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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.