Steven Silver

Steve Silver asked about the timeline for deeper penetration and an inflection point in GMV expansion from the Amazon marketplace and licensing, and whether new category innovations or patents should be expected for the 2026 season, given the younger customer base.

Answer

CEO Andrew McLean explained that Amazon requires significant effort in marketing, merchandising, and supply chain adjustments to build sustainable growth, citing the success of the Bedford Quarter Zip as an example of leveraging trends. He noted that international expansion also involves laying groundwork and leveraging licensing. McLean also affirmed a continuous focus on innovation and solutions, mentioning water-resistant fleece as an example of potential future patents.

Steve Silver inquired about the progress and pipeline within Lands' End's Outfitters business, seeking context on the number of prospects in advanced stages of conversation, particularly following recent contract wins. He also asked for context on Lands' End's expectations for completing the turnaround of its European business and its potential to contribute more significantly to the overall company.

Answer

Andrew McLean, CEO, detailed the Outfitters strategy, starting with school uniforms, where OEKO-TEX certified products and competitive pricing provide a significant advantage for targeting new schools (adding $0.5 million-$3 million buckets). For commercial uniforms, he noted a rebuilt experience for smaller customers with continuous IT upgrades, and for enterprise accounts, he highlighted the impact of winning back Delta and ongoing dominance in financial services. McLean also identified healthcare as a key adjacent category for future focused growth. Regarding Europe, McLean explained that the turnaround is leveraging the successful U.S. distributed commerce model, focusing on meeting customers through marketplaces (Next, Debenhams, Amazon) with channel-appropriate, narrowly assorted, and competitively priced products. He noted that the U.K. market has "turned the corner" with the right product assortment. The current focus is on engaging the "resolver" German customer, likely through a refined catalog strategy, to bring the brand to full contribution. McLean also teased upcoming "powerful collabs" in Europe to reach "evolver" customers, similar to the U.S. tote bag success.

Steve Silver inquired about the pipeline and new opportunities within Lands' End's Outfitters business, seeking context on prospects in advanced stages. He also asked for expectations regarding the turnaround of the European business and its potential contribution, particularly with new website implementations.

Answer

CEO Andrew McLean outlined growth in school uniforms, driven by OEKO-TEX certified products and a refined go-to-market strategy. In commercial uniforms, he noted rebuilt experiences for smaller customers and continuous IT upgrades, with smaller accounts often leading to enterprise opportunities. McLean highlighted the significant win of Delta Air Lines and ongoing dominance in financial services, with plans to expand into healthcare. For Europe, McLean detailed the implementation of a distributed commerce model, leveraging marketplaces like Next, Debenhams, and Amazon, which have shown strong starts. He mentioned the UK business is improving, and efforts are focused on engaging the German resolver customer through catalogs, with upcoming powerful collaborations expected to boost the brand's halo.

Steve Silver asked for an update on the Outfitters business pipeline, including the number of prospects in advanced stages, and the expectations for completing the turnaround of the European business to make it a more significant contributor.

Answer

CEO Andrew McLean outlined the Outfitters strategy, focusing on school uniforms with OEKO-TEX certified products and competitive pricing, aiming to add schools in $0.5M-$3M revenue buckets. For commercial uniforms, he described rebuilt experiences for smaller customers, continuous IT upgrades, and leveraging small accounts to prospect for enterprise clients, citing the Delta Air Lines win and plans to expand into adjacent sectors like healthcare. For Europe, McLean detailed the implementation of a distributed commerce model, expanding into marketplaces like Next, Debenhams, and Amazon with channel-appropriate products and pricing. He noted progress in the UK, ongoing efforts to engage the German 'resolver' customer via catalogs, and upcoming powerful brand collaborations to boost the European business's contribution.

Steven Silver asked how the strategy of minimal discounting aligns with the increased SG&A spending for new customer acquisition and inquired about the company's pipeline for patent-eligible products, particularly following the new patent in the swim category.

Answer

CFO Bernard McCracken explained that gross margin expansion was primarily driven by higher average unit retail, not deeper discounts, and that new, younger customers are being acquired profitably through channels like social media. CEO Andrew McLean elaborated on the renewed focus on innovation, stating that the company is actively building a pipeline of patents to protect product differentiation and re-establish Lands' End as an innovative brand, a core part of its heritage.

Steve Silver of Argus Research questioned if there was any hesitancy in the Outfitters enterprise business pipeline due to macroeconomic uncertainty. He also asked for context on the stickiness of new customers acquired through recent initiatives like the SMS subscription campaign.

Answer

CEO Andrew McLean responded that, surprisingly, they have seen no hesitancy in the enterprise pipeline and have experienced very consistent business. Regarding customer acquisition, he explained that stickiness is demonstrated by significant growth in '1 to 2x buyers,' which is driven by marketing brand quality and experience over discounts. McLean also noted a strategic shift from paid search to social channels and an emerging focus on using AI agents in marketing to reach customers more effectively.

Steve Silver of Argus Research inquired about the Outfitters business, asking if there has been any hesitancy in the enterprise pipeline due to macroeconomic uncertainty. He also asked about the 'stickiness' of new customers acquired through recent initiatives like the expanded SMS marketing program.

Answer

CEO Andrew McLean stated that, surprisingly, there has been no hesitancy in the enterprise Outfitters pipeline, with business remaining very consistent. Regarding customer acquisition, he pointed to significant growth in '1 to 2x buyers' as a key indicator of stickiness. McLean elaborated that the marketing strategy has shifted from paid search to brand expression channels like social media and leveraging AI agents for search, which is driving engagement and converting new customers who stay with the brand.

Steve Silver of Argus Research inquired about the Outfitters business, asking if there has been any hesitancy in the enterprise pipeline due to macroeconomic uncertainty. He also asked about the effectiveness and 'stickiness' of new customers acquired through recent initiatives like the expanded SMS marketing program.

Answer

CEO Andrew McLean responded that, surprisingly, they have seen no slowdown or hesitancy in the enterprise business pipeline, which has remained consistent. Regarding customer acquisition, McLean highlighted significant growth in customers making a second purchase (1x to 2x buyers), indicating good stickiness. He explained this is driven by a strategy focused on product quality and brand experience rather than discounting. He also noted a shift in marketing from paid search to more expressive channels like Instagram and influencer marketing, as well as exploring the use of AI agents for search.

Steve Silver from Argus Research questioned if there has been any macroeconomic-driven hesitancy in the pipeline for the Outfitters enterprise business. He also asked for context on the 'stickiness' of new customers acquired through recent initiatives like the expanded SMS program, and how these new subscribers are converting.

Answer

CEO Andrew McLean responded that, surprisingly, the enterprise business has seen no slowdown and remains consistent, defying expectations of macroeconomic volatility. Regarding customer acquisition, McLean highlighted significant growth in '1 to 2x buyers' as a key indicator of stickiness and successful conversion. He explained the marketing strategy is shifting from traditional paid search to brand expression on social channels and leveraging AI agents, which is proving effective at building long-term value relative to acquisition cost.

Steven Silver asked about the third-party business, specifically the timeline for new partnerships like Nordstrom to drive traffic to Lands' End's direct channels. He also inquired about the contribution of third-party expansion to the quarter's GMV growth and the breakdown of new customers between organic acquisition and third-party channels.

Answer

CEO Andrew McLean clarified that directly managed third-party marketplaces like Nordstrom, where assortments are curated, provide valuable customer data and do drive traffic back to the main site. He contrasted this with arm's-length licensing deals like Costco, where data is less direct but still provides brand exposure. CFO Bernard McCracken added that 80% of marketplace sales are from new or long-lapsed customers, and the company is actively analyzing this data to understand customer journeys and drive future growth across all channels.

Steve Silver asked about the sales impact of high-profile movie tie-ins, specifically whether sales are concentrated around the launch or have a longer tail, and the strategic rationale and potential leverage for opening second Build-A-Bear locations in major malls like American Dream and Mall of America.

Answer

CEO Sharon John explained that while movie tie-ins like 'Wicked' contribute, Black Friday trends are driven by a broader assortment. She noted that the sales tail for licensed products, especially films, varies widely and is difficult to predict unless it's a known sequel or a major hit. Regarding multiple mall locations, CEO Sharon John highlighted that Build-A-Bear's ability to drive revenue and foot traffic, coupled with its destination-driven experiential marketing, provides significant value and potential leverage with mall partners, positioning the brand as a key solution for attracting shoppers back to in-person retail.

Steve Silver asked about the sales concentration and tail duration for high-profile movie tie-ins like "Wicked," and the strategic rationale and potential lease leverage benefits of opening second Build-A-Bear locations in premier malls such as American Dream and Mall of America.

Answer

CEO Sharon John clarified that "Wicked" was a second-year partnership and not the sole driver of Black Friday success, noting that the sales tail for licensed film products varies widely. Regarding multiple mall locations, she explained that Build-A-Bear's destination-driven traffic and pioneering role in experiential retail are significant assets, contributing to mall foot traffic and providing leverage in discussions with partners, enabling the expansion into second locations at major retail destinations.

Steve Silver from Argus Research asked if the company, given its strong balance sheet and capital return programs, would consider expanding its own company-operated stores internationally, especially while partners are aggressively growing the brand's footprint.

Answer

CFO & President Voin Todorovic stated that while the company is open to all options that provide the highest ROI, the current partner-operated model is the primary focus for international growth. President & CEO Sharon Price John elaborated that local partners possess superior market knowledge, real estate access, and consumer insights, making the partnership model highly effective and the preferred strategy for the foreseeable future.

Steve Silver from Argus Research inquired about the process for gathering information from international partners to guide expansion decisions and asked about the primary drivers of the strong Q1 retail results, questioning if it was organic demand or potential consumer pull-forward.

Answer

President & CEO Sharon Price John explained that the company works with local market experts for international growth, setting a high bar for partners to ensure the brand experience is maintained. She cited partner enthusiasm and expansion as the best evidence of success. Regarding Q1 retail strength, John stated the company believes a consumer pull-forward was not a material factor, as people don't typically "hoard" teddy bears, given that the purchase is intrinsically tied to an in-person experience.

Steven Silver questioned the outlook for inventory levels in 2025 given store expansion and accelerated purchasing, and asked what factors might be offsetting positive business trends to result in a mid-single-digit revenue growth forecast.

Answer

CFO Vojin Todorovic explained that while inventory units will naturally increase to support store growth, the total inventory value will also be influenced by potential tariff-related cost increases. Regarding the revenue outlook, he stated that the mid-single-digit guidance is not conservative but accounts for external macro uncertainties, such as the consumer environment and tariff impacts, which are outside the company's control. CEO Sharon John added that while the company is benefiting from positive trends like the return to experiential retail and 'kidulting,' the guidance remains mindful of potential shifts in consumer behavior.

Steven Silver from Argus Research asked about the leverage gained from strong store traffic in lease negotiations and inquired about the long-term strategy for international expansion, particularly regarding market saturation versus flagship locations.

Answer

CEO Sharon John confirmed that outpacing mall traffic provides leverage in lease negotiations, as Build-A-Bear is a traffic driver. CFO Vojin Todorovic added that the company's flexible store formats and preference for percentage-rent deals also provide an advantage. Regarding international strategy, Vojin Todorovic stated the focus is on finding the right partners to secure prime real estate, while Sharon John clarified they are far from saturating any market and that partners strategically target tourist-heavy locations.

Steven Silver asked about the company's supply chain capabilities, specifically how it is set up to quickly replenish high-demand seasonal items, referencing the depletion of certain Halloween products.

Answer

CEO Sharon John explained that the company uses predictive analysis based on historical data and consumer trends to manage seasonal inventory. For the popular Pumpkin Kitty, they planned multiple inventory flows to meet demand. She emphasized that the majority of the business comes from evergreen products like classic teddy bears, which provides a stable inventory foundation and mitigates the risks associated with the more volatile seasonal and licensed product categories, ensuring something is always available for consumers.

Steve Silver from Argus Research asked about the potential market size for North America, questioning if it could eventually rival Japan, and what differentiates CTW in securing rights to attractive anime IP amidst industry competition.

Answer

CFO Patrick Liu expressed high expectations for the North American market, citing its historical gaming significance and growing anime fandom, and believes it could eventually surpass Japan for certain titles in the long term, especially with new local investments. He highlighted CTW's competitive advantages: strong relationships with Japanese IP holders (e.g., Kadokawa, Toei) due to consistent monetization performance, the frictionless HTML5 platform that appeals to IP owners, and advanced AI-backed marketing tools demonstrated by improved return on advertising spend.

Steve Silver inquired about CTW's competitive advantages, particularly its unique ability to secure rights to highly attractive anime IP amidst intense industry competition.

Answer

CFO Patrick Liu identified three key differentiators: strong relationships with major Japanese IP holders like Kadokawa and Toei due to consistent monetization, the frictionless HTML5 platform that allows instant game access without installs, and the proprietary AI-backed marketing tool, which has demonstrated improved return on advertising spend.

Steve Silver asked for color on the nature of asset sales reported this quarter, including proceeds from helicopter sales, and whether similar activity is expected in coming years. He also inquired about the income tax benefit in Q3 and the future outlook for the tax line, specifically the effective tax rate as the company's net income grows.

Answer

CFO Jennifer Whalen explained that Bristow opportunistically sells older assets no longer needed in its fleet, typically for utility or firefighting markets, and also engages in sale-leaseback transactions. This quarter's proceeds largely stemmed from a sale-leaseback on a new Star aircraft, alongside the sale of an older asset. Regarding the income tax benefit, Whalen stated it was a one-time event resulting from the removal of a valuation allowance on the Australian operation due to positive results. She anticipates that as profitability improves, the company's effective tax rate will normalize to an average rate, somewhat higher than the US tax rate, given its operations across many jurisdictions.

Steve Silver asked for color on the nature of asset sales reported this quarter, including proceeds from helicopter sales, and whether similar activity is expected in coming years. He also inquired about the income tax benefit in Q3 and the future outlook for the tax line, particularly the effective tax rate as the company's net income grows.

Answer

Jennifer Whalen (CFO) explained that asset sales are opportunistic, typically involving older assets no longer needed in the fleet, often sold into utility or firefighting markets, or through sale-leaseback transactions. This quarter's sales included a sale-leaseback on a new Star aircraft and an older asset. Regarding the tax benefit, Jennifer Whalen stated it was a one-time event primarily due to the removal of a valuation allowance on the Australian operation, and that as profitability improves, the effective tax rate will normalize to an average rate slightly above the U.S. tax rate.

Steve Silver of Argus Research asked for more color on the capital allocation strategy, specifically why only a modest portion of the share repurchase program was used in Q2, and questioned the rationale for accelerating principal payments on the UK SAR equipment facility over other debt instruments.

Answer

President & CEO Chris Bradshaw clarified that Q2 priorities were completing government project CapEx and beginning accelerated debt paydown, making the share repurchases an opportunistic pull-forward. He also reiterated the plan to initiate a dividend in 2026. SVP & CFO Jennifer Whalen added that the UK SAR debt was targeted for early repayment because it was the company's highest-cost debt and carried no prepayment penalty.

Steven Silver of Argus Research asked for more detail on the potential cost exposure from a higher tariff environment, given Bristow's international footprint, and questioned if the significant use of cash for working capital in the quarter was a one-time event.

Answer

President and CEO Chris Bradshaw explained that since 85% of revenue is generated outside the U.S., the tariff impact on imported parts for the U.S. fleet is not expected to be material. CFO Jennifer Whalen confirmed the working capital use was largely a timing issue related to government contract payments and would not recur at the same level, though some muted pre-operation and inventory costs will continue.

Steven Silver of Argus Research Company inquired about the funding plan for the remaining SAR contract investments and the expected impact on near-term liquidity and leverage. He also asked for an update on the company's capital allocation strategy as the major investment phase concludes.

Answer

SVP and CFO Jennifer Whalen stated that the remaining CapEx will be funded primarily through dedicated debt facilities tied to the UKSAR2G and Irish Coast Guard contracts, leading to a temporary increase in leverage. President and CEO Christopher Bradshaw reiterated the capital allocation framework, which prioritizes a strong balance sheet, funding organic growth, and shareholder returns. He mentioned that the strategy, including potential buybacks or dividends, will be further defined in early 2025.

Steve Silver asked for clarification on the more bullish M&A outlook, inquiring whether it stems from Enerpac's strong balance sheet, changes in the competitive landscape, or other factors, while reiterating the company's philosophy of acquiring high-quality businesses. He also inquired about the contribution of the second brand strategy to APAC's high single-digit growth in fiscal 2025 and the outlook for its continued growth in fiscal 2026.

Answer

Paul Sternlieb, President and CEO, confirmed a healthy balance sheet and ample financial flexibility for M&A. He noted that while valuation has been an issue historically, the funnel of opportunities has picked up pace and quality in recent quarters, with augmented resources to expand targets, maintaining a disciplined approach. Regarding APAC growth, Darren Kozik, CFO, highlighted strong growth in India (double-digit) and a return in Australia's mining sector. Mr. Sternlieb stated the second brand (Larzep) is a long-term initiative with continued year-over-year growth, expecting further expansion in FY2026 through distributor growth, new product lines, and marketing investment.

Steven Silver asked for clarification on the more bullish M&A outlook, inquiring if it stemmed from Enerpac's balance sheet strength or changes in the competitive landscape. He also inquired about the proportion of APAC's high single-digit growth in fiscal 2025 that came from the second brand strategy and the outlook for its continued growth in fiscal 2026.

Answer

Paul Sternlieb, President and CEO, confirmed the healthy balance sheet and ample financial flexibility. He stated that while valuation has been a past issue, the funnel of opportunities has picked up pace, and the company has augmented M&A resources. Darren Kozik, CFO, highlighted fantastic double-digit growth in India and a return in Australia's mining sector as key drivers for APAC. Mr. Sternlieb added that the second brand (Larzep) is a long-term initiative with continued year-over-year growth, expecting further expansion through distributor additions and new product lines in fiscal 2026.

Steve Silver of Argus Research requested context on the new in-house innovation lab's scalability and its potential impact on R&D costs. He also asked how Q3 product innovation played out against expectations that the second half of the year would see more new launches compared to the first half's focus on commercialization.

Answer

CEO Paul Sternlieb explained that the new innovation lab's primary benefit is a dramatic improvement in speed-to-market for new products, reducing prototyping time from weeks to days, which will accelerate the pace of innovation. He confirmed that while H1 focused on commercializing FY24 launches, Q3 saw new product introductions, such as a solution for the rail industry, demonstrating a continued mix of commercialization and new innovation as planned.

Steve Silver of Argus Research sought details on the new in-house innovation lab's scalability and impact on R&D, and inquired about the progress of new product innovation in Q3, following earlier commentary about a second-half focus.

Answer

CEO Paul Sternlieb explained that the new innovation lab's primary benefit is a dramatic improvement in speed-to-market for new products, reducing prototyping time from weeks to days. He confirmed the company's second-half innovation focus is on track, citing the launch of a new rail industry solution in Q3 alongside continued commercialization of prior-year products.

Steve Silver of Argus Research requested context on the new in-house innovation lab's pipeline and scalability, its comparison to previous outsourced R&D efforts, and its potential effect on R&D costs. He also asked how new product innovation in Q3 compared to the company's previously stated plan to focus more on new launches in the second half of the fiscal year.

Answer

CEO Paul Sternlieb explained that the primary advantage of the new innovation lab is a significant acceleration in time-to-market for prototypes, reducing timelines from weeks to days, which he believes will increase the overall pace of innovation. He confirmed that, as planned, the company shifted focus in Q3 to launch new products, providing an example of a new pin puller solution for the rail industry, while also continuing to commercialize products launched in fiscal 2024.

Steve Silver of Argus Research inquired about the new in-house innovation lab, asking about its pipeline size, scalability, and potential impact on R&D costs compared to the previous reliance on outsourced vendors. He also asked for an update on the product innovation cadence in Q3, following comments that the second half of the year would see more new launches.

Answer

CEO Paul Sternlieb explained that the primary benefit of the new innovation lab is a dramatic reduction in prototyping time, from weeks to days, which will accelerate the pace of innovation more significantly than direct cost savings. He confirmed that while the first half of the fiscal year focused on commercializing prior launches, Q3 saw new product introductions, such as a specialized pin-puller solution for the rail industry, demonstrating a continued focus on bringing new, customer-driven solutions to market.

Steve Silver of Argus Research requested context on the new in-house innovation lab's pipeline and scalability, its potential impact on R&D costs, and how the company's new product innovation focus played out in Q3 compared to prior expectations for the second half of the year.

Answer

CEO Paul Sternlieb explained that the new innovation lab's primary benefit is a dramatic improvement in time-to-market for new products, reducing prototyping from weeks to days. He confirmed that Q3 saw a healthy mix of commercializing prior launches and introducing new products, such as a specialized pin puller solution for the rail industry, aligning with the company's strategy to focus on key verticals.

Steven Silver from Argus Research inquired about the implementation progress of the Enerpac Commercial Excellence (ECX) program in Europe and sought an update on the company's e-commerce performance.

Answer

President and CEO Paul Sternlieb reported that the ECX rollout in Europe began one to two quarters ago and is progressing well, leveraging lessons from the Americas to drive a more disciplined, end-user-focused sales culture. On digital initiatives, he stated that the e-commerce business is performing strongly, with revenue up 43% year-over-year in Q2. He also noted the recent expansion of e-commerce and digital advertising into European markets and Australia, which is driving significant growth in website traffic.

Steven Silver asked about the drivers behind the return to growth in the APAC region, the current stage of progress for efficiency initiatives like PEP and ECX, and the market reception to the integrated capabilities following the DTA acquisition.

Answer

President and CEO Paul Sternlieb explained that APAC's growth was broad-based across most countries and product lines, excluding the soft mining market in Australia, and noted good progress with the second-brand strategy. He described the PEP program as an 'evergreen' continuation of the ASCEND initiative, driving ongoing margin expansion. CFO Darren Kozik and CEO Paul Sternlieb both commented on the DTA integration, stating it is performing well, with strong orders and a commercial playbook that is successfully generating leads for DTA's horizontal lifting technology outside of its core European market.

Steven Silver from Argus Research asked for an update on Enerpac's capital allocation strategy, given the company's low leverage, strong cash flow, and recent share repurchase activity. He also inquired whether management is observing any signs of wider consolidation within the fragmented industrial tool industry, especially amidst current macroeconomic challenges.

Answer

President and CEO Paul Sternlieb reiterated that the company's capital allocation priorities are unchanged: first, internal investments, followed by a balanced approach between M&A and opportunistic share repurchases. He emphasized the desire to maintain a strong balance sheet and 'dry powder' for the proprietary M&A funnel, which takes time to cultivate. On industry consolidation, Sternlieb stated that while the market remains fragmented, presenting an opportunity for Enerpac, he has not observed any significant, consistent consolidation efforts by other large acquirers.

Steven Silver of Argus Research questioned the company's strategy regarding share repurchases, noting the aggressive activity in Q1, and asked about its capacity and appetite for future buybacks.

Answer

Executive Holger Bartel stated the company capitalized on an attractive opportunity in the quarter. He expects the cash balance to increase due to upfront membership fee collection and overall profitability. Going forward, the priority for cash will be investing in member growth, which now presents a better opportunity than it did a year ago.

Steven Silver noted the company's positive net cash position and asked if the expected ramp in 2025 revenues would enable increased investment in growth initiatives like Travelzoo META, while still maintaining financial discipline and continuing share repurchases.

Answer

Holger Bartel (executive) confirmed that marketing spend will increase in 2025, driven by a successful model for acquiring paying members and growing subscription revenue. He emphasized that this will not compromise the company's disciplined and independent approach to investing in Travelzoo META, which is supported by the strengthening balance sheet and strong cash flow.

Steven Silver of Argus Research questioned the nature of new benefits for the paid membership, including a potential Travelzoo META bundle, and asked about the company's planned uses of cash beyond share repurchases and marketing.

Answer

Executive Holger Bartel revealed that four new member benefits focused on enhancing the travel experience are in development, with details to be announced soon. Regarding cash flow, he confirmed the company will continue its share repurchase program and, with expected higher cash flows in 2025, will invest more in marketing to grow the member base and improve EPS.

Steven Silver from Argus Research Corporation inquired about Tims China's balance sheet strategy, cash flow management amid growth and debt, the impact of volatile coffee bean prices on margins, plans for product innovation in 2025, and the growth trend of the loyalty program.

Answer

CFO Dong Li and CEO Yongchen Lu addressed the balance sheet, noting a cash balance of RMB 184 million, stable bank facilities, and reduced cash burn due to improved profitability and a capital-efficient franchise model. Li explained that the impact of coffee bean price volatility is mitigated by sourcing from Yunnan, a diverse menu, and the fact that beans constitute less than 14% of food costs, with an expected full-year margin impact of less than 90 basis points. Lu detailed the product innovation strategy, highlighting the success of 92 new products in 2024 and the focus on the 'Coffee Plus Fresh Prepared Food' model, such as the new lunchbox. He also confirmed the loyalty program continues to grow daily through new stores, online channels, and brand partnerships.

Steven Silver inquired about the potential for future expense leverage, the timeline for converting the 5,000 sub-franchise applications into operating stores, and the impact of the loyalty program on customer purchase frequency and transaction size.

Answer

CEO Yongchen Lu explained that continued revenue growth would provide operating leverage as fixed costs like rent and G&A are allocated over a larger base. He noted that while the company is strict in vetting its franchise applications to ensure quality partners and locations, progress is strong and will accelerate. Regarding the loyalty program, Lu confirmed that members have a much higher purchase frequency, highlighting that purchasers of the 'Chibaobao Card' showed a 4.6x increase in frequency compared to average members.

Steven Silver of Argus Research inquired about Tims China's strategy for expanding store-level EBITDA margins and executing its growth plan if competitive and macroeconomic challenges persist.

Answer

CEO Yongchen Lu stated that the company's 'coffee plus food' strategy is a key differentiator, with over 50% of orders now including food, which insulates them from direct price competition with pure coffee brands. He highlighted that this unique positioning has attracted over 3,000 sub-franchisee applications, which will accelerate network growth.

Steven Silver inquired about the company's capital investment plans for 2025, given its strong cash position and expected profitability, and asked about the focus for new partnerships now that Cheche is aligned with most major NEV manufacturers.

Answer

Chief Financial Officer Wenting Ji stated that the company does not anticipate significant capital investments, with the exception of R&D funding for new AI-driven products in claims management and autonomous driving insurance. An executive added that while the number of NEV partners may still grow, the primary focus for future growth will be deepening relationships with existing partners by providing auto insurance renewal services for their expanding customer base.

Steven Silver of Argus Research inquired about the company's capital allocation strategy and the future growth trajectory of its emerging private label e-commerce business.

Answer

CFO Dong Xie affirmed a balanced capital allocation strategy, using strong operating cash flow to fund both growth investments and shareholder returns, such as the recent special dividend. He clarified that e-commerce is one channel for the broader private label strategy, which is expected to see sustainable, rather than explosive, growth built upon its large user base and integrated online-offline model.

Steven Silver of Argus Research asked about the competitive landscape for e-commerce livestreaming in China and QuantaSing's specific product strategy for its platform, including the target number of SKUs.

Answer

CEO Peng Li described the large, competitive e-commerce market, highlighting QuantaSing's unique position due to its focus on the silver demographic and development of private label products. CFO Dong Xie added that the company follows a user-centric approach, aiming for a core set of approximately 10 flagship wellness products to ensure quality and build brand recognition.

Steven Silver asked for an update on the market reception for the Kandi golf carts launched through its partnership with Lowe's, inquiring whether sales have met the company's initial expectations.

Answer

CEO Feng Chen responded that the customer reception for the NFL-branded products has been "pretty good" and affirmed that the company is working well with Lowe's on the partnership.

Steven Silver of Argus Research asked for more detail on the initial launch of CyPath Lung in Texas, inquiring about any unexpected findings or adjustments the company is making based on early feedback.

Answer

President and CEO Maria Zannes responded that while there were no major surprises, the company is gaining valuable insights. She highlighted that physicians and patients appreciate the ease of use, particularly the at-home sputum collection supported by a patient coach, which has resulted in high-quality samples. Zannes also noted that physicians find the actionable binary (yes/no) results, supplemented by a numerical score, very helpful for determining next steps. This feedback is being used to refine branding and messaging with marketing partners Havas and Trinity.

Steven Silver from Argus Research inquired about the planned integration between the online literature and gaming segments in 2022, the company's flexibility in managing expenses to maintain its net income outlook, and the anticipated pace of new game launches.

Answer

Executive Kan Zhang explained that the company leverages a data-driven SaaS platform for both business lines, highlighting the success of 'Love Fantasy' as a model for future games combining literature and gameplay. He confirmed an accelerated pace of game launches is expected in 2022 through partnerships with over 20 external studios. CFO Robert Yi Cui addressed expense management, outlining 2022 targets for sales & marketing at 70% of revenue, R&D at 10%, and G&A at 6% to ensure profitability.

Steven Silver from Argus Research asked for more details on how the company can leverage the success of its game, Catwalk Beauty, to enhance the group's overall growth, visibility, marketing spend, and customer acquisition costs.

Answer

Executive Kan Zhang explained that Catwalk Beauty's success validates their holistic incubation mechanism, which they expect will produce one or two successful new games every two months. The game's high ROI, with a return cycle of less than three days, and significant organic growth from social sharing are contributing directly to the group's profitability. This success also proves their sophisticated growth platform, which they will now leverage to expand into publishing games for third-party partners.