[Management View]
Key metrics, strategic priorities: Management announced the introduction of 43 new menu items in Q2 2024, including 28 beverages and 15 food products, to drive menu innovation and broaden customer reach. The company emphasized the successful launch of new franchise models, with over 8,100 franchise applications since December 2023. The focus on company-level efficiencies led to positive adjusted corporate EBITDA.

[Outlook]
Performance guidance, future plans: Management expects positive same-store sales growth in Q3 2024 and the second half of 2024. The company is pursuing new capital through additional bank loans and financing plans, linking future company-owned store openings to this funding access. Plans for 200 to 300 new store openings annually over the next few years were reiterated.

[Financial Performance]
YoY/QoQ trends compared to expectations/estimates: Food revenue increased 8.6% year over year in Q2 2024, with food sales reaching a historical high of 35.2% of total sales. System sales grew 1.4% year over year. Revenue from company-owned and operated stores fell 12.5% year over year due to store closures and a 3.6% decrease in same-store sales. Other revenues delivered a 110.3% year-over-year profit increase.

[Q&A Highlights]
Question 1: I was hoping you could provide your current thinking on the rate at which you can review the growing number of sub-franchise applications to accelerate the rate of new store growth and ultimately return to net store growth?
Answer: We continue to improve underperforming company-owned and franchised stores, especially non-MTO stores. Among the 49 closures in Q2, 41 were non-MTO Express stores. Excluding these, we had 31 net openings of MTO stores. Our target is to open around 200 new MTO stores in 2025 on a gross basis, with the majority being subfranchisee stores. We expect over 100 net openings this year and 200 to 300 new openings annually in the next few years.

Question 2: It looks like the company continues to make good progress in managing its costs, although marketing expenses did go up as a percentage of revenues in Q2. Curious as to your thoughts on how sustainable that trend would be? And what impact it would have on the business same-store sales growth and its margins?
Answer: Our same-store sales have been recovering well, and we expect positive same-store sales in Q3 and the second half of the year. The marketing spend in Q2 and part of Q3 was to support the lunch box campaign, which has been working well. Food contribution has reached a historical high and is expected to continue growing.

Question 3: Just in terms of how TH International Limited is balancing the need to invest in order to grow revenues while at the same time being conservative with operating capital, really just your current thinking about your capital needs in order for TH International Limited to take the next steps towards sustainable profitable growth?
Answer: We returned to positive adjusted corporate EBITDA this quarter and believe we are close to full-year adjusted corporate EBITDA breakeven. We are working on securing additional capital through bank loans and financing plans. If successful, we would consider opening more profitable company-owned and operated stores while balancing our overall financial position.

Question 4: You already commented on same-store sales trends. Is there anything additional you can say about those trends thus far? And also, in particular, your outlook for the remainder of the year that you haven't addressed when you spoke with this earlier?
Answer: We will improve quarter by quarter. In Q2, same-store sales decreased by 3.6%, but we have seen a very positive trend in recent months. We expect positive same-store sales in Q3 and the second half of this year.

Question 5: Could you provide an update on the refinancing of the convertible debt?
Answer: We are making good progress and will disclose updates when available.

Question 6: How can we better monetize the team's loyalty members, which is sort of 26 million by now? The question is about the theoretical spend of $1 per member per week and what that would generate in annual sales. What is realistic in this regard? And how could this be better monetized?
Answer: We need to design good products and campaigns to attract members to spend more in our stores. This is something we are working on every day.

Question 7: Do you expect your liquidity position to improve going forward?
Answer: We are approaching operating cash flow self-sufficiency and do not expect to burn cash. We are working hard to bring in new capital and are confident in our current liquidity position.

[Sentiment Analysis]
Tone of analysts/management: The tone of the management was optimistic and confident, emphasizing positive trends and future growth. Analysts' questions focused on growth strategies, cost management, and liquidity, indicating a cautious but positive outlook.

[Quarterly Comparison]
| Metric | Q2 2024 | Q2 2023 |
|---------------------------------|---------------|---------------|
| Food Revenue Growth | 8.6% | N/A |
| Food Sales Contribution | 35.2% | 32.5% |
| System Sales Growth | 1.4% | N/A |
| Monthly Average Transacting Customers | 3.59 million | 3.14 million |
| Digital Order Penetration | 90.4% | 86.5% |
| Company-Owned Store Revenue | -12.5% | N/A |
| Same-Store Transaction Growth | 3.4% | N/A |
| Other Revenues Profit Increase | 110.3% | N/A |
| Marketing Spend as % of Revenue | 4% | 3.5% |
| General and Administrative Expense | -5.2% | N/A |
| Total Cash and Equivalents | RMB 10.778 billion | RMB 184.2 million |

[Risks and Concerns]
Risks and concerns content: The company faces risks related to store closures, particularly non-MTO Express stores, which could impact overall revenue. The need for additional capital and successful refinancing of convertible debt are critical for future expansion plans. Market competition and the ability to monetize the loyalty program effectively are ongoing challenges.

[Final Takeaway]
TH International Limited demonstrated strong performance in Q2 2024, driven by franchise expansion, digital growth, and cost management. The company returned to positive adjusted corporate EBITDA and expects positive same-store sales growth in the coming quarters. Management's focus on innovation, efficiency, and strategic expansion positions the company well for sustainable long-term growth. However, successful capital acquisition and effective monetization of the loyalty program remain crucial for future success.