Q2 2026 Yum China Holdings Inc Earnings Call

July 30, 2026

Operator: Good day everyone, and thank you for standing by. Welcome to Yum China Q2 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Florence Lip, Senior Director of Investor Relations. Please proceed.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised.

Operator: You will then hear a message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Florence Lip, Senior Director of Investor Relations. Please proceed.

Speaker #1: To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Now, it's my pleasure to hand the conference over to Florence Lip, Senior Director of Investor Relations.

Speaker #1: Please proceed.

Speaker #2: Thank you, Operator. Hello, everyone, and welcome to Yum China's second quarter 2026 earnings conference call. With me on the call are our CEO, Ms. Joey Wat, and our CFO, Mr. Adrian Ding.

Florence Lip: Thank you, operator. Hello everyone, and welcome to Yum China Q2 2026 Earnings Conference Call. With me on the call are our CEO, Ms. Joey Wat, and our CFO, Mr. Adrian Ding. Before we begin, I will remind everyone that our remarks and investment materials contain forward-looking statements. These are subject to future events and uncertainties, and actual results may differ materially. Please refer to these forward-looking statements, together with the cautionary statement in our earnings release and the risk factors included in our SEC filings. We will also be talking about non-GAAP financial measures. We encourage you to review the comparable GAAP measures along with the reconciliation of non-GAAP and GAAP measures provided in our earnings release, which is available on our investor relations website at ir.yumchina.com. You can also find both the webcast replay and a PowerPoint presentation on our IR website.

Speaker #2: Before we begin, I want to remind everyone that our remarks and investment materials contain forward-looking statements. These statements are subject to future events and uncertainties, and actual results may differ materially.

Speaker #2: Please refer to these forward-looking statements together with the cautionary statement in our earnings release and the risk factors included in our SEC filings. We'll also be talking about non-GAAP financial measures.

Florence Lip: Please refer to these forward-looking statements, together with the cautionary statement in our earnings release and the risk factors included in our SEC filings. We will also be talking about non-GAAP financial measures. We encourage you to review the comparable GAAP measures along with the reconciliation of non-GAAP and GAAP measures provided in our earnings release, which is available on our investor relations website at ir.yumchina.com. You can also find both the webcast replay and a PowerPoint presentation on our IR website.

Speaker #2: We encourage you to review the comparable GAAP measures along with the reconciliation of non-GAAP and GAAP measures provided in our earnings release, which is available on our investor relations website at ir.yumchina.com.

Speaker #2: You can also find both the webcast replay and a PowerPoint presentation on our IR website. Please note that all year-over-year growth rates discussed today exclude the impact of foreign currency, unless we mention otherwise.

Joey Wat: Please note that all year-over-year growth rates discussed today exclude the impact of foreign currency unless we mention otherwise. With that, I will now turn the call over to Joey Wat, CEO of Yum China. Joey? Hello everyone, and thank you for joining us. We delivered strong Q2 results. For the ninth consecutive Q, we achieved system sales growth, operating profit growth, and OP margin expansion at the same time. I would like to thank our team again for making this possible. Revenue grew 13%. Operating profit increased 14%, and diluted EPS rose 21% year-over-year, partially supported by favorable foreign exchange impact. Excluding foreign exchange impact, system sales grew 6% in Q2, up from 4% in Q1, and continued to outperform the catering industry. Same-store sales growth also improved sequentially to 1%, driven by the 14th consecutive Q of same-store transaction growth.

Florence Lip: Please note that all year-over-year growth rates discussed today exclude the impact of foreign currency unless we mention otherwise. With that, I will now turn the call over to Joey Wat, CEO of Yum China. Joey?

Speaker #2: With that, I'll now turn the call over to Joey Wat, CEO of Yum China. Joey?

Speaker #3: Hello, everyone, and thank you for joining us. We delivered strong second quarter results. For the ninth consecutive quarter, we achieved system sales growth, operating profit growth, and operating profit margin expansion at the same time.

Joey Wat: Hello everyone, and thank you for joining us. We delivered strong Q2 results. For the ninth consecutive Q, we achieved system sales growth, operating profit growth, and OP margin expansion at the same time. I would like to thank our team again for making this possible. Revenue grew 13%. Operating profit increased 14%, and diluted EPS rose 21% year-over-year, partially supported by favorable foreign exchange impact. Excluding foreign exchange impact, system sales grew 6% in Q2, up from 4% in Q1, and continued to outperform the catering industry. Same-store sales growth also improved sequentially to 1%, driven by the 14th consecutive Q of same-store transaction growth.

Speaker #3: I would like to thank our team again for making this possible. Revenue grew 13%. Operating profit increased 14%, and diluted EPS rose 21% year over year.

Speaker #3: Partially supported by favorable foreign exchange impact. Excluding foreign exchange impact, system sales grew 6% in Q2, up from 4% in Q1, and continued to outperform the catering industry.

Speaker #3: Same-store sales growth also improved sequentially to 1%, driven by the 14th consecutive quarter of same-store transaction growth. We opened 560 net new stores, with expansion accelerating year-over-year across both equity and franchise stores.

Florence Lip: We opened 560 net new stores, with expansion accelerating year-over-year across both equity and franchise stores. With our due focus on innovation and operational efficiency, Q2 restaurant margins and OP margins stayed resilient despite significant cost pressure from a higher delivery mix. Our breakthrough side-by-side modules are scaling rapidly, especially in higher tier cities. KFC's K Coffee Cafe and KPRO are effectively capturing new customer occasions. Pizza Hut's new Pizza Hut Burger Bar was well received by our customers. At the same time, KFC Small Town Model and Pizza Hut WOW are helping us penetrate lower tier cities quickly. Together with innovation in our core menus, these initiatives are unlocking new opportunities for us. Let me start with Pizza Hut, which makes significant progress in Q2.

Joey Wat: We opened 560 net new stores, with expansion accelerating year-over-year across both equity and franchise stores. With our due focus on innovation and operational efficiency, Q2 restaurant margins and OP margins stayed resilient despite significant cost pressure from a higher delivery mix. Our breakthrough side-by-side modules are scaling rapidly, especially in higher tier cities. KFC's K Coffee Cafe and KPRO are effectively capturing new customer occasions. Pizza Hut's new Pizza Hut Burger Bar was well received by our customers. At the same time, KFC Small Town Model and Pizza Hut WOW are helping us penetrate lower tier cities quickly. Together with innovation in our core menus, these initiatives are unlocking new opportunities for us. Let me start with Pizza Hut, which makes significant progress in Q2.

Speaker #3: With our due focus on innovation and operational efficiency, Q2 restaurant margins and OP margins stayed resilient despite significant cost pressure from a higher delivery mix.

Speaker #3: Our breakthrough side-by-side modules are scaling rapidly, especially in higher-tier cities. KFC's K-Coffee Café and K-Pro are effectively capturing new customer occasions. Pizza Hut's new Burger Bar was well received by our customers.

Speaker #3: At the same time, KFC's small-town model and Pizza Hut's WOW are helping us penetrate lower-tier cities quickly. Together with innovation in our core menus, these initiatives are unlocking new opportunities for us.

Speaker #3: Let me start with Pizza Hut, which made significant progress in the second quarter. Pizza Hut's same store sales growth returned to positive at 1%, while new store openings accelerated—almost doubling what we did in the second quarter last year.

Florence Lip: Pizza Hut same-store sales growth returned to positive at 1%, while new store openings accelerated almost double what we did in Q2 last year. This brings net new store openings to 381 in H1, nearly matching our 2025 total.

Joey Wat: Pizza Hut same-store sales growth returned to positive at 1%, while new store openings accelerated almost double what we did in Q2 last year. This brings net new store openings to 381 in H1, nearly matching our 2025 total.

Speaker #3: This brings net new store openings to 381 in the first half, nearly matching our 2025 total. In April, we launched Fujita’s and Shashuka’s on the spring menu to enrich Pizza Hut’s protein platforms and enhance the dining experience.

Joey Wat: In April, we launched Fajitas and Shakshuka on the spring menu to enrich Pizza Hut's protein platforms and enhance the dining experience. In May, we extend our pizza category into lighter meal occasions with a new multigrain crust and new protein and vegetable toppings. The pizza's colorful look, nutrient-packed profile, and grain-rich texture make it our best-selling crust since launch in June. We also introduced an individual-sized multigrain pizza with less than 500 calories, helping us attract more solo and light meal diners. Beyond pizza, we are taking Pizza Hut's burger category to the next level with a new side-by-side module, Pizza Hut Burger Bar. In just 6 months, it has expanded to more than 200 locations, contributing double-digit incremental sales and meaningful profit to parent stores. Pizza Hut Burger Bar features a tight menu centered on make-to-order burgers from an open kitchen.

Speaker #3: In May, we extended our pizza category into lighter meal occasions with a new multi-grain crust and new protein and vegetable toppings. The pizza's colorful look, nutrient-packed profile, and grain-rich texture have made it our best-selling crust since its launch in June.

Speaker #3: We also introduced an individual-sized multi-grain pizza with fewer than 500 calories, helping us attract more solo and light meal diners. Beyond pizza, we are taking Pizza Hut's burger category to the next level with a new side-by-side module.

Speaker #3: Pizza Hut's Burger Bar, in just six months, has expanded to more than 200 locations, contributing double-digit incremental sales and meaningful profit to parent stores.

Speaker #3: Pizza Hut’s Burger Bar features a tight menu centered on made-to-order burgers from an open kitchen. Our buns are baked fresh in-store every day, and our patties come straight off the griddle, releasing a rich, savory aroma.

Joey Wat: Our buns are baked fresh in-store every day, and our patties come straight off the griddle, releasing a rich, savory aroma. Great-tasting burgers, amazing value for money, and a quick service model have proved very appealing to young consumers and solo diners. With light investment and by utilizing space in existing stores, we believe Pizza Hut Burger Bar can unlock significant growth opportunities for Pizza Hut. We plan to accelerate the rollout in H2, reaching 500 to 600 locations by the end of 2026. That will represent around 10% of Pizza Hut's nearly 5,000-store portfolio. We are about to reach a major breakthrough by becoming the owner of the Pizza Hut brand in mainland China after operating the brand in the market for 36 years. In the near term, the savings in license fees will enhance store economics and make Pizza Hut's restaurant margin closer to KFC's.

Speaker #3: Great-tasting burgers, amazing value for money, and a quick service model have proved very appealing to young consumers and solo diners. With light investment and by utilizing space in existing stores, we believe Pizza Hut's Burger Bar can unlock Hut.

Speaker #3: We plan to accelerate the rollout in the second half, reaching 500 to 600 locations by the end of 2026. That would represent around 10% of Pizza Hut's nearly 5,000-store portfolio.

Speaker #3: And we are about to reach a major breakthrough by becoming the owner of the Pizza Hut brand in mainland China. After operating the brand in the market for 36 years, in the near term, the savings in license fees will enhance store economics and make Pizza Hut's restaurant margin closer to KFC's.

Speaker #3: This will enable more potential new stores to meet our payback requirement of two to three years. Over the longer term, brand ownership will give us flexibility and allow us to respond more nimbly to market opportunities and consumer needs.

Joey Wat: This will enable more potential new stores to meet our payback requirement of two to three years. Over the longer term, brand ownership will give us greater strategic flexibility and allow us to respond more nimbly to market opportunities and consumer needs. While we are still reviewing our growth plan, our initial assessment points to accelerated store openings beginning next year. In 2027 and 2028, we now expect net new openings to exceed 800 per year, up from our original target of over 600. As we step up our efforts at Pizza Hut, KFC continues to be our number one growth driver, delivering strong results. In Q2, both system sales and core operating profit grew 7% year-over-year. Same-store sales grew 1%. In H1, KFC opened nearly 800 net new stores, around 200 more than in H1 last year.

Speaker #3: While we are still reviewing our growth plan, our initial assessment points to accelerated store openings beginning next year. In 2027 and 2028, we now expect net new openings to exceed 800 per year, up from our original target of over 600.

Speaker #3: As we step up our efforts at Pizza Hut, KFC continues to be our number one growth driver, delivering strong results. In Q2, both system sales and core operating profits grew 7% year over year, and same-store sales grew 1%.

Speaker #3: In the first half, KFC opened nearly 800 net new stores, around 200 more than in the first half last year. KFC's hero products and their extensions continued to drive strong sales and repeat purchases.

Joey Wat: KFC's hero products and their extensions continued to drive strong sales and repeat purchases. Whole chicken has become a major platform for at-home consumption, generating over CNY 2 billion in sales last year. This category has delivered double-digit growth every year since its launch in 2021 and remains on track for double-digit growth in 2026. In April, we add the aromatic paper-wrapped roast chicken, to the permanent menu. It's super juicy and high in protein, appealing to consumers seeking lighter meals. Zinger is another top-selling platform for KFC. In Q2, we introduced the limited time offer, more fragrant, spicier Zinger. The extra spicy chicken thigh's secret sauce and toasted sesame aroma attracted younger customers. Sales were especially strong in spicy-loving provinces, such as Jiangxi and Sichuan. With more regional flavors to come, we see strong potential for the Zinger category to exceed CNY 5 billion in sales by end of 2026.

Speaker #3: Whole chicken has become a major platform for at-home consumption, generating over $2 billion in sales last year. This category has delivered double-digit growth every year since its launch in 2021, and remains on track for double-digit growth in 2026.

Speaker #3: In April, we added the aromatic paper-wrapped roast chicken to the permanent menu—a super juicy, high-protein option appealing to consumers seeking lighter meals.

Speaker #3: Zinger is another top-selling platform for KFC. In quarter two, we introduced the limited-time offer, more fragrant, spicier Zinger. The extra spicy chicken thigh, secret sauce, and toasted sesame aroma attracted younger customers.

Speaker #3: Sales were especially strong in spicy-loving provinces such as Jiangxi and Sichuan. With more regional flavors to come, we see strong potential for the Zinger category to exceed $5 billion in sales by the end of 2026.

Joey Wat: KFC's side-by-side modules, K Coffee Cafe and KPRO, continue to gain momentum and deliver incremental sales and profits. K Coffee Cafe grew to more than 3,300 locations, and we are on track to reach 5,000 locations by the end of 2027. In addition to coffee offerings K Coffee Cafe is broadening its tea and food options, including more eight-top flavors and breakfast pairings to expand its addressable market. KPRO has expanded to over 450 locations and has proven more promising than we expected. Earlier this year, we raised our year-end rollout target from 400 to 600 locations, and we now expect to reach around 800 locations. Following its success in higher tier cities, we are expanding KPRO into select lower tier cities. Beyond increasing its footprint, we are capturing the growing demand for lighter meals through menu innovation.

Speaker #3: KFC's side-by-side modules, Hey Coffee Café and Capro, continue to gain momentum and deliver incremental sales and profits. Hey Coffee Café grew to more than 3,300 locations, and we are on track to reach 5,000 locations by the end of 2027.

Speaker #3: In addition to coffee offerings, Hey Coffee Cafe is broadening its tea and food options, including more eight top flavors and breakfast pairings, to expand its addressable market.

Speaker #3: Capro has expanded to over 450 locations and has proven more promising than we expected. Earlier this year, we raised our year-end rollout target from 400 to 600 locations.

Speaker #3: We now expect to reach around 800 locations. Following its success in higher-tier cities, we are expanding Capro into select lower-tier cities. Beyond increasing its footprint, we are capturing the growing demand for lighter meals through menu innovation.

Speaker #3: In addition to our signature energy bowls, we recently launched sandwiches featuring whole wheat buns, chia seeds, and high-protein ingredients. The sandwiches became an instant hit, with good repeat purchases.

Joey Wat: In addition to our signature energy bowls, we recently launched sandwiches featuring whole wheat buns and chia seeds and high-protein ingredients. The sandwiches became an instant hit with good repeat purchases. In fact, more than 80% of KPRO sales came from KFC members, showing the power of cross-selling and membership. Combined with our trusted food quality standards and strong value for money, KPRO is well-positioned to become a leading player in China's light meal business. Aside from meal modules, KFC is also rolling out curbside pickup service to improve convenience for customers who drive. More than 8,000 KFC stores now offer either drive-through or curbside pickup, where our restaurant staff bring orders to designated pull-up areas. While customer awareness and habits are still in the early stage, the service is gaining traction, supported by strong repeat purchases. Over 7 million members have used this service this year.

Speaker #3: In fact, more than 80% of Capro sales came from KFC members, showing the power of cross-selling and membership. Combined with our trusted food quality standards and strong value for money, Capro is well positioned to become a leading player in China's light meal business.

Speaker #3: Aside from new modules, KFC is also rolling out car-side pickup service to improve convenience for customers who drive. More than 8,000 KFC stores now offer either drive-through or car-side pickup, where our restaurant staff bring orders to designated pull-up areas.

Speaker #3: While customer awareness and habits are still in the early stage, the service is gaining traction. Supported by strong repeat purchases, over 7 million members have used this service this year, yet that still represents only 3% of our active member base, leaving significant room for growth.

Joey Wat: Yet, that still represents only 3% of our active member base, leaving significant room for growth. Let me now turn the call over to Adrian.

Speaker #3: Let me now turn the call over to Adrian.

Speaker #1: Thank you, Joey. Let me update key highlights by brand, starting with KFC. In Q2, both KFC’s same-store sales growth and system sales growth improved sequentially.

Adrian Ding: Thank you, Joey. Let me update key highlights by brand, starting with KFC. In Q2, both KFC same-store sales growth and system sales growth improved sequentially. System sales grew 7%, up from 5% in Q1. Same-store sales grew 1%, the fifth consecutive quarter of growth. Same-store transaction grew 4%, more than offset the ticket average decrease of 3%. Ticket average was CNY 36, lower year-on-year, mainly due to incremental smaller orders from new customer segments and locations such as KCOFFEE and KPRO. Despite significant rider cost headwinds, KFC's restaurant margin expanded 20 basis points to 17.1% in Q2. OP margin also expanded by 20 basis points, once again demonstrating KFC's strong execution and nimble operations at scale. KFC's side-by-side modules continue to drive incremental sales and profit, while improving store economics through model iteration.

Speaker #1: System sales grew 7%, up from 5% in Q1. Same-store sales grew 1%, the fifth consecutive quarter of growth. Same-store transactions grew 4%, more than offsetting the ticket average decrease of 3%.

Speaker #1: Ticket average was 36 yuan, lower year-on-year mainly due to incremental smaller orders from new customer segments and locations, such as K Coffee and Capro.

Speaker #1: Despite significant rider cost headwind, KFC's restaurant margin expanded 20 basis points to 17.1% in Q2. Operating margin also expanded by 20 basis points.

Speaker #1: Once again, demonstrating KFC's strong execution and nimble operations at scale. KFC's side-by-side modules continue to drive incremental sales and profit, while improving store economics through model iteration.

Speaker #1: K Coffee Cafe delivered around a mid-single-digit sales uplift to its parent stores, while Capro delivered around 20%. Tapex for both K Coffee Cafe and Capro has come down by around half from earlier modules last year.

Adrian Ding: K Coffee Cafe delivered around mid-single-digit sales uplift to its parent stores, while KPRO delivered around 20%. CapEx for both K Coffee Cafe and KPRO has come down by around half from earlier modules last year, and both are showing solid margin improvement. Now, moving on to Pizza Hut. In Q2, system sales grew 6% year-over-year, accelerating from 4% in Q1, driven by the sequential improvement in same-store sales growth to 1%. Same-store transactions grew strongly by 13% in Q2, marking the 14th consecutive quarter of growth, offsetting an 11% ticket average decrease. Ticket average was CNY 68, moving closer to our target range of CNY 60 to 70, in line with our mass market strategy, mainly driven by veteran value for money and incremental smaller orders, including those from solo diners and burger bars.

Speaker #1: And both are showing solid margin improvement. Now, moving on to Pizza Hut. In Q2, system sales grew 6% year over year, accelerating from 4% in Q1, driven by the sequential improvement in same-store sales growth to 1%.

Speaker #1: Same-store transactions grew strongly by 13% in the second quarter, marking the 14th consecutive quarter of growth, offsetting an 11% decrease in average ticket. The average ticket was 68 yuan, moving closer to our target range of 60 to 70 yuan, in line with our mass market strategy.

Speaker #1: Mainly driven by better value for money and incremental smaller orders, including those from solo diners and burger bars. Pizza Hut restaurant margin was down 40 basis points.

Adrian Ding: Pizza Hut restaurant margin was down 40 basis points, mainly due to the increased cost associated with the higher delivery sales mix, better value for money, and expenses related to the launch of the Pizza Hut Burger Bar. The new initiative successfully drove incremental sales and profit with a modest margin investment. In H1, restaurant margin was up 10 basis points year-over-year. OP margin expanded by 60 basis points, mainly driven by lower closure and impairment expenses, reflecting improved store performance. In H2, we expect greater year-on-year improvement versus H1 in Pizza Hut's restaurant margin as efficiency continue to improve and rider cost headwinds soften. Moving on to store opening, we opened around 1,200 net new stores in H1, about double the pace of the same period last year, and entered more than 200 new cities.

Speaker #1: Mainly due to the increased cost associated with a higher delivered sales mix, better value for money, and expenses related to the launch of the Pizza Hut Burger Bar.

Speaker #1: The new initiative successfully drove incremental sales and profit, with a modest margin investment. In the first half, restaurant margin was up 10 basis points year over year.

Speaker #1: Operating profit margin expanded by 60 basis points, mainly driven by lower closure and impairment expenses, reflecting improved store performance. In the second half, we expect greater year-on-year improvement versus the first half in Pizza Hut's restaurant margin, as efficiency continues to improve and rider cost headwinds soften.

Speaker #1: Moving on to store openings. We opened around 1,200 new stores in the first half, about double the pace of the same period last year.

Speaker #1: And entered more than 200 new cities. Both equity and franchise store openings accelerated year over year. In the higher-tier cities, we continued to densify our network, primarily through equity stores.

Adrian Ding: Both equity and franchise store openings accelerated year over year. In the higher tier cities, we continue to densify our network, primarily through equity stores, to sustain our powerful brand momentum and operational mode. At the same time, franchisees, which accounted for 40% of total net new openings in H1, are unlocking incremental opportunities for us. They provide additional resources to help us expand into lower tier cities, remote areas, and strategic locations. With franchise stores accounting for only 18% of total stores at Yum China, we're confident there are significant opportunities ahead. Let me now go through our Q2 P&L. System sales grew 6% year on year. Same-store sales grew 1%, sequentially improved from Q1. Our restaurant margin was 16.1%, in line with the prior year level. Improvements in occupancy and other costs offset growth in cost of sales and cost of labor.

Speaker #1: To sustain our powerful brand momentum and operational moat. At the same time, franchisees, which accounted for 40% of total net new openings in the first half, are unlocking incremental opportunities for us.

Speaker #1: They provide additional resources to help us expand into lower-tier cities, remote areas, and strategic locations. With franchise stores accounting for only 18% of total stores for Yum China, we're confident there are significant opportunities ahead.

Speaker #1: Let me now go through our Q2 P&L. System sales grew 6% year-on-year. Same-store sales grew 1%, a sequential improvement from Q1.

Speaker #1: Our restaurant margin was 16.1%, in line with the prior year level. Improvements in occupancy and other costs offset growth in cost of sales and cost of 31.5%, 50 basis points higher year over year.

Adrian Ding: Cost of sales was 31.5%, 50 basis points higher year over year, mainly due to better value for money offerings, increased packaging costs due to a higher delivery sales mix, and Pizza Hut's new menu items, which have higher COS and are still being optimized. Commodity prices remain favorable, though the benefit was smaller than before. We also improved our procurement efficiency through menu innovation and dynamic price management. Cost of labor was 27.6%, 40 basis points higher year on year. Rider costs continued to increase year on year in Q2, driven by the strong growth in delivery sales mix, which rose from 45% last year to 54% this year. The margin impact from rider costs was 140 basis points, slightly lower than in Q1, and we offset most of that through enhanced store operations. Occupancy and other was 24.8%, 90 basis points lower year over year.

Speaker #1: Mainly due to better value-for-money offerings, increased packaging costs due to a higher delivered sales mix, and Pizza Hut's new menu items, which have higher COS and are still being optimized.

Speaker #1: Commodity prices remain favorable, though the benefit was smaller than before. We also improved our procurement efficiency through menu innovation and dynamic price management. Cost of labor was 27.6%, 40 basis points higher year-on-year.

Speaker #1: Rider cost continued to increase year on year in quarter two, driven by the strong growth in delivered sales mix, which rose from 45% last year to 54% this year.

Speaker #1: The margin impact from rider cost was 140 basis points, slightly lower than in Q1. And we offset most of that through enhanced store operations.

Speaker #1: Occupancy and other was 24.8%, 90 basis points lower year over year. The rent ratio improved through lease renegotiations and more favorable rent in lower-tier cities.

Adrian Ding: The rent ratio improved through lease renegotiations and more favorable rent in lower tier cities. We also implemented other initiatives to enhance operational efficiency. Our OP margin was 11.1%, 20 basis points higher year over year, achieving the ninth consecutive quarter of OP margin expansion. Savings in G&A expenses helped improve OP margins. Operating profit was $348 million, a second quarter record, growing 7% year on year. Net income was $244 million, up 6% year on year. Excluding our investment in Meituan, net income grew 3% year on year. Our investment in Meituan had a -$6 million impact in Q2 compared to a -$14 million impact in Q2 last year. As a reminder, we recognized $13 million less in interest income in Q2 this year due to a lower cash balance resulting from the cash we returned to shareholders and lower interest rates.

Speaker #1: We also implemented other initiatives to enhance operational efficiency. Our OP margin was 11.1%, 20 basis points higher year over year, achieving the ninth consecutive quarter of OP margin expansion.

Speaker #1: Savings in G&A expenses helped improve OP margins. Operating profit was $348 million, a second quarter record, growing 7% year on year. Net income was $244 million.

Speaker #1: Up 6% year on year. Excluding our investment in Meituan, net income grew 3% year on year. Our investment in Meituan had a negative impact of $6 million in Q2, compared to a negative impact of $14 million in Q2 last year.

Speaker #1: As a reminder, we recognize $13 million less in interest income in quarter two this year, due to a low cash balance resulting from the cash we returned to shareholders.

Speaker #1: And lower interest rates. Diluted EPS was $0.70, 14% higher year on year, or up 10% excluding our investment in Meituan. Now, moving on to our 2026 outlook.

Adrian Ding: Diluted EPS was $0.70, 14% higher year on year, or up 10% excluding our investment in Meituan. Now, moving on to our 2026 outlook. Let me start with sales. Since June, we have been lapping a higher delivery sales base, and that tougher sales comparison will continue through H2. That said, given our disciplined execution last year and multiple growth drivers, we remain confident in our ability to lead the catering industry in China. July tracked broadly in line with our expectations. We are working hard to maintain positive same-store sales growth in Q3 and deliver the 15th consecutive quarter of positive same-store transaction growth. Moving on to margins. Before considering the impact of the Pizza Hut deal, we expect Q3 restaurant margin to be stable to slightly positive year on year.

Speaker #1: Let me start with sales. Since June, we have been lapping a higher delivered sales base, and that tougher sales comparison will continue through the second half.

Speaker #1: That said, given our disciplined execution last year and multiple growth drivers, we remain confident in our ability to lead the catering industry in China.

Speaker #1: July tracked broadly in line with our expectations. We are working hard to maintain positive same-store sales growth in Q3 and deliver the 15th consecutive quarter of positive same-store transaction growth.

Speaker #1: Moving on to margins. Before considering the impact of the Pizza Hut deal, we expect third quarter restaurant margin to be stable to slightly positive year-on-year.

Speaker #1: Relative to the first half, incremental rider cost pressure is expected to moderate slightly, as delivered sales mix already increased to 51% in Q3 last year.

Adrian Ding: Relative to H1, incremental rider cost pressure is expected to moderate slightly as delivery sales mix already increased to 51% in Q3 last year. Our continued efforts to improve operational efficiency and optimize store costs, including rent, labor productivity, and CapEx, are expected to support margins, giving us room to reinvest in growth. We expect OP margin to be roughly in line with Q3 last year. There was a +20 basis points margin impact from some ad hoc government subsidies in Q3 2025 that are not expected to repeat in Q3 this year. Some similar subsidies were already recognized in H1 this year, though in smaller amounts.

Speaker #1: Our continued efforts to improve operational efficiency and optimize store costs—including rent, labor productivity, and capex—are expected to support margins, giving us room to reinvest in growth.

Speaker #1: We expect OP margin to be roughly in line with Q3 last year. There was a positive margin impact of about 20 basis points from some ad hoc government subsidies in Q3 2025 that are not expected to repeat in Q3 this year.

Speaker #1: Some similar subsidies were already recognized in the first half of this year, though in smaller amounts. For the full year, without considering the impact of the Pizza Hut deal, we're confident in meeting our 2026 targets, which are consistent with the range we shared at our Investor Day last year and in February.

Adrian Ding: For the full year, without considering the impact of the Pizza Hut deal, we're confident in meeting our 2026 targets, which are consistent with the range we shared at our investor day last year and in February. These include same-store sales index of 100 to 102, mid to high single-digit system sales growth, high single-digit operating profit growth, double-digit EPS growth, and a slight improvement in restaurant OP margins for Yum China. Additionally, we remain on track to reach 20,000 stores by year-end. Let's turn to the Pizza Hut deal, which is on track to close in August. We plan to fund this transaction primarily with debt. We expect to borrow an off-core bridge loan of around $1.2 billion equivalent for up to 12 months. For longer-term financing, all options remain on the table.

Speaker #1: These include: same store sales index of 100 to 102, mid to high single digit system sales growth, high single digit operating profit growth, double digit EPS growth, and a slight improvement in restaurant OP margins from Yum China additionally we remain on track to reach 20,000 stores by year end.

Speaker #1: Now, let's turn to the Pizza Hut deal, which is on track to close in August. We plan to fund this transaction primarily with debt.

Speaker #1: We expect to borrow an offshore bridge loan of around $1.2 billion equivalent for up to 12 months. For longer-term financing, all options remain on the table.

Speaker #1: We'll proceed in the best interest of our shareholders and execute financing when market conditions are appropriate. We'll provide an update once our financing plan is finalized.

Adrian Ding: We'll proceed in the best interest of our shareholders and execute financing when market conditions are appropriate. We'll provide an update once our financing plan is finalized. The savings in the 3% licensee payments to Yum! Brands are expected to add 2.8% to Pizza Hut's restaurant OP margins after taking VAT into account. This translates to approximately 60 basis points for Yum China overall. For Q3, we expect around +30 to 40 basis points impact to both Yum China's restaurant and OP margins. For the 2026 full year, around 20 to 30 basis points. After accounting for deal related costs, financing interest expense, tax, and without considering the potential higher growth of Pizza Hut, we expect the deal to be accretive to diluted EPS. Slightly accretive in 2026 and mid-single digit accretive in 2027 and 2028.

Speaker #1: The savings in the 3% license fee payments to Yum Brands are expected to add 2.8% to Pizza Hut's restaurant operating margins after taking VAT into account.

Speaker #1: This translates to approximately 60 basis points for Yum China overall. For Q3, we expect around 30 to 40 basis points of positive impact to both Yum China’s restaurant and operating margins.

Speaker #1: And for the 2026 full year, around 20 to 30 basis points. After accounting for deal-related costs, financing interest expense, and tax, and without considering the potential higher growth of Pizza Hut, we expect the deal to be accretive to diluted EPS.

Speaker #1: Slightly accretive in 2026, and mid-single-digit accretive in 2027 and 2028. In terms of capital returns to shareholders, we remain on track to return $1.5 billion to shareholders in 2026, equivalent to around 10% of our current market cap.

Adrian Ding: In terms of capital returns to shareholders, we remain on track to return $1.5 billion to shareholders in 2026, equivalent to around 10% of our current market cap. In H1, we returned $780 million, including $515 million through share repurchases and $203 million through quarterly cash dividends. We step up share repurchases in Q2, reflecting what we believe was a relatively attractive share price. From 2026 onward, we remain committed to returning around 100% of annual free cash flow after subsidiary's dividend payment to non-controlling interests. This translates to an average of $900 million to $1 billion-plus in 2027 and 2028, and exceed $1 billion in 2028 and beyond. With ownership of Pizza Hut brands supporting faster growth, we also see potential upside to our future free cash flow. With that, let me hand it back to Joey for her closing remarks.

Speaker #1: In the first half, we returned $718 million, including $515 million to share repurchases and $203 million to quarterly cash dividends. We stepped up share repurchases in Q2, reflecting what we believe was a relatively attractive share price.

Speaker #1: From 2027 onward, we remain committed to returning around 100% of annual free cash flow, after subsidiary's dividend payment to non-controlling interest. This translates to an average of $900 million to $1 billion plus in 2027 and 2028, and exceeding $1 billion in 2028 and beyond.

Speaker #1: With ownership of Pizza Hut brands supporting faster growth, we also see potential upside to our future free cash flow. With that, let me hand it back to Joey for her closing remarks.

Speaker #2: Thank you, Adrian. Looking ahead, we are firing on all cylinders to drive sales and expand our addressable market. A number of our initiatives have each reached, or are about to reach, the meaningful milestone of ¥1 billion in sales.

Joey Wat: Thank you, Adrian. Looking ahead, we are firing on all cylinders to drive sales and expand our addressable market. A number of our initiatives have each reached or are about to reach the meaningful milestone of CNY 1 billion in sales, or around 1% of Yum China sales. K Coffee Cafe generated around CNY 1 billion in sales last year. We target to double that to nearly CNY 2 billion this year. KPRO is expected to quadruple in sales year-over-year this year and exceed CNY 1 billion in sales next year. KFC's drive-through and car-side pickup are gaining strong momentum. We target to reach CNY 1 billion in sales this year. Pizza Hut burgers, a category we introduced two years ago, is also gaining popularity. We now target over CNY 1 billion in sales this year, or around 5% to 6% of Pizza Hut sales.

Speaker #2: Or around 1% of Yum China sales. K Coffee Cafe generated around RMB 1 billion in sales last year. We target to double that to nearly RMB 2 billion this year.

Speaker #2: K Pro is expected to triple its sales year over year this year and exceed RMB 1 billion in sales next year. KFC's drive-thru and K-Box pickup are gaining strong momentum.

Speaker #2: We target to reach ¥1 billion in sales this year. Pizza Hut burgers, a category we introduced two years ago, is also gaining popularity.

Speaker #2: We now target over ¥1 billion in sales this year, or around 5% to 6% of Pizza Hut sales. We remain confident in the strength of our brands and our ability to deliver sustainable growth, even in the current dynamic environment.

Joey Wat: We remain confident in the strength of our brands and our ability to deliver sustainable growth, even in the current dynamic environment. We continue to see significant long-term growth potential in China. Together with our team, I look forward to achieving our growth targets for 2026 and beyond. Now, let me pass it back to Florence.

Speaker #2: And we continue to see significant long-term growth potential in China. Together with our team, I look forward to achieving our growth targets for 2026 and beyond.

Speaker #2: Now, let me pass it back to Florence.

Speaker #3: Thanks, Joey. Now we will open the call for questions. In order to give more people the chance to ask questions, please limit your questions to one at a time.

Florence Lip: Thanks, Joey. Now we will open the call for questions. In order to give more people the chance to ask questions, please limit your questions to one at a time. Operator, please start the Q&A.

Speaker #3: Operator, please start the Q&A.

Speaker #4: Thank you so much. And as a reminder, to ask a question, simply press *11 to get in the queue and wait for your name to be announced.

Operator: Thank you so much. As a reminder, to ask a question, simply press star one one to get in the queue and wait for your name to be announced. To withdraw the question, press star one one again. Our first question is from Michelle Cheng with Goldman Sachs. Please proceed.

Speaker #4: To withdraw the question, press star one one again. Our first question is from Michelle Chang with Goldman Sachs. Please proceed.

Michelle Cheng: Hi, Joey, Adrian, Florence. Thanks for taking my questions, and congrats again for the very solid result. My question is about the overall consumption environment and also the pricing and promotion trend. We actually heard from many customer companies and also looking at the macro data. Q2, market has been turning softer and even into Q3, it's not exciting and definitely the weather didn't help at all. You still deliver very solid result in Q2. Can you share with us your observation on the overall consumption trend? I remember a few quarters ago you mentioned the promotional activities has been better in China, given these kind of a consumption trend, do you see any risks on the reemergence of these pricing trend or promotion activities in the market?

Speaker #5: Hi, Joey, Adrian, Florence. Thanks for taking my question, and congrats again on the very solid results. My question is about the overall consumption environment and also the pricing and promotion trends.

Speaker #5: So we actually heard from many consumer companies, and also, looking at the macro data, the second quarter market has been turning softer. And even into the third quarter, it's not exciting.

Speaker #5: And definitely the weather didn't help at all. But you still delivered very solid results in the second quarter. So can you share with us your observations on the overall consumption trend?

Speaker #5: And I remember a few quarters ago, you mentioned the promotional activities have been better in China. But given these kinds of consumption trends, do you see any risks of the reemergence of these pricing trends or promotional activities in the market?

Speaker #5: And since we know we have an easier base on margin, I still want to hear your thoughts on how to balance these pricing trends and the promotional activities to drive sales growth.

Michelle Cheng: Since we know we have an easier base on margin, still want to hear your thoughts, how to balance this pricing trend and the promotion activities to drive the sales growth. Thank you.

Speaker #5: Thank you.

Speaker #2: Thank you, Michelle. We are encouraged to see the rebound in June retail sales compared with May, actually. And as Adrian mentioned earlier in prepared remarks, July tracked broadly in line with our expectations.

Joey Wat: Thank you, Michelle. We are encouraged to see the rebound in June retail sales compared that with May, actually. As Adrian mentioned earlier in prepared remark, July tracked broadly in line with our expectations. There was some extreme weather, but it was temporary, and it has sort of regional impact in July. Coming back to the few trends, there are few things here worth noting. Consumers are still willing to spend on certain occasions. They are still growing nicely and present attractive opportunities such as coffee, light meal, and they're willing to spend money on innovative products and experiences, strong value for money, and emotional value. Additional interesting trend is we see some stabilization in pricing trends. More players are willing to take pricing, reflecting a stable consumer environment. The competition between the delivery platform is more rational. These are positive.

Speaker #2: There was some extreme weather, but it was temporary, and it had certain regional impact in July. Coming back to a few trends, there are a few things here worth noting.

Speaker #2: Consumers are still willing to spend on certain occasions. They are still growing nicely and present attractive opportunities, such as coffee and light meals, and they're willing to spend money on innovative products and experiences.

Speaker #2: Strong value for money and emotional value. Another interesting trend is that we are seeing some stabilization in pricing trends. More players are willing to take pricing.

Speaker #2: Reflecting a stable consumer environment, and the competition between the delivery platforms is more rational. So these are positives. And on top of that, we continue to see an ongoing increase in what we call chainification.

Joey Wat: On top of that, we continue to see ongoing increase, what we call chainification. China restaurant chain, the percentage has grown from 20% to 30% plus, and it's still relatively low compared with 60% plus in mature market. There's also another one little trend going on, is since April, the government has tightened oversight of the food delivery related to what is called ghost kitchen. We view this as a positive development, raising the standard of the industry, and we expect to benefit from our well-established food safety, which is a strategic moat for us. Thus, Michelle, Yum China team, we are working hard to drive traffic, sales, and profit, all at the same time. We target to maintain positive same-store sales growth in Q3 and deliver 15 quarter of same-store transaction growth as well. Thank you, Michelle.

Speaker #2: China restaurant chain, the percentage has grown from 20% to 30% plus. And it's still relatively low compared with 60% plus in mature markets. And there's also another little trend going on. Since April, the government has tightened oversight of food delivery related to what is called ghost kitchens.

Speaker #2: We view this as a positive development, raising the standard of the industry. We expect to benefit from our well-established food safety, which is a strategic moat for us.

Speaker #2: Thus, Michelle, Yum China team, we are working hard to drive traffic, sales, and profit all at the same time. We target to maintain positive same-store sales growth in Q3 and deliver the 15th quarter of same-store transaction growth as well.

Speaker #2: Thank you, Michelle.

Speaker #5: Thank you, Joey. That's very encouraging.

Michelle Cheng: Thank you, Joey. That's very encouraging.

Speaker #4: Our next question comes from Chen Luo with Bank of America. Please proceed.

Operator: Our next question comes from Chen Luo with Bank of America. Please proceed.

Speaker #6: Hi, Joey, Adrian, and Florence. Congrats again on the strong result for Q2. My question is focused on our Pizza Hut China brand acquisition. Just now, Adrian mentioned that there will be a 12-month bridge loan.

Chen Luo: Hi, Joey, Adrian, and Florence. Congrats again on the strong result for Q2. My question is focused on our Pizza Hut China brand acquisition. Just now, Adrian mentioned that there will be a 12-month bridge loan. Regarding the future refinancing plan, do we have any options in mind that we can share with investors? Say, whether these options may include syndicated loans or even CB. In particular, there have been some market concerns from some investors that if we are opting for CB, whether this will have some negative impact, either in terms of dilution or in terms of the share price performance. I understand that we are always trying to take a very disciplined approach, always trying to maximize shareholder value. Any color or comment on our future refinancing plan would be appreciated. Thank you.

Speaker #6: But regarding the future refinancing plan, do we have any options in mind that we can share with investors? For example, whether these options may include significant loans or even CB.

Speaker #6: And in particular, there have been some market concerns from some investors that if we are opting for CB, whether this will have some negative impact either in terms of dilution or in terms of the share price performance.

Speaker #6: I understand that we are always trying to take a very disciplined approach, always trying to maximize shareholder value. So any kind of comment on our future refinancing plan would be appreciated.

Speaker #6: Thank you. Sure. Thank you, Luo Chen. So, indeed, as I mentioned in my prepared remarks, we expect to take a bridge loan of approximately $1.2 billion, with a tenor of up to 12 months, to close the transaction first.

Adrian Ding: Sure. Thank you, Lu Chen. Indeed, as I mentioned in prepared remark, we expect to take a bridge loan of approximately $1.2 billion equivalent, of up to 12 months to close the transaction first. By the way, the closing will take place in August, as I mentioned. The bridge loan interest rate will be approximately 2%, so it will be quite favorable. Your question actually focused on the takeout financing or the long-term refinancing. Indeed, we think all options currently are on the table, including syndicate loans, including bonds, including CBs, et cetera.

Adrian Ding: Sure. Thank you, Luo Chen. Indeed, as I mentioned in prepared remark, we expect to take a bridge loan of approximately $1.2 billion equivalent, of up to 12 months to close the transaction first. By the way, the closing will take place in August, as I mentioned. The bridge loan interest rate will be approximately 2%, so it will be quite favorable. Your question actually focused on the takeout financing or the long-term refinancing. Indeed, we think all options currently are on the table, including syndicate loans, including bonds, including CBs, et cetera.

Speaker #6: And by the way, the closing will take place in August, as I mentioned. The bridge loan interest rate will be approximately 2%, so it will be quite favorable.

Speaker #6: And your question actually focused on the take-off financing or the long-term refinancing. Indeed, we think all options currently are on the table, including syndicated loans, including bonds, including CBs, et cetera, et cetera.

Speaker #6: And given you specifically asked about CB, although it's actually pretty preliminary and we don't have any inclination as to which instrument we'll take, but speaking for CB specifically—let's say even if we choose to take CB as the take-off financing option—there are different ways to minimize or reduce the potential dilution meaningfully.

Adrian Ding: Given you specifically asked about CB, although it is actually pretty preliminary and we don't have any inclination on which instrument we take. Speaking for CB specifically, let's say even if we choose to take CB as the takeout financing option, there are different ways to minimize or reduce the dilution meaningfully, potential dilution meaningfully. For instance, the issuer can take a capped call option, thereby to increase the conversion premium from 20%, 30% to as much as 70% or 80%. That means, the share price, when it only gets to 70%, 80% premium versus the time when they issue the CB, then the dilution will occur. In which case, the shareholders will be pretty happy, right? The share price, it's 80% up.

Speaker #6: For instance, the issuer can take a cap core option, thereby increasing the conversion premium from 20% or 30% to as much as 70% or 80%.

Speaker #6: That means the share price, when it only gets to a 70% or 80% premium versus the time when they issue the CB, then the dilution will occur.

Speaker #6: In which case, the shareholders will be pretty happy, right? The share price is 80% up. And even at that point in time, there is still an option to use net share settlement, meaning only the in-the-money portion of the CB will be used for issuing shares.

Adrian Ding: Even at that point in time, there is still an option to use net share settlement, meaning that only the in the money portion of the CB will be issuing shares. The dilution all in all will be very limited. That's about CB, and you can see some of the other big technology companies actually did quite similar things as what I mentioned, to minimize the dilution impact. We are still studying the different long-term refinancing options, and all the different options are on the table. I just want to share more color, given you ask about the CB. Thank you, Roshan.

Speaker #6: So the dilution, all in all, will be very limited. So that's about CB. And you can see some of the other big technology companies actually did quite similar things, as to what I mentioned, to minimize the dilution impact.

Speaker #6: Again, we're still studying the different long-term refinancing options, and all the different options are on the table. But I just want to share more color, given you asked about the CB.

Speaker #6: Thank you, Luo Chen. Thank you. Really helpful.

Chen Luo: Thank you. Really helpful.

Speaker #4: Thank you. Our next question comes from Lilian Luo with Morgan Stanley. Please proceed.

Operator: Thank you. Our next question comes from Lillian Lou with Morgan Stanley. Please proceed.

Speaker #5: Thank you for the chance to ask questions. Hey Joey, Adrian, and Florence—yes, congrats again on the strong result. My question is focusing on Pizza Hut again.

Lillian Lou: Thank you for the chance to ask question. Hey, Joey, Adrian, and Florence. Yes, congrats again on the strong result. My question is focusing on Pizza Hut again. I think in the previous statement you mentioned, H2, Pizza Hut margin will see some improvement. Just a little bit clarification, does that include the buyback, the margin accretion from the loyalty fee, or is underlying margin improvement? That's more technical question to clarify. The major question is more on the Pizza Hut store expansion acceleration. How do you balance this store expansion pace versus maintaining a positive same store? Thank you.

Speaker #5: I think in the previous statement, you mentioned second-half Pizza Hut margin will see some improvement. Just a little bit of clarification: does that include the buyback, the margin equation from the loyalty fee?

Speaker #5: Or is it underlying margin improvement? That's a more technical question to clarify. And the main question is about the Pizza Hut store expansion acceleration. How do you balance this store expansion pace versus maintaining positive same-store sales?

Speaker #5: Thank you.

Adrian Ding: Yeah, I'll take the question first, Lillian. On your clarification question, obviously our guidance, as we mentioned in prepared remark, is disregarding or without taking into account the Pizza Hut deal. We do expect the restaurant margin for Pizza Hut in H2 will enjoy a greater expansion compared to H1. The key reason is the moderation of rider cost pressure. Obviously, in H2 of last year, the delivery sales mix in the base was a bit more normal or comparable to what we see currently. Obviously, in H2 this year, there will still be a delivery sales mix increase, but the delta year-over-year will be much less, meaning the rider cost pressure will be more manageable in H2. In other cost line items, I think the trend will be kind of similar.

Speaker #6: Yeah, I'll take the question first. Lilian, on your clarification question—obviously, our guidance, as we mentioned in the prepared remarks, is disregarding or not taking into account the Pizza Hut deal.

Speaker #6: We do expect the restaurant margin for Pizza Hut in the second half will enjoy a greater expansion compared to the first half. And the key reason is the moderation of rider cost pressure.

Speaker #6: Obviously, in the second half of last year, the delivery sales mix in the base was a bit more normal, or comparable to what we see currently.

Speaker #6: Obviously, in the second half of this year, there will still be a delivery sales mix increase, but the delta year-over-year will be much less, meaning the rider cost pressure will be more manageable in the second half.

Speaker #6: In other cost line items, I think the trend will be kind of similar. For COS, in the second half for Pizza Hut, it will be broadly stable year over year.

Adrian Ding: For COS on H2 for Pizza Hut, will be broadly stable year-over-year. In our last earning release, we guided a full year approximately 34% COS for Pizza Hut. I think we should be able to deliver consistent results compared to our guidance on Pizza COS. On the long term, COS for Pizza will be 31% ±1%, as we always commented. All in all, we do see opportunity for expansion there. That's on the first question. The second part of the question is the relationship between store opening and comp sales, for Pizza Hut specifically, I think you mentioned. I think over the past few quarters or even the past few years, we have always trying to balance the different factors, right? Like comp sales, store opening, margin, profit growth.

Speaker #6: In our last earnings release, we guided a full year, approximately 34% COS for Pizza Hut. I think we should be able to deliver consistent results compared to our guidance on Pizza Hut COS.

Speaker #6: In the long term, COS for Pizza will be 31% plus or minus 1%, as we have always commented. All in all, we do see opportunity for expansion there.

Speaker #6: So that's on the first question. The second part of the question is the relationship between store openings and comp sales—for Pizza Hut specifically, I think you mentioned.

Speaker #6: I think over the past few quarters, or even the past few years, we have always tried to balance the different factors, right? Like comp sales, store openings, margin, and profit growth.

Speaker #6: And hopefully, it's fair to say that we successfully delivered the right, or proper, balance in most of the quarters, or hopefully in the past few years.

Adrian Ding: Hopefully it's fair to say that we successfully delivered a right or proper balance in most of the quarters or hopefully, in the past few years, in a consistent manner. Indeed, we see lots of untapped opportunities for Pizza Hut here in China, obviously for KFC too, but you asked about Pizza Hut. We will open the stores. We will not slow down the store opening. In terms of store opening, we do open store across different tiers, higher tier city, lower tier city. For Pizza particularly, the lower tier city penetration, there are actually lots of opportunities, right? We are kind of underrepresented there compared to where we are for KFC and compared to some of the local Chinese QSR brands there. For higher tier city, we will also continue to defend our market leadership and open stores in higher tier city.

Speaker #6: In a consistent manner. And indeed, we see lots of untapped opportunities for Pizza Hut here in China. Obviously, for KFC too, but you asked about Pizza Hut.

Speaker #6: So we will open the stores; we will not slow down the store openings. And in terms of store opening, we do open stores across different tiers—high-tier cities, low-tier cities.

Speaker #6: For Pizza particularly, in lower-tier city penetration, there are actually lots of opportunities, right? We are kind of a bit underrepresented there compared to where we are for KFC and compared to some of the local Chinese QSR brands there.

Speaker #6: So, for high-tier cities, we will also continue to defend our market leadership and open stores in higher-tier cities. And I think you focus on the relationship between store openings and comp sales.

Adrian Ding: I think you focus on the relationship between store opening and comp sales. There are different ways where we can manage or reduce the sales transfer by store opening. For instance, when we open stores in strategic channels like hospitals, university campuses, the sales transfer will be rather limited, right? Because it's a kind of a closed trade zone. For instance, when we open stores in lower tier cities, because there are lots of white space, the sales transfer will be rather limited. Also that's similarly true for outskirt areas in higher tier cities too. As always, we'll try to balance the different metrics and hopefully deliver a set of results that's satisfactory to our shareholders. Thank you.

Speaker #6: There are different ways we can manage or reduce sales transfer when opening new stores. For instance, when we open stores in strategic channels like hospitals or university campuses, the sales transfer will be rather limited, right?

Speaker #6: Because it's a kind of a closed trade zone. For instance, when we open stores in lower-tier cities, because there is a lot of white space, the sales transfer will be rather limited.

Speaker #6: And also, that's similarly true for outskirt areas in high-tier cities too. So, as always, we'll try to balance the different metrics and hopefully deliver a set of results that are satisfactory to our shareholders.

Speaker #6: Thank you.

Speaker #5: Thanks a lot, Adrian. That's very clear.

Lillian Lou: Thanks a lot, Adrian. That's very clear.

Speaker #4: Thank you. Our next question comes from Ann Ling with Jefferies. Please proceed.

Operator: Thank you. Our next question comes from Anne Ling with Jefferies. Please proceed.

Anne Ling: Hey. Hi, management team. Thank you very much for taking my question. Also on Pizza Hut side, we see the Burger Bar having very good momentum, we are expanding to more locations. For me, I would like to understand, because we're offering burger, the product itself something similar to that of pizza, how do we prevent from cannibalization? It seems that we do have incremental sales. As a customer, possibly even when I go to the store, I might want to go for a burger. In that case, how do we maintain or prevent the cannibalization? Also, for the incremental growth coming out from the Burger Bar, where do you think the market share is coming out from? What is the customers that you have attract, that are new to you? Yeah, that's my question. Thank you.

Speaker #5: Hey, hi. Hi, management team. Thank you very much for taking my question. Also, on the Pizza Hut side, we see Pizza the Burger Bar having very good momentum.

Speaker #5: And we are expanding to more locations. But for me, I would like to understand, because we're offering burger—the product itself—something similar to that of pizza.

Speaker #5: So, how do we prevent cannibalization? And it seems that we do have incremental sales. So as a customer, possibly even when I go to the store, I might want to go for a burger.

Speaker #5: So in that case, how do we maintain or prevent the cannibalization? And also, for the incremental growth coming up from the Burger Bar, where do you think the market share is coming out from?

Speaker #5: What are the customers that you have attracted that are new to you? Yeah, that's my question. Thank you.

Speaker #2: Cannibalization with what? Ann?

Joey Wat: Cannibalization with what, Anne?

Speaker #5: With the existing parent store.

Anne Ling: With Pizza.

Joey Wat: Yeah. Okay.

Joey Wat: Yeah. Okay. The overall market of the burger, first of all, is growing very nicely. That's a good starting point. When we decided to launch the Pizza Hut burger, it's very clear among our team that the product need to be very unique. It's unique compared to KFC, to start with. That the buns are baked fresh in the store. That is very unique, not only compared with KFC, but many other incumbent player in the market. The patty were prepared based on order. The quality of product is fantastic. I think, after learning from over 200 locations, we can see we are probably competing with business, they focus on beef burger only. Given KFC's beef burger share is relatively mid-single digit, and the burgers are quite unique and different, so KFC is not the target.

Speaker #2: Yeah, okay. So, the overall burger market, first of all, is growing very nicely, so that's a good starting point. When we decided to launch the Pizza Hut burger, it was very clear among our team that the product needed to be very unique.

Joey Wat: The overall market of the burger, first of all, is growing very nicely. That's a good starting point. When we decided to launch the Pizza Hut burger, it's very clear among our team that the product need to be very unique. It's unique compared to KFC, to start with. That the buns are baked fresh in the store. That is very unique, not only compared with KFC, but many other incumbent player in the market. The patty were prepared based on order. The quality of product is fantastic. I think, after learning from over 200 locations, we can see we are probably competing with business, they focus on beef burger only. Given KFC's beef burger share is relatively mid-single digit, and the burgers are quite unique and different, so KFC is not the target.

Speaker #2: So it's unique compared to KFC, to start with, that the buns are baked fresh in the store. So that is very unique, not only compared with KFC, but many other incumbent players in the market.

Speaker #2: And then the patties were prepared based on order. So the quality of the product is fantastic. And I think after learning from over 200 locations, we can see we are probably competing with businesses that focus on beef burgers.

Speaker #2: So given KFC's beef burger share is relatively—it's missing a digit. So, and the burgers are quite unique and different. So KFC is not the target.

Speaker #2: But from other beef burger-focused brands, and then in terms of cannibalization with pizza, we see incremental sales because it's always good to offer choices to customers.

Joey Wat: From other beef burger focused brands. In terms of cannibalization with Pizza Hut, we see incremental sales because it's always good to offer choices to customers, by offering a new category. We can see that in our number. It's double-digit sales to the parent stores, and the margin is nice. Therefore, within a few months, we built over 200 locations, and now we are targeting to increase to 500 to 600. We're talking about CNY 1 billion sales, which is 5% to 6% of the Pizza Hut sales. That is pretty fast. Fundamentally, it's the quality of the product that matters most. Of course, the value for money is there, and the brand is there. That's how we build our business. We are very excited and hopeful about this incremental business.

Speaker #2: By offering a new category, and we can see that in our numbers. I mean, it's double-digit sales to the parent stores, and the margin is nice.

Speaker #2: Therefore, within a few months, we built over 200 locations, and now we are targeting to increase to 500 to 600. And we are talking about a billion yuan in sales.

Speaker #2: Which is five to six percent of Pizza Hut sales. So that is pretty fast. And fundamentally, it's the quality of the product that matters most.

Speaker #2: And then, of course, the value for money is there, and the brand is there. That's how we build—that's how we build our business.

Speaker #2: So, we are very excited and hopeful about this incremental business.

Speaker #5: Yeah, definitely. I see that you're also offering burgers at Huang Jie Huang. I'm looking forward to having a try. Thank you so much.

Anne Ling: Yeah, definitely. I see that you're also offering burgers at Huang Ji Huang now. I'm looking forward to have a try. Thank you so much.

Joey Wat: It tastes really good. Yeah. I hope you like it. Yeah.

Speaker #2: It tastes really good. Yeah. I hope you like it. Yeah.

Anne Ling: Yeah, I'll try. Okay.

Speaker #5: I'll try. Okay. Thank you.

Joey Wat: Yeah.

Anne Ling: Thank you.

Speaker #2: Thank you, Ann.

Joey Wat: Thank you, Anne.

Speaker #4: Thank you. Our next question comes from Xiaobo Wei. What city? Please proceed.

Operator: Thank you. Our next question comes from Xiaopo Wei with Citi. Please proceed.

Xiaopo Wei: Hi. Hi, Joey. Can you hear me?

Speaker #6: Hi. Hi, Joey. Can you hear me?

Joey Wat: Yes. Please.

Speaker #2: Yes. Please.

Speaker #6: Hi. Yeah, I'd like to take this opportunity to ask more about Pizza Hut, because this is the first time you are talking to investors after announcing the acquisition of the brand.

Xiaopo Wei: Hi. Yeah. I'd like to take this opportunity to ask more about Pizza Hut, because this is the first time you talk to investors after announcing acquisition of the brand. We are trying to understand how big changes you will bring to the business after acquisition. For example, from your revitalization experience the past few years, what do you think will be the low-hanging fruit on the business after you acquire the brand? What has been the big challenges during the revitalization process, and how could you use the self-owned brand ownership to bridge the differences and make the challenges less? Also, will you make big changes in the business looking forward, like even transforming the business model of Pizza Hut? Anything, any color on that would be very helpful. Thank you.

Speaker #6: We just try to understand how big changes you were bringing to the business after acquisition. For example, from your revitalization experience the past few years, what do you think will be the low hanging fruit on the business after you acquire the brand?

Speaker #6: And then what has been the biggest challenges during the revitalization process and how could you use the self-owned brand ownership to bridge the differences and make the challenges more less?

Speaker #6: And also, will you make big changes in the business looking forward, like even transform the business model of Pizza Hut? So, any color on that would be very helpful.

Speaker #6: Thank you.

Speaker #2: Xiaobo, I feel like we need a separate meeting just for that topic. Let me try to answer at a high level here. You're asking about the challenges in revitalization and then, with the acquisition of the brand, any additional sort of changes—if that's what I heard from you.

Joey Wat: Shaobo, I feel like we need a separate meeting just for that topic. Let me try to answer at the high level here. You are asking about the challenges in revitalization, and then with acquisition of the brand, any additional changes. If that's what I heard you. We start the Pizza Hut transformation back to 2017. By 2024, we share with our shareholder that we have reached an inflection point. It has been a long and committed transformation. I am very honest to say this, that transformation is mainly fundamental. We built the core capabilities from the product, for example, the crust, the dough master, the crust technology and knowhow. We just launched the multi-grain crust in June, and it became instant hit. This would not happen if we have not built our core capability in the dough in the last many years. We built our menu.

Joey Wat: Xiaopo, I feel like we need a separate meeting just for that topic. Let me try to answer at the high level here. You are asking about the challenges in revitalization, and then with acquisition of the brand, any additional changes. If that's what I heard you. We start the Pizza Hut transformation back to 2017. By 2024, we share with our shareholder that we have reached an inflection point. It has been a long and committed transformation. I am very honest to say this, that transformation is mainly fundamental. We built the core capabilities from the product, for example, the crust, the dough master, the crust technology and knowhow. We just launched the multi-grain crust in June, and it became instant hit. This would not happen if we have not built our core capability in the dough in the last many years. We built our menu.

Speaker #2: We started the Pizza Hut transformation back in 2017. By 2024, we shared with our shareholders that we've reached an inflection point. So, it has been a long and committed transformation.

Speaker #2: And I am very honest to say this, the transformation is mainly fundamental. We built the core capabilities from the product— for example, the crust, the dough master, the crust technology, and know-how.

Speaker #2: We just launched the multi-grain crust in June and it became instant hit. And this will not happen if we have not built our core capability in the dough in the last many years.

Speaker #2: We built our menu. Pizza right now is only 40% of our sales. Which is significantly different from the rest of Pizza Hut business outside China.

Joey Wat: Pizza right now is only 40% of our sales, which is significantly different from the rest of pizza business outside China. We also recently launched burger business. I think with this burger story, I would like to sort of answer your question about, what is the benefit of the brand ownership. In the past, because we did not own the brand, even when we have this brilliant idea of doing Pizza Hut Burger Bar, you can imagine there were a lot of conversation behind the scene. Yum! has been very good partner. Still, the communication takes time. The explanation, the logic, and how would that impact the overall pizza brand globally, all these conversation takes time. There are many benefit for the brand ownership because not only we are buying the brand, but we also are going to own the recipe, the trademark, and many other things.

Speaker #2: We also recently launched burgers—burger business. And I think, with this burger story, I would like to sort of answer your question about what is the benefit of brand ownership.

Speaker #2: In the past, because we did not own the brand, even when we had this brilliant idea of doing a pizza burger bar, you can imagine there were a lot of conversations behind the scenes.

Speaker #2: Yum has been a very, very good partner. But still, the communication takes time. The explanation, the logic, and how that would impact the overall pizza brand globally – all these conversations take time.

Speaker #2: And there are many benefits to brand ownership because not only are we buying the brand, but we will also own the recipe, the trademark, and many other things.

Speaker #2: And with that, we will have a better ability to react or to respond to market changes. Our actions will be faster and sharper, and that strategic independence and speed are quite valuable.

Joey Wat: With that, we will have better ability to react or to respond to the market changes. Our action will be faster and sharper, and that strategic independence and speed is quite valuable. Among the many other benefits, this is one. Additionally, if I could highlight, it does help us to open stores even faster. You are very good at numbers. You are probably aware that for Q1 alone, the Pizza Hut China new store opening is more than 100% of the global opening, put it that way. We could open the store even faster. Why? Because you will understand and fully appreciate, when we open store, we want the quality first. That means we would look at what other store reach 2 to 3 years payback first, and then we open store.

Speaker #2: So, among the many other benefits, this is one. And additionally, if I could highlight, it does help us to open stores even faster. You have very good numbers.

Speaker #2: You are probably aware that for Q1 alone, the Pizza Hut China new store openings were more than 100% of the global openings.

Speaker #2: Put it that way, and we could open the store even faster—why? Because you will understand and fully appreciate that, when we open a store, we want the quality first.

Speaker #2: That means we will look at what other stores reached two to three years payback first, and then we open store. So now, with the additional margin of 2.8 into our restaurant margin, more stores will meet our requirement.

Joey Wat: Now, with the additional margin of 2.8 into our restaurant margin, more store will meet our requirement, and thus, we are increasing the guideline of next year new store opening to 800, on the condition that they will meet our 2 to 3 years payback. I think with that, I'm going to pause about what are the benefit. Again, I think, yeah, we need more time to go through this particular topic. Thank you again, Xiaopo.

Speaker #2: And thus, we are increasing the guideline for next year's new store openings to 800, on the condition that they will meet our two- to three-year payback.

Speaker #2: So I think with that, I'm going to pause on discussing the benefits. And again, I think, yeah, we need more time to go through this particular topic.

Speaker #2: Thank you again, Xiaobo.

Speaker #6: Thank you. We probably need an investor day on this topic. Thank you.

Xiaopo Wei: Thank you. We probably need an investor day on this topic. Thank you.

Speaker #4: One moment for our next question, which comes from Christine Peng at UBS. Please proceed.

Operator: One moment for our next question that comes from Christine Peng with UBS. Please proceed.

Speaker #5: Thank you for this opportunity to raise the question. I have a question for Joey. Joey, I noticed that in the presentation, you actually spent quite a bit of time talking about the new initiative, especially in terms of product innovations.

Christine Peng: Thank you for this opportunity to raise the question. I have a question for Joey. Joey, I noticed that in the presentation, you actually spend quite a bit of time talk about the new initiative, especially in terms of product innovations. Just to the broader picture, we also noticed that the Chinese government has been trying to advocating a healthier diet for the general public, in view of the increasing healthcare cost pressure for the government. I was just wondering, what management thoughts towards this initiative. I'm also very keen to understand the supply chain efforts, any challenges when you're trying to more healthier choices, such as KPRO, et cetera, to the consumers of Yum China. Thank you.

Speaker #5: So just to provide a broader picture, we have also noticed that the Chinese government has been trying to advocate a healthier diet for the general public, in view of the increasing healthcare cost pressures for the government.

Speaker #5: So I was just wondering what management's thoughts are towards this initiative, and also, I'm very keen to understand the supply chain efforts—any challenges when you are trying to bring more healthier choices, such as K-pro, etc.

Speaker #5: to the consumers of Yum China. Thank you.

Speaker #2: Thank you, Christine. We want to be more specific about the global new initiatives, because given KFC's size of business, it's quite hard to highlight the scale of the initiative.

Joey Wat: Thank you, Christine. We want to be more specific about the growth of new initiatives because given KFC's size of business, it's quite hard to highlight the scale of the initiative. Once we point out, they are actually quite big already, like K Coffee is CNY 1 billion a year sales, then we're going to double it to CNY 2 billion, then KPRO, we are quadruple. I mean, the growth is 4x, it's not even 2x. We are going to reach CNY 1 billion sales. All these are very sizable if it's a standalone business. We highlight that for that reason. Come to your question about the diet, I would like to point out that KFC and Pizza Hut both offer very healthy diet too. Protein is very healthy. Chicken is very nice protein.

Speaker #2: But once we point out, they are actually quite big already. Like K Coffee is $1 billion in U.S. sales, and then we're going to double it to $2 billion.

Speaker #2: And then K-pro, we are quadrupled—I mean, the growth is 4x, it's not even 2x. And then we're going to reach $1 billion US sales.

Speaker #2: And all these are very sizable if it's a standalone business, so we highlight that for that reason. And coming to your question about the diet—

Speaker #2: I would like to point out that KFC and Pizza Hut both offer very healthy diet options, too. Protein is very healthy—chicken is a very nice protein.

Speaker #2: What we talk about for K-Pro is light meal, and that's the important concept—light meal. It's growing very nicely, as you can see, because the concept is good.

Joey Wat: What we talk about for KPRO is light meal, and that's the important concept. Light meal. It's growing very nicely, as you can see, because the concept is good, both in terms of food and also drink. The light meal is about protein again. That also includes Pizza Hut, our recent light meal platform of the multi-grain crust pizza with the protein topping, like the chicken, the egg, and then mixed with vegetable. On the drink side, the drink come with protein, again, is getting very popular. Certainly an area growing nicely. For KPRO, it's not something that new. We start to open the first KPRO, that was 2017, actually. We've been working on the menu year after year, until we get to the menu that customer like, with the right balance of the protein, the calorie, and the vegetable, et cetera.

Speaker #2: And both in terms of food and also drink. So the light meal is about protein again, and that also includes Pizza Hut, our recent light meal platform of the multi-grain crust pizza with the protein topping, like the chicken, the egg, and then mixed with vegetable.

Speaker #2: And then on the drink side, the drinks come with protein again. It's getting very popular, so it's certainly an area growing nicely. So for K-pro, it's not something that's new.

Speaker #2: We started to open the first K-Pro—that was in 2017, actually. So we've been working on the menu year after year, year after year, until we got to the menu that customers like.

Speaker #2: With the right balance of the protein, the calories, and the vegetables, etc. And then, when it comes to the supply chain, the key thing about the supply chain in China, and for us, is food safety.

Joey Wat: When it come to the supply chain, the key thing about supply chain in China and for us is food safety. We are absolutely committed to it. Everything we produce, we provide in KPRO, also the light meal option for Pizza Hut, is from our supply chain, we share the suppliers between the two brands and our smaller brand as well. Again, the key thing is committed food safety. That's the focus. That's our strategic mode as well. We are very confident about the light meal option, because it's not only it's light, the concept is great, but customer trust our food safety. You can see KPRO, we have six promise.

Speaker #2: And we are absolutely committed to it. Everything we produce, we provide in KPRO, and then also the light meal option for Pizza Hut.

Speaker #2: It's from our supply chain, and we share the suppliers between the two brands and our smaller brand as well. And again, the key thing is committed food safety.

Speaker #2: That's the focus, and that's our strategic mode as well. So we are very confident about the light meal option, because not only is it light and the concept is great, but customers also trust our food safety.

Speaker #2: You can see K-Pro, we have a little bit of an unseen sixth promise. If we go a bit deeper—and make one more comment before I conclude my answer here—is food safety. For light meals, the requirement is even higher than for fried chicken.

Joey Wat: If we go a bit deeper and make one more comment before I conclude my answer here, is food safety for light meal, the requirement is even higher than fried chicken. It's much harder to achieve food safety for salad, whether a Chinese salad or Western salad, than fried chicken. Thank you.

Speaker #2: It's much harder to achieve food safety for salad, whether it's Chinese salad or Western salad, and for fried chicken. Thank you.

Speaker #5: Thank you, Joey.

Florence Lip: Thank you. Our last question comes from Ethan Wang with CLSA.

Operator: Thank you. Our last question comes from Ethan Wang with CLSA.

Speaker #4: Thank you. Our last question comes from Ethan Wang with CLSA.

Speaker #7: Good evening. Congrats on the result again. My question is on K Coffee. K Coffee is now an important contributor to KFC sales. I'm just wondering, how's the same-store sales growth trend going in the second quarter and third quarter?

Ethan Wang: Good evening, congrats for the result again. My question is on K Coffee. K Coffee is now an important contributor to KFC sales. I'm just wondering, how's the same-store sales growth trend going in Q2 and Q3? Because we noticed for the other coffee and milk tea companies, because of the high base, because of delivery subsidy, same-store sales growth has been pretty weak starting from Q2. Just wondering, how's that going with K Coffee? Thank you.

Speaker #7: Because we noticed, for the other coffee and milk tea companies, because of a high base and because of delivery subsidies, same-store sales growth has been pretty weak starting from the second quarter.

Speaker #7: So, just wondering, how's that going with K Coffee? Thank you.

Speaker #2: Thank you, Evan. You know us quite well already. I mean, I'm sure you're aware that whatever we do, the execution is always very disciplined.

Joey Wat: Thank you, Ethan. You know us quite well already. I mean, I'm sure you are aware that whatever we do, the execution is always very disciplined, and that applies to K Coffee as well. For K Coffee, last year, we get to the sales of CNY 1 billion sales. For 2026, we are going to get to CNY 2 billion plus. It's still contributing about mid-single digit same-store sales to the parent store. The ticket average or the price per cup is still a similar level compared to last year. I'm afraid I'm going to give you a boringly stable answer, which is sort of our style here.

Speaker #2: And that applies to K Coffee as well. For K Coffee, last year we get to the sales of one billion US sales. And for 2026, we are going to get to two billion US plus.

Speaker #2: And it's still contributing about mid-single-digit same store sales to the parent stores. And the ticket average, or the price per cup, is still at a similar level compared to last year.

Speaker #2: So, I'm afraid I'm going to give you a boringly stable answer, which is sort of our style here. Adrian, anything else to add?

Ethan Wang: Right.

Joey Wat: Adrian, anything else to add?

Speaker #7: Sure, sure. Indeed, Ethan. So we don't separately disclose the comp sales for K Coffee Café as a module. But what we can say is, obviously, the daily sales are higher than the pre-delivery war period of time, right?

Adrian Ding: Sure. Indeed, Ethan, we don't separately disclose the comp sales for K Coffee Cafe as a module. What we can say is, obviously, the daily sales is higher than the pre-delivery war period of time, right? That speaks for the consumer mindshare improvement. We have always been making the comment that K Coffee Cafe does somewhat benefit from the delivery war and increase in consumer mindshare, thereby helping us do a lot of new location extension. Now it's more than 3,300 locations, and we guide more than 5,000 location end of next year, which is 2 year ahead of schedule. One of the key precondition for us to do that is really the daily cup sale that has to be increasing in a very healthy way, right?

Speaker #7: That speaks for the consumer mind share improvement. And we have always been making the comment that K Coffee Café does, in some way, benefit from the delivery war and increasing consumer mind share.

Speaker #7: Thereby helping us do a lot of new location extension. Now it's more than 3,300 locations. And we guided more than 5,000 locations by end of next year, which is two years ahead of schedule.

Speaker #7: And one of the key preconditions for us to do that is really the daily cup sales that have to be increasing in a very healthy way, right?

Speaker #7: And then we're very happy to see that now the delivery war already is very rational, particularly for the beverage sector. But the daily cup sale is higher than the pre-delivery war period of time.

Adrian Ding: We're very happy to see, now the delivery war already is very rational, particularly for beverage sector. The daily cup sale is higher than the pre-delivery war period of time. We are pretty satisfied with that. Thank you, Ethan.

Speaker #7: So we are pretty satisfied with that. Thank you, Ethan. Got it. Thank you, Joey. Thank you, Adrian. Thank you.

Ethan Wang: Got it. Thank you, Joey. Thank you, Adrian.

Joey Wat: Thank you.

Adrian Ding: Thank you.

Speaker #5: Thank you, Joey, and thank you, Adrian. Now we will conclude our Q&A session. Thank you for joining the call today. Thank you.

Florence Lip: Thank you, Joey, and thank you, Adrian. Now we will conclude our Q&A session. Thank you for joining the call today. Thank you. This concludes our conference. Thank you for participating, and you may now disconnect.

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