Thank you for standing by. Welcome to the Yum China First Quarter 2025 Earnings Conference Thank you for standing by. Welcome to the Yum China First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After each presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising you how to proceed. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. There will also be a— I would now like to hand the conference over to your speaker today, Florence Lip, Senior Director of Investor Relations. Please go ahead. Thank you, Operator. Hello everyone. Thank you for joining Yum China's First Quarter 2025 Earnings Conference Call. On today's call are our CEO, Ms. Joey Wat, and our CFO, Mr. Adrian Ding. I'd like to remind everyone that our earnings call and investment materials contain forward-looking statements, which are subject to future events and uncertainties. Actual results may differ materially from these forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with the SEC. This call also includes certain non-GAAP financial measures. You should carefully consider the comparable GAAP measures. Reconciliation of non-GAAP and GAAP measures is included in our earnings release, which is available to the public through our investor relations website located at ir.yumchina.com. You can also find a webcast of this call and a PowerPoint presentation on our website. Please note that during today's call, all year-over-year growth results exclude the impact of foreign currency unless otherwise noted. Now, I would like to turn the call over to Joey Wat, CEO of Yum China. Joey. Hello everyone, and thank you for joining us. In Quarter One, we delivered another solid set of results. Our dual focus on operational efficiency and innovation led to improvements in both our top and bottom lines. We achieved first-quarter record highs in revenue, net income, and diluted EPS. Our same-store sales index advanced to 100% of prior-year level for the first time since the first quarter of 2024 for both KFC and Pizza Hut. Same-store transactions have grown for nine consecutive quarters. As our top line expanded, our margins also improved. Restaurant margin expanded by 100 basis points year-over-year. As a result, our operating profit grew by 8% and diluted EPS increased by 10%. This performance underscores our team's diligent efforts and the effectiveness of our strategy. Last quarter, I mentioned that I felt Pizza Hut had reached an inflection point. I'm pleased to report that we've been able to sustain the positive momentum. In Quarter One, we achieved notable improvements in both same-store sales index and margins. Pizza Hut's 2025 new menu further enhanced its value-for-money proposition and mass-market positioning, driving significant traffic growth. It also enabled simpler operations, contributing to the restaurant margin improvement in Q1. KFC remains a resilient fortress, achieving solid growth and profitability through both good times and bad. In Q1, KFC's system sales grew by 3%, and its restaurant margin expanded to 19.8%. In Q1, we also opened 300 K-Coffee cafes, reaching a total of 1,000 locations nationwide. Let me now turn the call over to Adrian to discuss our results in detail. Afterward, I will share additional color on our strategies. Adrian? Thank you, Joey. Let me start with KFC. In the first quarter, KFC delivered solid sales and profit growth. We added 295 net new stores, bringing our total to 11,943 stores. New store payback remained healthy at two years. System sales increased 3% year-over-year. Same-store sales index advanced to 100% of prior-year level for the first time since the first quarter of 2024, fueled by same-store transaction growth of 4%. We observed strong growth in smaller orders, driven by wider price ranges, lower delivery fees, and rapid growth in coffee. The ticket average for Quarter One was CNY 40, 4% lower than the prior-year period, similar to the trend in the second half of 2024. There may still be some short-term fluctuations, but we expect the TA to be relatively stable over the long run. Despite a lower TA, restaurant margin improved by 50 basis points year-over-year to 19.8%. Operating profit grew 5% year-over-year to $386 million. We innovated by adding a fresh twist to our classic menu items to excite customers and fulfill their changing needs. KFC launched a spicy flavor of Original Recipe Chicken for the first time since we entered China in 1987. The classic taste pairs well with the exotic spicy flavor. Sales mix of Original Recipe Chicken increased 50% during the promotion period. We also introduced the Spicy Original Recipe Chicken Burger, which, of course, comes with mashed potatoes. These innovative new products resonate well with our consumers, not just regionally, but nationwide, attracting new traffic. Serving buckets has been a Chinese New Year tradition for KFC. This year, we enhanced the Golden Bucket by including our popular whole chicken, making it even more ideal for sharing. To address the trend of smaller gatherings, we also offered a variety of smaller buckets. Total sales of our Chinese New Year buckets grew over 50% year-over-year. Let's now move on to Pizza Hut. For four consecutive quarters, Pizza Hut has achieved significant progress, marked by sequential improvement in the same-store sales index and year-over-year margin expansion. Operating profit also grew 29% year-over-year in Quarter One. In Quarter One, system sales increased 2% year-over-year. Same-store sales index advanced to 100% of prior-year level, also for the first time since the first quarter of 2024, up 2 percentage points versus Quarter Four last year. Same-store transactions grew substantially by 17% year-over-year, driven by rapid delivery growth, increased popularity of pizzas below CNY 50, and the successful launch of our new menu. The ticket average was CNY 78, 14% lower year-over-year, consistent with our strategy and driven mainly by better value for money offered by our new menu. Again, despite the lower TA, restaurant margins improved 190 basis points year-over-year. Our new menu allowed for simpler preparation at our stores. We also automated key kitchen processes. Additionally, Pizza Hut's all-you-can-eat campaign that took place in Quarter One last year was shifted to Quarter Two this year, and this accounted for nearly half of the year-over-year margin improvements. Pizza Hut has expanded to 3,769 stores, with a net addition of 45 stores in Quarter One. This number is lower than last year due to the timing of store openings and closures. For the full year, we expect double-digit% net new store growth for Pizza Hut. The payback period for new stores remains healthy at two to three years. Pizza Hut has made tremendous efforts to improve its menu and widen its addressable market. The new menu launched in December 2024 bolstered Pizza Hut's value-for-money perception and significantly boosted consumer traffic. In March, we further upgraded the menu with new products, such as an expanded selection of pizza dough burgers and more one-person meal options. For a limited time, consumers enjoyed our Super Supreme pizza at just CNY 39, half the regular price. Consumers love our flagship Super Supreme flavor, so we extended it from a pizza platform to other platforms, such as burgers, pasta, and rice. Let me now go through our Quarter One P&L. For Quarter One, system sales grew 2% year-over-year, and same-store sales index was 100% of prior-year level. System sales growth was moderate this quarter for three reasons. First, 2025 has one fewer business day, as 2024 was a leap year, a 1% impact. Second, we had slightly more temporary closures during the Chinese New Year holiday this year compared with the prior year. We carefully evaluated holiday traffic patterns in various trade zones and dynamically adjusted our store operations. This enabled us to serve our consumers' needs better and more efficiently. In Quarter One, net new units contributed 4% to sales growth. We're opening more smaller stores and expanding into lower-tier cities. Also, we strategically closed more stores to enhance the strength of our store portfolio for better overall performance. This led to lower sales growth in Quarter One, which will normalize as the year progresses. Our restaurant margin was 18.6%, 100 basis points higher year-over-year. Savings in cost of sales and occupancy and other costs offset increases in cost of labor. Cost of sales was 31.2%, 90 basis points lower year-over-year. Cost of sales improved through favorable commodity prices and continued benefits from Project Red Eye. We continue to pass these savings from these initiatives to our consumers, offering excellent value for money. The timing shift of Pizza Hut's all-you-can-eat campaign also positively impacted quarter one cost of sales. Cost of labor was 25.7%, 30 basis points higher year-over-year due to higher rider costs as percentage of sales. While cost per delivery order lowered, increased delivery volume led to higher overall rider costs. Non-rider costs as percent of sales remained stable year-over-year. Simplified operations helped offset low single-digit wage inflation for our frontline staff. Occupancy and other was 24.5%, 40 basis points lower year-over-year, as a result of the cost optimizations in a number of areas, notably utilities and simplified operations. G&A expenses were 4.6% of the revenue and 10 basis points lower compared to 4.7% in the prior year. Closure and impairment expenses increased year-over-year due to our strategic store optimization. Our OP margin was 13.4%, 80 basis points higher year-over-year, mainly driven by improved restaurant margin. Operating profit was $399 million, growing 8% year-over-year. Core OP also grew 8% year-over-year. Effective tax rate was 27.8%, 90 basis points higher year-over-year. Net income was $292 million, growing 3% year-over-year. As a reminder, we recognized $12 million less interest income this year due to a lowered cash balance as a result of the cash used for shareholder returns. Our mark-to-market equity investment also had a positive impact of $2 million in Quarter One compared to a positive impact of $6 million in Quarter One last year. Diluted EPS was 77 cents, growing 10% year-over-year, or 12% excluding the mark-to-market equity investment impact. Let's now move on to capital return to shareholders. We're on track to return $3 billion to shareholders in 2025 through 2026. This is on top of the $1.5 billion in cash we returned in 2024. The average annual amount of capital return over the three years is around 8%-9% of our current market cap. In Quarter One, we returned $262 million, with $172 million in share repurchases and $90 million in quarterly cash dividends. Our cash position remains healthy. We ended the quarter with $2.8 billion in net cash. Finally, moving on to our 2025 outlook. We're operating in a complex and evolving landscape. Consumer spending remains rational. Our strategy is to offer innovative food and great value to drive traffic to our stores. We're working hard to achieve 10 consecutive quarters of positive same-store transaction growth in Quarter Two. That said, we remain cautious about potential fluctuations in same-store sales index. Even with many moving parts, we reiterate our 2025 full-year guidance of mid- single-digit system sales growth. We expect to ramp up net store openings as the year progresses. For the full year, we're on track to open 1,600-1,800 net new stores. In Quarter One, we opened 247 net new stores, with franchise stores accounting for 41% of KFC net new opens and 33% for Pizza Hut. Franchise net new store mix for the 2025 full year is expected to be lower. Mid to long term, our outlook is unchanged. We expect the franchise net new store mix to reach 40%-50% for KFC and 20%-30% for Pizza Hut over the next few years. We also target to maintain or slightly improve core OP margins for the full year. On the cost of sales front, we anticipate modest year-over-year improvements compared to 2024, remaining between 31% and 32%. We expect no material impact from tariffs, as over 90% of our procurement is sourced locally. The direct impact from U.S. imports on our costs is expected to be minimal. Additionally, we have evaluated the indirect impact of tariffs on our upstream suppliers. Alternative raw material solutions are available along our supply chain, so we are protected at the moment, but we will monitor the situation closely. Moving on to cost of labor. We continue to face pressure on the total rider costs driven by rapid delivery growth. Our goal for non-rider costs is to keep them stable by offsetting the wage inflation of our frontline staff through more automation, simplification, and centralization. In terms of occupancy and other as a percentage of sales, these are likely to stay relatively stable year-over-year. We continue to explore optimization opportunities to offset cost increases. By brand, we expect restaurant margin at KFC to be healthy and stable year-over-year, and Pizza Hut's margin to improve in the mid to long run. Lastly, we expect our G&A expenses as percent of revenue to slightly decrease and the effective tax rate to be in the high 20s. In terms of quarterly phasing, we expect tougher year-over-year margin comparisons later in the year. More meaningful benefits started to trickle in from Project Fresh Eye in Quarter Two of 2024 and from Project Red Eye in the second half of 2024. Overall, we're working hard towards our full-year targets. Let me pass it back to Joey for her closing remarks. Thank you, Adrian. Now, let me spend some time on our strategy. Like everyone else, we are navigating choppy waters, but we have an excellent team capable of turning challenges into opportunities. We will stay alert and concentrate on what we can manage. Our customers continue to love our brands, our delicious, innovative food, and our very affordable prices. Our widened price ranges fueled healthy transaction growth. We also offer abundant emotional value to customers. The 85th anniversary of KFC's original recipe chicken, [Foreign language], brought back childhood memories for our customers. Pizza Hut celebrates Chinese New Year by wishing them good fortune with the Fortune Cat Crust Pizza, [Foreign language]. We also collaborate with top IPs to offer member-exclusive deals through our own online and offline channels. A notable example was our campaign with the popular Chinese mobile game Identity V, [Foreign language]. We include tangible and virtual accessories with our meals, successfully engaging many young customers. Besides our amazing food and value, we offer exceptional convenience. With over 16,000 stores in 2,300 cities across China, we are rapidly expanding our store portfolio and deepening our reach. Our innovative and flexible store models help us profitably expand our addressable market and capture additional dining opportunities. At KFC, K-Coffee sustained strong growth in Quarter One. With both cups and sales up around 20% year-over-year, we see huge growth potential by leveraging KFC's customers and membership base. In particular, a large majority of our members have yet to try K-Coffee. By utilizing KFC footprint, K-Coffee Cafe is expanding rapidly in this high-potential market. The incremental investment is light. Both equipment and resources can be shared. With 1,000 K-Coffee Cafes now, we're aiming for 1,500 locations by the end of 2025, which is 200 more than our original target. On the menu side, in addition to our signature sparkling Americano [Foreign language], we introduced premium Geisha beans [Foreign language] for coffee lovers at just CNY 12.9. We also launched a matcha [Foreign language] lineup for tea drinkers, boosting afternoon sales. Having coffee in the morning and tea in the afternoon is a great way to stay energized. At Pizza Hut, WOW is a simpler and more efficient model. Compared to the regular Pizza Hut, WOW's per-person spending is lower. Its simpler menu, entry price point products, and sharp value for money appeal to young people and solo diners. As we fine-tune the model, restaurant margin has expanded year-over-year. Building on the successful conversion of some Pizza Hut stores to the WOW model, we have started opening new WOW stores. A brand new WOW store's CapEx can be as low as half of a regular Pizza Hut store. With reduced CapEx, lower per-person spending, and simplified operations, WOW seems suitable for lower-tier cities, thereby expanding Pizza Hut's addressable market. Turning to our dual focus on operational efficiency and innovation, our approach is to rethink our operations from fresh perspectives. Over the past two years, we launched Project Fresh Eye and Project Red Eye. These initiatives will continue to benefit us far into the future. We have streamlined our menu, simplified food preparation, centralized certain processes, and deployed more automation. Our innovative approach enables us to maintain consistent standards for quality and service. Technology and innovation play a crucial role in boosting efficiency. Our end-to-end digitization covers key operational processes, from customer service and quality control to staffing and inventory management. There are numerous examples. Just to name a few, we leverage AI to analyze customer feedback from various platforms. This means we can swiftly adjust our operations after a new product launch, often within just a day or two. In our digital customer service center, generative AI helps customers resolve around 90% of issues before they reach our team. We are also exploring the use of robotics to further advance our operational capabilities. Before we turn to Q&A, I would like just to recap the three key takeaways from today. First, KFC continues to be a resilient fortress, performing well through both good times and bad. Pizza Hut has maintained its positive momentum following last year's inflection point. Second, we are broadening our addressable markets with expanded menus, widened price ranges, and innovative models. These include our K-Coffee Cafe, as well as KFC Small Town Mini and Pizza Hut WOW models. Lastly, we remain committed to our dual-focus strategy of enhancing operational efficiency and fostering innovation to capture the amazing opportunities in China and create long-term value for our shareholders. With that, I will pass it back to Florence. 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. Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q&A queue. Our first question comes from the line of Lillian Lou from Morgan Stanley. Please go ahead. Your line is open. Hello. Can you hear me? Yep. This is Lillian. Oh, okay. Thanks, Joey, and Adrian, and Florence. My question is more on the competition and the demand trend after first Q. We've been seeing a bit of general consumption slowdown post-Chinese New Year. I want to understand any kind of new update of our business trend. In particular, since April, we all know that JD started to push on delivery with big subsidies, and a lot of our competitors and the local players are joining. Any impact to our business so far and our strategy for the aggregator competition, if such competition is going to last for a longer run? Thank you. Thank you, Lillian. So far, our April performance is in line with our expectations, and we have not observed any significant negative impact, yet we continue to be watchful. Let me comment on the consumer trends and then touch upon the JD question. As I mentioned, we really have not observed any significant negative impact on our business. Of course, the situation remains fluid, and we'll continue to be alert and monitor the trends with multiple scenario marketing planning. With all these macro sort of challenging environments, I just want to point out that we have successfully navigated a wide range of market conditions in the last 30-some years. Even in the last few quarters, we have faced challenging market conditions for some time, but we have consistently demonstrated our ability to thrive in both good times and bad times. I would like to make three points about the consumer sentiment. Point one is we are in China and dedicated to serving the Chinese people. Both KFC and Pizza Hut are well-recognized brands, beloved by Chinese consumers, and we serve over 2 billion customers annually. We have earned very strong customer support and established deep connections with them. In general, Chinese consumers have become more rational, sophisticated, and very pragmatic. Point two is we are also well-recognized for supporting millions of jobs in China and giving back to the community. Some example, like 18 years of one-year donation, and then Food Bank in over 1,000 stores, etc., etc. Third is our suppliers and franchisees and business partners are very supportive, so we have good momentum. In terms of competition, in terms of the question regarding JD, I would like to make two points. One is we are open to work with all platforms. Our goal is always to serve customers where they are and attract new customers. With that said, we do things at our own pace. We always balance short-term and long-term considerations. Second point is, even as we expand on aggregator platform, and by the way, we have continued to grow our delivery business for 11 years, and we just delivered another double-digit or 13% increase in delivery business. We continue to maintain strong control over our business. Over 70% of our sales are outside the delivery aggregators. These 70% business include dine-in, take-away, and our own very own delivery channels, our own app exclusive perks further drive customers. That is where we are. I think as of yesterday or today, there is another company stepping up the delivery competition. We will remain watchful, and then we will balance our strategy in the short-term and long-term. Thank you, Lillian. Thanks a lot, Joey. That is very helpful. Thank you. We'll now move on to our next question. Our next question comes from the line of Michelle Cheng from Goldman Sachs. Please go ahead. Your line is open. Hi, Joey, Adrian, and Florence. Thanks for taking my question. My question is regarding Pizza Hut. The first quarter Pizza Hut's same-store sales and margins were really impressive, especially we know that actually first quarter last year, the same-store sales base was high given the all-you-can-eat campaign. Can you share with us how do you think about the same-store sales trajectory in the rest of the year? In second quarter, we launched the all-you-can-eat campaign again. On top of that, we had easier days supported from second quarter last year. Should we have a better expectation on the same-store sales? Also on margins, with these all-you-can-eat campaigns, how this will impact the near-term margin while these low efficiency gain and the same-store sales operating leverage is positive side, and this should be a positive driver for the rest of the year. Just wondering for the rest of the quarter, how should we think about the good performance in first quarter to carry on the Pizza Hut? Thank you very much. Thank you, Michelle. Yeah, if it is okay with you, let me take this chance to actually address the question for both Pizza and KFC and the group as a whole. Obviously, in terms of SSSG, because your question brings down to two parts. One is top line, one is the margins. I'll speak of the top line first. In terms of SSSG, the market environment is still quite evolving and complex. Consumers stay rational. As Joey mentioned, while we have not observed any significant negative impact on our business to date, we continue to be watchful for the development. April trading is generally in line with our expectation. It is worth noting that for the month of June, we have a tougher lap in for that month. Overall, for quarter two, we are striving to achieve a 10-concept quarter of positive same-store transaction growth. Amid the uncertain market conditions, we remain cautious about the potential fluctuations in the same-store sales index. This comment is actually true for both KFC and Pizza Hut. Now it comes down to margin, right? Specific to Pizza Hut, indeed, the Pizza Hut all-you-can-eat campaign that took place in quarter one last year was shifted to quarter two this year. There is a quarterly shifting on the margins. Broadly speaking, in terms of the margin outlook for the two brands respectively, I would say there is no change to our 2025 full-year guidance on margin. We expect the quarter P margin for the group as a whole to stay either steady or slightly improved, right? That is our guidance provided three months ago. By brand specifically, we expect the restaurant margin for KFC to be healthy and stable year-over-year in this year and also over the mid to long run. For Pizza Hut margin, we expect it to slightly improve this year. For mid to long run, hopefully, the restaurant margin for Pizza Hut will improve in a bigger magnitude compared to this year. On the top line, the top line is obviously a very important factor deciding on the restaurant margin. We reaffirm our guidance for the top line growth, which is a mid-single-digit growth in the system sales. I would also like to take this opportunity to provide some more color on the line-by-line margin outlook, right? For COS, as I mentioned, there is a quarterly shifting for Pizza Hut's all-you-can-eat campaign. More broadly speaking, for COS as a whole, we expect modest improvement year-over-year, this year over last year, mainly driven by the benefits of Project Red Eye and deflation. We continue to look to return much of the benefits to our consumers to continue offering great value for money to our consumers. Breaking down into these two brands specifically, we expect the COS for KFC to remain in the range of 31%-32% for the full year, and for Pizza Hut to be in the range of 32%-33% for the full year. Again, both these percentages will have a modest improvement year-over-year this year over last year. For COL, as mentioned in the previous earnings release, we faced some headwinds on the COL front, particularly because of the increase in delivery mix. Although the delivery cost per order decreased this year, driven by the increase in delivery mix, the overall rider cost as percent of sales will increase for the group and for the two brands this year. We will make all efforts to try to offset the wage inflation, which is kind of the non-delivery part, by the efficiency gain, by the simplification, automation, and centralization. We try to keep the non-delivery part of cost of labor to be stable year-over-year. When it comes to occupancy and other costs, as percent of sales, that line item is likely to stay stable, and we continue to explore optimization opportunities to offset the cost increases within that line item. I think it is very important to note, and as you also alluded to in the question, there is a quarterly phasing for the margin. We expect tougher year-over-year comparison on both the restaurant margin and operating profit margin later in the year. This is because more meaningful benefits started to trickle in for Project Fresh Eye from quarter two of last year and from Project Red Eye from the second half of last year. Obviously, the tailwinds from the favorable commodity prices will be narrowing in the second half of this year as well. Lastly, a couple of items. The interest income will obviously be lower as a result of the lower cash balance, given we significantly step up our shareholder return. Also, there may be some headwind on foreign exchange rate. I guess one last item is the market equity investment impact on May 20. That is a bit volatile quarter- over- quarter and year-over-year. Overall, we maintain and reaffirm our annual guidance on margin and our top line. In terms of the line-by-line color, that is as I described. Thank you, Michelle. Thank you, Adrian, for the very detailed line-by-line explanation. Thank you. We'll now move on to our next question. Our next question comes from the line of Brian Bittner from Oppenheimer & Co. Please head, your line is open. Thank you. Hi. Just for your investors outside of China, can you just maybe talk more about the consumer environment in China and how it's evolving so far in 2025? Are you seeing any positive indicators of maybe a potential inflection moving forward in the consumer? Separately, just I want to address the transaction growth, particularly at KFC. It's been very solid. Transaction growth up 4% in the first quarter. Can you help us understand how this compares to the industry? What is the industry transactions looking like? So we can understand how much market share KFC is taking recently. Thank you. Thank you, Brian. Let me start with the consumer sentiment. We have not seen sort of very different consumer sentiment change so far. If I could make some general comment of the consumer preference, and that's sort of reflecting in our number, is the preference towards sort of the wider price range and product with even better entry price and still very innovative food. That is still working for us. Therefore, you can see our transactions are growing very nicely, both in terms of our food business and drink business. The food business is the preferred. The delivery business as well. We have captured very nice incremental sales from lower delivery order, particularly in lower tier city. That helps a lot because the delivery transaction for KFC, the TC growth actually is 24%, while the delivery sales is 13%. Similar trend in Pizza Hut. While Pizza Hut also achieved 13% growth in delivery, the transaction growth for the sort of lower TA, about 30-60 TA, is actually over 50% growth. That gives you a sense of where we are going. Also in terms of drinks, I just want to quote you one number. Our K-Coffee, so the coffee that we sell in all our KFC store, the increase of cups and sales is actually 20%. That is sort of overall direction. I think we see sort of similar trend in the industry. I'm happy to report in both KFC and Pizza Hut based on our limited information because it's a very fragmented market in a way. We see some meaningful increase of our market share, particularly in the delivery business. I hope that gives you a sense about where things are. Going forward, we still stick to our dual focus. One is innovation. That means innovations in food, in everything we do. Then operational efficiency. That is where we get our margin from and supporting the innovations. One last interesting introduction of the innovation. Look at our K-Coffee business. Not only coffee, we are actually moving to tea as well. I hope that gives you a flavor of where things are, Brian. Thank you. It does. Thank you, Joey. Thank you. Thank you. We will now move on to our next question. Our next question comes from the line of Chen Luo from Bank of America. Please go ahead. Your line is open. Hello. Can you hear me? Hi. Yes. Hi, Joey. And Adrian, this is Luo Chen from Bank of America. First, congrats on the same-store sales growth, turning flat in Q1. Just now, I also hear you mentioned [Foreign language], and it happens that my daughter is a big fan of [Foreign language]. That actually means to me. Yeah. My question is regarding the new store expansion. In our earnings announcement, I noticed that new store contributed around 4% revenue growth, despite around 11% something new store year-on-year growth. Last quarter in Q4 last year, the new unit growth also contributed only roughly around 5% revenue growth. If you do the math, if we compare the revenue growth from new stores divided by the new store expansion pace, this gives you roughly around 40% something ratio. I understand that we tend to open smaller and smaller stores. I guess this could represent the long-term trend in the future. Is it fair to say that in the foreseeable future, because of our mix shift towards the smaller stores for around 10-11% new store expansion, we can only expect around 4% or at best 5% something revenue growth from new stores because of the dilutions of the smaller new stores opened? That's my question. Thank you. Thank you, Luo Chen. Yeah. Let me address the question quite directly. I think for this year, as we mentioned in the prepared remark, in terms of the growth rate in our top line, we do expect the system sales growth to be in the mid-single-digit range. That is a reaffirmation of our guidance. We target to open 1,600-1,800 net new stores. Obviously, there is some quarterly timing shifts for the net new open this quarter versus the rest of quarter of the year. Specific to a question on the 4% of net new units contribution to the top line. You mentioned the 10% of net new store increase as percentage. Obviously, that's the end of the quarter store count. Even with the end of quarter store count growth rate the same, the store week, when we open or close the store within the quarter, is actually a very important factor as well. The end of the quarter store count only tells one side of the story. On the 4% net unit contribution, we are opening smaller stores as we expand into lower-tier cities. Around 70%-80% of our new stores in this quarter are smaller stores. That's opening this quarter are smaller stores. As we guided to the market previously in the previous earnings release, new store sales are around 50%-60% of our mature stores in terms of the weekly sales. There is a ramp-up period for the new store sales too. We mentioned previously that is normally three years of ramp-up period when the new store gets to a mature store. Importantly, our new store remains very healthy, maintained very healthy payback periods and profitability. Specific to this quarter, in addition to the smaller store factor, this quarter, we strategically closed more stores to enhance the strength of our overall store portfolio, as we mentioned in the prepared remarks. The net new store open figure will normalize as the year progresses. That is more of this year, right? Speaking of mid to long run, if we open, let's say, 10%, 11%, 12% of net new stores in the quarter-end figure, what's the system sales growth rate? Would that be mid-single digit or low- single digit or high- single digit? I guess the store week and the smaller store is one aspect of the algorithm. The other important aspect is the same-store sales growth. As we mentioned just now, we remain cautious on the near-term, especially this year's same-store sales index. There may be some fluctuations there in the mid to long- run. Obviously, we don't have the crystal ball. We'll control things within our control and continue to deliver excellent value for money for consumers. If we can have some benefits in the mid to long- run on same-store sales growth, that will benefit the top line in the system sales as well. Luo Chen, hopefully, that addressed your question. Thank you. Thank you. Thank you. That's very helpful. I also look forward for your more cooperation with more IPs because my daughter is really a big fan of all different kinds of IPs. Thank you. The IPs are super to offer emotional values for young people, which is as important as the value sort of in the physical world. The virtual world and physical world, we have to take care of both these days. Yes. Totally agree. Absolutely. That's the trend to go. Thank you. Thank you. Thank you. Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Christine Peng from UBS. Please go ahead. Your line is open. Hello. Thank you for the opportunity to have the question. My question is about the K-Coffee. Joey, you mentioned that this year, you plan to open 200 more K-Coffee stores than your initial target. Can you share a small long-term view towards this K-Coffee? I was also wondering, what's the impact on the KFC store economics by opening K-Coffee side by side. Thank you, Christine. In the long term, we are committed to the K-Coffee business and particularly the K-Cafe business because we see very promising growth momentum of this particular business. Right now, our target is 1,500 cafes by end of 2025, 200 more. We only started last year. The most promising bit is huge, huge percentage of our members have yet tried the K-Coffee. That is a fantastic base. In terms of the top line and bottom line, the top line is very nice additional same-store sales growth for the stores with the K-Coffee cafe. I mean, it's still sort of low single digit, but it's very nice to that particular store. In terms of bottom line, because we share the equipment, we share the location, we share the cost of labor, the bottom line is very protected as well. These two are both very important to our business as well. If I could comment on the third bit, which is the business bit, the menu, the ambiance, and the menu includes the food and drink, we are making very good progress. Although we only started to open the K-Coffee cafe last year, in 2024 alone, we launched 52 coffee, drink, or food items. We already have some very nice signature products like the sparkling coffee, like the Gigantic Egg Tart, and some really quirky. Quirky is the right word to describe this product called Original Recipe Chicken Latte. It's a bit challenging in terms of name, but I can assure you the taste is really quite good. This year, we are moving on to introduce a more premium Geisha beans for just RMB 12.9. The product itself is getting into the mindset of the customer. As I mentioned earlier, we even started to launch the matcha drink. As of right now, we sell Longjing, the tea leaf Longjing, with latte as well. We are committed, and we are very positive about this K-Coffee cafe. Not only does it drive the uplift in top line, but it also drives incremental profit. Thank you, Christine. Thank you, Joey. Thank you. We'll now move on to our next question. Our next question comes from the line of Sijie Lin from CICC. Please go ahead. Your line is open. Hi. Thank you, Joey and Adrian. I have one question. We are doing good on new product, new store model, high operational efficiency. We are also doing good on brand marketing. Regarding the brand marketing, maybe there are some new trends in the market. For example, some are focusing on healthiness, some are focusing on the emotional value, which I'll talk about. For example, choosing brand ambassadors, joint brands, IP toys that are popular among consumers. Maybe some are connecting the brand promotion with product innovation. Do we have any new observations and evolving plans regarding this aspect, regarding the brand marketing? Could you talk more about this? Thank you. Thank you, CJ. I'll try to respond to your question in two ways. One is our strength in brand marketing certainly is shown through our ability to market fried chicken or pizza brand almost as a bit of fashionable brand. We always stay in touch with our consumers in terms of their preferred IP and something relevant to them. We would like to believe that we grow with them. We grow up with them or we grow with them, period. We will continue to do that. It seems that we have been doing it reasonably successfully. You also asked about other trends in terms of healthy food, etc., etc. I mean, we plan to introduce this concept to our investor and all of you guys in our Investor Day. I will just take a chance to make an advertisement for that. It is the module called KPRO. Some of you guys have already tried the product. What is KPRO? It's a module. Again, we continue to share the KFC store space and membership and equipment, everything. Why sharing? Because the incremental investment is very light. We have some of these stores in Beijing and Shanghai in particular. The menu is very different. They're sort of very focused, means very short menu there, particularly focused on energy bowls and smoothies. What we call this is the lighter meals. These consumers or customers, they're also our KFC members, but we just serve them with slightly different food. So far, we really like what we have seen in both Shanghai and Beijing. Actually, there are some stores in Shenzhen as well. If you cross the border from Hong Kong, in Shenzhen, you can try the product. I mean, I like it myself very much, and so as our KFC members. We do try to offer slightly different food to our customers. It is hard to just talk about the new concept without trying the food and without you guys seeing how it works. We are looking forward to build more of these stores, particularly in Tier 1 and Tier 2 cities. Hopefully, we will have a chance to introduce a full menu, not full menu, a wider range of menu to you guys when you come to the Investor Day later on in the year. I will pause here. Thank you. Thank you, Joey. Looking forward to the Investor Day, the new product and new concept. Thank you. Yes. If I can add on, the Pizza Hut, we have amazing innovation as well. Last year, we have tried the WOW, Pizza WOW menu, and we will continue to streamline the menu, and we will continue to work on the menu. Obviously, we will include that in the Investor Day as well. Thank you. Thank you. Due to time constraints, this concludes our question and answer session. I'll hand the call back to Florence for closing remarks. Thank you. Thank you, Joey and Adrian. This concludes our Q&A session. Before we end the call, as Joey mentioned, we're going to host our Investor Day later this year. It will be in November in Shenzhen, Tier 1 city in China. We'll provide more details in due course. Thank you for joining the call today. Thank you. Thank you. Thank you. Thank you. Bye-bye. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.