THCH

TH International Ltd. (THCH) - Form 20-F Summary

Business Context and Reporting Period

Company: TH International Limited (THIL)
Reporting Period: Fiscal Year Ended December 31, 2025
Business Overview: THIL is a Cayman Islands holding company operating the Tim Hortons master franchise in mainland China, Hong Kong, and Macau. As of December 31, 2025, the company operated 1,047 system-wide stores (562 company-owned, 485 franchised) across 92 cities in mainland China. The company has exited the Popeyes China business, which was disposed of in June 2024 and reported as discontinued operations.

Key Financial Metrics (2025 vs. 2024)

Note: USD conversions based on RMB 6.9931 = US$1.00.

Material Changes and Operational Highlights

• Revenue Decline: Total revenue decreased 5.4% year-over-year, driven by a strategic decision to prune underperforming company-owned stores (net closure of 14 stores) and a 2.0% decline in same-store sales. Company-owned store revenue fell 10.2%, while franchise-related revenue increased 22.3%.
• Cost Optimization: Total costs and expenses decreased to RMB 1.63 billion (from RMB 1.74 billion). Store-level costs declined due to closures, though delivery costs rose 9.6% due to increased delivery order volume.
• Debt Restructuring: In December 2025, the company completed a significant debt restructuring. It issued approximately US$89.9 million in Convertible Senior Secured Notes due 2029. Proceeds were used to repurchase the entire outstanding principal of the 2026 Convertible Senior Notes and settle overdue payables. This resulted in a one-time loss on debt extinguishment of RMB 73.1 million.
• Going Concern: Management has concluded that substantial doubt exists regarding the company's ability to continue as a going concern for the next 12 months due to recurring losses, negative operating cash flows, and accumulated losses of RMB 3.1 billion. The company requires additional liquidity to continue operations.

Guidance, Outlook, and Risks

• Outlook: The company has not updated long-term financial projections previously published. Management plans to focus on optimizing operational efficiencies, slowing store expansion, and securing additional funding through equity or debt financing.
• Internal Control Weaknesses: The company identified two material weaknesses in internal controls over financial reporting: (1) insufficient competent financial reporting personnel with appropriate U.S. GAAP understanding, and (2) inadequate period-end financial closing policies. Remediation plans are underway but not yet complete.
• Regulatory Risks: Significant risks include PRC regulatory oversight, foreign exchange controls limiting dividend repatriation, and potential delisting risks under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB cannot inspect the company's auditors for two consecutive years.
• Market Risks: Intense competition in China's coffee sector, inflationary pressures on raw materials (specifically coffee beans), and geopolitical tensions affecting supply chains.

Investor Verification Checklist

• Liquidity Runway: Verify the status of the "substantial doubt" going concern assessment and the feasibility of the company's plans to secure additional capital within the next 12 months.
• Debt Covenants: Review the covenants associated with the new Convertible Senior Secured Notes (due 2029) and the extended Convertible Junior Notes, specifically regarding restrictions on dividends and further debt issuance.
• Internal Controls: Monitor progress on remediation of the identified material weaknesses in financial reporting and internal controls.
• Store Economics: Analyze the trend in "Adjusted Company Owned and Operated Store Contribution," which remained positive at RMB 75.3 million in 2025, despite the overall net loss.
• Regulatory Compliance: Confirm the company's status regarding PRC cybersecurity reviews and the PCAOB's ability to inspect its auditors to assess delisting risk.