Luckin Coffee Inc

Ladies and gentlemen, welcome to Luckin Coffee's third quarter 2024 earnings call. All participants will be in listen-only mode during management's prepared remarks, and there will be a question and answer session to follow. Today's conference is being recorded. At this time, I'd like to turn the call over to Ms. Carol Liu of Investor Relations, manager of Luckin Coffee, for prepared remarks and introductions. Please go ahead.

Hello, everyone, and thank you for joining us today. Lacking Coffee announced its third quarter 2024 financial results earlier today. Today, you will hear from Dr. Guo Jingyi, Chairman and CEO of Lacking Coffee, and Ms. An Jing, CFO of Lacking Coffee. After the company's prepared remarks, there will be a question and answer session. We will be referring to a presentation on today's call, which can be found on the company's IR website, investor.lkcoffee.com. During today's call, the company will be making some forward-looking statements regarding future events and results. Statements that are not historical facts, including but not limited to statements about the company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding this and other risks is included in the company's filing with the SEC. With respect to any non-GAAP matters discussed during the call today, the accompanying reconciliation information related to those matters can be found in the earnings press release issued earlier today. During today's call, Dr. Guo will speak in Chinese and his comments will be translated into English. Now, I would like to turn the call over to Dr. Guo Jingyi, Chairman and CEO of Lackin' Coffee. Dr. Guo, please go ahead.

Hello, everyone. Welcome to today's conference. Thank you for your attention and support for Lackin' Coffee. I am Guo Jingyi, CEO and CEO of Lackin' Coffee. In the third quarter of this year, despite facing a still complex market environment, but with a unique business model, continuous expansion of scale advantages, continuous product innovation capabilities, and industry-leading brand advantages, the company's performance continues to grow steadily. For the first time, single-tool revenue has broken the one-billion mark. Income and profits have been historically high. The achievement of these achievements is inseparable from the joint efforts of all employees of Ruixin Coffee and the love and support of more than 300 million accumulated consumer users. Hello, everyone. Welcome to today's earnings conference call.

And thank you for your continued interest in and support of Luckin Coffee. I'm Huo Jingyi, Chairman and CEO of Luckin Coffee. Despite facing a complex market environment, I'm pleased to report that the company achieved solid growth in the quarter this year. Thanks to our unique business model, expanding scale advantage, ongoing product innovations, and leading brand strength, For the first time ever, our single coffee revenue surpassed RMB 10 billion, and both revenue and profit reached new heights. These achievements are the result of the collective efforts of all Luckin Coffee employees and the support and love of our more than 300 million cumulative transaction customers. I would like to take this opportunity to express my heartfelt thanks to them. Looking ahead, We will continue to focus on our established strategy, deepen on our domestic store layout, continuously expand market share, further consolidate our leading edge, and strive to enable more consumers to enjoy high-quality, cost-effective products. We are committed to promoting the sustainable and healthy development of China's coffee market. 具体来看,今年三季度延续了二季度的增长势能,

At the same time as the expansion of the door-to-door store, the income and profits are high, and the performance of the industry continues to improve. The total income of 101.8 billion yuan increased by 41.4%, the operating profit of 15.57 billion yuan, the operating profit rate is 15.3%, the net profit is 13.03 billion yuan, and the net profit rate is 12.8%. Please turn to page five. Looking into our numbers,

In the third quarter of this year, we maintained growth momentum from the second quarter, and the business performance continued to improve. While steadily extending our store network, we saw both revenue and profit reach new heights. Total net revenue was RMB 10.8 billion, marking a 41.4% year-over-year increase. Operating profit was RMB 1.56 billion, with an operating margin of 15.3%. Net profit was RMB 1.3 billion, reflecting a net margin of 12.8%. Self-operated store operating profit was RMB 1.75 billion, with a self-operated store operating margin of 23.3%. In the third quarter, the total number of manual store openings was 1,382. Our cumulative number of transacting customers exceeded 300 million, and the number of monthly average transaction customers was 79.85 million. Our CFO, An Jing, will share further financial details later on this call.

In terms of domestic market, we continue to deepen our store layout by increasing 1374 stores. The total number of stores in China has reached 21,298. There are 13,891 self-owned stores and 7,407 joint stores. The number of stores and the market layout have further expanded the leading advantage. Currently, the Chinese coffee industry is still in a strategic phase of rapid development. Coffee consumption is still in an accelerated recovery stage. The market space is still accelerating. Facing this historic opportunity, We will still stick to the development strategy of prioritizing branch stores, and while securing high-end cities, we will maintain the ability to expand the market. In terms of the international market, this quarter, in Singapore, we continue to steadily invest and compete with eight branch stores. The total number of Ji Du Mo branch stores is up to 45. Currently, Singapore has been operating for a year and a half. Although the overall business has not achieved profit, the loss has been significantly reduced, Please turn to page 6. In terms of store profits and store footprints, in the domestic market, we continue to deepen our store layout

adding 1,374 landing stores, bringing the total number of stores in mainland China to 21,298. Among these, there are 13,891 self-operated stores and 7,407 partnership stores, further expanding our leading advantages in store count and the market layout. China's public market is currently experiencing a strategic period of rapid development, with coffee consumption growing in popularity and the market stakes extending swiftly. Facing this valuable opportunity, we will continue to prioritize our store layout strategy by increasing density in top-tier cities, so maintaining our efforts to expand into lower-tier cities. In the international market, we continue to make steady investments in Singapore this quarter, with a net increase of eight stores, bringing the total number of stores to 45 at the end of this quarter. We have been operating in Singapore for a year and a half now. Although the overall business in Singapore has not yet achieved profitability, the losses have significantly narrowed and overall operations are moving in a positive direction. Looking ahead, we will steadily expand overseas markets on an ongoing basis explore and create innovative organizational models for international business, and continuously increasing investment, striving to enable consumers worldwide to enjoy Lacking Coffee's high-quality coffee and services.

In terms of product and customer growth, this year's In-Coffee introduced 28 limited-edition drinks and multiple-edition snacks. Through broadening the product boundary, we have provided consumers with more diverse choices. In August this year, the company launched the Green Tea series. The first month of the Qingqing Jasmine Green Tea was sold at more than 44 million cups. We surrounded the concept of morning coffee and afternoon tea, and tried to meet the needs of consumers in the non-coffee period of diversified consumption, and let the product line realize the coverage of the whole period and the whole scene. In addition, the small butter series products listed at the end of September were widely praised. The first week sales broke through 13.33 million cups, In this quarter, we have successfully launched many joint activities such as Black Godization Wukong, Zanmeng Luby, and Huangyou Xiaoxiong, which are widely loved and supported by consumers. By the end of the third quarter, the total number of trading users of Yuexing Coffee has exceeded 300 million, and the number of trading users of Yuejun has increased by more than 10 million, reaching 79.85 million, which is a new record. In order to ensure the stable supply of more than 20,000 stores, We insist on expanding our supply chain and investment efforts. In August this year, RuiXing Coffee's innovative production center officially opened in Qingdao. This will form a supply chain supply network that can produce up to 100,000 tons annually with Fujian Pingnan and Jiangsu Kunshan. In the future, we will continue to expand our supply chain integration efforts to ensure that every cup of coffee purchased by consumers is of high quality and stable quality. In addition, Please turn to page seven. In this quarter,

Locking Coffee has launched 28 freshly brewed beverages along with several light food products, expanding our product boundaries to provide our customers with a more diverse range of choices. In August, we introduced the Light Milk Tea series, and the last, Jasmine Milk Tea, has sold more than 44 million cups in its first month. Centered around the concept of coffee in the morning, tea in the afternoon, we are committed to meeting consumers' diverse needs during non-coffee hour, achieving all-day and all-scenario coverage of our product offerings. In addition, the Little Butter series, launched at the end of September, received vast rate of acclaim, with first-week sales exceeding 13.33 million cups. During this quarter, we also successfully launched several branding collaborations, including black-meat wukong, sanlong lupi, and butterbeer, all of which were well-received and supported by consumers. By the end of the third quarter, the number of cumulative transacting customers surpassed 300 million, with the number of monthly average transacting customers increasing by more than 10 million compared to the previous quarter, reaching 79.85 million, that's a new high. to ensure stable supply for our over 20,000 stores. We are committed to increasing investment in our supply chain. In August, Luckin Coffee broke ground on its new innovation and production center in Qingdao. This center, along with the two major roasting plants in Kunshan Jiangsu and Pingnan Zujian, will form a roasting supply network with an annual capacity of 100,000 metric tons. Moving forward, we will continue to enhance supply chain integration to ensure that every cup of coffee our consumers purchase is of consistently high quality. In addition, we are intensifying our procurement efforts in premium coffee beans regions worldwide. Luckin Coffee entered into a series of letters of intent to purchase approximately 120,000 metric tons of coffee beans from Brazil over the next two years. Moving forward, we will further accelerate our procurement plans in coffee-producing countries across Southeast Asia, Africa, Central America, and South America, bringing high-quality coffee beans from those regions to Chinese consumers.

In terms of sustainable development, Ruixin Coffee is highly concerned about the sustainable development of industrial superchargers, and continues to deepen exchanges and cooperation with original producers. By establishing standards, developing training, providing assistance, strengthening the sustainability of seed planting, improving the quality and production of raw materials, and contributing to the improvement and protection of the ecological environment of the original land, and improving the level of life of the growers. In September, we invited experts from relevant fields to the Xianguo Plantation in Baoshan, Yunnan Province, to present to local farmers and business representatives the development of the coffee industry, and training in biodiversity protection, and to organize the factory and local community volunteers to set up a volunteer service team to support the sustainable development and environmental protection of Yunnan coffee. In the third quarter, YuXing Coffee completed the global tour of Brazil. In August, at the opening ceremony of Qingdao Factory, we joined hands with Mr. Gao Wang, Ambassador of Brazil to China, to launch Brazil has a long coffee growing history and the world's largest coffee production capacity. We will continue to cooperate with the Brazilian coffee production site, set up a office and a planting support center, to promote the acquisition of responsibility, and deep cooperation in the fields of coffee cultivation and coffee culture exchange, and rejuvenation agricultural research, to promote the realization and exchange of practice in various production areas around the world, and to learn and land, and to contribute to the sustainable development of the core area of Chinese coffee and the global coffee origin. This is the main situation of the second-level performance. Next, please be quiet and let me introduce the financial data.

Lacking Coffee is deeply committed to the sustainable development of our entire supply chain and continuously enhance our communication and collaboration with places of our region, setting standards, conducting training, and providing support to boost the sustainability of source cultivation. This not only improves the quality and the yield of raw materials, but also contributes to the protection and enhancement of the ecological environment in this region. as well as the living standards of coffee farmers. In September, we invited experts from relevant fields to our green coffee bean processing plant in Baoshan, Yunnan, to provide training for local coffee farmers and business representatives on the coffee industry, regenerative agriculture, and the biodiversity conservation. We also organized the factory and the local community volunteer to form a volunteer service team to support the sustainable development of Yunnan coffee and the protection of the local environment. In the third quarter, Latin Coffee completed the Brazil stop of its global coffee bean search plan. As a groundbreaking ceremony of the Qingdao factory in August, They joined hands with His Excellency Marcos Galva, the Brazilian ambassador to China, and jointly launched the Latin Coffee Brazil Coffee Culture Festival. Brazil, with its long history of coffee cultivation and the world's largest coffee production capacity, has extensive practical experience in sustainable development, including regenerative agriculture and agricultural production technology innovation. They will continue to collaborate with Brazil's coffee regions, establishing office and support centers for farmers, promoting responsible sourcing, farmer assistance, coffee culture exchange, and the regenerative agriculture research. This will foster practice and exchange, learning and implementation about global coffee producing regions. contributing to the sustainable development of China's core coffee producing areas and global coffee regions. These are the key highlights of our performance in the third quarter. Next, I will now turn it over to our CFO, Anjing, to present the financial data and the commentary.

Thank you, Jingyi. Good morning, afternoon, and evening, everyone. Thank you for joining today's call. We appreciate your continued interest and support. I'm Jingyan, the CFO of Locking Coffee, and I'm excited to share our financial performance for the third quarter of 2024. Before we go over the results, I want to express my gratitude to our hardworking employees, loyal customers, and trusted investors. Your continued support is crucial to our success, and we are dedicated to providing value and innovation in the coffee industry. Now, I will take some time to highlight our 2024 third quarter results in detail. Please turn to slide 10. Let's start with our financial highlights. I'm pleased to share our strong third quarter 2024 results. Total net revenues of Q3 2024 reached RMB 10.2 billion. reflecting a large increase in 41.4% compared to RMB 7.2 billion in the same period of last year. This growth was mainly driven by an increase in the number of product sales and expansion of stores in operation and a notable increase in monthly transacting customers, despite a decrease in the average selling price of our products. Revenues from product sales were especially strong. totaling RMB 7.8 billion, representing a year-over-year increase of 46.3% from RMB 5.4 billion in Q3 2023. This reflects our focus on expanding product offerings and enhancing our customer engagement. Net revenues from freshly brewed drinks of a core product category reached RMB 7.2 billion in Q3 2024. Revenues from self-operated stores totaled RMB 7.5 billion, marking a 45.9% increase year-over-year. Same-store sales growth for self-operated stores in the third quarter was negative 13.1%, compared to positive 19.9% in the same quarter of 2023, due to exceptionally high bays from lots a year. The same stock growth is improved quarter by quarter, and we are actively working on maintaining this trend. Also, revenues from partnership store amount to RMB 2.3 billion, a strong 27.2% increase compared to Q3 2023. Meanwhile, our operating income for the quarters was RMB 1.6 billion, representing an operating margin of 15.3%. As we continued to explore and expand our business in the national market, we have successfully opened 45 self-operated stores in Singapore. By the first nine months of 2024, net revenues from the Singapore market amount to RMB 91.4 million, while cost and expenses mainly including store operations, regional expenses, In this world cost incurred at headquarters total around RMB 167.7 million. Slide 11 shows our store operating information. Our store growth remains strong throughout Q3. We saw a net income of 1,382 stores, resulting in a 6.9% quarter-over-quarter growth from the number of stores at the end of Q2. The total includes eight new stores in Singapore, bringing the total stores in Singapore to 45. We can underscore our ongoing efforts to explore and expand in international markets. By the end of the third quarter, our total stock count reached 21,343, including 13,936 self-operated stores and 70470 partnership stores. Our average monthly transaction customers in the third quarter reached 79.8 million, an impressive 36.5% increase compared to 58.5 million in the same quarter of last year. This strong growth not only highlights the success of our customer engagement and retention strategies, but also position us favorably against the competition and the changing customer preference. Next, let's move on to the detail of our probabilities. Please turn to slide 12. On a group level, our reported overall operating margins for the third quarter was 15.3%, up from 13.4% in the same period last year. This rise in probability is mainly due to changes in our product structure. which boosted the gross profit of our products. Additionally, our enhanced operational efficiency and operating average significantly contribute to the improved financial performance in this quarter. Meanwhile, we reported a net margin of 12.8% in this quarter, compared to 13.7% the same period last year. For our self-operated stores, the profit margin remained stable at 23.3% this quarter, compared to 23.1% in the same period last year. During this quarter, the company's overall operating expenses increased by 38.2% year over year, mainly due to our business expansion efforts. Our general and administrative expenses remain stable at 6.3% of revenue in Q3 2024, down from 6.7% in Q3 2023. In absolute terms, G&A expenses increased by 32.3% year-over-year, mainly driven by higher payroll costs, greater research and development spending, additional office supplies, and an uptick in share-based composition. Relative to the previous years, our sales and marketing expenses as a percentage of revenue increased to 5.8% from 5.3% in the same period last year. In absolute terms, these expenses rose around 53.2% year-over-year. This increase is the result of our strategic investment in boosting brand recognition, expanding product education initiatives, and fortifying our market position through multiple channels. Also, the rise in commission fees paid to the third-party delivery platforms was needed to handle the increased volume of the delivery orders. Loss expenses. related to the previous reported fabricated transactions and related restructuring were negative RMB 102.5 million in this quarter, compared to RMB 3 million in the same quarter of 2023. This large change is because the company become entitled to receive excess layer compensation of 50 million US dollar, which is about RMB 105.2 million. And there is DNO's insurance directors and officers liability and the company reimbursement insurance following the receipt of the base layer compensation. Then let's move on to the balance sheet and the cash flow statement on slide 13. Over-disciplined approach and robust cash precision allow us to maintain both balance sheet strength and flexibility. Positioning us to effectively navigate the current macro environment during the third quarter Our net operating cash inflow remains consistent at RMB 1.3 billion compared to the same period last year. As of September 30, 2024, we have about RMB 4.8 billion in cash, including cash and cash equivalents, restricted cash, term deposits, and short-term investments. Our strong cash flow generation and the healthy cash position continue to support our ongoing requirements, ensuring we can meet all of our business needs and provide additional growth potential. In closing, I want to recognize our team for their dedicated efforts and the tireless work to elevate the Lockheed Coffee experience in our stores, at our roasting plants, and in our support centers. Their strong commitment and hard work have been the grounds of our success. And I want to extend my deepest thanks to our employees for their invaluable contributions. To add, I would also like to express my sincere appreciation to all our investors for their unwavering support and confidence in our vision. We strive to continue to deliver strong execution and growth. Moving forward, we remain committed to meeting the ongoing needs of our customers and establishing Locking Coffee as a leading coffee brand worldwide. I will now turn it over to Jingyi for concluding remarks, followed by Q&A.

We can't live without the love of consumers. We are also proud of the support and encouragement of our partners and the trust of our investors. Here, I would like to express my sincere gratitude to all the relevant parties who care and support us. Looking forward to the future, Ruixin Coffee will continue to deepen its branch, continue to innovate, strengthen its brand advantage, and expand its investment chain to further consolidate and expand the market leading advantage. We will further optimize the cost structure, improve operation efficiency, and create long-term sustainable values for customers, shareholders, and all interest-related parties while paying attention to business growth and market share. In addition, Ruixin Coffee will pay more attention to social responsibility and form sustainable development ideas that only surround the core values of enterprises,

behind the continuous milestone achieved by Luckin Coffee lies the hard work of every Luckin Coffee employee the love of our consumers the support and encouragement from our partners and the trust of our investors on behalf of Luckin Coffee I would like to extend my sincere gratitude to all stakeholders who care for and support us. Looking ahead, Lexan Coffee will continue to deepen its store layout strategy, sustain product innovation, strengthen brand advantages, and increase supply chain investment to further consolidate and extend the market leading position. While focusing on business growth and market share improvement, we will further optimize our cost structure and enhance operational efficiency to create long-term sustainable value for customers, shareholders, and our stakeholders. Additionally, Latin Coffee will place greater emphasis on social responsibility, uphold the concept of sustainable development, and closely align with the company's core values striving to build Lackland Coffee into a world-class coffee brand and create greater value for society. Thank you all. Let's move on to the Q&A session.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we'll pause momentarily to assemble our roster. And our first question comes from Yongjian Yi from Minsheng Securities. Please go ahead.

Okay. Thank you, Mr. Guo, Mr. An, and Carol. I'm Dr. Yi Yongjian, an overseas analyst at Minsheng Securities. I saw that today's 3G report overall exceeded everyone's expectations, including some data and some risk. Indeed, since 2020, we have seen that after the company broke through and restarted, The whole data is relatively strong. We also see that a lot of core indicators are also changing. I mainly ask a core indicator here. Because everyone may be more concerned about the data growth of copper electricity. Because last year it was high. But in these few regions, there may be some fluctuations. Can Mr. Guo share with you some reasons behind this fluctuation? Of course, there may also be a time in the future OK, thank you very much for taking my question. My question is about the things or goals. How does the management of your fluctuations in the SSG metric and the reasons behind them? Additionally, could you provide us with more insights into the future outlook for the SSG metric? Thank you.

Thank you, because this is a very important indicator, which we continue to pay attention to. Next, let's have our chef, Anjing, to answer this question in detail. Thank you.

Thank you. Yes, the same source growth is a very important metric, and we always keep attention on that. So I would like to turn this question to Ms. Anjing for the answer. Thank you.

Okay. So the company, we have consistently paid close attention to this indicator. and over the past few quarters as you mentioned that the ssg has experienced the significant fluctuations which is largely due to our strategic positioning amid the rapid growth of china's coffee market and and the heightened industry competition so the faster phase expansion of our store network And the 9.9 promotion since June 2023 have notably impacted our SSSG. Overall, we think the fluctuation in SSSG align with our expectations. And we believe that last year's rapid expansion will ultimately support our long-term development. We have now, as you all know that, we have now surpassed 20,000 stores, providing us with a considerable scale advantage. In this quarter, the SSD, we just mentioned that, the self-operated store SSD is negative 13.1%, a narrowing compared to previous quarters. This improvement is mainly because the average selling price of this quarter exhibit a smaller deviation from the same quarter last year, compared to the price difference observed between the preceding quarters and their corresponding period of last year. And now we shifted to a more variable pace of expansion and the price gap to further reduce. We anticipate for the improvement of the SSG in the upcoming quarters. Looking ahead, as the company enters a more stable and sustainable growth pace, we will continue to closely monitor the same-store sales. These metrics will not only serve as a key reference of assessing our marketing performance, but we believe that will provide the valuable insight for our strategic decision-making. By leveraging this insight, we aim to refine our opening strategies to ensure new locations align with market demand. Additionally, through sales trend analysis, we will actively pursue the product innovation and offer opportunities to boost our overall competitiveness and ensure a steady and sustainable growth. That's my answer. Thank you.

Our next question comes from Xinyi Chang from CITIC Securities. Please go ahead.

Hello. Hello. X-Management, this is Xinyi from Cilix. And congrats on another strong quarter. My first question is about overseas extension. Could you share more details or maybe more color of Locking's plan to go abroad? And also, is there any update to the company's global capital market strategy? Thank you.

Thank you. Internationalization is actually a problem we are paying attention to. And we also have some relatively systematic thinking. Then I took this opportunity to talk to you about some of our thoughts on the international business in a more systematic way. Because Juixin Coffee, our vision is to create a world-class coffee brand that makes Ruixin a part of people's daily lives. In our view, this world-class coffee brand, in addition to income, profit, and market value, such as financial indicators, also includes the number of stores, coverage range, and the entire brand image, as well as international influence, and other relevant indicators should reach a world-class level. Of course, we are currently working hard for this goal.

Yeah, thank you for your question. So going to abroad is a very important question that we always think about that. And today I would like to share some systematic thinking about this thing. So overall, our Luckin Coffee's vision is to create a world-class coffee brand and become a part of everyone's daily life. So we believe that to achieve this, in addition to financial indicators such as revenue, profit, and market value, it should also reach world-class levels in indicators such as the number of stores, coverage, and brand image establishment, and the international influence. So now Lucky Steel is striving to doing that.

From the global market, We believe that the Chinese market has large customer base, strong consumption capacity, and a wide market space. Especially with the rapid growth of coffee consumption habits in recent years, the market potential is constantly expanding. We believe that the ceiling of the Chinese coffee industry is still improving. We believe that China will one day become the world's largest coffee consumption market. Facing this historical opportunity in the South, So if we're looking at the global market, the Chinese market has a large customer base, strong consumption power, and a broad market space, especially with the accelerated development of coffee consumption habits in recent years.

the market potential is continuously expanding and ceiling for the development of the China's coffee industry as a whole is still rising. So we firmly believe that China will one day become the world's largest coffee consumption market. So facing this historical opportunity, we will continue to focus on our domestic market further strengthen our store network, and continuously consolidate and expand Lacking's industry-leading advantage to capture the maximum benefits from the industry's rapid development.

Compared to the domestic market, overseas customers' coffee consumption habits have been improved overall, and the market has matured overall. Our overseas business is still in an early stage of exploration and investment, and needs to continue to grow. So compared to the domestic market, the overseas customers already have a very mature profit consumption habit.

so making the overall overseas market generally mature. So our overseas business is still in the very initial stage of exploration and investment. We still need to continue to increase investment in areas such as store network extension, supply chain enhancement, brand establishment, so gradually refine and form core advantages in cost structure and the customer experience, striving to win the recognition and favor of local consumers.

From the perspective of Singapore's advance exploration, although there are certain losses in finance, it has given us valuable experience in the overseas market. It has also made us understand the complexity of overseas business. The overseas market is full of opportunities and challenges. It does take patience and continuous investment. We have patience and confidence to do well. At the same time, we are actively exploring the opportunities of the United States and other markets considering that the U.S. has a mature, harmonious and competitive coffee market. When we implement a strategy to expand the market, we will be careful about our decisions. Next, we will pay close attention to overseas business and communicate with the market in time. At the same time, we will try to explore innovation in the organization and business models in a more suitable way and more flexible strategy to expand overseas business.

So although our initial exploration in Singapore has resulted in some financial losses, it has provided us with an invaluable experience and insight into the complexity of the overseas operation. The international market is full of opportunity, but it also presents significant challenges. It indeed requires patience, time, and continuous investment. So we remain both patient and confident in our ability to succeed. Meanwhile, we are actively evaluating opportunities in the United States and other markets. Given the maturity, saturation, and the competitiveness of the U.S. coffee market, we intend to approach our expansion strategy theory with careful consideration and a disciplined execution plan. Going forward, we will pay close attention to overseas business and communicate progress to the market in a timely manner. Meanwhile, we will also actively explore and create innovative organizational models for international business, expanding our overseas presence through more suitable methods and flexible strategies.

The second question is about the international capital market. As we communicated before, the company will continue to pay attention to the American capital market. But our primary task at this stage is still to build the company's business strategy In the complex market and monitoring environment, the company has no clear timetable for returning to the motherboard and restoring the status of the motherboard. At present, we will continue to focus on business development. By providing superior products and services to customers, we will strive for a higher market share and provide sustainable long-term value to our shareholders. Thank you.

So regarding to your second question, so in terms of the overseas capital markets, as communicated before, we will continue to monitor the U.S. capital markets. However, our primary focus remains on executing the company's business strategy. So given the complex market and the regulatory environment, there is currently no definitive timetable for an app listing on the main board. For now, we will continue to focus on business development, aiming to increase market share by delivering high-quality products and services to our customers while creating sustainable long-term value for our shareholders. Thank you.

Due to time restraints, no further questions will be taken at this time. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, Dr. Gourmet, and so that is all the time we have for today's earnings conference call. We thank you for your participation on today's call. We look forward to providing you with regular business updates and look forward to speaking with you again next quarter.

Thank you.

This concludes your call today. You may now disconnect.