Chagee Holdings (CHA) Q2 2026 earnings call transcript

Thank you. Hello, everyone, and welcome to Chagee's second quarter 2026 earnings call. With us today are Mr. Junjie Zhang, our CEO, Mr. Aidan Ying, our COO, and Mr. Aaron Huang, our CFO. So, the company's financial and operating results were released by the newsware earlier today and are currently available online. Before we continue, I refer you to our Safe Harbor Statement in the earnings rate price release, which applies to this call. Any forward-looking statements that we make on this call are based on assumptions as of today, and Chagee does not undertake any obligations to update these statements. Also, this call includes discussions of certain non-GAAP financial measure. Please refer to our earnings release, which contains a reconciliation of non-GAAP measure to GAAP measure.

With that, I will turn the call to our CEO, Mr. Juin Jie Zhang. Please go ahead, sir.

Hello, everyone. Welcome to the 2016 year's second year's financial announcement. Hello, everyone. Welcome to Chagee's Second Quarter 2026 Earnings Call. As we entered 2026, our strategy has stayed focused on the fundamentals of the business, centered on doing well and doing well. We will now turn the call over to management. The more complex the market, the more important it is to return to the fundamentals. The more intense the competition, the more important it is to perfect every consumer touchpoint. All of our work in the second quarter was built around this logic, not as reactive response, but as a more focused commitment to our proven path. The product for discussion with large and large numbers of companies is still in charge of the company.

The client calls for large and large, of all organizations have the opportunity to have on their public business. The E-Suite industry campaign has a strong and powerful governance to come for various brands. Which changes the product, all the prices have increased the capacity of supply. The future is the logic, and the future is the logic, and the key to the core of the market. The tea beverage industry is going through a structural change. On the supply side, the fresh milk tea category is now crowded with more players, and a competitive landscape has shaped from shared growth in an expanding market to competition over a fake space, raising the intensity of competition. On the demand side, shifting generational value requires brands to find new ways of telling their story.

The old playbook built on high-profile positioning and loud marketing has lost its effectiveness. What consumers are looking for today is individual self-expression and a genuine sense of comfort. Brands need to become a gentle touch point that resonates with the individual, connecting through sincerity and responding to consumers with care. On the channel side, intensified competition among delivering platforms is reshaping consumer behavior. The public domain has expanded meaningfully and become a key competitive arena for brands. Meanwhile, traffic distribution has become increasingly diversified and fragmented. Brands must closely track where consumers are moving and allocate resources efficiently.

In response to these changes, we're building our capabilities across four dimensions. First, strengthening our core capabilities. At the front end, we're in a way to build our capabilities. We are enhancing our innovation capabilities, striving for excellence, embracing new directions, and fully unlocking the creativity of our branding and product teams. In the middle office, we are reinforcing our support infrastructure. Innovation alone is not enough. We also need strong capabilities to mobilize resources and deliver our goals. We are therefore continuing to upgrading our operating system, channel capabilities, consumer operations, and IT infrastructure to support our growing scale. 第二,调整产品的结构,我们在原一些奶茶之外,积极在探索更多的品类,比如二季度大家看到三星的茶特条品类,Gilato品类的,我们也希望可以通过更多尝试更多产品的品类形态,以满足用户日益多元的需求。 This is a challenge for us to continue to change.

Whether it's the ability of the supply chain or the supply chain, we need to provide more practical support for the product. Second, broadening our product mix. Beyond loosely fresh milk tea, we're actively exploring additional categories, including the special deals and gelato, recently launched in the second quarter. We want to test more product formats to meet our consumers' increasingly diverse needs. This requires us to continue reforming our supply chain capabilities and operating system to provide a solid foundation for category expansion.

Third, enhancing consumer reach. On one hand, we're using flexible and diverse content marketing to connect with consumers and expand our traffic funnel. On the other hand, we are expanding our reach through penetration across more consumer scenarios. The fourth is the value of the market. With the change of the market, the market needs to be a good-to-date market.

Through the value of the market and experience, the market will be a real-to-date market. This is the first. Fourth, we are evolving our value proposition. As consumers need to evolve, our brand value proposition, This is a process of an ongoing one. We believe that in a more complicated environment, we will be able to make sure that we are more than enough to build a new product. Connecting through tea is our enduring value, perfecting the art of tea, bringing Chagi to the world, and building a premium brand with exceptional user experiences. This is our unrivering direction and standard. We continue to build our capabilities towards this goal. With every step deliberate and grounded, we believe that the more complex the environment, the more important it is to return to the fundamentals.

Making great products, serving our consumers well, and refining every tea house. As we continue to depend our capabilities across product innovation, marketing innovation, organizational efficiency, consumer operations, and overseas expansion, we're confident in achieving high quality, sustainable growth in any market environment. Last quarter, we announced a share repurchase program of up to 150 million. As of August 24th, we have executed approximately 30 million U. S. dollars in repurchases. Through continued action, we want to demonstrate the company's firm confidence in its long-term value and deliver a tangible return on our shareholders' trust.

Next I will hand the call over to our Cho O Aidan who will walk you through the execution during the quarter Thank you Thank you, Gwyn杰, and thank you all for joining our earnings call today. 首先,我来分享一下二季度的整体表现。二季度总收入为人民币34.15亿元,同比增长2.5%,环比下降37%。Gap净利润达到了人民币4.65亿元,净利润率为13.6%,相比去年同期的2.3%实现了大幅提升。 Long-gapal金利润为人民币4.89亿元, Long-gapal金利润率为14.3%,环比保持稳定。 Good morning, and welcome to the Chagee Holdings Ltd. earnings conference call. I will now turn the call over to management for Good morning. 二季度,总GNV为人民币76.6亿元,环比降低33%。中国区GNV为人民币71.56亿元,环比降低10.5%。海外市场表现突出,GNV达到人民币5.04亿元,环比增长18.2%,同比增长114.3%,继续成为我们重要的增长引擎。 Total GMV for the second quarter was RMB 7,660 million, down 3.3% sequentially. Greater China GMV was RMB 7,156 million, down 4.5% sequentially. Over-seas markets stood out, with GMB reaching RMB 504 million, up 18.2% sequentially, and 114.3% year-over-year, continuing to serve an important growth engine for us.

The C-Holdings Ltd. earnings conference call. The other one, the Chagee Holdings Lt. earnings conference call. The overall C&MV is 25% of the C&M. The performance is a good one. This quarter, we continued to advance our high quality growth strategy across four key dimensions.

First, we accelerated new product launches. We launched a total of 17 new products this quarter, the highest number in a single quarter in our history. Our offerings have expanded from loose leaf fresh milk tea to include special deals, lemon tea latte, matcha latte, gelato, and other series. Within loose tea fresh milk tea, we successfully brought back two classic products. Melon Oolong Tea Milk reached an average of 110 cups per tea house per day in its first week, with a cup share of nearly 20% and the highest first-time member penetration of any new product this year. The return of Long Jing Tea Latte drove overall GMV up nearly 25% sequentially during the tomb sweeping day period, outperforming last year.

品类拓展方面,长而特雕走走训练,精神匹配了周末休闲场景。上星3日,电日均倍量达到了124倍,带动了周末经济为涨幅达到了双位数。 柠檬奶上星期间带动首次消费会员增长了45%,验证了品类延伸对新颗获取的拉动力。 此外,我们在部分门店四点的Galato将原液茶与易式冰淇淋供应箱结合,截至8月累计落电达到190价。Galato受到了广大茶友的欢迎,从近期的表现来看,四点门店业绩显著提升。 平均线下局的GMV提升了20%以上,且贾丫头呈现出更强的Machine能力和沉睡用户的化险能力,同时也有效地增加了线下客流。 The launch of the Lemon Tea Latte also increased the first-time member acquisition by 45% during the launch period, underscoring for its effectiveness in attracting new customers. In addition, we piloted gelato in selected teahouses, combining loose tea leaves with Italian gelato craftsmanship. As of August, Gelato has been introduced in more than 190 teahouses and has been well received by our Chagi friends. Recent pilot store performance indicates meaningful improvement. With average offline channel GMV increasing by more than 20%, Gelato has also demonstrated a strong ability to attract new customers, reactivate dormant members, and increase in-store traffic. 第二,营销持续构建高价值品牌类合。深耕品牌质感与文化共鸣,推进了一系列高影像力合作,探索文化与茶影像结合的体验升级。 例如,6月份我们与阿拉雅系级界达成战略合作,并于7月开设首个XD Imagine查空间。 我们也联手湖北省博物馆,开设全国首家博物馆主持店,聚焦传统文化与非裔传承,让茶饮成为文化载体。 Second, our marketing campaign is a great deal. continues to build a high value brand core, deepening brand character and cultural resonance through a series of high impact collaborations, exploring upgrades at the intersection of culture and tea.

In June, we formed a strategic partnership with the Araya Theatre Festival and opened our first Cahagi Imagine Tea Space in July. We also partnered with the Hubei Provincial Museum to launch the country's first museum-themed tea house, drawing on traditional culture and intangible cultural heritage to position tea as a meaningful cultural medium. By clearly communicating with our brand values and philosophy, we have strengthened emotional connections with consumers and translated that engagement into consumer acquisition and loyalty. As of the end of June, our total registered members reached 257 million. The repurchase rate among active members remained above 43%, while members who made two or more purchases accounted for more than 78% of total orders. 第三,组织效能持续释放。本季度我们实现的non-gap管理费用率为9.1%,较去年同期的13.2%下降了4.1个百分点,环比也下降了2.5个百分点。 本集中Longap销售及营销费用率从去年同期的10.6%收到至8.8% 稳定在各位数的健康区间,与一季度8.6%的水平保持基本一致 我们优化费用率并非简单压缩支出,而是提升资源投放效率 The first thing we can do is to get more quickly, more accurate, more efficient, more efficient.

We will be able to collect the most available resources to the most available customer service. And sequentially, our non-GAAP sales and marketing expense ratio narrowed down to 8.8% from 10.6% a year ago, remaining within a healthy single-digit range and broadly in line with the 8.6% level reported in the first quarter. These improvements are not simply cutting spending. They reflect a more disciplined and efficient approach to resource allocation. We're executing faster, with greater precision and stronger coordination, while focusing our resources on an initiative that creates the most value for consumers. 第四,国的门链网络,以资料为先,海外扩张保持稳健节奏,截止二级多末,全球门链总计7639家,较上级多末竞争108家,其中中国区7240家,海外399家。 We have already entered 8 international markets, close to Singapore, Malaysia, China, India, Philippines, and Europe.

of 108 locations from the prior quarter. This includes 7,240 tea houses in Greater China and 399 overseas. We're now present in 8 overseas markets, including Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, and the United States, and South Korea. 本季度,我们首次进入韩国市场,所有三天开业前三日总销售杯量超过了16000杯,开业前APP下载量超过了46000次,五月单店日均杯量达到了1648倍,这一表现充分验证了包吻查局品牌的区域竞争力与吸引力。 This quarter marked our first entry into South Korean market Our three sold teahouses sold over 16 cups combined in their first three days with pre app downloads exceeding 46 Average daily cup volume per teahouse reached 1,648 in May, demonstrating the strong regional appeal and competitiveness of the Chagee brand. During World's Tea Day, we introduced new offerings under the Boya Tea Latte series across the Asia-Pacific region. The series is increased average cups sold per teahouse across the region by 52% during its first 15 days.

In Vietnam, Thailand, and in New Asia, the Boya Tea Lt series accounted for more than 30% of cup volume, underscoring the cross-market appeal of our core product offerings. We will now turn the call over to management for the future. We will ensure the product is a good product. We will ensure the product is a good product. On products, we will maintain a consistent launch cadence, expand into new categories, and continue enhancing ingredients, including sugar and dairy bases, to lead the development of healthier tea beverages.

On service, we will further optimize our membership program and overall consumer experience. Across our teahouse network, we will prioritize high-quality growth in Greater China while expanding overseas in a disciplined manner. We will also upgrade equipment to help ensure product consistency and improve operating efficiency. On experience, we will continue to differentiate our teahouses through thoughtful design, creating a third space where consumers genuinely want to spend time.

Finally, on brand, we will stay closely aligned with market trends and continue elevating the tea experience through brand enhancements, consistent product quality, and improved consumer experience. And an involving training system. My thoughts are here.

Next, I invite CFO to review the details of the current year's financial.

Thank you. In the beginning, please note that all amounts are in RMB and all comparisons are on year-over-year basis unless otherwise stated. As Junji and Aiden outlined, the second quarter presented a softer macro backdrop and a more challenging competitive landscape across the industry, and our results reflect that environment. What I want to emphasize is that even as top-line growth is moderated, we maintain the operating discipline we established earlier this year, and our profitability held largely intact. We view this as evidence that our cost structure and organizational efficiency gains are durable, not at one time, and that they give us a stable foundation to keep executing our strategy priority, regardless of the external environment.

With that contact, let me walk through the portal in detail. Total GMV was $7,660.3 million in the second quarter, down 3.3%, sequentially from $7,917.8 million in the first quarter. As of June 30, 2026, our teahouse network totaled 7,639 locations across Greater China and overseas, up 8.5% from 7,038 a year ago. Of these, 6,756 were franchisee teahouses, and 883 were company-owned teahouses. In Greater China, average monthly GME per tier houses was 338,259 in the second quarter, compared to 356,080 in the first quarter. Meanwhile, overseas total GMV grow 114.3% year-over-year and 18.2% quarter-over-quarter, from $426.4 million in the first quarter to $504.0 million in this quarter.

Overseas markets remain our clearest growth engine. Thin-Store GMV growth in Greater China improved by 7% points year over year and was broadly flat sequentially. Overall, Thin-Store GMV growth improved by 6.9% points from a year ago and remained relatively stable compared with the prior quarter.

On the revenue line, our net revenues increased by 2.5% year-over-year to $3,414.6 million in the second quarter. Net revenue from franchisees to teahouses were $2,474 million, representing 72.5% of total net revenue. Compared to $3,020.7 million a year ago, net revenue from company-owned teahouses were $940.6 million, up 202.2% from $311.2 million a year ago. Mainly as a result of continued development of the company-owned C-House and Standard Work across Greater China and overseas markets.

Turning to margin, our gross profit, calculated by excluding cost of material, storage, and logistics from net revenue, reached $1,843.4 million this quarter, Resulting in a gross margin of 54% flat year-over-year. Our organizational enhancements drove a meaningful year-over-year decline in operating expenses. Share-based conversation expenses totaled $23.9 million in the quarter, and it reflects our focus on retaining and motivating employees while aligning their interests with those of shareholders. To provide greater clarity on underlying operational performance, we will continue to reference non-GAAP operating results, with full reconstruations available in our earnings release in the Form 6K. Operating income was $524.7 million, representing an operating income margin of 15.4%, increased significantly from 3.2% in the same period of a year ago.

Benefiting from our strategic organizational adjustment and the continued discipline cost management. Excluding share-based compensation expenses, non-GAAP operating income was $548.6 million, representing a 16.1% margin compared to a 17.1% margin in the first quarter of 2026. Operating costs for company-owned teahouses were $566.8 million, up 207.8% from $184.1 million a year ago, consistently with the continued build-out of our company-owned network. Other operating costs decreased by 33.3% to $115.8 million, largely due to a decrease of RMB $30.2 million in payroll expenses, driven by organizational structure enhancement and headcount optimization. On a known gap basis, other operating costs accounts for 3.4% of revenues compared to 4.7% a year ago and 4.3% in the first quarter. Sales and marketing expenses for the quarter were $301.5 million, down 21.7% from $385 million a year ago, mainly due to a more streamlined branding and marketing team, together with improved efficiency in advertising, placement, and precision marketing.

On a non-GAAP basis, sales and marketing expenses represented 8.8% of revenue compared to 10.6% a year ago and 8.6% in the previous quarter. General and administrative expenses reached $334.5 million, down 64.6% year-over-year from $944.6 million. The decrease primarily reflected lower share-based compensation expenses, reduced payroll, facility, and professional service costs, and absence of IPO-related expenses incurred in the prior year period. On a non-GAAP basis, G&A expenses represented 9.1% of revenues compared to 13.2% in the same period a year ago and 11.6% in the first quarter. Income tax expenses represented 20% of income before income tax, compared to 62.1% a year ago and 21.2% in the first quarter. The year-over-year normalization primarily reflecting a reduced impact from share-based conversation expenses.

Notably we continue to deliver profitability on both GAAP and non basis extending our track record to 14 consecutive quarters of positive net income GAAP net income was $464.8 million. Non-GAAP net income, excluding $23.9 million of share-based compensation expenses, was $488.7 million, With a non-GAAP net margin of 14.3% compared to 18.9% a year ago and flat sequentially.

For the second quarter, basic and diluted net income per ordinary share was R&B 2.44 and R&B 2.42, respectively. On a non-gap basis, basic and diluted net income per ordinary share was R&B 2.57 and R&B 2.54, respectively.

Turning to liquidity, we ended the quarter with $6,795.5 million in cash and cash-equivalent restricted cash and time deposits. This reflects the impact of our share repurchase program commencing on June 1st, 2026 alongside our continued investment in Chagee Holdings network. We maintain a healthy balance sheet that gives us flexibility to keep executing our strategic priorities while returning capital to shareholders. As we move through the remainder of 2026, we will execute against our new product pipelines, enhancement memberships, and service experience, and maintain a focus on quality as we expand our T-House network in greater China and overseas. Our confidence in the company long-term value remains firm, and we are committed to return value to our shareholders in a meaningful way.

With that, we are ready to begin Q&A.

Thank you, Aaron. We received a number of questions ahead of today's call. We will now address some of the key topics raised. Our first question relates to the outlook of the second half of the year. How does management view the second half of the year amid the current competitive market environment?

Our CEO Junjie will address this question. Thank you. Thanks for the question. As we just shared, the market environment has changed. The market has changed significantly, and competition in the industry has become more intense. But we have always believed that the more complex the market becomes, the more important high-quality growth is. We see 2026 as a year of adjustment and stabilization. In Q1, we completed the organizational restructuring and conducted a systematic review of our growth strategy. In Q2, we have started to explore areas such as new product category expansion and user experience upgrades. Our core objective this year is not to pursue rapid expansion in scale, but to build a stronger foundation for sustainable growth in the next stage.

So, in the next half, our work will be more focused and more focused on the process of analyzing and searching. We will now turn the past year and future results. We will now turn the call over to management for the next year. We will be focused on the fundamentals, making good products, and doing things that matter most to our members. We remain confident in steady development in the second half. Our next question relates to Sameswar trends. Could you share how Sameswar have trended so far in the third quarter?

Our CEO Aiden will address this question. Thanks for the question. Since the startup Q3, we have seen positive signs of recovery. Same-store sales in July showed a low single-digit decline, representing a meaningful improvement from the first half. Based on trends so far, we expect same-store sales in August to turn positive year over year. We believe the improvement reflects that the benefit of our earlier strategic adjustments are gradually coming through.

There are a few drivers behind this trend. First, our new product strategy continues to contribute. In Q3, we maintained the pace of new launches from Q2, introducing several new products, including Guava Peach Ice Teeth and Lemon Tea Latte, while also relaunching popular bestsellers. The Chagee Holdings Ltd. earnings conference call. I will now turn the call over to management for the C-Hagee Holdings Ltd. Second, we continue to refine in-store service and customer experience. We have consistently emphasized a return to fundamentals, and throughout this year, we have continued to refine service details at the teahouse level, improving preparation and performance. We are translating these seemingly small details into real tangible outcomes in the form of repeat purchases and the world of miles.

I will now turn the call over to the Chagee Holdings Ltd. Thank you for your question. The returns have always been one of the key considerations in our capital allocation strategy. In the fourth quarter of last year, we paid a special dividend of 177 million U. S. dollars, which reflects our commitment to returning value to shareholders. In the year of the year of the year, the organization's development and the efficiency of the Chagee Holdings Lt. is now a part of the Chagee Holdings Lt. We will now turn the call over to management for the CHG. Entering 2026, with the organizational optimization and continued improvement in operating efficiency, our free cash flow has remained healthy. This provides a solid foundation for us to explore a more regular and sustainable shareholder return mechanism.

Currently, the board and management are actively and prudently reviewing different options, including regular dividends, while considering our medium- to long-term strategy, funding needs for tea house development, and changes in the market environment. We fully understand that it is important for shareholders to share in the results of the company where we maintain high-quality growth. Therefore, continuously enhancing shareholder returns remain a firm direction for us. Management team is currently evaluating the specific details. We will bring a proposal to the Board at the appropriate time, subject to the Board's review and approval, provide an update to the market.

That concludes today's Q&A session. If you have any further questions, please feel free to contact us or request us through our IR website. Thank you all for your time today. We look forward to reconnecting on our next call. Have a wonderful day.