Jollibee Foods Corporation (JBFCY) Q3 2026 Earnings Call Transcript

Operator: Good evening to everyone dialing in from Asia, and good afternoon and good morning to those dialing in from other time zones. Welcome to Jollibee Group's Third Quarter and First Nine Months 2026 Results Briefing. Thank you for taking the time to join us today. To begin, let me turn the floor over to Cossette Palomar, Head of Investor Relations, for the opening remarks and the reminder regarding forward-looking statements. Cossette, please go ahead.

Corazon Palomar: Thank you, Tris. Good evening, everyone, and good morning or good afternoon to those joining us from other time zones. Thank you for being with us. We're glad to have you on our earnings call and to anyone joining us for the first time, a warm welcome. As always, we're joined by our Chief Financial and Risk Officer, Mr. Richard Shin, who will walk us through our third quarter and nine-month results for 2026. After his presentation, Tris Lopez will moderate the Q&A session. Before we begin, I'd like to remind everyone that today's presentation and discussion 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 statements, 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. With that, I'll now turn over the call to Mr. Shin. Mr. Shin, please go ahead.

Woo Chong: Thank you, Cosette, and thank you very much, Tris. So let's get right into it, and I do want to share as much information as I can and also leave plenty of time for Q&A as always. So let's start with the quarter. So this is a view of Q3, and we've entitled it or labeled it as strongest growth for 2026 top line to bottom line because the data has come through indicating that is the case. So system-wide sales, PHP 133 billion or an increase of 15.6%. This is the consolidated number for both our Philippines and international business. Subset of that, of course, is our same-store sales growth, which had a solid 4.7% growth. And the split of that is average check, so some pricing in certain markets like Philippines, but also due to market mix and product mix. We had a 3.8% contribution from average check and also growth in our transaction count. As you can see, traffic was up 0.9%. So international, 19.1% and Philippines system-wide sales was up 12.5%. That, of course, drove a strong revenue line of 14.9% growth, which again was the strongest quarter in the year, and that was just under PHP 88 million. And we've highlighted here in red, the gross profit because we've spoken of this very important part of the P&L, which is our margins. And so I'm very happy to report a gross profit of PHP 16.3 billion, which represents a 16% growth or a GPM of 18.6%, which is 20 bps better than same period last year. Operating margin was up to 6.6% from a base of 5.2% in Q1. So just as a reference point there, and that delivered an 11% growth, which is PHP 5.7 billion. Now moving on to the next box. Here, we've labeled it as management adjusted operating income because we want to share with you that the run rate, if you will, if you were to normalize for one-offs and a big one-off this quarter, of course, is the start of our investment costs for our separate listing of international business, which is still on track to happen late 2027. So adding that plus a few other one-offs, we have a growth of 17.7% adjusted comparing to our statutory operating income of 11%. So i.e., that should be seen as the run rate. NIAT, so after interest and tax, we delivered PHP 3.3 billion or up 7.4% on a statutory basis, representing a margin rate of 3.7%. Now if we were to adjust for the same one-offs that I mentioned and in addition to that, there was one other one-off that was below the line. If you add those 3 items, we get to PHP 3.6 billion or 19.4% run rate NIAT or management adjusted NIAT. So strong momentum carrying into Q3 coming off of Q2 as we had indicated in Q2 that our second half will be stronger. And this momentum, of course, will carry into our strongest quarter, Q4. Momentum has been built every quarter since 2026, excuse me. And here, we're just showing one cut of it, which is revenue growth, which went from 9% growth in Q1 to 10.7% growth in Q2 and a peak of 14.9% in Q3. On the right-hand side, there's a few more data points. So GT, if you look right across Q1, Q2, Q3 and of course, comparing to Q3 last year, you can see where our numbers land. So once again, the 20 bps growth versus Q3 last year on the gross profit line of 18.6% versus 18.4%. Operating income related to that, you can see here stable and solid. Now if we were to adjust, as I mentioned, for the pre-listing cost plus other adjustments that are one-off, then you can see that it's actually a THB 7 billion delivery -- sorry, 7% delivery, OPM rate 7% versus last year's 6.8%. So we will be ahead of last year. NIAT at 3.7%, stable. But again, with the adjustments, we will be up 10 basis points versus last year. So again, pricing and productivity initiatives, which we spoke of in Q1 and Q2 have now transpired, and these are the results that we're seeing in Q3. Moving on further now to system-wide sales. So another way to look at the business. The 15.6% that I opened up with, the bridge to that is same-store sales growth. of 4.7% organic, meaning new stores in addition to the same stores of 3.8% or 8.5% of that was organic with some M&A adds here, which is Shabu All day, which now comes into our P&L since April this year. So first full quarter coming into Q3, adding another 3%. And of course, we had some currency upside in markets where we are transacting in non-pesos. On the right-hand side, you can see some of the businesses that contributed. So on a bigger picture, let's start with international is 19.1% and the subset of that is Jollibee Vietnam, Thailand Coffee, other parts of India and of course, our business in China all delivered strong double-digit growth so that North America on a larger scale P&L delivered 13.6%. And of course, Philippines on a very large-scale P&L delivered 12.5%. So this is where the growth is coming from. So essentially, pretty much throughout all of our businesses. Moving on now to explaining a little bit more on the management adjusted operating income, which rose by 17.7%. You can see here what was reported, so statutory of 11% growth. of PHP 5.7 billion. We had the spin-off costs. Again, these are onetime for our listing. And there'll be more spin-off costs coming in Q4 as well. And that's why we wanted to start in Q3 to really split those numbers out. So you can see what's our run rate versus what are really the one-off cost to set us up for the separate listing. And there were some accruals which were cleanup accruals. So the nature of it was such that there are one-offs as well. So that's another PHP 160 million around it to get us to that 17.7% or PHP 6.1 billion. Let's move on to EBITDA. So last year, we finished roughly around the same ratio. It was 58% Philippines and 38% EBITDA contribution coming from the international business. This quarter is slightly higher for international, but similar ratio of 60-40. That represented PHP 12.1 billion in group EBITDA or nearly 10% year-on-year growth for Q3. We do call out here 2% contribution of that comes from Shabu All Day, which is a profitable business that we acquired in April of this year. So going through the line. So Philippines with the largest EBITDA contribution of PHP 7.2 billion, representing 9.1% growth. contribution of 60%. International business, which follows from here on. We had China stable. We had North America Jolly Be business, up 13.3%. We had Smashburger with a contribution in Q3 of EBITDA of EUR 300 million. We had EMEA contributing 44% growth. Coffee Bean and Tea Leaf stable. We had Highlands Coffee also stable with a lot of reinvestment back into the business, of course, pre-IPO next year. And the other callout here is Jolly K, which now comprises of two assets, that's Compose plus Shabu All Day. Moving on to our network. We continue to drive our asset-light model, representing nearly 11,000 stores at 70% franchise model. I would say the last few months -- this is -- sorry, year-to-date September, so nine months. But if you look at the last three months or so, our quarter, we're running closer to 88% franchise for new stores opening. So we'll continue to evolve on the franchise side as seen by recent trends. What does this mean? This means we've added 917 new locations in the first nine months of the year, including the 172 Shabu All Day purchase. and 2/3 are outside of the Philippines and 1/3 of the store count is within the Philippines. Notable new store openings. Compose has opened 203 stores in the first nine months. Highlands Coffee is second at 132 with our quick payback franchise model, residential, Yonghe King openings of 38. And CDTL has a mix of both company-owned and franchise stores, 32 there, and then the balance here, 29 for EMEA and Philippines at 26. Also to call out, in China, we have store closures as we have had in Smashburger as we laid out the plan to restructure those businesses and rationalize nonperforming stores and pivot to franchise model. So pretty much all the new stores opened in China has been franchise stores. And later, I'll give you an update on Smashburger network. So if we were to step back and look at our soft Q1 with a strong Q2 and a stronger Q3, where are we? Revenue-wise, first half is represented by the gray. We grew at 9.9%, whereas for the full nine months, -- with Q3 added on, we are now at 11.6% year-to-date revenue growth. Operating income, we've dramatically reduced the losses from Q1. So we're down to now minus 1.3%. And as I mentioned, we've guided earlier that our operating income will be around the range of 10% with Q4 yet to come, which will be our strongest quarter. And NIAT losses also significantly reduced. And if you look at it from an adjusted point of view, the numbers are slightly better, but just a snapshot of where we are after nine months with each quarter getting stronger. So three key numbers. Again, revenue growth for third quarter, 14.9%, which drove a strong gross margin of 18.6% growth. and adjusted or run rate of operating income of 17.7% is how we're seeing the business. Let me now go into a few of our key businesses. So you have an update on how those businesses fared in Q3. Let's start with the Philippines. So Philippines, again, continues to be a growth market and a strong contributor with double-digit growth and strengthened or wider margins. And you can see here system-wide sales of $67.7 billion, up 12.5%. On an ADS basis, we're up 8.9% -- same-store sales is 6.7%. Earlier, I referenced 4.7% globally with TC flattish as we've taken some significant pricing in Q2 and Q3, but our volumes are holding. Operating income margin is now running at 9% OPM, which is 40 bps better than same quarter last year with a network of 3,530, representing 43 new openings in Q3 and 85 openings since January. You can see the Champion brands, which I will speak of, which is 82% of Philippines system-wide sales -- sorry, 88% of Philippines system-wide sales and 82% of its operating income. And you can see all three brands had very strong growth, whether it's system-wide sales or its same-store sales growth. So pricing, network growth and Champion brand momentum is what's driving the Philippine profit faster than sales. Moving on to Jollibee brand International. So international being North America plus EMEA, you can see system-wide sales growth of 23.5%. We do benchmark some peers here on the right, so we get a context of where we are versus some of the global peers and also regional peers in terms of same-store sales. In terms of system-wide sales, our peers are at 3% to 9.6%. So clearly indicating fast momentum growth for Jollibee International. International same-store sales growth grew at a solid 4.3% versus peer of 3% to 2.1%. International store growth. So network, we grew at 13.2% with North America just under 5% and EMEA balancing it out at 15.7%. Now if we to do a cut below and look at North America, which, of course, is our biggest opportunity region for us, system-wide sales was 18.9%, and this is above our target -- internal target. On a nine-month basis, we're holding at 17.3%, which is to say Q3 was a very strong quarter. Same-store sales growth of 4.1%, driven by traffic of 1.4% and average check growth of 2.7%. EBITDA growth, so solid cash contributions at 13.3% and again, if we were to compare to some of our peers, we have a leg up. And you can see some of the other brands here. So Jollibee North America is gaining share on tough comparisons. Some of the markets are tough in terms of industry, but we continue to be ahead of the pack. Now when we look at EMEA, which is Europe, Middle East, Asia and Australia, Vietnam, of course, is the one that we call out quite often, but rest of EMEA is also solid. So we had a contribution of PHP 26.3 billion from system-wide sales, of which PHP 11.2 billion is coming from Vietnam and system-wide sales was 48% higher versus the same quarter last year. Vietnam same-store sales growth of nearly 20%, which is the subset, of course, of this 48%. So it's new stores plus existing stores. And if you see the network now, we're clear #1 in terms of network as well as share of market, revenues and profit at 276 stores. And no doubt, we'll be breaking 300 fairly soon. Some of the other parts of our business within EMEA other than Vietnam. So you can see the rest of EMEA, excluding Vietnam, was still 25.6% up. Southeast Asia, 13%; Middle East, 14.7%, smaller business, but nonetheless, Guam, 16% and Europe, where in three countries, it also grew at 11.3%. Smashburger. So earlier, I mentioned our goal is to really close out the fourth quartile nonperforming stores and look for conversion opportunities of the other stores, which we've already started. And then, of course, finally, to press the gas on what's doing really well for this brand, which is the nontraditional led by the airport channel. So we continue that momentum for the balance of the year and going into next year ahead of the spin. But this slide here really is just to give you some color on growth. So we have 31 new franchise units in the pipeline, of which 28 are nontraditional, three are traditional and committed openings are three and airport RFPs still out there, seven and contracted food service final negotiation stage of 10. So where are we? We are targeting airports, but also colleges, casinos, military bases and travel centers. So this part of the business continues to move on strongly, and we'll continue to press on that as we look to convert our franchise model over the next six months plus. China. So happy to report that our dine-in segment is recovering and is coming back. And our EBITDA for the quarter was a solid 206 million contribution. And this is essentially our Yonghe King and Hong Zhuang Yuan brand, so the two brands, but led by Yonghe King. System-wide sales was up 18% despite the store closures, which I mentioned earlier. Same-store sales, we're starting to see reduction in the same-store sales decline. And the reason for the decline in Q2 and Q1 was because last year, 2025, there was a very intense aggregator war in China, where there was a lot of promotion fees funded by the aggregators, which led to high double-digit growth. So we're coming off of that as these promotions are less and things are back to more or less business as usual. So it's good to see the trend of how that is coming into the third quarter. So 5.7% gain, if you will, quarter-on-quarter on same-store sales. New stores year-to-date, 101 gross. Earlier, I shared with you the net number, which is 16 ahead of our target. And today, 547 stores. And we're moving also as a percentage of franchise to company-owned store, we're moving closer to 70% by year-end. So some of the key milestones and how we're approaching this. One of the things I will point out is this new box economics that we've developed, which is giving franchisees a payback within two years, is really accelerating new franchise opportunities in our residential area, parts of Tier 1 and Tier 2 cities. So cost discipline, recovering dine-in channel is putting China in a firm position for Q4. And as I've always said, we get to a certain point where we're 90% franchised and somewhere around 850 stores. At that point, it's pretty much this model becomes bulletproof in the sense that it's a highly franchised model with very profitable streams coming from royalties as well as commissary markups. Compose Coffee. So for September, we delivered an 8% same-store sales growth. And I do mention here July and August, where we were flattish. But I do want to call out that July, August of last year, 2025, the government did an intensive subsidy program to boost consumption. And so there were consumption vouchers given out, which led to record high July, August last year. So coming to a sort of normalized July, August this year, you're seeing flat, which is still a very solid performance. September is a like-for-like as the subsidy was over last year by end of August. And so we're back to seeing solid same-store sales growth here. Okay. So some of the other key points here, system-wide sales for the first nine months, up 20%. We've opened 223 new stores during the year, and we have another 60 to 90 to go for Q4 balance. We've also reported that we've opened stores in Taiwan and the Philippines as well. We're almost there. Thailand Coffee, I think we can say that this brand is the undisputed Vietnam's coffee champion. If you look at the next four competitors combined, we're actually larger than the next four combined by almost 2.6. So yes, let's forget the ratio. We're larger than the next four combined. I think that's the easier way to digest this data. System-wide sales for the first nine months was 38% up. Q3 was slightly ahead of that at 40.7% up. Same-store sales growth is a solid 5.7% in a market where actually this is ahead of the market norm. And in terms of network, we are now beyond 1,000 locations at 1,117. That is to say we've added -- we cracked the 1,000 mark this year by adding 154 new stores in the first nine months. Market share where we measure it, it's 31%. So category leader and plenty of white space for growth in Vietnam. So just to wrap up, to reiterate, we entered the third quarter with a stronger momentum, and the results demonstrate that the margin recovery is taking hold as we said it would in Q1 with broad-based growth across our Philippines and international businesses and continued discipline on pricing as well as cost management. We remain very confident that the group's long-term growth prospects are strong and Q4 is also going to be a strong quarter. So with that, I will hand time to back to Tris for Q&A. Thank you.

Operator: Thank you, Richard. We will now proceed to the Q&A session. We already received a number of questions in advance, which we will take first -- [Operator Instructions] So to start with the earlier questions we've received, is the Q3 margin recovery sustainable and can full year NIAT return to growth?

Woo Chong: I would say so, Tris it is sustainable because we're not doing anything in Q3 to really artificially inflate those numbers. I think what we're seeing is solid continued growth in our key markets like the Philippines and key segments like the coffee space as well as recovery in places where we're looking for recovery such as China.

Operator: All right. And on the attendees list, we have John with his hand raise. Two questions as promised.

John Te: So first one is perhaps the Jollibee North America franchisee pipeline. I saw there's some progress there. We're up to three stores. Any guidance on what that might be in the fourth quarter and what the pipeline looks like in '27?

Woo Chong: Yes. So we haven't announced the cut for '27, John. And the reason is because as the pipeline accumulates, so we're over 108 stores now in the pipeline. But in North America, from pipeline to actual store opening, it really depends on the state and licensing and a few other things. But what we are committing to still is what we've always said to 5x to 500 stores by 2030. And we're seeing some real good progress across many states in the U.S. So to reiterate, we have over 100 that's pipelined, and that's going to keep building up until we get to 500 stores by 2030.

John Te: Okay. And then second question on Compos Coffee. Maybe we can just talk about the -- I think there was a minus six new store contribution meant that there were some closures or some, I guess, restructuring that could have taken place. So any clarity on that?

Woo Chong: Yes. Good pickup on that, John. Let me take a step back. Compose Coffee was started in 2014 in Busan. And today, we're clear #1 in city of Busan, which is great, but it's the second city. The first city in Korea, as we all know, is Seoul. We now call it Greater Sap as Seoul continues to expand. That's where our competitor Mega is #1. So a couple of years back, we made a decision to move headquarter to Seoul and to really catch up because we're less than half of the store footprint. So in the first couple of years, we were opening stores in all sorts of trade areas. as long as it was convenient for our consumers. So trade areas, of course, A is better than B. So we were in A, B, C, et cetera. I would say sometime fourth quarter last year, we made an effort to rather than chase the number of new stores, we wanted to get quality locations, and we actually start to focus on trade areas A and B. Why? Because that will strengthen the brand in the city we wanted to compete in. And two, it would also mean better box economics for our franchisees. And so that's what we've been seeing. We've been seeing better box economics for our franchisees. And so although we're slowing down a little bit on the new store openings, we'll still do -- I think what I said was somewhere around 270 to 300 stores this year. So that's still a significant number. But the reason for the slowdown is our change in strategy to really focus on better locations of trade areas A and B. Right.

Operator: Next on to, we have Nadine Bautista.

Nadine Bautista: Nadine here from JPMorgan. So my first question is on Philippines. I mean it's commendable that you're able to deliver EBIT margin expansion. If you can just share the specific cost measures that did in the quarter? And how are you able to -- I mean, how are you able to deliver EBIT margin expansion despite, as you know, the high fuel cost and logistics costs in the Philippines.

Woo Chong: Yes, great question. Well, there's so many components of this -- but first and foremost, we did announce price increases that we would take strategically across certain SKUs, not a blanket. We map that, of course, against our competitors and also dayparts to make sure that we were not losing any volume or customers to our competitor through price increase. So I think that was done really well by the team. I would say that's the first point. Second, our procurement and supply chain team have been, as always, very professional in how we lock in the best pricing, and we have that advantage. So for example, on chicken, which is still 100% domestically procured, we're able to across multiple strategic vendors lock in those pricing. So I think managing the big ticket items of raw material and also packaging. So I would say that's the other thing. And then there's about 50 efficiency programs right across from logistics, warehousing, et cetera, which all goes into our cost of -- sorry, gross profit margin that I reported. So I would say that will be the last piece of it. Yes. So led by pricing, procurement and cost initiatives.

Nadine Bautista: How about the 10% drop in A&P spend for the quarter? Is that mostly from Philippines or international?

Woo Chong: The A&P is a bit of a timing. So we think that we are spending what we need to spend, whether there's opportunities where we feel we are getting demand creation, we're not pushing it. But I would say A&P is less flexible for us in the Philippines because of our 70% franchise model. We do have to have a consistent A&P spend.

Nadine Bautista: My second question is on Highlands. You highlighted earlier that Jollibee Vietnam and also Highlands is one of the more faster-growing system-wide sales growth in the third quarter. But we see that EBITDA is quite flat for Highlands. If you can just share color what's driving the divergence?

Woo Chong: Yes. So we've announced that there will be an IPO at some point next year, most likely in the first half of next year. So what we're doing is really we are investing in that growth model. So we're continuing to invest with new store openings. We're starting to invest around the brand as well. So we all know that EBITDA doesn't have depreciation and amortization of the new stores, but it does capture the preopening costs as well. So we've accelerated store opening. And I would say that's probably one of the bigger reasons why EBITDA is where it is because we're investing in network growth.

Operator: Now moving on to the Q&A box. We have two questions from M Rodriguez. First is, how are SSSG trends in October? And how do you see them ending in full year '26? And second, which commodities are you seeing the biggest price pressures?

Woo Chong: So you have to remind me the three. The first one was SSSG trend October. We are seeing a very solid trend. So we're happy to see the first month of Q4 continuing the momentum from Q3. The second question, I think, was the trend for the balance of the year, Tris?

Operator: Yes, that's correct.

Woo Chong: Yes. Again, we believe Q4 will be our strongest quarter. And then in terms of the third question?

Operator: Which commodities are we seeing the biggest price pressure?

Woo Chong: Right. What's been interesting is it's sort of flatlining now from the inflation that we saw starting from mid-March/April of this year. So we're starting to see a bit of flatlining. The two callouts, of course, is beef, and we're seeing that right across different markets, not just the Philippines. And I think that's more than inflation. I think that's also a supply and demand equation as well. And anything petroleum-based like plastics, so some of our packaging costs, we're also seeing price increase there. But we're seeing the reverse on paper. So certain paper packaging materials, we're seeing coming down high single digits as well. but I would say plastics and beef. But beef is less than a 9% contribution to our business in the Philippines, for example.

Operator: All right. Further questions from Paolo Garcia. First is, does the company still have price increases planned for the year? And second, given significant pricing actions taken year-to-date and although volumes have held, can this be sustained and accelerate given the weak macro outlook and the onset of potentially still elevated inflation due to El Nino?

Woo Chong: Yes. Great question. So the question around inflation, consumer confidence, the rest of it, this is a big one for us. And that's why in Q1, we reported strategically, we didn't take any price. So I think the bulk of the pricing has been done in Q2 and Q3 as we've announced earlier. In terms of, I think, demand, we continue to see increase in demand. And I would just put it as simple as it's an everyday need. What we provide service and food is affordability and strong brands like Jollibee and becoming strong brands like Mang Inasal, you can see that strong brands are actually taking market share from either non-branded eat outs or even other branded brands. So we continue to be sensitive to this topic, and we will continue to take market share and grow organically. But consumption continues. And I would say that we're in a good place in that sense because there's a history of 48 years of Jollibee having been built in the Philippines.

Operator: And then question from Karisa Magpayo. For the Philippines, how much of the average check increase in the third quarter was driven by the price hikes? And on Shabu All Day, what led to the sequential weakness in margins in 3Q '26?

Woo Chong: I don't have an exact split between mix and pricing, but I would venture I guess the majority, Karisa, of the average check in the Philippines would have come from pricing. Having said that, we do continue to offer value meals. And so there's also a mix between higher SKU and lower SKU mix as well, which goes into the equation. But I would say the majority is coming from price. And Tris, the second part of the question was?

Operator: On Shabu All Day, what led to the sequential weakness in margins.

Woo Chong: Yes. Yes, great pickup, Karisa. So I don't know if you recall, but two years ago, Compost Coffee, we went through the same thing of 3PL, 4PL. So just to simplify, the way we account for revenue and margins is very different between a 3PL and a 4PL. So effectively, we moved like the industry has to a 3PL, and that is to say we are now holding the cost of goods. And so it's a reflection of that change in the accounting more than any other factors. But yes, Shabu is a very profitable business for the size it is. And that's really 99% of the reason why we saw that shift going from mid-50% to lower.

Operator: And in a couple of questions on our one-off expenses. How much do we have left to incur? And when should we expect these one-offs or restructuring to finish?

Woo Chong: Yes. So if I may put the one-offs in a few buckets. So one, the listing is a onetime one-off, as we all know, because we've announced that we will be lifting the international business outside of the Philippines. So this will continue in Q4. There'll be lifting costs and it's not just the fees that we pay our auditors and tax and legal, et cetera. It's also related to stamp duties and other tax-related payments in order to move the asset. So that will continue. But again, the way I see it, I don't see it as a cost. I see it as a necessary investment or spend so that we can unlock the value of international going forward. The other bucket of one-off is what I would call nonrecurring and in a lot of cases, noncash. So those, I think, will happen every time there's a, for example, mark-to-market adjustment on fair value to P&L of some of our non-wholly owned investments. Those will continue from time to time as the portfolio balances between gains and losses. We did report that we have intention of selling 11% of Highlands Coffee. That transaction will conclude in Q3. So that would also be a one-off, but from a favorable or gain perspective as our book value to the transaction value was significantly different. So those things will come in. But we'll disclose them separately so that people can see what the run rate business is and what these one-offs are. But the old days of accruals not being done right, et cetera, those are not the types of one-offs that we're seeing anymore. We've cleaned that up a few years back.

Operator: And we have John Te again.

John Te: Richard, two questions. First is on Smashburger. So 300 million EBITDA positive this quarter from sustained losses a few quarters back. So A, did we book restructuring costs that would have pushed Smashburger even higher if they weren't present? And B, should we expect some more restructuring in the succeeding quarters just because of some of the efforts that you mentioned earlier?

Woo Chong: Yes. Great question. So under restructuring costs in Q2, if I may just start with that as context, we had two types of restructuring costs. Those where we're getting out of leases in locations that no matter what the ADS is, we would never be profitable. So like main on main, et cetera. So that was one type. And then, of course, the other restructuring cost is the store closures that we are deliberately closing. So terminating leases early. So in Q3, I would say those types of restructuring costs were slightly lower. The help that we got in Q3, of course, were all the leases that were terminated. So there was a, if you will, I don't know what the terminology is, but yes, lease liabilities, I guess, being off the table is the best way to describe it. So we had some help coming from that. But it is related all to the restructuring process.

John Te: And the guidance in the fourth, first quarter, whether we would see benefits or losses relating to Smashburger?

Woo Chong: So I think just to round off, I think the terminology is write-off of lease liabilities. I think that's the proper accounting terminology. Yes. So we'll continue. We have a robust plan for Q4. We've identified locations, and the team is actually slightly ahead of schedule in closing those stores. So yes, we'll continue to see that. We have not guided any numbers yet, John. I think -- but we will be disclosing that quarter-on-quarter.

John Te: Okay. If you don't mind one quick follow-up. I think we talked about the costs associated to spin-off. To the extent that you can, perhaps an update would be helpful with regards to what has been already accomplished for that spin-off process.

Woo Chong: Yes. I can't share too much, as you know, but what I can say is we are on track. And so we'll be seeking the formal approvals and going through the process on time within the time line.

John Te: Thank you, Richard.

Woo Chong: Okay, thank you.

Operator: Thank you, John. Going back to the Q&A box, we have a question from Francis Padit, asking for more insight on our raw ingredient costs, particularly emerging cost trends in the third quarter as well as supply lock-ins for coffee and edible oils.

Woo Chong: Yes. I think for this one, Francis, if it's okay, the IR team will get back to you with some specifics because I don't want to misquote any numbers, but yes, what I've seen in the last few months is a stabilization compared to what I saw in April -- sorry, March, April, May of the year. But yes, let us get back to you with that. But the proof is in the pudding. Our margin was 18.6%, which was again, 20 bps higher than last year where we didn't have these issues. So I would say it's being well managed.

Operator: All right. We'll do. And additionally, following the partial monetization of JFC stake in Highlands Coffee, is asset monetization part of the company's broader strategy to deleverage and reduce debt?

Woo Chong: I think it's fair to say when a company has a portfolio of businesses at different stages and there are opportunities to value crystallize, we'll certainly do that because that's in the best interest of our stakeholders.

Operator: All right. I see Nadine Bautista hand raised.

Woo Chong: Okay.

Nadine Bautista: Just a follow-up on Shabu All Day. I understand that the accounting change will impact margins, but we're seeing a decline in the absolute net profit contribution also in third quarter. And also, there's also, I think, net closures from franchise stores. If you can just give more color on that.

Woo Chong: I'll give you color. So in April, when we bought this business, we bought it at an incredible three multiple to EBITDA. So it is positive EBITDA, of course. and put it in context to other types of hot pots, if you will. So Haidilao comes to mind, they'll be closer to a 10 multiple. So we saw it as a nice bolt-on to our strategy. It fits the Asian dining category. And also, we had a strong presence in Korea with a team. So we took on that additional EBITDA opportunity because we knew the return was good. Having said that, we bought a business that probably overbuilt too quickly, and that is to say the 172 stores that the previous Chairman and the team have built happened relatively quick over three years. So what we noticed was we noticed there were some cannibalization opportunities that was within that portfolio. So we've closed a number of stores. We're now at 147 from the 172 that we took on. So what you're seeing is really, I think, some of that -- and there were profitable stores in there, of course. You're seeing some of that coming through because what we wanted to make sure was we want to make sure we have the right network to really start building within that store. So not necessarily new stores, but within that store, a higher turn ratio. That is to say, if you go from under two turns a day to, let's say, three or four turns a day, you're effectively getting very productive use of that asset. So you could have two lunches instead of one lunch because our revenue is based on a buffet price or you can eat fixed price. So the turn is really the revenue driver. And to do that, we looked at the network and we get the store closures. The good news is when the stores were too close to each other and they're cannibalizing, after the closure, we saw 60%, for example, increase in the remaining store. But in the first year, as always, after an acquisition, we will have cleanup items. So you're seeing some of those items coming through. Secondly, we've also invested in better quality offerings to our consumers. So premium craft beer versus the generic, et cetera. So those items are also adding in to really build that brand strong again. And of course, thirdly, we've fit it now with a very strong C-suite team, led by Jennifer, who is our CEO. She comes from Samsung Electronics and we've now fitted that in as well. So you're seeing those investments coming through as well.

Nadine Bautista: My second question is on the international bottom line losses that we're still seeing. So if you can just share color on when do you expect international to eventually turn around? And what would be the biggest drivers on your end?

Woo Chong: Yes. So we are a long-term minded company. So we think 2028 is really that pivotal year where our challenged businesses and brands through different strategies. So China, I always talk about this 850 stores, 90% franchise, bulletproof it. We get to those numbers by 2028 end. So that is to say we think 2028 is that pivotal year. Many businesses are going to get there much quicker. And of course, we have also profitable business that will continue to grow and contribute. So that's how we're seeing international. But once that curve happens, because of the unit level economics of our markets, some of the markets like U.S., Canada, Korea, et cetera, we think the growth rate will be amplified.

Nadine Bautista: Thank you.

Woo Chong: Great questions. Than you, Nadine.

Operator: Thank you, Nadine. Back to the Q&A box. How will the future store pipeline be funded without r deleverage?

Woo Chong: Yes. Again, we're very serious about this pivot. So China, we -- as I mentioned, we completely pivoted. All the stores are our franchise stores. Smash, we're pivoting to that model. Jollibee, depending on the market. So North America, we've announced the 500. So effectively, that is franchise-led as well. So the way we find -- we're still cash flow positive, of course. We still generate quite a bit of cash in the business, but we'll continue to grow our network through franchise model. CapEx, every quarter, every year is coming down. So year-to-date is PHP 9.1 billion, which is about PHP 1 billion lower than where we were last year. So we'll continue to do that. Our earlier investments in technology, we've gone pretty heavy in the last few years to get us up to speed on our POS, on our apps, on our self-ordering kiosk, et cetera. So those investments, of course, start coming down as we don't need to keep investing at that pace. But yes, net-net, our EBITDA is still positive.

Operator: All right. That's all the time that we have for tonight. For the questions we weren't able to address, the Investor Relations team will be happy to follow up with you directly. And so Richard, may I turn the floor back to you for any closing remarks before we conclude today's briefing.

Woo Chong: Yes. Firstly, a big thank you. I know it's 9:00 p.m. on this side of the world. So I do appreciate your kindness to join us on this late call. But we also give our -- our friends in North America a chance to attend. As usually, our call at 4:00 p.m. means it's 4:00 a.m. their time. So again, thank you for all those who have attended. Q3, solid. Q4 is going to be stronger. So we look to close the year within the guidance that we've given last time. Thank you, Tris. Thank you, Cossette, and thank you, Mona and the rest of the IR team for all the hard work behind the scene so that I can do what I do for an hour here.

Corazon Palomar: Thank you.

Operator: Okay.

Woo Chong: Thanks, everyone, for joining. Really appreciate it.

Operator: Thank you for your time and continued interest in JFC. The recording of the briefing will be uploaded along with the briefing deck as soon as possible to the JFC corporate website. Once again, thank you for joining us and the continued interest in JFC, and have a good day. You may now disconnect. Thank you.

Corazon Palomar: Thank you.

Woo Chong: Thanks, everyone.