Luckin Coffee Inc

Ladies and gentlemen, welcome to Luckin Coffee's first quarter 2025 earnings conference 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. Please be advised that today's call is being recorded. Now, I'd like to turn the call over to Ms. Nancy Song, investor relations of Luckin Coffee. Nancy, please go ahead.

Thank you, and hello, everyone. Welcome to Lock-In Coffee's first quarter 2025 earnings conference call. We announced our financial results earlier today before the U.S. market opened. The earnings release is now available on our IR website and the valuesware services. Today, you will hear from Dr. Guo Jingyi, co-founder and CEO of Lock-In Coffee, who will share a strategic overview of our business. Following that, Ms. Anjing, our CFO, will discuss our financial results in greater detail. Afterwards, we will open up the call for questions. During today's call, we will be making some forward-looking statements regarding future events and expectations. Any statements that are not historic facts, including but not limited to statements about our beliefs and expectations are forward-looking statements. These statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in our findings with the SEC. In addition, for net debt matters discussed today, the reconciliation information related to those matters will be found in our earnings press release. 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, co-founder and CEO of Lock-in Coffee. Dr. Guo, please go ahead.

Hello, everyone. Welcome to today's conference. Thank you for your continued attention and support for Yixing Coffee. Before the conference officially begins, as you can see in the company's announcement, we are very honored to welcome Mr. Li Hui, CEO and CEO of Dazheng Capital, to re-join the RuiHsing board of directors and become the chairman of the board of directors. At the time of the RuiHsing case, DaZheng Capital kept investing in RuiHsing to ensure the stability of company governance and equity structure. This is also the most important basis for RuiHsing to completely complete the history cut and realize the initial rebound. As a shareholder, Mr. Lin Hui himself has always been steadfast in supporting Ruixin to complete the process of re-establishing Nipan, helping the Ruixin team to achieve today's results. Mr. Lin Hui was able to re-join the board of directors and become the chairman, showing his full recognition of Ruixin's past performance and the long-term value of Ruixin. He was also able to play out his rich experience in management and strategic planning, to promote the continued development and strategic layout of Ruixin China and global business, to lead the company's development to enter a new stage and enter a new stage. From now on, I will continue to work closely with Mr. Lin Hui. Under his leadership, I will be more focused on running the CEO and board of directors, and continue to adhere to the core values of Ruixin together, and work hard to promote and realize Ruixin's mission and vision. Hello, everyone.

Welcome to today's earnings conference call. Thank you for your continued interest in and support of Lock-in Coffee. Before we officially begin today's call, as many of you may have seen in our earnings release, We are truly honored to welcome Mr. Li Hui, chairman and the CEO of Centrum Capital, back to Lockheed's board of directors as our new chairman. Centrum Capital has always supported Lockheed through its most challenging times, making continued investments to ensure the stability of our corporate governance and the shareholder structure. This steadfast support laid a solid foundation for Lockheed to fully emerge from past difficulties and enabled our strong rebound. As a shareholder, Mr. Li Hui has remained firmly committed to Lockheed's journey of transformation, facilitating our team toward the success we have achieved today. His return to the board and appointment as chairman reflect his full confidence in our past achievements and a strong recognition of Lockheed's long-term value. His rich experience in business management and the strategy of execution will help drive the continued development and the global extension of Lockheed's business, leading the company into a new stage of growth. Looking ahead, I look forward to working closely with Mr. Lee Kuei. Under his leadership, I will remain focused on fulfilling my responsibilities as CEO and director. Together, we will continue to uphold Lockheed's core values, advance our mission and vision, and work to create long-term sustainable value for all our shareholders and stakeholders who support Lockheed's development.

Next, I will introduce the operation progress of the company in the first quarter. Later, CFO An Jing will share with you more detailed financial data. In the first quarter of the opening year of 2025, Yixing Coffee achieved a strong performance growth. We focus on the priority development strategy to further expand the market share and strengthen competitive advantages. In the first quarter, our total net income increased by 41%. to about 8.9 billion yuan. Based on more than 24,000 stores, we have made full use of the scale to continuously improve the operating efficiency. The profit and loss are significantly increased. This quarter's profit and loss are significantly increased to 7.4 billion yuan. The profit and loss rate has reached 8.3%. It should be pointed out that Our copper chain indicators have continued to stabilize after the fluctuation of the past year. In the first quarter, the copper chain sales growth rate of self-employed stores has turned to 8.1 billion. This also confirms the huge demand potential of the Chinese market, which is also completely in line with our previous strategic judgment. The achievement of these results has further consolidated the market leadership of Ruixin, and has also set a solid foundation for the year-round strategic goals.

Next, I will provide some highlights of our first quarter results and our professional progress. Our CFO and Dean will share additional financial details later on this call. We are off to a strong start in 2025, delivering impressive first quarter results. With a scale-focused growth strategy, we further expanded our market share and strengthened our competitive edge. In the first quarter, our total net revenues rose by 41% year-over-year to around RMB 8.9 billion. As our network expanded to over 24,000 stores, we leveraged our scale to constantly drive operational efficiency and significantly improved profitability compared to the same period of last year. Our operating profit rebounded to nearly RMB 740 million, with operating margin rising to 8.3%. Notably, same-store sales growth for self-operated stores continued improving and returned to a positive territory as it impacted at 8.1%, following a year of fluctuations. This improvement reflects strong customer demand in China's coffee market and aligns well with our strategic vision. These results have reinforced our market leadership and laid a solid foundation for achieving our full-year targets.

In this quarter, we will continue to go deep into the business strategy of focusing on scale growth, expanding the scale advantage of stores, and constantly improving product quality. At the same time, we will further expand the customer base and continue to strengthen the core competitiveness of the three dimensions of the manpower factory.

During the first quarter, we further deepened the execution of our scale-oriented strategy, consistently expanding our store network, enhancing product quality, and growing our customer base while delivering greater value to consumers. We continue to strengthen our core competitiveness across three pillars, people, products, and places.

We continue to advance the development strategy of the front-line priority layout. According to market changes and business situations, dynamic evaluation of opening opportunities to maintain the leading speed of the industry. Remember, our opening speed is slightly faster than expected. This is mainly because we see that customers have needs and the market has space. It is even more necessary to take the priority position to lock the long-term market share.

On the storefront, we continuously prioritize strategic expansion, dynamically evaluating market conditions and the competition to identify high potential locations while maintaining an industry-leading expansion pace. This quarter, we opened slightly more stores than initially planned, as we saw evident consumer demand and untapped market opportunities. This required us to prioritize securing key locations early to lock in long-term market share. As of quarter end, we upgraded 24,097 stores, further cementing our leadership as China's largest coffee chain brand by store count.

To be more specific, the Chinese market has increased by 1743 stores. The total number of stores has reached 20,032. Of which, 15,541 are self-sufficient, and 8,491 are joint-sufficient. At the same time, while maintaining the speed of expansion, our same-store indicators are also steadily improving. This not only reflects the opening strategy of the company's scale and quality change, It has also verified the potential and effectiveness of the RuiXing development strategy. In the key window period, we set up a quick scale advantage in advance to effectively meet the coffee consumption needs of users and steadily improve the sales growth of the same chain. Therefore, 我们也更有信心能够把握中国市场咖啡中国咖啡市场发展的疫情机遇进一步扩大在高线和下沉市场的能量规模

In China, we added 1,743 manual stores, bringing the total to 24,032, comprising 15,541 self-operated stores and 8,491 partnership stores. Along with rapid expansion, we consistently improved same-store performance, validating our balanced approach to scale and quality. Our early investments in scale during a critical window have created clear network advantage, which is now effectively supporting rising consumer demand and driving face-to-face growth for our self-operated stores. This gives us greater confidence in capturing the historic growth opportunities in China's booming coffee market, allowing us to further expand in both high-tier and lower-tier cities.

In terms of the international market, we have 14 competitors in our group, with 65 stores in total. Of which, there are 57 in Singapore, and 8 in Malaysia. As a long-term strategic layout, we will steadily promote internationalization, strengthen the core value of RuiHsing in the market in different countries, optimize user experience and product combination, and polish the store model to meet the unique needs of the local market.

Internationally, we added 14 new stores this quarter, reaching a total of 65, including 57 self-operated stores in Singapore and 8 franchise stores in Malaysia. As part of our long-term development strategy, we are taking a disciplined approach to overseas expansion. We are methodically strengthening Lockheed's value proposition in each country, optimizing user experience and the product offerings, and fine-tuning store models to meet local demands. We plan to adopt flexible, locally tailored models to steadily build overseas experience and explore further growth opportunities.

In terms of products, in the first quarter, we have set up 15 drinks and several snacks, which are based on the brand concept of drink-and-drink originality. We have constantly strengthened the construction of upstream supply chain, and set up global high-quality originality resources. We have provided strong support for product innovation and quality improvement, and thus better meet the comprehensive needs of users for taste, health, and emotional value.

On the product front, we launched 15 new beverages and a range of light meals. Guided by our brand concept from the origin to use, we strengthened our global supply chain by sourcing from premium origin regions. This effort underpins our product innovation and quality upgrades, better satisfying customers' evolving preferences for taste, health, and emotional relevance.

In the forthcoming four-year anniversary of the long-term product of raw coconut latte, Yuexin Coffee exclusively belongs to the island of raw coconut and belongs to Indonesia. It has the exclusive right to purchase raw coconut resources on the island of Guangzhai. It has established a quality control system of the entire industry chain from the beginning to the end of consumption. It will further strengthen the attraction of raw coconut series products. Until the end of the first quarter, the total sales of raw coconut latte alone has exceeded 1.3 billion cups.

In March, as our flagship coconut latte approached its fourth anniversary, we secured exclusive procurement rights to coconuts from Indonesia's Sanko Islands, breaking Lockheed's exclusive coconut islands. With full control from origin to cost, we established a comprehensive quality management system that further enhances the appeal of our coconut series. Cumulative sales of coconut lattes surpassed 1.3 billion cups at the quarter end. The recent launch of the coconut jelly latte has brought fresh appeal to the signature lineup.

In addition, this quarter's green tea series has been fully upgraded, and fresh and fresh jasmine, fresh and fresh dragon fruit products, mainly fresh tea, animal fat and low-calorie, provide consumers with a better, healthier, and tastier tea experience. Yuexing's exclusive base in Hengzhou, Guangxi, has also ensured the quality of tea from the original production area. The new products have received widespread praise from new and old users, and those who are interested in awakening are active. We also upgraded our light milk tea line, introducing freshly gentle jasmine milk tea and freshly light longjing milk tea.

These products feature freshly brewed tea, animal milk fat, and low calories. delivering a superior, healthier, and tastier tea experience. Our dedicated Japanese garden in Hangzhou, Guangxi, ensures tea fragrance and quality from origin. This upgrade received widespread acclaim from both new and recurring customers, with encouraging results in customer acquisition and reactivation. Notably, single-day sales of freshly gentle jasmine milk tea peaked at 1.67 million cups, setting a new tea product record for this year.

In terms of customers, we use high-quality, high-efficiency, high-performance ratio as a starting point, and continue to adhere to the core values of customers, and continue to respond to consumers. On the customer front, our value propositions of high quality, high convenience, and high mobility continue to guide our customers' first core values.

We consistently reward consumers with high-quality coffee at competitive prices, while expanding our offerings to cover more day parts and scenarios. This strategy broadens beverage choices and enhances customer experience.

We use a large door-to-door delivery network, diversified product choices, and frequent sales joint activities. In the first quarter, the number of our new trading customers exceeded 20 million. By the end of this quarter, the total number of our monthly trading customers exceeded 350 million. In addition, the number of our monthly trading customers exceeded 74 million, which increased by 24% in total. Next, we will continue to adhere to a competitive price strategy, continue to carry out 9.9 quality coffee activities, and strictly operate in different areas.

Supporting our extensive store network, diverse product portfolio, and highly relevant co-branded marketing campaigns, we added over 20 million new transaction customers in the first quarter. Our cumulative transacting customer base exceeded 350 million by quarter end, while monthly average transacting customers increased 24% year-on-year to over 74 million. We will continue to implement competitive pricing, including consistent R&B 9.9 quality coffee initiative, and dynamically conduct region-specific operations to cultivate coffee drinking habits and brand loyalty. These efforts will help us solidify and grow our market share as we continue leading industry development.

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