Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Chagee's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that today's call -- event is being recorded. With that, I will now turn the call over to the first speaker today, Ms. Alicia Guo, Investor Relations Director of the company. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to Chagee's Second Quarter 2025 Earnings Call. With us today are Mr. Junjie Zhang, our CEO; and Mr. Aaron Huang, our CFO. The company's financial and operating results were released by the Newswire earlier today and are currently available online. Before we continue, I refer you to our safe harbor statements in the earnings press 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 measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. With that, I will turn the call to our CEO, Mr. Junjie Zhang. Please go ahead, sir.

[Interpreted] Hello, everyone. Thank you all for joining Chagee's Second Quarter 2025 Earnings Conference Call. We truly appreciate your continued trust and support, which has enabled us to forge ahead steadily in this dynamic market environment. Before we dive into our quarterly performance, I'm delighted to share an important update in our talent strategy. To accelerate our North American market expansion, we have successfully assembled a new North American leadership team. We are honored to welcome Ms. Emily Chang as our Chief Commercial Officer for North America. Emily brings extensive international brand building experience, having served as CEO at West at VML and McCann Worldgroup China and Chief Marketing Officer at Starbucks China. Additionally, we welcome Mr. Aaron Harris as our Chief Development Officer for North America. As a chain restaurant industry expert, Aaron has successfully led market expansion for multiple national and international QSR brands, most recently, as Senior Vice President of Development at Dutch Bros Coffee. His rich experience in scaled operations will drive our development in the U.S. market. This is not just a key talent acquisition, but also an important move for our global strategic layout. We have proactively established a local team in core markets such as Asia Pacific and North America, making systematic investments in organizational capabilities. In the second half of this year, we will continue to invest strategically in overseas markets, steadily enhancing the development of a global talent pipeline and operational system. With our elite local teams, we're confident that we will achieve a pivotal breakthrough and sustain strong growth momentum globally. Next, I will walk you through the operating results and business updates. Despite the evolving dynamics of the global tea beverage market, we have stayed committed to growth strategy driven by brand value and product innovation. This has reinforced…

Thank you, J, and good evening, good morning, everyone. Thank you for joining our earnings call. Before we dive into the details, please note that all amounts are in RMB and all comparisons are on a year-over-year basis, unless otherwise stated. In the second quarter, our revenue reached RMB 3.3 billion, up by 10.2% year-over-year. GMV came in at RMB 8.1 billion, a year-over-year increase of 15.5%. Non-GAAP net income was RMB 629.8 million, up by 0.1% year-over-year. For the first half of 2025 non- GAAP net income rose by 6.8% year-over-year to RMB 1.3 billion. By end of the second quarter, our total membership exceeded 200 million, increasing by 14.5 million from the first quarter and 42.7% year-over-year. These results underscore the resilience of our business model and the strength of our execution under dynamic market conditions. Now let me provide some context around the market condition we faced this quarter. The intensified delivery platform subsidy competition in China created headwinds for our business, while we remain disciplined in protecting our pricing integrity and a premium brand positioning. We recognize that this competitive environment weighed on near-term performance. At the same time, we are advancing our strategic expansion into international markets. This involves deliberate investments in organizational infrastructure, including talent acquisition just J and operational capabilities. While these initiatives are currently affecting profitability in short term, they are very critical investments as we work towards achieving operational leverage in these new markets. Next, let me go through these financials. Our total net revenue for the second quarter increased by 10.2% and year-over-year to RMB 3,331.9 million, mainly driven by the continued expansion of our teahouse network. Among them, net revenue from franchisee teahouse grew by 6.1% to RMB 3,020.7 million, representing 90.7% of our total net revenue. Net revenue…

[Operator Instructions] We will now take the first question from the line of Lillian Lou from Morgan Stanley.

Thanks a lot for Junjie Zhang and Aaron's detailed introduction and I look forward to a big step forward in the global expansion. I have a question actually on China right now. Obviously, we saw it in the second quarter results as there was impact from delivery platform subsidy program. So my question is related. One is what kind of operational impact we've been seeing. For example, the impact on general ASP, the franchise work on store's profit margin and the stability. And related to that, what company's strategy going forward related to dealing with platforms subsidy program, how we defend our positioning in the industry and how we look at the second half general operation focus? Then I will translate my question. [Foreign Language]

[Interpreted] Thank you so much for your question. We see delivery platform competition heating up quite a bit in the second quarter and attract a lot of attention globally. While competition can be really good for the market and the heavy reliance on the subsidy right now isn't really sustainable for the industry as a whole. So we don't really count on the platform or the discount to attract more customers. It might help us with the GMV in a short period of time, but it doesn't really help with the profitability to our partners or to our franchisees as well. So we believe that on -- it puts a lot of pressure on the merchant margin and shakes up delivery platforms' income and stability and create financial strength for the platform as well. So the key issue with the subsidy is that they mainly attract price-sensitive customers who don't have strong brand loyalty, and will switch quickly to whoever offers lowest price. So that makes it really hard to build lasting customer relationships. So for the company, we have 3 principles: the first principle is to build around, we stay firmly committed to delivering high-quality products and services. We're not going to get pulled into price wars. Instead, our focus is on offering superior product quality and an outstanding customer experience. And secondly, we're not doubling down our premium brand positioning. We believe real long-term value comes from brand building trust and delivering greater user experience not from short-term price cuts or discounts or coupons. Our strategy is all about enhancing the high-value brand image. And thirdly, we are focusing on optimizing operational efficiency to boost our competitiveness. Without relying on subsidies we keep investing in technology and progress -- process improvement to improve efficiency. For example, the 4.0 automated machine will be rolled out at the end of the year. It will largely lower the labor cost and increase the efficiency of the operation at the store level. So when we pass those savings on to the customers and partners who truly appreciate our quality so we can stay reasonably competitive on price without compromising our core value. And also at last, our R&D -- product R&D will have something different at the end of the year, and the menu will be changed totally. So we welcome you guys to look forward to our changes at the end of the year. Thank you for your question.

We will now take the next question from the line of Xiaopo Wei.

Sorry, Sandra, can we hold on for a second? The CEO has a little comment to add?

My apologies, of course.

[Interpreted] So actually, we believe right now, China has been transferring from the Chinese manufacturing or Made in China mode to the brand positioning mode at the moment. So we believe the lower pricing strategy doesn't really consistent with the high-quality life experience or branding positioning for the Chinese market overall trend at the moment. So keeping the lower voice, it is not really helped with the higher value positioning we firmly believe that we're going to stick to the high-quality brand positioning and also offer a high-quality product to our customers. Thank you. Sandra, please go ahead with the next question.

We will now take the next question from the line of Xiaopo Wei from Citi.

Can you hear me?

Yes, please.

Okay, good. yes, I have 2 questions on overseas, overseas business. In your prepared remarks, you mentioned the very exciting new hire in the U.S. leadership and also many exciting new products in the overseas market locally. So could you update us on the expansion plan for overseas and China in the next few quarters? Secondly, in the operation of overseas market, did you observe anything you want to share with us? And how could you translate those observations to the future strategy for the overseas business? [Foreign Language]

All right. Thanks for the question. Let me answer it. So let me first just go through a little bit more detail on the overseas development market by market that will be give you like a full picture of where we are now in overseas market. So I will not talk about the domestic growth, but more focus on the overseas market. In the international market that now we have 208 stores in total, including 178 Malaysia and 16 Singapore and 8 Indonesia, 5 Thailand and 1 U.S. So in overall, we have 39 new stores added in the second quarter. So we also successfully entered Indonesia first ever with new-age stores in 1 quarter. So in the same time, we made new strides in North America too. So opened our very first store in Los Angeles in May with the second U.S. store now soft opening in August. So overall, from -- a look at from an overall GMV perspective, the international markets keep up the strong growth. As I just mentioned that in the quarter that we have a 77.4% growth year-over-year. To break it down by market, we see a lot of very good signal in the performance country by country. In Singapore, we see the daily sales stayed very strong in the second quarter, holding steadily above 1,500 cups a day store. So we are still continuing optimizing the single store model to really maximize our potential in Singapore. By June, our average payback period of mature store in Singapore improved to less than 12 months. So we see they will soon as an overall country will we go breakeven in coming quarter. So that's really a very robust business development in Singapore. In Malaysia, we have 178 store now running very smoothly. And overall, the…

We will now take the next question from the line of Sijie Lin from CICC.

So my question is on SSSG. So could you please provide more color on the same-store sales performance in Q2, and what's your view of the same-store growth trend going forward? [Foreign Language].

Thank you. Thank you. It's a good question. Yes, the same-store GMV continued softening this quarter, mainly due to 2 reasons. The first reason that we talk about it before, so because we are comparing against a very strong second quarter in last year. And secondly, of course, the overall delivery platform price war intensified, we choose not to engage heavily to protect our brand positioning. So that's definitely where we have a little more market share kind of challenges leads to temporary customer diversion and that impacted the sales a little bit. Given the high base from the comparable period last year, we expected continued pressure on the same-store GMV in the second half of 2025. So we are moderating store expansion in 2025, which eases growth pressure on the same stores. Also, we believe that the subsidy-driven price will not last indefinitely, right? So its impact will gradually fade. And as J just mentioned that we will do what we are strong at. We will focus on the product quality elevation, and we will continue to improve better sugar, better milk and better tea. So really providing the high-quality product to the customers and to bring the customer back, focus on the customer experience, right, stay away from those price competition and really focus on our customer -- our long-term strategy, delivering high-quality product and experience to build a premium brand and earning the customer trust through the consistent excellence. So I think we believe that, that is something that the Chagee should play, and we are very confident that, that will be appreciated by customers as well.

I would like to hand the conference back to our management for closing remarks.

Thank you. Thank you again for joining our call today because we're short of time. If you have any other further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next call. Have a good day. Thank you.

Bye-bye.

Bye.

This concludes today's event. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]