Mr. Yongchen Lu reports

TIMS CHINA ANNOUNCES THIRD QUARTER 2023 FINANCIAL RESULTS

Restaurant Brands International Inc.'s. TH International Ltd. (Tims China) has released its unaudited financial results for the third quarter of 2023.

Third quarter 2023 highlights:

• Total revenues reached a quarterly record of 436.4 million renminbi ($59.8-million (U.S.)), representing a 42.7-per-cent increase from the same quarter of 2022.
• Net new store openings totalled 63 (14 company-owned-and-operated stores and 45 franchised stores for Tims; four company-owned-and-operated stores for Popeyes), resulting in 763 systemwide stores at quarter-end.
• The loyalty club grew to 16.9 million members, representing 90.3-per-cent year-over-year growth.
• Adjusted store EBITDA (earnings before interest, taxes, depreciation and amortization) was 29.3 million renminbi ($4-million (U.S.)), representing a 91.5-per-cent year-over-year growth compared with 15.3 million renminbi in the same quarter in 2022.
• Adjusted store EBITDA margin was 7.5 per cent, representing an increase of 2.2 per cent from the same quarter in 2022.

Company management statement

Yongchen Lu, chief executive officer and director of Tims China, commented: "In Q3 2023, we delivered 42.7-per-cent year-over-year top-line growth and set quarterly records for three critical metrics: revenue, adjusted store EBITDA and adjusted store EBITDA margin. We want to express our sincere gratitude to our 16.9 million registered loyalty club members; their continuous support and patronage inspire us to deliver an outstanding guest experience every time and improve every day. During the quarter, we continued to increase our presence in our existing cities, building density and delivering convenience for our guests. We also rapidly expanded our Tim Hortons franchised store network, driving capital efficient growth, and penetrated new cities such as Yibin, Handan and Lanzhou, among others. Tims launched 21 new beverages and 11 new food products in Q3 2023; our buffalo milk latte, watermelon cold brew and smile bagel (blueberry series) were among the bestsellers. To further enhance customers' perception of Tims's unique coffee-plus-warm-food brand image, we are also in the process of renovating our store designs so that our freshly handmade food preparation process can be visualized to our guests."

Mr. Lu added: "Since the grand opening of our first Popeyes restaurant in Shanghai on Aug. 19, we've successfully opened another six restaurants at premium locations in Shanghai as of today and are on track to have 10 restaurants open and operating by year-end. Our locally relevant menu, appealing store design and environment, and efficient digital ordering process have proven popular with our customers, as evidenced by over 29,000 renminbi average daily sales per restaurant year to date."

Dong (Albert) Li, chief financial officer of Tims China, commented: "As we scale our business, we have demonstrated meaningful expansion in store profitability and leverage in general and administrative expenses. Specifically, in the third quarter, adjusted store EBITDA margin increased by 2.2 percentage points and adjusted general and administrative expenses as a percentage of total revenues decreased by 1.3 percentage points year over year. Managing our cost structure effectively is very important to us; we continue to implement various optimization measures, targeting shorter payback periods and further improvements in store-level profitability."

Mr. Li continued: "Looking forward, one of our top near-term priorities is to drive capital-efficient growth via building density in our existing markets, entry into attractive new cities and accelerating our use of subfranchising. We are also squarely focused on profitability, as is demonstrated in our continuously improving margins."

Third quarter 2023 financial results

Total revenues reached 436.4 million renminbi ($59.8-million (U.S.)) for the three months ended Sept. 30, 2023, representing an increase of 42.7 per cent from 305.7 million renminbi in the same quarter of 2022. Total revenues comprise the following:

• Revenues from company-owned-and-operated store sales were 390.8 million renminbi ($53.6-million (U.S.)) for the three months ended Sept. 30, 2023, representing an increase of 34.8 per cent from 290 million renminbi in the same quarter of 2022. The growth was primarily driven by an increase in the number of company-owned-and-operated stores from 454 as of Sept. 30, 2022, to 589 as of Sept. 30, 2023.
• Other revenues were 45.6 million renminbi ($6.3-million (U.S.)) for the three months ended Sept. 30, 2023, representing an increase of 190.3 per cent from 15.7 million renminbi in the same quarter of 2022. The growth was primarily attributable to the rapid expansion of the company's e-commerce business and an increase in franchise fees and revenues from other franchise support activities, which was attributable to an increase in the number of franchised stores from 32 as of Sept. 30, 2022, to 174 as of Sept. 30, 2023.

Company-owned-and-operated store costs and expenses were 400.5 million renminbi ($54.9-million (U.S.)) for the three months ended Sept. 30, 2023, representing an increase of 33.6 per cent from 299.9 million renminbi in the same quarter of 2022. Company-owned-and-operated store costs and expenses comprise the following:

• Food and packaging costs were 137.5 million renminbi ($18.9-million (U.S.)), representing an increase of 42.4 per cent from 96.6 million renminbi, in line with the company's revenue growth and store network expansion. Food and packaging costs as a percentage of revenues from company-owned-and-operated stores increased by 1.9 percentage points from 33.3 per cent in the third quarter of 2022 to 35.2 per cent in the same quarter of 2023, driven by promotional activities to attract more customers.
• Rental and property management fee was 77.4 million renminbi ($10.6-million (U.S.)), representing an increase of 71.3 per cent from 45.2 million renminbi, mainly due to the increase in the number of company-owned-and-operated stores from 454 as of Sept. 30, 2022, to 589 as of Sept. 30, 2023, and also one-time rent concessions that the company received during the third quarter of 2022. As a result, rental and property management fee as a percentage of revenues from company-owned-and-operated stores increased by 4.2 percentage points from 15.6 per cent in the third quarter of 2022 to 19.8 per cent in the same quarter of 2023.
• Payroll and employee benefits expenses were 79.3 million renminbi ($10.9-million (U.S.)), representing an increase of 20.1 per cent from 66 million renminbi. Payroll and employee benefits as a percentage of revenues from company-owned-and-operated stores decreased by 2.5 percentage points from 22.8 per cent in the third quarter of 2022 to 20.3 per cent in the same quarter of 2023, primarily due to the continuous refinement of staffing systems and procedures.
• Delivery costs were 34.2 million renminbi ($4.7-million (U.S.)), representing an increase of 44.8 per cent from 23.6 million renminbi, due to an increased proportion of home delivery orders. Delivery costs as a percentage of revenues from company-owned-and-operated stores increased by 0.6 percentage point to 8.7 per cent in the third quarter of 2023 compared with that of the same quarter in 2022.
• Other operating expenses were 35.7 million renminbi ($4.9-million (U.S.)), representing a decrease of 5.8 per cent from 37.9 million renminbi, driven by cost optimization measures and deployment of systems to improve daily operation efficiency, for example, an automated stock-taking system. Other operating expenses as a percentage of revenues from company-owned-and-operated stores decreased by four percentage points from 13.1 per cent in the third quarter of 2022 to 9.1 per cent in the same quarter of 2023.
• Store depreciation and amortization expenses was 36.5 million renminbi ($5-million (U.S.)), representing an increase of 19.1 per cent from 30.6 million renminbi, driven by an increase in the number of company-owned-and-operated stores from 454 as of Sept. 30, 2022, to 589 as of Sept. 30, 2023. Store depreciation and amortization as a percentage of revenues from company owned and operated stores decreased by 1.3 percentage points from 10.6 per cent in the third quarter of 2022 to 9.3 per cent in the third quarter of 2023.

Costs for other revenues were 42.1 million renminbi ($5.8-million (U.S.)) for the three months ended Sept. 30, 2023, representing an increase of 345.6 per cent from 9.5 million renminbi in the same quarter of 2022, which was primarily driven by an increase in the number of franchised stores from 32 as of Sept. 30, 2022, to 174 as of Sept. 30, 2023, and the incurrence of higher cost of product sales related to the company's e-commerce business during the third quarter of 2023. Costs for other revenues as a percentage of other revenues increased by 32.1 percentage points from 60.2 per cent in the third quarter of 2022 to 92.3 per cent in the same quarter of 2023 due to higher discounts and more promotional activities offered to consumers of the company's e-commerce business.

Marketing expenses were 34.4 million renminbi ($4.7-million (U.S.)) for the three months ended Sept. 30, 2023, representing an increase of 38.5 per cent from 24.9 million renminbi in the same quarter of 2022, which was primarily attributable to the increase in the number of the company's systemwide stores from 486 as of Sept. 30, 2022, to 763 as of Sept. 30, 2023. Marketing expenses as a percentage of total revenues decreased by 0.2 percentage point from 8.1 per cent in the third quarter of 2022 to 7.9 per cent in the same quarter of 2023.

General and administrative expenses were 71.1 million renminbi ($9.7-million (U.S.)) for the three months ended Sept. 30, 2023, representing a decrease of 35.1 per cent from 109.6 million renminbi in the same quarter of 2022, which was primarily due to: (i) a decrease in share-based compensation expenses; and (ii) a decrease in professional fees. Adjusted general and administrative expenses, which exclude share-based compensation expenses of three million renminbi ($400,000 (U.S.)) and professional fees related to warrant exchange and other financing programs of 4.6 million renminbi ($600,000 (U.S.)), were 63.4 million renminbi ($8.7-million (U.S.)). Adjusted general and administrative expenses as a percentage of total revenues decreased by 1.3 percentage points from 15.8 per cent in the third quarter of 2022 to 14.5 per cent in the same quarter of 2023.

Franchise and royalty expenses were 15.5 million renminbi ($2.1-million (U.S.)) for the three months ended Sept. 30, 2023, representing an increase of 40.8 per cent from 11 million renminbi in the same quarter of 2022, which was in line with the company's top-line growth and was primarily driven by the increase in the number of the company's systemwide stores from 486 as of Sept. 30, 2022, to 763 as of Sept. 30, 2023. Franchise and royalty expenses as a percentage of total revenues remained flat at 3.6 per cent in the third quarters of 2022 and 2023.

As a result of the foregoing, operating loss was 159.7 million renminbi ($21.9-million (U.S.)) for the three months ended Sept. 30, 2023, compared with 150.5 million renminbi in the same quarter of 2022.

Adjusted corporate EBITDA was a loss of 70.2 million renminbi ($9.6-million (U.S.)) for the three months ended Sept. 30, 2023, compared with a loss of 47.6 million renminbi in the same quarter of 2022. Adjusted corporate EBITDA margin was negative 16.1 per cent in the third quarter of 2023, compared with negative 15.6 per cent in the same quarter of 2022.

Net loss was 159.7 million renminbi ($21.9-million (U.S.)) for the three months ended Sept. 30, 2023, compared with 195 million renminbi for the same quarter of 2022. Adjusted net loss was 107.9 million renminbi ($14.8-million (U.S.)) for the three months ended Sept. 30, 2023, compared with 87.5 million renminbi for the same quarter of 2022. Adjusted net loss margin was negative 24.7 per cent in the third quarter of 2023, representing an improvement of 3.9 percentage points from negative 28.6 per cent in the same quarter of 2022.

Basic and diluted net loss per ordinary share was 1.01 renminbi (14 U.S. cents) in the third quarter of 2023, compared with 1.56 renminbi in the same quarter of 2022. Adjusted basic and diluted net loss per ordinary share was 0.69 renminbi (nine U.S. cents) in the third quarter of 2023, compared with 0.70 renminbi in the same quarter of 2022.

Liquidity

As of Sept. 30, 2023, the company's total cash and cash equivalents and short-term investments were 461.8 million renminbi ($63.3-million (U.S.)), compared with 611.5 million renminbi as of Dec. 31, 2022. The change was primarily attributable to the settlements with investors who entered into an equity support agreement dated March 8, 2022, as amended, with the company and cash disbursements as a result of the rapid expansion of the company's business and store network nationwide, offset by an increase in bank borrowings.

Exchange rate information

This press release contains translations of certain renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from renminbi to U.S. dollars were made at the rate of 7.2960 renminbi to $1 (U.S.), the exchange rate in effect on Sept. 29, 2023, set forth in the H.10 statistical release of the Federal Reserve Board. The company makes no representation that the renminbi or U.S.-dollar amounts referred could be converted into U.S. dollars or renminbi, as the case may be, at any particular rate or at all.

Prerecorded presentation

The company will host a prerecorded presentation that will be available beginning at Wednesday, Nov. 15, 2023, at 8 a.m. Eastern Time (or Wednesday, Nov. 15, 2023, at 9 p.m. Beijing time) from the Tims China investor relations website under "Events and Presentations."

About TH International Ltd.

TH International (Tims China) is the parent company of the exclusive master franchisees of Tim Hortons coffee shops in China, Hong Kong and Macau and Popeyes restaurants in China and Macau. Tims China was founded by Cartesian Capital Group and Tim Hortons Restaurants International, a subsidiary of Restaurant Brands International.

The company's philosophy is rooted in world-class execution and data-driven decision making and centred on true local relevance, continuous innovation, genuine community and absolute convenience.

We seek Safe Harbor.