year comparison base and created near-term pressure on both same-store sales and average daily sales per store.

Importantly, our fundamentals behind these metrics remain strong. Average daily sales in the post-December 2022 markets continue to be at a solid level and above our overall average, contributing positively to profitability and reinforcing the scalability of our model. If we exclude the stores opened in these post-December 2022 markets, group same-store sales remained positive for the full year.

Our Tier 1 markets delivered positive same-store sales for the year and also for the first half and the second half of 2025. And our pre-December 2022 markets taken together also delivered positive same-store sales in 2025 and in each half year period despite the elevated sales base built over the past few years. This resilience underscores the strength of our core business and reinforces our confidence in our long-term growth trajectory.

Turning to delicious pizza at value. We further enhanced our menu and value propositions through new product launches and upgrades, which supported healthy traffic in both Tier 1 and non-Tier 1 markets. In 2025, we launched many popular new products such as Sicilian-inspired beef and bamboo shoot pizza, the Tuscany-inspired cheese salmon pizza, the Madrid inspired beef and shrimp pizza and the Cocoa Volcano crust.

These localized and globally inspired offerings resonated strongly with consumers across regions and supported positive same-store sales in our Tier 1 markets and pre-December 2022 markets, even within a softer consumption environment and highly competitive landscape. We also continue to pair product innovation with compelling value for money campaigns and smart promotions tailored to local preferences and occasions. This combination of innovation and value helped us attract 15.4 million new customers over the past 12 months and deepen relationships with existing consumers, underpinning both our revenue growth and the resilience of our same-store sales performance in all the markets.

On delivery, we maintain our high service standards and continue to uphold our well-known 30-minute delivery promise. For the full year, our overall delivery on-time rate remained above 93% of all delivery orders. In Tier 1 cities, delivery penetration increased meaningfully from 70.7% of sales in 2024 to 76.2% in 2025. This meaningful increase was supported by the ongoing consumer adoption of food delivery, amplified by the near-term competitive dynamics among aggregator platforms, while our reliable 30-minute service further strengthened consumer preference for our efficient delivery proposition.

We believe the aggregator platform activities bringing high volume of new customers and we, as a delivery expert will benefit from the increased delivery penetration in the longer term. We're still in the early stage of realizing our food delivery potential in the Tier 1 markets. As our footprint increases in these cities, we are rolling out delivery services in a targeted systematic way, balancing service quality with capacity and cost efficiency. As of December 2025, delivery services are available across nearly 76% of our existing city footprint, and we're excited to provide our delivery expert service to the customers in more markets as we expand the market share.

Digital remains a key competitive advantage for us. Our loyalty program reached 35.6 million members as of December 31, 2025, up from 24.5 million a year earlier. Rapid store network expansion, coupled with strong digital adoption has enabled us to broaden our consumer base significantly while deepening our understanding of consumer preferences. During the year, we demonstrated resilient profitability at the store level. Store level EBITDA increased by 20.4% year-over-year with the store level EBITDA margin moderating slightly from 19.3% to 18.6%.

Store level operating profit increased by 18.5% year-over-year with the corresponding margin at 13.7% compared with 14.5% in 2024. These movements reflect our strategic decision to invest in network and market share expansion and temporary delivery-related cost increase amid the aggregator platform dynamics. At the same time, we continue to drive efficiencies. Take one example, cash-based compensation for the corporate level staff decreased from 5.7% to 5.1% of revenue as we improved operating efficiency and benefited from scale at headquarters. while share-based compensation expenses declined from RMB 76 million to RMB 46 million and from 1.8% to 0.9% of revenue.

We received quite some awards within the Domino's global system and externally in 2025. Among them, on December 19, 2025, we were named a 2025 Best Employer by Mercer for the fourth consecutive year and received the Star Employer Award for the first time. This recognition reflects our focus on the people culture.

Looking ahead, we will continue to expand with discipline and confidence. In 2026, we plan to open 350 stores. On January 1, 2026, we opened 62 stores in 46 cities on a single day, the highest daily opening record in our history. As of March 20, 2026, we have opened 140 net new stores with 14 stores under construction and 65 sites signed, putting us well on track to deliver our full year target.

With further strengthened brand equity and rising brand momentum, we will continue to execute our go deeper and go broader network expansion strategy, entering more new cities while further penetrating existing markets. At the same time, we look to further improve cost efficiency as we continue to scale. Our strong execution track record, attractive store economics and operational efficiency enable us to deliver robust performances in a dynamic and competitive environment. We're confident in our ability to further enhance our market leadership and drive sustainable long-term value creation for our shareholders.

With that, I'll hand the call over to Helen, our CFO, to discuss the financial details.

Thank you, Aileen. Hello, everyone. Thank you again for attending the earnings call tonight. To start, I will walk you through our financial highlights for the full year of 2025. Please note that all the numbers that we are presenting today are in RMB terms, and all presentations are on a year-over-year basis, unless otherwise stated. 2025 was a year defined by disciplined execution and purposeful growth in a dynamic market environment. We refined our operations and scaled efficiency while making strategic investment in markets and capabilities that will drive our next phase of expansion.

By capturing meaningful efficiency gains and leveraging the advantage of scale, we strengthened profitability and built a solid foundation for long-term sustainable success. In 2025, our revenue increased by 24.8% to RMB 5.38 billion from RMB 4.31 billion in 2024. Breaking down our revenue performance by market segment. Our Tier 1 city markets generated RMB 2.22 billion in revenue, representing 41.2% of total revenue and a 5.2% year-over-year growth. This was driven by positive same-store sales growth in these highly competitive markets, which we believe is a true reflection of our resilient performance and brand recognition.

Our non-Tier 1 city markets delivered exceptional growth of 43.4% year-over-year, reaching RMB 3.17 billion and representing 58.8% of total revenue, up from 51.2% in 2024. This growth was fueled by the addition of 299 net new stores in these markets, and bolstered by the healthy sales generated in stores opened in newly entered markets. Our average daily sales per store declined by 5.3% year-over-year to RMB 12,428 in 2025 from RMB 13,126 in 2024. This decrease was mainly attributable to the decrease in the average daily sales in those post-December 2022 high-performing stores as they gradually normalize sales over time.

This normalizing trend is a natural part of our unique business evolution for the new markets we are entering, and we remain focused on optimizing our store portfolio and maximize long-term sustainable growth and profitability. The overall average daily sales per store in these post-December 2022 stores were still maintained at a solid level and higher than the group's overall average, and they continue to contribute positively to the group's profitability.

A few notes before we get into the specifics of our costs. First, our raw materials and consumables costs include COGS related to both our stores and the central kitchen. Staff compensation expenses encompasses store level cash-based salaries, which includes labor costs at our central kitchen, corporate level cash-based salaries and share-based compensation. The vast majority of rental costs are incurred at the store level as are the majority of plant and equipment depreciation, utility expenses and advertising and promotion expenses.

Meanwhile, the majority of the amortization of intangible assets is incurred at the corporate level as is the majority of our other expenses. Please refer to our income statement and the financial statement footnote for more context on both store and corporate level cost components.

With that, let's look at costs and margins at both the store and corporate level. Our raw materials and consumables costs in 2025 amounted to RMB 1.47 billion, representing an increase of 25.6%. In line with our revenue growth, as a percentage of revenue, our raw materials and consumable costs remained relatively stable for the 2024 and 2025 financial years, respectively.

Advertising and promotion expenses as a percentage of revenue remained at 5% for both '24 and '25 financial years. This was mainly because our brand marketing activities became more targeted and cost effective as we strengthen our brands through store network growth and remarkable performance in newly entered markets. The total staff compensation expenses as a percentage of revenue decreased to 34% in 2025 from 35% in 2024 as we continue to optimize the cost base at our group corporate level with the benefit slightly offset by the increase at the store level.

The store level cash-based staff compensation expenses as a percentage of revenue increased to 28% in 2025 from 27.5% a year ago. The increase was primarily attributable to relatively higher staffing for new market expansion and accelerated delivery sales from third-party aggregator platforms, ensuring high service standard, which capturing the delivery growth opportunities as the competition intensified during the second half of '25.

Cash-based compensation expenses for corporate level staff as a percentage of revenue decreased 1 -- to 5.1% in 2025 from 5.7% in '24. This was primarily due to our ongoing efforts to improve the efficiency of our operation at the corporate level as the benefit of our scale -- economy of scale continue to unfold at the group level.

Our rental or lease-related expenses are reflected in 3 lines on our income statement under the IFRS 16 accounting rule. First is depreciation of right-of-use assets. Second is variable lease rental payments, short-term rental and other related expenses. The aggregate amount of these 2 lines were RMB 539.9 million in 2025 compared to RMB 428.2 million in the prior year, representing a 26.1% increase year-over-year. As a percentage of revenue, the charge rate was 10%.

The third line is lease liability in the finance cost category recorded under the IFRS 16 accounting rule. The aggregate amount of the 3 lines as a percentage of revenue was 11.4% in 2025 compared with 11.5% in 2024. The charge rate for amortization of intangible utility expenses, store operation and maintenance expenses and other expenses experienced a slightly decrease, respectively, with an aggregate decrease of 0.6% relative to our growing revenue. The charge rate for depreciation of plant and equipment remained relatively stable during the same period.

By splitting the cost between store activities and the corporate activities, let's look at the profitability performance at both the store level and the group level. In 2025, our store level operating profit reached RMB 739.7 million, representing an 18.5% year-over-year increase from RMB 624 million in 2024. Our store level operating profit margin was 13.7% compared to 14.5% in 2024. Despite the store level operating profit margin decrease, overall profitability improved steadily at the group level, which reflects our continued focus on operational efficiency and disciplined cost management.

Building on our robust revenue growth, consistent cost controls at the store level and the increasing benefit of scale and efficiency at the corporate level, our group adjusted EBITDA grew to RMB 634.6 million. EBITDA growth outpaced our revenue growth by a notable margin, rising 28.2% year-over-year from RMB 495.2 million in 2024, a sign of our strong operating leverage. Our group adjusted EBITDA margin also saw positive growth, rising to 11.8% this year from 11.5% in 2024.

As a result, our adjusted net profit, which reflects our core recurring business reached RMB 187.9 million compared to an adjusted net profit of RMB 131.2 million in 2024. Our reported net profit after tax reached RMB 141.9 million in 2025 compared to RMB 55.2 million in 2024. You can find out more details on cost items at both store and the corporate level in our result presentation, which is posted on our IR website.

Finally, some updates on liquidity. Our cash position remained strong throughout the whole year. As of December 31, 2025, we held RMB 1 billion in cash and cash equivalents, which includes restricted cash. Additionally, we have an interest-bearing bank loan of RMB 199.8 million, which the final maturity is set for 2028.

Looking forward, as our brand strengthens and the momentum grow, we will continue to execute our go deeper and go broader network expansion strategy, entering more new cities while we further penetrate our existing markets. We will also look to further improve operational efficiency as we continue to scale our presence and ramp up our stores.

This concludes my prepared remarks for today's call. Operator, we are now ready to take some questions.

Today's first question comes from Sharon at Macquarie.

Congratulations for the store results. This is Sharon from Macquarie. So my question is, could you please roughly break down the same-store sales growth of the mature stores in first-tier cities and newly entered cities based on traffic and ASP?

Thank you for your question. I'll take this question. So first, our Tier 1 cities, they actually achieved positive same-store sales in 2025. And then within the PC versus the -- within the traffic versus the ASP, so we actually saw a strong momentum in -- on the PC side, but then the ASP actually went down because -- mainly because of the aggregator price war. And then for the newly entered markets, the new markets, so we actually saw sort of the decline in the traffic side. It's mainly because we're continuing to open new stores in the same -- open a new market. And then that actually dilutes sort of the average guest count per store.

And then at the same time, the ASP went down slightly. it's driven by 2 things. One thing is that we gradually opened the value program, the Crazy Tuesday and Wednesday for those new markets. And then also at the same time, we gradually opened the delivery. And then some of them actually went on aggregators and then also face the same aggregator price war.

And add to that because of the traffic count, the transaction count is actually coming from a very high level because for a lot of the stores that we open in the market, so they start very high and they're still solid. But then it is a very common normal process for all these stores, the TCs of the traffic to get normalized over the period.

And our next question today comes from Viola Yang with UBS.

My question is also on the same-store sales. Could you like to share more on the latest trend? We heard from some companies talking about demand recovery, while others seeing pressure continues. So what's like your observation?

So for us, the same-store sales, the main factor is still the new market high base impact. Like Helen mentioned, when we opened, we broke all those global records and then creating very high sales. And then as we continue to open stores in the same new market, so this original set of the store sales gradually spread to the other stores. And when these stores enter the same-store sales cycle, they actually had this impact of comping against a very high base before. Now that said, we also saw when the aggregator cut on the subsidy, we also saw some impact. But during the CNY, we also had a very strong CNY. So I would say so far, the sales is meeting our expectations.

And our next question comes from Lisa Liao with Jefferies.

I have 2 questions from my side. So the first is about the aggregator subsidies. So since we are actually expecting aggregator subsidies may gradually mitigate this year, how do we see this influence for us? And basically, how do we evaluate our consumers' retention rate from these third-party aggregators to our own mini program?

And my second question is about the delivery mix. You have mentioned that we will roll out the delivery services to more new cities in the future. What is the current delivery mix for these non-Tier 1 cities? And what will be our future plans to roll out to more cities?

Okay. So the first question, so how do we see the influence of the aggregator subsidy going down? Last year, we actually benefited from sort of the aggregator dynamics, right? And this year, as they cut down the subsidy, we did see some impact. That said, we've been doing several things. The first thing is that we are consistently having sort of the mechanism to convert the traffic from aggregator platform to our own online channel. We've been consistently doing that. We have targeted program for that.

And then second is that overall, we still sort of launch innovative products, good taste of products. We always honor [ 30-minute ] promise. We have a very good value proposition. We have the brand campaign, et cetera, to continue to improve the repeat. Over the longer term, I do think that the aggregator has been attracting a lot of new customers who probably would not be on the delivery platform before. And then as the delivery expert, over the long term, we will definitely benefit from this.

Yes. So I just want to add a few more points here is because I think if you've been following us or a lot of the analysts or investors, we have always been very strong in delivery. And then still, we have always been acquiring new customers from either our own online platform, or our third-party aggregator, which is a much larger nationwide platform. So we have always been attracting the new customers and try to convert them onto our own platform.

Now last year, there is a third-party aggregate campaigns on that one. Of course, we have been seeing investors not investors, shareholders -- not shareholders or our customers coming either on our own platform or on the third-party aggregator. There will be some [ shift ] in and ship out. So this is quite natural when the pricing is very dynamic.

But we have always been using that as a platform to attract new customers. So we have all the program in. So we will just continue to enhance that to make it -- to make our own online platform differentiated from the services or product we're offering on the third-party aggregators and win them back when the time is right. And it may take some time because for our customers to shift from our online platform when they see more value on the third party, but they're still eating pizza and then they're coming over. But then for them to come back also take some time to have it evolved.

Yes. In terms of the second question, the current delivery mix of the non-Tier 1 cities. So we currently already expanded the delivery services to about 76% of our footprint. And then for the newer markets, the non-Tier 1 city, the delivery mix is about 30%. So at the beginning, when we actually had the -- opened the new markets, our business was -- our sales was very strong. So we didn't have capacity to open delivery. Over the time, whenever we see there's opportunity for us to expand the service to delivery, we will do that.

And then recently, because we saw the opportunity on the aggregator dynamics, we do think that this is a very good opportunity to leverage the traffic and the media sort of to open delivery in the new market, so we jump on the opportunity. And we did see that the percentage of delivery actually increased quite quickly in these markets higher than what we saw in the past when we continue to penetrate the open market.

Now in terms of our plan to open more cities in the future, this year, so far, we opened around 10 new cities. And then we probably plan to open another 15 new cities. And in terms of when to open delivery for the new cities, it will depend on several things. One is the capacity. We still want to roll out the service in a way that our customers will be satisfied with the service, and then we can continue to honor the 30-minute promise. And then the other thing we'll consider is sort of the -- do we actually have the efficiency? And also, do we actually need the brand momentum to continue, and that's the time we open the delivery for the new markets.

And our next question today comes from [indiscernible] with Citics.

[indiscernible] I have one question about costs. Against the backdrop of rising upstream raw material prices, what is our outlook for the gross profit margin this year?

I'll take this question. Thank you very much for this. I think if you look at our cost of goods sold as a percentage of revenue, we've been managing that pretty well over the past few years. And then I think this year, so far, we haven't seen a lot of pressure in terms of -- on the COGS on the back of the rising oil prices or energy prices that you observed in the market. And then I think in addition to that, we actually still have quite a few levers to continue to actively manage our cost of goods sold on the raw material side. For instance, as we are increasing our scale, more stores, more procurement, so the scale plays a role in terms of bargaining or negotiation with our suppliers. That's one thing.

Second is that we are trying more to actually procure from the origin of the suppliers rather than -- and removing to the extent possible, the middlemen in the chain, right, which will actually help us to save some of the cost.

And the second -- and then the other thing is that we're actually increasing more of the local procurement, which will also help us. And then -- and also, we are actually elevating our supplies to better manage on that. For instance, we were actually including more supplier bidding process in terms of the procurement or our purchasing. So all these things will play a role, continue to contribute to help us to manage the raw material and COGS as a percentage of revenue going forward.

And our next question today comes from [indiscernible] Liu with CICC.

I am [indiscernible] Li from CICC. First of all, congratulations on the company's performance. And I would like to ask one question regarding staff cost. We observed that the store level staff cost as a percentage of revenue increased in 2025. And I wonder how does management plan to optimize labor costs moving forward?

First of all, I think the 2 reasons actually caused this. One is, of course, you see that actually last year, especially, I mean, starting from maybe May or peaked in the second half is that there is a third-party aggregate war, and then we have more and more delivery orders and the rider cost will actually automatically go up. So that actually has one of the contributing reasons for our labor cost as a percent of revenue going up. The second is that because we're adding more new stores in the cities, and there will be having some dilution -- dilutive impact on the per store sales and especially for these new stores, which are in the normalization period. So this will also have some impact on that one.

But if you look at this one -- and also secondly, the other reason is that we are still in an expansion mode, and we are entering so many new more markets, right? And then we want to actually make sure that we think that the investment is needed on the labor side is that to ensure that the service quality will not be compromised for our customers.

So adding all these together, you will see that actually the labor cost as a percentage to the revenue increased slightly for 2025. And then -- but we do also think that actually there is still room for improvement. For instance, as we continue to scale up and also more orders, and we will get some efficiency on the delivery side. And also, we will have the technology improvement on our smart dispatch system, which has been trained and then optimized constantly. So I think all these factors will continue to help us to actually manage the labor cost at the store level while not compromising the service level that we're giving to our customers.

And our next question comes from Miao Zhang from CMBI.

And my question is about our new stores. I noted that we plan to open 350 new stores in 2026. And so could management break down the layout of this 350 new stores and including the split between the first tier and non-first tier cities? And also based on our go deeper and go broader strategy, what is the proportion in existing 60 cities? And what is the proportion in the new market?

Got it. So the store allocation, so we have this go deeper and go broader development strategy. So basically, we allocate about 25% of the 2026 opening target to the pre-2022 December markets probably 60% will be allocated to the sort of already opened new markets. And then the remaining 25% to 30% will be allocated to the new, new markets, meaning the markets -- the cities we just entered this year in 2026.

And that concludes our question-and-answer session. I'd like to turn the conference back over to the company for closing remarks.

Thank you for coming to our call. We look forward to continuing the conversation with you. Thank you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. If you have additional questions or do not get a chance to ask during the call, please feel free to reach out at [email protected] or visit the website at www.dpcdash.com. The team would like the chance to connect with you. You may now disconnect your lines.

Ladies and gentlemen, welcome to DPC Dash Limited Interim 2025 Earnings Conference Call. [Operator Instructions] Today's conference will be recorded. At this time, I would like to turn the conference over to Cathy Zhang, IR Director of DPC Dash, who will share the process for today's call and provide some important disclosures. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and thank you for joining us on today's call. [Operator Instructions].

Today, you will hear from Ms. Aileen Wang, Executive Director and CEO of DPC Dash; Ms. Helen Wu, CFO of DPC Dash; and Mr. Michael Xu, CPO of DPC Dash. Aileen will provide insights into the company's overall performance and share recent developments. Helen will go a bit deeper into the first half financial results. The management team will address your questions after their remarks.

Before we continue, I'd like to remind you that our earnings call and investor materials contain forward-looking statements about our business that may be considered as forward-looking statements under applicable securities laws, which are based on various assumptions and other factors that are beyond the company's control and are subject to risks, future events and uncertainties. Accordingly, actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements. You can identify these forward-looking statements because they include terminology such as may, will, expect, estimate, believe, going forward, plan, projection, aim or other similar expressions.

Statements that are not historical facts, including, but not limited to the statements about the company's beliefs, plans and expectations are forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the Hong Kong Stock Exchange.

Also, this call includes discussions of financial information and certain non-IFRS financial measures. Please refer to our results announcement and interim report to be published in accordance with the rules governing the listing of the securities on the Stock Exchange of Hong Kong Limited, which contain a reconciliation of the non-IFRS measures to IFRS measures.

All information provided in this earnings call is as of the date of this call. The company, our affiliates, advisers and representatives undertake no obligation to update any forward-looking statements, except as required by law.

With that, I will turn the call over to Ms. Aileen Wang, Executive Director and CEO of DPC Dash. Aileen, please go ahead.

Hello, everyone, and thank you for joining us today as we discuss DPC Dash Limited's results for the first half of the year of 2025. As the exclusive master franchisee for Domino's Pizza in Mainland China, Hong Kong SAR and Macau SAR, we continue to see significant growth opportunities in underserve China pizza market. Our global franchisor, Domino's Pizza Inc. is one of the largest pizza companies worldwide with more than 21,500 stores across over 90 markets as of June 30, 2025. This global presence gives us a strong foundation as we execute our 4D strategy; Development, Delicious pizza at value, Delivery and Digital.

We are pleased to share our robust financial results for the first half of the year of 2025. Our total revenue reached RMB 2.59 billion, marking a solid 27% increase compared to the same period of last year with 190 net new stores added during the period, bringing our total store count to 1,198 across 48 cities. Once again, we have delivered strong results, achieving close to 30% revenue growth. This consistent performance underscores the effective execution of our growth strategy and highlights the vast potential of China's QSR market. As of June 30, 2025, our market ranked as the third largest international market in Domino's Pizza's global network in terms of store count.

Our profitability has shown strong improvement across all levels. Store level EBITDA reached RMB 502.8 million, up 27.7% year-over-year with the margin at 19.4% compared to 19.3% last year. Store level operating profit grew by 28% year-over-year to RMB 379.2 million, with the margin at 14.6% compared to 14.5% a year ago. At the group level, adjusted EBITDA increased to 38.3% year-over-year to RMB 322.9 million, with the margin expanding to 12.4% from 11.4% in the prior year. Adjusted net profit rose by 79.6% to RMB 91.4 million, with the margin improving to 3.5% from 2.5% in the same period of 2024. These improvements demonstrate our ability to drive profitability.

Let me share more details on the key drivers behind our performance. On development, we maintain our disciplined expansion approach, strategically deepening our presence in existing cities by adding new stores while broadening our reach into new markets. By entering 9 new cities in H1 2025, we now operate across 48 cities, expanding our footprint into more markets in China. As of June 30, 2025, while maintaining a solid 7.2% growth in Tier 1 cities, reaching RMB 1.08 billion revenue, our non-tier 1 market delivered remarkable 46.6% revenue growth, reaching RMB 1.51 billion revenue. Non-Tier 1 cities contributed 58.2% of the total revenue, up from 50.4% just a year ago.

Our youngest region, the Central and Western China region, reached 100 stores in just 2.5 years since the entry in December 2022. This momentum clearly validates our strategic focus of expansion and the vast potential that will continue to offer growth opportunities going forward. After setting so many global sales records over the past couple of years, our first store in Shenyang continues to legend. It not only set a new global record for the first 30-day sales, they also surpassed the previous global annual sales record of RMB 31 million held by Xiamen SM Phase III store in just 198 days of operation. Similarly, our first store in Handan, which opened on August 3, 2025, delivered a record-breaking first day sales exceeding RMB 540,000 with over 6,000 orders.

As of June 30, 2025, we hold 48 of the top 50 positions for the first 30-day sales among Domino's global network. During the first half of the year, the 64 stores we operated across 15 new markets opening in the end of 2024 and H1 2025 delivered impressive average daily sales of RMB 47,102. By August 15, 2025, 24 of these stores had already achieved a full cash payback with an average payback months of within 12 months. More broadly, the stores in the new markets we have opened since December 2022 have maintained strong average daily sales around RMB 17,438 even as we continue to add new stores in these markets. This performance highlights our strong brand recognition, the effectiveness of our site selection and operational excellence across the markets.

Let's switch gears to talk about same-store sales. The same-store sales landed at negative 1% for the first half of year of 2025. We have shared before that for the new markets we entered since December 2022, we have been opening new stores with very strong sales performance, which continuously set new global sales records within Domino's system. As more of these high sales record stores gradually enter the same-store sales cycle, they start to bring negative same-store sales impact to the group same-store sales initially.

Carving out the impact of the stores in these new markets, the group's SSG remained positive. In Tier 1 markets, SSG also remained positive despite a high sales base with the consecutive 31 quarters of positive same-store sales accumulated over the past 7 years, as we mentioned before. We also believe this showcased the resilience of our results in the context of a challenging environment. On the Delicious pizza at value front, we continue to focus on menu innovations with a range of successful new product launches. This includes our popular [indiscernible] series, featuring new Dubai Chocolate and lychee flavors, the beef Wellington-style pizza, the Tuscany-inspired salmon pizza and the coco crust and coco volcano pizza. Our approach to product development and localization continues to generate exciting products that resonate strongly with the Chinese customers across different markets.

Turning to delivery. We hold up to industry-leading service standards by faithfully executing our well-known 30-minute delivery promise. Our overall delivery on-time rate further improved to 94% of all the delivery orders. In Tier 1 cities, delivery sales as share of total sales increased from 70.4% to 73.7% during the first half of the year of 2025, reflecting growing consumer preference for our efficient delivery service. This is just the beginning of our delivery potential. As we deepen our presence across non-Tier 1 cities, we will systematically roll out delivery services in this market. This measured approach unlocks incremental growth opportunities, enabling us to extend proven Tier 1 service efficiencies to China's emerging markets when capacity allows it.

Our digital initiatives delivered outstanding results with loyalty membership growing 55% to 30.1 million members and member revenue contribution increased to 66% from 63.6% a year ago. We have attracted 13.2 million new customers placing the order over the past 12 months from all channels. These results demonstrate the effectiveness of our marketing campaigns and smart consumer engagement in driving growth. Looking ahead, we're continuing our expansion with confidence with healthy unit economics and strengthening brand equity.

From January to as of August 15, we have opened 233 stores, have 27 stores under construction and have signed 35 sites. This represents approximately 98% to our goal of opening 300 new stores by 2025. Our strong execution capabilities and operational efficiency enable us to consistently deliver strong results in a dynamic market environment. We're well positioned to further solidify our leadership and drive sustainable growth that creates long-term value for our shareholders.

With that, I will now hand the call over to Helen Wu, our CFO, to discuss the financial details.

Thank you, Aileen. Hello, everyone. Thank you again for attending the earnings call tonight. To start, I will walk you through our financial highlights for the first half of 2025. Please note that all the numbers that we're presenting today are in RMB terms and all presentations are on a year-over-year basis unless otherwise stated. We delivered a strong financial result during the first half of 2025, demonstrating our resilience and strategic execution in a dynamic market environment. Our robust revenue growth combined with our ongoing initiative to improve operational efficiency has yielded improved profitability at both the store and corporate levels.

For the first 6 months of this year, our revenue increased by 27% to RMB 2.59 billion from RMB 2.04 billion in the same period of 2024. Breaking down our revenue performance by market segments, our Tier 1 city markets, including Beijing, Shanghai, Shenzhen and Guangzhou generated RMB 1.08 billion in revenue, representing 41.8% of the total revenue and a 7.2% year-over-year growth. This was driven by positive same-store sales growth in these highly competitive markets, supported by 17 incremental stores in operation during the reporting period. Our non-Tier 1 city markets delivered exceptional growth of 46.6% year-over-year, reaching RMB 1.51 billion and representing 58.2% of the total revenue, up from 50.4% in prior year.

The growth was fueled by our store network expansion of 184 net new stores added in these markets, making more stores in operation during reporting period and also the strong performance in newly entered markets. Our average daily sales per store declined by 4.4% year-over-year to RMB 12,915 in the first half of 2025 from RMB 13,515 in the same period of 2024. This decrease was mainly attributable to the decrease in average daily sales in those post-December 2022 high-performing stores as they gradually stabilized sales over time. This stabilizing trend is a natural part of our unique business evolution for the new markets we are entering, and we remain focused on optimizing our store portfolio to maximize long-term sustainable growth of our business and also the profitability.

A few notes before we get into the specifics of our costs. First, our raw materials and consumables cost includes the COGS related to both our stores and the central kitchen. Staff compensation expenses encompasses store level cash-based salaries, which include labor costs at our central kitchen, corporate level cash-based salaries and share-based compensation. The vast majority of rental costs are incurred at our store level as are a majority of plant and equipment depreciation, utility expenses and advertising and promotion expenses.

Meanwhile, the majority of amortization of intangible assets is incurred at the corporate level as is the majority of our other expenses on the P&L. Please refer to our income statement and financial statement footnotes for more context on both store and corporate level cost components.

With that, let's look at the cost and margins at both the store and corporate levels. Our raw materials and consumables cost for the first 6 months of 2025 amounted to RMB 706.8 million, representing an increase of 26.7%, in line with our revenue growth. We have managed to keep the ratio of our raw materials and consumable costs to revenues stable at 27.3% in the first 6 months of 2024 and in the same period of 2025 as our proactive cost management initiatives continue to yield results. Advertising and promotion expenses as a percentage of revenue decreased to 5.3% in the first 6 months of this year from 5.4% a year ago. This was mainly because our brand marketing activities became more targeted and cost effective as we strengthen our brands through store network growth and remarkable performance in newly entered markets.

Store level cash-based staff compensation expenses as a percentage of revenue increased to 27.7% during the first half of the year from 27.4% a year ago. The increase was primarily attributable to the growth in the number of store level employees per store. As we accelerate our store openings in the first half of 2025, we recruited more store-level staff for training in advance in order to better serve our customers and become more familiar with markets. Cash-based compensation expenses for corporate level staff as a percentage of our revenue decreased to 5.1% in the first half of 2025 from 5.5% in the same period of last year. This was primarily due to our corporate level staff becoming more experienced and better equipped to support operations of an expanding network of stores and also reflects the continued benefits of economies of scale for cost efficiency at the corporate level.

Our rental or lease-related expenses are reflected in 3 lines on our income statement under the IFRS 16 accounting rule. The first is depreciation of right-of-use assets. Second is variable lease rental payments, short-term rental and other related expenses. These 2 lines aggregate amount was RMB 259.2 million during the first half of 2025 compared with RMB 201.7 million in the same period of last year, representing a 28.5% increase year-over-year. As a percentage of revenue, the charge rate was 9.99%. This third line is lease liability in the finance cost category recorded under IFRS 16 accounting rule. The aggregate 3 lines amount as a percentage of revenue was 11.48% as compared to 11.51% of the revenue in the same period of 2024.

The charge rates for depreciation of plant and equipment, amortization of intangibles, utility expenses, store operation and maintenance expenses and other expenses experienced a slight decrease, respectively, with an aggregate decrease of 1% relative to our growing revenue. By splitting the cost between store activities and corporate activities, we look at profitability performance at both the store level and group level. Building on our consistent effort to drive efficiency, our store level operating profit achieved robust growth. In the first half of 2025, our store level operating profit reached RMB 379.2 million, a 28% year-over-year increase. We are particularly pleased that our store level operating profit margin remained resilient at 14.6%, even as we invest in talent development and market expansion.

This positive trend also extends to the corporate level. Charge rates for both share-based -- cash-based compensation expenses for corporate level staff and depreciation and amortization costs decreased during the first half of 2025. This improvement aligns with our continued revenue growth and unfolding benefits of scale and efficiency. Building on our robust revenue growth, effective cost controls at the store level and the increasing benefits of scale and efficiency at the corporate level, our group adjusted EBITDA grew to RMB 322.9 million. EBITDA growth outpaced our revenue growth by a notable margin, rising 38.3% year-over-year from RMB 233.4 million in the first half of '24, a sign of our strong operating leverage. Our group adjusted EBITDA margin also saw positive growth rising to 12.4% in the first 6 months of this year from 11.4% in the same period of 2024.

As a result, our adjusted net profit, which reflects our core recurring business, reached RMB 91.4 million compared to an adjusted net profit of RMB 50.9 million in the first half of 2024. Our reported net profit after tax reached RMB 65.9 million in the first half of 2025 compared to RMB 10.9 million in the same period of 2024. You can find more details on the cost item at both store and corporate level in our results presentation, which is posted on our IR website.

Finally, some updates on the liquidity. Our cash position remained strong through the first half of the year. As of June 30, 2025, we held RMB 1.02 billion in cash and cash equivalents, which includes restricted cash. Additionally, we have an interest-bearing bank loan of RMB 200 million with the final maturity set for 2028. Looking ahead, we remain confident in our ability to navigate the evolving market landscape. Our strong fundamentals, continuous rising brand recognition by customers, proven execution capability and strategic market positioning provides a solid foundation for our continued expansion in this underpenetrated pizza market in China. We will continue to execute our 4D strategy with a primary focus on expanding our store network and gaining more market share, coupled with a balance of healthy and sustainable profitability level.

This concludes my prepared remarks for today's earnings call. Operator, we are now ready to take some questions.

[Operator Instructions] Our first question today will come from Lucy Yu of Bank of America.

So I have three questions here. First one is we have seen the same-store decline by 1%. Normally, negative same-store means that store level margin will contract given the operating deleverage. But surprisingly, we are glad to see that our store level operating margin was still up slightly year-over-year. Could you please elaborate what we have done here?

Second question is on store expansion. We already reached 43 cities so far, which are a lot. Can I ask that our future expansion will continue to expand to new cities or we will temporarily shift our focus on deepening penetration in existing cities?

Question number three is on the social security impact. There has been a lot of discussion on that. So if the social security got strictly implemented by the government, what kind of impact do we see on our company?

Lucy, thank you for the question. I'll take the first one about the SSC and its relationship to the operating profit margin. I think this is the real unique part of our business so far at our stage because as you said, typically, we will see a store when you open, you start from low and you gradually ramp up, and you will see that actually you have positive same-store sales and the margins are improving, right? But I think we actually mentioned a lot of times that because this is -- we have a very strong brand momentum. So whenever we enter new market, there's always record high sales, right? So for first half, I would highlight that actually, even though you see that actually our group level same-store sales is negative, it's actually anchored by the high global record-setting stores coming into the same-store sales cycle. But I have to say that actually, even though the sales level at these stores are still pretty solid, pretty high. So in terms of profit margin of these stores are still very strong. So that's one reason, right?

And the second is that we're now still entering new markets. So these markets -- these stores are not in the same-store sales cycle yet, but these are also high profit margin contributing stores. So that's why even if you see that actually, you see a slightly negative same-store sales, but our profit margin -- store-level profit margin is still actually pretty resilient, solid and also moved up a little bit. So that's the reason. Now you asked a good question. So I think at the same time, just leveraging this question, I also want to highlight that a company like us, which has a strong brand momentum when we have a solid base of the market that we've built up over the years, but also because we are entering the new markets and always hitting the global record high sales. So this kind of -- so SSC is probably not the only KPI or metric or the number that you should actually evaluate how good we are performing because we're a fast-growing company. We've been entering new markets with very, very high and strong sales. And then gradually, when we add more stores, when these stores itself, they are normalizing, even though you will see these stores record a initial negative same-store sales, which will have a negative impact on the same-store sales of the group. But in terms of profitability, it is still very solid.

So that's why for a company like us, you probably need to look collectively a few numbers. Are we growing the store count? Are we engaging the market share? Are we actually growing the top line? Overall, as we scale up, are we improving the margins at the store level? And at the same time, are we actually unfolding continuously the benefit of the scale of the economy at the corporate level. And this is how we believe -- our management believes that you should actually look at how we perform and how we can carry out the business.

And in terms of the second question, store opening.

I can answer the question. Okay. So when we allocate the new store openings this year, we will look at -- so how many cities we have already opened and then whether we should go to new cities. Typically, based on the store potential and also the return of last year, we allocate -- we will gradually sort of open in existing cities, the cities we opened. And also, we will check whether we should move to new cities based on several things. One is sort of the brand momentum and then the demand we see of consumers from those markets and also the readiness of the operation team, i.e., whether the cities they are actually close to the supply chain centers, they're actually close to the cluster centers, we can leverage the existing operational resources, et cetera.

So in terms of the allocation, I think for the stores we opened sort of before the end of 2022, probably we will still open 20% to 30% of the new stores there. And then for the cities we opened since the end of 2022 to this year, the end of this year, probably we'll open about 40% to 50% of the new stores. Then for the rest, we'll open sort of brand-new markets. It's a balanced approach to between sort of the deeper and then broader.

I think your last question is about the security. Let me put it this way. At the very beginning, and even in our prospectus, we say that actually in terms of store staffing, we actually have full time and also we have a part time. This is actually decided by our business model and also the flexibility of the staffing, right, so which actually works with us. So for our full time, we are fully compliant with the Chinese regulatory regulations. The part time, their social securities are covered by their full-time job, which actually will cover their social security. And we do have a part of the orders or deliveries actually outsourced to the delivery companies, which when we actually engage with these companies, we will request them to actually represent to us that they are in compliance with the relevant Chinese laws on the security matter.

Our next question today will come from Viola Yang of UBS.

This is Viola from UBS. So my question on the sales per store because you mentioned in the press release that the daily sales of new markets that you entered before -- sorry, entered since the December of 2022 was like over 30% higher than the average of your overall store portfolio. So can we like add more color of the performance by store age? I'm asking this question because I'm trying to understand how long it normally takes for a store to normalize to its normal sales level?

And the second question is that based on our expansion pace, how long do we expect the base pressure to continue? And the last one is, ultimately, how do we expect the daily sales of like Tier 2 and Tier 3 city stores comparing to the level we achieved in the Tier 1 cities?

Okay. I'll take this one. So thank you for your question. As you mentioned, right, when we enter these new markets, consumers love the brand. They're very excited. And then the sales is actually very high. They kept breaking the global record. As we continue to open more new stores in the cities, so we sort of -- before you can only go to this one store, now you probably have choices to go to 20 stores, 30 stores. So naturally, the average daily sales of these stores will actually go down.

Now that said, how much -- what level will this be normalized? And when will that be normalized? We actually don't know the answer yet because all these markets are very new, right? So none of them actually reached a sort of a steady state. I think it depends on several things. One thing is how big is the city in terms of store potential. And one thing is how many we choose to open. And then one thing is how quickly we will open and also the existing brand strength. And also, after sort of the first phase is gone, how do we decide to continue to build the brand, right? So all these factors will play some role in determining sort of the steady state. But so far, I can say that it's still sort of -- we're in the early phase, I couldn't tell. That's basically the three questions you're asking.

Our next question today will come from Lisa Liao of Jefferies.

This is Lisa Liao from Jefferies. Congratulations to our strong growth as always. So my question is mainly on the Tier 1 cities. So first of all, I wonder what measures did we do to achieve the positive same-store sales growth in the Tier 1 cities, especially Beijing and Shanghai, pretty outstanding results as is our mature markets with relatively high penetration and industry competition is fierce. And also for other Tier 1 cities like Guangzhou and Shenzhen, I did a very simple calculation. So it seems compared to Beijing and Shanghai, the average store sales is something like close to 80% of the store sales, but also delivered good same-store sales growth. But what do we think about the potential in Guangzhou and cities like Guangzhou and Shenzhen in the future, considering there is also a local competitor and also the people's preferences on pizza products in South China?

Thank you for the question. So I heard two questions. One is on Tier 1 city, what did we do to maintain the positive same-store sales. To start with, I think in today's environment, for us to get the positive same-store sales for the tier 1 cities is actually -- I think the team actually did a good job on that, right? Back to the basics, I think when consumers choose the brand to eat, they typically will think about several things. The first thing is actually the product. So you can see that we continue to sort of innovate on the products. So for example, this year, it's actually the Dubai Chocolate flavor is actually quite popular. So we start to introduce that to combine with our durian flavor, right, which is very interesting. And in the summertime, we find some of the consumers may find it's a little bit [indiscernible] to eat durian by itself. So then we added lychee to make the taste more balanced, right?

And then we are also quite innovative to introduce the beef Wellington-style pizza, et cetera. So you can see we continue to offer the exciting products to consumers. Like I mentioned before, I do think Tier 1 cities consumers want this kind of product innovations and they resonate with their taste buds. So that's one.

The second thing is that we continue to deliver this delivery 30-minute promise, right? Now you may say that a lot of times sort of channels make claim they can deliver 30 minutes, but we actually managed to maintain or even improve our delivery on-time rate. So I think that actually means a lot to help people in their busy lives to get this convenience on-time and then make their life easier and less stressful.

And then also, we provide consistent value, as we mentioned before. And also on the digital side, I think we not only sort of have existing channels, we open new channels and then we emphasize the conversion and then we emphasize on sort of interactions and customized offers to the members. And that's why you see the membership number also increased significantly, right?

So all of these things and also we continue to open stores, and that will help to continue to strengthen the brand positioning in tier 1 cities. So it's nothing magical, but doing the foundational things well and then consistently doing that. I think over the time, you will win people on their hearts, right? So that's one.

The second question is on South, so Guangzhou and Shenzhen. Now Guangzhou and Shenzhen, actually, when we opened Guangzhou and Shenzhen with a large opening number, it was actually before the COVID time, right? So right before the COVID time. And then since -- so then their sales was about to take off, but then they actually went into the COVID period, which sort of delayed the sales growth. Nowadays, I think we sort of revamped the people base there. And also we emphasize the best practices from the old market. And the same thing, right, the product, the service, the value, the digital, et cetera. We emphasize on those sort of foundational benefits to offer that to customers, and we start to win consumers. And then this is actually a market with sort of 2 years in a row, very strong same-store sales. But that said, Beijing and Shanghai same-store sales is quite strong, too. So I can see the same kind of growth pattern across the Tier 1 cities.

So in terms of potential, I do think that given the momentum in South, there's no reason that we cannot reach Shanghai, Beijing potential. But it probably will take a few years.

Our next question today will come from Linda Huang of Macquarie.

So my question is regarding for the delivery competition in the second quarter because we know that the delivery aggregators launched very strong subsidies and benefit quite a lot of the fresh made, the beverage [indiscernible]. So I just want to know that these delivery subsidies positive or negative to our business. Do you see that these subsidies was even stronger in July, August or the subsidies are fading out? I just want to know how this impacts to our business in 2025 and '26 and how to evaluate that?

Okay. I'll take this question. So for the first half of the year, so the impact of the recent sort of the aggregator dynamics didn't actually have a lot of impact to us, right? Now that said, recently, we did see there's more dynamics in this aspect. As a name brand, we actually sort of benefit more in the whole sort of situation, right, because of more traffic and also the support from the aggregator platforms, right?

So, so far, the benefit to us is actually positive. Now that said, whether this sort of situation will continue, I think the situation is quite dynamic. We'll continue to monitor that. But I do believe that as a delivery brand, right? So if the consumers -- if the price war of aggregators end and consumers, I do think they will have -- more of them will actually sort of form the habit to actually order delivery. And then as the delivery expert in this aspect, we will benefit just like we did in the COVID times, right? So that's my perspective.

I think the way we look at the third-party aggregator is always because it is a large platform -- and we can always -- and wider access to consumers. So we actually use them as more sort of a new customer acquisition channel, right? So given that these platforms, they are directing more traffic to these platforms like [indiscernible]. So we are actually getting more exposure, which is good. But we do our own delivery ourselves. So we will monitor the situation. But I think more important is that once they experience the 30-minute delivery, the convenience from our delivery, right, they get used to this habit. And then we also -- the way we manage that is we actually attract or acquire more new customers using differentiated loyalty programs to convert them into our own platform. So in the long run, we actually -- we were consistently doing that so that this platform will still continue to be our channels to acquire more new customers, convert them into our own platform. So this is how we actually operate that how we look at it rather than purely actually relying on the traffic there to boost our business. So this is not the way we do that.

Our next question today will come from Walter Woo of CMB International.

This is Walter from CMBI. Congratulations once again on your impressive results. There's only one question from my side, and it's about the semi-new and new markets. The performance in the semi-new and new markets has been extremely strong in recent years. But looking ahead, like what do you -- how do you foresee the same-store sales growth in these markets in perhaps in the medium term, like 2 to 3 years? And also, how do you think about the margin trend evolving in these markets as well? Will it be higher than that in the mature markets? And will it continue to trend up in the future?

I'll take this question. So I think you will observe the following things for the semi-new and new markets, right? So at the beginning, because people are looking forward to us coming to these markets. So once we open there, we saw very strong results there. And then as I mentioned before, we should continue to open stores there, right, to build the brand and also to leverage the supply chain. And then as we continue to do that over the time, at the beginning, I think the average daily sales for these stores on average will actually go down. But then at the same time, we actually have levers to add to sort of these stores.

So for example, at the beginning, we will show crunched on capacity because the line is very long. We didn't open delivery. Nowadays as we open more stores to show the demand and then we can actually open delivery gradually, right, as we mentioned. And then at the same time, we can actually replicate the other best practices proven in the Tier 1 cities. So for example, the value, sometimes we don't even offer the full menu in those new stores, right?

And then I think as you continue to build the stores and replicate these best practices in these markets, the brand will continue to get stronger. The other component I forgot to mention is actually people. Our people in these markets are very sort of young tenure, right? They got hired, they got trained. We want to train them more. But then because the new markets only exist maximum for 3 years, less than 3 years, right? So we don't have enough time to train them as much as we train people in Beijing and Shanghai, older markets. As they gain more experience, they can actually get faster, they can actually deliver sort of better service and products consistently to the consumers. That will actually create more demand for the brand, too.

So I think that's a curve. So at the beginning, probably we open more stores, that will be the major impact. But as you continue to add those sales levers and build the brand and build the critical mass of the stores, you will start to see the inflection point. But then like I mentioned before, this is also new in the system. We don't know how soon, how long, but we will try our best to do the right thing, just focus on the foundational benefits to serve the customers, right?

Yes. Well, in terms of margin. Obviously, because the sales is pretty high, right? So obviously, the margin is very, very strong, very high as well, much higher than our group level, right? But initially, when they -- actually the sales slightly coming down a bit as we add more stores, as the store itself start to kind of normalize, it will come down naturally, right? But then in terms of profitability, it's still pretty strong, right? So it's actually higher than -- it still contribute positively to the group's overall profitability. But when you see -- if you look even longer term, and then we need to talk about in these markets, there are more stores and the market itself has scaled economy in terms of how we operate these stores in the market. And the brand name penetration is expanding, is stronger with more stores there. So I do not have a definite answer for you yet in terms of where it could go. But then I think a positive sign is that actually, we do believe that actually these will be maintained at the higher than the current group level profit margin for the stores.

The next question will come from [indiscernible].

This is [indiscernible] from [indiscernible]. You mentioned the importance of the member customer base. So I have questions regarding membership. Do you have any long-term plans for acquiring members, boosting number repurchases and designing member benefits?

Okay. So it's about numbers. So you're [indiscernible], right? So our membership number actually increased very quickly. And then at the same time, the members already contributed to 66% of the sales. So we have existing mechanism in terms of where to acquire the members across different channels and then also the existing membership sort of loyalty program. And we also do sort of CDP, CRM program to design customized offers for different consumers.

Now recently, we find that in the new markets, it's actually very interesting. Because when we open a new market, we get a lot of consumers coming in at the beginning. And then we actually leverage the time to interact with them to get them into the membership program. And we do understand that to get people in, it's not the intention, but to get the members to come back is important, which is not only sort of the offer, but also the first-time experience. I think our operations team has continued to optimize their capacity, their training to make sure the service and also the food quality of the first time is actually very good.

So typically, loyalty members, the frequency is actually higher than average customer. And then as the market actually gets more mature, the frequency of the consumers will get higher, too, right? So we do think that with more new markets sort of entering -- becoming more tenured, and then we will see the same pattern happening for them. And we're very happy that the frequency we see for the beginning phase of the new markets is already sort of speed up compared to before. So it's relatively higher than what we see before.

And then I think in terms of the benefits, the other interesting thing we find is that for the older markets and new markets, people may want different things. So then when we design a benefit, we will actually fine-tune based on the city type, location type, et cetera.

We will take one more question. The next question will come from [indiscernible] of CICC.

I'm [indiscernible] from CICC. I have one question. As your store density is relatively high in Beijing and Shanghai, what are future sales drivers in these cities like new models, new dayparts, et cetera?

Got it. So I think even in sort of older cities, you will continue to leverage those existing levers. So for example, as you continue to open stores, right, your brand gets strengthened, your market share gets bigger. And then as your brand goes up, you also -- sort of the sales penetration and also frequency will actually go up from the existing stores. And then also as the sales goes up in the city, your media will go up, right? And then we'll continue to do menu innovation. So every single year, we actually present new innovations to consumers to create excitement. Sometimes it's pizza, sometimes it's size, sometime it's drink, sometimes it's dayparts, sometimes it's location, sometimes it's cost, right?

And then for the last year, the volcano, we actually first used the [indiscernible]. Now this year, we have the chocolate and marshmallow. So if you haven't tried that yet, you should try that. We will continue to have new ideas to make it very fun and tasty for people to have our pizza and food, right? And then as we build more stores in these existing older cities, our speed is actually getting faster and faster for delivery, which I think convenience is very important for busy people in these cities, right?

And then for the value, we also have different levers. And for the digital, as I mentioned, we have the data behind it. And then for digital, we have several areas we continue to focus on. So for example, the customer facing, right? How do you become omnichannels. For those new channels, how do you actually make it easy to place orders. And then for the existing channels, how do you optimize the conversion into purchase, right? And then also for dayparts, like you mentioned, right, we opened the late night daypart. And then it's not like you open, it's just the end of the story because it will take a while for people to realize you actually offer this daypart. You continue to build up for years, right? And then you have other dayparts you can open. For example, we have the afternoon tea. But probably we're not viewed as the afternoon tea daypart players yet. So how do you build that daypart, et cetera, right? So I do think that even for the existing markets, there are ways to continue to build up the sales and the brand.

At this time, we will conclude our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Thank you for coming to our call. We look forward to continuing the conversation with you. Thank you.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.