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

Please feel free to review them. Now, we invite Mr. Li Yu, CEO and Executive Director of Super Hi International, to review the company's performance for the second quarter of 2026.

Thank you, moderator. Can everybody hear me okay?

Yes, we can. Please go ahead.

Dear investors and analysts, good evening. I am Li Yu, CEO and Executive Director of Super Hi International. Let me present to you the key highlights of Super Hi International for the second quarter of 2026. This quarter, the company's earlier investment in employees and customers have further translated into operating improvements. Customer traffic and table turnover rates both improved year-over-year, while the employee cost ratio and several operating expense ratios declined, driving a significant year-over-year increase in operating profit. In Q2, Haidilao restaurants served 8.1 million customer visits, up 5.2% compared to the previous year, last year.

Supported by customer traffic, overall table turnover rate for the quarter was 3.9 turns per day. Same store turnover was 4.0 turns per day, both up 0.1 turn per day year-over-year. Both dining service at Haidilao restaurants and also were expanding revenue sources. Revenue from delivery and other businesses both doubled this quarter. Driven by the above business, the company achieved total revenue of $219 million in the second quarter, representing a 10% increase year-over-year. This quarter, company's operating profit increased by 118.9% YoY. The operating profit margin increased by 1.8 percentage point YoY. Profit growth has significantly outpaced revenue growth, reflecting the continued conversion of company's earlier investment and the beginning of the operating leverage release. Now I will review the major operational initiatives this quarter. First, continue to enhance the operational management of Haidilao restaurants.

This quarter, we maintained management flexibility with each region autonomously adjusting operating strategies based on the local business conditions, market conditions, and consumer trends. At the same time, we further strengthened the professionalism and support capabilities of the headquarter platform by introducing digital tools and new technologies. We enhanced our insights into the industry markets and consumers, empowering frontline restaurants in areas such as menu items, marketing, and labor efficiency, thereby making improvements in the precisions and execution efficiencies. This second quarter is a traditional low season. Judging from the table turnover performance, we believe that these initiatives have delivered a positive response. Second, in term of products and menus. In the first half of this year, the company fully integrated local consumer dietary habits, consumption trends, and dining scenarios to drive menu optimization and new product development.

For instance, in Southeast Asia, we introduced local flavors such as lemongrass, satay, and basil, extended soup bases, snacks, and beverage combinations around the core products to enhance the cross-selling. At the same time, we optimized the existing products by improving taste, presentation, and product combination, lowering the barrier for customer trial and enhanced product appeal. In addition, the company continuously conducts dynamic operations based on new product sales performance, customer feedback, and regional market characteristics, providing customer with a more value-oriented and differentiated consumption experience. Third, in terms of membership and marketing, as of the end of June, the number of overseas members reached 9.246 million. This quarter, we continue to improve customer management loop around sustained marketing, precise traffic acquisition, and member operations.

On the other hand, each region combined local consumption habits, holiday occasions, the preference of younger customer groups to continue to enhance brand exposures and reach new customers through IP collaborations, new product launches, and new local events. On the other hand, we place a greater emphasis on post-marketing customer retention by further strengthening tiered membership operations using member exclusive activities, differentiated benefits, customer communications, and in-store experience optimizations. We improve the member activities and visit frequency. We are continuously exploring more across the scenario and the multi-branded membership benefits, hoping to gradually transfer one-time marketing traffic into long-term membership relationships, further enhancing customer repurchase and store operating resilience. In terms of store expansion this quarter, we opened one new Haidilao restaurant in South Korea, one in Vietnam. In the first half of this year, we opened a total of three Haidilao restaurants.

At end of Q2, we operated a total of 129 Haidilao restaurants overseas. To date, the number of signed but not yet opened Haidilao stores remain in the double digits. Meanwhile, based on the current deconstruction schedules in July and August, we expect several new stores to be opened successfully in the second half of the year, and the full year new store opening target is in the double digits. As of this quarter, the Pomegranate Plan has operated a cumulative total of 12 brands and 22 second brand restaurant overseas. We continue to optimize the Hi Bowl Malatang project, which originated in Canada, and we are now opening up the second Hi Bowl store in Japan. At the same time, the Izakaya project in Japan is also steadily improving its sustainability with the potential for further replication.

Various country markets are exploring opportunities to independently incubate or replicate existing second brand formats. That is my conclusion for the business performance for this quarter. I would like to invite Qu Cong to present the financial results.

Thank you, Mr. Li. I will now report about the financial results. In the Q2 of 2026, the company achieved a total revenue of $219 million, an increase of 10% year-over-year. Haidilao restaurant operating revenue was $198 million, up by 4.6% year-over-year. Number of Haidilao restaurants increased by a net of three compared to the same period last year. Company served around 8.1 million customer visits in this quarter, an increase of 5.2% year-over-year continuously to support the restaurant business. Beyond the dining business, the company continued to expand the revenue sources. Delivery service reached $7.562 million, up by 105% year-over-year.

During the period, each region continued to strengthen delivery operation investment, deepen collaboration with the major delivery platforms in each country, secure more promotional resources, and online traffic favorabilities. They enrich their delivery product offerings to enhance product appeal in the delivery scenario. Other business reached $13.39 million, up by 119.7% year-over-year, mainly contributed by sales of food and seasoning under the Haidilao brand and from the company's own central kitchens, as well as the active development of some new restaurant business under the Pomegranate Plan. Overall, in this quarter, delivery and other business together generated $21 million in revenue, up by 114.3% year-over-year. Their share of total company revenue increased from about 5% in the same period last year to nearly 9.6% to further diversifying company's revenue. In terms of cost and expenses, overall operating efficiency improved compared to the same period last year.

In the second quarter, raw material and consumable cost was $74 million, with a gross profit margin of 65.9%, down slightly by 0.1% year-over-year. Restaurant operating gross margin remains stable, mainly because of the central kitchen and the supply chain business has grown significantly versus last year. In terms of employee cost, $74.51 million in the employee cost to revenue ratio decreased from 35.3% in the same period of last year, down approximately 1% decrease as past years. Efforts in employee capacity building, staffing, and store management optimization have gradually been implemented. The labor efficiency improvements have begun to materialize. Rent and related expenses were $5.6 million, accounting for approximately 2.6% of revenue, down about 0.4 percentage, mainly due to revenue growth by booting rent expenses, as well as adjustment in restaurant network layout reductions.

In short term, utility expenses of $7 million, accounting for approximately 3.3% of revenue, down 0.3% year-over-year. Depreciation and amortization, $21 million, accounting for 9.6% of revenue, down about 0.3% year-on-year. In terms of travel, communications, and other operating related expenses, about $25.73 million, accounting for about 11.8%, remaining broadly stable year-on-year. Overall, the declines in the employee cost ratio and expenses ratio for rent utilities, depreciation, amortization were important factors in the operating margin improvement this quarter. Raw material and other expenses resources still have room for further optimization. In Q2, the company achieved operating profit of $8.1 million, up by 118.9% from $3.7 million in the same period last year. Operating margin increased from 1.9% in the same period last year to 3.7%, up 1.8% year-over-year.

As revenue grew, the employee cost ratio and several fixed operating expense ratio declined, driving the earlier investment in employees, customers, and the store management to gradually translate into operating efficiency improvements. Although operating profit improved significantly, non-operating items in this quarter were mainly affected by exchange rate fluctuations. The same period last year, there was a net foreign exchange gain of $16.33 million. For this quarter, there was a loss of $4.34 million, a negative swing of more than $20 million year-over-year. The company recorded a net loss of after-tax of $1.93 million for this quarter, compared to a net profit of $16.39 million in the same period last year. Although final net profit was affected by non-operating factors, the company's core operating profitability improved significantly.

In terms of operating cash flow, companies for this quarter was a net inflow of $28 million, an increase of 6.2%, compared with a net inflow of $26 million in the same period as of June 30th this year. Company's cash reserve was approximately $266 million, and overall liquidity remains ample to be used for continued store expansion. In terms of key restaurant operating metrics, the company served approximately 8.1 million customers visits this quarter, up by 5.2%. This reflects that Haidilao's turnover ratio as well as same day period is going up. Further improvement in the store customer traffic and overall spending per store for the quarter was $24.3. Daily revenue was $17,400, down slightly by 1.1%. This overall restaurant operations customer traffic, table turnover have improved this quarter, though single store operating quality in certain regions have room for further optimization.

By region, market performance diverged this quarter. Earlier, the table turnover in Southeast Asia and East Asia continue to improve. Turnover raised in North America and other regions faced pressure. For Southeast Asia, the restaurant revenue for this quarter was $98.66 million, up about 3.9%. This is mainly driven by high customer traffic. In terms of average spending per customers was $18.6, flat year-over-year. Overall, Southeast Asian stores maintain a steady and upward operating trend. In East Asia, Haidilao restaurant revenue was $33.7 million, up about 9.9% year-on-year. Average table turnover increased from 4.8 turns per day, 4.9 turns per day, continuing to maintain at a high level. This is mainly because the customer decreased spending from $29.4 in the same period, down by $2-$27.4.

On a constant currency basis, the average spending per customer in both countries actually increased year-over-year, excluding exchange rate disturbances. East Asia continues to maintain a strong operating trend with good customer traffic and table turnover performance. In North America, Haidilao restaurant revenue was approximately $40 million, up about 6.6% year-over-year, with the store count increasing from 20-22. Average table turnover 4 turns. In terms of the average spending per customer increased from $39.1 the same period to $41, but a higher average check has not fully offset the impact of the lower turnover. North America still need to focus on improving customer traffic and operating efficiency. Other regions, the restaurant revenue was $25.1 million and down by 1.8%. Average table turnover is 3.7 turns per day, down by 0.2 turn per day.

This is mainly due to geopolitical volatility in the Middle East is still affecting the operation, though the impact is currently assessed to be gradually diminishing. Average spending per customer in other regions increased from $39.7 in the same period to $41, primarily driven by exchange rate effects. Overall regional operating performance in the second quarter showed some divergence. Southeast Asia improved. East Asia continued to maintain a high level. North America and other region need to further enhance the customer traffic and per store output. Same store performance. There were 111 same store restaurants. Same store sales was approximately $179 million, down about 0.8%. Among them, same store sales in Southeast Asia and East Asia increased by 2.5% and 0.9% year-over-year. Same store in other regions declined by 2.7% and 8.5%, and the same reason as consistent over trend overall.

Going forward, the company will continue to focus on cooperation, customers, customer operations, and in-store operations, driving further conversion of customer traffic improvement into per store sales and profitability enhancement.

We now welcome questions. Our first question comes from Lai Shengwei from CICC.

Thank you, Mr. Li and Ms. Qu. Thank you for giving me this opportunity. I have three questions. Number one is that we can see that in China, right now, there is an emphasis on empowering through an intelligent middle platform. Does the overseas operation have any new ideas or plans regarding middle platform constructions or organized structure adjustment? Second is about the Pomegranate Plan. How do you balance the mature single store model to share? Do you balance the long-term investment cost of the new brands with the company's short-term performance? Do you currently have any relatively mature mechanisms and methodologies to further improve the probability? My third question is about further optimization measures there are for cost and expensive controls going forward.

Thank you, Mr. Lai, for your question. There are a total of three questions, and I will take them one by one. In terms of the middle platform capability building, overseas is similar to China, but the overseas characteristic is that each country has different consumer habits, labor regulations, supply chain tax, and marketing environments. There is no single set of operating methods that can be directly replicated across all markets. Therefore, the principle for overseas middle platform construction is the headquarters should build common capabilities as well, whilst the regions and stores should run their local business well. In terms of division of labor, headquarters centrally build common capabilities such as digital systems, bulk supply chain, personal management, financial management, and a membership system, standards and infrastructure.

Regional teams then adapt and implement these capabilities in combination with the local market conditions, whilst specific operational decisions are left to the frontline teams who know the local markets and customers. From an organizational perspective, HQ's role will increasingly become that of a supporting platform, and frontline autonomy and operation will continue to be preserved. But things such as food safety and service quality will not be relaxed in any way. Currently, there are two projects that are running relatively smoothly. One is Hi Bowl Malatang. Currently, we have both in Canada and one in Japan. It is a simple and fast casual and easy-to-run low barrier. In terms of turnover efficiency and operating performance, both meet our expectations. We are also looking at the United States, Canada, and other markets. We will continue to verify its reputability.

Others is the Japanese izakaya. It is a product offering focused on sashimi, yakitori, and Japanese side dishes. At the moment, in Tokyo, the customer acceptance and operation stability are continually improving, and the second store is being prepared in Osaka. Regarding the balance between long-term investment and short-term performance, we verify the certainty with a small cost. Each project starts with one or two stores. Investment per store is not large. Trial and error cost is controllable. It will not have a material impact on the short-term performance. During the process, if operating performance or customer experience does not meet expectations, we will make adjustment without blindly pursuing scale. The real significant spending comes in the scale replication, and we only allocate replication resources to models that have been verified and proven viable.

Once proven, the company has already designed the return paths and expectation for projects in the replication phase. Your third question about the cost control. Currently, it is not about compressing cost across the board, but to narrow the gaps between the stores. There is still imbalance in operating performance among stores. Lifting underperforming stores to the average levels, this is a better way forward. If we continue to compress store-level investment, this will ultimately harm customer experience and that is not the efficiency we want, nor is it sustainable. We have identified two sources of improvement. The first is operating leverage as the second half enters the peak season. Customer traffic and the table turnover maintain good performance. Revenue growth itself will dilute relatively fixed costs such as labor run and depreciation. Second is the daily refinement of staffing and scheduling efficiency.

Procurement and supply chain and inventory shrinkage, we will continue to optimize these areas as routine work and not dependent on peak season. Right now, we still focus on our investment in Pomegranate Plan, and we are not going to be stopping due to short-term profit pressure, but we will control the pace and strictly manage budgets. As you can see with the new brands gradually contribute to revenue and the middle platform capability building completes its major investment phase, this gap will gradually narrow.

Thank you, Mr. Li, for your comprehensive response.

Our next question comes from Zeng Jun from Huatai Securities. Please.

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

Great. Thank you, Ms. Zeng, for your questions, and I will take the first few questions, and Ms. Qu will answer the third question. Number one, in terms of overseas market, apart from Chinese cuisine and hotpot, we also look at the entire dining market. Currently, overseas consumers' acceptance of Asian cuisine and Chinese food continue to rise. There is a lot of room for development. Our main brand is in the hotpot segment and Chinese cuisine. We are still cultivating the market and raising consumer awareness. Far from a zero-sum competition at the moment. Therefore, more Chinese brands going overseas is a positive sign. It validates the real demand existing and will also accelerate the process of overseas customers getting to know and accept Chinese cuisine, expanding the overall category part. Of course, we maintain a healthy respect for competition.

We will focus on doing our own things well, continue to enhance brand appeal through product, service, and customer experience, especially by diversifying our customer base and continuing improving the proportion of local customers. For Pomegranate projects, they are relatively diverse, including incubating and operating restaurants serving local cuisine. It's not about brand, but it's about model and capability first. For these projects, being the first to enter is not the most critical factor. What matters the most is to really prove the single-store model and make it replicable. Second, in terms of the overseas brand building, we don't really need to increase the marketing spend to buy the buzz. We center on product, service, store experience to let buzz grow organically. Marketing expenses have always been kept at a reasonable level, and what we pursue is discussion conversion, not just impressions. There are three layers.

The first layer is to place marketing creativity and execution locally. Teams in each region have considerable flexibility to collaborate with local IPs, artists, and games to plan around local festivals and major events, and to interact with customers on the local online platforms so that the activities are rooted in local culture and feel familiar to local customers. Second is to make the products themselves carriers of communication. We launched a coriander-themed product series in some of the regions. Coriander as an ingredient is strongly loved or hated by people. We built a complete product portfolio around this theme, extending from soup base to dishes and snacks. Generated excellent organic discussion and in-store conversion. We plan this every season, and with the same logic. The theme selection comes from the real interest of local customers, while supply chain and R&D are centrally supported by the company.

Number three is to capture and retain the buzz. If it only comes once, then the value is limited. We continue to connect market activities, member operations, and online attention is directed to offline stores. After arrival, through membership benefits and refined operations, it is converted into repeat purchase and referrals. Buzz is the entry point. Membership and repurchase are the lasting accumulation. Finally, we must return to the fundamentals. No matter how front-end marketing changes, the metric of win value is all about customer satisfaction. Customer willing to come again and recommend us to other people. This is where the brand influence truly takes root. Marketing can amplify the process, but cannot replace it. The third question about turnover performance and what are the specific measures that we have. I'll have Ms. Qu to answer this question.

Thank you, Ms. Zeng, for your question. I will take your third question. For Q2, our overall increased by 0.1 turn year-over-year. The trend is healthy, but there is indeed divergence among regions. East Asia and Southeast Asia perform better, while North America and other regions still have room for improvement. Take North America as an example. The issue for some stores is that customer base structure is relatively concentrated, and the coverage of mainstream local customers is insufficient. For instance, if there are changes in the local immigration or visa policies, this can cause a fluctuation in traffic. In the short term, we'll drive store traffic by adjusting menu combination, off-peak operations. But at the end of the day, it's really about diversifying the customer structure, solidly develop surrounding customer groups and member operations, and localize the marketing, reducing reliance on any single customer segment.

This is our long-term direction across all overseas markets. In other regions, there are external factors such as geopolitics, which are beyond our control. What we can do is to adjust operating strategies and control expenses in a timely manner based on local conditions. At the moment, we can see that the negative impacts are gradually diminishing. In terms of mechanisms, the headquarters' role is to help stores accurately identify problems, and using operating data to attribute underperforming stores by table turnover on a store-by-store basis, whether it's a customer base issue, a trade area issue, or operational issue. We will be looking at solutions, for instance, whether we will be relocating, adjustments, rather than continuing to invest just to maintain the store count.

Thank you. That is very clear, and I would also like to thank both the CEO and CFO for their answers.

Thank you. Next question, please. It comes from [Wei Jiabao] in CITIC.

Mr. Li and Ms. Qu, this is [Wei Jiabao] from CITIC Securities. I have three questions. Number one is, what is the outlook for the average unit price per customer trend in Q3 and Q4, and why? What are the specific measures that you will be taking if there are price increase or decreases? Second, which region will be the focus for store openings in the coming quarters? Will you accelerate openings in the regions with a few current stores or enter into entirely new countries? Next question is on the investment and payback period in each region compared with the past, are they improving, roughly flat, or increasing? What are the reasons for these changes behind those, if any?

Thank you, Mr. Wei, for your question. Your first question with respect to the unit price for Q3 and Q4. Right now, we don't really have any plans for a uniform price adjustment. We will not just simply pass all cost on to customers. Each market will adjust autonomously based on the local customer acceptance, the competitive environment, and product structure. We pay more attention to the value perceived by customers rather than simply pursuing higher prices. For instance, we add new products across different price ranges, adjust the set meals and combo products, and give customers more choices. That's our unit price. With respect to store openings for the second half, we expect double-digit new stores to open in North America, East Asia, and Southeast Asia.

In addition, there are still about a dozen stores with substantial progress, among which stores in North America and the U.K. are already in construction phase and will open successively over the next two years. Layout and business expansion in existing countries continue to be handled by each country in a bottom-up manner. The project advancement pace in each country is basically consistent with its operating rhythm. For new entrants, headquarter will more cautiously assess market conditions, consumptions, and specific site locations. There is currently no definite entry plan for new countries. We are under discussion, but they are not yet definitive. On your third question, for new stores currently, we are looking at a standard payback period of three to four years, roughly. Southeast Asia, relatively faster, and Europe and America, relatively slower, versus the past, each region has become more careful and prudent in site selections.

So the overall store payback periods are more controllable, and quality has also improved. For single store investment fluctuates due to factors such as location, store size, and decoration style. In the meantime, decoration and labor cost in some markets have indeed risen over the past two years. We continue to control investments by optimizing store formats, decoration design, local procurement, and construction management, and overall per store expenditure remains stable. Thank you.

Thank you, Ms. Qu, for your answer.

Thank you. Our next question comes from [Fund and Securities], [Ms. Jenny Lee].

Thank you for giving me this opportunity to ask a question. I have two questions here. Number one, which is about the localization of supply chain. For instance, Singapore and Malaysia in these areas in Southeast Asia. Do you have central kitchens? And do you have plans for localization of central kitchens and supply chains in these areas? My second question is about the impact of exchange rate fluctuation on your net profit and hedging, because we can see that there is an impact to a certain degree on the net profit. And what are the control measures that you have taken? And perhaps you could share with us on those points.

Thank you, Ms. Lee, for your question. The first question on supply chain and central kitchens. In Singapore and Malaysia, after many years of operation, local procurement and supply chain systems have become mature. For products that can be stably procured locally and meet quality requirements, we will localize as much as possible. For some core seasonings or products whose local supply is not yet stable enough, we will continue to source from central kitchens or established suppliers. Central kitchens do not necessarily expand linearly with the store counts.

We will consider store density, delivery radius, and capacity utilization. Existing central kitchens have a surplus capacity. Then we will also try to do some external sales to improve capacity utilization efficiency. With respect to the exchange fluctuation for Q2, that was indeed quite pronounced, and this is mainly due to base effects. Same period last year, we recorded a larger foreign exchange gain. This year it is a loss. Positive and negative combined amplified the year-over-year fluctuation. But it should be emphasized that this is a non-operating, non-cash impact from a currency translation, does not reflect the changes in the underlying business. Excluding foreign exchange gain losses, operating profit and operating profit margin in Q2 both improved significantly year-over-year. Therefore, we ourselves focus on the operating profit measures. In exchange rate management, our approach has two layers. The first layer is natural hedging.

That is, most of our revenue and costs occur in the same market, local collections, local procurement, local labor, and rent repayment. The higher the degree of the business localization, the smaller cross-border exposure that truly needs to be managed. The second layer is for exposures that do exist, such as centralized funds and cross-border settlements. Company will continue to monitor them, and based on the size of exposure, hedging costs, local compliance requirements, evaluate appropriate funds and exchange rate management methods. However, we will not engage in speculative forex operation just for the sakes of reported numbers. Overall speaking, we are quite cautious. Thank you.

Thank you, Ms. Qu. That is very clear.

Thank you. ZheShang Securities. Mr. Zhong Yazhen, please. Ms. Zhong Yazhen, please.

Hi, everyone. This is Zhong Yazhen from ZheShang Securities. I have two questions. Number one is about stores. If we divide them into mature stores, relatively new stores, and new stores, are there significant differences in the table turnover and store model among them if we compare, and which ones would perform better or vice versa? My second question is about incentives for overseas headquarter management teams. We are going overseas early, and we have a large scale, relatively sound talent pipeline with more and more Chinese cuisine brands going overseas. It's likely that there are people who will be approaching your staff and your talent. How do you ensure the team stability?

Thank you for your question. On the first point, the store age itself is not the key factor determining store performance. The difference among mature stores come from the trade areas and operational capabilities rather than how many years they have been open. The real impact of a store age is mainly in the first six months after opening. New stores need to go through a ramp-up period of team integration, developing surrounding customers or groups, and stabilizing operating processes. This is a normal pattern. Taking 2024 as a dividing line, among 107 stores opened from 2018 to 2023, about 50 achieved a positive cash flow in the first month of opening. Among the 27 stores opened from 2024 to June this year, the proportion rose to about 78%. In other words, the ramp-up speed of the new generation stores is significantly faster than before.

The underlying reason is that in recent years, we have tightened requirements and site selection standards, investment calculations, store format design, and store manager reserves. Stores are opened more precisely, and preparation before opening is also more thorough. Your second question, with respect to the evaluation, there are three levels. The core of a store manager evaluation is about, on one hand, employees, on the other hand, customers, with a focus on customer satisfaction, employee development, and long-term store operating quality. Business results are included in incentives, but they are not the only metric, because focusing solely on short-term profit can easily sacrifice the employee and customer experience. Regional teams are more results-oriented, looking at operating performance, growth quality, and talent development. Headquarter functional teams are evaluated on whether they can truly help frontline improve efficiency rather than merely completing their own tasks and targets.

In terms of talent stability, intensified competition is inevitable, but retaining people is not only about compensation but also growth space and operating space. Haidilao went overseas early. Its greatest advantage is that it has already cultivated a group of local store managers and regional managers from the frontline. They have a deep understanding of the local market and company culture. As new stores expand, new regions are entered, the new Pomegranate Plan businesses are explored, outstanding managers will always have the next bigger stage. They can also share in the fruits of the business growth through incentive mechanisms. This is our most fundamental way to maintain team stability. Thank you for your question.

I would also like to thank the management for your very clear answers, and I also wish the company a bright future. Thank you.

Thank you very much, everyone. In the interest of time, this concludes today's conference earnings call. I'd like to thank all the investors and analysts for joining us in today's call. Thank you, and we'll see you next time.

Hello respected investors and analysts. Thank you for joining today's Super Hi earnings call. Participating in today's meeting are Li Yu, Executive Director and CEO, and Ms. Chu Zong, Financial Controller and Board Secretary. Today's meeting may contain forward-looking statements, including but not limited to the company's statements on strategies and business plans, as well as outlook on performance. The content published by the company during the earnings presentation, as well as the comments in response to all your questions, represent only management views as of today. Please refer to the latest safe harbor statement in the earnings press release, which applies to the conference call. The meeting is conducted in Chinese with simultaneous English interpretation provided by external agency. In case of any discrepancies, the Chinese version shall prevail. The presentation materials have been uploaded to the company's investor relations page for your review. Hello, investors and analysts.

I'm Li Yu, Executive Director and CEO of Super Hi International. Welcome to Super Hi International Q1 2026 earnings call. I'm going to be talking to you about, on behalf of the company, I thank you for your interest and support. It is my honor to share with you the Super Hi International operating performance for this quarter. In the first quarter of 2026, the company's operations maintained a positive improvement trend, with all core operating metrics achieving simultaneous increases. As of the 31st 2026, the company operated a total of 127 Haidilao restaurants in overseas markets, added one new store in Southeast Asia during the period, recorded a net increase of four stores compared to the same period last year. At the same time, the operating quality of the existing stores is continuously being strengthened.

In the first quarter, Haidilao restaurant revenue was USD 204 million, an increase of 8.4% year-over-year. Same-store sales increased by 4% year-over-year. Total customer traffic exceeded 8.1 million visits, and its overall table turnover rate was four turns per day, an increase of 0.1 turn per day compared to the same period last year. Meanwhile, the delivery business, the Red Pomegranate project, and other businesses continue to contribute to incremental growth with a combined year-over-year increase of 130.9%. The multiple initiatives that drove the company's total revenue to USD 226 million, a year-over-year increase of 14.2%. On this basis, thanks to increased customer traffic and refined operations, we have seen a significant release of operating leverage. In the first quarter, the company's operating profit reached USD 13.993 million, a year-over-year increase of 17.7%.

The operating profit margin rose from 4.1% last year to 6.2%, representing a substantial improvement in profitability. In terms of specific business initiatives, we continue to focus on strengthening the three fundamentals: focus on employees, focus on customers, and focus on products. During the daily store visits, we realized that the past reliance on standard plans to some extent limited the warmth of service provided by frontline employees. Therefore, this quarter, we continuously emphasized flexible operations, helping employees understand the logic behind services actions by strengthening post-event reviews and store manager mentoring, and granting them more on-site discretion. While maintaining high standard operations, we provide more personalized and flexible service, thereby continuously improving customer satisfaction at individual stores. We're gradually seeing that these actions focused on enhancing employee awareness and capabilities are translating into better customer experiences.

In terms of the product and menu innovation, this quarter headquarters focused on scenario segmentation, differentiation, and product empowerment, providing targeted support to various regional markets globally. First, we deeply explored dining scenarios. We offered various kids meal sets for families with young children. For late night hours, we focused on launching spicy grilled dishes paired with refreshing drinks to precisely drive consumption during that period. Second, following the summer season, we collaboratively launched combination products such as vegetable and mushroom platter and beef and lamb combo in multiple regions. For core categories, we focused on upgrading the beef series, offering premium Australian wagyu and freshly cut beef to meet the quality experience needs of different customer segments.

Looking at the results, the menu innovations in the first quarter were more customer-centric, and each market produced excellent localized products that did not only effectively drove a single store sale, but also validated the effectiveness of our strategy of localized product selection and refining menu planning. In terms of the business expansion, we added 1 new restaurant in Southeast Asia during this period. Since last year, the company has imposed stricter requirements on new store location accuracy, profit expectations, and execution quality. Currently, our pipeline of reserved stores remains in the double digits, and the overall expansion pace going forward will continue to adhere to the principle of balancing stability and quality. Regarding the Red Pomegranate project, we are actively building a multiple-brand matrix, continuously incubating prototype stores and second-brand projects in different countries.

To date, we have operated a total of 10 brands with a total of 18 stores, including formats such as Canadian Malatang, Indonesian Halal Hot Pot, Japanese Izakaya, Korean stores, and Sparkora BBQ. This quarter, other business revenues achieved strong growth of 166.7%, marking substantial growth in the diversifying of our revenue structure and expanding our customer base. Looking ahead, the company remains committed to its long-term development goal of becoming a leading global integrated catering group, continuously improving in 5 areas: customer experience, restaurant network, operational enhancement, new businesses, and headquarter capabilities. That concludes my introduction of the business situation. Next, let me invite Chu Zong to present the financials. Thank you. President Li Yu. Next, I will report on the financial situation. In the first quarter of 2026, the company achieved a total revenue of USD 226 million, an increase of 14.2% year-over-year.

Haidilao restaurant operating revenue accounted for 90.4% of total revenue, reaching USD 204 million this quarter, an increase of 8.4% year-over-year. This was mainly attributable to, first, the continued improvement in operating performance of existing Haidilao stores, with increases in both table turnover rate and the customer traffic. Second, a net increase of 4 stores in the company's restaurant network compared to the same period last year, with adjustment in the store network layout contributing incremental revenue. Delivery businesses revenue accounted for 3.2% of total revenue, reaching USD 7.3 million this quarter, an increase of 82.5% year-over-year, primarily because we continue to optimize delivery products and services based on market demand, and strengthen the cooperation and joint marketing with local delivery platforms. Other businesses revenue accounted for 6.4% of total revenue, reaching USD 14.4 million this quarter, an increase of 166.7% year-over-year.

The revenue growth came primarily from the sales of food products and the seasoning under the Haidilao brand, and from the company's own central kitchen, as well as from the active development of some new brand restaurant business under the Red Pomegranate project. In other businesses this quarter, external sales from the central kitchen contributed significantly. We have commercially converted some of the central kitchen's excess capacity for external use. Although the gross margin of this type of B2B supply chain business is lower than that of the B2C restaurant business, and there is order volatility, it dilutes our supply chain fixed cost. From the perspective of our core model, the Haidilao restaurant main business remains our most core business. Next, regarding cost and expenses.

Benefiting from the company's proactive investment in employee management and customer experiences throughout 2025, the operating leverage brought by revenue growth in this quarter has led to further improvement in the cost structure. Raw material cost for this quarter was USD 76 million, with a gross margin of 66.1%, an increase of 0.1 percentage point compared to the same period last year. Employee costs were USD 76.6 million, with employees cost as a percentage of the revenue at 34%, a decrease of 1.3 percentage points compared to the same period last year. This improvement was mainly because after the company proactively shared profits with the employees and strengthened the team last year, we began to see in the first quarter of this year the release of personal efficiency brought by higher customer traffic. Rental expenses were USD 6 million, representing 2.8% of revenue, remaining relatively stable.

Utilities expenses were USD 7 million, representing 3.2% revenue, a decrease of 0.4 percentage points compared to the same period last year. Depreciation and amortization were USD 20.658 million, representing 9.2% of revenue, a decrease of 0.9 percentage points compared to the same period last year, demonstrating the diluting effect of revenue growth on the fixed cost. Meanwhile, the end of the amortization period of certain individual stores brought some short-term optimization. Travel and other operating expenses were USD 23.891 million, representing 10.6% revenue, a decrease of 0.1 percentage points compared to the same period last year. On the profit side, driven by both revenue growth and cost structure optimization, the company's core profitability improved significantly this quarter. Operating profit reached USD 13.99 million, a substantial year-over-year increase of 70.7%, with an operating margin of 6.2%, a year-over-year increase of 2.6 percentage points, representing a clear improvement in operating quality.

A special note is warranted regarding the fluctuation in net profit for the period this quarter. We had a net foreign exchange loss of approximately USD 4.292 million compared to a foreign exchange gain of USD 7.435 million in the same period last year. The difference in non-operating exchange rate fluctuations amounts to USD 11.73 million. Affected by this both change translation impact, the reported net profit for this quarter was USD 4 million, a decline compared to the same period last year. Excluding the non-operating factor of the exchange rate fluctuations, the company's actual business profitability showed a growth trend. The company's operating cash flow for this quarter was USD 24.24 million, an increase of 23.1% compared to USD 19.69 million in the same period last year.

As of the same period end, our cash reserves were $214 million, a decrease of $30 million compared to $270 million at the end of 2025, primarily due to investment in the continuous expansion of the stores and the development of the second brand business. Regarding key restaurant performance metrics, this quarter, Haidilao restaurants served approximately 8.1 million customers, an increase of 3.8% year-over-year. Driven by customer traffic, the overall average table turnover rate for Haidilao restaurants was 4 turns per day, an increase of 0.1 turn from 3.9 turns per day in the same period. Last year, the average check per customer at Haidilao restaurant this quarter was $25.3, an increase of $1.1 from the same period of last year, of which approximately $0.8 of the increase came from exchange rate and fluctuations driven by both the customer traffic and average check.

The average daily revenue per Haidilao restaurant was $18,400, an increase of 3.4% year-over-year, effectively improving single-store operating efficiency. Looking at the region breakdown, there was some divergence in regional performance, but the overall foundation of the restaurant operations remained stable. This quarter, the Southeast Asia region served 5.2 million customers, an increase of 2% year-over-year. Benefiting from customer traffic, the table turnover rate increased by 0.1% turn year-over-year to 3.8 turns. The average checks in Southeast Asia this quarter was $19.6, an increase of $0.9 from $18.7 in the same period last year, mainly affected by the exchange rate fluctuations of the U.S. dollar against the other currencies.

As of the end of this quarter, the company operated a total of 72 Haidilao restaurants in Southeast Asia, a net increase of one restaurant compared to the end of previous quarter, and a decrease of one restaurant compared to the same period last year. Overall, Southeast Asia remains the company's most profitable and stable foundation, with relatively steady customer traffic and average checks this quarter. The East Asia region continued its strong growth momentum this quarter. Haidilao restaurants in this region served 1.3 million customers, an increase of 18.2% year-over-year. The table turnover rate for Haidilao restaurants this quarter was 5.1% turns, a further increase of 0.1 turn from 5 turns in the same period last year. The average check in East Asia was $28.2, flat compared to the same period last year.

As of the end of this quarter, the company operated a total of 21 Haidilao restaurants in East Asia, unchanged from the end of previous quarter, a net increase of two restaurants compared to the same period last year. The North America region served 1 million customers this quarter, roughly flat year-over-year, due to the frequent extreme cold weather in North America in January and February, as well as the new stores opened at the end of last year in both the U.S. and Canada that are still in the ramping up phase. The overall table turnover for North American restaurants fell from 4.0 turns to 3.6 turns this quarter. The average check was $41.4, an increase of $1.8 from the same period last year, of which $0.7 of the increase came from the exchange rate fluctuations.

As of the end of this quarter, the company operated a total of 22 Haidilao restaurants in North America, unchanged from the end of previous quarter, and a net increase of 2 restaurants compared to the same period last year. The other regions had a table turnover rate of 3.6 turns this quarter, a decrease of 0.4 turns year-over-year, mainly because the geopolitical volatility in the Middle East had a significant impact on restaurant operations. The average check was $41.3, an increase of $3.1 from the same period last year, primarily due to the exchange rate fluctuations. As of the end of this quarter, the company operated a total of 12 Haidilao restaurants in other regions, unchanged from the end of previous quarter and a net increase of 1 restaurant compared to the same period last year.

Facing the uncontrollable external macro environment, we have implemented more prudent cost control measures locally to enhance our risk resistance capabilities. This quarter, same-store revenue for Haidilao restaurants was $184 million, representing same-store revenue growth of approximately 4%. Among them, East Asia performed the most prominently with the same-store sales growth of approximately 10.6% year-over-year. Southeast Asia and other regions saw same-store sales growth of approximately 6.3% and 1.8% year-over-year respectively. Same-store sales in North America declined by 5.1% this quarter, still affected by the extreme weather impacting customer in-store dining behavior. Table turnover rate and average check performance were generally consistent with the overall trends and will not be reiterated here. The above is the performance review of the first quarter of 2026, and we now go into the Q&A session. We welcome questions and comments.

Will Mr. Yang's departure affect the company's established strategy of prioritizing customer and employee benefits to drive long-term growth? Will the approach to balance the short-term profits and the long-term development change? What specific consideration does the new management have to ensure strategic continuity and team stability? Mr. Yang's departure will not affect the deeply embedded strategy of prioritizing customer and the employee benefits. Customer experience, service affection, and employee engagement remain our core focus and will not change in the short term. Employee benefits, service enhancement, and food quality control are key areas we continue to advance. This quarter's profit improvement mainly comes from a more proficient daily store operations, identifying more areas for improvement in strategy execution, and boosting employee motivation. With the revenue growth, we are managing costs and expenses more efficiently, but our long-term strategic direction remains unchanged.

Since the second half of 2025, this strategy has become ingrained in store operations. The proactive investment made earlier are part of our strategic design. As we balance short-term returns and long-term growth, we will continue to follow the logic of the quality first, growth second. Even after Mr. Yang's department from Super Hi, the system where overseas regional managers and store managers are responsible for store openings and operation remains unchanged. We will further deepen employee training incentives and mentoring to steadily improve store operation quality. How is the category layout and decision-making authority of the Red Pomegranate plan allocated across the region? How is the collaboration achieved from regions of headquarters? Will Ms. Yang have any linkage and collaboration on the Red Pomegranate plan after restructuring to Haidilao in China? The Red Pomegranate plan is a key part of our development strategy.

It now combines regional decision-making with headquarters empowerment. Successful projects such as Canadian Malatang in Canada and the Yoyimoto, Izakaya in Japan, were incubated by regional managers after in-depth local market research and customer analysis, including selections of business types and products. During incubation and operation, we continuously adjusted management approaches. A cross-functional team covering product, brand, marketing, business analysis, technology, and legal has been formed at the headquarter level to deeply engage in key projects, better mobilize resources, and make brand new incubation more efficient, whilst the decision-making authority remains with regional managers. Some brands are driven top-down and involve collaboration with China. For example, Sparkora BBQ overseas was inspired by BBQ in China, with brand design and menu selection unified from the top.

After opening the first prototype store in Malaysia, Sparkora has been replicated to Indonesia and Vietnam, with the daily operations managed by local country managers. We maintain regular but informal communication with Haidilao, the Red Pomegranate plan in China. After Ms. Young returns to Haidilao China, she will share her experience with overseas Red Pomegranate projects and the new business formats. We continue to give regions sufficient autonomy to ensure local adaptation and innovation. "What changes in consumer demand have been observed since the beginning of this year? Are there any noticeable new trends or characteristics based on recent consumption trends? How do you assess our medium to long-term growth potential?" The most noticeable trend this year is that overseas consumer markets are not deteriorating. Rather, consumers have become more rational and value-conscious.

Value is not just about price, but also the memorable product, the dining experience, the service quality, and suitable ambience, and tangible value for their money. This trend varies by market. North America customers are focused more on cost performance and are more cautious in ordering. Southeast Asia remains vibrant, but prioritizes convenience, delivery, and youth-oriented dining scenarios. Mature markets like Japan and Korea are more sensitive to efficiency, limited-time offerings, light versions, and social sharing. Australia, the U.K., the Middle East, and others have their own habits and pressure points. The common thread is that customers increasingly want restaurants to give them a clear reasoning to choose them. For Haidilao, this trend clarifies our direction. What we have always done is essentially to provide clearer value choices for customers. We continue to advance the quality-to-price ratio initiatives.

Adjusting menu structure, product combinations, portion sizes, and price reasonableness, combined with effective promotions to make it easier for customers to choose and feel value. We are building the experiences. We are building a different Haidilao, not just through decoration and gimmicks, but by designing our products and experiences tailored to different scenarios such as family meals, late-night snacks, friends gatherings, and people's interactions. Fresh cuts, set meals, combo launches, and extended delivery scenarios all follow the same logic of giving customer a reason to choose Haidilao in different contexts. In the meantime, in the medium to long term, we do not see the market space as shrinking, but rather industry barriers rising. Our earlier management adjustment and strategy execution are making the company more resilient from employees to product, from organization to operations.

We believe a resilient company can quickly adapt to any market change and capture medium to long-term growth opportunities. Next question. "What is the current status of member consumption, member spending share, repurchase rate? What are the future strategies and expected outcome for member management?" As of the end of this quarter, Haidilao's overseas membership reached 9.05 million. We continue to promote membership work overseas. This quarter, over 92% of the table turns came from member customers. Thus, member login rate is 92.5%, a slight increase from last year. In terms of consumption composition, over 20% of spending came from newly registered members this year. About one-third came from repeat customers within 3 months. The overall members contribution structure remains stable. Regarding membership work, we will continue to strengthen front-end and back-end cooperation.

At the headquarter level, we will enhance the digitalization of the membership system and focus on optimizing member experience, including improving each reach rate and refining the points system and benefit designs. On the operation side, we are committed to having store managers and frontline staff place a greater emphasis on customers. By designing different tiered benefits, we enable members to experience exclusive services, and thereby increasing customer loyalty. Next question. Based on current oil prices and raw material cost, what is the impact on the company's gross margin this year? Based on current observations, the impact of rising oil prices and cost on our gross margin is relatively controllable. On one hand, the product mix adjustment and supply chain optimization can buffer some pressure. Regional manager can choose more cost-advanced suppliers while ensuring quality. The local supplier model. We can see that the overall margin is controllable.

The first reason is that for hot pot, basically there is control and there is flexibility. So we can see, for instance, including different seafood in the restaurant, all of these are actually quite flexible. This means that once we are ensuring the experience of the customers, we are able to provide them with better choices. The second is that with respect to our overseas business, we continue to have a localization. We have a localized supply chain, and some of those we have worked to strengthen our collaboration with the local customers, and some of those we will be working with. For instance, collaborations, and this has helped us to offset the commodity's cost. In the meantime, in terms of our cost on the storefront side, we have also been able to control the storefront.

With respect to other fees, for instance, labor cost. On this front, in terms of our optimization, it's not sacrificing the benefits of the customers. The growth really comes from the business growth. In terms of the human labor at the moment, it's about 3.3% to 3.4%, and that is in the reasonable range. Going forward in the future, it's about the flexible arrangement of the labor allocation to further improve our human efficiency. For instance, in terms of rent, we can see that it is quite stable. Going forward, we'll also be adopting more strict selection of locations and to further improve our space in the stores and to further improve our negotiation prices.

Apart from this, we can also see that in terms of different cost consumptions as well as the storefront management for the cost in terms of cost side, we do think that it is quite under control. Thank you, Mr. Chi. It is very clear. Thank you, Mr. Lan. How do you see the room for optimization in labor cost ratio, rent cost, and other expenses this year? We have always maintained that ensuring customer experience and service quality is the most important, so store staffing has a certain rigidity. This quarter, overall labor cost accounted for 34%, a reasonable level that ensures. Thank you very much for your question. With respect to the turnover since April and our performance, overall speaking, it is relatively stable and generally speaking, we have been able to continue with the trend of the first quarter.

In terms of the turnover rate, we can see that in different regions, there are some variations, and the reasons would be roughly the same. In terms of the price wise, we have been working through optimization of dish combinations in the localized marketing, and in the meantime, we continue to maintain a stable unit price per customer. Right now, we have entered into the off-season of hot pot, and we are relying on the following areas to further improve. First of all, we know that this is the low season, and that is something that we cannot change. But during this period, we continue to improve our internal capabilities. For instance, for the summer and as well as for the customers, we will be providing them with summer food, and in the meantime, we are also launching new product as well as in the summer.

We have, for instance, barbecued fish and various different drinks that are suitable for the summer drinks. We are also adjusting our staff allocation in a more flexible fashion. In the meantime, in terms of our scenarios, we continue to further expand our scenarios. For instance, interactive marketing with various IPs using local performance in social events overseas with set meals and gifts to attract the customers. Number 1, whether it is our existing customers or it is our new customers, and we will be able to find new ways to tap into these comments. We are trying our best so that we are able to maintain healthy turnover and a good customer experience even during the off-season.

My next question is about the store opening expectations and the store opening plans for this year and the next 3 years, as well as the approximate numbers by regions. Can you please tell us more about these aspects? Okay, no problem. Thank you for your question. Our store opening strategy, we have always adhered to bottom up, and Mr. Lee has also said that we have put forward stricter requirements. At the moment, we have double-digit stores that we have already signed, or we are already entering into the substantial contract signing stage. Apart from Haidilao, in various places, we will also have Red Pomegranate plans, and one type is bottom up. This is based on the local regional managers, and those are the ones that rely on the local platforms.

Another one is from top to bottom, those are the ones being pushed by the company from the headquarter, which will also help us to further expand and grow. Within the company ourselves, we are not going to be providing any specific numbers or figures. It is really because relying on the local people and relying on their local situations to specifically come up with a plan that is suitable for them for their future development and opening. Thank you. Thank you, management, and thank you, host. Thank you everyone for joining the call.