Earnings call transcript: Jollibee Foods Q2 2025 misses EPS forecast, stock slips

Jollibee Foods Corporation reported its second-quarter 2025 earnings, revealing a significant miss on its earnings per share (EPS) forecast. The company posted an EPS of $2.61, falling short of the expected $3.11, marking a negative surprise of 16.08%. Despite a robust revenue of 78 billion pesos, the market reaction was muted, with Jollibee’s stock price declining by 0.73% during open market trading, settling at $217.4.

Key Takeaways

• Jollibee reported a 15.5% revenue growth, reaching 78 billion pesos.
• The EPS miss of 16.08% led to a stock price drop of 0.73%.
• International segments contributed to 42% of the company’s EBITDA, a record high.
• The company is expanding its store network, aiming for 3,000 Compost Coffee stores by year-end.
• Jollibee is shifting its capital structure to 90% debt and 10% equity.

Company Performance

Jollibee Foods Corporation demonstrated solid revenue growth of 15.5% year-over-year, reaching 78 billion pesos for the second quarter of 2025. InvestingPro data shows the company’s trailing twelve-month revenue growth at 12.67%, with EBITDA reaching $493.26 million. The company maintained a steady gross margin of 19.1%, with notable performance in its international segments contributing to 42% of its EBITDA, the highest on record. The company also reported a net income after tax (NIAT) growth of 5.6%. With a market capitalization of $4.57 billion and an overall Financial Health Score of "GOOD" from InvestingPro, Jollibee remains a prominent player in the Hotels, Restaurants & Leisure industry.

Financial Highlights

• Revenue: 78 billion pesos, a 15.5% increase year-over-year
• Earnings per share: $2.61, down from the forecasted $3.11
• Gross profit growth: 13.1%
• EBITDA growth: 13.5%

Earnings vs. Forecast

Jollibee’s actual EPS of $2.61 fell short of the forecasted $3.11, resulting in a negative surprise of 16.08%. This miss is significant when compared to previous quarters, where the company had generally met or exceeded expectations.

Market Reaction

Following the earnings announcement, Jollibee’s stock price declined by 0.73%, closing at $217.4. This movement reflects investor concerns over the EPS miss, despite the company’s robust revenue growth. The stock remains within its 52-week range, which saw a high of $279.6 and a low of $203.

Outlook & Guidance

Looking forward, Jollibee remains committed to its 2028 target of tripling net income and achieving a top quartile 20% Return on Invested Capital (ROIC), compared to its current ROIC of 8%. The company is optimistic about its performance in the second half of the year and plans to continue its aggressive store expansion strategy. InvestingPro analysis indicates the company trades at a P/E ratio of 26.51x, relatively high compared to its near-term earnings growth. Notably, Jollibee has maintained dividend payments for 32 consecutive years, demonstrating consistent shareholder returns despite market challenges. Jollibee is also considering moderate price increases to offset potential cost pressures.

Executive Commentary

"We are a company with more than one brand... positioned well for growth," stated Richard Shin, CFO. He emphasized the effectiveness of Jollibee’s strategy to mitigate inflation impacts without fully passing on costs to consumers. "Our strategy to not pass on all of inflation to our consumers is working really well," Shin added, highlighting the company’s focus on maintaining customer loyalty.

Risks and Challenges

• Inflationary pressures could impact consumer spending and margins.
• The shift towards a higher debt ratio may increase financial risk.
• Market saturation in key regions could limit growth opportunities.
• Currency fluctuations may affect international earnings.
• Changes in consumer preferences could impact sales.

Q&A

During the earnings call, analysts questioned the company’s ability to maintain its guidance amid rising costs. Jollibee expressed confidence in its strategies, noting minimal impact from wage increases and expecting interest rates to trend downward. The company also addressed concerns regarding accounting changes in Compost Coffee, which have affected margin perceptions.

Full transcript - Jollibee Foods Corp (JFC) Q2 2025:

Giselle Tanero, Moderator, AB Capital: Okay. Good afternoon, everyone. Thank you for joining Jollibee Foods second quarter results call. I’m Giselle Tanero. I’m from AB Capital and I’ll be the moderator for the session today.

So to give us updates on Jollibee as well as the company’s strategies and plans moving forward, we have mister Richard Shin, Jollibee Foods CFO and miss Cosette Palomar, from Investor Relations. So thank you, Richard. Thank you, Cosette, again, for being with us today. So before we start, as mister Shin goes through the presentation, you may type your questions so we can read them out, after the presentation. But before we start, Kaseth will, come up with some disclosures before the presentation proper.

Kaseth, the floor is yours. Thank you, Hazel. Good afternoon, everyone, and welcome to the Jollibee Group’s earnings call for the 2025. So let me just quickly, read a reminder on forward looking statements. 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 Jollibee Foods Corporation 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 Jollibee Foods Corporation or persons acting on behalf of Jollibee Foods Corporation are expressly qualified in their entirety by the above cautionary statements. And now I’ll turn the call over to Mr. Shih.

Richard Shin, CFO, Jollibee Foods Corporation: Thank you very much, Kosehn, and thank you, Hazel and AV Capital for hosting us. And a very good afternoon to everyone. And I understand we have some joined callers from The U. S. As well as Europe.

So thank you for joining and thank you so much given the time difference as well. So a very good morning to you all. So let me start, as usual, with the top of mind questions that we all have about the business and here we go in terms of the Jollibee brand. So the first question I’m sure all of you are thinking about is, how is Jollibee brand expanding and performing on the international stage? Sorry, So I’m just going to click this off.

Okay. So starting with Philippines, first and foremost, you can see that we had very strong continuous double digit top line growth, led by system wide sales of 13.3%. We also had a very strong same store sales growth with good quality contributions from volume. And, Philippines market, just as a reminder, had a 4.6% or just under 5% network growth both through company owned stores and also through our franchising, model that we have in The Philippines. Within the international markets, overall, we grew the business by 15.4% system wide sales and same store sales growth of 9.2%.

And you can see the contributions coming right across the board. So we got Hong Kong and Macau, North America, that’s both US and Canada, and of course, EMEA had all very high to low double digit same store sales growth. And please keep, in context to that, which I’m about to show you on the next slide where our peers, are. So total, 1,807 stores for the Jollibee brand globally and 6.5% store expansion for the quarter. So as I mentioned, how does that compare against some of the competitors in the QSR space?

So you can see down here the multi brand peers. So those, businesses that have more than one brand. So Yum! And RBI, and of course, we do look at within our region, Asia Pac and Yum! China as well.

System wide sales figures are shown here and same store sales growth are shown here as compared to what I’ve just shown you, which is again summarized on top here. So we have superior results from that sense. Single brand peers like the McDonald’s, Chipotle, and the Domino’s of the world, you can also see same store sales growth. We’re nearly triple that of, the average here if you take AAA’s decline out. So continuing with the Jollibee brands, we wanted to see, some of our strategic market and also key markets such as Vietnam, what’s happening there.

So let me start with North America. I’m sure some of you have seen this, but we won for the second year in a row or back to back, the best fast fried sorry, the best fried chicken by USA TODAY. What’s also interesting here in North America is we have a fifty four month streak or nearly four and a half years of sustained same store sales growth. And, that, of course, only has meaning if we understand how our ADS is performing. I’ve said on the past call that our ADS in The U.

S, for example, was 13,400. I’m happy to report that for Q2, we’re now at 14,000 per store on an average day in The U. S. And Canada is higher. We’re running our business at 16.4 ks and these are all 100% owned company owned stores.

We’ve also advanced in terms of our loyalty program. So we’ve launched our Jollibee app, which has an early stage, has 600,000 subscribers and growing. And this is a very important part of our strategy in terms of going beyond trial, repeat, frequency, and really getting into, loyalty. So, this, this was a very important initiative and we’re very proud to say that, it’s now, up and running. In terms of the franchising foundations that we’ve been talking about for a while, where are we?

Our first store will open in the second half of this year. We’re also on track to closing many deals in the pipeline, and that is to say 15 franchisees are in the pipeline at the moment with seven multiunit development or more in key major cities like New York, Atlanta, New Jersey, Vegas, etcetera. Moving on to Vietnam. Vietnam, I can say now that we are a clear number one in the marketplace in terms of market share, revenue, net income despite our store count is still, lacking that of Lotter and KFC. And you can see the numbers here.

We’re number three, but closely sorry, quickly, closing in on KFC. And so, with that, I think it’s also important to see that our same store sales growth in Vietnam is at at high double digit of 21 and a half percent. Our OPM is single digit positive and so, 100% company owned stores. I think that’s a very, strong indication that, Jollibee can and does work outside of Philippines within Southeast Asia. Second question, or update on the Chinese cuisine segment.

So the question really here is, is China’s recovery progressing meaningfully and is the trend proving to be sustainable? First and foremost, I’ve talked about this in the past, but to reiterate again, we have a, we have strategically pivoted towards value positioning for both day parts, morning or breakfast and lunch. And given the nature of Yungha King, as it started as a breakfast brand, it’s also very strong in lunch daypart as well, and it’s delivering a clear measurable success. Why do I say that? Same store sales growth for all brands in China, so that’s Hangzhou, Yun and Yungha.

We delivered a 4% same store sales growth. And if you remember earlier, showed Yungha as a reference point. And this is underpinned really by what we’re very excited about and that’s traffic gain. So that’s 15% up. And for the Yungha King brand, which is our flagship brand in China, it’s 3.4% same store sales with traffic nearly 7% up, reversing previous quarters, multi quarters of decline.

And what does that mean in terms of how’s it looking post q two? So July, is better than June and June was the strongest quarter in Q2, and August is looking even stronger than July. Business level NOI turned positive in June as well, reflecting improvements, reflecting improving fundamentals, excuse me, due to the REITs and what we call the super value store model. So we revamped also our store model prototype so that we can scale even quicker. What that means is in order to be able to go forward with a franchising model in China, we need payback of around two years or less, and that’s where we’re now hovering.

So, the first half of the year, we did continue to open, stores. In the back half of the year, our plan continues to be to open stores even at more accelerated rate given that we now have a box economics prototype that is sellable to our franchisees. In addition to all that, business as usual items such as looking for cost efficiencies right across, the board, and so we continue to do that as well. So we’re very positive on China, and we believe that second half of China will be significantly different versus the first quarter that we saw, with some challenges. Continuing on with the Chinese cuisine segment, we have our other brand and this is more of a global positioning for us.

So that’s Tim Ho One. Please, again, as a reminder, we started to manage TIM-one only from January when we, had the opportunity to take it out of the Titan Fund and make it a subsidiary of JFC. So under the key categories or areas of where we’ve been focusing, so let me start with organization. We’ve now assembled a leadership team that is also fully integrated into JFC’s shared service model, and that is to say our Tim O’One team is quite lean, given that we have a lot of support coming from JFC service model. Second, regarding the brand, in just six months just sorry.

In just around six months time, Jessie has really brought the center of gravity of or where the brand really originated from back to Hong Kong. And so we’re very proud to say that it’s now it’s got its roots back in Hong Kong. Hong Kong is completely transformed. We’ve opened new stores in Hong Kong as well, and we’re starting to build our prototype store. And really, the brand heritage is reignited, and we’re now looking at expanding this into other markets within the region of Asia, but also focus on our core market, which is The U.

S. For future growth potential. Thirdly, regarding consumer experience, we’ve completely revamped the menu. Again, it’s been many years that Timo One was managed differently, in the fund, but, of course, JFC using our, prototype of brand, product and retail or BRPS we call it. We have a playbook, so we revamped the menu.

We’ve enhanced the products. We’ve also adjusted price to the more affordable level for a higher consumption. We’ve also ensured very importantly that the store service as well as the product quality was consistent and superior. And, of course, all the standard operating procedures that we use in our other brands like, Jollibee. We’re rolling that out, to Timo one as well.

And what we’re seeing is that the appeal to the local consumer base is, heightened, and we are seeing the return of the everyday consumer back, which means that, the traffic, is up and also the frequency of dining with us is up as well. And that, of course, translates into higher average daily sales that we’ve been seeing. And lastly here for Timo one in terms of an update since only it’s been six months. Franchise expansion, under that, we have, as I mentioned, a very successful store proof of concept. And here, we put an example.

Our Shopkins store, which is a new store that we opened within the last six months, is absolutely ahead of internal targets and our expectation. And we’ve understood why this is happening, And we’re now using that formula to really go up to other markets, like I said. I’m starting with The US. We’ll have our first, store under the new management, Us, in October in The US. And we’re also buying Canada because it’s a significantly, important but also very interesting demographically, where this brand, I believe, will do very well.

So we have also transferred one of our executives to North America so that, he and the team that he’s building, will take this business forward. So we’re very excited about the potential of this business, and we think it’s quite unique in terms of Chinese cuisine to be really potentially to be the first truly global Chinese cuisine brand. Moving on to Smashburgers. So what are the key enablers supporting Smashburgers’ clear path to financial viability? I’ll start off with leadership again.

So Jim Sullivan, he was our chief development officer and, president. So he’s been with with us, I would say, just under a year now, but his role as CEO, effective August 1, has really reignited the passion, the atmosphere back in home based in Denver and, throughout US. Jim comes, of course, with, over twenty five years of relevant experience in the QSR space doing very similar type of work that we’ve asked him to do, which is to really grow the business, at a difficult starting point. And, I have to say, I’ve seen nothing but positive feedback coming from the franchisees and also, the industry community regarding, Jim and what he brings to the table. So more tangibly, what we were seeing is, traffic is starting to pick up.

And again, numbers I’m presenting today are q two, but I wanna talk a little bit about the latest, which is our single largest campaign that, we’ve launched in a long time, and it’s called December of Smash. We launched that in July, on July 22. So we do have, data points from there, and there’s been a significant change in terms of transaction count swing. And I’ll just qualify that by saying it’s double digit positive swing. So it’s been fantastic.

The feedback from our customers have been great as well. And there’s new menu items that’s quite unique and interesting. I don’t think there’s anyone out there who’s doing a $4.99. This is USD currency, with a certified Angus beef everyday price. So it’s not a promo, it’s an everyday price.

We still have very strong margins on this product, and, this is proving to drive traffic back in along with, the launch of the, all beef hot dog, well, which we call the big dog, which is doing incredibly well. And, of course, we brought back, the fan favorite from the past, create your own offering. There’s a few other items, but what’s what’s interesting here is we’re getting the excitement around the brand back. And, with Jim being announced as CEO, we’re really seeing quite a bit of exciting opportunities for the balance of the year. So, I can confidently say the second half of the year for Smashburger will be vastly different from the first half of the year.

Q2 was much stronger than Q1, but I think the momentum will continue into the second half of the year. From a franchising update perspective, Smashburger, just to set context here, has two zero four total stores, of which 82 stores are franchised, of which a big proportion of that or 41 stores, are what we call nontraditional. And what’s important about nontraditional is that segment of our business is doing extremely well. There are airports and there are other places like universities and military bases, etcetera. But if we take airport as a, high density traffic place, we can see consistently our operators are enjoying over 20% EBITDA margin, from Smashburger business.

So for that reason, we’ve been quite a bit, in demand, and there’s quite a bit of new, opportunities that’s in the pipeline. Detroit is just an example that opened two weeks ago in, airport in Detroit, I should say, that opened two weeks ago. So we’re very excited about the progress of this channel. And, of course, we are looking to refranchise or convert, if you will, 100 of those two zero four stores that I mentioned. And what this will do is it’ll unlock capital.

And as we convert these stores, of course, we’ll have a store development commitment that will mean that we’ll be adding more stores into the pipeline to essentially convert this business into nearly a full franchise business while maintaining our pace in Denver with, some company owned stores there. So, this asset light model plus what we’re seeing in terms of traffic creation activities will continue on. And so, the light at the end of the tunnel is very bright on this brand, and so we’re very excited about the comeback of Smashburger. So here are just some snips snippets of what we’re seeing in the press. So articles such as, you know, the new menu item is one that no one expected.

Our hot dogs are best sellers, and, you know, we think pound for pound, we probably have the best beef hot dog, out there and we’re getting similar prices back from consumers and also the trade. And then you can see some of the visuals here around our everyday price of the two burger variants, the all American and the deluxe single patty. Here’s the hot dog visual that we mentioned. We have four variants of that. We’ve launched also the brisket bacon burger and that’s back again.

So, again, very much focused on the quality of the food, improving the standards around service, and continue to do what, Smashburger was meant to do, and that is to really make the best beef burgers. Moving on to the coffee and tea segment, how is that performing? Simply put, very strongly. So the strong EBITDA growth supported, by a very strong top line growth and our margins are very resilient. So what I mean, so let’s go one by one.

In terms of system wide sales, these numbers here are those quarters that you see below in reference to the same quarter a year ago or versus last year, as we call it. So you can see even before compost comes into the equation, 21.5% growth for Q2, moving on to nearly 49%, nearly 59% and then ramping up to nearly 69%. And you can see in gray here the impact of compost coming in. But you can also see Highlands sorry, CBTL also being still the largest contributor and growing very strongly in second quarter versus the first quarter and also second quarter versus last year. We’re enjoying very strong growth there.

In terms of footprint or number of stores, it’s now about 52% of our 10,000 plus stores. It is in the coffee and tea category. In terms of money or EBITDA profits, we see a growth of 77% versus the same quarter of last year. And if you want to strip out compost and look at it organically, it’s still a high double digit of 19.2% EBITDA growth from the same quarter of last year. Continuing with the coffee category, let’s move on to what’s on everyone’s mind and that’s the cost of goods or bean price.

Back in q one, it was, yeah, it was it was pretty scary to some extent as we started to see this kind of curve happening in q one. Then, of course, like everything else, things do come down and up, etcetera. And so the peak was $4.39, and you can see now, as of two days ago when we had a look for yeah. When we take a look, it was, down to $3.20, and you can see now. The question really is not what is today’s price, but it’s what’s our procurement policy and how do we then, purchase beans so that we’re not stuck, with high cost beans, etcetera.

And in short, I can say this is a very, very important area for us. We spend a lot of time analyzing and thinking about it. And I can tell you, we do both short and long holds and it’s it’s worked out very nicely. So I just wanted to reintroduce and maybe introduce for those who don’t know, our brand ambassador for Compost Coffee in Korea is one of the most popular and famous member of the BTS group. And as some of you may know, V just came back from military service in June, and we’re very proud to say that, Compost Coffee is really the first company, that he’s now come out and done work with.

So this is the second signing of Vee. So this is his second term. And one of the difference I wanted to point out here is really, these three drinks, These were actually collaboration or call, collabs with V who helped design these drinks. And the way, we’re gonna go to market in terms of marketing and, advertising around that is we’re gonna talk about the drinks and we’re gonna talk about, the fact that, you know, we had full endorsement and participation from our brand ambassador. Here, the Korean text, if I may just translate, it just says coffee the way coffee should be.

We do, have a major, media campaign starting on August 19. So today is four days, prior to that. So we can’t show you the full video, but we did get permission from his management team that we can show you a small teaser. So just wanted to show you this four second clip. So what he just said in Korean is, I missed you as he was in the military, and let’s meet at Compose.

So, we’re pretty proud. There’s a few more videos which are a little bit longer, of course. And, again, it’s not just about network expansion for Compose, but we’re really, you know, thoughtfully building the brand as well for both growth in Korea and also potentially if we were to take this brand outside of Korea, we would have the marketing assets and the brand ambassador and the product and price positioning that allows us to be very competitive outside of Korea, should we, take that move sometime in the future. Let’s switch now to, our flagship market, Philippines. So is The Philippines business demonstrating sustainable growth and profitability?

The answer is yes. I wanted to show you not only 2024 versus twenty twenty four q two, but also versus twenty twenty three q two. And the reason is, I think, it’s important to know that the the base of q two twenty twenty four was coming off of the highest, then base of 2023. And you can see the growth rate in 2024 versus 2023 is unusually high, if you will, for industry standards, but, these were all driven really behind Jollibee and some of our core, brands in The Philippines like Mang Unisel and ChowKing, which are doing phenomenally well for us, plus all of our other, brands that’s also doing very well for us. So off of that base, we still delivered a 11.3% system wide sales, translating into revenue growth of 10.3.

And I will talk a little bit about some of the compression, if you will, on our profit growth rates. Again, so if you look at the double digit profit growth rates that we had versus 2023, it’s not the same rate, but in terms of dollars, they’re also moving north, so accretive, if you will. And the reason is because cost of inventory, in particular, within cost of sales as the cost of running the stores and factories, we actually had efficiency savings there. So it’s really about cost of inventories. So inflation, still exists to some extent, and we’ve taken a conscious decision not to price out inflation in full to our consumers.

And that has worked because we’re able to grow the top line double digit in a in a highly competitive, market in The Philippines. So, that is to say that we’ve taken only 1.3% price increase on our flagship brand Jollibee, and that was in June, so the last month of q two. So we’re not seeing the full impact of that price increase coming through, in the back half of the year. We should have a better profitability mix to the top line mix. Again, overall, still a very strong performance and the business continues to grow and for the first half of the year, delivering 6,100,000,000.0 to NEIAS.

Tariffs, I think this is also very topical for many of you. In our case, the expected tariff impact on overall cost, we assess right across our major businesses and markets to be low with the highest impact, if you will, on CBTL. And I think we all understand, the components of that. So Brazilian coffee bean price, obviously landed in The US, will be impacted by the 50% tariff rate that The US has imposed on Brazil. There are many things we’re doing to counter that, but, overall, at the moment, we consider this risk to be manageable and so classified as low.

How are we doing in terms of funding and how are we funding the growth? I’ll start by saying there’s a deliberate use of debt, and later, you’ll see some of the impact of that through the short term interest, expense increases. But I say the word deliberate because the key point here is we’re shifting from 66% debt, 34% equity capital structure to now a 90 debt, 10 equity structure. And that means going forward, we are going to be, improving or reducing our WAC rate. So when we start to look at ROIC increases, which we’re driving, and I’ll come on to that in a second, and we start to see lower WAC rates, we’re gonna start to see a wider ROIC to WAC spread, which of course is very important for, for all of us in terms of our ability to be able to really drive that component of the business.

So let me just give you, the major component of that switch. As some of you may be familiar, we had a 396,000,000 perpetual bond that matured Jan first of this year. That was previously enjoying a coupon rate of 3.9% pre pandemic rate, of course. And when we refinanced it, we did a couple of things. We took 96,000,000 off of that, which is to say we converted into pesos.

So we lowered our exposure to USD by, nearly one quarter. This is now, refinanced through PESO loan on a floating term loan base. The balance of the 300,000,000 of the $3.96, we’ve converted from perpetual, which was equity accounted to senior. And we got a very good rate at the time of 5.4%. And so this effectively shows up in our interest expense comparisons.

But again, this was done, with thoughtful reason and overall, we believe there’ll be a benefit to the company by restructuring it this way. Second component of, funding, relevance here is, compost coffee, which, we, of course, funded partially through, term loan and also sorry. Let me just click this off. And also through, cash on hand. And the Compost Coffees business will return 36% ROIC, and this is the standard ROIC formula of notepad over invested capital of Compost Coffee.

It’s also important to note here that we are seeing very good flow or strong dividend inflows. Again, as a reminder, it’s a 100% franchise business for us. We bought it at around 2,400 store level. Today, one year later, we have 2,800 plus stores and 100% continues to be a franchise model. So, the payback for this investment is quite rapid.

How is ROIC progressing relative to our return thresholds and capital allocation strategy? So, again, capital allocation strategy is both for organic new investments and inorganic as the example we gave on Compost. And so this is what we’re seeing from an ROIC perspective. So new investments ROIC, we’re seeing them around 10.5% and for Compost Coffee’s ROIC, again, 36%. Now let me get into the financial highlights, now that we’ve gone through the top of mind questions.

So the summary again for the first quarter sorry, the Q2 summary, system wide sales number I just shared, 19.6% revenue growth of 15.5% at just under 80 sorry, 78,000,000,000 pesos translating into a good gross profit carrying 13.1%. We’re running our business still in the 19% and above range. Our NOI or OP margin, is sorry, growth is 19.1%. Our margin rate is 7.8%. And of course, our NIAT grew significantly better than Q1 as well, at billion or 5.6 growth versus a strong Q2 of last year.

And in summary, this is where we sit in the first half of the year. Let me give you a little bit deeper dive in terms of key metrics. So here, again, we’re looking at versus 2024 and also one previous year of 2023. So you can see the evolution and the growth rates over two years. So Q2 versus Q2 ’twenty four and Q2 ’twenty three, starting with ’twenty three to ’twenty four growth rates, you can see extraordinary rates, have to say, very high double digits, 28% on revenue, positive gearing up to gross profit growth of 36%, 51% versus for OP growth rate, EBITDA growth rate of 34%, that’s all cash, of course, and NIAT growth rate of 38%.

So coming off of that very strong profit delivery, we continue to grow double digits up until OP level. Some of that, again, reflects, as I mentioned, our deliberate choice on financing, but also higher taxes given that our profit base is higher as well. So just to make sure I have enough time for q and a, so let me just go through this a bit quicker. So EBITDA, by region or, key businesses, the big picture or takeaway points are here, 13.5% growth on EBITDA versus last year. And what that means for the first half is we’re up 11.5%.

For Philippines, we’re up 5.2%. And the softer growth here you see on EBITDA is what I explained earlier is the cost of inventories, which we’re not pricing out, but we’re getting transaction count and volume in place. So we’ll continue to grow the pie. In the second half of the year, that shape is gonna change, of course, and the flow through, of course, will be different as well in in a higher rate basis. You can see Smashburger loss of 0.2 compared to the first half, which is to say Q2 is half of Q1 loss.

And, with the Summer of Smash program rolling out and seeing early signs of traffic improvements, etcetera, and also margin dollar improvements. We’re not losing margin dollars. We’re actually gaining margin dollars even though unit margin is coming down a little bit, because of some of the pricing that we’ve decided on everyday burgers, etcetera. We’re seeing that net net, we’re making more margin dollars. And what we’re gonna see in the second half of the year, of course, is a much, improved momentum of that coming through.

This here, North America is driven mainly by Jollibee, so continues to grow at double digit, as is EMEA, mainly Jollibee. And then the coffee category, which earlier I showed some breakdowns. You can see CB tails growth, compost. There’s no comparison because we didn’t have compost in Q2 of last year. Quarter on quarter, so this is quarter two versus quarter one, all double digits, top line growth and high double digit, bottom line growth.

For example, NIAT, we’re 33 and a half percent up from q one. Cash flow and balance sheet. Again, before lease payments, our business is running at 10.3% free cash flow margin rates and taking into account the lease payments, 6.6. The difference that you see here from q two of last year really is in our outflows and inflows of working capital. Just to break it down, we’re taking a different position on inventory, and the cost base of inventory has gone up a little bit, but some of this also is, deliberate decision to hold an extra day of inventory because our growth is so rapid.

We want to make sure that our safety stock is well protected. Our underlying EBITDA margin rate continues to be in the 14% range. And, of course, our other key item here to call out is, our CapEx, which we, are well within the range that we guided. Just very quickly is to say that we’re way below, the covenants. And if I can move on to this and just highlight to you the accounting change from equity based accounting of perps to debt on the senior is really what you’re seeing in terms of movement here.

In terms of cash on hand, slightly higher than where we were, last year. So, just to wrap up, with guidance, system wide sales significantly ahead. Here’s the range that we guided. Same store sales growth or RB growth, excuse me, on the high end of the range. Network significantly ahead.

CapEx 5.6 And the back half of the year, of course, usually ramps up a little bit higher than the first half, but nonetheless, I would say comfortably within this range to slightly on the lower end of the range or even outside the lower end of the range. Operating income growth significantly higher than what we had guided on the NOI. So final two slides, three slides, key takeaway. First and foremost, JFC is a, I think, we’ve been a proven successful brand folio and that is to say we are a company with more than one brand. But we are very focused, of course, on the food and beverage space.

And we have scaled both organically but also through selective acquisitions. JFC is also positioned well for growth and also we are mitigated from, certain risks. For example, dependency on a single brand or category as we’re in four categories as I always talk about chicken, coffee and tea, better burgers, and Chinese. And also equally important, we are not a single market, risk dependent. So, sorry, risk exposed.

And so we do focus on, other markets outside of Philippines as well. And you could see our international business, has grown quite a bit. So 42% of total EBITDA for Q2 has come from the international business segment, and that’s a record high that, we saw in Q2. We have a clear path to financial viability for Smashburger as well as China, which I spoke to through asset light model and franchise focused scalable box economics. We do have a proven box economics in China that we’re scaling, and we’re working, on Smash converting company owned stores as well.

We are intentionally leveraging debt to continue rapid scale of high return investments, and that’s through disciplined CapEx and strategic capital allocation. That’s also through looking for accretive returns on new capital and franchising. And that is to say, new capital investments now we’re seeing for many of our businesses delivering somewhere around two to three year payback. We’re also incrementally investing in significantly higher yielding ROICs, which I spoke of earlier. We have strong operating cash flow, strong cash on hand as well, and, this is for reinvestment as well as shareholder return.

And lastly, just wanted to show you, a wider view. So that is from 2022 to 2025. So you can see here, CAGR rates around our store network, 17%. You can see in terms of system wide sales, a very strong double digit, CAGR rate on system wide sales. And very closely following that is our revenue CAGR, our gross profit margin.

Again, we’re running our business at 19.1%. And our NOI CAGR has been, 25.5% over this period of three point five years. And that is now to say that our strong track record of outperformance against peers and industry despite market volatility is reinforcing our conviction to what we said, and that is to deliver our 2028 target of tripling NEAT. Just to wrap up, we have global icon brands in each of the categories of chicken, better burger, Chinese cuisine, and coffee and tea. We have multi country favorites that are accretive and adding to our p and l.

We also have very beloved local brands. And, of course, we have some strategic brands or franchise brands in The Philippines as well as, of course, we have our foundation where we’re always reminded to, work with the community and give back to the community. So I will now switch over to q and a.

Giselle Tanero, Moderator, AB Capital: So thank you, Richard, for walking us through Jollibee’s performance and outlook. Congratulations on the, very good set of results. So we’ll move now to Q and A. To our participants, please feel free to type your questions into the Q and A box or raise your hand if you’d like to speak. So we’ll address the questions, in order received and where possible Richard will group the questions because some are very similar and some you’ve already touched light on.

So we’ll try to like breeze through them. So let’s kick off with the first question, on store performance. So we’ve seen consolidated SSSG come in at 5.5%. So given that, you know, there’s a bit of uncertainty on the macro front moving forward, are you expecting similar or faster growth in terms of assets SG in the coming quarters? How confident are you in sustaining that given the current situation?

Richard Shin, CFO, Jollibee Foods Corporation: Thank you, Hazel. So I’ll reiterate, we are not changing our guidance. We are committed to our guidance and I think the back half will be as strong or better. And in terms of the macro headwinds and uncertainties, I believe that we have been living through that for the past couple of years as well. So one theme I mentioned several times is our strategy to not pass on all of inflation to our consumers.

And that’s working really well for us because in terms of same store sales growth or system wide sales growth or transaction count growth, we continue to grow. And that’s because we continue to provide top quality products at very, competitive pricing. And as we do that, we we have opportunities also to increase our margin through price, that we we will take in the second half, but moderately and smartly.

Giselle Tanero, Moderator, AB Capital: And then there was one question here or or on any planned price increases in the coming two years.

Richard Shin, CFO, Jollibee Foods Corporation: Coming two years. Yeah. I’m not sure about coming two years, but back of the second half of the year, we do have a planned price increase. Again, moderate, strategic, and where and when as needed. And Yeah.

With coffee price coming down, we’re also seeing that, there could be also some givebacks, to our franchisees, if needed.

Giselle Tanero, Moderator, AB Capital: Are you not looking to upgrade operating profit guidance despite the first half being well ahead?

Richard Shin, CFO, Jollibee Foods Corporation: Thank you for the question. My team and I debated this many times as well. We do believe the second half will be very strong because if you look at Q4 in particular and to some extent Q3 of last year, there’s many opportunities for us to really, be stronger. But, we’ll keep our guidance for now, but, we’re very confident, very confident, that we’ll deliver the guidance on the high end of the range.

Giselle Tanero, Moderator, AB Capital: How confident? How confident.

Richard Shin, CFO, Jollibee Foods Corporation: Very confident.

Giselle Tanero, Moderator, AB Capital: So let’s, head over to some questions on Smash. First, Smashburgers, SSSG, in 2Q, was it due to improve con consumer sentiment? Or was it successful interventions, change of strategy? How why what was the, reason for, stronger SSSG both in Smash and China? Sorry.

Richard Shin, CFO, Jollibee Foods Corporation: So China’s SSG was application of the strategy that I spoke of, which was really to take, our pricing to a place where the market had changed to. So in terms of what consumers felt was, was value, even though we’re a value business in China with Yungha, the market has, had shifted. And so we, of course, chipped it with the market. So we’re seeing that. Our transaction count increase is both coming from dine in, but also a very, important channel of delivery.

In China, delivery is a big component of our business as it is for all other businesses. So it’s really working with the aggregators smartly and, working with programs, etcetera. So so that’s what it was. For Smash, I don’t think we’ve seen anything yet in q two. I think it’s more about q three and q four.

And really, this, summer of Smashed, beyond a launch of a campaign, it’s a reset of many things. And so we’re very excited about the second half of the year for Smash because we’re already seeing data points in July and August to support our excitement and confidence.

Giselle Tanero, Moderator, AB Capital: I think you already answered why 2Q was a bit weak for Smash. And you already answered also, what the company has been doing to revitalize brand, yeah, for the long term. So, the follow-up question is, what is your target timeline for Smash improvement in terms of hitting positive SSSG and profitability?

Richard Shin, CFO, Jollibee Foods Corporation: Right. So if you think about it, if you’re going to be 95% franchise business, profitability reflects that. Yeah. And so our target to really and it’s not a lot of stores. It’s literally 97 stores, as I said earlier, Ron, just stores, is to convert those.

And in order to convert those, you need a certain level of transaction count, which then drives store level EBITDA margin, which makes it box economic attractive for our existing franchisees, but also for new franchisees. So if you think through that, it’s it’s not gonna take long with this new strategy. Second, within the franchise channel, nontraditional is absolutely smashing it. It’s absolutely doing well. And so we’re getting more and more requests.

I think we’re probably one of the few burger breads, if not the only burger brand, that’s been invited by, militaries, to come and open. So and university, as well. We do have presence in Ohio State, one of the largest populate populated universities. But, these are all opportunities for us in the nontraditional. So, yeah, I think profitability, you can you can see, follows up very quickly.

Giselle Tanero, Moderator, AB Capital: I think, Richard, part of the, like, the anecdotal evidence we got from investors in the past, and I’m sure you’ve heard of this a few times, is that the location of smash burger stores in The US is not so ideal. And management has started to kind of fix that already. Has management already, like, fixed the problem? Or is it you’re still seeing it in a bit of, you know, in some branches where location is really a different?

Richard Shin, CFO, Jollibee Foods Corporation: If we go back three years, I would say it’s night and day. I think we’re about 350 stores back then. We’re now thinner, 204. So that was deliberately getting out of those types of locations. I think there’s still a little bit more to go, but, that’s gonna happen just naturally as leases come up.

There’s no need to take big hits on the p and l, but it’s to naturally, accept those leases. So that’s part of the strategy as well. But we are in places like Times Square and Eighth Avenue in New York, etcetera. And New Jersey is a great market for us, and Texas is a great market for us, etcetera. So, yeah, I there’s always work to be done for every brand, I would say, but it’s night and day versus three years ago in terms of where our stores are.

And then we’ll rebuild from that, of course. As I mentioned, when we sell our stores, it comes with network commitments. And so we do see the network develop, ramping up again to a larger size, of course, by 2028. We have, you know, ambitious targets as well done through franchising model.

Giselle Tanero, Moderator, AB Capital: And then, Richard, going back to the business as a whole, can you talk a little bit more about the higher input cost and OpEx that drag the margins?

Richard Shin, CFO, Jollibee Foods Corporation: Yeah. So so it’s it’s the cost of inventory. So the increase in cost of inventory was higher than the the revenue growth line, in some cases. And when you really look down, what’s really reassuring for us is for, our biggest business, Philippines, our biggest brand, Jollibee, If you look at The Philippines, the raw material that is the most important for us, of course, is chicken and we are 36% 36.4% of total raw material cost is in the chicken category. And, we are all locally sourced on that, so we don’t have currency and other types of exposures.

And the index of inflation on that was only two and a half percent compared to our basket, which was 4.8%. So when we look at that, we know we’re in good price. We can price that 2.5% out easily. We chose not to, as as I mentioned. And then if you kind of look down the list and see where, you know, the big one is, it’s things like coconut oil, etcetera, but again, smaller contribution to raw material.

But when you add it all up, that was really what was driving it. But our margins are still very strong as I demonstrated, nineteen point one percent GP. And so I think we’re doing the right strategy. And when it’s time to take pricing, we’ll take moderate pricing.

Giselle Tanero, Moderator, AB Capital: K. And then shifting to capital structure, can you expand on the capital structure transaction, transition, especially debt to equity? Yeah.

Richard Shin, CFO, Jollibee Foods Corporation: So, if you look at your classic WAC model, our formula, two thirds really is your market cap and then one third is what you can you can adjust and amend and that’s really the fact that cost of debt is really lower than cost of equity. And so when we thought through this, we said, you know, we don’t need to do equity accounting. We don’t need that for any of our covenants. So let’s take the direction of really working on improved WACC and working on the WACC to ROIC spread. ROIC, again, is stuff from the past, capital investments in the past, but it’s also capital investments that, you know, we’ve been making presently.

And so, therefore, I shared a couple of the numbers to try to illustrate that we’re very much focused on this, and this is our top priority and number one KPI for the business that we work on making sure ROIC delivers to the top quartile 20% by 2028 as we’ve, you know, indicated. So we’re seeing very good progress that’s happening this year, and we’ll see more progress next year onwards. So we’re also very confident to deliver what we promised on the ROIC rate.

Giselle Tanero, Moderator, AB Capital: That’s very clear. Again, on COGS, OpEx appears to have dragged the EBITDA margin as well. Can you elaborate Yes. On

Richard Shin, CFO, Jollibee Foods Corporation: So it’s exactly that. It’s cost of inventory, driven by inflation and our conscious decision not to price everything out, but to rather go for volume. And that’s why you’re seeing those tremendous top line growth as well. Net net, we make money, of course. The efficiency ratios, change, but then that also then puts us in a position, and also as, cost of some of these items get hedged out or, get stable margin, or operating leverage on that cost of goods line starts to drop to the bottom line, and that’s what we expect for the second half of the year.

Giselle Tanero, Moderator, AB Capital: And then moving on to Compost, we have a few questions there. What is the full year store opening target of Compose? Any seasonalities in store rollout we should be mindful of, I e, slowdown in four q or one q due to winter months?

Richard Shin, CFO, Jollibee Foods Corporation: Yeah. Yeah. In terms of new store opening, we have not slowed down. So we’re averaging 30 to 40 per month. And so, we are looking to, be very close to, if not cracking, 3,000 by the end of the year.

We’re already at 2,800. The we’re only we’re less than 10% market share in the world’s number three coffee market, per capita. So and we don’t spend any capital opening stores. And and so for us, it’s it’s really driving that KPI very hard. And how do we do that?

We do it really by starting with a non sorry, non quantitative KPI, and that is to be the best franchisor. What do we mean by that? When we look at, our competitor, I won’t mention names, they have a very different philosophy around new store openings, so it’s a bit more aggressive than, I would say, our philosophy. But we’ve actually quartiled all of the 2,800 stores. Most of these are single unit operators, so I think that’s an important fact, which means a lot of them, need assistance and help, whether it is in terms of operations or running or retraining them, training them multiple times, visiting them more frequently or it’s operators that might need a little help in understanding their cash flow or p and l or balance sheet.

So we’ve broken it down to what the opportunities are. So I’ll give you a very concrete example. So I’ll use some points on this one. We were the lowest price for, Ice Americana, which is about 40% of our business. And, the Ice Americana price of thousand 501 was the lowest in the market.

So other value players, they were sitting somewhere around 2,000. So that’s quite a difference. So, after much analysis, we decided to take 300 retail selling price increase, Korean won, from 1,500 to 1,800. And understanding our franchisees, we gave all of that, that 300 won, we gave all of that to the franchisees to enjoy as incremental margin. We didn’t take any of that.

And what that has done is, of course, these stores continue to grow and continue to order from us. And so, therefore, our our business grows because we continue to sell, coffee beans, to these stores. So, that’s an example of, I think, how we’re thinking differently and servicing our franchisees differently. So we’re very confident, and we’re seeing that in the numbers now as well. We are seeing switchover from other brands into Compost in terms of franchisees wanting to open with, Compost now.

So that’s been, very exciting. So our network growth will continue to be aggressive. July, we’re also seeing incredible high double digit numbers in terms of system wide sales growth. So I think our strategy is working.

Giselle Tanero, Moderator, AB Capital: Richard, what is the sustainable, gross margin for compost for 2025?

Richard Shin, CFO, Jollibee Foods Corporation: Yes.

Giselle Tanero, Moderator, AB Capital: And when should lower sorry. When should lower coffee cost flow into the margins?

Richard Shin, CFO, Jollibee Foods Corporation: Okay. So so let me talk about this a little bit because, I think, there is a curiosity out there when, you look at our Q4. So we bought the business in August. But if you look at our Q4 margin rate versus the margin rate of Q1 and Q2, Lot of people are wondering if there’s been a margin erosion. So what has happened is and let me start by saying, in Korea, you’re allowed to do accounting per Korean GAAP using either the 3PL, so that’s third party logistics, or four p l.

Now, I I don’t wanna get too technical, but the difference there on the bottom line in terms of absolute dollars is zero. So it’s the same absolute dollar. Depending on which accounting methodology you use, it’s just the how and who is only that inventory. And so, therefore, your revenue number is different. So the margin percentage, of course, looks different as we switch to the three p l accounting versus the four p l.

And we did that. So they’re using four p l. We bought the business. We finished the year with four p l. But this year, we started with 3PL because all the other players in the value segment are using 3PL accounting.

So, we we did that purposefully, and so the margin rate comes down. Having said that, our, NOI or OPM or NOI margin rate of 19% compared to 7% to 8% for JFC as a group is significantly higher. So it’s a very profitable business. So we have not seen margin erosion. It’s an accounting change.

Now there are two components that could reduce profitability. One is how we want to invest in brand building, as I mentioned earlier. So that’s marketing expense because there are that’s a choice that the company can take. And you only do that if you wanna build a brand because you see that this brand could live outside of Korea as well. And secondly, the bean price.

But again, the way we completely revamped the way procurement was done and the way we’re doing it, we’re smartly buying on short and long. And so, therefore, we’re not seeing a full impact. Of course, there’s always some impact when bean prices do go up, but I would say that’s still manageable. When bean prices come down, we do not plan to necessarily, you know, price that out in terms of rebates. I don’t think, there’s a need for that.

Why? Because earlier I mentioned, we allow the franchisees to take pricing and to keep all the margins from the pricing. And and so, therefore, I think overall, net, the franchisees will still enjoy very good profit margin levels. And so that was, again, a very well thought out strategy that we implemented knowing that bean prices do fluctuate over time. So we’re trying to normalize all the ups and downs and and deliver consistent profit levels for Compose.

So so that’s what it is. So, yeah. Again, just to reiterate the point, the accounting change is what you’re seeing in terms of the margin rate change from q four last year versus this year.

Giselle Tanero, Moderator, AB Capital: Thank you, Richard. Very, very clear. We have a few questions on the cost again. First is the impact of the recent, increase in minimum wage and the impact on margins moving forward. We’ll start there.

And then I think the second is about, E and P spend for the first half. Can you provide color on the level of E and P spend for the first half versus last year and how the second half E and P spend will be? Just stay flat, lower, or higher.

Richard Shin, CFO, Jollibee Foods Corporation: Yeah. Let me start with the E and P question first. We were slightly ahead in terms of percentage off for this year versus last year. If you remember two years or even further back, the struggle was always the catch up in the fourth quarter. And so we made a lot of conscious effort to try to spend, differently.

And so I think net net, the percentage for the full year will be similar. As we are 69 franchise business, this is also part of how we invoice out to our franchisees the A and P funding. So there’s a certain level of, percentage commitment. So that’s how we work through that. In terms of the labor impact, when we looked at it, again, taking Philippines as our biggest market, it was, I think, very, very, nominal to our business.

And so it did not register as a a top risk for us. And so yeah. So we recognize it, and we follow the laws and regulations of, you know, increasing pay to our employees, but it’s not, impacting our business in any meaningful way.

Giselle Tanero, Moderator, AB Capital: Thanks, Richard. Last three questions. We’ll cut it there.

Richard Shin, CFO, Jollibee Foods Corporation: Mhmm.

Giselle Tanero, Moderator, AB Capital: You’re running overtime.

Richard Shin, CFO, Jollibee Foods Corporation: Okay.

Giselle Tanero, Moderator, AB Capital: The first one is on the Philippine SSSG. Can you expand a bit on why, the SSSG on the Philippine business was slower compared to the previous quarter?

Richard Shin, CFO, Jollibee Foods Corporation: Okay. So, I’ll give you the technical answer in a second, but I also wanna say the more generic point that every time the business grows, the percentage is off of larger base. So, I I think, it’s it’s important to know, that math or that mechanics is happening as well. But, we did it’s not an excuse, but we understand Philippines does have some harsh, how do I say, typhoons, weather conditions, etcetera, and that has impacted as well. I think in particular, June, there was there was an impact of that.

We also saw some impact in terms of, you know, getting ready to send, kids back to school. So the timing of that and how families, you know, spend, because of that. So I think those were the two, if I remember, two main reasons why, we saw some of that movement. So then the natural question is what does July and August look like? I would say the latest I would say in August is back to a very consistent, strong same store sales growth, again, on a bigger base.

So we’re not worried about Philippines. In fact, that’s the least of our worries in terms of growth. We’ll consistently grow this business in Philippines, infrastructure is very strong here for us to continue to take market share.

Giselle Tanero, Moderator, AB Capital: Thank you. And then on CBTL, your quarterly SSSG is quite volatile. How should we think about this? What are the drivers or reasons behind this? Is this a function of geography performance, variance, or seasonality?

Richard Shin, CFO, Jollibee Foods Corporation: If you look at our q two versus our q one in in, CBTL, we made significantly more, profits. And so that’s an indication of top line growth as well. And our star performers, our biggest company owned market is Malaysia. It’s 100% company owned, and, we’re seeing very strong growth there. And in The US, we saw also strong growth as well as Middle East.

So, we have a lot of markets. We have 23 markets for CBTL, but we also have the top five markets that we track very closely. But I I have to say the brand is doing quite well and in many places, it’s number two after Starbucks or it, yeah, it’s a homegrown brand in many parts, as well. So I’m not sure if that answers it exactly, but, again, I’m not seeing too much fluctuations in CBTL, and and I’m actually seeing growth quarter on quarter.

Giselle Tanero, Moderator, AB Capital: Can you confirm, Richard, what drove the improvement in EBITDA margins in the second quarter?

Richard Shin, CFO, Jollibee Foods Corporation: Overall, as a company?

Giselle Tanero, Moderator, AB Capital: Yes. For CBTL.

Richard Shin, CFO, Jollibee Foods Corporation: For CBTL. Yes. When we dug into it, I believe Ramadan in Malaysia was in Q1 last month. So we had some benefits coming from there. And also, S.

Was the other market that gave us the largest growth. And that’s new products being launched. That’s, we have a new leader in The US, Tara Henkel, a very seasoned veteran there. So, yeah, it’s a new product launches. Malaysia launched its app as well.

So we saw, good performance coming through that. So Malaysia and US and Middle East were the reasons for the strong growth.

Giselle Tanero, Moderator, AB Capital: And then for the final question on debt, what is your view on interest rates going forward, and how does it shape up your debt refinancing strategy? And will it be biased towards short term or long term loans? I think you kinda talked about this already a while ago. But just to

Richard Shin, CFO, Jollibee Foods Corporation: I’ll probably say it’s the same view as, I think, most CFOs who, you know, listen to the experts, the economists and so forth. The trend, we believe, will go down. So, therefore, earlier, I don’t know if, people caught it, but when we refinanced, to term loans, we are using floating rates.

Giselle Tanero, Moderator, AB Capital: Yeah.

Richard Shin, CFO, Jollibee Foods Corporation: So, we haven’t locked into very long term rates, and we’re waiting for, you know, the basis, so the rate cuts, etcetera, like everyone else. But in the meantime, we know all of our investments are yielding much higher return than the cost of debt. So we’ll continue to use leverage as a, enabler to grow.

Giselle Tanero, Moderator, AB Capital: Very clear. So with that, any additional questions, you can email it to me. We can send it to Richard. But with that, we end this session on Jollibee Foods. And we thank you, Richard.

Thank you, Kasseth, for sharing your views today and for answering all our questions. To all the participants, thank you for joining us. If you have further questions, again, please let me know. Otherwise, you may disconnect. Have a good weekend.

Richard Shin, CFO, Jollibee Foods Corporation: Thank you. Thank you. Thank you, everyone.

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