I think we can start. Yeah, it's 4:00 P.M. Yeah. Good afternoon, everyone. Thank you for joining us. Credit Suisse and Jollibee Foods video call. I'm Hazel Tangedo. I'll be the moderator for the session today. With me today is Mr. Richard Shin, CFO of Jollibee Foods, and of course, Ms. Cossette Palomar, investor relations. Thank you for being with us today, and congratulations on the results. I think, Cossette, you'll start off with some, you know, outlook for 2023, followed by Mr. Shin, who'll discuss the summary of the results. Without wasting any time, Cossette, I pass the floor on to you. Thank you, Hazel. Good afternoon, everyone, and welcome to Jollibee Foods Corporation's first quarter 2023 earnings conference call. Again, I'm Cossette Palomar, Investor Relations Head of JFC, and I'm here with our CFO, Mr. Richard Shin, who'll provide an update on our results for the quarter. Well, following Mr. Shin's report, we will turn the call over for questions. Okay. Before I turn over to Mr. Shin, let me just read this reminder. This earnings call may include forward-looking statements that are based on certain assumptions of management and are subject to risks and opportunities or unforeseen events. Actual results could differ materially from those contemplated in the relevant forward-looking statement, and the JFC Group gives no assurance that such forward-looking statements will prove to be correct or that such intentions will not change. All subsequent written and oral forward-looking statements attributable to the company or persons acting on behalf of the company are expressly qualified in their entirety by the above cautionary statements. Okay, now I'll turn over the call to Mr. Shin. Okay. Thank you very much, Cossette. Firstly, good afternoon to all those joining us from Asia. I know it's a Friday, late afternoon, so a special thank you for that. Of course, good morning to all of you joining us from other parts of the world. In particular, a very good early morning to those joining us from the U.S. Thank you so much for making the time to join us today. Let me start off with a quick summary of what our Q1 2023 highlights look like. Let me start with the top line. When we say here strong top and bottom line, we mean it from the context that Q1 was once again a historical high, with revenue delivering at just over 28% versus the same quarter last year. System-wide sales continues to outpace revenue slightly at 31%. Of course, very important, our rolling base or same store sales also grew a healthy 22.4%. I'll get into the details of this as it pertains to Philippines and our international markets. That translate into very positive gearing for us, delivering an operating income of nearly +81%. Later on, I will also give some color as to whether this is the true run rate that we're seeing or whether there are certain factors in Q1 that need to be considered for the rest of the year. I wanted to talk about China because last year, we talked about China quite a bit in the context of our inability to really operate the business during lockdown, because of many restrictions, in particular around dine in. I'm very happy to report that China first quarter, the top line has recovered, with 20.7% on system-wide sales and a very healthy double digit rolling base of 12.5%. I'll give a bit more color on China as well as it's a very important strategic market for us. All in all, we grew the network by just under 5% or 111 new stores. Again, I will give you the details at following slides. Before we get into all that, I just wanted to quickly share a key point here about Q1. What is the role of Q1, and how does it fit in in terms of seasonality, to the rest of the year? For those of you who are familiar with the industry and familiar with us, will know that Q1 is, in fact, the slowest quarter of the four quarters. For those who are new to our company or the industry, I wanted to just share with you this fact here. On the top here you see system-wide sales, quarterly contributions. Last year you can see only 20% came from Q1. Q4 traditionally, in particular December with Christmas, is the strongest quarter. If you go pre-COVID, 2019 over here, you see similar pattern with Q1, the softest and Q4 the strongest. In 2018, you see again, once again, similar patterns. I just wanted to remind everyone of this because there, I'm sure, will be questions around run rates and our growth for Q2, three, and four. That also translates very similarly in terms of gross profit contribution. Again, 2022 last year gross profit contribution was 18.7% in first quarter. If you go to pre-COVID years of 2019 and 2018, you can see again Q1 is the smallest gross profit contribution. Again, just context, just as a reminder and also for those who are new. Let me put this onto, I guess, a wider landscape. Let's start with system-wide sales. Q1 2023 was a record high first quarter top line. A couple of mentions here, and later when I talk about quarter-on-quarter versus last year, I will make reference to the fact that Philippines was more or less locked down for nearly all 3 months last year. The incredible growth rates that you see in the Philippines, I think we have to put that in context of where we came from. Having said that, I think the rest of international, we can have a slightly different view in that the lockdown wasn't as severe and China, the lockdown was throughout the year, not just that part. In fact, Q1 of last year, China, the lockdown was less severe. I think it started really in Q2 of last year. Here are the numbers in PHP billion, PHP 78.6 billion. I put all the first quarters in red. A year ago first quarter, COVID period first quarter, pre-COVID period first quarter, PHP 46 billion in 2018, and PHP 54 billion in 2019. That's very positive and good news. What does it look like in terms of translating forward to profitability? I will give you more color on that as we go through. Now let's look at it by our businesses or regions and also by our global brand, CBTL, and some of our other brands, and that's worth noting here. Sales growth has in broad-based terms with all regions posting very strong not only System-wide sales but also Same store sales growth versus Q1 of 2022. The drivers of this, as you can see here, was transaction count or volume of 15.1%, and the average check size also grew by 6.3%. Here I wanna talk a little bit about pricing, 'cause we all know about the inflation impact of last year. We did take pricing last year throughout the year. You see some of that pricing coming through into Q1 of this year as a carry. Our pricing of Q1 in 2023 was negligible, so it's really about a carry coming in from the pricing we took in 2022. Philippines, again, led the pack at 36.7% System-wide sales growth. Majority of that actually came from Same store. I think that's a healthy growth, as you can see. I have more details on China. For now, let's enjoy this number, 28.7% growth in System-wide sales, driven by 12.5% from rolling base and 9.4% from new stores. North America, we have a few businesses there, so we broke it up into the Philippine brands, near 19%. The slightly lower number here is really because there's multiple brands in there, and there are certain brands that are a little bit more challenged in inflation environment. That's brands like Red Ribbon. Jollibee itself was healthy at nearly 6%, Same-store growth in North America. Smashburger, we've been talking about that for a bit, and I have mentioned over several earnings call that there is a concrete turnaround plan that we implemented. You can see here we continue now to see success coming out from that turnaround plan with a very healthy 15.3% same-store growth in Smashburger. India, very strong, led by markets like Vietnam. Coffee Bean & Tea Leaf, you can see here, very respectable, near 7% same-store growth. We continue to expand, in particular through franchising, you can see system-wide sales growth of 19%. Superfoods predominantly, this is Highlands Coffee now. You can see, that is one of our stars. On a fairly large base, it continues to grow at rapid pace. Milksha, we'll put it here, as it came into our system in February of last year, we don't have the same-store growth details yet because it doesn't qualify yet. Overall, international, very strong at 23.3% system-wide sales, contributed by nearly 9% from same-store growth. In totality, 31% top line growth, 22% same-store growth. I wanna just very quickly, I won't go into it as much detail, but map this against 2019, which is pre-COVID, to try to answer the question, are we back to pre-COVID levels? The answer, as you can see here, we are back to pre-COVID levels and beyond. International, 109% growth, system-wide sales, same-store growth of nearly 13%. Global roll-up is 45% and 12% for same store. Again, you can see Philippines here, with a better than 2019 recovery, which is really good to see. Right across, you can see all the brands and the businesses delivering strong performance, and I'll get a bit more into China and where we are with that. This slide is dedicated just to the China region. I took the liberty of trying to walk through what does January look like, what does February look like, and of course, what does March look like. Why? Because the lockdown situation looked very different. In January it still was lockdown until officially announced on the eighth of January. Of course, it takes time for the market to react. You can see we were still quite in recovery mode in January. In February, you can see our biggest brand Yonghe King starting to really deliver what it's capable of delivering, which is a strong double-digit top line growth. Tim Hortons, if you just again as a reminder, we have 18 stores in China. Fairly new brand for us, and we spent, I would say most of 2022 and a good part of 2021 building those 18 stores. Again, just keep in mind that it's still a fairly new brand and business. We're only in tier 1 cities and we're only in the top malls. You can see over here in March where things start to now normalize, if I may use the word, for now, let's just call it back to normal in terms of people being able to dine out and being able to move around freely, and the confidence also to go out and eat, et cetera. You can see the very strong double-digit growth rate across all of the brands, accumulating in a 38.5% same-store growth rate. That's China. Let me take a step up again and just go back to global. There's quite a bit of information here. Let me start with this piece on the right. Essentially this is just a channel mix. It gives one dimension of it in that we can see what dine-in looks like, what delivery looks like and the rest of it looks like, but it doesn't give you the context of absolute dollars. What's important to note here is that Q1 2023 compared to last year, our dine-in has bounced back quite strong. The overall size of the pie, as I just explained, it has grown. Our dine-in, in particular, is driving that. Therefore, our takeaway is starting to on a sort of proportional basis or contribution basis, decrease a bit. Delivery still more or less remains relevant. That again is because consumer convenience dictates that delivery will continue to be relevant even post-COVID. Okay? Drive-thru is our smallest channel. Let's look over here on the top left where you can see by the size of the bars. This is absolute PHP terms. Again to illustrate what we just went through on the right. Dine-in dipped in absolute terms as well, and then now it's bounced back and you can see it's now higher than our pre-COVID level. Even though as a% it's still lower than pre-COVID. That means the pie is growing and our channels are growing accordingly. Takeaway you can see, I mentioned here proportionally down, but in absolute terms larger, bigger. We're growing in that channel as well. Delivery, slight growth, but delivery continues to grow from last year and of course significant growth from pre-COVID where it was less relevant channel. I wanted to talk a little bit about digital because for us digital sales in most cases is accretive, not cannibalization. We have statistics around transaction count that shows that in most cases it is additional or accretive. Where are we? We're not there yet. We're not at global best standards yet. We are getting better. As you can see here, let me just walk you through. 2019 Q1, 2022 Q1. I shall be heard. 2023 Q1. I I do not accept this. Welcome to WatchMojo. Today we're counting down our picks for the top 10 failed Oscar bait movies of all time. You can see red is for global. We're summing all of it here is You can see red is for global. We're summing all of it here is international and the light pink is Philippines. We just put some numbers here just so you can, you know, get a sense. There's PHP 6.7 billion from our delivery channel in Q1 last year. That has risen to PHP 7.3 billion in Q1 in the Philippines. You can see international is also growing. When you look at the percentages here, net net our percentage has gone down, which means the other channels such as dine-in is growing faster. Drive-thru in the U.S. is growing faster. Takeaway overall is growing faster. Overseas I mean, not in, not in Philippines in terms of percentage. This rate here is if you look at it from one point of view, it looks like it's a decline, but it's actually not given that overall our delivery accretive dollars or pesos has increased. We're not world-class yet. We're gonna continue to build on that and this is a fairly new organization and new initiative for us. We will continue to put focus on this. Store network just very quickly, where are we? Again, earlier I mentioned just under 5%, so 4.7%. International accounting for 7.9% network size growth. Philippines were driving our business mostly through our existing stores. As you saw, the rolling base or same store sales growth going. You could also see by sector, here's the cluster of our beverage brands. We've got Milksha, which is a Taiwanese bubble tea and other specialty tea products. We got Superfoods, which is the Vietnamese coffee, Highlands Coffee, and you can see Coffee Bean & Tea Leaf. We've opened quite a bit of stores. Milksha would be predominantly franchised. Coffee Bean will be predominantly franchised new stores. And Superfoods at the moment, it's still predominantly company-owned store because it's essentially in one market, which is Vietnam. That's our network expansion. Where are we in terms of split? One of the, I think, questions I'd like to address later on is about the shape of our P&L and how we can get our OPM up. We are, and we've made this very clear, we are making efforts to become a higher percentage franchised company, so more capital light. Of course, it has a very different P&L, but nonetheless, you can see we're only 57% franchised at the moment globally. Philippines is ahead of the curve at two-thirds franchised, one-third company-owned, but international is where we have the opportunity to franchise more of our brands. Shifting gears a little bit now to the financial. I think the top line I mentioned, so I won't spend too much time. You can see both comparables pre-COVID and last year, and you hear the percentage growth rates. What's interesting here is we are actually way up ahead or above pre-COVID. You can see, 45% on system-wide, 36% on revenue. Gross profit as well. Good leverage, good gearing all the way down to operating income. EBITDA we're up 33% versus pre-COVID. I will just focus on this number a little bit. You may think this number is a bit flat, and the reason is because in 2022, first quarter, we did disclose that there was a land conveyance or a sale of land. That was a strategy to go land asset lights, and really to focus on a different model, if you will, by putting all that land into a company called Central Hub, whereby we would run that separate to our main business. That PHP 1.8 billion gain that we enjoyed in the first quarter of 2022, clearly that's not gonna come back again in 2023. That's what's missing. The way to really look at run rates and where are we in our slowest or softest quarter, first quarter, is this is a true run rate level of business, PHP 7.6 billion, compared to 2019 at PHP 5.7 billion. If you adjust this out, it would be PHP 5.2 billion of last year. That's where we are. This is a new disclosure, so we've filed this in our MD&A, so I'm happy to share with you our EBITDA profitability by business units. Philippines, again, I just explained this number, so that PHP 1.8 billion was contained in this PHP 5.9 billion. You can see China continues to be an EBITDA level profitable. The dip here, as I showed you, January was very soft. Feb started to improve, and then March really started to pick up. I would say the gradual pickup is one reason. The other reason is we had quite a bit of rental subsidies from the government in Q1 of last year that we enjoyed as profit. It's distorted for that one-off. Smashburger, again, we said we will deliver a break-even or better EBITDA year in 2023. Our first quarter delivered PHP 195 million. Coffee Bean & Tea Leaf continues to grow at a good pace, steady. The rest of the world, certain brands in here like Highlands Coffee, etcetera, is doing really well for us. You can see international, which is in the rest of the world here, is contributing quite a bit of profits. What does all this mean? A year ago, international contributed only 16.5% at EBITDA level to group. This year it's contributing at a double rate. Of course, we're still early stages with many of our brands, but this is what we're seeing now. This slide just takes us down, all the way down now to net income and net income attribute to equity holders and of course, EPS. This column here is just for comparison purposes. It's not what our share price is traded on, but again, it indicates that on a run rate basis or real repeatable, sustainable growth basis, we should really be comparing it to 5.2 because that strips out the PHP 1.8 billion land gain. Nonetheless, these are the numbers. Let me now summarize our performance into four key KPIs that are, I think, important and relevant. On a gross profit margin basis, so this also includes store cost, commissary, and supply chain expenses, so it's not just food costs. If you take the whole cost of goods and cost of sales, you see in Q1 we've delivered, once again, a more superior, gross profit margin at 18.2% versus last year, despite, I guess, the continuing inflation and the continuing headwinds. A lot of that came really from managing our costs. We did not price out everything. We made sure that we had a balanced view between taking price and the impact it would have on our consumers. A lot of our gains actually came from efficiency programs in our business or store level, factory level, et cetera. Operating profit margin, OPM, you can see we're delivering now a higher rate of 6.5%. EBITDA margin, lower than last year. If you take the PHP 1.8 billion gain out, higher on a run rate basis. I'll explain a little bit more on the free cash flow, but our free cash flow margin is 7.4% this quarter, which is a 430 basis point improvement versus same quarter last year. Gross profit margin. Just focusing on the middle of the P&L, you can see kinda historically where we've been at. I boxed in here Q1 of this year versus Q1 of last year. Similar data points you just saw, 18.2% and 16.1%. Here we just broke it down between Philippines, 18.4%. You can see international has caught up quite a bit, 17.7%, compared to last year when it was at 14.6%. Strong international rebound. Operating income, similar. Q1 of last year, you can see 8.3% from the Philippines, a drag of 0.5% negative from international, mainly because of China now producing, and also we still have brands, like Smashburger, which we're still losing money. This quarter, you can see international is making money, and it's just early start. Again, Q1's toughest quarter and China just coming out of the rebound. Philippines also improved from 8.3% to 9.3% with its strong leverage programs. That's the split there. Free cash flow. As always, we start with the key contributor, which is EBITDA. We didn't have any one-offs on land conveyances as we did last year, we didn't get any cash from that. We did have a gain on mark-to-market, these are fixed income instruments that we hold. You can see that part of the macros is improving with a slight currency loss. Again, it's mainly due to our EBITDA. Over here, if I can just go down to the bottom, our CapEx that we've spent in Q1 is PHP 2.3 billion, slightly higher than what it was in Q1 last year, but more or less in line and probably slightly more on the conservative side, I would say, vis-a-vis our full-year CapEx and plan to build 550 stores into the network, plus other CapEx requirements of the company. Balance sheet. As always, I wanna just focus first on working capital. We reduced our collection period yet again by another one day, which obviously helps our cash flow, but also good discipline. We continue to hold the strategy of holding a little bit extra inventory, and I think it's still important because we believe that the macro unknowns, geopolitical unknowns, et cetera, still exist, and we certainly do not want to end up unable to fulfill demand. As you can see, Philippines demand's coming back pretty fast and strong, and we certainly will be ready to make sure we don't have any out-of-stock situation. A little bit higher in inventory, but I think that's good use of cash. Payables, we're managing it with a 60-day DPO, which is two days more efficient than it was the same quarter last year. Sorry, full year, full year of last year average, sorry. Our current ratio, very strong. Our debt to equity improved from 1.88 to 1.77. Overall, we're way below any covenant breaches. I think it's safe to say that we are able to continuously pay our loans and our interest on it and continue to use that leverage to get better returns through our store margins. Forward guidance, and this will be my last slide, and I'll open up to questions. The store network, we continue to believe, as we said last year, that it'll be somewhere around the 5% increase level or around 550-600 stores. We believe that the System-wide sales will be somewhere in the range double digit of 15.5%-20%. Please keep in mind Q2, Q3, Q4 were record quarters last year, even ahead of pre-COVID. We are now coming to cycle around that. I don't think we'll be having 30%, 40% growth rates as we've seen. I think we will continue to still have robust, double-digit growth rates. That's the average for the year. Same-store growth rate. Quarter one, we delivered 28.5%, as I've shown you. We believe, again, because we're cycling now into historical quarters of two, three, and four last year, we think we'll still have a very respectable 7%-10% same-store growth rate. With positive gearing and leverage, we think we can produce operating income growth between 20%-25% from top-line growth and cost management. I will now stop sharing so I can open up the screen. Thanks, Richard. For the next 30 minutes, the floor will be open for Q&A. For those who have questions, please use the Raise Hand function. An alternative is for you to email me your questions. Thank you for those who have already sent their questions ahead. I guess to get the ball rolling, Richard, we were discussing prior to the call, maybe you can give a little bit more color. We saw that there was a turnaround in EBITDA performance for Smashburger, for CBTL, even for the international business. Maybe you could give us more color on what drove the EBITDA and margins to perform in 1Q. Thank you, Hazel. I think our international rebound or turnaround is right across the board. What I mean by that is our North America business, including Smash, our EMEA business led by markets such as Vietnam, our coffee and tea categories led by CBTL and Highlands Coffee. Of course, China is now starting to show very strong signs of rebounding, particularly in the month of March, and we see similar patterns coming into Q2. I think it's a combination of pretty much all of our international businesses growing top line, and therefore, we're benefiting also from the profit contribution, which again, in the first quarter was 2.5% versus last year where it was -0.5%. That's pretty much the summary of why international's doing well. For the margins, Richard, is there like, some sort of guidance on OpEx items such as A&P, right? Yeah. Is there a risk for, you know, for it to sort of like shoot up in the next few quarters or any delays like what we saw in 4 Q of last year? Maybe some guidance on the OpEx side. Sure. the margins will turn out. very happy to that. let me break OpEx down to define it as our food costs, so all the cost of goods, and I'll also put in the store commissary, factory. in the first quarter, our total direct costs, if you will, including some A&P related to sales, was 81.8%. Yeah. The same quarter last year was 83.8%. I believe that our costs will hold, and I believe that we'll continue to be able to drive that, 'cause we haven't really taken any further pricing. When we flip the cost base and look at margins, we haven't really benefit from further price increases. So I will say that that's kind of a sustainable rate. Specific to A&P, I know that at the fourth quarter there was some, I guess unpleasant reactions to the fact that we caught up because we didn't want to lose the momentum in building our brand, we continued to spend to really catch up. What happened? Last year, first quarter, our A&P was severely underspent, in particular because Philippines was locked down. We were unable to spend that money, we spent only at a rate of 1.8%. First quarter this year, we're now spending at 2.8% on revenue, compared to 2.5% A&P that we spent in Q1 of last year. If you take A&P investment or spend, and you take all the direct costs, what I'm seeing really is only potential upsides in the sense that there's pricing and there's other things that we could contribute. The final thing I'll say is looking into Q2, we're about 87% hedged on our top raw materials. Again, once again, take some comfort in our inventory costs being planned and managed as well. Thanks, Richard. Let's maybe retreat back a bit to the revenue side. We've gotten a lot of questions. I'll combine it in one. Basically, what are you seeing in the months of April and May now that, you know, we're hearing a huge spike in cases in the Philippines and there's some macro and inflationary issues, you know, at the, in other parts of the world? What are you seeing in the months of April and May? What we're seeing in April and May actually is very similar to what we saw in March. We have not felt any impact of potentially heightened COVID cases in the Philippines. I say that because our dine in is pretty consistent to slightly higher than March. I think that's a good indication that we're not seeing that direct impact. The rest of the world, we're not seeing any surprises per se. What we're seeing is just kind of pick up and carrying the momentum. We will have growth in Q2. I don't think it's gonna be the types of numbers that we've been enjoying, as I said, 'cause we're cycling back now onto record high quarters. We will still see growth, but double digit growth, but not to the extent of what we saw in Q1. Richard, given that we're expecting, you know, global growth to slow, we're seeing, you know, a bit more, you know, inflation down in the West. Are we expecting very good numbers in one, two? You did say this earlier in the presentation, right? That, you know, it's not a one-off. We're expecting it to be maintained in the second, third, and fourth quarter. You know, what are the chances that, you know, in the U.S. or in the West, you see a bit of, you know, the macro situation to worsen and therefore impact the top line? Mm-hmm. least the North American business, the Smashburger and CBTL business, or is, you know, Jollibee confident that, you know, so far trends are showing that despite inflation, we're still expecting the same trends to carry over? Yeah. rest of the year? Yeah. I wanna clarify growth because when we're comparing to 30%-40%, it feels like we're slowing down or not growing. The way we're looking at growth is absolute. On a bigger pie, we believe the pie continues to grow, and it's getting bigger. By pie, I mean top line. We do, we don't have any reasons to believe that we've seen anything contrary to that. Having said that, there are still macro risks, as you said, Hazel. There are still unknowns, et cetera. On the flip side, I think we're in an industry where actually it is to some extent our advantage as we continue to provide highest quality food options at affordable pricing. I think those fundamentals are still there. We are seeing people still dining out. We are in fact increasing the dine out ratio as we've seen. We're also seeing that people continue to enjoy the convenience of delivery. As long as these channels keep going, I think we'll continue to enjoy double-digit growth. Thanks, Richard. We have a question that was sent just now. Sorry, I'll include it right now. In MSCI, the score of Jollibee is not so great. Is this something that you guys intend to look into improving? Absolutely. We're not happy nor proud of the fact that we are triple C-rated in MSCI. This is October of last year, we got that rating. What I can say is that there's been a tremendous amount of work that's been done. For example, for the first time, we now have ESG councils with the most senior executives on it, including our CEO. We have dedicated teams working on a very systematic way to break down the E, the S, and the G, and to really understand where we're losing our points. One of the big takeaways for us is, there's a ton of good stuff that's being done in the company. For example, Jollibee Foundation, as an example, under social. We've been very humble to our value of being humble, we haven't been very good at disclosure. We spent a lot of time actually on working on disclosure, and that's why in April, for the first time, we saw the sustainability report disclosing the way it was disclosed. The platforms have been made very clear around food, people, and planet. There are, you know, 10 key initiatives, et cetera, et cetera. The simple answer is, this is important to us, and we are taking this serious, we're chipping away at it like we do with any other challenges that we have at Jollibee. Thanks, Richard. Yep. Back to the operating metrics again. Mm-hmm. back to margins. There was one question here. why are Jollibee margins much lower compared to other- Yeah. QSR players, yeah, globally? For domestic, you know, comps, GPM are occasionally lower, like for other companies that are also listed. Would you have any thoughts on, you know, where margins would be? Does Jollibee intend to, as you invest more in, let's say, coffee or casual dine-in? Mm-hmm. or, you know, Yeah. higher up in the value chain. Do you expect margins to sort of like get pulled alongside other, you know, QSR players? Again, first, I think the main question here is why are Jollibee's margins? Why. lower compared to other QSR players? Yeah. Great question. This probably is the question I spend most of my time trying to solve. I'll tell you what we're doing. We consistently benchmark against the top 30 QSR businesses where we can get readily public data or information. Mainly publicly listed companies. We see some clear observations. One, at the food margin level, in particular beverage like coffee and tea, it's superior. Two, international food margins are superior to as an absolute rate, and probably in terms of dollars as well because of the purchase price parity. It's superior in international than it is in domestic Philippines. Three, the mix of company-owned stores to franchise really impacts below food margin, which is what I call the store and manufacturing costs. If you have an outsourced model, whereby you don't have commissaries or factories, but you just have a pure strategic vendor supplying you with your raw materials, and if you don't have stores because you franchised it out, then obviously, that cost pool is much smaller and lighter. Hence earlier I said, it is a strategic imperative for us to start to move our business to a higher ratio of franchise to company-owned. You'll see when you start to do that, the math, the way it works, these percentages starts to become much higher. And we've seen that with companies like McDonald's, et cetera, that are predominantly franchised. We do see the numbers in the first quartile. They enjoy being in the first quartile. We are not yet. There is, sort of the anomaly of Chipotle, who is 100% company-owned store, only in the U.S., and yet their margins are better than ours, but not at the level of McDonald's. I think there are some conclusions that we've taken that in international growth opportunity will come through franchising. That's what we're focused on. Richard, now that there's that focus to, you know, shift towards a more, you know, asset-light business model, have your, like, internal ROE target, have they changed? Like, meaning, from 5 years ago, 10 years ago to today, now that there's that overall shift of the whole group towards a more asset-light business model, have your, like, ROE targets increased or changed? Absolutely. As an example, I'll speak of ROIC as an example. Our ROIC targets have changed for two reasons. One, when we decide to build a store, which in the past, I suppose, had a certain ROIC target, certain payback target, right across the board. We've now defined it by brands and by locations. What I mean by that is we've become a bit more, I guess, specific as to our expectations. I think that will certainly help us with our capital allocation management. The other thing is, if there's an opportunity to franchise, we would obviously consider that as an alternative. Therefore, you have to have even better ROIC to do that. Now, certain exceptions are being made, as it should be, I referenced earlier about Tim Ho Wan China. Strategic brand because we have four pillars, and Chinese cuisine is one of our strategic pillars. Tim Ho Wan sits on top as a strategic brand. China and the U.S. are strategic markets, therefore Tim Ho Wan in China, we're okay. Not 1,000 stores, but we're okay, for example, to get up to 25 stores by the end of this year, all company-owned. In China, the payback and ROIC is quite different. It tends to be quicker, because there's more transaction and more volume and more sort of, customers coming through, and also tends to have higher ADS for businesses like Tim Ho Wan. The answer is absolutely. There's been an impact, and we do break it down by brand market combination and whether it's strategic brand or whether it's a non-strategic brand. Richard, I guess in terms of, you know, capital allocation, now that, you know, you've set forth, you know, ROIC targets for certain brands and geographies, can you rank the geographies in terms of, like, priority in terms of allocating your capital? Yes. The three strategic markets are the Philippines, U.S., and China. In the short to medium term, Philippines will rank in terms of ability to return quickly and to give us a good high probability return as well. That's important, the probability of returning. Philippines would be, in our minds, a champion market. Jollibee Philippines will be a combination where we would continue to fund, and there is still growth for Jollibee in Philippines. We're looking at U.S. and China slightly different. In China, we decided to stay focused on one category, which is Chinese cuisine, with three brands. Whereas in the U.S., we've got multi-brand focus, so Better Burger, which is another pillar for us. That's Smashburger. That's why it's so imperative that Smash turns a profit, and it's on its way, so that we can start to international franchise it outside of the U.S. as well. Jollibee has to grow, again, through the franchising opportunities that go beyond, I guess, our high probability to success markets, which is predominantly the Filipino markets. As we go into mixed and general population markets, you know, we need to consider the risks there, but at the same time, capital light options. If you look at the beverage sector, again, I think that'll probably be, I guess, our third focus or priority for capital allocation. Thanks, Richard. Let me just remind everyone in the call, we have 100 participants. They're all very silent, so let me remind them if you have any questions for Richard... I think your presentation was so detailed, Richard, that there's no question anymore. Anyone who has questions, please use the Raise Hand functions. Otherwise, I will continue to read the questions that were sent through email. Okay. Next, Richard, is on Superfoods. Mm-hmm. What cost are the very strong or the 20+% growth in Superfoods Group? SSSG seemed very strong. Yeah ...1%. What drove that growth? In addition to that, what is the update on the potential, like, listing and, you know, the news in the past where, you know, the Superfoods business would be doing an IPO? Okay. Highlands Coffee, again, we are north of 600 stores now, predominantly in Vietnam. I say predominantly because there's a little bit that sits in the Philippines as a franchise, but they're predominant. Highlands Coffee finds itself now in the number one position amongst the coffee groups, and it's bigger. Just to put it in context, it's bigger than the next three coffee groups put together, including Starbucks in Vietnam. We have scale and momentum. It took a number of years to get there, but one, we have scale and momentum. Two, we don't have any issues on capital or funding. It's quite self-funding at the moment. When we build out stores, the payback is very quick. Why? Because the kitchens are different than restaurants. A Highlands Coffee kitchen, if you will, is less complicated and less costly, so we're able to build out quickly with lower CapEx, therefore we're able to expand quicker. Lastly, I'll say Vietnam is very interesting because it's not just about two urban cities of Ho Chi Minh and Hanoi, that is 80% of the business. No. For the coffee category, in particular, Vietnamese coffee category, we see the opportunities going right across all 28 provinces. I think, the macros or the demographics is helping us to expand because there's still lots and lots of room for us to build more stores in Vietnam. 600 is nowhere close to where we could potentially go. Hence we're getting very good EBITDA ratios, very good cash flows, very good profitability on these stores. In terms of what are we gonna do with the brand, I think, I probably cannot comment too much on forward thinking on this brand, but I think everybody understands that this brand value has increased quite a bit, so there's a lot of opportunities for us to do something with this brand going forward. Thanks, Richard. A question just came in. Do you have plans to increase franchise store count through the sale or conversion of existing company-owned stores to potential- Yeah. buyers/new franchisees? Great question. Depends on the brand and country. I say this because, for example, when you have a very successful company-owned stores that's already paid back and has a very strong cash component, we won't give up the EBITDA margin in place of a smaller royalty fee. That just mathematically doesn't work for us, so we won't do that. In the case of Smashburger, as an example, we've looked at key strategic important regions within the U.S. where we're, I guess, clustered. We looked at all the vast spaces where we thought perhaps taking on a franchisee partner, they can do a better job because they have the leverage, whether they have other brands or whether they have commissaries or supply chain or other reasons why they'll be more successful. We're partnering with them to convert our stores where we believe that it's a win-win for the franchisees to make money, but also for us to get a, sort of, a guaranteed P&L, if you will, through royalty. At the same time, we're signing up a multi-store, store development deal. We don't just convert stores to manage a P&L, we convert it, but also to grow. That's what we're seeing. In the pipeline for Smashburger, you'll see quite a bit of franchise stores coming through in the next couple of years, and we're very excited about that strategy. Related to that, do you feel that you have the capabilities in place to increase share of franchising? What investments have you made to support that growth? I think we do. The key thing is, the stores have to make money for franchisees. That always makes it easier. You know, in the U.S., as you know, we do a pretty comprehensive filing of this franchisee report. All the information is there for people to take a look compared to other brands and businesses. Small things like having a VP, vice president of franchise with a lot of experience. You know, we've onboarded several of these skills in the past year. We're building our team, but I think the most important thing is the box economics for the franchisees to be able to make a profit. We're seeing that right across the board with our brands. Then another one related to franchising as well. Can you ask how the acquisition of the master franchisee in Hong Kong fits in the strategy to grow the international business through franchising? Yeah. Great question. A very important priority, I think we can all agree, is to make sure that Jollibee outside of Philippines is as successful as it is in Philippines. In our view, to do that, we have to elevate the brand. The brand positioning and the brand has to be different and suited for markets outside of Philippines. As we all know, Hong Kong is a very interesting market vis-a-vis the love and culture around food, but also its connectivity to China. Our decision to take a position was really to influence the elevation of the Jollibee brand. Thanks, Richard. Okay, I thought I saw Richard. Okay, next question. Sorry, we have a question from Tunde. Tunde, you can go and ask your question, please. Hey, thank you so much. Thanks, Richard. Can you hear me? Yes, we can, Tunde. Thank you so much. And I really appreciate the disclosure, improved disclosure from Jollibee since you kind of took over. That's, I mean, from an investor perspective, that's something really appreciated, and thank you for that. I also want to talk about something that you've improved also, talking about disclosure on Smash and CBTL, where you've disclosed the EBITDA profitability so far, which nicely improved this quarter. Mm-hmm. I wasn't sure if they're profitable in terms of net profit. I would assume no. My question for you is, when do you anticipate those brands to actually be profitable in terms of net income? Yeah. good things are gonna get in the near or mid-term. That would be my first question. Absolutely. Yeah. Thank you, Tunde. It's a great question. If I take a step back, the importance of Smashburger and CBTL, beyond the contribution to our business, is that we can also prove that we can run businesses outside of the Philippines, as well as we do in the Philippines. I think that's very important for us. We spend a lot of time, skilling up. A fancy term of saying, building a good team. These are international talents, et cetera, for both brands. Of course, we all know those investments in people, tend to, you know, are not cheap. Therefore, it takes time, for profitability to come. To be very direct, Tunde, our target is 2024. We need Smash, and we are very confident that Smash, the way it's turned around and moving, will get to profitability by end of 2024. CBTL, again, because it's a more franchised model, 70% of our stores are franchised. We think the opportunity to, you know, get to profitability is very quick. But again, we are investing in the right people to making sure we set the right team and process so that when we do expand and get new contracts with new franchisees in new geographies, we're not in all geographies, we're not in China, for example. As you start to think about the possibility of CBTL going into new markets, we wanna make sure we have the right people to be able to handle that growth. There's slightly different reasons why the financials are the way they are. Yeah. Thanks. Is CBTL profitable currently already or is near profitable? CBTL can be and was and is profitable, but then our investments in the organization also means that. Got it. There are periods where it may not be profitable only because of the G&A carry. Again, for me, I don't see that as a short-term thing. I see that as in building an infrastructure. Got it. Thanks. Just thank you so much, Richard. The second and last question for me is on sort of your international expansion plan as well. You've in the past talked about the plan to have a 50/50 contribution between international and Philippines. I don't know if that strategic plan is still in place, given that this is sort of a new management in place now with you on board. Do you still have that? Um- If you do have that, I was just wondering what you think about imagined trajectory for the international business. Obviously, it's improving right now. Yeah. Do you think it could match, what you have in the Philippines in the medium term? Do you think structurally, maybe because of competition and other things, it will always be lower than what you have in the Philippines? Yeah. I sincerely believe this, Tunde, and I'm not saying it because, I'm here representing the company on this earnings call, but I sincerely believe this because of the brands, of what I've seen. International is 12 and a half% of our profit contribution, this quarter. Now, the 50/50, I think, was always in the past reference to the top line. Yes. I'm certainly more interested in the bottom line, and I think at some point, what a global business should look like is probably going to be predominantly from international 'cause we have markets like U.S. and China, et cetera, that are international. I think that's the opportunity. Again, the pillars or the key drivers are ability to franchise, ability to have strong brands that people want, et cetera. But on the profitability side, to get to 50/50, I think, you know, it just takes a few consecutive things going the right way with momentum. You can see the power of China when they open up. They were extremely profitable before COVID. It's just a matter of a few things going the right way, and I think the ratios will start to get very interesting in a positive way. Got it. Thank you so much. Thank you. Thanks, Tunde. We have two more questions left, Richard. Great. Let's do it. So first- Yeah, absolutely. Yeah. Why, PH store rollout in the Philippines in 1Q was a -4 on a net basis? That's a gross new 17 and closure of 21, despite our positive view on the Philippines. The Philippines Q1, we've actually closed some stores that where leases expired or where the locations were off. We also have in plan in 2023 a pretty aggressive renovation plan as well. We're factoring in CapEx terms, we're factoring in new stores as well as renovating existing stores. It's a big. We need to balance it and spread it out, because otherwise our financials will look like that. Our first quarter was a slow quarter in terms of new stores, but we started, you know, looking into renovation projects as well. That's why you're seeing the numbers. Certainly, in the full year context, Philippines, network will grow. Thank you. Last question from Karisa. Karisa, you may ask your question. Yes. Hi, Karisa. Hi, Richard. Congratulations on the strong 1Q results. Just wanted to focus on Smashburger. What drove the 15% Same store sales growth of Smashburger in the first quarter? How much of this was due to pricing versus volumes? Secondly, can you talk about the competitive landscape, and is it becoming more competitive, and how do you compete or differentiate yourself from other players? Thank you. Mm-hmm. Yeah, no, great question. I don't have the exact numbers, Karisa Magpayo, so, rather than making them up, I'll describe to you what we saw. We saw 2022 with a quite aggressive price increase in Smashburger for two reasons. We found ourselves price indexed quite below Five Guys and even Shake Shack. We saw an opportunity, and we're talking about, you know, 10%-12% opportunity to slowly climb up without losing too much of our volume or having a price elasticity impact. That was one driver last year. Secondly, inflation and everything else that we know of. We've taken, in fact, significantly higher percentage price increase in Smashburger than we did in the Philippines, for example, where it's more price sensitive. That and first quarter this year, we did not take any price. The growth is coming really from that price increase throughout last year, holding and coming in as a contribution to our AC increase. Our TC for Smash, we're seeing relatively flattish. We're not seeing the same level of TC that we saw at a global average. Therefore, I think the opportunity for us is to really accelerate our digital platform where we're underweight. A lot of focus is going around increasing TC or new customers through digital. That's why in September last year, we announced that we've changed our platform and we're starting to see some improvements. I think Q1 is still a little bit early for us to get that ramp. Smash was built really on holding that price coming through our AC and holding TC, but not necessarily growing it and having, I guess, less stores that are losing money. We now have single-digit stores that are unprofitable. We've done quite a bit to turn these stores around. Thanks, Richard. What could explain the flattish, volume growth or transaction count of Smashburger? Is it because of increased competition or is it because you've raised prices quite a bit, or is it the macro environment? I think it's a combination, Karisa. Macro... I don't wanna blame macro for everything because we should always be finding solutions to macro challenges, but our store count is flat. Store count is flat, meaning we've taken a deliberate decision not to overinvest in new stores that may take a long time to pay back. That's why I keep going back to the franchise model for Smashburger being such a critical piece. When the new stores are flat, you're not getting the SWS. Of course, you're not getting the rolling base. As we find stores to convert or new franchises come in, you'll see the TC count lift. I think the network expansion will help us with the TC, because we're only 244 stores, and that's not a huge business at the moment. All right. Thank you, Richard. That's all from me. Thank you, Karisa. One last question from the floor. Manuel, you may ask your question. Yeah. Hi. I have a question with regards to PHO24. What's the outlook on impairment given its discontinuation? Okay. Thank you, Manuel. Thank you for the patience in waiting. Very simply, last year, fourth quarter, we disclosed a PHP 463 million provision for PHO24. Why? Because strategically, we wanna stay focused. We have four pillars, four key brands. PHO24 is not a strategic brand, and it's not a brand that where we felt we would have any real advantage, so it makes sense to exit it. Hence we took the provision last year. The provision is done, so there'll be no impact this year. In fact, the opposite has happened this year, and this will come through in our Q2, but we've divested our share of holdings, so we're 60% in the brand. We've divested that now, so we'll get some proceeds of that divestiture coming in. You won't see an impairment, rather you'll see a divestiture gain coming in. Is that okay, Manuel? Yeah. Thank you. Okay. Thank you. Okay. I think that's all the questions we have for today. With that, we end our session on Jollibee Foods. Let me take this time to thank you again, Richard. Thank you, Cossette, for sharing your thoughts, as we head on to the second quarter of the year. To all the participants, thank you for joining us. You may now disconnect. Thank you, Hazel. Thank you, everyone.